| Prospectus |
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-199273 |
Up to 5,121,767 Shares of Common Stock
to be sold by the Selling Stockholder
This prospectus relates to the offer and
sale from time to time by the selling stockholder named in this prospectus of up to 5,121,767 shares of our common stock. We will
not receive any proceeds from the sale of shares being sold by the selling stockholder. We will, however, receive proceeds on the
exercise by the selling stockholder of outstanding warrants for shares of our common stock covered by this prospectus if the warrants
are exercised for cash. The selling stockholder may offer the shares for sale directly to purchasers or through dealers or agents
to be designated at a future date.
Our common stock is listed on the NYSE MKT
under the symbol “XXII.” On October 9, 2014, the closing price of our common stock was $2.44 per share.
Investment in our common stock involves
risks. Please read carefully the section entitled “Risk Factors” on page 1 of this prospectus, our most recent Annual
Report on Form 10-K and in any applicable prospectus supplement and/or other offering material for a discussion of certain factors
which should be considered in an investment of the securities which may be offered hereby.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is October
23, 2014.
TABLE OF CONTENTS
About This
Prospectus
Unless the context otherwise requires, in
this prospectus, “company,” “we,” “us,” “our” and “ours” refer to 22nd
Century Group, Inc. and its subsidiaries on a combined basis.
This prospectus is part of a registration
statement that we filed with the Securities and Exchange Commission, or SEC, using a “shelf” registration process.
Under this shelf registration process, the selling stockholder may, from time to time, sell the shares of common stock described
in this prospectus in one or more offerings. The prospectus supplement and/or other offering material may also add, update or change
information contained in this prospectus. You should read this prospectus, any prospectus supplement and any other offering material
together with additional information described under the heading “Where You Can Find More Information.”
You should rely only on the information
contained or incorporated by reference in this prospectus and in any prospectus supplement or other offering material. We have
not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent
information, you should not rely on it. This prospectus is not making offers to sell or solicitations to buy shares of our common
stock in any jurisdiction in which an offer or solicitation is not authorized or in which the person making that offer or solicitation
is not qualified to do so or to anyone to whom it is unlawful to make an offer or solicitation. You should not assume that the
information in this prospectus, any prospectus supplement or any other offering material, or the information we previously filed
with the SEC that we incorporate by reference in this prospectus or any prospectus supplement, is accurate as of any date other
than its respective date. Our business, financial condition, results of operations and prospects may have changed since those dates.
“Forward-Looking” Information
The information included or incorporation
by reference into this prospectus contains statements that the company believes to be “forward-looking statements”
within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, without limitation, any statement that is not a statement of historical fact, including, without limitation,
statements regarding the company’s business strategy and plans and objectives of management for future operations or that
may predict, forecast, indicate or imply future results, performance or achievements. The words “estimate,” “project,”
“intend,” “forecast,” “anticipate,” “plan,” “planning,” “expect,”
“believe,” “will,” “will likely,” “should,” “could,” “would,”
“may” or the negative of such words or words or expressions of similar meaning are intended to identify forward-looking
statements. These forward-looking statements are not guarantees of future performance, and all such forward-looking statements
involve risks and uncertainties, many of which are beyond the company’s ability to control. Actual results may differ materially
from those expressed or implied by such forward-looking statements as a result of various factors. We do not undertake, and we
disclaim, any obligation to update any forward-looking statements or to announce revisions to any of the forward-looking statements.
Certain factors that could cause results to differ materially from those projected in the forward-looking statements, including,
among other things:
| · | Our ability to manage our growth effectively; |
| · | Our ability to comply with existing and new government regulations; |
| · | Our ability to retain key personnel; |
| · | Our ability to enter into additional licensing transactions; |
| · | Our ability to achieve profitability; |
| · | The potential for our clinical trials to produce negative or inconclusive results; |
| · | Our ability to obtain significant revenue for our tobacco products; |
| · | Our ability to obtain U.S. Food and Drug Administration (“FDA”) clearance for our potentially modified risk tobacco
products and FDA approval for our X-22 smoking cessation aid; |
| · | Our ability to gain market acceptance for our products; |
| · | Our ability to compete with competitors that may have greater resources than us; |
| · | The potential for our competitors to develop products that are less expensive, safer or more effective than ours; |
| · | Negative press from entering the cannabis space; |
| · | Our dependence on state laws and regulations regarding cannabis; |
| · | Our ability to generate significant revenue from cannabinoid production while use, possession and interstate distribution of
marijuana remains illegal on a federal level in the U.S.; |
| · | The potential exposure to product liability claims, product recalls and other claims; and |
| · | Our ability to adequately protect our intellectual property and to avoid infringement on rights of third parties. |
22nd Century
Group, inc.
We are a plant biotechnology company focused
on (i) tobacco harm reduction and smoking cessation products produced from modifying the nicotine content in tobacco plants and
(ii) modification of cannabinoid levels and profiles in cannabis through genetic engineering and plant breeding. We exclusively
control 129 issued patents in 78 countries and an additional 51 pending patent applications, plus we have co-exclusive rights to
another 16 patent applications; of these, we own 25 issued patents plus 27 patent applications. Goodrich Tobacco Company, LLC (“Goodrich
Tobacco”), Hercules Pharmaceuticals, LLC (“Hercules Pharmaceuticals”) and Botanical Genetics, LLC (“Botanical
Genetics”) are subsidiaries of 22nd Century Ltd. Goodrich Tobacco is focused on commercial tobacco products and potentially
reduced-risk or modified risk tobacco products. Hercules Pharmaceuticals is focused on X-22, a prescription smoking cessation
aid in development. On September 15, 2014, Botanical Genetics acquired rights to patent applications related to four (4) genes
required for cannabinoid production in the cannabis plant.
We are a Nevada corporation and our corporate
headquarters is located at 9530 Main Street, Clarence, New York 14031. Our telephone number is (716) 270-1523. Our Internet website
address is www.xxiicentury.com. We do not incorporate the information on our website into this prospectus, and you should not consider
it part of this prospectus.
Use of Proceeds
We will not receive any proceeds from the
sale of shares being sold by the selling stockholder. We will, however, receive proceeds on the exercise by the selling stockholder
of outstanding warrants for shares of our common stock covered by this prospectus if the warrants are exercised for cash. See “Description
of Capital Stock - Warrants and Convertible Notes – Issuance of Tranche 1A, 1B, 2 and 3 Warrants” for a description
of the Tranche 1A Warrants, which Tranche 1A Warrants are exercisable for shares of our common stock covered by this prospectus.
Risk Factors
Investing in our common stock involves a
high degree of risk. You should carefully consider the specific risks described below as well as the risks described in our annual
report on Form 10-K for the year ended December 31, 2013 and any subsequently filed quarterly reports on Form 10-Q before
making an investment decision. Any of the risks we describe below or in the information incorporated herein by reference could
cause our business, financial condition, or operating results to suffer. You could lose all or part of your investment. Additional
risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect
our business, financial condition, or operating results. Some of the statements in this section of the prospectus are forward-looking
statements. For more information about forward-looking statements, please see the section of this prospectus entitled “About
This Prospectus - Forward-Looking Information.”
Negative press from entering the cannabis space could
have a material adverse effect on our business, financial condition and results of operations.
Despite growing support for the cannabis
industry and legalization of cannabis in certain U.S. states, many individuals and businesses remain opposed to the cannabis industry.
Any negative press resulting from our recent entry into the cannabis space could result in a loss of current or future business.
It could also adversely affect the public’s perception of us and lead to reluctance by new parties to do business with us.
We cannot assure you that additional business partners, including but not limited to financial institutions and customers, will
not attempt to end or curtail their relationships with us. Any such negative press or cessation of business could have a material
adverse effect on our business, financial condition and results of operations.
Any business related cannabinoid production is dependent
on laws pertaining to the cannabis industry.
As of September 30, 2014, 23 states and
the District of Columbia allow its citizens to use medical marijuana. Additionally, the states of Colorado and Washington have
legalized cannabis for adult use. The state laws are in conflict with the federal Controlled Substances Act, or CSA, which makes
marijuana use, possession and interstate distribution illegal on a federal level.
We do not currently conduct any activities
related to cannabis in the United States. Our research facilities for cannabis are located exclusively in Canada. In Canada, licenses
to cultivate, possess and supply cannabis for medical research are granted by agencies of the federal government in Canada. In
order to carry out research in other countries, similar licenses are required to be issued by the relevant authority in each country.
Local, state federal and international medical
marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial
costs associated with compliance requirements. In addition, violations of these laws, or allegations of such violations, could
disrupt our business and result in a material adverse effect on our operations. In addition, it is possible that regulations may
be enacted in the future that will be directly applicable to our proposed business regarding cannabinoid production. We cannot
predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional
governmental regulations or administrative policies and procedures, when and if promulgated, could have on our proposed business.
Description
of Capital Stock
Our authorized capital stock consists of
300,000,000 shares of common stock, $0.00001 par value per share, and 10,000,000 shares of preferred stock, $0.00001 par value
per share. As of October 1, 2014, 64,325,042 shares of common stock were issued and outstanding and no shares of preferred stock
were issued and outstanding.
The following summary of certain provisions
of our capital stock does not purport to be complete and is subject to and is qualified in its entirety by our amended and restated
articles of incorporation, amended and restated bylaws, warrants and notes referred to below. This description is only a summary.
For more detailed information, you should refer to the exhibits to the registration statement of which this prospectus is a part
and incorporated by reference into this prospectus. See “Where You Can Find More Information.”
Common Stock
Our common stock is traded on the NYSE MKT
under the symbol “XXII.” Holders of our common stock are entitled to one vote for each share held on all matters submitted
to a vote of stockholders and do not have cumulative voting rights. Holders of common stock are entitled to receive ratably such
dividends, if any, as may be declared by the board of directors out of funds legally available therefore, subject to a preferential
dividend right of outstanding preferred stock. Upon the liquidation, dissolution or our winding up, the holders of common stock
are entitled to receive ratably our net assets available after the payment of all debts and other liabilities and subject to the
prior rights of any outstanding preferred stock. The rights, preferences and privileges of holders of common stock are subject
to, and may be adversely affected by the rights of the holders any series of preferred stock that we may designate and issue in
the future.
Private Placement of Common Stock and Registration Rights
On September 17, 2014, we entered into a
Securities Purchase Agreement (the “Securities Purchase Agreement”) with Crede CG III, Ltd. pursuant to which we issued
and sold to Crede CG III, Ltd. 3,871,767 shares of common stock at an offering price of $2.5828 per share, which was the volume
weighted average price for the common stock on the NYSE MKT during normal trading hours for the three trading days of September
10, 11 and 12, 2014. We also agreed to pay a fee of $430,000 to Chardan Capital Markets, LLC, the exclusive placement agent in
the transaction.
The Securities Purchase Agreement contains
customary representations, warranties and covenants. In addition, if we issue equity or equity-linked securities on or before December
31, 2014 for an effective per share price less than the per share purchase price for the shares of common stock sold pursuant to
the Securities Purchase Agreement, then we will be required to issue to Crede CG III, Ltd. a number of additional shares of common
stock such that Crede CG III, Ltd.’s cost of common stock would equal such lower price.
In connection with the entry into the Securities
Purchase Agreement, we entered into a Registration Rights Agreement (the “Registration Rights Agreement”) requiring
us to register the resale of the shares of common stock issued pursuant to the Securities Purchase Agreement. In addition, we also
agreed to register the resale of 1,250,000 shares of common stock issuable upon exercise or exchange of the Tranche 1A Warrants.
The offering of such shares is pursuant to this prospectus. The Registration Rights Agreement provides customary penalties for
the benefit of Crede CG III, Ltd. in the event the Registration Statement, of which this prospectus is a part, is not timely filed
and declared effective by the Securities and Exchange Commission. We agreed to keep the prospectus effective until the earlier
of (i) the date on which the shares may be sold without registration and without regard to any volume or manner-of-sale limitations
by reason of Rule 144 and without the need for current public information required by Rule 144(c)(1) or (ii) all of the shares
have been sold.
Preferred Stock
Under the terms of our amended and restated
articles of incorporation, the board of directors is authorized, subject to any limitations prescribed by law, without stockholder
approval, to issue such shares of preferred stock in one or more series. Each such series of preferred stock shall have such rights,
preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences, as shall be determined by the board of directors.
The purpose of authorizing the board of
directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder
vote on specific issuances. The issuance of preferred stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, a majority of our outstanding voting stock. We have no present plans to issue any additional
shares of preferred stock.
The effects of issuing preferred stock could
include one or more of the following:
| · | decreasing the amount of earnings and assets available for distribution to holders of common stock; |
| · | restricting dividends on the common stock; |
| · | diluting the voting power of the common stock; |
| · | impairing the liquidation rights of the common stock; or |
| · | delaying, deferring or preventing changes in our control or management. |
As of the date of this prospectus, there
were no shares of preferred stock outstanding.
Stock Options and Restricted Stock
As of October 1, 2014, we had outstanding
options to purchase a total of 890,000 shares of common stock at a weighted average exercise price of $1.38 per share. As of October
1, 2014, options to purchase 640,000 shares are vested.
As of October 1, 2014, we had outstanding
1,221,000 shares of restricted common stock subject to vesting conditions.
Warrants and Convertible Notes
Warrants Issued in Connection with our
January 25, 2011 Private Placement Offering
Investor Warrants. We issued five-year
warrants to purchase shares of our common stock in exchange for the warrants contained in the securities purchased by investors
in our January 25, 2011 private placement offering. These warrants may be exercised on a cashless basis in certain circumstances.
The exercise price and number of shares of our common stock issuable upon exercise of the warrants may be adjusted in certain circumstances,
including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation. Certain of these
warrants also provide holders with weighted-average anti-dilution price protection. No fractional shares will be issued upon exercise
of these warrants. If, upon exercise of these warrants, a holder would be entitled to receive a fractional interest in a share,
we may, in our discretion, upon exercise, round up to the nearest whole number of shares of our common stock to be issued to the
warrant holder or otherwise equitably adjust the exercise and exercise price per share. Of the warrants described above, as of
October 1, 2014, warrants to purchase 353,624 shares of our common stock were outstanding and consisted of 280,465 shares purchasable
with an exercise price of $1.2672 per share, 62,329 shares purchasable with an exercise price of $1.2018 per share, and 10,830
shares purchasable with an exercise price of $1.1718. All of the warrants to purchase 353,624 shares of our common stock have been
amended to remove the weighted-average anti-dilution provisions.
Century Warrants. We issued five-year
warrants to purchase shares of our common stock in exchange for the warrants held by the members of 22nd Century Limited LLC prior
to the consummation of the January 25, 2011 private placement offering. These warrants may be exercised on a cashless basis in
certain circumstances. The exercise price and number of shares of our common stock issuable upon exercise of the warrants may be
adjusted in certain circumstances, including in the event of a stock dividend, or our recapitalization, reorganization, merger
or consolidation. These warrants also provide holders with weighted-average anti-dilution price protection. No fractional shares
will be issued upon exercise of these warrants. If, upon exercise of these warrants, a holder would be entitled to receive a fractional
interest in a share, we may, in our discretion, upon exercise, round up to the nearest whole number of shares of our common stock
to be issued to the warrant holder or otherwise equitably adjust the exercise and exercise price per share. Of the warrants described
above, as of October 1, 2014, warrants to purchase 6,534,486 shares of our common stock were outstanding consisting of 3,062,665
shares purchasable with an exercise price of $1.96 per share, 653,870 shares purchasable with an exercise price of $2.00 per share,
and 2,817,951 shares purchasable with an exercise price of $2.2029 per share. All of the warrants to purchase 6,534,486 shares
of our common stock have been amended to remove the weighted-average anti-dilution provisions.
Conversion Warrants. We issued five-year
warrants to purchase shares of our common stock in exchange for the warrants issued to the placement agent and sub-placement agent
in the January 25, 2011 private placement offering. These warrants contain a cashless exercise provision. The exercise price and
number of shares of our common stock issuable upon exercise of the warrants may be adjusted in certain circumstances, including
in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation. These warrants also provide
holders with weighted-average anti-dilution price protection. No fractional shares will be issued upon exercise of these warrants.
If, upon exercise of these warrants, a holder would be entitled to receive a fractional interest in a share, we may, in our discretion,
upon exercise, round up to the nearest whole number of shares of our common stock to be issued to the warrant holder or otherwise
equitably adjust the exercise and exercise price per share. Of the warrants described above, as of October 1, 2014, warrants to
purchase an aggregate of 49,677 shares of our common stock were outstanding and consisted of 12,500 purchasable with an exercise
price of $1.2672 per share and 37,177 shares purchasable with an exercise price of $1.2018 per share. Of the 49,677 warrants to
purchase shares of our common stock, 12,500 shares purchasable under these warrants have been amended to remove the weighted-average
anti-dilution provisions.
Convertible Notes Issued in December 2011 and Related Warrants
On December 14, 2011, we entered into an
agreement with certain accredited investors, whereby such investors acquired approximately $1.9 million of convertible promissory
notes of the Company (the “Convertible Notes”).
All of the Convertible Notes were converted
or paid off in full subsequent to December 31, 2012 in transactions that resulted in the issuance of warrants to the note holders
to purchase an aggregate amount of 2,662,769 shares of our common stock at an exercise price of $1.50 per share. These warrants
issued upon conversion of the Convertible Notes have a term of five years and are exercisable at any time on or before the fifth
anniversary of the issue date of the warrants. The warrants may be exercised on a cashless basis. The exercise price and number
of shares of our common stock issuable upon exercise of these warrants may be adjusted in certain circumstances, including in the
event of a stock dividend, or our recapitalization, reorganization, merger or consolidation. Of the warrants described above, as
of October 1, 2014, warrants to purchase an aggregate of 974,945 shares of our common stock were outstanding and consisted of 802,215
shares purchasable with an exercise price of $1.3816 per share and 172,730 shares purchasable with an exercise price of $1.1984
per share. All of the warrants to purchase 974,945 shares of our common stock have been amended to remove the weighted average
anti-dilution provision.
In connection with the issuance of preferred
shares in January 2013, all of which were subsequently converted into shares of common stock, the note holders entered into a lock-up
agreement with the Company which limited their ability to sell any of the shares received as a result of the conversion of the
notes and received additional warrants (five year term at $1.50 exercise price) to purchase 219,909 shares of common stock.
Warrants Issued in 2012
On May 15, 2012, we entered into an agreement
with certain accredited investors, whereby the investors acquired warrants with a 5-year term to purchase up to 1,710,833 shares
of our common stock at an exercise price of $1.00 per share. The exercise price and number of shares of our common stock issuable
upon exercise of the warrants may be adjusted in certain circumstances, including in the event of a stock dividend, or our recapitalization,
reorganization, merger or consolidation. These warrants also provided holders with weighted-average anti-dilution price protection.
No fractional shares will be issued upon exercise of these warrants. Of the warrants described above, as of October 1, 2014, warrants
to purchase an aggregate of 401,700 shares of common stock are outstanding with an exercise price of $0.60 per share. All of the
warrants to purchase 401,700 shares of our common stock have been amended to remove the weighted average anti-dilution provision.
On November 9, 2012, we entered into an
agreement with certain accredited investors, whereby the investors acquired warrants with a 5-year term to purchase up to 1,619,000
shares of our common stock at an exercise price of $1.00 per share. The exercise price and number of shares of our common stock
issuable upon exercise of the warrants may be adjusted in certain circumstances, including in the event of a stock dividend, or
our recapitalization, reorganization, merger or consolidation. These warrants also provide holders with anti-dilution price protection.
No fractional shares will be issued upon exercise of these warrants. Of the warrants described above, as of October 1, 2014, warrants
to purchase an aggregate of 925,100 shares of common stock are outstanding with an exercise price of $0.60 per share. All of the
warrants to purchase 925,100 shares of our common stock have been amended to remove the weighted average anti-dilution provision.
Convertible Notes Issued in August 2012
On August 9, 2012, we completed a private
placement of $222,600 of convertible notes, which were sold at a 6% discount. We received proceeds of $210,000. All of the Convertible
Notes were converted in August 2013 in transactions that resulted in the issuance of warrants to the note holders to purchase an
aggregate amount of 371,000 shares of our common stock at an exercise price of $1.00 per share. These warrants issued upon conversion
of the Convertible Notes have a term of five years and are exercisable at any time on or before the fifth anniversary of the issue
date of the warrants. The warrants may be exercised on a cashless basis. The exercise price and number of shares of our common
stock issuable upon exercise of these warrants may be adjusted in certain circumstances, including in the event of a stock dividend,
or our recapitalization, reorganization, merger or consolidation. These warrants also provide holders with weighted-average anti-dilution
price protection. As of October 1, 2014, warrants to purchase an aggregate of 184,876 shares of common stock are outstanding and
consist of 92,632 shares purchasable with an exercise price of $0.9520 and 92,244 shares purchasable with an exercise price of
$0.9060 per share. Of the 184,876 warrants to purchase shares of our common stock, 92,244 shares purchasable under these warrants
have been amended to remove the weighted-average anti-dilution provisions.
Issuance of Tranche 1A, 1B, 2 and 3 Warrants
In connection with the entry into a consulting
agreement, we issued 1,250,000 Tranche 1A Warrants (the “Tranche 1A Warrants”), 1,000,000 Tranche 1B Warrants (the
“Tranche 1B Warrants”), 1,000,000 Tranche 2 Warrants (the “Tranche 2 Warrants”) and 1,000,000 Tranche 3
Warrants (the “Tranche 3 Warrants” and together with the Tranche 1A, 1B and 2 Warrants, collectively the “Warrants”)
to Crede CG III, Ltd.
The Tranche 1A Warrants have an exercise
price equal to $3.36 per share. The Tranche 1B Warrants have an exercise price equal to $2.5951 per share. The Tranche 1A Warrants
and the Tranche 1B Warrants each have a term of two years and are exercisable at any time. The Tranche 2 Warrants and Tranche 3
Warrants each have an exercise price equal to $3.3736 per share and only vest and become exercisable upon certain sales milestones
being met, as described below. In certain instances, the Warrants may be exercised on a cashless basis by the holder. Holders of
the Warrants may exercise their warrants to purchase shares of common stock on or before the termination date of the applicable
Warrant by delivering to us an exercise notice, appropriately completed and duly signed, and payment of the exercise price for
the number of shares for which the warrant is being exercised in cash.
The Tranche 2 Warrants have a term of five
years and vest and become exercisable only if 22nd Century Asia Ltd., our subsidiary, achieves revenues of at least $15 million
in either of the two twelve month periods beginning on the Commencement Date (as defined therein) or revenues of at least $90 million
during either of the two twelve month periods beginning on the first anniversary of the Commencement Date, and in each instance
we must be cash flow positive from our investment in 22nd Century Asia.
The Tranche 3 Warrants have a term of five
years and vest only if 22nd Century Asia achieves revenues of at least $45 million in either of the two twelve month periods beginning
on the one-year anniversary of the Commencement Date (as defined therein) or revenues of at least $27 million during either of
the two twelve month periods beginning on the Commencement Date and the first anniversary of the Commencement Date, and in each
instance we must be cash flow positive from our investment in 22nd Century Asia.
In addition to the traditional cashless
exercise provision, the Tranche 1A Warrants, but not the Tranche 1B Warrants, Tranche 2 Warrants or Tranche 3 Warrants, provide
that the Tranche 1A Warrants may be exercised on a cashless basis by exchanging such warrants for shares of common stock using
a negotiated Black-Scholes formula beginning on the day that is sixty one days after September 17, 2014 provided that all conditions
for such exchange are satisfied. The negotiated Black-Scholes value is defined as the value of an option for the number of shares
equal to the portion of the Tranche 1A Warrant being exchanged at the applicable exchange date as such value is determined calculated
using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying
price per share equal to the closing sale price of the common stock as of the date of issuance of the warrant, (ii) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of the warrant as of such exchange
date, (iii) a strike price equal to the exercise price in effect at the time of the applicable exchange, (iv) an expected volatility
equal to 135% and (v) an assumed period of five years remaining in the term of the warrant (regardless of the actual remaining
term of the warrant). The total number of shares issuable under this exchange provision is limited as provided in the Tranche 1A
Warrants.
We may force the holder to exercise the
Tranche 1A Warrants for cash in the event the following are satisfied: (i) the trading volume in our common stock over twenty consecutive
days is equal or greater than an aggregate of Ten Million shares, (ii) a registration statement covering the shares of common stock
issuable upon exercise of the Tranche 1A Warrants is effective and (iii) the trading price of the common stock on the date prior
to delivery of the notice to the holder is equal or greater than 125% of the exercise price of the warrant.
The Warrants do not confer upon holders
any voting or other rights as stockholders. Each of the Warrants contains a limitation that the holder may not exercise or exchange
the Warrant if such exercise or exchange will cause the holder to acquire beneficial ownership of more than 9.99% of our outstanding
shares of common stock
Anti-Takeover Provisions Under Nevada Law
Combinations with Interested Stockholder.
Sections 78.411-78.444, inclusive, of the Nevada Revised Statutes (NRS) contain provisions governing combinations with an interested
stockholder. For purposes of the NRS, “combinations” include: (i) any merger or consolidation with any interested stockholder,
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to any interested stockholder of corporate assets
with an aggregate market value equal to 5% or more of the aggregate market value of the corporation's consolidated assets, 5% or
more of the outstanding shares of the corporation or 10% or more of the earning power or net income of the corporation; (iii) the
issuance to any interested stockholder of voting shares (except pursuant to a share dividend or similar proportionate distribution)
with an aggregate market value equal to 5% or more of the aggregate market value of all the outstanding shares of the corporation,
(iv) the dissolution of the corporation if proposed by or on behalf of any interested stockholder, (v) any reclassification of
securities, recapitalization or corporate reorganization that will have the effect of increasing the proportionate share of the
corporation's outstanding voting shares held by any interested stockholder and (vi) any receipt by the interested stockholder of
the benefit (except proportionately as a stockholder) of any loan, advance, guarantee, pledge or other financial assistance. For
purposes of the NRS, an “interested stockholder” is defined to include any beneficial owner of more than 10% of any
class of the voting securities of a Nevada corporation and any person who is an affiliate or associate of the corporation and was
at any time during the preceding three years the beneficial owner or more than 10% of any class of the voting securities of the
Nevada corporation.
Subject to certain exceptions, the provisions
of the NRS statute governing combinations with interested stockholders provide that a Nevada corporation may not engage in a combination
with an interested stockholder for two years after the date that the person first became an interested stockholder unless the combination
or the transaction by which the person first became an interested stockholder is approved by the board of directors before the
person first became an interested stockholder.
Control Share Acquisitions. The NRS
also contains a “control share acquisitions statute.” If applicable to a Nevada corporation, this statute restricts
the voting rights of certain stockholders referred to as “acquiring persons” that acquire or offer to acquire ownership
of a “controlling interest” in the outstanding voting stock of an “issuing corporation.” For purposes of
these provisions a “controlling interest” means with certain exceptions the ownership of outstanding voting stock sufficient
to enable the acquiring person to exercise one-fifth or more but less than one-third, one-third or more but less than a majority,
or a majority or more of all voting power in the election of directors and “issuing corporation” means a Nevada corporation
that has 200 or more stockholders of record, at least 100 of whom have addresses in Nevada appearing on the stock ledger of the
corporation, and which does business in Nevada directly or through an affiliated corporation. The voting rights of an acquiring
person in the affected shares will be restored only if such restoration is approved by the holders of a majority of the voting
power of the corporation (excluding the shares held by the acquiring person). The NRS allows a corporation to “opt-out”
of the control share acquisitions statute by providing in such corporation's articles of incorporation or bylaws that the control
share acquisitions statute does not apply to the corporation or to an acquisition of a controlling interest specifically by types
of existing or future stockholders, whether or not identified. We have not opted-out of the control share acquisitions statute.
Liability and Indemnification of Directors and Officers
NRS Sections 78.7502 and 78.751 provide
us with the power to indemnify any of our directors and officers. The director and officer must have conducted himself or herself
in good faith and reasonably believe that his or her conduct was in, or not opposed to, our best interests. In a criminal action,
the director, officer, employee, or agent must not have had reasonable cause to believe that his or her conduct was unlawful.
Under NRS Section 78.751, advances for expenses
may be made by agreement if the director or officer affirms in writing that he or she believes that he or she has met the statutory
standards and will personally repay the expenses if it is determined that such officer or director did not meet the statutory standards.
Our amended and restated articles of incorporation
provide that we shall indemnify directors and officers to the fullest extent permitted by the NRS. Our amended and restated articles
of incorporation also provide a limitation of liability such that no director or officer shall be personally liable to us or any
of our stockholders to the fullest extent permitted by the NRS.
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and controlling persons of ours under Nevada law or otherwise,
we have been advised the opinion of the SEC is that such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than payment by
us for expenses incurred or paid by a director, officer or controlling person of ours in successful defense of any action, suit,
or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered, we
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction, the question of whether such indemnification by it is against public policy in the Securities Act and will be governed
by the final adjudication of such issue.
NYSE MKT Listing
Our common stock is listed on the NYSE MKT
under the symbol “XXII.”
Transfer Agent and Registrar
The transfer agent and registrar for our
common stock is Continental Stock Transfer & Trust Company, 17 Battery Place, 8th Floor, New York, NY 10004.
Selling
Stockholder
The shares of common
stock being offered by the selling stockholder include those issuable to the selling stockholder upon exercise or exchange of the
Tranche 1A Warrants. For additional information regarding the issuance of the common stock and Warrants, see “Description
of Capital Stock – Common Stock - Private Placement of Common Stock and Registration Rights” and “Description
of Capital Stock – Warrants and Convertible Notes - Issuance of Tranche 1A, 1B, 2 and 3 Warrants” above, respectively.
We are registering the shares of common stock in order to permit the selling stockholder to offer the shares for resale from time
to time.
The table below lists
the selling stockholder and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder) of the shares of common stock held by the selling stockholder.
The second column lists the number of shares of common stock beneficially owned by the selling stockholder, based on ownership
of shares of common stock and warrants, as of October 1, 2014, assuming exercise or exchange of the warrants held by the selling
stockholder on that date but taking account of any limitations on exercise or exchange set forth therein.
The third column lists
the shares of common stock being offered by this prospectus by the selling stockholder and does not take into account any limitations
on the exercise or exchange of the warrants set forth therein.
In accordance with
the terms of the Registration Rights Agreement, this prospectus generally covers the resale the sum of (i) 3,871,767 shares issued
pursuant to the Securities Purchase Agreement and (ii) 1,250,000 shares of common stock issuable pursuant to the Tranche 1A Warrant.
Under the terms of
the Warrants, the selling stockholder may not exercise or exchange the Warrants to the extent (but only to the extent) the selling
stockholder or any of its affiliates would beneficially own a number of shares of our common stock which would exceed 9.9%. The
number of shares in the second column reflects these limitations. The selling stockholder may sell all, some or none of its shares
in this offering. See “Plan of Distribution.”
| Name of Selling Stockholder | |
Number of Shares of
Common Stock Owned
Prior to Offering(2) | |
Maximum Number of
Shares of Common Stock to
be Sold Pursuant to this
Prospectus | | |
Number of Shares of
Common Stock
Owned
After Offering(3) |
| Crede CG III, Ltd.(1) | |
8,561,005 | |
| 5,121,767 | | |
3,439,238 |
(1) The sole stockholder of
Crede CG III, Ltd. is Crede Capital Group, LLC. Acuitas Financial Group, LLC holds all of the membership interests of Crede Capital
Group, LLC and Terren Peizer holds all of the membership interests of Acuitas Financial Group, LLC. Voting and dispositive power
with respect to the shares held by Crede CG III, Ltd. is exercised by Terren Peizer, the sole and Managing Member of Acuitas Financial
Group, LLC, Crede Capital Group, LLC and Managing Director of Crede CG III, Ltd., who acts as investment advisor to these entities.
Terren Peizer, Acuitas Financial Group, LLC and Crede Capital Group, LLC disclaim beneficial ownership with respect to the shares
held by Crede CG III, Ltd.
(2) Includes 2,250,000 shares of common stock underlying the
Tranche 1A and 1B Warrants and excludes 2,000,000 shares of common stock underlying the Tranche 2 and 3 Warrants, which are subject
to vesting requirements. See “Description of Capital Stock – Warrants and Convertible Notes – Issuance
of Tranche 1A, 1B, 2 and 3 Warrants.” Under the terms of the Tranche 1A, 1B, 2 and 3 Warrants, the selling stockholder
may not exercise or exchange the warrants to the extent the selling stockholder or its affiliates would beneficially own in excess
of 9.9% of our outstanding common stock.
(3)
Includes 1,000,000 shares of common stock underlying the Tranche 1B Warrants and
excludes 2,000,000 shares of common stock underlying the Tranche 2 and 3 Warrants, which are subject to vesting requirements.
Plan of
Distribution
We are registering
the shares of common stock, including shares of common stock issuable upon exercise or exchange of the Tranche 1A Warrants to permit
the resale of these shares of common stock by the holder of the common stock and warrants from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the selling stockholder of the shares of common stock. We
will, however, receive proceeds on the exercise by the selling stockholder of outstanding warrants for shares of our common stock
covered by this prospectus if the warrants are exercised for cash. We will bear all fees and expenses incident to our obligation
to register the shares of common stock.
The selling stockholder
may sell all or a portion of the shares of common stock held and offered hereby from time to time directly or through one or more
underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling
stockholder will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of common stock
may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve crosses
or block transactions, pursuant to one or more of the following methods:
| · | on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale; |
| · | in the over-the-counter market; |
| · | in transactions otherwise than on these exchanges or systems or in the over-the-counter market; |
| · | through the writing or settlement of options, whether such options are listed on an options exchange or otherwise; |
| · | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| · | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction; |
| · | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| · | an exchange distribution in accordance with the rules of the applicable exchange; |
| · | privately negotiated transactions; |
| · | short sales made after the date the Registration Statement is declared effective by the SEC; |
| · | broker dealers may agree with a selling stockholder to sell a specified number of such shares at a stipulated price per share; |
| · | a combination of any such methods of sale; |
| · | any other method permitted pursuant to applicable law. |
The selling stockholder
may also sell shares of common stock under Rule 144 promulgated under the Securities Act of 1933, as amended, if available, rather
than under this prospectus. In addition, the selling stockholder may transfer the shares of common stock by other means not described
in this prospectus. If the selling stockholder effects such transactions by selling shares of common stock to or through underwriters,
broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions
or commissions from the selling stockholder or commissions from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers
or agents may be in excess of those customary in the types of transactions involved). The selling stockholder may also loan or
pledge shares of common stock to broker-dealers that in turn may sell such shares.
The selling stockholder
may pledge or grant a security interest in some or all of the warrants or shares of common stock owned and, if it defaults in the
performance of its secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time
to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors
in interest as a selling stockholder under this prospectus. The selling stockholder also may transfer and donate the shares of
common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.
To the extent required
by the Securities Act and the rules and regulations thereunder, the selling stockholder and any broker-dealer participating in
the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities
Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus
supplement, if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered
and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other
terms constituting compensation from the selling stockholder and any discounts, commissions or concessions allowed or re-allowed
or paid to broker-dealers. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would
exceed eight percent (8%).
Under the securities
laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance
that the selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement,
of which this prospectus forms a part.
The selling stockholder
and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation
M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholder
and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged
in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock.
All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage
in market-making activities with respect to the shares of common stock.
We will pay all expenses
of the registration of the shares of common stock pursuant to the Registration Rights Agreement, estimated to be $46,000 in total,
including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities
or “blue sky” laws; provided, however, the selling stockholder will pay all underwriting discounts and selling commissions,
if any. We will indemnify the selling stockholder against liabilities, including some liabilities under the Securities Act in accordance
with the registration rights agreements or the selling stockholder will be entitled to contribution. We may be indemnified by the
selling stockholder against civil liabilities, including liabilities under the Securities Act that may arise from any written information
furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related registration
rights agreements or we may be entitled to contribution.
We agreed to keep this
prospectus effective until the earlier of (i) the date on which the shares may be resold by the selling stockholder without registration
and without regard to any volume or manner-of-sale limitations by reason of Rule 144 and without the need for current public information
required by Rule 144(c)(1) or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities
Act or any other rule of similar effect. The shares will be sold only through registered or licensed brokers or dealers if required
under applicable state securities laws. In addition, in certain states, the shares of common stock covered hereby may not be sold
unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Once sold under the
registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands
of persons other than our affiliates.
Legal Matters
The validity of the securities offered by
this prospectus will be passed upon for us by Foley & Lardner LLP. As of October 8, 2014, Foley & Lardner, LLP owns 1,000,000
shares of common stock of the Company. The validity of the securities offered by this prospectus will be passed upon for any underwriters
or agents by counsel named in the applicable prospectus supplement.
Experts
The consolidated financial statements of
22nd Century Group, Inc. as of December 31, 2013 and 2012, and for the years then ended, have been incorporated by reference herein
in reliance upon the report of Freed Maxick CPAs, P.C., independent registered public accounting firm, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and auditing. To the extent that Freed Maxick CPAs, P.C. audits
and reports on consolidated financial statements of 22nd Century Group, Inc. at future dates and consents to the use of their reports
thereon, such consolidated financial statements also will be incorporated by reference in the registration statement in reliance
upon their reports and said authority.
Where You
Can Find More Information
We file annual, quarterly and current reports,
proxy statements and other information with the SEC. We also filed a registration statement on Form S-3, including exhibits, under
the Securities Act of 1933, as amended, or the Securities Act, with respect to the securities offered by this prospectus. This
prospectus is a part of the registration statement, but does not contain all of the information included in the registration statement
or the exhibits. You may read and copy the registration statement and any other document that we file at the SEC’s public
reference room at 100 F Street, N.E., Washington D.C. 20549. You can call the SEC at 1-800-SEC-0330 for further information on
the operation of the public reference room. You can also find our public filings with the SEC on the internet at a web site maintained
by the SEC located at www.sec.gov.
Incorporation
of Certain Documents by Reference
We are “incorporating by reference”
specified documents that we file with the SEC, which means:
| · | incorporated documents are considered part of this prospectus; |
| · | we are disclosing important information to you by referring you to those documents; and |
| · | information we file with the SEC will automatically update and supersede information contained in this prospectus. |
We incorporate by reference the documents
listed below and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (i) after
the date of the registration statement on Form S-3 filed under the Securities Act with respect to securities offered by this prospectus
and prior to the effectiveness of such registration statement and (ii) after the date of this prospectus and before the end
of the offering of the securities pursuant to this prospectus:
| · | our Annual Report on Form 10-K for the year ended December 31, 2013; |
| · | our Quarterly Reports on Form 10-Q for the periods ended March 31, 2014 and June 30, 2014; |
| · | our Definitive Proxy Statement on Schedule 14A filed March 4, 2014; |
| · | our Current Reports on Form 8-K filed on April 14, 2014, May 14, 2014, May 19, 2014, July 31, 2014, September 4, 2014 (excluding
Item 7.01 and the exhibit thereto), September 18, 2014 (excluding Item 7.01 and the exhibit related thereto) and September 30,
2014; and |
| · | the description of our common stock contained in or incorporated into our Registration Statement on Form 8-A, filed March 6,
2014, and any amendment or report updating that description. |
Information in this prospectus supersedes
related information in the documents listed above, and information in subsequently filed documents supersedes related information
in both this prospectus and the incorporated documents.
We will promptly provide, without charge
to you, upon written or oral request, a copy of any or all of the documents incorporated by reference in this prospectus, other
than exhibits to those documents, unless the exhibits are specifically incorporated by reference in those documents. Requests should
be directed to:
22nd Century Group, Inc.
9530 Main Street
Clarence, New York 14031
(716) 270-1523
You can also find these filings on our website
at www.xxiicentury.com. We are not incorporating the information on our website other than these filings into this prospectus.
22nd CENTURY GROUP,
INC.
Up to 5,121,767 Shares of Common Stock
to be sold by the Selling Stockholder
PROSPECTUS
October 23, 2014
22nd Century (AMEX:XXII)
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22nd Century (AMEX:XXII)
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