Financial Performance Overview
VLN Early Adoption Commercial Activity Expands with Two Partner Brand Launches – Smoker Friendly and Pinnacle
Commenced Pinnacle VLN Stocking Shipments for Almost 1,000 Locations of Top C-Store Customer, Additional Locations to Come
Significantly Expanded State Authorizations for both Reduced Nicotine Content and Conventional Products
High Margin Branded Products Business Model Set to Grow Profitably
MOCKSVILLE, N.C. -- 22nd Century Group, Inc. (NASDAQ: XXII), a pioneer in the tobacco harm reduction sector, has reported its financial results for the second quarter of 2025, along with highlights of business developments.
“22nd Century has transformed into a purpose-built tobacco harm reduction company centered around our proprietary reduced nicotine content tobacco strains that form the basis of our VLN products – the first FDA-authorized product that already aligns with the FDA’s proposed standard for nicotine content. Years of research indicate that our proprietary reduced nicotine products stand out in the industry by genuinely assisting individuals addicted to nicotine in managing their consumption and reducing their smoking habits,” stated Larry Firestone, CEO of 22nd Century Group.
“Our partners carrying VLN products are pioneers, adopting the FDA’s proposed standards for low nicotine content. We now offer three various VLN-based brands, with further discussions on additional partner brands and an increasing number of states approving these products, showcasing the growing momentum of VLN products in addressing tobacco use. Collaboration with our partner brands allows us to broaden access to smokers seeking tools to manage their habits, while we continue to innovate with more tobacco products to meet user preferences without the addictive nicotine levels.”
“We have streamlined our operations and are entering a growth phase with our branded products leading this trajectory. The roadmap ahead looks promising, fueled by partnerships and expected distribution expansions.”
Second Quarter Financial Highlights
All financial figures mentioned reflect ongoing operations, excluding those related to the discontinuation of the Company’s hemp/cannabis business in 2023.
- Net revenues decreased sequentially to $4.1 million, compared to $6.0 million.
- Gross profit remained consistent at $(0.6) million, unchanged from the previous quarter.
- Operating expenses rose to $2.3 million from $2.0 million.
- Operating loss increased to $3.0 million, compared to $2.6 million.
- Net loss remained at $3.3 million, stable compared to the previous quarter.
- Adjusted EBITDA loss expanded to $2.6 million from $2.3 million.
- Debt was reduced by an additional $1.0 million, totaling $3.8 million.
Recent Developments and Business Highlights
- Advocated for the FDA’s proposed Tobacco Product Standard for Nicotine Yield, marking VLN and partner VLN cigarettes as the only products compliant with these standards.
- Increased state authorizations significantly, covering 44 states for VLN products and 39 states for Pinnacle products.
- Announced a second notable partnership with Pinnacle VLN, launching alongside conventional products in a leading c-store chain, set for distribution to nearly 1,000 stores across designated regions.
- Initiated the delivery of two SKUs of Pinnacle moist snuff products, targeting sales launches across the c-store network in the latter half of 2025.
- Progressed on a 100mm VLN reduced nicotine cigarette prototype, targeting FDA submission by the fourth quarter of 2025.
- Advanced the MRTP Renewal Process for VLN, including necessary clinical studies ahead of its renewal in December 2026.
- Concluded the sale of Needle Rock Farms assets, raising $770,000 in cash.
Analysis of Financial Results
Cigarette net revenues totaled $2.7 million, down from $5.0 million in the previous quarter. Despite increased sales volume to 594 thousand cartons, this decline is attributed to revenue recognition timing due to a new customer contract initiated on January 1, 2025, which adversely affected the previous quarter's figures. Additionally, promotional spending surged compared to the prior quarter.
Filtered cigar segment revenues increased to $1.3 million, reflecting volume stabilization from contracts with customers. Meanwhile, cigarillo distributions have begun seeing revenues as customers respond to reorders, anticipating more substantial contributions in the latter part of this year.
Net revenues from VLN cigarette sales reflected necessary returns for previously shipped products. The company is implementing a new branding strategy for VLN products alongside the introduction of two new partner brand families targeting significant existing customers, with initial shipments expected in the upcoming quarter.
Balance Sheet Overview
- Total debt reported approximately $3.9 million at quarter end, with net debt recorded at $0.7 million and cash holdings of about $3.1 million. The company has successfully reduced its debt burden by $3.4 million thus far in the fiscal year.
Upcoming Conference Call
22nd Century will host a live discussion today at 8:00 a.m. ET to delve into the findings of their second quarter financial results and share further insights on business developments.
About 22nd Century Group, Inc.
22nd Century Group is at the forefront of the nicotine harm reduction movement, empowering smokers to manage their nicotine consumption actively.
With its flagship product, the VLN cigarette, the company provides a genuine alternative for traditional smokers to regain control over their nicotine intake. VLN cigarettes contain 95% less nicotine than standard cigarettes, significantly aiding in nicotine reduction. The goal is to empower smokers with better-informed choices, potentially leading to healthier lifestyles.
Our operational facilities include a leading U.S. cigarette manufacturer producing all VLN products and offering turnkey contract manufacturing for other tobacco brands. The Mocksville, North Carolina facility holds the capability to produce over 45 million cartons annually and has room for future expansion.
The remarkable achievement of our proprietary reduced nicotine tobacco blends stems from patented technologies regulating nicotine synthesis activities, delivering a full flavor experience while drastically decreasing nicotine content. Our robust patent portfolio ensures that our limited nicotine combustible products are unique in the U.S. and critical international markets. Our objective remains to be the last cigarette sold before the 22nd Century begins.
VLN and “Helps You Smoke Less” are registered trademarks of 22nd Century Limited LLC.
For further inquiries, reach out to our Investor Relations team led by Matt Kreps, at mkreps@xxiicentury.com or call 214-597-8200.
Frequently Asked Questions
What is 22nd Century Group known for?
22nd Century Group is recognized for leading initiatives in tobacco harm reduction, particularly through their innovative VLN product line, which offers reduced nicotine options for smokers.
What are the recent financial performance results?
The company reported a net revenue of $4.1 million for the second quarter of 2025, with notable decreases in certain revenue streams, primarily due to timing and promotional spending increases.
How is 22nd Century addressing tobacco addiction?
By offering VLN cigarettes that have significantly less nicotine, they empower smokers to reduce their consumption and take control of their habits, striving for healthier lifestyle choices.
What is the company's future outlook?
22nd Century aims to expand its branded products and partner collaborations, anticipating profitable growth in response to market demands and regulatory changes that favor lower nicotine products.
How can investors get in touch with the company?
Investors can contact the company through Investor Relations via email at mkreps@xxiicentury.com or by calling 214-597-8200.
