MOCKSVILLE, NC - 22nd Century (NASDAQ:XXII) Group, Inc. (NASDAQ: XXII), a tobacco company known for its efforts in nicotine harm reduction, announced today a new agreement with an existing customer to produce filtered cigar products. This deal complements a previous arrangement for exporting conventional cigarettes and is expected to significantly increase the company's manufacturing volumes.
The agreement involves 22nd Century Group taking over the production of the customer's filtered cigar products using an in-house blend. The initial shipments of these products are slated for the fourth quarter of 2024, with anticipated annual volumes exceeding 200,000 cartons. This expansion follows an earlier contract with the same customer for cigarette exports, which is projected to grow the company's overall contract manufacturing business volumes by 20%.
Chairman and CEO Larry Firestone stated that the combined contracts would notably enhance their production volume and contribute to the full utilization of their manufacturing capacity. Firestone also highlighted the working capital efficiency of high volume export contracts, emphasizing the expected positive impact on cash flows as the company aims for cash positive operations in the first quarter of 2025.
22nd Century Group's flagship product, the VLN® cigarette, is a reduced nicotine combustible cigarette that has received a Modified Risk Tobacco Product designation from the FDA. The company's mission includes offering smokers the option to control their nicotine intake and ultimately aims to sell the last cigarette before the 22nd century.
This expansion news comes as part of the company's broader business outlook, which includes cost reduction initiatives and expectations for regulatory enforcement. 22nd Century Group's manufacturing facility in Mocksville has the capacity to produce more than 45 million cartons of tobacco products annually, with room for further expansion.
The information in this article is based on a press release statement from 22nd Century Group.
In other recent news, 22nd Century Group, a company focused on reducing nicotine consumption, announced a new client agreement to introduce its Moonlight brand cigarettes to the Southeast Asian market. The company also secured approximately $3.48 million in an equity sale involving 6.1 million shares of common stock. Furthermore, the distribution of its VLN® cigarettes, which contain 95% less nicotine than standard cigarettes, is set to expand to over 270,000 retail outlets nationwide.
In financial maneuvers, 22nd Century Group raised an additional $1.68 million through a Regulation A offering and a private placement of common warrants. The company also sold 460,000 shares of common stock to an institutional investor, resulting in gross proceeds of $262,200. A debt reduction agreement with JGB Partners and a debt restructuring with Omnia were also part of the company's recent developments.
These are recent developments in the company's operations, which also include the appointment of Robert Manfredonia as the new Executive Vice President of Sales and Marketing and the expansion of VLN® cigarette distribution in South Korea through a commercial agreement with Nico-Tech Korea, Inc. The company's forward-looking statements, including projections and business outlook, are subject to risks and uncertainties detailed in their filings with the Securities and Exchange Commission.
InvestingPro Insights
Amidst 22nd Century Group's announcement of its new production agreement for filtered cigar products, a glance at InvestingPro data and tips suggests a mixed financial picture for the company. According to the latest metrics, 22nd Century Group has a market capitalization of just $2.61 million, indicating a relatively small size within the tobacco industry. The company's revenue in the last twelve months as of Q2 2024 stands at $19.23 million, but this reflects a concerning decline of 28.49% from the previous period.
InvestingPro Tips highlight several challenges facing the company. A significant debt burden and the risk of struggling to make interest payments are particularly notable in the context of its expansion efforts. Moreover, with analysts not anticipating profitability this year and a history of weak gross profit margins, the financial health of 22nd Century Group remains in question. However, it is worth considering that analysts do expect sales growth in the current year, which could be buoyed by the new production agreement.
For investors considering 22nd Century Group's stock, it's important to note its high price volatility and the fact that it does not pay dividends. Nonetheless, the stock has experienced a significant return over the last week, which could be a point of interest for those with a higher risk tolerance. For a more comprehensive analysis, including an additional 17 InvestingPro Tips, interested parties can visit the InvestingPro platform for 22nd Century Group at https://www.investing.com/pro/XXII.
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