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.
Copyright Business Wire 2014