New York biotech company says it will sell off Las Vegas CBD unit at a massive loss

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New York-based 22nd Century Group said it intends to sell off its GVB Biopharma unit, a CBD maker, with the price tag estimated at $2.25 million – after having purchased the Las Vegas-based company for roughly $60 million less than 18 months ago.

GVB provides drug development services and is a contract supplier of CBD and other hemp derivatives to the pharmaceutical and consumer goods industries.

22nd Century said it is selling GVB to Specialty Acquisition Corp., a Nevada business “affiliated with current GVB employees,” to cut costs, according to a press release. The purchase price includes $1 million in cash, and the buyer is issuing a 12%, $1.25 million promissory note, according to the seller, which said it will retain the right to recoup an unresolved $9 million insurance payout from a 2022 fire at a GVB manufacturing facility in Oregon.

Cost cutting

“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 Chief Executive Officer of 22nd Century.

The 22nd Century/GVB deal is scheduled to close in December, pending GVB securing $3 million in financing and a signoff by 22nd Century’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.

Buffalo, New York-based 22nd Century Group, Inc. swapped $60-65 million in stock for 100% of GVB in June 2022.

Plans dashed

At the time James A. Mish, 22nd Century’s CEO, suggested the acquired company could generate positive cash flow “in the near term,” and double his company’s income, pegged at ~$31 million in 2021. The acquisition was expected to “add significant commercial scale to 22nd Century’s existing hemp/cannabis franchise,” GVB had said. That obviously didn’t happen.

Mish was ousted this past July, with Miller installed to temporarily head the company.

A highly risky penny stock traded on NASDAQ, 22nd Century Group is an agriculture biotech company with interests in reduced-nicotine tobacco, hemp, marijuana and hops. The company claimed it sold more than five billion doses of CBD in 2021.

22nd Century Group, which also owns Goodrich Tobacco Company, LLC, has suffered losses of ~$72 million through the first three quarters of this year. The company lost ~$52 million in 2022, and about ~$33 million in 2021. Past yearly reports show the company has consistently lost millions each year since going public in 2011.

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