The Elixinol Global Ltd (ASX: EXL) share price was a very poor performer on Friday.
The cannabis company's shares finished the week with a massive 14% decline to 77 cents.
Its shareholders will no doubt be hoping for better on Monday. Though, that will depend on the reaction to the release of an announcement this morning.
What did Elixinol Global announce?
This morning Elixinol Global announced that it has agreed to sell its subsidiary Hemp Foods Australia to a subsidiary of Shanghai Shunho New Materials.
Management notes that the sale of the Hemp Foods Australia business is in line with Elixinol Global's refined strategy to focus on the hemp derived CBD market.
According to the release, Shanghai Shunho New Materials will acquire the business for a cash consideration of A$500,000.
Completion is conditional on, amongst other standard conditions, obtaining third party consents and entry into a licence agreement between Elixinol and Shunho appointing the latter as the exclusive licensee to manufacture and distribute Elixinol branded hemp derived CBD products in China, Hong Kong, Taiwan, and Macau.
Management expects the transaction to complete during the first quarter of 2020.
Non-cash impairment charge.
The release explains that the company expects the sale of the Hemp Foods Australia business to give rise to a non-cash impairment charge of approximately A$12.5 million.
Whilst this is disappointing, management believes the sale will improve its future operating cashflow and allow it to focus its capital and resources solely on its hemp derived CBD products business.
The company's Chief Executive Officer, Stratos Karousos, said: "We are pleased at the opportunity Hemp Foods Australia will have under Shunho's guidance and the ability to leverage Shunho's experience in hemp cultivation, manufacturing and distribution, particularly in Asia."
"During negotiations of the sale of HFA, it became apparent that Elixinol could benefit from Shunho's extensive experience and reputation in Greater China and we have agreed to sign an exclusive licence to Shunho in relation to the manufacturing and distribution of Elixinol branded hemp derived CBD products in China, Taiwan, Hong Kong and Macau which aligns with our global strategy," he added.
Nunyara sale.
This morning the company also revealed that it has decided against pursuing its application for a medical cannabis cultivation licence in Australia.
In light of this, it will begin the process of selling assets owned by its Nunyara business (including the land) and redeploy the cash proceeds to support its Elixinol CBD operations.
This decision gives rise to another non-cash impairment charge of A$4.8 million.
