Q4 2025 22nd Century Group Inc Earnings Call

March 26, 2026

Speaker #1: Welcome to 22nd Century Group's 4th quarter and full year 2025 conference call and webcast. At this time, all participants have been placed in a listen-only mode.

Speaker #1: It is now my pleasure to turn the floor over to Matthew Kreps, Investor Relations for 22nd Century Group. Please go ahead.

Speaker #2: Thank you. Hello and welcome to 22nd Century's fourth quarter and full year 2025 results conference call. Joining me today are Larry Firestone, CEO, and Dan Otto, CFO.

Matthew Kreps: Joining me today are Larry Firestone, CEO, and Dan Otto, CFO. Earlier today, we issued a press release announcing our results for the quarter and year ended December 31, 2025. The earnings release and 10-K are available in the investors section of our website at xxiicentury.com.

Speaker #2: Earlier today, we issued a press release announcing our results for the quarter and year ended December 31, 2025. The earnings release and 10-K are available in the Investors section of our website at xxii-century.com.

Speaker #2: Today's call will include prepared remarks from Larry and Dan, updating you on 22nd Century's business, operations, strategy, and financial results through December 31, 2025, and subsequent events post the close of quarter end.

Matthew Kreps: Today's call will include prepared remarks from Larry and Dan, updating you on 22nd Century's business, operations, strategy, and financial results through December 31, 2025, and subsequent events post the close of quarter end. Before we begin, a few reminders for today's call. Some of the statements made today are forward-looking. Forward-looking statements are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by these statements.

Speaker #2: Before we begin, a few reminders for today's call. Some of the statements made today are forward-looking. Forward-looking statements are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by these statements.

Matthew Kreps: Additional information regarding these factors can be found in our annual, quarterly, and other reports filed with the SEC. During today's call, we may also discuss non-GAAP financial measures, including Adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, and amortization as adjusted for certain non-cash or non-operating expenses. For more details on these measures, please refer to our earnings release issued earlier today. With that, I'll now turn the call over to Larry.

Speaker #2: Additional information regarding these factors can be found in our annual quarterly and other reports followed with the SEC. During today's call, we may also discuss non-gap financial measures including adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, and amortization, as adjusted for certain non-cash or non-operating expenses.

Speaker #2: For more details on these measures, please refer to our earnings release issued earlier today. And with that, I'll now turn the call over to Larry.

Speaker #3: Thank you, Matt. Good morning, everyone, and thank you for joining 22nd Century's 4th quarter 2025 results conference call. 2025 was truly our transition year from restructuring to fully focus on growth.

Larry Firestone: Thank you, Matt. Good morning, everyone, and thank you for joining 22nd Century's Q4 2025 Results Conference Call. 2025 was truly our transition year from restructuring to fully focus on growth. As final acts of the restructuring, we closed out a host of legacy issues from the prior business model, closed unprofitable contracts, and product lines, reduced our manufacturing overhead, and paid off our structured senior and subordinated remaining debt. As we shifted into growth in 2025, that allowed us to launch new brands and new products, secure a substantial base of retail outlets, and begin to see initial sales of VLN products in the market under our own VLN brand and our two newest VLN partner brand products. The progress made in 2025 was an extremely heavy lift and our team did an awesome job.

Speaker #3: As final acts of the restructuring, we closed out a host of legacy issues from the prior business model, closed unprofitable contracts and product lines, reduced our manufacturing overhead, and paid off our structured senior and subordinated remaining debt.

Speaker #3: Then, as we shifted into growth in 2025, that allowed us to launch new brands and new products, secure a substantial base of retail outlets, and begin to see initial sales of BLN products in the market under our own BLN brand and our two newest BLN partner brand products.

Larry Firestone: As we shifted into growth in 2025, that allowed us to launch new brands and new products, secure a substantial base of retail outlets, and begin to see initial sales of VLN products in the market under our own VLN brand and our two newest VLN partner brand products. The progress made in 2025 was an extremely heavy lift and our team did an awesome job.

Speaker #3: The progress made in 2025 was an extremely heavy lift, and our team did an awesome job as a result. We have set our company up to begin an exciting growth path for 2026 and beyond.

Larry Firestone: As a result, we have set our company up to begin an exciting growth path for 2026 and beyond. We are now in the market with our VLN combustible cigarette products, and smoking consumers are finding our products in 1,636 retail outlets in 23 states. These numbers will continue to grow, especially as we secure more retail partners throughout the US. The consumer tobacco market is changing rapidly. The big tobacco companies are aggressively pushing consumers into alternative, yet highly addictive nicotine products like pouches and vapes in order to maintain their customer base. They know many of their customers want to smoke less, which is of course bad for their business model. Their solution is to transition as many of their 28.8 million US cigarette customers as possible to other addictive products.

Speaker #3: We are now in the market with our BLN combustible cigarette products, and smoking consumers are finding our products in 1,636 retail outlets in 23 states.

Speaker #3: These numbers will continue to grow, especially as we secure more retail partners throughout the U.S. The consumer tobacco market is changing rapidly. The big tobacco companies are aggressively pushing consumers into alternative, yet highly addictive nicotine products like pouches and vapes, in order to maintain their customer base.

Larry Firestone: The big tobacco companies are aggressively pushing consumers into alternative, yet highly addictive nicotine products like pouches and vapes in order to maintain their customer base. They know many of their customers want to smoke less, which is of course bad for their business model. Their solution is to transition as many of their 28.8 million US cigarette customers as possible to other addictive products.

Speaker #3: They know many of their customers want to smoke less, which is, of course, bad for their business model. Their solution is to transition as many of their 28.8 million U.S. cigarette customers as possible to other addictive products.

Speaker #3: This strategy prioritizes revenue and market share to the detriment of the health of the consumer and the overall cost of healthcare-related to illnesses derived from smoking and nicotine.

Larry Firestone: This strategy prioritizes revenue and market share to the detriment of the health of the consumer and the overall cost of healthcare related to illnesses derived from smoking and nicotine. In contrast, we're the only tobacco products company focused on reducing the harms of smoking through nicotine reduction while using the form factor smokers are used to and most comfortable with: a cigarette. The company's proprietary low nicotine technology is designed to serve adult smokers who want to change their smoking habits and smoke less by significantly reducing nicotine consumption. 22nd Century is focusing on smoker health and wellness by giving smokers an opportunity to control their tobacco consumption rather than switching them to another highly addictive product like a vape or a pouch. Although the market is in flux, we are right in the middle of the directional battle for the smoker.

Speaker #3: In contrast, we're the only tobacco products company focused on reducing the harms of smoking through nicotine reduction, while using the form factor smokers are used to and most comfortable with—cigarettes.

Speaker #3: The company's proprietary low nicotine technology is designed to serve adult smokers who want to change their smoking habits and smoke less by significantly reducing nicotine consumption.

Larry Firestone: The company's proprietary low nicotine technology is designed to serve adult smokers who want to change their smoking habits and smoke less by significantly reducing nicotine consumption. 22nd Century is focusing on smoker health and wellness by giving smokers an opportunity to control their tobacco consumption rather than switching them to another highly addictive product like a vape or a pouch. Although the market is in flux, we are right in the middle of the directional battle for the smoker.

Speaker #3: 22nd Century is focusing on smoker health and wellness by giving smokers an opportunity to control their tobacco consumption rather than switching them to another highly addictive product like a vape or a pouch.

Speaker #3: Although the market is in flux, we are right in the middle of the directional battle for the smoker. Our BLN products are now in stores in 23 states, and consumers who enjoy smoking are choosing our BLN products and giving them a try.

Larry Firestone: Our VLN products are now in stores in 23 states, and consumers who enjoy smoking are choosing our VLN products and giving them a try. We've seen some stores with very low volume but building, and some stores are moving VLN products, and the reorders are starting to materialize. Some stores are about to put our VLN products into position in the front of the store and begin selling. Our sample size is small as we are in Q1 of selling our VLN products. Even with the compressed timeline and the small data set, we are seeing month-over-month growth within the stores. Our VLN products are backed by science, and we have the results to prove it.

Speaker #3: We've seen some stores with very low volume but building, and some stores are moving BLN products and the reorders are starting to materialize. Some stores are about to put our BLN products into position in the front of the store and begin selling.

Speaker #3: Our sample size is small, as we are in the first quarter of selling our BLN products. But even with the compressed timeline and the small data set, we are seeing month-over-month growth within the stores.

Larry Firestone: Our sample size is small as we are in Q1 of selling our VLN products. Even with the compressed timeline and the small data set, we are seeing month-over-month growth within the stores. Our VLN products are backed by science, and we have the results to prove it. We have examples of smokers who have changed from their traditional high nicotine brand to one of our VLN brands in just 12 weeks, have cut their smoking habit by two-thirds.

Speaker #3: Our BLN products are backed by science, and we have the results to prove it. We have examples of smokers who have changed from their traditional high-nicotine brand to one of our BLN brands and, in just 12 weeks, have cut their smoking habit by two-thirds.

Larry Firestone: We have examples of smokers who have changed from their traditional high nicotine brand to one of our VLN brands in just 12 weeks, have cut their smoking habit by two-thirds. The positive impact of this change for the smoker is huge, health-wise as well as financially. The total addressable market for smokers in the US is 28.8 million smokers. As we've reported, surveys of adult smokers indicate that approximately 70% have expressed their desire to change their habit, including quitting. Unfortunately, nicotine is what keeps them coming back at the rate they are used to. Many smokers actually enjoy their smoke as it is a comfort zone for them. They just wish they could maintain their habit at a more controlled pace. That's where we come in.

Speaker #3: The positive impact of this change for the smoker is huge, health-wise as well as financially. The total addressable market for smokers in the U.S. is 28.8 million smokers.

Larry Firestone: The positive impact of this change for the smoker is huge, health-wise as well as financially. The total addressable market for smokers in the US is 28.8 million smokers. As we've reported, surveys of adult smokers indicate that approximately 70% have expressed their desire to change their habit, including quitting. Unfortunately, nicotine is what keeps them coming back at the rate they are used to. Many smokers actually enjoy their smoke as it is a comfort zone for them. They just wish they could maintain their habit at a more controlled pace. That's where we come in.

Speaker #3: And, as we've reported, surveys of adult smokers indicate that approximately 70% have expressed their desire to change their habit, including quitting. Unfortunately, nicotine is what keeps them coming back at the rate they're used to.

Speaker #3: Many smokers actually enjoy their smoke, as it is a comfort zone for them. They just wish they could maintain their habit at a more controlled pace.

Speaker #3: That's where we come in. If 70% of the 28.8 million smokers are sincere, our serviceable addressable market, or SAM, is 20.2 million smokers—roughly a $58 billion market.

Larry Firestone: If 70% of the 28.8 million smokers are sincere, our serviceable addressable market, or SAM, is 22.2 million smokers, roughly a $58 billion market. All of the smokers who have been making the choice to now try our VLN products represent a shift in the market. We have our sights set on taking a meaningful share of that market, where even initially a small piece would be a substantial business for 22nd Century. We know that none of our competitors are gonna move over and let us in, so we'll have to win on every front to gain retail positions and earn a shot at the smoking consumer's mind. This is why we welcome other brands to join the battle and introduce a VLN concept within their own brands that they have in the market.

Speaker #3: All of the smokers who have been making the choice to now try our BLN products represent a shift in the market. We have our sites set on taking a meaningful share of that market.

Larry Firestone: We have our sights set on taking a meaningful share of that market, where even initially a small piece would be a substantial business for 22nd Century. We know that none of our competitors are gonna move over and let us in, so we'll have to win on every front to gain retail positions and earn a shot at the smoking consumer's mind. This is why we welcome other brands to join the battle and introduce a VLN concept within their own brands that they have in the market.

Speaker #3: Even initially, a small piece would be a substantial business for 22nd Century. We know that none of our competitors are going to move over and let us in, so we'll have to win on every front to gain retail positions and earn a shot at the smoking consumer's mind.

Speaker #3: This is why we welcome other brands to join the battle and introduce a BLN concept within their own brands that they have in the market.

Speaker #3: This could range from including our low-nicotine tobacco in their products, or they could license our BLN brand and use it within their brand lineup.

Larry Firestone: This could range from including our low nicotine tobacco in their products, or they could license our VLN brand and use it within their brand lineup. I'll transition now to discuss topics in the regulatory arena. In December 2025, we filed our MRTP renewal application with the FDA. We're excited about this milestone as we also plan on to expand our PMTA and MRTP filings with the FDA for other products. We have the 100 millimeter version of our VLN cigarette, which once authorized, will allow us to expand served markets for those consumers who prefer the 100 millimeter cigarette. For the broader picture, the FDA published their low nicotine proposed rule in January 2025, with a comment period extending through September 2025. This allowed the FDA to harvest comment letters from all constituents, those for, and those against, and they are now in an internal review process.

Speaker #3: I'll transition now to discuss topics in the regulatory arena. In December 2025, we filed our MRTP renewal application with the FDA. We're excited about this milestone as we also plan to expand our PMTA and MRTP filings with the FDA for other products.

Speaker #3: We have the 100-millimeter version of our BLN cigarette, which, once authorized, will allow us to expand served markets for those consumers who prefer the 100-millimeter cigarette.

Larry Firestone: We have the 100 millimeter version of our VLN cigarette, which once authorized, will allow us to expand served markets for those consumers who prefer the 100 millimeter cigarette. For the broader picture, the FDA published their low nicotine proposed rule in January 2025, with a comment period extending through September 2025. This allowed the FDA to harvest comment letters from all constituents, those for, and those against, and they are now in an internal review process.

Speaker #3: For the broader picture, the FDA published their low nicotine proposed rule in January 2025, with a comment period extending through September 2025. This allowed the FDA to harvest comment letters from all constituents, those for and those against, and they are now in an internal review process.

Speaker #3: Our BLN products and science are the backbone of the proposed rule, including specific citations to 22nd Century Group and Spectrum Research Cigarettes which once again proves the positive impact we can make on smokers' health and wellness.

Larry Firestone: Our VLN products and science are the backbone of the proposed rule, including specific citations to 22nd Century Group and SPECTRUM research cigarettes, which once again proves the positive impact we can make on smokers' health and wellness. Our attitude with respect to the proposed rule is, we are the only ally the FDA has from the tobacco business in this battle. The FDA, the tobacco industry, and the politicians all know what the answer is, and we have the answer. However, the forces of politics, financial power, and taxes all cast aside the care and the cost of care and the mortality of our smoking population who are addicted. We have to force ourselves into the ring and fight the fight to at least offer the option to smokers who have had what we call the moment.

Larry Firestone: Our attitude with respect to the proposed rule is, we are the only ally the FDA has from the tobacco business in this battle. The FDA, the tobacco industry, and the politicians all know what the answer is, and we have the answer. However, the forces of politics, financial power, and taxes all cast aside the care and the cost of care and the mortality of our smoking population who are addicted. We have to force ourselves into the ring and fight the fight to at least offer the option to smokers who have had what we call the moment.

Speaker #3: Our attitude with respect to the proposed rule is we are the only ally the FDA has from the tobacco business in this battle. The FDA and tobacco industry and the politicians all know what the answer is, and we have the answer.

Speaker #3: However, the forces of politics, financial power, and taxes all cast aside the care and the cost of care, and the mortality of our smoking population who are addicted, so we have to force ourselves into the ring and fight the fight to at least offer the option to smokers who have had what we call the moment.

Speaker #3: So our strategy is to continue to expand distribution and push our way into retail in all 50 states, continue to gain consumers and share the market so that when the FDA has to make the final go/no-go decision on the mandate, we, 22nd Century, will have already established a full low-nicotine ecosystem to address their low-nicotine mandate and silence the claims that were made by opposition in their responses to the FDA.

Larry Firestone: Our strategy is to continue to expand distribution and push our way into retail in all 50 states, continue to gain consumers and share the market, so that when the FDA has to make the final go, no-go decision on the mandate, we, 22nd Century, will have already established a full low nicotine ecosystem to address their low nicotine mandate and silence the claims that were made by opposition in their responses to the FDA. This would include the development of other low nicotine tobacco strains developed by our team to expand the variety, setting up and contracting with growers who can produce our low nicotine crops with no problem and no harm or degradation to their business, entering into agreements with other brands that will have adopted a VLN SKU in their branded lineup.

Speaker #3: This would include the development of other low nicotine tobacco strains, developed by our team to expand the variety, setting up and contracting with growers who can produce our low nicotine crops with no problem and no harm or degradation to their business, entering into agreements with other brands that will have adopted a BLN SKU in their branded lineup.

Larry Firestone: This would include the development of other low nicotine tobacco strains developed by our team to expand the variety, setting up and contracting with growers who can produce our low nicotine crops with no problem and no harm or degradation to their business, entering into agreements with other brands that will have adopted a VLN SKU in their branded lineup.

Speaker #3: Retail positions that can display the products prominently for the consumer, so they may choose how they want to pursue their habit. This would be a normal share shift, as we have seen over many years in all varieties of consumer products.

Larry Firestone: Retail positions that can display the products prominently for the consumer, so they may choose how they want to pursue their habit. This would be a normal share shift, as we have seen over many years in all varieties of consumer products. We are building the chassis of a business that will develop new strains of low nicotine tobacco, sell low nicotine tobacco to others, and potentially license others to grow and produce low nicotine products using our genetics and technology, and potentially license our VLN brand to others, making VLN a prominent worldwide brand. We are clearly at the center of the conflict, as the larger forces around the industry are pushing more and more nicotine, we're pulling the opposite way. We know the harms of nicotine has on the brain, the skeletal system, and the vascular system.

Speaker #3: We are building the chassis of a business that will develop new strains of low nicotine tobacco sell low nicotine tobacco to others, and potentially license others to grow and produce low nicotine products using our genetics and technology and potentially license our BLN brand to others making BLN a prominent worldwide brand.

Speaker #3: We are clearly at the center of the conflict, as the larger forces around the industry are pushing more and more nicotine; we're pulling the opposite way.

Larry Firestone: We are clearly at the center of the conflict, as the larger forces around the industry are pushing more and more nicotine, we're pulling the opposite way. We know the harms of nicotine has on the brain, the skeletal system, and the vascular system. While our competitors are pushing as hard as they can to keep consumers addicted and looking away from the harms of nicotine, they are also adding new consumers and are ignoring the bigger picture, which is health. We are just fine having the answer and being the contrarian.

Speaker #3: We know the harms nicotine has on the brain, the skeletal system, and the vascular system. And while our competitors are pushing as hard as they can to keep consumers addicted and looking away from the harms of nicotine, they are also adding new consumers and are ignoring the bigger picture, which is health.

Larry Firestone: While our competitors are pushing as hard as they can to keep consumers addicted and looking away from the harms of nicotine, they are also adding new consumers and are ignoring the bigger picture, which is health. We are just fine having the answer and being the contrarian. One thing is clear, all the smokers who have quit in their lifetime and the 70% of the 28.8 million smokers in the US who have declared they want to make a change have all had the moment. When they do, we will be there with the answer and an answer that does not require pharma to invent a new drug or a visit to the doctor or other nicotine reduction therapies. The answer, VLN products, will be ready and on the shelf for the consumer to choose.

Speaker #3: We are just fine having the answer and being the contrarian. One thing is clear: all the smokers who have quit in their lifetime and the 70% of the 28.8 million smokers in the US who have declared they want to make a change have all had the moment.

Larry Firestone: One thing is clear, all the smokers who have quit in their lifetime and the 70% of the 28.8 million smokers in the US who have declared they want to make a change have all had the moment. When they do, we will be there with the answer and an answer that does not require pharma to invent a new drug or a visit to the doctor or other nicotine reduction therapies. The answer, VLN products, will be ready and on the shelf for the consumer to choose.

Speaker #3: When they do, we will be there with the answer. And an answer that does not require pharma to invent a new drug or a visit to the doctor or other nicotine reduction therapies.

Speaker #3: The answer: BLN products will be ready and on the shelf for the consumer to choose. We also consider the regulatory environment outside the US, where the World Health Organization has a similar mandate as the FDA.

Larry Firestone: We also consider the regulatory environment outside the US, where the World Health Organization has a similar mandate as the FDA. Their doctrine is known as the Framework Convention on Tobacco Control or FCTC. Like the FDA's mandate, 22nd Century's low nicotine cigarettes and the science behind are mentioned in the document. Even though this organization has been around since 2016, the international tobacco market has remained challenged in impacting widespread positive change in the tobacco harm reduction. However, we believe additional action is beginning to shape to address the harms of smoking and the harms of nicotine worldwide. Australia, for example, has just implemented a doubling of the tax on cigarettes, and every legal pack of cigarettes in Australia now retails for $40. Australia is a government that is serious about smoking.

Speaker #3: Their doctrine is known as the Framework Convention on Tobacco Control, or FCTC, and like the FDA's mandate, 22nd Century's low-nicotine cigarettes and the science behind them are mentioned in the document.

Speaker #3: Even though this organization has been around since 2016, the International Tobacco Market has remained challenged in impacting widespread positive change in tobacco harm reduction.

Larry Firestone: Even though this organization has been around since 2016, the international tobacco market has remained challenged in impacting widespread positive change in the tobacco harm reduction. However, we believe additional action is beginning to shape to address the harms of smoking and the harms of nicotine worldwide. Australia, for example, has just implemented a doubling of the tax on cigarettes, and every legal pack of cigarettes in Australia now retails for $40. Australia is a government that is serious about smoking.

Speaker #3: However, we believe additional action is beginning to take shape to address the harms of smoking and the harms of nicotine worldwide. Australia, for example, has just implemented a doubling of the tax on cigarettes, and every legal pack of cigarettes in Australia now retails for $40 USD.

Speaker #3: Australia is a government that is serious about smoking. Several other countries have taken a strong position against smoking in public areas and the workplace.

Larry Firestone: Several other countries have taken a strong position against smoking in public areas and the workplace. Our low nicotine tobacco varieties include non-GMO, so we can manufacture products that comply with many of the international country standards for consumer products, including tobacco. Our non-GMO low nicotine tobacco varieties utilize our most recent technology developed into commercial form over the last few years. We've had an open dialogue with several international constituents, both at the governmental level and the commercial level, regarding our low nicotine tobacco and our VLN products. All of these discussions are in their infancy, but it is clear that we are in the middle of the battle.

Speaker #3: Our low-nicotine tobacco varieties include non-GMO, so we can manufacture products that comply with many international countries' standards for consumer products, including tobacco.

Larry Firestone: Our non-GMO low nicotine tobacco varieties utilize our most recent technology developed into commercial form over the last few years. We've had an open dialogue with several international constituents, both at the governmental level and the commercial level, regarding our low nicotine tobacco and our VLN products. All of these discussions are in their infancy, but it is clear that we are in the middle of the battle.

Speaker #3: Our non-GMO low nicotine tobacco varieties utilize our most recent technology developed into commercial form over the last few years. We've had an open dialogue with several international constituents both at the governmental level and the commercial level regarding our low nicotine tobacco and our BLN products.

Speaker #3: All of these discussions are in their infancy. But it is clear that we are in the middle of the battle. Our attitude internationally is the same as it is domestically, which is: let's get our low-nicotine tobacco and VLN products in the market, recognized by the retailers and consumers as a brand they can trust with their smoking choices, and build a base of business like we are in the U.S.

Larry Firestone: Our attitude internationally is the same as it is domestically, which is let's get our low nicotine tobacco and VLN products in the market, recognized by the retailers, and consumers as a brand they can trust with their smoking choices and build a base of business like we are in the US. Transitioning now into the year ahead for 2026, I'm excited to report that we're finally in the building phase of our company and focused on growth. We fully understand that we're gonna have to earn our place in the market one smoker at a time. We know with every pack we sell, we're changing a life. This is a delicate transition for a smoker who's had what we call the moment.

Speaker #3: Transitioning now into the year ahead for 2026, I'm excited to report that we're finally in the building phase of our company and focused on growth.

Larry Firestone: We fully understand that we're gonna have to earn our place in the market one smoker at a time. We know with every pack we sell, we're changing a life. This is a delicate transition for a smoker who's had what we call the moment.

Speaker #3: We fully understand that we're going to have to earn our place in the market one smoker at a time, and we know with every pack we sell, we're changing a life.

Speaker #3: This is a delicate transition for a smoker who's had what we call the moment. That moment has to initiate a change, and we understand that changing a habit is one thing, but altering an addiction as powerful as nicotine—which is akin to heroin—is a really big deal.

Larry Firestone: That moment has to initiate a change, and we understand that changing a habit is one thing, but altering an addiction as powerful as nicotine, which is akin to heroin, is a really big deal. Earlier this week, we closed an additional round of financing to provide additional growth capital to support the plans we will be implementing throughout 2026. We now have over $10 million in cash on the balance sheet to implement our strategy. Now, looking ahead in the coming months, we'll be adding important additional points of distribution in the Northeast and other states that wrap around the Mid-Atlantic region. We'll also be expanding in California on the West Coast. We will be launching our latest Pinnacle combustible product, complementing the broad Pinnacle brand portfolio, Pinnacle Pure.

Speaker #3: Earlier this week, we closed an additional round of financing to provide additional growth capital to support the plans we will be implementing throughout 2026.

Speaker #3: We now have over $10 million in cash on the balance sheet to implement our strategy. Now looking ahead in the coming months, we'll be adding important additional points of distribution in the Northeast and other states that wrap around the Mid-Atlantic region.

Larry Firestone: Now, looking ahead in the coming months, we'll be adding important additional points of distribution in the Northeast and other states that wrap around the Mid-Atlantic region. We'll also be expanding in California on the West Coast. We will be launching our latest Pinnacle combustible product, complementing the broad Pinnacle brand portfolio, Pinnacle Pure.

Speaker #3: We'll also be expanding in California on the West Coast. We will be launching our latest Pinnacle combustible product, complementing the broad Pinnacle brand portfolio, Pinnacle Pure.

Larry Firestone: Pinnacle Pure is a tobacco and water only cigarette that we will be looking to drive into existing retail outlet footprint. As we launched VLN under three different brands in the US, the initial phase was stocking retail locations as well as training distributors and retail associates about reduced nicotine content cigarettes. Now, we will add prominent retail collateral and strengthen our marketing support to increase rate of sale. We have very early baseline measurements and are looking for steady growth. We will track not only the number of cartons, but the geographies that are moving our VLN products the most. A key component of our growth is that we'll be adding headcount in the coming months to support product launches, and other marketing initiatives.

Speaker #3: Pinnacle Pure is a tobacco and water-style cigarette that we will be looking to drive into existing retail outlet footprint. As we launch BLN under three different brands in the US, the initial phase was stocking retail locations as well as training distributors and retail associates about reduced nicotine content cigarettes.

Larry Firestone: Now, we will add prominent retail collateral and strengthen our marketing support to increase rate of sale. We have very early baseline measurements and are looking for steady growth. We will track not only the number of cartons, but the geographies that are moving our VLN products the most. A key component of our growth is that we'll be adding headcount in the coming months to support product launches, and other marketing initiatives.

Speaker #3: Now we will add prominent retail collateral and strengthen our marketing support to increase rate of sale. We have very early baseline measurements and are looking for steady growth.

Speaker #3: We will track not only the number of cartons, but the geographies that are moving our BLN products the most. A key component of our growth is that we'll be adding headcount in the coming months to support product launches and other marketing initiatives.

Larry Firestone: We believe we're the good guys in this market, and long term, even if a smoker desires a high nicotine alternative to a standard combustible cigarette, such as a vape, an e-cigarette, a heat-not-burn device, a pouch, or moist snuff, we will be here in the market with a VLN answer when they have the moment and they decide they've had enough nicotine. We know this is the beginning of a very long and challenging road to success. We're up for the challenge, and as we've seen, we have consumers who are up for a change. Now, I'll turn the call over to Dan to discuss the numbers.

Speaker #3: We believe we're the good guys in this market and long-term, even if a smoker desires a high-nicotine alternative to a standard combustible cigarette—such as a vape, an e-cigarette, a heat-not-burn device, a pouch, or moist snuff—we will be here in the market with a VLN answer when they have the moment and they've decided they've had enough nicotine.

Speaker #3: We know this is the beginning of a very long and challenging road to success. We're up for the challenge and as we've seen, we have consumers who are up for a change.

Speaker #3: Now I'll turn the call over to Dan to discuss the numbers.

Dan Otto: Thank you, Larry. Good morning, everyone, and thank you for joining our discussion today. Q4 and full year 2025 reflect continued progress in strengthening our balance sheet and improving our operating model as we transition the business into higher margin proprietary branded products. During the year, we exited several unprofitable high volume revenue streams and focused our resources on building the foundation for growth in our reduced nicotine VLN cigarette portfolio and partner VLN brands. Shipments of our VLN and partner VLN products continued to build as distribution expanded and additional retail locations were authorized. In Q4 of 2025, we shipped approximately 8,800 cartons of newly branded VLN and partner VLN to our customers, in many cases being swapped out or exchanged for the legacy branded VLN packages.

Speaker #1: Thank you, Larry. Good morning, everyone, and thank you for joining our discussion today. Fourth quarter and full year 2025 reflect continued progress in strengthening our balance sheet and improving our operating model as we transition the business into higher-margin proprietary branded products.

Speaker #1: During the year, we exited several unprofitable high-volume revenue streams and focused our resources on building the foundation for growth and our reduced nicotine BLN cigarette portfolio in partner BLN brands.

Dan Otto: Shipments of our VLN and partner VLN products continued to build as distribution expanded and additional retail locations were authorized. In Q4 of 2025, we shipped approximately 8,800 cartons of newly branded VLN and partner VLN to our customers, in many cases being swapped out or exchanged for the legacy branded VLN packages.

Speaker #1: Shipments of our BLN and partner BLN products continue to build as distribution expanded and additional retail locations were authorized. In the fourth quarter of 2025, we shipped approximately 8,800 cartons of newly branded BLN and partner BLN to our customers, in many cases being swapped out or exchanged for the legacy-branded BLN packages.

Dan Otto: These products remain central to our strategy as they typically generate gross profit margin in the range of 20% to 30% after marketing and promotional costs and assuming optimal labor and overhead is achieved within our factory. As I discussed at length in Q3, this has been a large focus of 2025. We now will track rate of sale metrics in early 2026 with a keen eye for the effectiveness of pricing and promotional strategies, which has long been the tactics used to drive revenue across the heavily regulated tobacco industry in lieu of the ability to directly market the product. In addition to garnering new customers and repeat purchase, scaling in 2026 will occur primarily through expanded distribution and adoption at additional retail locations, with the majority being H2 additions.

Speaker #1: These products remain central to our strategy, as they typically generate gross profit margin in the range of 20% to 30% after marketing and promotional costs, and assuming optimal labor and overhead is achieved within our factory.

Dan Otto: As I discussed at length in Q3, this has been a large focus of 2025. We now will track rate of sale metrics in early 2026 with a keen eye for the effectiveness of pricing and promotional strategies, which has long been the tactics used to drive revenue across the heavily regulated tobacco industry in lieu of the ability to directly market the product. In addition to garnering new customers and repeat purchase, scaling in 2026 will occur primarily through expanded distribution and adoption at additional retail locations, with the majority being H2 additions.

Speaker #1: As I discussed at length in the third quarter, this has been a large focus of 2025. We now will track rate-of-sale metrics in early 2026, with a keen eye for the effectiveness of pricing and promotional strategies.

Speaker #1: This has long been the tactic used to drive revenue across the heavily regulated tobacco industry in lieu of the ability to directly market the product.

Speaker #1: In addition to garnering new customers and repeat purchase, scaling in 2026 will occur primarily through expanded distribution and adoption at additional retail locations. With the majority being second half of the year additions, we are now authorized across the majority of US states and continue working to increase store count and availability of our product. We estimate increasing current store count by more than double by the end of 2026.

Dan Otto: We are now authorized across the majority of US states and continue working to increase store count and availability of our product. We estimate increasing current store count by more than double by the end of 2026. Let me now walk through some of the specific numbers from our financial results for the Q4 and full year 2025. All figures discussed exclude discontinued operations unless noted. For the Q4 of 2025, we recorded net revenue of approximately $3.6 million, compared with $4 million in the Q3 of 2025. Total cartons shipped during the quarter were approximately 248,000, compared with 517,000 cartons in the third quarter. The reduction in volume reflects our strategic shift away from lower margin contract manufacturing activity into higher margin branded products that we've previously spoken of.

Speaker #1: Let me now walk through some of the specific numbers from our financial results for the fourth quarter and full year 2025. All figures discussed exclude discontinued operations unless noted.

Dan Otto: For the Q4 of 2025, we recorded net revenue of approximately $3.6 million, compared with $4 million in the Q3 of 2025. Total cartons shipped during the quarter were approximately 248,000, compared with 517,000 cartons in the third quarter. The reduction in volume reflects our strategic shift away from lower margin contract manufacturing activity into higher margin branded products that we've previously spoken of.

Speaker #1: For the fourth quarter of 2025, we recorded net revenue of approximately $3.6 million, compared with $4.0 million in the third quarter of 2025. Total cartons shipped during the quarter were approximately 248,000, compared with 517,000 cartons in the third quarter.

Speaker #1: The reduction in volume reflects our strategic shift away from lower-margin contract manufacturing activity into higher-margin branded products that we've previously spoken of. Revenue will remain consistent in the first quarter of 2026, and then we'll begin growing sequentially thereafter, mirroring the timing of added points of distribution.

Dan Otto: Revenue will remain consistent in Q1 2026 and then will begin growing sequentially thereafter, mirroring the timing of added points of distribution. The initial 8,800 cartons of VLN and partner VLN shipped in Q4 continue to be distributed and sold to retail, and we anticipate restocking shipments to commence later in Q2 2026. For the full year 2025, net revenues were approximately $17.6 million, compared with $24.4 million in 2024, again, reflecting the same strategic repositioning of the business that I've spoken of.

Speaker #1: The initial 8,800 cartons of BLN and partner BLN shipped in the fourth quarter continue to be distributed and sold to retail, and we anticipate restocking shipments to commence later in the second quarter of 2026.

Speaker #1: For the full year 2025, net revenues were approximately $17.6 million, compared with $24.4 million in 2024, again reflecting the same strategic repositioning of the business that I've spoken of.

Dan Otto: Gross profit for Q4 improved sequentially with a gross loss of approximately $0.8 million compared with a $1.1 million gross loss in Q3 2025, reflecting early benefits from our late Q3 cost reduction initiatives and operational restructuring of our manufacturing facility. As volume scales in the high-margin branded products throughout 2026, that will drive gross margin improvement. Operating loss for Q4 was $2.8 million, compared with $3.2 million in Q3, and net loss from continuing operations for Q4 was approximately $2.8 million, compared with $3.8 million in Q3. Adjusted EBITDA for Q4 was $2.4 million, compared with $2.9 million in Q3 2025.

Speaker #1: Gross profit for the fourth quarter improved sequentially, with a gross loss of approximately $0.8 million, compared with a $1.1 million gross loss in the third quarter 2025, reflecting early benefits from our late third quarter cost reduction initiatives and operational restructuring of our manufacturing facility.

Speaker #1: As volume scales in the high-margin branded products throughout 2026, that will drive gross margin improvement. Operating loss for the fourth quarter was $2.8 million, compared with $3.2 million in the third quarter, and net loss from continuing operations for the fourth quarter was approximately $2.8 million, compared with $3.8 million in the third quarter.

Dan Otto: Operating loss for Q4 was $2.8 million, compared with $3.2 million in Q3, and net loss from continuing operations for Q4 was approximately $2.8 million, compared with $3.8 million in Q3. Adjusted EBITDA for Q4 was $2.4 million, compared with $2.9 million in Q3 2025. Now, for the full year 2025, net loss from continuing operations was approximately $13.1 million, improved from $15.5 million in 2024, reflecting the progress made in reducing operating expenses and restructuring the business.

Speaker #1: And adjusted EBITDA for the fourth quarter was $2.4 million, compared with $2.9 million in the third quarter of 2025. Now, for the full year 2025, net loss from continuing operations was approximately $13.1 million, improved from $15.5 million in 2024, reflecting the progress made in reducing operating expenses and restructuring the business.

Dan Otto: Now, for the full year 2025, net loss from continuing operations was approximately $13.1 million, improved from $15.5 million in 2024, reflecting the progress made in reducing operating expenses and restructuring the business. Turning to the balance sheet, we ended the year with approximately $7.1 million in cash and cash equivalents, and importantly, $0 long-term debt, having fully extinguished our remaining senior secured debt during 2025. We also increased our inventory position during Q4 of 2025 to approximately $4.3 million, up from $2 million at the end of Q3, reflecting the harvest of our 2025 reduced nicotine tobacco crop in preparation for expanded VLN production.

Dan Otto: Turning to the balance sheet, we ended the year with approximately $7.1 million in cash and cash equivalents, and importantly, $0 long-term debt, having fully extinguished our remaining senior secured debt during 2025. We also increased our inventory position during Q4 of 2025 to approximately $4.3 million, up from $2 million at the end of Q3, reflecting the harvest of our 2025 reduced nicotine tobacco crop in preparation for expanded VLN production.

Speaker #1: Turning to the balance sheet, we ended the year with approximately $7.1 million in cash and cash equivalents, and importantly, zero long-term debt, having fully extinguished our remaining senior secured debt during 2025.

Speaker #1: We also increased our inventory position during the fourth quarter of 2025 to approximately $4.3 million, up from $2.0 million at the end of the third quarter, reflecting the harvest of our 2025 reduced nicotine tobacco crop in preparation for expanded BLN production.

Dan Otto: Overall, we believe our strengthened balance sheet, inclusive of the capital raise activity earlier this week, which added approximately $5.6 million in cash, our debt-free capital structure, and streamlined cost base positions us well to execute our growth strategy as we move into 2026. In summary, 2025 was a year of transition and foundation building for the company. We strengthened the balance sheet, exited unprofitable revenue streams, restructured our manufacturing operations, continued expanding the distribution of our proprietary reduced nicotine products. With these steps largely behind us, our focus now turns to scaling distribution, increasing product adoption, and leveraging our improved operating model to drive sequential improvements in revenue, margin, and overall profitability as we progress through 2026. I will now turn the call back over to Larry for concluding remarks.

Speaker #1: Overall, we believe our strengthened balance sheet, inclusive of the capital raise activity earlier this week—which added approximately $5.6 million in cash—our debt-free capital structure, and streamlined cost base, positions us well to execute our growth strategy as we move into 2026.

Speaker #1: In summary, 2025 was a year of transition and foundation building for the company. We strengthened the balance sheet exited unprofitable revenue streams, restructured our manufacturing operations, continued expanding the distribution of our proprietary reduced nicotine products.

Dan Otto: With these steps largely behind us, our focus now turns to scaling distribution, increasing product adoption, and leveraging our improved operating model to drive sequential improvements in revenue, margin, and overall profitability as we progress through 2026. I will now turn the call back over to Larry for concluding remarks.

Speaker #1: With these steps largely behind us, our focus now turns to scaling distribution, increasing product adoption, and leveraging our improved operating model to drive sequential improvements in revenue, margin, and overall profitability as we progress through 2026.

Speaker #1: I will now turn the call back over to Larry for concluding remarks.

Larry Firestone: Thank you, Dan. The most important point from today's call is 2026 is really the new beginning for 22nd Century. We have built the operating foundation, the brands, the products, and the initial pathways to reach the consumer with a product that can truly change smoking behaviors and reduce health harms. We meet the adult smoker where they are with a cigarette and give them, for the first time, a real option to choose a lower nicotine pathway. This has been over a quarter of a century in the making, and we have a very large market to serve with what I call the answer. I would personally like to take a minute and thank and appreciate our team for their extremely hard work transitioning our company in a very short period of time with very limited resources. This has been like moving a mountain.

Speaker #2: Thank you, Dan. The most important point from today's call is 2026 is really the new beginning for 22nd Century. We have built the operating foundation, the brands, the products, and the initial pathways to reach the consumer with a product that can truly change smoking behaviors and reduce health harms.

Speaker #2: We meet the adult smoker where they are, with a cigarette, and give them for the first time a real option to choose a lower nicotine pathway.

Larry Firestone: This has been over a quarter of a century in the making, and we have a very large market to serve with what I call the answer. I would personally like to take a minute and thank and appreciate our team for their extremely hard work transitioning our company in a very short period of time with very limited resources. This has been like moving a mountain. They have done an awesome job, and we look forward to updating you with press releases along the way and again at next quarter's earnings release timeframe. I hope you all have a great day, and thank you for joining.

Speaker #2: This has been over a quarter of a century in the making, and we have a very large market to serve with what I call the answer. I would personally like to take a minute and thank and appreciate our team for their extremely hard work transitioning our company in a very short period of time with very limited resources.

Speaker #2: This has been like moving a mountain. They have done an awesome job, and we look forward to updating you with press releases along the way, and again at next quarter's earnings release timeframe.

Larry Firestone: They have done an awesome job, and we look forward to updating you with press releases along the way and again at next quarter's earnings release timeframe. I hope you all have a great day, and thank you for joining.

Speaker #2: I hope you all have a great day, and thank you for joining.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker #3: The conference is now. Thank you for attending.

Q4 2025 22nd Century Group Inc Earnings Call

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