MOCKSVILLE, NC - 22nd Century (NASDAQ:XXII) Group, Inc. (NASDAQ: XXII), a company specializing in tobacco products with reduced nicotine content, announced its plans to extend the distribution of its VLN® cigarettes, which contain 95% less nicotine than standard cigarettes. The company aims to increase its footprint to over 270,000 retail outlets nationwide and to amplify its global presence.
The expansion follows positive sales data from VLN®'s initial launch in 2023, which was piloted in approximately 5,100 stores across 26 states. Larry Firestone, Chairman and CEO of 22nd Century Group, stated that the product's low nicotine message is resonating with consumers, and the company's sales and marketing team is set to implement a comprehensive strategy to further penetrate the market.
22nd Century Group's international strategy includes partnering with entities that will manage distribution, sales, and marketing efforts abroad. This follows the model of a renewed distribution agreement with a South Korean partner. The company also plans to introduce flanker brands that leverage its proprietary reduced nicotine tobacco with existing private label relationships.
To support the anticipated demand, Firestone highlighted that the company has an inventory of low nicotine tobacco sufficient to produce up to 1.4 million cartons of VLN® and flanker brand cigarettes. This stockpile is expected to generate up to $85 million in revenue and positive cash flow for the company before the need for new tobacco crops arises.
VLN® cigarettes have received a Modified Risk Tobacco Product designation from the FDA, allowing them to be marketed with the claim "Helps You Smoke Less®." 22nd Century Group's mission is to offer smokers an alternative to traditional cigarettes that can aid in reducing nicotine consumption.
The company's manufacturing subsidiary in Mocksville, NC, is capable of producing over 45 million cartons of combusted tobacco products annually, with room for expansion. The patented technologies used by 22nd Century Group enable the production of tobacco with significantly reduced nicotine levels.
This expansion announcement is based on a press release statement from 22nd Century Group. The company's forward-looking statements involve risks and uncertainties, including financial and regulatory challenges, as detailed in their filings with the SEC. The company does not undertake any obligation to update these forward-looking statements.
In other recent news, 22nd Century Group has been actively making strategic moves to bolster its financial standing and operational efficiency. The company successfully raised an additional $1.68 million in gross proceeds through a Regulation A offering and a separate private placement of common warrants. This was alongside a significant financial agreement to sell 460,000 shares of common stock to an institutional investor, resulting in gross proceeds of $262,200.
In a bid to reduce its debt, the company entered into an agreement with JGB Partners, amending its existing debentures and capping JGB's monthly redemption right at 50% of the allowed amounts from August 2024 through July 2025. This move was coupled with a debt reduction of $2.3 million through an agreement with JGB Capital and a debt restructuring with Omnia.
22nd Century Group also recently disclosed its Q2 earnings and maintained its performance outlook. However, the company received a warning from NASDAQ due to its stock price falling below the required minimum, with a 180-day period given to regain compliance.
In terms of personnel changes, the company appointed Robert Manfredonia as the new Executive Vice President of Sales and Marketing. On the operational front, it expanded the distribution of its VLN® reduced nicotine content cigarettes in South Korea through a commercial agreement with Nico-Tech Korea, Inc. and partnered with Greenbutts, LLC to manufacture biodegradable cigarette filters. These are recent developments in the company's operations.
InvestingPro Insights
As 22nd Century Group, Inc. (NASDAQ: XXII) gears up for a major expansion of its VLN® cigarettes, the company's financial health and stock performance are critical for investors. According to InvestingPro, XXII operates with a significant debt burden and may have trouble making interest payments on its debt. This is particularly relevant as the company seeks to increase its distribution footprint and invest in inventory to support anticipated demand.
InvestingPro Data reveals some key metrics: the company's market capitalization stands at a modest $3.05 million, reflecting a very small size in the financial markets. The Revenue Growth for the last twelve months as of Q2 2024 shows a decline of 28.49%, indicating challenges in increasing sales. Furthermore, the Operating Income Margin for the same period is at -140.45%, suggesting that the company's core operations are currently not generating profit.
InvestingPro Tips highlight that analysts do not anticipate the company will be profitable this year, which could be a concern for investors banking on the success of the VLN® product line. On a brighter note, the stock has seen a significant return over the last week, with a 15.52% price total return, pointing to some positive investor sentiment in the short term. However, the overall performance over the last year has seen a dramatic 98.36% drop, emphasizing the high-risk nature of the investment.
Investors looking for a deeper dive into XXII's potential can find additional InvestingPro Tips at https://www.investing.com/pro/XXII, which can provide further insights into the company's financial health and stock performance.
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