22nd Century Group will sell most of its GVB Biopharma hemp/cannabis operations to Specialty Acquisition Corp., an entity affiliated with GVB employees.
Terms of the transaction include a cash payment to the company of $1 million at closing of the sale and a 12 percent secured promissory note for $1.25 million issued by the buyer. The company plans to use the proceeds from the sale to further deleverage its balance sheet.
22nd Century is also entitled to retain any insurance proceeds received in connection with the fire at the company’s Grass Valley manufacturing facility, a portion of which will be used to offset the buyer’s portion of the shared liabilities.
The sale is expected to close in early December 2023, subject to customary closing conditions, including approval by 22nd Century’s board of directors.
“The sale of our hemp/cannabis franchise will immediately and materially further reduce the cash and operating demands within our business,” said John Miller, interim CEO of 22nd Century, in a statement.
“We expect this transaction will substantially lower 22nd Century’s operating expenses beyond the previously announced $15 million in cost savings initiatives on an annual basis. Additionally, we will retain rights to the insurance proceeds, subject to certain offsets, effectively recouping cash that was invested into the continuity of the hemp/cannabis business.