Executives at 22nd Century Group (NASDAQ:XXII) told investors its fourth quarter and full-year 2025 results marked a transition from restructuring to a growth-focused strategy built around the company’s proprietary reduced-nicotine VLN combustible cigarettes and partner-branded VLN products.
On the company’s earnings call, CEO Larry Firestone said 2025 included closing “a host of legacy issues” tied to the prior business model, exiting unprofitable contracts and product lines, reducing manufacturing overhead, and paying off remaining structured senior and subordinated debt. CFO Dan Otto added that the company also exited “several unprofitable high volume revenue streams” as it repositioned toward higher-margin proprietary branded products.
VLN rollout and early retail traction
Firestone framed the company’s approach as distinct from major tobacco companies, which he said are pushing consumers toward alternative nicotine products such as pouches and vapes. He positioned VLN as a reduced-nicotine cigarette intended for adult smokers who want to change their smoking habits by reducing nicotine consumption while keeping the cigarette “form factor” they are accustomed to.
As part of the market opportunity discussion, Firestone cited an estimated 28.8 million U.S. smokers and referenced surveys indicating that roughly 70% have expressed a desire to change their habit, including quitting. He described that group as a serviceable addressable market of 20.2 million smokers, which he said represents roughly a $58 billion market.
Regulatory and policy update
Firestone said the company filed its modified risk tobacco product (MRTP) renewal application with the FDA in December 2025 and plans to expand additional PMTA and MRTP filings for other products. He also pointed to a 100 mm version of the VLN cigarette, which he said could expand the addressable market if authorized.
Management also discussed the FDA’s proposed low-nicotine rule, which Firestone said was published in January 2025 with a comment period extending through September 2025 and is now in internal review. He said 22nd Century’s VLN products and related science were cited in connection with the proposal, including references to 22nd Century Group and Spectrum research cigarettes.
Firestone said the company’s strategy is to expand distribution and work toward retail placement across all 50 states while building what he called a “low-nicotine ecosystem” that could support the market if a nicotine mandate is ultimately adopted. He described potential components of that ecosystem as including development of additional low-nicotine tobacco strains, relationships with growers, and partnering arrangements with other brands that may adopt VLN products or concepts. He also said the company could potentially license its VLN brand or genetics and technology.
Internationally, Firestone referenced the World Health Organization’s Framework Convention on Tobacco Control and said 22nd Century’s low-nicotine cigarettes and science are mentioned in that document. He said the company’s low-nicotine tobacco varieties include non-GMO options and that the company has held early-stage discussions with international governmental and commercial constituents. As an example of heightened anti-smoking policy activity, he noted Australia has doubled cigarette taxes and said legal packs there retail for $40.
Financial results and operating trends
Otto said fourth quarter and full-year 2025 results reflected ongoing progress strengthening the balance sheet and improving the operating model as the company shifted to higher-margin branded products.
- Fourth-quarter 2025 net revenue: approximately $3.6 million, compared with $4.0 million in the third quarter of 2025.
- Fourth-quarter cartons shipped: approximately 248,000, compared with 517,000 in the third quarter. Otto said the decrease reflected a strategic shift away from lower-margin contract manufacturing.
- Fourth-quarter VLN and partner VLN shipments: approximately 8,800 cartons, largely reflecting newly branded packages being swapped or exchanged for legacy VLN packaging.
- Full-year 2025 net revenue: approximately $17.6 million, compared with $24.4 million in 2024, which Otto attributed to the same repositioning away from lower-margin revenue streams.
- Fourth-quarter gross profit:loss of about $0.8 million, improving from a $1.1 million gross loss in the third quarter, reflecting cost reductions and restructuring actions.
- Fourth-quarter operating loss: $2.8 million, compared with $3.2 million in the third quarter.
- Fourth-quarter net loss from continuing operations: approximately $2.8 million, compared with $3.8 million in the third quarter.
- Fourth-quarter adjusted EBITDA: $(2.4) million, compared with $(2.9) million in the third quarter.
- Full-year 2025 net loss from continuing operations: approximately $13.1 million, improved from $15.5 million in 2024.
Otto said VLN and partner VLN products are central to the strategy and “typically generate” gross profit margins in the 20% to 30% range after marketing and promotional costs, assuming optimal labor and overhead levels in the factory are achieved. He said the company plans to track rate-of-sale metrics in early 2026 and evaluate pricing and promotional strategies, which he described as key levers in a heavily regulated tobacco market.
Balance sheet, financing, and 2026 outlook
Otto said the company ended 2025 with approximately $7.1 million in cash and cash equivalents and $0 long-term debt after fully extinguishing its remaining senior secured debt during 2025. Inventory increased to approximately $4.3 million at year-end from $2.0 million at the end of the third quarter, reflecting the harvest of the 2025 reduced-nicotine tobacco crop in preparation for expanded VLN production.
Both Firestone and Otto referenced a financing completed earlier in the week. Firestone said the raise provided additional growth capital and that the company now has over $10 million in cash to support its 2026 plans. Otto said the capital raise added approximately $5.6 million in cash.
Looking ahead, Otto said revenue is expected to remain consistent in the first quarter of 2026 and then begin growing sequentially as new points of distribution are added. He said the company expects scaling in 2026 to occur “primarily through expanded distribution and adoption at additional retail locations,” with the majority of store additions occurring in the second half of the year, and estimated the company could increase its current store count by more than double by the end of 2026. He also said restocking shipments for VLN and partner VLN products are expected to commence later in the second quarter of 2026.
Firestone said the company plans to add distribution in the Northeast and other states around the Mid-Atlantic region, expand in California, and launch a new combustible product under the Pinnacle portfolio called Pinnacle Pure, which he described as a “tobacco and water style cigarette.” He also said the company intends to expand retail collateral, strengthen marketing support, and add headcount in the coming months to support product launches and marketing initiatives.
In closing remarks, Firestone described 2026 as “the new beginning” for the company, saying it has built the operating foundation, brands, products, and early pathways to reach consumers with a reduced-nicotine option.
About 22nd Century Group (NASDAQ:XXII)
22nd Century Group, Inc, founded in 1998 and headquartered in New York, is a plant biotechnology company that applies proprietary breeding and gene modulation technologies to tobacco, hemp and related plant species. The company’s core mission is to develop and commercialize plant-based solutions that address public health, consumer wellness and agronomic needs. Its flagship reduced nicotine tobacco platform is engineered to deliver significantly lower levels of nicotine than conventional tobacco products while retaining the sensory characteristics sought by adult smokers.
Through its branded reduced nicotine tobacco products, marketed under the NEXT Generation™ portfolio, and its GenCanna® subsidiary focused on hemp cultivation and cannabinoid extraction, 22nd Century serves both commercial markets and contract research clients.
