Material Agreement (Form 8-K)

Item 1.01 Entry into a Material Definitive Agreement.

On March 20, 2026, 22nd Century Group, Inc. (the "Company") and certain investors (the "Investors") entered into a securities purchase agreement (the "Securities Purchase Agreement") with respect to the offer and sale of up to $20 million of shares of Series B Convertible Preferred Stock, stated value $1,000 per share (the "Series B Preferred Stock") and warrants (the "Warrants") to purchase shares of common stock ("Common Stock") pursuant to a registered direct offering (collectively, the "Offering"). Stockholder approval for the Offering was obtained at the February 20, 2026 Special Meeting of the Stockholders.

At the initial closing (the "Initial Close"), the Investors will purchase approximately $16.0 million of shares of Series B Preferred Stock and Warrants. The remaining $4.0 million of shares of Series B Preferred Stock and Warrants are expected to be purchased at a second closing (the "Second Close"). The Investors may request the Second Close at any time until the one year anniversary of the Initial Close. The Company may require the Second Close by individual investor once less than 50% of such Investor's Series B Preferred Stock purchased at the Initial Close remains outstanding and certain equity conditions have been satisfied for at least 7 of the prior 10 trading days, including: (1) the Common Stock closes above 2.5 times the floor price and (2) the daily dollar trading volume of the Common Stock exceeds $500,000. The Company may exercise this right until the one year anniversary of the Initial Close.

The Series B Preferred Stock will be convertible into shares of Common Stock at a fixed conversion price of $3.57 and, alternatively, at a 15% discount to the lowest daily volume-weighted average price ("VWAP") during the prior 20 trading days (the "Alternative Conversion Price"), subject in each case to a floor price equal to 20% of the Nasdaq minimum price on the date of the Securities Purchase Agreement. The fixed conversion price is subject to anti-dilution adjustment for future dilutive issuances, subject to the floor price. The Company has the ability to reset the fixed conversion price (lower), subject to board approval and the floor price.

The Warrants will be immediately exercisable at an exercise price of $3.57 per share of Common Stock (equal to the fixed conversion price) and expire on the date that is five (5) years after issuance. The Investors received 100% warrant coverage, calculated as the face value of their Series B Preferred Stock divided by the fixed conversion price. The Warrants contain Black-Scholes value protections for fundamental transactions. The Warrants also have anti-dilution protection (price-only) for future issuances at prices below the then-current exercise price; provided that such anti-dilution protection does not apply to conversions of the Series B Preferred Stock.

The Initial Close of the Offering is expected to close on March 24, 2026, subject to the satisfaction of customary closing conditions. For a description of the terms of the Series B Preferred Stock, see Item 5.03 below.

The Securities Purchase Agreement provides that, subject to certain exceptions, until 30 days after the Initial Close, neither the Company nor any of its subsidiaries will issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock equivalents, except for approved issuances of restricted stock up to $500,000 and management equity grants. The Securities Purchase Agreement also provides that certain of the Investors in the Offering that fund at least $2,000,000 have a right of participation in future equity or equity-linked offerings by the Company in an amount equal to 50% of such subsequent financing for a period of 9 months after no shares of Series B Preferred Stock are outstanding.

The Securities Purchase Agreement provides that, subject to certain exceptions, until no shares of Series B Preferred Stock are outstanding, the Company will be prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its subsidiaries of common stock or common stock equivalents (or a combination of units thereof) involving a Variable Rate Transaction (as defined in the Securities Purchase Agreement). The Company may, however, utilize an at-the-market ("ATM") offering program to sell up to $250,000 in common shares per week, limited to 10% of the daily dollar trading volume for the Company's common shares and subject to a floor price of $1.50 per share, without time-of-day limitations.

The Securities Purchase Agreement provides that the Company shall not issue any securities senior to or pari passu with the Series B Preferred Stock, including but not limited to any debt. Additionally, the Investors have agreed not to enter into any short sales of the Common Stock while they hold any shares of Series B Preferred Stock, with such restrictions applying to affiliates and related parties.