22nd Century Group, Inc.

Previous wording

Except for historical information, all of the statements, expectations, and assumptions contained in this section are forward-looking statements. 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 ability to continue as a going concern, (ii) our expectations regarding our debt obligations, (iii) our ability to remain listed on NASDAQ (iv) our financial and operating performance, (v) our strategic alternatives, including our cost savings initiatives, (vi) our expectations regarding regulatory enforcement (vii) our products, and (viii) the volatility of our common stock and warrants. 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 our Annual Report on Form 10-K filed on March 20, 2025. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as otherwise required by law. All information provided in this quarterly report is as of the date hereof, and we assume no obligation to and do not intend to update these forward-looking statements, except as required by law.

Current wording

Except for historical information, all of the statements, expectations, and assumptions contained herein are forward-looking statements. 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 ability to continue as a going concern, (ii) our ability to become profitable, (iii) our ability to remain listed on NASDAQ (iv) our financial and operating performance, (v) our strategic alternatives, including our cost savings initiatives, (vi) our expectations regarding regulatory enforcement (vii) our products, and (viii) the volatility of our common stock. 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 our Annual Report on Form 10-K filed on March 20, 2025. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as otherwise required by law. All information provided in this quarterly report is as of the date hereof, and we assume no obligation to and do not intend to update these forward-looking statements, except as required by law.

Previous wording

22nd Century Group, Inc. (NASDAQ: XXII) is a tobacco products company focused on tobacco harm reduction by offering tobacco products with 95% less nicotine, designed to improve health and wellness by giving smokers a choice to control their nicotine consumption. Backed by comprehensive and extensively patented technologies that regulate nicotine biosynthesis activities in the tobacco plant, the Company has pioneered 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 its both own products and contract manufacturing operations ("CMO"), which consist primarily of branded filtered cigars and conventional cigarettes.

Current wording

22nd Century Group, Inc. (NASDAQ: XXII) is a tobacco products company focused on tobacco harm reduction by offering tobacco products with 95% less nicotine, designed to improve health and wellness by giving smokers a choice to control their nicotine consumption. Backed by comprehensive and extensively patented technologies that regulate nicotine biosynthesis activities in the tobacco plant, the Company has pioneered 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.

Previous wording

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

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Three Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Previous wording

For the second quarter and six months ended June 30, 2025, total product line revenues decreased to $4,083 and $10,039, respectively, compared to the prior year periods.

Current wording

For the third quarter and nine months ended September 30, 2025, total product line revenues decreased to $4,011 and $14,050, respectively, compared to the prior year periods.

Previous wording

For the six months of 2025, cigarette sales benefitted from new customer contracts with our largest CMO customer effective January 1, 2025, including the initial impact of accounting for revenue accruals recorded as over-time revenue recognition, offset by pricing arrangements recorded as consideration payable to the customer recognized within revenue. In prior year periods under legacy contracts, similar pricing arrangements were recorded within cost of goods sold.

Current wording

For the nine-month period ended September 30, 2025, cigarette volume increased to 1,370 cartons reflecting additional CMO cigarette customers, including product sold for export, as compared to the prior year period. Cigarette sales benefitted from new customer contracts with our largest CMO customer effective January 1, 2025, including the initial impact of accounting for revenue accruals recorded as over-time revenue recognition, offset by pricing arrangements recorded as consideration payable to the customer recognized within revenue and low-priced product sold for export volume. In prior year periods under legacy contracts, similar pricing arrangements were recorded within cost of goods sold. During April 2024, the Company also benefitted from a one-time Spectrum®research cigarette order which provided a $889 benefit to the prior year period.

Previous wording

Gross (loss) profit for the second quarter and six months of 2025 declined as compared to the prior year comparable period, primarily driven by the decrease in overall volume, and shift in product mix. Additionally, during April 2024, the Company also benefitted from a one-time Spectrum®research cigarette order which provided an approximate $750 benefit to the prior year period.

Current wording

Gross (loss) profit for the third quarter and nine month period ended September 30, 2025 declined as compared to the prior year comparable period, primarily driven by the decrease in overall volume, and shifts in product mix. In the third quarter of 2025, management implemented further cost savings initiatives of our manufacturing operations to align to our higher margin branded products and VLN cigarettes, as well as forecasted volume, to drive margin improvement. Cost savings include headcount reductions and pricing strategies employed with raw material suppliers. Additionally, during April 2024, the Company also benefitted from a one-time Spectrum®research cigarette order which provided an approximate $750 benefit to the prior year period.

Previous wording

(a) Compensation and benefits expense decreased for the three and six months ended June 30, 2025 compared to the prior year period due to a reduction of headcount.

Current wording

(a) Compensation and benefits expense decreased for the three and nine months ended September 30, 2025 compared to the prior year period due to a reduction of headcount.

Previous wording

Decreases of strategic consulting for the six months ended June 30, 2025, compared to the prior year period was due to reduced consulting expenses related to post-market studies offset by increased investor relations and public company expenses.

Current wording

(b) Decreases of strategic consulting for the three and nine months ended September 30, 2025, compared to the prior year period was due to decreased spending related to investor relations and consulting for post-market studies.

Previous wording

(c) Legal expenses decreased for the three and six months ended June 30, 2025 compared to 2024 mainly due to an increase in regulatory legal expense in the prior year period.

Current wording

(c) Legal expenses decreased for the three and nine months ended September 30, 2025 compared to 2024 mainly due to decreased spending for regulatory legal expense compared to the prior year period.

Previous wording

(d) Decreases for the three and six months ended June 30, 2025 compared to the prior years periods were due to lower insurance premiums.

Current wording

(d) Decreases in insurance for the three and nine months ended September 30, 2025 compared to the prior years periods were due to lower insurance premiums.

Previous wording

For the six months ended June 30, 2025 compared to the prior year period, cash interest decreased $202, non-cash interest amortization increased $610 including $129 of extinguishment charges recognized from the Senior Secured Credit Facility (of these totals, interest that was allocated to discontinued operations decreased by $109), and other interest charges of $65, offset by a loss that occurred in the prior year period of $459 as a result of change in fair value of conversion option derivative liability. Additionally, interest expense decreased $1,030 from the Subordinated Note, which was a $400 loss on extinguished prior to maturity in April 2024.

Current wording

For the nine months ended September 30, 2025 compared to the prior year period, cash interest decreased $301, non-cash interest amortization increased $1,110 due to $1,091 of extinguishment charges recognized from the Senior Secured Credit Facility (of these totals, interest that was allocated to discontinued operations increased by $168), and other interest charges of $78, offset by a gain that occurred in the prior year period of $482 as a result of change in fair value of conversion option derivative liability. Additionally, interest expense decreased $1,430 from the Subordinated Note, which was due to a $400 loss on extinguished prior to maturity in April 2024.

Previous wording

We have incurred significant losses and negative cash flows from operations since inception and expect to incur additional losses until such time that we can generate significant revenue and profit in our tobacco business. We had negative cash flow from operations of $6,454 for the six months ended June 30, 2025 and an accumulated deficit of $401,606 as of June 30, 2025. As of June 30, 2025, we had cash and cash equivalents of $3,083 and working capital deficit from continuing operations of ($3,064) (compared to working capital from continuing operations of $1,790 at December 31, 2024). Given our projected operating requirements and existing cash and cash equivalents, there is substantial doubt about our ability to continue as a going concern through one year following the date that the Condensed Consolidated Financial Statements herein are issued.

Current wording

We have incurred significant losses and negative cash flows from operations since inception and expect to incur additional losses until such time that we can generate significant revenue and profit in our tobacco business. We had negative cash flow from operations of $10,472 for the nine months ended September 30, 2025 and an accumulated deficit of $396,117 as of September 30, 2025. As of September 30, 2025, we had cash and cash equivalents of $4,846 and working capital from continuing operations of $12,711 (compared to working capital from continuing operations of $1,790 at December 31, 2024). Given our projected operating requirements and existing cash and cash equivalents, there is substantial doubt about our ability to continue as a going concern through one year following the date that the Condensed Consolidated Financial Statements herein are issued.

Previous wording

As of June 30, 2025, we had working capital deficit from continuing operations, excluding assets and liabilities held for sale, of approximately ($3,064) compared to working capital of approximately $1,790 at December 31,2024 a decrease of $4,854. This decrease in working capital was primarily due to an increase in net current liabilities of $6,251 reflecting the reclassification of the convertible senior secured credit facility and the 2024 Omnia warrant liability to current, as the maturity date is within twelve months of the balance sheet date, offset by an increase of $1,397 in net current assets. Cash and cash equivalents decreased by $1,339 and the remaining net current assets increased by $2,736. As a result of the working capital balance, management has taken a number of steps to improve liquidity. Refer below to “Cash demands on operations.”

Current wording

As of September 30, 2025, we had working capital from continuing operations, excluding assets and liabilities held for sale, of approximately $12,711 compared to working capital of approximately $1,790 at December 31,2024, an increase of $10,921. This increase in working capital was primarily due to an increase in net current assets of $12,452 due to the recognition of $9,500 of insurance recoveries related to the Dorchester claim (see Note 12), offset by an increase in net current liabilities of $1,531 reflecting the reclassification of the 2024 Omnia warrant liability to current and an increase in accrued excise taxes and fees offset by the elimination of debt in the current period. Cash and cash equivalents increased by $424 and the remaining net current assets increased by $12,028. Management continues to take further steps to improve liquidity more. Refer below to “Cash demands on operations.”

Previous wording

Cash used in operating activities decreased $516 from $6,970 in 2024 to $6,454 in 2025. The primary driver for this change was lower net loss of $884, an increase of $1,111 related to net adjustments to reconcile net loss to cash, and a decrease in cash used for working capital components related to operations in the amount of $289 for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024.

Current wording

Cash used in operating activities increased $525 from $9,947 in 2024 to $10,472 in 2025. The primary driver for this change was lower net loss of $8,362, an increase of $1,833 related to net adjustments to reconcile net loss to cash, and an increase in cash used for working capital components related to operations in the amount of $10,720 for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024.

Previous wording

Cash provided by investing activities amounted to $672 the six months ended June 30, 2025, as compared to cash used in investing activities of $49 for the six months ended June 30, 2024. The increase in cash provided by investing activities of $721 was the result of an increase of $748 of proceeds from the sale of property, plant and equipment primarily from the sale of Needlerock farms and an increase of cash outflows of $27 related to the acquisitions of patents, trademarks, licenses and property, plant and equipment.

Current wording

Cash provided by investing activities amounted to $150 the nine months ended September 30, 2025, as compared to cash used in investing activities of $119 for the nine months ended September 30, 2024. The increase in cash provided by investing activities of $269 was the result of an increase of $748 of proceeds from the sale of property, plant and equipment primarily from the sale of Needlerock farms, a decrease of cash outflows of $21 related to the acquisitions of patents, trademarks, licenses and property, plant and equipment offset by $500 from the issuance of the GVB promissory note.

Previous wording

Net cash (used in) provided by financing activities

Current wording

Net cash provided by financing activities

Previous wording

During the six months ended June 30, 2025, cash provided by financing activities decreased by $1,797 from $6,240 in the prior year period to $4,443, resulting from decreases in net proceeds from common stock issuances of $3,913, increases of payments of long-term debt of $768, decreases of proceeds from issuance of notes payable of $233, offset by increases in cash inflows from net proceeds from warrant exercises of $2,830 and a decrease of cash outflows from taxes paid related to net share settlement of RSUs of $1 and a decrease in payments on notes payable of $286.

Current wording

During the nine months ended September 30, 2025, cash provided by financing activities decreased by $2,603 from $13,349 in the prior year period to $10,746, resulting from decreases in net proceeds from common stock issuances of $10,592, increases of payments of long-term debt of $3,666, decreases of proceeds from issuance of notes payable of $233, offset by increases in cash inflows from net proceeds from Series A preferred stock of $9,893 and from warrant exercises of $1,672, decreases of cash outflows from taxes paid related to net share settlement of RSUs of $1 and in payments on notes payable of $322.