Pharmagreen Biotech Inc

What they do

The company's stated mission is to advance tissue culture science, providing germ-free, disease-free, genetically identical plantlets of high-CBD hemp and other flora, along with DNA testing, live genetics preservation, and botanical oil extraction. In 2021, it shifted business development from Canada to the United States, specifically California. It currently focuses on formulating nutraceutical products from blends of therapeutic plants and fungi.

Revenue drivers

• MaxGenomic™ Supplement — A proprietary blend of nine medicinal mushrooms and six medicinal plants, produced in a U.S. cGMP facility in enteric capsules. It is the company's first new product and its primary near-term revenue source, though recent quarterly revenues are negligible.
• Tissue culture plantlets and laboratory services — Provision of germ-free, disease-free hemp plantlets, DNA testing, and genetics preservation. This was the original business line, but no recent revenue from this segment is disclosed.
• Cannabis cultivation and extracts (planned) — A proposed acquisition of a Northern California cannabis operation with 12 acres and licenses, intended to enable greenhouse cultivation and CBD oil extraction. The acquisition is on hold as of the 2023 10-K.

Recent performance

For the quarter ended June 30, 2023, the company reported revenue of $597, down from $963 in the prior quarter. For the quarters ended March 31, 2022, and June 30, 2022, revenue was $0.00. Annual net losses have been persistent, with a net loss of $875,505 for fiscal year 2022, following a loss of $4.5 million in 2021 and $2.5 million in 2020. Operating cash flow was negative $426,568 in 2022 and negative $206,081 in 2021. As of June 30, 2023, total assets were $140,313, total liabilities were $2.3 million, and shareholder equity was negative $2.1 million, with cash of only $5,315.

Strategy

Management's stated strategy is to focus on immediate revenues by formulating and selling nutraceutical products, led by the MaxGenomic™ Supplement. The company is deferring its planned acquisition of a California cannabis operation due to a market regression in 2022, with raw material prices below production costs. It intends to eventually move forward with a biotech complex for tissue-cultured high-CBD hemp starter plantlets once the economy recovers. To fund operations, the company plans to raise capital through equity security sales, debt instruments, and private financing. Management acknowledges that without additional capital, it may need to curtail operations or liquidate assets.

Risks

• Going concern — Management states that if unable to raise additional capital soon, the company will need to curtail operations, liquidate assets, or seek capital on less favorable terms, and financial statements do not include adjustments for recoverability of assets.
• No definitive cannabis acquisition — The July 2021 MOU for a Northern California cannabis operation remains without a definitive agreement, and management has put the acquisition on hold due to market conditions.
• Market regression in California cannabis — In 2022, raw material prices dropped below production costs with greatly diminished demand for sun-grown material, making the planned acquisition unattractive.
• COVID-19 operational impact — The pandemic has impacted and could further impact operations, suppliers, and vendors through quarantines, facility closures, and travel and logistics restrictions.

Outlook

Management expects to continue incurring losses for at least the next 12 months and does not expect revenue to be sufficient to cover expenses. The company lacks sufficient cash to execute its plan of operations for the next twelve months and will need additional financing. It plans to raise capital through equity sales, debt instruments, or private financing. The cannabis acquisition remains on hold until the economy turns around.