22nd Century Group, Inc. Q3 FY2024 earnings call

• The company has undergone a dramatic transformation in the past year, with a new strategy in place. - The CMO business model involves providing superior services to customers, owning product until it leaves the factory, and having critical relationships with key customers. - The VLN product is a low nicotine cigarette aiming to give smokers control over nicotine intake. - Strategy to expand VLN SKU lineup and integrate private label VLN into CMO customers' product lines. - Need to reactivate VLN brand in the 5,100 retail outlets carrying its products, with goal of 1 carton per store to break even on VLN. - Cigarillo business is in steady state of reorders, using an existing large c-store partner with a repeatable operating model.

In the third quarter of 2024, net revenue was $5.9 million. The CMO (contract manufacturing) business is the lion's share of revenue currently. The VLN (low nicotine cigarette products) segment had negligible revenue in the third quarter. The CMO business provides a range of services to customers including procurement, product quality, production scheduling, etc., and is a significant contributor. VLN is a low nicotine product with 95% less nicotine than traditional cigarettes, but its revenue was minimal in Q3.

• Expect Q4 2024 revenues to be relatively consistent, with less filtered cigar volume offset by ramping export volume. - Anticipate increasing volume in 2025 across all product lines with new and expanded customer contracts, including export and VLN sales. - Target to breakeven in Q1 of 2025. - Amended senior secured credit facility to reduce monthly debt amortization payments by 50% through August 2025.

• Market risks related to the tobacco industry landscape, such as competition from big tobacco. - Operational risks in reactivating the VLN brand and managing CMO production effectively. - Debt-related risks, although the amended credit facility helps mitigate some of these risks.