GEO Investing

22nd Century Group, Inc. (XXII) – Closed a $10 million private placement adding to dilution

We will look to add to our short position. 22 days after trying to rebut our claims about the company’s share count rising, XXII Closed a $10 million private placement adding to the dilution predicted in our short thesis article from 8/27/2014.  It issued 3.87M shares at what appears to be $2.58. In addition to the private placement, the company issued even more shares in its attempt to ride the “Cannabis Hype” by signing a license agreement with Anandia Laboratories Inc. through its subsidiary, Botanical Genetics.  The agreement states that XXII shelled out $1.5M in cash and restricted stock to take a 25% stake in Anandia.  Interestingly, XXII did not disclose the specific amount of shares and cash that made up the Anandia transaction.

We remind our readers that while XXII does have 3 subsidiaries (Goodrich Tobacco, Hercules Pharmaceuticals, Botanical Genetics), they manage to operate all three, plus headquarters from one small office space in Clarence, NY with 9 employees (per XXII’s 2013 10-K). The Botanical Genetics subsidiary of XXII was founded on February 10, 2014 and according to the LinkedIn page of Anandia’s founder, that company has been around only slightly longer, as it was founded in January 2014. In the press release, the company states that it has rights to this license “outside of the U.S. and Canada.”  XXII appears not to have the ability to monetize this license in the emerging marijuana market in the U.S. and Canada.

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