22nd Century Group Eliminates $7.7 Million of Warrant Liability
April 01 2014 - 8:12AM
Business Wire
22nd Century Group, Inc. (NYSE MKT:XXII) today announced that
the Company entered into warrant amendments yesterday with existing
warrant holders to eliminate virtually all of the Company’s
“derivative warrant liability.” 22nd Century Group had previously
issued certain warrants that contained anti-dilution
provisions.
These anti-dilution provisions are accounted for as “derivative
warrant liability” on the Company’s financial statements.
“Derivative warrant liability” is not an actual cash obligation (or
cash expense) and is classified and reported as a derivative
liability for accounting purposes and marked-to-market at the
balance sheet date, which negatively impacts the Company’s balance
sheet and statement of operations. Upon the exercise of a warrant
or elimination of the anti-dilution feature of a warrant, the
derivative warrant liability is reduced and equity (capital in
excess of par value) is increased accordingly.
As of December 31, 2013, the Company’s derivative warrant
liability was approximately $3.8 million. However, as a result of
the 52% appreciation of 22nd Century Group’s share price in the
first quarter of 2014, the Company’s derivative warrant liability
would have increased to approximately $7.7 million by the end of
the first quarter 2014 if the Company and certain warrant holders
did not amend the warrants containing anti-dilution provisions.
Seven out of nine non-management warrant holders agreed to
eliminate the anti-dilution provisions over a total of 756,953
warrant shares in consideration for reduced exercise prices, which
averaged $0.18 per warrant share. Additionally, three 22nd Century
Group executive officers, the CEO, President and VP of R&D,
voluntarily eliminated the anti-dilution provisions in their
3,052,961 warrant shares and declined to receive any consideration
for these warrant amendments.
By foregoing the consideration offered to the non-management
warrant holders, Company officers personally forfeited a total of
$570,632 in value (warrant shares multiplied by reduction in
exercise price). As a result of these warrant amendments, as of
March 31, 2014, there are now only two Company warrants outstanding
that contain an anti-dilution provision, which have a cumulative
derivative warrant liability of approximately $560,000.
Joseph Pandolfino, Founder and CEO of 22nd Century Group,
stated, “We are pleased that 22nd Century Group has eliminated
virtually all its derivative warrant liability as we prepare to
begin manufacturing and marketing our own tobacco products
nationally. Our quarterly financial results will no longer be
clouded by a substantial warrant liability on our balance sheet or
the related expense on our statement of operations.”
For additional information, please visit:
www.xxiicentury.com
About 22nd Century Group, Inc.
22nd Century is a plant biotechnology company whose proprietary
technology allows for the levels of nicotine and other nicotinic
alkaloids (e.g., nornicotine, anatabine and anabasine) in the
tobacco plant to be decreased or increased through genetic
engineering and plant breeding. 22nd Century owns or is the
exclusive licensee of 114 issued patents in 78 countries plus an
additional 38 pending patent applications. Goodrich Tobacco
Company, LLC and Hercules Pharmaceuticals, LLC are wholly-owned
subsidiaries of 22nd Century. Goodrich Tobacco is focused on
commercial tobacco products and potential less harmful cigarettes.
Hercules Pharmaceuticals is focused on X-22, a prescription smoking
cessation aid in development.
Cautionary Note Regarding Forward-Looking Statements: This press
release contains forward-looking information, including all
statements that are not statements of historical fact regarding the
intent, belief or current expectations of 22nd Century Group, Inc.,
its directors or its officers with respect to the contents of this
press release. The words “may,” “would,” “will,” “expect,”
“estimate,” “anticipate,” “believe,” “intend” and similar
expressions and variations thereof are intended to identify
forward-looking statements. We cannot guarantee future results,
levels of activity or performance. You should not place undue
reliance on these forward-looking statements, which speak only as
of the date that they were made. These cautionary statements should
be considered with any written or oral forward-looking statements
that we may issue in the future. Except as required by applicable
law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform
these statements to reflect actual results, later events or
circumstances, or to reflect the occurrence of unanticipated
events. You should carefully review and consider the various
disclosures made by us in our annual report on Form 10-K for the
fiscal year ended December 31, 2013, filed on January 30, 2014,
including the section entitled “Risk Factors,” and our other
reports filed with the U.S. Securities and Exchange Commission
which attempt to advise interested parties of the risks and factors
that may affect our business, financial condition, results of
operation and cash flows. If one or more of these risks or
uncertainties materialize, or if the underlying assumptions prove
incorrect, our actual results may vary materially from those
expected or projected.
Redington, Inc.Tom Redington, 203-222-7399
22nd Century (AMEX:XXII)
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