22nd Century Group, Inc. (OTCQB:XXII) today announced that the Company’s warrant exchange, which concluded last Thursday, was a huge success greatly exceeding management’s expectations.  The warrant exchange reduced 22nd Century Group’s “derivative warrant liability” by 93 percent and generated gross proceeds of approximately $3.6 million for the company.

As reported last month, the primary purpose of the warrant exchange was to reduce 22nd Century Group’s “derivative warrant liability” through the exercise or amendment of the Company’s outstanding warrants in order for the Company to have sufficient stockholders’ equity to up-list its common stock to a national securities exchange – such as NASDAQ or NYSE. Many institutional investors and retail brokers looking to build a position in 22nd Century Group stock cannot buy OTC Bulletin Board stocks.

As of December 13, 2013, 22nd Century Group had total assets of approximately $12 million, which includes approximately $6.2 million in cash, and only $700 thousand in current liabilities. The Company’s only long-term liability is its “derivative warrant liability,” which due to the warrant exchange has been reduced from $18.6 million to approximately $1.2 million.

22nd Century Group’s $6.2 million cash balance reflects $3.2 million the Company has already invested and paid in full for the equipment at its manufacturing facility. As reported in early December, the Company’s management believes that having its own factory will create tremendous shareholder value since costs will be reduced and control, production and exports of its differentiated tobacco products will be greatly facilitated.

John Brodfuehrer, 22nd Century’s Group’s CFO, stated, “We now have approximately $10 million of net stockholders’ equity, which is more than sufficient to qualify for an up-listing to a national securities exchange.”

22nd Century Group currently has 56,691,897 shares of common stock issued and outstanding, including the approximate 5.5 million shares the Company issued as a result of the warrant exchange. Approximately 5.3 million shares of common stock issued from the warrant exchange were from the exercise of warrants on a cash basis. These shares cannot be sold for 6 months pursuant to Rule 144.

The Company currently has approximately 10.6 million warrant shares outstanding. Of these, 6.25 million have a purchase price of $1.96 to $2.40 and 4.1 million are owned by the Company’s management.

The Company’s Series-A warrant holder, which is an institutional investor, has only 225,798 warrant shares remaining, as compared to approximately 3.67 million warrant shares as of September 30, 2013. There are no Series-B or Series-C warrants outstanding.

Joseph Pandolfino, Founder and CEO of 22nd Century’s Group stated, “We are now well positioned to up-list to a national securities exchange; the only qualification remaining is our share price which we expect to appreciate over the next 60 days since many catalysts are on the horizon as we continue to execute our business plan.”

Chardan Capital Markets, LLC acted as the financial advisor for 22nd Century Group’s warrant exchange.

22nd Century Group Warrant Exchange Eliminates 93% of Warrant Liability - Yahoo Finance

The popularity of electronic cigarettes (e-cigarettes) has exploded internationally, particularly in France, where smoking has long been part of the social fabric and culture. Both longtime and new smokers have gravitated toward this innovative device-drug combination, which costs significantly less than traditional cigarettes and benefits from a smokeless and odorless technology. Many claim that e-cigarettes’ noncarcinogenic liquid-vapor-based formula demonstrates a health profile superior to that of conventional cigarettes.

However, product characteristics vary significantly, owing to the market’s rapid and unregulated development, and medical experts express uncertainty about long-term health implications.

E-cigarettes: Lighting Up in France and Beyond » Knowledge@Wharton

Remains to be seen how much of a competitive threat e-cigarettes pose, and there is an upside as well:

The rapid rise of the global e-cigarette market — which registered global sales CAGR (compound annual growth rate) of 57% between 2010 and 2012 and is expected to be worth around US$2 billion by the end of 2013 — has eaten into the broader tobacco market and prompted calls for government regulation.

It shows how a market can rapidly grow once less damaging products catch on. Enter XXII's low nicotine cigarettes..

Never before have heard of a 5 bagger target by an investment house. Probably will prove conservative (not that any IOC'ers will take notice).

There are plenty of companies with great stories, but when a major player in the same industry helps validate that story things become a lot more interesting.

22nd Century Group Inc (XXII): 22nd Century Limited - Not Exactly Offering A Cure For Cancer, But Maybe The Next Best Thing - Seeking Alpha