22nd Century Reduces Debt by Additional $1.5 Million via Payment from GVB

Rhea-AI Summary

22nd Century Group (NASDAQ: XXII) announced a $1.5 million reduction in its secured debt following a payment from GVB. This payment stems from a promissory note linked to GVB's acquisition of 22nd Century's hemp/cannabis assets in December 2023. Consequently, the remaining $500,000 debt has been extended to December 31, 2024. CEO Larry Firestone highlighted that this repayment contributes to a reduction in total outstanding debt and obligations to $8.3 million from $15.8 million at the end of 2023, significantly lowering both cash and non-cash interest expenses.

Positive

• 22nd Century Group reduced its secured debt by $1.5 million.
• Total outstanding debt decreased to $8.3 million from $15.8 million as of December 31, 2023.
• Significant reduction in cash and non-cash interest expenses.

Negative

• Remaining $500,000 debt extended until December 31, 2024.

Insights

Financial Analyst

22nd Century Group’s recent reduction of $1.5 million in secured debt is a noteworthy financial maneuver that could impact the company's financial health and stock performance. While the absolute reduction may seem modest, it represents a significant relative improvement when viewed against their total outstanding debt, which has decreased from $15.8 million as of December 31, 2023, to $8.3 million currently. This move is a positive signal to investors as it suggests a stronger balance sheet and reduced financial risk.

Lowering debt often translates directly into reduced interest expenses, which can bolster the company's earnings in the short term. The reduced debt and thus lower interest burden also improves the company’s cash flow, providing more flexibility for other strategic investments or operations. Investors should note the resulting improvement in debt ratios, such as the debt-to-equity ratio, which signifies a healthier financial position relative to equity. This could potentially make 22nd Century Group more attractive to both equity and debt investors.

Moreover, the extension of the remaining $500,000 debt to the end of 2024 can be seen as a strategic move to manage cash flow efficiently without facing immediate pressure for repayment. However, investors should remain vigilant regarding the company's overall strategy for sustaining and growing its core business operations amidst these financial adjustments.

Market Research Analyst

From a market perspective, the reduction in secured debt sends a strong signal about 22nd Century Group's commitment to improving its financial footing. Debt reduction strategies are often viewed favorably by the market as they can indicate prudent management and a focus on long-term sustainability. This can also enhance investor confidence, potentially leading to a more favorable market perception and improved stock performance.

However, it is also important to consider the context of the industry. The tobacco and nicotine harm reduction sectors are highly regulated and face ongoing scrutiny. Any financial improvements need to be balanced against the broader market trends and regulatory environment. While the debt reduction is a positive development, the company's ability to maintain revenue growth and capture market share in a competitive landscape remains critical.

Investors should look at this debt reduction as one piece of the overall strategy. It is essential to keep an eye on how 22nd Century Group plans to leverage its improved financial position to drive growth, whether through product innovation, market expansion, or strategic partnerships.

Mocksville, North Carolina--(Newsfile Corp. - June 25, 2024) - 22nd Century Group, Inc. (NASDAQ: XXII), a tobacco products company focused on nicotine harm reduction and contract manufacturing, today announced a $1.5 million reduction in its secured debt via a paydown of the GVB secured promissory note. The amount was paid by GVB directly to the lender under terms of the note executed in conjunction with GVB's December 2023 purchase of 22nd Century Group's previous hemp/cannabis assets. The promissory note is secured by the assets acquired by GVB. The remaining $500,000 due under the note has been extended to December 31, 2024.

Said Larry Firestone, Chairman and CEO: "We continue to make substantial progress across our key business objectives as we work to create value for our stockholders. With this most recent payment by GVB, we have now reduced our total outstanding debt and related obligations to just $8.3 million, with $1.5 million of non-operating assets pledged, as compared to $15.8 million as of December 31, 2023. The rapid repayment of our senior and subordinated debt has significantly lowered our cash and noncash interest expense."

About 22nd Century Group, Inc.
22nd Century Group, Inc. (NASDAQ: XXII) is an agricultural biotechnology company focused on tobacco harm reduction, reduced nicotine tobacco and improving health and wellness through plant science. With dozens of patents allowing it to control nicotine biosynthesis in the tobacco plant, the Company has developed proprietary reduced nicotine content (RNC) tobacco plants and cigarettes, which have become the cornerstone of the FDA's Comprehensive Plan to address the widespread death and disease caused by smoking. The Company received the first and only FDA Modified Risk Tobacco Product (MRTP) authorization for a combustible cigarette in December 2021. The Company is a subsequent participating manufacturer under the Master Settlement Agreement ("MSA") and vertically integrated for the production of its both own products and contract manufacturing operations ("CMO"), which consist primarily of branded filtered cigars and conventional cigarettes.

Learn more at xxiicentury.com, on Twitter, on LinkedIn, and on YouTube.
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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 strategic alternatives and 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 Quarterly Report on Form 10-Q filed on May 15, 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/214370

FAQ

What recent financial move did 22nd Century Group (XXII) announce?

22nd Century Group announced a $1.5 million reduction in its secured debt via a payment from GVB.

How has the debt reduction impacted 22nd Century Group's (XXII) total outstanding debt?

The debt reduction has decreased 22nd Century Group's total outstanding debt to $8.3 million from $15.8 million as of December 31, 2023.

What is the new due date for the remaining $500,000 debt of 22nd Century Group (XXII)?

The remaining $500,000 debt has been extended to December 31, 2024.

What are the benefits of the $1.5 million debt reduction for 22nd Century Group (XXII)?

The $1.5 million debt reduction has significantly lowered both cash and non-cash interest expenses for 22nd Century Group.

Why did GVB pay $1.5 million to reduce 22nd Century Group's (XXII) debt?

GVB paid $1.5 million as part of a promissory note linked to its purchase of 22nd Century Group's hemp/cannabis assets from December 2023.