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REVENUE RECOGNITION | 9 Months Ended
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Sep. 30, 2025
REVENUE RECOGNITION |
REVENUE RECOGNITION | NOTE 8. – REVENUE RECOGNITION The Company’s revenues are derived primarily from contract manufacturing organization (“CMO”) customer contracts that consist of obligations to manufacture the customers’ branded filtered cigars and cigarettes. Additional revenues are generated from sale of the Company’s proprietary low nicotine content cigarettes, sold under the brand name VLN®, or research cigarettes sold under the brand name SPECTRUM®. The Company recognizes revenue when it satisfies a performance obligation by transferring control of the product to a customer. For certain CMO contracts, the performance obligation is satisfied over time as the Company determines, due to contract restrictions, it does not have an alternative use of the product and it has an enforceable right to payment as the product is manufactured. The Company recognizes revenue under those contracts at the unit price stated in the contract based on the units manufactured for each customer and is recognized net of cash discounts, rebates, royalties, and sales returns and allowances. There was no allowance for returns as of September 30, 2025 and December 31, 2024. Consideration payable to the customer for royalties is recorded as an offset of the transaction price with a corresponding contract liability. Disaggregation of Revenue The Company’s net revenue is derived from customers located primarily in the United States and is disaggregated by the timing of revenue. Revenue recognized from tobacco products transferred to customers over time represented 97% and 44% for the three months ended September 30, 2025 and September 30, 2024, respectively. Revenue recognized from tobacco products transferred to customers over time represented substantially all net revenue and 58% for the nine months ended September 30, 2025 and 2024, respectively. The following table presents net revenue by product line: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | ​ | Nine Months Ended
​ | ​ | September 30, | ​ | ​ | September 30,
​ |  | 2025 | ​ | 2024 | ​ | ​ | 2025 | ​ | 2024
Contract Manufacturing | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cigarettes | ​ | $ | 2,520 | ​ | $ | 4,078 | ​ | ​ | $ | 10,249 | ​ | $ | 10,942
Filtered Cigars | ​ | ​ | 1,282 | ​ | ​ | 1,664 | ​ | ​ | ​ | 3,704 | ​ | ​ | 8,593
Cigarillos | ​ | ​ | - | ​ | ​ | 204 | ​ | ​ | ​ | 88 | ​ | ​ | 756
Total Contract Manufacturing | ​ | ​ | 3,802 | ​ | ​ | 5,946 | ​ | ​ | ​ | 14,041 | ​ | ​ | 20,291
VLN® | ​ | ​ | 209 | ​ | ​ | - | ​ | ​ | ​ | 9 | ​ | ​ | 70
Total Product Line Revenues | ​ | $ | 4,011 | ​ | $ | 5,946 | ​ | ​ | $ | 14,050 | ​ | $ | 20,361
​ The following tables present net revenues by significant customers, which are defined as any customer who individually represents 10% or more of disaggregated product line net revenues: ​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | September 30,
​ |  | 2025 | ​ | 2024
Customer A | ​ | 51.94 | % | ​ | 55.75 | %
Customer B | ​ | 14.42 | % | ​ | 16.08 | %
Customer C | ​ | 20.18 | % | ​ | 17.63 | %
Customer D | ​ | 13.46 | % | ​ | - | ​
All other customers | ​ | - | ​ | ​ | 10.54 | %
​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended
​ | ​ | September 30,
​ | ​ | 2025 | ​ | 2024
Customer A | ​ | 62.29 | % | ​ | 41.94 | %
Customer B | ​ | 10.22 | % | ​ | 14.63 | %
Customer C | ​ | 10.60 | % | ​ | - | ​
Customer D | ​ | 11.43 | % | ​ | - | ​
All other customers | ​ | 5.46 | % | ​ | 43.43 | %
​ Contract Assets and Liabilities Unbilled receivables (contract assets) represent revenues recognized for performance obligations that have been satisfied but have not been billed. These receivables are included as Accounts receivable, net on the Condensed Consolidated Balance Sheets. Customer payment terms vary depending on the terms of each customer contract, but payment is generally due prior to product shipment or within credit terms up to 30 days after shipment. Deferred income (contract liabilities) relates to down payments received from customers in advance of satisfying a performance obligation and is included as Deferred income on the Condensed Consolidated Balance Sheets. Total contract assets and contract liabilities are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, | ​ | December 31,
​ |  | 2025 |  | 2024
Unbilled receivables |  | $ | 2,958 |  | $ | 1,298
Consideration payable to the customer |  | ​ | (1,753) |  | ​ | —
Deferred income | ​ | ​ | (79) | ​ | ​ | (20)
Net contract assets | ​ | $ | 1,126 | ​ | $ | 1,278
​ ​ During the nine months ended September 30, 2025 and 2024, the Company recognized $0 and $726 of revenue that was included in the contract liability balance as of December 31, 2024 and 2023.

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