22nd Century Group, Inc. Enters \$20 Million Series B Convertible Preferred Stock Financing with Warrants

Key Points for Investors

• 22nd Century Group, Inc. (“the Company”) has entered into a Securities Purchase Agreement for the sale of up to \$20 million of Series B Convertible Preferred Stock and Warrants to purchase common shares.
• The offering is a registered direct offering, with stockholder approval secured on February 20, 2026.
• The Series B Preferred Stock has a stated value of \$1,000 per share and is convertible into common stock at a conversion price to be determined.
• Participating investors funding at least \$2 million gain significant preemptive rights for future equity offerings.
• Restrictions on future equity issuance and anti-dilution provisions protect investor interests and potentially impact the company’s future financing flexibility.
• No active trading market will exist for the Series B Preferred Stock, limiting liquidity for investors in these shares.

Detailed Overview

On March 20, 2026, 22nd Century Group, Inc. announced it has entered into a Securities Purchase Agreement with select investors for a registered direct offering of up to \$20 million in Series B Convertible Preferred Stock and accompanying Warrants. The Series B Preferred Stock carries a stated value of \$1,000 per share. The offering structure and terms were previously approved by shareholders at a special meeting held on February 20, 2026.

Terms of the Securities Purchase Agreement

• Lock-up on new issuances: For 30 days following the Initial Close, the Company and subsidiaries are restricted from issuing or announcing the issuance of additional common stock or equivalents, except for limited approved grants (up to \$5,000 in restricted stock and management equity grants).
• Participation rights: Investors providing at least \$2 million receive the right to participate in future equity or equity-linked offerings, up to 50% of such financings, for nine months after all Series B Preferred Stock is no longer outstanding.
• Ban on Variable Rate Transactions: The Company may not enter into variable rate financings while any Series B Preferred Stock is outstanding. However, an exception allows for at-the-market (“ATM”) programs with strict limitations (up to \$250,000 per week, capped at 10% of daily dollar trading volume, and a \$1.50 per share floor price).
• Seniority restrictions: The Company may not issue securities senior or pari passu to the Series B Preferred Stock, including debt, without investor consent.
• Investor short sale restriction: Investors (and affiliates) are prohibited from engaging in short sales of the Company’s common stock while holding Series B Preferred Stock.

Series B Convertible Preferred Stock – Key Terms

• Stated Value: \$1,000 per share.
• Conversion: Series B Preferred Stock is convertible at the holder’s option at the then-applicable conversion price (or alternative conversion price at the holder’s election). The specific conversion price is set forth in the Certificate of Designation and may be adjusted for anti-dilution and other events.
• Mandatory Conversion: If the Company’s common stock closes at or above 200% of the conversion price for 10 consecutive trading days and certain trading volume thresholds are met, the Company may require holders to convert their Series B Preferred Stock.
• Preemptive Rights: Confirmed for investors funding at least \$2 million, as noted above.
• Non-voting: Series B Preferred holders generally do not have voting rights, except with respect to proposed amendments that adversely affect the rights or preferences of the Series B Preferred, increases in authorized preferred stock, or other charter changes.
• Dividends: Dividends may be paid if declared by the board, but none are guaranteed or cumulative.
• Seniority: Series B Preferred Stock ranks senior to common stock and pari passu with other preferred shares unless otherwise agreed.
• No market for Series B Preferred: These shares will not be listed for trading; the only liquidity is via conversion to common stock.
• Certificate of Designation: The Company will file a Certificate of Designation with the Nevada Secretary of State to formally create the Series B Preferred Stock.

Warrants

• Investors will receive Warrants to purchase shares of common stock. The Warrants’ terms (including exercise price, anti-dilution provisions, and adjustment mechanisms for stock splits and fundamental transactions) are outlined in detail in the attached Warrant forms (Exhibits 4.1 and 4.2).
• The Placement Agent will also receive Warrants, with similar terms and conditions.

Other Material Terms and Shareholder Impact

• Material changes to shareholder rights: The offering and related anti-dilution and preemptive rights provisions could significantly affect the Company’s capital structure and future financing flexibility. Shareholders should note the potential for dilution if Series B Preferred Stock is converted or Warrants are exercised.
• No change in fiscal year or other charter amendments: The company is not changing its fiscal year in connection with this transaction.
• Legal opinion: A legal opinion from Foley & Lardner LLP regarding the validity of the securities issued is filed as Exhibit 5.1.

Potential Price-Sensitive Implications

• Significant potential dilution: If all Series B Preferred Stock is converted and all Warrants are exercised, the number of outstanding common shares could increase substantially, potentially pressuring the share price.
• Restrictive covenants: The lock-up and anti-dilution provisions may support the share price by limiting the Company’s ability to issue additional shares at below-market prices or enter into highly dilutive transactions.
• Market uncertainty: The absence of a trading market for the Series B Preferred Stock means investors must rely on conversion rights and the liquidity of the common stock.
• Future capital raises: The preemptive rights granted to certain investors could influence the terms and pricing of subsequent equity or equity-linked financings.
• Short sale prohibition: The restriction on investors short selling while holding Series B Preferred Stock may reduce downward pressure on the common stock from these investors.

Exhibits and Additional Information

• Exhibit 1.1: Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock
• Exhibit 4.1: Form of Warrant
• Exhibit 4.2: Form of Placement Agent Warrant
• Exhibit 10.1: Form of Securities Purchase Agreement
• Exhibit 5.1/23.1: Legal opinion and consent of Foley & Lardner LLP

Conclusion

This \$20 million financing provides 22nd Century Group, Inc. with significant new capital but also creates meaningful new obligations, restrictions, and potential dilution for existing shareholders. The transaction structure, anti-dilution protections, and participation rights for lead investors are all material considerations that could impact the Company’s stock price and future capital strategy.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should review the full SEC filings and consult their financial advisors before making any investment decisions. The information herein is based on the company’s public disclosures as of the date of the report and may be subject to change without notice.

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