All right, welcome back, everyone. We have an update from 22nd Century Group. It trades on the NASDAQ under the ticker XXII, and it's the pioneering nicotine harm reduction company in the tobacco industry, enabling smokers to take control of their nicotine consumption. Happy to welcome back Chairman and CEO Larry Firestone. Welcome back, Larry. We're looking forward to hearing your update.
Thanks, Anna. Thanks for having me. Well, we've made a lot of progress since the last time we talked. We're departing from the debt-laden turnaround company and into the product launch phase and growth company. But let me take a few minutes to describe the problem and the solution that we provide. We have been leading the tobacco harm reduction movement with our lowest nicotine VLN branded products. What gives our company true purpose is the knowledge that there's an unspoken epidemic in the world. Yes, I said epidemic. That's a nicotine epidemic. Sometime during the life cycle of us humans, we decided that we need unnatural sources to deliver a euphoria effect to our being. There are many vehicles that deliver that euphoria effect outside of the natural sources, and many are addictive, ergo the term epidemic.
In that collection of addictive euphoric substances is cocaine, heroin, opioids, alcohol, cannabis, THC, methamphetamines, and yes, nicotine. The cause and the result of all these addictions is related to a dopamine surge in the brain. Nicotine attaches to the receptors in our brain to experience a dopamine surge, which delivers a mind-altering euphoric experience. As the brain gets used to the reward given from the intake of the addictive substance, our bodies begin to crave the experience again and again, which is the root of the addiction. Nicotine is naturally found in tobacco, and now we have, along with natural nicotine, synthetic nicotine, and consumers can find nicotine in various strengths in full strength cigarettes, filtered cigars, cigars, cigarillos, moist snuff, nicotine pouches, heat-not-burn tobacco products, heated tobacco products such as e-cigarettes, vapes, and other devices.
The misnomer in the world is that full strength cigarettes are the only problem. The full list above is the problem because nicotine is the problem, so the race to get cigarette smokers off cigarettes and into other nicotine delivery systems is still delivering a public health problem of a massive proportion, actually larger than the COVID pandemic. As the longtime leader of the tobacco harm reduction movement, we at 22nd Century have created our best antidote, our VLN cigarette. Other nicotine reduction therapies have been out there for a long time and have been proven to be ineffective, and these include nicotine gum, lozenges, patches, and those are all over the counter and can still have addictive levels of nicotine in them, then there are prescription medications such as Chantix, which require a visit to your physician.
And then there are clinics to help people detox their bodies in a workout kind of way. Smoking is comfortable to a smoker. It's a place to go. Our target market in the U.S. is the 70% of the 28.8 million smokers who have declared that they want to stop smoking. That's almost 20.5 million people. That's our target. Smokers who want to change their habit have moments when they're on the bubble and they're in the decision-making process. Typically, when this moment happens, they are not sitting in the doctor's office looking for a prescription. Changing habits is hard enough. Changing full addictive habits is even harder. Also, there's uncertainty if they really want to change or can change. Our VLN cigarettes give the smoker a chance to try and by adjusting the nicotine, but not the experience.
Then when their brain craves a cigarette and the body goes to work on delivering the smoking experience, they get that with a non-addictive dose of nicotine while they exercise the smoking ritual. As the smoker follows through with this, they will positively adjust their dependence on nicotine while exercising their normal smoking practice, therefore finding comfort in their choice to change. Part of the failure of the other NRTs, or nicotine replacement therapies, is the absence of the motor skills that a smoker uses in their habit. By using VLN products over about 12 weeks, the brain receptors will return to their natural state and produce the needed dopamine naturally. This is why I say we have the antidote for nicotine addiction. We have our VLN products under three brands right now: Smoker Friendly, Pinnacle, and our 22nd Century brand.
We are still loading in initial store inventories, but some stores have already begun reordering. Along with our full nicotine product brands and SKUs, we are now looking at cross-marketing activity across the brands. We are also under discussions with other retailers for both VLN products as well as the standard products. The main point is our smoking consumers, all 28.8 million of them, or the 70% who want to change their habit, 20.5 million people, don't need to and shouldn't jump to other form factors to find their nicotine, and instead should seek out our VLN products to help them with their dependence. Tobacco harm reduction starts with nicotine reduction. That's our mission, and that's how we've built a base of products and an initial distribution around that mission.
On the business front, we're continuing to move out of the high-volume, low-margin CMO business and replacing those revenues with profitable revenues from our branded products lineup. We are now debt-free, and following the receipt of the $9.5 million insurance settlement, we now have cash on the balance sheet to take us deep into 2026. The startup and growth phase of 22nd Century has begun, and we are very excited about the early returns on our branded product strategy that we implemented in Q3 and are looking forward to a prosperous 2026, and with that, Anna, I'd entertain any questions that you have for me.
Thank you, Larry. Okay, yes, some questions for you. Can you provide an update on the VLN rollout in South Korea, please?
South Korea, we put South Korea on hold. We want to make sure we get the U.S. right. We want to make sure we get the product set right before we take it to South Korea. So we are under contract, but it is on hold at this time.
And talk a little bit about the website. Are you updating the website? tryvln.com. Any updates on that?
Yeah, tryvln.com is up and running, and it's accurate. You can actually find stores where we've got VLN products, Smoker Friendly, Pinnacle, and 22nd Century VLN products. And as we deliver into stores, the website is automatically updated.
Great. And can you discuss the plan to cover the burn moving forward? What does the structure of the financing look like?
Well, like I said, we've got cash now to take us deep into 2026. And so as we continue to grow the profitable revenues that we have, we're still looking at breaking even in the first half of 2026. And if everything lines up correctly, which we hope it will, we should be covering our own cash flow by the time we get to there.
Perfect. And can you talk about what your costs are to acquire a smoker, a customer?
Our costs are very low, actually. It's really placement in the retail store, and then we have programs that we run with the retailers on VLN attachment. We do have some marketing costs per store for change mats and door signs and floor mats, things like that, and shelf talkers and the like. We do a training with the store managers. It's all very low cost, and then we do have some promotions that we're running that we're starting to run, cross-branding, so maybe you would pick up a Pinnacle, a Pinnacle Moist Snuff, and get something off of your first pack of VLN, so we're just in the front end of that. I don't have an exact cost of customer acquisition at this point.
No problem. Well, Larry, do you have any closing remarks for our viewer today?
Yeah, I'd just like to, first of all, thank you, Anna, for having us. It's always great to be here, and I hope you have a wonderful holiday season as well to all of our shareholders out there and look forward to updating you in 2026.
Perfect. Thank you, Larry. We appreciate you, and we look forward to seeing you again with some updates in 2026.
You got it. Thanks.
All right, everyone. We'll be right back.