Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 07, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q2 | |
Entity File Number | 001-36338 | |
Entity Registrant Name | 22nd Century Group, Inc. | |
Entity Central Index Key | 0001347858 | |
Current Fiscal Year End Date | --12-31 | |
Entity Incorporation, State or Country Code | NV | |
Entity Tax Identification Number | 98-0468420 | |
Entity Address, Address Line One | 8560 Main Street | |
Entity Address, Address Line Two | Suite 4 | |
Entity Address, City or Town | Williamsville | |
Entity Address, State or Province | NY | |
Entity Address, Postal Zip Code | 14221 | |
City Area Code | 716 | |
Local Phone Number | 270-1523 | |
Title of 12(b) Security | Common Stock, $0.00001 par value | |
Security Exchange Name | NYSEAMER | |
Trading Symbol | XXII | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 138,854,193 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Current Assets: | ||
Cash and cash equivalents | $ 844 | $ 485 |
Short-term investment securities | 28,103 | 38,477 |
Accounts receivable, net | 999 | 867 |
Inventory, net | 2,769 | 2,266 |
Prepaid expenses and other assets | 3,580 | 648 |
Total current assets | 36,295 | 42,743 |
Property, plant and equipment: | ||
Machinery and equipment, net | 2,849 | 3,120 |
Operating leases right-of-use assets, net | 651 | 602 |
Total property, plant and equipment | 3,500 | 3,722 |
Other assets: | ||
Intangible assets, net | 8,239 | 8,494 |
Investments | 7,372 | 8,403 |
Convertible note | 5,732 | 5,589 |
Total other assets | 21,343 | 22,486 |
Total assets | 61,138 | 68,951 |
Current liabilities: | ||
Notes payable | 2,247 | 581 |
Operating lease obligations | 333 | 220 |
Accounts payable | 1,019 | 1,997 |
Accrued expenses | 2,235 | 2,619 |
Accrued severance, current | 487 | 359 |
Deferred income | 0 | 5 |
Total current liabilities | 6,321 | 5,781 |
Long-term liabilities: | ||
Notes payable | 292 | 292 |
Operating lease obligations | 318 | 382 |
Severance obligations | 342 | 446 |
Total long-term liabilities | 952 | 1,120 |
Commitments and contingencies (Note 11) | ||
Shareholders' equity | ||
Common stock value | 1 | 1 |
Capital in excess of par value | 188,591 | 187,735 |
Accumulated other comprehensive (loss) income | 52 | 7 |
Accumulated deficit | (134,779) | (125,693) |
Total shareholders' equity | 53,865 | 62,050 |
Total liabilities and shareholders' equity | $ 61,138 | $ 68,951 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2020 | Dec. 31, 2019 |
CONSOLIDATED BALANCE SHEETS | ||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, par value | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, par value | $ 0.00001 | $ 0.00001 |
Common stock, shares issued | 138,854,193 | 138,362,809 |
Common stock, shares outstanding | 138,854,193 | 138,362,809 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Revenue: | ||||
Sale of products, net | $ 6,435 | $ 5,815 | $ 13,493 | $ 12,109 |
Cost of goods sold (exclusive of depreciation shown separately below): | ||||
Products | 6,234 | 5,901 | 13,005 | 12,298 |
Gross profit (loss) | 201 | (86) | 488 | (189) |
Operating expenses: | ||||
Selling, general and administrative (including equity-based compensation ) | 3,501 | 2,586 | 6,640 | 5,060 |
Impairment of intangible assets | 146 | 146 | ||
Depreciation | 157 | 147 | 313 | 282 |
Amortization | 189 | 223 | 361 | 438 |
Total operating expenses | 4,954 | 4,943 | 9,384 | 10,218 |
Operating loss | (4,753) | (5,029) | (8,896) | (10,407) |
Other income (expense): | ||||
Unrealized (loss) gain on investment | 312 | (1,424) | (133) | 1,549 |
Impairment of stock warrant | (1,062) | (1,062) | ||
Realized (loss) on short-term investment securities | 3 | 72 | 56 | |
Litigation expense | (1,891) | 0 | (1,891) | |
Gain on the sale of machinery and equipment | 0 | 87 | ||
Interest income, net | 462 | 243 | 1,074 | 515 |
Interest expense | (19) | (13) | (31) | (24) |
Total other income (expense) | (304) | (3,013) | (152) | 292 |
Loss before income taxes | (5,057) | (8,042) | (9,048) | (10,115) |
Income taxes | 38 | |||
Net loss | (5,057) | (8,042) | (9,086) | (10,115) |
Other comprehensive income (loss): | ||||
Unrealized gain (loss) on short-term investment securities | 241 | 89 | 45 | 236 |
Reclassification of gain to net loss | (3) | (72) | (56) | |
Other comprehensive income (loss) | 238 | 17 | 45 | 180 |
Comprehensive loss | $ (4,819) | $ (8,025) | $ (9,041) | $ (9,935) |
Net loss per common share - basic and diluted | $ (0.04) | $ (0.06) | $ (0.07) | $ (0.08) |
Weighted average common shares outstanding - basic and diluted (in thousands) | 138,854 | 124,662 | 138,732 | 124,653 |
Products Other Than Modified Risk Tobacco Products [Member] | ||||
Operating expenses: | ||||
Research and development (including equity-based compensation ) | $ 957 | $ 1,674 | $ 1,770 | $ 2,914 |
Modified Risk Tobacco Product [Member] | ||||
Operating expenses: | ||||
Research and development (including equity-based compensation ) | $ 4 | $ 313 | $ 154 | $ 1,524 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Capital in Excess of Par Value [Member] | Accumulated Other Comprehensive Income [Member] | Accumulated Deficit [Member] | Total |
Beginning balance at Dec. 31, 2018 | $ 1,000 | $ 170,392,000 | $ 21,000 | $ (99,134,000) | $ 71,280,000 |
Beginning balance (in shares) at Dec. 31, 2018 | 124,642,593 | ||||
Stock issued in connection with option exercises | $ 1,000 | 0 | 0 | 0 | 1,000 |
Net shares issued for options exercised (in shares) | 17,407 | ||||
Equity-based compensation | $ 0 | 449,000 | 0 | 0 | 449,000 |
Equity-based compensation (in shares) | 0 | ||||
Unrealized gain (loss) on short-term investment securities | $ 0 | 0 | 147,000 | 0 | 147,000 |
Reclassification of losses (gains) to net loss | 0 | 0 | 16,000 | 0 | 16,000 |
Net loss | 0 | 0 | 0 | (2,073,000) | (2,073,000) |
Ending balance at Mar. 31, 2019 | $ 2,000 | 170,841,000 | 184,000 | (101,207,000) | 69,820,000 |
Ending balance (in shares) at Mar. 31, 2019 | 124,660,000 | ||||
Beginning balance at Dec. 31, 2018 | $ 1,000 | 170,392,000 | 21,000 | (99,134,000) | 71,280,000 |
Beginning balance (in shares) at Dec. 31, 2018 | 124,642,593 | ||||
Net loss | (10,115,000) | ||||
Ending balance at Jun. 30, 2019 | $ 2,000 | 171,358,000 | 201,000 | (109,249,000) | 62,312,000 |
Ending balance (in shares) at Jun. 30, 2019 | 124,673,936 | ||||
Beginning balance at Mar. 31, 2019 | $ 2,000 | 170,841,000 | 184,000 | (101,207,000) | 69,820,000 |
Beginning balance (in shares) at Mar. 31, 2019 | 124,660,000 | ||||
Net shares issued for options exercised (in shares) | 13,936 | ||||
Equity-based compensation | 517,000 | 517,000 | |||
Unrealized gain (loss) on short-term investment securities | 89,000 | 89,000 | |||
Reclassification of losses (gains) to net loss | (72,000) | (72,000) | |||
Net loss | (8,042,000) | (8,042,000) | |||
Ending balance at Jun. 30, 2019 | $ 2,000 | 171,358,000 | 201,000 | (109,249,000) | 62,312,000 |
Ending balance (in shares) at Jun. 30, 2019 | 124,673,936 | ||||
Beginning balance at Dec. 31, 2019 | $ 1,000 | 187,735,000 | 7,000 | (125,693,000) | 62,050,000 |
Beginning balance (in shares) at Dec. 31, 2019 | 138,362,809 | ||||
Stock issued in connection with RSU vesting | $ 0 | 0 | 0 | 0 | 0 |
Stock issued in connection with RSU vesting (in shares) | 491,384 | ||||
Equity-based compensation | $ 0 | 480,000 | 0 | 0 | 480,000 |
Equity-based compensation (in shares) | 0 | ||||
Unrealized gain (loss) on short-term investment securities | $ 0 | 0 | (196,000) | 0 | (196,000) |
Reclassification of losses (gains) to net loss | 0 | 0 | 3,000 | 0 | 3,000 |
Net loss | 0 | 0 | 0 | (4,029,000) | (4,029,000) |
Ending balance at Mar. 31, 2020 | $ 1,000 | 188,215,000 | (186,000) | (129,722,000) | 58,308,000 |
Ending balance (in shares) at Mar. 31, 2020 | 138,854,193 | ||||
Beginning balance at Dec. 31, 2019 | $ 1,000 | 187,735,000 | 7,000 | (125,693,000) | 62,050,000 |
Beginning balance (in shares) at Dec. 31, 2019 | 138,362,809 | ||||
Net loss | (9,086,000) | ||||
Ending balance at Jun. 30, 2020 | $ 1,000 | 188,591,000 | 52,000 | (134,779,000) | 53,865,000 |
Ending balance (in shares) at Jun. 30, 2020 | 138,854,193 | ||||
Beginning balance at Mar. 31, 2020 | $ 1,000 | 188,215,000 | (186,000) | (129,722,000) | 58,308,000 |
Beginning balance (in shares) at Mar. 31, 2020 | 138,854,193 | ||||
Equity-based compensation | 376,000 | 376,000 | |||
Unrealized gain (loss) on short-term investment securities | 241,000 | 241,000 | |||
Reclassification of losses (gains) to net loss | (3,000) | (3,000) | |||
Net loss | (5,057,000) | (5,057,000) | |||
Ending balance at Jun. 30, 2020 | $ 1,000 | $ 188,591,000 | $ 52,000 | $ (134,779,000) | $ 53,865,000 |
Ending balance (in shares) at Jun. 30, 2020 | 138,854,193 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (9,086) | $ (10,115) |
Adjustments to reconcile net loss to cash used in operating activities: | ||
Impairment of intangible assets | 146 | |
Impairment of stock warrant | 1,062 | |
Amortization and depreciation | 549 | 602 |
Amortization of license fees | 125 | 119 |
Amortization of ROU assets | 151 | 106 |
Unrealized (gain) loss on investment | 133 | (1,549) |
Realized (gain) loss on short-term investment securities | (56) | |
Litigation settlement | 0 | 1,891 |
Gain on the sale of machinery and equipment | 0 | (87) |
Accretion of non cash interest expense | 13 | 21 |
Accretion of interest on Panacea investments | (306) | |
Equity-based employee compensation expense | 856 | 966 |
(Increase) decrease in assets: | ||
Accounts receivable | (132) | (39) |
Inventory | (503) | 112 |
Prepaid expenses and other assets | (2,934) | (345) |
Increase (decrease) in liabilities: | ||
Operating lease obligations | (149) | (107) |
Accounts payable | (1,033) | (610) |
Accrued expenses | (384) | 340 |
Accrued severance | 24 | 0 |
Deferred income | (5) | 7 |
Net cash provided by (used in) operating activities | (11,473) | (8,744) |
Cash flows from investing activities: | ||
Acquisition of patents and trademarks | (198) | (244) |
Acquisition of machinery and equipment | (42) | (398) |
Proceeds from the sale of machinery and equipment | 0 | 166 |
Sales and maturities of short-term investment securities | 19,272 | 18,287 |
Purchase of short-term investment securities | (8,853) | (8,397) |
Net cash provided by investing activities | 10,179 | 9,414 |
Cash flows from financing activities: | ||
Payment on note payable | (542) | (400) |
Proceeds from note payable issuance | 2,195 | |
Proceeds from SBA loan | 1,183 | |
Repayment of SBA loan | (1,183) | |
Net cash used in financing activities | 1,653 | (400) |
Net increase (decrease) in cash and cash equivalents | 359 | 270 |
Cash and cash equivalents - beginning of period | 485 | 605 |
Cash and cash equivalents - end of period | 844 | 875 |
Net cash paid for: | ||
Cash paid during the period for interest | 6 | 3 |
Non-cash transactions: | ||
Patent and trademark additions included in accounts payable | 54 | 198 |
Machinery and equipment additions included in accounts payable | 0 | 58 |
Right-of-use assets and corresponding operating lease obligations | $ 198 | 814 |
Legal settlement included in accrued expenses | $ 1,891 |
NATURE OF BUSINESS AND SUMMARY
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2020 | |
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - Operating results for the six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The balance sheet as of December 31, 2019 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, 2019 audited consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on March 11, 2020. Principles of Consolidation - Nature of Business - Reclassifications COVID-19 Pandemic Our Williamsville, NY corporate re-opened in June and our R&D laboratory in Buffalo, NY re-opened in May and are currently operating under strict safety protocols in accordance with New York State’s reopening guidelines. These protocols include physical distancing, mandatory face coverings, disinfection of surfaces, and other health and safety measures. We continue to encourage remote work arrangements by any and all employees where job duties permit. Although our laboratory in Buffalo reopened in May, some of our external research and development partners were either closed or operating on a modified or limited schedule during the height of the pandemic. The temporary closure of our laboratory and the interruption to our workflow related to COVID-19 have impacted our internal and external laboratory research operations. Our executive leadership team and staff are continuously monitoring this ever-evolving situation and its impacts on our business. Our NASCO production facility in North Carolina remains open, having been classified as an essential business as it is part of the supply chain for grocery stores and convenience stores. Despite the pandemic, we have been able to fulfill sales orders in a timely manner. The safety and well-being of our employees remains a top priority and we to continue monitor and operate in line with local, state, and federal safety guidelines. An outbreak at our production facility, or disruption in our supply chain, could cause us to slow or temporarily cease our manufacturing operations. We will continue to monitor the local, state and federal guidance regarding our business practices. Use of Estimates - Fair Value of Financial Instruments - Investments - Stock Based Compensation Income Taxes - |
INVENTORY
INVENTORY | 6 Months Ended |
Jun. 30, 2020 | |
INVENTORY | |
INVENTORY | 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 and raw materials inventory and 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 June 30, 2020 and December 31, 2019 consisted of the following: June 30, December 31, 2020 2019 Inventory - tobacco leaf $ 1,191 $ 1,178 Inventory - finished goods Cigarettes and filtered cigars 212 106 Inventory - raw materials Cigarette and filtered cigar components 1,466 1,082 Less: inventory reserve (100) (100) $ 2,769 $ 2,266 |
MACHINERY AND EQUIPMENT
MACHINERY AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2020 | |
MACHINERY AND EQUIPMENT | |
MACHINERY AND EQUIPMENT | NOTE 3. - MACHINERY AND EQUIPMENT Machinery and equipment at June 30, 2020 and December 31, 2019 consisted of the following: June 30, December 31, Useful Life 2020 2019 Cigarette manufacturing equipment 3 or 10 years $ 4,896 $ 4,870 Office furniture, fixtures and equipment 5 Years 162 152 Laboratory equipment 5 Years 125 125 Leasehold improvements 6 Years 263 257 Less: accumulated depreciation (2,597) (2,284) Machinery and equipment, net $ 2,849 $ 3,120 Depreciation expense was $157 and $313 for the three and six months ended June 30, 2020, respectively ($147 and $282 for the three and six months ended June 30, 2019, respectively). |
RIGHT-OF-USE ASSETS, LEASE OBLI
RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS, AND OTHER LEASES | 6 Months Ended |
Jun. 30, 2020 | |
RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS, AND OTHER LEASES | |
RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS, AND OTHER LEASES | NOTE 4. - RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS, AND OTHER LEASES On January 1, 2019, the Company adopted ASU 2016-02, Subtopic ASC 842, Leases (the “new guidance”) and elected to use the practical expedient which allowed the Company to carry forward the historical lease classifications of the existing leases as of adoption. Our lessee right of use (ROU) assets represent our right to use an underlying asset and our lease liabilities represent our obligation to make lease payments. The Company leases a manufacturing facility and warehouse in North Carolina, a corporate office space in Williamsville, New York, and a laboratory space in Buffalo, New York. The ROU assets and lease liabilities for these operating leases are recognized as of the commencement date at the net present value of the fixed minimum lease payments for the lease term. 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. The following table summarizes the Company’s discount rate and remaining lease terms: Weighted average remaining lease term in years 2.4 Weighted average discount rate 4.8 % Future minimum lease payments as of June 30, 2020 are as follows: 2020 $ 173 2021 324 2022 92 2023 88 2024 15 Total lease payments 692 Less: imputed interest (41) Total $ 651 |
INVESTMENTS & CONVERTIBLE NOTE
INVESTMENTS & CONVERTIBLE NOTE RECEIVABLE | 6 Months Ended |
Jun. 30, 2020 | |
INVESTMENTS & CONVERTIBLE NOTE RECEIVABLE | |
INVESTMENTS & CONVERTIBLE NOTE RECEIVABLE | NOTE 5. – INVESTMENTS & CONVERTIBLE NOTE RECEIVABLE Investment in Panacea Life Sciences, Inc. On December 3, 2019, the Company entered into a securities purchase agreement with Panacea Life Sciences, Inc. (“Panacea”) for $13,297 in exchange for a 15.8% ownership interest. The Company’s investment consists of three instruments: shares of Series B preferred stock (“preferred stock”); a convertible note receivable; and a warrant (“stock warrant”) to purchase additional shares of Series B preferred stock, to obtain 51% ownership of Panacea, at an exercise price of $2.344 per share. The convertible note receivable has a term of five years , bears interest of 10% per annum, and can be converted to shares of Series B preferred stock at the Company’s discretion. The preferred stock carries an annual 10% cumulative dividend, compounded annually, and has an implicit put option after the fifth anniversary date so long that the stock warrants have not been exercised. The stock warrant may be exercised at any time after the fifth anniversary date and would be accelerated if Panacea achieves certain sales targets for two consecutive years. The Series B preferred stock also has equity preferences in the event of a liquidation, sale, or transfer of Panacea assets. The convertible note receivable and the preferred stock investment are considered available for sale debt securities with a private company that is not traded in active markets. Since observable price quotations were not available at acquisition, fair value was estimated based on cost less an appropriate discount upon acquisition. The discount of each instrument is accreted into interest income over the respective term as shown within the Company’s Consolidated Statements of Operations and Comprehensive Loss. See Note 6 for additional information on these fair value measurements. The stock warrant was recorded at its cost basis in accordance with the practical expedient under ASU 2016-01. In accordance with ASC 326-30-35 and ASC 321-35-3, credit loss risk of available-for-sale securities and impairment risk of investments recorded at cost should be evaluated if negative indicators are present. During the first six months of 2020, the cannabidiol (CBD) industry has experienced an overall decline due to increased competition, FDA regulation uncertainty, and continued uncertainty from COVID-19—all relevant indicators for the valuation of our Panacea investment. Based on our assessment, we determined that no credit loss existed for the available-for-sale debt security instruments as of June 30, 2020. As such, we concluded that the recorded value aligns with the expected cash flows of the instruments. However, we determined that the recorded cost basis of the stock warrant exceeded its fair value due to the negative macroeconomic indicators mentioned above. As such, the Company recognized an impairment charge of $1,062 during the three and six months ended June 30, 2020. 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. The carrying value of the Company’s investments at June 30, 2020 and December 31, 2019 consisted of the following: June 30, December 31, 2020 2019 Aurora stock warrants $ 540 $ 673 Panacea preferred stock 5,029 4,865 Panacea stock warrant 1,803 2,865 Total Investments $ 7,372 $ 8,403 Convertible Note Receivable $ 5,732 $ 5,589 |
FAIR VALUE MEASUREMENTS AND SHO
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS | 6 Months Ended |
Jun. 30, 2020 | |
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS | |
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS | 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. The following table presents information about our assets and liabilities measured at fair value as of June 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value: Fair Value June 30, 2020 Level 1 Level 2 Level 3 Total Assets Short-term investment securities: Money market funds $ 1,123 $ — $ — $ 1,123 Corporate bonds — 26,980 — 26,980 Total short-term investment securities $ 1,123 $ 26,980 $ — $ 28,103 Investment - Aurora stock warrants $ — $ — $ 540 $ 540 Investment - Panacea preferred stock $ — $ — $ 5,029 $ 5,029 Convertible note receivable $ — $ — $ 5,732 $ 5,732 Fair Value December 31, 2019 Level 1 Level 2 Level 3 Total Assets Short-term investment securities: Money market funds $ 12,146 $ — $ — $ 12,146 Corporate bonds — 26,331 — 26,331 Total short-term investment securities $ 12,146 $ 26,331 $ — $ 38,477 Investment - Aurora stock warrants $ — $ — $ 673 $ 673 Investment - Panacea preferred stock $ — $ — $ 4,865 $ 4,865 Convertible note receivable $ — $ — $ 5,589 $ 5,589 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. Corporate bonds are valued using pricing models maximizing the use of observable inputs for similar securities. The investment in the Aurora stock (ACB) 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 141% and 83% at June 30, 2020 and December 31, 2019, respectively. Therefore, changes in market volatility will impact the fair value measurement of our ACB investment. A 20% increase or decrease in the volatility factor used at June 30, 2020 would have the impact of increasing or decreasing the fair value measurement of the stock warrants by approximately $175. A 20% increase or decrease in the volatility factor used at December 31, 2019 would have the impact of increasing or decreasing the fair value measurement of the stock warrants by approximately $260. The Panacea convertible note receivable and the preferred stock investment are considered available-for-sale debt securities with a private company that is not traded in active markets. Since observable price quotations were not available, fair value was estimated based on cost less an appropriate discount upon acquisition. The discount of each instrument is accreted into interest income over the respective term and will adjust the amortized cost basis of the investments. The following table sets forth a summary of the changes in fair value of the Company’s Level 3 investments for the quarter ended June 30, 2020: Fair Value at December 31, 2019 $ 11,128 Unrealized loss as a result of change in fair value (133) Accretion of interest on Panacea Investment 306 Fair Value at June 30, 2020 $ 11,301 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 June 30, 2020 and December 31, 2019: Available for Sale Debt Securities June 30, 2020 Amortized Gross Gross Cost Unrealized Unrealized Fair Basis Gains Losses Value Corporate bonds $ 26,928 $ 140 $ (88) $ 26,980 Convertible note receivable 5,732 — — 5,732 Investment - Panacea preferred stock 5,029 — — 5,029 $ 37,689 $ 140 $ (88) $ 37,741 Available for Sale Debt Securities December 31, 2019 Amortized Gross Gross Cost Unrealized Unrealized Fair Basis Gains Losses Value Corporate bonds $ 26,324 $ 64 $ (57) $ 26,331 Convertible note receivable 5,589 — — 5,589 Investment - Panacea preferred stock 4,865 — — 4,865 $ 36,778 $ 64 $ (57) $ 36,785 The following table sets forth a summary of the Company’s available-for-sale securities from amortized cost basis and fair value by contractual maturity as of June 30, 2020 and December 31, 2019: Available for Sale Debt Securities June 30, 2020 December 31, 2019 Amortized Amortized Cost Basis Fair Value Cost Basis Fair Value Due in one year or less $ 18,796 $ 18,796 $ 16,823 $ 16,851 Due after one year through five years 18,893 18,945 9,501 9,480 Due in five years — — 10,454 10,454 $ 37,689 $ 37,741 $ 36,778 $ 36,785 |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 6 Months Ended |
Jun. 30, 2020 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | NOTE 7. - 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 product. The amounts capitalized relate to intellectual property that the Company owns or to which it has exclusive rights. The Company’s intellectual property capitalized costs are amortized using the straight-line method over the remaining statutory life of the granted patent assets in each of the Company’s patent families, which have estimated expiration dates ranging from 2020 to 2036. 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 patent expiration dates are expected to range from 2020 through 2036. The Company believes costs associated with becoming a signatory to the MSA and acquiring a predicate cigarette product have an indefinite life and as such, no amortization is taken. Total intangible assets at June 30, 2020 and December 31, 2019 consisted of the following: June 30, December 31, 2020 2019 Intangible assets, net Patent and trademark costs $ 5,512 $ 5,712 Less: accumulated amortization and impairment (2,774) (2,839) Patent and trademark costs, net 2,738 2,873 License fees 3,776 3,777 Less: accumulated amortization (827) (708) License fees, net 2,949 3,069 MSA signatory costs 2,202 2,202 License fee for predicate cigarette brand 350 350 $ 8,239 $ 8,494 Amortization expense relating to the above intangible assets for the three and six months ended June 30, 2020 amounted to $189 and $361 respectively ($223 and $438 for the three and six months ended June 30, 2019 respectively). Impairment expense for the three and six months ended June 30, 2020 amounted to $146 (cost of approximately $448 less accumulated amortization of approximately $302). The impairment related to patent intellectual property that would be expired before the Company planned to commercialize. |
NOTES PAYABLE
NOTES PAYABLE | 6 Months Ended |
Jun. 30, 2020 | |
NOTES PAYABLE | |
NOTES PAYABLE | NOTE 8. – NOTES PAYABLE License Fees On June 22, 2018, the Company entered into the Second Amendment to the License Agreement (the “Second Amendment”) with North Carolina State University (“NCSU”) that amended an original License Agreement between the Company and NCSU, dated December 8, 2015, and the First Amendment, dated February 14, 2018, to the original License Agreement. Under the terms of the Second Amendment, the Company was obligated to pay NCSU milestone payments totaling $1,200, which originally amounted to a present value of $1,175. As of June 30, 2020 the Company paid the final milestone payment of $300. The cost of the of acquired license amounted to $1,175 and is included in Intangible assets, net on the Company’s Consolidated Balance Sheets, and is amortized on a straight-line basis over the last-to-expire patent, which is expected to be in 2036. 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 is obligated to pay the University of Kentucky milestone payments totaling $1,200, of which $300 was payable upon execution, and $300 will be payable annually over three years on the anniversary of the execution of the License Agreement. The Company has recorded the present value of the obligations under the License Agreement as a note payable that originally amounted to $1,151. The cost of the of acquired licenses amounted to $1,151 and is included in Intangible assets, net on the Company’s Consolidated Balance Sheets, and will be amortized on a straight-line basis over the last-to-expire patent, which is expected to be in 2033. CARES Act Paycheck Protection Program Loan On May 1, 2020, the Company received an U.S. Small Business Administration Loan (“SBA Loan”) from Bank of America, N.A. related to the COVID-19 crisis in the amount of $1.2 million. On May 12, 2020, the Company repaid the SBA loan in full. D&O Insurance During the second quarter of 2020, the Company renewed its Director and Officer (“D&O”) insurance for a one-year policy premium totaling $2,744. The Company paid $549 as a premium down payment and financed the remaining $2,195 of policy premiums over nine months at a 3.19% annual percentage rate. The financed amount is recorded within current notes payable on the Company’s Consolidated Balance Sheets. The table below outlines our notes payable balances as of June 30, 2020 and December 31, 2019: June 30, December 31, 2020 2019 License Fees $ 293 $ 581 D&O Insurance 1,954 — Total current notes payable $ 2,247 $ 581 Long term license fees $ 292 $ 292 Accretion of non-cash interest expense amounted to $6 and $13 for the three and six months ended June 30, 2020, respectively, and $10 and $21 for the three and six months ended June 30, 2019, respectively. |
SEVERANCE LIABILITY
SEVERANCE LIABILITY | 6 Months Ended |
Jun. 30, 2020 | |
Postemployment Benefits [Abstract] | |
SEVERANCE LIABILITY | NOTE 9. – SEVERANCE LIABILITY During the second quarter of 2020, the Company recorded an accrual for severance benefits for $306 in accordance with FASB ASC 712 - “Compensation – Nonretirement Postemployment Benefits.” Consistent with certain contractual obligations related to a resignation, the Company will provide cash payments and full reimbursement for health insurance premiums under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). The cash payments will be paid over a twelve-month period, on a bi-weekly basis, and the COBRA health insurance premiums will be reimbursed over twelve months . During the third quarter of 2019, the Company recorded an accrual for severance benefits for $721 in accordance with FASB ASC 712 - “Compensation – Nonretirement Postemployment Benefits.” The severance accrual relates to the resignation of the Company’s former President and Chief Executive Officer (the “former CEO”) effective July 26, 2019. Concurrent with the former CEO’s resignation, the Company entered into a Consulting Agreement (the “Agreement”) with the former CEO. The Agreement calls for the Company to pay a monthly consulting fee to the former CEO in the amount of $17 plus health insurance benefits for a period of forty-two months . The Company concluded that the terms of the Agreement met the severance criteria in ASC 712 and accordingly, a severance accrual was recorded. The accrued severance balance remaining as of June 30, 2020 was $829 with $487 and $342 shown as current and long-term accrued severance, respectively, on the Company’s Consolidated Balance Sheets. The accrued severance balance remaining as of December 31, 2019 was $805 with $359 and $446 shown as current and long-term accrued severance, respectively. |
WARRANTS FOR COMMON STOCK
WARRANTS FOR COMMON STOCK | 6 Months Ended |
Jun. 30, 2020 | |
WARRANTS FOR COMMON STOCK | |
WARRANTS FOR COMMON STOCK | NOTE 10. - WARRANTS FOR COMMON STOCK The Company issued warrants to purchase 11,293,211 shares of common stock which remain outstanding as of June 30, 2020. The warrants have an exercise price of $1.11 per share and an expiration date of November 25, 2024. The outstanding warrants do not include anti-dilution features and therefore are not considered derivative instruments and do not have an associated warrant liability. The following table summarizes the Company’s outstanding warrant activity since December 31, 2018: Number of Warrants in thousands Warrants outstanding at December 31, 2018 11,293 Warrants exercised in Q4 2019 (11,293) Warrants issued in Q4 2019 11,293 Warrants outstanding at June 30, 2020 11,293 There were no warrants issued or exercised during the first six months of 2020. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 11. - COMMITMENTS AND CONTINGENCIES License agreements and sponsored research – Future Commitments Commitment Counter Party Product Relationship Commitment Type 2020 2021 2022 2023 2024 & After Total Research Agreement KeyGene Hemp / Cannabis Contract fee $ 600 $ 1,200 $ 1,200 $ 1,200 $ 295 $ 4,495 (1) License Agreement NCSU Tobacco Annual royalty fee 113 225 225 — — 563 (2), (3) License Agreement NCSU Tobacco Minimum annual royalty 25 25 50 50 650 800 (3) License Agreement NCSU Tobacco Minimum annual royalty 50 50 50 50 550 750 (3) Sublicense Agreement Anandia Laboratories, Inc. Hemp / Cannabis Annual license fee 10 10 10 10 120 160 (4) Growing Agreement Various Various Contract fee 75 — — — — 75 (5) $ 873 $ 1,510 $ 1,535 $ 1,310 $ 1,615 $ 6,843 (1) Exclusive agreement with the Company with respect to the Cannabis Sativa L. plant (the "Field"). The initial term of the agreement is five years with an option for an additional two years . The aggregate cost of the agreement over the initial term is $6,000 . The Company will exclusively own all results and all intellectual property relating to the results of the collaboration with KeyGene (the "Results”). The Company will pay royalties in varying amounts to KeyGene relating to the Company's commercialization in the Field of certain Results. The Company has granted KeyGene a license to commercialize the Results outside of the Field and KeyGene will pay royalties in varying amounts to the Company relating to KeyGene's commercialization outside of the Field of the Results. (2) The license agreement also requires a milestone payment of $150 upon FDA approval or clearance of a product that uses the NCSU licensed technology. The annual royalty fee is credited against running royalties on sales of licensed products. (3) The Company is also responsible for reimbursing NSCU for actual third-party patent costs incurred, including capitalized patent costs and patent maintenance costs. These costs vary from year to year and the Company has certain rights to direct the activities that result in these costs. (4) The Company is also responsible for the payment of certain costs, including, capitalized patent costs and patent maintenance costs, a running royalty on future net sales of products made from the sublicensed intellectual property, and a sharing of future sublicensing consideration received from sublicensing to third parties. (5) Various R&D growing agreements for hemp / cannabis and tobacco. Investment in Panacea - Modified Risk Tobacco Product Application (“MRTP Application”) Litigation Class Action 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 March 25, 2019, Plaintiffs’ counsel in the Fitch Fitch Bull Fitch Bull Bull On May 28, 2019, the plaintiff in the Fitch Bull On September 16, 2019, pursuant to a joint motion by the parties, the Court in the Bull Plaintiffs in the Bull On January 3, 2020, the Court reassigned the Bull On January 29, 2020, the Company and Messrs. Sicignano and Brodfuehrer filed a Motion to Dismiss the Amended Complaint. On March 30, 2020, Plaintiffs filed a brief in opposition to the motion to dismiss. We then filed our final reply brief on April 29, 2020. On July 31, 2020, the Court heard oral arguments on our motion to dismiss and we are awaiting their decision. We believe that the claims are frivolous, meritless and that the Company and Messrs. Sicignano and Brodfuehrer have substantial legal and factual defenses to the claims. We intend to vigorously defend the Company and Messrs. Sicignano and Brodfuehrer against such claims. Shareholder Derivative Cases On February 6, 2019, Melvyn Klein, a resident of Nassau County New York, 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 United States District Court for the Eastern District of New York entitled: Melvyn Klein, derivatively on behalf of 22nd Century Group v. Henry Sicignano, III, Richard M. Sanders, Joseph Alexander Dunn, Nora B. Sullivan, James W. Cornell, John T. Brodfuehrer and 22nd Century Group, Inc Case No. 1:19-cv-00748 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. v. 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. 801786/2019 Company; and (v) the individual defendants allegedly engaged in gross mismanagement. The Complaint seeks declaratory relief, unspecified monetary damages, corrective corporate governance actions, and attorney’s fees and costs. On April 12, 2019, the parties jointly filed a Stipulated Notice of Removal in United States District Court for the Western District of New York. On April 23, 2019, the parties jointly filed an Amended Stipulated Notice of Removal in the Western District of New York. On May 3, 2019, pursuant to a stipulation from the parties, the Court ordered this litigation stayed. 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 August 15, 2019, the Court consolidated the Mathew Klein 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. v. 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. 807214/2019 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. v. James W. Cornell, Richard M. Sanders, Nora B. Sullivan, Henry Sicignano, III, and John T. Brodfuehrer, Case No. A-20-808599. 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. v. James W. Cornell, Richard M. Sanders, Nora B. Sullivan, Henry Sicignano, III, and John T. Brodfuehrer, Case No. A-20-808599. Mr. Wayne 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. 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. 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 March 25, 2020, the Court ordered the Brocutto Wayne Shareholder Derivative Demand On February 19, 2019, the Company received a demand letter from attorneys representing Van McClendon, a shareholder of the Company, in which Mr. McClendon demanded that the Company’s Board of Directors take action to pursue certain purported causes of action on behalf of the Company to remedy alleged breaches of fiduciary duties by each of the members of the Company’s Board of Directors, the Company’s Chief Executive Officer, Henry Sicignano III, and the Company’s Chief Financial Officer, John T. Brodfuehrer. On February 28, 2019, the Board appointed a Special Committee of independent directors and instructed the Committee to assess whether pursuing the claims detailed in the demand letter would be in the best interests of the Company. Subsequently, Mr. McClendon sold his shares and withdrew his demand. On May 7, 2019, after Mr. McClendon sold his shares, the Company received a similar demand letter from attorneys representing Jeremy Houck, a shareholder of the Company. Pursuant to the Board’s instruction, the Special Committee completed an investigation of the claims detailed in Mr. Houck’s demand letter. The Special Committee determined that pursuing such claims would not be in the best interest of the Company. On February 27, 2020, the Board of Directors adopted and approved the Special Committee’s determination. |
EQUITY- BASED COMPENSATION
EQUITY- BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2020 | |
EQUITY- BASED COMPENSATION | |
EQUITY- BASED COMPENSATION | NOTE 12 – EQUITY- BASED COMPENSATION On April 12, 2014, the stockholders of the Company approved the 22nd Century Group, Inc. 2014 Omnibus Incentive Plan (the “OIP”) and the authorization of 5,000,000 shares to be reserved for issuance thereunder. On April 29, 2017, the stockholders approved an amendment to the OIP to increase the number of shares available for issuance by an additional 5,000,000 shares and on May 3, 2019, the stockholders approved an additional amendment to the OIP to increase the number of shares available for issuance by an additional 5,000,000 shares. The OIP allows for the granting of equity and cash incentive awards to eligible individuals over the life of the OIP, including the issuance of up to an aggregate of 15,000,000 shares of the Company’s common stock pursuant to awards under the OIP. The OIP 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 OIP and the number of shares of common stock to underlie each such award under the OIP. As of June 30, 2020, the Company had available 4,409,969 shares remaining for future awards under the OIP. Restricted Stock (“RSU”) Unvested RSUs Weighted Average Number of Grant-date Shares Fair Value shares in thousands Unvested at December 31, 2019 951 $ 2.15 Granted 2,696 $ 0.70 Vested (491) $ 2.36 Forfeited (214) $ 1.11 Unvested at June 30, 2020 2,942 $ 0.87 The fair value of RSUs that vested during the six months ended June 30, 2020 was approximately $362 based on the stock price at the time of vesting. As of June 30, 2020, unrecognized restricted stock compensation expense amounted to $2,059 which is expected to be recognized over a weighted average period of approximately 1.94 years. Stock Options. Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Options Price Term Value shares in thousands Outstanding at December 31, 2019 7,837 $ 1.49 Forfeited (52) $ 2.28 Expired (362) $ 1.43 Outstanding June 30, 2020 7,423 $ 1.49 5.1 years $ 47 Exercisable at June 30, 2020 6,559 $ 1.48 5.0 years $ 26 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. As of June 30, 2020, unrecognized stock option compensation expense amounted to $204 which is expected to be recognized over a weighted average period of approximately 0.7 years. In addition, there is approximately $637 of unrecognized stock option compensation expense that requires the achievement of certain milestones which have yet to be obtained. Restricted Stock and Stock Option Compensation Expense Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Sales, general, and administrative $ 334 $ 446 $ 772 $ 795 Research and Development 42 71 84 171 Total restricted stock and stock option compensation $ 376 $ 517 $ 856 $ 966 |
REVENUE RECOGNITION
REVENUE RECOGNITION | 6 Months Ended |
Jun. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE RECOGNITION | NOTE 13. – REVENUE RECOGNITION The Company recognizes revenue when it satisfies a performance obligation by transferring control of the product to a customer. The Company’s customer contracts consist of obligations to manufacture the customer’s branded filtered cigars and cigarettes. For certain 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 is recognized net of cash discounts, sales returns and allowances. There was no allowance for discounts or returns and allowances at June 30, 2020 and December 31, 2019. Contract Assets and Liabilities Unbilled receivables (contract assets) represent revenues recognized for performance obligations that have been satisfied but have not been billed. These receivables are included as Accounts receivable, net on the Consolidated Balance Sheets. Customer payment terms vary depending on the terms of each customer contract, but payment is generally due prior to product shipment or within extended credit terms up to twenty-one (21) days after shipment. Deferred Revenue (contract liabilities) relate to down payments received from customers in advance of satisfying a performance obligation. This deferred revenue is included as Deferred income on the Consolidated Balance Sheets. Total contract assets and contract liabilities are as follows: June 30, December 31, 2020 2019 Unbilled receivables $ 164 $ 406 Deferred Revenue — 5 Net contract assets $ 164 $ 401 Disaggregation of Revenue The Company’s net sales revenue is derived from customers located primarily in the United States of America and is disaggregated by the timing of revenue recognition—net sales transferred over time and net sales transferred at a point in time. All revenue is related to contract manufacturing. Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Net sales-over time $ 3,718 $ 3,444 $ 8,526 $ 7,029 Net sales-point in time 2,717 2,371 4,967 5,080 Total Revenue $ 6,435 $ 5,815 $ 13,493 $ 12,109 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Jun. 30, 2020 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | NOTE 14. – EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings (loss) per common share for the three and six months ended June 30, 2020 and June 30, 2019, respectively. Outstanding warrants, options, and restricted stock units were excluded from the calculation of diluted EPS as the effect was antidilutive. Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (in thousands) Net loss $ (5,057) $ (8,042) $ (9,086) $ (10,115) Weighted average common shares outstanding - basic and diluted 138,854 124,662 138,732 124,653 Net loss per common share - basic and diluted $ (0.04) $ (0.06) $ (0.07) $ (0.08) Anti-dilutive shares are as follows: Warrants 11,293 11,293 11,293 11,293 Options 7,423 7,703 7,423 7,703 Restricted stock units 2,942 693 2,942 693 21,659 19,689 21,659 19,689 |
NATURE OF BUSINESS AND SUMMAR_2
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation - Operating results for the six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The balance sheet as of December 31, 2019 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, 2019 audited consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on March 11, 2020. |
Principles of Consolidation | Principles of Consolidation - |
Nature of Business | Nature of Business - |
Reclassifications | Reclassifications |
COVID-19 Pandemic | COVID-19 Pandemic Our Williamsville, NY corporate re-opened in June and our R&D laboratory in Buffalo, NY re-opened in May and are currently operating under strict safety protocols in accordance with New York State’s reopening guidelines. These protocols include physical distancing, mandatory face coverings, disinfection of surfaces, and other health and safety measures. We continue to encourage remote work arrangements by any and all employees where job duties permit. Although our laboratory in Buffalo reopened in May, some of our external research and development partners were either closed or operating on a modified or limited schedule during the height of the pandemic. The temporary closure of our laboratory and the interruption to our workflow related to COVID-19 have impacted our internal and external laboratory research operations. Our executive leadership team and staff are continuously monitoring this ever-evolving situation and its impacts on our business. Our NASCO production facility in North Carolina remains open, having been classified as an essential business as it is part of the supply chain for grocery stores and convenience stores. Despite the pandemic, we have been able to fulfill sales orders in a timely manner. The safety and well-being of our employees remains a top priority and we to continue monitor and operate in line with local, state, and federal safety guidelines. An outbreak at our production facility, or disruption in our supply chain, could cause us to slow or temporarily cease our manufacturing operations. We will continue to monitor the local, state and federal guidance regarding our business practices. |
Use of Estimates | Use of Estimates - |
Fair Value of Financial Instruments | Fair Value of Financial Instruments - |
Investments | Investments - |
Stock Based Compensation | Stock Based Compensation |
Income Taxes | Income Taxes - |
INVENTORY (Tables)
INVENTORY (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
INVENTORY | |
Schedule of Inventories | June 30, December 31, 2020 2019 Inventory - tobacco leaf $ 1,191 $ 1,178 Inventory - finished goods Cigarettes and filtered cigars 212 106 Inventory - raw materials Cigarette and filtered cigar components 1,466 1,082 Less: inventory reserve (100) (100) $ 2,769 $ 2,266 |
MACHINERY AND EQUIPMENT (Tables
MACHINERY AND EQUIPMENT (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
MACHINERY AND EQUIPMENT | |
Schedule of Machinery and equipment | June 30, December 31, Useful Life 2020 2019 Cigarette manufacturing equipment 3 or 10 years $ 4,896 $ 4,870 Office furniture, fixtures and equipment 5 Years 162 152 Laboratory equipment 5 Years 125 125 Leasehold improvements 6 Years 263 257 Less: accumulated depreciation (2,597) (2,284) Machinery and equipment, net $ 2,849 $ 3,120 |
RIGHT-OF-USE ASSETS, LEASE OB_2
RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS AND OTHER LEASES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS, AND OTHER LEASES | |
Summary of discount rate and lease term | Weighted average remaining lease term in years 2.4 Weighted average discount rate 4.8 % |
Schedule of future minimum lease payments | 2020 $ 173 2021 324 2022 92 2023 88 2024 15 Total lease payments 692 Less: imputed interest (41) Total $ 651 |
INVESTMENTS & CONVERTIBLE NOT_2
INVESTMENTS & CONVERTIBLE NOTE RECEIVABLE (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
INVESTMENTS & CONVERTIBLE NOTE RECEIVABLE | |
Schedule of carrying value of investments | June 30, December 31, 2020 2019 Aurora stock warrants $ 540 $ 673 Panacea preferred stock 5,029 4,865 Panacea stock warrant 1,803 2,865 Total Investments $ 7,372 $ 8,403 Convertible Note Receivable $ 5,732 $ 5,589 |
FAIR VALUE MEASUREMENTS AND S_2
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS | |
Schedule of assets and liabilities measured at fair value | Fair Value June 30, 2020 Level 1 Level 2 Level 3 Total Assets Short-term investment securities: Money market funds $ 1,123 $ — $ — $ 1,123 Corporate bonds — 26,980 — 26,980 Total short-term investment securities $ 1,123 $ 26,980 $ — $ 28,103 Investment - Aurora stock warrants $ — $ — $ 540 $ 540 Investment - Panacea preferred stock $ — $ — $ 5,029 $ 5,029 Convertible note receivable $ — $ — $ 5,732 $ 5,732 Fair Value December 31, 2019 Level 1 Level 2 Level 3 Total Assets Short-term investment securities: Money market funds $ 12,146 $ — $ — $ 12,146 Corporate bonds — 26,331 — 26,331 Total short-term investment securities $ 12,146 $ 26,331 $ — $ 38,477 Investment - Aurora stock warrants $ — $ — $ 673 $ 673 Investment - Panacea preferred stock $ — $ — $ 4,865 $ 4,865 Convertible note receivable $ — $ — $ 5,589 $ 5,589 |
Schedule of the changes in fair value of Level 3 investments | Fair Value at December 31, 2019 $ 11,128 Unrealized loss as a result of change in fair value (133) Accretion of interest on Panacea Investment 306 Fair Value at June 30, 2020 $ 11,301 |
Schedule of available-for-sale securities reconciliation | Available for Sale Debt Securities June 30, 2020 Amortized Gross Gross Cost Unrealized Unrealized Fair Basis Gains Losses Value Corporate bonds $ 26,928 $ 140 $ (88) $ 26,980 Convertible note receivable 5,732 — — 5,732 Investment - Panacea preferred stock 5,029 — — 5,029 $ 37,689 $ 140 $ (88) $ 37,741 Available for Sale Debt Securities December 31, 2019 Amortized Gross Gross Cost Unrealized Unrealized Fair Basis Gains Losses Value Corporate bonds $ 26,324 $ 64 $ (57) $ 26,331 Convertible note receivable 5,589 — — 5,589 Investment - Panacea preferred stock 4,865 — — 4,865 $ 36,778 $ 64 $ (57) $ 36,785 |
Schedule of available for sale securities classified by contractual maturity | Available for Sale Debt Securities June 30, 2020 December 31, 2019 Amortized Amortized Cost Basis Fair Value Cost Basis Fair Value Due in one year or less $ 18,796 $ 18,796 $ 16,823 $ 16,851 Due after one year through five years 18,893 18,945 9,501 9,480 Due in five years — — 10,454 10,454 $ 37,689 $ 37,741 $ 36,778 $ 36,785 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
INTANGIBLE ASSETS | |
Schedule of Intangible Assets | June 30, December 31, 2020 2019 Intangible assets, net Patent and trademark costs $ 5,512 $ 5,712 Less: accumulated amortization and impairment (2,774) (2,839) Patent and trademark costs, net 2,738 2,873 License fees 3,776 3,777 Less: accumulated amortization (827) (708) License fees, net 2,949 3,069 MSA signatory costs 2,202 2,202 License fee for predicate cigarette brand 350 350 $ 8,239 $ 8,494 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
NOTES PAYABLE | |
Schedule of notes payable balances | June 30, December 31, 2020 2019 License Fees $ 293 $ 581 D&O Insurance 1,954 — Total current notes payable $ 2,247 $ 581 Long term license fees $ 292 $ 292 |
WARRANTS FOR COMMON STOCK (Tabl
WARRANTS FOR COMMON STOCK (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
WARRANTS FOR COMMON STOCK | |
Schedule of warrant activity | Number of Warrants in thousands Warrants outstanding at December 31, 2018 11,293 Warrants exercised in Q4 2019 (11,293) Warrants issued in Q4 2019 11,293 Warrants outstanding at June 30, 2020 11,293 |
COMMITMENTS & CONTINGENCIES (Ta
COMMITMENTS & CONTINGENCIES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
Contractual Obligation, Fiscal Year Maturity [Table Text Block] | Future Commitments Commitment Counter Party Product Relationship Commitment Type 2020 2021 2022 2023 2024 & After Total Research Agreement KeyGene Hemp / Cannabis Contract fee $ 600 $ 1,200 $ 1,200 $ 1,200 $ 295 $ 4,495 (1) License Agreement NCSU Tobacco Annual royalty fee 113 225 225 — — 563 (2), (3) License Agreement NCSU Tobacco Minimum annual royalty 25 25 50 50 650 800 (3) License Agreement NCSU Tobacco Minimum annual royalty 50 50 50 50 550 750 (3) Sublicense Agreement Anandia Laboratories, Inc. Hemp / Cannabis Annual license fee 10 10 10 10 120 160 (4) Growing Agreement Various Various Contract fee 75 — — — — 75 (5) $ 873 $ 1,510 $ 1,535 $ 1,310 $ 1,615 $ 6,843 (1) Exclusive agreement with the Company with respect to the Cannabis Sativa L. plant (the "Field"). The initial term of the agreement is five years with an option for an additional two years . The aggregate cost of the agreement over the initial term is $6,000 . The Company will exclusively own all results and all intellectual property relating to the results of the collaboration with KeyGene (the "Results”). The Company will pay royalties in varying amounts to KeyGene relating to the Company's commercialization in the Field of certain Results. The Company has granted KeyGene a license to commercialize the Results outside of the Field and KeyGene will pay royalties in varying amounts to the Company relating to KeyGene's commercialization outside of the Field of the Results. (2) The license agreement also requires a milestone payment of $150 upon FDA approval or clearance of a product that uses the NCSU licensed technology. The annual royalty fee is credited against running royalties on sales of licensed products. (3) The Company is also responsible for reimbursing NSCU for actual third-party patent costs incurred, including capitalized patent costs and patent maintenance costs. These costs vary from year to year and the Company has certain rights to direct the activities that result in these costs. (4) The Company is also responsible for the payment of certain costs, including, capitalized patent costs and patent maintenance costs, a running royalty on future net sales of products made from the sublicensed intellectual property, and a sharing of future sublicensing consideration received from sublicensing to third parties. (5) Various R&D growing agreements for hemp / cannabis and tobacco. |
EQUITY- BASED COMPENSATION (Tab
EQUITY- BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
EQUITY- BASED COMPENSATION | |
Summary of changes in unvested restricted stock | Unvested RSUs Weighted Average Number of Grant-date Shares Fair Value shares in thousands Unvested at December 31, 2019 951 $ 2.15 Granted 2,696 $ 0.70 Vested (491) $ 2.36 Forfeited (214) $ 1.11 Unvested at June 30, 2020 2,942 $ 0.87 |
Summary of stock option activity | Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Options Price Term Value shares in thousands Outstanding at December 31, 2019 7,837 $ 1.49 Forfeited (52) $ 2.28 Expired (362) $ 1.43 Outstanding June 30, 2020 7,423 $ 1.49 5.1 years $ 47 Exercisable at June 30, 2020 6,559 $ 1.48 5.0 years $ 26 |
Schedule of compensation costs related to restricted stock and stock options | Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Sales, general, and administrative $ 334 $ 446 $ 772 $ 795 Research and Development 42 71 84 171 Total restricted stock and stock option compensation $ 376 $ 517 $ 856 $ 966 |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Contract with Customer, Asset and Liability [Table Text Block] | June 30, December 31, 2020 2019 Unbilled receivables $ 164 $ 406 Deferred Revenue — 5 Net contract assets $ 164 $ 401 |
Disaggregation of Revenue [Table Text Block] | Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Net sales-over time $ 3,718 $ 3,444 $ 8,526 $ 7,029 Net sales-point in time 2,717 2,371 4,967 5,080 Total Revenue $ 6,435 $ 5,815 $ 13,493 $ 12,109 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
EARNINGS PER SHARE | |
Schedule of computation of basic and diluted earnings per common share | Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (in thousands) Net loss $ (5,057) $ (8,042) $ (9,086) $ (10,115) Weighted average common shares outstanding - basic and diluted 138,854 124,662 138,732 124,653 Net loss per common share - basic and diluted $ (0.04) $ (0.06) $ (0.07) $ (0.08) Anti-dilutive shares are as follows: Warrants 11,293 11,293 11,293 11,293 Options 7,423 7,703 7,423 7,703 Restricted stock units 2,942 693 2,942 693 21,659 19,689 21,659 19,689 |
Schedule of anti-dilutive shares excluded from dilutive securities | Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (in thousands) Net loss $ (5,057) $ (8,042) $ (9,086) $ (10,115) Weighted average common shares outstanding - basic and diluted 138,854 124,662 138,732 124,653 Net loss per common share - basic and diluted $ (0.04) $ (0.06) $ (0.07) $ (0.08) Anti-dilutive shares are as follows: Warrants 11,293 11,293 11,293 11,293 Options 7,423 7,703 7,423 7,703 Restricted stock units 2,942 693 2,942 693 21,659 19,689 21,659 19,689 |
NATURE OF BUSINESS AND SUMMAR_3
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2020item | Jun. 30, 2020subsidiary | |
Condensed Financial Statements, Captions [Line Items] | ||
Number of subsidiaries | 3 | |
Number of line items affected by reclassifications | item | 2 | |
Twenty Second Century Ltd [Member] | ||
Condensed Financial Statements, Captions [Line Items] | ||
Number of subsidiaries | 2 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
INVENTORY | ||
Inventory - tobacco leaf | $ 1,191 | $ 1,178 |
Inventory - finished goods | 212 | 106 |
Inventory - raw materials | 1,466 | 1,082 |
Less: inventory reserve | (100) | (100) |
Inventory, Net | $ 2,769 | $ 2,266 |
MACHINERY AND EQUIPMENT (Detail
MACHINERY AND EQUIPMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Property, Plant and Equipment [Line Items] | |||||
Less: accumulated depreciation | $ (2,597) | $ (2,597) | $ (2,284) | ||
Machinery and equipment, net | 2,849 | 2,849 | 3,120 | ||
Depreciation | 157 | $ 147 | 313 | $ 282 | |
Cigarette manufacturing equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Machinery and Equipment, Gross | 4,896 | $ 4,896 | 4,870 | ||
Cigarette manufacturing equipment | Maximum | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, Plant and Equipment, Useful Life | 10 years | ||||
Cigarette manufacturing equipment | Minimum | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, Plant and Equipment, Useful Life | 3 years | ||||
Office furniture, fixtures and equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Machinery and Equipment, Gross | 162 | $ 162 | 152 | ||
Property, Plant and Equipment, Useful Life | 5 years | ||||
Laboratory equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Machinery and Equipment, Gross | 125 | $ 125 | 125 | ||
Property, Plant and Equipment, Useful Life | 5 years | ||||
Leasehold Improvements [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Machinery and Equipment, Gross | $ 263 | $ 263 | $ 257 | ||
Property, Plant and Equipment, Useful Life | 6 years |
RIGHT-OF-USE ASSETS, LEASE OB_3
RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS AND OTHER LEASES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Jun. 30, 2020 | |
RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS, AND OTHER LEASES | ||
Lease, Practical Expedient, Use of Hindsight [true false] | true | |
Weighted average remaining lease term in years | 2 years 4 months 24 days | |
Weighted average discount rate | 4.80% | |
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | ||
2020 | $ 173 | |
2021 | 324 | |
2022 | 92 | |
2023 | 88 | |
2024 | 15 | |
Total lease payments | 692 | |
Less: imputed interest | (41) | |
Operating Lease, Liability | $ 651 |
INVESTMENTS & CONVERTIBLE NOT_3
INVESTMENTS & CONVERTIBLE NOTE RECEIVABLE (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020USD ($)$ / shares | Jun. 30, 2020USD ($)item$ / shares | Dec. 31, 2019USD ($) | Dec. 03, 2019USD ($) | |
Marketable Securities [Line Items] | ||||
Investments | $ 7,372 | $ 7,372 | $ 8,403 | |
Exercise price | $ / shares | $ 1.11 | $ 1.11 | ||
Impairment of stock warrant | $ 1,062 | $ 1,062 | ||
Convertible note | 5,732 | 5,732 | 5,589 | |
Panacea preferred stock | ||||
Marketable Securities [Line Items] | ||||
Investments | $ 5,029 | $ 5,029 | 4,865 | |
Dividend rate | 10.00% | |||
Investment in Panacea | ||||
Marketable Securities [Line Items] | ||||
Investments | $ 13,297 | |||
Ownership percentage (in percent) | 15.80% | |||
Number of instruments comprising the investment | item | 3 | |||
Note receivable interest rate | 10.00% | 10.00% | ||
Note receivable term | 5 years | |||
Investment in Panacea | Warrant | ||||
Marketable Securities [Line Items] | ||||
Investments | $ 1,803 | $ 1,803 | 2,865 | |
Ownership percentage (in percent) | 51.00% | 51.00% | ||
Exercise price | $ / shares | $ 2.344 | $ 2.344 | ||
Aurora Cannabis Inc [Member] | Warrant | ||||
Marketable Securities [Line Items] | ||||
Investments | $ 540 | $ 540 | $ 673 |
FAIR VALUE MEASUREMENTS - Recur
FAIR VALUE MEASUREMENTS - Recurring (Details) $ / shares in Units, $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2020USD ($)$ / shares | Dec. 31, 2019USD ($) | |
Money Market Funds | ||
Assets | ||
Net Asset Value Per Share | $ / shares | $ 1 | |
Warrant | ||
Assets | ||
Estimated change in fair value due to change in input | $ 175 | |
Warrant | Volatility | ||
Assets | ||
Equity Securities, FV-NI, Measurement Input | 1.41 | 0.83 |
Input increase (decrease) assumption, as a percent | 20.00% | 20.00% |
Estimated change in fair value due to change in input | $ 260 | |
Fair Value, Recurring [Member] | Short-term Investments [Member] | ||
Assets | ||
Assets at fair value | $ 28,103 | 38,477 |
Fair Value, Recurring [Member] | Money Market Funds | ||
Assets | ||
Assets at fair value | 1,123 | 12,146 |
Fair Value, Recurring [Member] | Corporate Bonds | ||
Assets | ||
Assets at fair value | 26,980 | 26,331 |
Fair Value, Recurring [Member] | Warrant | ||
Assets | ||
Assets at fair value | 540 | 673 |
Fair Value, Recurring [Member] | Panacea preferred stock | ||
Assets | ||
Assets at fair value | 5,029 | 4,865 |
Fair Value, Recurring [Member] | Notes Receivable [Member] | ||
Assets | ||
Assets at fair value | 5,732 | 5,589 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 | Short-term Investments [Member] | ||
Assets | ||
Assets at fair value | 1,123 | 12,146 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 | Money Market Funds | ||
Assets | ||
Assets at fair value | 1,123 | 12,146 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 | Corporate Bonds | ||
Assets | ||
Assets at fair value | 0 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 | Warrant | ||
Assets | ||
Assets at fair value | 0 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 | Panacea preferred stock | ||
Assets | ||
Assets at fair value | 0 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 | Notes Receivable [Member] | ||
Assets | ||
Assets at fair value | 0 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 | Short-term Investments [Member] | ||
Assets | ||
Assets at fair value | 26,980 | 26,331 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 | Money Market Funds | ||
Assets | ||
Assets at fair value | 0 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 | Corporate Bonds | ||
Assets | ||
Assets at fair value | 26,980 | 26,331 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 | Warrant | ||
Assets | ||
Assets at fair value | 0 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 | Panacea preferred stock | ||
Assets | ||
Assets at fair value | 0 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 | Notes Receivable [Member] | ||
Assets | ||
Assets at fair value | 0 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 | Short-term Investments [Member] | ||
Assets | ||
Assets at fair value | 0 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 | Money Market Funds | ||
Assets | ||
Assets at fair value | 0 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 | Corporate Bonds | ||
Assets | ||
Assets at fair value | 0 | 0 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 | Warrant | ||
Assets | ||
Assets at fair value | 540 | 673 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 | Panacea preferred stock | ||
Assets | ||
Assets at fair value | 5,029 | 4,865 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 | Notes Receivable [Member] | ||
Assets | ||
Assets at fair value | $ 5,732 | $ 5,589 |
FAIR VALUE MEASUREMENTS - Chang
FAIR VALUE MEASUREMENTS - Changes in fair value, Level 3 (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2020USD ($) | |
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS | |
Fair value at beginning of the period | $ 11,128 |
Unrealized loss as a result of change in fair value | (133) |
Accretion of interest on Panacea investment | 306 |
Fair value at end of the period | $ 11,301 |
FAIR VALUE MEASUREMENTS - Avail
FAIR VALUE MEASUREMENTS - Available-for-sale securities (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Available-for-sale Securities - Amortized Cost Basis | $ 37,689 | $ 36,778 |
Available-for-sale Securities - Gross Unrealized Gains | 140 | 64 |
Available-for-sale Securities - Gross Unrealized Losses | (88) | (57) |
Available-for-sale Securities - Fair Value | 37,741 | 36,785 |
Corporate Bonds | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Available-for-sale Securities - Amortized Cost Basis | 26,928 | 26,324 |
Available-for-sale Securities - Gross Unrealized Gains | 140 | 64 |
Available-for-sale Securities - Gross Unrealized Losses | (88) | (57) |
Available-for-sale Securities - Fair Value | 26,980 | 26,331 |
Panacea preferred stock | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Available-for-sale Securities - Amortized Cost Basis | 5,029 | 4,865 |
Available-for-sale Securities - Gross Unrealized Gains | 0 | 0 |
Available-for-sale Securities - Gross Unrealized Losses | 0 | 0 |
Available-for-sale Securities - Fair Value | 5,029 | 4,865 |
Notes Receivable [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Available-for-sale Securities - Amortized Cost Basis | 5,732 | 5,589 |
Available-for-sale Securities - Gross Unrealized Gains | 0 | 0 |
Available-for-sale Securities - Gross Unrealized Losses | 0 | 0 |
Available-for-sale Securities - Fair Value | $ 5,732 | $ 5,589 |
FAIR VALUE MEASUREMENTS - Matur
FAIR VALUE MEASUREMENTS - Maturity of available-for-sale securities by contractual maturity (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS | ||
Available For Sale Securities Debt Maturities After One Year or Less Amortized Cost | $ 18,796 | $ 16,823 |
Available For Sale Securities Debt Maturities After One Year Through Five Years Amortized Cost | 18,893 | 9,501 |
Available For Sale Securities Debt Maturities Within Five Years Amortized Cost | 10,454 | |
Available-for-sale Securities, Amortized Cost | 37,689 | 36,778 |
Available-for-sale, Maturity, Allocated and Single Maturity Date, within One Year, Fair Value | 18,796 | 16,851 |
Available For Sale Securities Debt Maturities After One Through Five Years Fair Value | 18,945 | 9,480 |
Available For Sale Securities Debt Maturities Within Five Years Fair Value | 10,454 | |
Debt Securities, Available-for-sale, Total | $ 37,741 | $ 36,785 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Intangible assets, net | |||||
Intangible assets, net | $ 8,239 | $ 8,239 | $ 8,494 | ||
Amortization expense | 189 | $ 223 | 361 | $ 438 | |
Impairment of intangible assets | 146 | 146 | |||
Intangible assets written off, cost | 448 | ||||
Intangible assets written off, accumulated amortization | 302 | ||||
Patent and Trademark [Member] | |||||
Intangible assets, net | |||||
Intangible assets, before impairment | 5,512 | 5,512 | 5,712 | ||
Less: accumulated amortization and impairment | (2,774) | (2,774) | (2,839) | ||
Total | 2,738 | 2,738 | 2,873 | ||
License fee | |||||
Intangible assets, net | |||||
Gross | 3,776 | 3,776 | 3,777 | ||
Less: accumulated amortization | (827) | (827) | (708) | ||
Total | 2,949 | 2,949 | 3,069 | ||
MSA Signatory Costs | |||||
Intangible assets, net | |||||
Indefinite-lived intangible assets | 2,202 | 2,202 | 2,202 | ||
License fee | |||||
Intangible assets, net | |||||
Indefinite-lived intangible assets | $ 350 | $ 350 | $ 350 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) $ in Thousands | May 01, 2020USD ($) | Oct. 22, 2018USD ($)item | Jun. 22, 2018USD ($) | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Dec. 31, 2019USD ($) |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||
Proceeds from SBA loan | $ 1,200 | $ 1,183 | ||||||
Directors And Officers insurance, policy term | 1 year | |||||||
Annual premium | $ 2,744 | |||||||
Premium paid | 549 | |||||||
Proceeds from Notes Payable | $ 2,195 | $ 2,195 | ||||||
Debt Instrument, Term | 9 months | |||||||
Debt Instrument, Interest Rate, Stated Percentage | 3.19% | 3.19% | ||||||
License fees, current | $ 293 | $ 293 | $ 581 | |||||
D&O insurance payable | 1,954 | 1,954 | ||||||
Notes Payable, Current, Total | 2,247 | 2,247 | 581 | |||||
License fees, long-term | 292 | 292 | $ 292 | |||||
Accretion of non cash interest expense | $ 10 | 13 | $ 21 | |||||
License Agreement With NCSU Incepted June, 2018 [Member] | ||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||
Aggregate milestone payments | $ 1,200 | |||||||
Notes Payable | 1,175 | |||||||
Milestone payments beyond upfront amount | 300 | |||||||
License acquired | $ 1,175 | |||||||
License Agreement With University Of Kentucky Incepted October, 2018 [Member] | ||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||
Aggregate milestone payments | $ 1,200 | |||||||
Notes Payable | 1,151 | |||||||
Milestone payments beyond upfront amount | 300 | |||||||
License acquired | 1,151 | |||||||
Upfront payment | $ 300 | |||||||
Number of installments | item | 3 | |||||||
Borrowings [Member] | ||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||
Accretion of non cash interest expense | $ 6 | $ 13 |
SEVERANCE LIABILITY (Details)
SEVERANCE LIABILITY (Details) - USD ($) $ in Thousands | Jul. 26, 2019 | Jun. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 |
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | ||||
Accrued severance, current | $ 487 | $ 359 | ||
Accrued severance, noncurrent | 342 | 446 | ||
Former CEO [Member] | ||||
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | ||||
Severance accrual | $ 721 | |||
Monthly consulting fee to the former CEO | $ 17 | |||
Severance period | 42 months | |||
Severance liability, total | 829 | 805 | ||
Accrued severance, current | 487 | 359 | ||
Accrued severance, noncurrent | 342 | $ 446 | ||
Personnel Other Than Former CEO [Member] | ||||
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | ||||
Severance accrual | $ 306 | |||
Severance period | 12 months |
WARRANTS FOR COMMON STOCK (Deta
WARRANTS FOR COMMON STOCK (Details) | Jun. 30, 2020$ / sharesshares |
WARRANTS FOR COMMON STOCK | |
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares | 11,293,211 |
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares | $ 1.11 |
WARRANTS FOR COMMON STOCK - War
WARRANTS FOR COMMON STOCK - Warrant Activity (Details) - shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2020 | Dec. 31, 2019 | |
WARRANTS FOR COMMON STOCK | ||
Warrant outstanding beginning balance | 11,293,000 | 11,293,000 |
Warrants exercised | 0 | (11,293,000) |
Warrants issued | 0 | 11,293,000 |
Warrant outstanding ending balance | 11,293,000 | 11,293,000 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Licenses (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2020USD ($) | |
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | |
2020 | $ 873 |
2021 | 1,510 |
2022 | 1,535 |
2023 | 1,310 |
2024 & After | 1,615 |
Contractual Obligation, Total | 6,843 |
Framework Collaborative Research Agreement With KeyGene [Member] | |
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | |
2020 | 600 |
2021 | 1,200 |
2022 | 1,200 |
2023 | 1,200 |
2024 & After | 295 |
Contractual Obligation, Total | $ 4,495 |
Period of agreement | 5 years |
Agreement extension period | 2 years |
Aggregate milestone payments | $ 6,000 |
License Agreement With NCSU, Agreement 1 | |
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | |
2020 | 113 |
2021 | 225 |
2022 | 225 |
Contractual Obligation, Total | 563 |
Milestone payment upon approval of a product | 150 |
License Agreement With NCSU, Agreement 2 | |
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | |
2020 | 25 |
2021 | 25 |
2022 | 50 |
2023 | 50 |
2024 & After | 650 |
Contractual Obligation, Total | 800 |
License Agreement With NCSU, Agreement 3 | |
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | |
2020 | 50 |
2021 | 50 |
2022 | 50 |
2023 | 50 |
2024 & After | 550 |
Contractual Obligation, Total | 750 |
Sublicense Agreement With Anandia | |
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | |
2020 | 10 |
2021 | 10 |
2022 | 10 |
2023 | 10 |
2024 & After | 120 |
Contractual Obligation, Total | 160 |
Growing Agreement [Member] | |
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | |
2020 | 75 |
Contractual Obligation, Total | $ 75 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Investment, litigation, etc. (Details) $ / shares in Units, $ in Thousands | Dec. 03, 2019USD ($)$ / sharesshares | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Feb. 11, 2020item | Jan. 15, 2020item | Nov. 19, 2019item |
Other Commitments [Line Items] | ||||||||
Application fees | $ 4 | $ 313 | $ 154 | $ 1,524 | ||||
Investment in Panacea | ||||||||
Other Commitments [Line Items] | ||||||||
Ownership percentage (in percent) | 15.80% | |||||||
Amount paid to acquire investments | $ 12,000 | |||||||
Shares issued for Panacea, value | $ 1,297 | |||||||
Shares issued for Panacea, number of shares | shares | 1,297,017 | |||||||
Additional shares to be purchased, number | shares | 5,333,334 | |||||||
Share price | $ / shares | $ 1.875 | |||||||
Portion of commitment payable in cash | $ 8,500 | |||||||
Class Action Case Brought By Matthew Bull | ||||||||
Other Commitments [Line Items] | ||||||||
Number of counts | item | 3 | |||||||
Shareholder Derivative Cases [Member] | ||||||||
Other Commitments [Line Items] | ||||||||
Number of counts | item | 3 | 3 |
EQUITY-BASED COMPENSATION (Deta
EQUITY-BASED COMPENSATION (Details) - shares | May 03, 2019 | Apr. 29, 2017 | Jun. 30, 2020 | Apr. 12, 2014 |
EQUITY- BASED COMPENSATION | ||||
Number of shares authorized as of date | 15,000,000 | 5,000,000 | ||
Additional shares authorized during the period | 5,000,000 | 5,000,000 | ||
Plan term | 10 years | |||
Number of shares remaining for future awards | 4,409,969 |
EQUITY- BASED COMPENSATION - RS
EQUITY- BASED COMPENSATION - RSUs (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended |
Jun. 30, 2020USD ($)$ / sharesshares | |
RSUs, Number of shares | |
Nonvested, Number, Beginning Balance | shares | 951 |
RSUs granted, number | shares | 2,696 |
RSUs vested, number | shares | (491) |
RSUs forfeited, number | shares | (214) |
Nonvested, Number, Ending Balance | shares | 2,942 |
RSUs, Weighted average grant-date fair value | |
Nonvested, Weighted Average Grant Date Fair Value, Beginning Balance | $ / shares | $ 2.15 |
RSUs granted, grant-date fair value | $ / shares | 0.70 |
RSUs vested, grant-date fair value | $ / shares | 2.36 |
RSUs forfeited, grant-date fair value | $ / shares | 1.11 |
Nonvested, Weighted Average Grant Date Fair Value, Ending Balance | $ / shares | $ 0.87 |
Fair value of RSUs that vested during the period | $ | $ 362 |
Unrecognized compensation, RSUs | $ | $ 2,059 |
Restricted stock units | |
RSUs, Weighted average grant-date fair value | |
Unrecognized compensation, period for recognition | 1 year 11 months 8 days |
EQUITY- BASED COMPENSATION - St
EQUITY- BASED COMPENSATION - Stock option activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Dec. 31, 2019 | |
Number of Options | ||
Options, number, Beginning of Period | 7,837 | |
Options forfeited, number | (52) | |
Options expired, number | (362) | |
Options, number, End of Period | 7,423 | |
Options exercisable, number, End of Period | 6,559 | |
Options, Weighted Average Exercise Price | ||
Options, Beginning of Period, weighted average exercise price | $ 1.49 | |
Options forfeited, weighted average exercise price | 2.28 | |
Options expired, weighted average exercise price | 1.43 | |
Options, End of Period, weighted average exercise price | 1.49 | |
Options exercisable, End of Period, weighted average exercise price | $ 1.48 | |
Weighted Average Remaining Contractual Term | ||
Options, End of Period, weighted average remaining contractual term | 5 years 1 month 6 days | |
Options exercisable, End of Period, weighted average remaining contractual term | 5 years | |
Aggregate Intrinsic Value | ||
Options, End of Period, aggregate intrinsic value | $ 47 | |
Options exercisable, End of Period, aggregated intrinsic value | 26 | |
Unrecognized compensation, non-vested options | $ 204 | |
Unrecognized compensation, options with milestone-based vesting | $ 637 | |
Employee Stock Option | ||
Aggregate Intrinsic Value | ||
Unrecognized compensation, period for recognition | 8 months 12 days |
EQUITY-BASED COMPENSATION - Com
EQUITY-BASED COMPENSATION - Compensation expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based employee compensation expense | $ 376 | $ 517 | $ 856 | $ 966 |
Selling, General and Administrative Expenses [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based employee compensation expense | 334 | 446 | 772 | 795 |
Research and Development Expense [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based employee compensation expense | $ 42 | $ 71 | $ 84 | $ 171 |
REVENUE RECOGNITION (Details)
REVENUE RECOGNITION (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Disaggregation of Revenue [Line Items] | |||||
Allowance for discounts or returns and allowances | $ 0 | $ 0 | $ 0 | ||
Payment period | 21 days | ||||
Unbilled receivables | 164 | $ 164 | 406 | ||
Deferred revenue | 0 | 0 | 5 | ||
Contract asset (liability), net | 164 | 164 | $ 401 | ||
Sale of products, net | 6,435 | $ 5,815 | 13,493 | $ 12,109 | |
Transferred over Time [Member] | |||||
Disaggregation of Revenue [Line Items] | |||||
Sale of products, net | 3,718 | 3,444 | 8,526 | 7,029 | |
Transferred at Point in Time [Member] | |||||
Disaggregation of Revenue [Line Items] | |||||
Sale of products, net | $ 2,717 | $ 2,371 | $ 4,967 | $ 5,080 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
EARNINGS PER SHARE | ||||||
Net loss attributed to common shareholders | $ (5,057) | $ (4,029) | $ (8,042) | $ (2,073) | $ (9,086) | $ (10,115) |
Weighted average common shares outstanding - basic and diluted (in thousands) | 138,854 | 124,662 | 138,732 | 124,653 | ||
Loss per common share - basic and diluted | $ (0.04) | $ (0.06) | $ (0.07) | $ (0.08) |
EARNINGS PER SHARE - Anti-dilut
EARNINGS PER SHARE - Anti-dilutive securities (Details) - shares shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Securities outstanding but excluded from computation of earnings per share | 21,659 | 19,689 | 21,659 | 19,689 |
Warrant | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Securities outstanding but excluded from computation of earnings per share | 11,293 | 11,293 | 11,293 | 11,293 |
Options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Securities outstanding but excluded from computation of earnings per share | 7,423 | 7,703 | 7,423 | 7,703 |
Restricted stock units | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Securities outstanding but excluded from computation of earnings per share | 2,942 | 693 | 2,942 | 693 |