22nd Century (NASDAQ:) Group, Inc. (NASDAQ:XXII), a company specializing in cigarette manufacturing, has entered into a material definitive agreement and sold equity securities, as reported in its recent SEC filing.
On September 13, 2024, the company finalized a subscription agreement with certain institutional investors and high net worth individuals, selling 6.1 million shares of common stock at $0.57 per share, resulting in gross proceeds of approximately $3.48 million.
This transaction is part of a Regulation A offering, which was initially filed on August 2, 2024, and qualified on August 13, 2024. The offering has reached a total of 9.72 million shares sold to date. The company has the option to raise an additional $15.8 million under the same offering conditions, although there are no current agreements for further sales.
Concurrent with the equity sale, 22nd Century Group also engaged in a private placement of warrants. The company issued 12.2 million warrants at a nominal price of $0.00001 per warrant, each warrant exercisable into one share of common stock at a price of $1.00.
These warrants are immediately exercisable and will expire five years from the issuance date. The exercise price is subject to adjustment, pending stockholder approval for any reduction. The net proceeds from the warrant sale are expected to be around $122 after deducting estimated offering expenses.
Both the shares and warrants were issued in private placements, exempt from registration under the Securities Act of 1933, in reliance on Section 4(a)(2) and/or Rule 506 of Regulation D. The company has committed to filing a registration statement for the shares issuable upon exercise of the warrants within 30 days upon demand from the investors.
In other recent news, 22nd Century Group has announced plans to expand the distribution of its VLN® cigarettes, which contain 95% less nicotine than standard cigarettes.
The company aims to increase its footprint to over 270,000 retail outlets nationwide and enhance its global presence. This expansion follows positive sales data from VLN®’s initial launch, with the company planning to introduce flanker brands leveraging its proprietary reduced nicotine tobacco.
To support the anticipated demand, 22nd Century Group has secured an inventory of low nicotine tobacco sufficient to produce up to 1.4 million cartons of VLN® and flanker brand cigarettes. This stockpile is expected to generate up to $85 million in revenue.
In parallel, 22nd Century Group has raised additional funds through a Regulation A offering and a private placement of common warrants, and has entered into an agreement to sell 460,000 shares of common stock to an institutional investor. The company has also made efforts to reduce its debt, including an agreement with JGB Partners and a debt restructuring with Omnia.
The company recently disclosed its Q2 earnings and maintained its performance outlook. Robert Manfredonia has been appointed as the new Executive Vice President of Sales and Marketing, and the distribution of VLN® cigarettes has been expanded in South Korea through a commercial agreement with Nico-Tech Korea, Inc.
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