22nd Century Group, Inc. 8-K

What Happened

• 22nd Century Group, Inc. announced on March 20, 2026 that it entered into a Securities Purchase Agreement to sell up to $20.0 million of Series B Convertible Preferred Stock (stated value $1,000 per share) and associated warrants in a registered direct offering. Stockholder approval was obtained at the February 20, 2026 Special Meeting. The Initial Close is expected to be approximately $16.0 million (expected March 24, 2026) with up to $4.0 million available at a Second Close within one year. The Series B is convertible into common stock at a fixed conversion price of $3.57 per share or at an Alternative Conversion Price equal to a 15% discount to the lowest daily VWAP over the prior 20 trading days, each subject to a floor equal to 20% of the Nasdaq minimum price on the SPA date. Warrants are immediately exercisable at $3.57, expire five years after issuance, and were issued at 100% warrant coverage.

Key Details

• Offering size: up to $20.0M total; Initial Close ≈ $16.0M, Second Close up to $4.0M (may occur within 1 year).
• Conversion / warrant economics: Fixed conversion price $3.57; Alternative Conversion = 15% discount to lowest daily 20‑day VWAP; floor = 20% of Nasdaq minimum price. Warrants exercisable at $3.57, 5‑year term, 100% coverage; placement agent warrants = 187,659 shares at 110% of warrant exercise price.
• Use of proceeds and net cash: Company expects to repurchase outstanding Series A Convertible Preferred Stock (issued Aug 2025) for $9.65M; net proceeds to the company from the Initial Close after fees, expenses and that repurchase are expected to be ≈ $5.7M.
• Fees and restrictions: Placement agent cash fees — 3.0% of first $9.65M, 6.0% of remaining gross proceeds, plus 6.0% on cash warrant exercises and expense reimbursements (legal fees up to $35,000). Company and investors are subject to issuance and trading restrictions (e.g., 30‑day limits on new equity issuances, prohibition on Variable Rate Transactions while Series B outstanding, an ATM window of up to $250k/week with $1.50 floor, and investor short‑sale restrictions while holding Series B). Certain investors funding ≥ $2.0M receive a 50% participation right in future financings under stated conditions.

Why It Matters

• This financing is material because it provides near‑term capital and is structured to retire the prior Series A preferred ($9.65M), but it also creates potential dilution through conversion and warrants (fixed $3.57 conversion and 100% warrant coverage). The Company’s ability to reset the fixed conversion price lower (subject to board approval and the floor) and the anti‑dilution features in the warrants are important for how much dilution common shareholders may face. The agreement also places limitations on the Company’s future equity issuances while Series B shares are outstanding, which can affect financing flexibility. Investors should note the expected net cash benefit (~$5.7M) after the Series A repurchase and fees, and review the full agreements for details on conversion mechanics, anti‑dilution protections, and financing restrictions.