What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-03-20 compared with 2024-03-28 · 498 added, 568 removed, 981 unchanged (52% of the section changed)

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Other Information.

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.

In accordance with Rule 10b5-1 and the Company’s insider trading policy, directors, officers and certain employees who, at such time, are not in possession of material non-public information about the Company are permitted to enter into written plans that pre-establish amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of the Company’s common stock, including shares acquired pursuant to the Company’s equity plans (“Rule 10b5-1 Trading Plans”).

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.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspectio n

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Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Changes in Shareholders’ Equity

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

and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in shareholders' equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes to the consolidated financial statements (collectively, the financial statements).

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.

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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.

Further, the Company has negative working capital and a shareholders’ deficit as of December 31, 2023.

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

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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.

Debt related accounting, classification, and valuation

Debt related accounting and classification.

Critical Audit Matter description

As discussed in Note 1 and 13 of the consolidated financial statements, during the year ended December 31, 2023, prior to the amendments described in Note 13, the Company entered into a senior secured credit facility, which consisted of a three-year debenture with a principal amount of $21,053 (as defined in Note 13) and a $2,865 subordinated promissory note (the “Subordinated Note).

The Debentures were issued at a 5% original issuance discount and are subject to a 5% exit payment.

In connection with the issuance with the Debentures and the Subordinated Note, the Company issued warrants to purchase common stock (“Detachable Warrants")

The Debenture, Subordinated Note, and Detachable Warrants included various terms that required evaluation at the issuance date.

Further, a portion of the Detachable Warrants met the criteria for equity classification (Note 10), while a portion are treated as liabilities (Note 9) due to holder put features applicable to only a portion of the warrants issued.

The fair value of both classes of warrants was determined at the date of issuance and recorded as a debt discount.

The liability classified warrants were subsequently adjusted to fair value at the end of each reporting period.

We identified the accounting for the terms of the Debentures (prior to amendments), Subordinated Note, and Detachable Warrants as well as the valuation and classification of the same as a critical audit matter.

Auditing the accounting for these was especially challenging due to the inherent complexity of the agreements and the related valuation models.

As discussed in Note 12 of the financial statements, during the year ended December 31, 2024, the Company amended their debt via a series of letter agreements/amendments.

For each agreement/amendment, the Company was required to evaluate troubled debt restructuring applicability and debt modification versus extinguishment analysis.

None of these agreements/agreements met the criteria to qualify as an extinguishment.

We identified the accounting for the various agreements/amendments as a critical audit matter.

Auditing the accounting for these items was especially challenging due to the inherent complexity of the agreements/amendments.

Auditing these elements required an increased level of audit effort, including the involvement of professionals with specialized skill and knowledge.

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Addressing the 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 include:

Inspecting the underlying agreements and ensuring appropriate application of the relevant accounting literature to the terms of the Debentures and Subordinated Note;

evaluating the appropriateness of the fair value and classification of the Detachable Warrants;

and utilizing personnel with specialized skill and knowledge in valuation to assist in assessing the fair value determined.

Debt extinguishment, conversion option and fair value measurement

The primary procedure we performed include:

Inspecting the underlying agreements/amendments and ensuring appropriate application of the relevant accounting literature to the terms of the amended Debentures.

Subordinated note settlement accounting, classification, and valuation

Critical Audit Matter description

During the year ended December 31, 2023, the Company amended the Debentures (as defined in Note 13) with its lenders.

The terms of the amendments are described in Note 13.

For each amendment, the Company was required to evaluate troubled debt restructuring applicability and debt modification versus extinguishment analysis.

Neither qualified as a troubled debt restructuring and the first was a modification while the second was extinguishment, primarily resulting from the addition of conversion feature.

Further, the conversion feature did require bifurcation from the debt host.

Therefore, both the conversion feature (Note 9) and the Debentures post-extinguishment were subject to fair market measurement.

The derivative liability is subsequently adjusted to fair value at the end of each reporting period.

We identified the accounting for the amended terms as well as the valuations related to the conversion option and Debentures post extinguishment as a critical audit matter.

As discussed in Note 12 of the financial statements, during the year ended December 31, 2024, the Company entered into a General Release and Settlement Agreement with Omnia Capital LP (Omnia).

This agreement settled and extinguished all outstanding debt and interest owed to Omnia, via their subordinated note, as well as the put provision on the 2023 Omnia warrants.

In return, Omnia received a combination of shares, pre-funded warrants, warrants, and cash.

The warrants were recorded at fair value on the date of the settlement and are subsequently adjusted to fair value at the end of each reporting period.

We identified the accounting for the settlement as well as the valuations related to the warrants as a critical audit matter.

Auditing the accounting for these items was especially challenging due to the inherent complexity of the agreements and the related valuation models.

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The primary procedures we performed include:

Inspecting the underlying agreements and ensuring appropriate application of the relevant accounting literature to the terms of the amended Debentures;

evaluating the appropriateness of the fair value for the bifurcated conversion option derivative and the amended Debentures post-extinguishment utilizing personnel with specialized skill and knowledge in valuation to assist in assessing the fair values determined.

Discontinued Operations

Inspecting the underlying agreements and ensuring appropriate application of the relevant accounting literature to the terms of the settlement;

evaluating the appropriateness of the fair value of the warrants;

and utilizing personnel with specialized skill and knowledge in valuation to assist in assessing the fair value determined.

Warrants issued with equity raises and related deemed dividend valuation

Critical Audit Matter description

As discussed in Notes 1, and 2 of the consolidated financial statements, during the year ended December 31, 2023, the Company divested substantially all of its assets in the GVB hemp/cannabis business and recorded impairment charges.

As a result of the agreement management determined the hemp/cannabis disposal group has met the requirements to be presented as held for sale and discontinued operations for all periods presented.

The Company has not segregated the statement of cash flows.

We identified the reporting of discontinued operations and the impairment charges as a critical audit matter, which required extensive effort and a higher degree of auditor judgement.

As discussed in Note 9 of the financial statements, during the year ended December 31, 2024, the Company entered into several warrant and common stock agreements with investors.

Due to anti-dilution and down round provisions with their existing warrants, the agreements triggered these provisions multiple times.

We identified the valuation for these deemed dividends to be a critical audit matter.

Auditing these elements required an increased level of audit effort, including the involvement of professionals with specialized skill and knowledge.

How the Critical Audit Matter was addressed in the Audit

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The primary procedures we performed include:

assessed management’s conclusion regarding discontinued operations treatment, obtained and read the related agreements and compared the terms of that agreement to the identification of the assets and liabilities included in the disposal group, reviewed management assumptions and judgment for determining historical numbers related to discontinued operations, reviewed and recomputed the loss on disposal of discontinued operations and related income tax benefit, and assessed the completeness and accuracy of the presentation and disclosures.

/s/ Freed Maxick, CPAs, P.C.

Inspecting the underlying agreements;

evaluating the appropriateness of the fair value calculations of the warrants;

and utilizing personnel with specialized skill and knowledge in valuation to assist in assessing the fair value determined.

/s/ Freed Maxick P.C.

(F/K/A Freed Maxick CPAs, P.C.)

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

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Cash and cash equivalents

Short-term investment securities

Accounts receivable, net

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Intangible assets, net

Noncurrent assets of discontinued operations held for sale

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:

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Other long-term liabilities

Noncurrent liabilities of discontinued operations held for sale

Total liabilities

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Capital in excess of par value

Accumulated other comprehensive loss

Accumulated deficit

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per-share data)

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Cost of goods sold

Excise taxes and fees on products

Gross (loss) profit

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Research and development

Other operating expense (income), net

Other operating expense, net

Total operating expenses

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Other income (expense):

Realized loss on Panacea investment

Other income (expense), net

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Interest expense

Total other expense

Total other income (expense), net

Loss from continuing operations before income taxes

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Discontinued operations:

Loss from discontinued operations before income taxes

Provision (benefit) for income taxes

Net loss from discontinued operations

Income (loss) from discontinued operations before income taxes

Provision for income taxes

Net income (loss) from discontinued operations

Deemed dividends

Net loss available to common shareholders

Basic and diluted loss per common share from continuing operations

Basic and diluted loss per common share from discontinued operations

Basic and diluted loss per common share from deemed dividends

Basic and diluted loss per common share

Weighted average common shares outstanding - basic and diluted

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

( 15,925.99 )

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

( 15,925.99 )

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 (loss) on short-term investment securities

Unrealized gain on short-term investment securities

Foreign currency translation

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Balance at January 1, 2023

Stock issued in connection with option exercises

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

Stock issued in connection with acquisition

Stock issued in connection with capital raise, net of issuance costs of 2,516

Equity-based compensation

Other comprehensive income

Balance at December 31, 2022

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

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Balance at December 31, 2023

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

Stock issued in connection with licensing arrangement

Stock issued in connection with warrant exercises, net of fees of $ 261

Stock issued in connection with Reg A Private Placement, net of issuance costs of $ 332

Stock issued in connection with capital raises, net of issuance costs of $ 713

Stock issued upon conversion of Senior Secured Credit Facility

Stock issued in connection with settled indebtedness

Stock issued for extinguishment of Subordinated Note (1)

Reclass of conversion option

Fractional shares issued for reverse stock split

Equity-based compensation

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

See accompanying notes to consolidated financial statements.

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

Impairment of long-lived assets

Impairment of goodwill and long-lived assets

Amortization and depreciation

Amortization of right-of-use asset

Amortization of inventory step-up

Unrealized loss on investment

GVB fire write-offs

Other non-cash (gains) and losses

Other non-cash gains

Provision for credit losses

(Gain) loss on the sale of machinery and equipment

Realized loss (gain) on Panacea investment

Inventory write-off

Loss on sale or disposal of machinery and equipment

Debt related charges included in interest expense

Equity-based employee compensation expense

Equity-based compensation

Gain on change of contingent consideration

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Deferred income taxes

Increase in inventory reserves

Change in inventory reserves

Changes in operating assets and liabilities, net of acquisition:

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Proceeds from sale of discontinued operations

Investment in Change Agronomy Ltd.

Property, plant and equipment insurance proceeds

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Purchase of short-term investment securities

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

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Proceeds from issuance of notes payable

Other financing activities

Payments of long-term debt

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Proceeds from issuance of detachable warrants

Net proceeds from option exercise

Net proceeds from warrant exercise

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Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

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

Cash and cash equivalents - beginning of period

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Right-of-use assets and corresponding operating lease obligations

Non-cash assignment of PLSH Promissory Note

Insurance/litigation gross up

Non-cash proceeds from sale of discontinued operations

Deemed dividends

Stock issued in connection with acquisition

Stock issued in connection with settled indebtedness

Non-cash consideration RXP acquisition

Non-cash licensing arrangement

Stock issued for extinguishment of Subordinated Note

Payment of 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

See accompanying notes to consolidated financial statements .

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

This segment structure reflects the financial information and reports used by the Company’s management, specifically its Chief Operating Decision Maker (“CODM”), to make decisions regarding the Company’s business, including resource allocations and performance assessments.

All assets and continuing operations of the Company are physically located or domiciled in the United States.

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.

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As of December 31, 2024, the Company had cash and cash equivalents of $ 4,422 .

Subsequent to December 31, 2023, the Company completed a warrant inducement offering with gross proceeds to the Company of approximately $ 2,421 , before deducting the placement agent fees of $ 165 (see Note 21 “Subsequent Events”).

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

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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;

the possible delisting of its common stock from Nasdaq;

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

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and protection of proprietary technology.

Reverse Stock Split – On July 5, 2023, the Company effected a 1-for-15 reverse stock split of its common stock in order to regain compliance with Nasdaq's continued listing requirements.

Fractional shares resulting from the reverse stock split were rounded up to the nearest whole share, which resulted in the issuance of a total of 66,035 shares of common stock to implement the reverse stock split.

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 this reverse stock split.

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

fractional shares

April 2, 2024

December 17, 2024

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.

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

Short-term investment securities – The Company’s short-term investment securities are classified as available-for-sale securities and consist of money market funds, corporate bonds, U.S.

government agency bonds, U.S.

treasury securities, and commercial paper with maturities that may extend beyond three months at the time of acquisition.

The Company’s short-term investment securities are carried at fair value within current assets on the Company’s Consolidated Balance Sheets.

The Company views its available-for-sale securities as available for use in current operations regardless of the stated maturity date of the security.

The Company’s investment policy states that all investment securities must have a maximum maturity of twenty-four (24) months or less and the maximum weighted maturity of the investment securities must not exceed twelve (12) months.

Some of the Company’s short-term investment securities are fixed-income debt instruments, and accordingly, unrealized gains and losses incurred on the short-term investment securities (the adjustment to fair value) are recorded in other comprehensive income or loss on the Company’s Consolidated Statements of Operations and Comprehensive Loss.

Realized gains and losses on short-term investment securities are recorded in the other income (expense) portion of the Company’s Consolidated Statements of Operations and Comprehensive Loss.

Interest income is recorded on the accrual basis and presented net of investment related fees.

Trade Accounts Receivable and Provision for Current Expected Credit Losses – The Company provides credit, in the normal course of business, to its tobacco customers in the form of trade receivables.

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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.

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.

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

Cost is determined using an average cost method for tobacco leaf inventory and raw materials inventory.

Cost is determined using an average cost method for tobacco leaf inventory by crop year and raw materials inventory.

Standard cost is primarily used for finished goods inventory.

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3 to 10 years

Laboratory equipment

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

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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.

Warrants - The Company accounts for 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.

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

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

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Changes in subsequent measurement fair value are recorded in Other income (expense), net of the Company’s Consolidated Statements of Operations and Comprehensive Loss.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in

capital at the time of issuance.

For additional discussion on warrants, see Note 9 “Fair Value Measurements” and Note 10 “Capital Raise and Warrants for Common Stock”.

Deemed dividends associated with anti-dilution or 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 additional paid-in-capital resulting in no change to stockholders’ equity/deficit.

The incremental value of modifications to warrants as a result of the trigger of down round provisions in connection with equity financings was $ 3,029 , the incremental value of replacement warrants was $ 6,596 , and the incremental value of modifications to warrants as a result of the trigger of anti-dilution provisions of the JGB warrants was $ 367 .

Such amounts were determined using Monte-Carlo valuation models and are recorded as Deemed dividends for the year ended December 31, 2023 on the Consolidated Statement of Operations and Comprehensive Loss.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of Capital in excess of par value at the time of issuance.

For additional discussion on warrants, see Note 8 “Fair Value Measurements” and Note 9 “Capital Raises and Warrants for Common Stock”.

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

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

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

Debt Issued with Detachable Warrants - The Company considers guidance within ASC 470-20, Debt (ASC 470), ASC 480, and ASC 815 when accounting for the issuance of debt with detachable warrants.

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

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

A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

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

Beginning in the fourth quarter of 2024, the Company 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.

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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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 as of December 31, 2023, and December 31, 2022.

The Company’s federal and state tax returns for the years ended December 31, 2021 through December 31, 2023 are currently open to audit under the statutes of limitations.

There are no pending audits as of December 31, 2023.

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

Diluted loss per share is computed assuming conversion of all potentially dilutive securities.

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

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

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

Diluted earnings (loss) per share is computed assuming conversion of all potentially dilutive securities, using the treasury-stock method or the if-converted method, as applicable.

Potential common shares outstanding are excluded from the computation if their effect is anti-dilutive.

Refer to Note 16 “Loss Per Common Share” for additional information.

Refer to Note 15 “Earnings (Loss) Per Common Share” for additional information.

Gain and Loss Contingencies – The Company establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable.

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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 liabilities, presented within Other current liabilities and Other long-term liabilities Consolidated Balance Sheets:

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

Cash payments

Balance at December 31, 2022

Reversal from settlement

Cash payments

Balance at January 1, 2024

Cash payments

Settlement in common stock

Balance at December 31, 2024

Total severance liability

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, net

Other operating expense (income), net

Total severance charges

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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.

Accounting Guidance Not Yet Elected or Adopted

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

The ASU enhances disclosure of significant segment expenses by requiring disclosure of significant segment expenses regularly provided to the chief operating decision maker, extend certain annual disclosures to interim periods, and permits more than one measure of segment profit or loss to be reported under certain conditions.

The amendments are effective for the Company in years beginning after December 15, 2023, and interim periods within years beginning after December 15, 2024.

Early adoption of the ASU is permitted, including adoption in any interim period for which financial statements have not been issued.

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

The amendments in ASU 2023-07 were adopted by the Company effective January 1, 2024 for the fiscal year-ended December 31, 2024 and interim reports beginning in fiscal year 2025.

See Note 17 “Segment and Geographic Information.”

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.

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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 “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 Sheet as of December 31, 2023.

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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As a result, the operating results of the hemp/cannabis disposal group have been classified as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss for all periods presented and the assets and liabilities of the hemp/cannabis disposal group have been classified as assets and liabilities of discontinued operations in the Consolidated Balance Sheets at December 31, 2024 and 2023, respectively.

See additional information in Note 3, “Business Acquisitions” related to GVB And RXP, including the date of transactions and periods that operating results of the acquired business are included in the Consolidated Financial Statements.

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

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.

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:

Cash and cash equivalents

Accounts receivable, net

Insurance recoveries

Prepaid expenses and other current assets

Property, plant and equipment, net - current

Other current assets

Current assets of discontinued operations held for sale

Property, plant and equipment, net

Operating lease right-of-use assets, net

Intangible assets, net

Noncurrent assets of discontinued operations held for sale

Current assets of discontinued operations held for sale

Notes and loans payable - current

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Accrued expenses

Accrued payroll

Deferred income

Other current liabilities

Current liabilities of discontinued operations held for sale

Notes and loans payable

Operating lease obligations

Other long-term liabilities

Noncurrent liabilities of discontinued operations held for sale

Net (liabilities) assets

Net loss from discontinued operations for year ended December 31, 2023 and 2022 was as follows:

Net liabilities

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

Revenues, net

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Total operating expenses

Operating loss from discontinued operations

Operating income (loss) from discontinued operations

Other income (expense):

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Total other expense

Loss from discontinued operations before income taxes

Income (loss) from discontinued operations before income taxes

Provision (benefit) for income taxes

Net loss from discontinued operations

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.

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

Grass Valley fire:

Fixed asset write-offs

Inventory charges

Lease obligations

Professional services

Compensation & benefits

Insurance recoveries

Total Grass Valley fire

Impairment of intangible assets

Gain on change in contingent consideration

Needlerock Farms settlement

Impairment of inventory

Gain on sale or disposal of property, plant and equipment

Gain on release of lease obligations

Acquisition costs

Total other operating expenses, net

Grass Valley fire

In November 2022, there was a fire at our Grass Valley manufacturing facility in Oregon, which manufactures bulk ingredients, primarily CBD isolate and distillate.

The Company has incurred continuous expenses throughout 2023 related to consulting, legal and demolition at this facility.

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

Cash used in investing activities

Cash provided by investing activities

Depreciation and amortization

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– BUSINESS ACQUISITIONS

The following acquisitions occurring during the years ended December 31, 2023, and 2022, respectively, are included in the Company’s former hemp/cannabis reportable segment.

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.

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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.

GVB Biopharma

On May 13, 2022, the Company entered into and closed the transactions contemplated by the Reorganization and Acquisition Agreement (the “Reorganization Agreement”) with GVB.

Under the terms of the Reorganization Agreement, the Company acquired substantially all of the assets of GVB’s business dedicated to hemp-based cannabinoid extraction, refinement, contract manufacturing and product development (the “Transaction”).

The aggregate consideration for the Transaction consisted of (i) the assumption of approximately $ 4,637 of debt, (ii) the assumption and direct payment of certain third-party transaction costs incurred by GVB in connection with the Transaction totaling approximately $ 1,753 and (iii) the issuance to GVB of 2,193,334 unregistered shares of common stock of the Company (the “Shares”) with a fair value of $ 51,653 .

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.

The Transaction was structured as a tax-free re-organization pursuant to Internal Revenue Code Section 368(a)(1)(c).

Accordingly, the tax basis of net assets acquired retain their carry over tax basis and holding period in purchase accounting.

The Company recorded provisional estimated fair values for the assets purchased, liabilities assumed and purchase consideration as of the date of the acquisition during the second quarter of 2022, resulting in goodwill of $ 44,200 .

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.

Following the initial acquisition accounting, the Company recorded final measurement period adjustments, in which the preliminary fair values of the assets acquired and liabilities assumed as of May 13, 2022 were adjusted to reflect the ongoing acquisition valuation analysis procedures of property and equipment, intangible assets, deferred taxes, and working capital adjustments.

These adjustments resulted in a combined reduction to goodwill of $ 10,840 .

The impact of depreciation and amortization to Operating loss recorded in the third quarter of 2022 as a result of completing valuation procedures for property and equipment and intangible assets, that would have been recorded in the prior period since the date of acquisition was $ 70 .

The following table presents management’s purchase price allocation:

Accounts receivable

Property, plant & equipment

Operating leases right-of-use assets, net

Customer relationships

Accounts payable and accrued expenses

Other current liabilities

Lease liabilities

Deferred tax liability

Fair value of net assets acquired

The fair values of the assets acquired were determined using one of three valuation approaches:

market, income or cost.

The selection of a particular method for a given asset depended on the reliability of available data and the nature of the asset, among other considerations.

The market approach estimates the value for a subject asset based on available market pricing for comparable assets.

The income approach estimates the value for a subject asset based on the present value of cash flows projected to be generated by the asset.

The projected cash flows were discounted at a required rate of return that reflects the relative risk of the asset and the time value of money.

The projected cash flows for each asset considered multiple factors from the perspective of a marketplace participant including revenue projections from existing customers, attrition trends, tradename life-cycle assumptions, marginal tax rates and expected profit margins giving consideration to historical and expected margins.

The cost approach estimates the value for a subject asset based on the cost to replace the asset and reflects the estimated reproduction or replacement cost for the asset, less an allowance for loss in value due to depreciation or obsolescence, with specific consideration given to economic obsolescence if indicated.

These fair value measurement approaches are based on significant unobservable inputs, including management estimates and assumptions.

Current Assets and Liabilities

The fair value of current assets and liabilities, excluding inventory, was assumed to approximate their carrying value as of the acquisition date due to the short-term nature of these assets and liabilities.

The fair value of in-process and finished goods inventory acquired was estimated by applying a version of the income approach called the comparable sales method.

This approach estimates the fair value of the assets by calculating the potential revenue generated from selling the inventory and subtracting from it the costs related to the completion and sale of that inventory and a reasonable profit allowance for these remaining efforts.

Based upon this methodology, the Company recorded the inventory acquired at fair value resulting in an increase in inventory of $ 978 , which was fully amortized in the three month period ended June 30, 2022 in the Consolidated Statement of Operations and Comprehensive Loss.

Property, Plant and Equipment

The fair value of PP&E acquired was estimated by applying the cost approach for personal property and leasehold improvements.

The cost approach was applied by developing a replacement cost and adjusting for economic depreciation and obsolescence.

The Company recognized operating lease liabilities and operating lease right-of-use assets for office and manufacturing facilities in (i) Las Vegas, Nevada (ii) Grass Valley, Oregon (iii) Prineville, Oregon, and (iv) Tygh Valley, Oregon, accordance with ASC 842, Leases .

All facilities were subsequently divested as part of the GVB sale discussed in Note 2 “Discontinued Operations and Divestitures.”

The following table summarizes the Company’s discount rate and remaining lease terms as of the acquisition date:

Weighted average remaining lease term in years

Weighted average discount rate

The Company concluded there were no off-market lease intangibles on the date of acquisition based on an evaluation of market rents per square foot, geographic location and nature of use of the underlying asset, among other considerations.

Intangible assets

The purchase price was allocated to intangible assets as follows:

Weighted Average

Amortization Period

Weighted Average

Definite-lived Intangible Assets

Discount Rate

Customer relationships

Customer Relationships

Customer relationships represent the estimated fair value of contractual and non-contractual customer relationships GVB had as of the acquisition date.

These relationships were valued separately from goodwill at the amount that an independent third party would be willing to pay for these relationships.

The fair value of customer relationships was determined using the multi-period excess-earnings method, a form of the income approach.

The estimated useful life of the existing customer base was based upon the historical customer annual attrition rate of 20 %, as well as management’s understanding of the industry and product life cycles.

Tradename represents the estimated fair value of GVB’s corporate and product names.

The acquired tradename was valued separately from goodwill at the amount that an independent third party would be willing to pay for use of these names.

The fair value of the tradename was determined by utilizing the relief from royalty method, a form of the income approach, with a royalty rate of 1.0 %.

The GVB tradename was assumed to have an indefinite useful life based upon long-term management expectations and future operating plans.

Deferred Taxes

The Company determined the deferred tax position to be recorded at the time of the GVB acquisition in accordance with ASC Topic 740, Income Taxes , resulting in recognition of deferred tax liabilities for future reversing of taxable temporary differences primarily for intangible assets and property, plant and equipment.

This resulted in a preliminary net deferred tax liability of $ 627 , which includes the carryover basis of historical recognized deferred tax assets, liabilities and valuation allowance.

The net deferred tax liabilities recorded as a result of the acquisition of GVB was determined by the Company to also provide future taxable temporary differences that allow for the Company to utilize certain previously fully reserved deferred tax assets.

Accordingly, the Company recognized a reduction to its valuation allowance resulting in a net tax benefit of approximately $ 434 for the year ended December 31, 2022.

The excess of the purchase price over the fair value of net tangible and intangible assets acquired and liabilities assumed was allocated to goodwill.

A variety of factors contributed to the goodwill recognized, including the value of GVB’s assembled work force, the incremental value resulting from GVB’s capabilities in hemp/cannabis, operational synergies across the plant science platform, and the expected revenue growth over time that is attributable to increased market share from future products and customers.

Goodwill recorded in the transaction will be non-deductible.

Acquisition costs

During the year ended December 31, 2023, direct costs incurred as a result of the acquisition of RXP were $ 130 , compared to direct costs incurred as a result of the acquisition of GVB of $ 1,046 during the year ended December 31, 2022.

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.

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Finished goods

During the year ended December 31, 2023, the Company reserved certain leaf inventory totaling $ 7,720 resulting from restructuring initiatives implemented, as described in Note 18 “Other Operating Expenses, Net”.

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.

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Office furniture, fixtures and equipment

Laboratory equipment

accumulated depreciation

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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.

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:

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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.

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 .

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.

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

– INVESTMENTS & OTHER ASSETS

Panacea Investment – Promissory Note:

On June 30, 2021, the Company entered into a Promissory Note Exchange Agreement with Panacea Life Sciences Holdings, Inc.

(“PLSH”) as a component of various investment transactions with PLSH.

The promissory note was issued in the amount of $ 4,300 (the “Promissory note receivable”) with a maturity date of June 30, 2026 and a 0 % interest rate.

The Promissory note receivable is with J&N Real Estate Company, L.L.C., a related party of Panacea and is fully secured by a first priority lien on Panacea’s headquarters located in Golden, Colorado.

The Promissory note receivable was originally valued at $ 3,684 ($ 4,300 face value less $ 616 discount) and is included within the Consolidated Balance Sheets as “Other Assets.” Subsequently, on December 31, 2022 the Company and PLSH entered into a settlement agreement in which the Company agreed to a reduction to the face value of the Promissory note receivable of $ 500 , in exchange for resolution to all contractual requirements surrounding the investment and business relationship.

Accordingly, the Company recognized an extinguishment charge of note receivable of $ 500 less adjusted discount of $ 51 during the year-ended December 31, 2022.

As of October 16, 2023, the $ 3,800 Promissory note receivable was fully assigned in connection with the Senior Secured Credit Facility Amendment and Waiver.

The remaining discount of $ 305 was extinguished and after recognizing consideration of $ 2,600 , resulted in a loss on transfer of financial asset of $ 895 recorded as a component of Other income (expense) on the Consolidated Statement of Operations and Comprehensive Loss.

Refer to Note 13 “Debt.” Through the date of assignment, the C ompany intended to hold the remaining outstanding Promissory note receivable to maturity and the associated discount will be amortized into interest income over the term of the note.

– FAIR VALUE MEASUREMENTS

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Fair value measurement standards apply to certain financial assets and liabilities that are measured at fair value on a recurring basis (each reporting period).

For the Company, these financial assets and liabilities include its short-term investment securities and equity investments.

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 assets and liabilities measured at fair value at December 31, 2023 and 2022, 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 2023, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

December 31, 2024

Detachable warrants

Derivative liability

Omnia 2024 warrants

Total liabilities

December 31, 2023

Money market funds

Corporate bonds

treasury securities

Money market mutual funds are valued at their daily closing price as reported by the fund.

Money market mutual funds held by the Company are open-end mutual funds that are registered with the SEC that generally transact at a stable $ 1.00 Net Asset Value (“NAV”) representing its estimated fair value.

On a daily basis the fund’s NAV is determined by the fund based on the amortized cost of the funds underlying investments.

The Company classifies its money market funds within Level 1 because it uses quoted market prices to determine their fair value.

The Company classifies its commercial paper, corporate notes, certificates of deposit, and U.S.

government bonds within Level 2 because it uses quoted prices for similar assets or liabilities in active markets and each has a specified term and all level 2 inputs are observable for substantially the full term of each instrument.

Corporate bonds are valued using pricing models maximizing the use of observable inputs for similar securities.

The following tables set forth a summary of the Company’s available-for-sale debt securities from amortized cost basis to fair value as of December 31, 2022:

Available for Sale Debt Securities

December 31, 2022

Corporate bonds

The following table sets forth a summary of the Company’s available-for-sale debt securities at amortized cost basis and fair value by contractual maturity as of December 31, 2022:

December 31, 2022

Due in one year or less

The Company recognized interest income on short-term investment securities recorded in Interest income, net on the Consolidated Statement of Operations and Comprehensive Loss during the years ended December 31, 2023 and 2022 of $ 52 and $ 546 , respectively.

Detachable warrants

The following table sets forth a summary of the changes in fair value of the Company’s stock warrants accounted for as liabilities (Level 3 asset) for the period ended December 31, 2023:

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, 2023

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Fair value measurement at December 31, 2023

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

Settlement and General Release

Initial measurement (Omnia 2024 warrants)

Fair value measurement adjustment

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

Risk-free interest rate per year

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Exercise price

The detachable warrants are measured at fair value using certain estimated factors which are classified within Level 3 of the valuation hierarchy.

Significant unobservable inputs that are used in the fair value measurement of the Company’s detachable warrants include the volatility factor, anti-dilution provisions, and contingent put option.

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

Significant unobservable inputs that are used in the fair value measurement of the Company’s warrants include the volatility factor, anti-dilution provisions, and contingent put option.

Significant increases or decreases in the volatility factor would have resulted in a significantly higher or lower fair value measurement.

Additionally, a change in probability regarding the anti-dilution provision or put option would have resulted in a significantly higher or lower fair value measurement.

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

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

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

Derivative Liability

The derivative liability related to the debentures and embedded conversion option using was measured at December 31, 2023 using a binomial lattice valuation model under a “with and without” approach and contained the following assumptions:

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):

Fair value measurement at January 1, 2024

Fair value measurement adjustment

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

Stock price as of measurement date (per share)

Risk-free rate

Risk-free interest rate

Credit rating

4 unchanged sentences

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, 2023 and 2022, the Company did not have any financial assets or liabilities 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”.

– CAPITAL RAISES AND WARRANTS FOR COMMON STOCK

The following tables summarize the Company’s warrant activity:

The following table summarizes the Company’s warrant activity:

Warrants outstanding at January 1, 2023

Warrants outstanding at December 31, 2023

( 18,084,052 )

Warrants outstanding at December 31, 2024

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

# of warrants outstanding

Exercise price

Issue date exercise price

Current exercise price (1)

Expiration date

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September 3, 2028

Subordinated Note - Omnia

September 3, 2030

July 19, 2023 RDO warrants (3)

January 10, 2029

July 19, 2023 RDO warrants

July 20, 2028

3 unchanged sentences

February 15, 2029

2022 Registered Direct Offering & Warrant Repricing

On July 21, 2022, the Company and certain institutional investors (the “July 2022 Investors”) entered into a securities purchase agreement (the “July 2022 Securities Purchase Agreement”) relating to the issuance and sale of shares of common stock pursuant to a registered direct offering (the “July 2022 Registered Offering” and, together with the July 2022 Private Placement (as defined below), the “July 2022 Offerings”).

The July 2022 Investors purchased approximately $ 35,000 of shares, consisting of an aggregate of 1,138,221 shares of common stock at a purchase price of $ 30.75 per share, subject to certain restrictions.

The net proceeds to the Company from the July 2022 Offerings, after deducting the fees and the Company’s offering expenses, were $ 32,484 .

Pursuant to the July 2022 Securities Purchase Agreement, in a concurrent private placement, the Company issued and sold to the July 2022 Investors warrants (the “July 2022 Warrants”) to purchase up to 1,138,221 shares of common stock (the “July 2022 Private Placement”).

The July 2022 Warrants were exercisable immediately upon issuance at an exercise price of $ 30.75 per share of common stock, subject to adjustment in certain circumstances, and expire on July 25, 2027.

As a result of the June 19, 2023 offering described below, certain of the July 2022 Investors and the Company entered a warrant reprice letter (the “Warrant Repricing”) and agreed to reduce the exercise price on the previously issued 747,974 warrants owned by the investors participating in the June 19, 2023 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.

The Warrant Repricing is accounted for as a modification of a freestanding equity-classified written call option, and therefore resulted in an immediate and incremental increase of approximately $ 2,025 in the estimated fair value of the related 747,974 warrants, recorded as a component of Capital in excess of par value, with an offsetting equal amount recorded as equity issuance costs.

As a result of subsequent offerings, the exercise price on 747,974 warrants was automatically adjusted triggering non-cash deemed dividends as a result of the down-round adjustments.

In July 2023 the exercise price was adjusted to $ 3.80 and $ 2.42 , respectively, and further in October 2023 was adjusted to $ 0.525 .

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

The remaining 390,247 previously issued July 2022 Warrants were not repriced and on December 7, 2023, the Company was provided notice of irrevocable abandonment of 325,205 warrants.

Accordingly, the Company has 65,042 remaining July 2022 Warrants with an exercise price of $ 30.75 and an expiration date of July 25, 2027.

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:

Total deemed dividends

June 19, 2023 Registered Direct Offering

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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 a result of the subsequent offerings, the exercise price on the 747,974 warrants was automatically adjusted triggering non-cash deemed dividends as a result of the down-round adjustments.

In July 2023, the exercise price was adjusted to $ 3.80 and $ 2.42 , respectively, and further in October 2023 was adjusted to $ 0.525 .

All of the outstanding warrants were subsequently exercised in connection with the Warrant Inducement Offering and no warrants issued in the June 2023 registered direct offering remain outstanding as of December 31, 2023.

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.

The warrants became 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 subsequent offerings, the exercise price on 1,557,268 warrants was automatically adjusted triggering non-cash deemed dividends as a result of the down-round adjustments.

In July 2023, the exercise price was adjusted to $ 2.42 and further in October 2023 was adjusted to $ 0.525 .

1,557,368 warrants that remained outstanding as of December 31 , 2023 were subsequently exercised in connection with the Warrant Inducement Offering in January 2024 (see Note 21 “Subsequent Events.”)

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.

The warrants were 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 a subsequent offering, the exercise price on 8,746,438 warrants was automatically adjusted triggering non-cash deemed dividends as a result of the down-round adjustment.

In October 2023 the exercise price was adjusted to $ 0.525 .

7,521,438 of the warrants were subsequently exercised in connection with the Warrant Inducement Offering through December 31, 2023.

1,225,000 warrants remained outstanding with an exercise price of $ 0.1765 and an expiration date of July 19, 2028, of which 775,000 were subsequently exercised in January 2024 (see Note 21 “Subsequent Events.”).

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 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 “October Warrants”) and (iii) pre-funded warrants to purchase 2,400,000 shares of common stock (the “Pre-Funded Warrants”).

The Common Warrants had 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 will be able to be exercised 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 October Warrants.

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

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

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 .

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.

3,800,000 of the warrants were subsequently exercised in connection with the Warrant Inducement Offering through December 31, 2023.

13,500,000 warrants remained outstanding with an exercise price of $ 0.1765 and an expiration date of October 19, 2028, of which 10,800,000 were subsequently exercised in January 2024 (see Note 21 “Subsequent Events.”).

Warrant Inducement Offering

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:

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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)).

Pursuant to the warrant inducement agreements, the exercising holders of the Existing Warrants received 31,034,772 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 .

As a result of the inducement and subsequent exercise, the Company determined the incremental fair value provided to the holders using Black Scholes and Monte Carlo models as (i) $ 883 increase in fair value due to the adjustment in exercise price of Existing Warrants attributable to down round pricing protection (ii) $ 6,596 fair value of Inducement Warrants issued to the holders that exercised Existing Warrants.

The incremental fair value is recorded as non-cash deemed dividend.

The proceeds of the warrant inducement and issuance of common stock are recorded as Capital in excess of par value.

Refer to Note 21 “Subsequent Events.”

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.

The Company also issued an aggregate of 880 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 investors purchased approximately $ 1,175 of shares and warrants, consisting of an aggregate of 38,041 shares of Common Stock and warrants to purchase 76,348 shares of common stock, at a purchase price of $ 30.78 per share and accompanying warrant.

The Company also issued an aggregate of 2,290 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 .

2024 Warrant Inducement

On September 29, 2024, the Company commenced a warrant inducement offering with the holders of outstanding warrants to purchase 37,624 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 .

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

In connection with the 2024 Warrant Inducement, the Company issued 75,248 new warrants.

The Company also issued an aggregate of 2,257 placement agent warrants.

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 105,679 shares of common stock and warrants to purchase 211,358 shares of common stock, at a purchase price of $ 20.25 per share and accompanying warrant.

The Company also issued an aggregate of 6,341 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

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 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 Company also issued an aggregate of 16,803 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.

Other Equity Financings

Pursuant to a Regulation A offering of Form 1-A, the Company entered into subscription agreements with certain accredited investors and high net worth individuals, pursuant to which the Company issued and sold to the investors 72,000 shares of its Common Stock, par value $ 0.0001 per share of the Company at a price of $ 76.95 per share for net proceeds to the Company of $ 5,208 , net of offering costs of $ 332 .

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

Private Placement of Warrants

During the third quarter of 2024, the Company and certain investors entered into warrant purchase agreements related to the private placement of 109,600 warrants to purchase an equal number of shares of common stock at a purchase price of $ 0.00001 per warrant.

Other Agreements

During the second quarter of 2024, the Company settled an aggregate of $ 1,192 of outstanding indebtedness under various commercial agreements for an aggregate of 5,192 shares of common stock at an effective average price per share of $ 288.90 .

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 13,116 shares of common stock at an effective average price per share of $ 40.03 .

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 are exercisable for five years from September 3, 2023, at an exercise price of $ 19.125 per share, determined as 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.

The JGB warrants initial fair value of $ 4,475 net of issuance costs of $ 139 (see Note 9 “Fair Value Measurements”), of which half of the warrants meet 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 $ 15.00 upon certain conditional events such as change in control or event of default.

Accordingly, at issuance half of the warrants with the put provision are 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 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 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.

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).

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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 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.

The Omnia warrants initial fair value was $ 1,316 (see Note 9 “Fair Value Measurements”), and meet 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 $ 30.00 upon certain conditional events such as change in control or event of default.

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

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

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Exercise price

On March 31, 2023, the Company established an at-the-market common equity offering program (“ATM Program”), through which it may, 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 .

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.

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

(in thousands, except for per-share data)

Number of common shares issued

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Consulting Agreements

Growing Agreements

(1) The minimum annual royalty fee is credited against running royalties on sales of licensed products.

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(3) 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.

(4) Various R&D tobacco growing agreements.

Litigation - The Company is subject to litigation arising from time to time in the ordinary course of its business.

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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 “Divestitures and discontinued operations,” the Company has received unasserted claims related to disputed contracts, which could result in accrual of an additional amount up to $ 1,314 on the Consolidated Balance Sheet.

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.

On January 21, 2019, Matthew Jackson Bull, a resident of Denver, Colorado, filed a Complaint against the Company, the Company’s then Chief Executive Officer, Henry Sicignano III, and the Company’s then Chief Financial Officer, John T.

Brodfuehrer, in the United States District Court for the Eastern District of New York entitled:

Matthew Bull, Individually and on behalf of all others similarly situated, v.

22nd Century Group, Inc., Henry Sicignano III, and John T.

Brodfuehrer, Case No.

1:19 cv 00409.

On January 29, 2019, Ian M.

Fitch, a resident of Essex County Massachusetts, filed a Complaint against the Company, the Company’s then Chief Executive Officer, Henry Sicignano III, and the Company’s then Chief Financial Officer, John T.

Brodfuehrer, in the United States District Court for the Eastern District of New York entitled:

Ian Fitch, Individually and on behalf of all others similarly situated, v.

22nd Century Group, Inc., Henry Sicignano III, and John T.

Brodfuehrer, Case No.

2:19 cv 00553.

On May 28, 2019, the plaintiff in the Fitch case voluntarily dismissed that action.

On August 1, 2019, the Court in the Bull case issued an order designating Joseph Noto, Garden State Tire Corp, and Stephens Johnson as lead plaintiffs.

On September 16, 2019, pursuant to a joint motion by the parties, the Court in the Bull case transferred the class action to federal district court in the Western District of New York, where it remains pending as Case No.

1:19-cv-01285.

Plaintiffs in the Bull case filed an Amended Complaint on November 19, 2019 that alleges three counts:

Count I sues the Company and Messrs.

Sicignano and Brodfuehrer and alleges that the Company's quarterly and annual reports, SEC filings, press releases and other public statements and documents contained false statements in violation of Section 10(b) of the Securities Exchange Act and Rule 10b-5;

Count II sues Messrs.

Sicignano and Brodfuehrer pursuant to Section 10(b) of the Securities Exchange Act and Rule 10b5(a) and (c);

and Count III sues Messrs.

Sicignano and Brodfuehrer for the allegedly false statements pursuant to Section 20(a) of the Securities Exchange Act.

The Amended Complaint seeks to certify a class, and unspecified compensatory and punitive damages, and attorney's fees and costs.

On January 29, 2020, the Company and Messrs.

Sicignano and Brodfuehrer filed a Motion to Dismiss the Amended Complaint.

On January 14, 2021, the Court granted the motion, dismissing all claims with prejudice.

The Plaintiffs filed a notice of appeal on February 12, 2021 to the Second Circuit Court of Appeals.

On May 24, 2022, after briefing and oral argument, the Second Circuit issued an order affirming in part, and reversing in part, the District Court’s dismissal order.

The Second Circuit affirmed the District Court’s dismissal of the claims relating to the non-disclosure of stock promotion articles, but reversed the District Court’s dismissal order of the claims alleging the non-disclosure of an SEC investigation.

The Second Circuit noted in its opinion, however, that the District Court had not addressed certain arguments raised by the Company and Messrs.

Sicignano and Brodfuehrer in the Motion to Dismiss the Amended Complaint as to these remaining claims, and remanded the case to the District Court to address these arguments for the dismissal of the remaining claims.

On August 8, 2022, the Company and Messrs.

Sicignano and Brodfuehrer filed a renewed motion to dismiss the remaining claims in the Amended Complaint to address the arguments not previously addressed by the District Court.

On September 22, 2022, Plaintiffs filed a brief in opposition to the motion.

On October 12, 2022, the Company and Messrs.

Sicignano and Brodfuehrer filed a reply brief in further support of the motion.

On January 6, 2023, the District Court denied the motion to dismiss.

The parties participated in a mediation on March 21, 2023 and reached an initial memorandum of understanding for settlement in principle to resolve the litigation and release all claims against the Company.

On April 25, 2023, the parties filed with the Court the Motion for Preliminary Approval of the Settlement, which includes the final terms of the proposed settlement.

The Court preliminarily approved the settlement on June 30, 2023, and scheduled a further settlement hearing for October 3, 2023.

The Court entered the Final Judgment and Order of Dismissal with Prejudice of the action on October 23, 2023.

The settlement amount that the defendants paid is $ 3,000 and is fully covered by the Company’s insurance, which has been funded by the Company’s insurance carrier in an escrow account and anticipated to be disbursed in the first or second quarter of 2024.

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

Shareholder Derivative Cases

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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.

On February 11, 2019, Stephen Mathew 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 Supreme Court of the State of New York, County of Erie, entitled:

Stephen Mathew, derivatively on behalf of 22nd Century Group, Inc.

Henry Sicignano, III, John T.

Brodfuehrer, Richard M.

Sanders, Joseph Alexander Dunn, James W.

Cornell, Nora B.

Sullivan and 22nd Century Group, Inc., Index No.

Mathew brings this action derivatively generally alleging the same allegations as in the Klein case.

The Complaint seeks declaratory relief, unspecified monetary damages, corrective corporate governance actions, and attorney’s fees and costs.

On August 15, 2019, the Court consolidated the Mathew and Klein actions pursuant to a stipulation by the parties (Western District of New York, Case No.

1-19-cv-0513).

On May 3, 2019, the Court ordered the Mathew case stayed.

This stay was applied to the Consolidated Action pursuant to the Court’s August 15, 2019 Order Consolidated Related Shareholder Derivative Actions and Establishing a Leadership Structure.

As a result of the Court’s denial of the renewed Motion to Dismiss the Amended Complaint, the May 3, 2019 stay will be lifted.

No trial date has been set.

believe that the claims are frivolous, meritless and that the Company and the individual defendants have substantial legal and factual defenses to the claims.

We intend to vigorously defend the Company and the individual defendants against such claims.

On June 10, 2019, Judy Rowley 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 Supreme Court of the State of New York, County of Erie, entitled:

Judy Rowley, derivatively on behalf of 22nd Century Group, Inc.

Henry Sicignano, III, Richard M.

Sanders, Joseph Alexander Dunn, Nora B.

Sullivan, James W.

Cornell, John T.

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

Rowley brought the action derivatively alleging that the director defendants supposedly breached their fiduciary duties by allegedly allowing the Company to make false statements.

The Complaint sought declaratory relief, unspecified monetary damages, corrective corporate governance actions, and attorney’s fees and costs.

We believe that the claims are frivolous, meritless and that the Company and the individual defendants have substantial legal and factual defenses to the claims.

We intend to vigorously defend the Company and the individual defendants against such claims.

On September 13, 2019, the Court ordered the litigation stayed pursuant to a joint stipulation by the parties.

On August 3, 2022, Plaintiff dismissed the case with prejudice by filing a stipulation of discontinuance with the Court.

This dismissal was not pursuant to a settlement.

On January 15, 2020, Kevin Broccuto 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 certain members of the Company's prior Board of Directors in the District Court of the State of Nevada, County of Clark, entitled:

Kevin Broccuto, derivatively on behalf of 22nd Century Group, Inc.

Cornell, Richard M.

Sanders, Nora B.

Sullivan, Henry Sicignano, III, and John T.

Brodfuehrer, Case No.

Broccuto brings this action derivatively alleging three counts:

Count I alleges that the defendants breached their fiduciary duties;

Count II alleges they committed corporate waste;

and Count III that they were unjustly enriched, by allegedly allowing the Company to make false statements.

On February 11, 2020, Jerry Wayne 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 certain members of the Company's prior Board of Directors in the District Court of the State of Nevada, County of Clark, entitled:

Jerry Wayne, derivatively on behalf of 22nd Century Group, Inc.

Cornell, Richard M.

Sanders, Nora B.

Sullivan, Henry Sicignano, III, and John T.

Brodfuehrer, Case No.

Wayne brings this action derivatively alleging generally the same allegations as the Broccuto case.

The Complaint seeks unspecified monetary damages, corrective corporate governance actions, disgorgement of alleged profits and imposition of constructive trusts, and attorney's fees and costs.

The Complaint also seeks to declare as unenforceable the Company's Bylaw requiring derivative lawsuits to be filed in Erie County, New York, where the Company is headquartered.

On March 25, 2020, the Court ordered the Broccuto and Wayne cases consolidated and stayed pursuant to a joint stipulation from the parties.

On June 27, 2022, the Court ordered that the stay continue until thirty (30) days after the District Court rules on the renewed Motion to Dismiss the Amended Complaint in the Noto Class Action case.

As a result of the Court’s denial of the Motion to Dismiss the Amended Complaint, the June 27, 2022 stay will be lifted if the case is not resolved.

No trial date has been set.

The parties participated in a mediation on March 21, 2023, and a subsequent mediation on October 17, 2023.

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.

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, 2023.

On September 1, 2023, Kenneth Troup 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 certain members of the Company's Board of Directors in the United States District Court for the Western District of New York entitled:

Kenneth Troup, derivatively on behalf of 22nd Century Group v.

Nora Sullivan, James Mish, Michael Koganov, Anthony Johnson, Richard Sanders, Lucille Salhany, Andy Arno, James W.

Henry Sicignano, III, and John T.

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

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.

Troup brings this action derivatively generally alleging the same allegations as in the Klein case.

The Complaint seeks declaratory relief, unspecified monetary damages, corrective corporate governance actions, and attorney’s fees and costs.

On February 9, 2024, defendants filed an unopposed Motion to Consolidate the Troup action with the consolidated derivative cases, which would include the Troup case in the preliminary settlement described above.

We believe that the claims are frivolous, meritless and that the Company and the individual defendants have substantial legal and factual defenses to the claims.

We intend to vigorously defend the Company and the individual defendants against such claims.

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.

Insurance Litigation

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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.

Discovery is ongoing.

No trial date has been set.

Needle Rock Farms – Settlement Agreement

During March 2023, the Company negotiated and entered into a settlement agreement related to water rights dispute with the adjacent property owner for Needle Rock Farms in which the Company agreed to pay $ 250 in cash upon execution of the settlement, transferred certain farm equipment with net book value of $ 272 , and accrued an additional payment of $ 225 that is contingent on either the sale of the farm or will be paid within one year .

The total charges of $ 747 recorded in connection with the settlement agreement is included in discontinued operations within Other operating expenses, net on the Consolidated Statements of Operations and Comprehensive Loss.

Fact discovery is complete.

Expert discovery is complete.

The trial date is November 4, 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, and preserves the Company’s option for an additional 2-year extension, through first quarter of 2029.

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 the new Framework Collaborative Agreement, 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 Agreement and has invoiced the Company $ 881 for services performed.

The parties anticipate mediating the dispute although no mediation date has been set.

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.

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.

(“CCC”), Cookies SF, LLC (“CSF”), GMLC WLNS, LLC (“GMLC”) and other defendants, Case No.

24STCV27828, Superior Court of California, County of Los Angeles.

The complaint alleges three counts against all defendants:

Count I for Breach of Contract related to a Settlement Agreement entered into between CRP, Paul Rock, CSF, GMLC, CCC and PTB (the “Settlement Agreement”), and a Purchase Agreement entered into between PTB and CRP (the “Purchase Agreement”);

Count II for Fraud – False Promise related to the Settlement Agreement and Purchase Agreement;

and Count III for Violation of Penal Code Section 496 related to 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.

Discovery is ongoing.

The Company believes it has substantial defenses to CRP’s claims, and counterclaims, and intends to defend itself vigorously.

Employee Dispute

On November 19, 2024, a former employee of the Company filed a complaint against the Company, two subsidiaries of the Company, and numerous other former subsidiaries of the Company that were part of the hemp/cannabis division that was divested in December 2023.

The complaint was filed in the Circuit Court of the State of Oregon, County of Multnomah, Case No.

The complaint alleges three counts against all defendants:

Count I for Premises Liability;

Count II for Personal Injury – Employer Liability Law, and Count III for Negligence/Negligence Per Se, all related to the November 2022 fire at the Company’s Grass Valley manufacturing facility in Oregon.

The former employee is seeking monetary damages.

The Company has 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 ( infra ).

(“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 Company believes it has substantial defenses to Maison’s claims and intends to defend itself vigorously.

The Company has a senior secured credit facility (the “Senior Secured Credit Facility”), which consists of three-year $ 21,053 Debentures (as defined below) and $ 2,865 subordinated promissory note (the “Subordinated Note).

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.

Debt related to the Senior Secured Credit Facility and Subordinate Note as of December 31, 2023, consists of the following:

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:

Senior Secured Credit Facility

3 unchanged sentences

Total long-term debt

On March 3, 2023, the Company entered into a 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 .

On March 3, 2023, the Company entered into a Securities Purchase Agreement with each of the purchasers party thereto (collectively, the “Purchasers”) and JGB Collateral, LLC, as collateral agent for the Purchasers (the “Agent”) which pursuant to the agreement, the Company sold 5 % original issuance discount senior secured debentures with an aggregate principal amount of $ 21,053 .

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

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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.

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.

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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 is 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.

In connection with the sale of the Debentures, the Company issued warrants to purchase up to 333,334 shares of common stock for an exercise price of $ 19.125 per share (the “JGB Warrants”), which had an initial fair value of $ 4,475 net of issuance costs of $ 139 (see Note 9 “Fair Value Measurements” and Note 10 “Capital Raise and Warrants for Common Stock”).

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.

In connection with the sale of the Debentures, the Company issued warrants to purchase up to 155 shares of common stock for an exercise price of $ 41,310 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 155 shares of the Company’s common stock for an exercise price of $ 41,310 per share were automatically adjusted to be $ 27,708.48 exercise price for up to 231 shares of common stock.

There are 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 be applied to, and reduce, the outstanding principal amount of the Debentures on a dollar-for-dollar basis.

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

As additional consideration for the waiver, the Company agreed to assign, transfer and convey to the Agent, the Company’s entire right, title and interest in and to (i) the Promissory Note made by J&N Real Estate Company, L.L.C.

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Upon assignment of the Pledged Indebtedness, the Company recognized the $ 2,600 of consideration in exchange to be applied as a $ 2,000 reduction of the Put Price (as defined below), $ 600 reduction of the outstanding principal amount of Debentures and $ 895 loss on sale of financial asset.

In connection with the waiver, the Company and Holders agreed to exercise the outstanding put provision to redeem 166,667 Warrants for an aggregate put price equal to $ 2,500 (the “Put Price”), which was concurrently reduced by $ 2,000 , as described above, with the remaining $ 500 payable by the Company on the Maturity Date recorded as Other long-term liabilities on the Consolidated Balance Sheet.

In connection with the waiver, the Company and Holders agreed to exercise the outstanding put provision to redeem 78 warrants for an aggregate put price equal to $ 2,500 (the “Put Price”), which was concurrently reduced by $ 2,000 , as described above, with the remaining $ 500 payable by the Company on the Maturity Date recorded as Other long-term liabilities on the Consolidated Balance Sheets.

No cash was exchanged as a result of executing the October 2023 Amendment.

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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 “GVB Promissory Note”), (iii) assign the GVB Insurance Proceeds to the Agent until the outstanding aggregate principal amount of the Debentures, plus accrued and unpaid interest, has been repaid in full;

provided that the first $ 1,000 of Insurance Proceeds in excess of $ 5,000 shall be applied as stated above, and (iv) post-closing enter into a deed in lieu of foreclosure agreement with respect to 224 acres of real property in Delta County, Colorado commonly known as Needle Rock Farms, resulting in a non-monetary exchange yielding additional debt reduction of $ 1,000 .

As of December 31, 2023, the $ 2,000 GVB Promissory Note and $ 1,000 real estate farm asset are pledged to the senior lender for principal reduction and accordingly $ 3,000 of the Senior Secured Credit Facility is recorded as Current portion of long-term debt on the Consolidated Balance Sheets.

Additionally, the Company, the Holders and the Agent 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 remains subject to the approval of the Company’s stockholders and the Company is required pursuant to the December Amendment to use its commercially reasonable efforts to obtain such approval.

Additional terms of the December 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.

provided that the first $ 1,000 of Insurance Proceeds in excess of $ 5,000 shall be applied as stated in the agreement, and (iv) post-closing enter into a deed in lieu of foreclosure agreement with respect to 224 acres of real property in Delta County, Colorado commonly known as Needle Rock Farms, resulting in a non-monetary exchange yielding additional debt reduction of $ 1,000 .

Effective June 24, 2024, GVB Biopharma (“GVB”), the Company’s former subsidiary, made a scheduled principal and interest payment against the Company’s outstanding indebtedness to JGB, reducing the Company’s total outstanding principal indebtedness with JGB by $ 1,500 .

The remaining $ 500 payable by GVB under the 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.

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

Under the terms of the Letter Agreement, the Holders are permitted to convert their debt to common stock at anytime and the Conversion Price (as defined in the Debentures) at which the Holders may convert the principal amount of their Debentures to the Company’s common stock is reduced to $ 288.90 per share in accordance with applicable Nasdaq rules through the conversion option reset date on June 28, 2024.

The principal amount of the Debentures converted shall be applied to the Monthly Allowance (as defined in the Debentures) for that month, and any excess shall be applied to the Monthly Allowances for the succeeding months.

The conversions will be a dollar for dollar reduction of the remaining outstanding obligation owed to the Holders.

The Agent and Holders have also agreed to daily limits on trading volume and minimum conversion amounts.

The Holders converted $ 428 of debt in exchange for 1,482 shares of common stock during the quarter-ended June 30, 2024.

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

Under the terms of the May 2024 Amendment, the Company and Holders have agreed the Company shall incur an aggregate amendment charge to the undersigned holders equal to $ 275 , which shall be added to the principal balance of the Debentures.

Under the terms of the May 2024 Exchange Agreement, the Company and Holders exchanged an aggregate of $ 2,328 in principal, fees and expenses owed under the Debentures for 2,926 shares of common stock and 6,630 immediately exercisable pre-funded warrants to purchase shares of common stock at an exercise price of $ .00001 (at an effective per share price of $ 228.15 ).

All pre-funded warrants were subsequently exercised during the quarter-ended June 30, 2024.

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

Under the terms of the August 2024 Agreement, each Holder agreed that it shall not exercise its Holder Redemption Right (as defined in the Debentures) for more than 50 % of its Monthly Allowance (as defined in the Debentures) through and including July 2025.

Further, the provisions in Section 3(c)(i) of the Debentures requiring 20 % of any equity issuances to be paid to the Holders shall be suspended through December 31, 2024.

In consideration for the amendments set forth in the August 2024 Amendment, the Company paid an amendment fee of $ 746 , which was added to the aggregate principal amount of the Debentures.

JGB subsequently issued a conversion notice for 3,260 shares of common stock equal to principal reduction of $ 328 .

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

Under the terms of the October 2024 Amendment, the Company will be able to reset the Conversion Price (as defined in the Debentures) currently in effect, at the discretion of the Board of Directors and on a one time basis, to an amount equal to the average of the daily VWAPs for each of 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 $ 0.7458 .

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 Amendment was concluded to be a modification, and not an extinguishment, based on an analysis of the present value of future cash flows.

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.

A new effective interest rate was determined, and the debt continued to be amortized.

The December Amendment was concluded to be an extinguishment, due to the addition of a substantive conversion option.

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.

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 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 AC 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 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 December 31, 2023, respectively as a component of Other Long-Term Liabilities on the Consolidated Balance Sheet.

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.

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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 (see Note 3 “Business Acquisitions”).

The accrued PIK interest refinanced from the Original Notes was $ 365 .

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.

For the year ended December 31, 2023 the PIK Interest accrual amounts were $ 695 .

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.

The Subordinated Note includes customary event of default provisions.

The Subordinated Note is subordinated to the Debenture pursuant to a Subordination Agreement between the Company, the Agent and Omnia.

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 Omnia warrants initial fair value was $ 1,316 (see Note 9 “Fair Value Measurements” and 10 “Capital Raise and Warrants for Common Stock”).

Contractual maturities under the Senior Secured Credit Facility and Subordinate Note through maturity, excluding any discounts or premiums, as of December 31, 2023 is as follows:

Future minimum principal payments

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.

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 ;

(ii) 8,519 shares of common stock and 8,519 immediately exercisable pre-funded warrants to purchase shares of common stock at an exercise price of $ 0.0001 that are exercisable until May 1, 2029 (at an effective per share price of $ 288.90 ) and (iii) 3,408 immediately exercisable warrants to purchase an equal number of shares of common stock at an exercise price of $ 288.90 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).

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.”

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:

January 1, 2023

Amortization during the year

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December 31, 2023

Amortization during the period

Amendment fees

December 31, 2024

– NOTES AND LOANS PAYABLE

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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 $ 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 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 2022, the Company expanded its D&O coverage as a result of the acquisition of GVB, resulting in an additional premium down payment of $ 90 and financing of $ 168 , under the same terms as the original one-year policy.

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.

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2021 Omnibus Incentive Plan (the “2021 Plan”).

The 2021 Plan allows for the granting of equity awards to eligible individuals over the life of the 2021 Plan, including the issuance of up to 333,334 shares of the Company’s common stock, in addition to any remaining shares under the Company’s 2014 Omnibus Incentive Plan pursuant to awards under the 2021 Plan.

The 2021 Omnibus Incentive Plan was amended on June 16, 2023, increasing the authorized shares by 233,334 .

The 2021 Plan allows for the granting of equity awards to eligible individuals over the life of the 2021 Plan, including any remaining shares under the Company’s 2014 Omnibus Incentive Plan pursuant to awards under the 2021 Plan.

The 2021 Plan has a term of ten years and is administered by the Compensation Committee of the Company’s Board of Directors to determine the various types of incentive awards that may be granted to recipients under the 2021 Plan and the number of shares of common stock to underlie each such award under the 2021 Plan.

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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.

Amounts are recorded as Selling, general and administrative in the Consolidated Statements of Operations and Comprehensive Loss.

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 at December 31, 2024

The fair value of RSUs that vested during the years ended December 31, 2023 and 2022 was approximately $ 1,838 and $ 4,505 , respectively, based on the stock price at the time of vesting.

As of December 31, 2023, unrecognized compensation expense for RSUs amounted to $ 823 which is expected to be recognized over a weighted average period of approximately 1.7 years.

In addition, there is approximately $ 786 of unrecognized compensation expense that requires the achievement of certain milestones which are not yet probable.

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.

During the year ended December 31, 2024, there were 2,750 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.

Stock Options.

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There was no stock option grant activity during 2024 and 2023.

A summary of all stock option activity since January 1, 2022 is as follows:

A summary of all stock option activity from January 1, 2023 to December 31, 2024 is as follows:

Outstanding at January 1, 2023

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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.

In addition, there is approximately $ 190 of unrecognized compensation expense for stock options that requires the achievement of certain milestones which are not yet probable.

– LOSS PER COMMON SHARE

The following table sets forth the computation of basic and diluted loss per common share for the years ended December 31, 2023 and 2022, respectively.

Outstanding warrants, options, and restricted stock units were excluded from the calculation of diluted EPS as the effect was antidilutive.

– 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, 2024 and 2023, respectively.

Net loss from continuing operations

Net loss from discontinued operations

Net income (loss) from discontinued operations

Deemed dividends

Net loss available to common shareholders

Weighted average common shares outstanding - basic and diluted

Basic and diluted loss per common share from continuing operations

Basic and diluted loss per common share from discontinued operations

Basic and diluted loss per common share from deemed dividends

Basic and diluted loss per common share

Anti-dilutive shares are as follows as of December 31 (in thousands):

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

( 15,925.99 )

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

( 15,925.99 )

Anti-dilutive shares are as follows as of December 31:

Warrants (excluding pre-funded)

Restricted stock units

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Additional revenues are generated from sale of the Company’s proprietary low nicotine content cigarettes, sold under the brand name VLN ® , or research cigarettes sold under the brand name SPECTRUM®.

The Company does not have significant intra-entity sales or transfers.

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

For certain CMO contracts, the performance obligation is satisfied over time as the Company determines, due to contract restrictions, it does not have an alternative use of the product and it has an enforceable right to payment as the product is manufactured.

The Company recognizes revenue under those contracts at the unit price stated in the contract based on the units manufactured.

Revenue from the sale of the Company’s products, which include excise taxes and shipping and handling charges billed to customers, is recognized net of cash discounts, sales returns and allowances.

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.

Excise taxes recorded in Cost of Goods Sold on the Consolidated Statement of Operations and Comprehensive Loss for the years ended December 31, 2023 and 2022 was $ 10,413 and $ 12,619 , respectively.

Disaggregation of Revenue

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Revenue recognized from Tobacco products transferred to customers over time represented 54 % and 63 %, for the year ended December 31, 2024 and 2023, respectively.

The following table presents net revenue by product line:

Contract Manufacturing

Filtered Cigars

Total Contract Manufacturing

Total Product Line Revenues

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

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This deferred revenue is included as Deferred income on the Consolidated Balance Sheets.

Total contract assets and contract liabilities are as follows:

Total contract assets and liabilities are as follows:

Unbilled receivables

Deferred income

Net contract assets (liabilities)

During the years ended December 31, 2023 and 2022, the Company recognized $ 688 and $ 119 of revenue that was included in the contract asset balance as of December 31, 2022 and 2021 respectively.

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.

SEGMENT AND GEOGRAPHIC INFORMATION

The Company has organized its business as a single reportable segment (“Reporting Segment”), tobacco, as it operates and derives all revenues from its tobacco operations and products.

The Company’s Chief Executive Officer serves as the CODM.

The accounting policies of the Reporting Segment are the same as those described in the summary of significant accounting policies.

See Note 1 for additional information about the Company's business and significant accounting policies.

Consolidated net income (loss) from continuing operations, as presented on the Company's Consolidated Statements of Operations and Comprehensive Loss is a metric utilized by the CODM to assess the Reporting Segment's performance and allocate resources.

Total consolidated assets, excluding assets held for sale, as presented on the Company's Consolidated Balance Sheets is used to measure the Reporting Segment's assets.

The CODM uses Consolidated net income (loss) from continuing operations to evaluate profitability generated from segment assets in determining the strategic decisions of the Company with respect to utilizing its assets.

Consolidated net income (loss) from continuing operations is also used to monitor budget versus actual results.

The following table presents revenues and significant segment expenses from continuing operations for the years ended December 31, 2024 and 2023:

Consolidated net revenue

Cost of goods sold

Selling, general and administration

Research and development

Depreciation and amortization

Other segment items (1)

Interest expense

Segment net loss from continuing operations

(1) Other segment items include:

other operating expenses, other (income) expense, interest income, and provision for income taxes.

Geographic Area Information

For the years ended December 31, 2024 and 2023, substantially all third-party sales of product are shipped to customers in the United States.

Additionally, as of December 31, 2024, and 2023, all long-lived assets are physically located or domiciled in the United States.

– OTHER OPERATING EXPENSES (INCOME), NET

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Acquisition and transaction costs

Gain on sale or disposal of property, plant and equipment

Total other operating expenses (income), net

Impairment of intangible assets

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

Other operating expense, net

Restructuring costs

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Total income tax provision

The (benefit) 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.

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:

Statutory federal rate

GVB sale adjustments

Stock based compensation

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Deferred tax assets:

Net operating loss carry-forward

Net operating loss carryforward

Stock-based compensation

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Severance liability

Credit loss reserves

Allowance for credit losses

Research and development costs

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Capital loss on investment

Interest expense limitation

Note payable and warrant liability

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The Company has net operating loss (“NOL”) carryforwards of approximately $ 215,397 as of December 31, 2024 that do not expire.

The Company had accumulated an NOL carryforward of approximately $ 46,920 through December 31, 2017 and this NOL carryforward begins to expire in 2030.

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 generated a capital loss carryover of approximately $ 9,932 as of December 31, 2023, that begins to expire in 2026.

Utilization of these NOL 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 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 $ 12,094 and $ 11,021 for the years ended December 31, 2023, and 2022, respectively, and increased an additional $ 12,910 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, 2023.

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, 2023.

– QUARTERLY REVENUE AND EARNINGS DATA – UNAUDITED

Three Months Ended

September 30,

Revenues, net

Gross profit (loss)

Net loss from continuing operations (2)

Basic and diluted loss per common share from continuing operations (1)

Three Months Ended

September 30,

Revenues, net

Net loss from continuing operations (3)

Basic and diluted loss per common share from continuing operations (1)

(1) The quarterly per share data in this table has been rounded and therefore may not sum to total year-to-date EPS.

(2) For the quarter ended December 31, 2023, net loss from continuing operations increased from the previous current year quarters, mainly due to an inventory leaf reserve charge of $ 7,720 and loss on extinguishment of debt in the amount of $ 5,158 .

(3) For the quarter ended December 31, 2022, net loss from continuing operations increased from the previous current year quarters, mainly due to higher personnel and strategic consulting costs.

The Company has evaluated its tax positions and believes there are no uncertain tax positions as of December 31, 2024 and 2023.

– SUBSEQUENT EVENTS

Increase in Authorized Shares

On February 15, 2024, our stockholders approved an amendment (the “Articles Amendment”) to our Articles of Incorporation, as amended, to increase the number of authorized shares of common stock sixty-six million, six hundred sixty-six thousand six hundred and sixty-seven ( 66,666,667 ) to two hundred fifty million ( 250,000,000 ), which Articles Amendment was filed and effective with the Secretary of the State of Nevada on February 15, 2024.

Warrant Inducement

For the period from January 1, 2024 to 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 13,132,268 shares of common stock at a reduced weighted average exercise price of approximately $ 0.1844 .

Pursuant to the warrant inducement agreements, the exercising holders of the Existing Warrants received 26,264,536 Inducement Warrants and the Company received aggregate gross proceeds of approximately $ 2,421 from the exercise of the Existing Warrants.

Additionally, on the date of Stockholder Approval, the exercise price of the 57,299,308 outstanding Inducement Warrants, was reduced to $ 0.1765 based on the lowest Nasdaq Minimum Price (as defined in the as defined in Nasdaq Listing Rule 5635(d)) during the inducement period.

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.

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.

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Amendment to Certificate of Incorporation of the Company (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement filed with the Commission on March 4, 2014).

Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the Commission on December 17, 2024).

Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the Commission on April 3, 2024).

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).

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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 28, 2024).

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).

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).

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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)

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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)

Form of Inducement Letter (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on November 29, 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)

Insider Trading Policy

Consent of Freed Maxick CPAs, P.C.

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)

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 Freed Maxick P.C.

(f/k/a Freed Maxick CPAs, P.C.)

Section 302 Certification.

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Written Statement of Principal Executive Officer and Chief Financial Officer pursuant to 18.U.S.C §1350.

Compensation Recovery Policy

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):

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March 20, 2025

/s/ Daniel Otto

Chief Financial Officer

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March 20, 2025

March 28, 2024

/s/ Richard M.

March 28, 2024

/s/ Andrew Arno

March 20, 2025

Michael Koganov

March 28, 2024

/s/ Anthony Johnson

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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