What changed in this filing

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Item 1. Business

2021-06-29 compared with 2020-08-24 · 155 added, 213 removed, 98 unchanged (79% of the section changed)

Our company changed its name from Alliance One International, Inc.

to Pyxus International, Inc.

on September 12, 2018.

Pyxus International, Inc.

("we," "Pyxus" or the "Company") is a Virginia corporation with consolidated revenues of approximately $1.5 billion for the year ended March 31, 2020.

As the context requires, "we" or the "Company" also includes the consolidated subsidiaries of Pyxus International, Inc.

Bankruptcy Proceedings

On June 15, 2020 (the "Petition Date"), the Company (then named Pyxus International, Inc.) and its then subsidiaries Alliance One International, LLC, Alliance One North America, LLC, Alliance One Specialty Products, LLC and GSP Properties, LLC (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to implement a prepackaged chapter 11 plan of reorganization (“Prepack Plan”) that effectuates a financial restructuring of the Company’s secured debt (the “Restructuring”).

The Company commenced solicitation of the Prepack Plan with a related disclosure statement (“Disclosure Statement”) on June 14, 2020.

The Chapter 11 Cases have been administered jointly under the caption In re Pyxus International, Inc., et al.

This Annual Report on Form 10-K (this "Annual Report") is being filed by Pyxus International, Inc.

(the “Company,” “Pyxus,” “we,” or “us”).

The Company is the successor issuer to Old Holdco, Inc.

(“Old Pyxus”) and was incorporated as a Virginia corporation in August 2020 to facilitate the Restructuring described below.

The terms the “Company,” “Pyxus,” “we,” or “us” when used with respect to periods commencing prior to the effectiveness of the Plan (as defined below), refer to Old Pyxus, unless the context would indicate otherwise.

As the context requires, the “Company,” “Pyxus,” “we” and “us” also includes the consolidated subsidiaries of Pyxus International, Inc.

On June 15, 2020 (the "Petition Date"), Old Pyxus (then named Pyxus International, Inc.) and its then subsidiaries Alliance One International, LLC, Alliance One North America, LLC, Alliance One Specialty Products, LLC and GSP Properties, LLC (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code with the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to implement a prepackaged Chapter 11 plan of reorganization to effectuate a financial restructuring (the “Restructuring”) of Old Pyxus’ secured debt.

On August 21, 2020, the Bankruptcy Court issued an order (the “Confirmation Order”) confirming the Amended Joint Prepackaged Chapter 11 Plan of Reorganization (the “Plan”) filed by the Debtors in the Chapter 11 Cases.

This Form 10-K is being signed concurrently with the effectiveness of the Plan.

These and other related matters are discussed in greater detail in the "Note 28.

Subsequent Events" to the "Notes to Consolidated Financial Statements" for additional information.

On August 24, 2020, the Plan became effective in accordance with its terms, and the Debtors emerged from the Chapter 11 Cases.

In connection with the satisfaction of the conditions to effectiveness as set forth in the Confirmation Order and the Plan, Old Pyxus completed a series of transactions pursuant to which the business assets and operations of Old Pyxus were vested in a new Virginia corporation, Pyxus Holdings, Inc., which is an indirect subsidiary of the Company.

Pursuant to the Confirmation Order and the Plan, at the effectiveness of the Plan, all outstanding shares of common stock, and rights to acquire the common stock, of Old Pyxus were cancelled and the shares of common stock of the Company were delivered to certain creditors of Old Pyxus.

Other than our Chief Executive Officer, our Board of Directors does not include any of the individuals who served as directors of Old Pyxus at the time the Chapter 11 Cases were commenced or at the effectiveness of the Plan.

These and other related matters are discussed in greater detail in " Note 3.

Emergence from Voluntary Reorganization under Chapter 11 " to the "Notes to Consolidated Financial Statements," which is incorporated herein by reference.

Cross references included in this Annual Report to “Notes to Consolidated Financial Statements” are to the "Notes to Consolidated Financial Statements" included in Item 8, “Financial Statements and Supplementary Data” of this Annual Report.

Company Overview

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Through our predecessor companies, we have a long operating history in the leaf tobacco industry with some customer relationships beginning in the early 1900s.

In an increasing number of markets, we also provide agronomy expertise for growing leaf tobacco.

Our contracted tobacco grower base often produces a significant volume of non-tobacco crop utilizing the agronomic assistance that our team provides.

Pyxus is working to find markets for these crops as part of our ongoing efforts to improve farmer livelihoods and the communities in which they live.

Our core leaf tobacco operations continued to account for almost all of our revenues for the fiscal year ended March 31, 2021.

We are committed to responsible crop production that supports economic viability for the grower, provides a safe working atmosphere for those involved in crop production and minimizes negative environmental impact.

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Throughout the entire production process, from seed through processing and final shipment, our SENTRI SM traceability system provides clear visibility into how products are produced throughout the supply chain, supporting product integrity.

As announced in February 2018, we have begun a strategic process designed to diversify the Company's products and services by leveraging our core strengths in agronomy and traceability.

In general, our diversification strategy focuses on products that

are value-added, require some degree of processing and play well to our strengths as well as offering higher margin potential than our core tobacco leaf business.

In support of this strategy, the Company has made the following investments over the past five years:

In an increasing number of markets, we also provide agronomy expertise for growing leaf tobacco.

Our contracted tobacco grower base often produces a significant volume of non-tobacco crop utilizing the agronomic assistance that our team provides.

Pyxus is working to find markets for these crops as part of our ongoing efforts to improve farmer livelihoods and the communities in which they live.

Beginning in 2017, we undertook a strategic process designed to diversify the Company's products and services by leveraging our core strengths in agronomy and traceability.

In general, our diversification strategy focused on products that were value-added, required some degree of processing and offered a higher margin potential than our core tobacco leaf business.

In support of this strategy, the Company made the following investments:

• On April 2, 2018, we purchased a 51% interest in Humble Juice, LLC ("Humble Juice"), a manufacturer and distributor of flavored e-liquids.

Humble Juice is a consolidated subsidiary of the Company.

• On August 21, 2017, the Company completed a purchase of a 40% interest in Nicotine River, LLC ("Nicotine River"), a manufacturer, retailer and wholesale supplier of compounds used for e-liquid production, and on August 14, 2020, the Company exchanged its 40.0% ownership interest in Nicotine River for an additional 14.3% interest in Humble Juice, increasing the Company's ownership interest in Humble to 65.3%.

Industrial hemp/CBD

• On December 18, 2017, a subsidiary of the Company completed a purchase of a 40% interest in Criticality LLC ("Criticality"), a North Carolina-based industrial hemp company to engage in cannabidiol ("CBD") extraction and other applications for industrial hemp.

On April 22, 2020, that subsidiary completed a purchase of the 60% interest in Criticality not owned by the subsidiary, and as a result Criticality became a wholly owned subsidiary of Pyxus.

• On January 25, 2018, a Canadian subsidiary of the Company acquired a 75% equity position in Canada’s Island Garden Inc.

Legal cannabis in Canada

• On January 25, 2018, a wholly owned Canadian subsidiary of the Company acquired a 75% equity position in Canada’s Island Garden Inc.

(“Figr East”).

Figr East is fully licensed to produce and sell medicinal cannabis in the Canadian province of Prince Edward Island.

We acquired an additional 18% and 1.2% equity interest in Figr East on March 22, 2019 and October 15, 2019, respectively.

• On January 29, 2018, a Canadian subsidiary of the Company acquired an 80% equity position in Figr Norfolk, Inc.

("Figr Norfolk" and, together with Figr East "Figr"), formerly known as Goldleaf Pharm Inc., which is licensed to produce cannabis in the Canadian province of Ontario.

• On April 2, 2018, we purchased a 51% interest in Humble Juice, LLC ("Humble Juice"), a manufacturer and distributor of flavored e-liquids.

On August 14, 2020, we acquired an additional 14.3% interest in Humble Juice Co, LLC ("Humble"), increasing the Company's ownership interest in Humble to 65.3%.

To support these business lines, we have broad geographic processing capabilities, a diversified product offering, an established customer base for our core leaf tobacco business and a growing customer base for our new business lines.

As certain of these diversification investments are accounted for under the equity method and others were made only recently and involve early-stage businesses, our core leaf tobacco operations continued to account for almost all of our revenues for the fiscal year ended March 31, 2020.

Our consolidated operations are managed and reported in ten operating segments that are organized by product category and geographic area and aggregated into three reportable segments for financial reporting purposes:

Leaf - North America, Leaf - Other Regions, and Other Products and Services.

The Other Products and Services segment includes Global Specialty Products ("GSP") - Cannabis, GSP - E-liquids, GSP - Hemp, GSP - Other, and Value-Added Agriculture Products.

As of March 31, 2020, we did not have a controlling interest in Criticality, Nicotine River, and Purilum, LLC ("Purilum"), a 50% owned U.S.

Figr East is fully licensed to produce and sell medicinal and adult-use cannabis in most of the provinces in the Canadian market.

We acquired an additional 18% and 1.2% equity interest in Figr East on March 22, 2019 and October 15, 2019, respectively, increasing the ownership percentage to 94.2%.

• On January 29, 2018, a wholly owned Canadian subsidiary of the Company acquired an 80% equity position in Figr Norfolk Inc.

("Figr Norfolk" and, together with Figr East "Figr"), formerly known as Goldleaf Pharm Inc., which is fully licensed to produce and sell medicinal and adult-use cannabis in most of the provinces in the Canadian market.

Following the effectiveness of the Plan and the election of additional members of our Board of Directors in October 2020, our Board of Directors determined to exit the industrial hemp, CBD and Canadian cannabis businesses in light of the Company’s limited capital resources and the continuing capital requirements to develop and expand these early-stage businesses.

In December 2020, the Company commenced actions to exit operations of the industrial hemp businesses, including the production and sale of products containing extracts of industrial hemp, including CBD products, by Criticality.

Criticality’s CBD extraction facility has ceased operations.

On January 21, 2021, Figr Norfolk Inc.

(“Figr Norfolk”) and Figr Brands, Inc.

(“Figr Brands”), which are indirect subsidiaries of the Company, and Canada’s Island Garden Inc.

(“Figr East,” and together with Figr Norfolk and Figr Brands, the “Canadian Cannabis Subsidiaries”), which, prior to its sale on June 28, 2021 was an indirect subsidiary of the Company, applied for relief from their respective creditors pursuant to Canada’s Companies’ Creditors Arrangement Act (the “CCAA”) in the Ontario Superior Court of Justice (Commercial List) (the “Canadian Court”) in Ontario, Canada as Court File No.

CV-21-00655373-00CL (the “CCAA Proceeding”).

On January 21, 2021 (the “Order Date”), upon application by the Canadian Cannabis Subsidiaries, the Canadian Court issued an order for creditor protection of the Canadian Cannabis Subsidiaries pursuant to the provisions of the CCAA and the appointment of FTI Consulting Canada Inc.

to serve as the Canadian Court-appointed monitor of the Canadian Cannabis Subsidiaries during the pendency of the CCAA Proceeding (the “Monitor”).

On January 29, 2021, the Canadian Court issued an order permitting the Canadian Cannabis Subsidiaries to initiate a sale and investment solicitation process to be conducted by the Monitor and its affiliate to solicit interest in, and opportunities for, a sale of, or investment in, all or substantially all, or one or more components, of the assets and/or the business operations of the Canadian Cannabis Subsidiaries.

The Canadian Court also approved a debtor-in-possession financing facility (the "Canadian DIP Facility") provided to Figr Brands by another non-U.S.

subsidiary of Pyxus (the "DIP Lender") in an initial amount of up to Cdn.$8.0 million, which following approval by the Canadian Court was increased to Cdn.$16.0 million, to fund the working capital needs of the Canadian Cannabis Subsidiaries.

On May 10, 2021, a definitive agreement for the sale of the assets of Figr Norfolk was entered into for an estimated purchase price of Cdn.$5.0 million.

On June 10, 2021, the Canadian Court approved the sale agreement.

The consummation of the sale under this agreement is subject to approval of the buyers by Health Canada and the satisfaction of certain other conditions.

On May 25, 2021, a definitive agreement was entered into with a separate buyer for the sale of the outstanding equity of Figr East and certain intangible assets of Figr Brands for an estimated aggregate purchase price of Cdn.$24.8 million.

On June 10, 2021, the Canadian Court approved the sale agreement.

On June 25, 2021, Health Canada approved the buyers of Figr East and certain intangible assets of Figr Brands.

The consummation of the sale of Figr East and certain intangible assets of Figr Brands occurred on June 28, 2021.

The amount of recovery that the Company may receive from the sale of the assets of Figr Norfolk, the sale of the outstanding equity of Figr East, and the sale of certain intangible assets of Figr Brands will be impacted by the amount of claims against the Canadian Cannabis Subsidiaries submitted in the CCAA Proceeding, the extent to which such claims are approved by the

Canadian Court, and the extent to which the Company's interest in the Canadian Cannabis Subsidiaries are determined by the Canadian Court to be debt claims entitled to recovery on the same basis as other unsecured creditor claims with respect to the Canadian Cannabis Subsidiaries.

These and other related matters are discussed in greater detail in “Note 5.

CCAA Proceeding and Deconsolidation of Subsidiaries” and “ Note 30.

Subsequent Events ” to the “Notes to Consolidated Financial Statements”.

As of March 31, 2021, we owned a 50% noncontrolling interest in Purilum, LLC ("Purilum"), a U.S.

company that develops, produces, and sells consumable e-liquids and e-liquid components to manufacturers and distributors of vapable products.

During the periods reported in the financial statements included in this annual report on Form 10-K, the results of Criticality, Nicotine River, and Purilum are not consolidated in our financial results reported in this annual report on Form 10-K and we accounted for our respective interests in these businesses during those periods under the equity method of accounting.

During the periods reported in the financial statements included in this Annual Report on Form 10-K, the results of Purilum, and for periods during which we owned a non-controlling interest in Criticality and Nicotine River, the respective results of those businesses, are not consolidated in our financial results reported in this Annual Report on Form 10-K and we accounted for our respective interests in these businesses during those periods under the equity method of accounting.

Accordingly, our interest in their financial results for those periods, along with our interests in the financial results of several unconsolidated joint ventures with leaf tobacco operations, are reflected as “Income from unconsolidated affiliates, net” in our Consolidated Statement of Operations.

Pyxus Employees

Pyxus' consolidated entities employed approximately 3,385 persons, excluding seasonal employees, in our worldwide operations at March 31, 2020.

We consider the Company's employee relations to be satisfactory.

Government Regulation and Environmental Compliance

“Risk Factors - Risks Relating to the Tobacco Industry” for a discussion of additional government regulation.

Currently, there are no material estimated capital expenditures related to environmental control facilities.

In addition, there is no material effect on capital expenditures, results of operations or competitive position anticipated as a result of compliance with current or pending federal or state laws and regulations relating to protection of the environment.

Available Information

Our website is www.pyxus.com .

Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge at http://investors.pyxus.com as soon as reasonably practicable after we file such material with, or furnish it to, the U.S.

Securities and Exchange Commission ("SEC").

The information contained on our website shall not be deemed part of this

annual report on Form 10-K.

The SEC maintains a website ( www.sec.gov ) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Following the effectiveness of the Plan, the common stock of New Pyxus will be deemed to be registered under Section 12 of the Securities Exchange Act of 1934, as amended, pursuant to Rule 12g-3 thereunder.

Accordingly, following the effectiveness of the Plan, New Pyxus will be obligated to file with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other filings.

New Pyxus intends to make such filings available free of charge at http://investors.pyxus.com as soon as reasonably practicable after it files such material with, or furnishes it to the SEC.

As a result of the commencement of the CCAA Proceeding and the appointment of the Monitor, and in accordance with U.S.

generally accepted accounting principles, the Canadian Cannabis Subsidiaries have been deconsolidated from the Company’s financial statements as of the Order Date.

As a result of the deconsolidation of the Canadian Cannabis Subsidiaries, as of March 31, 2021, our consolidated operations are managed and reported in nine operating segments that are organized by product category and geographic area and aggregated into three reportable segments for financial reporting purposes:

Leaf - North America, Leaf - Other Regions, and Other Products and Services.

The Other Products and Services segment includes Global Specialty Products ("GSP") - E-liquids, GSP - Hemp, GSP - Other, and Value-Added Agriculture Products.

The Other Products and Services segment included, for periods prior to the Order Date, the Canadian Cannabis Subsidiaries, which comprised an operating segment within the reportable segment.

Leaf Tobacco Operations

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Leaf tobacco revenues are primarily comprised of sales of processed tobacco and fees charged for processing and related services to these manufacturers of tobacco products.

We purchase tobacco in more than 35 countries and ship to approximately 90 countries.

We purchase tobacco in more than 32 countries and ship to approximately 90 coun tries.

We primarily purchase tobacco directly from suppliers.

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In some locales, we purchase seeds, fertilizer, pesticides, and other products related to growing tobacco, which represent prepaid inventory, and issue them to suppliers with whom we have purchase contracts.

The suppliers then utilize these inputs to grow tobacco, which we are contractually obligated to purchase.

The advances of inputs for the current crop generally include the original cost of the inputs plus a mark-up and interest as it is earned.

Where contractually permitted, we charge interest to the suppliers during the period the current crop advance is outstanding.

We generally advance inputs at a price greater than our cost, which results in a mark-up on the inputs.

We account for our advances to tobacco suppliers using a cost accumulation model, which results in us reporting our advances at the lower of cost or recoverable amounts excluding the mark-up and interest.

The mark-up and interest on our advances are recognized when the tobacco is delivered as a decrease in our cost of the current crop.

Upon delivery of tobacco, part of the purchase price paid to the supplier is paid in cash and part through a reduction of the advance balance.

The advances applied to the delivery are reclassified out of advances and into unprocessed inventory.

We advance inputs only to suppliers with whom we have purchase contracts.

Under longer-term arrangements with suppliers, we may advance or guarantee financing on suppliers' capital assets, which are also recovered through the delivery of tobacco to us by our suppliers.

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Accordingly, we have located our production facilities in proximity to our principal sources of tobacco.

We process tobacco in Company-owned and third-party facilities around the world, including Argentina, Brazil, China, Zimbabwe, Jordan, Guatemala, India, Tanzania, the United States, Malawi, Thailand, Indonesia, Macedonia, Kenya, and Turkey.

We process tobacco in Company-owned and third-party facilities around the world, including Argentina, Brazil, China, Guatemala, India, Indonesia, Jordan, Macedonia, Malawi, Tanzania, Thailand, Turkey, Uganda, United States, and Zimbabwe.

These facilities encompass all leading export locations of flue-cured, burley, and oriental tobaccos.

In addition, we have entered into contracts, joint ventures and other arrangements for the purchase of tobacco grown in substantially all other countries that produce export-quality flue-cured and burley tobacco.

During the three years ended March 31, 2020, 2019, and 2018, approximately 15%, 17%, and 25%, respectively, of our purchases of leaf tobacco were from the Leaf - North America operating segment and approximately 85%, 83%, and 75%, respectively, were from the Leaf - Other Regions operating segment.

Within the Leaf - Other Regions operating segment, approximately 67%, 67%, and 61% of our total purchases for the three years ended March 31, 2020, 2019, and 2018, respectively, were from China, Brazil, Turkey, and the Africa Region.

After processing, whole leaves, bundles, strips or stems and scrap where applicable are separately packed in cases, bales, cartons or hogsheads for storage and shipment.

Packed flue-cured, burley and oriental tobacco generally is transported in the country of origin by truck or rail, and exports are moved by ship.

During the seven months ended March 31, 2021, the five months ended August 31, 2020, and the fiscal years ended March 31, 2020 and 2019, approximate ly 16%, 13%, 15%, and 17%, respectively, of our purchases of leaf tobacco were from the Leaf - North America operating segment and approximately 84%, 87%, 85%, and 83%, respectively, were from the Leaf - Other Regions operating segment.

Within the Leaf - Other Regions operating segment, approximat ely 60%, 68%, 67% , and 67% of our total purchases for the seven months ended March 31, 2021, five months ended August 31, 2020, and the fiscal years ended March 31, 2020 and 2019, respectively, were from Brazil, China, Turkey, and the Africa Region.

We have entered into contracts, joint ventures and other arrangements for the purchase of tobacco grown in substantially all other countries that produce export-quality flue-cured and burley tobacco.

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In our leaf tobacco business, our primary customers are major consumer tobacco product manufacturers.

Including their respective affiliates, accounting for more than 10% of our revenues were each of Philip Morris International, Inc.

("PMI") and China Tobacco International, Inc.

for the years ended March 31, 2020 and 2018, and PMI, China Tobacco International, Inc., and Imperial Brands, PLC for the year ended March 31, 2019.

In the year ended March 31, 2020, Pyxus delivered approximately 35% of its tobacco sales to customers in Europe and approximately 14% to customers in the United States.

Refer to “ Note 29.

Segment Information ” to the "Notes to Consolidated Financial Statements" for additional information regarding customers, and their respective affiliates, that account for more than 10% of our annual revenues.

Pyxus delivered approximately 35% and 41% of its tobacco sales to customers in Europe and approximately 16% and 13% to customers in the United States for the seven months ended March 31, 2021 and the five months ended August 31, 2020, respectively.

The remaining sales of leaf tobacco are to customers located in Asia, Africa, and other geographic regions of the world.

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At March 31, the end of our fiscal year, the seasonal components of our working capital reflect primarily the operations related to foreign-grown tobacco.

Research and Development

We routinely cooperate with both our customers and the manufacturers of the equipment used in our leaf processing facilities to improve processing technologies.

However, no material amounts are expended for research and development, and we hold no material patents, franchises, or concessions.

Track and Trace Technology

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SENTRI SM utilizes an experienced team of agronomists to track data and insights regarding growing practices.

Operations of New Business Lines

The new business lines encompass both consolidated operations (which for the fiscal years ended March 31, 2020 and 2019 included the cannabis and certain e-liquids businesses, which together comprised the Other Products and Services segment) and investments that are accounted for under the equity method, and generally are early-stage businesses.

It is our plan that, as these new businesses further develop and we pursue other diversification opportunities, these business lines will begin to meaningfully contribute to future years’ revenues with a more significant impact toward profitability.

Canadian Cannabis Businesses

Legislation in Canada legalized recreational adult use of cannabis nationwide effective in October 2018.

We refer to this legislation as the “Canadian Cannabis Act.” Pursuant to the Canadian Cannabis Act, the production and sale of cannabis products for medical or adult recreational use is subject to licensing by Health Canada and by various provincial authorities.

Figr East and Figr Norfolk operate cannabinoid businesses from their facilities in Charlottetown, Prince Edward Island, and Simcoe, Ontario, respectively.

Figr East and Figr Norfolk are licensed to produce, package, and label dried cannabis, fresh cannabis, cannabis seeds, cannabis plants, and cannabis oil, and to sell such cannabis products for recreational and medical purposes within Canada in accordance with Canadian regulatory provisions.

Figr Norfolk has a processing license to extract and sell bulk cannabis oil to other licensed producers.

As of March 31, 2020, approximately 330,000 square feet of Figr East's Prince Edward Island facility is licensed for the cultivation and processing of cannabis.

Figr East’s facility employs supercritical carbon dioxide extraction equipment for the on-site production of cannabis oil.

As of March 31, 2020, approximately 19,500 square feet of Figr Norfolk's Simcoe facility is licensed for the cultivation and processing of cannabis.

Figr tests its products for potency, microbiological, heavy metal, and pesticide contamination using third party labs, as well as internal testing processes.

These data points are logged and made available to consumers through the SENTRI SM platform.

Figr currently offers a line of legal cannabinoid consumer products, branded “Figr”, for sale to the medical and adult-use market, with premium product offerings of dried cannabis flowers, pre-rolls, and cannabis oils containing varying levels of tetrahydrocannabinol (“THC”), the primary psychoactive compound in cannabis, and CBD intended to appeal to a range of consumer segments.

Figr products are currently licensed for sale in the following Canadian provinces through retail locations and online stores:

Prince Edward Island, Nova Scotia, New Brunswick, Ontario and British Columbia.

Subsidiaries of the Company are exploring further international cannabis opportunities as other jurisdictions move towards establishing new or improved medical and/or recreational cannabis systems.

Company subsidiaries will conduct cannabis business activities only in jurisdictions where such activities are permitted by applicable law.

The markets in which Figr competes are competitive.

Certain of these competitors have significantly greater financial, production, marketing, R&D and technical, and human resources than Figr does.

As a result, these competitors may be more successful in gaining market penetration and market share than Figr.

Figr also faces competition from the illicit cannabis market.

Illegal dispensaries and “black market” operations and participants, despite not having a valid license, may be able to offer products with higher concentrations of active ingredients than Figr is authorized to produce and sell, sell products at lower prices and market products in ways not permissible by law.

The Canadian Cannabis Act places a general ban on promotion of cannabis, cannabis accessories or any service related to cannabis, unless the promotional activity is specifically authorized under the Canadian Cannabis Act.

Cannabis products may be promoted at their point of sale if the promotion indicates only its availability and/or price.

Further, brand preference and informational promotion is permitted if such promotion is:

• in a communication that is addressed and sent to an individual who is of legal consumption age or older and is identified by name;

• in a place where young persons are not permitted;

• communicated by means of a telecommunication, where the person responsible for the content of the promotion has taken reasonable steps to ensure that the promotion cannot be accessed by a young person.

As a result of the general prohibition against cannabis advertising under the Canadian Cannabis Act, investments in branding and other marketing activities may have limited effect on consumer perception of Figr’s products.

The Canadian Cannabis Act and the regulations thereunder (the “Canadian Cannabis Regulations”) became effective on October 17, 2018, thereby legalizing the production, distribution, and sale of cannabis for adult non-medicinal (i.e., recreational) purpose, as well as incorporating the existing medical cannabis regulatory scheme under one complete framework.

The Canadian Cannabis Regulations, among other things, provide more detailed rules and standards that apply to the legal cultivation, processing, research, testing, distribution, sale, importation, and exportation of cannabis in Canada by federal license holders under the Canadian Cannabis Act.

Pursuant to the federal regulatory framework in Canada, each province and territory may adopt its own laws governing the distribution, sale and consumption of cannabis and cannabis accessories within the province or territory.

provinces and territories have enacted their own legislation to regulate the distribution and sale of cannabis for recreational purposes within those jurisdictions, and retail models vary between jurisdictions.

The Canadian Cannabis Regulations set out the product categories that are permitted for sale.

The THC content and serving size of cannabis products is limited by the Canadian Cannabis Regulations.

The Canadian Cannabis Regulations set out strict requirements pertaining to the packaging and labelling of cannabis products.

Vendors must package cannabis in a way that is tamper-proof, child-resistant, prevents contamination and ensures dryness.

The Canadian Cannabis Regulations also require plain packaging, with strict requirements for logos, colors and branding.

For example, all-over packaging wraps must be clear, and the interior surface and exterior surface of any container in which a cannabis product is packaged must be one uniform color.

The Canadian Cannabis Act provides that the provinces and territories of Canada have authority to regulate certain aspects of recreational cannabis, such as sale and distribution, minimum age requirements, places where cannabis can be consumed, and a range of other matters.

All Canadian provinces and territories have enacted regulatory regimes for the distribution and sale of cannabis for recreational purposes within those jurisdictions.

There are three general frameworks that the provinces and territories have followed:

(i) private cannabis retailers licensed by the province;

(ii) government-run retail stores;

or (iii) a combination of both frameworks (e.g., privately licensed retail stores, while online retailers are operated by the applicable provincial government).

Regardless of the provincial or territorial framework, the recreational cannabis market in Canada is required to be supplied by federally licensed producers.

The minimum age for purchase and possession of cannabis in each Canadian jurisdiction is 19 years old, except for Quebec and Alberta, where it is 18.

The Company conducts an e-liquids business through its majority-owned, consolidated subsidiary, Humble Juice, and has investments in unconsolidated joint ventures with involvement in e-liquids businesses, Nicotine River and Purilum.

Humble Juice sells branded, flavored e-liquids (that is, the liquid containing tobacco-derived nicotine used in vaporizers, electronic cigarettes, and other vaping hardware and accessories) to retailers for sale to consumers.

Humble Juice offers consumer flavored e-liquid products under the Humble Juice Co.

Humble Juice is registered with the U.S Food and Drug Administration (the “FDA”) as a manufacturer of tobacco products (nicotine containing vaping products).

“Risk Factors” for a discussion of applicable government regulation of leaf tobacco.

The Company conducts an e-liquids business primarily through its majority-owned, consolidated subsidiary, Humble Juice, and an investment in Purilum, an unconsolidated joint venture.

Humble Juice has historically offered consumers flavored e-liquid products under the Humble Juice Co.

brand name through its website.

Humble Juice operates out of a facility in Thousand Oaks, California.

Nicotine River supplies liquid tobacco-derived nicotine to commercial e-liquid producers nationwide and also retails online the materials necessary to permit the home manufacture of e-liquids, including lab equipment, vegetable glycerin, liquid nicotine, propylene glycol, polyethylene glycol, flavor extracts, titration kits and do-it-yourself kits.

Purilum offers flavor formulation and development for vaping products, including e-liquids.

In addition to creating original flavors for customers, Purilum replicates formulations and flavors, matching brand requirements.

In addition, Purilum develops and manufactures vaping products, including vapable oils and nicotine salts, for direct sale, as well as for business-to-business commerce.

In addition to creating original flavors for manufacturers, Purilum replicates formulations and flavors, matching brand requirements.

In addition, Purilum develops and manufactures vaping products, including vapable oils and nicotine salts, for sale to consumers through retailers, as well as for business-to-business commerce.

The market for the e-liquid products is highly competitive and subject to rapid change and regulatory requirements.

While historically the e-liquids niche of the vaping industry had low barriers to entry, recent regulatory requirements in the U.S.

have created regulatory hurdles and approvals for new entrants to those markets.

The e-liquids market is currently intensifying with continual innovations and upgrades being the primary characteristics of the market.

The e-liquids market is highly fragmented, and many of the competitors of each of Humble Juice, Nicotine River, and Purilum have significantly greater resources than it does.

Each of Humble Juice, Nicotine River, and Purilum competes primarily on the basis of product quality, brand recognition, brand loyalty, service, marketing, advertising, and price.

have created regulatory hurdles and authorizations for new entrants to those markets.

The e-liquids market is highly fragmented, and many of the competitors of each of Humble Juice and Purilum have significantly greater resources than it does.

Each of Humble Juice and Purilum competes primarily on the basis of product quality, brand recognition, brand loyalty, service, marketing, advertising, and price.

The FDA has authority to regulate e-liquids, e-cigarettes and other vaping products that contain (or are used to consume e-liquid containing) tobacco-derived ingredients (e.g., nicotine) as "tobacco products" under the federal Food, Drug and Cosmetic Act (the "Food, Drug and Cosmetic Act"), as amended by Family Smoking Prevention and Tobacco Control Act of 2009 (the "Tobacco Control Act").

Via the issuance of "Deeming Regulations" that became effective on August 8, 2016, the FDA began regulating e-liquids, e-cigarettes, and other vaping products that qualify as "tobacco products" under the Food, Drug and Cosmetic Act's requirements added by the Tobacco Control Act.

Via the issuance of the "Deeming Regulation" that became effective on August 8, 2016, the FDA began regulating e-liquids, e-cigarettes, and other vaping products that qualify as "tobacco products" under the Food, Drug and Cosmetic Act's requirements added by the Tobacco Control Act.

The Deeming Regulations extended the FDA's "tobacco products" authorities to apply to most previously unregulated products that meet the statutory definition of "tobacco product," including e-liquids, e-cigarettes and other vaping products that contain (or are used to consume e-liquid containing) tobacco-derived ingredients ("Deemed Tobacco Products").

Beginning August 8, 2016, Deemed Tobacco Products became subject to all existing statutory controls initially applicable only to cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco (including components, parts, and accessories of such products) as well as some existing and some new FDA

regulations related to the sale and distribution of tobacco products.

As a result, Deemed Tobacco Products are now subject to various federal restrictions and requirements, including without limitation:

• a prohibition on sales to those younger than 21 years of age and requirements for verification by means of photographic identification by purchasers under 27;

• a prohibition on sales to those younger than 21 years of age and requirements for verification by means of photographic identification by purchasers under 27 (which we anticipate the FDA will increase to 30 via regulatory amendment);

• requirements to include addictiveness warnings on product packages and in advertisements;

• a ban on vending machine sales unless the vending machines are located in a facility where the retailer ensures that individuals under 18 years of age are prohibited from entering at any time;

• a ban on vending machine sales unless the vending machines are located in a facility where the retailer ensures that individuals under 18 years of age (which we anticipate the FDA will increase to 21 via regulatory amendment) are prohibited from entering at any time, provided the facility's operator otherwise complies with the prohibition on sales to consumers younger than 21;

• requirements for owners and operators of domestic tobacco product manufacturing establishments to register their establishments with the FDA and submit listings of products manufactured at those establishments to the FDA;

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The Food, Drug and Cosmetic Act requires that any Deemed Tobacco Product that was not commercially marketed as of the "grandfathering" date of February 15, 2007 obtain premarket authorization before it can be marketed in the United States.

However, the FDA has announced a compliance policy for such Deemed Tobacco Products that qualify as "new tobacco products" and that the agency will not enforce these requirements for non-finished products (i.e., those intended solely for use in future manufacturing), which include certain products manufactured by Purilum.

As modified by orders issued by the United States District Court for the District of Maryland, the current compliance policy generally allows companies to market finished Deemed Tobacco Products that qualify as "new tobacco products" but that were on the U.S.

However, the FDA has announced a compliance policy for such Deemed Tobacco Products that qualify as "new tobacco products" under which the agency will not enforce these requirements for non-finished products (i.e., those intended solely for use in future manufacturing), which include certain products manufactured by Purilum.

As modified by orders issued by the United States District Court for the District of Maryland, the current compliance policy also generally allows companies to market finished Deemed Tobacco Products that qualify as "new tobacco products" but that were on the U.S.

market on August 8, 2016, until September 9, 2020, and the continued marketing of such products without otherwise-required authorization for up to one year during the FDA's review of a pending marketing application submitted by September 9, 2020.

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The current compliance policy also does not apply to otherwise-eligible products (i) for which the manufacturer has failed to take (or is failing to take) adequate measures to prevent minors’ access and (ii) that are targeted to minors or with marketing that is likely to promote use by minors.

In the absence of this policy, Humble Juice, Nicotine River and Purilum would have had to obtain prior authorization from the FDA to market these products after August 8, 2016.

In the absence of this policy, Humble Juice and Purilum would have had to obtain prior authorization from the FDA to market these products after August 8, 2016.

Accordingly, such finished e-liquid products have been marketed pursuant to the FDA's current compliance policy based on evidence that they were on the U.S.

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or (3) submission of a request for an exemption from substantial equivalence requirements and receipt of a substantial equivalence exemption determination.

The Company cannot predict if the finished, nicotine-containing e-liquid products of Humble Juice, Nicotine River and Purilum, all of which would be considered "new tobacco products," will receive the required marketing authorization from the FDA if they were to seek premarket approval through an available authorization pathway.

The Company cannot predict if the finished, nicotine-containing e-liquid products of Humble Juice and Purilum, all of which would be considered "new tobacco products," will receive the required marketing authorization from the FDA if they were to seek premarket approval through an available authorization pathway.

Since there were few, if any, e-liquid, e-cigarette or other vaping products on the market as of February 15, 2007, there is no way to utilize the less onerous substantial equivalence or substantial equivalence exemption pathways that traditional tobacco corporations can utilize for cigarettes, smokeless tobacco, and other traditional tobacco products.

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Furthermore, the Deeming Regulations created a significant barrier to entry for any new e-liquid, e-cigarette or other vaping product seeking to enter the market after August 8, 2016, since any such product would require an FDA marketing authorization through one of the aforementioned pathways.

The Company expects that Humble Juice will file PMTA applications by September 9, 2020.

Humble Juice filed PMTAs for its line of finished Deemed New Tobacco Products by the September 9, 2020 deadline.

These PMTAs are pending with the FDA.

Provisions included in the Consolidated Appropriations Act, 2021, the omnibus appropriations and COVID-19 stimulus bill enacted on December 27, 2020 (the “2021 Appropriations Act”), require the United States Postal Service (the “USPS”) to issue regulations prohibiting the mailing of e-cigarettes and other vaping devices, as well as nicotine e-liquids products.

On February 19, 2021, the USPS published its proposed regulations (the “Proposed Regulations”).

The Proposed Regulations would subject e-cigarettes, vaping devices products, and e-liquid products to all existing restrictions on and exceptions for the mailing of cigarettes, except that the existing exceptions permitting the mailing of cigarettes (i) for consumer testing purposes and (ii) by federal agencies for public health purposes would not be available for the mailing of e-cigarettes, vaping devices products, and e-liquid products.

If the Proposed Regulations were enacted as proposed by the USPS, subject to limited exceptions in applicable USPS regulations (including between legally operating businesses pursuant to applications approved by the USPS), shipment of these products via the USPS, including shipments to consumers, would be prohibited on and after the date on which the USPS promulgates the final regulations.

Provisions of the 2021 Appropriations Act subject e-cigarettes and other vaping devices, as well as e-liquids products, to the provisions of the Prevent All Cigarette Trafficking Act of 2009 (the “PACT Act”), which imposes stringent rules on online sellers.

Under the PACT Act, online retailers are required to (i) register with the U.S.

Attorney General, (ii) verify the age of customers using a commercially available database, (iii) use private shipping services that collect an adult signature at the point of delivery, (iv) if selling in states that tax vaping products, register with the federal government and with the tobacco tax administrators of the states, (v) collect all applicable local and state taxes, and affix any required tax stamps to the products

sold, (vi) send each taxing state’s tax administrator a list of all transactions with customers in their state, including the names and addresses of each customer sold to, and the quantities and type of each product sold and (vii) maintain records for five years of any delivery interrupted because the carrier or delivery service determines or has reason to believe that the person ordering the delivery is in violation of the PACT Act.

Sellers who do not register or do not comply with the shipping and reporting rules of the PACT Act are subject to civil and criminal penalties, including up to three years in prison.

State and local governments also currently regulate tobacco products, including nicotine-containing vaping products.

Certain municipalities have enacted local ordinances that prohibit the use of e-liquid, e-cigarette and other vaping products where traditional tobacco-burning cigarettes cannot be used, and certain state and local jurisdictions have enacted total or partial bans on the sale of flavored tobacco products, including e-liquid, e-cigarette and other vaping products.

Certain states and municipalities have enacted local ordinances that prohibit the use of e-liquid, e-cigarette and other vaping products where traditional tobacco-burning cigarettes cannot be used, and certain state and local jurisdictions have enacted total or partial bans on the sale of flavored tobacco products, including e-liquid, e-cigarette and other vaping products.

A growing number of states have imposed excise taxes on e-liquids, e-cigarettes, and other vaping products.

Other states and local jurisdictions imposed restrictions or prohibitions on internet sales of such products, and have challenged the marketing of such products under consumer protection statutes (e.g., on the basis that certain marketers unlawfully target underage consumers or make unsubstantiated or misleading claims about their products).

Industrial Hemp

Criticality produces products containing extracts of industrial hemp, including CBD products, specializing in the production of bulk and white label hemp-extract and CBD products, as well as the production of its own branded product lines (Korent™ and Korent Select™).

The Company sources industrial hemp from growers to supply Criticality.

Prior to our acquisition of the majority of interests in Criticality on April 22, 2020, Criticality was an unconsolidated equity method investment.

The market for hemp-extract and CBD products is highly competitive and highly fragmented.

Many of the Criticality’s competitors have significantly greater resources than it does, access to more retail distribution channels and a longer operating history.

Criticality competes primarily on the basis of product quality, brand recognition, brand loyalty, production chain transparency, marketing, advertising, and price.

In 2014, the Agriculture Act of 2014 (the “2014 Farm Bill”) was enacted in the United States.

The 2014 Farm Bill allowed for the domestic cultivation of "industrial hemp" (i.e., cannabis plants, plant parts, and derivatives with no more than 0.3% THC) as part of agricultural pilot programs adopted by individual states for the purposes of research by state departments of agriculture and institutions of higher education.

Until October 13, 2020, the 2014 Farm Bill governs domestic production of industrial hemp for growers holding licenses from states that do not have industrial hemp plans approved by the United States Department of Agriculture ("USDA").

These states include Colorado, New York, North Carolina, and Virginia.

There is significant uncertainty concerning the permissible scope of commercial activity under the 2014 Farm Bill.

The 2014 Farm Bill authorized only institutions of higher education and state agriculture departments to cultivate industrial hemp, and only to do so for research purposes.

However, it also gave significant discretion to states to regulate industrial hemp pilot programs.

Many states that have adopted pilot programs have registered private companies to cultivate and process industrial hemp.

Additionally, many states, including North Carolina, where Criticality is based, have interpreted the 2014 Farm Bill to permit marketing research concerning industrial hemp through, among other things, commercial marketing and sale of industrial hemp and industrial hemp products.

In contrast, the FDA, the U.S.

Drug Enforcement Agency (the “DEA”) and the USDA have taken the position that, under the 2014 Farm Bill, industrial hemp products may not be sold for the purpose of general commercial activity or in states without agricultural pilot programs that permit their sale for research marketing purposes;

these agencies have also taken the position that, under the 2014 Farm Bill, industrial hemp plants and seeds may not be transported across state lines.

There is evidence that Congress does not agree with these agencies’ interpretation of the 2014 Farm Bill, including through its insertion in various appropriations bills language prohibiting the DEA from using funds to impede state agricultural pilot programs.

Further, with the enactment of the Agricultural Improvement Act of 2018 (the “2018 Farm Bill”), discussed below, industrial hemp products meeting the 2018 Farm Bill’s definition of “hemp” do not qualify as controlled substances under the U.S.

Controlled Substances Act, regardless of their compliance with the 2014 Farm Bill.

On December 20, 2018, the 2018 Farm Bill was signed into law.

The 2018 Farm Bill, among other things, removes “hemp” and its derivatives (including its cannabinoids, such as CBD) from the U.S.

Controlled Substances Act and amends the Agricultural Marketing Act of 1946 to provide for commercial production of hemp in the United States.

The law defines "hemp" as "the plant Cannabis sativa L.

and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol ("THC") concentration of not more than 0.3 percent on a dry weight basis." The 2018 Farm Bill tasked the USDA with establishing a regulatory framework for the commercial hemp industry.

Hemp-producing states currently have the option either (a) to submit a plan to the USDA that (if approved) would allow that state’s plan-compliant growers to operate under the requirements and protections of the 2018 Farm Bill, or (b) until October 13, 2020, to continue to operate under the requirements and protections for the agricultural pilot programs under the 2014 Farm Bill.

The 2018 Farm Bill also permits individual growers in states without USDA approved plans to apply for a federal license from the USDA and to operate individually under the 2018 Farm Bill.

On October 31, 2019, the USDA published an interim final rule which became effective immediately.

The interim final rule governs hemp production under the 2018 Farm Bill, subject to public review and comment and any changes made when the formal rule is promulgated.

The interim final rule provides for certain minimum requirements for state plans, provides a plan

for the USDA to review and approve state-submitted hemp plans, and establishes a federal licensing and regulatory system for hemp production in states without an approved state plan.

Although the interim final rule became effective immediately, until such time as the USDA approves state hemp plans or issues federal licenses to hemp cultivators in states without plans in the approval process, hemp production is governed by the more restrictive 2014 Farm Bill, and commercial production of hemp may be deemed to violate federal law.

As of May 27, 2020, the most current data available from the USDA, the USDA had approved seventeen state plans and thirty-two tribal plans and one territorial plan under the 2018 Farm Bill.

As of that date, North Carolina, where Criticality is based, had not submitted a plan that had been approved by the USDA.

Accordingly, it continues to permit research-related activities involving industrial hemp under the more-restrictive 2014 Farm Bill, as do several other states from which Criticality purchases hemp.

In North Carolina, where Criticality is based, the state has issued, and continues to issue, licenses for an agricultural pilot program under the 2014 Farm Bill.

On October 31, 2015, the state general assembly passed Senate Bill 313 (as amended, the “NC Hemp Act”), establishing a state pilot program to research the cultivation of industrial hemp.

Consistent with the 2014 Farm Bill, the NC Hemp Act defined industrial hemp to include any part of the cannabis plant, whether growing or not, with a delta-9 THC concentration of not more than 0.3% on a dry weight basis.

The NC Hemp Act further created a North Carolina Industrial Hemp Commission (the “NC Hemp Commission”) to oversee the state’s pilot program.

The NC Hemp Commission was charged with, among other things, issuing licenses allowing persons, firms or corporations to cultivate industrial hemp for research purposes.

The NC Hemp Act provided that those licensed to grow and cultivate industrial hemp under the pilot program could engage in any of eleven authorized research-related activities, including, among others, studying and investigating marketplace opportunities for hemp products;

studying and investigating methods of industrial hemp cultivation;

studying the economic feasibility of developing an industrial hemp market in various types of industrial hemp that can be grown in the state, including by commercial marketing and sale of industrial hemp;

researching and promoting on the world market industrial hemp and hemp seed that can be grown in the state;

and promoting research into the development of industrial hemp and commercial markets for North Carolina industrial hemp and hemp products.

Criticality is a registered processor of industrial hemp under North Carolina’s agricultural pilot program.

Criticality sells industrial hemp-derived products, including CBD products, to consumers in other states.

The 2018 Farm Bill permits states to establish additional restrictions on hemp production and hemp products than required under federal law, although states may not interfere with the interstate transportation of hemp or hemp products produced in compliance with the 2018 Farm Bill.

Further, in May 2019, the USDA issued a legal opinion asserting its view that states may not interfere with the interstate transportation of industrial hemp or products derived from industrial hemp produced in compliance with the 2014 Farm Bill, although whether the individual states will heed and reviewing courts will defer to this opinion remains uncertain.

Under the 2018 Farm Bill, any cannabis plant, plant part or plant product that contains a higher concentration of THC than permitted in hemp is still considered a Schedule I substance under the Controlled Substances Act (i.e., marijuana) and is not protected by the 2018 Farm Bill.

Further, the 2018 Farm Bill specifies certain consequences for domestic production of hemp in violation of the applicable state or USDA hemp plan.

These include potential disqualification from hemp production for a five-year period beginning on the date of a third violation.

Further, under the 2018 Farm Bill, the FDA has retained authority over hemp, including CBD derived from hemp, in products that qualify as regulated articles under the Food, Drug, and Cosmetic Act, including foods, drugs, dietary supplements, and cosmetics.

The statutory text of the 2018 Farm Bill expressly left in place the authority of the FDA over hemp-derived products, including hemp-derived CBD products, under the Food, Drug, and Cosmetic Act.

The FDA has exercised this regulatory authority over hemp-derived products sold in interstate commerce to the extent that they qualify as regulated articles under the Food, Drug, and Cosmetic Act–i.e., they meet the statutory definition of “food,” “drug,” “cosmetic,” etc.

In particular, the FDA has continued to assert its view that the Food, Drug and Cosmetic Act prohibits the marketing of CBD dietary supplements or the addition of CBD to food, regardless of whether the CBD is hemp-derived, because CBD was not marketed as a food or dietary supplement prior to the authorization of substantial clinical investigations of CBD-containing drug products.

Stakeholders have questioned the validity of the FDA’s stated positions as applied to some or all CBD-containing food or dietary supplement products (e.g., those containing full- or broad-spectrum hemp extracts containing naturally occurring quantities of CBD).

Regardless, the FDA has express statutory authority to decide whether to issue regulations permitting the marketing of CBD dietary supplements and use of CBD as a conventional food additive.

The FDA has never previously used these authorities to promulgate regulations permitting the use of active drug ingredients in dietary supplements and conventional foods.

While the FDA has taken preliminary steps to explore the possibility of using these authorities and continues to invite submission of evidence establishing the prior marketing of CBD dietary supplements and CBD-containing foods, we cannot assure you that the FDA will change its current positions or proceed with issuing regulations overriding the statutory provisions on which the agency relies in asserting its current positions.

Indeed, even after soliciting submissions regarding potential regulations, the FDA has continued to send warning letters to certain producers of CBD products asserting its position and

warning those producers to cease production and marketing of their products.

Even if the FDA chooses to proceed with rulemaking, the timing and content of any final regulations cannot be assured, nor can it be predicted which particular products would be permitted and under what circumstances.

In addition, even if FDA ultimately permits the marketing of CBD dietary supplements or CBD-containing conventional foods, such products must otherwise comply with all applicable requirements of the Food, Drug, and Cosmetic Act and the FDA’s implementing regulations and policies for these categories of products, including restrictions on the types of claims that marketers may make for them.

Additionally, the Federal Trade Commission ("FTC") regulates advertising of all products, including for FDA-regulated articles made from hemp and CBD derived from hemp.

In addition to regulating hemp and industrial hemp under the aegis of the 2014 and 2018 Farm Bills, states regulate hemp and industrial hemp in other ways.

States, including North Carolina, have retained regulatory authority through their own analogs to the Food, Drug, and Cosmetic Act and have the authority to regulate the marketing of hemp and industrial hemp products, including CBD products, in food, drugs, dietary supplements and cosmetics as well as the claims made about them.

Some states have adopted the FDA’s positions regarding CBD dietary supplements and CBD in conventional foods.

Other states have not established industrial hemp pilot programs or otherwise prohibit the sale of all or certain hemp and industrial hemp products, including CBD products, under state controlled substances laws that do not include the same exceptions for excluded parts and hemp found in the U.S.

Controlled Substances Act, as amended by the 2018 Farm Bill, or that restrict the sale of such products only for certain limited medical uses.

In addition, the sales and marketing of hemp and industrial hemp products, including CBD products, are subject to regulation by state consumer regulatory and health agencies and are subject to enforcement actions by state attorneys general.

Criticality’s industrial hemp activities are and likely will continue to be governed by a complex fabric of rapidly evolving and sometimes-conflicting federal and state laws and regulations, including among others the unique and varied laws of the states from which Criticality sources its hemp and industrial hemp and to which Criticality ships its products.

The Company cannot provide assurance that all states will amend their laws to mirror the federal Controlled Substances Act’s exclusions for hemp or otherwise permit the broad commercial distribution of hemp-derived products, including CBD products.

Intellectual Property

We routinely cooperate with both our customers and the manufacturers of the equipment used in our leaf processing facilities to improve processing technologies.

Building consumer product brands is a critical element of our diversification strategy and we promote our products through trademarks that distinguish them in the market.

“Risk Factors” for a discussion of applicable government regulation of e-liquids.

Human Capital Management

Our workforce is one of our most important stakeholder groups and is critical to achieving our purpose–to transform people’s lives so that together we can grow a better world.

The attraction, development, and retention of talent enables us to make progress against our business strategy, and it is essential that we create and maintain a culture of conducting business the right way.

It is for these reasons that we dedicate resources to employee engagement, focus on creating a safe workplace, and recognizing employees for the results that they deliver.

At March 31, 2021, we employed approximately 2,900 people, excluding seasonal employees, in our worldwide operations.

We maintain positive relationships with the Company’s employees and their respective organizations.

We have collective bargaining agreements in place in many of the countries in which we operate and we have long-term agreements in-place in certain jurisdictions to resolve disputes through binding arbitration.

Oversight and Management

Our Human Resources department is responsible for managing employment-related matters, including recruiting and hiring, onboarding, compensation design and implementation, performance management, advancement and succession planning, and professional and learning development.

Our Board of Directors provides oversight of various matters pertaining to our workforce.

The Compensation Committee of the Board is responsible for executive compensation matters and oversight of the risks and programs related to talent management.

Our Human Rights Policy and Code of Business Conduct highlight our commitment to diversity, inclusion, fairness, safety, and equal opportunity in all aspects of employment.

In response to COVID-19, we focused on business continuity, health and safety of our employees, and adapting our ways of working to a new environment.

We quickly implemented additional safety measures to protect essential employees in our offices and facilities, including social distancing protocols, face covering requirements, temperature checks, and additional cleaning and sanitation practices.

We also enhanced remote-work arrangements and digital collaboration and related risk management.

Supply Chain Human Rights Matters

We support efforts to address human rights concerns in the tobacco supply chain.

For example, in our tobacco supply chain, we use on-farm good agricultural practices assessments to assess growers’ compliance with labor practices.

Our subsidiaries establish contract terms and conditions with tobacco suppliers related to issues such as forced and child labor, and they conduct social compliance due diligence throughout our tobacco-growing regions.

Environmental Compliance

Currently, there are no material estimated capital expenditures related to environmental control facilities.

Available Information

Our website is www.pyxus.com .

Securities and Exchange Commission ("SEC").

The information contained on our website shall not be deemed part of this annual report on Form 10-K.

The SEC maintains a website (www.sec.gov ) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Forward-looking Statements

We may from time to time make written or oral forward-looking statements, including statements contained in filings with the SEC, in reports to stockholders and in press releases and investor calls and webcasts, which are forward-looking statements under the Private Securities Litigation Reform Act of 1995.

You can identify these forward-looking statements by use of words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “will,” “estimates,” “intends,” “projects,” “goals,” “targets” and other words of similar meaning.

You can also identify them by the fact that they do not relate strictly to historical or current facts.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions.

Achievement of future results is subject to risks, uncertainties and inaccurate assumptions.

Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated, or projected.

Investors should bear this in mind as they consider forward-looking statements and whether to invest in or remain invested in the Company’s securities.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, this Annual Report includes disclosure of risks and uncertainties, including in " Item 1A.

Risk Factors ", that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by us.

Any such statement is qualified by reference to these cautionary statements.

It is not possible to predict or identify all risk factors.

Consequently, the risks and uncertainties identified in this Annual Report should not be considered a complete discussion of all potential risks or uncertainties.

We do not undertake to update any forward-looking statement that we may make from time to time except as may be required by law.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business