22nd Century Group Reports First Quarter 2024 Financial Results
22nd Century Group (NASDAQ: XXII) reported its financial results for Q1 2024, showing major improvements compared to the previous periods. Net revenue from continuing operations reached $6.5 million, focusing on higher margin products. The company significantly reduced its cash used in operations to $2.3 million from $17.5 million year-over-year. Gross profit was reported at $(1.1) million due to one-time charges. Operating expenses fell to $3.3 million from $10.4 million in Q1 2023. Net loss decreased to $5.5 million, and adjusted EBITDA showed a loss of $3.5 million, both improved from the previous year. The company strengthened its balance sheet by increasing its cash position to $4.8 million and reducing debt by $8.0 million through equity exchanges.
- Net revenue increased to $6.5 million, focusing on higher margin products.
- Cash used in operations decreased significantly to $2.3 million from $17.5 million year-over-year.
- Operating expenses dropped to $3.3 million from $10.4 million in Q1 2023.
- Net loss from continuing operations decreased to $5.5 million from $10.8 million in the prior year.
- Adjusted EBITDA loss improved to $3.5 million from $9.0 million year-over-year.
- Cash position increased to $4.8 million as of May 1, 2024.
- The company reduced $8.0 million in debt and other liabilities through equity exchanges.
- Gross profit was reported at $(1.1) million, impacted by one-time charges.
- Long-term debt stood at $8.1 million with current debt at $6.5 million.
- Adjusted EBITDA still shows a loss of $3.5 million.
Insights
The reported financial results show a significant improvement in the company's financial health. The first quarter of 2024 saw cash used in operations reduce drastically to
Interestingly, the net revenue from continuing operations was
Another positive aspect is the decrease in operating expenses to
For retail investors, these developments point to a company making strides toward profitability and better cash flow management. However, the gross profit needs closer monitoring to ensure the trend of improvement continues.
The highlight of the report is the strategic shift in the company's revenue mix. Moving away from negative margin filtered cigars to higher-margin products like VLN® and conventional cigarettes could position the company better in the market. This strategic pivot is essential for sustaining long-term profitability in a competitive tobacco industry.
The addition of two significant new customer contracts starting in April 2024 is another critical point. These contracts are expected to drive additional revenue and improve the company's margin profile, including a
For retail investors, understanding the significance of these new contracts is crucial. They not only promise immediate revenue growth in Q2 2024 but also signal the company's ability to secure business in a challenging market.
The company's balance sheet improvements are noteworthy. As of May 1, 2024, the cash and cash equivalents stood at
Moreover, the reduction of around
Retail investors should note the improved cash position and reduced debt levels, as these factors can contribute to a more robust financial footing. However, the company's ability to maintain this improved liquidity and further reduce debt will be critical to watch in the coming quarters.
New Contracts to Boost Second Quarter Revenue
Reduced Operating Costs, Improved Cash Position
Reduced ~
Mocksville, North Carolina--(Newsfile Corp. - May 15, 2024) - 22nd Century Group, Inc. (NASDAQ: XXII), a tobacco products company focused on nicotine harm reduction, today reported results for the first quarter ended March 31, 2024, and provided an update on recent business highlights.
First Quarter 2024 Financial Results
All figures reported below reflect continuing operations, excluding discontinued operations related to the sale and exit of its hemp/cannabis franchise in late 2023.
- Cash used in operations during the first quarter of 2024 declined significantly to
$2.3 million , as compared to the prior comparative period of$17.5 million , and fourth quarter 2023 of$4.8 million . - Net revenue from continuing operations was
$6.5 million , as the Company further refined its revenue mix away from negative margin filtered cigars in favor of higher margin VLN® and conventional cigarettes. - Gross profit for the first quarter of 2024 was
$(1.1) million which included a one-time charge of$(0.4) million for inventory reserves and$(0.2) million for an excise tax assessment related to prior periods. - Total operating expenses for the first quarter of 2024 were
$3.3 million , compared with$10.4 million in the first quarter of 2023, and sequential improvement from$6.4 million in the fourth quarter of 2023. - Operating loss for the first quarter of 2024 was
$4.4 million , compared with$10.4 million in the prior year comparative period. - Net loss from continuing operations for the first quarter of 2024 decreased to
$5.5 million , compared with$10.8 million in the prior year comparative period. - Adjusted EBITDA for the first quarter 2024 declined to a loss of
$3.5 million , from a loss of$9.0 million in the prior year comparative period. Please refer to the tables included in this release for a reconciliation of Adjusted EBITDA (a non-GAAP measure) compared to net loss.
Balance Sheet and Liquidity
As of May 1, 2024, the Company held
Additionally, long-term debt was
Said Larry Firestone, Chairman and CEO: "The first quarter and subsequent events in Q2 2024 demonstrate that we are rapidly transforming 22nd Century's operating results as we shift our revenue mix and implement a lean operating cost mantra across the Company, and strengthening the balance sheet. Operating costs declined dramatically, to just
Conference Call
22nd Century will host a live webcast today at 8:00 a.m. E.T. to discuss its first quarter 2024 financial results and business highlights.
The live webcast will be accessible in the Events section on 22nd Century's Investor Relations website at https://ir.xxiicentury.com/events-and-presentations/default.aspx. An archived replay of the webcast will also be available shortly after the live event has concluded.
About 22nd Century Group, Inc.
22nd Century Group, Inc. (NASDAQ: XXII) is an agricultural biotechnology company focused on tobacco harm reduction, reduced nicotine tobacco and improving health and wellness through plant science. With dozens of patents allowing it to control nicotine biosynthesis in the tobacco plant, the Company has developed proprietary reduced nicotine content (RNC) tobacco plants and cigarettes, which have become the cornerstone of the FDA's Comprehensive Plan to address the widespread death and disease caused by smoking. The Company received the first and only FDA Modified Risk Tobacco Product (MRTP) authorization for a combustible cigarette in December 2021. The Company is a subsequent participating manufacturer under the Master Settlement Agreement ("MSA") and vertically integrated for the production of its both own products and contract manufacturing operations ("CMO"), which consist primarily of branded filtered cigars and conventional cigarettes.
Learn more at xxiicentury.com, on Twitter, on LinkedIn, and on YouTube.
Learn more about VLN® at tryvln.com.
Cautionary Note Regarding Forward-Looking Statements
Except for historical information, all of the statements, expectations, and assumptions contained in this press release are forward-looking statements, including but not limited to our full year business outlook. Forward-looking statements typically contain terms such as "anticipate," "believe," "consider," "continue," "could," "estimate," "expect," "explore," "foresee," "goal," "guidance," "intend," "likely," "may," "plan," "potential," "predict," "preliminary," "probable," "project," "promising," "seek," "should," "will," "would," and similar expressions. Forward-looking statements include, but are not limited to, statements regarding (i) our strategic alternatives and cost reduction initiatives, (ii) our expectations regarding regulatory enforcement, including our ability to receive an exemption from new regulations, (iii) our financial and operating performance and (iv) our expectations for our business interruption insurance claim. Actual results might differ materially from those explicit or implicit in forward-looking statements. Important factors that could cause actual results to differ materially are set forth in "Risk Factors" in the Company's Annual Report on Form 10-K filed on March 28, 2024, and in the Company's Quarterly Report filed on May 15, 2024. All information provided in this release is as of the date hereof, and the Company assumes no obligation to and does not intend to update these forward-looking statements, except as required by law.
Investor Relations & Media Contact
Matt Kreps
Investor Relations
22nd Century Group
mkreps@xxiicentury.com
214-597-8200
22nd CENTURY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(amounts in thousands, except share and per-share data)
| March 31, | December 31, | |||||
| 2024 | 2023 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 1,517 | $ | 2,058 | ||
| Accounts receivable, net | 1,747 | 1,671 | ||||
| Inventories | 2,889 | 4,346 | ||||
| Insurance recoveries | 3,768 | 3,768 | ||||
| GVB promissory note | 2,000 | 2,000 | ||||
| Prepaid expenses and other current assets | 699 | 1,180 | ||||
| Current assets of discontinued operations held for sale | | 1,093 | 1,254 | |||
| Total current assets | 13,713 | 16,277 | ||||
| Property, plant and equipment, net | 3,236 | 3,393 | ||||
| Operating lease right-of-use assets, net | 1,832 | 1,894 | ||||
| Intangible assets, net | 5,820 | 5,924 | ||||
| Other assets | | 15 | 15 | |||
| Total assets | $ | 24,616 | $ | 27,503 | ||
| LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||
| Current liabilities: | ||||||
| Notes and loans payable - current | $ | - | $ | 543 | ||
| Current portion of long-term debt | 6,577 | 5,848 | ||||
| Operating lease obligations | 238 | 231 | ||||
| Accounts payable | 5,046 | 4,445 | ||||
| Accrued expenses | 1,449 | 1,322 | ||||
| Accrued litigation | 3,768 | 3,768 | ||||
| Accrued payroll | 466 | 883 | ||||
| Accrued excise taxes and fees | 2,525 | 2,234 | ||||
| Deferred income | 376 | 726 | ||||
| Other current liabilities | 1,672 | 1,849 | ||||
| Current liabilities of discontinued operations held for sale | | 3,147 | 3,185 | |||
| Total current liabilities | 25,264 | 25,034 | ||||
| Long-term liabilities: | ||||||
| Operating lease obligations | 1,635 | 1,698 | ||||
| Long-term debt | 8,136 | 8,058 | ||||
| Other long-term liabilities | 1,205 | 1,123 | ||||
| Total liabilities | | 36,240 | 35,914 | |||
| Shareholders' equity (deficit) | ||||||
| Preferred stock, $.00001 par value, 10,000,000 shares authorized | ||||||
| Common stock, $.00001 par value, 250,000,000 shares authorized | ||||||
| Capital stock issued and outstanding: | ||||||
| 3,600,935 common shares (2,720,437 at December 31, 2023) | ||||||
| Common stock, par value | - | - | ||||
| Capital in excess of par value | 372,822 | 370,297 | ||||
| Accumulated deficit | | (384,446 | ) | (378,707 | ) | |
| Total shareholders' deficit | | (11,624 | ) | (8,410 | ) | |
| Total liabilities and shareholders' deficit | $ | 24,616 | $ | 27,503 | ||
22nd CENTURY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(amounts in thousands, except share and per-share data)
| Three Months Ended | ||||||
| March 31, | ||||||
| 2024 | 2023 | |||||
| Revenues, net | $ | 6,469 | $ | 8,926 | ||
| Cost of goods sold | 4,213 | 4,724 | ||||
| Excise taxes and fees on products | | 3,385 | 4,185 | |||
| Gross (loss) profit | (1,129 | ) | 17 | |||
| Operating expenses: | ||||||
| Sales, general and administrative | 2,906 | 9,837 | ||||
| Research and development | 425 | 730 | ||||
| Other operating expense (income), net | (26 | ) | (146 | ) | ||
| Total operating expenses | 3,305 | 10,421 | ||||
| Operating loss from continuing operations | (4,434 | ) | (10,404 | ) | ||
| Other income (expense): | ||||||
| Other income (expense), net | - | (155 | ) | |||
| Interest income, net | - | 57 | ||||
| Interest expense | (1,016 | ) | (328 | ) | ||
| Total other expense | (1,016 | ) | (426 | ) | ||
| Loss from continuing operations before income taxes | (5,450 | ) | (10,830 | ) | ||
| Provision (benefit) for income taxes | - | - | ||||
| Net loss from continuing operations | $ | (5,450 | ) | $ | (10,830 | ) |
| Discontinued operations: | ||||||
| Loss from discontinued operations before income taxes | $ | (289 | ) | $ | (7,352 | ) |
| Provision (benefit) for income taxes | - | - | ||||
| Net loss from discontinued operations | $ | (289 | ) | $ | (7,352 | ) |
| Net loss | $ | (5,739 | ) | $ | (18,182 | ) |
| Deemed dividends | (3,589 | ) | - | |||
| Net loss available to common shareholders | $ | (9,328 | ) | $ | (18,182 | ) |
| Basic and diluted loss per common share from continuing operations | $ | (1.72 | ) | $ | (12.80 | ) |
| Basic and diluted loss per common share from discontinued operations | $ | (0.09 | ) | $ | (8.69 | ) |
| Basic and diluted loss per common share from deemed dividends | $ | (1.13 | ) | $ | - | |
| Basic and diluted loss per common share | $ | (2.94 | ) | $ | (21.49 | ) |
| Weighted average common shares outstanding - basic and diluted | 3,165,237 | 846,005 | ||||
| Net loss | $ | (5,739 | ) | $ | (18,182 | ) |
| Other comprehensive income: | ||||||
| Unrealized gain on short-term investment securities | - | 61 | ||||
| Foreign currency translation | - | (4 | ) | |||
| Reclassification of realized losses to net loss | - | 13 | ||||
| Other comprehensive income | - | 70 | ||||
| Comprehensive loss | $ | (5,739 | ) | $ | (18,112 | ) |
Reconciliations of Non-GAAP Measures
Below is a table containing information relating to the Company's Net loss, EBITDA and Adjusted EBITDA for the quarter ended March 31, 2024 and 2023, including a reconciliation of these Non-GAAP measures for such periods.
| Quarter Ended | |||||||||
| March 31, | |||||||||
| Amounts in thousands ( | |||||||||
| except share and per share data | |||||||||
| (UNAUDITED) | |||||||||
| $ Change 1 | |||||||||
| 2024 | 2023 | fav / (unfav) | |||||||
| Net loss from continuing operations | $ | (5,450 | ) | $ | (10,830 | ) | $ | 5,380 | |
| Interest (income)/expense, net | 1,016 | 271 | 745 | ||||||
| Provision (benefit) for income taxes | - | - | - | ||||||
| Amortization and depreciation | 266 | 361 | (95 | ) | |||||
| EBITDA | $ | (4,168 | ) | $ | (10,198 | ) | $ | 6,030 | |
| Adjustments: | |||||||||
| Restructuring and impairment | (26 | ) | - | (26 | ) | ||||
| Inventory write-down | 431 | - | 431 | ||||||
| Change in fair value of derivative liabilities | 82 |
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FAQ
What were 22nd Century Group's Q1 2024 financial results?
The company reported net revenue of $6.5 million, a net loss of $5.5 million, and an adjusted EBITDA loss of $3.5 million for Q1 2024.
How did 22nd Century Group's operating costs change in Q1 2024?
Operating costs dropped to $3.3 million from $10.4 million in Q1 2023.
What was 22nd Century Group's cash position at the end of Q1 2024?
The cash position was $4.8 million as of May 1, 2024.
What is the impact of new contracts on 22nd Century Group's revenue?
New contracts are expected to boost revenue and improve margin profiles starting from Q2 2024.
How much debt did 22nd Century Group reduce through equity exchanges in Q2 2024?
The company reduced $8.0 million in debt and liabilities through equity exchanges.
22nd Century Group Inc.
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