XXII 22nd Century Group Inc

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.

  Three Months Ended September 30, 2016   2015   % Change Net loss $ (2,679,988) $ (2,761,691) -3% Adjustments: Warrant liability loss (gain) - net 46,995 (27,723) -270% Depreciation and amortization 211,161 197,371 7% Loss on equity investment 29,997 33,211 -10% Interest expense 9,315 8,702 7% Interest income (2,131) (10,101) -79% Equity based compensation - Third-party service providers - 97,969 -100% Officers, directors and employees   204,860   314,743 -35% Adjusted EBITDA $ (2,179,791) $ (2,147,519) 2%     Nine Months Ended September 30, 2016   2015   % Change Net loss $ (8,834,794) $ (8,167,133) 8% Adjustments: Warrant liability gain – net (14,602) (199,556) -93% Depreciation and amortization 623,707 571,100 9% Loss on equity investment 172,068 125,026 38% Interest expense 29,011 27,963 4% Interest income (6,729) (24,424) -72% Equity based compensation - Crede consulting agreement - 1,978,785 -100% Third-party service providers 30,873 232,187 -87% Officers, directors and employees 677,076 1,000,603 -32% Settlement proceeds   -   (1,000,000) -100% Adjusted EBITDA $ (7,323,390) $ (5,455,449) 34%  

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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Investor Relations:IRTH CommunicationsAndrew Haag, 866-976-4784xxii@irthcommunications.comorRedington, Inc.Tom Redington, 203-222-7399