What changed in this filing

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Item 9A. Controls and Procedures

2026-03-26 compared with 2025-03-20 · 1092 added, 709 removed, 770 unchanged (70% of the section changed)

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Other Information.

Item 5.03 Amendments to Articles of Incorporation or Bylaws;

Change in Fiscal Year.

On March 23, 2026, we filed a Certificate of Designation of Preferences, Rights and Limitations with the Secretary of State of the State of Nevada designating 20,000 shares out of the authorized but unissued shares of preferred stock as Series B Convertible Preferred Stock with a stated value of $1,000 per share (the “Series B Certificate of Designation”).

The Series B Certificate of Designation is attached as Exhibit 3.1.7 hereto.

The following is a summary of the principal terms of the Series B Preferred Stock as set forth in the Series B Certificate of Designation.

The summary below is not intended to be complete and is qualified in its entirety by reference to such exhibit which is incorporated herein by reference.

The holders of Series B Preferred Stock will be entitled to dividends when and as declared by the board of directors of the Company (the “Board”), from time to time, in its sole discretion, which dividends will be paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms of the Certificate of Designations, in cash, in securities of the Corporation or using assets as determined by the Board on the stated value of such Preferred Stock.

Voting Rights

The shares of Series B Preferred Stock have no voting rights, except to the extent required by applicable law.

As long as any shares of Series B Preferred Stock are outstanding, the Company may not, without the approval of a majority of the then outstanding shares of Series B Preferred Stock (a) alter or change the powers, preferences or rights given to the Series B Preferred Stock, (b) alter or amend the Certificate of Incorporation or the bylaws of the Company in such a manner so as to materially adversely affect any rights given to the Series B Preferred Stock, (c) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation (as defined below) senior to, or otherwise pari passu with, the Series B Preferred Stock, (d) increase the number of authorized shares of Series B Preferred Stock, or (e) enter into any agreement to do any of the foregoing.

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the then holders of the Series B Preferred Stock are entitled to receive out of the assets available for distribution to stockholders of the Company an amount equal to either (i) 100% of the stated value or (ii) the amount the holder would receive if the Series B Preferred Stock had been converted into Common Stock;

in each instance, prior to and in preference to the Common Stock or any other series of preferred stock.

The Series B Preferred Stock is convertible into Common Stock at any time at a fixed conversion price of $3.57, subject to adjustment for certain anti-dilution provisions set forth in the Series B Certificate of Designation, subject to a floor price equal to 20% of the Nasdaq minimum price on the date of the Securities Purchase Agreement ($0.714) (the “Series B Conversion Price”).

The fixed conversion price has anti-dilution price protection for future dilutive issuances.

The Company has the ability to reset the fixed conversion price (lower), subject to board approval.

The Series B Preferred Stock is also convertible at any time at the Alternative Conversion Price, which is a 15% discount to the lowest daily VWAP in the prior 20 trading days, subject to the floor price.

Conversion at the Option of the Holder

The Series B Preferred Stock is convertible at the then-effective Series B Conversion Price (or the Alternative Conversion Price, at the holder’s election) at the option of the holder at any time and from time to time.

Mandatory Conversion at the Option of the Company

If, at any time from and after issuance, (i) the closing price of the Common Stock equals or exceeds 200% of the then fixed conversion price for 10 consecutive trading days and (ii) the daily dollar trading volume for the Common Stock exceeds $500,000 per day during such period, the Company may require the holders to convert the Series B Preferred Stock into Common Stock at the Series B Conversion Price.

Beneficial Ownership Limitation

The Series B Preferred Stock cannot be converted to Common Stock if the holder and its affiliates would beneficially own more than 4.99% (or 9.99% at the election of the holder) of the outstanding Common Stock.

However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon notice to us, provided that any increase in this limitation will not be effective until 61 days after such notice from the holder to us and such increase or decrease will apply only to the holder providing such notice.

Preemptive Rights

The Securities Purchase Agreement also provides that certain of the Investors in the Offering that fund at least $2,000,000 have a right of participation in future equity or equity-linked offerings by the Company in an amount equal to 50% of such subsequent financing for a period of 9 months after no shares of Series B Preferred Stock are outstanding.

At any time six (6) months after the issuance date, the Company may redeem all or a portion of the shares of Series B Preferred Stock outstanding by delivering notice at least 30 calendar days prior equal to 110% of the stated value per share of Series B Preferred Stock being redeemed.

During the 30-day notice period, holders shall be permitted to convert their Series B Preferred Stock.

Such redemption right may also be exercised in advance of a change in control of the Company.

Negative Covenants

As long as any Series B Preferred Stock is outstanding, unless the holders of more than 50% of the then outstanding shares of Series B Preferred Stock shall have otherwise given prior written consent, the Company cannot, subject to certain exceptions, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness (as defined in the Certificate of Designations) exceeding $100,000, with the exception of a working capital line of credit with a commercial bank or other similar financial institution up to $1,000,000.

The Series B Preferred Stock is perpetual and has no stated maturity date.

Trading Market

There is no established trading market for any of the Series B Preferred Stock, and we do not expect a market to develop.

We do not intend to apply for a listing for any of the Series B Preferred Stock on any securities exchange or other nationally recognized trading system.

Without an active trading market, the liquidity of the Series B Preferred Stock will be limited.

Our directors and executive officers may purchase or sell shares of our common stock in the market from time to time, including pursuant to equity trading plans adopted in accordance with Rule 10b5-1 under the Exchange Act (“Rule 10b5-1”) and in compliance with guidelines specified by the Company.

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Under a Rule 10b5-1 Trading Plan, a broker executes trades pursuant to parameters established by the director or executive officer when entering into the plan, without further direction from them.

No contracts, instructions or

written plans for the sale or purchase of our securities were adopted , terminated or modified by our directors and executive officers during the three months ended December 31, 2024.

No contracts, instructions or written plans for the sale or purchase of our securities were adopted , terminated or modified by our directors and executive officers during the three months ended December 31, 2025.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspectio n

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Directors, Executive Officers and Corporate Governance.

Information concerning our executive officers, directors and corporate governance is incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its 2025 Annual Meeting of Stockholders.

Our Board of Directors represents the best interests of our stockholders by overseeing the business and affairs of the Company.

Members of the Board participate in quarterly Board and Committee meetings, engage with senior management of the Company, review, provide input, approve the Company’s strategic plan and principal issues, and discuss feedback from stockholders and other stakeholders.

Under the Company’s current Amended and Restated Articles of Incorporation, directors hold office for a term ending on the date of the third annual stockholders’ meeting following the Annual Meeting at which such director’s class was most recently elected until the earlier of their death, resignation, removal or until their successors have been duly elected and qualified.

Our Bylaws provide that the number of members of our Board of Directors may be changed from time to time by resolutions adopted by the Board of Directors.

Our Board of Directors currently consists of four (4) members with no vacancies.

The information below identifies and sets forth certain biographical and other information regarding our directors as of March 23, 2026.

Position/Office Held With the Company

Director Since

Chairman, Chief Executive Officer

Lead Director

Lawrence F irestone

Firestone has served as Chief Executive Officer and Chairman of the Board since December 2023.

Firestone brings over 40 years of enterprise, operations, and financial management experience in both public and private companies, including tenures as CEO, CFO and COO across multiple industry sectors.

Firestone most recently served as Chief Financial Officer of Oakland Manager, a privately-held purveyor of cannabis with both retail and wholesale market penetration, and as Chairman of FirePower Technology, a privately held manufacturer of ATX power supplies for the IT and instrumentation markets.

In the public company sector, Mr.

Firestone has served as Chief Executive Officer of Eastside Distilling, Inc.

EAST), Chief Executive Officer of Qualstar Corporation (NASDAQ:

QBAK), Chief Financial Officer of Advanced Energy Industries (NASDAQ:

AEIS), and Chief Financial Officer of Applied Films Corporation (NASDAQ:

He has served on numerous boards, including those of Eastside Distilling, Qualstar, CVD Equipment Corporation (NASDAQ:

CVD), Amtech Systems, Inc.

ASYS) and HyperSpace Communications, Inc.

Firestone received his Bachelor of Science in Business Administration with a concentration in Accounting from Slippery Rock University of Pennsylvania.

Arno joined our Board of Directors in 2011 and has more than 30 years of experience handling a wide range of corporate and financial matters, primarily including work as an investment banker and strategic advisor to emerging growth companies.

Arno currently serves as a managing member of Unterberg Legacy, LLC, a merchant bank and multi-family office, where he has served since 2023.

He previously served, from 2015 to 2023, as vice chairman of Special Equities Group, LLC, a privately held investment banking firm affiliated with Dawson James Securities Inc.

and previously affiliated with Bradley Woods & Co.

and Chardan Capital Markets LLC.

From 2013 until 2015, Mr.

Arno served as managing director of Emerging Growth Equities, an investment banking firm, and was previously president of LOMUSA Limited, an investment banking firm.

Earlier in his career, Mr.

Arno served as vice chairman and chief marketing officer of Unterberg Capital, LLC, an investment advisory firm that he co-founded.

He was also vice chairman and head of the equity capital markets division of Merriman Capital LLC, an investment banking firm, and served on the board of the parent company, Merriman Holdings, Inc.

Arno currently serves on the boards of Insight Molecular Diagnostic Inc.

(IMDX), a precision diagnostics company, where he serves as chairman;

SmithMicro Software, Inc.

(SMSI), a software technology company;

Catheter Precision, Inc.

(VTAK), a medical device company;

Independa, Inc., a privately held software company;

and ComHear Inc., a privately held audio technology R&D company, where he serves as chairman.

Arno received a Bachelor of Science degree from George Washington University.

He is currently the Lead Independent Director, Chair of the Compensation Committee and a member of the Corporate Governance & Nominating Committee and Audit Committee.

Salhany is currently President and CEO of her own consulting company, JHMedia, which she founded in 1997.

She was also one of the founding partners of Echo Bridge Entertainment and CEO & President of LifeFX Networks, Inc.

Prior to this, she served as Chairperson of the Twentieth Television division of Fox, and was appointed the first woman in history to head a major television network when she accepted the Chairmanship of Fox Broadcasting.

After chairing Fox, Salhany accepted the post of Chief Executive Officer and President of United Paramount Network (UPN), launching and growing UPN to become the fifth major broadcast network.

She also served on the Board of Directors for Echo Bridge Entertainment, Compaq / Hewlett-Packard, Fox, Inc., Avid Technologies, and American Media, Inc.

Salhany was also a trustee of Emerson College and Lasell College, where she received Honorary Doctorates.

She is currently Chair of the Corporate Governance & Nominating Committee and is a member of the Audit Committee and Compensation Committees of the Board.

Keys began his career with Deloitte serving in the audit group in the Las Vegas and New York City executive offices.

David was the Executive Vice President, CFO and member of the executive committee of the Board of Directors of American Pacific Corporation, a chemical company that was publicly traded on The Nasdaq Stock Market for the entirety of the time he was a director and executive officer.

Since 2004, Mr.

Keys has been an independent financial and operations consultant.

Keys currently serves as Chairman of the Audit Committee of SurgPays Inc (NASDAQ:SURG) since July 2019.

Keys currently serves on the Board and is the Chair of the Audit Committee of ARCpoint Inc.

He previously served on the Boards of Directors of AmFed Financial Inc., RSI International Systems, Inc.

RSY.H), Norwest Bank of Nevada and Wells Fargo Bank of Nevada.

Keys also served on the Advisory Board of Directors of FM Global, a leading provider of property and casualty insurance.

Keys is a Certified Public Accountant (CPA), Certified Valuation Analyst (CVA), Certified Management Accountant (CMA), Chartered Global Management Accountant (CGMA), Certified Information Technology Professional (CITP), Certified in Financial Forensics (CFF), and Certified in Financial Management (CFM).

David was a member of the National Roster of Neutrals of the American Arbitration Association for over fifteen years.

He received a Bachelor of Science in accounting from Oklahoma State University.

He is currently Chair of the Audit Committee and is a member of the Corporate Governance & Nominating Committee and Compensation Committees of the Board.

Executive Officers

The information below identifies and sets forth certain biographical and other information regarding our executive officers as of March 23, 2026.

Position/Office Held With the Company

Chairman, Chief Executive Officer

Chief Financial Officer

Jonathan Staffeldt

General Counsel and Corporate Secretary

Robert Manfredonia

Senior Vice President of Sales and Marketing

Vice President of Manufacturing Operations

Firestone’s biographical information is set forth above under “ Directors.

Otto has served as the Company’s Chief Financial Officer since April 2024 and previously as the Company’s Corporate Controller since July 2022 where he is responsible for capital markets, investor relations, accounting, SEC external reporting, treasury, tax and other finance management functions.

Prior to joining the Company, Mr.

Otto served as a Senior Manager at Deloitte & Touche LLP providing audit and accounting advisory services to public companies, ranging from small to large cap issuers, for over ten years.

Otto is also a certified public accountant.

Otto received his Master’s in Business Administration and B.A.

in Accounting from Niagara University.

Jonathan Staffeldt has served as General Counsel of the Company since April 2024 and previously as Deputy General Counsel since January 2023.

Prior to that, Mr.

Staffeldt was Chief Legal Officer of GVB Biopharma, the former subsidiary of the Company that was acquired in May 2022, and served in that role since September 2019.

Staffeldt was previously in private practice with significant experience in corporate, mergers and acquisitions, and litigation.

Staffeldt received his B.S.

in Accounting from the University of Southern California and his Juris Doctorate from the University of California Los Angeles.

Robert Manfredonia has served as our Executive Vice President of Sales and Marketing since August 2024.

Previously, Mr.

Manfredonia served as Chief Executive Officer for Bonavita Beverage a privately-held service company providing business structure support, strategy development, national sales team coverage, wholesaler and corporate retail access with back of the house solutions.

Prior he served as the President of Eastside Distilling Company Inc.

EAST), where he was responsible for providing strategic leadership with establishing long-range goals, strategies, plans, and policies.

Previously he held positions including Vice President of Corporate Retail for Roust, the second largest Global Vodka Producer and Western Regional Manager of Artisanal Brands for Molson Coors (NYSE:

Manfredonia early in his career worked for Southern Glazer’s Wine and Spirits the largest wine and spirits distributor in the United States.

Manfredonia proudly served in the United States Air Force as a Logistics Planner in Asia and Europe.

Scott Marion has served as our Vice President of Manufacturing Operations since February 2023.

Previously, Mr.

Marion served as head of Manufacturing and Supply Chain Finance at Reynolds American.

Marion has over twenty years’ experience in the tobacco industry where he has held various management roles in finance working closely with manufacturing operations.

He holds a Bachelor of Science Degree in Business Administration from High Point University and an MBA from Wake Forest University.

Family Relationships

There are no family relationships among our directors and executive officers.

Independent Directors

Our Board of Directors has determined that David Keys, Lucille S.

Salhany, and Andrew Arno are “independent” as defined by applicable Nasdaq Stock Market listing standards.

Each director serving on the Audit Committee and the Compensation Committee of our Board also meets the more stringent independence requirements established by SEC and Nasdaq rules applicable to audit and compensation committees.

Our Board has determined that no director or nominee has a relationship that would interfere with the exercise of independent judgment in carrying out their responsibilities as a director.

There are no family relationships among our directors, nominees, or executive officers.

The Board annually reviews all business and other relationships of directors and determines whether directors meet these categorical independence tests.

Board Leadership Structure and the Role of the Board in Oversight of Risk Management

Our Board of Directors has not adopted a policy requiring that the roles of Chief Executive Officer and chairperson of the Board be separate.

Our Board reserves the right to assign the responsibilities of the Chief Executive Officer and chair position as determined by our Board to be in the best interest of our Company.

In the circumstance where the responsibilities of the Chief Executive Officer and chair are vested in the same individual or in other circumstances when deemed appropriate, the Board will designate a Lead Independent Director from among the independent directors to preside at the meetings of non-employee director executive sessions.

Currently, Lawrence D.

Firestone serves as Board Chair and Chief Executive Officer, and Andrew Arno serves as the Lead Independent Director.

Our Board reviews our leadership structure annually and retains the authority to modify this structure to best address our Company’s unique circumstances as and when appropriate.

Our Board is actively involved in oversight of risks that could affect the Company.

Our Board has assigned responsibility for addressing certain risks, and the steps management has taken to monitor, control and report such risk, to our Audit Committee, including risks relating to execution of our growth strategy, with appropriate reporting to the full Board.

Our Board relies on our Compensation Committee to address significant risk exposures facing our Company with respect to compensation.

Our Board receives reports by each committee chair regarding the applicable committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within the Company.

Stockholder Communications with the Board

Stockholders wishing to communicate with the Board of Directors or with an individual Board member concerning the Company may do so by writing to the Board or to the particular Board member care of the Corporate Secretary, 22nd Century Group, Inc.

The envelope or subject line should indicate that it contains a stockholder communication.

Meetings of Board of Directors

Our Board held eight meetings throughout 2025.

All directors attended at least 75% of meetings of the Board and Board committees on which they served in 2025.

Executive Sessions of Independent Directors

The independent directors hold regularly scheduled executive sessions of the Board and its committees no management directors or employees present.

The independent directors met in executive session at most of the regularly scheduled Board and committee meetings held in 2025.

Standing Committees

Our Board of Directors currently has three (3) standing committees:

(i) an Audit Committee, (ii) a Compensation Committee, and (iii) a Corporate Governance and Nominating Committee.

Members of these committees are elected annually by the Board.

The charters of each committee are each available on the investor relations section of our website at www.xxiicentury.com.

The Audit Committee oversees the Company’s financial reporting process and system of internal accounting controls, as well as appointment and oversight of the independent public accountants engaged to audit the Company’s financial statements.

The Audit Committee also assists the Board in monitoring compliance with legal and regulatory requirements and oversees the Company’s policies with respect to risk assessment and management, including but not limited to cybersecurity risks.

The Audit Committee is comprised solely of non-employee directors who satisfy current Nasdaq standards with respect to independence, financial expertise and experience.

The Audit Committee is comprised of Mr.

Salhany and Mr.

Arno as Chair.

Our Board of Directors has determined that Mr.

Arno meets the SEC’s definition of “audit committee financial expert,” and that all members of the Audit Committee meet the financial literacy requirements of the Nasdaq Stock Market.

No members of the Audit Committee serve on the audit committees of more than three public companies.

The Audit Committee held four meetings during 2025.

To ensure independence, the Audit Committee also meets separately with our independent public accountants apart from meetings with members of management.

The Compensation Committee is comprised solely of directors who meet the current Nasdaq requirements for independence.

The Compensation Committee is comprised of Mr.

Salhany as Chair.

The Compensation Committee establishes and regularly reviews our compensation and benefits philosophy and program in a manner consistent with corporate financial goals and objectives.

The Compensation Committee also approves compensation arrangements for senior management, including annual incentive and long-term compensation;

administers grants under our equity incentive plans;

annually evaluates the performance of our Chief Executive Officer;

and reviews leadership development and succession planning.

The Compensation Committee held two meetings in 2025.

The Corporate Governance and Nominating Committee is comprised solely of independent directors and is comprised of Mr.

Salhany and Mr.

Keys as Chair.

The Corporate Governance and Nominating Committee develops and recommends to the Board corporate governance guidelines applicable to the Company;

identifies, evaluates and recommends candidates for election to the Board;

leads the Board in its annual review of the Board’s performance;

and recommends Board members to serve on each committee of the Board.

The Corporate Governance and Nominating Committee held one meeting in 2025.

The guidelines and procedures for identifying and evaluating nominees for election to the Board are set forth in the charter of the Corporate Governance and Nominating Committee.

In general, persons considered for nomination to the Board must have demonstrated outstanding achievement, integrity and judgment and such other skills and experience as will enhance the Board’s ability to serve the long−term interests of the Company and its stockholders.

Candidates must also be willing and able to devote the necessary time for Board service.

The Corporate Governance and Nominating Committee also considers diversity in terms of gender, ethnicity, age, and other attributes that could contribute to Board effectiveness, and assesses diversity in the course of the Committee’s annual evaluation of Board structure and composition.

The Corporate Governance and Nominating Committee considers potential candidates recommended by current directors, company officers, employees and others, and will consider candidates recommended by stockholders for consideration as director nominees.

Nominations of persons for election to the Board at the Annual Meeting may be made by any stockholder entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in our Bylaws.

Such nominations by any stockholder shall be made pursuant to timely notice in writing to the Secretary.

To be timely, a stockholder’s notice shall be delivered to the Secretary at our principal executive offices not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year’s Annual Meeting;

provided, however, that in the event that the date of the Annual Meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such Annual Meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such Annual Meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made.

Code of Business Conduct and Corporate Ethics

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We intend to satisfy any disclosure requirements pursuant to Item 5.05 of Form 8-K regarding any amendment to, or waiver from, certain provisions of the Code of Ethics by posting such information on our website.

Insider Trading Policy

Our directors, executive officers, and employees are required to comply with the 22nd Century Group, Inc.

Insider Trading Policy and may not engage in any transaction (such as short-selling) to hedge against the potential decline in value of any of our securities.

Our Insider Trading policy also clearly sets forth the prohibition on trading based on material non-public information.

Compensation of Directors

Elements of 2025 Non-Employee Director Compensation

Non-employee directors are compensated for their service on our Board as shown below.

Directors who are employees of the Company receive no additional compensation for serving as directors.

The Compensation Committee periodically reviews the compensation of our non-employee directors and considers market practices.

The Board approved the following compensation for 2025 as follows:

2025 Director Compensation (non-employee)

Annual cash retainer:

Chair of Board or Lead Independent Director

Chair of Audit Committee

Chair of Compensation or Corporate Governance & Nominating Committee

Member of a Board Committee

Annual equity award value:

Chair of Board or Lead Independent Director

Member of a Board Committee

For fiscal 2026, compensation will consist of cash and equity-based awards, as set forth below:

2026 Director Compensation (non-employee)

Annual cash retainer:

Chair of Board or Lead Independent Director

Chair of Audit Committee

Chair of Compensation or Corporate Governance & Nominating Committee

Member of a Board Committee

Annual equity award value:

Chair of Board or Lead Independent Director

Member of a Board Committee

Non-employee director equity-based awards will vest annually, and consist of a mix weighted as 75% non-qualifying stock options (NQSO’s) and 25% restricted stock units (RSU’s).

Additionally, a one-time special award in November 2025 was granted of NQSOs and RSUs which vest in equal increments over three years.

NON-EMPLOYEE DIRECTOR COMPENSATION FOR 2025

David Keys (3)

Anthony Johnson (4)

(1) Represents the grant date fair value computed in accordance with FASB ASC 718.

The assumptions used for the option awards are set forth in Note 14 “Equity Based Compensation” of the Notes to the Financial Statements contained in Item 8 of this report.

(2) The fair value of each restricted stock unit is based on the stock price of the Company’s common stock on the grant date of the award.

Keys was appointed as a director on July 14, 2025 and received pro rata compensation for service during 2025.

(4) Former director.

Executive Compensation.

Information is incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its 2025 Annual Meeting of Stockholders.

COMPENSATION DISCUSSION AND ANALYSIS

This section contains a discussion of the material elements of compensation awarded to, earned by, or paid to our principal executive officer, our principal financial officer, and our other executive officers who were serving as executive officers of the Company on December 31, 2025.

These individuals are identified in the Summary Compensation Table and other compensation tables that follow this section, and are referred to throughout this report as our “named executive officers.”

Executive Summary and Overview of 2025 Compensation

Our Company’s long-term success depends on our ability to fulfill the expectations of our customers and clients in a competitive environment and deliver value to stockholders.

To achieve these goals, it is critical that we are able to attract, motivate, and retain highly talented individuals at all levels of the organization that are committed to our values and objectives.

We strive to provide compensation that is (a) linked to stockholder value creation, (b) reflective of the overall performance of the Company and each individual executive, and (c) considerate of the competitive market levels of compensation needed to recruit, retain and motivate top executive talent, while remaining consistent with the other objectives.

Compensation Philosophy and Objectives

The Company’s executive compensation program is based on the same principles that guide us in establishing all of the Company’s compensation programs:

● Compensation fosters the long−term focus required for the Company’s success.

In general, the compensation of Company executives includes longer−term incentives because they are in a greater position to influence longer−term results.

● Compensation reflects the level of job responsibility, individual performance, and Company performance.

As employees progress to higher levels in the organization, an increasing proportion of their pay should be linked to Company performance and stockholder returns because those employees are more able to affect the Company’s results.

● Compensation reflects the value of the job in the marketplace.

To attract and retain a highly skilled workforce, we must remain competitive with the pay of other premier employers who compete with us for talent.

● While compensation programs and individual pay levels will always reflect differences in job responsibilities, geographies and marketplace considerations, the overall structure of the compensation and benefit programs should be broadly similar and equitable across the organization.

Overview of Executive Compensation

The Compensation Committee

Our Compensation Committee has primary responsibility for, among other things, determining our compensation philosophy, evaluating the performance of our executive officers, setting the compensation and other benefits of our executive officers, and considering the outcome of the advisory votes of stockholders on executive compensation.

To ensure alignment of compensation programs with the Company’s needs and goals, the Compensation Committee is informed by and responsive to the overall mission and strategies of the Company as determined by the full Board of Directors.

As the strategic focus of the Company evolves, as for example toward commercialization of its products and profitability, the Compensation Committee has and will continue to adapt the Company’s compensation programs to meet these evolving needs.

The Compensation Committee also evaluates risks and rewards associated with the Company’s overall compensation philosophy and structure.

To the extent our compensation programs provide for incentive−based compensation, the Compensation Committee evaluates whether these programs are designed to pay for performance, and thus encourage only appropriate risk−taking.

These programs are also subject to oversight of the Compensation Committee and various functional departments of the Company to ensure that our employees, including our executive officers, are not encouraged to take excessive or unnecessary risks in managing our business.

Role of Executive Officers in Compensation Discussions

The Compensation Committee meets with our Chief Executive Officer in order to obtain recommendations with respect to the Company’s compensation programs and practices for executives and other employees.

Management discusses with the Compensation Committee the practices that have been put in place to identify and mitigate, as necessary, potential risks.

The Chief Executive Officer annually reviews the performance of each executive officer, other than himself.

The Chief Executive Officer’s performance is reviewed annually by the Compensation Committee.

With support from market compensation data, performance reviews and other information, management makes recommendations to the Compensation Committee on the base salaries, bonus targets and equity compensation for the executive officers and other employees.

The Compensation Committee takes management’s recommendations into consideration, but is not bound by management’s recommendations with respect to executive compensation.

While management attends certain meetings of the Compensation Committee, the Compensation Committee also holds executive sessions not attended by any members of management or by non−independent directors.

The Compensation Committee annually reviews and recommends for approval to the full Board all elements of compensation of the Chief Executive Officer, and reviews, counsels, and makes recommendations regarding the compensation elements of other senior executives.

The Compensation Committee also approves equity awards to all employees and directors of the Company.

Elements of Executive Compensation

For 2025, the principal components of compensation for named executive officers were:

(1) Base Salary, (2) Performance−Based Incentive Compensation, (3) Long−Term Equity Incentive Compensation, (4) Personal Benefits, and (5) Other Compensation.

In determining the amount and relative allocation among each component of compensation for each named executive officer, the Compensation Committee considered, among other factors, each executive officer’s experience level and historical performance, compensation paid by companies comparable in size, data obtained from management’s recruitment activities, historical rates of executive compensation, Company revenues and financial outlook, and alignment with the Company’s overall compensation philosophy.

Base salaries are set at levels that the Compensation Committee deems to be sufficient to attract and retain highly talented executive officers capable of fulfilling the Company’s key objectives.

Base salaries are also set with the goal of rewarding executive officers on a day−to−day basis for their time and services while encouraging them to strive for performance−based and long−term incentives.

The table below shows the base salary established by the Compensation Committee for each of our named executive officers for 2025 and 2026, and the percentage change compared to the prior fiscal year.

Salary adjustments typically do not coincide with the beginning of the fiscal year, so the amounts shown below may differ from those shown in the 2025 Summary Compensation Table.

Percentage Increase

Chief Executive Officer

Chief Financial Officer

Jonathan Staffeldt

General Counsel

Robert Manfredonia

Executive Vice President Sales and Marketing

Vice President Manufacturing Operations

Performance−Based Incentive Compensation

Historically, the Compensation Committee has considered, and in some cases established, incentive bonus plans for other executive officers that align pay with performance.

Because the Company has not in the Committee’s judgment achieved sufficient levels of revenues or profits, the Committee did not approve performance-based incentive compensation awards for named executive officers in 2024.

During 2024, the Compensation Committee developed a new performance-based incentive compensation plan for our executive officers, which became effective initially for fiscal year 2025.

The performance-based incentive compensation program for 2025 consists of (i) annual performance-based cash bonus opportunity and (ii) long-term equity incentive compensation consisting of equity awards.

The Compensation Committee also developed a performance-based annual cash bonus plan for 2025.

Cash bonus amounts awarded were determined based on (i) a percentage of each executive position’s base pay, (ii) Company performance, (iii) individual performance.

Weighting of Company performance was 80% and individual performance was 20%.

The cash bonus pool was based on achievement of key financial metrics for the fiscal year, funded as 25% of Adjusted EBITDA greater than $2.0 million, and up to 150% of target.

Individual performance was tied to the achievement of quarterly initiatives, which was based on at least 5 measurable objectives defined for that position that were strategic for the Company in achieving its goals.

In order to calculate EBITDA, the Company adjusts net (loss) income by adding back interest expense (income), provision (benefit) for income taxes, and depreciation and amortization expense.

Adjusted EBITDA consists of EBITDA adjusted by the Company for certain non-cash and/or non-operating expenses, including adding back equity-based employee compensation expense, restructuring and restructuring-related charges such as impairment, acquisition and transaction costs, and other unusual or infrequently occurring items, if applicable, such as inventory reserves and adjustments, gains or losses on disposal of property, plant and equipment, and gains or losses on investments.

For fiscal 2025, the Compensation Committee target bonus levels and achieved bonus amounts as follows:

Target Bonus % of Base Salary

Target Cash Bonus

Achieved 2025 Cash Bonus (1)

Chief Executive Officer

Chief Financial Officer

Jonathan Staffeldt

General Counsel

Robert Manfredonia

Executive Vice President Sales and Marketing

Vice President Manufacturing Operations

(1) The Company's adjusted EBITDA loss for the year ended December 31, 2025 resulted in a $0 payout.

Long-Term Equity Incentive Program Compensation

Our 2021 Omnibus Incentive Plan, as amended and restated, authorizes the Company to grant various types of equity awards, including stock options and restricted stock units, as incentives for management to increase stockholder value.

Equity awards are granted to executive officers as long−term incentives in order to align executives’ performance with the interests of the Company’s stockholders.

In addition, the multi-year nature of the vesting periods of such awards encourages executive retention.

Our Compensation Committee has authority to determine eligible participants, the types of awards, and the terms and conditions of awards.

Upon review of the Company’s financial performance for 2024, the Committee determined to forego issuance of long-term equity incentive awards for 2024.

For 2025, the Compensation Committee developed a new long-term equity incentive program, whereby recipients’ equity awards are aligned to the prior fiscal years achieved cash bonus, with initial grants for fiscal 2025 being set as equal to the target cash bonus amounts.

Equity awards are split as 75% in either non-qualifying stock options (NQSO’s) or incentive stock options (ISO’s) and 25% restricted stock units (RSU’s), and the number of shares to award was determined by taking the target cash bonus as the numerator divided by the 30-day average of closing stock price prior to grant as the denominator.

All equity awards will vest in equal annual installments over a three-year period, subject to continued service with us.

For fiscal 2025, the table below summarized the number of NQSO’s and RSU’s granted to our executives:

Chief Executive Officer

Chief Financial Officer

Jonathan Staffeldt

General Counsel

Robert Manfredonia

Executive Vice President Sales and Marketing

Vice President Manufacturing Operations

Retirement and Other Benefits

As employees, the executives were eligible to participate in health and welfare benefits, as offered to our general workforce, designed to attract and retain a skilled workforce in a competitive marketplace.

These benefits help ensure that the Company has a healthy and focused workforce through reliable and competitive health and other personal benefits.

We do not maintain any pension or non-qualified deferred compensation plans, but we do sponsor a 401(k)-plan pursuant to which we make a safe harbor non-elective contribution of 3% of the employee’s annual compensation, subject to certain wage maximums, to provide employees with the opportunity to save for retirement on a tax deferred basis.

These benefits were considered in relation to total compensation packages, but did not materially impact decisions regarding other elements of executive officer compensation.

Compensation on Termination of Employment

Each of our NEOs has an employment agreement that provides for severance in the event they are terminated without cause or they leave for good reason.

We believe these agreements are important to attract and retain NEOs since many companies we compete with offer severance compensation.

For additional information on compensation on termination of employment, see “Executive Compensation — Employment Agreements with Named Executive Officers” and “Executive Compensation — Compensation on Termination of Employment.”

Policy on Hedging Transactions

We prohibit our officers and directors from engaging in hedging transactions or arrangements designed to lock in the value of their company securities.

This prevents our officers and directors from continuing to own company securities without having the full risks and rewards of ownership.

Recoupment/Clawback Policies

The Sarbanes-Oxley Act of 2002 subjects incentive compensation and stock sale profits of our CEO and CFO to forfeiture in the event of an accounting restatement resulting from any non-compliance, as a result of misconduct, with any financial reporting requirement under GAAP and SEC rules.

On June 22, 2023 we adopted the 22nd Century Group, Inc.

Compensation Recovery Policy in full compliance with Listing Rule 5608(a).

Compensation Committee Interlocks and Insider Participation

During the last fiscal year, no member of the Compensation Committee had a relationship with us that required disclosure under Item 404 of Regulation S-K.

During the past fiscal year, none of our executive officers served as a member of the Board of Directors or Compensation Committee, or other committee serving an equivalent function, for any entity that has one (1) or more executive officers who served as members of our Board of Directors or our Compensation Committee.

None of the members of our Compensation Committee is an officer or employee of our Company, nor have they ever been an officer or employee of our Company.

Compensation Committee Report

For the year ended December 31, 2025, the Compensation Committee reviewed and discussed the foregoing Compensation Discussion and Analysis with the Company’s management and Board of Directors.

Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included herein.

Submitted by the members of the Compensation Committee

David Keys, Chair

Executive Compensation

SUMMARY COMPENSATION TABLE FOR 2025

The following table summarizes the compensation of our NEOs for 2025.

The amounts reported for salary represent annual wages as reported to the internal revenue service reflective of any lawful withholdings or deductions, and therefore may differ from stated annual salary rates for the NEO’s.

The amounts reported for stock awards may not represent the amounts that the NEOs will actually realize from the awards.

Whether, and to what extent, a named executive officer realizes value will depend on our performance, stock price and continued employment.

Name and Principal Position

Compensation (4)

Chief Executive Officer

Chief Financial Officer

Jonathan Staffeldt

General Counsel

Robert Manfredonia

Executive Vice President Sales and Marketing

Vice President Manufacturing Operations

(1) Bonus amounts relate to amounts paid under retention agreements executed during July 2023 with the respective individuals.

Remaining amounts owed under the retention agreements were terminated in April 2024.

(2) Represents the grant date fair value computed in accordance with FASB ASC 718.

The assumptions used for the option awards are set forth in Note 14 “Equity Based Compensation” of the Notes to the Financial Statements contained in Item 8 of this report.

(3) The fair value of each restricted stock unit is based on the stock price of the Company’s common stock on the grant date of the award.

(4) All Other Compensation consists of the following:

Contributions

Jonathan Staffeldt

Robert Manfredonia

*Includes Company paid premiums for health insurance, dental insurance, vision insurance, group-term life insurance, and long and short-term disability insurance.

Certain executives had health insurance premiums over $10,000 (Daniel A.

Otto - $18,634 and Scott Marions - $18,834).

GRANTS OF PLAN BASED AWARDS DURING 2025

Date of Board

Awards ($) (3)

Jonathan Staffeldt

Robert Manfredonia

(1) Represents RSUs and Stock Options which vest in equal increments over three years on March 10, 2026, 2027 and 2028, subject to continued service.

(2) Represents RSUs and Stock Options which vest in equal increments over three years on November 5, 2026, 2027 and 2028, subject to continued service.

(3) Represents the grant date fair value computed in accordance with FASB ASC 718.

The assumptions used for the option awards are set forth in Note 14 “Equity Based Compensation” of the Notes to the Financial Statements contained in Item 8 of this report.

The fair value of each restricted stock unit is based on the stock price of the Company’s common stock on the grant date of the award.

OUTSTANDING EQUITY AWARDS AT FISCAL-YEAR END

Option awards

Equity Incentive

Payout Value of

Restricted Stock

Units or Other

Unexercisable

Have Not Vested

Jonathan Staffeldt

Robert Manfredonia

(1) Represents RSUs and Stock Options which vest in equal annual increments over three years on March 10, 2026, 2027 and 2028, subject to continued service.

(2) Represents RSUs and Stock Options which vest in equal annual increments over three years on November 5, 2026, 2027 and 2028, subject to continued service.

(3) The amounts in this column are based on the closing stock price of the Company’s common stock on December 31, 2025.

These amounts do not reflect the actual amounts that may be realized.

OPTION EXERCISES AND STOCK VESTED DURING 2025

None of our NEOs had any equity awards that vested during 2025.

Employment Agreements with Named Executive Officers

On November 3, 2025, we entered into employment agreements with each of our NEOs with initial durations indicated in the table below, with automatic one-year renewal periods unless either party provides advance written notice of an intent not to renew.

The Employment Agreements specify the titles and provide for base salaries at the current levels indicated in the table below.

They also provide that the executive officers will be eligible to participate in annual cash incentive and long-term cash and equity incentive plans and programs, as well as other employee benefit plans, that are generally provided to the Company’s senior executives from time to time.

The Employment Agreements also provide that, upon an involuntary termination of the executive officer’s employment by the Company without Cause (as defined in the Employment Agreements), or upon a resignation for Good Reason (as defined in the Employment Agreements) upon or within 24 months following a Change of Control (as defined in the Company’s 2021 Omnibus Incentive Plan or any successor incentive plan) (the “Change of Control Employment Period”), the executive officer will receive the severance payment indicated in the table below, as well as subsidized COBRA benefits for the continuation period indicated in the table below.

Severance Payment on

Qualifying Termination

Change of Control

Executive Officer

Employment Period

Chief Executive Officer

1.5x sum of base salary plus target bonus

2.5x sum of base salary plus greater of target bonus or prior year’s actual bonus

Chief Financial Officer

1.0x sum of base salary plus target bonus

1.5x sum of base salary plus greater of target bonus or prior year’s actual bonus

Jonathan Staffeldt

General Counsel

1.0x sum of base salary plus target bonus

1.5x sum of base salary plus greater of target bonus or prior year’s actual bonus

Robert Manfredonia

Executive Vice President Sales and Marketing

1.0x sum of base salary plus target bonus

1.5x sum of base salary plus greater of target bonus or prior year’s actual bonus

Vice President Manufacturing Operations

1.0x sum of base salary plus target bonus

1.5x sum of base salary plus greater of target bonus or prior year’s actual bonus

“Cause” is defined generally in the Employment Agreements to include (a) a willful act or omission that is a material breach of any material obligation under the Employment Agreement or material written policy or procedure and failure to cure, (b) continued willful failure or refusal to substantially perform duties reasonably required, (c) an act of moral turpitude, dishonesty or fraud by, or criminal conviction (excluding non-felony convictions relating solely to vehicle and traffic offenses), (d) material misappropriation of Company property or (e) other willful misconduct that is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company.

“Good Reason” is defined generally in the Employment Agreements to include (1) a breach by the Company or successor in the Change of Control of the Employment Agreement, (2) a reduction in base salary, percentage of base salary available as incentive compensation or bonus opportunity or benefits, in each case relative to those most favorable to the in effect at any time during the 180-day period prior to the Change of Control or, to the extent more favorable to the executive officer, those in effect at any time after the Change of Control, (3) the removal of the executive officer from, or failure to reelect or reappoint the executive to, any of the positions held with the Company on the date of the Change of Control or any other positions with the Company to which the executive officer has been elected, appointed or assigned, (4) a material adverse change, without the executive officer’s written consent, in the executive officer’s working conditions or status with the Company relative to the most favorable working conditions or status in effect during the 180-day period prior to the Change of Control or, to the extent more favorable to the executive officer, those in effect at any time after the Change of Control, (5) the relocation by more than 50 miles from the principal place of employment on the date 180 days prior to the Change of Control, (6) a requirement to travel 20% in excess of the average number of days per month the executive officer was required to travel during the 180-day period prior to the Change of Control, or (7) a failure to obtain an agreement from a successor in a Change of Control expressly to assume and agree to perform from and after the date of such assignment all of the terms, conditions and provisions imposed by the Employment Agreement.

Upon a qualifying termination, the executive officers will also receive accrued but unpaid benefits.

Equity awards will be treated as provided in the applicable equity incentive plan and award agreements.

The Employment Agreements also require the executive officers to comply with certain restrictive covenants.

Compensation on Termination of Employment

The following table illustrates the additional compensation that we estimate would be payable to each of our NEOs on termination of employment under each of the circumstances described above, assuming the termination occurred on December 31, 2025.

The amounts shown are estimates and do not necessarily reflect the actual amounts that these individuals would receive on termination of employment.

Termination by the Company Without Cause or by the Executive for Good Reason

Jonathan Staffeldt

Robert Manfredonia

Death or Disability

Jonathan Staffeldt

Robert Manfredonia

Change of Control with Triggering Event

Jonathan Staffeldt

Robert Manfredonia

(1) Health insurance payments have been estimated based on current rates.

(2) The dollar amount is calculated based on the closing share price on December 31, 2025.

(3) As of December 31, 2025, the intrinsic value of the stock options was zero.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth information regarding the beneficial ownership of our common stock as of March 20, 2026, by:

each person who, to our knowledge, owns more than 5% of our common stock;

each of our current directors and executive officers;

all our current directors and executive officers as a group.

Derivative securities exercisable or convertible into shares of our common stock within sixty (60) days of March 20, 2026, are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the person holding securities but are not deemed outstanding for computing the percentage of any other person.

Beneficial ownership representing less than 1% is denoted with an asterisk (*).

The address of named beneficial owners that are officers and/or directors of the Company is:

c/o 22nd Century Group, Inc., 321 Farmington Road, Mocksville, North Carolina.

The following table is based upon information supplied by officers and directors, and with respect to 5% or greater stockholders who are not officers or directors, information filed with the SEC.

Name of Beneficial Owner

5% + Beneficial Stockholders:

Anson Funds Management LP (2)

Management and Directors:

Firestone (3)

Jonathan Staffeldt (4)

Robert Manfredonia (5)

Scott Marion (5)

Andrew Arno (6)

David Keys (8)

All directors and executive officers as a group (8 persons) (3) - (8)

(1) Based on 662,023 shares of common stock issued and outstanding as of March 20, 2026.

(2) Anson Funds Management LP (d/b/a Anson Funds), a Texas limited partnership, Anson Management GP LLC, a Texas limited liability company, Mr.

Tony Moore, the principal of Anson Funds Management LP and Anson Management GP LLC, Anson Advisors Inc., an Ontario, Canada corporation, Mr.

Amin Nathoo, a director of Anson Advisors Inc., and Mr.

Moez Kassam, a director of Anson Advisors Inc..

Ownership relates to a private fund to which Anson Funds Management LP and Anson Advisors Inc.

serve as co-investment advisors (the “Fund”).

Anson Funds Management LP and Anson Advisors Inc.

serve as co-investment advisors to the Fund and may direct the vote and disposition of the shares of Common Stock held by the Fund.

As the general partner of Anson Funds Management LP, Anson Management GP LLC may direct the vote and disposition of the shares of Common Stock held by the Fund.

As the principal of Anson Fund Management LP and Anson Management GP LLC, Mr.

Moore may direct the vote and disposition of the shares of Common Stock held by the Fund.

As directors of Anson Advisors Inc., Mr.

Nathoo and Mr.

Kassam may each direct the vote and disposition of the shares of Common Stock held by the Fund.

Business address is 16000 Dallas Parkway, Suite 800, Dallas, Texas 75248

(3) Consists of (a) 87 shares of common stock issuable upon exercise of stock options and (b) 4,426 restricted stock units and 13,278 options to purchase common shares are not included in the number of beneficially owned shares because they do not vest within 60 days of March 20, 2026.

(4) Consists of (a) 49 shares of common stock issuable upon exercise of stock options and (b) 2,461 restricted stock units and 7,381 options to purchase common shares are not included in the number of beneficially owned shares because they do not vest within 60 days of March 20, 2026.

(5) Consists of (a) 42 shares of common stock issuable upon exercise of stock options and (b) 2,148 restricted stock units and 6,444 options to purchase common shares are not included in the number of beneficially owned shares because they do not vest within 60 days of March 20, 2026.

(6) Consists of (a) 37 shares of common stock issuable upon exercise of stock options and (b) 1,153 restricted stock units and 3,460 options to purchase common shares are not included in the number of beneficially owned shares because they do not vest within 60 days of March 20, 2026.

(7) Consists of (a) 22 shares of common stock issuable upon exercise of stock options and (b) 734 restricted stock units and 2,202 options to purchase common shares are not included in the number of beneficially owned shares because they do not vest within 60 days of March 20, 2026.

(8) Consists of (a) 424 shares of common stock issuable upon exercise of stock options and (b) 839 restricted stock units and 2,516 options to purchase common shares are not included in the number of beneficially owned shares because they do not vest within 60 days of March 20, 2026.

DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Exchange Act requires our directors, executive officers and stockholders holding more than 10% of our outstanding common stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in beneficial ownership of our common stock.

Section 16(a) filers are required by Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file.

Based on a review of the ownership reports filed with Securities and Exchange Commission during 2024, we believe that all Section 16(a) filing requirements were met on a timely basis, except for a late Form 3 and 4 filed by David Keys due to delays in obtaining EDGAR filing codes and a late Form 4 filed by Andy Arno.

Certain Relationships and Related Transactions, and Director Independence.

Our policy is to enter into transactions with related persons on terms that, on the whole, are no less favorable to us than those available from unaffiliated third parties.

Our Board of Directors has adopted written policies and procedures regarding related person transactions.

For purposes of these policies and procedures:

● A “related person” means any of our directors, executive officers, nominees for director, holder of 5% or more of our common stock or any of their immediate family members;

● A “related person transaction” generally is a transaction (including any indebtedness or a guarantee of indebtedness) in which we were or are to be a participant and the amount involved exceeds $120,000 and in which a related person had or will have a direct or indirect material interest.

Each of our executive officers, directors or nominees for director is required to disclose to our Audit Committee certain information relating to related person transactions for review, approval or ratification by our Audit Committee.

In making a determination about approval or ratification of a related person transaction, our Audit Committee will consider the information provided regarding the related person transaction and whether consummation of the transaction is believed by the Audit Committee to be in our best interests.

Our Audit Committee may take into account the effect of a director’s related person transaction on the director’s status as in independent member of our Board of Directors and eligibility to serve on committees of our Board under SEC rules and the listing standards of the Nasdaq Stock Market.

Any related person transaction must be disclosed to our full Board of Directors.

Except as set forth below, there were no related party transactions during 2025 and 2024.

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

The arrangement was terminated in April 2025.

Principal Accounting Fees and Services.

On August 22, 2025, the Audit Committee of the Board of Directors approved the replacement of Freed Maxick P.C.

(“Freed”) as our independent registered public accounting firm, due to the acquisition of certain assets of Freed by Withum Smith+Brown, PC (“Withum”).

The following table shows the fees billed to us for the audits and other services provided by for the fiscal years ended December 31, 2025 and 2024, respectively, by Withum (and prior to the acquisition, Freed).

Audit-related fees

All other fees

Audit Fees consist of the aggregate fees billed for professional services rendered for the audit of our consolidated annual financial statements and the quarterly reviews of financial statements and for any other services that are normally provided by our independent registered public accountants in connection with our statutory and regulatory filings or engagements.

All of the services described above were pre-approved by our Audit Committee.

The Committee concluded that the provision of these services by Withum would not affect their independence.

Pre-Approval Policies and Procedures

The Audit Committee, in accordance with its charter, must pre-approve all non-audit services provided by our independent registered public accountants.

The Audit Committee generally pre-approves specified series in the defined categories of audit services, audit related services and tax services up to specified amounts.

Pre-approval may also be given as part of our Audit Committee’s approval of the scope of the engagement of the independent registered public accountants or on an individual, explicit case-by-case basis before the independent auditor is engaged to provide each service.

Exhibits and Financial Statement Schedules.

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Report of Independent Registered Public Accounting Firm (PCAOB ID 100)

Report of Independent Registered Public Accounting Firm (PCAOB ID 317)

Consolidated Financial Statements:

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Changes in Shareholders’ Equity

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Changes in Shareholders’ Equity (Deficit) and Mezzanine Equity

Consolidated Statements of Cash Flows

6 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of 22nd Century Group, Inc.

and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, statements of comprehensive loss, changes in shareholders' equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of 22 nd Century Group, Inc.

and subsidiaries (the “Company”) as of December 31, 2025, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity (deficit) and mezzanine equity and cash flows for year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

The financial statements of the Company as of and for the year ended December 31, 2024 were audited by Freed Maxick P.C., who joined WithumSmith+Brown, PC on August 1, 2025, and rendered their opinion on such statements on March 20, 2025.

Going Concern

6 unchanged sentences

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting and Valuation for the Modifications of the August 2025 Series A Convertible Preferred Stock Offering

Critical Audit Matter Description

As discussed in Note 9 of the financial statements, during the year ended December 31, 2025, the Company entered a securities purchase agreement with investors to sell Series A Convertible Preferred Stock and warrants.

Subsequent to the initial sale, the terms of both the Series A Convertible Preferred Stock and warrants were amended.

As a result of the amendments, the Company determined that the fair value of the Series A Convertible Preferred Stock and warrants had increased and recorded a deemed dividend of approximately $4.7 million.

We identified the evaluation of the Company’s accounting and valuation for modifications of the Series A Convertible Preferred Stock and warrants as a critical audit matter due to the complexity of the calculations required in determining the proper accounting treatment and fair value of the Series A Convertible Preferred Stock and warrants.

This led to a high degree of auditor judgement, subjectivity, and effort in performing procedures to evaluate the reasonableness of management’s assumptions and calculations.

Additionally, auditing these elements required the involvement of professionals with specialized skill and knowledge.

How the Critical Audit Matter Was Addressed in the Audit

Addressing the critical audit matter involved performing subjective procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.

The primary procedures we performed included:

(i) obtaining and reading relevant amendment agreements for the Series A Convertible Preferred Stock and warrants, (ii) obtaining an understanding and evaluating of the design of controls over the financial reporting and equity transaction cycle, (iii) assessing management’s conclusions of the modifications under the relevant guidance, (iii) testing the accuracy and completeness of the inputs to the external valuation analysis to evaluate whether the conclusions reached were reasonable and consistent with our understanding, (iv) utilizing the knowledge, experience, and expertise of our internal valuation specialists to assess the reasonableness of the methodologies employed to value the fair value of the Series A Preferred Stock and warrants at the amendment date, and (v) assessing the completeness and accuracy of the financial statement disclosures.

/s/ WithumSmith+Brown, PC

We have served as the Company’s auditor since 2011.

Buffalo, New York

March 26, 2026

PCAOB ID Number 100

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of 22nd Century Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of 22nd Century Group, Inc.

and subsidiaries (the Company) as of December 31, 2024, the related consolidated statements of operations, statements of comprehensive loss, changes in shareholders' equity and cash flows for the year ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has incurred significant losses and negative cash flows from operations since inception and expects to incur additional losses until such time that it can generate significant revenue and profit in its tobacco business.

This raises substantial doubt about the Company's ability to continue as a going concern.

Management's plans in regard to these matters also are described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

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federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provide a reasonable basis for our opinion.

Critical Audit Matters

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Insurance recoveries

GVB promissory note

GVB promissory note, net

Prepaid expenses and other current assets

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Intangible assets, net

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' EQUITY

Current liabilities:

3 unchanged sentences

Accounts payable

Accrued expenses

Accrued expenses and other current liabilities

Accrued litigation

Accrued payroll

Accrued excise taxes and fees

Deferred income

Other current liabilities

Contract liabilities

Current liabilities of discontinued operations held for sale

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Long-term liabilities:

Notes and loans payable

Operating lease obligations

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Commitments and contingencies (Note 11)

Shareholders' equity (deficit):

Preferred stock, $ .00001 par value, 10,000,000 shares authorized

Common stock, $ .00001 par value, 250,000,000 shares authorized

Capital stock issued and outstanding:

730,148 common shares ( 20,313 at December 31, 2023)

Mezzanine equity:

Series A convertible preferred shares, $ 0.00001 par value;

10,000,000 shares authorized, 9,650 shares issued and outstanding at December 31, 2025 and 0 at December 31, 2024, respectively

Total mezzanine equity

Shareholders' equity:

Common stock, $ .00001 par value, 500,000,000 shares authorized, 510,384 shares issued and outstanding at December 31, 2025 and 2,285 at December 31, 2024, respectively

Common stock, par value

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Accumulated deficit

Total shareholders' equity (deficit)

Total liabilities and shareholders’ equity (deficit)

Total shareholders' equity

Total liabilities, mezzanine equity and shareholders’ equity

See accompanying notes to consolidated financial statements.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per-share data)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(amounts in thousands, except share and per-share data)

Revenues, net

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Excise taxes and fees on products

Gross (loss) profit

Operating expenses:

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Other income (expense), net

Loss on transfer of promissory note

Interest income, net

Interest income

Interest expense

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Loss from continuing operations before income taxes

Provision for income taxes

(Benefit) provision for income taxes

Net loss from continuing operations

Discontinued operations:

Income (loss) from discontinued operations before income taxes

Income from discontinued operations before income taxes

Provision for income taxes

Net income (loss) from discontinued operations

Income from discontinued operations

Comprehensive loss

Deemed dividends

Net loss available to common shareholders

Basic loss per share:

Basic loss per common share from continuing operations

Basic income (loss) per common share from discontinued operations

Basic loss per common share from deemed dividends

Basic loss per common share

Basic and diluted income (loss) per share:

Basic and diluted loss per common share from continuing operations

( 27,812.56 )

Diluted loss per share:

Diluted loss per common share from continuing operations

Diluted income (loss) per common share from discontinued operations

Diluted loss per common share from deemed dividends

Diluted loss per common share

Basic and diluted income per common share from discontinued operations

Basic and diluted loss per common share from deemed dividends

( 18,493.32 )

Weighted average shares outstanding:

See accompanying notes to consolidated financial statements.

22nd CENTURY GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(amounts in thousands)

Other comprehensive income:

Unrealized gain on short-term investment securities

Foreign currency translation

Reclassification of realized losses to net loss

Other comprehensive income

Comprehensive loss

Basic and diluted loss per common share

( 45,711.05 )

Weighted average shares outstanding - basic and diluted

See accompanying notes to consolidated financial statements.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) AND MEZZANINE EQUITY

(amounts in thousands, except share amounts)

Years Ended December 31, 2025 and 2024

Comprehensive

Shareholders' Equity

Mezzanine Equity

Shareholders'

Income (Loss)

Balance at January 1, 2024

Stock issued in connection with RSU vesting, net of shares withheld for taxes

Stock issued in connection with acquisition

Stock issued in connection with ATM, net of fees of $ 178

Stock issued in connection with licensing arrangement

Stock issued in connection with capital raises, net of issuance costs of $ 2,279

Stock issued in connection with warrant exercises, net of fees of $ 292

Equity detachable warrants

Adoption of ASU 2016-13

Fractional shares issued for reverse stock split

Equity-based compensation

Other comprehensive income

Balance at December 31, 2023

Stock issued in connection with RSU vesting, net of 3 shares withheld for taxes

Stock issued in connection with RSU vesting, net of 1 share withheld for taxes

Stock issued in connection with licensing arrangement

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Balance at December 31, 2024

*Giving retroactive effect to the 1-for-15 reverse stock split on July 5, 2023, 1-for-16 reverse stock split on April 2, 2024 and 1-for-135 reverse stock split on December 17, 2024.

(1) Excludes 8,519 of pre-funded warrants

Stock issued in connection with warrant exercises, net of fees of $ 363

Stock issued from alternative cashless warrant exercises

Stock issued in connection with the issuance of Series A Convertible Preferred Stock, net of fees of $ 757

Stock issued upon conversion of preferred stock

Stock issued upon conversion of Senior Secured Credit Facility

Conversion option remeasurement

Stock issued in connection with licensing arrangement

Stock issued in connection with settled indebtedness

Fractional shares issued for reverse stock split

Equity-based compensation

Balance at December 31, 2025

*Giving retroactive effect to the 1 -for-16 reverse stock split on April 2, 2024, 1 -for-135 reverse stock split on December 17, 2024, 1 -for-23 reverse stock split on June 20, 2025 and 1 -for-15 on January 26, 2026.

See accompanying notes to consolidated financial statements.

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Adjustments to reconcile net loss to cash used in operating activities:

Impairment of goodwill and long-lived assets

Impairment of long-lived assets - held for sale

Impairment of long-lived assets

Amortization and depreciation

Amortization of right-of-use asset

Amortization of right-of-use assets

Other non-cash gains

Provision for credit losses

Loss on sale or disposal of machinery and equipment

(Gain) loss on sale or disposal of property, plant, and equipment

Debt related charges included in interest expense

Equity-based compensation

Gain on change of contingent consideration

Change in fair value of warrant liabilities

Change in fair value of derivative liability

Loss on disposal of discontinued operations

Loss on transfer of promissory note

Deferred income taxes

Change in inventory reserves

Changes in operating assets and liabilities, net of acquisition:

Changes in operating assets and liabilities:

Accounts receivable

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Accounts payable

Accrued expenses

Accrued payroll

Accrued expenses and other current liabilities

Accrued excise taxes and fees

Contract liabilities

Other liabilities

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Proceeds from the sale of property, plant and equipment

Acquisition, net of cash acquired

Proceeds from sale of discontinued operations

Property, plant and equipment insurance proceeds

Sales and maturities of short-term investment securities

Purchase of short-term investment securities

Net cash (used in) provided by investing activities

Issuance of 2025 GVB promissory note

Payments received from 2025 GVB promissory note

Net cash used in investing activities

Cash flows from financing activities:

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Proceeds from issuance of notes payable

Payments of penalties from long-term debt

Payments of long-term debt

Proceeds from issuance of long-term debt

Payment of debt issuance costs

Proceeds from issuance of detachable warrants

Net proceeds from warrant exercise

Proceeds from issuance of common stock related to the ATM

Payment of common stock issuance costs related to the ATM

Net proceeds from Series A convertible preferred stock

Payments of deferred offering costs

Proceeds from issuance of common stock

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Net cash provided by financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash and cash equivalents - beginning of period

Cash and cash equivalents - end of period

Net increase in cash and cash equivalents

Cash and cash equivalents - beginning of year

Cash and cash equivalents - end of year

Supplemental disclosures of cash flow information:

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Cash paid during the period for interest

Cash paid during the period for income taxes

Cash (received) paid during the period for income taxes

Non-cash transactions:

Capital expenditures incurred but not yet paid

Right-of-use assets and corresponding operating lease obligations

Deemed dividends

Stock issued in connection with settled indebtedness

Non-cash consideration RXP acquisition

Non-cash licensing arrangement

Right-of-use assets and corresponding operating lease obligations

Stock issued for extinguishment of Subordinated Note

Payment of 2023 GVB promissory note

Insurance/litigation gross up

Non-cash proceeds from sale of discontinued operations

Payment of debt issuance costs

Equity conversion of Senior Secured Credit Facility

Conversion option remeasurement

See accompanying notes to consolidated financial statements .

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22nd Century Group, Inc.

(together with its consolidated subsidiaries, “22 nd Century Group” or the “Company”) is a publicly traded Nevada corporation on the NASDAQ Capital Market under the symbol “XXII.” 22nd Century Group is a tobacco products company with sales and distribution of the Company’s own proprietary new reduced nicotine tobacco products authorized as Modified Risk Tobacco Products by the FDA.

(together with its consolidated subsidiaries, “22 nd Century Group” or the “Company”) is a Nevada corporation and its common stock is listed on the NASDAQ Capital Market under the symbol “XXII.” 22nd Century Group is a tobacco products company with sales and distribution of the Company’s own proprietary new reduced nicotine tobacco products authorized as Modified Risk Tobacco Products by the FDA.

Additionally, the Company provides contract manufacturing services for conventional combustible tobacco products for third-party brands.

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

As a result of the divestiture of GVB and strategic shift away from hemp/cannabis, the Company has realigned its corporate and management reporting structure to focus solely on its tobacco business.

As a result, during the fourth quarter of 2023, the Company reorganized its business to become a single reportable segment:

The results of operations of the former hemp/cannabis segment are reported as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss for all periods presented and the related assets and liabilities associated with the discontinued operations are classified as held for sale in the Consolidated Balance Sheets as of December 31, 2024 and 2023, respectively.

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

The Consolidated Statements of Cash Flows includes cash flows related to the discontinued operations due to 22 nd Century’s (parent) centralized treasury and cash management processes, and, accordingly, cash flow amounts for discontinued operations are disclosed in Note 2 “Discontinued Operations and Divestitures.” All results and information in the Consolidated Financial Statements are presented as continuing operations and exclude the former hemp/cannabis segment unless otherwise noted specifically as discontinued operations.

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The Company has incurred significant losses and negative cash flows from operations since inception and expects to incur additional losses until such time that it can generate significant revenue and profit in its tobacco business.

The Company had negative cash flow from operations of $ 14,345 and $ 54,987 for the years ended December 31, 2024 and 2023, respectively, and an accumulated deficit of $ 393,871 and $ 378,707 as of December 31, 2024 and December 31, 2023, respectively.

The Company had negative cash flow from operations of $ 7,723 and $ 14,345 for the years ended December 31, 2025 and 2024, respectively, and an accumulated deficit of $ 398,925 and $ 393,871 as of December 31, 2025 and 2024, respectively.

As of December 31, 2025, the Company had cash and cash equivalents of $ 7,149 .

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Other Significant Risks and Uncertainties - The Company is subject to a number of risks, including, but not limited to, the lack of available capital;

future covenant non-compliance with respect to the Company’s Senior Secured Credit Facility giving rise to an event of default;

inability to identify or consummate any strategic initiatives and transactions;

unsuccessful commercialization strategy and launch plans for the Company’s products or market acceptance of the Company’s products;

risks inherent in litigation, including purported class actions;

and protection of proprietary technology.

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

December 31, 2024

As originally

Accrued expenses and other current liabilities

Accrued payroll

Contract liabilities

Deferred income

Other current liabilities

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

December 31, 2024

As originally

Accrued expenses and other current liabilities

Accrued payroll

Contract liabilities

Other liabilities

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

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December 17, 2024

June 20, 2025

January 26, 2026

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

Preferred Stock Authorized – The Company is authorized to issue “blank check” preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock.

See Note 9 “Capital Raises and Warrants for Common Stock” for additional information on the Series A Convertible Preferred Stock issued during the year-ended December 31, 2025.

Concentration of Credit Risk – Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in financial institutions.

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Cash and Cash Equivalents – The Company considers all highly liquid investments with maturities of three months or less at the date of acquisition to be cash equivalents.

However, the Company has elected to classify money market mutual funds related to its short-term investment portfolio as short-term investment securities.

There are no restrictions on the Company’s cash and cash equivalents.

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Provisions for current expected credit losses are charged to current operating expenses.

Actual losses are

charged against the provision when incurred.

As of December 31, 2024, and 2023, the Company recorded a provision for credit losses of $ 9 and $ 8 , respectively.

Actual losses are charged against the provision when incurred.

As of December 31, 2025 and 2024, the Company recorded a provision for credit losses against trade accounts receivable of $ 19 and $ 9 , respectively.

Inventories – Inventories are valued at the lower of historical cost or net realizable value.

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5 to 15 years

Office furniture, fixtures and equipment

3 to 10 years

Laboratory equipment

Acquisitions - The Company accounts for acquisitions under the acquisition method of accounting for business combinations.

Results of operations of acquired companies are included in the Company’s results of operations as of the respective acquisition dates.

The purchase price of each acquisition is allocated to the net assets acquired based on estimates of their fair values at the date of the acquisition.

Any purchase price in excess of these net assets is recorded as goodwill.

The allocation of purchase price in certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition date.

Discontinued Operations - In determining whether a group of assets which has been disposed of (or is to be disposed of) should be presented as a discontinued operation, the Company analyzes whether the group of assets being disposed of represented a component of the entity;

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The Company allocates interest to discontinued operations if the interest is directly attributable to the discontinued operations or is interest on debt that is required to be repaid as a result of the disposal transaction.

Contingent Consideration - Contingent consideration arising from a business acquisition is included as part of the purchase price and is recorded at fair value as of the acquisition date.

Subsequent to the acquisition date, the Company remeasures contingent consideration arrangements at fair value at each reporting period until the contingency is resolved.

The changes in fair value are recognized within Other operating expenses (income), net in the Company’s Consolidated Statement of Operations and Comprehensive Loss.

Changes in fair values reflect new information about the likelihood of the payment of the contingent consideration and the passage of time.

See Note 3 “Business Acquisitions” for the contingent consideration arising from the acquisition of RX Pharmatech Ltd.

Goodwill - Goodwill represents the excess of cost over the fair value of identifiable net assets of a business acquired and is assigned to one or more reporting units.

The Company tests its reporting unit’s goodwill for impairment at least annually as of the measurement date year and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.

The Company concluded an interim impairment trigger event occurred and tested its goodwill for impairment during the quarter ended September 30, 2023 and concluded that goodwill impairment existed.

No goodwill remained as of December 31, 2023.

See Note 2 “Discontinued Operations and Divestitures” for additional information.

Intangible Assets – Definite lived intangible assets are recorded at cost and consist primarily of (1) expenditures incurred with third-parties related to the processing of patent claims and trademarks with government authorities, as well as costs to acquire patent rights from third-parties, (2) license fees paid for third-party intellectual property.

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Periodic maintenance or renewal fees are expensed as incurred.

Annual minimum license fees are charged to expense.

Annual minimum license royalty fees are charged to expense.

License fees paid for third-party intellectual property are amortized on a straight-line basis over the last to expire patents, which have expected expiration dates from 2028 through 2043.

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Note 8 “Fair Value Measurements” contains additional information on assets and liabilities recorded at fair value in the Consolidated Financial Statements.

Mezzanine Equity - Where ordinary or preferred shares are determined to be conditionally redeemable upon the occurrence of certain events that are not solely within the control of the Company, and upon such event, the shares would become redeemable at the option of the holder, such as when the Company has not obtained shareholder approval for certain provisions of the outstanding preferred shares, they are classified as "mezzanine equity" (temporary equity).

The purpose of this classification is to convey that such a security may not be permanently part of equity and could result in a demand for cash, securities or other assets of the entity in the future.

The Company evaluates whether the contingent redemption provisions are probable of becoming redeemable to determine whether the carrying value of the redeemable convertible preferred shares are required to be remeasured to their respective redemption values.

All instruments that are classified as mezzanine equity are evaluated for embedded derivative features by evaluating each feature against the nature of the host instrument (e.g., more equity-like or debt-like).

Features identified as freestanding instruments or bifurcated embedded derivatives that are material are recognized separately as a derivative asset or liability in the Consolidated Financial Statements.

Warrants - The Company accounts for common stock warrants as either equity instruments, derivative liabilities, or liabilities in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”) depending on the specific terms of the warrant agreement.

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Deemed dividends associated with down round provisions (commonly referred to as “ratchets”) represent the economic transfer of value to holders of equity-classified freestanding financial instruments when these provisions are triggered.

These deemed dividends are presented as a reduction in net income or an increase in net loss available to common stockholders and a corresponding increase to Capital in excess of par value resulting in no change to stockholders’ equity/deficit.

These deemed dividends are presented as a reduction in net income or an increase in net loss available to common shareholders and a corresponding increase to Capital in excess of par value resulting in no change to shareholders’ equity/deficit.

See Note 9 “Capital Raises and Warrants for Common Stock.”

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Embedded derivatives are initially and subsequently measured at fair value.

With the exception of the bifurcated embedded conversion option as described in Note 12 “Debt”, the embedded derivatives associated with the Company’s Senior Secured Credit Facility and Subordinated Note are not material.

The Company previously accounted for its convertible debt instrument, for which the conversion option is not bifurcated and accounted for separately as a derivative and is modified or exchanged in a transaction that is not accounted for as an extinguishment, the accounting was determined based on whether there is an increase or decrease in the fair value of the embedded conversion option.

The fair value was calculated as the difference between the fair value of the embedded conversion option immediately before and after the modification or exchange.

An increase in fair value was recorded as a decrease to the carrying amount of the debt instrument with a corresponding increase to Capital in Excess of Par Value.

Debt Issuance Costs and Discounts - Debt issuance costs and discounts associated with the issuance of debt by the Company are deferred and amortized over the term of the related debt.

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Note 12 “Debt” contains additional information on the Company’s debt issuance costs and discounts.

Transfers of Financial Assets – The Company accounts for transfers of financial assets as sales when it has surrendered control over the related assets.

Whether control has been relinquished requires, among other things, an evaluation of relevant legal considerations and an assessment of the nature and extent of the Company’s continuing involvement with the assets transferred.

Gains and losses resulting from transfers reported as sales are included as a component of Other income (expense) in the Consolidated Statement of Operations and Comprehensive Loss.

Gain/Loss on Debt Extinguishment – Gain or loss on debt extinguishment is generally recorded upon an extinguishment of a debt instrument.

Gain or loss on extinguishment of debt is calculated as the difference between the reacquisition price and net carrying amount of the debt, which includes unamortized debt issuance costs.

Gains and losses on debt extinguishment are included as a component of Interest expense in the Consolidated Statement of Operations and Comprehensive Loss.

Gains and losses on debt extinguishment are included as a component of Interest expense in the Consolidated Statements of Operations and Comprehensive Loss.

Related Party Transaction - A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company.

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The Company may conduct business with its related parties in the ordinary course of business.

Beginning in the fourth quarter of 2024, the Company recorded $ 154 of revenue , net and corresponding contract asset with a related party contract manufacturing customer for the sale of private label cigarettes.

The customer relationship is conducted at arm’s length.

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

The arrangement was terminated in April 2025.

Revenue Recognition – The Company recognizes revenue when it satisfies a performance obligation by transferring control of the product to a customer.

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Income Taxes – The Company recognizes deferred tax assets and liabilities for any basis differences in its assets and liabilities between tax and U.S.

GAAP reporting, and for operating loss and credit carry-forwards.

As a result of the Company’s history of cumulative net operating losses and the uncertainty of their future utilization, the Company has established a valuation allowance to fully offset its net deferred tax assets associated with definite lived assets as of December 31, 2024, and December 31, 2023.

GAAP reporting, and for operating loss and credit carryforwards.

The Company’s federal and state tax returns for the years ended December 31, 2022 through December 31, 2024 are currently open to audit under the statutes of limitations.

The Company is currently under federal examination for tax year 2021.

There are no other pending audits as of December 31, 2024.

There are no pending audits as of December 31, 2025.

Earnings (Loss) Per Common Share – Basic earnings (loss) per common share is computed using the weighted-average number of common shares outstanding.

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Refer to Note 11 “Commitments and Contingencies”.

Severance charges - From time to time, the Company evaluates its resources and optimizes its business plan to align to changing needs of executing on its strategy.

These actions may result in voluntary or involuntary employee termination benefits.

Voluntary termination benefits are accrued when an employee accepts the related offer.

Involuntary termination benefits are accrued upon the commitment to a termination plan and the benefit arrangement is communicated to affected employees, or when liabilities are determined to be probable and estimable, depending on the existence of a substantive plan for severance or termination.

The following table summarizes the change in accrued severance liabilities, presented within Other current liabilities on the Consolidated Balance Sheets:

Balance at January 1, 2023

Reversal from settlement

Cash payments

Balance at January 1, 2024

Cash payments

Settlement in common stock

Balance at December 31, 2024

The following table summarizes the classification of severance charges on the Condensed Consolidated Statements of Operations and Comprehensive Loss:

Sales, general, and administrative

Other operating expense (income), net

Total severance charges

Recent Accounting Pronouncement(s) –

The Company adopted ASU 2016-13, or ASC 326 Financial Instruments-Credit Losses , effective January 1, 2023 under a modified retrospective approach.

Under the current expected credit losses (“CECL”) model, the Company immediately recognizes an estimate of credit losses expected to occur over the life of the financial asset at the time the financial asset is originated or acquired.

Estimated credit losses are determined by taking into consideration historical loss conditions, current conditions and reasonable and supportable forecasts.

Changes to the expected lifetime credit losses are recognized each period.

The new guidance applies to the Company’s trade receivables and contract asset balances.

Due to the nature of business operations and contracts with customers, the Company has historically not experienced significant bad debt expense or write-offs and as a result, the adoption of ASC 326 did not have a material impact to the Company’s Consolidated Financial Statements.

In connection with the adoption of ASC 326, the Company recorded a provision for credit losses of $ 118 with an offsetting cumulative-effect adjustment to the opening balance of retained earnings as of January 1, 2023.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)-Improvements to Reportable Segment Disclosures .

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See Note 17 “Segment and Geographic Information.”

Accounting Guidance Not Yet Elected or Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)-Improvements to Income Tax Disclosures.

The ASU requires additional quantitative and qualitative income tax disclosures to allow readers of the consolidated financial statements to assess how the Company’s operations, related tax risks and tax planning affect its tax rate and prospects for future cash flows.

For public business entities, the ASU is effective for annual periods beginning after December 15, 2024.

The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements.

The amendments in ASU 2023-09 were retrospectively adopted by the Company for the fiscal year-ended December 31, 2025.

See Note 13 “Income Taxes.”

Accounting Guidance Not Yet Elected or Adopted

In November 2024, the FASB issued an accounting standards update, ASU 2024-03, which requires new tabular disclosures in the notes to consolidated financial statements, disaggregating certain cost and expense categories within relevant captions on the Consolidated Statements of Operations and Comprehensive Loss.

The prescribed cost and expense categories requiring disaggregated disclosures include purchases of inventory, employee compensation, depreciation and intangible asset amortization, along with certain other expense disclosures already required by U.S.

GAAP that would need to be integrated within the new tabular disaggregated expense disclosures.

Additionally, the amendments also require the disclosure of total selling expenses and an entity's definition of those expenses.

The amendments in ASU 2024-03 are effective for annual periods beginning after December 15, 2026, which for the Company would be the fiscal year ending December 31, 2027, and for subsequent interim periods.

Early adoption is permitted and the amendments should be applied on a prospective basis.

Retrospective application is permitted.

The Company is currently evaluating the impact the new accounting standard will have on its expense disclosures in the notes to the consolidated financial statements.

In July 2025, the FASB issued an accounting standards update, ASU 2025-05, which creates a new optional practical expedient related to the estimation of future expected credit losses on accounts receivable.

If elected, this expedient removes the requirement, when estimating expected credit losses, to consider changes in forecasted macroeconomic conditions, such as changes in unemployment rates or gross domestic product growth.

Instead, companies electing the expedient may assume that current conditions as of the balance sheet date will not change for the remaining life of the asset.

The amendments in ASU 2025-05 are effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods, which for the Company would be the fiscal first quarter ending March 31, 2026.

Early adoption is permitted and the amendments should be applied on a prospective basis.

The Company is currently evaluating the impact the new accounting standard could have on its estimates for future expected credit losses if the Company chooses to elect the optional practical expedient.

We consider the applicability and impact of all ASUs.

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– DISCONTINUED OPERATIONS AND DIVESTITURES

Provision for Impairment of GVB Hemp/Cannabis Business

During the third quarter of 2023, the Company identified certain events and circumstances that could potentially be an impairment triggering event for both the tobacco and hemp/cannabis reporting units in connection with (1) the announcement of initiating a process to evaluate strategic alternatives for the Company’s assets, and (2) announcement of cost cut initiatives intended to yield significant cash savings on an annual basis.

The initiation of these two processes was in response to the sustained decline in the Company's market capitalization, operating losses and negative cash flows from operations, and current liquidity position, and is intended to monetize the value or more effectively expand the market reach of our products.

Accordingly, the Company evaluated the impact on each of its reporting units to assess whether there was an impairment triggering event requiring it to perform a goodwill impairment test.

The Company had no recorded goodwill in its tobacco reporting unit.

For the hemp/cannabis reporting unit, as part of this impairment test, the Company considered certain qualitative factors, such as the Company’s performance, business forecasts, and strategic plans.

It reviewed key assumptions, including projected cash flows and future revenues.

After reviewing the qualitative assessment, the Company determined a quantitative assessment was required to be performed.

Using the income approach, with the discount rate selected considering and capturing the related risk associated with the forecast, the Company compared the fair value of the reporting unit to carrying value.

Based on the results, the carrying value of the hemp/cannabis reporting unit exceeded its fair value and the goodwill was determined to be impaired and $ 33,360 , representing the full amount of goodwill recorded to the hemp/cannabis reporting unit, was written off as impaired during the quarter ended September 30, 2023.

The impairment charge is the result of the Company's Step-1 goodwill impairment test for the former hemp/cannabis reporting unit, which reflected a decrease in the future expected cash flows related to bulk ingredient and CDMO+D product sales, along with increases in discount rates to reflect the uncertainty of future cash flows.

Estimating the fair value of goodwill requires the use of estimates and significant judgments that are based on a number of factors, including unobservable level 3 inputs.

These estimates and judgments may not be within the control of the Company and accordingly it is reasonably possible that the judgments and estimates could change in future periods.

The Company also evaluated the recoverability of its hemp/cannabis segment other intangible assets, net and long-lived assets to determine whether any assets or asset groups were impaired.

The Company determined that the carrying value of certain tradenames, patents and license intangible assets, net were greater than their fair value, as these intangible assets related to hemp/cannabis operations.

Therefore, the Company recorded additional provision for impairment in the amount of $ 10,879 , the Cookies license acquired in the second quarter of 2023 was written-off and fully impaired in the amount of $ 3,037 , and a loss on equity investments of $ 682 .

Additionally, through a similar analysis, the Company recorded provision for impairment of $ 7,418 for property, plant and equipment and $ 5,038 for operating lease right-of-use assets related to manufacturing and lab facilities.

The undiscounted cash flow analysis and fair value determination requires the use of estimates and significant judgments that are based on a number of factors, including unobservable level 3 inputs.

For the year ended December 31, 2023, total impairment charges for other intangibles and long-lived assets is $ 25,189 .

Discontinued Operations and Divestiture of GVB Hemp/Cannabis Business

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

Until repaid to the senior lender, the GVB Note is recorded as a current asset and corresponding amount is pledged as Current portion of long term debt on the Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023.

The 2023 GVB Note was repaid in full to the senior lender (see Note 12 “Debt”).

The parties previously agreed that the Company would retain any insurance proceeds received in connection with the fire at the Grass Valley manufacturing facility, if any (the “Insurance Proceeds”) and up to the first $ 2,000 of the Insurance Proceeds would be used to offset the Buyer’s portion of certain shared liabilities.

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provided that, the Insurance Proceeds exceed $ 5,000 .

In connection with the closing of the transaction on December 22, 2023, but prior to any adjustments for Insurance Proceeds and certain shared liabilities, after selling expenses of $ 434 , the Company recognized a loss on disposal of discontinued operations of $ 58,521 during the year ended December 31, 2023, which includes the third quarter impairment charges described above.

The Insurance Proceeds amounted to $ 9,500 (see Note 11 “Commitments and Contingencies”).

For disposal transactions, a component of an entity that is anticipated to be sold in the future is reported in discontinued operations after it meets the criteria for held-for-sale classification, and if the disposition represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results.

The Company evaluated the quantitative and qualitative factors related to the expected sale of the GVB hemp/cannabis business and exit from the hemp/cannabis space, and concluded that it met the held-for-sale criteria and that all other conditions for discontinued operations presentation were not met until November 30, 2023.

Property, plant and equipment are not depreciated, and intangibles assets are not amortized once classified as held-for-sale.

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The assets and liabilities of a discontinued operation held for sale, other than goodwill, are measured at the lower of carrying amount or fair value less cost to sell.

Following the provision for impairment charges recorded during the third quarter of 2023 as described above, the Company concluded the carrying value of assets and liabilities of the GVB hemp/cannabis business approximated fair value when deemed held for sale based on the purchase price consideration of $ 3,100 .

As of December 31, 2024 and 2023, all assets and liabilities of the hemp/cannabis disposal group are presented as current in the Consolidated Balance Sheets as management believes the remaining disposal and exit from hemp/cannabis is deemed probable and will occur within one year.

Following the provision for impairment charges recorded during the third quarter of 2023, the Company concluded the carrying value of assets and liabilities of the GVB hemp/cannabis business approximated fair value when deemed held for sale based on the purchase price consideration of $ 3,100 .

As of December 31, 2024, all assets and liabilities of the hemp/cannabis disposal group were presented as current in the Consolidated Balance Sheets as management believed the remaining disposal and exit from hemp/cannabis was deemed probable and will occur within one year.

On May 6, 2025, the Company closed the sale of the Needle Rock Farms land property and received cash proceeds of $ 770 .

Accordingly, there are no remaining assets held for sale on the Consolidated Balance Sheets as of December 31, 2025.

The carrying amounts of the hemp/cannabis disposal group assets and liabilities that were classified as assets and liabilities of discontinued operations held for sale were as follows:

Prepaid expenses and other current assets

Property, plant and equipment, net

Current assets of discontinued operations held for sale

Notes and loans payable - current

Operating lease obligations

Accounts payable

Accrued expenses

Deferred income

Current liabilities of discontinued operations held for sale

Net liabilities

Net income (loss) from discontinued operations for the year ended December 31, 2024 and 2023 was as follows:

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

Revenues, net

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Research and development

Other operating expense, net

Loss on disposal of discontinued operations

Total operating expenses

Operating income (loss) from discontinued operations

Other operating (income), net

Total operating (income)

Operating income from discontinued operations

Other income (expense):

Other income, net

Interest expense

Total other expense

Income (loss) from discontinued operations before income taxes

Income from discontinued operations before income taxes

Provision (benefit) for income taxes

Net income (loss) from discontinued operations

(1) During the year ended December 31, 2024, the Company settled outstanding obligations which resulted in reversals of previously accrued liabilities of $ 1,561 .

(2) The Company recorded $ 25,189 of impairment charges in Other operating expenses, net and recorded $ 33,360 of Goodwill impairment from discontinued operations during the three months ended September 30, 2023, which were reclassified to Loss on disposal of discontinued operations during the three months ended December 31, 2023.

Income from discontinued operations

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

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Professional services

Gain on change in contingent consideration

Needlerock Farms settlement

Gain on sale or disposal of property, plant and equipment

(Gain) loss on sale or disposal of property, plant and equipment

Gain on release of lease obligations

Acquisition costs

Impairment charges related to Needle Rock Farms

Provision of credit loss for 2025 GVB promissory note

Dorchester proceeds

Other operating expense, net

Cash flow information from discontinued operations for years ended December 31, 2024 and 2023 was as follows:

Cash used in operating activities

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

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

Cash provided by (used in) operating activities

Cash provided by investing activities

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Capital expenditures

– BUSINESS ACQUISITIONS

The following acquisition occurred during the year ended December 31, 2023 and was included in the Company’s former hemp/cannabis reportable segment.

Accordingly, the results of operations are reported as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss for all periods presented.

See Note 2 “Discontinued Operations and Divestitures” for additional information.

RX Pharmatech, Ltd.

On January 19, 2023, the Company acquired RX Pharmatech Ltd (“RXP”) pursuant to a share purchase agreement ("SPA”) a privately held distributor of cannabinoids with 1,276 novel food applications with the U.K.

Food Standards Agency (“FSA”).

RXP’s products include CBD isolate and numerous variations of finished products like gummies, oils, drops, candies, tinctures, sprays, capsules and others.

The initial consideration paid to acquire RXP included $ 200 in cash and $ 503 in common stock (consisting of 31,056 unregistered shares of common stock), and an initial estimate of target working capital true-up of $ 286 .

The fair value of the Company’s common stock issued as part of the consideration was determined based upon the opening stock price of the Company’s shares as of the acquisition date.

Additionally, the contingent consideration in the transaction represents the estimated fair value of the Company’s obligation, under the share purchase agreement, to make additional equity based payments of up to $ 1,550 over the next three years based on specified conditions being met, which has an initial fair value of contingent consideration of $ 1,138 .

The fair value of the aggregate consideration in the transaction is $ 2,127 .

Based on the preliminary purchase price allocation, the assets acquired and liabilities assumed principally comprise $ 1,744 of intangible assets, and other immaterial working capital items representing a net asset of $ 93 (net of cash acquired of $ 290 ).

There was no excess purchase price and therefore no goodwill recorded as part of the business combination.

The determination of estimated fair value required management to make significant estimates and assumptions based on information that was available at the time the Consolidated Financial Statements were prepared.

Intangible assets include the intellectual property associated with the 1,276 novel food applications with the FSA, which is determined to be indefinite lived.

The preliminary fair value was determined by utilizing the cost approach and considered market data to evaluate the replacement cost per application.

The intellectual property is included in the former hemp/cannabis reportable segment.

The Company utilizes third-party valuation experts to assist in estimating the fair value of the contingent consideration and develops estimates by considering weighted-average probabilities of likely outcomes and discounted cash flow analysis.

These estimates require the Company to make various assumptions about forecasted revenues and discount rates, which are unobservable and considered Level 3 inputs in the fair value hierarchy.

A change in these inputs to a different amount might result in a significantly higher or lower fair value measurement at the reporting date.

The following table provides quantitative information associated with the initial fair value measurement of the Company’s liabilities for contingent consideration as of January 19, 2023:

Maximum Payout

Weighted Average

Contingency Type

(undiscounted)

Unobservable Inputs

Revenue-based payments

Discount rate

Projected year(s) of payment

During the third quarter of 2023, the Company finalized amounts recorded as purchase price allocation and recorded measurement period adjustments of $ 53 , resulting from an increase of the working capital true-up amount based on final payment made to the sellers.

On December 22, 2023, concurrent with the GVB divestiture (as described in Note 2) which included RXP, the Company entered into a binding letter agreement to terminate its’ remaining contingent consideration obligation payable in shares under the SPA with the sellers of RXP.

Accordingly, for the year-ended December 31, 2023, the Company recognized within discontinued operations a gain of $ 1,138 in Other operating expenses, net in connection with the change in fair value of the contingent consideration.

Acquisition costs

During the year ended December 31, 2023, direct costs incurred as a result of the acquisition of RXP were $ 130 .

Acquisition costs are expensed as incurred and included in Other operating expenses, net in the Consolidated Statements of Operations and Comprehensive Loss.

– INVENTORIES

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Finished goods

During the fourth quarter of 2023, the Company reserved certain leaf inventory totaling $ 7,720 resulting from restructuring initiatives implemented.

Inventory charges are included within Cost of goods sold on the Company’s Consolidated Statement of Operations and Comprehensive Loss.

– PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net at December 31, 2024 and 2023 consisted of the following:

Leasehold improvements

Manufacturing equipment

Office furniture, fixtures and equipment

Laboratory equipment

accumulated depreciation

Property, plant and equipment, net

Depreciation expense was $ 585 and $ 852 for the year ended December 31, 2024 and 2023, respectively.

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

The Company leases a manufacturing facility in Mocksville, North Carolina and an inventory storage facility in Winston-Salem, North Carolina.

On January 1, 2023, the Company signed the lease agreement for the inventory storage facility.

The lease has an initial monthly base rent of $ 15 (escalating 3.0 % annually after the first year), an initial term of 36 months – with two twenty-four-month optional renewal options at the Company’s discretion.

On March 31, 2023, the Company extended the lease terms for its manufacturing facility.

As a result of this lease modification, the Company re-measured the lease liability and adjusted the ROU asset on the modification dates, including reassessment of renewal options.

The following table summarizes the Company’s discount rate and remaining lease terms as of December 31, 2024:

Weighted average remaining lease term in years

Weighted average discount rate

Future minimum lease payments as of December 31, 2024 are as follows:

Total lease payments

imputed interest

Present value of lease liabilities

current portion of lease liabilities

Total long-term lease liabilities

Operating lease costs for the year ended December 31, 2024 and 2023, were $ 419 and $ 475 , respectively.

Supplemental cash flow information for leases for fiscal years 2024 and 2023 are comprised of the following:

Cash paid for operating leases

Assets acquired under operating leases

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

– INTANGIBLE ASSETS, NET

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Total amortization expense

During the years ended December 31, 2024 and 2023, the Company incurred impairment charges of $ 68 and $ 1,375 , respectively, related to write-downs and disposals of patents, licenses and trademarks as a result of a shift in strategy related to the nature and use of the related assets.

During 2024, impairment charges related to patents that are no longer being pursued.

Impairment charges during the year-ended December 31, 2023 consisted of $ 552 for patents and

trademarks the Company continues to hold but does not align with its current strategy, $ 772 was related to disposals of patents abandoned from future maintenance and renewal and $ 51 was related to disposals of trademarks abandoned.

The Company also disposed of $ 1,501 of patents that had a net book value of $ 0 and no estimated future economic benefit.

During the years ended December 31, 2025 and 2024, the Company incurred impairment charges of $ 111 and $ 68 , respectively, related to patents that are no longer being pursued.

In addition, the Company disposed of $ 39 of trademark costs due to change in strategy.

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

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Amortization expense

– PROPERTY, PLANT AND EQUIPMENT, NET

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

Leasehold improvements

Manufacturing equipment

Laboratory equipment

accumulated depreciation

Property, plant and equipment, net

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

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

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

On January 1, 2023, the Company signed a lease agreement for an inventory storage facility.

The lease had an initial monthly base rent of $ 15 (escalating 3.0 % annually after the first year), an initial term of 36 months – with two twenty-four-month optional renewal options at the Company’s discretion.

The Company did not renew its extension option and therefore the lease has ended as of December 31, 2025.

On March 31, 2023, the Company extended the lease terms for its manufacturing facility and corporate headquarters in Mocksville, North Carolina.

As a result of this lease modification, the Company re-measured the lease liability and adjusted the ROU asset on the modification dates, including reassessment of renewal options.

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

Weighted average remaining lease term in years

Weighted average discount rate

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

Total lease payments

imputed interest

Present value of lease liabilities

current portion of lease liabilities

Total long-term lease liabilities

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

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

Cash paid for operating leases

ROU assets released under operating leases

– NOTES AND LOANS PAYABLE

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

Insurance loans payable

NCSU promissory note

Total notes and loans payable

Total current notes and loans payable

Total long-term notes and loans payable

Insurance loans payable

During the second quarter of 2025, the Company renewed its Director and Officer (“D&O”), property and general liability insurances for a one-year policy premium totaling $ 1,023 .

The Company paid $ 205 as a premium down payment and financed the remaining $ 818 of policy premiums over nine months at a 6.6 % annual percentage rate.

During the second quarter of 2024, the Company renewed its D&O insurance for a one-year policy premium totaling $ 866 .

The Company paid $ 147 as a premium down payment and financed the remaining $ 719 of policy premiums over ten months at 8.3 % annual percentage rate.

NCSU promissory note

On October 31, 2025, the Company entered into a note payable with NCSU in the amount of $ 632 at 7 % simple fee interest rate payable in equal installments over 60 months .

The note payable was issued as settlement for all remaining outstanding obligations owed to NCSU related to license fees, annual royalties, and intellectual property and patent maintenance.

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

– FAIR VALUE MEASUREMENTS

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The Company does not have any nonfinancial assets or liabilities that are measured at fair value on a recurring basis.

The following table presents information about our liabilities measured at fair value at December 31, 2024 and 2023, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

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

December 31, 2024

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Total liabilities

December 31, 2023

Detachable warrants

Derivative liability

Total liabilities

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

Fair value measurement at January 1, 2024

Initial measurement (see Note 1 and 10)

Fair value measurement adjustment

JGB redemption of 78 warrants

Fair value measurement at December 31, 2023

Settlement and General Release

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Fair value measurement at December 31, 2024

The Omnia warrants were measured at December 31, 2024 and 2023 using a Monte Carlo valuation model with the following assumptions:

Omnia 2024 warrants

Omnia 2023 warrants

Fair value measurement adjustment

Omnia 2024 warrants put option exercise

Fair value measurement at December 31, 2025

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

Risk-free interest rate per year

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The Omnia 2023 warrants were extinguished and the Omnia 2024 warrants were issued in April 2024.

The Omnia 2024 warrants are classified as Other current liabilities on the Consolidated Balance Sheets.

The put option of the 2024 Omnia Warrants was fully exercised on September 29, 2025, in the amount of $ 1,231 and paid on October 2, 2025.

See Note 12 “Debt” and Note 9 “Capital Raises and Warrants for Common Stock” for further details.

Derivative Liability

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

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

Fair value measurement at January 1, 2024

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Fair value measurement at December 31, 2024

The derivative liability related to the debentures and embedded conversion option using was measured at December 31, 2023 using a binomial lattice valuation model and contained the following assumptions:

Stock price volatility

Expected term

Risk-free interest rate

Credit rating

Market yield (credit risk)

The debentures and derivative liability are measured at fair value using certain estimated factors which are classified within Level 3 of the valuation hierarchy.

Significant unobservable inputs that are used in the fair value measurement of the Company’s derivative liability include a decrease/increase in our stock price, stock price volatility, credit rating, and simulated stock price upon conversion could significantly change the fair value measurement as either an increase or decrease.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Fair value standards also apply to certain assets and liabilities that are measured at fair value on a nonrecurring basis.

During the years ended December 31, 2024 and 2023, the Company did not have any financial assets or liabilities measured at fair value on a nonrecurring basis, other than as described in Note 2 “Discontinued Operations and Divestitures”.

During the years ended December 31, 2025 and 2024, the Company did not have any financial assets or liabilities measured at fair value on a nonrecurring basis.

– CAPITAL RAISES AND WARRANTS FOR COMMON STOCK

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Warrants outstanding at December 31, 2024

Anti-dilution adjustment

Warrants outstanding at December 31, 2025

The following tables summarizes the Company’s outstanding warrants as of December 31, 2024:

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

# of warrants outstanding

Issue date exercise price

Current exercise price (1)

Expiration date

July 2022 RDO warrants

July 25, 2027

Senior Secured Credit Facility - JGB

September 3, 2028

July 19, 2023 RDO warrants (3)

Weighted average exercise price

Weighted average expiration date

Amended October 2024 PIPE warrants (1)

July 15, 2030

October 2023 CMPO warrants (3)

October 19, 2028

2023 Inducement warrants (3)

February 15, 2029

April 2024 RDO Placement Agent warrants (3)

April 8, 2029

August 2024 Reg A+ warrants (3)

December 6, 2029

September 2024 Reg A+ warrants (3)

December 6, 2029

September 2024 RDO warrants (3)

December 6, 2029

September 2024 RDO Placement Agent warrants (3)

December 6, 2029

September 2024 Inducement warrants (3)

December 6, 2029

September 2024 Inducement Placement Agent warrants (3)

December 6, 2029

Omnia Pre-Funded Warrants

Not applicable

Omnia warrants

October 2024 RDO (3)

December 6, 2029

October 2024 RDO Placement Agent Warrants (3)

December 6, 2029

October 2024 PIPE Warrants (3)

October 2024 PIPE Placement Agent Warrants (3)

(1) Warrant price adjusted as a result of anti-dilution or ratchet provisions.

(2) Expiration date is 5-years following shareholder approval date.

(3) The exercise prices of the warrants are subject to appropriate adjustment as a result of anti-dilution or ratchet protection provisions relating to subsequent equity sales of shares of the Company’s common stock or common stock equivalents at an effective price per share lower than the then effective exercise price of such warrants.

Additionally, the warrant contains cashless and/or alternative cashless exercise features.

(4) Reflects the number of warrants and exercise price assuming stockholder approval is obtained.

The incremental value of modifications to warrants as a result of down-round ratchet provisions in outstanding warrants from the issuance of equity in a subsequent financing is determined based on Monte-Carlo and Black Scholes valuation models.

Amounts recorded as Deemed dividends in determining Net loss available to common shareholders in the Statement of Operations and Comprehensive Loss are as follows:

August 2025 warrants (2)

August 27, 2030

August 2025 Placement Agent warrants (2)

August 27, 2030

(1) The warrants contain anti-dilution protection provisions relating to subsequent equity sales of shares of the Company’s common stock or common stock equivalents at an effective price per share lower than the then effective exercise price of such warrants.

Additionally, the warrants allow the holder of such warrants to also effect an alternative form of cashless exercise on or after the initial exercise date whereby the aggregate number of shares of common stock issuable in such alternative form of cashless exercise pursuant to any given notice of exercise shall equal the product of (x) the aggregate number of shares of common stock that would be issuable upon exercise of the warrant in accordance with the terms of the warrant if such exercise were by means of a cash exercise rather than a cashless exercise and (y) 2.0 (a “Zero Exercise Price Exercise”).

Accordingly, a Zero Exercise Price Exercise for the warrants will result in the issuance of two (2) shares for no additional consideration.

(2) The warrants contain anti-dilution protection provisions relating to subsequent equity sales of shares of the Company’s common stock or common stock equivalents at an effective price per share lower than the then effective exercise price of such warrants.

The incremental value of modifications to financial instruments, such as warrants or convertible preferred stock, is determined based on Monte-Carlo, Binomial Lattice, or Black-Scholes valuation models.

Amounts recorded as Deemed dividends in determining Net loss available to common shareholders in the Statements of Operations and Comprehensive Loss are as follows:

Total deemed dividends

June 19, 2023 Registered Direct Offering

On June 19, 2023, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of shares of approximately $ 5,300 of shares and warrants, consisting of an aggregate of 346 shares of common stock and 346 warrants to purchase an equal number of shares, at a purchase price of $ 15,228 per unit.

The net proceeds to the Company from the offering were approximately $ 4,800 .

July 6, 2023 Registered Direct Offering.

On July 6, 2023, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of approximately $ 3,000 of shares and warrants, consisting of an aggregate of 360 shares of common stock and 721 warrants to purchase an equal number of shares, at a purchase price of $ 8,208 per unit.

July 19, 2023 Registered Direct Offering.

On July 19, 2023, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of approximately $ 11,700 of shares and warrants, consisting of an aggregate of 2,025 shares of common stock and 4,050 warrants to purchase an equal number of shares, at a purchase price of $ 5,767.20 per unit.

October 2023- Public Equity Offering

On October 17, 2023, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed to sell and issue, in a registered public offering, (i) an aggregate of 3,519 shares of the Company’s common stock, par value $ 0.00001 per share, (ii) warrants to purchase 9,259 shares of common stock (the “October Warrants”) and (iii) pre-funded warrants to purchase 1,111 shares of common stock.

The shares were offered at a combined public offering price of $ 1,134 per share and two accompanying warrants.

The pre-funded warrants were offered at a combined public offering price of $ 1,133.78 per pre-funded warrant and two accompanying warrants.

In addition, the Company issued the placement agent warrants to purchase up to 463 shares of common stock (equal to 10 % of the aggregate number of shares and pre-funded warrants sold in the offering) at an exercise price of $ 1,417.50 , which represents 125 % of the public offering price per share and accompanying warrants.

The offering closed on October 19, 2023 with gross proceeds to the Company of approximately $ 5,250 , before deducting the placement agent fees of $ 367 and other offering expenses payable by the Company of approximately $ 288 .

November 2023 Warrant Inducement Offering

On November 28, 2023, the Company commenced a warrant inducement offering with the holders of the Company’s outstanding 14,713 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 were exercisable for an equal number of shares of common stock at an exercise price of $ 1,134 .

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)).

For the period from November 28, 2023 to December 31, 2023, the Company entered into warrant inducement agreements with certain holders of the Existing Warrants to purchase an aggregate of 7,184 shares of common stock at a reduced exercise price of $ 464.10 Pursuant to the warrant inducement agreements, the exercising holders of the Existing Warrants received 14,368 Inducement Warrants and the Company received aggregate gross proceeds of approximately $ 3,336 from the exercise of the Existing Warrants before deducting the placement agent fees of $ 234 and other offering expenses payable by the Company of approximately $ 58 .

For the remaining inducement period from January 1, 2024 to February 15, 2024, the Company entered into warrant inducement agreements with certain holders of the Existing Warrants to purchase an aggregate of 6,081 shares of common stock at a reduced weighted average exercise price of approximately $ 398.30 .

Pursuant to the warrant inducement agreements, the exercising holders of the Existing Warrants received 12,160 Inducement Warrants and the Company received aggregate gross proceeds of approximately $ 2,421 from the exercise of the Existing Warrants

April 2024 Registered Direct Offering

On April 8, 2024, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of shares of common stock (or pre-funded warrants in lieu of common stock) pursuant to a registered direct offering and a private placement of warrants to purchase shares of common stock.

The investors purchased approximately $ 4,237 of shares and warrants, consisting of an aggregate of 13,741 shares of common stock, pre-funded warrants to purchase 926 shares of common stock and warrants to purchase 14,667 shares of common stock, at a purchase price of $ 288.90 per share and accompanying warrant.

August 2025 Series A Convertible Preferred Stock Offering

On August 22, 2025, the Company and certain investors entered into a securities purchase agreement with respect to the offer and sale of $ 10,650 of shares of Series A Convertible Preferred Stock, stated value $ 1,000 per share (the “Series A Preferred Stock”), initially convertible into an aggregate of 324,201 shares of the Company’s common stock at an initial conversion price of $ 32.85 (subject to adjustment in certain circumstances with a floor price of $ 5.91 ) and warrants to purchase shares of Common Stock pursuant to a registered direct offering.

The Investors purchased $ 10,650 of shares of Series A convertible preferred stock and warrants.

The warrants are immediately exercisable at an exercise price of $ 1.97 per share of common stock and expire on the date that is five years after issuance.

The net proceeds to the Company from the offering was $ 9,893 .

In addition, the Company issued placement agent warrants to purchase an aggregate of 37,843 shares of common stock with substantially the same terms as the Warrants, except that the exercise price of the Placement Agent Warrants is $ 32.55 .

Following the offering, 1,000 shares of Series A Preferred Stock were converted into 30,443 shares of common stock , with 9,650 shares remaining outstanding.

The shares of Series A Preferred Stock have no voting rights, except to the extent required by the applicable law and certain protective provisions.

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the then holders of the Series A Preferred Stock are entitled to receive out of the assets available for distribution to stockholders of the Company an amount equal to either (i) 100 % of the stated value or (ii) the amount the holder would receive if the Series A Preferred Stock had been converted into common stock;

in each instance, prior to and in preference to the common stock or any other series of preferred stock.

The Series A Preferred Stock is convertible into common stock at any time at the floor conversion price of $ 5.91 .

The Series A Preferred Stock is convertible at the then-effective Series A Conversion Price at the option of the holder at any time and from time to time.

If, at any time from and after issuance, (i) the closing price of the common stock equals or exceeds 200 % of the then Conversion Price for 10 consecutive trading days and (ii) the daily dollar trading volume for the common stock exceeds $ 1,000,000 per day during such period, the Company may require the holders to convert the Series A Preferred Stock into Common Stock at the Series A Conversion Price.

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

Pursuant to the Amendment Agreement, the Company and the holders agreed to provide an alternative conversion feature to the Certificate of Designation whereby the Series A Preferred Stock can be converted at a conversion price equal to 85 % of the lowest VWAP in any of the twenty trading days preceding the conversion.

Pursuant to the Amendment Agreement, the Company also agreed to provide certain anti-dilution adjustments to the exercise price of the warrants and placement agent warrants to provide protection against future dilutive issuances.

See Note 18 “Subsequent Events.”

Following execution of the Amendment Agreement, the Company re-evaluated conclusions on classification and embedded features, resulting in no changes from the date of issuance of the Series A Preferred Stock, as further described below.

The impacts of the Amendment Agreement are accounted for as an extinguishment, as the fair value of the instruments before and after modification increased by greater than 10 %, resulting in the incremental value being recorded within Capital in excess of par value as a deemed dividend of $ 4 ,679.

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

See Note 18 “Subsequent Events.”

Mezzanine Classification

ASC 480-10-S99-3A(2) of the SEC's Accounting Series Release No.

268 ("ASR 268") requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer.

Preferred securities that are mandatorily redeemable are required to be classified by the issuer as liabilities whereas under ASR 268, a company should classify a preferred security whose redemption is contingent on an event not entirely in control of the issuer as mezzanine equity.

The Series A convertible preferred stock is redeemable at the option of the holder if "shareholder approval" (as defined in the agreements) is not obtained, which is not solely within control of the Company, and accordingly, the Company determined that mezzanine treatment is appropriate for the Series A convertible preferred stock.

The Series A convertible preferred stock was initially measured at the amount of total proceeds less any offering costs and proceeds allocated to the accompanying warrants based on relative fair value, and is presented as such in our Consolidated Balance Sheet as of December 31, 2025.

Further, the Company evaluated all embedded features against an equity-like host and concluded none of the embedded features identified within the Series A convertible preferred stock require bifurcation as they are either deemed clearly and closely related or not net settleable as a result of a lack of an active market.

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

Series A Convertible Preferred Stock Shares

Weighted Average Conversion Price

Common Shares Issued from Conversions

January 1, 2025

2025 Issuance

2025 Conversions

December 31, 2025

April 2025 Warrant Inducement and Amendment

On April 29, 2025, the Company commenced a warrant inducement offering with the holders of outstanding warrants to purchase 32,093 shares of common stock (the “Existing Warrants”), which are exercisable for an equal number of shares of common stock at an exercise price of $ 1,484.25 .

The Company offered the holders of the Existing Warrants an inducement period whereby the Company agreed to issue new warrants (the “Inducement Warrants”) to purchase up to a number of shares of common stock equal to 100 % of the number of shares of common stock issued pursuant to the exercise by the holders of the Existing Warrants, for cash, at a reduced exercise price equal to $ 272.25 .

Each holder agreed to exercise 60 % of their Existing Warrants immediately (the “Initial Exercise”) and will exercise the remaining 40 % within 30 calendar days following the Effectiveness Date (as defined in the agreements), provided that the Company’s stock price at such time equals or exceeds 90% of the Nasdaq Minimum Price on that date (the “Additional Exercise”).

The net proceeds to the Company from the Initial Exercise, after deducting placement agent fees and the Company’s offering expenses were $ 5,075 .

In connection with the Initial Exercise, the Company issued 19,970 Inducement Warrants.

Of the aggregate net proceeds, the Company was obligated under the Debentures of the convertible senior secured credit facility to repay outstanding debt in the amount of $ 1,017 .

The Company also measured the fair value of the Existing Warrants before and after the modification to decrease the cash exercise price, and concluded there was no incremental fair value to be recorded as issuance costs due to the alternative cashless exercise features of the warrants.

Additionally, on April 29, 2025, the Company entered into amendments with the holders of the outstanding warrants issued on October 24, 2024, which adjusted the provisions of the warrants regarding recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock.

The anti-dilution adjustment resulted in the issuance of an additional 94,579 October 2024 PIPE Warrants and October 2024 PIPE Placement Agent warrants.

October 2024 PIPE Offering

On October 23, 2024, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of prefunded warrants to purchase shares of common stock of the Company and warrants to purchase shares of Common Stock pursuant to a private placement.

The investors purchased approximately $ 3,039 of prefunded warrants and warrants, consisting of prefunded warrants to purchase an aggregate of 609 shares of common stock and warrants to purchase an aggregate of 914 shares of common stock, at a purchase price of $ 4,992 per prefunded warrant and accompanying warrant.

The prefunded warrants are immediately exercisable upon issuance.

The Company also issued an aggregate of 49 placement agent warrants.

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

September 2024 Registered Direct Offering

On September 27, 2024, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of shares of common stock of the Company pursuant to a registered direct offering and a private placement of warrants to purchase shares of common stock.

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

October 2024 Registered Direct Offering

On October 11, 2024, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of shares of common stock of the Company pursuant to a registered direct offering and a private placement of warrants to purchase shares of common stock.

The investors purchased approximately $ 2,140 of shares and warrants, consisting of an aggregate of 307 shares of common stock and warrants to purchase 613 shares of common stock, at a purchase price of $ 6,986.25 per share and accompanying warrant.

The Company also issued an aggregate of 19 placement agent warrants.

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

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

2024 Warrant Inducement

On September 29, 2024, the Company commenced a warrant inducement offering with the holders of outstanding warrants to purchase 110 shares of common stock, consisting of:

(i) common stock purchase warrants to purchase 24,043 shares of common stock issued on or about November 29, 2023, and (ii) common stock purchase warrants to purchase 13,596 shares of common stock issued on or about April 9, 2024 ((i) and (ii) collectively, the “2024 Existing Warrants”), which are exercisable for an equal number of shares of common stock at an exercise price of $ 30.78 .

(i) common stock purchase warrants to purchase 70 shares of common stock issued on or about November 29, 2023, and (ii) common stock purchase warrants to purchase 40 shares of common stock issued on or about April 9, 2024 ((i) and (ii) collectively, the “2024 Existing Warrants”).

The net proceeds to the Company from the 2024 Warrant Inducement, after deducting placement agent fees and the Company’s offering expenses were $ 1,073 .

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The Company also issued an aggregate of 7 placement agent warrants.

October 2024 Registered Direct Offering

September 2024 Registered Direct Offering

The investors purchased approximately $ 1,175 of shares and warrants, consisting of an aggregate of 111 shares of Common Stock and warrants to purchase 222 shares of common stock, at a purchase price of $ 30.78 per share and accompanying warrant.

The Company also issued an aggregate of 7 placement agent warrants.

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

October 2024 PIPE Offering

The investors purchased approximately $ 3,039 of prefunded warrants and warrants, consisting of prefunded warrants to purchase an aggregate of 210,036 shares of common stock and warrants to purchase an aggregate of 315,055 shares of Common Stock, at a purchase price of $ 14.47 per prefunded warrant and accompanying warrant.

The prefunded warrants are immediately exercisable upon issuance.

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

April 2024 Registered Direct Offering

The investors purchased approximately $ 4,237 of shares and warrants, consisting of an aggregate of 40 shares of common stock, pre-funded warrants to purchase 3 shares of common stock and warrants to purchase 43 shares of common stock, at a purchase price of $ 99,670.50 per share and accompanying warrant.

The Company also issued an aggregate of 3 placement agent warrants.

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

The shares issuable upon exercise of the warrants are subject to stockholder approval.

The Company has agreed to hold an annual or special meeting on or before May 30, 2025, to have stockholders approve the issuance of the shares of common stock underlying the warrants pursuant to applicable Nasdaq rules.

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

Other Equity Financings

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

March 2023 JGB Warrants

In connection with the sale of the Debentures as described in Note 12 “Debt”, the Company issued the JGB Warrants to purchase up to 155 shares of common stock for an exercise price of $ 41,310 per share.

The JGB warrants initial fair value of $ 4,475 net of issuance costs of $ 139 (see Note 8 “Fair Value Measurements”), of which half of the warrants met the criteria for liability classification due to a contingent put option which allows the holder to require that the Company redeem the warrants in cash for a purchase price equal to $ 32,400 .

Accordingly, at issuance half of the warrants with the put provision were classified as Other long-term liabilities on the Consolidated Balance Sheets in the amount of $ 2,898 whereas the remainder of the warrants without the put provision are equity classified and recorded as a component of Capital in excess of par value in the amount of $ 1,577 .

The valuation assumptions of the warrants at issuance, as detailed below, are the same for all warrants except for the put provision which derives a greater fair value.

As a result of the June 19, 2023 offering, the exercise price of the Company’s outstanding JGB warrants to purchase up to 155 shares of the Company’s common stock was automatically adjusted to be $ 27,708 exercise price for up to 230 shares of common stock.

As a result of the anti-dilution provision being triggered, the Company recognized a non-cash deemed dividend of $ 367 in connection with these adjustments, recorded on the Consolidated Statement of Operations and Comprehensive Loss and within Capital in excess of par value (as the Company has an accumulated deficit and therefore the deemed dividend is treated as paid out of Capital in excess of par value).

There are no further anti-dilution adjustments on such warrants.

In connection with the Senior Secured Credit Facility Amendment and Waiver, the Company redeemed 78 of such warrants for an aggregate put price equal to $ 2,500 .

See Note 12 “Debt.”

The JGB detachable warrants were valued at the closing dates of the Senior Secured Credit Facility using a Monte Carlo valuation model with the following assumptions:

Risk-free interest rate per year

Expected volatility per year

Expected dividend yield

Contractual expiration

Exercise price

March 2023 Omnia Warrants

In connection with the Subordinated Note as described in Note 12 “Debt”, the Company issued to Omnia, the Omnia Warrants to purchase up to 21 shares of the Company’s common stock (the “Omnia 2023 Warrants”).

The Omnia 2023 Warrants are exercisable for seven years from September 3, 2023, at an exercise price of $ 27,708 per share.

The Omnia warrants initial fair value was $ 1,316 (see Note 8 “Fair Value Measurements”), and met the criteria for liability classification due to contingent put option which allows the holder to require that the Company redeem the warrants in cash for a purchase price equal to $ 64,800 .

The Omnia 2023 Warrants are classified as Other long-term liabilities on the Consolidated Balance Sheets.

The detachable Omnia 2023 Warrants were valued at the closing dates of the Subordinated Note using a Monte Carlo valuation model with the following assumptions:

Risk-free interest rate per year

Expected volatility per year

Expected dividend yield

Contractual expiration

Exercise price

On March 31, 2023, the Company established an at-the-market common equity offering program (“ATM Program”), through which it had the ability to offer and sell shares of common stock having an aggregate gross sales price of up to $ 50,000 .

The Company paid a 3.00 % sales commission based on the gross proceeds of the sales price per share of common stock sold.

On June 19, 2023, the Company terminated the ATM Program in connection with the June 2023 Capital Raise.

The following table shows the number of shares sold under the ATM Program prior to its termination:

Number of common shares issued

Weighted average sale price per share

Gross proceeds

On November 4, 2025, the Company established an at-the-market common equity offering program (“ATM Program”), through which it had the ability to offer and sell shares of common stock having an aggregate gross sales price of up to $ 25,000 .

The Company will pay a 3.00 % sales commission based on the gross proceeds of the sales price per share of common stock sold.

No proceeds were raised under the ATM Program in the year ended December 31, 2025.

See Note 18 “Subsequent Events.”

– RETIREMENT PLAN

The Company sponsors a defined contribution plan under IRC Section 401(k).

The Company sponsors a defined contribution plan under Internal Revenue Code Section 401(k).

The plan covers all employees who meet the minimum eligibility requirements.

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Minimum annual royalty

License Agreement

Consulting Agreements

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These costs vary from year to year and the Company has certain rights to direct the activities that result in these costs.

(2) On November 1, 2023, the Company entered into a license agreement with NCSU for an exclusive sublicensable right and license under specific patent rights and plant variety rights for the field of use in specific licensed territories.

Additional milestone fees could be required pending achievement of events pursuant to the agreement.

(2) As a requirement for a modified risk tobacco product and a condition of the marketing authorization by the FDA, the Company engaged various consultants to conduct post-market studies and research.

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The Company will then continue to monitor the matter for further developments that could affect the amount of any such accrued liability.

In connection with ongoing restructuring efforts and the hemp/cannabis disposal group (see Note 2 “Discontinued Operations and Divestitures,” the Company has received unasserted claims related to disputed contracts, which could result in accrual of an additional amount up to $ 1,100 on the Consolidated Balance Sheet.

The Company is vigorously defending its position against these claims.

Shareholder Derivative Cases

On February 6, 2019, Melvyn Klein, a resident of Nassau County New York, filed a shareholder derivative claim against the Company, the Company’s then Chief Executive Officer, Henry Sicignano III, the Company’s Chief Financial Officer, John T.

Brodfuehrer, and each member of the Company’s Board of Directors in the United States District Court for the Eastern District of New York entitled:

Melvyn Klein, derivatively on behalf of 22nd Century Group v.

Henry Sicignano, III, Richard M.

Sanders, Joseph Alexander Dunn, Nora B.

Sullivan, James W.

Cornell, John T.

Brodfuehrer and 22nd Century Group, Inc., Case No.

1:19 cv 00748.

Klein brings this action derivatively alleging that (i) the director defendants supposedly breached their fiduciary duties for allegedly allowing the Company to make false statements;

(ii) the director defendants supposedly wasted corporate assets to defend this lawsuit and the other related lawsuits;

(iii) the defendants allegedly violated Section 10(b) of the Securities Exchange Act and Rule 10b 5 promulgated thereunder for allegedly approving or allowing false statements regarding the Company to be made;

and (iv) the director defendants allegedly violated Section 14(a) of the Securities Exchange Act and Rule 14a 9 promulgated thereunder for allegedly approving or allowing false statements regarding the Company to be made in the Company’s proxy statement.

Numerous other shareholder derivative cases were subsequently filed and consolidated into the main action.

On December 5, 2023, the parties entered into a Memorandum of Settlement to fully resolve all claims pending the Court’s approval of a motion for preliminary approval of settlement, which was filed with the Court on March 6, 2025.

The settlement amount is $ 768 related to plaintiffs attorney and legal fees and is fully covered by the Company’s insurance.

Accordingly, the Company has recorded an accrual for litigation settlement and corresponding indemnification receivable on the Consolidated Balance Sheets as of December 31, 2024 and 2023.

A complaint was originally filed against the Company and several former executive officers in the Eastern District of New York as Bull v.

22nd Century Group , Case No.

1:19-cv-00409, and later transferred to the Western District of New York in a consolidated putative class action captioned Noto v.

22nd Century Group , Case No.

1:19-cv-01285.

The parties participated in a mediation on March 21, 2023, and reached a settlement of $ 3,000 (payable by the insurance carrier) to resolve the litigation and release all claims against the Company.

On June 30, 2023, District Court preliminarily approved the settlement and on October 23, 2023 the Court finally approved the settlement and dismissed the action with prejudice.

Accordingly, the Company has recorded an accrual for litigation settlement and corresponding indemnification receivable on the Consolidated Balance Sheets as of December 31, 2023 which was subsequently paid from the escrow account funded by the insurance carrier during the fourth quarter of 2024.

On February 6, 2019, a shareholder derivative claim was filed against the Company and certain current and former directors and officer in the United States District Court for the Eastern District of New York (Case No.

1:19 cv 00748) alleging breaches of fiduciary duty and other similar claims .

On March 4, 2025, the parties entered into a Stipulation and Agreement of Settlement to fully resolve all claims that was finally approved on July 16, 2025.

As part of the settlement, the Company agreed to certain corporate governance reforms as part of the settlement.

The settlement also includes an amount of $ 768 related to plaintiffs’ attorney and legal fees that is fully covered and paid by the Company’s insurance.

Accordingly, the Company has released its accrual for litigation settlement and corresponding indemnification receivable on the Consolidated Balance Sheets during 2025.

Insurance Litigation

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2:23-cv-01057-HL.

The Company is alleging breach of contract, breach of duty of good faith and fair dealing and negligence per se.

The Company is seeking full recovery of its business interruption claim under the policy plus direct, indirect and consequential damages resulting from Dorchester’s continued delay in issuing coverage payments.

Fact discovery is complete.

Expert discovery is complete.

The trial date is November 4, 2025.

The parties fully resolved the matter for $ 9,500 pursuant to a Settlement Agreement and Release executed on September 18, 2025.

Payment was received on October 29, 2025.

KeyGene Dispute

On April 11, 2024 the Company received a Request for Arbitration from Keygene N.V.

(“Keygene”) in connection with the Company’s termination of various framework collaborative research agreements described below.

On April 3, 2019, the Company entered into the Framework Collaborative Research Agreement with KeyGene in the field of hemp/cannabis.

On April 30, 2021, the Company and KeyGene entered into a First Amended and Restated Framework Collaborative Research Agreement which extended the agreement term, from first quarter 2024 to first quarter 2027.

On March 30, 2022, the Company and KeyGene entered into a new Framework Collaborative Research Agreement for a term of three years in the field related to the hops plant.

On January 8, 2024, the Company formally terminated both Framework Collaborative Research Agreements, as amended, related to hemp/cannabis and hops.

KeyGene is seeking payment in the amount of $ 1,885 for current and future services under the Framework Collaborative Research Agreements and has invoiced the Company $ 881 for services performed.

The matter is being arbitrated under the administration of the International Court of Arbitration.

The Company filed its Answer to Request for Arbitration with Defenses and Counterclaims on June 4, 2024.

On July 25, 2024, an arbitrator was formally appointed.

The parties have submitted their Statements of Claim/Counterclaim, and their Responsive Statements to the Statements of Claim and Counterclaim.

Discovery is complete.

The arbitration date has been set for March 24, 2025.

The Company believes it has substantial defenses to KeyGene’s claims and intends to defend itself vigorously.

in connection with the Company’s termination of various framework collaborative research agreements.

The parties fully resolved the matter pursuant to a Settlement Agreement and Mutual Release executed on April 25, 2025.

Cookies Retail Products Dispute

On October 23, 2024, Cookies Retail Products, LLC (“CRP”) filed a complaint against the Company, a subsidiary of the Company (“PTB”), Cookies Creative Consulting, Inc.

On October 23, 2024, Cookies Retail Products, LLC (“CRP”) filed a complaint against the Company, a subsidiary of the Company (“PTB”), Cookies Creative Consulting & Promotions, Inc.

(“CCC”), Cookies SF, LLC (“CSF”), GMLC WLNS, LLC (“GMLC”) and other defendants, Case No.

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Count II for Fraud – False Promise related to the Settlement Agreement and Purchase Agreement;

and Count III for Violation of Penal Code Section 496 related to a Licensing and Distribution Agreement between GMLC, CCC and PTB.

and Count III for Violation of Penal Code Section 496 related to the Purchase Agreement and a Licensing and Distribution Agreement between GMLC, CCC and PTB.

CRP is seeking monetary damages.

CRP also filed an application for right to attach order and writ of attachment against PTB on February 19, 2025.

A hearing date for the application is scheduled for April 4, 2025.

The Company filed a demurrer to the complaint on February 24, 2025.

CRP then filed a first amended complaint on March 12, 2025.

CRP filed a first amended complaint on March 12, 2025, restating the same three counts.

The Company filed a Special Motion to Strike the first amended complaint on March 27, 2025.

At an April 28, 2025 hearing, the Court granted the Company’s Special Motion to Strike as to Count II and Count III in CRP’s first amended complaint, leaving only Count I.

CRP will not have an opportunity to amend its complaint to replead Count II or Count III.

On May 15, 2025, the Court also denied an application that had been filed by CRP for a right to attach order and writ of attachment against PTB.

Discovery is ongoing.

The Company believes it has substantial defenses to CRP’s claims, and counterclaims, and intends to defend itself vigorously.

Trial date is set for October 27, 2026.

Employee Dispute

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The former employee is seeking monetary damages.

The Company has been served but has not yet filed its responsive pleading to the complaint.

The Company believes it has substantial defenses to the claims and intends to defend itself vigorously.

Maison Dispute

On January 23, 2024, the Company received a Notice of Intent to Arbitrate from Maison Placements Canada Inc.

(“Maison”) in connection with the Company’s March 2023 Senior Secured Credit Facility transaction.

Maison claims it is owed fees for closure of the Senior Secured Credit Facility transaction as a result of discussions with former Company personnel and a purported letter of engagement dating from 2021.

The parties fully resolved the matter and entered into a full and final release of claims during the fourth quarter of 2024.

The Company has a senior secured credit facility (the “Senior Secured Credit Facility”), which consists of Debentures (as defined below) and previously, a subordinated promissory note (the “Subordinated Note).

The Debentures were issued at a 5 % original issuance discount and are subject to a 5 % exit payment.

The Subordinated Note was extinguished in April 2024, as described below.

Debt related to the Senior Secured Credit Facility and Subordinate Note as of December 31, 2024 and 2023 consists of the following:

The Company has moved to dismiss all counts of the complaint directed to the Company and its subsidiaries.

In the event the counts are not dismissed, the Company believes it has substantial defenses to the claims and intends to defend itself vigorously.

The Company had a senior secured credit facility (the “Senior Secured Credit Facility”), which consisted of debentures (the “Debenture”) and a subordinated promissory note (the “Subordinated Note”).

The Subordinated Note was extinguished in April 2024 and the Senior Secure Credit Facility was repaid in full and terminated in September 2025, each described below.

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

Senior Secured Credit Facility

Subordinated Note

Unamortized discount on loan and deferred debt issuance costs

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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.

Commencing on March 3, 2024, at its option, the holder of a Debenture may require the Company to redeem 2 % of the original principal amount of the Debentures per calendar month 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.

The Company’s obligations under the Debentures can be accelerated upon the occurrence of certain customary events of default.

In the event of a default and acceleration of the Company’s obligations, the Company would be required to pay the Prepayment Amount, liquidated damages and other amounts owing in respect thereof through the date of acceleration.

The Debentures contain customary representations, warranties and covenants including among other things and subject to certain exceptions, covenants that restrict the Company from incurring additional indebtedness, creating or permitting liens on assets, making or holding any investments, repaying outstanding indebtedness, paying dividends or distributions and entering into transactions with affiliates.

Substantially all of the company’s assets, including intellectual property, are collateralized and at risk if Debenture obligation is not satisfied.

In addition, the Company was required to maintain at least $ 7,500 on its balance sheet as restricted cash in a separate account and has financial covenants to maintain certain quarterly revenue targets.

The Debentures had a maturity date of March 3, 2026.

In connection with the sale of the Debentures, the Company issued warrants to purchase up to 7 shares of common stock for an exercise price of $ 950,130 per share (the “JGB Warrants”), which had an initial fair value of $ 4,475 net of issuance costs of $ 139 .

On June 22, 2023, as a result of the June 19, 2023 offering, the Company’s outstanding JGB warrants to purchase up to 7 shares of the Company’s common stock for an exercise price of $ 950,130 per share were automatically adjusted to be $ 637,295 exercise price for up to 11 shares of common stock.

There are no further anti-dilution adjustments on such warrants.

There were no further anti-dilution adjustments on such warrants.

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

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No cash was exchanged as a result of executing the October 2023 Amendment.

Subsequently, on December 22, 2023, the Company, the Holders and the Agent entered into an Amendment Agreement (the “December 2023 Amendment”) pursuant to which the Holders and the Agent consented to the Purchase Agreement, as amended by the GVB Amendment (see Note 2 “Discontinued Operations and Divestitures”).

In consideration of the Holders and the Agents’ consent, the Company agreed to (i) pay to the Agent, a cash payment of $ 2,200 to reduce the outstanding principal of the Debentures (which includes the cash portion of the New Purchase Price paid directly to Agent by Buyer which consists of a cash payment of $ 1,100 and an additional $ 1,100 paid by the Company), (ii) a 12 % secured promissory note issued to the Company’s senior lender, on behalf of and at the direction of the Company, in an aggregate principal amount of $ 2,000 (the “2023 GVB Promissory Note”), (iii) assign the GVB Insurance Proceeds to the Agent until the outstanding aggregate principal amount of the Debentures, plus accrued and unpaid interest, has been repaid in full;

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The remaining $ 500 payable by GVB under the 2023 GVB Promissory Note was initially extended to December 31, 2024, and subsequently to March 31, 2025.

As of December 31, 2024, the $ 500 remaining GVB Promissory Note and $ 1,000 real estate farm asset are pledged to the senior lender for principal reduction and accordingly $ 1,500 of the Senior Secured Credit Facility is recorded as Current portion of long-term debt on the Consolidated Balance Sheets.

As part of the December 2023 amendment, the Company, the Holders and the Agent also agreed to amend the Debentures to (i) allow the Holders to voluntarily convert the Debentures, in whole or in part, into shares of the Company’s common stock (“Voluntary Conversion Option”) on the earlier of (i) June 30, 2024 and (ii) the public announcement of a Fundamental Transaction at a conversion price equal to the lower of (x) $ 1.00 per share and (y) the closing sale price of the Company’s common stock on June 29, 2024 (the “Conversion Price”), and (ii) include a mandatory prepayment of the outstanding principal of the Debentures in an amount equal to 20 % of the net cash proceeds of any issuance by the Company of any of its stock, or other Equity Interests (as defined in the Debentures) or the incurrence or issuance of any indebtedness.

The Voluntary Conversion Option was approved by the Company’s shareholders on June 28, 2024 and the conversion option price in effect is $ 100.683 .

Additional terms of the December 2023 Amendment include revised financial covenants to reflect the sale of the Purchased Interests, including lowering the Company’s quarterly revenue targets.

As of December 31, 2024, the Company was in compliance with these financial covenants.

As of March 31, 2025, the 2023 GVB Promissory Note was in default with respect to payment at maturity of the contractual term and accordingly an allowance for credit loss was initially recorded as of March 31, 2025 in the amount of $ 500 .

In connection with the September 18, 2025 full repayment of the debentures (as described below), the Company entered into a new 2025 GVB Promissory Note with GVB in the amount of $ 500 , payable in installments of $ 100 each on November 1, 2025, January 1, 2026 and February 1, 2026, with the remaining balance of $ 200 payable over a term of 31 monthly installments thereafter.

The Company received the first payment on the 2025 GVB Promissory Note in the amount of $ 100 .

As of December 31, 2025, the Company continues to maintain an allowance for credit loss against the 2025 GVB Promissory Note.

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

During the second quarter of 2025, the Company made principal payments in the amount of $ 1,017 as 20 % of the net cash proceeds of the issuance of common stock (see Note 9 “Capital Raises and Warrants for Common Stock”).

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

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

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The reset Conversion Price shall in no event be greater than the Conversion Price in effect on the date of the Letter Agreement, which is $ 2,315.71 .

See Note 20 “Subsequent Events.”

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

The October 2023 Amendment, April 2024 Amendment, May 2024 Amendment, and August 2024 Amendment was concluded to be a modification, and not an extinguishment, based on an analysis of the present value of future cash flows.

On January 13, 2025, the Board of Directors approved the reset of the Conversion Price to $ 2,083.8 per share.

The change in conversion price resulted in an increase in fair value to the embedded conversion option, resulting in an increase in debt discount of $ 283 and a corresponding increase in capital in excess of par value.

The Holders exercised conversion notices in the amount of $ 3,132 in January 2025 and the Company issued 1,504 shares of common stock.

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

Under the terms of the May 2025 Amendment, the Company will be able to reset the Conversion Price (as defined in the Debentures) currently in effect, at the discretion of the Board of Directors and on a one time basis, to an amount equal to the average of the daily VWAPs for each of 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 on the date of the Letter Agreement, which is $ 138.92 .

On September 18, 2025, the Company repaid in full all outstanding obligations under, and terminated, the Senior Secured Credit Facility, the Debentures, and the related security and collateral documents.

In connection with the payoff and termination, the Company paid the outstanding principal, accrued and unpaid interest, and all other amounts then due and payable, totaling $ 3,790 in aggregate principal payments made between August 29, 2025 and September 18, 2025, from the proceeds of the August 2025 Series A convertible preferred stock offering (see Note 9 “Capital Raises and Warrants for Common Stock”).

All liens and security interests securing the Debentures and related obligations were released.

The Company also paid a prepayment penalty of $ 28 and recorded extinguishment charges of $ 416 .

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

The October 2023 Amendment, April 2024 Amendment, May 2024 Amendment, August 2024 Amendment, January 2025 Amendment, and May 2025 Amendment were concluded to be a modification, and not an extinguishment, based on an analysis of the present value of future cash flows.

A new effective interest rate was determined, and the debt continued to be amortized.

The December 2023

Amendment was concluded to be an extinguishment, due to the addition of a substantive conversion option.

As a result, the pre-amended debt carrying value was extinguished and the new debt was recorded at fair value, which is subsequently amortized using the effective interest method.

Extinguishment charges were $ 5,158 and recorded in Interest expense on the Consolidated Statements of Operations and Comprehensive Loss for the quarter ended December 31, 2023.

The Company analyzed the conversion feature of the December 2023 Amendment for derivative accounting consideration under ASC 815-15 and determined that the embedded conversion features should be classified as a bifurcated derivative because the exercise price of these convertible notes are subject to a variable conversion rate.

The December 2023 Amendment was concluded to be an extinguishment, due to the addition of a substantive conversion option.

The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment.

In accordance with ASC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability at fair value in the amount of $ 557 as of December 31, 2023, respectively as a component of Other Long-Term Liabilities on the Consolidated Balance Sheet.

In accordance with ASC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability at fair value in the amount of $ 557 as of March 31, 2024, as a component of Other Long-Term Liabilities on the Consolidated Balance Sheets.

Subsequently, during the year-ended December 31, 2024, the derivative liability related to the debentures and embedded conversion option was reclassified from Other Long-Term Liabilities to Capital in Excess of Par, based on the Company’s reassessment of the classification and conclusion the derivative met the ‘fixed for fixed’ criteria in ASC 815.

See Note 8 “Fair Value Measurement” for additional information related to measurement of the debentures and derivative liability.

Subordinated Note

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

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.

Under the terms of the Subordinated Note, the Company is obligated to make interest payments in-kind (the “PIK Interest”).

The PIK Interest accrues monthly at a compounding 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.

The Subordinated Note was terminated and extinguished in April 2024.

In connection with the Subordinated Note, the Company issued to Omnia, warrants to purchase up to 21 shares of the Company’s common stock (the “Omnia 2023 Warrants”).

The 2023 Omnia Warrants are exercisable for seven years from September 3, 2023, at an exercise price of $ 27,708.48 per share, subject, with certain exceptions, to adjustments in the event of stock splits, dividends, subsequent dilutive offerings and certain fundamental transactions.

In connection with the Subordinated Note, the Company issued to Omnia, warrants to purchase up to 1 share of the Company’s common stock (the “2023 Omnia Warrants”).

The 2023 Omnia Warrants were exercisable for seven years from September 3, 2023, at an exercise price of $ 637,295 per share, subject, with certain exceptions, to adjustments in the event of stock splits, dividends, subsequent dilutive offerings and certain fundamental transactions.

On April 29, 2024, the Company entered into a General Release and Settlement Agreement (the “Omnia Agreement”) with Omnia Capital LP (“Omnia”).

The Omnia Agreement 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 in the 2023 Omnia Warrants, amounting to a total of approximately $ 5,228 , for (i) a cash payment of $ 249 ;

The Omnia Agreement settled and extinguished all outstanding debt and interest owed to Omnia under the Subordinated Note and the put provision contained in the 2023 Omnia Warrants, amounting to a total of approximately $ 5,228 , for (i) a cash payment of $ 249 ;

(ii) 371 shares of common stock and 371 immediately exercisable pre-funded warrants to purchase shares of common stock at an exercise price of $ 0.00001 that are exercisable until May 1, 2029 (at an effective per share price of $ 6,644 ) and (iii) 148 immediately exercisable warrants to purchase an equal number of shares of common stock at an exercise price of $ 6,644 until May 1, 2029 (the “2024 Omnia Warrants”).

The 2024 Omnia Warrants contain a put provision that permits the holder to require the Company to redeem the 2024 Omnia Warrants, no earlier than May 1, 2025, for a purchase price equal to $ 361.125 per warrant, and had an initial fair value of $ 1,515 (see Note 8).

The 2024 Omnia Warrants contain a put provision that permits the holder to require the Company to redeem the 2024 Omnia Warrants, no earlier than May 1, 2025, for a purchase price equal to $ 8,306 per warrant, and had an initial fair value of $ 1,515 (see Note 8 “Fair Value Measurements”).

The put option of the 2024 Omnia Warrants was fully exercised on September 29, 2025 in the amount of $ 1,231 and paid on October 2, 2025.

Subject to limited exceptions, a holder of pre-funded warrants and 2024 Omnia Warrants will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 19.99 % of the number of shares of our common stock outstanding immediately after giving effect to such exercise.

As part of the Omnia Agreement, the parties agreed to terminate and cancel the Old Note and the 2023 Omnia Warrants and released all debts,

claims or other obligations against each other occurring prior to the date of the Omnia Agreement.

The total cash and non-cash consideration amounted to $ 5,628 , resulting in extinguishment charges of $ 400 for the year ended December 31, 2024, recorded in Interest expense in the Statement of Operations and Comprehensive Loss.

Contractual Maturities

The Company has $ 1,500 pledged against outstanding indebtedness under the Senior Secured Credit Facility comprised of (i) $ 500 GVB promissory note and (ii) $ 1,000 assignment of Needle Rock Farms to be applied as principal reduction in 2024.

As of December 31, 2024, contractual maturities under the Senior Secured Credit Facility for the remainder of 2024 and through maturity, excluding any discounts or premiums, were to be paid in 2024 of $ 1,500 and 2026 of $ 6,190 .

Additionally, commencing August 2024, 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 $ 1,053 in cash during the year ended December 31, 2024.

If the redemption feature is elected, as of December 31, 2024, contractual maturities under the senior secured credit Facility for 2025 are $ 3,368 , and for 2026 are $ 4,332 .

See Note 20 “Subsequent Events.”

As part of the Omnia Agreement, the parties agreed to terminate and cancel the Old Note and the 2023 Omnia Warrants and released all debts, claims or other obligations against each other occurring prior to the date of the Omnia Agreement.

Debt Issuance Costs

The fair values of the warrants at issuance of $ 5,791 , together with the Debentures original issuance discount of $ 1,053 , Debentures exit payment of $ 1,053 , and third-party debt issuance costs of $ 801 , are being amortized using the effective interest method over the term of the respective debt instrument, recorded as Interest expense in the Consolidated Statement of Operations and Comprehensive Loss.

The components and activity of unamortized discount and deferred debt issuance costs related to the Senior Secured Credit Facility and Subordinated Note is as follows:

The fair values of the warrants at issuance of $ 5,791 , together with the Debentures original issuance discount of $ 1,053 , Debentures exit payment of $ 1,053 , and third-party debt issuance costs of $ 801 , were being amortized using the effective interest method over the term of the respective debt instrument, recorded as Interest expense in the Consolidated Statements of Operations and Comprehensive Loss.

The components and activity of unamortized discount and deferred debt issuance costs related to the Senior Secured Credit Facility and Subordinated Note are as follows:

January 1, 2024

Amortization during the year

Debt extinguishment charges

Extinguishment of debt

December 31, 2024

Amortization during the period

Conversion option remeasurement

Amendment fees

Extinguishment of debt

December 31, 2025

– NOTES AND LOANS PAYABLE

The table below outlines our notes payable balances as of December 31, 2024 and 2023:

Insurance loans payable

Total current notes and loans payable

Insurance loans payable

During the second quarter of 2024, the Company renewed its Director and Officer (“D&O”) insurance for a one-year policy premium totaling $ 866 .

The Company paid $ 147 as a premium down payment and financed the remaining $ 719 of policy premiums over ten months at 8.3 % annual percentage rate.

During the second quarter of 2023, the Company renewed its Director and Officer (“D&O”) insurance for a one-year policy premium totaling $ 1,626 .

The Company paid $ 285 as a premium down payment and financed the remaining $ 1,341 of policy premiums over ten months at a 7.88 % annual percentage rate.

Additionally, during the third quarter of 2023, the Company expanded its D&O coverage, resulting in additional financing of $ 143 , at 9.38 % annual percentage rate over six months .

The Company also has other insurance loans payables related to pollution, property, and general liability across the Company.

As of December 31, 2024, all estimated future principal payments to be made under the above notes and loans payable will be paid in 2025.

– INCOME TAXES

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

Pre-tax income (loss)

Outside the U.S.

Total pre-tax (loss) earnings

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

Federal provision:

Current provision

Deferred provision

Change in valuation allowance

Total federal income tax provision

State provision:

Current provision

Deferred provision

Change in valuation allowance

Total state income tax (benefit) provision

Foreign provision:

Current provision

Deferred provision

Change in valuation allowance

Total foreign income tax (benefit) provision

Total income tax (benefit) provision

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

corporate income tax rates, as follows:

federal statutory tax rate

State and local income taxes, net of federal income tax effect (a)

Foreign Tax Effects

Effect of changes in tax laws or rates enacted in current period

Effect of cross-border tax laws

Research and development credit carryforward

Changes in valuation allowances

Nontaxable or nondeductible items

Stock based compensation (b)

GVB sale adjustments

Changes in unrecognized tax benefits

Other adjustments

Effective tax rate (benefit) provision

(a) State benefits in Texas made up the majority (greater than 50 percent) of the tax effect in this category.

(b) In 2025, incentive stock options not deductible.

In 2024, forfeitures of $ 563 , cancellations of $ 45 , and shortfalls of $ 204 .

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

Deferred tax assets:

Net operating loss carryforward

Stock-based compensation

Start-up expenditures

Research and development credit carryforward

Severance liability

Allowance for credit losses

Research and development costs

Operating lease obligations

Capital loss on investment

Interest expense limitation

Note payable and warrant liability

Deferred tax liabilities:

Machinery and equipment

Patents and trademarks

Operating lease right-of-use assets

Other intangible assets

Valuation allowance

Net deferred taxes

The Company has US federal net operating loss (“NOL”) carryforwards of approximately $ 228,923 as of December 31, 2025 that do not expire.

The Company also accumulated US federal NOL carryforward of approximately $ 46,920 through December 31, 2017 and these NOL carryforwards begins to expire in 2030.

In addition to the US federal NOL carryforward, the Company has state NOL carryforwards of approximately $ 104,844 in various jurisdictions in which it files that will begin to expire in 2031.

As of December 31, 2025, the Company has a research and development credit carryforward of approximately $ 1,654 that begins to expire in 2030.

The Company has a capital loss carryover of approximately $ 11,188 as of December 31, 2025, that begins to expire in 2026.

Utilization of these carryforwards may be subject to an annual limitation in the case of equity ownership changes, as defined by law.

Due to the uncertainty of the Company’s ability to generate sufficient taxable income in the future, the Company has recorded a valuation allowance to reduce the net deferred tax asset associated with the definite lived assets to zero.

These carryforwards are included in the net deferred tax asset that has been fully offset by the valuation allowance.

The valuation allowance increased for continuing operations by $ 2,982 and $ 3,305 for the years ended December 31, 2025 and 2024, respectively, and changed by ($ 1,537 ) and $ 922 due to tax attributes that were generated as a part of discontinued operations but remain on a prospective basis with continuing operations due to the Company filing a consolidated U.S.

federal return for the years ended December 31, 2025 and 2024.

ASC 740 provides guidance on the financial statement recognition and measurement for uncertain income tax positions that are taken or expected to be taken in a company’s income tax return.

The Company has evaluated its tax positions and believes there are no uncertain tax positions as of December 31, 2025 and 2024.

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

North Carolina

State Subtotal

Total cash paid or income taxes (net of refunds)

The One Big Beautiful Bill Act ("OBBB") was signed into law on July 4, 2025.

The OBBB makes changes to the U.S.

corporate income tax, including immediate expensing of domestic research and development costs, with retroactive application beginning January 1, 2025;

reinstating the option to claim 100% accelerated depreciation deductions on qualified property, with retroactive application beginning January 20, 2025;

permanent reinstatement of the EBITDA-based limitation for the business interest deduction under IRC Section 163(j);

and international tax provisions modifying global intangible low-taxed income ("GILTI"), foreign-derived intangible income ("FDII"), and base erosion and anti-abuse tax ("BEAT").

The impact of the OBBB on the Company is accelerating the expensing of the domestic research and development costs.

– EQUITY-BASED COMPENSATION

Stock Compensation Plan

On May 20, 2021, the stockholders of 22nd Century Group, Inc.

On May 20, 2021, the shareholders of 22nd Century Group, Inc.

(the “Company”) approved the 22nd Century Group, Inc.

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Sales, general, and administrative

Cost of goods sold

Research and development

Total equity based compensation - continuing operations

Total equity based compensation - discontinued operations

Total equity-based compensation

On December 31, 2024, the Company canceled all remaining unvested awards at that time which resulted in accelerated compensation expense of $ 117 .

During the years ended December 31, 2025 and 2024, equity-based compensation expense reversals due to employee termination forfeitures amounted to $ 17 and $ 99 , respectively.

Additionally, the Company recorded $ 0 and $ 523 of accelerated equity compensation expense, respectively, in connection with the vesting of an employees’ outstanding equity awards as part of termination severance agreements.

On December 31, 2024, the Company canceled all remaining unvested awards which resulted in accelerated compensation expense of $ 117 .

Restricted Stock Units (“RSUs”) .

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Unvested RSUs

Unvested at January 1, 2023

Unvested at December 31, 2024

Unvested at December 31, 2025

The fair value of RSUs related to employee grants that vested during the years ended December 31, 2024 and 2023 was approximately $ 9 and $ 1,838 , respectively, based on the stock price at the time of vesting.

The fair value of RSUs related to employee grants that vested during the year ended December 31, 2024, was $ 9 , based on the stock price at the time of vesting.

During the year ended December 31, 2024, there were 121 shares granted and immediately vested during the period for settled indebtedness for consulting and other services provided;

in which the fair value at the time of vesting amounted to $ 125 .

As of December 31, 2024, the Company canceled all remaining unvested RSUs.

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

Stock Options.

Our outstanding stock options were valued using the Black-Scholes option-pricing model on the date of the award.

There was no stock option grant activity during 2024 and 2023.

A summary of all stock option activity from January 1, 2024 to December 31, 2025 is as follows:

Outstanding at January 1, 2023

Outstanding at December 31, 2024

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

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

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

Grant date fair value

Risk-free interest rate (1)

Expected dividend yield (2)

Expected volatility (3)

Expected term of stock options (4)

(1) The risk-free interest rate is based on the period matching the expected term of the stock options based on the U.S.

Treasury yield curve in effect on the grant date.

(2) The expected dividend yield is assumed as zero.

The Company has never paid cash dividends nor does it anticipate paying dividends in the foreseeable future.

(3) The expected volatility is based on historical volatility of the Company’s stock.

(4) The expected term represents the period of time that options granted are expected to be outstanding based on vesting date and contractual term.

– EARNINGS (LOSS) PER COMMON SHARE

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

(in thousands, except for per-share data)

Net loss from continuing operations

Net income (loss) from discontinued operations

Net income from discontinued operations

Deemed dividends

Net loss available to common shareholders

Weighted average common shares outstanding - Basic

Dilutive effect of warrants and RSUs

Dilutive effect of convertible notes

Denominator for diluted EPS

Basic loss per common share from continuing operations

Basic loss per common share from discontinued operations

Basic loss per common share from deemed dividends

Basic loss per common share

Weighted average common shares outstanding - basic and diluted

Basic and diluted loss per common share from continuing operations

( 27,812.56 )

Diluted loss per common share from continuing operations

Diluted income (loss) per common share from discontinued operations

Diluted loss per common share from deemed dividends

Diluted loss per common share

Basic and diluted income per common share from discontinued operations

Basic and diluted loss per common share from deemed dividends

( 18,493.32 )

Basic and diluted loss per common share

( 45,711.05 )

Anti-dilutive shares are as follows as of December 31:

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For certain CMO contracts, the performance obligation is satisfied over time as the Company determines, due to contract restrictions, it does not have an alternative use of the product and it has an enforceable right to payment as the product is manufactured.

The Company recognizes revenue under those contracts at the unit price stated in the contract based on the units to customers and is recognized net of cash discounts, sales returns and

There was no allowance for discounts or returns and allowances at December 31, 2024 and December 31, 2023.

The Company recognizes revenue under those contracts at the unit price stated in the contract based on the units to customers and is recognized net of cash discounts, sales returns and allowances.

There was no allowance for discounts or returns and allowances at December 31, 2025 and 2024.

Consideration payable to the customer for royalties is recorded as an offset of the transaction price with a corresponding contract liability.

Disaggregation of Revenue

The Company’s net revenue is derived from customers located primarily in the United States and is disaggregated by the timing of revenue.

Revenue recognized from Tobacco products transferred to customers over time represented 54 % and 63 %, for the year ended December 31, 2024 and 2023, respectively.

Revenue recognized from Tobacco products transferred to customers over time represented 99 % and 54 %, for the years ended December 31, 2025 and 2024, respectively.

The following table presents net revenue by product line:

1 unchanged sentence

Filtered cigars

Other tobacco products

Total contract manufacturing

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Customer payment terms vary depending on the terms of each customer contract, but payment is generally due prior to product shipment or within extended credit terms up to twenty-one ( 21 ) days after shipment.

Deferred Revenue (contract liabilities) relate to down payments received from customers in advance of satisfying a performance obligation.

This deferred revenue is included as Deferred income on the Consolidated Balance Sheets.

Deferred income relates to down payments received from customers in advance of satisfying a performance obligation.

This deferred income is included within Contract liabilities on the Consolidated Balance Sheets.

Total contract assets and liabilities are as follows:

Unbilled receivables

Consideration payable to the customer

Deferred income

Net contract assets

During the years ended December 31, 2024 and 2023, the Company recognized $ 726 and $ 688 of revenue that was included in the contract liability balance as of December 31, 2023 and 2022 respectively.

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

SEGMENT AND GEOGRAPHIC INFORMATION

19 unchanged sentences

other operating expenses, other (income) expense, interest income, and provision for income taxes.

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

Cost of goods sold

Selling, general and administration

Total depreciation from continuing operations

Cost of goods sold

Research and development

Total amortization from continuing operations

Geographic Area Information

1 unchanged sentence

Additionally, as of December 31, 2025 and 2024, all long-lived assets are physically located or domiciled in the United States.

– OTHER OPERATING EXPENSES (INCOME), NET

The components of “Other operating expenses (income), net” were as follows:

Restructuring costs:

Impairment of intangible assets (see Note 7)

Impairment of fixed assets

Professional services

Severance (see Note 1)

Total Restructuring costs

Acquisition and transaction costs

Impairment of intangible assets

Loss (gain) on sale or disposal of property, plant and equipment

Other operating expense, net

Restructuring costs

During the third quarter of 2023, the Company undertook various restructuring activities in an effort to better align its internal organizational structure and costs with its strategy, as well as preserve liquidity.

As a component of the restructuring, the Company has initiated a process to evaluate strategic alternatives with respect to the Company’s tobacco assets.

The process will include consideration of a range of strategic, operational and financial transactions and alternatives, such as business combinations, asset sales, licensing agreements, alternate financing strategies and other options.

As a result, the Company incurred $ 2,415 in restructuring costs for the year ended December 31, 2023, which included costs related to employee termination, professional services and consulting, and long-lived asset impairment.

– INCOME TAXES

The following is a summary of the components giving rise to the (benefit) provision for income taxes from continuing operations for the years ended December 31, 2024 and 2023:

Total current provision

Total deferred benefit

Change in valuation allowance

Total income tax provision

corporate income tax rates, as follows:

Statutory federal rate

GVB sale adjustments

Stock based compensation

Research and development credit carryforward

State tax, net of federal benefit

162(m) limitation

Valuation allowance

Effective tax rate

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

Deferred tax assets:

Net operating loss carryforward

Stock-based compensation

Start-up expenditures

Research and development credit carryforward

Accrued bonus

Severance liability

Allowance for credit losses

Research and development costs

Operating lease obligations

Capital loss on investment

Interest expense limitation

Note payable and warrant liability

Deferred tax liabilities:

Machinery and equipment

Patents and trademarks

Operating lease right-of-use assets

Other intangible assets

Valuation allowance

Net deferred taxes

The Company has net operating loss (“NOL”) carryforwards of approximately $ 215,397 as of December 31, 2024 that do not expire.

The Company also accumulated an NOL carryforward of approximately $ 46,920 through December 31, 2017 and this NOL carryforward begins to expire in 2030.

As of December 31, 2024, the Company has a research and development credit carryforward of approximately $ 1,654 that begins to expire in 2030.

The Company has a capital loss carryover of approximately $ 11,119 as of December 31, 2024, that begins to expire in 2026.

Utilization of these carryforwards may be subject to an annual limitation in the case of equity ownership changes, as defined by law.

As a result of the Company’s history of cumulative net operating losses and the uncertainty of their future utilization, the Company has established a valuation allowance to reduce the net deferred tax asset associated with the definite lived assets to zero.

For the years ended December 31, 2024 and 2023, the valuation allowance increased for continuing operations by $ 3,305 and $ 12,094 , and increased an additional $ 922 and $ 12,910 , respectively due to tax attributes that were generated as a part of discontinued operations but remain on a prospective basis with continuing operations due to the Company filing a consolidated US federal return for the year ended December 31, 2024 and 2023.

ASC 740 provides guidance on the financial statement recognition and measurement for uncertain income tax positions that are taken or expected to be taken in a company’s income tax return.

The Company has evaluated its tax positions and believes there are no uncertain tax positions as of December 31, 2024 and 2023.

– SUBSEQUENT EVENTS

JGB Senior Secured Credit Facility

As previously disclosed, on October 9, 2024, 22nd Century Group, Inc.

(the “Company”) entered into that certain Letter Agreement to modify the terms of the Securities Purchase Agreement dated March 3, 2023 (the “JGB SPA”) and debentures (the “Debentures”), as amended, 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”).

Under the terms of the Letter Agreement, as approved by the stockholders at the December 6, 2024 special meeting of stockholders, the Company was granted approval to reset the Conversion Price (as defined in the Debentures) currently in effect, at the discretion of the Board of Directors and on a one time basis, to an amount equal to the average of the daily VWAPs for each of the five (5) consecutive Nasdaq trading days immediately preceding the date on which the Conversion Price shall be reset.

On January 13, 2025, the Board of Directors approved the reset of the Conversion Price to $ 6.04 per share.

The Holders exercised conversion notices in the amount of $ 3,132 in January 2025 and the Company issued 518,600 shares of common stock.

The remaining principal balance of the Debentures is $ 4,558 , of which the Company and Holders have $ 1,500 of non-operating assets pledged for repayment.

Nasdaq Compliance

On January 21, 2025, the Company received a letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) confirming that the Company had regained compliance with the bid price requirement under Nasdaq Listing Rule 5550(a)(2).

As a result, the Company’s hearing before the hearings panel has been cancelled and the Company’s common stock will remain listed on Nasdaq.

NCSU Payment Agreement

On September 5, 2024, the Company entered into a Payment Agreement (the “Agreement”) with NCSU to satisfy outstanding payments due under existing License Agreements with NCSU and to prepay license fees and minimum royalty payments related to sponsored research for the Company’s intellectual property program through the end of 2025.

The second installment of payments was satisfied through the issuance of 83,299 shares of Company common stock occurred on January 30, 2025.

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

March 2026 Series B Convertible Preferred Stock Offering

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

The Company has the ability to reset the fixed conversion price (lower), subject to board approval and the floor price.

Stockholder approval for the offering was obtained at the February 20, 2026 Special Meeting of the Stockholders.

At the initial closing, the investors purchased $16,000 of shares of Series B convertible preferred stock and warrants.

The remaining $4,000 of shares of Series B Preferred Stock and warrants are expected to be purchased at a second closing.

The investors may request the second closing at any time until the one-year anniversary of the initial closing date and we may require the second closing at any time until the one-year anniversary of the initial closing date by individual investor once less than 50% of such Investor’s Series B Preferred Stock purchased at the initial closing remains outstanding and certain equity conditions have been satisfied for at least 7 of the prior 10 trading days, including:

(1) the Common Stock closes above 2.5 times the floor price and (2) the daily dollar trading volume of the Common Stock exceeds $500.

The warrants are immediately exercisable at an exercise price of $3.57 per share of common stock and expire on the date that is five years after issuance.

In addition, the Company issued placement agent warrants to purchase an aggregate of 187,816 shares of common stock with substantially the same terms as the Warrants, except that the exercise price of the Placement Agent Warrants is $3.927.

The Company used the net proceeds from the offering to repurchase at par all of the shares of outstanding Series A Convertible Preferred Stock issued in August 2025 in the amount of $9.65 million.

The balance of the net proceeds from the offering was approximately $5,680, after deducting placement agent case fees but before any other offering expenses.

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

Item 15(a)2 Financial Statement Schedules

In reviewing the agreements included as exhibits to this report, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company, its subsidiaries or other parties to the agreements.

13 unchanged sentences

Amendment to Certificate of Incorporation of the Company (incorporated by reference to Appendix B to the Company’s Definitive Proxy Statement filed with the Commission on December 11, 2023).

Form of Certificate of Amendment to Restated Articles of Incorporation (incorporated by reference from Appendix A to the Company’s definitive proxy statement filed June 10, 2025).

Amendment to Certificate of Incorporation of the Company (incorporated by reference to 3.1 to Form 8-K filed with the Commission on January 22, 2026).

Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock

Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Commission on January 30, 2014).

2 unchanged sentences

Description of Securities Registered Pursuant to Section 12

Form of Warrant (incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on July 25, 2022).

Form of Amended Original Issue Discount Senior Secured Debentures dated March 3, 2023 (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on December 28, 2023).

Form of JGB Warrant (incorporated by reference to Exhibit 4.4 to the Company’s Form 10-K filed with the Commission on March 9, 2023).

Form of Omnia Warrant (incorporated by reference to Exhibit 4.5 to the Company’s Form 10-K filed with the Commission on March 9, 2023).

Form of Inducement Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on November 29, 2023).

Waiver and Amendment Agreement (Incorporated by reference from Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on October 16, 2023).

Form of Common Warrant (Incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on October 18, 2023).

Form of Placement Agent Warrant (Incorporated by reference from Exhibit 4.3 to the Company’s Form 8-K filed with the Commission on October 18, 2023).

Form of Prefunded Warrant (Incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on October 24, 2024).

Form of Warrant (Incorporated by reference from Exhibit 4.2 to the Company’s Form 8-K filed with the Commission on October 24, 2024).

Form of Placement Agent Warrant (Incorporated by reference from Exhibit 4.3 to the Company’s Form 8-K filed with the Commission on October 24, 2024).

Form of Warrant (Incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on October 15, 2024).

Form of Placement Agent Warrant (Incorporated by reference from Exhibit 4.2 to the Company’s Form 8-K filed with the Commission on October 15, 2024).

Form of Warrant (Incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on September 30, 2024).

Form of Placement Agent Warrant (Incorporated by reference from Exhibit 4.2 to the Company’s Form 8-K filed with the Commission on September 30, 2024).

Form of Warrant (Incorporated by reference from Exhibit 4.3 to the Company’s Form 8-K filed with the Commission on September 30, 2024).

Form of Placement Agent Warrant (Incorporated by reference from Exhibit 4.4 to the Company’s Form 8-K filed with the Commission on September 30, 2024).

Form of Warrant (Incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on September 13, 2024).

Form of Warrant (Incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on August 25, 2025).

Form of Pre Funded Warrant (Incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on May 10, 2024).

Form of Warrant (Incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on April 30, 2024).

Form of Pre Funded Warrant (Incorporated by reference from Exhibit 4.2 to the Company’s Form 8-K filed with the Commission on April 30, 2024).

Form of Common Warrant (Incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on April 9, 2024).

Form of Pre-Funded Warrant (Incorporated by reference from Exhibit 4.2 to the Company’s Form 8-K filed with the Commission on April 9, 2024).

Form of Placement Agent Warrant (Incorporated by reference from Exhibit 4.3 to the Company’s Form 8-K filed with the Commission on April 9, 2024).

Form of Placement Agent Warrant (Incorporated by reference from Exhibit 4.2 to the Company’s Form 8-K filed with the Commission on August 25, 2025)

Form of Warrant (Incorporated by reference from Exhibit 4.1 to the Company’s Form 8-K filed with the Commission on March 20, 2026)

Form of Placement Agent Warrant (Incorporated by reference from Exhibit 4.2 to the Company’s Form 8-K filed with the Commission on March 20, 2026)

License Agreement dated March 6, 2009 between North Carolina State University and 22nd Century Limited, LLC (incorporated by reference to Exhibit 10.21 to the Company’s Form S-1 registration statement filed with the Commission on August 26, 2011).

1 unchanged sentence

Letter Agreement between the Company and North Carolina State University dated November 22, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on November 23, 2011).

Amended and Restated 22nd Century Group, Inc.

2021 Omnibus Incentive Plan (incorporated by reference from Appendix B to the Company’s definitive proxy statement filed April 29, 2024)

Amended and Restated 2021 Omnibus Incentive Plan (incorporated by reference from Appendix B to the Company’s definitive proxy statement filed June 10, 2025)

Form of Option Award Agreement under 22nd Century Group, Inc.

6 unchanged sentences

2014 Omnibus Incentive Plan, as amended and restated (incorporated by reference from Appendix A to the Company’s definitive proxy statement filed on March 22, 2019).

Securities Purchase Agreement dated March 3, 2023 with each of the purchasers party thereto and JGB Collateral, LLC, a Delaware limited liability company, as collateral agent for the Purchasers (incorporated by reference to Exhibit 10.18 to the Company’s Form 10-K filed with the Commission on March 9, 2023)

Amendment to Securities Purchase Agreement dated March 3, 2023 with each of the purchasers party thereto and JGB Collateral, LLC, a Delaware limited liability company, as collateral agent for the Purchasers (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the Commission on December 28, 2023)

Letter Agreement with JGB (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on October 10, 2024)

Letter Agreement with JGB (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on August 28, 2024)

May 2024 Letter Agreement with JGB (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on May 10, 2024)

May 2024 Exchange Agreement with JGB (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the Commission on May 10, 2024)

Letter Agreement with JGB (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on April 8, 2024)

Subordinated Promissory Noted dated March 3, 2023 (incorporated by reference to Exhibit 10.19 to the Company’s Form 10-K filed with the Commission on March 9, 2023)

Equity Purchase Agreement dated November 20, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on November 27, 2023)

Amendment to Equity Purchase Agreement dated December 22, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on December 28, 2023)

License Agreement with NCSU dated November 2, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on November 8, 2023) .

Master Services Agreement and Addendum #1 with Smoker Friendly International, LLC dated January 1, 2025.

Payment Agreement with NCSU (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on September 9, 2024)

General Release and Settlement Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on April 30, 2024)

Master Services Agreement, Addendum #1, #2 and #3 with Smoker Friendly International, LLC dated January 1, 2025.

Master Services Agreement with Murphy Oil USA, Inc.

dated June 23, 2025 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2025 filed with the Commission on August 14, 2025).

Form of Omnibus Amendment and Waiver (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on December 17, 2025) .

Sales Agreement, dated November 4, 2025, by and between 22nd Century Group, Inc.

and Needham & Company, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on November 4, 2025) .

Form of Executive Employment Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the Commission on November 4, 2025) .

Insider Trading Policy (incorporated by reference to Exhibit 19.1 to the Company’s Form 10-K filed with the Commission on March 28, 2024)

Consent of WithumSmith+Brown, PC

Consent of Freed Maxick P.C.

(f/k/a Freed Maxick CPAs, P.C.)

Section 302 Certification.

2 unchanged sentences

Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 to the Company’s Form 10-K filed with the Commission on March 28, 2024)

Interactive data files formatted in XBRL (eXtensible Business Reporting Language):

Interactive data files formatted in Inline XBRL (eXtensible Business Reporting Language):

(i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.

25 unchanged sentences

March 26, 2026

/s/ Anthony Johnson

Anthony Johnson

/s/ David Keys

March 26, 2026

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures