22nd Century Group (XXII) Emerging Growth Conference summary

Strategic positioning and product portfolio

• Focused on nicotine harm reduction with proprietary VLN and Flanker VLN brands, aiming to establish a new very low-nicotine cigarette (VLNC) category in the market.

• Only FDA-authorized low-nicotine combustible cigarette, fully aligned with the FDA's low-nicotine mandate reinitiated in January 2025.

• Relaunching VLN with new branding and expanding the product portfolio to include companion and non-combustible VLN-based products.

• Targeting both domestic and international markets, positioning VLN as a premium, lifestyle-driven choice.

• Drawing parallels to the zero/low-proof spirits market to highlight shifting consumer preferences.

Growth initiatives and distribution strategy

• Signed a five-year contract manufacturing agreement with Smoker Friendly, including adoption of Flanker VLN, and targeting expansion into their 300 stores.

• Engaged in discussions with other major retailers to drive VLN penetration across the US.

• Expanding state regulatory approvals, aiming for all 50 states by July 2025.

• Currently in about 5,100 retail stores (2% of the market), with a focus on increasing points of distribution and rate of sale.

• Emphasizing consumer education, integrated marketing, and in-store visibility to drive adoption.

Financial performance and operational turnaround

• 2024 was a turnaround year, with cost reductions, lean operations, and a restructured balance sheet.

• All customer contracts and SKUs now profitable; operating expenses significantly reduced.

• Targeting EBITDA break-even in Q4 2025, revised from Q1 due to a better understanding of revenue lag times.

• Debt reduced to $4.6 million, with a focus on profitable growth and cash-positive operations.

• R&D reactivated, with new product extensions (e.g., 100mm VLN) and non-combustible products in development.