
BUFFALO, N.Y.,
Nov. 27, 2023 (GLOBE NEWSWIRE) -- PRESS RELEASE -- 22nd Century Group, Inc., a biotechnology company focused on utilizing advanced plant technologies to
improve health and wellness, today announced it has reached an agreement to
sell substantially all of its GVB Biopharma hemp/cannabis operations to
Specialty Acquisition Corporation, a Nevada corporation, an entity affiliated with current GVB employees. The transaction is subject to
certain approvals and buyer obtaining financing.
Terms of the transaction include a cash payment to the company of $1 million at closing of the sale and a 12% secured promissory note for $1.25 million issued by the buyer and payable through six equal monthly installments of principal and accrued interest commencing the fourth calendar month after the closing. The parties will equally share liabilities related to any GVB entities not part of the transaction, subject to certain conditions. 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 buyer’s portion of the shared liabilities. At
present, damages being sought are approximately $9 million, subject to upward
revision the longer the disputed claim with the insurer remains unresolved,
although the amount received will not be finalized until resolution of the
matter.
The sale is expected to close in early December 2023, subject to customary closing conditions including approval by 22nd Century’s Board of Directors, receipt of a fairness opinion, buyer obtaining $3 million of financing and receipt of third-party consents, including the consent of the company’s senior lender. The company is currently in discussions with the senior lender to obtain such consent. 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 sale of
our hemp/cannabis franchise will immediately and materially further reduce the
cash and operating demands within our business,” stated John Miller, interim chief executive officer of 22nd Century. “The buyer will assume responsibility
for payroll, lease, and other operational expenses, along with future funding
requirements for the hemp/cannabis business. 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.”
We remain
committed to determining the best path forward to create value for our
shareholders. Including, evaluating strategic alternatives with respect to our
tobacco assets, notably our VLN reduced nicotine content products, as approved
by the FDA for harm reduction as a modified risk tobacco product (MRTP),” said
Miller.