22nd Century (XXII)2022-11-08 12:00Product Development and Market Expansion - 22nd Century Group, Inc. received FDA Modified Risk Tobacco Product authorization for its VLN® cigarettes, which contain 95% less nicotine than conventional cigarettes [138]. - The company has launched VLN® reduced nicotine cigarettes in over 150 Circle K stores in Chicago and plans to expand to more than 3,000 locations in Colorado [139]. - By the end of 2023, the company aims to launch VLN® in a total of up to 12 to 18 states, having secured regulatory authorizations to sell in 47 states and the District of Columbia [142]. - The company planted its largest VLN® tobacco crop in 2022, achieving 30% higher yields and improved quality, with plans for expansion in 2023 [143]. - The FDA's new leadership is expected to favor policies that support the company's reduced nicotine products, including a proposed nicotine cap in combustible cigarettes [144]. - The company anticipates commercial production of its VLN® 2.0 American blend cigarettes featuring non-GMO reduced nicotine varieties to begin in 2023 [148]. - The global nicotine retail sales were approximately $853 billion in 2021, with 84.1% from combustible cigarettes, indicating a significant market opportunity for VLN® [136]. - The company has provided over 31.6 million variable nicotine research cigarettes for independent clinical studies, with costs exceeding $125 million [134]. - Studies show that smokers using the company's reduced nicotine products reduce nicotine exposure and dependence, smoke fewer cigarettes, and double their quit attempts [135]. Financial Performance - Net revenues for Q3 2022 were $19,383, a 148.2% increase from $7,811 in Q3 2021, driven by contract manufacturing volumes and GVB's full quarter revenue [162]. - Net revenues from tobacco-related products were $11,535, a 47.7% increase from the previous year, while hemp/cannabis-related products generated $7,848 in revenue [162]. - Gross profit for Q3 2022 was $619, reflecting a 112.0% increase from $292 in Q3 2021, despite an inventory write-down of $281 [162]. - Total operating expenses for Q3 2022 rose to $15,887, up from $7,861 in the prior year, primarily due to the GVB acquisition and increased strategic consulting and marketing expenses [162]. - Research and development expenses for Q3 2022 were $1,318, an increase of $287 from the prior year, driven by strategic initiatives and personnel costs [169]. - Sales, general and administrative expenses for Q3 2022 were $14,569, a significant increase of $7,739 from the previous year, largely due to GVB-related expenses and accelerated launch costs for VLN® [171]. Cash Flow and Financial Position - The company had $43,721 in cash, cash equivalents, and short-term investment securities as of September 30, 2022 [162]. - Unrealized loss on investments for Q3 2022 was $(345), a significant improvement from $(1,900) in Q3 2021, indicating better performance in equity securities [175]. - As of September 30, 2022, the company reported an unrealized loss of $345 for the three months and $2,041 for the nine months due to fluctuations in the value of PLSH common stock, which was valued at $299 per share [177]. - Interest expense increased to $(148) for the quarter ended September 30, 2022, compared to $(23) in the same quarter of 2021, primarily due to interest from GVB bridge notes related to the GVB acquisition [178]. - Cash and cash equivalents decreased by $5,015 to $2,364 as of September 30, 2022, primarily due to cash used in operating activities [179]. - Working capital decreased by $222 to approximately $45,736 as of September 30, 2022, primarily due to a $10,238 increase in net current liabilities [180]. - Cash used in operating activities increased by $14,441 to $(32,648) for the nine months ended September 30, 2022, driven by higher SG&A spending [182]. - Cash provided by investing activities decreased by $33,587, primarily due to increased cash used for acquisitions and investments, including GVB and Change Agronomy Ltd. [184]. - Cash provided by financing activities decreased by $18,718, resulting from lower net proceeds from common stock issuances and warrant exercises [185]. - As of September 30, 2022, the company had approximately $43,721 in cash and cash equivalents and short-term investment securities, a decrease of $5,015 from December 31, 2021 [186]. - The company completed a capital raise on July 25, 2022, generating net proceeds of $32,484 to accelerate the launch of VLN® products and meet increased customer demands [188]. - Future cash requirements are anticipated to decrease, reflecting higher sales volume for VLN® products and continued organic growth of GVB's operations [187]. Strategic Acquisitions and Growth - The company is focused on developing proprietary hemp/cannabis varieties for applications in life sciences and consumer products, optimizing plant genetics for high-quality production [149]. - The acquisition of GVB Biopharma is expected to double the company's revenue going forward, enhancing its position in the hemp-derived active ingredients market [154]. - GVB's Prineville facility is one of the largest hemp extraction plants globally, with a projected CBD crude output capacity exceeding 15,000 kg/month at full capacity [155].