This article first appeared on GuruFocus.

Release Date: November 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

22nd Century Group Inc (NASDAQ:XXII) has become debt-free and improved its balance sheet significantly, providing a strong foundation for future growth.

The company is focusing on high-margin branded products, which are expected to drive profitability and reduce reliance on low-margin CMO business.

22nd Century Group Inc (NASDAQ:XXII) is the only tobacco company supporting the FDA’s low nicotine mandate, positioning itself as a leader in tobacco harm reduction.

The company has expanded its product offerings to include both full nicotine and very low nicotine (VLN) products, increasing market penetration and consumer choice.

Significant progress has been made in distribution, with VLN products now available in approximately 1,500 stores across 21 states, and authorized in 40 states.

Negative Points

The company reported a net loss from continuing operations of approximately $3.8 million in the third quarter of 2025, reflecting ongoing financial challenges.

Gross profit was a loss of $1.1 million in the third quarter, indicating difficulties in transitioning from low-margin CMO products to higher-margin branded products.

Total cartons sold decreased from 779,000 to 517,000, highlighting a decline in sales volume during the transition period.

The company is still in the early stages of measuring rate of sale metrics, which are crucial for assessing the success of its marketing and distribution efforts.

Despite improvements, the company remains reliant on raising additional capital to support growth, as evidenced by the implementation of an at-the-market offering.

Q & A Highlights

Q: What are 22nd Century Group’s plans for the $14 million in cash they have post-quarter? A: The company plans to use the cash to support operations, advance VLN products in the market, increase store count and distribution, and fund R&D and CapEx initiatives, which they haven’t been able to do much of in the past due to restructuring. (Respondent: CFO, Dan Otto)

Q: Will any of the cash be used to settle outstanding warrants, and what is the share equivalent of these warrants? A: No, the cash will not be used to settle outstanding warrants. The current share equivalent of outstanding warrants is just under 7 million shares, with a fully diluted basis of 23.7 million shares. (Respondent: CFO, Dan Otto)