22nd Century (NASDAQ:XXII) Group, Inc. (NASDAQ:XXII), a company specializing in the cigarette manufacturing sector, has announced a significant adjustment to the conversion price of its senior secured credit facility. According to InvestingPro data, the company currently operates with concerning financial metrics, including a weak overall Financial Health Score of 0.73 and a debt-to-equity ratio of 2.69x.
On Monday, the board of directors approved a reset of the conversion price to $6.04 per share, a change made possible through a Letter Agreement with JGB Partners, LP, JGB Capital, LP, JGB Capital Offshore Ltd., and JGB Collateral, LLC, as the collateral agent.
This strategic move follows the approval by the company's stockholders at the special meeting held on December 6, 2024, which allowed the board to adjust the conversion price of the debentures issued under the Securities Purchase Agreement dated March 3, 2023. The decision comes as the company faces significant challenges, with InvestingPro analysis revealing rapid cash burn and negative EBITDA of -$23.26 million in the last twelve months. The reset price is based on the average of the daily volume-weighted average prices (VWAPs) for the five consecutive trading days preceding the reset date.
The original agreement with JGB entities included provisions for potential adjustments to the conversion price, which the company has now enacted to align with recent market conditions. This decision reflects the company's efforts to manage its debt obligations effectively and could potentially impact the interests of current and future shareholders.
The Nevada-incorporated company, with its principal executive office in Mocksville, North Carolina, has confirmed that the reset was carried out in accordance with the terms set forth in the Letter Agreement. The SEC filing made today ensures full transparency of this corporate action to investors and the market. The company's stock has experienced significant volatility, with InvestingPro data showing a 98.75% decline over the past year. InvestingPro subscribers have access to 16 additional key insights about XXII's financial health and market performance.
In other recent news, 22nd Century Group, a cigarette manufacturer, has made several significant moves. Following shareholder approval, the company executed a 1-for-135 reverse stock split as a strategic response to Nasdaq's delisting notice due to non-compliance with minimum bid price requirements. This move aims to increase the trading price of its common stock and address listing deficiencies.
Additionally, 22nd Century Group has adjusted the terms of a previous agreement with investment entities JGB Partners, LP, JGB Capital, LP, and JGB Capital Offshore Ltd., contingent upon shareholder approval. This amendment allows for a reset of the conversion price of the debentures.
In terms of financial developments, the company secured approximately $3.48 million through an equity sale involving 6.1 million shares of common stock. This maneuver helped the company meet the NASDAQ Capital Market's minimum shareholders' equity requirement, ensuring its continued listing on the exchange.
Lastly, 22nd Century Group is expanding its business by increasing manufacturing volumes, introducing its Moonlight brand cigarettes to the Southeast Asian market, and planning to extend the distribution of its VLN® cigarettes, which contain 95% less nicotine than standard cigarettes, to over 270,000 retail outlets nationwide.
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