UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period From ________ to ________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction | (IRS Employer | |
of incorporation) | Identification No.) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Act:
Title of each class |
| Ticker symbol |
| Name of Exchange on Which Registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
As of April 29, 2022, there were
22nd CENTURY GROUP, INC.
INDEX
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PART I. | FINANCIAL INFORMATION |
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Item 1. | Financial Statements |
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Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021 | 3 | |
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Consolidated Statements of Cash Flows for the Three Months ended March 31, 2022 and 2021 (unaudited) | 6 | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22 | |
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2
22nd CENTURY GROUP, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per-share data)
March 31, | December 31, | |||||
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| 2022 |
| 2021 | ||
(Unaudited) | ||||||
ASSETS |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Short-term investment securities |
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Accounts receivable, net |
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Inventory, net |
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Prepaid expenses and other assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating leases right-of-use assets, net |
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Intangible assets, net |
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Investments |
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Other assets | | | ||||
Total assets | $ | | $ | | ||
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities: |
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Notes payable | $ | — | $ | | ||
Operating lease obligations |
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Accounts payable |
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Accrued expenses |
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Accrued payroll |
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Accrued excise taxes and fees |
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Accrued severance |
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Deferred income |
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Total current liabilities |
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Long-term liabilities: |
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Operating lease obligations |
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Severance obligations | — | | ||||
Total liabilities | | | ||||
Commitments and contingencies (Note 11) |
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Shareholders' equity |
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Preferred stock, $ |
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Common stock, $ |
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Capital stock and : |
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Common stock, par value | | | ||||
Capital in excess of par value |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total shareholders' equity |
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Total liabilities and shareholders’ equity | $ | | $ | |
See accompanying notes to consolidated financial statements.
3
22nd CENTURY GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
($ in thousands, except per-share data)
Three Months Ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Revenue: |
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Sale of products, net | $ | | $ | | ||
Cost of goods sold (exclusive of depreciation shown separately below): |
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Products |
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Gross profit |
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Operating expenses: |
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Research and development |
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Sales, general and administrative |
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Depreciation |
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Amortization |
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Total operating expenses |
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Operating loss |
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Other income (expense): |
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Unrealized gain (loss) on investments |
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Interest income, net |
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Interest expense |
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Total other income (expense) |
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Loss before income taxes |
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Net loss | $ | ( | $ | ( | ||
Other comprehensive loss: |
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Unrealized loss on short-term investment securities |
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Other comprehensive loss | ( | ( | ||||
Comprehensive loss | $ | ( | $ | ( | ||
Net loss per common share - basic and diluted | ( | ( | ||||
Weighted average common shares outstanding - basic and diluted (in thousands) |
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See accompanying notes to consolidated financial statements.
4
22nd CENTURY GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
($ in thousands)
Three Months Ended March 31, 2022 | |||||||||||||||||
Accumulated | |||||||||||||||||
Common | Par Value | Capital in | Other | Total | |||||||||||||
Shares | of Common | Excess of | Comprehensive | Accumulated | Shareholders’ | ||||||||||||
| Outstanding |
| Shares |
| Par Value |
| Income (Loss) |
| Deficit |
| Equity | ||||||
Balance at December 31, 2021 |
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| $ | ( |
| $ | ( | $ | | ||
Stock issued in connection with RSU vesting |
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Equity-based compensation |
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Unrealized gain (loss) on short-term investment securities |
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Net loss |
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Balance at March 31, 2022 | |
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Three Months Ended March 31, 2021 | |||||||||||||||||
Accumulated | |||||||||||||||||
Common | Par Value | Capital in | Other | Total | |||||||||||||
Shares | of Common | Excess of | Comprehensive | Accumulated | Shareholders’ | ||||||||||||
| Outstanding |
| Shares |
| Par Value |
| Income (Loss) |
| Deficit |
| Equity | ||||||
Balance at December 31, 2020 |
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| $ | ( | $ | | ||
Stock issued in connection with RSU vesting |
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Stock issued in connection with option exercises | | — | | — | — | | |||||||||||
Stock issued in connection with warrant exercises | | | | — | — | | |||||||||||
Equity-based compensation |
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Unrealized gain (loss) on short-term investment securities |
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Net loss |
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Balance at March 31, 2021 | | $ | | $ | | $ | | $ | ( | $ | |
See accompanying notes to consolidated financial statements.
5
22nd CENTURY GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
Three Months Ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Cash flows from operating activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to cash used in operating activities: |
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Amortization and depreciation |
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Amortization of license fees |
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Amortization of ROU Asset |
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Unrealized (gain) loss on investment |
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Accretion of non-cash interest expense (income) | | ( | ||||
Equity-based employee compensation expense |
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(Increase) decrease in assets: |
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Accounts receivable |
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Inventory |
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Prepaid expenses and other assets |
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Increase (decrease) in liabilities: |
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Operating lease obligations |
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Accounts payable |
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Accrued expenses |
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Accrued payroll |
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Accrued excise taxes and fees |
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Accrued severance | ( | ( | ||||
Deferred income |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Acquisition of patents, trademarks, and licenses |
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Acquisition of property, plant and equipment |
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Investment in Change Agronomy Ltd. | ( | — | ||||
Sales and maturities of short-term investment securities |
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Purchase of short-term investment securities |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities: |
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Payment on note payable | ( | ( | ||||
Net proceeds from option exercise | — | | ||||
Net proceeds from warrant exercise | — | | ||||
Net cash provided by (used in) financing activities |
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Net increase in cash and cash equivalents |
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Cash and cash equivalents - beginning of period |
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Cash and cash equivalents - end of period | $ | | $ | | ||
Supplemental disclosures of cash flow information: |
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Net cash paid for: |
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Cash paid during the period for interest | $ | | $ | | ||
Non-cash transactions: |
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Patent and trademark additions included in accounts payable | $ | — | $ | | ||
Property, plant and equipment additions included in accounts payable | $ | $ | | |||
Property, plant and equipment additions included in accrued expenses | $ | | $ | — | ||
Patent and trademark additions included in accrued expenses | $ | | $ | — |
See accompanying notes to consolidated financial statements.
6
22nd CENTURY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
Amounts in thousands, except for share and per-share data
NOTE 1. - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair and non-misleading presentation of the financial statements have been included.
Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements.
These interim consolidated financial statements should be read in conjunction with the December 31, 2021 audited consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 1, 2022.
Principles of Consolidation - The accompanying consolidated financial statements include the accounts of (i) 22nd Century Group, Inc. (“22nd Century Group”); (ii) its
Reclassifications – Certain prior period amounts have been reclassified to conform to the current period’s classification. None of these reclassifications had a material impact on our consolidated financial statements.
COVID-19 Pandemic – The COVID-19 pandemic has adversely impacted the U.S. economy and supply chains and created volatility in U.S. financial markets. The COVID-19 pandemic has had a minimal impact on the Company’s operations in 2021 and thus far in 2022, but there is a risk that state and federal authorities’ responses to the COVID-19 pandemic or another pandemic may disrupt our business in the future.
All our facilities continue to operate in compliance with state and local guidance (as applicable) related to the prevention of COVID-19 transmission and employee safety. We also continue to allow remote work arrangements by our employees where job duties permit.
7
Our executive leadership team and staff are monitoring this evolving situation and its impacts on our business. We will continue to monitor the local, state, and federal guidance regarding our business practices.
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Intangible Assets – Intangible assets are recorded at cost and consist primarily of (1) expenditures incurred with third-parties related to the processing of patent claims and trademarks with government authorities, as well as costs to acquire patent rights from third-parties, (2) license fees paid for third-party intellectual property, (3) costs to become a signatory under the tobacco MSA, and (4) license fees paid to acquire a predicate cigarette brand. The amounts capitalized relate to intellectual property that the Company owns or to which it has rights to use.
The Company’s capitalized intellectual property costs are amortized using the straight-line method over the remaining statutory life of the patent assets in each of the Company’s patent families, which have estimated expiration dates ranging from 2026 to 2043. Periodic maintenance or renewal fees are expensed as incurred. Annual minimum license fees are charged to expense. License fees paid for third-party intellectual property are amortized on a straight-line basis over the last to expire patents, which have expected expiration dates from 2028 through 2036. The Company believes that costs associated with becoming a signatory to the MSA, costs related to the acquisition of a predicate cigarette brand and trademarks have indefinite lives. As such, no amortization is taken. At each reporting period, the Company evaluates whether events and circumstances continue to support the indefinite-lived classification.
Impairment of Long-Lived Assets – On at least an annual basis, the Company reviews the carrying value of its amortizing long-lived assets whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be recoverable. If any such indicators are present, the Company will test for recoverability in accordance with ASC 360-Property, plant, and equipment or ASC 350- Intangibles, Goodwill, and Other.
Intangible assets subject to amortization are reviewed for strategic importance and commercialization opportunity prior to expiration. If it is determined that the asset no longer supports the Company’s strategic objectives and/or will not be commercially viable prior to expiration, the asset is impaired. In addition, the Company will assess the expected future undiscounted cash flows for its intellectual property based on consideration of future market and economic conditions, competition, federal and state regulations, and licensing opportunities. If the carrying value of such assets are not recoverable, the carrying value will be reduced to fair value and record the difference as an impairment.
Indefinite-lived intangible asset carrying values are reviewed at least annually or more frequently if events or changes in circumstances indicate that it is more likely than not that an impairment exists. The Company first performs a qualitative assessment and considers its current strategic objectives, future market and economic conditions, competition, and federal and state regulations to determine if an impairment is more likely than not. If it is determined that an impairment is more likely than not, a quantitative assessment is performed to compare the asset carrying value to fair value and record the difference as an impairment.
Fair Value of Financial Instruments - The Company’s financial instruments include cash and cash equivalents, short-term investment securities, accounts receivable, investments, a promissory note receivable, accounts payable, accrued expenses, and notes payable. The carrying values of these financial instruments approximate fair value. The Company carries cash equivalents, short-term investment securities, investments, and certain other assets at fair value which is described further in Note 6.
Investments – The Company’s equity securities are recorded at fair value with changes in fair value included within the statement of operations. Equity securities without a readily determinable market value are carried at cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer. The Company considers certain debt instruments as available-for-sale securities, and accordingly, all 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.
8
Right-of-use assets (“ROU”) and Lease Obligations – The Company reviews any lease arrangements in accordance with ASU 2016-02, Subtopic ASC 842, Leases. Any lease having a lease term greater than twelve months will be recognized on the Consolidated Balance Sheets as a ROU asset with an associated lease obligation—all other leases are considered short-term in nature and will be expensed as payments are made over the lease term. The ROU assets and lease obligations are recognized as of the commencement date at the net present value of the fixed minimum lease payments for the lease term. The lease term is determined based on the contractual conditions, including whether renewal options are reasonably certain to be exercised. The discount rate used is the interest rate implicit in the lease, if available, or the Company’s incremental borrowing rate which is determined using a base line rate plus an applicable spread.
Stock Based Compensation – The Company’s Omnibus Incentive Plan allows for various types of equity-based incentive awards. Stock based compensation expense is based on awards that are expected to vest over the requisite service periods and are based on the fair value of the award measured on the grant date. Vesting requirements vary for directors, officers, and employees. In general, time-based awards fully vest after for directors and vest in equal annual installments over a period for officers and employees. Performance-based awards vest upon achievement of certain milestones. Forfeitures are accounted for when they occur.
Income Taxes - For interim income tax reporting, due to a full valuation allowance on net deferred tax assets, no income tax expense or benefit is recorded unless it is an unusual or infrequently occurring item. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur.
Recent Accounting Pronouncements – In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” The standard replaces the incurred loss model with the current expected credit loss (CECL) model to estimate credit losses for financial assets measured at amortized cost and certain off-balance sheet credit exposures. The CECL model requires companies to estimate credit losses expected over the life of the financial assets based on historical experience, current conditions and reasonable and supportable forecasts. The provisions of the ASU have an effective date for the Company beginning after December 15, 2022 and interim periods within those fiscal years. The Company is evaluating the expected impacts of the ASU.
We consider the applicability and impact of all ASUs. If the ASU is not listed above, it was determined that the ASU was either not applicable or would have an immaterial impact on our financial statements and related disclosures.
9
NOTE 2. - INVENTORY
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, hemp/cannabis inventory, and raw materials inventory. Standard cost is primarily used for finished goods inventory. Inventories are evaluated to determine whether any amounts are not recoverable based on slow moving or obsolete condition and are written off or reserved as appropriate.
Inventories at March 31, 2022 and December 31, 2021 consisted of the following:
| March 31, |
| December 31, | |||
| 2022 |
| 2021 | |||
Inventory - tobacco leaf | $ | | $ | | ||
Inventory - hemp/cannabis | | | ||||
Inventory - finished goods |
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Cigarettes and filtered cigars |
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Inventory - raw materials |
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Cigarette and filtered cigar components | | | ||||
Less: inventory reserve |
| ( |
| ( | ||
$ | | $ | |
NOTE 3. – PROPERTY, PLANT, AND EQUIPMENT, NET
Property, plant, and equipment, net at March 31, 2022 and December 31, 2021 consisted of the following:
March 31, | December 31, | |||||||
| Useful Life |
| 2022 |
| 2021 | |||
Land | $ | | $ | | ||||
Building | | | ||||||
Leasehold Improvements | shorter of | | | |||||
Manufacturing equipment | | | ||||||
Office furniture, fixtures and equipment |
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Laboratory equipment |
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Construction in progress | | | ||||||
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Less: accumulated depreciation |
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| ( |
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Property, plant and equipment, net |
| $ | | $ | |
Depreciation expense was $
NOTE 4. - RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS, AND OTHER LEASES
The Company leases a manufacturing facility and warehouse in North Carolina, a corporate headquarters in Buffalo, New York and a laboratory space in Rockville, Maryland. The corporate headquarters has an initial term of
The following table summarizes the Company’s discount rate and remaining lease terms:
Weighted average remaining lease term in years | ||||
Weighted average discount rate |
| | % |
10
Future minimum lease payments as of March 31, 2022 are as follows:
2022 | $ | | |
2023 | | ||
2024 |
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2025 | | ||
2026 | | ||
Thereafter | | ||
Total lease payments |
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Less: imputed interest |
| ( | |
Total | $ | |
NOTE 5. – INVESTMENTS & OTHER ASSETS
The total carrying value of the Company’s investments and other assets at March 31, 2022 and December 31, 2021 consisted of the following:
March 31, | December 31, | |||||
2022 | 2021 | |||||
Panacea Life Sciences Holdings, Inc. common stock |
| $ | |
| $ | |
Aurora stock warrants | | | ||||
Change Agronomy Ltd. ordinary shares | | — | ||||
Total investments | $ | | $ | | ||
Promissory note receivable | $ | | $ | |
Investment in Panacea Life Sciences Holdings, Inc.
Initial Investment:
On December 3, 2019, the Company entered into a securities purchase agreement with Panacea Life Sciences, Inc. (“Panacea”) whereby the Company acquired shares of Panacea Series B preferred stock; a convertible note receivable with a $
On June 30, 2021, the Company entered into a Promissory Note Exchange Agreement with Panacea and a Securities Exchange Agreement with Panacea, Exactus, Inc. (“Exactus”) and certain other Panacea shareholders. Pursuant to the Securities Exchange Agreement, Exactus fully acquired Panacea. These transactions effected the (i) conversion of all of the Company’s Series B Preferred Stock in Panacea into
11
The Promissory note receivable was valued at $
On October 25, 2021, Exactus announced the completion of a
Investment in Aurora Cannabis Inc.
The Company has an investment in Aurora Cannabis Inc. (“Aurora”) stock warrants that are considered equity securities under ASC 321 – Investments – Equity Securities and a derivative instrument under ASC 815 – Derivatives and Hedging. The stock warrants are not designated as a hedging instrument, and in accordance with ASC 815, the Company’s investment in stock warrants are recorded at fair value with changes in fair value recorded to unrealized gain/loss as shown within the Company’s Consolidated Statements of Operations and Comprehensive Loss. See Note 6 for additional information on the fair value measurements.
Investment in Change Agronomy Ltd.
On December 10, 2021, the Company entered into a subscription agreement to invest £
NOTE 6. – FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS
FASB ASC 820 - “Fair Value Measurements and Disclosures” establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
● | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; |
● | Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and |
● | Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. |
A financial asset’s or a financial liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
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The following table presents information about our assets and liabilities measured at fair value as of March 31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:
Fair Value | ||||||||||||
March 31, 2022 | ||||||||||||
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||
Assets |
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Short-term investment securities: |
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Money market funds | $ | | $ | | $ | | $ | | ||||
Corporate bonds |
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Total short-term investment securities | $ | | $ | | $ | | $ | | ||||
Investments: | ||||||||||||
Panacea Life Sciences Holdings, Inc. common shares | $ | | $ | — | $ | — | $ | | ||||
Aurora stock warrants | — | — | | | ||||||||
Change Agronomy Ltd. ordinary shares | — | — | | | ||||||||
Total investments | $ | | $ | — | $ | | $ | |
Fair Value | ||||||||||||
December 31, 2021 | ||||||||||||
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||
Assets |
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Short-term investment securities: |
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Money market funds | $ | | $ | — | $ | — | $ | | ||||
Corporate bonds |
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Total short-term investment securities | $ | | $ | | $ | — | $ | | ||||
Investments: | ||||||||||||
Panacea Life Sciences Holdings, Inc. common shares | $ | | $ | — | $ | — | $ | | ||||
Aurora stock warrants | — | — | | | ||||||||
Total investments | $ | | $ | — | $ | | $ | |
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 $
Corporate bonds are valued using pricing models maximizing the use of observable inputs for similar securities.
The investment in the Aurora stock warrants is measured at fair value using the Black-Scholes pricing model and is classified within Level 3 of the valuation hierarchy. The unobservable input is an estimated volatility factor of
A
The investment in Panacea Life Sciences Holdings Inc. common shares is considered an equity security with a readily determinable fair value. The fair value is determined using the quotable market price as of the last trading day of the fiscal quarter.
The investment in Change Agronomy Ltd. is in a privately held company and its stock does not have a readily determinable fair value; therefore, the investment is carried at cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer.
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The following table sets forth a summary of the changes in fair value of the Company’s Level 3 investments for the three months ended March 31, 2022:
Fair Value at December 31, 2021 | $ | | |
Unrealized loss on Aurora stock warrants | ( | ||
Investment in Change Agronomy Ltd. ordinary shares | | ||
Fair Value at March 31, 2022 | $ | |
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 March 31, 2022 and December 31, 2021:
Available for Sale Debt Securities | ||||||||||||
March 31, 2022 | ||||||||||||
Amortized | Gross | Gross | ||||||||||
Cost | Unrealized | Unrealized | Fair | |||||||||
| Basis |
| Gains |
| Losses |
| Value | |||||
Corporate bonds | $ | | $ | — | $ | ( | $ | |
Available for Sale Debt Securities | ||||||||||||
December 31, 2021 | ||||||||||||
Amortized | Gross | Gross | ||||||||||
Cost | Unrealized | Unrealized | Fair | |||||||||
| Basis |
| Gains |
| Losses |
| Value | |||||
Corporate bonds | $ | | $ | | $ | ( | $ | |
The following table sets forth a summary of the Company’s available-for-sale securities at amortized cost basis and fair value by contractual maturity as of March 31, 2022 and December 31, 2021:
Available for Sale Debt Securities | ||||||||||||
March 31, 2022 | December 31, 2021 | |||||||||||
Amortized | Amortized | |||||||||||
| Cost Basis |
| Fair Value |
| Cost Basis |
| Fair Value | |||||
Due in one year or less | $ | | $ | | $ | | $ | | ||||
Due after one year through five years |
| |
| |
| |
| | ||||
$ | | $ | | $ | | $ | |
NOTE 7. - INTANGIBLE ASSETS
Total intangible assets at March 31, 2022 and December 31, 2021 consisted of the following:
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Intangible assets, net |
|
|
|
| ||
Patent and trademark costs | $ | | $ | | ||
Less: accumulated amortization |
| ( |
| ( | ||
Patent and trademark costs, net |
| |
| | ||
License fees |
| |
| | ||
Less: accumulated amortization |
| ( |
| ( | ||
License fees, net |
| |
| | ||
MSA signatory costs |
| |
| | ||
| ||||||
License fee for predicate cigarette brand |
| |
| | ||
$ | | $ | |
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Amortization expense relating to the above intangible assets for the three months ended March 31, 2022 amounted to $
NOTE 8. – NOTES PAYABLE
License Fees
On October 22, 2018, the Company entered into a License Agreement with the University of Kentucky. Under the terms of the License Agreement, the Company was obligated to pay the University of Kentucky milestone payments totaling $
D&O Insurance
During the second quarter of 2021, the Company renewed its Director and Officer (“D&O”) insurance for a
The table below outlines our notes payable balances as of March 31, 2022 and December 31, 2021:
March 31, | December 31, | |||||
|
| 2022 |
| 2021 | ||
D&O Insurance | $ | — | $ | |
Accretion of non-cash interest expense amounted to $
NOTE 9. – SEVERANCE LIABILITY
During the second quarter of 2020, the Company recorded severance benefits related to a resignation of $
During 2019, the Company recorded severance benefits of $
The current and long-term accrued severance balance remaining as of March 31, 2022 was $
NOTE 10. – CAPITAL RAISE AND WARRANT EXERCISE
Capital Raise
On June 7, 2021, the Company entered into a placement agent agreement (the “Placement Agent Agreement”) with Cowen and Company, LLC (the “Placement Agent”) relating to the Company’s registered direct offering (the “Offering”) to a select investor (the “Investor”). In addition, on June 7, 2021, the Company and the Investor entered into a securities purchase agreement relating to the issuance and sale of shares of common stock pursuant to which the Investor purchased
15
Warrant Exercise
During the first quarter of 2021, the Company’s warrant holders exercised all
NOTE 11. - COMMITMENTS AND CONTINGENCIES
License agreements and sponsored research – The Company has entered into various license, sponsored research, collaboration, and other agreements (the “Agreements”) with various counter parties in connection with the Company’s plant biotechnology business relating to tobacco, hemp/cannabis and hops. The schedule below summarizes the Company’s commitments, both financial and other, associated with each Agreement. Costs incurred under the Agreements are generally recorded as research and development expenses on the Company’s Consolidated Statements of Operations and Comprehensive Loss.
Future Commitments | |||||||||||||||||||||||||
Commitment |
| Counter Party |
| Product Relationship |
| Commitment Type |
| 2022 |
| 2023 |
| 2024 |
| 2025 | 2026 & After | Total |
| ||||||||
Research Agreement | KeyGene | Hemp / Cannabis | Contract fee | $ | | $ | | $ | | $ | | $ | | $ | | (1) | |||||||||
License Agreement | NCSU | Tobacco | Annual royalty fee | | — | — | — | — | | (2), (3) | |||||||||||||||
License Agreement | NCSU | Tobacco | Minimum annual royalty | | | | | | | (3) | |||||||||||||||
License Agreement | NCSU | Tobacco | Minimum annual royalty | | | | | | |