MOCKSVILLE - 22nd Century (NASDAQ:XXII) Group, Inc. (NASDAQ: XXII), a company specializing in nicotine harm reduction through tobacco products, has announced a significant restructuring of its debt. The company has entered into an agreement to redeem $5.2 million in principal and interest of its Omnia subordinated note and outstanding warrants. This move is expected to strengthen its balance sheet and increase shareholder equity.
The terms of the agreement involve a payment of approximately $248,000 in cash, the issuance of 1.15 million shares of common stock, and an equal number of pre-funded warrants, both priced at $2.14 per share. Moreover, Omnia will receive 460,000 warrants with a five-year term and an exercise price of $2.14 per share.
Larry Firestone, Chairman and CEO of 22nd Century Group, stated, "Paying Omnia at maturity with equity greatly improves our balance sheet, preserves cash for growing our operating business and significantly increases shareholder equity." He also noted the transaction's role in reducing monthly interest expenses and contributing to the company's goal of becoming cash positive by the first quarter of 2025.
The agreement limits Omnia's ownership to no more than 19.99% of the outstanding common stock. The securities involved in the transaction are being issued in a private placement, exempt from registration under the Securities Act of 1933, as amended. The company has committed to filing a registration statement for the resale of the shares and warrants issued to Omnia.
This strategic financial move comes as the company continues to leverage its proprietary reduced nicotine content tobacco plants and cigarettes, which align with the FDA's plan to combat smoking-related health issues. 22nd Century Group received the first and only FDA Modified Risk Tobacco Product authorization for a combustible cigarette in December 2021.
The details of the agreement have been outlined in an 8-K filed with the Securities and Exchange Commission on April 30, 2024. This transaction is based on a press release statement and should not be considered an offer to sell or a solicitation of an offer to buy any securities.
InvestingPro Insights
As 22nd Century Group, Inc. (NASDAQ: XXII) navigates its debt restructuring, a glance at the company's financial health through InvestingPro data reveals a challenging landscape. The company's market capitalization stands at a modest $10.16 million, indicating a relatively small player within the industry. The revenue for the last twelve months as of Q4 2023 has decreased by 21.85%, highlighting potential concerns about the company's sales trajectory.
Moreover, the gross profit margin for the same period is reported at -39.91%, which underscores the company's struggles to maintain profitability in its operations. These figures are critical for investors to consider, especially in the context of the company's recent strategic financial moves aimed at improving its financial position.
InvestingPro Tips for 22nd Century Group suggest that the company is grappling with significant debt and may face difficulties in meeting interest payments, which aligns with the need for debt restructuring.
The company's stock has been characterized by high price volatility, which could be pertinent for investors looking for stability in their investments. For those considering a deeper analysis, there are over 15 additional InvestingPro Tips available, providing a comprehensive view of the company's financial status and market performance.
Investors interested in further insights can explore these tips at: https://www.investing.com/pro/XXII and take advantage of an exclusive offer using coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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