This NASDAQ Hemp And Tobacco Stock Is Trading Lower Post Q2 Earnings Report, Here's Why

22nd Century Group, Inc. XXII reported second-quarter results for the three months ended June 30, 2023, revealing a 61.8% year-over-year increase in net revenues to $23.4 million. The sum includes revenue from hemp/cannabis-related products of $15.4 million and tobacco-related products of $8.1 million.

Q2 2023 Financial Highlights

• Gross loss totaled $2.3 million, as compared to gross profit of $900 000 in the prior year period. 
• Adjusted EBITDA was a loss of $16 million, compared to the prior year's loss of $7.1 million.
• Operating loss and net losses were $19.4 million, compared to $10.5 million in the same quarter of 2022.
• Total operating expenses amounted to $17 million.
• As of June 30, 2023, the company had $11.9 million in cash, cash equivalents and restricted cash.

The company also announced a cost reduction initiative for the second half of 2023, expected to generate at least $15 million in annualized operating cost reductions.

"Much of this will reflect efficiencies and streamlining as we conclude a period of substantial extra upfront investment undertaken in the first half of 2023 to upgrade distribution, regulatory approvals, marketing, sales and research activities in support of our VLN® launch, which we are now aligning to the more focused ongoing needs for the commercial launch," explained John Miller, interim CEO of 22nd Century Group.

In July, Miller, who leads the tobacco business unit, succeeded James A. Mish, who has served as CEO since June 2020.

Following the quarter's end, the company secured an additional $11.7 million in gross proceeds from registered direct financing and announced an estimated $15 million annualized cost reduction initiative.

Tobacco vs. Cannabis

Meanwhile, some of the major tobacco players like Philip Morris International, Altria Group, Imperial Brands and British American Tobacco are exploring opportunities in the cannabis market.

Altria invested $1.8 billion in Cronos Group, Imperial Brands invested in Oxford Cannabinoid Technologies and Auxly Cannabis Group and BAT invested in OrganiGram Holdings.

This doesn't come as a surprise, considering that in both Colorado and Washington State, the cannabis tax revenue has surpassed tobacco tax revenue, with cannabis outperforming tobacco by 17 percent in Colorado and 44 percent in Washington State in 2021.

With billions of dollars being collected in tax revenue from adult-use cannabis sales nationwide, it is clear that legalizing cannabis presents an opportunity for the federal government to tap into a valuable source of revenue.

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Price Action

22nd Century Group's shares traded 18.5455% lower at $2.24 per share at the time of writing on Monday morning.

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