22nd Century Group, Inc.

December 31, 2025

Amounts in thousands, except for share and per share data

NOTE 1. – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

22nd Century Group, Inc. (together with its consolidated subsidiaries, “22 nd Century Group” or the “Company”) is a Nevada corporation and its common stock is listed on the NASDAQ Capital Market under the symbol “XXII.” 22nd Century Group isa tobacco products company with sales and distribution of the Company’s own proprietary new reduced nicotine tobacco products authorized as Modified Risk Tobacco Products by the FDA. Additionally, the Company provides contract manufacturing services for conventional combustible tobacco products for third-party brands.

Basis of Presentation and Principles of Consolidation– The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of 22nd Century Group and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

As described in Note 2, on December 22, 2023, the Company divested substantially all of the assets of GVB Biopharma’s (“GVB”) business within its former hemp/cannabis segment.

As a result of the divestiture of GVB, during the fourth quarter of 2023, the Company reorganized its business to become asingle reportable segment: tobacco.

The results of operations of the former hemp/cannabis segment are reported as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss for all periods presented and the related assets and liabilities associated with the discontinued operations are classified as held for sale in the Consolidated Balance Sheets as of December 31, 2024. The Consolidated Statements of Cash Flows includes cash flows related to the discontinued operations due to 22 nd Century’s (parent) centralized treasury and cash management processes, and, accordingly, cash flow amounts for discontinued operations are disclosed in Note 2 “Discontinued Operations and Divestitures.” All results and information in the Consolidated Financial Statements are presented as continuing operations and exclude the former hemp/cannabis segment unless otherwise noted specifically as discontinued operations.

Use of Estimates–** **The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Liquidity and Capital Resources– These Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company has incurred significant losses and negative cash flows from operations since inception and expects to incur additional losses until such time that it can generate significant revenue and profit in its tobacco business. The Company had negative cash flow from operations of $7,723 and $14,345 for the years ended December 31, 2025 and 2024, respectively, and an accumulated deficit of $398,925 and $393,871 as of December 31, 2025 and 2024, respectively. As of December 31, 2025, the Company had cash and cash equivalents of$7,149.

Given the Company’s projected operating requirements and its existing cash and cash equivalents, there is substantial doubt about the Company’s ability to continue as a going concern through one year following the date that the Consolidated Financial Statements are issued.

In response to these conditions, management is currently evaluating different strategies for reducing expenses, as well as pursuing financing strategies which include raising additional funds through the issuance of securities, asset sales, and through arrangements with strategic partners. If capital is not available to the Company when, and in the amounts needed, it could be required to liquidate inventory or assets, cease or curtail operations, or seek protection under applicable bankruptcy laws or similar state proceedings. There can be no assurance that the Company will be able to raise the capital it needs to continue operations. Management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern through one year following the date that the Consolidated Financial Statements are issued.

The Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Other Significant Risks and Uncertainties -The Company is subject to a number of risks, including, but not limited to, the lack of available capital; unsuccessful commercialization strategy and launch plans for the Company’s products or market acceptance of the Company’s products; and protection of proprietary technology.

Reclassifications – The Company has revised the presentation and classification of the following in the Consolidated Balance Sheets to conform to current period presentation as follows:

The Company has revised the presentation and classification of the following in the Consolidated Statements of Cash Flows as follows:

Reverse Stock Split* –*In order to regain compliance with Nasdaq's continued listing requirements, the Company effected the following reverse stock splits:

All share and per share amounts, and exercise prices of stock options, and warrants in the Consolidated Financial Statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the reverse stock splits.

Preferred Stock Authorized– The Company is authorized to issue “blank check” preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock. See Note 9 “Capital Raises and Warrants for Common Stock” for additional information on the Series A Convertible Preferred Stock issued during the year-ended December 31, 2025.

Concentration of Credit Risk– Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in financial institutions. Although the cash accounts exceed the federally insured deposit amount, management does not anticipate nonperformance by the financial institutions. Management reviews the financial viability of these institutions on a periodic basis.

Cash and Cash Equivalents – The Company considers all highly liquid investments with maturities of three months or less at the date of acquisition to be cash equivalents. There are no restrictions on the Company’s cash and cash equivalents.

Trade Accounts Receivable and Provision for Current Expected Credit Losses –The Company provides credit, in the normal course of business, to its tobacco customers in the form of trade receivables. Credit is extended based on evaluation of a customer’s financial condition and collateral is not required. The Company maintains a provision for those trade receivables that it does not expect to collect. In accordance with Accounting Standards Codification (“ASC”) Topic 326, the Company accrues its estimated losses from uncollectable accounts receivable to the provision based upon recent historical experience, the length of time the receivable has been outstanding, other specific information as it becomes available, and reasonable and supportable forecasts not already reflected in the historical loss information. Provisions for current expected credit losses are charged to current operating expenses. Actual losses are charged against the provision when incurred. As of December 31, 2025 and 2024, the Company recorded a provision for credit losses against trade accounts receivable of $19 and $9, respectively.

Inventories– Inventories are valued at the lower of historical cost or net realizable value. Cost is determined using an average cost method for tobacco leaf inventory by crop year and raw materials inventory. Standard cost is primarily used for finished goods inventory. Inventories are evaluated to determine whether any amounts are not recoverable based on slow moving or obsolete condition and are written off or reserved as appropriate.

Property, Plant and Equipment*–*Plant and equipment are recorded at their acquisition cost and depreciated on a straight-line basis over their estimated useful lives. Leasehold improvements are depreciated on a straight-line basis over the term of the lease or the estimate useful life of the asset, whichever is shorter. Depreciation commences when the asset is placed in service. The following table shows estimated useful lives of property, plant and equipment:

Discontinued Operations - In determining whether a group of assets which has been disposed of (or is to be disposed of) should be presented as a discontinued operation, the Company analyzes whether the group of assets being disposed of represented a component of the entity; that is, whether it had historic operations and cash flows that were clearly distinguished (both operationally and for financial reporting purposes). In addition, the Company considers whether the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results.

The assets and liabilities of a discontinued operation held for sale, other than goodwill, are measured at the lower of carrying amount or fair value less cost to sell. The Company allocates interest to discontinued operations if the interest is directly attributable to the discontinued operations or is interest on debt that is required to be repaid as a result of the disposal transaction.

Intangible Assets – Definite lived intangible assets are recorded at cost and consist primarily of (1) expenditures incurred with third-parties related to the processing of patent claims and trademarks with government authorities, as well as costs to acquire patent rights from third-parties, (2) license fees paid for third-party intellectual property. The amounts capitalized relate to intellectual property that the Company owns or to which it has rights to use. The Company’s capitalized intellectual property costs are amortized using the straight-line method over the remaining statutory life of the patent assets in each of the Company’s patent families, which have estimated expiration dates ranging from 2026 to 2043. Periodic maintenance or renewal fees are expensed as incurred. Annual minimum license royalty fees are charged to expense. License fees paid for third-party intellectual property are amortized on a straight-line basis over the last to expire patents, which have expected expiration dates from 2028 through 2043.

The Company believes that costs associated with becoming a signatory to the master settlement agreement (“MSA”), costs related to the acquisition of a predicate cigarette brand, and tobacco brand related trademarks have indefinite lives. At each reporting period, the Company evaluates whether the nature and use of the asset continue to support the indefinite-lived classification.

Impairment of Long-Lived Assets–** **The Company reviews the carrying value of its long-lived assets at each reporting period to determine if impairment indicators are present in accordance with ASC 360-Property, plant, and equipment or ASC 350-Intangibles, Goodwill, and Other.

Definite lived intangible assets subject to amortization are reviewed for strategic importance and commercialization opportunity prior to expiration. If it is determined that the asset no longer supports the Company’s strategic objectives and/or will not be commercially viable prior to expiration, the asset is impaired. In addition, the Company will assess the expected future undiscounted cash flows for its intellectual property based on consideration of future market and economic conditions, competition, federal and state regulations, and licensing opportunities. If the carrying value of such assets are not recoverable, the carrying value will be reduced to fair value and the difference is recorded as impairment.

Indefinite-lived intangible asset carrying values are reviewed at least annually or more frequently if events or changes in circumstances indicate that it is more likely than not that an impairment exists. The Company first performs a qualitative assessment and considers its current strategic objectives, future market and economic conditions, competition, and federal and state regulations to determine if an impairment is more likely than not. If it is determined that an impairment is more likely than not, a quantitative assessment is performed to compare the asset carrying value to fair value.

Leases – The Company determines if an arrangement is, or contains, a lease at inception and classifies it as operating or finance. The Company has operating and finance leases for office and manufacturing facilities, machinery and vehicles. Finance lease assets and corresponding liabilities are not material to the Consolidated Financial Statements.

Any operating lease having a lease term greater than twelve months will be recognized on the Consolidated Balance Sheets as a right-of-use (“ROU”) asset with an associated lease obligation—all other leases are considered short-term in nature and will be expensed on a month-to-month basis. The ROU assets and lease obligations are recognized as of the commencement date at the net present value of the fixed minimum lease payments for the lease term. The lease term is determined based on the contractual conditions, including whether renewal options are reasonably certain to be exercised. The discount rate used is the interest rate implicit in the lease, if available, or the Company’s incremental borrowing rate which is determined using a base line rate plus an applicable spread.

Refer to Note 6 “Right-of-Use Assets, Lease Obligations, and Other Leases” for additional information.

Fair Value of Financial Instruments* *– FASB ASC 820 -Fair Value Measurements and Disclosures establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

A financial asset’s or a financial liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The Company estimates that the carrying amounts reported on the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, contract assets, promissory note receivable, accounts payable and accrued expenses, and notes and loans payable approximate their fair value due to the short-term nature of these items. Note 8 “Fair Value Measurements” contains additional information on assets and liabilities recorded at fair value in the Consolidated Financial Statements.

Mezzanine Equity - Where ordinary or preferred shares are determined to be conditionally redeemable upon the occurrence of certain events that are not solely within the control of the Company, and upon such event, the shares would become redeemable at the option of the holder, such as when the Company has not obtained shareholder approval for certain provisions of the outstanding preferred shares, they are classified as "mezzanine equity" (temporary equity). The purpose of this classification is to convey that such a security may not be permanently part of equity and could result in a demand for cash, securities or other assets of the entity in the future. The Company evaluates whether the contingent redemption provisions are probable of becoming redeemable to determine whether the carrying value of the redeemable convertible preferred shares are required to be remeasured to their respective redemption values. All instruments that are classified as mezzanine equity are evaluated for embedded derivative features by evaluating each feature against the nature of the host instrument (e.g., more equity-like or debt-like). Features identified as freestanding instruments or bifurcated embedded derivatives that are material are recognized separately as a derivative asset or liability in the Consolidated Financial Statements.

Warrants -The Company accounts for common stock warrants as either equity instruments, derivative liabilities, or liabilities in accordance with ASC 480,Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815,Derivatives and Hedging (“ASC 815”) depending on the specific terms of the warrant agreement. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

Warrants that the Company may be required to redeem through payment of cash or other assets outside its control are classified as liabilities pursuant to ASC 480 and are initially and subsequently measured at their estimated fair values. Changes in subsequent measurement fair value are recorded in Other income (expense), net of the Company’s Consolidated Statements of Operations and Comprehensive Loss. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of Capital in excess of par value at the time of issuance. For additional discussion on warrants, see Note 8 “Fair Value Measurements” and Note 9 “Capital Raises and Warrants for Common Stock”.

Deemed dividends associated with down round provisions (commonly referred to as “ratchets”) represent the economic transfer of value to holders of equity-classified freestanding financial instruments when these provisions are triggered. These deemed dividends are presented as a reduction in net income or an increase in net loss available to common shareholders and a corresponding increase to Capital in excess of par value resulting in no change to shareholders’ equity/deficit. See Note 9 “Capital Raises and Warrants for Common Stock.”

Debt Issued with Detachable Warrants -The Company considers guidance within ASC 470-20,Debt(ASC 470), ASC 480, and ASC 815 when accounting for the issuance of debt with detachable warrants. As described above under the caption*“Warrants”*, the Company classifies stock warrants as either equity instruments, derivative liabilities, or liabilities depending on the specific terms of the warrant agreement. In circumstances in which debt is issued with detachable warrants, the proceeds from the issuance of the debt are first allocated to the warrants at their full estimated fair value with a corresponding debt discount. The remaining proceeds, as further reduced by discounts (including those created by the bifurcation of embedded derivatives), is allocated to the debt. The Company accounts for debt as liabilities measured at amortized cost and amortizes the resulting debt discount from the allocation of proceeds, to interest expense using the effective interest method over the expected term of the debt instrument pursuant to ASC 835,Interest(ASC 835).

Embedded Derivatives* -*The Company considers whether there are any embedded features in debt instruments that require bifurcation and separate accounting as derivative financial instruments pursuant to ASC 815. Embedded derivatives are initially and subsequently measured at fair value.

The Company previously accounted for its convertible debt instrument, for which the conversion option is not bifurcated and accounted for separately as a derivative and is modified or exchanged in a transaction that is not accounted for as an extinguishment, the accounting was determined based on whether there is an increase or decrease in the fair value of the embedded conversion option. The fair value was calculated as the difference between the fair value of the embedded conversion option immediately before and after the modification or exchange. An increase in fair value was recorded as a decrease to the carrying amount of the debt instrument with a corresponding increase to Capital in Excess of Par Value.

Debt Issuance Costs and Discounts -Debt issuance costs and discounts associated with the issuance of debt by the Company are deferred and amortized over the term of the related debt. Debt issuance costs and discounts related to the Company’s Senior Secured Credit Facility and Subordinated Note are recorded as a reduction of the carrying value of the related debt and are amortized to Interest expense using the effective interest method over the period from the date of issuance to the maturity date, whichever is earlier. The amortization of debt issuance costs and discounts are included in Debt related charges included in interest expense in the Consolidated Statements of Cash Flows. Note 12 “Debt” contains additional information on the Company’s debt issuance costs and discounts.

Gain/Loss on Debt Extinguishment –Gain or loss on debt extinguishment is generally recorded upon an extinguishment of a debt instrument. Gain or loss on extinguishment of debt is calculated as the difference between the reacquisition price and net carrying amount of the debt, which includes unamortized debt issuance costs. Gains and losses on debt extinguishment are included as a component of Interest expense in the Consolidated Statements of Operations and Comprehensive Loss.

Related Party Transaction -A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. The Company may conduct business with its related parties in the ordinary course of business.

Beginning in the fourth quarter of 2024, the Company generated revenue from a related party contract manufacturing customer and during the years ended December 31, 2025 and 2024, private label cigarette revenue, net and corresponding contract asset from the related party were not material. The arrangement was terminated in April 2025.

Revenue Recognition– The Company recognizes revenue when it satisfies a performance obligation by transferring control of the product to a customer. For additional discussion on revenue recognition, refer to Note 16 “Revenue Recognition”.

Research and Development–** **Research and development costs are expensed as incurred.

Stock Based Compensation– The Company’s Omnibus Incentive Plan allows for various types of equity-based incentive awards. Stock based compensation expense is based on awards that are expected to vest over the requisite service periods and are based on the fair value of the award measured on the grant date. Vesting requirements vary for directors, officers, and employees. In general, time-based awards fully vest afterone year for directors and vest in equal annual installments over athree-year period for officers and employees. Performance-based awards vest upon achievement of certain milestones. Forfeitures are accounted for when they occur.

Income Taxes–** **The Company recognizes deferred tax assets and liabilities for any basis differences in its assets and liabilities between tax and U.S. GAAP reporting, and for operating loss and credit carryforwards.

As a result of the Company’s history of cumulative net operating losses and the uncertainty of their future utilization, the Company has established a valuation allowance to fully offset its net deferred tax assets associated with definite lived assets as of December 31, 2025, and 2024.

The Company’s federal and state tax returns for the years ended December 31, 2022 through December 31, 2024 are currently open to audit under the statutes of limitations. There are no pending audits as of December 31, 2025.

Earnings (Loss) Per Common Share– Basic earnings (loss) per common share is computed using the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed assuming conversion of all potentially dilutive securities, using the treasury-stock method or the if-converted method, as applicable. Potential common shares outstanding are excluded from the computation if their effect is anti-dilutive. Refer to Note 15 “Earnings (Loss) Per Common Share” for additional information.

Gain and Loss Contingencies– The Company establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency related to a litigation or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. When a loss contingency related to a litigation or regulatory matter is deemed to be both probable and estimable, the Company will establish an accrued liability with respect to such loss contingency and record a corresponding amount of related expenses. The Company will then continue to monitor the matter for further developments that could affect the amount of any such accrued liability.

The Company maintains general liability insurance policies for its facilities. Under the terms of our insurance policies, in the case of loss to a property, the Company follows the guidance in ASC 610-30,Other Income —Gains and Losses on Involuntary Conversions, for the conversion of nonmonetary assets (the properties) to monetary assets (insurance recoveries). Under ASC 610-30, once the recovery is deemed probable the Company recognizes an asset for the insurance recovery receivable in the Consolidated Balance Sheets, with corresponding income that is offsetting to the casualty losses recorded in the Consolidated Statements of Operations and Comprehensive Loss. If the insurance recovery is less than the amount of the casualty charges recognized, the Company will recognize a loss whereas if the insurance recovery is greater than the amount of casualty loss recognized, the Company will only recognize a recovery up to the amount of the casualty loss and will account for the excess as a gain contingency in accordance with ASC 450-30,*Gain Contingencies.*Business interruption insurance is treated as a gain contingency. Gain contingencies are recognized when earned and realized, which typically will occur at the time of final settlement or when cash is received.

Refer to Note 11 “Commitments and Contingencies”.

Recent Accounting Pronouncement(s)* –*

In November 2023, the FASB issued ASU 2023-07,Segment Reporting (Topic 280)-Improvements to Reportable Segment Disclosures. The ASU enhances disclosure of significant segment expenses by requiring disclosure of significant segment expenses regularly provided to the chief operating decision maker, extend certain annual disclosures to interim periods, and permits more than one measure of segment profit or loss to be reported under certain conditions. The amendments in ASU 2023-07 were adopted by the Company effective January 1, 2024 for the fiscal year-ended December 31, 2024 and interim reports beginning in fiscal year 2025. See Note 17 “Segment and Geographic Information.”

In December 2023, the FASB issued ASU 2023-09,* Income Taxes (Topic 740)-Improvements to Income Tax Disclosures.*The ASU requires additional quantitative and qualitative income tax disclosures to allow readers of the consolidated financial statements to assess how the Company’s operations, related tax risks and tax planning affect its tax rate and prospects for future cash flows. The amendments in ASU 2023-09 were retrospectively adopted by the Company for the fiscal year-ended December 31, 2025. See Note 13 “Income Taxes.”

Accounting Guidance Not Yet Elected or Adopted

In November 2024, the FASB issued an accounting standards update, ASU 2024-03, which requires new tabular disclosures in the notes to consolidated financial statements, disaggregating certain cost and expense categories within relevant captions on the Consolidated Statements of Operations and Comprehensive Loss. The prescribed cost and expense categories requiring disaggregated disclosures include purchases of inventory, employee compensation, depreciation and intangible asset amortization, along with certain other expense disclosures already required by U.S. GAAP that would need to be integrated within the new tabular disaggregated expense disclosures. Additionally, the amendments also require the disclosure of total selling expenses and an entity's definition of those expenses. The amendments in ASU 2024-03 are effective for annual periods beginning after December 15, 2026, which for the Company would be the fiscal year ending December 31, 2027, and for subsequent interim periods. Early adoption is permitted and the amendments should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating the impact the new accounting standard will have on its expense disclosures in the notes to the consolidated financial statements.

In July 2025, the FASB issued an accounting standards update, ASU 2025-05, which creates a new optional practical expedient related to the estimation of future expected credit losses on accounts receivable. If elected, this expedient removes the requirement, when estimating expected credit losses, to consider changes in forecasted macroeconomic conditions, such as changes in unemployment rates or gross domestic product growth. Instead, companies electing the expedient may assume that current conditions as of the balance sheet date will not change for the remaining life of the asset. The amendments in ASU 2025-05 are effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods, which for the Company would be the fiscal first quarter ending March 31, 2026. Early adoption is permitted and the amendments should be applied on a prospective basis. The Company is currently evaluating the impact the new accounting standard could have on its estimates for future expected credit losses if the Company chooses to elect the optional practical expedient.

We consider the applicability and impact of all ASUs. If the ASU is not listed above, it was determined that the ASU was either not applicable or would have an immaterial impact on our financial statements and related disclosures.

NOTE 2. – DISCONTINUED OPERATIONS AND DIVESTITURES

Discontinued Operations and Divestiture of GVB Hemp/Cannabis Business

On November 20, 2023, the Company entered into an Equity Purchase Agreement (the “Purchase Agreement”) with Specialty Acquisition Corporation, a Nevada corporation (the “Buyer”) pursuant to which the Company agreed to sell substantially all of its equity interests in its GVB hemp/cannabis business (the “Purchased Interests”) for a purchase price of $2,250 (the “Purchase Price”).

On December 22, 2023, the Company and the Buyer entered into an Amendment to Equity Purchase Agreement (the “GVB Amendment”) pursuant to which the Company and the Buyer increased the Purchase Price to $3,100 (the “New Purchase Price”) which consisted of (i) a cash payment of $1,100 to the Company’s senior lender, on behalf of and at the direction of the Company and (ii) a 12% secured promissory note issued by the Buyer to the Company’s senior lender, on behalf of and at the direction of the Company, in an aggregate principal amount of $2,000 (the “2023 GVB Note”). The 2023 GVB Note was repaid in full to the senior lender (see Note 12 “Debt”).

The parties previously agreed that the Company would retain any insurance proceeds received in connection with the fire at the Grass Valley manufacturing facility, if any (the “Insurance Proceeds”) and up to the first $2,000 of the Insurance Proceeds would be used to offset the Buyer’s portion of certain shared liabilities. Pursuant to the terms of the GVB Amendment, the Buyer will be entitled to offset its portion of certain shared contingent liabilities up to $1,000; provided that, the Insurance Proceeds exceed $5,000. The Insurance Proceeds amounted to $9,500 (see Note 11 “Commitments and Contingencies”).

For disposal transactions, a component of an entity that is anticipated to be sold in the future is reported in discontinued operations after it meets the criteria for held-for-sale classification, and if the disposition represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results. The Company evaluated the quantitative and qualitative factors related to the expected sale of the GVB hemp/cannabis business and exit from the hemp/cannabis space, and concluded that it met the held-for-sale criteria and that all other conditions for discontinued operations presentation were met on November 30, 2023. Property, plant and equipment are not depreciated, and intangibles assets are not amortized once classified as held-for-sale.

As a result, the operating results of the hemp/cannabis disposal group have been classified as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss for all periods presented and the assets and liabilities of the hemp/cannabis disposal group have been classified as assets and liabilities of discontinued operations in the Consolidated Balance Sheets at December 31, 2025 and 2024, respectively.

The assets and liabilities of a discontinued operation held for sale, other than goodwill, are measured at the lower of carrying amount or fair value less cost to sell. Following the provision for impairment charges recorded during the third quarter of 2023, the Company concluded the carrying value of assets and liabilities of the GVB hemp/cannabis business approximated fair value when deemed held for sale based on the purchase price consideration of $3,100.

As of December 31, 2024, all assets and liabilities of the hemp/cannabis disposal group were presented as current in the Consolidated Balance Sheets as management believed the remaining disposal and exit from hemp/cannabis was deemed probable and will occur within one year. On May 6, 2025, the Company closed the sale of the Needle Rock Farms land property and received cash proceeds of $770. Accordingly, there areno remaining assets held for sale on the Consolidated Balance Sheets as of December 31, 2025. The carrying amounts of the hemp/cannabis disposal group assets and liabilities that were classified as assets and liabilities of discontinued operations held for sale were as follows:

Net income from discontinued operations for the years ended December 31, 2025 and 2024 was as follows:

During the years ended December 31, 2025 and 2024, the Company settled outstanding obligations which resulted in reversals of previously accrued liabilities of $526 and $1,561, respectively.

The Company allocates interest to discontinued operations if the interest is directly attributable to the discontinued operations or is interest on debt that is required to be repaid as a result of the disposal transaction. Interest expense included in discontinued operations reflects an estimate of interest expense related to the principal balance of debt that is required to be repaid with the proceeds from the sale of the GVB hemp/cannabis business.

The components of discontinued operations “Other operating expenses, net” were as follows:

During the year ended December 31, 2025, Other operating expense, net was comprised of $400 provision for credit loss for the 2025 GVB promissory note (see Note 12 “Debt”), $293 of impairment charges related to the sale of Needle Rock Farms land property, offset by $9,500 gain related to the Dorchester insurance settlement (see Note 11 “Commitments and Contingencies").

Cash flow information from discontinued operations for the years ended December 31, 2025 and 2024 was as follows:

NOTE 3. – INVENTORIES

Inventories at December 31, 2025 and 2024 consisted of the following:

As of December 31, 2025 and 2024, the Company’s proprietary reduced nicotine content tobacco leaf inventory was valued within raw materials at$2,334 and$200, respectively.

NOTE 4. – INTANGIBLE ASSETS, NET

Our intangible assets at December 31, 2025 and 2024 consisted of the following:

Aggregate intangible asset amortization expense comprises of the following:

During the years ended December 31, 2025 and 2024, the Company incurred impairment charges of $111 and $68, respectively, related to patents that are no longer being pursued. In addition, the Company disposed of $39 of trademark costs due to change in strategy.

The impairment charges are included in Other operating expenses, net on the Company’s Consolidated Statements of Operations and Comprehensive Loss.

Estimated future intangible asset amortization expense based on the carrying value as of December 31, 2025 is as follows:

NOTE 5. – PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net at December 31, 2025 and 2024 consisted of the following:

Depreciation expense was $479 and $585 for the years ended December 31, 2025 and 2024, respectively.

NOTE 6. – RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS, AND OTHER LEASES

The Company leases a manufacturing facility in Mocksville, North Carolina.

On January 1, 2023, the Company signed a lease agreement for an inventory storage facility. The lease had an initial monthly base rent of$15 (escalating 3.0% annually after the first year), an initial term of 36 months – withtwo twenty-four-month optional renewal options at the Company’s discretion. The Company did not renew its extension option and therefore the lease has ended as of December 31, 2025.

On March 31, 2023, the Company extended the lease terms for its manufacturing facility and corporate headquarters in Mocksville, North Carolina. As a result of this lease modification, the Company re-measured the lease liability and adjusted the ROU asset on the modification dates, including reassessment of renewal options.

The following table summarizes the Company’s discount rate and remaining lease terms as of December 31, 2025:

Future minimum lease payments as of December 31, 2025 are as follows:

Operating lease costs for the years ended December 31, 2025 and 2024, were $339 and $419, respectively.

Supplemental cash flow information for leases for fiscal years 2025 and 2024 is comprised of the following:

NOTE 7. – NOTES AND LOANS PAYABLE

The table below outlines our notes payable balances as of December 31, 2025 and 2024:

Insurance loans payable

During the second quarter of 2025, the Company renewed its Director and Officer (“D&O”), property and general liability insurances for aone-year policy premium totaling $1,023. The Company paid $205 as a premium down payment and financed the remaining $818 of policy premiums over nine months at a 6.6% annual percentage rate.

During the second quarter of 2024, the Company renewed its D&O insurance for aone-year policy premium totaling $866. The Company paid $147 as a premium down payment and financed the remaining $719 of policy premiums overten months at 8.3% annual percentage rate.

NCSU promissory note

On October 31, 2025, the Company entered into a note payable with NCSU in the amount of $632 at 7% simple fee interest rate payable in equal installments over 60 months. The note payable was issued as settlement for all remaining outstanding obligations owed to NCSU related to license fees, annual royalties, and intellectual property and patent maintenance.

Estimated future principal payments to be made under the above notes and loans payable as of December 31, 2025 are as follows:

NOTE 8. – FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Fair value measurement standards apply to certain financial assets and liabilities that are measured at fair value on a recurring basis (each reporting period). The Company does not have any nonfinancial assets or liabilities that are measured at fair value on a recurring basis.

The following table presents information about our liabilities measured at fair value at December 31, 2024, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

Warrants

The following table sets forth a summary of the changes in fair value of the Company’s common stock warrants accounted for as liabilities (Level 3):

The Omnia warrants were measured at December 31, 2024 using a Monte Carlo valuation model with the following assumptions:

The warrants are measured at fair value using certain estimated factors which are classified within Level 3 of the valuation hierarchy. Significant unobservable inputs that are used in the fair value measurement of the Company’s warrants include the volatility factor, anti-dilution provisions, and contingent put option. Significant increases or decreases in the volatility factor would have resulted in a significantly higher or lower fair value measurement. Additionally, a change in probability regarding the anti-dilution provision or put option would have resulted in a significantly higher or lower fair value measurement. The Omnia 2023 warrants were extinguished and the Omnia 2024 warrants were issued in April 2024. The put option of the 2024 Omnia Warrants was fully exercised on September 29, 2025, in the amount of$1,231 and paid on October 2, 2025. See Note 12 “Debt” and Note 9 “Capital Raises and Warrants for Common Stock” for further details.

Derivative Liability

The following table sets forth a summary of the changes in fair value of the Company’s derivative related to the bifurcated conversion option on the Senior Secured Credit Facility debentures accounted for as liabilities (Level 3):

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Fair value standards also apply to certain assets and liabilities that are measured at fair value on a nonrecurring basis. During the years ended December 31, 2025 and 2024, the Company did not have any financial assets or liabilities measured at fair value on a nonrecurring basis.

NOTE 9. – CAPITAL RAISES AND WARRANTS FOR COMMON STOCK

The following table summarizes the Company’s warrant activity:

The following table summarizes the Company’s outstanding warrants as of December 31, 2025:

The incremental value of modifications to financial instruments, such as warrants or convertible preferred stock, is determined based on Monte-Carlo, Binomial Lattice, or Black-Scholes valuation models. Amounts recorded as Deemed dividends in determining Net loss available to common shareholders in the Statements of Operations and Comprehensive Loss are as follows:

August 2025 Series A Convertible Preferred Stock Offering

On August 22, 2025, the Company and certain investors entered into a securities purchase agreement with respect to the offer and sale of $10,650 of shares of Series A Convertible Preferred Stock, stated value $1,000 per share (the “Series A Preferred Stock”), initially convertible into an aggregate of 324,201 shares of the Company’s common stock at an initial conversion price of $32.85 (subject to adjustment in certain circumstances with a floor price of $5.91) and warrants to purchase shares of Common Stock pursuant to a registered direct offering. The Investors purchased $10,650 of shares of Series A convertible preferred stock and warrants. The warrants are immediately exercisable at an exercise price of $1.97 per share of common stock and expire on the date that isfive years after issuance. The net proceeds to the Company from the offering was $9,893. In addition, the Company issued placement agent warrants to purchase an aggregate of 37,843 shares of common stock with substantially the same terms as the Warrants, except that the exercise price of the Placement Agent Warrants is $32.55. Following the offering,1,000 shares of Series A Preferred Stock were converted into 30,443 shares of common stock , with 9,650 shares remaining outstanding.

The shares of Series A Preferred Stock have no voting rights, except to the extent required by the applicable law and certain protective provisions. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the then holders of the Series A Preferred Stock are entitled to receive out of the assets available for distribution to stockholders of the Company an amount equal to either (i)100% of the stated value or (ii) the amount the holder would receive if the Series A Preferred Stock had been converted into common stock; in each instance, prior to and in preference to the common stock or any other series of preferred stock. The Series A Preferred Stock is convertible into common stock at any time at the floor conversion price of $5.91. The Series A Preferred Stock is convertible at the then-effective Series A Conversion Price at the option of the holder at any time and from time to time. If, at any time from and after issuance, (i) the closing price of the common stock equals or exceeds 200% of the then Conversion Price for 10 consecutive trading days and (ii) the daily dollar trading volume for the common stock exceeds $1,000,000 per day during such period, the Company may require the holders to convert the Series A Preferred Stock into Common Stock at the Series A Conversion Price.

On December 17, 2025, the Company entered into an Omnibus Amendment and Waiver (the “Amendment Agreement”) with the holders of the outstanding Series A Preferred Stock to amend Series A Preferred Stock, the warrants and certain placement agent warrants issued in connection with the August 2025 offering described above.

Pursuant to the Amendment Agreement, the Company and the holders agreed to provide an alternative conversion feature to the Certificate of Designation whereby the Series A Preferred Stock can be converted at a conversion price equal to 85% of the lowest VWAP in any of thetwenty trading days preceding the conversion. Pursuant to the Amendment Agreement, the Company also agreed to provide certain anti-dilution adjustments to the exercise price of the warrants and placement agent warrants to provide protection against future dilutive issuances. See Note 18 “Subsequent Events.”

Following execution of the Amendment Agreement, the Company re-evaluated conclusions on classification and embedded features, resulting in no changes from the date of issuance of the Series A Preferred Stock, as further described below. The impacts of the Amendment Agreement are accounted for as an extinguishment, as the fair value of the instruments before and after modification increased by greater than 10%, resulting in the incremental value being recorded within Capital in excess of par value as a deemed dividend of $4,679.

Subsequent to December 31, 2025, on March 24, 2026, in connection with an offering of newly issued Series B Convertible Preferred Stock, the Company redeemed all 9,650 shares of Series A Preferred Stock at par. See Note 18 “Subsequent Events.”

Mezzanine Classification

ASC 480-10-S99-3A(2) of the SEC's Accounting Series Release No. 268 ("ASR 268") requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer. Preferred securities that are mandatorily redeemable are required to be classified by the issuer as liabilities whereas under ASR 268, a company should classify a preferred security whose redemption is contingent on an event not entirely in control of the issuer as mezzanine equity. The Series A convertible preferred stock is redeemable at the option of the holder if "shareholder approval" (as defined in the agreements) is not obtained, which is not solely within control of the Company, and accordingly, the Company determined that mezzanine treatment is appropriate for the Series A convertible preferred stock. The Series A convertible preferred stock was initially measured at the amount of total proceeds less any offering costs and proceeds allocated to the accompanying warrants based on relative fair value, and is presented as such in our Consolidated Balance Sheet as of December 31, 2025. Further, the Company evaluated all embedded features against an equity-like host and concluded none of the embedded features identified within the Series A convertible preferred stock require bifurcation as they are either deemed clearly and closely related or not net settleable as a result of a lack of an active market.

Series A convertible preferred stock transaction activity is summarized in the table below:

April 2025 Warrant Inducement and Amendment

On April 29, 2025, the Company commenced a warrant inducement offering with the holders of outstanding warrants to purchase 32,093 shares of common stock (the “Existing Warrants”), which are exercisable for an equal number of shares of common stock at an exercise price of$1,484.25. The Company offered the holders of the Existing Warrants an inducement period whereby the Company agreed to issue new warrants (the “Inducement Warrants”) to purchase up to a number of shares of common stock equal to 100% of the number of shares of common stock issued pursuant to the exercise by the holders of the Existing Warrants, for cash, at a reduced exercise price equal to $272.25. Each holder agreed to exercise 60% of their Existing Warrants immediately (the “Initial Exercise”) and will exercise the remaining 40% within 30 calendar days following the Effectiveness Date (as defined in the agreements), provided that the Company’s stock price at such time equals or exceeds 90% of the Nasdaq Minimum Price on that date (the “Additional Exercise”).

The net proceeds to the Company from the Initial Exercise, after deducting placement agent fees and the Company’s offering expenses were$5,075. In connection with the Initial Exercise, the Company issued 19,970 Inducement Warrants. Of the aggregate net proceeds, the Company was obligated under the Debentures of the convertible senior secured credit facility to repay outstanding debt in the amount of $1,017. The Company also measured the fair value of the Existing Warrants before and after the modification to decrease the cash exercise price, and concluded there was no incremental fair value to be recorded as issuance costs due to the alternative cashless exercise features of the warrants.

Additionally, on April 29, 2025, the Company entered into amendments with the holders of the outstanding warrants issued on October 24, 2024, which adjusted the provisions of the warrants regarding recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock. The anti-dilution adjustment resulted in the issuance of an additional 94,579 October 2024 PIPE Warrants and October 2024 PIPE Placement Agent warrants.

October 2024 PIPE Offering

On October 23, 2024, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of prefunded warrants to purchase shares of common stock of the Company and warrants to purchase shares of Common Stock pursuant to a private placement. The investors purchased approximately$3,039 of prefunded warrants and warrants, consisting of prefunded warrants to purchase an aggregate of 609 shares of common stock and warrants to purchase an aggregate of 914 shares of common stock, at a purchase price of$4,992 per prefunded warrant and accompanying warrant. The prefunded warrants are immediately exercisable upon issuance. The Company also issued an aggregate of 49 placement agent warrants.

The net proceeds to the Company from the offering, after deducting placement agent fees and the Company’s offering expenses, are approximately$2,909.

October 2024 Registered Direct Offering

On October 11, 2024, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of shares of common stock of the Company pursuant to a registered direct offering and a private placement of warrants to purchase shares of common stock. The investors purchased approximately$2,140 of shares and warrants, consisting of an aggregate of 307 shares of common stock and warrants to purchase 613 shares of common stock, at a purchase price of$6,986.25 per share and accompanying warrant. The Company also issued an aggregate of 19 placement agent warrants.

The net proceeds to the Company from the Offering, after deducting the placement agent fees and the Company’s offering expenses were$2,002.

2024 Warrant Inducement

On September 29, 2024, the Company commenced a warrant inducement offering with the holders of outstanding warrants to purchase 110 shares of common stock, consisting of: (i) common stock purchase warrants to purchase 70 shares of common stock issued on or about November 29, 2023, and (ii) common stock purchase warrants to purchase 40 shares of common stock issued on or about April 9, 2024 ((i) and (ii) collectively, the “2024 Existing Warrants”). The net proceeds to the Company from the 2024 Warrant Inducement, after deducting placement agent fees and the Company’s offering expenses were$1,073. In connection with the 2024 Warrant Inducement, the Company issued 219 new warrants. The Company also issued an aggregate of 7 placement agent warrants.

September 2024 Registered Direct Offering

On September 27, 2024, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of shares of common stock of the Company pursuant to a registered direct offering and a private placement of warrants to purchase shares of common stock. The investors purchased approximately$1,175 of shares and warrants, consisting of an aggregate of 111 shares of Common Stock and warrants to purchase 222 shares of common stock, at a purchase price of$30.78 per share and accompanying warrant. The Company also issued an aggregate of 7 placement agent warrants.

The net proceeds to the Company from the Offering, after deducting placement agent fees and the Company’s offering expenses were$1,054.

April 2024 Registered Direct Offering

On April 8, 2024, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of shares of common stock (or pre-funded warrants in lieu of common stock) pursuant to a registered direct offering and a private placement of warrants to purchase shares of common stock. The investors purchased approximately $4,237 of shares and warrants, consisting of an aggregate of 40 shares of common stock, pre-funded warrants to purchase 3 shares of common stock and warrants to purchase 43 shares of common stock, at a purchase price of $99,670.50 per share and accompanying warrant. The Company also issued an aggregate of 3 placement agent warrants.

The net proceeds to the Company from the Offering, after deducting placement agent fees and the Company’s estimated offering expenses, were approximately $3,913.

Other Equity Financings

Pursuant to a Regulation A offering of Form 1-A, the Company entered into subscription agreements with certain accredited investors and high net worth individuals, pursuant to which the Company issued and sold to the investors 210 shares of its Common Stock, par value $0.0001 per share of the Company at a price of $26,547.75 per share for net proceeds to the Company of $5,208, net of offering costs of $332.

The shares that were offered and sold above or at-the-market under Nasdaq rules and pursuant to the Company’s Form 1-A, initially filed by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended, on August 2, 2024 and qualified on August 13, 2024.

Private Placement of Warrants

During the third quarter of 2024, the Company and certain investors entered into warrant purchase agreements related to the private placement of 318 warrants to purchase an equal number of shares of common stock at a purchase price of $0.00001 per warrant.

Other Agreements

During the second quarter of 2024, the Company settled an aggregate of $1,192 of outstanding indebtedness under various commercial agreements for an aggregate of 15 shares of common stock at an effective average price per share of $99,670.50.

During the third quarter of 2024, the Company settled an aggregate of $525 of outstanding indebtedness under various commercial and licensing agreements for an aggregate of 38 shares of common stock at an effective average price per share of $13,810.35.

ATM Offering

On November 4, 2025, the Company established an at-the-market common equity offering program (“ATM Program”), through which it had the ability to offer and sell shares of common stock having an aggregate gross sales price of up to $25,000. The Company will pay a 3.00% sales commission based on the gross proceeds of the sales price per share of common stock sold. No proceeds were raised under the ATM Program in the year ended December 31, 2025. See Note 18 “Subsequent Events.”

NOTE 10. – RETIREMENT PLAN

The Company sponsors a defined contribution plan under Internal Revenue Code Section 401(k). The plan covers all employees who meet the minimum eligibility requirements. Under the 401(k) plan eligible employees are allowed to make voluntary deferred salary contribution to the plan, subject to statutory limits. The Company has elected to make Safe Harbor Non-Elective Contributions to the plan for eligible employees in the amount of three percent (3%) of the employee’s compensation. Total employer contributions to the plan for the years ended December 31, 2025 and 2024 amounted to $140 and $152, respectively.

NOTE 11. – COMMITMENTS AND CONTINGENCIES

License and growing agreements*–*The Company has entered into various license and tobacco growing agreements (the “Agreements”) with various counter parties in connection with the Company’s plant biotechnology business relating to tobacco. The schedule below summarizes the Company’s commitments, both financial and other, associated with each Agreement. Costs incurred under the Agreements are generally recorded as research and development expenses on the Company’s Consolidated Statements of Operations and Comprehensive Loss.

Litigation* - The Company is subject to litigation arising from time to time in the ordinary course of its business. The Company does not expect that the ultimate resolution of any pending legal actions will have a material effect on its consolidated results of operations, financial position, or cash flows. However, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which the Company currently believes to be immaterial, will not become material in the future. In accordance with applicable accounting guidance, the Company establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency related to a litigation or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. When a loss contingency related to a litigation or regulatory matter is deemed to be both probable and estimable, the Company will establish an accrued liability with respect to such loss contingency and record a corresponding amount of related expenses. The Company will then continue to monitor the matter for further developments that could affect the amount of any such accrued liability.* **

Shareholder Derivative Cases

On February 6, 2019, a shareholder derivative claim was filed against the Company and certain current and former directors and officer in the United States District Court for the Eastern District of New York (Case No. 1:19 cv 00748) alleging breaches of fiduciary duty and other similar claims . On March 4, 2025, the parties entered into a Stipulation and Agreement of Settlement to fully resolve all claims that was finally approved on July 16, 2025. As part of the settlement, the Company agreed to certain corporate governance reforms as part of the settlement. The settlement also includes an amount of$768 related to plaintiffs’ attorney and legal fees that is fully covered and paid by the Company’s insurance. Accordingly, the Company has released its accrual for litigation settlement and corresponding indemnification receivable on the Consolidated Balance Sheets during 2025.

Insurance Litigation

In November 2022, there was a fire at the Company’s Grass Valley manufacturing facility in Oregon, which resulted in a total loss of the facility. The Company submitted an insurance claim with Dorchester Insurance Company, Ltd. (“Dorchester”) for casualty loss and business interruption coverage which was acknowledged on November 23, 2022. Dorchester funded $5,000 of casualty loss insurance but has failed to issue any payments in connection with the Company’s business interruption claim.

On July 19, 2023, the Company filed a Complaint against Dorchester in the United States District Court for the District of Oregon, Pendleton Division, Case No. 2:23-cv-01057-HL. The parties fully resolved the matter for$9,500 pursuant to a Settlement Agreement and Release executed on September 18, 2025. Payment was received on October 29, 2025.

*KeyGene Dispute

On April 11, 2024 the Company received a Request for Arbitration from Keygene N.V. in connection with the Company’s termination of various framework collaborative research agreements. The parties fully resolved the matter pursuant to a Settlement Agreement and Mutual Release executed on April 25, 2025.

Cookies Retail Products Dispute

On October 23, 2024, Cookies Retail Products, LLC (“CRP”) filed a complaint against the Company, a subsidiary of the Company (“PTB”), Cookies Creative Consulting & Promotions, Inc. (“CCC”), Cookies SF, LLC (“CSF”), GMLC WLNS, LLC (“GMLC”) and other defendants, Case No. 24STCV27828, Superior Court of California, County of Los Angeles.

The complaint alleges three counts against all defendants: Count I for Breach of Contract related to a Settlement Agreement entered into between CRP, Paul Rock, CSF, GMLC, CCC and PTB (the “Settlement Agreement”), and a Purchase Agreement entered into between PTB and CRP (the “Purchase Agreement”); Count II for Fraud – False Promise related to the Settlement Agreement and Purchase Agreement; and Count III for Violation of Penal Code Section 496 related to the Purchase Agreement and a Licensing and Distribution Agreement between GMLC, CCC and PTB. CRP is seeking monetary damages.

CRP filed a first amended complaint on March 12, 2025, restating the same three counts. The Company filed a Special Motion to Strike the first amended complaint on March 27, 2025. At an April 28, 2025 hearing, the Court granted the Company’s Special Motion to Strike as to Count II and Count III in CRP’s first amended complaint, leaving only Count I. CRP will not have an opportunity to amend its complaint to replead Count II or Count III. On May 15, 2025, the Court also denied an application that had been filed by CRP for a right to attach order and writ of attachment against PTB. Discovery is ongoing. Trial date is set for October 27, 2026.

Employee Dispute

On November 19, 2024, a former employee of the Company filed a complaint against the Company, two subsidiaries of the Company, and numerous other former subsidiaries of the Company that were part of the hemp/cannabis division that was divested in December 2023. The complaint was filed in the Circuit Court of the State of Oregon, County of Multnomah, Case No. 24CV55110.

The complaint alleges three counts against all defendants: Count I for Premises Liability; Count II for Personal Injury – Employer Liability Law, and Count III for Negligence/Negligence Per Se, all related to the November 2022 fire at the Company’s Grass Valley manufacturing facility in Oregon. The former employee is seeking monetary damages.

The Company has moved to dismiss all counts of the complaint directed to the Company and its subsidiaries. In the event the counts are not dismissed, the Company believes it has substantial defenses to the claims and intends to defend itself vigorously.

NOTE 12. – DEBT

The Company had a senior secured credit facility (the “Senior Secured Credit Facility”), which consisted of debentures (the “Debenture”) and a subordinated promissory note (the “Subordinated Note”). The Subordinated Note was extinguished in April 2024 and the Senior Secure Credit Facility was repaid in full and terminated in September 2025, each described below.

Debt related to the Senior Secured Credit Facility as of December 31, 2025 and 2024 consisted of the following:

Debentures

On March 3, 2023, the Company entered into a Securities Purchase Agreement with each of the purchasers party thereto (collectively, the “Purchasers”) and JGB Collateral, LLC, as collateral agent for the Purchasers (the “Agent”) which pursuant to the agreement, the Company sold 5% original issuance discount senior secured debentures with an aggregate principal amount of $21,053. The Debentures bear interest at a rate of 7% per annum, payable monthly in arrears as of the last trading day of each month and on the maturity date. The Debentures had a maturity date of March 3, 2026.

In connection with the sale of the Debentures, the Company issued warrants to purchase up to 7 shares of common stock for an exercise price of $950,130 per share (the “JGB Warrants”), which had an initial fair value of $4,475 net of issuance costs of $139. On June 22, 2023, as a result of the June 19, 2023 offering, the Company’s outstanding JGB warrants to purchase up to 7 shares of the Company’s common stock for an exercise price of $950,130 per share were automatically adjusted to be $637,295 exercise price for up to 11 shares of common stock. There wereno further anti-dilution adjustments on such warrants.

On October 16, 2023, the Company entered into a Waiver and Amendment Agreement (the “October Amendment”) with each of the subsidiaries of the Company executing the Debentures, the Holders and the Agent, pursuant to which, among other things, (a) the Holders waived an event of default under Section 7(d) of the Debentures which required the Company to achieve revenue of at least $18,500 for the quarter ended September 30, 2023 (the “waiver”), (b) the parties agreed to amend Schedule E of the Debentures to reduce the Revenue Target (as such term is defined in the Debentures), for the quarter ended December 31, 2023, to $15,500, and (c) the Company agreed to release to the Purchasers the $7,500 that the Company was required to maintain in a separate account (the “Escrow Funds”) which Escrow Funds were applied to, and reduce, the outstanding principal amount of the Debentures on a dollar-for-dollar basis.

As additional consideration for the waiver, the Company agreed to assign, transfer and convey to the Agent, the Company’s entire right, title and interest in and to (i) the Promissory Note made by J&N Real Estate Company, L.L.C. (“J&N”) payable to the Company in the principal amount of $3,800 and (ii) the Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated June 30, 2021, between J&N, as borrower, for the benefit of the Company, as lender (collectively, the “Pledged Indebtedness”). Upon assignment of the Pledged Indebtedness, the Company recognized the $2,600 of consideration in exchange to be applied as a $2,000 reduction of the Put Price (as defined below), $600 reduction of the outstanding principal amount of Debentures and $895 loss on sale of financial asset.

In connection with the waiver, the Company and Holders agreed to exercise the outstanding put provision to redeem 4 warrants for an aggregate put price equal to $2,500 (the “Put Price”), which was concurrently reduced by $2,000, as described above, with the remaining $500 payable by the Company on the Maturity Date recorded as Other long-term liabilities on the Consolidated Balance Sheets. No cash was exchanged as a result of executing the October 2023 Amendment.

Subsequently, on December 22, 2023, the Company, the Holders and the Agent entered into an Amendment Agreement (the “December 2023 Amendment”) pursuant to which the Holders and the Agent consented to the Purchase Agreement, as amended by the GVB Amendment. In consideration of the Holders and the Agents’ consent, the Company agreed to (i) pay to the Agent, a cash payment of $2,200 to reduce the outstanding principal of the Debentures (which includes the cash portion of the New Purchase Price paid directly to Agent by Buyer which consists of a cash payment of $1,100 and an additional $1,100 paid by the Company), (ii) a 12% secured promissory note issued to the Company’s senior lender, on behalf of and at the direction of the Company, in an aggregate principal amount of $2,000 (the “2023 GVB Promissory Note”), (iii) assign the GVB Insurance Proceeds to the Agent until the outstanding aggregate principal amount of the Debentures, plus accrued and unpaid interest, has been repaid in full; provided that the first $1,000 of Insurance Proceeds in excess of $5,000 shall be applied as stated in the agreement, and (iv) post-closing enter into a deed in lieu of foreclosure agreement with respect to 224 acres of real property in Delta County, Colorado commonly known as Needle Rock Farms, resulting in a non-monetary exchange yielding additional debt reduction of $1,000.

Effective June 24, 2024, GVB Biopharma (“GVB”), the Company’s former subsidiary, made a scheduled principal and interest payment against the Company’s outstanding indebtedness to JGB, reducing the Company’s total outstanding principal indebtedness with JGB by$1,500. The remaining$500 payable by GVB under the 2023 GVB Promissory Note was initially extended to December 31, 2024, and subsequently to March 31, 2025. As of March 31, 2025, the 2023 GVB Promissory Note was in default with respect to payment at maturity of the contractual term and accordingly an allowance for credit loss was initially recorded as of March 31, 2025 in the amount of$500.

In connection with the September 18, 2025 full repayment of the debentures (as described below), the Company entered into a new 2025 GVB Promissory Note with GVB in the amount of$500, payable in installments of$100 each on November 1, 2025, January 1, 2026 and February 1, 2026, with the remaining balance of$200 payable over a term of 31 monthly installments thereafter. The Company received the first payment on the 2025 GVB Promissory Note in the amount of$100. As of December 31, 2025, the Company continues to maintain an allowance for credit loss against the 2025 GVB Promissory Note.

As part of the December 2023 Amendment, the Company, the Holders and the Agent also agreed to amend the Debentures to (i) allow the Holders to voluntarily convert the Debentures, in whole or in part, into shares of the Company’s common stock (“Voluntary Conversion Option”) on the earlier of (i) June 30, 2024 and (ii) the public announcement of a Fundamental Transaction at a conversion price equal to the lower of (x) $46,575.00 per share (reverse split adjusted) and (y) the closing sale price of the Company’s common stock on June 29, 2024 (the “Conversion Price”), and (ii) include a mandatory prepayment of the outstanding principal of the Debentures in an amount equal to 20% of the net cash proceeds of any issuance by the Company of any of its stock, or other Equity Interests (as defined in the Debentures) or the incurrence or issuance of any indebtedness. During the second quarter of 2025, the Company made principal payments in the amount of $1,017 as 20% of the net cash proceeds of the issuance of common stock (see Note 9 “Capital Raises and Warrants for Common Stock”).

Additional terms of the December 2023 Amendment include a financial covenant holiday through the third quarter of 2024 and revised certain covenants thereafter to reflect the sale of the Purchased Interests, including lowering the Company’s quarterly revenue targets.

On April 8, 2024, the Company, the Holders and the Agent entered into that certain Letter Agreement to modify the terms of the Amendment Agreement, the JGB SPA and the Debentures, as amended (“April 2024 Amendment”).

Under the terms of the Letter Agreement, the Holders are permitted to convert their debt to common stock at anytime and the Conversion Price (as defined in the Debentures) at which the Holders may convert the principal amount of their Debentures to the Company’s common stock is reduced to $6,644.70 per share in accordance with applicable Nasdaq rules through the conversion option reset date on June 28, 2024. The principal amount of the Debentures converted shall be applied to the Monthly Allowance (as defined in the Debentures) for that month, and any excess shall be applied to the Monthly Allowances for the succeeding months. The conversions will be a dollar for dollar reduction of the remaining outstanding obligation owed to the Holders. The Agent and Holders have also agreed to daily limits on trading volume and minimum conversion amounts. The Holders converted $428 of debt, in exchange for 65 shares of common stock during the quarter-ended June 30, 2024.

On May 10, 2024, the Company, the Holders and the Agent entered into that certain May 2024 Exchange Agreement and May 2024 Letter Agreement to modify the terms of the Amendment Agreement, the Securities Purchase Agreement and the Debentures, as amended (“May 2024 Amendment”).

Under the terms of the May 2024 Amendment, the Company and Holders have agreed the Company shall incur an aggregate amendment charge to the undersigned holders equal to $275, which shall be added to the principal balance of the Debentures. Under the terms of the May 2024 Exchange Agreement, the Company and Holders exchanged an aggregate of $2,328 in principal, fees and expenses owed under the Debentures for 128 shares of common stock and 289 immediately exercisable pre-funded warrants to purchase shares of common stock at an exercise price of $.00001 (at an effective per share price of $5,247.45). All pre-funded warrants were subsequently exercised during the quarter-ended June 30, 2024.

On August 27, 2024, the Company, the Holders and the Agent entered into that certain August 2024 Letter Agreement to modify the terms of the Amendment Agreement, the JGB SPA, and the Debentures, as amended (“August 2024 Amendment”).

Under the terms of the August 2024 Agreement, each Holder agreed that it shall not exercise its Holder Redemption Right (as defined in the Debentures) for more than 50% of its Monthly Allowance (as defined in the Debentures)through and including July 2025. Further, the provisions in Section 3(c)(i) of the Debentures requiring 20% of any equity issuances to be paid to the Holders shall be suspended through December 31, 2024. In consideration for the amendments set forth in the August 2024 Amendment, the Company paid an amendment fee of$746, which was added to the aggregate principal amount of the Debentures. JGB subsequently issued a conversion notice for 142 shares of common stock equal to principal reduction of$328.

On October 10, 2024, the Company, the Holders and the Agent entered into that certain October 2024 Letter Agreement to modify the terms of the Amendment Agreement, the JGB SPA, and the Debentures, as amended (“October 2024 Amendment”).

Under the terms of the October 2024 Amendment, the Company will be able to reset the Conversion Price (as defined in the Debentures) currently in effect, at the discretion of the Board of Directors and on a one time basis, to an amount equal to the average of the daily VWAPs for each of thefive (5) consecutive Nasdaq trading days immediately preceding the date on which the Conversion Price shall be reset. The reset Conversion Price shall in no event be greater than the Conversion Price in effect on the date of the Letter Agreement, which is $2,315.71.

On January 13, 2025, the Board of Directors approved the reset of the Conversion Price to $2,083.8 per share. The change in conversion price resulted in an increase in fair value to the embedded conversion option, resulting in an increase in debt discount of $283 and a corresponding increase in capital in excess of par value. The Holders exercised conversion notices in the amount of $3,132 in January 2025 and the Company issued 1,504 shares of common stock.

On May 22, 2025, the Company, the Holders and the Agent entered into that certain May 2025 Letter Agreement to modify the terms of the Amendment Agreement, the JGB SPA, and the Debentures, as amended (“May 2025 Amendment”).

Under the terms of the May 2025 Amendment, the Company will be able to reset the Conversion Price (as defined in the Debentures) currently in effect, at the discretion of the Board of Directors and on a one time basis, to an amount equal to the average of the daily VWAPs for each of thefive (5) consecutive Nasdaq trading days immediately preceding the date on which the Conversion Price shall be reset. The reset Conversion Price shall in no event be greater than the Conversion Price in effect on the date of the Letter Agreement, which is $138.92.

On September 18, 2025, the Company repaid in full all outstanding obligations under, and terminated, the Senior Secured Credit Facility, the Debentures, and the related security and collateral documents. In connection with the payoff and termination, the Company paid the outstanding principal, accrued and unpaid interest, and all other amounts then due and payable, totaling $3,790 in aggregate principal payments made between August 29, 2025 and September 18, 2025, from the proceeds of the August 2025 Series A convertible preferred stock offering (see Note 9 “Capital Raises and Warrants for Common Stock”). All liens and security interests securing the Debentures and related obligations were released. The Company also paid a prepayment penalty of $28 and recorded extinguishment charges of $416.

In accordance with ASC 470-60,Troubled Debt Restructurings by Debtors, and ASC 470-50,Debt Modifications and Extinguishment, the Company performed an assessment of whether the related transaction was deemed to be a troubled debt restructuring, and if no, whether the transaction was deemed modification of existing debt, or an extinguishment of existing debt and new debt.

The October 2023 Amendment, April 2024 Amendment, May 2024 Amendment, August 2024 Amendment, January 2025 Amendment, and May 2025 Amendment were concluded to be a modification, and not an extinguishment, based on an analysis of the present value of future cash flows. A new effective interest rate was determined, and the debt continued to be amortized. The December 2023 Amendment was concluded to be an extinguishment, due to the addition of a substantive conversion option.

The Company analyzed the conversion feature of the December 2023 Amendment for derivative accounting consideration under ASC 815-15 and determined that the embedded conversion features should be classified as a bifurcated derivative because the exercise price of these convertible notes is subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liabilityat fair value in the amount of $557 as of March 31, 2024, as a component of Other Long-Term Liabilities on the Consolidated Balance Sheets. Subsequently, during the year-ended December 31, 2024, the derivative liability related to the debentures and embedded conversion option was reclassified from Other Long-Term Liabilities to Capital in Excess of Par, based on the Company’s reassessment of the classification and conclusion the derivative met the ‘fixed for fixed’ criteria in ASC 815.

Subordinated Note

On March 3, 2023, the Company executed a Subordinated Promissory Note (the “Subordinated Note”) with a principal amount of $2,865 in favor of Omnia Ventures, LP (“Omnia”).

In connection with the Subordinated Note, the Company issued to Omnia, warrants to purchase up to 1 share of the Company’s common stock (the “2023 Omnia Warrants”). The 2023 Omnia Warrants were exercisable forseven years from September 3, 2023, at an exercise price of $637,295 per share, subject, with certain exceptions, to adjustments in the event of stock splits, dividends, subsequent dilutive offerings and certain fundamental transactions.

On April 29, 2024, the Company entered into a General Release and Settlement Agreement (the “Omnia Agreement”) with Omnia Capital LP (“Omnia”). The Omnia Agreement settled and extinguished all outstanding debt and interest owed to Omnia under the Subordinated Note and the put provision contained in the 2023 Omnia Warrants, amounting to a total of approximately $5,228, for (i) a cash payment of $249; (ii)371 shares of common stock and 371 immediately exercisable pre-funded warrants to purchase shares of common stock at an exercise price of $0.00001 that are exercisable until May 1, 2029 (at an effective per share price of $6,644) and (iii)148 immediately exercisable warrants to purchase an equal number of shares of common stock at an exercise price of $6,644 until May 1, 2029 (the “2024 Omnia Warrants”). The 2024 Omnia Warrants contain a put provision that permits the holder to require the Company to redeem the 2024 Omnia Warrants, no earlier than May 1, 2025, for a purchase price equal to $8,306 per warrant, and had an initial fair value of $1,515 (see Note 8 “Fair Value Measurements”). The put option of the 2024 Omnia Warrants was fully exercised on September 29, 2025 in the amount of $1,231 and paid on October 2, 2025.

Subject to limited exceptions, a holder of pre-funded warrants and 2024 Omnia Warrants will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 19.99% of the number of shares of our common stock outstanding immediately after giving effect to such exercise. As part of the Omnia Agreement, the parties agreed to terminate and cancel the Old Note and the 2023 Omnia Warrants and released all debts, claims or other obligations against each other occurring prior to the date of the Omnia Agreement. The total cash and non-cash consideration amounted to $5,628, resulting in extinguishment charges of $400 for the year ended December 31, 2024, recorded in Interest expense in the Consolidated Statements of Operations and Comprehensive Loss.

Debt Issuance Costs

The fair values of the warrants at issuance of $5,791, together with the Debentures original issuance discount of $1,053, Debentures exit payment of $1,053, and third-party debt issuance costs of $801, were being amortized using the effective interest method over the term of the respective debt instrument, recorded as Interest expense in the Consolidated Statements of Operations and Comprehensive Loss. The components and activity of unamortized discount and deferred debt issuance costs related to the Senior Secured Credit Facility and Subordinated Note are as follows:

NOTE 13. – INCOME TAXES

Pre-tax earnings from continuing operations consisted of the following for the years ended December 31:

The following is a summary of the components giving rise to the (benefit) provision for income taxes from continuing operations for the years ended December 31:

The provision for income tax from continuing operations varies from that which would be expected based on applying the statutory federal rate to pre-tax book loss, including the effect of the change in the U.S. corporate income tax rates, as follows:

Individual components of deferred taxes consist of the following as of December 31:

The Company has US federal net operating loss (“NOL”) carryforwards of approximately $228,923 as of December 31, 2025 that do not expire. The Company also accumulated US federal NOL carryforward of approximately $46,920 through December 31, 2017 and these NOL carryforwards begins to expire in 2030. In addition to the US federal NOL carryforward, the Company has state NOL carryforwards of approximately $104,844 in various jurisdictions in which it files that will begin to expire in 2031. As of December 31, 2025, the Company has a research and development credit carryforward of approximately $1,654 that begins to expire in 2030. The Company has a capital loss carryover of approximately $11,188 as of December 31, 2025, that begins to expire in 2026. Utilization of these carryforwards may be subject to an annual limitation in the case of equity ownership changes, as defined by law. Due to the uncertainty of the Company’s ability to generate sufficient taxable income in the future, the Company has recorded a valuation allowance to reduce the net deferred tax asset associated with the definite lived assets to zero. These carryforwards are included in the net deferred tax asset that has been fully offset by the valuation allowance. The valuation allowance increased for continuing operations by $2,982 and $3,305 for the years ended December 31, 2025 and 2024, respectively, and changed by ($1,537) and $922 due to tax attributes that were generated as a part of discontinued operations but remain on a prospective basis with continuing operations due to the Company filing a consolidated U.S. federal return for the years ended December 31, 2025 and 2024.

ASC 740 provides guidance on the financial statement recognition and measurement for uncertain income tax positions that are taken or expected to be taken in a company’s income tax return. The Company has evaluated its tax positions and believes there areno uncertain tax positions as of December 31, 2025 and 2024.

The following tax payments and received refunds during the years ended December 31, 2025 and 2024, were as follows:

The One Big Beautiful Bill Act ("OBBB") was signed into law on July 4, 2025. The OBBB makes changes to the U.S. corporate income tax, including immediate expensing of domestic research and development costs, with retroactive application beginning January 1, 2025; reinstating the option to claim 100% accelerated depreciation deductions on qualified property, with retroactive application beginning January 20, 2025; permanent reinstatement of the EBITDA-based limitation for the business interest deduction under IRC Section 163(j); and international tax provisions modifying global intangible low-taxed income ("GILTI"), foreign-derived intangible income ("FDII"), and base erosion and anti-abuse tax ("BEAT"). The impact of the OBBB on the Company is accelerating the expensing of the domestic research and development costs.

NOTE 14. – EQUITY-BASED COMPENSATION

Stock Compensation Plan

On May 20, 2021, the shareholders of 22nd Century Group, Inc. (the “Company”) approved the 22nd Century Group, Inc. 2021 Omnibus Incentive Plan (the “2021 Plan”). The 2021 Plan allows for the granting of equity awards to eligible individuals over the life of the 2021 Plan, including any remaining shares under the Company’s 2014 Omnibus Incentive Plan pursuant to awards under the 2021 Plan. The 2021 Plan has a term often years and is administered by the Compensation Committee of the Company’s Board of Directors to determine the various types of incentive awards that may be granted to recipients under the 2021 Plan and the number of shares of common stock to underlie each such award under the 2021 Plan. As of December 31, 2025, the Company had available 3,772,848 shares remaining for future awards under the 2021 Plan.* *

Compensation Expense

The Company recognized the following compensation costs, net of actual forfeitures, related to RSUs and stock options:

On December 31, 2024, the Company canceled all remaining unvested awards at that time which resulted in accelerated compensation expense of $117. During the years ended December 31, 2025 and 2024, equity-based compensation expense reversals due to employee termination forfeitures amounted to $17 and $99, respectively.

Restricted Stock Units (“RSUs”). We typically grant RSUs to employees and non-employee directors. The following table summarizes the changes in unvested RSUs from January 1, 2024 through December 31, 2025.

The fair value of RSUs related to employee grants that vested during the year ended December 31, 2024, was $9, based on the stock price at the time of vesting. During the year ended December 31, 2024, there were 121 shares granted and immediately vested during the period for settled indebtedness for consulting and other services provided; in which the fair value at the time of vesting amounted to $125.

As of December 31, 2025, unrecognized compensation expense for new granted RSUs amounted to $642 which is expected to be recognized over a weighted average period of approximately 2.6 years.

Stock Options. Our outstanding stock options were valued using the Black-Scholes option-pricing model on the date of the award. A summary of all stock option activity from January 1, 2024 to December 31, 2025 is as follows:

The intrinsic value of a stock option is the amount by which the current market value or the market value upon exercise of the underlying stock exceeds the exercise price of the option.

As of December 31, 2025, unrecognized compensation expense for new granted stock options amounted to $1,696, which is expected to be recognized over a weighted average period of approximately 2.6 years.

The weighted average of fair value assumptions used in the Black-Scholes option-pricing model for such grants were as follows:

NOTE 15. – EARNINGS (LOSS) PER COMMON SHARE

The following table sets forth the computation of basic and diluted earnings (loss) per common share for the years ended December 31, 2025 and 2024, respectively:

NOTE 16. – REVENUE RECOGNITION

The Company’s revenues are derived primarily from contract manufacturing organization (“CMO”) customer contracts that consist of obligations to manufacture the customers’ branded filtered cigars and cigarettes. Additional revenues are generated from sale of the Company’s proprietary low nicotine content cigarettes, sold under the brand name VLN®, or research cigarettes sold under the brand name SPECTRUM®. The Company does not have significant intra-entity sales or transfers.

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the product to a customer. For certain CMO contracts, the performance obligation is satisfied over time as the Company determines, due to contract restrictions, it does not have an alternative use of the product and it has an enforceable right to payment as the product is manufactured. The Company recognizes revenue under those contracts at the unit price stated in the contract based on the units to customers and is recognized net of cash discounts, sales returns and allowances. There wasno allowance for discounts or returns and allowances at December 31, 2025 and 2024. Consideration payable to the customer for royalties is recorded as an offset of the transaction price with a corresponding contract liability.

Disaggregation of Revenue

The Company’s net revenue is derived from customers located primarily in the United States and is disaggregated by the timing of revenue. Revenue recognized from Tobacco products transferred to customers over time represented 99% and 54%, for the years ended December 31, 2025 and 2024, respectively.

The following table presents net revenue by product line:

The following table presents net revenues by significant customers, which are defined as any customer who individually represents 10% or more of disaggregated product line net revenues:

Contract Assets and Liabilities

Unbilled receivables (contract assets) represent revenues recognized for performance obligations that have been satisfied but have not been billed. These receivables are included as Accounts receivable, net on the Consolidated Balance Sheets. Customer payment terms vary depending on the terms of each customer contract, but payment is generally due prior to product shipment or within extended credit terms up to twenty-one (21) days after shipment. Deferred income relates to down payments received from customers in advance of satisfying a performance obligation. This deferred income is included within Contract liabilities on the Consolidated Balance Sheets.

Total contract assets and liabilities are as follows:

During the year ended December 31, 2024, the Company recognized $726 of revenue that was included in the contract liability balance as of December 31, 2023.

NOTE 17. SEGMENT AND GEOGRAPHIC INFORMATION

The Company has organized its business as asingle reportable segment (“Reporting Segment”), tobacco, as it operates and derives all revenues from its tobacco operations and products. This segment structure reflects the financial information and reports used by the Company’s management, specifically its Chief Operating Decision Maker (“CODM”), to make decisions regarding the Company’s business, including resource allocations and performance assessments. The Company’s Chief Executive Officer serves as the CODM. The accounting policies of the Reporting Segment are the same as those described in the summary of significant accounting policies. See Note 1 for additional information about the Company's business and significant accounting policies.

Consolidated net income (loss) from continuing operations, as presented on the Company's Consolidated Statements of Operations and Comprehensive Loss is a metric utilized by the CODM to assess the Reporting Segment's performance and allocate resources. Total consolidated assets, excluding assets held for sale, as presented on the Company's Consolidated Balance Sheets is used to measure the Reporting Segment's assets.

The CODM uses Consolidated net income (loss) from continuing operations to evaluate profitability generated from segment assets in determining the strategic decisions of the Company with respect to utilizing its assets. Consolidated net income (loss) from continuing operations is also used to monitor budget versus actual results.

The following table presents revenues and significant segment expenses from continuing operations for the years ended December 31, 2025 and 2024:

The* *Company recognized the following depreciation and amortization costs from continuing operations:

Geographic Area Information

For the years ended December 31, 2025 and 2024, substantially all third-party sales of product are shipped to customers in the United States. Additionally, as of December 31, 2025 and 2024, all long-lived assets are physically located or domiciled in the United States.

NOTE** 18. – SUBSEQUENT EVENTS**

ATM Offering

Subsequent to December 31, 2025, the Company sold 44,381 shares of common stock under the ATM Program for gross proceeds of $200 at a weighted average price of $4.51.

March 2026 Series B Convertible Preferred Stock Offering

On March 20, 2026, the Company and certain investors entered into a securities purchase agreement with respect to the offer and sale of $20,000 of shares of Series B Convertible Preferred Stock, stated value $1,000 per share (the “Series B Preferred Stock”), initially convertible into shares of the Company’s common stock at an initial conversion price of $3.57 (subject to adjustment in certain circumstances with a floor price of $0.714) and, alternatively, at a 15% discount to the lowest daily volume-weighted average price (“VWAP”) during the prior 20 trading days (the “Alternative Conversion Price”) and warrants to purchase shares of Common Stock pursuant to a registered direct offering. The Company has the ability to reset the fixed conversion price (lower), subject to board approval and the floor price. Stockholder approval for the offering was obtained at the February 20, 2026 Special Meeting of the Stockholders.

At the initial closing, the investors purchased $16,000 of shares of Series B convertible preferred stock and warrants. The remaining $4,000 of shares of Series B Preferred Stock and warrants are expected to be purchased at a second closing. The investors may request the second closing at any time until the one-year anniversary of the initial closing date and we may require the second closing at any time until the one-year anniversary of the initial closing date by individual investor once less than 50% of such Investor’s Series B Preferred Stock purchased at the initial closing remains outstanding and certain equity conditions have been satisfied for at least 7 of the prior 10 trading days, including: (1) the Common Stock closes above 2.5 times the floor price and (2) the daily dollar trading volume of the Common Stock exceeds $500. The warrants are immediately exercisable at an exercise price of $3.57 per share of common stock and expire on the date that is five years after issuance. In addition, the Company issued placement agent warrants to purchase an aggregate of 187,816 shares of common stock with substantially the same terms as the Warrants, except that the exercise price of the Placement Agent Warrants is $3.927.

The Company used the net proceeds from the offering to repurchase at par all of the shares of outstanding Series A Convertible Preferred Stock issued in August 2025 in the amount of $9.65 million. The balance of the net proceeds from the offering was approximately $5,680, after deducting placement agent case fees but before any other offering expenses.

Following the offering, 130 shares of Series B Preferred Stock were converted into 33,929 shares of common stock, with 15,870 Series B Preferred Stock shares remaining outstanding.

Item 15(a)2 Financial Statement Schedules

None