22nd Century Group Inc
For the period ended Sep 30, 2024. Filed Nov 12, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 12, 2024
XXII$1.55-19.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0001558370-24-011967
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001558370-24-015126
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 74 previous paragraphs and 59 current paragraphs.
33 unchanged; 19 reworded; 6 added; 22 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 26 previous and 27 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
For the third quarter and first nine months of 2024, contract manufacturing net revenues decreased to $5,946 and $20,361, respectively, compared to the prior year periods.
Current report
Gross profit (loss) for the third quarter and first nine months of 2024 decreased compared to the prior year periods, primarily driven by lower sales volume, offset by implementation of cost cut initiatives, efficiency, and the shift in product mix.
Current report
(d) Insurance expenses decreased for the three and nine months ended September 30, 2024 compared to the prior year periods due to lower D&O and other insurance premiums.
Current report
We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants to purchase common stock and sale of debt instruments with various institutions, accredited investors, high net worth individuals and creditors.
Current report
In January and February 2024, we received net proceeds of $2,245 from the inducement and exercise of 820,769 warrants for shares of common stock and issuance of 1,641,535 warrants to purchase common stock. In April 2024, we received net proceeds of $3,913 from the issuance of 1,855,000 shares of common stock, 125,000 pre-funded warrants and 1,980,000 warrants to purchase common stock in a registered direct offering. In August and September 2024, we received net proceeds of $5,208 from the issuance of 9,720,000 shares of common stock pursuant to a Regulation A offering, and in separate private placements, issued 14,796,000 warrant to purchase common stock. In September 2024 we received net proceeds of $1,054 from the issuance of 5,153,508 shares of common stock and 10,307,016 warrants to purchase common stock in a registered direct offering. Also, in September 2024 we received net proceeds of $1,073 from the inducement and exercise of 5,079,244 warrants for shares of common stock and issuance of 10,158,488 warrants to purchase common stock. In October 2024 we received net proceeds of $2,002 from the issuance of 14,266,666 shares of common stock and 28,533,332 warrants to purchase common stock in a registered direct offering. Also, in October 2024 we received net proceeds of $2,909 from the issuance of 28,354,914 prefunded warrants to purchase shares of common stock and 42,532,372 warrants to purchase common stock in a private placement offering.
Current report
Additionally, at its option, JGB may require the Company to redeem 2% of the original principal amount of the Debentures, as amended to be no more than 50% or $210 per calendar month through July 2025 and $421 per calendar month thereafter which amount may at the Company’s election, subject to certain exceptions, be paid in cash, shares of the Company’s common stock, or a combination thereof. JGB elected the monthly redemption feature and the Company repaid 421k in cash during the three month period ended September 30, 2024. If the redemption feature is elected, as of September 30, 2024, contractual maturities under the Senior Secured Credit Facility for the remainder of 2024 are $632, for 2025 are $3,579, and for 2026 are $4,110.
Removed paragraphs (22)
Previous report
The improvement in gross profit and gross profit as a percent of revenues, net for the three and six-month periods ended June 30, 2024, compared to the prior year periods, was primarily due to the benefit of ongoing cost cut initiatives, efficiency, and the shift in product mix.
Previous report
As of June 30, 2024, we had approximately $1,279 of cash and cash equivalents. Our principal sources of liquidity are our cash and cash equivalents and cash generated from our tobacco contract manufacturing business and proceeds from debt and equity financing activities, which cash flows provided by financing activities for the six months ended June 30, 2024 were $6,240.
Previous report
Senior Secured Credit Facility
Previous report
On March 3, 2023, the Company entered into that certain Securities Purchase Agreement (the “SPA”) with JGB Partners, LP (“JGB Partners”), JGB Capital, LP (“JGB Capital”) and JGB Capital Offshore Ltd. (“JGB Offshore” and collectively with JGB Partners and JGB Capital, the “Holders”) and JGB Collateral, LLC, as collateral agent for the Holders (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 mature on March 3, 2026. At the Company’s election, subject to certain conditions, interest can be paid in cash, shares of the Company’s common stock, or a combination thereof. The Debentures are subject to an exit payment equal to 5% of the original principal amount, or $1,053, payable on the maturity date or the date the Debentures are paid in full (the “Exit Payment”). Any time after, March 3, 2024, the Company may irrevocably elect to redeem all of the then outstanding principal amount of the Debentures for cash in an amount equal to the entire outstanding principal balance, including accrued and unpaid interest, the Exit Payment and a prepayment premium in an amount equal to 3% of the outstanding principal balance as of the prepayment date (collectively, the “Prepayment Amount”). Upon the entry into a definitive agreement that would effect a change in control (as defined in the Debentures) of the Company, the Agent may require the Company to prepay the outstanding principal balance in an amount equal to the Prepayment Amount.
Previous report
The JGB Warrants are exercisable for five years from September 3, 2023, at an exercise price of $306.00 per share, a 50% premium to the VWAP on the closing date, subject, with certain exceptions, to adjustments in the event of stock splits, dividends, subsequent dilutive offerings and certain fundamental transactions. As a result of the June 19, 2023 offering, the Company’s outstanding JGB warrants to purchase up to 20,834 shares of the Company’s common stock for an exercise price of $306.00 per share were automatically adjusted to be $205.248 exercise price for up to 31,063 shares of common stock. There are no further anti-dilution adjustments on such warrants. In connection with the JGB October 2023 Amendment, the Company and Holders agreed to exercise the outstanding put provision to redeem 10,418 Warrants for an aggregate put price equal to $2,500.
Previous report
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.
Previous report
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 $2.14 per share in accordance with applicable Nasdaq rules. 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 200,000 shares of common stock during the 20-day period.
Previous report
The provisions in Section 3(c)(i) of the Debentures requiring 20% of any equity issuances to be paid to the Holders was suspended for 20 days.
Previous report
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.
Previous report
Under the terms of the May 2024 Letter Agreement, 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.
Previous report
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 395,000 shares of common stock and 895,000 immediately exercisable pre-funded warrants to purchase shares of common stock at an exercise price of $.00001 (at an effective per share price of $1.69). As a result of the transaction, the exercise price on 5,876,887 of the Company’s outstanding warrants is reduced to $1.69 per share in accordance with the adjustment provisions therein.
Previous report
Omnia Subordinated Note
Previous report
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”). The Subordinated Note refinanced the 12% Secured Promissory Note with a principal amount of $1,000 dated as of October 29, 2021 payable to Omnia (the “October Note”) and the 12% Secured Promissory Note with a principal amount of $1,500 dated as of January 14, 2022 payable to Omnia (the “January Note”, and together with the October Note, the “Original Notes”), which were assumed by the Company in connection with the acquisition of GVB Biopharma.
Previous report
Under the terms of the Subordinated Note, the Company is obligated to make interest payments in-kind (the “PIK Interest”). The PIK Interest accrues at a rate of 26.5% per annum, payable monthly. The Company is not permitted to prepay all or any portion of the outstanding balance on the Subordinated Note prior to maturity. The maturity date of the Subordinated Note was May 1, 2024.
Previous report
In connection with the Subordinated Note, the Company issued to Omnia, warrants to purchase up to 2,813 shares of the Company’s common stock. The Omnia Warrants are exercisable for seven years from September 3, 2023, at an exercise price of $205.248 per share subject, with certain exceptions, to adjustments in the event of stock splits, dividends, subsequent dilutive offerings and certain fundamental transactions.
Previous report
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 settles and extinguishes all outstanding debt and interest owed to Omnia under the outstanding Subordinated Promissory Note dated March 3, 2023 (the “Old Note”) and the put provision contained the outstanding common stock purchase warrant dated March 3, 2023 (the “Old Warrant”), amounting to a total of approximately $5,228, for (i) a cash payment of $249; (ii) 1,150,000 shares of common stock and 1,150,000 immediately exercisable pre-funded warrants to purchase shares of common stock at an exercise price of $0.0001 that are exercisable until May 1, 2029 (at an effective per share price of $2.14) and (iii) 460,000 immediately exercisable warrants to purchase an equal number of shares of common stock at an exercise price of $2.14 until May 1, 2029 (the “New Warrant”). The New Warrant contains a put provision that permits the holder to require the Company to redeem the New Warrants, no earlier than May 1, 2025, for a purchase price equal to $2.675 per New Warrant, and had an initial fair value of $1,515. Subject to limited exceptions, a holder of pre-funded warrants and New 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 Old Warrant 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.
Previous report
Warrant Inducement Offering
Previous report
On November 28, 2023, the Company commenced a warrant inducement offering with the holders of the Company’s outstanding 1,986,229 warrants consisting of: (i) the common stock purchase warrants of the Company issued on or about June 22, 2023; (ii) the common stock purchase warrants of the Company issued on or about July 10, 2023; (iii) the common stock purchase warrants of the Company issued on or about July 21, 2023; and/or (iv) the common stock purchase warrants of the Company issued on or about October 19, 2023 (collectively, the “Existing Warrants”), which Existing Warrants are exercisable for an equal number of shares of common stock at an exercise price of $8.40. The Company agreed to issue new warrants (the “Inducement Warrants”) to purchase up to a number of shares of common stock equal to 200% of the number of shares of common stock issued pursuant to the exercise by the holders of the Existing Warrants during the inducement period, for cash, at a reduced exercise price equal to the Nasdaq Minimum Price (as defined in the as defined in Nasdaq Listing Rule 5635(d)).
Previous report
For the period from January 1, 2024 to February 15, 2024, the date of shareholder approval, the Company entered into warrant inducement agreements with certain holders of the Existing Warrants to purchase an aggregate of 820,769 shares of common stock at a reduced weighted average exercise price of approximately $2.9504 (which were subsequently reduced to $1.69 in connection with the May 2024 JGB debt for equity exchange). Pursuant to the warrant inducement agreements, the exercising holders of the Existing Warrants received 1,641,535 Inducement Warrants and the Company received aggregate gross proceeds of approximately $2,421 from the exercise of the Existing Warrants. Additionally, on the date of Shareholder Approval, the exercise price of the 3,581,213 outstanding
Previous report
Inducement Warrants, was reduced to $2.8237 based on the lowest Nasdaq Minimum Price (as defined in the as defined in Nasdaq Listing Rule 5635(d)) during the inducement period.
Previous report
April 2024 Registered Direct Offering.
Previous report
On April 8, 2024, the Company and certain investors entered into a securities purchase agreement (“April SPA”) relating to the issuance and sale of approximately $4,200 of shares and warrants, consisting of an aggregate of 1,855,000 shares of common stock, 125,000 pre-funded warrants and 1,980,000 warrants to purchase an equal number of shares, at a purchase price of $2.14 per unit. The warrants are exercisable immediately at an exercise price of $2.14 per share of common stock and expire five years after shareholder approval, as defined in the April SPA (which were subsequently reduced to $1.69 in connection with the May 2024 JGB debt for equity exchange). The net proceeds to the Company from the offering were approximately $3,913.
Reworded paragraphs (19)
Previous wording
Except for historical information, all of the statements, expectations, and assumptions contained in this section are forward-looking statements. Forward-looking statements typically contain terms such as “anticipate,” “believe,” “consider,” “continue,” “could,” “estimate,” “expect,” “explore,” “foresee,” “goal,” “guidance,” “intend,” “likely,” “may,” “plan,” “potential,” “predict,” “preliminary,” “probable,” “project,” “promising,” “seek,” “should,” “will,” “would,” and similar expressions. Forward looking statements include, but are not limited to, statements regarding (i) our ability to continue as a going concern, (ii) our expectations regarding our debt obligations, (iii) our ability to remain listed on NASDAQ (iv) our financial and operating performance, (v) our strategic alternatives, including our cost savings initiatives, (vi) our expectations regarding regulatory enforcement (vii) our products, and (viii) the volatility of our common stock and warrants. Actual results might differ materially from those explicit or implicit in forward-looking statements. Important factors that could cause actual results to differ materially are set forth in “Risk Factors” herein and in our Annual Report on Form 10-K filed on March 28, 2024 and within Part II Item 1A of our Form 10-Q for the three months ended March 31, 2024. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as otherwise required by law. All information provided in this quarterly report is as of the date hereof, and we assume no obligation to and do not intend to update these forward-looking statements, except as required by law.
Current wording
Except for historical information, all of the statements, expectations, and assumptions contained in this section are forward-looking statements. Forward-looking statements typically contain terms such as “anticipate,” “believe,” “consider,” “continue,” “could,” “estimate,” “expect,” “explore,” “foresee,” “goal,” “guidance,” “intend,” “likely,” “may,” “plan,” “potential,” “predict,” “preliminary,” “probable,” “project,” “promising,” “seek,” “should,” “will,” “would,” and similar expressions. Forward looking statements include, but are not limited to, statements regarding (i) our ability to continue as a going concern, (ii) our expectations regarding our debt obligations, (iii) our ability to remain listed on NASDAQ (iv) our financial and operating performance, (v) our strategic alternatives, including our cost savings initiatives, (vi) our expectations regarding regulatory enforcement (vii) our products, and (viii) the volatility of our common stock and warrants. Actual results might differ materially from those explicit or implicit in forward-looking statements. Important factors that could cause actual results to differ materially are set forth in “Risk Factors” herein and in our Annual Report on Form 10-K filed on March 28, 2024 and within Part II Item 1A of our Form 10-Q for the three months ended March 31, 2024. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new
Previous wording
22nd Century Group, Inc. (NASDAQ: XXII) is an agricultural biotechnology company focused on tobacco harm reduction by offering tobacco products with 95% less nicotine, designed to improve health and wellness by helping smokers smoke less. Backed by comprehensive and extensively patented technologies that regulate nicotine biosynthesis activities in the tobacco plant, the Company has pioneered development of high-yield, proprietary reduced nicotine content (RNC) tobacco plants and clinically validated RNC cigarette products. The Company received the first and only FDA Modified Risk Tobacco Product (MRTP) authorization for a combustible cigarette in December 2021. The Company is a subsequent participating manufacturer under the Master Settlement Agreement ("MSA") and vertically integrated for the production of its both own products and contract manufacturing operations ("CMO"), which consist primarily of branded filtered cigars and conventional cigarettes.
Current wording
22nd Century Group, Inc. (NASDAQ: XXII) is an agricultural biotechnology company focused on tobacco harm reduction by offering tobacco products with 95% less nicotine, designed to improve health and wellness by giving smokers a choice to control their nicotine consumption. Backed by comprehensive and extensively patented technologies that regulate nicotine biosynthesis activities in the tobacco plant, the Company has pioneered development of high-yield, proprietary reduced nicotine content (RNC) tobacco plants and clinically validated RNC cigarette products. The Company received the first and only FDA Modified Risk Tobacco Product (MRTP) authorization for a combustible cigarette in December 2021. The Company is a subsequent participating manufacturer under the Master Settlement Agreement ("MSA") and vertically integrated for the production of its both own products and contract manufacturing operations ("CMO"), which consist primarily of branded filtered cigars and conventional cigarettes.
Previous wording
Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 2023
Current wording
Three and Nine Months Ended September 30, 2024 Compared to Three and Nine Months Ended September 30, 2023
Previous wording
For the second quarter and first six months of 2024, cigarette net revenues, including export volume, increased to $4,107 million or 8%, and decreased to $6,867 or (17%), respectively, compared to the prior year periods. For the second quarter 2024, cigarette sales benefitted from strong summer seasonal demand with key customers, price increases that took effect in April 2024 and a one-time Spectrum®research cigarette order which provided a $0.9 million boost, sequentially compared to the first quarter 2024. For the first six months of 2024, volume decreases were result of prior year comparable period stocking orders of Pinnacle cigarettes launched in a top-five convenience store chain and a large one-time order of export product.
Current wording
For the third quarter 2024, cigarette sales benefitted from strong summer seasonal demand with key customers and price increases that took effect in April 2024. For the first nine months of 2024, volume decreases were result of prior year comparable period stocking orders of Pinnacle cigarettes launched in a top-five convenience store chain and a large one-time order of export product.
Previous wording
For the second quarter and first six months of 2024, filtered cigars net revenues decreased to $3,303 and $6,927, respectively, compared to $3,931 and $8,326 in the prior year comparable periods, reflecting lower volumes as the Company continues to transition away from low or negative margin manufacturing agreements, in favor of higher margin cigarette manufacturing agreements. Additionally, price increases for certain customers took effect in April 2024.
Current wording
For the third quarter and first nine months of 2024, filtered cigars net revenues decreased to $1,664 and $8,592, respectively, compared to the prior year periods, reflecting lower volumes as the Company continues to transition away from low or negative margin manufacturing agreements- in favor of higher margin cigarette manufacturing agreements.
Previous wording
Cigarillo distribution net revenues for the second quarter and first six months of 2024 amounted to $552, reflective of the expanded Pinnacle branded product offerings launched in April 2024 with a top-five national convenience store chain.
Current wording
Cigarillo distribution net revenues for the third quarter and first nine months of 2024 amounted to $204 and $756, respectively, reflective of the expanded Pinnacle branded product offerings launched in April 2024 with a top-five national convenience store chain.
Previous wording
VLN® cigarette net revenues were negligible in the second quarter 2024, a decrease from the comparable prior year period which benefited from stocking orders with major c-stores. While the Company has secured broad distribution of its VLN® products, the sell-through has not yet materialized. The Company is currently making changes to rebrand and relaunch its VLN® products.
Current wording
VLN® cigarette net revenues were negligible in the third quarter 2024 and $70 for the first nine months of 2024, a decrease from the comparable prior year periods which benefited from stocking orders with major c-stores. While the Company has secured broad distribution of its VLN® products, the sell-through has not yet materialized. The Company is currently making changes to rebrand and relaunch its VLN® products.
Previous wording
(a) Compensation and benefits and equity compensation expense decreased for the three and six months ended June 30, 2024 compared to the prior year periods due to a reduction of headcount as part of our cost cut initiatives.
Current wording
(a) Compensation and benefits and equity compensation expense decreased for the three and nine months ended September 30, 2024 compared to the prior year periods due to a reduction of headcount as part of our cost cut initiatives.
Previous wording
(b) Decreases of strategic consulting, sales and marketing and travel and entertainment for the three and six months ended June 30, 2024 compared to the prior year periods were due to reduced spending as part of our cost cut initiatives.
Current wording
(b) Decreases of strategic consulting, sales and marketing and travel and entertainment for the three and nine months ended September 30, 2024 compared to the prior year periods were due to reduced spending as part of our cost cut initiatives.
Previous wording
(c) Decreases in public company expenses for the three- and six-month periods ended June 30, 2024 compared to the prior year periods were mainly due to waived board of director compensation fees in the current year periods and a decrease in professional services fees due to the restructuring of our business.
Current wording
(c) Decreases in public company expenses for the three- and nine-month periods ended September 30, 2024 compared to the prior year periods were mainly due to waived board of director compensation fees in the current year periods and a decrease in professional services fees due to the restructuring of our business.
Previous wording
(d) Other expenses decreased for the three and six months ended June 30, 2024 compared to the three and six month periods ended June 30, 2023 were mainly due to decreases in insurance, technology and legal expenses.
Current wording
(e) Other expenses decreased for the three and nine months ended September 30, 2024 compared to the three and nine month periods ended September 30, 2023 were mainly due to decreases in insurance, technology and legal expenses.
Previous wording
Other income (expense), net decreased for the six months ended June 30, 2024 compared to the same prior year period, due to a decrease of $60 of realized losses on short term investments and $1,047 gain resulting from change in fair value of warrant liabilities.
Current wording
Other income (expense), net increased for the nine months ended September 30, 2024 compared to the same prior year period, due to a decrease of $51 of realized losses on short term investments and $116 loss resulting from change in fair value of warrant liabilities.
Previous wording
For the six months ended June 30, 2024 compared to the prior year period, interest expense partially increased as a result of higher PIK interest accrual prior to extinguishment in April 2024 of $609, and $400 loss on extinguishment. This is offset by the ongoing repayment and elimination of debt obligations on our balance sheet, resulting in a decrease of cash interest of $102 and a decrease of non-cash interest amortization of $349 recognized from the Senior Secured Credit Facility (of these totals, interest that was allocated to discontinued operations decreased by $18), and additional decreases of $459 as a result of change in fair value of conversion option derivative liability.
Current wording
For the nine months ended September 30, 2024 compared to the prior year period, interest expense decreased as a result of ongoing repayment and elimination of debt obligations on our balance sheet. Cash interest decreased $352 and non-cash interest amortization decreased $601 recognized from the Senior Secured Credit Facility (of these totals, interest that was allocated to discontinued operations decreased by $71), and additional decreases of $482 as a result of change in fair value of conversion option derivative liability. Additionally, interest expense decreased $215 from the Subordinated Note, which was extinguished prior to maturity in April 2024 and resulted in a loss on extinguishment of $400.
Previous wording
We have incurred significant losses and negative cash flows from operations since inception and expect to incur additional losses until such time that we can generate significant revenue and profit in our tobacco business. We had negative cash flow from operations of $6,970 for the six months ended June 30, 2024 and an accumulated deficit of $385,558 as of June 30, 2024. As of June 30, 2024, we had cash and cash equivalents of $1,279 and working capital deficit from continuing operations of ($2,249) (compared to working capital deficit from continuing operations of ($6,826) at December 31, 2023). Given our projected operating requirements and existing cash and cash equivalents, there is substantial doubt about our ability to continue as a going concern through one year following the date that the Condensed Consolidated Financial Statements herein are issued.
Current wording
We have incurred significant losses and negative cash flows from operations since inception and expect to incur additional losses until such time that we can generate significant revenue and profit in our tobacco business. We had negative cash flow from operations of $9,947 for the nine months ended September 30, 2024 and an accumulated deficit of $389,315 as of September 30, 2024. As of September 30, 2024, we had cash and cash equivalents of $5,341 and working capital from continuing operations of $1,568 (compared to working capital deficit from continuing operations of ($6,826) at December 31, 2023). Given our projected operating requirements and existing cash and cash equivalents, there is substantial doubt about our ability to continue as a going concern through one year following the date that the Condensed Consolidated Financial Statements herein are issued.
Previous wording
As of June 30, 2024, we had working capital deficit from continuing operations, excluding assets and liabilities held for sale, of approximately ($2,249) compared to working capital deficit of approximately ($6,826) at December 31,2023 an increase of $4,577. This increase in working capital was primarily due to a $2,597 increase in net current assets and a decrease in net current liabilities of $7,174. Cash and cash equivalents decreased by $779 and the remaining net current assets decreased by $1,818. As a result of the working capital balance, management has taken a number of steps to improve liquidity. Refer below to “Cash demands on operations.”
Current wording
As of September 30, 2024, we had working capital from continuing operations, excluding assets and liabilities held for sale, of approximately $1,568 compared to working capital deficit of approximately ($6,826) at December 31,2023 an increase of $8,394. This increase in working capital was primarily due to a decrease in net current liabilities of $8,705 offset by a decrease of $311 in net current assets. Cash and cash equivalents increased by $3,283 and the remaining net current assets decreased by $3,594. As a result of the working capital balance, management has taken a number of steps to improve liquidity. Refer below to “Cash demands on operations.”
Previous wording
Cash used in operating activities decreased $30,362 from $37,332 in 2023 to $6,970 in 2024. The primary driver for this decrease was lower net loss of $31,870, a decrease of $5,830 related to net adjustments to reconcile net loss to cash, and a decrease in cash used for working capital components related to operations in the amount of $4,322 for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.
Current wording
Cash used in operating activities decreased $40,237 from $50,184 in 2023 to $9,947 in 2024. The primary driver for this decrease was lower net loss of $100,833, a decrease of $66,249 related to net adjustments to reconcile net loss to cash, and a decrease in cash used for working capital components related to operations in the amount of $5,653 for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.
Previous wording
Cash used in investing activities amounted to $49 the six months ended June 30, 2024, as compared to cash provided by investing activities of $18,923 for the six months ended June 30, 2023. The decrease in cash provided by investing activities of $18,972 was primarily the result of (i) a decrease in net proceeds from short-term investments of $18,239; (ii) decrease of $3,500 in property, plant and equipment casualty loss insurance proceeds collected in the prior year period (iii) decrease of $90 from the acquisition of RXP in the prior year period and (iv) a decrease of $229 of proceeds from the sale of property, plant and equipment. These decreased cash inflows were partially offset by a decrease in cash outflows of $3,086 related to the acquisitions of patents, trademarks and property, plant and equipment.
Current wording
Cash used in investing activities amounted to $119 the nine months ended September 30, 2024, as compared to cash provided by investing activities of $17,352 for the nine months ended September 30, 2023. The decrease in cash provided by investing activities of $17,471 was primarily the result of (i) a decrease in net proceeds from short-term investments of $18,239; (ii) decrease of $3,500 in property, plant and equipment casualty loss insurance proceeds collected in the prior year period and (iii) a decrease of $229 of proceeds from the sale of property, plant and equipment. These decreased cash inflows were partially offset by a decrease in cash outflows of (i) $4,243 related to the acquisitions of patents, trademarks and property, plant and equipment and (ii) $254 from the acquisition of RXP in the prior year period
Previous wording
During the six months ended June 30, 2024, cash provided by financing activities decreased by $21,082, from $27,322 in the prior year period, to $6,240, resulting from decreases in (i) net proceeds of $16,048 from issuance of long-term debt, (ii) proceeds of $6,016 from issuance of detachable warrants, (iii) net proceeds of $3,501 from the issuance of common stock (iv) proceeds from issuance of notes payable of $962 offset by an increase in net proceeds from warrant exercise of $2,245. These cash inflows were offset by decreases in cash outflows of note payable payments of $3,030 and taxes paid related to net share settlement of RSUs of $419 and increases in payments of long-term debt of $249.
Current wording
During the nine months ended September 30, 2024, cash provided by financing activities decreased by $26,813, from $40,162 in the prior year period, to $13,349, resulting from decreases in (i) net proceeds of $16,048 from issuance of long-term debt, (ii) proceeds of $6,016 from issuance of detachable warrants, (iii) net proceeds of $10,238 from the issuance of common stock (iv) proceeds from issuance of notes payable of $1,104 offset by an increase in net proceeds from warrant exercise of $3,403. These cash inflows were offset by decreases in cash outflows of note payable payments of $3,441 and taxes paid related to net share settlement of RSUs of $419 and increases in payments of long-term debt of $670.
Previous wording
As of June 30, 2024, the remaining principal balance of the Debentures is $8,325 of which $1,500 remains current with corresponding pledged assets.
Current wording
As of September 30, 2024, the remaining principal balance under our Senior Secured Credit Facility is $8,321 of which $1,500 remains current with corresponding pledged assets. The Debentures under the Senior Secured Credit Facility allow the Holders to voluntarily convert the Debentures, in whole or in part, into shares of the Company’s common stock and the conversion option price in effect is $0.7458. On October 9, 2024, the Company entered into that certain Letter Agreement to modify the terms of the Debentures with JGB, subject to obtaining shareholder approval, Company will be able to reset the Conversion Price 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 the five (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.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
information, future events, or otherwise, except as otherwise required by law. All information provided in this quarterly report is as of the date hereof, and we assume no obligation to and do not intend to update these forward-looking statements, except as required by law.