22nd Century Continues CMO Business Expansion with Additional Filtered Cigar Volume

Rhea-AI Summary

22nd Century Group (NASDAQ: XXII) has announced an expansion of its Contract Manufacturing Organization (CMO) business with an existing customer. The company will now produce filtered cigar products for this customer, with initial shipments expected in Q4 2024 and anticipated annual volumes of 200,000 cartons or more. This agreement complements an earlier deal for export conventional cigarette products, which is expected to increase overall CMO business volumes by 20%.

The combined business from this customer is projected to significantly boost production volume and profitability for 22nd Century's CMO operations. CEO Larry Firestone highlighted that high-volume export contracts like these are working capital efficient, supporting the company's goal of achieving cash-positive operations by Q1 2025.

Positive

• Expansion of CMO business with additional filtered cigar production
• Expected annual volume of 200,000 cartons or more for filtered cigars
• 20% increase in overall CMO business volumes from earlier cigarette export deal
• Improved utilization of manufacturing capacity
• Working capital efficiency from high-volume export contracts
• Progress towards goal of cash-positive operations by Q1 2025

Negative

• None.

Insights

Financial Analyst

This announcement represents a positive development for 22nd Century Group, indicating expansion of their contract manufacturing operations (CMO) business. The company has secured additional volume for filtered cigar production from an existing customer, on top of a previously announced cigarette export deal. Key points:

• Expected annual volume of 200,000+ cartons of filtered cigars starting Q4 2024
• Earlier cigarette export deal expected to add 20% to overall CMO volumes
• Combined deals should significantly increase production utilization and profitability
• Export contracts are noted as working capital efficient, benefiting cash flows
• Company aims for cash positive operations by Q1 2025

While specific financial figures aren't provided, the increased production volumes and focus on profitable new business suggest a positive impact on revenue and potentially margins. The working capital efficiency of these deals is particularly noteworthy for a company of this size ($6.49 million market cap), as it could help improve their cash position without additional financing needs.

CMO customer adds to previously announced cigarette export business with combined volume significantly adding to profitability

Mocksville, North Carolina--(Newsfile Corp. - September 25, 2024) - 22nd Century Group, Inc. (NASDAQ: XXII), a tobacco products company that is leading the fight against nicotine and believes smokers should have a choice about their nicotine consumption, today announced a commitment from an existing customer to also supply their filtered cigar products.

As part of this customer relationship, 22nd Century Group will assume production of all the customer's filtered cigar products using an in-house predicate blend. Initial shipments are expected in the fourth quarter of 2024, with volumes anticipated to be 200,000 cartons or more on an annual basis.

In a deal announced earlier this year, 22^nd Century also entered into an agreement with the same customer for its export conventional cigarette products business. That deal, which is expected to add 20% to the overall contract manufacturing business volumes, is now beginning to more steadily ramp up production and expected to increase volumes steadily through the rest of 2024, and significantly in 2025.

"The combination of this added CMO business is expected to significantly bolster production volume to our CMO business as we work to fully utilize our manufacturing capacity under profitable new business," said Larry Firestone, Chairman and CEO. "Additionally, high volume export contracts such as this agreement is working capital efficient for the Company, an important benefit to cash flows as we continue to work toward our goal of cash positive operations in the first quarter of 2025."

About 22nd Century Group, Inc.

22nd Century Group is the pioneering nicotine harm reduction company in the tobacco industry enabling smokers to take control of their nicotine consumption.

We created our flagship product, the VLN® cigarette, to give traditional cigarette smokers an authentic and familiar alternative that helps them smoke less. VLN® is the world's first and only combustible cigarette to receive a Modified Risk Tobacco Product designation from the FDA, which the FDA has mandated to be described as a product that Helps You Smoke Less®. VLN® cigarettes have 95% less nicotine than the traditional cigarette and have been proven to greatly reduce nicotine consumption. Instead of offering new ways of delivering nicotine to addicted smokers, we offer smokers the option to take control of their nicotine consumption and make informed and more productive choices, including the choice to avoid addictive levels of nicotine altogether.

Our wholly owned subsidiaries include a leading cigarette manufacturer that produces all VLN® products and provides turnkey contract manufacturing for other tobacco brands both domestically and internationally. The 60,000 square foot facility in Mocksville, North Carolina has the capacity to produce more than 45 million cartons of combusted tobacco products annually with additional space for expansion.

Our proprietary reduced nicotine tobacco blends are made possible by comprehensive and patented technologies that regulate nicotine biosynthesis activities in the tobacco plant, resulting in full flavor and high yield with 95% less nicotine. Our extensive patent portfolio has been developed to ensure we have the only low nicotine combustible cigarette in the United States and critical international markets. Our mission is to sell the last cigarette before the 22nd Century.

VLN® and Helps You Smoke Less® are registered trademarks of 22nd Century Limited LLC.

Learn more at xxiicentury.com, on X (formerly Twitter), on LinkedIn, and on YouTube.
Learn more about VLN^® at tryvln.com.

Cautionary Note Regarding Forward-Looking Statements

Except for historical information, all of the statements, expectations, and assumptions contained in this press release are forward-looking statements, including but not limited to our full year business outlook. Forward-Looking statements typically contain terms such as "anticipate," "believe," "consider," "continue," "could," "estimate," "expect," "explore," "foresee," "goal," "guidance," "intend," "likely," "may," "plan," "potential," "predict," "preliminary," "probable," "project," "promising," "seek," "should," "will," "would," and similar expressions. Forward-Looking statements include, but are not limited to, statements regarding (i) our cost reduction initiatives, (ii) our expectations regarding regulatory enforcement, including our ability to receive an exemption from new regulations, (iii) our financial and operating performance and (iv) our expectations for our business interruption insurance claim. Actual results might differ materially from those explicit or implicit in forward-looking statements. Important factors that could cause actual results to differ materially are set forth in "Risk Factors" in the Company's Annual Report on Form 10-K filed on March 28, 2024, and in the Company's Quarterly Reports filed on May 15, 2024 and August 13, 2024. All information provided in this release is as of the date hereof, and the Company assumes no obligation to and does not intend to update these forward-looking statements, except as required by law.

Investor Relations & Media Contact
Matt Kreps
Investor Relations
22nd Century Group
mkreps@xxiicentury.com
214-597-8200

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/224501

FAQ

What new product line is 22nd Century Group (XXII) adding to its CMO business?

22nd Century Group is adding filtered cigar production to its CMO business for an existing customer.

When will 22nd Century Group (XXII) begin shipping filtered cigars for the new CMO agreement?

Initial shipments of filtered cigars are expected in the fourth quarter of 2024.

How much is the cigarette export deal expected to increase 22nd Century Group's (XXII) CMO business volumes?

The cigarette export deal is expected to increase overall CMO business volumes by 20%.

What is 22nd Century Group's (XXII) target for achieving cash-positive operations?

22nd Century Group aims to achieve cash-positive operations by the first quarter of 2025.