22nd Century Group Files 2017 Second Quarter Report and Announces Conference Call to Provide Business Update

CLARENCE, N.Y.–(BUSINESS WIRE)– 22nd Century Group, Inc. (NYSE American: XXII),
a plant biotechnology company that is focused on tobacco harm reduction
and cannabis research, announced today the Company’s second quarter 2017
financial results and will provide a business update for investors on a
conference call to be held Thursday, August 10th, 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) 344-6491 and using Conference
ID 9326956. The conference call will consist of an overview of recent
business highlights and a summary of the financials presented in the
Company’s second quarter 2017 Form 10-Q. Immediately thereafter, there
will be a question and answer segment open to all callers.

Although 22nd Century has not yet received revenues from licensing or
broad commercial sales of the Company’s proprietary Very Low Nicotine
tobacco – which are expected to be considerable – sales of the Company’s
conventional products continue to grow impressively. Second quarter
results show that 22nd Century is already experiencing the benefits of
newly signed manufacturing agreements. Revenue for the second quarter of
2017 increased to approximately $3.9 Million – a 37.8% increase over the
revenues for the second quarter of 2016 and the highest quarterly
revenue in the Company’s history. 22nd Century projects that year-end
revenue will exceed $16 Million – a new record for the Company. In
addition to climbing revenues, the Company currently has approximately
$17.8 Million in cash, the highest amount of cash on hand in the history
of the Company. 22nd Century’s cash reserves are sufficient to meet all
regular operating expenses through at least March 2019.

On July 28, 2017, FDA Commissioner Scott Gottlieb, M.D. declared that
the FDA was exercising its authority under the Family Smoking Prevention
and Tobacco Control Act to mandate lower nicotine – to non-addictive
levels – in combustible cigarettes sold in the United States. The Washington
Post called FDA’s nicotine mandate, “…the
most important public-health initiative of the century.” 22nd
Century is the only company in the world capable of growing tobacco with
non-addictive levels of nicotine.

FDA Commissioner Dr. Gottlieb further stated: “I’ve followed the
compelling discussion… of FDA’s potential to render cigarettes minimally
addictive or non-addictive by regulating their nicotine levels. I’ve
seen the science in this area and believe it holds much promise.” The
science to which Dr. Gottlieb refers includes numerous independent
clinical trials using 22nd Century’s proprietary SPECTRUM
research cigarettes. To date, the FDA and other agencies of the U.S.
federal government have invested more than $100 million in this science.

22nd Century’s proprietary Very Low Nicotine cigarettes have
demonstrated that the FDA’s target for cigarettes with non-addictive
levels of nicotine is both achievable and realistic. The Company
believes that the implementation of an FDA mandate that lowers nicotine
levels in all combustible cigarettes sold in the United States will save
millions of lives and billions of dollars in healthcare costs. Matthew
Myers, president of anti-smoking group Campaign for Tobacco-Free Kids
asserted in an August 9, 2017 Bloomberg
News article that the new FDA plan could lead to “the most
fundamental change the tobacco industry has ever seen.”

In June 2017, 22nd Century met twice with the U.S. Food and Drug
Administration (“FDA”) to advance the Company’s efforts to gain
regulatory approval for its novel products. On June 15, 2017, 22nd
Century met with the FDA’s Center for Tobacco Products (“CTP”) to
discuss the Company’s BRAND A Modified Risk Tobacco Product
(“MRTP”) application for an over-the-counter cigarette with labeling
that discloses that the product contains 95% less nicotine than
conventional tobacco cigarettes. Based on guidance received from the
FDA/CTP at that meeting, 22nd Century is working to resubmit its MRTP
application with additional consumer perception data pertaining to the
product, together with information from already completed clinical
studies using the Company’s Very Low Nicotine (“VLN”) tobacco cigarettes
and related scientific data. In 2018, 22nd Century intends to submit its
revised MRTP application for the world’s lowest nicotine tobacco
cigarette.

On June 20, 2017, Company executives met with the FDA’s Center for Drug
Evaluation and Research (“CDER”) to discuss “X-22,” the Company’s
signature prescription-based smoking cessation aid in development. Based
on this meeting, 22nd Century will work collaboratively with the
FDA/CDER on an appropriate path for X-22 to become a
prescription-based cessation aid for smokers in the United States.
Pending FDA authorization, and finding a joint venture partner or
another source of capital, the Company intends to conduct an X-22
Phase III clinical trial in 2018.

22nd Century also continues to make advancements in hemp biotechnology.
Building on the Company’s groundbreaking zero-THC industrial hemp plants
and technology, 22nd Century is creating hemp plants that combine
zero-THC traits with unique cannabinoid profiles, including plants with
increased levels of other cannabinoids, including CBC, CBG, and CBD. In
Virginia, in collaboration with research partners at The University of
Virginia (“UVA”), the Company is optimizing hemp plants for growth in
the fertile region of the Southeastern United States known as the
“tobacco belt.” 22nd Century and UVA are also testing 22nd Century’s
hemp plants for their unique phytoremediation properties – their ability
to clean up and reclaim polluted soils. Applying biotechnology expertise
to optimize hemp plants for unique cannabinoid profiles and for
phytoremediation are important projects that are uniquely suited to the
scientists at 22nd Century and UVA.

Only months after 22nd Century was invited to attend New York Governor
Andrew Cuomo’s “Summit on Growing the Hemp Industry in New York State”
at Cornell University, the New York Governor signed into law a new
measure that aims to treat industrial hemp like any other agriculture
crop in New York State. 22nd Century has applied for licenses to
research, grow and commercialize hemp in the State of New York, which
will allow 22nd Century to expand the Company’s cutting-edge hemp
research at its Buffalo, New York-based laboratories. When the Company’s
license applications are approved, 22nd Century will begin planting its
proprietary hemp plants in the field.

Second Quarter 2017 Financial Summary

As mentioned above, net sales revenue for the second quarter of 2017 was
$3,897,206, an increase of $1,069,548, or 37.8%, over net sales revenue
of $2,827,658 for the three months ended June 30, 2016. Net sales
revenue for the six months ended June 30, 2017 was $6,128,723, an
increase of $282,009, or 4.8%, over net sales revenue of $5,846,714 for
the six months ended June 30, 2016. The increase in net sales revenue
for the second quarter of 2017 was primarily the result of a new
filtered cigar manufacturing agreement that commenced in mid-May of 2017.

For the three months ended June 30, 2017, the Company reported an
operating loss of $3,282,525 as compared to an operating loss of
$2,830,830 for the three months ended June 30, 2016, an increase in the
operating loss of $451,695, or 16.0%. The increase in the operating loss
was primarily due to an increase in operating expenses of approximately
$428,000 and an increase in the gross loss on product sales in the
amount of approximately $24,000. For the six months ended June 30, 2017,
the Company reported an operating loss of $6,252,474 as compared to an
operating loss of $6,059,234 for the six months ended June 30, 2016, an
increase of $193,240, or 3.2%. This increase was primarily the result of
an increase in the gross loss on product sales of approximately
$421,000, partially offset by a decrease in operating expenses of
approximately $228,000.

The Company’s net loss for the three months ended June 30, 2017 was
$3,355,624, or ($0.04) per share, as compared to a net loss of
$2,902,354, or ($0.04) per share, for the three months ended June 30,
2016. The increase in the net loss of $453,270, or 15.6%, was due
primarily to an increase in the operating loss of approximately
$452,000. The net loss for the three months ended June 30, 2017 included
non-cash expenses consisting of equity based compensation totaling
approximately $154,000 and depreciation and amortization in the
approximate amount of $231,000.

The Company’s net loss for the six months ended June 30, 2017 was
$5,976,901, or ($0.07) per share, as compared to a net loss of
$6,154,806, or ($0.08) per share, for the six months ended June 30,
2016. The decrease in the net loss of $177,905, or 2.9%, was primarily
the result of an increase in the operating loss of approximately
$193,000, offset by an increase in net other income of approximately
$371,000. The net loss for the six months ended June 30, 2017 included
non-cash expenses consisting of equity based compensation totaling
approximately $323,000 and depreciation and amortization in the
approximate amount of $460,000.

Adjusted EBITDA (as described in the paragraph and table below) was a
negative $2,897,047, or ($0.03) per share for the three months ended
June 30, 2017, as compared to a negative $2,403,500, or ($0.03) per
share for the three months ended June 30, 2016. Adjusted EBITDA for the
six months ended June 30, 2017 was a negative $5,469,008, or (0.06) per
share, as compared to a negative $5,143,599, or ($0.07) per share, for
the six months ended June 30, 2016.

Below is a table containing information relating to the Company’s
Adjusted EBITDA for the three and six months ended June 30, 2017 and
2016, 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.

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 in tobacco
is to reduce the harm caused by smoking. The Company’s primary mission
in cannabis is to develop proprietary cannabis strains for important new
medicines and agricultural crops. Visit www.xxiicentury.com
and www.botanicalgenetics.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, 2016, filed on March 8,
2017, 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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