22nd Century Raises $1.68 Million in Regulation A Offering, Amends Senior Secured Credit Facility

Rhea-AI Summary

22nd Century Group (NASDAQ: XXII) has raised $1.68 million through a Regulation A offering and private placement of common warrants. The company has also amended its Senior Secured Credit Facility with JGB Partners, suspending certain provisions and limiting monthly redemption rights. These financial moves aim to support the company's focus on scaling its contract manufacturing business and expanding its FDA-authorized VLN® reduced nicotine content product line. The Regulation A offering was priced at $0.57, and the amendments to the debenture agreements will be in effect through December 31, 2024, for the suspension of equity issuance payments, and through July 2025 for the monthly redemption rights.

Positive

• Raised $1.68 million in additional capital
• Amended credit facility to improve financial flexibility
• Suspension of 20% equity issuance payments to debenture holders until December 31, 2024
• monthly redemption rights for debenture holders to 50% through July 2025

Negative

• Ongoing need for additional capital raising
• Existing debt obligations requiring amendments

Insights

Financial Analyst

The $1.68 million capital raise through a Regulation A offering and private placement is a modest sum for 22nd Century Group, providing some short-term liquidity but not significantly altering its financial position. The amendment to the senior secured credit facility with JGB Partners is more noteworthy, as it eases near-term financial pressure on the company.

By suspending the 20% equity issuance payment requirement and limiting monthly redemptions to 50%, 22nd Century gains more flexibility in managing its cash flow. This could be important for funding operations and growth initiatives in the contract manufacturing business and VLN® product line. However, investors should note that this is essentially kicking the can down the road, as the company will still need to address these obligations in the future.

The $0.57 pricing for the offering indicates significant dilution for existing shareholders, reflecting the company's challenging financial position. While the additional capital and debt restructuring provide some breathing room, 22nd Century Group still faces substantial hurdles in achieving profitability and sustainable growth.

Tobacco Industry Analyst

22nd Century Group's focus on reactivating and expanding its FDA-authorized VLN® reduced nicotine content product line is a strategic move in the evolving tobacco landscape. As regulatory pressures increase on traditional tobacco products, reduced-risk alternatives like VLN® could gain traction.

However, the company faces significant challenges:

• Market acceptance of reduced nicotine products remains uncertain
• Competition from established tobacco giants with deeper pockets
• Regulatory environment that's still evolving

The emphasis on scaling the contract manufacturing business suggests a dual-pronged strategy to diversify revenue streams. This could provide more stable cash flow to support the riskier, but potentially more lucrative, reduced nicotine product line. The success of this approach will depend on the company's ability to secure and retain manufacturing contracts in a competitive market while simultaneously building brand awareness for VLN®.

Mocksville, North Carolina--(Newsfile Corp. - August 28, 2024) - 22nd Century Group, Inc. (NASDAQ: XXII), a tobacco products company focused on nicotine harm reduction and contract manufacturing, today announced that it has secured an additional $1.68 million in gross proceeds from institutional investors through its Regulation A offering priced at $0.57 and from a separate private placement of common warrants. The Company also entered into an amendment to its existing debentures held by JGB Partners and related entities ("JGB").

Under the terms of the amended debenture agreements, JGB suspended provisions of the Debentures requiring 20% of any equity issuances to be paid to the Holders through December 31, 2024. Additionally, JGB will limit its monthly redemption right to not more than 50% of the amounts allowed beginning in August 2024 and through July 2025.

"Accessing additional capital and amending the repayment terms of our Senior Secured Credit Facility enables 22nd Century Group to remain focused on the continued scaling of our contract manufacturing business, while at the same time reactivating and expanding our FDA authorized VLN® reduced nicotine content product line in the markets," said Larry Firestone, Chairman and CEO.

About 22nd Century Group, Inc.

22nd Century Group, Inc. (NASDAQ: XXII) is an agricultural biotechnology company focused on tobacco harm reduction by offering tobacco products with 95% less nicotine, designed to improve health and wellness by helping smokers smoke less. Backed by comprehensive and extensively patented technologies that regulate nicotine biosynthesis activities in the tobacco plant, the Company has pioneered the development of high-yield, proprietary reduced nicotine content (RNC) tobacco plants and clinically validated RNC cigarette products. The Company received the first and only FDA Modified Risk Tobacco Product (MRTP) authorization for a combustible cigarette in December 2021. The Company is a subsequent participating manufacturer under the Master Settlement Agreement ("MSA") and vertically integrated for the production of both its own products and contract manufacturing operations ("CMO"), which consist primarily of branded filtered cigars and conventional cigarettes.

Learn more at xxiicentury.com, on X, on LinkedIn, and on YouTube.
Learn more about VLN^® at tryvln.com.

Cautionary Note Regarding Forward-Looking Statements

Except for historical information, all of the statements, expectations, and assumptions contained in this press release are forward-looking statements, including but not limited to our full year business outlook. Forward-looking statements typically contain terms such as "anticipate," "believe," "consider," "continue," "could," "estimate," "expect," "explore," "foresee," "goal," "guidance," "intend," "likely," "may," "plan," "potential," "predict," "preliminary," "probable," "project," "promising," "seek," "should," "will," "would," and similar expressions. Forward-looking statements include, but are not limited to, statements regarding (i) our cost reduction initiatives, (ii) our expectations regarding regulatory enforcement, including our ability to receive an exemption from new regulations, (iii) our financial and operating performance and (iv) our expectations for our business interruption insurance claim. Actual results might differ materially from those explicit or implicit in forward-looking statements. Important factors that could cause actual results to differ materially are set forth in "Risk Factors" in the Company's Annual Report on Form 10-K filed on March 28, 2024, and in the Company's Quarterly Reports filed on May 15, 2024 and August 13, 2024. All information provided in this release is as of the date hereof, and the Company assumes no obligation to and does not intend to update these forward-looking statements, except as required by law.

Investor Relations & Media Contact
Matt Kreps
Investor Relations
22nd Century Group
mkreps@xxiicentury.com
214-597-8200

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/221372

FAQ

How much capital did 22nd Century Group (XXII) raise in its recent offering?

22nd Century Group (XXII) raised $1.68 million in gross proceeds through a Regulation A offering and a separate private placement of common warrants.

What changes were made to 22nd Century Group's (XXII) Senior Secured Credit Facility?

22nd Century Group (XXII) amended its Senior Secured Credit Facility with JGB Partners, suspending the requirement to pay 20% of equity issuances to debenture holders through December 31, 2024, and limiting monthly redemption rights to 50% of allowed amounts from August 2024 through July 2025.

What is the pricing of 22nd Century Group's (XXII) Regulation A offering?

The Regulation A offering by 22nd Century Group (XXII) was priced at $0.57 per share.

What are 22nd Century Group's (XXII) plans for the raised capital?

22nd Century Group (XXII) plans to use the raised capital to focus on scaling its contract manufacturing business and expanding its FDA-authorized VLN® reduced nicotine content product line in the markets.