Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 04, 2021 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2021 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
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 | 500 Seneca Street | |
Entity Address, Address Line Two | Suite 507 | |
Entity Address, City or Town | Buffalo | |
Entity Address, State or Province | NY | |
Entity Address, Postal Zip Code | 14204 | |
City Area Code | 716 | |
Local Phone Number | 270-1523 | |
Title of 12(b) Security | Common Stock, $0.00001 par value | |
Security Exchange Name | NYSEAMER | |
Trading Symbol | XXII | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 152,444,163 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Current Assets: | ||
Cash and cash equivalents | $ 1,272 | $ 1,029 |
Short-term investment securities | 29,671 | 21,313 |
Accounts receivable, net | 2,023 | 2,159 |
Inventory, net | 2,137 | 2,034 |
Prepaid expenses and other assets | 1,280 | 1,806 |
Total current assets | 36,383 | 28,341 |
Property, plant and equipment: | ||
Machinery and equipment, net | 2,487 | 2,483 |
Operating leases right-of-use assets, net | 182 | 247 |
Total property, plant and equipment | 2,669 | 2,730 |
Other assets: | ||
Intangible assets, net | 8,110 | 8,211 |
Investments | 6,643 | 6,536 |
Convertible note | 5,876 | 5,876 |
Total other assets | 20,629 | 20,623 |
Total assets | 59,681 | 51,694 |
Current liabilities: | ||
Notes payable | 295 | 539 |
Operating lease obligations | 182 | 247 |
Accounts payable | 1,572 | 1,116 |
Accrued expenses | 4,681 | 4,830 |
Accrued severance, current | 274 | 339 |
Deferred income | 0 | 272 |
Total current liabilities | 7,004 | 7,343 |
Long-term liabilities: | ||
Severance obligations | 187 | 241 |
Total liabilities | 7,191 | 7,584 |
Commitments and contingencies (Note 11) | ||
Shareholders' equity | ||
Common stock value | 2 | 1 |
Capital in excess of par value | 202,880 | 189,439 |
Accumulated other comprehensive (loss) income | 42 | 74 |
Accumulated deficit | (150,434) | (145,404) |
Total shareholders' equity | 52,490 | 44,110 |
Total liabilities and shareholders' equity | $ 59,681 | $ 51,694 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2021 | Dec. 31, 2020 |
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 | 152,397,501 | 139,061,690 |
Common stock, shares outstanding | 152,397,501 | 139,061,690 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenue: | ||
Sale of products, net | $ 6,806 | $ 7,058 |
Cost of goods sold (exclusive of depreciation shown separately below): | ||
Products | 6,159 | 6,771 |
Gross profit (loss) | 647 | 287 |
Operating expenses: | ||
Selling, general and administrative (including equity-based compensation ) | 4,829 | 3,141 |
Depreciation | 138 | 156 |
Amortization | 150 | 172 |
Total operating expenses | 5,818 | 4,429 |
Operating loss | (5,171) | (4,142) |
Other income (expense): | ||
Unrealized (loss) gain on investment | 36 | (445) |
Realized (loss) on short-term investment securities | (3) | |
Interest income, net | 112 | 612 |
Interest expense | (7) | (12) |
Total other income (expense) | 141 | 152 |
Loss before income taxes | (5,030) | (3,990) |
Income taxes | 38 | |
Net loss | (5,030) | (4,028) |
Other comprehensive income (loss): | ||
Unrealized gain (loss) on short-term investment securities | (32) | (196) |
Reclassification of (gain) loss to net loss | 3 | |
Other comprehensive income (loss) | (32) | (193) |
Comprehensive loss | $ (5,062) | $ (4,221) |
Net loss per common share - basic and diluted | $ (0.03) | $ (0.03) |
Weighted average common shares outstanding - basic and diluted (in thousands) | 144,258 | 138,610 |
Products Other Than Modified Risk Tobacco Products [Member] | ||
Operating expenses: | ||
Research and development (including equity-based compensation ) | $ 689 | $ 811 |
Modified Risk Tobacco Product [Member] | ||
Operating expenses: | ||
Research and development (including equity-based compensation ) | $ 12 | $ 149 |
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, 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 (in shares) | 491,384 | ||||
Equity-based compensation | $ 0 | 481,000 | 0 | 0 | 481,000 |
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 | (4,028,000) | (4,028,000) |
Ending balance at Mar. 31, 2020 | $ 1,000 | 188,216,000 | (186,000) | (129,721,000) | 58,310,000 |
Ending balance (in shares) at Mar. 31, 2020 | 138,854,193 | ||||
Beginning balance at Dec. 31, 2020 | $ 1,000 | 189,439,000 | 74,000 | (145,404,000) | 44,110,000 |
Beginning balance (in shares) at Dec. 31, 2020 | 139,061,690 | ||||
Stock issued in connection with RSU vesting | $ 0 | 0 | 0 | 0 | 0 |
Stock issued in connection with RSU vesting (in shares) | 1,196,258 | ||||
Stock issued in connection with warrant exercises | $ 1,000 | 11,781,000 | 11,782,000 | ||
Stock issued in connection with warrant exercises (in shares) | 11,293,211 | ||||
Stock issued in connection with option exercises | 1,153,000 | $ 1,153,000 | |||
Stock issued in connection with option exercises (in shares) | 846,342 | 846,000 | |||
Equity-based compensation | $ 0 | 507,000 | 0 | 0 | $ 507,000 |
Equity-based compensation (in shares) | 0 | ||||
Unrealized gain (loss) on short-term investment securities | $ 0 | 0 | (32,000) | 0 | (32,000) |
Net loss | 0 | 0 | 0 | (5,030,000) | (5,030,000) |
Ending balance at Mar. 31, 2021 | $ 2,000 | $ 202,880,000 | $ 42,000 | $ (150,434,000) | $ 52,490,000 |
Ending balance (in shares) at Mar. 31, 2021 | 152,397,501 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash flows from operating activities: | ||
Net loss | $ (5,030) | $ (4,028) |
Adjustments to reconcile net loss to cash used in operating activities: | ||
Amortization and depreciation | 226 | 266 |
Amortization of license fees | 62 | 62 |
Amortization of ROU assets | 65 | 71 |
Unrealized (gain) loss on investment | (36) | 445 |
Realized (gain) loss on short-term investment securities | 3 | |
Accretion of non cash interest expense | 6 | 12 |
Accretion of non-cash interest income | (45) | (209) |
Equity-based employee compensation expense | 507 | 481 |
(Increase) decrease in assets: | ||
Accounts receivable | 135 | (266) |
Inventory | (103) | (182) |
Prepaid expenses and other assets | 526 | (273) |
Increase (decrease) in liabilities: | ||
Operating lease obligations | (66) | (70) |
Accounts payable | 381 | (639) |
Accrued expenses | (148) | (188) |
Accrued severance | (119) | (213) |
Deferred income | (272) | 66 |
Net cash provided by (used in) operating activities | (3,911) | (4,662) |
Cash flows from investing activities: | ||
Acquisition of patents and trademarks | (20) | (103) |
Acquisition of machinery and equipment | (100) | (8) |
Sales and maturities of short-term investment securities | 4,950 | 11,613 |
Purchase of short-term investment securities | (13,365) | (6,606) |
Net cash provided by investing activities | (8,535) | 4,896 |
Cash flows from financing activities: | ||
Payment on note payable | (246) | |
Net proceeds from option exercises | 1,153 | |
Net proceeds from warrant exercises | 11,782 | |
Net cash used in financing activities | 12,689 | 0 |
Net increase (decrease) in cash and cash equivalents | 243 | 234 |
Cash and cash equivalents - beginning of period | 1,029 | 485 |
Cash and cash equivalents - end of period | 1,272 | 719 |
Net cash paid for: | ||
Cash paid during the period for interest | 1 | 0 |
Non-cash transactions: | ||
Patent and trademark additions included in accounts payable | 29 | 88 |
Machinery and equipment additions included in accounts payable | $ 43 | 0 |
Right-of-use assets and corresponding operating lease obligations | $ 198 |
NATURE OF BUSINESS AND SUMMARY
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2021 | |
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 three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The balance sheet as of December 31, 2020 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, 2020 audited consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on March 11, 2021. Principles of Consolidation - Nature of Business - COVID-19 Pandemic During April 2021, the Company relocated its corporate headquarters into downtown Buffalo, NY. The new office, as well as all of our facilities, continue to operate under state and federal protocols which include physical distancing, mandatory face coverings, and disinfection of surfaces. We also continue to encourage remote work arrangements by our employees where job duties permit. Our executive leadership team and staff are monitoring this evolving situation and its impacts on our business. We will continue to monitor the local, state and federal guidance regarding our business practices. Use of Estimates - of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Intangible Assets The Company’s capitalized intellectual property 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 2026 to 2041. Periodic maintenance or renewal fees are expensed as incurred. Annual minimum license fees are charged to expense. License fees paid for third-party intellectual property are amortized on a straight-line basis over the last to expire patents, which have expected expiration dates ranging from 2028 through 2036. The Company believes costs associated with becoming a signatory to the MSA and acquiring a predicate cigarette brand have an indefinite life and as such, no amortization is taken. At each reporting period, the Company evaluates whether events and circumstances continue to support the indefinite-lived classification. Impairment of Long-Lived Assets Intangible assets subject to amortization are reviewed for strategic importance and commercialization opportunity prior to expiration. If it is determined that the asset no longer supports the Company’s strategic objectives and/or will not be commercially viable prior to expiration, the asset is impaired. In addition, the Company will assess the expected future undiscounted cash flows for its intellectual property based on consideration of future market and economic conditions, competition, federal and state regulations, and licensing opportunities. If the carrying value of such assets are not recoverable, the carrying value will be reduced to fair value. Indefinite-lived intangible asset carrying values are reviewed at least annually or more frequently if events or changes in circumstances indicate that it is more likely than not that an impairment exists. The Company first performs a qualitative assessment and considers its current strategic objectives, future market and economic conditions, competition, and federal and state regulations to determine if an impairment is more likely than not. If it is determined that an impairment is more likely than not, a quantitative assessment is performed to compare the asset carrying value to fair value. Fair Value of Financial Instruments - Investments - Stock Based Compensation Income Taxes - |
INVENTORY
INVENTORY | 3 Months Ended |
Mar. 31, 2021 | |
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. Standard cost is primarily used for finished goods inventory. Inventories are evaluated to determine whether any amounts are not recoverable based on slow moving or obsolete condition and are written off or reserved as appropriate. Inventories at March 31, 2021 and December 31, 2020 consisted of the following: March 31, December 31, 2021 2020 Inventory - tobacco leaf $ 703 $ 821 Inventory - finished goods Cigarettes and filtered cigars 229 171 Inventory - raw materials Cigarette and filtered cigar components 1,305 1,142 Less: inventory reserve (100) (100) $ 2,137 $ 2,034 |
MACHINERY AND EQUIPMENT
MACHINERY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2021 | |
MACHINERY AND EQUIPMENT | |
MACHINERY AND EQUIPMENT | NOTE 3. - MACHINERY AND EQUIPMENT Machinery and equipment at March 31, 2021 and December 31, 2020 consisted of the following: March 31, December 31, Useful Life 2021 2020 Cigarette manufacturing equipment 3 or 10 years $ 4,924 $ 4,893 Office furniture, fixtures and equipment 5 Years 26 20 Laboratory equipment 5 Years 117 117 Leasehold improvements 6 Years 123 123 Construction in progress 105 — Less: accumulated depreciation (2,808) (2,670) Machinery and equipment, net $ 2,487 $ 2,483 Depreciation expense was $138 for the three months ended March 31, 2021 ($156 for the three months ended March 31, 2020). |
RIGHT-OF-USE ASSETS, LEASE OBLI
RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS, AND OTHER LEASES | 3 Months Ended |
Mar. 31, 2021 | |
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 The Company leases a manufacturing facility and warehouse in North Carolina, a corporate headquarters in Buffalo, New York, and a laboratory space in Buffalo, New York. The tables outlined below represent information regarding the Company’s manufacturing facility lease and laboratory lease which are both classified as operating leases and are currently reflected within the Consolidated Balance Sheets. The following table summarizes the Company’s discount rate and remaining lease terms: Weighted average remaining lease term in years 0.8 Weighted average discount rate 4.4 % Future minimum lease payments as of March 31, 2021 are as follows: 2021 $ 176 2022 9 Total lease payments 185 Less: imputed interest (3) Total $ 182 On January 15, 2021, the Company signed a lease agreement to relocate its corporate headquarters to the Larkinville District in downtown Buffalo, New York. The Company moved into the new office location in April 2021 and signed an amended lease agreement which revised the original lease commencement date to April 1, 2021. During the second quarter of 2021, the Company will recognize the respective right of use (“ROU”) asset and lease liability for the new corporate headquarters on its Consolidated Balance Sheets. The lease has a monthly base rent of $6, which escalates 2.5% annually after the first year, and an initial term of 36 months twenty-four-month |
INVESTMENTS AND CONVERTIBLE NOT
INVESTMENTS AND CONVERTIBLE NOTE RECEIVABLE | 3 Months Ended |
Mar. 31, 2021 | |
INVESTMENTS & CONVERTIBLE NOTE RECEIVABLE | |
INVESTMENTS & CONVERTIBLE NOTE RECEIVABLE | NOTE 5. – INVESTMENTS & CONVERTIBLE NOTE RECEIVABLE Investment in Panacea Life Sciences, Inc. The Company has an investment in Panacea Life Sciences (“Panacea”) that consists of three instruments: (i) shares of Series B preferred stock (“preferred stock”); (ii) a convertible note receivable with a $7,000 face value; and (iii) 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 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 on the convertible note receivable and preferred stock is being amortized into interest income over the respective term. See Note 6 for additional information on the fair value measurements. The Company entered into a non-binding agreement with Panacea to potentially restructure the investment and business relationship. The non-binding agreement with Panacea generally provides for (i) the transfer of $7,170 in operational assets, including an agricultural facility and various extraction and distillation equipment, from Panacea to the Company in exchange for the cancellation of the $7,000 convertible note receivable plus accrued interest; (ii) an amendment of transaction documents to remove any future investment rights and obligations of the Company in Panacea, (iii) cancellation of the stock warrant to purchase additional Series B preferred stock; and (iv) various other amendments to Panacea’s charter to amend various investors rights therein. As a result of the expected outcome of this non-binding agreement, the discount on the convertible note receivable is no longer amortized into interest income as the Company’s total carrying value of its stock warrant, convertible note receivable, and accrued interest equals the fair value outlined in the non-binding agreement. However, the agreement to restructure the investment with Panacea is preliminary, non-binding, subject to change, and may not occur. As of March 31, 2021, the total carrying value of the Company’s investment in Panacea is outlined below: March 31, December 31, 2021 2020 Panacea preferred stock $ 5,244 $ 5,173 Panacea stock warrant 1,124 1,124 Accrued interest on convertible note receivable (included within prepaid expenses and other assets) 170 170 Convertible note receivable 5,876 5,876 Total $ 12,414 $ 12,343 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 total carrying value of the Company’s investments at March 31, 2021 and December 31, 2020 consisted of the following: March 31, December 31, 2021 2020 Aurora stock warrants $ 275 $ 239 Panacea preferred stock 5,244 5,173 Panacea stock warrant 1,124 1,124 Total Investments $ 6,643 $ 6,536 Convertible Note Receivable $ 5,876 $ 5,876 |
FAIR VALUE MEASUREMENTS AND SHO
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS | 3 Months Ended |
Mar. 31, 2021 | |
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 March 31, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value: Fair Value March 31, 2021 Level 1 Level 2 Level 3 Total Assets Short-term investment securities: Money market funds $ 22,001 $ — $ — $ 22,001 Corporate bonds — 7,670 — 7,670 Total short-term investment securities $ 22,001 $ 7,670 $ — $ 29,671 Investment - Aurora stock warrants $ — $ — $ 275 $ 275 Investment - Panacea preferred stock $ — $ — $ 5,244 $ 5,244 Convertible note receivable $ — $ — $ 5,876 $ 5,876 Fair Value December 31, 2020 Level 1 Level 2 Level 3 Total Assets Short-term investment securities: Money market funds $ 8,636 $ — $ — $ 8,636 Corporate bonds — 12,677 — 12,677 Total short-term investment securities $ 8,636 $ 12,677 $ — $ 21,313 Investment - Aurora stock warrants $ — $ — $ 239 $ 239 Investment - Panacea preferred stock $ — $ — $ 5,173 $ 5,173 Convertible note receivable $ — $ — $ 5,876 $ 5,876 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 143% and 137% as of March 31, 2021 and December 31, 2020, 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 as of March 31, 2021 would have the impact of increasing or decreasing the fair value measurement of the stock warrants by approximately $128. A 20% increase or decrease in the volatility factor used at December 31, 2020 would have the impact of increasing or decreasing the fair value measurement of the stock warrants by approximately $115. 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 following table sets forth a summary of the changes in fair value of the Company’s Level 3 investments for the three months ended March 31, 2021: Fair Value at December 31, 2020 $ 11,288 Unrealized gain as a result of change in fair value 36 Accretion of interest on Panacea preferred stock 71 Fair Value at March 31, 2021 $ 11,395 The following tables set forth a summary of the Company’s available-for-sale debt securities from amortized cost basis to fair value as of March 31, 2021 and December 31, 2020: Available for Sale Debt Securities March 31, 2021 Amortized Gross Gross Cost Unrealized Unrealized Fair Basis Gains Losses Value Corporate bonds $ 7,628 $ 42 $ — $ 7,670 Convertible note receivable 5,876 — — 5,876 Investment - Panacea preferred stock 5,244 — — 5,244 $ 18,748 $ 42 $ — $ 18,790 Available for Sale Debt Securities December 31, 2020 Amortized Gross Gross Cost Unrealized Unrealized Fair Basis Gains Losses Value Corporate bonds $ 12,603 $ 74 $ — $ 12,677 Convertible note receivable 5,876 — — 5,876 Investment - Panacea preferred stock 5,173 — — 5,173 $ 23,652 $ 74 $ — $ 23,726 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 March 31, 2021 and December 31, 2020: Available for Sale Debt Securities March 31, 2021 December 31, 2020 Amortized Amortized Cost Basis Fair Value Cost Basis Fair Value Due in one year or less $ 7,628 $ 7,670 $ 11,692 $ 11,753 Due after one year through five years 11,120 11,120 11,960 11,973 Due in five years — — — — $ 18,748 $ 18,790 $ 23,652 $ 23,726 |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2021 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | NOTE 7. - INTANGIBLE ASSETS Total intangible assets at March 31, 2021 and December 31, 2020 consisted of the following: March 31, December 31, 2021 2020 Intangible assets, net Patent and trademark costs $ 5,717 $ 5,667 Less: accumulated amortization (3,025) (2,936) Patent and trademark costs, net 2,692 2,731 License fees 3,876 3,876 Less: accumulated amortization (1,010) (948) License fees, net 2,866 2,928 MSA signatory costs 2,202 2,202 License fee for predicate cigarette brand 350 350 $ 8,110 $ 8,211 Amortization expense relating to the above intangible assets for the three months ended March 31, 2021 amounted to $150 ($172 for the three months ended March 31, 2020). |
NOTES PAYABLE
NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2021 | |
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. 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 table below outlines our notes payable balances as of March 31, 2021 and December 31, 2020: March 31, December 31, 2021 2020 License Fees $ 295 $ 293 D&O Insurance — 246 Total current notes payable $ 295 $ 539 Accretion of non-cash interest expense amounted to $2 for the three months ended March 31, 2021 and $6 for the three months ended March 31, 2020. |
SEVERANCE LIABILITY
SEVERANCE LIABILITY | 3 Months Ended |
Mar. 31, 2021 | |
Postemployment Benefits [Abstract] | |
SEVERANCE LIABILITY | NOTE 9. – SEVERANCE LIABILITY During the second quarter of 2020, the Company recorded severance benefits of $306 related to a resignation which will be provided over a twelve-month period. During 2019, the Company recorded severance benefits of $881 . Consistent with certain contractual obligations, $771 of the related benefit will be provided over a period of forty-two months . The current and long-term accrued severance balance remaining as of March 31, 2021 was $274 and $187 , respectively. The current and long-term accrued severance balance remaining as of December 31, 2020 was $339 and $241 , respectively. |
WARRANTS FOR COMMON STOCK
WARRANTS FOR COMMON STOCK | 3 Months Ended |
Mar. 31, 2021 | |
WARRANTS FOR COMMON STOCK | |
WARRANTS FOR COMMON STOCK | NOTE 10. - WARRANTS FOR COMMON STOCK During the first quarter of 2021, the Company’s warrant holders exercised all 11,293,211 outstanding warrants for cash in exchange for common stock. In connection with these exercises, the Company received net proceeds of $11,782. No warrants remain outstanding as of March 31, 2021. The following table summarizes the Company’s outstanding warrant activity since December 31, 2020: Number of Warrants Warrants outstanding at December 31, 2020 11,293,211 Warrants exercised in Q1 2021 (11,293,211) Warrants outstanding at March 31, 2021 — |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2021 | |
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 2021 2022 2023 2024 2025 & After Total Research Agreement KeyGene Hemp / Cannabis Contract fee $ 900 $ 1,200 $ 1,200 $ 1,200 $ 300 $ 4,800 (1) License Agreement NCSU Tobacco Annual royalty fee 202 225 — — — 427 (2), (3) License Agreement NCSU Tobacco Minimum annual royalty 19 50 50 50 600 769 (3) License Agreement NCSU Tobacco Minimum annual royalty 38 50 50 50 500 688 (3) Research Agreement NCSU Tobacco Contract fee 75 — — — — 75 (4) Sublicense Agreement Anandia Laboratories, Inc. Hemp / Cannabis Annual license fee 10 10 10 10 110 150 (5) Research Agreement Cannametrix Hemp / Cannabis Contract fee 150 50 — — — 200 (6) Growing Agreement Various Various Contract fee 67 — — — — 67 (7) $ 1,461 $ 1,585 $ 1,310 $ 1,310 $ 1,510 $ 7,176 (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. On April 30, 2021, the Company and KeyGene entered into a First Amended and Restated Framework Collaborative Research Agreement. The First Amendment, described further in Note 15, lengthens the exclusively terms and adjusts the minimum commitment amounts shown in the table above. (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) On September 11, 2020, the Company entered into a one-year Sponsored Project Agreement with NCSU for continued research of tobacco alkaloid formation. (5) 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 in all countries except for Canada. Anandia retains all patent rights, and is responsible for all patent maintenance, in Canada. (6) On March 1, 2021, the Company entered into a 14 month research agreement with Cannametrix for hemp/cannabis product development, formulation, and validation. (7) 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 May 28, 2019, the plaintiff in the Fitch case voluntarily dismissed that action. On August 1, 2019, the Court in the Bull case issued an order designating Joseph Noto, Garden State Tire Corp, and Stephens Johnson as lead plaintiffs. On September 16, 2019, pursuant to a joint motion by the parties, the Court in the Bull case transferred the class action to federal district court in the Western District of New York, where it remains pending as Case No. 1:19-cv-01285. Plaintiffs in the Bull case filed an Amended Complaint on November 19, 2019 that alleges three counts: Count I sues the Company and Messrs. Sicignano and Brodfuehrer and alleges that the Company's quarterly and annual reports, SEC filings, press releases and other public statements and documents contained false statements in violation of Section 10(b) of the Securities Exchange Act and Rule 10b-5; Count II sues Messrs. Sicignano and Brodfuehrer pursuant to Section 10(b) of the Securities Exchange Act and Rule 10b5(a) and (c); and Count III sues Messrs. Sicignano and Brodfuehrer for the allegedly false statements pursuant to Section 20(a) of the Securities Exchange Act. The Amended Complaint seeks to certify a class, and unspecified compensatory and punitive damages, and attorney's fees and costs. On January 29, 2020, the Company and Messrs. Sicignano and Brodfuehrer filed a Motion to Dismiss the Amended Complaint. On July 31, 2020, the Court heard oral arguments on the motion to dismiss. On January 14, 2021, the Court granted motion, dismissing all claims with prejudice. The Plaintiffs filed a notice of appeal on February 12, 2021 to the Second Circuit Court of Appeals. The Second Circuit has granted an expedited briefing schedule and Plaintiff’s/Appellant’s was filed on April 12, 2021 and the Company’s must be filed no later than May 17, 2021. 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. Mr. Klein brings this action derivatively alleging that (i) the director defendants supposedly breached their fiduciary duties for allegedly allowing the Company to make false statements; (ii) the director defendants supposedly wasted corporate assets to defend this lawsuit and the other related lawsuits; (iii) the defendants allegedly violated Section 10(b) of the Securities Exchange Act and Rule 10b 5 promulgated thereunder for allegedly approving or allowing false statements regarding the Company to be made; and (iv) the director defendants allegedly violated Section 14(a) of the Securities Exchange Act and Rule 14a 9 promulgated thereunder for allegedly approving or allowing false statements regarding the Company to be made in the Company’s proxy statement. On February 11, 2019, Stephen Mathew filed a shareholder derivative claim against the Company, the Company’s then Chief Executive Officer, Henry Sicignano III, the Company’s Chief Financial Officer, John T. Brodfuehrer, and each member of the Company’s Board of Directors in the Supreme Court of the State of New York, County of Erie, entitled: Stephen Mathew, derivatively on behalf of 22nd Century Group, Inc. 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. Mr. Mathew brings this action derivatively generally alleging the same allegations as in the Klein case. The Complaint seeks declaratory relief, unspecified monetary damages, corrective corporate governance actions, and attorney’s fees and costs. On August 15, 2019, the Court consolidated the Mathew and Klein actions pursuant to a stipulation by the parties (Western District of New York, Case No. 1-19-cv-0513). 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 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. Ms. Rowley brings this action derivatively alleging that the director defendants supposedly breached their fiduciary duties by allegedly allowing the Company to make false statements. The Complaint seeks declaratory relief, unspecified monetary damages, corrective corporate governance actions, and attorney’s fees and costs. We believe that the claims are frivolous, meritless and that the Company and the individual defendants have substantial legal and factual defenses to the claims. We intend to vigorously defend the Company and the individual defendants against such claims. On September 13, 2019, the Court ordered the litigation stayed pursuant to a joint stipulation by the parties. On 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. Mr. Broccuto brings this action derivatively alleging three counts: Count I alleges that the defendants breached their fiduciary duties; Count II alleges they committed corporate waste; and Count III that they were unjustly enriched, by allegedly allowing the Company to make false statements. On February 11, 2020, Jerry Wayne filed a shareholder derivative claim against the Company, the Company's then Chief Executive Officer, Henry Sicignano III, the Company's Chief Financial Officer, John T. Brodfuehrer, and certain members of the Company's prior Board of Directors in the District Court of the State of Nevada, County of Clark, entitled: Jerry Wayne, derivatively on behalf of 22nd Century Group, Inc. 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 generally the same allegations as the Brocutto case. The Complaint seeks unspecified monetary damages, corrective corporate governance actions, disgorgement of alleged profits and imposition of constructive trusts, and attorney's fees and costs. The Complaint also seeks to declare as unenforceable the Company's Bylaw requiring derivative lawsuits to be filed in Erie County, New York, where the Company is headquartered. On March 25, 2020, the Court ordered the Brocutto and Wayne cases consolidated and stayed pursuant to a joint stipulation from the parties. 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. |
EQUITY- BASED COMPENSATION
EQUITY- BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2021 | |
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 March 31, 2021, the Company had available 1,979,059 shares remaining for future awards under the OIP. The Company is also seeking shareholder approval of the 22nd Century Group, Inc. 2021 Omnibus Incentive Plan (the “Plan”) to authorize 5,000,000 shares of our common stock for issuance under the Plan to meet our compensation goals for current and future years. Our Board of Directors has adopted the Plan contingent on stockholder approval. Restricted Stock (“RSU”) Unvested RSUs Weighted Average Number of Grant-date Shares Fair Value in thousands $ per share Unvested at December 31, 2020 2,938 $ 0.85 Granted 1,995 $ 3.20 Vested (1,234) $ 0.85 Forfeited (216) $ 0.67 Unvested at March 31, 2021 3,483 $ 2.21 The fair value of RSUs that vested during the three months ended March 31, 2021 was approximately $3,600 based on the stock price at the time of vesting. Stock Options. Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Options Price Term Value in thousands $ per share Outstanding at December 31, 2020 6,581 $ 1.50 Granted 235 $ 3.10 Exercised (846) $ 1.36 Expired (6) $ 2.76 Outstanding March 31, 2021 5,964 $ 1.59 4.3 years $ 7,480 Exercisable at March 31, 2021 5,028 $ 1.56 4.1 years $ 8,144 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. The weighted average of fair value assumptions used in the Black-Scholes option-pricing model for such grants were as follows: 2021 Risk-free interest rate (1) 0.54 % Expected dividend yield (2) — % Expected volatility (3) 87.92 % Expected term of stock options (4) 4.09 years (1) The risk-free interest rate is based on the period matching the expected term of the stock options based on the U.S. Treasury yield curve in effect on the grant date. (2) The expected dividend yield is assumed as zero. The Company has never paid cash dividends nor does it anticipate paying dividends in the foreseeable future. (3) The expected volatility is based on historical volatility of the Company’s stock. (4) The expected term represents the period of time that options granted are expected to be outstanding based on vesting date and contractual term. Restricted Stock and Stock Option Compensation Expense Three Months Ended March 31, 2021 2020 Sales, general, and administrative $ 480 $ 440 Research and Development 27 41 Total restricted stock and stock option compensation $ 507 $ 481 As of March 31, 2021, unrecognized compensation expense amounted to $7,765 which is expected to be recognized over a weighted average period of approximately 1.4 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. |
REVENUE RECOGNITION
REVENUE RECOGNITION | 3 Months Ended |
Mar. 31, 2021 | |
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 March 31, 2021 and December 31, 2020. 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: March 31, December 31, 2021 2020 Unbilled receivables $ 53 $ 349 Deferred Revenue — (272) Net contract assets $ 53 $ 77 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 March 31, 2021 2020 Net sales-over time $ 4,512 $ 4,357 Net sales-point in time 2,294 2,701 Total Revenue $ 6,806 $ 7,058 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2021 | |
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 months ended March 31, 2021 and 2020, respectively. Outstanding warrants, options, and restricted stock units were excluded from the calculation of diluted EPS as the effect was antidilutive. Three Months Ended March 31, 2021 2020 (in thousands, except for per-share data) Net loss $ (5,030) $ (4,028) Weighted average common shares outstanding - basic and diluted 144,258 138,610 Net loss per common share - basic and diluted $ (0.03) $ (0.03) Anti-dilutive shares are as follows: Warrants — 11,293 Options 5,964 7,837 Restricted stock units 3,483 2,938 9,447 22,068 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2021 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 15. – SUBSEQUENT EVENTS On April 30, 2021, 22nd Century Group, Inc. (the “Company”) and KeyGene N.V. (“KeyGene”) entered into a First Amended and Restated Framework Collaborative Research Agreement (the “Amended Agreement”) which amends and restates the terms of that certain Framework Collaborative Research Agreement entered into between the two companies on April 3, 2019 (the “FCRA”), under which KeyGene agreed to work exclusively with the Company with respect to the Cannabis Sativa L. (i) a 3-year extension of the agreement term, from first-quarter 2024 to first-quarter 2027, and preserves the Company’s option for an additional 2-year extension, now through first quarter 2029; (ii) a reduction of the 2021-2022 (Contract Year 3) spending commitment to $800. The annual spending commitment will be $1,200 thereafter and will be increased by 3% per annum beginning in 2025-2026 (Contract Year 6); (iii) the addition of a framework and exclusivity guidelines for a future Master Development Agreement related to other plant varieties; and (iv) the establishment of an Executive Committee, comprised of members from both the Company and KeyGene, to focus on strategic development of the research partnership. |
NATURE OF BUSINESS AND SUMMAR_2
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation - Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The balance sheet as of December 31, 2020 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, 2020 audited consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on March 11, 2021. |
Principles of Consolidation | Principles of Consolidation - |
Nature of Business | Nature of Business - |
COVID-19 pandemic | COVID-19 Pandemic During April 2021, the Company relocated its corporate headquarters into downtown Buffalo, NY. The new office, as well as all of our facilities, continue to operate under state and federal protocols which include physical distancing, mandatory face coverings, and disinfection of surfaces. We also continue to encourage remote work arrangements by our employees where job duties permit. Our executive leadership team and staff are monitoring this evolving situation and its impacts on our business. We will continue to monitor the local, state and federal guidance regarding our business practices. |
Use of Estimates | Use of Estimates - of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. |
Intangible Assets | Intangible Assets The Company’s capitalized intellectual property 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 2026 to 2041. Periodic maintenance or renewal fees are expensed as incurred. Annual minimum license fees are charged to expense. License fees paid for third-party intellectual property are amortized on a straight-line basis over the last to expire patents, which have expected expiration dates ranging from 2028 through 2036. The Company believes costs associated with becoming a signatory to the MSA and acquiring a predicate cigarette brand have an indefinite life and as such, no amortization is taken. At each reporting period, the Company evaluates whether events and circumstances continue to support the indefinite-lived classification. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Intangible assets subject to amortization are reviewed for strategic importance and commercialization opportunity prior to expiration. If it is determined that the asset no longer supports the Company’s strategic objectives and/or will not be commercially viable prior to expiration, the asset is impaired. In addition, the Company will assess the expected future undiscounted cash flows for its intellectual property based on consideration of future market and economic conditions, competition, federal and state regulations, and licensing opportunities. If the carrying value of such assets are not recoverable, the carrying value will be reduced to fair value. Indefinite-lived intangible asset carrying values are reviewed at least annually or more frequently if events or changes in circumstances indicate that it is more likely than not that an impairment exists. The Company first performs a qualitative assessment and considers its current strategic objectives, future market and economic conditions, competition, and federal and state regulations to determine if an impairment is more likely than not. If it is determined that an impairment is more likely than not, a quantitative assessment is performed to compare the asset carrying value to fair value. |
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) | 3 Months Ended |
Mar. 31, 2021 | |
INVENTORY | |
Schedule of Inventories | March 31, December 31, 2021 2020 Inventory - tobacco leaf $ 703 $ 821 Inventory - finished goods Cigarettes and filtered cigars 229 171 Inventory - raw materials Cigarette and filtered cigar components 1,305 1,142 Less: inventory reserve (100) (100) $ 2,137 $ 2,034 |
MACHINERY AND EQUIPMENT (Tables
MACHINERY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
MACHINERY AND EQUIPMENT | |
Schedule of Machinery and equipment | March 31, December 31, Useful Life 2021 2020 Cigarette manufacturing equipment 3 or 10 years $ 4,924 $ 4,893 Office furniture, fixtures and equipment 5 Years 26 20 Laboratory equipment 5 Years 117 117 Leasehold improvements 6 Years 123 123 Construction in progress 105 — Less: accumulated depreciation (2,808) (2,670) Machinery and equipment, net $ 2,487 $ 2,483 |
RIGHT-OF-USE ASSETS, LEASE OB_2
RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS AND OTHER LEASES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS, AND OTHER LEASES | |
Summary of discount rate and lease term | Weighted average remaining lease term in years 0.8 Weighted average discount rate 4.4 % |
Schedule of future minimum lease payments | 2021 $ 176 2022 9 Total lease payments 185 Less: imputed interest (3) Total $ 182 |
INVESTMENTS AND CONVERTIBLE N_2
INVESTMENTS AND CONVERTIBLE NOTE RECEIVABLE (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Marketable Securities [Line Items] | |
Schedule of carrying value of investments | March 31, December 31, 2021 2020 Aurora stock warrants $ 275 $ 239 Panacea preferred stock 5,244 5,173 Panacea stock warrant 1,124 1,124 Total Investments $ 6,643 $ 6,536 Convertible Note Receivable $ 5,876 $ 5,876 |
Investment in Panacea | |
Marketable Securities [Line Items] | |
Schedule of carrying value of investments | March 31, December 31, 2021 2020 Panacea preferred stock $ 5,244 $ 5,173 Panacea stock warrant 1,124 1,124 Accrued interest on convertible note receivable (included within prepaid expenses and other assets) 170 170 Convertible note receivable 5,876 5,876 Total $ 12,414 $ 12,343 |
FAIR VALUE MEASUREMENTS AND S_2
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS | |
Schedule of assets and liabilities measured at fair value | Fair Value March 31, 2021 Level 1 Level 2 Level 3 Total Assets Short-term investment securities: Money market funds $ 22,001 $ — $ — $ 22,001 Corporate bonds — 7,670 — 7,670 Total short-term investment securities $ 22,001 $ 7,670 $ — $ 29,671 Investment - Aurora stock warrants $ — $ — $ 275 $ 275 Investment - Panacea preferred stock $ — $ — $ 5,244 $ 5,244 Convertible note receivable $ — $ — $ 5,876 $ 5,876 Fair Value December 31, 2020 Level 1 Level 2 Level 3 Total Assets Short-term investment securities: Money market funds $ 8,636 $ — $ — $ 8,636 Corporate bonds — 12,677 — 12,677 Total short-term investment securities $ 8,636 $ 12,677 $ — $ 21,313 Investment - Aurora stock warrants $ — $ — $ 239 $ 239 Investment - Panacea preferred stock $ — $ — $ 5,173 $ 5,173 Convertible note receivable $ — $ — $ 5,876 $ 5,876 |
Schedule of the changes in fair value of Level 3 investments | Fair Value at December 31, 2020 $ 11,288 Unrealized gain as a result of change in fair value 36 Accretion of interest on Panacea preferred stock 71 Fair Value at March 31, 2021 $ 11,395 |
Schedule of available-for-sale securities reconciliation | Available for Sale Debt Securities March 31, 2021 Amortized Gross Gross Cost Unrealized Unrealized Fair Basis Gains Losses Value Corporate bonds $ 7,628 $ 42 $ — $ 7,670 Convertible note receivable 5,876 — — 5,876 Investment - Panacea preferred stock 5,244 — — 5,244 $ 18,748 $ 42 $ — $ 18,790 Available for Sale Debt Securities December 31, 2020 Amortized Gross Gross Cost Unrealized Unrealized Fair Basis Gains Losses Value Corporate bonds $ 12,603 $ 74 $ — $ 12,677 Convertible note receivable 5,876 — — 5,876 Investment - Panacea preferred stock 5,173 — — 5,173 $ 23,652 $ 74 $ — $ 23,726 |
Schedule of available for sale securities classified by contractual maturity | Available for Sale Debt Securities March 31, 2021 December 31, 2020 Amortized Amortized Cost Basis Fair Value Cost Basis Fair Value Due in one year or less $ 7,628 $ 7,670 $ 11,692 $ 11,753 Due after one year through five years 11,120 11,120 11,960 11,973 Due in five years — — — — $ 18,748 $ 18,790 $ 23,652 $ 23,726 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
INTANGIBLE ASSETS | |
Schedule of Intangible Assets | March 31, December 31, 2021 2020 Intangible assets, net Patent and trademark costs $ 5,717 $ 5,667 Less: accumulated amortization (3,025) (2,936) Patent and trademark costs, net 2,692 2,731 License fees 3,876 3,876 Less: accumulated amortization (1,010) (948) License fees, net 2,866 2,928 MSA signatory costs 2,202 2,202 License fee for predicate cigarette brand 350 350 $ 8,110 $ 8,211 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
NOTES PAYABLE | |
Schedule of notes payable balances | March 31, December 31, 2021 2020 License Fees $ 295 $ 293 D&O Insurance — 246 Total current notes payable $ 295 $ 539 |
WARRANTS FOR COMMON STOCK (Tabl
WARRANTS FOR COMMON STOCK (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
WARRANTS FOR COMMON STOCK | |
Schedule of warrant activity | Number of Warrants Warrants outstanding at December 31, 2020 11,293,211 Warrants exercised in Q1 2021 (11,293,211) Warrants outstanding at March 31, 2021 — |
COMMITMENTS & CONTINGENCIES (Ta
COMMITMENTS & CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
COMMITMENTS AND CONTINGENCIES | |
Contractual Obligation, Fiscal Year Maturity [Table Text Block] | Future Commitments Commitment Counter Party Product Relationship Commitment Type 2021 2022 2023 2024 2025 & After Total Research Agreement KeyGene Hemp / Cannabis Contract fee $ 900 $ 1,200 $ 1,200 $ 1,200 $ 300 $ 4,800 (1) License Agreement NCSU Tobacco Annual royalty fee 202 225 — — — 427 (2), (3) License Agreement NCSU Tobacco Minimum annual royalty 19 50 50 50 600 769 (3) License Agreement NCSU Tobacco Minimum annual royalty 38 50 50 50 500 688 (3) Research Agreement NCSU Tobacco Contract fee 75 — — — — 75 (4) Sublicense Agreement Anandia Laboratories, Inc. Hemp / Cannabis Annual license fee 10 10 10 10 110 150 (5) Research Agreement Cannametrix Hemp / Cannabis Contract fee 150 50 — — — 200 (6) Growing Agreement Various Various Contract fee 67 — — — — 67 (7) $ 1,461 $ 1,585 $ 1,310 $ 1,310 $ 1,510 $ 7,176 (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. On April 30, 2021, the Company and KeyGene entered into a First Amended and Restated Framework Collaborative Research Agreement. The First Amendment, described further in Note 15, lengthens the exclusively terms and adjusts the minimum commitment amounts shown in the table above. (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) On September 11, 2020, the Company entered into a one-year Sponsored Project Agreement with NCSU for continued research of tobacco alkaloid formation. (5) 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 in all countries except for Canada. Anandia retains all patent rights, and is responsible for all patent maintenance, in Canada. (6) On March 1, 2021, the Company entered into a 14 month research agreement with Cannametrix for hemp/cannabis product development, formulation, and validation. (7) Various R&D growing agreements for hemp / cannabis and tobacco. |
EQUITY- BASED COMPENSATION (Tab
EQUITY- BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
EQUITY- BASED COMPENSATION | |
Summary of changes in unvested restricted stock | Unvested RSUs Weighted Average Number of Grant-date Shares Fair Value in thousands $ per share Unvested at December 31, 2020 2,938 $ 0.85 Granted 1,995 $ 3.20 Vested (1,234) $ 0.85 Forfeited (216) $ 0.67 Unvested at March 31, 2021 3,483 $ 2.21 |
Schedule of stock option activity | Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Options Price Term Value in thousands $ per share Outstanding at December 31, 2020 6,581 $ 1.50 Granted 235 $ 3.10 Exercised (846) $ 1.36 Expired (6) $ 2.76 Outstanding March 31, 2021 5,964 $ 1.59 4.3 years $ 7,480 Exercisable at March 31, 2021 5,028 $ 1.56 4.1 years $ 8,144 |
Schedule of fair value assumptions | 2021 Risk-free interest rate (1) 0.54 % Expected dividend yield (2) — % Expected volatility (3) 87.92 % Expected term of stock options (4) 4.09 years (1) The risk-free interest rate is based on the period matching the expected term of the stock options based on the U.S. Treasury yield curve in effect on the grant date. (2) The expected dividend yield is assumed as zero. The Company has never paid cash dividends nor does it anticipate paying dividends in the foreseeable future. (3) The expected volatility is based on historical volatility of the Company’s stock. (4) The expected term represents the period of time that options granted are expected to be outstanding based on vesting date and contractual term. |
Schedule of compensation costs related to restricted stock and stock options | Three Months Ended March 31, 2021 2020 Sales, general, and administrative $ 480 $ 440 Research and Development 27 41 Total restricted stock and stock option compensation $ 507 $ 481 |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of contract assets and liabilities | March 31, December 31, 2021 2020 Unbilled receivables $ 53 $ 349 Deferred Revenue — (272) Net contract assets $ 53 $ 77 |
Schedule of disaggregation of revenue | Three Months Ended March 31, 2021 2020 Net sales-over time $ 4,512 $ 4,357 Net sales-point in time 2,294 2,701 Total Revenue $ 6,806 $ 7,058 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
EARNINGS PER SHARE | |
Schedule of computation of basic and diluted earnings per common share | Three Months Ended March 31, 2021 2020 (in thousands, except for per-share data) Net loss $ (5,030) $ (4,028) Weighted average common shares outstanding - basic and diluted 144,258 138,610 Net loss per common share - basic and diluted $ (0.03) $ (0.03) Anti-dilutive shares are as follows: Warrants — 11,293 Options 5,964 7,837 Restricted stock units 3,483 2,938 9,447 22,068 |
Schedule of anti-dilutive shares excluded from dilutive securities | Three Months Ended March 31, 2021 2020 (in thousands, except for per-share data) Net loss $ (5,030) $ (4,028) Weighted average common shares outstanding - basic and diluted 144,258 138,610 Net loss per common share - basic and diluted $ (0.03) $ (0.03) Anti-dilutive shares are as follows: Warrants — 11,293 Options 5,964 7,837 Restricted stock units 3,483 2,938 9,447 22,068 |
NATURE OF BUSINESS AND SUMMAR_3
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 3 Months Ended |
Mar. 31, 2021subsidiary | |
Condensed Financial Statements, Captions [Line Items] | |
Number of subsidiaries | 3 |
Twenty Second Century Ltd [Member] | |
Condensed Financial Statements, Captions [Line Items] | |
Number of subsidiaries | 2 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
INVENTORY | ||
Inventory - tobacco leaf | $ 703 | $ 821 |
Inventory - finished goods | 229 | 171 |
Inventory - raw materials | 1,305 | 1,142 |
Less: inventory reserve | (100) | (100) |
Inventory, Net | $ 2,137 | $ 2,034 |
MACHINERY AND EQUIPMENT (Detail
MACHINERY AND EQUIPMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Property, Plant and Equipment [Line Items] | |||
Less: accumulated depreciation | $ (2,808) | $ (2,670) | |
Machinery and equipment, net | 2,487 | 2,483 | |
Depreciation | 138 | $ 156 | |
Cigarette manufacturing equipment | |||
Property, Plant and Equipment [Line Items] | |||
Machinery and Equipment, Gross | $ 4,924 | 4,893 | |
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 | $ 26 | 20 | |
Property, Plant and Equipment, Useful Life | 5 years | ||
Laboratory equipment | |||
Property, Plant and Equipment [Line Items] | |||
Machinery and Equipment, Gross | $ 117 | 117 | |
Property, Plant and Equipment, Useful Life | 5 years | ||
Leasehold Improvements [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Machinery and Equipment, Gross | $ 123 | $ 123 | |
Property, Plant and Equipment, Useful Life | 6 years | ||
Construction in Progress [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Machinery and Equipment, Gross | $ 105 |
RIGHT-OF-USE ASSETS, LEASE OB_3
RIGHT-OF-USE ASSETS, LEASE OBLIGATIONS AND OTHER LEASES (Details) $ in Thousands | Apr. 01, 2021USD ($)item | Mar. 31, 2021USD ($) |
Lessee, Lease, Description [Line Items] | ||
Weighted average remaining lease term in years | 9 months 18 days | |
Weighted average discount rate | 4.40% | |
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | ||
2021 | $ 176 | |
2022 | 9 | |
Total lease payments | 185 | |
Less: imputed interest | (3) | |
Operating Lease, Liability | $ 182 | |
Subsequent Event [Member] | ||
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | ||
Base Rent Annual Increase, as a percent | 2.50% | |
Monthly base rent | $ 6 | |
Initial lease term | 36 months | |
Number of renewal options | item | 2 | |
Renewal term | 24 months |
INVESTMENTS AND CONVERTIBLE N_3
INVESTMENTS AND CONVERTIBLE NOTE RECEIVABLE - Investment in Panacea (Details) $ / shares in Units, $ in Thousands | Dec. 03, 2019USD ($)$ / shares | Mar. 31, 2021USD ($)item$ / shares | Dec. 31, 2020USD ($) |
Marketable Securities [Line Items] | |||
Long-term Investments | $ 6,643 | $ 6,536 | |
Convertible note | $ 5,876 | 5,876 | |
Investment in Panacea | |||
Marketable Securities [Line Items] | |||
Amount paid to acquire investments | $ 12,000 | ||
Shares issued for Panacea, value | $ 1,297 | ||
Share price | $ / shares | $ 1.875 | ||
Ownership percentage (in percent) | 15.80% | ||
Number of instruments comprising the investment | item | 3 | ||
Cancellation of note receivable | $7,000 | ||
Interest Receivable | $ 170 | 170 | |
Value before impairment | 7,170 | ||
Investments, Fair Value Disclosure [Abstract] | |||
Total | 12,414 | 12,343 | |
Investment in Panacea | Preferred stock | |||
Marketable Securities [Line Items] | |||
Long-term Investments | 5,244 | 5,173 | |
Original issuance price | 7,000 | ||
Investment in Panacea | Warrant | |||
Marketable Securities [Line Items] | |||
Long-term Investments | $ 1,124 | 1,124 | |
Ownership percentage (in percent) | 51.00% | ||
Exercise price | $ / shares | $ 2.344 | ||
Investment in Panacea | Convertible note receivable | |||
Marketable Securities [Line Items] | |||
Long-term Investments | $ 5,244 | 5,173 | |
Convertible note | $ 5,876 | $ 5,876 |
INVESTMENTS AND CONVERTIBLE N_4
INVESTMENTS AND CONVERTIBLE NOTE RECEIVABLE - Total carrying value (Details) - USD ($) $ / shares in Units, $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Marketable Securities [Line Items] | ||
Investments | $ 6,643 | $ 6,536 |
Convertible note | $ 5,876 | 5,876 |
Investment in Panacea | Warrant | ||
Marketable Securities [Line Items] | ||
Exercise price | $ 2.344 | |
Investments | $ 1,124 | 1,124 |
Investment in Panacea | Preferred stock | ||
Marketable Securities [Line Items] | ||
Investments | 5,244 | 5,173 |
Aurora Cannabis Inc [Member] | Warrant | ||
Marketable Securities [Line Items] | ||
Investments | $ 275 | $ 239 |
FAIR VALUE MEASUREMENTS - Recur
FAIR VALUE MEASUREMENTS - Recurring (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021USD ($)$ / shares | Dec. 31, 2020USD ($) | |
Money Market Funds | ||
Assets | ||
Net Asset Value Per Share | $ / shares | $ 1 | |
Warrant | ||
Assets | ||
Estimated change in fair value due to change in input | $ 128 | |
Warrant | Volatility | ||
Assets | ||
Equity Securities, FV-NI, Measurement Input | 1.43 | 1.37 |
Input increase (decrease) assumption, as a percent | 20.00% | 20.00% |
Estimated change in fair value due to change in input | $ 115 | |
Fair Value, Recurring [Member] | Short-term Investments [Member] | ||
Assets | ||
Assets at fair value | $ 29,671 | 21,313 |
Fair Value, Recurring [Member] | Money Market Funds | ||
Assets | ||
Assets at fair value | 22,001 | 8,636 |
Fair Value, Recurring [Member] | Corporate Bonds | ||
Assets | ||
Assets at fair value | 7,670 | 12,677 |
Fair Value, Recurring [Member] | Warrant | ||
Assets | ||
Assets at fair value | 275 | 239 |
Fair Value, Recurring [Member] | Convertible note receivable | ||
Assets | ||
Assets at fair value | 5,244 | 5,173 |
Fair Value, Recurring [Member] | Notes Receivable [Member] | ||
Assets | ||
Assets at fair value | 5,876 | 5,876 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 | Short-term Investments [Member] | ||
Assets | ||
Assets at fair value | 22,001 | 8,636 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 | Money Market Funds | ||
Assets | ||
Assets at fair value | 22,001 | 8,636 |
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 | Convertible note receivable | ||
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 | 7,670 | 12,677 |
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 | 7,670 | 12,677 |
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 | Convertible note receivable | ||
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 | 275 | 239 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 | Convertible note receivable | ||
Assets | ||
Assets at fair value | 5,244 | 5,173 |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 | Notes Receivable [Member] | ||
Assets | ||
Assets at fair value | $ 5,876 | $ 5,876 |
FAIR VALUE MEASUREMENTS - Chang
FAIR VALUE MEASUREMENTS - Changes in fair value, Level 3 (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($) | |
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS | |
Fair value at beginning of the period | $ 11,288 |
Unrealized gain as a result of change in fair value | 36 |
Accretion of interest on note | 71 |
Fair value at end of the period | $ 11,395 |
FAIR VALUE MEASUREMENTS - Avail
FAIR VALUE MEASUREMENTS - Available-for-sale securities (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Available-for-sale Securities - Amortized Cost Basis | $ 18,748 | $ 23,652 |
Available-for-sale Securities - Gross Unrealized Gains | 42 | 74 |
Available-for-sale Securities - Gross Unrealized Losses | 0 | 0 |
Available-for-sale Securities - Fair Value | 18,790 | 23,726 |
Corporate Bonds | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Available-for-sale Securities - Amortized Cost Basis | 7,628 | 12,603 |
Available-for-sale Securities - Gross Unrealized Gains | 42 | 74 |
Available-for-sale Securities - Gross Unrealized Losses | 0 | 0 |
Available-for-sale Securities - Fair Value | 7,670 | 12,677 |
Convertible note receivable | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Available-for-sale Securities - Amortized Cost Basis | 5,244 | 5,173 |
Available-for-sale Securities - Gross Unrealized Gains | 0 | 0 |
Available-for-sale Securities - Gross Unrealized Losses | 0 | 0 |
Available-for-sale Securities - Fair Value | 5,244 | 5,173 |
Notes Receivable [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Available-for-sale Securities - Amortized Cost Basis | 5,876 | 5,876 |
Available-for-sale Securities - Gross Unrealized Gains | 0 | 0 |
Available-for-sale Securities - Gross Unrealized Losses | 0 | 0 |
Available-for-sale Securities - Fair Value | $ 5,876 | $ 5,876 |
FAIR VALUE MEASUREMENTS - Matur
FAIR VALUE MEASUREMENTS - Maturity of available-for-sale securities by contractual maturity (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS | ||
Available For Sale, Maturities One Year or Less, Amortized Cost | $ 7,628 | $ 11,692 |
Available For Sale, Maturities One Through Five Years, Amortized Cost | 11,120 | 11,960 |
Available For Sale Securities, Amortized Cost | 18,748 | 23,652 |
Available For Sale, Maturities One Year or Less, Fair Value | 7,670 | 11,753 |
Available For Sale, Maturities One Through Five Years, Fair Value | 11,120 | 11,973 |
Available For Sale Securities, Fair Value | $ 18,790 | $ 23,726 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Intangible assets, net | |||
Intangible assets, net | $ 8,110 | $ 8,211 | |
Amortization expense | 150 | $ 172 | |
MSA Signatory Costs | |||
Intangible assets, net | |||
Indefinite-lived intangible assets | 2,202 | 2,202 | |
Licensing agreements | |||
Intangible assets, net | |||
Indefinite-lived intangible assets | 350 | 350 | |
Patent and Trademark [Member] | |||
Intangible assets, net | |||
Gross | 5,717 | 5,667 | |
Less: accumulated amortization | (3,025) | (2,936) | |
Total | 2,692 | 2,731 | |
Licensing agreements | |||
Intangible assets, net | |||
Gross | 3,876 | 3,876 | |
Less: accumulated amortization | (1,010) | (948) | |
Total | $ 2,866 | $ 2,928 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) $ in Thousands | Oct. 22, 2018USD ($)item | Jun. 22, 2018USD ($) | Mar. 31, 2021USD ($) | Jun. 30, 2020USD ($) | Mar. 31, 2020USD ($) | Jun. 30, 2020USD ($) | Dec. 31, 2020USD ($) |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
Directors And Officers insurance, policy term | 1 year | ||||||
Annual premium | $ 2,744 | ||||||
Premium paid | 549 | ||||||
Proceeds from Notes Payable | $ 2,195 | ||||||
Debt Instrument, Term | 9 months | ||||||
Debt Instrument, Interest Rate, Stated Percentage | 3.19% | 3.19% | |||||
License fees, current | $ 295 | $ 293 | |||||
D&O insurance payable | 246 | ||||||
Notes Payable, Current, Total | 295 | $ 539 | |||||
Accretion of non cash interest expense | 6 | $ 12 | |||||
License Agreement | North Carolina State University [Member] | |||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
Aggregate milestone payments | $ 1,200 | ||||||
Notes Payable | 1,175 | ||||||
Annual milestone payments beyond upfront amount | $ 300 | ||||||
License acquired | $ 1,175 | ||||||
License Agreement | University Of Kentucky [Member] | |||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
Aggregate milestone payments | $ 1,200 | ||||||
Notes Payable | 1,151 | ||||||
Annual 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 | $ 2 | $ 6 |
SEVERANCE LIABILITY (Details)
SEVERANCE LIABILITY (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Jun. 30, 2020 | Dec. 31, 2019 | Mar. 31, 2021 | Dec. 31, 2020 | |
Postemployment Benefits [Abstract] | ||||
Severance expense | $ 306 | $ 881 | ||
Severance accrual | $ 771 | |||
Severance period | 42 months | |||
Accrued severance, current | $ 274 | $ 339 | ||
Accrued severance, noncurrent | $ 187 | $ 241 |
WARRANTS FOR COMMON STOCK (Deta
WARRANTS FOR COMMON STOCK (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($)shares | |
WARRANTS FOR COMMON STOCK | |
Number Of Warrants Exercised | shares | 11,293,211 |
Proceeds from Warrant Exercises | $ | $ 11,782 |
WARRANTS FOR COMMON STOCK - War
WARRANTS FOR COMMON STOCK - Warrant Activity (Details) - shares | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
WARRANTS FOR COMMON STOCK | ||
Warrant outstanding balance | 11,293,211 | |
Warrants exercised | (11,293,211) |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Licenses (Details) - USD ($) $ in Thousands | Mar. 01, 2021 | Mar. 31, 2021 |
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | ||
2021 | $ 1,461 | |
2022 | 1,585 | |
2023 | 1,310 | |
2024 | 1,310 | |
2025 & After | 1,510 | |
Contractual Obligation, Total | 7,176 | |
Research Agreement | KeyGene | ||
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | ||
2021 | 900 | |
2022 | 1,200 | |
2023 | 1,200 | |
2024 | 1,200 | |
2025 & After | 300 | |
Contractual Obligation, Total | $ 4,800 | |
Agreement Term | 5 years | |
Agreement extension period | 2 years | |
Aggregate cost over initial term | $ 6,000 | |
Research Agreement | North Carolina State University [Member] | ||
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | ||
2021 | 75 | |
Contractual Obligation, Total | $ 75 | |
Agreement Term | 1 year | |
Research Agreement | Cannametrix [Member] | ||
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | ||
2021 | $ 150 | |
2022 | 50 | |
Contractual Obligation, Total | 200 | |
Agreement Term | 14 months | |
License Agreement | Annual Royalty [Member] | ||
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | ||
2021 | 202 | |
2022 | 225 | |
Contractual Obligation, Total | 427 | |
License Agreement | Minimum Annual Royalty 1 [Member] | ||
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | ||
2021 | 19 | |
2022 | 50 | |
2023 | 50 | |
2024 | 50 | |
2025 & After | 600 | |
Contractual Obligation, Total | 769 | |
License Agreement | Minimum Annual Royalty 2 [Member] | ||
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | ||
2021 | 38 | |
2022 | 50 | |
2023 | 50 | |
2024 | 50 | |
2025 & After | 500 | |
Contractual Obligation, Total | 688 | |
License Agreement | North Carolina State University [Member] | ||
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | ||
Milestone payment upon approval of a product | 150 | |
Sublicense Agreement With Anandia | ||
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | ||
2021 | 10 | |
2022 | 10 | |
2023 | 10 | |
2024 | 10 | |
2025 & After | 110 | |
Contractual Obligation, Total | 150 | |
Growing Agreement [Member] | ||
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract] | ||
2021 | 67 | |
Contractual Obligation, Total | $ 67 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Investment, MRTP, litigation (Details) $ / shares in Units, $ in Thousands | Dec. 03, 2019USD ($)$ / sharesshares | Mar. 31, 2021USD ($) | Mar. 31, 2020USD ($) | Jan. 15, 2020item | Dec. 19, 2019item |
Other Commitments [Line Items] | |||||
Number of counts | item | 3 | 3 | |||
Modified Risk Tobacco Product [Member] | |||||
Other Commitments [Line Items] | |||||
Research and Development Expense | $ 12 | $ 149 | |||
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 | ||||
Additional shares to be purchased, number | shares | 5,333,334 | ||||
Share price | $ / shares | $ 1.875 | ||||
Portion of commitment payable in cash | $ 8,500 |
EQUITY-BASED COMPENSATION (Deta
EQUITY-BASED COMPENSATION (Details) - shares | May 03, 2019 | Apr. 29, 2017 | Mar. 31, 2021 | Apr. 12, 2014 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
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 | 1,979,059 | |||
Scenario, Plan [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Additional shares authorized during the period | 5,000,000 |
EQUITY- BASED COMPENSATION - RS
EQUITY- BASED COMPENSATION - RSUs (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($)$ / sharesshares | |
RSUs, Number of shares | |
Nonvested, Number, Beginning Balance | shares | 2,938 |
RSUs granted, number | shares | 1,995 |
RSUs vested, number | shares | (1,234) |
RSUs forfeited, number | shares | (216) |
Nonvested, Number, Ending Balance | shares | 3,483 |
RSUs, Weighted average grant-date fair value | |
Nonvested, Weighted Average Grant Date Fair Value, Beginning Balance | $ / shares | $ 0.85 |
RSUs granted, grant-date fair value | $ / shares | 3.20 |
RSUs vested, grant-date fair value | $ / shares | 0.85 |
RSUs forfeited, grant-date fair value | $ / shares | 0.67 |
Nonvested, Weighted Average Grant Date Fair Value, Ending Balance | $ / shares | $ 2.21 |
Fair value of RSUs that vested during the period | $ | $ 3,600 |
EQUITY- BASED COMPENSATION - St
EQUITY- BASED COMPENSATION - Stock option activity (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($)$ / sharesshares | |
Number of Options | |
Options, number, Beginning of Period | shares | 6,581 |
Options granted, number | shares | 235 |
Options exercised, number | shares | (846) |
Options expired, number | shares | (6) |
Options, number, End of Period | shares | 5,964 |
Options exercisable, number, End of Period | shares | 5,028 |
Options, Weighted Average Exercise Price | |
Options, Beginning of Period, weighted average exercise price | $ / shares | $ 1.50 |
Options granted, weighted average exercise price | $ / shares | 3.10 |
Options exercised, weighted average exercise price | $ / shares | 1.36 |
Options expired, weighted average exercise price | $ / shares | 2.76 |
Options, End of Period, weighted average exercise price | $ / shares | 1.59 |
Options exercisable, End of Period, weighted average exercise price | $ / shares | $ 1.56 |
Weighted Average Remaining Contractual Term | |
Options, End of Period, weighted average remaining contractual term | 4 years 3 months 18 days |
Options exercisable, End of Period, weighted average remaining contractual term | 4 years 1 month 6 days |
Aggregate Intrinsic Value | |
Options, End of Period, aggregate intrinsic value | $ | $ 7,480 |
Options exercisable, End of Period, aggregated intrinsic value | $ | $ 8,144 |
EQUITY BASED COMPENSATION - Fai
EQUITY BASED COMPENSATION - Fair value assumptions (Details) | 3 Months Ended |
Mar. 31, 2021 | |
EQUITY- BASED COMPENSATION | |
Risk-free interest rate (weighted average) | 0.54% |
Expected stock price volatility | 87.92% |
Expected life of options (weighted average) | 4 years 1 month 2 days |
EQUITY-BASED COMPENSATION - Com
EQUITY-BASED COMPENSATION - Compensation expense and unrecognized compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Equity-based employee compensation expense | $ 507 | $ 481 |
Unrecognized compensation | $ 7,765 | |
Unrecognized compensation, period for recognition | 1 year 4 months 24 days | |
Unrecognized compensation, options with milestone-based vesting | $ 637 | |
Selling, General and Administrative Expenses [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Equity-based employee compensation expense | 480 | 440 |
Research and Development Expense [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Equity-based employee compensation expense | $ 27 | $ 41 |
REVENUE RECOGNITION (Details)
REVENUE RECOGNITION (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Allowance for discounts or returns and allowances | $ 0 | $ 0 | ||
Payment period | 21 days | |||
Unbilled receivables | $ 53 | $ 349 | ||
Deferred revenue | 0 | (272) | ||
Contract asset (liability), net | 53 | $ 77 | ||
Sale of products, net | 6,806 | $ 7,058 | ||
Transferred over Time [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Sale of products, net | 4,512 | 4,357 | ||
Transferred at Point in Time [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Sale of products, net | $ 2,294 | $ 2,701 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
EARNINGS PER SHARE | ||
Net loss attributed to common shareholders | $ (5,030) | $ (4,028) |
Weighted average common shares outstanding - basic and diluted (in thousands) | 144,258 | 138,610 |
Loss per common share - basic and diluted | $ (0.03) | $ (0.03) |
EARNINGS PER SHARE - Anti-dilut
EARNINGS PER SHARE - Anti-dilutive securities (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Securities outstanding but excluded from computation of earnings per share | 9,447 | 22,068 |
Warrant | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Securities outstanding but excluded from computation of earnings per share | 11,293 | |
Options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Securities outstanding but excluded from computation of earnings per share | 5,964 | 7,837 |
Restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Securities outstanding but excluded from computation of earnings per share | 3,483 | 2,938 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) $ in Thousands | Apr. 30, 2021USD ($)item | Mar. 31, 2021USD ($) |
Subsequent Event [Line Items] | ||
Contractual Obligation, Due in Next Fiscal Year | $ 1,585 | |
KeyGene | Research Agreement | ||
Subsequent Event [Line Items] | ||
Agreement Term | 5 years | |
Period Of Agreement Extension | 2 years | |
Contractual Obligation, Due in Next Fiscal Year | $ 1,200 | |
Subsequent Event [Member] | KeyGene | Research Agreement | ||
Subsequent Event [Line Items] | ||
Number of companies | item | 2 | |
Agreement Term | 3 years | |
Period Of Agreement Extension | 2 years | |
Contractual Obligation, Due in Next Fiscal Year | $ 800 | |
Annual commitment, thereafter | $ 1,200 | |
Annual commitment increase, as a percent | 3.00% |