22nd Century Group (XXII) risk factors, FY2024 10-K

Risks Related to Our Business and Operations

1. 01We have a history of losses, and we expect to incur significant expenses and continuing losses for the foreseeable future and there is substantial doubt regarding our ability to continue as a going concern
2. 02Doubts about our ability to continue as a going concern have and could continue to negatively impact our relationships with our commercial partners and our employees
3. 03We may be unable to comply with the covenants in our convertible senior secured debentures
4. 04Our competitors generally have greater financial resources and name recognition than we do, and they may therefore develop products or other technologies similar or superior to ours, or otherwise compete more successfully than we do
5. 05Our competitors may develop products that are less expensive, safer or otherwise more appealing, which may diminish or eliminate the commercial success of our VLN® cigarettes or any other potential products that we may commercialize
6. 06Our competitors may render our technologies obsolete by advances in existing technological approaches or the development of new or different approaches, potentially eliminating the advantages that we believe we derive from our research approach and proprietary technologies
7. 07Our research and development process may not develop marketable products cost-effectively or at all, which would result in loss of our investment into such process
8. 08The failure of our information systems to function as intended or their penetration by outside parties with the intent to corrupt them could result in business disruption, litigation and regulatory action, and loss of revenue, assets, or personal or confidential data (cybersecurity)
9. 09Business interruptions, whether caused by natural disaster, terrorism, economic downturns, global pandemics or other events, could negatively impact our business

Risks Related to the Tobacco Industry

1. 10We may be unsuccessful in our efforts to commercialize our RNC tobacco using the reduced exposure claims authorized by the FDA
2. 11We may be unable to renew our MRTP Application for our VLN® cigarettes
3. 12We have limited experience marketing and selling Modified Exposure Cigarettes and our working capital and inventory estimates based on demand expectations may be incorrect, which could harm our operating results and financial condition
4. 13The manufacturing and sale of tobacco products subjects us to significant governmental regulation and the failure to comply with such regulations could have a material adverse effect on our business and subject us to substantial fines or other regulatory actions
5. 14We may become subject to litigation related to cigarette smoking and/or exposure to environmental tobacco smoke, or ETS, which could severely impair our results of operations and liquidity
6. 15Our production facility (NASCO) is integral to our tobacco business and adverse changes or developments affecting our facility may have an adverse impact on our business
7. 16The loss of a significant customer for whom we manufacture tobacco products could have an adverse impact on our results of operation
8. 17Product liability claims, product recalls, or other claims could cause us to incur losses or damage our reputation
9. 18Government mandated prices or taxes, production control programs, shifts in crops driven by economic conditions, climatic or adverse weather patterns may increase the cost or reduce the quality and/or supply of the tobacco and other agricultural products used to manufacture our products
10. 19We may distribute and sell our products outside of the U.S., which subjects us to other regulatory risks
11. 20We may become subject to governmental investigations on a range of matters
12. 21We may be unsuccessful in anticipating changes in adult consumer preferences, responding to changes in consumer purchase behavior or managing through difficult competitive and economic conditions, which could have an adverse effect on business
13. 22We may be unsuccessful in developing and commercializing adjacent products or processes, including innovative tobacco products that may reduce the health risks associated with certain other tobacco products and that appeal to adult tobacco consumers
14. 23An extended disruption at a facility or in service by a supplier, distributor or distribution chain service provider could have a material adverse effect on our business
15. 24A ban on menthol or flavored tobacco products could have a material adverse impact on our business

Risks Related to Intellectual Property

1. 25We may be unable to adequately protect our intellectual property, products and potential products, and if we cannot obtain adequate protection of our intellectual property
2. 26The ability to commercialize our existing and potential products will depend on our ability to sell such products without infringing the patent or proprietary rights of third parties
3. 27In addition, because patent applications are published up to 18 months after their filing, and because patent applications can take several years to issue, there may be currently pending third-party patent applications and freedom-to-operate issues that are unknown to us, which may later result in issued patents
4. 28Our patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours
5. 29We license certain patent rights from third-party owners. If such owners do not properly maintain or enforce the patents underlying such licenses, our competitive position and business prospects could be harmed

Risks Related to Ownership of Our Common Stock

1. 30Nasdaq may delist our common stock from trading on its exchange which could limit investors’ ability to make transactions in our common stock and subject us to additional trading restrictions
2. 31An active trading market for our common stock may not be sustained and you may not be able to resell your shares at or above the price at which you purchased them
3. 32Our stock price may be highly volatile and could decline in value
4. 33We are named defendant in certain litigation matters; if we are unable to resolve these matters favorably, then our business, operating results and financial condition may be adversely affected
5. 34Future sales of our common stock will result in dilution to our common stockholders
6. 35We have a significant number of outstanding warrants with anti-dilution price protection
7. 36We do not expect to declare any dividends on our common stock in the foreseeable future
8. 37Our common stock may become the target of a “short squeeze.”
9. 38Anti-takeover provisions contained in our articles of incorporation and bylaws, as well as provisions of Nevada law, could impair a takeover attempt
10. 39These provisions, alone or together, could delay hostile takeovers and changes in control of our Company or changes in our management