VECTOR GROUP LTD MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

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(in thousands of dollars, except per share amounts)

Overview

We are a holding company and are primarily engaged in two business areas:

•Tobacco: the manufacture and sale of cigarettes in United States through our Liggett Group LLC and LLC Tobacco Vector subsidiaries, and

•Real Estate: the real estate investment business through our subsidiary, New
Valley LLC, which (i) has interests in numerous real estate projects across the
United States and (ii) is seeking to acquire or invest in additional real estate
properties or projects.

Cigarettes from our tobacco subsidiaries are produced in 100 length, style and wrapper combinations. Liggett’s current brand portfolio includes:

•Eagle 20's

•Pyramid

•Montego

• Grand Prix, Liggett Select, Eva, United States and various Partner Brands and Private Labels.

The discount segment is a challenging marketplace, with consumers having less
brand loyalty and placing greater emphasis on price. Liggett's competition is
divided into two segments. The first segment consists of the three largest
manufacturers of cigarettes in the United States: Philip Morris USA Inc., which
is owned by Altria Group, Inc., RJ Reynolds Tobacco Company, which is owned by
British American Tobacco Plc, and ITG Brands LLC, which is owned by Imperial
Brands Plc. These three manufacturers, while primarily premium cigarette-based
companies, also produce and sell discount cigarettes. The second segment of
competition is comprised of a group of smaller manufacturers and importers, most
of which sell deep discount cigarettes.

See section 1. “Business” for a detailed overview and description of our principal businesses.

The financial results of Douglas Elliman through the distribution date are
presented as income (loss) from discontinued operations, net of income taxes on
our consolidated statements of operations and are not included in our results
from continuing operations discussed below. See Note 6.


COVID-19 pandemic and current business and industry trends

The COVID-19 pandemic continues to evolve and disrupt normal activities in many
segments of the U.S. economy even as COVID-19 vaccines have been and continue to
be administered. Many uncertainties continue to surround the pandemic, including
risks associated with the timing and extent of vaccine administration and the
impact of COVID-19 variants, the duration of the pandemic and the length of
immunity. The following provides a summary of our actions in our two segments -
Tobacco and Real Estate - since COVID-19 was declared a pandemic in March 2020.

Impact of COVID-19 on Tobacco Segment.  We believe many tobacco consumers have
had incremental discretionary spending availability during the COVID-19 pandemic
as a result of a variety of factors, including federal government stimulus
payments and enhanced unemployment benefit payments enacted in response to the
COVID-19 pandemic, and lower non-tobacco discretionary spending due to
stay-at-home practices.

Although our Tobacco segment has not experienced a material adverse impact to
date from the COVID-19 pandemic, there is continued uncertainty as to how the
COVID-19 pandemic (including vaccine administration and the impact of variants
as well as changes in COVID-19-related restrictions and guidelines) may impact
tobacco consumers in the future. The majority
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of retail stores in which our tobacco products are sold, including convenience
stores, have been deemed to be essential businesses by authorities and have
remained open.

Our management also continues to monitor the macroeconomic risks of the COVID-19
pandemic and its effect on tobacco consumer purchasing behaviors, including the
mix of between premium and discount brand purchases. Our Montego brand is priced
in the deep discount category and our other brands are primarily priced in the
traditional discount category.

To date, we have not experienced any material disruptions to our supply or
distribution chains and have not experienced any material adverse effects
associated with governmental actions to restrict consumer movement or business
operations. However, our suppliers and members of our distribution chain may be
subject to government action requiring facility closures, vaccine mandates,
remote working protocols and labor shortages. We continue to monitor the risk
that a supplier, a distributor or any other entity within our supply and
distribution chain closes temporarily or permanently.

Impact of COVID-19 on Real Estate Segment.  New Valley has investments in
multiple real estate ventures and properties in the New York metropolitan area,
which had a carrying value of $24,289 at December 31, 2021. Published reports
and data indicate that the New York metropolitan area was initially impacted
more than any other area in the United States. Consequently, various
governmental agencies in the New York metropolitan area and in other markets
where New Valley invests, instituted quarantines, "pause" orders,
"shelter-in-place" rules, restrictions on travel and restrictions on the types
of businesses that could operate. These restrictions adversely impacted New
Valley's investment's ability to conduct business during the year ended December
31, 2020 and, in particular from March 2020 to October 2020.

There remain significant uncertainties related to the COVID-19 pandemic, including the impact of COVID-19 variants, the duration of the pandemic, and the duration of immunity. See “Risk Factors”.

RECENT DEVELOPMENTS

Spin-off of Douglas Elliman Inc. On December 29, 2021, at 11:59 p.m., New York
City time, we completed the distribution to our stockholders (including Vector
common stock underlying outstanding stock option awards and restricted stock
awards) of the common stock of Douglas Elliman. Each holder of Vector common
stock received one share of Douglas Elliman's common stock for every two shares
of Vector common stock (including Vector common stock underlying outstanding
stock option awards and restricted stock awards) held of record as of the close
of business, New York City time, on December 20, 2021 (the "Spin-off"). In the
Spin-off, an aggregate of 77,720,159 shares of Douglas Elliman's common stock
were issued, with fractional shares converted to cash and paid to applicable
Vector stockholders.

We incurred significant costs in connection with the Spin-off. These costs
include fees for third-party advisory, consulting, legal and professional
services, as well as other items that are incremental and one-time in nature. We
expensed $10,468 for the year ended December 31, 2021. We also recorded expenses
of $4,317 associated with the acceleration of stock compensation in connection
with the Spin-off The expenses are reflected in operating, selling,
administrative and general expenses.

For the three years ended December 31, 2021, the financial results of Douglas
Elliman through the date of the Distribution are presented as income (loss) from
discontinued operations, net of income taxes on our consolidated statements of
operations and are not included in our results from continuing operations
discussed below. See Note 6.

Issuance of Senior Secured Notes due 2029. In January 2021, we issued $875,000
in aggregate principal of our 5.75% Senior Secured Notes due 2029 ("5.75% Senior
Secured Notes") in a private offering that is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
to qualified institutional buyers in accordance with Rule 144A under the
Securities Act and to persons outside the United States in compliance with
Regulation S under the Securities Act. The 5.75% Senior Secured Notes pay
interest on a semi-annual basis at a rate of 5.75% per year and mature on
February 1, 2029. Prior to February 1, 2024, we may redeem some or all of the
5.75% Senior Secured Notes at any time at a make-whole redemption price and,
thereafter, we may redeem some or all of the 5.75% Senior Secured Notes at a
premium that will decrease over time, plus accrued and unpaid interest, if any,
to the redemption date. The aggregate net proceeds from the issuance of the
5.75% Senior Secured Notes were approximately $855,500 after deducting offering
expenses. We used the net proceeds of the issuance, together with cash on hand,
to redeem all of our outstanding 6.125% Senior Secured Notes due 2025, including
accrued interest and any premium thereon, and to pay fees and expenses in
connection with the offering of the 5.75% Senior Secured Notes.

Liggett Credit Facility. At March 22, 2021Liggett, 100 Maple LLC (“Maple”), a subsidiary of Liggett, and Vector Tobacco have entered into Addendum No. 4 and Joinder of the Third Amended and Restated Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Associationas agent and lender.

The existing credit agreement has been amended to, among other things, (i) add Vector Tobacco as a borrower under the updated credit agreement, (ii) extend the term of the credit to March 22, 2026and (iii) increase the amount of

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the maximum line of credit thereunder from $60,000 for $90,000. From December 31, 2021approximately $81,000 was available for borrowing with an outstanding balance of $24 under the credit agreement.

Montego. Since August 2020, Liggett has expanded the distribution of its Montego
deep discount brand into a total 35 states. Montego was Liggett's third-largest
brand for the year ended December 31, 2021. Prior to August 2020, Montego was
sold in select targeted markets in four states. Montego's volume represented
approximately 16% of Liggett's unit volume for the year ended December 31, 2021
compared to approximately 6% for the year ended December 31, 2020.


Recent Developments in Tobacco Litigation

The cigarette industry continues to be challenged on numerous fronts. New cases
continue to be commenced against Liggett and other cigarette manufacturers.
Liggett could be subjected to substantial liabilities and bonding requirements
from litigation relating to cigarette products. Adverse litigation outcomes
could have a negative impact on our ability to operate due to their impact on
cash flows. It is possible that there could be adverse developments in pending
cases including the certification of additional class actions. An unfavorable
outcome or settlement of pending tobacco-related litigation could encourage the
commencement of additional litigation. In addition, an unfavorable outcome in
any tobacco-related litigation could have a material adverse effect on our
consolidated financial position, results of operations or cash flows. Liggett
could face difficulties in obtaining a bond to stay execution of a judgment
pending appeal.

Mississippi Dispute. In January 2016, the Attorney General for Mississippi filed
a motion in Chancery Court in Jackson County, Mississippi to enforce the March
1996 settlement agreement (the "1996 Agreement") alleging that Liggett owes
Mississippi at least $27,000 in compensatory damages and interest. In April
2017, the Chancery Court ruled, over Liggett's objections, that the 1996
Agreement should be enforced as Mississippi claims and referred the matter first
to arbitration and then to a Special Master for further proceedings to determine
the amount of damages, if any, to be awarded. In April 2021, following
confirmation of the final arbitration award, the parties stipulated that the
unpaid principal (exclusive of interest) purportedly due from Liggett to
Mississippi pursuant to the 1996 Agreement was approximately $16,700, subject to
Liggett's right to litigate and/or appeal the enforceability of the 1996
Agreement (and all issues other than the calculation of the principal amount
allegedly due).

In September 2019, the Special Master held a hearing regarding Mississippi's
claim for pre- and post-judgment interest. In August 2021, the Special Master
issued a final report with proposed findings and recommendations that
pre-judgment interest, in the amount of approximately $18,800, is due from
Liggett from April 2005 - August 3, 2021. Liggett filed formal objections to the
final report in Mississippi Chancery Court. A ruling is pending. If the
Mississippi Chancery Court rejects Liggett's objections and enters final
judgment adopting the Special Master's findings and recommendations, additional
interest amounts will accrue if the judgment is not overturned on appeal.
Liggett continues to assert that the April 2017 Chancery Court order is in error
because the most favored nations provision in the 1996 Agreement eliminated all
of Liggett's payment obligations to Mississippi, and has reserved all rights to
appeal this and other issues at the conclusion of the case. In the event Liggett
appeals an adverse judgment, the posting of a bond will likely be required.

Liggett may be required to make additional payments to Mississippi which could
have a material adverse effect on our consolidated financial position, results
of operations and cash flows.

See “Laws and Regulations” in Section 7 of the MD&A for further information on litigation.


Critical Accounting Policies

General. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities and the
reported amounts of revenues and expenses. Significant estimates subject to
material changes in the near term include impairment charges, valuation of
intangible assets, promotional accruals, actuarial assumptions of pension plans,
deferred tax liabilities, settlement accruals, valuation of investments,
including other-than-temporary impairments to such investments, and litigation
and defense costs. Actual results could differ from those estimates.

Revenue Recognition. Revenue is measured based on a consideration specified in a
contract with a customer and excludes any sales incentives. Revenue is
recognized when (a) an enforceable contract with a customer exists, that has
commercial substance, and collection of substantially all consideration for
services is probable; and (b) the performance obligations to the customer are
satisfied either over time or at a point in time.

Revenue from cigarette sales, which include federal excise taxes billed to
customers, are recognized upon shipment of cigarettes when control has passed to
the customer. Average collection terms for Tobacco sales range between three and
twelve
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days from the time cigarettes are shipped to the customer. We record a liability
for goods estimated to be returned in other current liabilities and the
associated receivable for anticipated federal excise tax refunds in other
current assets on the consolidated balance sheets. The allowance for returned
goods is based principally on sales volumes and historical return rates. The
estimated costs of sales incentives, including customer incentives and trade
promotion activities, are based principally on historical experience and are
accounted for as reductions in Tobacco revenue. Expected payments for sales
incentives are included in other current liabilities on our consolidated balance
sheets. We account for shipping and handling costs as fulfillment costs as part
of cost of sales.

Revenue from facilities primarily relates to Escena and consists of revenues
from food and beverage sales, fees charged for gameplay and the sale of golf
related equipment and apparel. Revenue is recognized at the time of sale.

Revenue from investments in real estate is recognized from land and building
sales at the time of the closing of a sale, which is typically when cash is due,
the performance obligation is satisfied as the title to and possession of the
real estate asset are transferred to the buyer and we have no further
obligations or involvement in the real estate asset.

Leases. Under Accounting Standards Committee ("ASC") 842, we determine if an
arrangement is a lease at contract inception. At lease commencement, we record
and recognize right-of-use ("ROU") assets for the lease liability amount and
initial direct costs incurred, offset by lease incentives received. We record
lease liabilities for the net present value of future lease payments over the
lease term. The discount rate we use is generally our estimated incremental
borrowing rate unless the lessor's implicit rate is readily determinable. We
calculate discount rates periodically to estimate the rate we would pay to
borrow the funds necessary to obtain an asset of similar value, over a similar
term, with a similar security. The lease terms may include options to extend or
terminate the lease when it is reasonably certain that we will exercise that
option. We recognize operating lease expense on a straight-line basis over the
lease term. We recognize finance lease cost on a straight-line basis over the
shorter of the useful life of the asset and the lease term. Operating leases are
included in operating lease ROU assets and lease liabilities on the consolidated
balance sheets. Finance leases are included in investments in real estate, net,
property, plant and equipment and current and long-term portions of notes
payable and long-term debt on the consolidated balance sheets.

Contingencies. We record Liggett's product liability legal expenses and other
litigation costs as operating, selling, administrative and general expenses as
those costs are incurred. As discussed in Note 15 to our consolidated financial
statements, legal proceedings regarding Liggett's tobacco products are pending
or threatened in various jurisdictions against Liggett and us.

We record provisions in our consolidated financial statements for pending
litigation when we determine that an unfavorable outcome is probable and the
amount of loss can be reasonably estimated. At the present time, while it is
reasonably possible that an unfavorable outcome in a case may occur, except as
discussed in Note 15 to our consolidated financial statements and discussed
below related to the 16 cases where an adverse verdict was entered against
Liggett: (i) management has concluded that it is not probable that a loss has
been incurred in any of the pending tobacco-related cases; or (ii) management is
unable to reasonably estimate the possible loss or range of loss that could
result from an unfavorable outcome of any of the pending tobacco-related cases
and, therefore, management has not provided any amounts in the consolidated
financial statements for unfavorable outcomes, if any. Legal defense costs are
expensed as incurred.

Although Liggett has generally been successful in managing litigation in the
past, litigation is subject to uncertainty and significant challenges remain,
particularly with respect to the Engle progeny cases.

A reader of this Form 10-K should not infer from the absence of any reserve in
our consolidated financial statements that we will not be subject to significant
tobacco-related liabilities in the future. Litigation is subject to many
uncertainties, and it is possible that our consolidated financial position,
results of operations or cash flows could be materially adversely affected by an
unfavorable outcome in any such tobacco-related litigation.

There may be several other proceedings, lawsuits and claims pending against us
and certain of our consolidated subsidiaries unrelated to tobacco or tobacco
product liability. We are of the opinion that the liabilities, if any,
ultimately resulting from such other proceedings, lawsuits and claims should not
materially affect our financial position, results of operations or cash flows.

Master Settlement Agreement. As discussed in Note 15 to our consolidated
financial statements, Liggett and Vector Tobacco are participants in the Master
Settlement Agreement ("MSA"). Liggett and Vector Tobacco have no payment
obligations under the MSA except to the extent their market shares exceed
approximately 1.65% and 0.28%, respectively, of total cigarettes sold in the
United States. Their obligations, and the related expense charges under the MSA,
are subject to adjustments based upon, among other things, the volume of
cigarettes sold by Liggett and Vector Tobacco, their relative market shares and
inflation. Since relative market shares are based on cigarette shipments, the
best estimate of the allocation of charges under the MSA is recorded in cost of
goods sold as the products are shipped. Settlement expenses under the MSA
recorded in the accompanying consolidated statements of operations were $171,058
for 2021, $175,837 for 2020 and $165,471 for 2019.
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Adjustments to these estimates are recognized in the period when the change becomes probable and the amount can be reasonably estimated.

Stock-Based Compensation. Our stock-based compensation uses a fair-value-based
method to recognize non-cash compensation expense for share-based transactions.
Under the fair value recognition provisions, we recognize stock-based
compensation net of an estimated forfeiture rate and only recognize compensation
cost for those shares expected to vest on a straight-line basis over the
requisite service period of the award. We recognized stock-based compensation
expense of $849, $1,428 and $1,923 in 2021, 2020 and 2019, respectively, related
to the amortization of stock option awards and $13,949, $7,546 and $7,705,
respectively, related to the amortization of restricted stock grants. As of
December 31, 2021 and 2020, there was $381 and $1,229, respectively, of total
unrecognized cost related to employee stock options and $10,627 and $12,081,
respectively, of total unrecognized cost related to restricted stock grants. See
Note 14 to our consolidated financial statements.

Employee Benefit Plans. The determination of our net pension and other
postretirement benefit income or expense is dependent on our selection of
certain assumptions used by actuaries in calculating such amounts. Those
assumptions include, among others, the discount rate, expected long-term rate of
return on plan assets and rates of increase in compensation and healthcare
costs. We determine discount rates by using a quantitative analysis that
considers the prevailing prices of investment grade bonds and the anticipated
cash flow from our two qualified defined benefit plans and our postretirement
medical and life insurance plans. These analyses construct a hypothetical bond
portfolio whose cash flow from coupons and maturities match the annual projected
cash flows from our pension and retiree health plans. As of December 31, 2021,
our benefit obligations were computed assuming a discount rate between 1.80% -
2.85%. As of December 31, 2021, our service cost was computed assuming a
discount rate of 1.40% - 2.55%. In determining our expected rate of return on
plan assets, we consider input from our external advisors and historical returns
based on the expected long-term rate of return which is the weighted average of
the target asset allocation of each individual asset class. Our actual 10-year
annual rate of return on our pension plan assets was 7.74%, 6.91% and 7.59% for
the years ended December 31, 2021, 2020 and 2019, respectively, and our actual
five-year annual rate of return on our pension plan assets was 7.86%, 7.51% and
5.41% for the years ended December 31, 2021, 2020 and 2019, respectively. In
computing expense for the year ended December 31, 2022, we will use an
assumption of a 3.5% annual rate of return on our pension plan assets. In
accordance with GAAP, actual results that differ from our assumptions are
accumulated and amortized over future periods and therefore, generally affect
our recognized income or expense in such future periods. While we believe that
our assumptions are appropriate, significant differences in our actual
experience or significant changes in our assumptions may materially affect our
future net pension and other postretirement benefit income or expense.

Net pension expense for defined benefit pension plans and other postretirement
expense was $1,390, $4,210 and $2,834 for the years ended December 31, 2021,
2020 and 2019, respectively, and we currently anticipate benefit expense will be
approximately $1,358 for 2022. In contrast, our funding obligations under the
pension plans are governed by the Employee Retirement Income Security Act
("ERISA"). To comply with ERISA's minimum funding requirements, we do not
currently anticipate that we will be required to make any funding to the tax
qualified pension plans for the pension plan year beginning on January 1, 2022
and ending on December 31, 2022.

Long-Term Investments and Impairments. At December 31, 2021, our long-term
investments were comprised of $32,089 of equity securities at fair value that
qualify for the net asset value ("NAV") practical expedient and $20,984 of
long-term investments that were accounted for under the equity method. Our
investments in equity securities at fair value that qualify for the NAV
practical expedient consisted primarily of investment partnerships investing in
investment securities. The investments in these investment partnerships are
illiquid and the ultimate realization of these investments is subject to the
performance of the underlying partnership and its management by the general
partners. The estimated fair value of these investments was provided by the
partnerships based on the indicated market values of the underlying assets or
investment portfolio. Our investments accounted for under the equity method
included interests in partnerships in which we have the ability to exercise
significant influence over their operating and financial policies. The estimated
fair value of the investments is either provided by the partnerships based on
the indicated market values of the underlying assets or is calculated internally
based on the number of shares owned and the equity in earnings or losses and
interest income we recognize on the investment. Gains are recognized when
realized in our consolidated statement of operations. Losses are recognized as
realized or upon the determination of the occurrence of an other-than-temporary
decline in fair value. Pursuant to the amendments provided by ASU 2016-01,
Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities ("ASU 2016-01"), our long-term
investments that qualify for the NAV practical expedient are measured at fair
value with changes in fair value recognized in net income. Therefore, impairment
analyses for these investments are no longer warranted.

At December 31, 2021, we also had $5,200 of investments in various limited
liability companies that were classified as equity securities without readily
determinable fair values that do not qualify for the NAV practical expedient.
The investments are included in "Other assets" on the consolidated balance
sheets and are valued at cost minus impairment, if any, plus or minus changes
resulting from observable price changes in orderly transactions for the
identical or a similar investment. On a quarterly basis, we evaluate our
investments to determine if there are indicators of impairment. If so, we also
make a determination of whether there is an impairment and if it is considered
temporary or other than temporary. We believe that the assessment of
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temporary or other-than-temporary impairment is facts-and-circumstances driven.
The impairment indicators that are taken into consideration as part of our
analysis include (a) a significant deterioration in the earnings performance,
credit rating, asset quality, or business prospects of the investee, (b) a
significant adverse change in the regulatory, economic, or technological
environment of the investee, (c) a significant adverse change in the general
market condition of either the geographical area or the industry in which the
investee operates, and (d) factors that raise significant concerns about the
investee's ability to continue as a going concern, such as negative cash flows
from operations, working capital deficiencies, or noncompliance with statutory
capital requirements or debt covenants.

Current Expected Credit Losses. On January 1, 2020, we adopted ASU No. 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments, therefore, our measurement of credit losses for most
financial assets and certain other instruments has been modified as discussed in
Note 3 to our consolidated financial statements.

• Tobacco receivables: average collection times for tobacco sales vary between three and twelve days from the time the cigarettes are shipped to the customer. Based on Tobacco’s historical and ongoing cash collections from customers, an estimated credit loss in accordance with ASU 2016-13 has not been recorded for these trade receivables as of January 1, 2021 and December 31, 2021.

•Term loan receivables: New Valley provides term loans to real estate
developers, which are included in Other assets on the consolidated balance
sheets. The loans are secured by guarantees and are evaluated individually.
Because New Valley does not have internal historical loss information by which
to evaluate the risk of credit losses, external market data measuring default
risks on high yield loans as of each measurement date was utilized to estimate
reserves for credit losses on these loans. New Valley's expected credit loss
estimate was $3,100 as of adoption (January 1, 2020). New Valley's expected
credit loss estimate was $15,928 as of December 31, 2021.

Intangible Assets. Intangible assets with indefinite lives are not amortized,
but instead are tested for impairment on an annual basis, or whenever events or
changes in business circumstances indicate the carrying value of the assets may
not be recoverable.

Our intangible asset associated with the benefit under the MSA is related to
Vector Tobacco. The fair value of the intangible asset associated with the
benefit under the MSA is determined using discounted cash flows. This approach
involves two steps: (i) estimating future cash savings due to the payment
exemption under the MSA and (ii) discounting the resulting cash flow savings to
determine fair value. This fair value is then compared with the carrying value
of the intangible asset associated with the benefit under the MSA. To the extent
that the carrying amount exceeds the implied fair value of the intangible asset,
an impairment loss is recognized. We performed its impairment test for the year
ended December 31, 2021 and no impairment was noted.

Income Taxes. The application of income tax law is inherently complex. Laws and
regulations in this area are voluminous and are often ambiguous. As such, we are
required to make many subjective assumptions and judgments regarding our income
tax exposures. Interpretations of and guidance surrounding income tax laws and
regulations change over time and, as a result, changes in our subjective
assumptions and judgments may materially affect amounts recognized in our
consolidated financial statements.

See Note 13 to our consolidated financial statements for additional information regarding our accounting for income taxes and uncertain tax positions.

Operating results

The following discussion provides an assessment of our results of operations,
capital resources and liquidity and should be read in conjunction with our
consolidated financial statements and related notes included elsewhere in this
report. The consolidated financial statements include the accounts of Liggett,
Vector Tobacco, Liggett Vector Brands, New Valley, and other less significant
subsidiaries.

Our business segments were Tobacco and Real Estate for the three years ended
December 31, 2021, 2020 and 2019. The Tobacco segment consists of the
manufacture and sale of cigarettes. The Real Estate segment includes our
investment in New Valley, which includes Escena and investments in real estate
ventures.

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies and can be found in Note 1 to our
consolidated financial statements.
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                                             Year Ended December 31,
                               2021                   2020                   2019
                                             (Dollars in thousands)
Revenues:
Tobacco                    $ 1,202,497            $ 1,204,501            $ 1,114,840

Real Estate                     18,203                 24,181                  4,763

 Total revenues            $ 1,220,700            $ 1,228,682            $ 1,119,603

Operating income (loss):
Tobacco                    $   360,317   (1)      $   319,536   (2)      $   261,630   (3)

Real Estate                      4,066                   (610)                   550
Corporate and Other            (43,944)  (4)          (24,498)  (5)          (27,565)
Total operating income     $   320,439            $   294,428            $   234,615


_____________________________

(1)Operating income includes $211 of litigation settlement and judgment expense
and $2,722 received from a litigation settlement associated with the MSA (which
reduced cost of sales).

(2) Operating income includes $337 litigation and judgment costs and $299 expenses of MSA Settlement.

(3) Operating income includes $990 settlement of disputes and costs of judgment.

(4)Operating loss includes transaction charges of $10,468 and accelerated stock
compensation of $4,317 related to the spin-off of Douglas Elliman; and $910 of
gain on sale of assets.

(5) Operating loss includes $2,283 gain on the sale of assets.

2021 Compared to 2020

Revenues. Total revenues were $1,220,700 for the year ended December 31, 2021
compared to $1,228,682 for the year ended December 31, 2020. The $7,982 (0.6%)
decline in revenues was due to a $2,004 decline in Tobacco revenues related to
lower unit volume, partially offset by increases in net pricing and a $5,978
decline in Real Estate revenues, primarily related to the absence of the $20,500
sale of an investment in real estate located in Sagaponack, NY, offset by the
$12,850 sale of investments in real estate in the current period.

Cost of sales. Total cost of sales was $769,542 for the year ended December 31,
2021 compared to $819,602 for the year ended December 31, 2020. The $50,060
(6.1%) decline in cost of sales was due to a $37,889 decline in Tobacco cost of
sales related to decreased sales volume and a $12,171 decline in Real Estate
cost of sales.

Expenses. Operating expenses were $130,719 for the year ended December 31, 2021
compared to $114,652 for the year ended December 31, 2020. The $16,067 (14.0%)
increase was due to a $19,446 increase in Corporate and Other expense and a
$1,517 increase in Real Estate expenses. This was offset by a $4,896 decline in
Tobacco expenses for the year ended December 31, 2021. The increase in Corporate
and Other expense included transaction charges of $10,468 related to the
spin-off of Douglas Elliman.

Operating income. Operating income was $320,439 for the year ended December 31,
2021 compared to $294,428 for the year ended December 31, 2020, an increase of
$26,011 (8.8%). Tobacco operating income increased by $40,781 and Real Estate
operating income increased by $4,676. This was offset by an increased Corporate
and Other operating loss of $19,446.

Other expenses. Other expenses were $110,478 and $113,385 for the years ended
December 31, 2021 and 2020, respectively. For the year ended December 31, 2021,
other expenses primarily consisted of interest expense of $112,728 and loss on
extinguishment of debt of $21,362. This was offset by equity in earnings from
real estate ventures of $10,250, other income of $10,687, and equity in earnings
from investments of $2,675. For the year ended December 31, 2020, other expenses
primarily consisted of interest expense of $121,278, equity in losses from real
estate ventures of $44,728, and other expenses of $8,646. This was offset by
income of equity in earnings from investments of $56,268 and $4,999 from changes
in fair value of derivatives embedded within convertible debt.

Earnings before provision for income taxes. Earnings before income taxes were
$209,961 and $181,043 for the years ended December 31, 2021and 2020, respectively.

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Income tax expense. Income tax expense was $62,807 for the year ended
December 31, 2021 compared to income tax expense of $54,121 for the year ended
December 31, 2020. Our income tax rates for the years ended December 31, 2021
and 2020 do not bear a customary relationship to statutory income tax rates as a
result of the impact of nondeductible expenses, state income taxes, changes in
valuation allowances, and excess tax benefits on stock-based compensation.

The tobacco.

Tobacco revenues. Liggett increased the list price of Eagle 20's, Pyramid,
Liggett Select, Eve and Grand Prix by $0.15 per pack in January 2022, $0.15 per
pack in September 2021, $0.14 per pack in June 2021, $0.14 per pack in January
2021, $0.13 per pack in November 2020, $0.11 per pack in June 2020, and $0.08
per pack in February 2020. Liggett increased the list price of Montego by $0.10
per pack in January 2022.

All of our Tobacco sales were in the discount category in 2021 and 2020. For the
year ended December 31, 2021, Tobacco revenues were $1,202,497 compared to
$1,204,501 for the year ended December 31, 2020. Revenues declined by $2,004
(0.2%) due to declines in unit sales volume offset by a favorable price variance
for the year ended December 31, 2021. The decline in sales volume (535.5 million
units) resulted in an unfavorable variance of $70,378, while the higher selling
prices resulted in a favorable price variance of $68,374.

Tobacco cost of sales. The major components of our Tobacco cost of sales were as
follows:
                                                                                                           Year Ended December 31,
                                                                                                           2021                    2020

Manufacturing overhead, raw materials and labor                                                    $     121,424               $ 128,091
Federal excise taxes                                                                                     434,695                 461,532

FDA expense                                                                                               23,832                  24,842
MSA expense, net of market share exemption                                                               171,058        (1)      175,837
Customer shipping and handling                                                                             7,006                   5,602
                        Total cost of sales                                                        $     758,015               $ 795,904

_____________________________

(1)Includes $2,722 receipt of a litigation settlement associated with the MSA expense (which reduced the cost of sales).

The Tobacco segment's MSA expense is included in cost of sales. Under the terms
of the MSA, we have no payment obligations except to the extent that our tobacco
subsidiaries' market share of the U.S. cigarette market exceeds 1.92%. The
calculation of this benefit from the MSA is an estimate based on taxable unit
shipments of cigarettes in the U.S. As of December 31, 2021, we estimate taxable
shipments in the U.S. decreased by approximately 7.3% in 2021. Our annual MSA
liability changes by approximately $1,800 for each percentage change in the
estimated shipment volumes in the U.S. market. For the year ended December 31,
2021, the estimated decrease in taxable shipments in conjunction with the annual
MSA inflation adjustment decreased the value of Liggett's market share exemption
compared to the prior year end and, thus, increased cost of sales by $495.

Tobacco gross profit was $444,482 for the year ended December 31, 2021 compared
to $408,597 for the year ended December 31, 2020, an increase of $35,885 (8.8%).
The increase in gross profit for the year ended December 31, 2021 was primarily
attributable to increased pricing on the Eagle 20's and Pyramid brands offset by
declines in volume and increased cost of sales per unit. For the year ended
December 31, 2021, Eagle 20's remains Liggett's primary low cost cigarette brand
and its percentage of Liggett's total unit volume sales has declined from
approximately 62% for the year ended December 31, 2020 to approximately 57% for
the year ended December 31, 2021. Pyramid, Liggett's second largest brand,
declined from approximately 23% of total unit volume sales for the year ended
December 31, 2020 to approximately 20% for the year ended December 31, 2021.
Montego, Liggett's third largest brand, increased from approximately 6% of total
unit volume sales for the year ended December 31, 2020 to approximately 16% for
the year ended December 31, 2021. As a percentage of revenue (excluding Federal
Excise Taxes), Tobacco gross profit increased from 55.0% in the 2020 period to
57.9% in the 2021 period primarily as a result of price increases partially
offset by a continued shift in sales volume to the lower-priced Montego brand.

Tobacco expenses. Tobacco operating, selling, general and administrative
expenses, excluding settlements and judgments, were $83,954 for the year ended
December 31, 2021 compared to $88,724 for the year ended December 31, 2020. The
$4,770 (5.4%) decline is primarily due to declines in professional fees and
expenses associated with Colorado's minimum price legislation partially offset
by higher sales and marketing expenses related to the return to pre-pandemic
business activities. Tobacco product liability legal expenses, including
settlements and judgments, were $6,436 and $6,476 for the years ended
December 31, 2021 and 2020, respectively.
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Tobacco operating income. Tobacco operating income was $360,317 for the year
ended December 31, 2021 compared to $319,536 for the year ended December 31,
2020. The increase of $40,781 (12.8%) was primarily attributable to higher gross
profit margins, as discussed above, and declines in operating, selling, general
and administrative expenses.

Real Estate.

Real Estate revenues. Real Estate revenues were $18,203 and $24,181 for the
years ended December 31, 2021 and 2020, respectively. Real Estate revenues
declined by $5,978 (24.7%), which was primarily related to the absence of the
$20,500 sale of an investment in real estate located in Sagaponack, NY in the
prior period, offset by the $12,850 sale of investments in real estate in the
current period.

Real estate revenue and cost of sales are as follows:

                                                           Year Ended December 31,
                                                              2021                2020
 Real Estate Revenues:
 Revenues from investments in real estate                   12,850          

20,500

 Sales on facilities primarily from Escena                   5,353                3,681

  Total real estate revenues                         $      18,203             $ 24,181

 Real Estate Cost of Sales:
 Cost of sales from investments in real estate               7,508          

20,488

 Cost of sales on facilities primarily from Escena           4,019          

3,210

 Total real estate cost of sales                     $      11,527          

$23,698


Real Estate cost of sales. Real Estate cost of sales were $11,527 and $23,698
for the years ended December 31, 2021 and 2020, respectively. Real Estate cost
of sales declined by $12,171, primarily related to the absence of the $20,488
cost of sales of an investment in real estate located in Sagaponack, NY in the
prior period, offset by the $7,508 cost of sales of investments in real estate
in the current period.

Real estate expenses. Real estate expenditure was $2,610 and $1,093 for the years ended December 31, 2021 and 2020, respectively.

Profit (loss) from real estate operations. real estate segment recorded an operating profit of $4,066 for the year ended December 31, 2021 and the operating loss of $610
for the year ended December 31, 2020.

Corporate and others.

Corporate and other loss. The operating loss at the corporate segment was
$43,944 for the year ended December 31, 2021 compared to $24,498 for the same
period in 2020. The increase of $19,446 was primarily due to transaction charges
of $10,468 and accelerated stock compensation of $4,317 related to the Spin-off
for the year ended December 31, 2021.


2020 vs. 2019

Revenues. Total revenues were $1,228,682 for the year ended December 31, 2020
compared to $1,119,603 for the year ended December 31, 2019. The $109,079 (9.7%)
increase in revenues was due to a $89,661 increase in Tobacco revenues related
to an increase in both unit volume and net pricing and a $19,418 increase in
Real Estate revenues, primarily related to the $20,500 sale of an investment in
real estate located in Sagaponack, NY.

Cost of sales. Total cost of sales was $819,602 for the year ended December 31,
2020 compared to $774,885 for the year ended December 31, 2019. The $44,717
(5.8%) increase in cost of sales was due to a $24,774 increase in Tobacco cost
of sales related to increased sales volume and higher MSA expense and a $19,943
increase in Real Estate cost of sales, which was primarily an investment in real
estate located in Sagaponack, NY.

Expenses. Operating expenses were $114,652 for the year ended December 31, 2020
compared to $110,103 for the year ended December 31, 2019. The $4,549 (4.1%)
increase was due to a $6,981 increase in Tobacco expenses and a $635 increase in
Real Estate expenses for the year ended December 31, 2020. This was offset by a
$3,067 decline in Corporate and Other expense, including gain on sale of assets
of $2,283.
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Operating income. Operating income was $294,428 for the year ended December 31,
2020 compared to $234,615 for the year ended December 31, 2019, an increase of
$59,813 (25.5%). Tobacco operating income increased by $57,906 and Corporate and
Other operating loss declined by $3,067, while Real Estate operating income
declined by $1,160.

Other expenses. Other expenses were $113,385 and $109,600 for the years ended
December 31, 2020 and 2019, respectively. For the year ended December 31, 2020,
other expenses primarily consisted of interest expense of $121,278, equity in
losses from real estate ventures of $44,728, and other expenses of $8,646. This
was offset by equity in earnings from investments of $56,268 and income of
$4,999 from changes in the fair value of derivatives embedded within convertible
debt. For the year ended December 31, 2019, other expenses primarily consisted
of interest expense of $137,543, loss on extinguishment of debt of $4,301 and
equity in losses from real estate ventures of $27,760. This was offset by income
of $26,425 from changes in fair value of derivatives embedded within convertible
debt, equity in earnings from investments of $17,000 and other income of
$16,579.

Earnings before provision for income taxes. Earnings before income taxes were
$181,043 and $125,015 for the years ended December 31, 2020and 2019, respectively.

Income tax expense. Income tax expense was $54,121 for the year ended December
31, 2020 compared to $31,085 for the year ended December 31, 2019. Our income
tax rates for the years ended December 31, 2020 and 2019 do not bear a customary
relationship to statutory income tax rates as a result of the impact of
nondeductible expenses, state income taxes, changes in valuation allowances, and
excess tax benefits on stock-based compensation.

The tobacco.

Tobacco revenues. Liggett increased the list price of Eagle 20's by $0.13 per
pack in November 2020, $0.11 per pack in June 2020, $0.08 per pack in February
2020, $0.08 per pack in October 2019, and $0.11 per pack in February 2019.
Liggett also increased the list price of Pyramid, Liggett Select, Eve and Grand
Prix by $0.13 per pack in November 2020, $0.11 per pack in June 2020, $0.08 per
pack in February 2020, $0.08 per pack in October 2019, $0.06 per pack in June
2019, and $0.11 per pack in February 2019.

All of our Tobacco sales were in the discount category in 2020 and 2019. For the
year ended December 31, 2020, Tobacco revenues were $1,204,501 compared to
$1,114,840 for the year ended December 31, 2019. Revenues increased by $89,661
(8.0%) due to increases in unit sales volume and the average selling price of
our brands for the year ended December 31, 2020. The higher selling prices
resulted in a favorable price variance of $65,348 and the increase in sales
volume (195.6 million units) resulted in a favorable variance of $24,313. We
believe a competitor's announcement of a price increase in December 2020, as
well as the prospect of increased restrictions and lockdowns associated with the
COVID-19 pandemic, resulted in increased fourth quarter sales volumes and
elevated wholesale inventories as of December 31, 2020.

Tobacco cost of sales. The major components of our Tobacco cost of sales were as
follows:

                                                                                                          Year Ended December 31,
                                                                                                          2020                    2019

Manufacturing overhead, raw materials and labor                                                   $     128,091               $ 123,654
Federal excise taxes                                                                                    461,532                 451,256

FDA expense                                                                                              24,842                  24,947
MSA expense, net of market share exemption                                                              175,837        (1)      165,471
Customer shipping and handling                                                                            5,602                   5,802
Total cost of sales                                                                               $     795,904               $ 771,130

_____________________________

(1)Includes $299 increase in MSA Settlement expenses.

The Tobacco segment's MSA expense is included in cost of sales. Under the terms
of the MSA, we have no payment obligations except to the extent that our tobacco
subsidiaries' market share of the U.S. cigarette market exceeds 1.92%. The
calculation of this benefit from the MSA is an estimate based on taxable unit
shipments of cigarettes in the U.S. As of December 31, 2020, we estimated
taxable shipments in the U.S. increased by approximately 1.0% in 2020. In 2020,
our annual MSA liability changed by approximately $1,700 for each percentage
change in the estimated shipment volumes in the U.S. market. For the year ended
December 31, 2020, the estimated increase in taxable shipments in conjunction
with the annual MSA inflation adjustment increased the value of Liggett's market
share exemption compared to the prior year end and, thus, decreased cost of
sales by $7,731. Similar to some other consumer product categories, cigarette
industry volumes outperformed
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recent historical trends and benefited from increased consumer demand related to
changes in underlying cigarette purchasing and consumption patterns associated
with the pandemic.

Tobacco gross profit was $408,597 for the year ended December 31, 2020 compared
to $343,710 for the year ended December 31, 2019, an increase of $64,887
(18.9%). The increase in gross profit for the year ended December 31, 2020 was
primarily attributable to increased pricing on the Eagle 20's and Pyramid brands
and increased Eagle 20's volume. For the year ended December 31, 2020, Eagle
20's remains Liggett's primary low-cost cigarette brand and its percentage of
Liggett's total unit volume sales has increased from approximately 60% for the
year ended December 31, 2019 to approximately 62% for the year ended December
31, 2020. Pyramid, Liggett's second largest brand, declined from approximately
27% of total unit volume sales for the year ended December 31, 2019 to
approximately 23% for the year ended December 31, 2020. As a percentage of
revenue (excluding Federal Excise Taxes), Tobacco gross profit increased from
51.8% in the 2019 period to 55.0% in the 2020 period primarily as a result of
price increases partially offset by a continued shift in sales volume to the
lower-priced Eagle 20's brand.

Tobacco expenses. Tobacco operating, selling, general and administrative
expenses, excluding settlements and judgments, were $88,724 for the year ended
December 31, 2020 compared to $81,090 for the year ended December 31, 2019. The
$7,634 (9.4%) increase is primarily due to increased professional fees and
expenses associated with Colorado's minimum price legislation. Tobacco product
liability legal expenses, including settlements and judgments, were $6,476 and
$7,363 for the years ended December 31, 2020 and 2019, respectively.

Tobacco operating income. Tobacco operating income was $319,536 for the year
ended December 31, 2020 compared to $261,630 for the year ended December 31,
2019. The increase of $57,906 (22.1%) was primarily attributable to higher gross
profit margins, as discussed above, and was partially offset by increased
operating, selling, general and administrative expenses.

Immovable.

Real Estate revenues. Real Estate revenues were $24,181 and $4,763 for the years
ended December 31, 2020 and 2019, respectively. Real Estate revenues increased
by $19,418, which was primarily related to the $20,500 sale of an investment in
real estate located in Sagaponack, NY.


Real estate revenue and cost of sales are as follows:

                                                          Year Ended December 31,
                                                             2020                2019
Real Estate Revenues:
Revenues from investments in real estate            $      20,500              $     -
Sales on facilities primarily from Escena                   3,681                4,763

 Total real estate revenues                         $      24,181              $ 4,763

Real Estate Cost of Sales:
Cost of sales from investments in real estate       $      20,488              $     -
Cost of sales on facilities primarily from Escena           3,210           

3,755

Total real estate cost of sales                     $      23,698           

$3,755


Real Estate cost of sales. Real Estate cost of sales were $23,698 and $3,755 for
the years ended December 31, 2020 and 2019, respectively. Real Estate cost of
sales increased by $19,943, primarily related to $20,488 from the sale of an
investment in real estate located in Sagaponack, NY.

Real estate expenses. Real estate expenditure was $1,093 and $458 for the years ended December 31, 2020 and 2019, respectively.

Real Estate operating (loss) income. The Real Estate segment had operating loss
of $610 for the year ended December 31, 2020 and operating income of $550 for
the year ended December 31, 2019. The Real Estate segment's operating loss was
primarily related to declines in operations at the Escena facility.
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Corporate and others.

Corporate and other loss. The operating loss at the corporate segment was
$24,498 for the year ended December 31, 2020 compared to $27,565 for the same
period in 2019. The decline of $3,067 was primarily due to the $2,283 gain on
the sale of assets and decreased administrative costs related to professional
fees and travel expenses for the year ended December 31, 2020.


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Summary of real estate investments

We own and seek to acquire investment interests in various domestic and
international real estate projects through debt and equity investments. Our real
estate investments primarily include the following projects as of December 31,
2021:

                                                                                                                                                           (Dollars in Thousands. Area and Unit Information in Ones)
                                                                                                                                                                               Future
                                                                                                                                                                              Capital
                                                                                                                                                                              Commit-                                                                                        Projected Number of
                                                                                                                                              Cumulative    Carrying Value   ments from                                                                                       Residential Lots,        Projected
                                                                                                                                Net Cash       Earnings          as of       New Valley                                                                                      Units and/or Hotel   Construction Start         Projected
                                                 Location                Date of Initial Investment    Percentage Owned (1)     Invested       (Losses)       12/31/2021        (2)          Projected Residential and/or Hotel Area         Projected Commercial Space             Rooms                Date          Construction End Date

                                    Master planned community, golf
                                    course, and club house in Palm                                                                                                                                                                                                                 667  R Lots
Escena, net                         Springs, CA                                  March 2008                    100%           $   (1,826)   $     10,924    $      9,098            -               450          Acres                                                             450     H              N/A                   N/A
Townhome A (11 Beach Street)        TriBeCa, Manhattan, NY                      November 2020                  100%                   22             (22)              -            -             6,169          SF                                                              1         R              N/A                Completed
Investments in real estate, net                                                                                               $   (1,804)   $     10,902    $      9,098    $       -

Investments in real estate
ventures:

111 Murray Street                   TriBeCa, Manhattan, NY                        May 2013                     9.5%                6,819          (4,414)          2,405            -           330,000          SF                           1,700        SF                  157         R        September 2014           Completed

87 Park (8701 Collins Avenue)       Miami Beach, FL                             December 2013                  23.1%              (6,485)          6,485               -            -           160,000          SF                             TBD                             70         R         October 2015            Completed
125 Greenwich Street                Financial District, Manhattan, NY            August 2014                   13.4%               7,992          (7,992)              -            -           306,000          SF                          16,000        SF                  273         R          March 2015                TBD
West Hollywood Edition (9040 Sunset                                                                                                                                                                                                                                                 20     R
Boulevard)                          West Hollywood, CA                          October 2014                   48.5%              17,188         (17,188)              -            -           210,000          SF                               -                                190     H           May 2015              Completed

Monad Terrace (1300 West Ave)       Miami Beach, FL                               May 2015                     19.6%               7,635          (7,635)              -            -           160,000          SF                               -                             59         R           May 2016              Completed
Takanasee (805 Ocean Ave)           Long Branch, NJ                             December 2015                  22.8%               6,144          (5,588)            556            -            63,000          SF                               -                             13         R           June 2017                TBD
Brookland (15 East 19th St)         Brooklyn, NY                                 April 2017                    9.8%                  402             (11)            391            -            24,000          SF                               -                             33         R          August 2017            Completed
Dime (209 Havemeyer St)             Brooklyn, NY                                November 2017                  16.5%               9,145          (3,791)          5,354            -           100,000          SF                         150,000                            177         R          
May 2017              Completed
352 6th Avenue                      Brooklyn, NY                                February 2019                  37.0%                (416)            416               -            -             5,200          SF                               -        0                     4         R        September 2019           Completed

Meat packaging square (44 Ninth Avenue) Meat packing quarter, Manhattan, NY

      April 2019                    16.9%              10,692          (2,808)          7,884            -             8,741          SF                          76,919        SF                   15         R           July 2021             May 2023
Five Park (500 Alton Road)          Miami Beach, FL                            September 2019                  38.9%              18,098           1,209          19,307            -           472,000          SF                          15,000        SF                  291         R          April 2020           February 2024
9 DeKalb Avenue                     Brooklyn, NY                                 April 2019                    4.2%                5,000           1,065           6,065            -           450,000          SF                         120,000        SF                  540         R          March 2019           February 2023
Natura                              Miami, FL                                   December 2019                  77.8%               7,354           5,036          12,390            -           460,000          SF                               -                            460         R         December 2019         November 2022
Townhome B (11 Beach Street)        TriBeCa, Manhattan, NY                      November 2020                  46.7%                (594)            594               -            -             4,752          SF                               -                              1         R              N/A                Completed
Ritz-Carlton Villas (4701 Meridian
Avenue)                             Miami Beach, FL                             December 2020                  50.0%               4,109            (125)          3,984            -            58,000          SF                               -                             15         R         October 2020           August 2022
2000 N. Atlantic Ave.               Daytona Beach, FL                           November 2021                  50.0%               1,882              37           1,919            -              TBD                                                                                                    TBD                   TBD
Society Nashville (915 Division St) Nashville, TN                               November 2021                  89.1%              19,500             384          19,884            -           320,000          SF                           8,000        SF                  472         R           May 2022              July 2024
Condominium and Mixed Use
Development                                                                                                                   $  114,465    $    (34,326)   $     80,139    $       -

Maryland Portfolio                  Primarily Baltimore County, MD                July 2012                    7.6%              (17,583)         17,583               -            -              N/A                                          N/A                            245         R              N/A                   N/A
Riverchase Landing                  Hoover, AL                                  October 2021                   50.0%              11,900               -          11,900            -           746,000          SF                             N/A                            468         R              N/A                   N/A
Apartment Buildings                                                                                                           $   (5,683)   $     17,583    $     11,900    $       -

Park Lane Hotel (36 Central Park
South)                              Central Park South, Manhattan, NY           November 2013                  1.0%           $    8,682    $     (7,626)   $      1,056            -           446,000          SF                               -                            628         H              N/A                   N/A

215 Chrystie Street (4)             Lower East Side, Manhattan, NY              December 2012                  12.3%              (1,533)          1,533               -            -           246,000          SF                               -                            367         H           June 2014             Completed
Coral Beach and Tennis Club         Coral Beach, Bermuda                        December 2013                  49.0%               6,048          (4,526)          1,522            -                52          Acres                            -                            101         H              N/A                   N/A
                                                                                                                                                                                                                                                                                   587     H
Parker New York (119 W 56th St)     Midtown, Manhattan, NY                        July 2019                    0.4%                1,000            (421)            579            -           470,000          SF                               -                                 99     R           May 2020            December 2022
Hotels                                                                                                                        $   14,197    $    (11,040)   $      3,157    $       -

The Plaza at Harmon Meadow          Secaucus, NJ                                 March 2015                    49.0%          $    4,200    $     (4,200)   $          -    $       -                 -          -                          219,000        SF                    -         -              N/A                  N /A
Wynn Las Vegas Retail               Las Vegas, NV                               December 2016                  1.6%                4,163           3,127           7,290            -                 -          -                          160,000        SF                    -         -              N/A                   N/A
Commercial                                                                                                                    $    8,363    $     (1,073)   $      7,290    $       -

Witkoff GP Partners (3)             Multiple                                     March 2017                    15.0%          $   11,154    $     (9,620)   $      1,534    $       -              N/A                                          N/A                             N/A                       N/A                   N/A
1 QPS Tower (23-10 Queens Plaza
South)                              Long Island City, NY                        December 2012                  45.4%             (14,406)         14,406               -            -              N/A                                          N/A                             N/A                   March 2014             Completed
Witkoff EB-5 Capital Partners       Multiple                                   September 2018                  49.0%                 516             526           1,042            -              N/A                                          N/A                             N/A                       N/A                   N/A
Diverse Real Estate Portfolio                                                                                                 $   (2,736)   $      5,312    $      2,576    $       -

Investment in real estate ventures                                                                                            $  128,606    $    (23,544)   $    105,062    $       -

Total Carrying Value                                                                                                          $  126,802    $    (12,642)   $    114,160    $       -

(1) Ownership percentage reflects our estimated current ownership percentage. Our actual percentage of ownership as well as the percentage of earnings and cash distributions may ultimately differ due to a number of factors, including potential dilution, financing or admission of additional partners.

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(2) This column only represents capital commitments required under the various joint venture agreements. However, many of the operating agreements
provide for the operating partner to call capital. If a joint venture partner, such as New Valley, declines to fund the capital call, then the
partner's ownership percentage could either be diluted or, in some situations, the character of a funding member's contribution would be converted
from a capital contribution to a member loan.
(3) The Witkoff GP Partners venture includes a $1,534 investment in 500 Broadway, a Condominium and Mixed Use Development in Santa Monica, CA.

                                                               TBD -To be        R - Residential
N/A - Not applicable  SF - Square feet  H - Hotel rooms        determined        Units              R Lots - Residential lots


New Valley capitalizes net interest expense into the carrying value of its
ventures whose projects were under development. Net capitalized interest costs
included in Carrying Value as of December 31, 2021 were $8,658. This amount is
included in the "Cumulative Earnings (Losses)" column in the table above. During
the year ended December 31, 2021, New Valley capitalized $2,669 of interest
costs and utilized (reversed) $1,489 of previously capitalized interest in
connection with the recognition of equity in (losses) earnings, gains and
liquidations from various ventures.


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Liquidity and Capital Resources

Cash and cash equivalents from continuing and discontinued operations decreased by $170,828, $13,799 and $212,253 in 2021, 2020 and 2019, respectively.

Cash provided by continuing and discontinued operations was $255,219, $267,547
and $124,071 in 2021, 2020 and 2019, respectively. The decline of cash provided
by continuing and discontinued operations in 2021 compared to 2020 related
primarily to increased MSA payments in 2021 in connection with tax planning
strategies, increased income tax payments in 2021, the payment of a redemption
premium in 2021 to retire our 6.125% Senior Secured Notes due 2025 and the
absence of distributions from long-term investments, which were associated with
the sale of LTS in 2020. These items were partially offset by an increase in
operating income in 2021 from 2020. The increase in 2020 compared to 2019
related primarily to an increase in operating income, increased distributions
from long-term investments, which were associated with the sale of LTS, and the
proceeds from the sale of an investment in real estate located in Sagaponack, NY
and, in connection with tax planning strategies, a deferral of a portion our MSA
payments from 2020 to 2021.

Cash used in investing activities from continuing and discontinued operations
was $61,970 and $23,099 in 2021 and 2019, respectively, and cash provided by
investing activities from continuing and discontinued operations was $7,341 in
2020. Our investment philosophy is to maximize return on investments using a
reasonable expectation for return. For example, we expect our investment returns
to exceed the comparable return on cash or short-term U.S. Treasury Bills when
investing in equity and debt securities and to exceed our weighted-average cost
of capital when investing in non-consolidated real estate businesses and making
capital expenditures. In 2021, cash used in investing activities from continuing
operations comprised the purchase of investment securities of $124,080,
investments in real estate ventures of $49,463, capital expenditures of $13,506,
the purchase of long-term investments of $14,316, an increase in the cash
surrender value of corporate-owned life insurance policies of $1,219, the
purchase of subsidiaries of $500, and an increase in restricted assets of $5.
These items were offset by maturities of investment securities of $71,505, sale
of investment securities of $45,627, distributions from investments in real
estate ventures of $11,936, proceeds from the sale or liquidation of long-term
investments of $11,509, pay downs of investment securities of $525, and proceeds
from the sale of fixed assets of $17. In 2020, cash provided by investing
activities from continuing operations comprised the maturities of investment
securities of $61,230, proceeds from the sale or liquidation of long-term
investments of $32,572, the sale of investment securities of $30,458,
distributions from investments in real estate ventures of $18,818, the proceeds
from the sale of fixed assets of $5,162, cash acquired in purchase of subsidiary
of $2,760, pay downs of investment securities of $812, and the decrease in
restricted assets of $436. These items were offset by the purchase of investment
securities of $99,871, capital expenditures of $19,063, investments in real
estate ventures of $14,922, the purchase of long-term investments of $9,687,
purchase of subsidiaries of $722, and an increase in the cash surrender value of
corporate-owned life insurance policies of $642. In 2019, cash used in investing
activities from continuing operations comprised the purchase of investment
securities of $87,766, investments in real estate ventures of $52,529, capital
expenditures of $12,575, the purchase of long-term investments of $9,223,
investments in real estate, net of $2,295, an increase in the cash surrender
value of corporate-owned life insurance policies of $719, and the purchase of
subsidiaries of $380. These items were offset by maturities of investment
securities of $68,859, distributions from investments in real estate ventures of
$41,300, the sale of investment securities of $21,879, proceeds from the sale or
liquidation of long-term investments of $8,256, pay downs of investment
securities of $1,083, a decrease in restricted assets of $994, and the proceeds
from the sale of fixed assets of $17.

Cash used in financing activities from continuing and discontinued operations
was $364,077, $288,687 and $313,225 in 2021, 2020, and 2019, respectively. In
2021, cash used in financing activities from continuing and discontinued
operations comprised repayments of debt of $862,973, dividends and distributions
on common stock of $131,798, tax withholdings related to net share settlements
of stock option exercise of $13,145, payment of deferred financing costs of
$20,109, cash distributed in the Spin-off of $212,571, and other of $130. These
items were offset by proceeds from debt issuance of $875,000, contributions from
non-controlling interest of $1,625, and net borrowings of debt under the Liggett
Credit Agreement described below of $24. In 2020, cash used in financing
activities from continuing operations comprised repayments of debt of $174,989,
dividends and distributions on common stock of $128,231, net repayments of debt
under the Liggett Credit Agreement of $34,952, tax withholdings related to net
share settlements of stock option exercise of $2,630, and distributions to
non-controlling interest of $448. These items were offset by proceeds from the
issuance of common stock of $52,563. In 2019, cash used in financing activities
from continuing operations comprised repayments of debt of $293,419, dividends
and distributions on common stock of $238,249, payment of deferred financing
costs of $9,802, tax withholdings related to net share settlements of stock
option exercise of $5,415, distributions to non-controlling interest of $286 and
other of $216. These factors were offset by proceeds of debt issuance of
$230,000 associated with the issuance of an additional amount of our 10.5%
Senior Notes due 2026 in November 2019, and net borrowings of debt under the
Liggett Credit Agreement described below of $4,162.

We have significant liquidity commitments in 2022 at the corporate level (not
including our tobacco and real estate operations) that require the use of
existing cash resources. These include cash interest expense of approximately
$108,600, dividends on our outstanding common shares of approximately $127,500,
which is based on an assumed quarterly cash dividend of $0.20 per share, and
other corporate expenses and taxes.
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In order to meet these liquidity requirements as well as other liquidity needs
in the normal course of business, we have in the past used cash flows from
operations as well as existing cash and cash equivalents, which have, in the
past, been generated from operations, monetization of investments and proceeds
from debt issuances. Should these resources be insufficient to meet upcoming
liquidity needs, we may also liquidate investment securities and other long-term
investments, or, if available, draw on Liggett's credit facility. While there
are actions we can take to reduce our liquidity needs, there can be no assurance
that such measures will be successful. As of December 31, 2021, we had cash and
cash equivalents of $193,411 (including $14,899 of cash at Liggett), and
investment securities, carried at $178,776 (see Note 7 to our consolidated
financial statements). As of December 31, 2021, our investments in real estate
ventures were carried at $105,062 and our investments in real estate, net were
carried at $9,098.

Limitation of interest expense deductible for income taxes.  Since 2018, the
amount of interest expense that is deductible in the computation of income tax
liability has been limited to a percentage of adjusted taxable income, as
defined by applicable law. In 2019 and 2020, the amount of deductible interest
expense was limited to 50% of taxable income before interest, depreciation and
amortization and, in 2021, the amount will be limited to 30% of taxable income
before interest, depreciation and amortization. Beginning in 2022, the amount is
limited to 30% of taxable income before interest. However, interest expense
allocable to a designated excepted trade or business is not subject to
limitation. One such excepted trade or business is any electing real property
trade or business, for which portions of our real estate businesses may qualify.
If any interest expense is disallowed, we are permitted to carry forward the
disallowed interest expense indefinitely. As a result of interest expense that
is allocated to our real estate businesses (from the holding company) not being
subject to the limitation, all of our interest expense to date has been tax
deductible; however, after the Spin-off, the allocation of interest expense to
our real estate business will decline. Without the benefit of such an excepted
trade or business, a portion of our interest expense in future years may not be
deductible, which may increase the after-tax cost of any new debt financings as
well as the refinancing of our existing debt.

Tobacco Litigation. As of December 31, 2021, 16 verdicts were entered in Engle
progeny cases against Liggett. Several of these verdicts have been affirmed on
appeal and have been satisfied by Liggett. Liggett has paid $40,111, including
interest and attorney's fees, to satisfy the judgments entered against it. It is
possible that additional cases could be decided unfavorably.

Notwithstanding the comprehensive nature of the Engle Progeny Settlements of
more than 5,200 cases, approximately 28 plaintiffs' claims remain outstanding.
Therefore, we and Liggett may still be subject to periodic adverse judgments
that could have a material adverse effect on our consolidated financial
position, results of operations and cash flows.

In addition, Liggett may be required to make additional payments for Mississippi
which could have a material adverse effect on our consolidated financial condition, results of operations and cash flows. See Recent Developments in Dispute.

Management cannot predict the cash requirements related to any future
settlements or judgments, including cash required to bond any appeals, and there
is a risk that those requirements will not be able to be met. Management is
unable to make a reasonable estimate of the amount or range of loss that could
result from an unfavorable outcome of the cases pending against Liggett or the
costs of defending such cases. It is possible that our consolidated financial
position, results of operations or cash flows could be materially adversely
affected by an unfavorable outcome in any such tobacco-related litigation.

Vector.

6.125% Senior Secured Notes. On February 1, 2021, the 6.125% Senior Secured
Notes due 2025 were redeemed in full and we recorded a loss on the
extinguishment of debt of $21,362 for the year ended December 31, 2021,
including $13,014 of premium and $8,348 of other costs and non-cash interest
expense related to the recognition of previously unamortized deferred finance
costs.

5.75% Senior Secured Notes due 2029. On January 28, 2021, we completed the sale
of $875,000 in aggregate principal amount of our 5.75% Senior Secured Notes due
2029 ("5.75% Senior Secured Notes") to qualified institutional buyers and
non-U.S. persons in a private offering pursuant to the exemptions from the
registration requirements of the Securities Act of 1933 (the "Securities Act")
contained in Rule 144A and Regulation S thereunder. The aggregate net cash
proceeds from the sale of the 5.75% Senior Secured Notes were approximately
$855,500 after deducting the initial purchaser's discount and estimated expenses
and fees in connection with the offering. We used the net cash proceeds from the
5.75% Senior Secured Notes offering, together with cash on hand, to redeem all
of our outstanding 6.125% Senior Secured Notes due 2025, including accrued
interest and premium thereon, on January 28, 2021.

The 5.75% Senior Secured Notes pay interest on a semi-annual basis at a rate of
5.75% per year and mature on the earlier of February 1, 2029 and the date that
is 91 days before the final stated maturity date of our 10.5% Senior Notes due
2026 ("10.5% Senior Notes") if such 10.5% Senior Notes have not been repurchased
and cancelled or refinanced by such date. Prior to February 1, 2024, we may
redeem some or all of the 5.75% Senior Secured Notes at any time at a make-whole
redemption price. On or after February 1, 2024, we may redeem some or all of the
5.75% Senior Secured Notes at a premium that will decrease over time, plus
accrued and unpaid interest, if any, to the redemption date. In addition, any
time prior to February 1, 2024, we may redeem up to 40% of the aggregate
outstanding amount of the 5.75% Senior Secured Notes with the net proceeds
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of certain equity offerings at 105.75% of the aggregate principal amount of the
5.75% Senior Secured Notes, plus accrued and unpaid interest, if any, to the
redemption date, if at least 60% of the aggregate principal amount of the 5.75%
Senior Secured Notes originally issued remains outstanding after such
redemption, and the redemption occurs within 90 days of the closing of such
equity offering. In the event of a change of control, as defined in the
indenture governing the 5.75% Senior Secured Notes (the "2029 Indenture"), each
holder of the 5.75% Senior Secured Notes may require us to repurchase some or
all of its 5.75% Senior Secured Notes at a repurchase price equal to 101% of
their aggregate principal amount plus accrued and unpaid interest, if any, to
the date of purchase. If we sell certain assets and do not apply the proceeds as
required pursuant to the 2029 Indenture, we must offer to repurchase the 5.75%
Senior Secured Notes at the prices listed in the 2029 Indenture.

The 5.75% Senior Secured Notes are fully and unconditionally guaranteed, subject
to certain customary automatic release provisions, on a joint and several basis
by all of our wholly-owned domestic subsidiaries that are engaged in the conduct
of our cigarette businesses, which subsidiaries, as of the issuance date of the
5.75% Senior Secured Notes, were also guarantors under our outstanding 10.5%
Senior Notes. The 5.75% Senior Secured Notes are not guaranteed by New Valley
LLC, or any of our subsidiaries engaged in our real estate business conducted
through our subsidiary, New Valley LLC. The guarantees provided by certain of
the guarantors are secured by first priority or second priority security
interests in certain collateral of such guarantors pursuant to security and
pledge agreements, subject to certain permitted liens and exceptions as further
described in the 2029 Indenture and the security documents relating thereto.
Vector Group Ltd does not provide any security for the 5.75% Senior Secured
Notes.

The 2029 Indenture contains covenants that restrict the payment of dividends if
our consolidated earnings before interest, taxes, depreciation and amortization
("Consolidated EBITDA"), as defined in the 2029 Indenture, for the most recently
ended four full quarters is less than $75,000. The 2029 Indenture also restricts
the incurrence of debt if our Leverage Ratio and our Secured Leverage Ratio,
each as defined in the 2029 Indenture, exceed 3.0 to 1.0 and 1.5 to 1.0,
respectively. Our Leverage Ratio is defined in the 2029 Indenture as the ratio
of our and our guaranteeing subsidiaries' total debt less the fair market value
of our cash, investment securities and long-term investments to Consolidated
EBITDA, as defined in the 2029 Indenture. Our Secured Leverage Ratio is defined
in the 2029 Indenture in the same manner as the Leverage Ratio, except that
secured indebtedness is substituted for indebtedness. The following table
summarizes the requirements of these financial test and the extent to which we
would have satisfied these requirements had the 2029 Indenture been in effect as
of December 31, 2021.

                                          Indenture        December 31,
Covenant                                 Requirement           2021

Consolidated EBITDA, as defined $75,000 $407,165
Leverage ratio, as defined

                   <3.0 to 1          2.50 to 1
Secured leverage ratio, as defined           <1.5 to 1          1.17 to 1


From December 31, 2021we were in compliance with all covenants related to the 2029 trust indenture.

10.5% Senior Notes due 2026. On November 2, 2018 and November 18, 2019, we sold
$325,000 and $230,000, respectively, in aggregate principal amount of our 10.5%
Senior Notes to qualified institutional buyers and non-U.S. persons pursuant to
the exemptions from the registration requirements of the Securities Act
contained in Rule 144A and Regulation S thereunder. The aggregate net proceeds
from the 2018 sale of the 10.5% Senior Notes and the 2019 sale of the 10.5%
Senior Notes were approximately $315,000 and $220,400, respectively, after
deducting underwriting discounts, commissions, fees and offering expenses. We
used the net cash proceeds from the 2018 issuance of our 10.5% Senior Notes to
retire the principal amount of, plus accrued and unpaid interest on, our 7.5%
Variable Interest Senior Convertible Notes due 2019, and for general corporate
purposes. We used the net cash proceeds from the 2019 issuance of our 10.5%
Senior Notes to retire the principal amount of, plus accrued and unpaid interest
on, our 5.5% Variable Interest Senior Convertible Notes due 2020.

The 10.5% Senior Notes pay interest on a semi-annual basis at a rate of 10.5%
per year and mature on November 1, 2026. Prior to November 1, 2021, we may
redeem some or all of the 10.5% Senior Notes at any time at a make-whole
redemption price. On or after November 1, 2021, we may redeem some or all of the
10.5% Senior Notes at a premium that will decrease over time, plus accrued and
unpaid interest, if any, to the redemption date. In addition, any time prior to
November 1, 2021, we may redeem up to 40% of the aggregate outstanding amount of
the 10.5% Senior Notes with the net proceeds of certain equity offerings at
110.5% of the aggregate principal amount of the 10.5% Senior Notes, plus accrued
and unpaid interest, if any, to the redemption date, if at least 60% of the
aggregate principal amount of the 10.5% Senior Notes originally issued remains
outstanding after such redemption, and the redemption occurs within 90 days of
the closing of such equity offering. In the event of a change of control, as
defined in the indenture governing the 10.5% Senior Notes (the "2026
Indenture"), each holder of the 10.5% Senior Notes may require us to make an
offer to repurchase some or all of our 10.5% Senior Notes at a repurchase price
equal to 101% of their aggregate principal amount plus accrued and unpaid
interest, if any, to the date of purchase. If we sells certain assets and does
not apply the proceeds as required pursuant to the 2026 Indenture, we must offer
to repurchase the 10.5% Senior Notes at the prices listed in the 2026 Indenture.
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The 10.5% Senior Notes were fully and unconditionally guaranteed subject to
certain customary automatic release provisions on a joint and several basis by
all of our wholly-owned domestic subsidiaries that are engaged in the conduct of
our cigarette businesses, and, prior to the Spin-off, by DER Holdings LLC,
through which we indirectly owned a 100% interest in Douglas Elliman as of
December 31, 2021. In connection with the Spin-off, the guarantee by DER
Holdings LLC was released. DER Holdings LLC did not guarantee our 5.75% Senior
Secured Notes.

The 2026 Indenture contains covenants that restrict the payment of dividends and
certain other distributions subject to certain exceptions, including exceptions
for (1) dividends and other distributions in an amount up to 50% of our
consolidated net income, plus certain specified proceeds received by us, if no
event of default has occurred, and we are in compliance with a Fixed Charge
Coverage Ratio (as defined in the 2026 Indenture) of at least 2.0 to 1.0, and
(2) dividends and other distributions in an unlimited amount, if no event of
default has occurred and we are in compliance with a Net Leverage Ratio (as
defined in the 2026 Indenture) no greater than 4.0 to 1.0. As a result, absent
an event of default, we can pay dividends if the Net Leverage ratio is below 4.0
to 1.0, regardless of the value of the Fixed Charge Coverage Ratio at the time.
The 2026 Indenture also restricts our ability to incur debt if our Fixed Charge
Coverage Ratio is less than 2.0 to 1.0, and restricts our ability to secure debt
to the extent doing so would cause our Secured Leverage Ratio (as defined in the
2026 Indenture) to exceed 3.75 to 1.0, unless the 10.5% Senior Notes are secured
on an equal and ratable basis. Our Fixed Charge Coverage Ratio is defined in the
2026 Indenture as the ratio of our Consolidated EBITDA to our Fixed Charges
(each as defined in the 2026 Indenture). Our Net Leverage Ratio is defined in
the 2026 Indenture as the ratio of our and our guaranteeing subsidiaries' total
debt less our cash, cash equivalents, and the fair market value of our
investment securities, long-term investments, investments in real estate, net,
and investments in real estate ventures, to Consolidated EBITDA, as defined in
the 2026 Indenture. Our Secured Leverage Ratio is defined in the 2026 Indenture
as the ratio of our and our guaranteeing subsidiaries' total secured debt, to
Consolidated EBITDA, as defined in the 2026 Indenture. The following table
summarizes the requirements of these financial test and the extent to which we
satisfied these requirements as of December 31, 2021.


                                               Indenture        December 

31,

                Covenant                      Requirement           2021

Fixed charge coverage ratio, as defined >2.0 to 1 3.18 to 1 Net leverage ratio, as defined

                 <4.0 to 1         2.59 to 1
Secured leverage ratio, as defined             <3.75 to 1        2.46 to 1


From December 31, 2021we were in compliance with all covenants related to the 2026 trust indenture.

Guarantor Summarized Financial Information. Vector Group Ltd. (the "Issuer") and
its wholly-owned domestic subsidiaries that are engaged in the conduct of its
cigarette business (the "Subsidiary Guarantors") have filed a shelf registration
statement for the offering of debt and equity securities on a delayed or
continuous basis and we are including this condensed consolidating financial
information in connection therewith. Any such debt securities may be issued by
us and guaranteed by our Subsidiary Guarantors. New Valley and any of its
subsidiaries (the "Nonguarantor Subsidiaries") will not guarantee any such debt
securities. Both the Subsidiary Guarantors and the Nonguarantor Subsidiaries are
wholly-owned by the Issuer. The Condensed Consolidating Balance Sheets as of
December 31, 2021 and the related Condensed Consolidating Statements of
Operations for the year ended December 31, 2021 of the Issuer, Subsidiary
Guarantors and the Nonguarantor Subsidiaries are set forth in Exhibit 99.2.

Presented herein are the Summarized Combined Balance Sheets as of December 31,
2021 and December 31, 2020 and the related Summarized Combined Statements of
Operations for the year ended December 31, 2021 for the Issuer and the
Subsidiary Guarantors (collectively, the "Obligor Group"). The summarized
combined financial information is presented after the elimination of: (i)
intercompany transactions and balances among the Obligor Group, and (ii) equity
in earnings from and investments in the Nonguarantor Subsidiaries.

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Summarized Combined Balance Sheets:

                                                             December 31,              December 31,
                                                                 2021                      2020
Assets:
Current assets                                            $        487,797          $        515,082
Current assets of discontinued operations                                -                         -
Noncurrent assets                                                  274,292                   264,041
Noncurrent assets of discontinued operations                             -                         -
Intercompany receivables from Nonguarantor
Subsidiaries                                                         1,832                     2,040

Liabilities:
Current liabilities                                                194,097                   180,406
Current liabilities of discontinued operations                           -                    12,719
Noncurrent liabilities                                           1,536,792                 1,508,793
Noncurrent liabilities of discontinued operations                        -                    12,500



Summary Combined Statements of Results:

                                               Year Ended
                                              December 31,
                                                  2021
Revenues                                     $  1,202,557
Cost of sales                                     758,015
Operating income                                  316,615
Net income from continuing operations             137,891


Liggett funding. Liggett has not entered into any equipment finance deals in 2021, 2020 and 2019.

Liggett Credit Facility. In January 2015Liggett and Maple, entered into the credit agreement with Wells Fargo, as agent and lender.

On October 31, 2019, Liggett and Maple amended the Credit Agreement to, among
other things, update the borrowing base to adjust the advance rates in respect
of eligible inventory and add certain eligible real property. On March 22, 2021,
Liggett, Maple and Vector Tobacco entered into Amendment No. 4 and Joinder to
the Credit Agreement with Wells Fargo. The Credit Agreement was amended to,
among other things, (i) add Vector Tobacco as a borrower under the Credit
Agreement, (ii) extend the maturity of the Credit Agreement to March 22, 2026,
and (iii) increase the amount of the maximum credit line thereunder from $60,000
to $90,000.

Since October 31, 2019, all borrowings under the Credit Agreement have been
limited to a borrowing base equal to the sum of (I) the lesser of 85% of
eligible trade receivables less certain reserves and $15,000; plus (II) 80% of
the value of eligible inventory consisting of packaged cigarettes; plus (III)
the designated percentage of the value of eligible inventory consisting of leaf
tobacco (i.e., 65% of Liggett's eligible cost of inventory consisting of leaf
tobacco less certain reserves or 85% of the net orderly liquidation value of
eligible inventory); plus (IV) the lesser of (a) the real property subline
amount or (b) 60% of the fair market value of eligible real property. The
obligations under the Credit Agreement are collateralized on a first priority
basis by all inventories, receivables and certain other personal property of
Liggett and Maple, a mortgage on Liggett's manufacturing facility and certain
real property of Maple, subject to certain permitted liens.
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The term of the Credit Agreement expires on March 22, 2026. Loans under the
Credit Agreement bear interest at a rate equal to LIBOR plus 2.25%. The interest
rate applicable to this Credit Agreement at December 31, 2021 was 2.35%. The
Credit Agreement, as amended, permitted the guaranty of the 6.125% Senior
Secured Notes due 2025, and permits the guaranty of the 5.75% Senior Secured
Notes and the 10.5% Senior Notes, by each of Liggett, Maple and Vector Tobacco.
Wells Fargo, Liggett, Maple, Vector Tobacco and the collateral agent for the
holders of the 5.75% Senior Secured Notes have entered into an intercreditor
agreement, pursuant to which the liens of such collateral agent on the assets
that are subject to the Credit Agreement are subordinated to the liens of Wells
Fargo on such assets.

The Credit Agreement contains customary affirmative and negative covenants,
including covenants that limit Liggett's, Maple's, Vector Tobacco's and their
subsidiaries' ability to incur, create or assume certain indebtedness, to incur
or assume certain liens, to purchase, hold or acquire certain investments, to
declare or make certain dividends and distributions and to engage in certain
mergers, consolidations and asset sales. The Credit Agreement also requires the
Company to comply with specified financial covenants, including that Liggett's
earnings before interest, taxes, depreciation and amortization, as defined under
the Credit Agreement, on a trailing twelve month basis, shall not be less than
$150,000 if Liggett's excess availability, as defined under the Credit
Agreement, is less than $30,000. The covenants also require that annual capital
expenditures, as defined under the Credit Agreement (before a maximum carryover
amount of $10,000), shall not exceed $20,000 during any fiscal year. The Credit
Agreement also contains customary events of default. Liggett was in compliance
with these covenants as of December 31, 2021.

As of December 31, 2021, there was $24 in outstanding balance under the Credit
Agreement. Availability, as determined under the Credit Agreement, was $80,771
based on eligible collateral at December 31, 2021.

Anticipated Liquidity Obligations. We and our subsidiaries have significant
indebtedness and debt service obligations. As of December 31, 2021, we and our
subsidiaries had total outstanding indebtedness of $1,430,120. Of this amount
$875,000 comprised of the outstanding amount under our 5.75% Senior Secured
Notes due 2029, and $555,000 comprised of the outstanding amount under our
10.5% Senior Notes due 2026. There is a risk that we will not be able to
generate sufficient funds to repay our debt. If we cannot service our fixed
charges, it would have a material adverse effect on our business and results of
operations.

We believe that our cigarette business is a positive cash flow generating unit and will continue to be able to maintain operations without any significant liquidity issues.

In order to meet the above liquidity requirements as well as other anticipated
liquidity needs in the normal course of business, we had cash and cash
equivalents of approximately $193,400, investment securities at fair value of
approximately $178,800 and availability under Liggett's credit facility of
approximately $81,000 as of December 31, 2021. Management currently anticipates
that these amounts, as well as expected cash flows from our operations, proceeds
from public and/or private debt and equity financing to the extent available,
management fees and other payments from subsidiaries should be sufficient to
meet our liquidity needs over the next 12 months.

We continue to evaluate our capital structure and current market conditions
related to our capital structure. Depending on market conditions, we may utilize
our cash, investment securities and long-term investments to repurchase our
10.5% Senior Notes due 2026 in open-market purchases or privately negotiated
transactions.

There can be no assurance that we would be able to continue to issue debt at a
lower interest rate than our historical borrowing levels in the future and, in
the event we pursue any capital markets activities, our ability to complete any
debt or equity offering would be subject to market conditions.

 Furthermore, we may access the capital markets to refinance our 10.5% Senior
Notes due 2026. We can presently redeem such bonds at price of 105.25% and the
redemption price declines to 102.625% on November 1, 2022 and 100% on November
1, 2023. There can be no assurance that we would be able to continue to issue
debt at a lower interest rate than our historical borrowing levels in the future
and, in the event we pursue any capital markets activities, our ability to
complete any debt or equity offering would be subject to market conditions.

We may acquire or seek to acquire additional operating businesses through merger, asset purchase, stock acquisition or other means, or to make other investments, which may limit our otherwise available cash.

The total amount of unrecognized tax benefits was $1,653 as of January 1, 2021
and increased $556 during the year ended December 31, 2021, primarily due to
accruals for state tax audits offset by the expiration of various state statutes
of limitations and settlements. The total amount of unrecognized tax benefits
was $1,647 as of January 1, 2020 and increased $6 during the year ended
December 31, 2020, primarily due to accruals for state tax audits offset by the
expiration of various state statutes of limitations.

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Off-Balance Sheet Arrangements

We have various agreements in which we may be obligated to indemnify the other
party with respect to certain matters. Generally, these indemnification clauses
are included in contracts arising in the normal course of business under which
we customarily agree to hold the other party harmless against losses arising
from a breach of representations related to such matters as title to assets sold
and licensed or certain intellectual property rights. In addition, in connection
with the Spin-off, we agreed to indemnify Douglas Elliman for losses arising out
of Vector's business or incurred in our provision of services to Douglas Elliman
under the Transition Services Agreement. Payment by us under such
indemnification clauses is generally conditioned on the other party making a
claim that is subject to challenge by us and dispute resolution procedures
specified in the particular contract. Further, our obligations under these
arrangements may be limited in terms of time and/or amount, and in some
instances, we may have recourse against third parties for certain payments made
by us. It is not possible to predict the maximum potential amount of future
payments under these indemnification agreements due to the conditional nature of
our obligations and the unique facts of each particular agreement. Historically,
payments made by us under these agreements have not been material. As of
December 31, 2021, we were not aware of any indemnification agreements that
would or are reasonably expected to have a current or future material adverse
impact on our financial position, results of operations or cash flows.

From December 31, 2021we had an amazing time $1,438 letter of credit issued as a security deposit for an office lease.

We have a leaf inventory management program whereby, among other things, we are
committed to purchase certain quantities of leaf tobacco. The purchase
commitments are for quantities not in excess of anticipated requirements and are
at prices, including carrying costs, established at the commitment date. At
December 31, 2021, Liggett had tobacco purchase commitments of approximately
$13,289. We have a single source supply agreement for reduced ignition
propensity cigarette paper through 2022.

Future commitments to purchase machinery and equipment from Liggett have been $890 at
December 31, 2021.

Market risk

We are exposed to market risks principally from fluctuations in interest rates,
foreign currency exchange rates and equity prices. We seek to minimize these
risks through our regular operating and financing activities and our long-term
investment strategy. Our market risk management procedures cover all market risk
sensitive financial instruments.

As of December 31, 2021, there was an outstanding balance of $24 on the Liggett
Credit Facility which also has variable interest rates. As of December 31, 2021,
we had no interest rate caps or swaps. Based on a hypothetical 100 basis point
increase or decrease in interest rates (1%), our annual interest expense could
increase or decrease by approximately $0.

We held available-for-sale debt securities totaling $103,906 from December 31, 2021. See note 7 to our consolidated financial statements. Adverse market conditions could have a significant impact on the value of these investments.

On a quarterly basis, we evaluate our debt securities available for sale and
equity securities without readily determinable fair values that do not qualify
for the NAV practical expedient to determine whether an impairment has occurred.
If so, we also make a determination if such impairment is considered temporary
or other-than-temporary. We believe that the assessment of temporary or
other-than-temporary impairment is facts-and-circumstances driven. The
impairment indicators that are taken into consideration as part of our analysis
include (a) a significant deterioration in the earnings performance, credit
rating, asset quality, or business prospects of the investee, (b) a significant
adverse change in the regulatory, economic, or technological environment of the
investee, (c) a significant adverse change in the general market condition of
either the geographical area or the industry in which the investee operates, and
(d) factors that raise significant concerns about the investee's ability to
continue as a going concern, such as negative cash flows from operations,
working capital deficiencies, or noncompliance with statutory capital
requirements or debt covenants.

Equity Price Risk

As of December 31, 2021, we held various investments in equity securities with a
total fair value of $74,870, of which $42,781 represents equity securities at
fair value and $32,089 represents long-term investment securities at fair value.
The latter securities represent long-term investments in various investment
partnerships. These investments are illiquid and their ultimate realization is
subject to the performance of the underlying entities. See Note 7 to our
consolidated financial statements for more details on equity securities at fair
value and long-term investment securities at fair value. The impact to our
consolidated statement of operations related to equity securities fluctuates
based on changes in their fair value.

We record changes in the fair value of equity securities in net income. To the
extent that we continue to hold equity securities, our operating results may
fluctuate significantly. Based on our equity securities held as of December 31,
2021, a
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hypothetical 10% decline in the price of these equity securities would reduce the fair value of the investments and therefore our net income by approximately $7,487.

New Accounting Pronouncements

Refer to Note 1, Summary of Significant Accounting Policies, to our Consolidated Financial Statements for additional information on new accounting pronouncements.

Legislation, Regulation, Taxation and Litigation

In the United States, tobacco products are subject to substantial and increasing
legislation, regulation, taxation, and litigation, which have a negative effect
on revenue and profitability.

The cigarette industry continues to be challenged on numerous fronts. The
industry faces increased pressure from anti-smoking groups and continued smoking
and health litigation, the effects of which, at this time, we are unable to
quantify. Product liability litigation, particularly in Florida in the Engle
progeny cases, continues to adversely affect the cigarette industry. See Item 1.
"Business - Legislation and Regulation", Item 1A. "Risk Factors", Item 3. "Legal
Proceedings" and Note 15 to our consolidated financial statements, which contain
a description of litigation.

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               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, this report contains "forward-looking
statements" within the meaning of the federal securities law. Forward-looking
statements include information relating to our intent, belief or current
expectations, primarily with respect to, but not limited to:

•economic outlook,

•capital expenditures,

•cost reduction,

•competition,

• legislation and regulations,

•cash flows,

•operating performance,

•litigation, and

• related industry developments (including trends affecting our business, financial condition and results of operations).

We identify forward-looking statements in this report by using words or phrases such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may be”, ” aim”, “plan”, “seek”, “predict”, “project” and “will” and similar words or expressions or their negatives.

The forward-looking information involves important risks and uncertainties that
could cause our actual results, performance or achievements to differ materially
from our anticipated results, performance or achievements expressed or implied
by the forward-looking statements. Factors that could cause actual results to
differ materially from those suggested by the forward-looking statements
include, without limitation, the following:

• general economic and market conditions and any changes thereto, whether due to acts of war and terrorism or otherwise,

• government regulations and policies,

•adverse changes in global, national, regional and local economic and market
conditions, including those related to pandemics and health crises, such as the
outbreak of COVID-19,

• significant changes in the price, availability or quality of tobacco, other raw materials or components, including as a result of the COVID-19 pandemic,

•potential dilution to our holders of or common stock as a result of issuances
of additional shares of common stock to fund our financial obligations and other
financing activities,

• the impacts of the Tax Cuts and Jobs Act of 2017, including the deductibility of interest charges and the impact of markets on our Real Estate segment,

• effects of industrial competition,

• the impact of business combinations, including acquisitions and divestitures, both internally for us and externally in the tobacco industry,

•impact of legislation on our results of operations and product costs, i.e. the
impact of federal legislation providing for regulation of tobacco products by
FDA,

• impact of substantial increases in federal, state and local excise taxes,

•uncertainty related to product liability and other tobacco-related litigations
including the Engle progeny cases pending in Florida and other individual and
class action cases where certain plaintiffs have alleged compensatory and
punitive damage amounts ranging into the hundreds of million and even billions
of dollars; and,

•potential additional payment obligations for us under the MSA and other state settlement agreements.

Further information on the risks and uncertainties to our business include the
risk factors discussed above under Item 1A. "Risk Factors" and in "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there is a risk that these expectations will not be achieved and that any deviations could be material. Forward-looking statements speak only as of the date they are made.

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ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk” is incorporated herein by reference.

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