Firstly, if I’m understanding your question correctly, I’m not sure how you derived that there is no insurance on our seeds, as it would defy logic. Dr. J and Dylon have repeatedly spoken directly about insuring and underwriting shipments, the farm, and all assets. So, the inference that there’s no insurance would go against all logic, especially for such a valuable asset.
The 15 million seeds were initially recorded on the books in an unaudited form. This strategic move helped the company likely avoid being declared a shell risk in late 2022 due to the CE application to the company. This classification could have brought additional regulatory scrutiny, so the company used the seed application to prevent that outcome.
In early 2024, the company underwent an audit as part of its annual report. This audit served several purposes, including likely laying the groundwork for an insurer or underwriter to evaluate the value of the company's assets—particularly the genetically stabilized seeds. The audit was performed under GAAP and likely IFRS standards, given the company’s plans for uplisting and its mention of the JSE and NYSE . With the audit providing verified numbers, it would then become possible for underwriters to step in, assess the operation, and offer insurance coverage for the assets. It's likely the seed assets were insured following the audit, given the need for clear, validated financial records to secure such coverage.
The seeds were officially valued at $1.00 per seed in the filings. This valuation was consistent across both the originally listed seeds and the donated seeds, which initially had no stated production value but were eventually assessed at the same $1.00 value. The $1.00 book value provides a baseline for accounting, but it doesn't reflect the actual worth of these seeds, which are genetically stabilized and pure strain. This kind of seed, especially with genetic stabilization, typically sells at prices exceeding $20 per seed in retail markets. However, these seeds are not intended for sale—they are part of the conglomerate's virtual seed bank, adding intrinsic long-term value beyond the book price.
This business model is similar to what Monsanto, now under Bayer, has implemented. Monsanto was a leader in developing genetically modified seeds and held numerous patents on their seed varieties. Rather than flooding the market with these seeds, Monsanto focused on controlling their distribution through in-house strategies. By doing so, they retained significant control over seed propagation and agricultural production, which allowed them to increase the value of their intellectual property. Monsanto’s strategy was to license their seed technologies selectively, which generated long-term revenue streams while keeping a tight grip on the genetics of their crops.
Keep in mind that TXTM is an acquisition company that can collateralize its assets, like the seeds, and leverage them to pursue acquisitions. This adds another layer of value, as the company’s assets can be used to generate growth through strategic transactions.
Comparisons made between TXTM’s seeds and general market seeds i've seen are severely flawed. There are virtually no large suppliers in the world that offer pure strain Genus Sativa seeds in bulk or otherwise, which is a key characteristic of TXTM’s assets. The unique nature of these seeds means a professional valuator would be required to properly assess their fair value, considering these distinctive traits.
Under GAAP, particularly ASC 905-330, agricultural products such as seeds can be valued at fair value when harvested. This value is determined based on market factors or production costs. For TXTM's seeds, which are genetically stabilized, winterized and proprietary, this means their fair value is significantly higher than typical market prices for regular seeds. IFRS, under IAS 41 Agriculture, aligns with this valuation approach, allowing biological assets like seeds to be recorded at fair value minus costs to sell, which supports the premium valuation assigned to these seeds due to their unique characteristics.
IMO the audit played crucial role in confirming the company’s valuation of the seeds. The verified valuation strengthens the company’s financial reporting and supports the underwriting and insurability of these assets. Auditors provide a critical assessment that insurers and underwriters rely on to determine asset coverage. In this case, the audit enables a professional valuator to assess the fair value of the seeds, which is likely far higher than the $1.00 book value reported in the filings. This assessment also serves as the foundation for future financial reports, insurance efforts, and potential uplisting plans, particularly on exchanges like the JSE and NYSE.
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