REVENUE RECOGNITION |
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| 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®, and Pinnacle® branded products. The Company does not have significant intra-entity sales or transfers. 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 discounts or returns as of June 30, 2026 and December 31, 2025. 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 substantially all net revenue for the three and six months ended June 30, 2026 and 2025. The following table presents net revenue by product line:
The following table presents net revenues by significant customers, which are defined as any customer who individually represents 10% or more of disaggregated product line net revenues:
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 relates to down payments received from customers in advance of satisfying a performance obligation and is included as Contract liabilities on the Condensed Consolidated Balance Sheets. Total contract assets and contract liabilities are as follows:
During the six months ended June 30, 2026 and 2025, the Company recognized $242 and $0 of revenue that was included in the deferred income contract liability balance as of December 31, 2025 and 2024, respectively. |
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