Tobacco and cannabis company 22nd Century Group Inc. (Nasdaq: XXII) announced plans to sell a majority of its hemp and cannabis operations, GVB Biopharma, to Specialty Acquisition Corp., a Nevada entity with connections to GVB’s current employees.
The transaction, which is still subject to approvals and buyer’s financing, includes a $1 million cash payment at closing and a 12% secured promissory note of $1.25 million, payable in six monthly installments starting four months after the sale.
The agreement also stipulates an equal sharing of liabilities related to GVB entities not included in the sale, under certain conditions.
“The sale of our hemp/cannabis franchise will immediately and materially further reduce the cash and operating demands within our business,” John Miller, 22nd Century Group’s interim CEO, said in a statement Monday.
Additionally, 22nd Century will retain any insurance payments from a fire at its Grass Valley manufacturing facility. The expected insurance payout, around $9 million, may increase due to unresolved disputes with the insurer. Part of these funds will help cover the buyer’s share of liabilities.
The sale’s completion, anticipated for early December 2023, is contingent upon various factors, including:
- Approval from the company’s board of directors.
- A fairness opinion.
- The buyer’s acquisition of $3 million in financing
- Consent from third parties, including the company’s senior lender.
“No assurances can be given that the buyer will obtain the required financing or that the company’s senior lender will provide the consent to the transaction,” the company said.
This move is part of 22nd Century’s broader strategy to reduce operational expenses and focus on core business areas. The CEO said that the company is also reevaluating its tobacco products, including its VLN reduced-nicotine cigarettes, which have FDA approval as a modified risk tobacco product.