What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-20 compared with 2024-03-28 · 116 added, 168 removed, 158 unchanged (64% of the section changed)

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and its direct and indirect subsidiaries for the periods described herein.

On December 17, 2024, we implemented a 1-for-135 reverse stock split, on March 28, 2024, we implemented a 1-for-16 reverse stock split, and on July 5, 2023, we implemented a 1-for-15 reverse stock split of our common stock.

All historical share and per-share amounts reflected throughout this section have been adjusted to reflect the reverse stock splits.

The par value per share of our common stock was not affected.

($ in thousands, except per share data or unless otherwise specified)

Executive Overview

● On December 23, 2021, the FDA issued modified risk granted orders for our reduced nicotine cigarettes, VLN ® King and VLN ® Menthol King.

In addition to authorizing the Company to market VLN ® cigarettes with the claim, “95% less nicotine”, to clarify the purpose of the brand, the FDA also required the use of the claim, “Helps You Smoke Less.”

● Commenced pilot market sales in Chicago during the first quarter of 2022 of VLN® King and VLN® Menthol King 95% reduced nicotine content cigarettes, the first and only FDA authorized MRTP designated combustible cigarettes, and subsequently expanded sales and distribution channels throughout 2022 and 2023 to more than 5,000 stores across 26 states.

● In December 2023, the Company completed the sale of substantially all of the GVB hemp/cannabis business (referred to as the “GVB Divestiture”) to Specialty Acquisition Corporation, exiting the hemp/cannabis market and focusing fully on the Company’s tobacco operations.

● Appointed Larry Firestone as Chairman and Chief Executive Officer in November 2023, and announced plans for a turnaround in the business, including cost reductions and efforts to reposition the company’s business to focus on its VLN assets and CMO business.

● On December 23, 2021, the FDA issued modified risk orders for our reduced nicotine cigarettes, VLN ® King and VLN ® Menthol King, authorizing the Company to market VLN ® cigarettes with the claim, “95% less nicotine”, to clarify the purpose of the brand, the FDA also required the use of the claim, “Helps You Smoke Less.”

● Subsequently commenced pilot market sales of VLN® King and VLN® Menthol King 95% reduced nicotine content cigarettes in Chicago during the first quarter of 2022, then expanded sales and distribution channels from 2022 - 2024 to more than 5,100 stores across 26 states.

● Executed on restructuring plans that commenced in the fourth quarter of 2023 for a turnaround in the business, including cost reductions and efforts to reposition the company’s business to focus on its VLN assets and CMO business, inclusive of:

o In December 2023, the Company completed the sale of substantially all of the GVB hemp/cannabis business (referred to as the “GVB Divestiture”) to Specialty Acquisition Corporation, exiting the hemp/cannabis market and focusing fully on the Company’s tobacco operations.

o Decreased consolidated liabilities from December 31, 2023 to December 31,2024 by $18,251 through payment, equity exchange and other means, including $8,124 reduction in long-term debt.

Tobacco Business Highlights

● Continued a multi-state VLN ® rollout strategy, having launched sales in more than 5,000 locations across 26 states at year-end 2023, aimed at penetrating geographies and markets with large adult smoker populations, including those with favorable MRTP state excise tax savings, which can be used toward consumer incentives, distribution support, and additional programming to raise awareness of VLN ® products.

● Initiated agreements with national-scale C-store distribution partners, including Core-Mark/Eby-Brown, McLane and others pending, to facilitate state-wide or multi-state launches of VLN ® at hundreds of stores within our target markets in an accelerated timeline.

● Launched a private label premium cigarette brand, Pinnacle, for sale at one of the nation’s top 10 gas station convenience store chains, comprising almost 1,700 stores in 27 states.

● Announced expansion into Texas, California and Florida, expected in conjunction with the largest multi-state U.S.

C-store chain leveraging these new national scale distribution capabilities.

● Secured additional retail point of sale placements with regional C-stores, such as Texas based CEFCO, and new regional distribution agreements with Hub, Inc., serving regional Midwestern and tribal accounts, and Chambers & Owen, Inc., serving the upper Midwest.

● Gained authorization to test VLN ® sales at four United States military bases located in California, Arizona and North Carolina, beginning in the second quarter.

● Launched sales at a top U.S.

drugstore chain at approximately 1,200 locations across five states in the third quarter.

● Poised to benefit from federal, state and international regulatory appetite for banning menthol and mandating reduced nicotine content.

The Company has the only FDA-authorized combustible cigarette able to meet the stringent reduced nicotine content product standard under the FDA’s Comprehensive Plan requiring that all cigarettes be made “minimally or non-addictive.”

o Proposed FDA menthol cigarette ban , in final rules status, could leave VLN ® Menthol King as the only combustible menthol cigarette on the market , providing a critical off-ramp to help current menthol smokers to smoke less , a final decision is now expected in 2024.

Recent Business Divestiture

On December 22, 2023, we completed the sale of substantially all of the assets of the GVB hemp/cannabis business to Specialty Acquisition Corporation.

As a result, we classified the results of operations of the hemp/cannabis segment and disposal group as discontinued operations in the Consolidated Statements of Operations for all periods presented and classified the related assets and liabilities associated with the discontinued operations as held for sale in the Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively.

All results and information presented exclude the hemp/cannabis segment and disposal group unless otherwise noted.

Refer to Note 2 “Discontinued Operations and Divestitures” of the Notes to Consolidated Financial Statements contained in Item 15 of this report for additional information about the divestiture of the GVB and hemp/cannabis disposal group.

● Poised to benefit from the January 2025 proposed FDA rule mandating reduced nicotine content in all combustible cigarette products, if advanced.

The Company has the only FDA-authorized combustible cigarette able to meet the proposed stringent reduced nicotine content product standard.

● Continued agreements with national-scale C-store distribution partners to support state-wide or multi-state availability of VLN ® at hundreds of stores within our target markets.

● Announced plans for new VLN product branding and marketing initiatives designed to drive greater customer engagement, as well as the development of partner VLN brands to be sold alongside proprietary VLN products.

● Announced the first VLN partner brand with Smoker Friendly, to begin shipments in the second quarter 2025.

● Restructured contract manufacturing business operations to deliver improved efficiency and exited or renegotiated underpriced contracts in favor of improved customer agreements.

● Signed a new license and manufacturing agreement with Smoker Friendly, one of the largest independent cigarette retailers in the United States, covering 11 brands currently sold in the Smoker Friendly network of retail stores and dealers in the U.S., plus another eight new premium brands to be launched and establishing a framework for other planned future products to be added.

● Expanded the Pinnacle private label brand to add distribution of cigarillo products to its existing Pinnacle cigarette products currently sold as a private label brand in a top-5 U.S.

gas station convenience store chain.

● Executed two significant new export customer contracts to drive additional revenue and improve our margin profile, including an expected substantial increase in our overall CMO production unit volumes.

Those contracts and production setup commenced in April 2024, with initial shipments during the fourth quarter.

Financial Overview – Fourth Quarter and Full Year 2024 Results

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● Net revenues for the full year 2024 were $24,382, a decrease of 24.3% from $32,204 in 2023.

● Gross profit for the fourth quarter of 2023 was a loss of $7,829 compared to gross loss of $44 in the prior year period.

● Gross profit for the full year 2023 was a loss of $8,696, compared to a gross profit of $1,847 in 2022.

● Gross profit (loss) for the fourth quarter of 2024 was a loss of $1,254 compared to loss of $7,829 in the prior year period.

● Gross profit (loss) for the full year 2024 was a loss of $2,400, compared to a loss of $8,696 in 2023.

● Total operating expenses for the fourth quarter 2024 decreased 56% to $2,837 compared to $6,403 in the prior year quarter driven by:

o Sales, general and administrative expenses decreased to $4,005 driven primarily by a decrease in personnel costs, strategic consulting, and sales and marketing due to our cost savings initiatives.

o Research and development expenses decreased to $493, driven by a decrease in personnel expenses and costs associated with the Company’s research programs.

o Other operating expenses, net was $1,905, primarily reflecting restructuring costs of $1,871, including impairment and legal charges.

o Sales, general and administrative expenses decreased to $2,471, driven primarily by a decrease in strategic consulting, insurance expenses, and other public company expenses due to our cost savings initiatives.

o Research and development expenses decreased to $219, driven by a decrease in contract and IP related costs.

o Other operating expense, net was $147 compared to $1,905 in the prior year period, primarily reflecting restructuring costs of $1,871, including impairment and legal charges that occurred in 2023.

● Operating loss for the fourth quarter 2024 was $4,091, compared to a loss of $14,232 in the prior year period.

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● Net loss in the fourth quarter of 2024 was $4,246 representing a net loss per share of $10.59 compared with net loss in the fourth quarter of 2023 of $22,068, representing a net loss per share of $1,413.40.

Net loss for the full year 2023 was $54,686, representing a net loss per share of $2.64 compared with net loss for the full year 2022 of $36,553, representing a net loss per share of $2.84.

Net loss for the full

year 2024 was $15,495, representing a net loss per share of $105.85 compared with net loss for the full year 2023 of $54,686, representing a net loss per share of $5,776.63.

● As of December 31, 2024, we had $4,422 in cash and cash equivalents.

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Cost of goods sold

Excise taxes and fees on products

Gross (loss) profit

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R&D as a % of revenues, net

Other operating expenses (income), net ("OOE")

Other operating expense, net ("OOE")

Total operating expenses

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Other income (expense):

Other income (expense), net

Realized loss on Panacea investment

Loss on transfer of promissory note

Other income (expense), net

Interest income, net

Interest expense

Total other expense

Total other income (expense), net

Loss before income taxes

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Net loss per common share from continuing operations (basic and diluted)

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Fiscal 2023 Compared with Fiscal 2022

2024 Compared with 2023

Revenue - Sale of products, net

Revenues, net

Tobacco revenue was $32,204, a decrease of 20.5% from $40,501 in the prior year period, reflecting lower unit sales as a result of a planned reallocation in production resources during 2023 at the Company’s NASCO facilities away from lower margin filtered cigars to higher margin VLN® and conventional cigarette products.

Full year 2023 cartons sold were of 3,459 compared to 5,782 in the comparable prior year period.

Tobacco revenue was $24,382, a decrease of 24.3% from $32,204 in the prior year, primarily driven by a decrease in volumes of filtered cigars and export cigarettes, offset by increases in cigarettes and new sales in 2024 for cigarillos.

Gross (loss) profit

Percent of Revenues, net

The decrease in gross profit and gross profit as a percent of revenues, net for the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily driven by lower volume due to an intentional shift during 2023 in product mix.

In connection with evaluation of strategic alternatives and tobacco focused restructuring efforts, during the fourth quarter of 2023, the Company increased the reserve for excess, obsolete or expired leaf inventory by $7,720.

The decrease in gross loss and gross loss as a percent of revenues, net for the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily driven by implementation of cost cut initiatives, efficiency, and the shift in product mix offset by lower sales volume.

Additionally, the improvement in gross loss and gross loss as a percent of revenues, net is due to the prior year period reserve for excess, obsolete or expired leaf inventory of $7,720 recorded during the fourth quarter of 2023.

Sales, general and administrative expense

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Compensation and benefits (a)

Sales and marketing (b)

Strategic consulting (b)

Sales and marketing (c)

Administrative, public company and other expenses (d)

Other expenses (c)

Net decrease in SG&A expenses

(a) Decreases in compensation and benefits primarily resulted from $3,200 benefit of lower equity based compensation expense due to current year headcount reduction and forfeitures, and compared with prior year accelerated vesting of an employee’s outstanding equity awards as part of a termination severance agreement;

$218 decrease in severance expenses offset by an increase of $1,179 in personnel costs due to increased headcount during the year compared to the prior year period.

(b) Decrease of strategic consulting due to restructuring efforts and implementation of cost savings initiatives.

(d) Other expenses increased due to $291 of technology expenses, $579 in public company fees, $270 of facilities expense offset by a decrease in insurance expenses of $469 and other of $397.

(e) Increased legal expenses due to regulatory compliance, business development, and contract matters.

(a) Compensation and benefits and equity compensation expense decreased for the year ended December 31, 2024 compared to the prior year due to a reduction of headcount as part of our cost cut initiatives.

(b) Decreases of strategic consulting, sales and marketing and travel and entertainment for the year ended December 31, 2024 compared to the prior year were due to reduced spending as part of our cost cut initiatives.

(c) Other expenses decreased for the year ended December 31, 2024 compared to the prior year ended December 31, 2023 mainly due to decreases in insurance of $1,483, public company expenses of $1,407, legal expenses of $617, travel and entertainment of $615, technology expenses $329 and depreciation expense of $78 which were partially offset by an allocation to our hemp cannabis business that occurred in the prior year.

Research and development expense

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Compensation and benefits (a)

Royalty, license and contract costs (b)

Consulting and professional services (c)

Contract, IP and other expenses (b)

Net decrease in R&D expenses

(a) Decreased compensation and benefits primarily related to personnel bonus expense of $255 in the prior year period as compared to $0 in the current year.

(b) Decreased expenses primarily due to a decrease in royalty fees due in the current year period.

(c) Decreased consulting due to an evaluation of strategic opportunities related to our tobacco patent portfolio that occurred in the period year period.

(a) Decreased compensation and benefits primarily relate to the decrease in headcount in 2024 compared to the prior year.

(b) Contract, IP and other expenses decreased for the year ended December 31, 2024 compared to the prior year primarily due to a decrease in contract costs of $500 and IP related consulting and expenses of $503 due to our cost cutting initiatives.

Other operating expenses (income), net

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Acquisition and transaction costs (b)

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

Total other operating expenses (income), net

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Impairment of intangible assets

Loss (gain) on sale or disposal of property, plant and equipment

Total other operating expense, net

(a) During the second half 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 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.

(b) Acquisition and transaction costs primarily relate to professional fees incurred in connection with potential capital markets transactions.

Refer to Note 18, “Other operating expenses, net,” of the Notes to Consolidated Financial Statements contained in Item 15 of this report for additional information regarding these charges.

Other income (expense)

Changes From Prior Year

Other income (expense):

Realized loss on Panacea investment (a)

(b) Acquisition and transaction costs primarily relate to professional fees incurred in connection with potential capital markets transactions in the prior year.

Refer to Note 18, “Other operating expenses (income), net,” of the Notes to Consolidated Financial Statements contained in Item 15 of this report for additional information regarding these charges.

Other income (expense), net

Loss on transfer of promissory note (a)

Other income (expense), net (b)

Loss on transfer of promissory note (c)

Interest income, net

Interest expense (d)

Net increase in other expense

(a) Realized loss on PLSH investment reflects the change in fair value and write-off of our investment in PLSH common stock during the year ended December 31, 2022 of $2,340 and extinguishment of note receivable of $500 less adjusted discount of $51.

(b) Other income (expense), net includes a decrease of $336 of realized losses on short-terms investments and $364 gain on change in fair value of warrant liability.

(c) In connection with the Senior Secured Credit Facility October Amendment, the Company assigned $3,800 PLSH promissory note less unamortized discount of $305, and corresponding pay down of indebtedness on outstanding principal of $600 and redemption of the related warrant liability of $2,000 resulting in loss on sale of financial asset of $895.

(d) Interest expense increased in 2023, as compared to the prior year period, primarily due to the cash interest of $1,104 and non-cash interest of $2,087 recognized from the Senior Secured Credit Facility (of these totals, $366 of interest was allocated to discontinued operations), and additional charges of $5,158 for extinguishment of debt and $557 of derivative liability in connection with the December Amendment.

Additionally, interest expense increased as a result of PIK interest of $695 recognized from the Subordinated Note.

Interest expense (c)

Net decrease in other expense

(a) During 2023 and in connection with the Senior Secured Credit Facility October 2023 Amendment, the Company assigned $3,800 PLSH promissory note less unamortized discount of $305, and corresponding pay down of indebtedness on outstanding principal of $600 and redemption of the related warrant liability of $2,000 resulting in loss on sale of financial asset of $895.

(b) Other income (expense), net primarily reflects the change in fair value of warrant liability.

(c) Interest expense decreased for 2024, as compared to the prior year 2023 as a result of ongoing repayment and elimination of debt obligations on our balance sheet.

Cash interest decreased $454 and non-cash interest amortization decreased $723 recognized from the Senior Secured Credit Facility (of these totals, interest that was allocated to discontinued operations decreased by $82), and additional decreases of $1,113 as a result of change in fair value of conversion option derivative liability and other interest charges of $28.

Additionally, these amounts are offset by $5,158 for extinguishment of debt in the prior year period.

Additionally, interest expense decreased $278 from the Subordinated Note, which was extinguished prior to maturity in April 2024 and resulted in a loss on extinguishment of $400.

Liquidity and Capital Resources

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We had negative cash flow from operations of $14,345 for the year ended December 31, 2024 and an accumulated deficit of $393,871 as of December 31, 2024.

As of December 31, 2023, we had cash and cash equivalents of $2,058, and working capital of ($6,826) (compared to working capital of $22,079 at December 31, 2022).

As of December 31, 2024, we had cash and cash equivalents of $4,422, indebtedness under the Convertible Senior Secured Credit Facility of $7,690 and working capital from continuing operations of $1,790 (compared to working capital deficit from continuing operations of ($6,826) at December 31, 2023).

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

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Management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern through one year following the date that the Consolidated Financial Statements are issued.

Our cash and short-term investments, and working capital as of December 31, 2023, and 2022, are set forth below:

Our cash and cash equivalents, and working capital as of December 31, 2024, and 2023, are set forth below:

Cash and cash equivalents

Short-term investment securities

Working capital

Working Capital

As of December 31, 2023, we had working capital, excluding assets and liabilities held for sale, of approximately ($6,826) compared to working capital of approximately $22,079 as of December 31, 2022, a decrease of $28,905.

This decrease in working capital is primarily driven by the decrease in short-term investment securities resulting from cash burn, increase in current portion of long-term debt, and other normal fluctuations from operations in accounts receivable, inventory, accounts payable and accrued expenses.

As of December 31, 2024, we had working capital, excluding assets and liabilities held for sale, of approximately $1,790 compared to working capital deficit of approximately ($6,826) as of December 31, 2023, an improvement of $8,616.

This increase in working capital was primarily due to a decrease in current liabilities of $13,168 offset by a decrease of $4,552 in current assets.

Cash and cash equivalents increased by $2,364 and the remaining net current assets decreased by $6,916.

As a result of the working capital balance, management has taken a number of steps to improve liquidity.

Refer below to “Cash demands on operations.”

Summary of Cash Flow

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Net cash used in operating activities

Cash used in operations increased $3,273 from $51,714 in 2022 to $54,987 in 2023.

The primary driver for this increase was higher net loss of $80,974, driven by increased spending in SG&A and R&D both from the acquisition of GVB and acceleration of the launch of VLN ® , an increase of $67,866 related to net adjustments to reconcile net loss to cash, and an increase in cash used for working capital components related to operations in the amount of $9,835 for the year ended December 31, 2023, as compared to the year ended December 31, 2022.

Net cash provided by investing activities

Cash provided by investing activities amounted to $16,816 in 2023 as compared to cash provided by investing activities of $22,578 in 2022.

Cash used in operations decreased $40,642 from $54,987 in 2023 to $14,345 in 2024.

The primary driver for this decrease was lower consolidated net loss of $125,611 due to our cost savings initiatives implemented in 2024, a decrease of $89,876 related to net adjustments to reconcile net loss to cash primarily due to a loss on disposal of the hemp cannabis business that occurred in the prior year of $58,521, and a decrease in cash used for working capital components related to operations in the amount of $4,907 for the year ended December 31, 2024, as compared to the year ended December 31, 2023.

Net cash (used in) provided by investing activities

Cash used in investing activities amounted to $139 in 2024 as compared to cash provided by investing activities of $16,816 in 2023.

The decrease in cash provided by investing activities of $16,955 was primarily the result of (i) a decrease in net proceeds from short-term investments of $18,239;

(ii) $1,188 related to the acquisition of patents, trademarks and property, plant and equipment;

and (iii) $126 of proceeds from the sale of property, plant and equipment.

These decreased cash outflows were partially offset by an increase in cash inflows of (i) $3,500 of property, plant, and equipment casualty loss insurance proceeds collected in the current year;

(ii) $1,043 from the acquisition of RXP in the current year and GVB in the prior year period;

(iii) $682 from the investment in Change Agronomy Ltd.

in the prior year and (iv) $665 from proceeds from the sale of discontinued operations.

(ii) $3,500 of property, plant, and equipment casualty loss insurance proceeds collected in the prior year;

(iii) $665 from proceeds from the sale of discontinued operations in the prior year and (iv) a decrease in the proceeds from the sale of property, plant and equipment of $261.

These decreased cash inflows were partially offset by a decrease in cash outflows of $5,456 related to the acquisitions of patents, trademarks and property, plant and equipment and (ii) $254 from the acquisition of RXP in the prior year.

Net cash provided by financing activities

During the year ended December 31, 2023, cash provided by financing activities increased by $6,389 resulting from the net proceeds of $16,048 from issuance of long-term debt, proceeds of $6,016 from issuance of detachable warrants, net proceeds of $3,044 from warrant exercises, net proceeds of $2,563 from issuance of common stock related to the prior ATM facility, increased proceeds of $198 from the issuance of notes payable, and a decrease in other financing of $29.

These cash inflows were offset by a decrease in net proceeds of issuance of common stock of $9,605, payments of long-term debt of $9,700, increased note payable payments of $1,759, taxes paid related to net share settlement of RSUs of $271 and $174 of option exercises that occurred in 2022.

During the year ended December 31, 2024, cash provided by financing activities decreased by $20,361, from $37,209 in the prior year, to $16,848, resulting from decreases in (i) net proceeds of $16,048 from issuance of long-term debt, (ii) proceeds of $6,016 from issuance of detachable warrants, (iii) net proceeds of $10,335 from the issuance of common stock (iv) proceeds from issuance of notes payable of $1,104 offset by an increase in net proceeds from warrant exercise of $309.

These cash inflows were offset by decreases in cash outflows of note payable payments of $4,035, payments of long-term debt of $8,398, and taxes paid related to net share settlement of RSUs of $419.

Cash demands on operations

As of December 31, 2023, we had approximately $2,058 of cash and cash equivalents.

Our principal sources of liquidity are our cash and cash equivalents and cash generated from our tobacco contract manufacturing business and proceeds from debt and equity financing activities, which cash flows provided by financing activities for the year ended December 31, 2023 were $37,209.

As discussed above, in response to the cash demands on operations, management has implemented programs to evaluate strategic alternatives for the Company’s assets and cost cut initiatives intended to reduce our operating costs to provide additional cash runway.

However, our cash, cash equivalents, potential business interruption insurance proceeds, and debt/equity financings, as well as the sustained tobacco contract manufacturing, currently are not forecasted to provide sufficient cash resources or liquidity for a period of twelve months from issuance of these consolidated financial statements.

Senior Secured Credit Facility

On March 3, 2023, the Company entered into that certain Securities Purchase Agreement (the “SPA”) with JGB Partners, LP (“JGB Partners”), JGB Capital, LP (“JGB Capital”) and JGB Capital Offshore Ltd.

(“JGB Offshore” and collectively with JGB Partners and JGB Capital, the “Holders”) and JGB Collateral, LLC, as collateral agent for the Holders (the “Agent”) which pursuant to the agreement, the Company sold 5% original issuance discount senior secured debentures with an aggregate principal amount of $21,053.

The Debentures bear interest at a rate of 7% per annum, payable monthly in arrears as of the last trading day of each month and on the maturity date.

The Debentures mature on March 3, 2026.

At the Company’s election, subject to certain conditions, interest can be paid in cash, shares of the Company’s common stock, or a combination thereof.

The Debentures are subject to an exit payment equal to 5% of the original principal amount, or $1,053, payable on the maturity date or the date the Debentures are paid in full (the “Exit Payment”).

Any time after, March 3, 2024, the Company may irrevocably elect to redeem all of the then outstanding principal amount of the Debentures for cash in an amount equal to the entire outstanding principal balance, including accrued and unpaid interest, the Exit Payment and a prepayment premium in an amount equal to 3% of the outstanding principal balance as of the prepayment date (collectively, the “Prepayment Amount”).

Upon the entry into a definitive agreement that would effect a change in control (as defined in the Debentures) of the Company, the Agent may require the Company to prepay the outstanding principal balance in an amount equal to the Prepayment Amount.

Commencing on May 1, 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 JGB Warrants are exercisable for five years from September 3, 2023, at an exercise price of $19.125 per share, a 50% premium to the VWAP on the closing date, subject, with certain exceptions, to adjustments in the event of stock splits, dividends, subsequent dilutive offerings and certain fundamental transactions.

As a result of the June 19, 2023 offering, the Company’s outstanding JGB warrants to purchase up to 333,334 shares of the Company’s common stock for an exercise price of $19.125 per share were automatically adjusted to be $12.828 exercise price for up to 496,960 shares of common stock.

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

In connection with the JGB October Amendment, the Company and Holders agreed to exercise the outstanding put provision to redeem 166,667 Warrants for an aggregate put price equal to $2,500.

Following the JGB October and December Amendments (as further described in Note 13 “Debt” of the Notes to Consolidated Financial Statements contained in Item 15 of this report) , as of December 31, 2023 the remaining principal loan balance is approximately $10,752, exit fee of $1,052 and remaining $500 of the put price will be due at maturity in March 2026 in accordance with the original terms of the debenture agreements.

As of December 31, 2023, the Company has pledged to JGB the $2,000 GVB promissory note and $1,000 assignment of Needle Rock Farms to be applied as principal reduction in 2024.

Omnia 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 at a rate of 26.5% per annum, payable monthly.

The Company is not permitted to prepay all or any portion of the outstanding balance on the Subordinated Note prior to maturity.

The maturity date of the Subordinated Note is May 1, 2024.

In connection with the Subordinated Note, the Company issued to Omnia, warrants to purchase up to 45,000 shares of the Company’s common stock.

The Omnia Warrants are exercisable for seven years from September 3, 2023, at an exercise price of $12.828 per share subject, with certain exceptions, to adjustments in the event of stock splits, dividends, subsequent dilutive offerings and certain fundamental transactions.

On March 9, 2023 the Company entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (the “Sales Agent”) under which the Company was previously able issue and sell in a registered offering shares of our common stock having an aggregate offering price of up to $50,000 from time to time through or to the Sales Agent (the “ATM Offering”).

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

Total net proceeds during the second quarter of 2023 were $2,563.

On June 19, 2023, the Company terminated the ATM Program in connection with the June 2023 offering described below.

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 747,974 shares of common stock and 747,974 warrants to purchase an equal number of shares, at a purchase price of $7.05 per unit.

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

The warrants were exercisable immediately upon issuance at an exercise price of $7.05 per share of common stock, expire on June 22, 2028 and are subject to adjustment in certain circumstances, including upon any subsequent equity sales at a price per share lower than the then effective exercise price of such warrants, then such exercise price shall be lowered to such price at which the shares were offered.

As part of the offering, the Company entered into a warrant reprice letter and agreed to reduce the exercise price on the previously issued 747,974 warrants owned by the investors participating in the Offering from $30.75 to $7.05 and to add a provision in the warrants that upon any subsequent equity sales at a price per share lower than the then effective exercise price of such warrants, such exercise price shall be lowered to such price at which the shares were offered.

As a result of the offerings completed in July 2023, the exercise price on the 1,495,948 warrants was automatically adjusted to $2.42 per share and subsequently adjusted to $0.525 per share in October.

All of the outstanding warrants were subsequently exercised in connection with the Warrant Inducement Offering.

The remaining 390,247 previously issued warrants were not repriced and remain at an exercise price of $30.75 on their original terms.

On December 7, 2023, the Company was provided notice of irrevocable abandonment of 325,205 warrants.

In addition, as a result of the offering, the Company’s outstanding warrants to purchase up to 333,334 shares of the Company’s common stock for an exercise price of $19.125 per share were automatically adjusted as follows:

$12.828 exercise price for up to 496,960 shares of common stock, of which 166,667 were redeemed in October 2023 (see above discussion of amendment and waiver under Senior Secured Credit Facility).

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 778,634 shares of common stock and 1,557,268 warrants to purchase an equal number of shares, at a purchase price of $3.80 per unit.

The warrants are exercisable six months after issuance at an exercise price of $3.80 per share of common stock and expire on January 10, 2029.

The net proceeds to the Company from the offering were approximately $2,722.

As a result of the subsequent offering completed in July 2023, the exercise price on the 1,557,268 warrants was automatically adjusted to $2.42 per share and subsequently adjusted to $0.525 per share in October.

All of the outstanding warrants were subsequently exercised in connection with the Warrant Inducement Offering.

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 4,373,219 shares of common stock and 8,746,438 warrants to purchase an equal number of shares, at a purchase price of $2.67 per unit.

The warrants are exercisable immediately at an exercise price of $2.42 per share of common stock and expire five years after issuance.

The net proceeds to the Company from the offering were approximately $10,742.

As a result of the subsequent offering completed in October 2023, the exercise price on the 8,746,438 warrants was automatically adjusted to $0.525 per share.

8,296,438 of the warrants were subsequently exercised in connection with the Warrant Inducement Offering.

October 2023 Public 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 7,600,000 shares of the Company’s common stock, par value $0.00001 per share, (ii) warrants to purchase 20,000,000 shares of common stock (the “Common Warrants”) and (iii) pre-funded warrants to purchase 2,400,000 shares of common stock (the “Pre-Funded Warrants”).

The Common Warrants have an exercise price of $0.525, are immediately exercisable and have a term of exercise equal to five years following the original issuance date.

The Pre-Funded Warrants have an exercise price of $0.0001, are immediately exercisable and are exercisable at any time after their original issuance until such Pre-Funded Warrants are exercised in full.

The shares were offered at a combined public offering price of $0.525 per share and two accompanying Common Warrants.

The Pre-Funded Warrants were offered at a combined public offering price of $0.5249 per Pre-Funded Warrant and two accompanying Common Warrants.

In addition, the Company issued the placement agent warrants to purchase up to 1,000,000 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 $0.65625, which represents 125% of the public offering price per share and accompanying Common Warrant.

The placement agent agreed not to exercise the such warrants until the Company subsequently increases its authorized shares of common stock.

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.

As a result of the offering, the exercise price on 11,799,654 previously outstanding warrants were automatically adjusted from $2.42 per share to $0.525 per share.

The Pre-Funded Warrants were subsequently exercised on a cashless basis in October 2023, resulting in issuance of 2,399,512 shares of common stock.

17,300,000 of the October Warrants were subsequently exercised in connection with the Warrant Inducement Offering.

Warrant Inducement Offering

On November 28, 2023, the Company commenced a warrant inducement offering with the holders of the Company’s outstanding 31,779,654 warrants consisting of:

(i) the common stock purchase warrants of the Company issued on or about June 22, 2023;

(ii) the common stock purchase warrants of the Company issued on or about July 10, 2023;

(iii) the common stock purchase warrants of the Company issued on or about July 21, 2023;

and/or (iv) the common stock purchase warrants of the Company issued on or about October 19, 2023 (collectively, the “Existing Warrants”), which Existing Warrants are exercisable for an equal number of shares of common stock at an exercise price of $0.525.

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 through February 15, 2024, the date of Stockholder Approval, the Company entered into warrant inducement agreements with certain holders of the Existing Warrants to purchase an aggregate of 28,649,654 shares of common stock at a reduced weighted average exercise price of $0.2010.

Pursuant to the warrant inducement agreements, the exercising holders of the Existing Warrants received 57,299,308 Inducement Warrants at an exercise price of $0.1765 and the Company received aggregate gross proceeds of approximately $5,757 from the exercise of the Existing Warrants.

We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants to purchase common stock and sale of debt instruments with various institutions, accredited investors, high net worth individuals and creditors.

In January and February 2024, we received net proceeds of $2,245 from the inducement and exercise of 6,081 warrants for shares of common stock and issuance of 12,160 warrants to purchase common stock.

In April 2024, we received net proceeds of $3,913 from the issuance of 13,741 shares of common stock, 926 pre-funded warrants and 14,667 warrants to purchase common stock in a registered direct offering.

In August and September 2024, we received net proceeds of $5,208 from the issuance of 72,000 shares of common stock pursuant to a Regulation A offering, and in separate private placements, issued 109,600 warrant to purchase common stock.

In September 2024 we received net proceeds of $1,054 from the issuance of 38,041 shares of common stock and 76,348 warrants to purchase common stock in a registered direct offering.

Also, in September 2024 we received net proceeds of $1,073 from the inducement and exercise of 37,624 warrants for shares of common stock and issuance of 75,248 warrants to purchase common stock.

In October 2024 we received net proceeds of $2,002 from the issuance of 105,679 shares of common stock and 211,358 warrants to purchase common stock in a registered direct offering.

Also, in October 2024 we received net proceeds of $2,909 from the issuance of 210,036 prefunded warrants to purchase shares of common stock and 315,055 warrants to purchase common stock in a private placement offering.

Convertible Senior Secured Credit Facility

As of December 31, 2024, the remaining principal balance under our Senior Secured Credit Facility is $7,690 of which $1,500 remains current with corresponding non-operating pledged assets.

The Debentures under the Senior Secured Credit Facility allow the Holders to voluntarily convert the Debentures, in whole or in part, into shares of the Company’s common stock and the conversion option price in effect as of January 13, 2025 is $6.04.

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, as of March 17, 2025 following the conversion of which the Company and Holders have $1,500 of non-operating assets pledged for repayment.

Outstanding Warrants

1 unchanged sentence

# of warrants outstanding

Exercise price

Issue date exercise price

Current exercise price (1)

Expiration date

3 unchanged sentences

September 3, 2028

Subordinated Note - Omnia

September 3, 2030

July 19, 2023 RDO warrants (3)

4 unchanged sentences

February 15, 2029

April 2024 RDO Placement Agent warrants (3)

April 8, 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.

Impact of Recently Issued Accounting Standards

38 unchanged sentences

Unforeseen changes, such as the loss of one or more significant customers, technology obsolescence, or significant manufacturing disruption, among other factors, could substantially alter the assumptions regarding the ability to realize the return of our investment in long-lived assets, definite-lived intangible assets or their estimated useful lives.

For our long-lived assets, we determined that impairment indicators occurred during the fourth quarter of 2023 in connection with ongoing evaluation of our tobacco strategy and restructuring efforts and concluded that certain definite-lived intangible assets, including patents, were impaired due to obsolescence or abandonment in the amount of $1,375.

No other long-lived assets were concluded to be non-recoverable based on undiscounted cash flow analysis performed.

For our long-lived assets, we determined that no impairment indicators occurred during 2024.

Detachable Warrants

16 unchanged sentences

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 7. Management’s Discussion and Analysis