22nd Century Group, Inc.

COMPENSATION DISCUSSION AND ANALYSIS

This section contains a discussion of the material elements of compensation awarded to, earned by, or paid to our principal executive officer, our principal financial officer, and our other executive officers who were serving as executive officers of the Company on December 31, 2025. These individuals are identified in the Summary Compensation Table and other compensation tables that follow this section, and are referred to throughout this report as our “named executive officers.”

Executive Summary and Overview of 2025 Compensation

Our Company’s long-term success depends on our ability to fulfill the expectations of our customers and clients in a competitive environment and deliver value to stockholders. To achieve these goals, it is critical that we are able to attract, motivate, and retain highly talented individuals at all levels of the organization that are committed to our values and objectives.

We strive to provide compensation that is (a) linked to stockholder value creation, (b) reflective of the overall performance of the Company and each individual executive, and (c) considerate of the competitive market levels of compensation needed to recruit, retain and motivate top executive talent, while remaining consistent with the other objectives.

Compensation Philosophy and Objectives

The Company’s executive compensation program is based on the same principles that guide us in establishing all of the Company’s compensation programs:

Overview of Executive Compensation

The Compensation Committee

Our Compensation Committee has primary responsibility for, among other things, determining our compensation philosophy, evaluating the performance of our executive officers, setting the compensation and other benefits of our executive officers, and considering the outcome of the advisory votes of stockholders on executive compensation.

To ensure alignment of compensation programs with the Company’s needs and goals, the Compensation Committee is informed by and responsive to the overall mission and strategies of the Company as determined by the full Board of Directors. As the strategic focus of the Company evolves, as for example toward commercialization of its products and profitability, the Compensation Committee has and will continue to adapt the Company’s compensation programs to meet these evolving needs.

The Compensation Committee also evaluates risks and rewards associated with the Company’s overall compensation philosophy and structure. To the extent our compensation programs provide for incentive−based compensation, the Compensation Committee evaluates whether these programs are designed to pay for performance, and thus encourage only appropriate risk−taking. These programs are also subject to oversight of the Compensation Committee and various functional departments of the Company to ensure that our employees, including our executive officers, are not encouraged to take excessive or unnecessary risks in managing our business.

Role of Executive Officers in Compensation Discussions

The Compensation Committee meets with our Chief Executive Officer in order to obtain recommendations with respect to the Company’s compensation programs and practices for executives and other employees. Management discusses with the Compensation Committee the practices that have been put in place to identify and mitigate, as necessary, potential risks. The Chief Executive Officer annually reviews the performance of each executive officer, other than himself. The Chief Executive Officer’s performance is reviewed annually by the Compensation Committee.

With support from market compensation data, performance reviews and other information, management makes recommendations to the Compensation Committee on the base salaries, bonus targets and equity compensation for the executive officers and other employees. The Compensation Committee takes management’s recommendations into consideration, but is not bound by management’s recommendations with respect to executive compensation.

While management attends certain meetings of the Compensation Committee, the Compensation Committee also holds executive sessions not attended by any members of management or by non−independent directors. The Compensation Committee annually reviews and recommends for approval to the full Board all elements of compensation of the Chief Executive Officer, and reviews, counsels, and makes recommendations regarding the compensation elements of other senior executives. The Compensation Committee also approves equity awards to all employees and directors of the Company.

Elements of Executive Compensation

For 2025, the principal components of compensation for named executive officers were: (1) Base Salary, (2) Performance−Based Incentive Compensation, (3) Long−Term Equity Incentive Compensation, (4) Personal Benefits, and (5) Other Compensation. In determining the amount and relative allocation among each component of compensation for each named executive officer, the Compensation Committee considered, among other factors, each executive officer’s experience level and historical performance, compensation paid by companies comparable in size, data obtained from management’s recruitment activities, historical rates of executive compensation, Company revenues and financial outlook, and alignment with the Company’s overall compensation philosophy.

Base Salary

Base salaries are set at levels that the Compensation Committee deems to be sufficient to attract and retain highly talented executive officers capable of fulfilling the Company’s key objectives. Base salaries are also set with the goal of rewarding executive officers on a day−to−day basis for their time and services while encouraging them to strive for performance−based and long−term incentives.

The table below shows the base salary established by the Compensation Committee for each of our named executive officers for 2025 and 2026, and the percentage change compared to the prior fiscal year. Salary adjustments typically do not coincide with the beginning of the fiscal year, so the amounts shown below may differ from those shown in the 2025 Summary Compensation Table.

Performance−Based Incentive Compensation

Historically, the Compensation Committee has considered, and in some cases established, incentive bonus plans for other executive officers that align pay with performance. Because the Company has not in the Committee’s judgment achieved sufficient levels of revenues or profits, the Committee did not approve performance-based incentive compensation awards for named executive officers in 2024.

During 2024, the Compensation Committee developed a new performance-based incentive compensation plan for our executive officers, which became effective initially for fiscal year 2025. The performance-based incentive compensation program for 2025 consists of (i) annual performance-based cash bonus opportunity and (ii) long-term equity incentive compensation consisting of equity awards.

The Compensation Committee also developed a performance-based annual cash bonus plan for 2025. Cash bonus amounts awarded were determined based on (i) a percentage of each executive position’s base pay, (ii) Company performance, (iii) individual performance. Weighting of Company performance was 80% and individual performance was 20%.

The cash bonus pool was based on achievement of key financial metrics for the fiscal year, funded as 25% of Adjusted EBITDA greater than $2.0 million, and up to 150% of target. Individual performance was tied to the achievement of quarterly initiatives, which was based on at least 5 measurable objectives defined for that position that were strategic for the Company in achieving its goals.

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.

For fiscal 2025, the Compensation Committee target bonus levels and achieved bonus amounts as follows:

Long-Term Equity Incentive Program Compensation

Our 2021 Omnibus Incentive Plan, as amended and restated, authorizes the Company to grant various types of equity awards, including stock options and restricted stock units, as incentives for management to increase stockholder value. Equity awards are granted to executive officers as long−term incentives in order to align executives’ performance with the interests of the Company’s stockholders. In addition, the multi-year nature of the vesting periods of such awards encourages executive retention.

Our Compensation Committee has authority to determine eligible participants, the types of awards, and the terms and conditions of awards. Upon review of the Company’s financial performance for 2024, the Committee determined to forego issuance of long-term equity incentive awards for 2024.

For 2025, the Compensation Committee developed a new long-term equity incentive program, whereby recipients’ equity awards are aligned to the prior fiscal years achieved cash bonus, with initial grants for fiscal 2025 being set as equal to the target cash bonus amounts. Equity awards are split as 75% in either non-qualifying stock options (NQSO’s) or incentive stock options (ISO’s) and 25% restricted stock units (RSU’s), and the number of shares to award was determined by taking the target cash bonus as the numerator divided by the 30-day average of closing stock price prior to grant as the denominator. All equity awards will vest in equal annual installments over a three-year period, subject to continued service with us.

For fiscal 2025, the table below summarized the number of NQSO’s and RSU’s granted to our executives:

Retirement and Other Benefits

As employees, the executives were eligible to participate in health and welfare benefits, as offered to our general workforce, designed to attract and retain a skilled workforce in a competitive marketplace. These benefits help ensure that the Company has a healthy and focused workforce through reliable and competitive health and other personal benefits. We do not maintain any pension or non-qualified deferred compensation plans, but we do sponsor a 401(k)-plan pursuant to which we make a safe harbor non-elective contribution of 3% of the employee’s annual compensation, subject to certain wage maximums, to provide employees with the opportunity to save for retirement on a tax deferred basis. These benefits were considered in relation to total compensation packages, but did not materially impact decisions regarding other elements of executive officer compensation.

Compensation on Termination of Employment

Each of our NEOs has an employment agreement that provides for severance in the event they are terminated without cause or they leave for good reason. We believe these agreements are important to attract and retain NEOs since many companies we compete with offer severance compensation. For additional information on compensation on termination of employment, see “Executive Compensation — Employment Agreements with Named Executive Officers” and “Executive Compensation — Compensation on Termination of Employment.”

Policy on Hedging Transactions

We prohibit our officers and directors from engaging in hedging transactions or arrangements designed to lock in the value of their company securities. This prevents our officers and directors from continuing to own company securities without having the full risks and rewards of ownership.

Recoupment/Clawback Policies

The Sarbanes-Oxley Act of 2002 subjects incentive compensation and stock sale profits of our CEO and CFO to forfeiture in the event of an accounting restatement resulting from any non-compliance, as a result of misconduct, with any financial reporting requirement under GAAP and SEC rules. On June 22, 2023 we adopted the 22nd Century Group, Inc. Compensation Recovery Policy in full compliance with Listing Rule 5608(a).

Compensation Committee Interlocks and Insider Participation

During the last fiscal year, no member of the Compensation Committee had a relationship with us that required disclosure under Item 404 of Regulation S-K. During the past fiscal year, none of our executive officers served as a member of the Board of Directors or Compensation Committee, or other committee serving an equivalent function, for any entity that has one (1) or more executive officers who served as members of our Board of Directors or our Compensation Committee. None of the members of our Compensation Committee is an officer or employee of our Company, nor have they ever been an officer or employee of our Company.

Compensation Committee Report

For the year ended December 31, 2025, the Compensation Committee reviewed and discussed the foregoing Compensation Discussion and Analysis with the Company’s management and Board of Directors. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included herein.

Submitted by the members of the Compensation Committee

David Keys, Chair

Andrew Arno

Lucille S. Salhany

SUMMARY COMPENSATION TABLE FOR 2025

The following table summarizes the compensation of our NEOs for 2025. The amounts reported for salary represent annual wages as reported to the internal revenue service reflective of any lawful withholdings or deductions, and therefore may differ from stated annual salary rates for the NEO’s. The amounts reported for stock awards may not represent the amounts that the NEOs will actually realize from the awards. Whether, and to what extent, a named executive officer realizes value will depend on our performance, stock price and continued employment.

*Includes Company paid premiums for health insurance, dental insurance, vision insurance, group-term life insurance, and long and short-term disability insurance. Certain executives had health insurance premiums over $10,000 (Daniel A. Otto - $18,634 and Scott Marions - $18,834).

GRANTS OF PLAN BASED AWARDS DURING 2025

OUTSTANDING EQUITY AWARDS AT FISCAL-YEAR END

OPTION EXERCISES AND STOCK VESTED DURING 2025

None of our NEOs had any equity awards that vested during 2025.

Employment Agreements with Named Executive Officers

On November 3, 2025, we entered into employment agreements with each of our NEOs with initial durations indicated in the table below, with automatic one-year renewal periods unless either party provides advance written notice of an intent not to renew. The Employment Agreements specify the titles and provide for base salaries at the current levels indicated in the table below. They also provide that the executive officers will be eligible to participate in annual cash incentive and long-term cash and equity incentive plans and programs, as well as other employee benefit plans, that are generally provided to the Company’s senior executives from time to time.

The Employment Agreements also provide that, upon an involuntary termination of the executive officer’s employment by the Company without Cause (as defined in the Employment Agreements), or upon a resignation for Good Reason (as defined in the Employment Agreements) upon or within 24 months following a Change of Control (as defined in the Company’s 2021 Omnibus Incentive Plan or any successor incentive plan) (the “Change of Control Employment Period”), the executive officer will receive the severance payment indicated in the table below, as well as subsidized COBRA benefits for the continuation period indicated in the table below.

“Cause” is defined generally in the Employment Agreements to include (a) a willful act or omission that is a material breach of any material obligation under the Employment Agreement or material written policy or procedure and failure to cure, (b) continued willful failure or refusal to substantially perform duties reasonably required, (c) an act of moral turpitude, dishonesty or fraud by, or criminal conviction (excluding non-felony convictions relating solely to vehicle and traffic offenses), (d) material misappropriation of Company property or (e) other willful misconduct that is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company. “Good Reason” is defined generally in the Employment Agreements to include (1) a breach by the Company or successor in the Change of Control of the Employment Agreement, (2) a reduction in base salary, percentage of base salary available as incentive compensation or bonus opportunity or benefits, in each case relative to those most favorable to the in effect at any time during the 180-day period prior to the Change of Control or, to the extent more favorable to the executive officer, those in effect at any time after the Change of Control, (3) the removal of the executive officer from, or failure to reelect or reappoint the executive to, any of the positions held with the Company on the date of the Change of Control or any other positions with the Company to which the executive officer has been elected, appointed or assigned, (4) a material adverse change, without the executive officer’s written consent, in the executive officer’s working conditions or status with the Company relative to the most favorable working conditions or status in effect during the 180-day period prior to the Change of Control or, to the extent more favorable to the executive officer, those in effect at any time after the Change of Control, (5) the relocation by more than 50 miles from the principal place of employment on the date 180 days prior to the Change of Control, (6) a requirement to travel 20% in excess of the average number of days per month the executive officer was required to travel during the 180-day period prior to the Change of Control, or (7) a failure to obtain an agreement from a successor in a Change of Control expressly to assume and agree to perform from and after the date of such assignment all of the terms, conditions and provisions imposed by the Employment Agreement.

Upon a qualifying termination, the executive officers will also receive accrued but unpaid benefits. Equity awards will be treated as provided in the applicable equity incentive plan and award agreements. The Employment Agreements also require the executive officers to comply with certain restrictive covenants.

Compensation on Termination of Employment

The following table illustrates the additional compensation that we estimate would be payable to each of our NEOs on termination of employment under each of the circumstances described above, assuming the termination occurred on December 31, 2025. The amounts shown are estimates and do not necessarily reflect the actual amounts that these individuals would receive on termination of employment.