22nd Century Group Files 2016 Third Quarter Report and Announces Conference Call to Provide Business Update

CLARENCE, N.Y.–(BUSINESS WIRE)– 22nd Century Group, Inc. (NYSE MKT: XXII),
a plant biotechnology company that is a leader in tobacco harm
reduction, announced today the Company’s third quarter 2016 financial
results and will provide a business update for investors on a conference
call to be held on Wednesday, November 9th, at 4:15 PM (Eastern Time).

Henry Sicignano, III, President and Chief Executive Officer of 22nd
Century Group, together with John T. Brodfuehrer, Chief Financial
Officer, will conduct the call. Interested parties are invited to
participate in the call by dialing: 800-768-6563 and using Conference ID
3559524.

The conference call will consist of an overview of the financials
presented in the Company’s third quarter 2016 Form 10-Q and a discussion
of business highlights and updates. Immediately thereafter, there will
be a question and answer segment open to all callers.

Recent Business Highlights

• In August 2016, the World Health Organization (WHO) Study Group on
  Tobacco Product Regulation recommended that all member countries adopt
  a policy limiting the sale of cigarettes only to products with a very
  low nicotine content. The WHO report explains that government-mandated
  nicotine reduction strategies utilizing Very Low Nicotine cigarettes
  could: 1) decrease the number of smokers addicted to cigarettes, 2)
  increase the number of smokers who are able to quit, and 3) reduce the
  number of former smokers who relapse. Commenting on the WHO report,
  Drs. Dorothy Hatsukami, Ghazi Zaatari and Eric Donny concluded that
  the WHO recommendation to limit nicotine content to a level below what
  is needed to sustain addiction “…has the potential to save millions of
  lives…”
• The Company’s wholly-owned subsidiary, Botanical Genetics LLC,
  announced in September 2016, an expanded cannabis research program to
  include multiple new research projects in support of its core mission,
  which is to develop proprietary cannabis strains for important new
  medicines and commercially viable agricultural crops. More
  specifically, Botanical Genetics is: 1) actively is working to
  optimize hemp strains for broad production in varied U.S. climates, 2)
  developing new technologies to manipulate the cannabis plant genome,
  3) together with its partners, developing and refining cannabis
  varieties with cannabis profiles that eliminate THC and boost
  production of medically important CBD and CBC, and 4) developing the
  means to produce cannabinoids in tobacco plants.
• In September 2016, 22nd Century also announced results from two
  separate independent surveys showing that strong consumer demand
  mirrors physicians’ willingness to prescribe the Company’s X-22
  smoking cessation aid in development. Nearly 90% of smokers identified
  the X-22 smoking cessation product as their preferred means to help
  them quit smoking. At the same time, a vast majority of physicians
  (more than 88%) indicated that, if the product were made available,
  they would prescribe X-22 for their patients.

Third Quarter 2016 Financial Summary

Net sales revenue for the third quarter of 2016 were $3,098,000, an
increase of $430,000, or 16.1%, over net sales revenue of $2,668,000 for
the three months ended September 30, 2015. Net sales revenues for the
nine months ended September 30, 2016 were $8,944,000, an increase of
$3,353,000, or 60.0%, over net sales revenue of $5,591,000 for the nine
months ended September 30, 2015.

For the three months ended September 30, 2016, the Company reported an
operating loss of $2,596,000 as compared to an operating loss of
$2,758,000 for the three months ended September 30, 2015, a decrease in
the operating loss of $162,000. The decrease in the operating loss is
primarily due to a decrease in operating expenses of $65,000 and a
decrease in the gross loss on product sales in the amount of $97,000.
For the nine months ended September 30, 2016, the Company reported an
operating loss of $8,655,000, as compared to an operating loss of
$9,238,000 for the nine months ended September 30, 2015, a decrease of
$583,000. The decrease is primarily the result of a decrease in equity
based compensation of $2,504,000, a decrease in the gross loss on
product sales of $389,000, partially offset by an increase in other
operating expenses (excluding equity based compensation) in the amount
of $2,310,000.

The Company’s net loss for the three months ended September 30, 2016 was
$2,680,000, or ($0.03) per share, as compared to a net loss of
$2,762,000, or ($0.04) per share, for the three months ended September
30, 2015. The results for the three months ended September 30,2016
included non-cash expenses consisting of (i) equity based compensation
totaling $205,000 and (ii) depreciation and amortization in the amount
of $211,000. The Company’s net loss for the nine months ended September
30, 2016 was $8,835,000, or ($0.11) per share, as compared to a net loss
of $8,167,000, or ($0.12) per share, for the nine months ended September
30, 2015. The results for the nine months ended September 30,2016
included non-cash expenses consisting of (i) equity based compensation
totaling $708,000 and (ii) depreciation and amortization in the amount
of $624,000. The net loss for the nine months ended September 30, 2015
also included proceeds from a legal settlement with an unrelated
third-party in the amount of $1,000,000 reported during the second
quarter of 2015.

Adjusted EBITDA (as described in the paragraph and table below) for the
three months ended September 30, 2016 was a negative $2,180,000, or
($0.03) per share, and a negative $2,148,000, or ($0.03) per share, for
the three months ended September 30, 2015. Adjusted EBITDA for the nine
months ended September 30, 2016 was a negative $7,323,000, or ($0.10)
per share, and a negative $5,455,000, or ($0.08) per share, for the nine
months ended September 30, 2015.

Below is a table containing information relating to the Company’s
Adjusted EBITDA for the three and nine months ended September 30, 2016
and 2015, including a reconciliation of net loss to Adjusted EBITDA for
such periods.

Adjusted EBITDA is a financial measure not prepared in accordance with
generally accepted accounting principles (“GAAP”). In order to calculate
Adjusted EBITDA, the Company adjusts the net loss for certain non-cash
and non-operating income and expenses items listed in the table above in
order to measure the Company’s operating performance. The Company
believes that Adjusted EBITDA is an important measure that supplements
discussions and analysis of its operations and enhances an understanding
of its operating performance. While management considers Adjusted EBITDA
to be important, it should be considered in addition to, but not as a
substitute for or superior to, other measures of financial performance
prepared in accordance with GAAP, such as operating (loss) income, net
loss and cash flows from operations. Adjusted EBITDA is susceptible to
varying calculations and the Company’s measurement of Adjusted EBITDA
may not be comparable to those of other companies.

Company Announcements Made Subsequent to the Close of the Second
Quarter of 2016

• On October 19, 2016, the Company closed a registered direct stock
  offering and received approximately $11.4 million in gross proceeds
  through the sale of units priced at $1.3425 per unit, which is $0.0625
  per share above the closing price of the Company’s common stock on the
  NYSE MKT on October 13, 2016, the date immediately prior to the
  signing of the stock purchase agreement. The transaction included a
  total of 8,500,000 shares of the Company’s common stock and 66-month
  warrants to purchase 4,250,000 shares of common stock at an exercise
  price of $1.45 per share (exercisable after six months). The net
  proceeds of the financing will be used for general corporate purposes,
  including working capital.
• The Company announced results from two separate independent clinical
  studies, each adding to the merit of our Very Low Nicotine tobacco. In
  the October 2016 issue of Psychopharmacology,
  a new independent clinical study concluded that, even among vulnerable
  populations, 22nd Century’s Very Low Nicotine tobacco cigarettes
  significantly reduce nicotine withdrawal and craving symptoms. Also in
  October 2016, the Addiction Journal published online a report
  that investigated smokers’ cost sensitivity for Very Low Nicotine
  cigarettes. Led by Dr. Eric Donny of the University of Pittsburg
  Cancer Institute, the new publication focused on the real-world
  context of “normally priced” cigarettes and found that, compared to
  conventional cigarettes, 22nd Century’s Very Low Nicotine cigarettes
  reduced the number of cigarettes that the participants estimated they
  would smoke at every price range tested.
• The Company announced in October 2016, the hiring of Michael Zercher
  as the Company’s Vice President of Business Development. Mr. Zercher
  previously headed Santa Fe Natural Tobacco Company’s international
  business operations based in Zurich, Switzerland and will lead the
  Company’s efforts to form strategic partnerships with companies
  capable of widely commercializing 22nd Century’s proprietary brands
  and products.

About 22nd Century Group, Inc.

22nd Century is a plant biotechnology company focused on technology
which allows it to increase or decrease the level of nicotine in tobacco
plants and the level of cannabinoids in cannabis plants through genetic
engineering and plant breeding. The Company’s primary mission is to
reduce the harm caused by smoking. 22nd Century currently owns or
exclusively controls more than 200 issued patents and more than 50
pending patent applications around the world. Visit www.xxiicentury.com
for more information.

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, including but not limited to our future revenue expectations.
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, 2015, filed on February 18,
2016, 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.

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