Path to Cash Positive Operations in Q1 2025; Continued Fiscal Discipline with 2Q24 Financial Results; Reduced Net Debt by ~$6.3 Million Year-to-Date

Mocksville, North Carolina--(Newsfile Corp. - August 13, 2024) - 22nd Century Group, Inc. (NASDAQ: XXII) today announced results for the second quarter ended June 30, 2024, and provided an update on recent business highlights.

Second Quarter 2024 Financial Results (compared to First Quarter 2024, except as noted)

All figures reported below reflect continuing operations, excluding discontinued operations related to the sale and exit of the Company's hemp/cannabis franchise in late 2023.

• Net revenues increased sequentially by 22.8% to $7.9 million, compared to $6.5 million.

• Gross profit was $0.6 million, compared to $(1.1) million.

• Operating loss declined 53.8% to $2.0 million, compared to $4.4 million.

• Net loss decreased 61.4% to $2.2 million, compared to $5.5 million.

• Basic and diluted EPS improved to $(0.30), compared to $($1.72).

• Adjusted EBITDA declined to a loss of $2.6 million, from a loss of $3.5 million.

"The second quarter financial results demonstrate our ongoing progress in the rapid transformation of 22nd Century's operations, including improved revenues based on many new CMO opportunities, positive gross profit, and significantly reduced operating expenses for our Company," said Larry Firestone, Chairman and CEO. "Our revenue growth from new contract volumes we have secured will continue to ramp in the latter half of fiscal 2024 as we work to achieve cash positive operations by the first quarter of 2025. Additionally, our emphasis on debt reduction and improvements to the balance sheet have allowed us to focus our cash resources on operating the business."

Second Quarter 2024 - Discussion of Product Line Net Revenues

• Cigarette net revenues, including export volume, increased to $4.1 million or 8% compared to $3.8 million in the prior year comparable period on neutral volume increases. Q2 2024 cigarette sales benefitted from strong summer seasonal demand with key customers, price increases that took effect in April 2024 and a one-time Spectrum^® research cigarette order which provided a $0.9 million boost.

• Filtered cigars net revenues decreased to $3.3 million, compared to $3.9 million in the prior year comparable period, reflecting lower volumes as the Company continues to transition away from low or negative margin manufacturing agreements, in favor of higher margin cigarette manufacturing agreements. Additionally, price increases for certain customers took effect in April 2024.

• Cigarillo distribution net revenues amounted to $0.6 million, reflective of the expanded Pinnacle branded product offerings launched in Q2 2024 with a top-five national convenience store chain.

• VLN^® cigarette net revenues were negligible in the second quarter, a decrease from the comparable prior year period which benefited from stocking orders with major c-stores. While the Company has secured broad distribution of its VLN^® products, the sell-through has not yet materialized. The Company is making changes to rebrand and relaunch its VLN^® products, which will be discussed further on the conference call noted below.

Conference Call

22nd Century will host a live webcast today at 8:00 a.m. E.T. to discuss its second quarter 2024 financial results and business highlights. The live and archived webcast will be accessible in the Events section on 22nd Century's Investor Relations website at https://ir.xxiicentury.com/events.

Summary Financial Results
(dollars in thousands, except per share data)

Summary Product Line Results
(in thousands)

About 22nd Century Group, Inc.

22nd Century Group, Inc. (NASDAQ: XXII) is an agricultural biotechnology company focused on tobacco harm reduction by offering tobacco products with 95% less nicotine, designed to improve health and wellness by helping smokers smoke less. Backed by comprehensive and extensively patented technologies that regulate nicotine biosynthesis activities in the tobacco plant, the Company has pioneered the development of high-yield, proprietary reduced nicotine content (RNC) tobacco plants and clinically validated RNC cigarette products. The Company received the first and only FDA Modified Risk Tobacco Product (MRTP) authorization for a combustible cigarette in December 2021. The Company is a subsequent participating manufacturer under the Master Settlement Agreement ("MSA") and vertically integrated for the production of both its own products and contract manufacturing operations ("CMO"), which consist primarily of branded filtered cigars and conventional cigarettes.

Learn more at xxiicentury.com, on Twitter, on LinkedIn, and on YouTube.

Learn more about VLN^® at tryvln.com.

Notes regarding Non-GAAP Financial Information

In addition to the Company's reported results in accordance with generally accepted accounting principles in the United States of America ("GAAP"), the Company provides EBITDA and Adjusted EBITDA.

In order to calculate EBITDA, the Company adjusts net (loss) income by adding back interest expense (income), provision (benefit) for income taxes, and depreciation and amortization expense. Adjusted EBITDA consists of EBITDA adjusted by the Company for certain non-cash and/or non-operating expenses, including adding back equity-based employee compensation expense, restructuring and restructuring-related charges such as impairment, acquisition and transaction costs, and other unusual or infrequently occurring items, if applicable, such as inventory reserves and adjustments, gains or losses on disposal of property, plant and equipment, and gains or losses on investments.

The Company believes that the presentation of EBITDA and Adjusted EBITDA are important financial measures that supplement discussion and analysis of its financial condition and results of operations and enhances an understanding of its operating performance. While management considers EBITDA and Adjusted EBITDA to be important, these financial performance measures 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) income 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.

Net total debt is calculated as total principal amount of debt outstanding less cash and cash equivalents. In addition to the performance measures identified above, we believe that net total debt provides a meaningful measure of liquidity and a useful basis for assessing our ability to fund our activities, including the financing of scheduled debt repayments.

Cautionary Note Regarding Forward-Looking Statements

Except for historical information, all of the statements, expectations, and assumptions contained in this press release are forward-looking statements, including but not limited to our full year business outlook. Forward-looking statements typically contain terms such as "anticipate," "believe," "consider," "continue," "could," "estimate," "expect," "explore," "foresee," "goal," "guidance," "intend," "likely," "may," "plan," "potential," "predict," "preliminary," "probable," "project," "promising," "seek," "should," "will," "would," and similar expressions. Forward-looking statements include, but are not limited to, statements regarding (i) our strategic alternatives and cost reduction initiatives, (ii) our expectations regarding regulatory enforcement, including our ability to receive an exemption from new regulations, (iii) our financial and operating performance and (iv) our expectations for our business interruption insurance claim. Actual results might differ materially from those explicit or implicit in forward-looking statements. Important factors that could cause actual results to differ materially are set forth in "Risk Factors" in the Company's Annual Report on Form 10-K filed on March 28, 2024, and in the Company's Quarterly Report filed on May 15, 2024. All information provided in this release is as of the date hereof, and the Company assumes no obligation to and does not intend to update these forward-looking statements, except as required by law.

Investor Relations & Media Contact
Matt Kreps
Investor Relations
22nd Century Group
mkreps@xxiicentury.com
214-597-8200

22nd CENTURY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(amounts in thousands, except share and per-share data)

22nd CENTURY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(amounts in thousands, except share and per-share data)

Table A - Reconciliations of Non-GAAP Measures
(dollars in thousands, except share and per-share data)

Below is a table containing information relating to the Company's Net loss, EBITDA and Adjusted EBITDA for the three and six month periods ended June 30, 2024 and 2023, including a reconciliation of these Non-GAAP measures for such periods.

Table B: Net Total Debt Reconciliation
(dollars in thousands)

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