22nd Century Group Files Annual Report and Provides Business Update

  22nd Century Group Files Annual Report and Provides Business Update

Business Wire

CLARENCE, N.Y. -- January 30, 2014

22nd Century Group, Inc. (OTCQB:XXII) today announced that the Company filed
its 2013 report on Form 10-K with the Securities and Exchange Commission.

For year ended December 31, 2013, revenues were $7.28 million, compared to
$0.02 million for 2012. The increase in revenues in 2013 was primarily due to
licensing revenue from British American Tobacco (Investments) Limited of $7
million.

22nd Century Group recorded operating income of $1.8 million for 2013,
compared to an operating loss of $3.2 million for 2012. The Company’s net loss
for 2013 was $26.2 million, or ($0.60) per diluted common share, compared to a
net loss of $6.7 million, or ($0.22) per diluted common share, for 2012. The
results for 2013 included non-operating expenses from (i) a non-cash change in
the fair value of derivatives (warrant liability) of $23.6 million, (ii) a
non-cash inducement expense of $3.7 million from our Warrant Exchange Program,
and (iii) other non-operating expenses of $0.6 million.

Adjusted EBITDA (as described in the paragraph and table below) was $4.3
million, or $0.10 per diluted common share, for 2013, compared to Adjusted
EBITDA of negative $1.8 million, or ($0.06) per diluted common share, for
2012. Below is a table of information relating to the Company’s Adjusted
EBITDA for the years ended December 31, 2013 and 2012, including a
reconciliation of net loss to Adjusted EBITDA for such periods, and a
cautionary note on EBITDA.

                          Years Ended December 31,
                           2013               2012              % Change
                                                                      
Net loss                   $ (26,153,158 )       $ (6,736,737 )       288    %
Add back:
Warrant liability loss -     23,602,711            1,998,043          1,081  %
net
Warrant exchange             3,736,313             -                  100    %
inducement expense
Depreciation and             144,289               198,406            -27    %
amortization
Interest expense and
amortization of debt         748,605               1,494,545          -50    %
discount
Stock based compensation     2,361,962             1,254,171          88     %
Income tax credit refund    (122,024    )        -                 100    %
                                                                      
Adjusted EBITDA            $ 4,318,698          $ (1,791,572 )       341    %
                                                                             

Adjusted EBITDA is a financial measure not prepared in accordance with
generally accepted accounting principles (“GAAP”). 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 income, net 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.

22nd Century Business Update

Up-listing to national securities exchange

22nd Century Group will file an application next week with NASDAQ and the New
York Stock Exchange to list its common stock on a national securities
exchange. As of December 31, 2013, 22nd Century Group had total assets of
approximately $12.3 million, including $5.8 million cash, and only $0.98
million of current liabilities. The Company’s only long-term liability is its
(non-cash) “derivative warrant liability,” which due to the Company’s Warrant
Exchange Program that closed December 12, 2013, was only $3.8 million.

Tobacco research products

Goodrich Tobacco Company, our wholly-owned subsidiary, is currently finishing
a 5.5 million SPECTRUM^®  cigarette order for NIDA, a component of the
National Institutes of Health. The tobacco in SPECTRUM  government research
cigarettes has eight different nicotine contents – from very low to high.

In the fourth quarter 2013, Goodrich Tobacco sold 2,500 kilograms of its
proprietary very low nicotine (“VLN’) tobacco to the U.S. Food and Drug
Administration (“FDA”) as a subcontractor under a government contract. The
Company plans to continue to work with the FDA on other contracts and
currently has a separate bid under consideration by the agency.

NASCO acquisition

On September 17, 2013, the Company entered into a Membership Interest Purchase
Agreement (“Purchase Agreement”) to purchase all of the issued and outstanding
membership interests of NASCO Products, LLC (“NASCO”), a North Carolina
tobacco manufacturer and member of the Tobacco Master Settlement Agreement
known as the MSA (the “NASCO Transaction”). Consummation of the NASCO
Transaction is subject to conditions including consents from the attorneys
general of the settling states of the MSA. NAAG has been discussing the NASCO
Transaction with a small working group of settling states of the MSA for which
the Company has answered various rounds of questions. The working group has
presented the matter to all the settling states with a recommended course of
action which the settling states are evaluating. Upon the entry of a revised
adherence agreement of NASCO Products, LLC reflecting the NASCO Transaction,
the Company believes it will be able to close the NASCO Transaction.

Purchase of manufacturing facility

In the fourth quarter 2013, Goodrich Tobacco purchased cigarette manufacturing
equipment and equipment parts, factory items, office furniture and fixtures,
vehicles and computer software from the bankruptcy estate of PTM Technologies,
Inc. (“PTM”) and additional equipment and equipment parts, vehicles, and
additional factory items from the bankruptcy estate of Renegade Tobacco Co.
(“Renegade”) for a total of approximately $3.4 million. PTM and Renegade are
related companies located in Mocksville, North Carolina undergoing Chapter 7
liquidation proceedings in the United States Bankruptcy Court for the Middle
District of North Carolina. The Company has had no relationship in the past,
nor intends to have any relationship going forward, with the former principals
of PTM or Renegade.

An auction will be held by the EttinGroup in late February for a portion of
the manufacturing equipment not required by the Company.

National distribution of RED SUN^® and MAGIC^® cigarette brands in 2014

Upon the closing of the NASCO Transaction, Goodrich Tobacco will ramp up
distribution of its premium brands to various wholesalers. Since the launch of
the products in 2011, sales and marketing of Goodrich Tobacco’s commercial
cigarettes have been curtailed in order to limit the complexity and costs
associated with becoming a participating manufacturer of the MSA.

Modified Risk Tobacco Products

The Company intends to seek FDA authorization to market two products in
development, BRAND A and BRAND B, as modified risk cigarettes. 22nd Century
has continued to gather additional information since the FDA’s guidance on the
subject, Modified Risk Tobacco Product Applications Draft Guidance to
facilitate the submission of complete applications for our two modified risk
cigarette candidates. The Company expects to submit these applications in
2014.

X-22 Smoking Cessation

Hercules Pharmaceuticals, our wholly-owned subsidiary, is currently in the
process of identifying potential joint venture partners or licensees to fund
the remaining X-22 clinical trials. Upon identifying a suitable joint venture
partner or licensee, we will request a meeting with the FDA to discuss moving
the Company’s Investigational New Drug Application forward.

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.

Contact:

Redington, Inc.
Tom Redington, 203-222-7399