UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
For the fiscal year ended: December 31 2016
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number: 333-183360
Panacea Life Sciences Holdings, Inc.
(Exact name of registrant as specified in its charter)
Nevada | 27-1085858 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | ||
5910 S University Blvd, C18-193, Greenwood Village, CO80121
(Address of principal executive offices, Zip Code)
800-985-0515
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
N/A | N/A | N/A |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☑ ☐ No ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the precedingpast 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ ☒ No ☑
Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate website, if any every interactive data fileInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large | Accelerated | |
Smaller reporting company | ||
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of June 30, 2016,the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, theJune 30, 2021, was approximately $11,185,976. The aggregate market value gives effect to the closing of the shares of commonSecurities Exchange Agreement dated June 30, 2021 and the 1-for-28 reverse stock held by non-affiliates of the registrant was not determinable.
State the number of shares outstanding of each of the registrant’sissuer’s classes of common stock, as of the latest practicable date. 33,571,862date: shares of Common Stockcommon stock, par value $0.0001 per share, outstanding as of March 28, 2017
TABLE OF CONTENTS
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Item 1. | Business | 1 |
Item 1A. | ||
PART II | 16 | |
PART III | ||
PART IV | 26 | |
SIGNATURES | 27 |
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Cautionary Statement Regarding Forward-Looking Statements
This Annual Report on Form 10-K and other written and oral statements made from time to time by us may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about our new operations in the hemp industry through Panacea, our expected revenue growth, our future plans and developments, proposed federal legislation and its potential impact on the CBD industry, our plans to raise capital, and our liquidity. Words such as “expects,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “could,” “would,” “may,” “intends,” “targets” and similar expressions or variations of such words are intended to identify forward-looking statements but are not the exclusive means of identifying forward-looking statements in this Report. The identification of certain statements as “forward-looking” is not intended to mean that other statements not specifically identified are not forward-looking. All statements other than statements about historical facts are statements that could be deemed forward-looking statements, including, but not limited to, statements that relate to our future revenue, product development, customer demand, market acceptance, growth rate, competitiveness, gross margins, and expenditures.
Although forward-looking statements in this Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties discussed under the heading “Risk Factors” within Part I, Item 1A of this Report, and other documents we file from time-to-time with the Securities and Exchange Commission (“SEC”). Such risks, uncertainties and changes in condition, significance, value, and effect could cause our actual results to differ materially from those expressed herein and in ways not readily foreseeable. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report and are based on information currently and reasonably known to us. We undertake no obligation to revise or update any forward-looking statements to reflect any event or circumstance that may arise after the date of this Report, other than as required by law. Readers are urged to carefully review and consider the various disclosures made in this Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
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PART I
Item 1. Business
General
Panacea Life Sciences Holdings, Inc. (PLSH) is holding company structured to support the life sciences and health and wellness industry. Its subsidiary, Panacea Life Sciences, Inc. (PLS) is dedicated to manufacturing, research and producing the highest-quality, hemp-derived cannabinoid, functional mushroom, Kratom and nutraceutical products for consumers and pets. Established in 2017, PLS is a woman-owned and woman-led company. Panacea operates out of its 51,000 square foot, state-of-the-art, cGMP facility in Golden Colorado, focusing on natural plant-based extraction, manufacturing, research, testing and fulfillment services. Panacea operates in every segment of the manufacturing value chain. From cultivation to finished goods, the company ensures its products with stringent GMP standards and testing protocols employed at every stage of the supply chain. Panacea also offers the purest natural remedies within its branded product lines for every aspect of life: PANA Health™, PANA Beauty®, PANA Sport™, PANA Pet®, PANA Pure® and PANA Life™. If you would like more information, please visit www.panacealife.com.
Recent Developments
In June 2022, given the FDA’s lack of clarity regarding the CBD industry, the Company pivoted some of its resources to focus on the nutraceutical industry. The Company made further investments in its softgel line for bovine and vegan softgels. The sales approach has been successful and we have closed over ten different nutraceutical contracts. In this same timeframe we have focused on two other natural plant products—functional mushrooms and kratom. These new areas will continue to be a focus area for Panacea in 2023.
On November 18, 2021, the Company and an institutional investor signed an agreement for a $1.1 million original issue discount convertible note (the “Note”) financing in which the investor is paying $1 million in gross proceeds. The one-year Note is convertible into common stock at $1.40 per share. We also issued the investor 785,715 warrants to purchase common stock at an exercise price of $1.40 per share. The warrants are exercisable over a five-year period beginning May 18, 2022. The loan payoff was made on December 15, 2022 for the amount of $1,115,000.
Our Competitive Analysis
We believe that our competitive advantages are derived from being vertically integrated that allows for extraction, enrichment and manufacturing under a cGMP quality environment: 1) Using pharmaceutical formulation methods to optimize the delivery of various nutraceutical, hemp, mushroom and kratom products, 2) Developing both full spectrum and THC-free products, 3) hemp supply, and 4) utilize Good Manufacturing Practice to produce goods that ensures safe and quality products that deliver consistent dosing. The ability to produce both full spectrum products (those that contain <0.3%) and THC-free products allows us to optimize dosage and delivery to various human conditions.
Industrial hemp extracts are found to have particular application as neuroprotectants, for example in limiting neurological damage and increasing speed of recovery with traumatic brain injury. The cannabinoids have also been reported to treat human disease conditions where currently multiple pharmacological products are needed, e.g., Post Traumatic Stress Disorder (PTSD), or where there is no current cure such as Alzheimer’s, Parkinson’s Disease, and age-related dementia, to name a few. Cannabinoids have a wide range of possible benefits which we are pursuing through clinical trials and studies.
● | Anti-Nausea /Antiemetic | |
● | Anticonvulsant | |
● | Antipsychotic | |
● | Anti-inflammatory | |
● | Anti-oxidant | |
● | Anti-tumoral / Anti-cancer | |
● | Anxiolytic / Anti-depressant | |
● | Reduces nausea and vomiting | |
● | Suppresses seizure activity | |
● | Combats psychosis disorders | |
● | Combats inflammatory disorders | |
● | Combats neurodegenerative disorders | |
● | Combats tumor and cancer cells | |
● | Combats anxiety and depression |
Although numerous reports describe cannabis/hemp extract health benefits the industry lacks sufficient clinical data and quality control to provide patient benefit. We are combining human and pet clinical studies with Good Manufacturing Process manufacturing to generate a panel of products tailored and optimized for specific disease treatment. Our products are designed to optimize formulation with delivery method to maximize health benefits including an intellectual property portfolio enabling development of topical creams, sublingual products, oral soft gel capsules, patches, and sprays. Our products are derived from organic practices industrial hemp grown in Colorado.
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Our goals are to research, produce, and distribute products both domestically and internationally that target and treat major categories of medical conditions: pain, cancer, psychological, gastrointestinal, autoimmune, neurological, and sleep disorders. These categories include conditions that affect hundreds of millions of patients and animals worldwide.
Our goal is to be a leader in contract manufacturing for end-products, such as nutraceuticals, supplements and pet and farm products.
Our Intellectual Property
We operate in every segment of the cannabinoid product value chain. From the hemp plant to finished goods, we ensure our products with stringent testing protocols employed at every stage of the supply chain. Panacea endeavors to offer pure natural remedies within product lines for every aspect of life, Our portfolio includes the following trademarks and registrations: PANA Health™, PANA Beauty®, PANA Sport™, PANA Pet®, PANA Life®.
Research and Development
In October 2021, Panacea Life Sciences’ investment in the Cannabinoid Lab at Colorado State University (“CSU”) was realized. The Cannabinoid Research Center is conducting numerous studies and clinical research that will extend our knowledge of how cannabis extracts affect human and animal health. We will work through the center to form multiple research collaborations as well as perform our own studies in multiple therapeutic areas. The Panacea Life Sciences Cannabinoid Research Center is housed in the Chemistry Building in the heart of the CSU campus. The center is expected to be a leader in cannabinoid research nation and world-wide as the industry continues to grow.
Our Sales Strategy
As previously described, since our cannabinoid products contain little to no THC, we have the ability to sell our products across the United States and internationally. We have established a multi-faceted sales strategy targeting:
● | global ecommerce platform for fulfilling orders and shipping worldwide where legally permitted; | |
● | direct pharmacy placement; | |
● | direct placement in retail stores, salons, spas, athletic facilities, etc. | |
● | Intelligent vending machines | |
● | E-commerce based systems and social media |
In addition, we have established several other sales channels via sales reps, e-commerce (selling directly to customers), large bulk sales to suppliers and to dispensaries. The e-commerce sales platform also works with the commissioned based sales. All sales commissions are tracked and paid via the ERP platform.
We also manufacture nutraceutical and other cannabinoid/kratom/mushroom products for several other companies for various white label and contract manufacturing deals. We specialize in bovine and vegan soft gel manufacturing.
Marketing and Distribution
We distribute our products to various businesses across the United States through channels optimized to the individual needs of customers. Our B2B as well as B2C approach allows much flexibility for healthcare providers the ability to recommend specific treatment options using cannabinoids as a replacement for conventional pharmaceuticals.
Currently we sell over 60 different product SKUs of CBD and CBG products. In addition, we offer “white label” licensing to retail businesses and contract manufacturing services to smaller CBD companies. We plan to continue to build an integrated healthcare organization by creating products and programs using emerging botanical extracts. We deliver these programs through managed agriculture, pharmaceutical production, physician education, distribution and social media networks. We use our intellectual property in extraction technology, proprietary compounds, delivery systems, and distribution to produce high-quality products in terms of control, consistency, accountability, and packaging.
All our products are stored in a secure distribution area in preparation for delivery to various sales channels, healthcare providers and other retail locations. The laboratory and production facility have the capacity for domestic and international delivery fulfillment and for international export. All products are tracked and securely manifested for delivery to retail and medical offices for distribution.
We are recruiting key service providers to leverage the power of online sales and social media placement. We have placed products on various online retail sales stores and has launched product sales on Amazon.com. As product ambassadors are secured, we intend to increase its online and social media exposure to advance a business-to-consumer and business to business distribution model.
In 2018, we entered into an agreement with Quintel-MC, Inc. to research and define Panacea Life Sciences business and manufacturing processes. The ERPCannabis system based on an SAP architecture was used to develop the base installation. All financial, human resource, payroll, procurement, production planning and materials management business processes are represented in this system. In addition, the system is linked to our e-Commerce web site. This system allows us to update product costing and determine inventory levels which will be critical as the company expands. In addition, sophisticated financial and payroll processing are inherent in the solution; thus, offering investors detailed accounting results related to company investments.
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Our Industrial Hemp Supply
Our 2020 and 2021 hemp crop was grown in NeedleRock Farms in Crawford CO. In 2021 XXII was the grower and is using organic practices for the crop. XXII is contractually obligated to provide use with $500,000 of hemp from the 2021 crop. We also have several hemp tolling contracts in which the output of crude and or distillate is shared with the growers.
Biotechnology Goals
We seek to take advantage of an emerging worldwide trend to utilize the production of cannabinoids derived from industrial hemp, such as CBD, CBDA, CBG, CBDV and CBN, to produce consumer products. Hemp is being used in cosmetics, nutritional supplements, and animal feed, where we also intend to focus our efforts. The market for hemp-derived products is expected to increase substantially over the next five years.
The therapeutic potential of cannabinoids is attributable to the valuable overlap between phyto-cannabinoids (i.e., “our”plant-derived cannabinoids) and the endogenous cannabinoid system in humans, termed a “therapeutic handshake”. Clinical trials demonstrate few adverse effects from oral CBD doses of up to 1,500 mg/day. The scientific understanding of the hemp plant’s clinical effects is based mostly on studies in specific indications, like epilepsy. One company, GW Pharmaceuticals pls, a leading company developing pharmaceutical drugs and cannabinoid-based medicines, has sought and obtained US and foreign approvals since 2018. EPIDIOLEX®/EPIDYOLEX® (cannabidiol), “us”the first prescription, plant-derived cannabis-based medicine approved by the U.S. Food and Drug Administration (FDA) for use in the U.S. and the European Commission (EC) for use in Europe, is an oral solution which contains highly purified cannabidiol (CBD). In the U.S., “we”EPIDIOLEX® is indicated for the treatment of seizures associated with Lennox-Gastaut syndrome (LGS), Dravet syndrome or Tuberous Sclerosis Complex (TSC) in patients one year of age and older.
Environmental Matters
Compliance with federal, state and local requirements regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, have not had, nor are they expected to have, any direct material effect on our capital expenditures, earnings or competitive position, however such factors could indirectly affect us as well as participants in the supply chain for our products, and our business, operations, vendors or suppliers.
Government Regulations
On December 20, 2018, the President of the United States signed the Farm Bill into law. Among other things, this new law changed certain federal authorities relating to the production and marketing of hemp, defined as cannabis (Cannabis sativa L.), and hemp products containing less than 0.3 percent delta-9-tetrahydrocannabinol (THC, including removing hemp and derivatives of hemp from the Controlled Substance Act. January 15, 2021, the USDA issued its final rule regarding the Establishment of a Domestic Hemp Production Program which authorized hemp to be grown and processed legally in the United States and made it legal to transport in interstate commerce.
The Farm Bill recognizes hemp as distinct from its genetic cousin, marijuana, and specifically industrial hemp has been excluded from U.S. drug laws. The Farm Bill allows for each individual state to regulate industrial hemp and industrial hemp-based products or accept the USDA rules. Although no longer a controlled substance under federal law, cannabinoids derived from industrial hemp (other than THC) are still subject to a patchwork of state regulations. We are actively monitoring the regulations and proposed regulations in each state to ensure our operations are compliant.
As of the date of this report, and based upon publicly available information, to our knowledge the FDA has not taken any enforcement actions against CBD companies. The FDA, however, has sent warning letters to companies demanding they cease and desist from the production, distribution, or advertising of CBD products, only relating to instances that such CBD companies have made misleading and unapproved label claims. We will continue to monitor the FDA’s position on CBD as the FDA has now transferred this area to Congress.
We are subject to federal and state consumer protection laws, including laws protecting the privacy of customer non-public information and the handling of customer complaints and regulations prohibiting unfair and deceptive trade practices. The growth and demand for online commerce has and may continue to result in more stringent consumer protection laws that impose additional compliance burdens on online companies. These laws may cover issues such as user privacy, spyware and the tracking of consumer activities, marketing e-mails and communications, other advertising and promotional practices, money transfers, pricing, product safety, content and quality of products and services, taxation, electronic contracts and other communications and information security.
There is also great uncertainty over whether or how existing laws governing issues such as sales and other taxes, auctions, libel, and personal privacy apply to the internet and commercial online services. These issues may take years to resolve. For example, tax authorities in several states, as well as a Congressional advisory commission, are currently reviewing the appropriate tax treatment of companies engaged in online commerce, and new state tax regulations may subject us to additional state sales and income taxes. New legislation or regulation, the application of laws and regulations from jurisdictions whose laws do not currently apply to our business or the “Company” referapplication of existing laws and regulations to Exactus, Inc.the internet and its wholly-owned subsidiary, unlesscommercial online services could result in significant additional taxes or regulatory restrictions on our business. These taxes or restrictions could have an adverse effect on our cash flows, results of operations and overall financial condition. Furthermore, there is a possibility that we may be subject to significant fines or other payments for any past failures to comply with these requirements.
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Human Capital
On December 31, 2022, we had 19 full-time employees. There are no collective bargaining agreements covering any of our employees. We believe that our success depends on our ability to attract, develop and retain key personnel. We believe that the context otherwise requires) was incorporated on January 18, 2008 as “Solid Solar Energy, Inc.”skills, experience and industry knowledge of our key employees significantly benefit our operations and performance.
Employee health and safety in the Stateworkplace is one of Nevada as a for-profit Company. On May 16, 2013, we filed a certificateour core values. The COVID-19 pandemic has underscored for us the importance of amendmentkeeping our employees safe and healthy. In response to the Company’s amendedpandemic, we have taken actions aligned with the World Health Organization and restated articlesthe Centers for Disease Control and Prevention in an effort to protect our workforce so they can more safely and effectively perform their work.
Employee levels are managed to align with the pace of incorporationbusiness and management believes it has sufficient human capital to changeoperate its business successfully.
Additional information
We file annual, quarterly and other reports, proxy statements and other information with the SEC. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers such as our namecompany that file electronically with the SEC.
Our corporate website address is www.panacealife.com. We make available free of charge, through the Investor section of our website, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to “Spiral Energy Tech., Inc.” from Solid Solar Energy, Inc. On February 29, 2016, we acquired allthose reports filed or furnished pursuant to Section 13(a) or 15(d) of the issued and outstanding capital stock of Exactus BioSolutions, Inc. (“Exactus BioSolutions”) pursuant to a Share Exchange Agreement, dated February 29, 2016,Act as soon as reasonably practicable after we electronically file such material with, Exactus BioSolutions (the “Share Exchange”). The Company issued 30 million shares of newly-designated Series B-1 Preferred Stockor furnish it to, the shareholdersSEC. The information which appears on our corporate website is not part of Exactus BioSolutionsthis report.
Item 1A. Risk Factors
RISK FACTORS
Investing in our common stock involves a high degree of risk. Investors should carefully consider the following Risk Factors before deciding whether to invest in us. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations or our financial condition. If any of the events discussed in the Share Exchange, representing approximately 87%Risk Factors below occur, our business, financial condition, results of voting controloperations or prospects could be materially and adversely affected. In such case, the value and marketability of our common stock could decline.
Summary Risk Factors
Our business is subject to numerous risks and uncertainties that you should consider before investing in our common stock. Set forth below is a summary of the Companyprincipal risks we face:
● | We intend to raise capital through the sale of our common stock or securities convertible or exercisable into our common stock soon which will have a dilutive effect on our existing stockholders; | |
● | Our ability to continue as a going concern is in doubt unless we obtain adequate new debt or equity financing and achieve sufficient sales levels; | |
● | Because we require additional capital to execute our business plan and expand our operations, our inability to generate and obtain such capital on acceptable terms, or at all, could harm our business, operating results, financial condition and prospects; | |
● | We are highly dependent on our Chief Executive Officer, and the loss of her services or a conflict of interest arising from her loans to us, and her other business endeavors would adversely affect us; | |
● | Our business and the CBD industry generally are subject to substantial regulation and governmental scrutiny characterized by high compliance costs and uncertainty, including the possibility that laws change in a manner adverse to us; | |
● | Panacea’s operations and our new Chief Executive Officer were not previously subject to SEC reporting obligations, which could render us difficult to evaluate and expose us to risk; | |
● | If we are unable to keep up with rapid technological change, consumer preferences and economic developments in our industry or in general, our products may become obsolete. | |
● | We could become subject to data privacy and security claims or enforcement actions, particularly due to our digital marketing efforts; | |
● | We may become subject to product liability or related claims based on our production and sale of products containing chemical compounds designed to be ingested or applied topically; |
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● | Our Chief Executive Officer, directly and through entities she controls, owns a majority of our outstanding common stock and voting power on an as-converted basis, rendering other stockholders’ ability to influence matters before them limited in most cases; and | |
● | Operational risks such as material weaknesses and other deficiencies in internal control over financial reporting could result in errors, potentially requiring restatements of our historical financial data, leading investors to lose confidence in our reported results. |
Risks Related to Our Business and the CBD Industry
Because we need to raise additional capital any financing based on our common stock or common stock equivalents will dilute our existing stockholders and the terms of any such financing could impose restrictions on our operations.
We have depended upon consummationloans from our Chief Executive Officer and principal stockholder and have primarily financed our operations by borrowing funds from her.
Because, we are highly dependent on the services of Leslie Buttorff, our sole executive officer, the loss of her and our inability to expand our management team, could harm our business.
Our success is largely dependent on the continued services of Leslie Buttorff, our Chief Executive Officer and principal stockholder. The loss of the Share Exchange. Asservices of Ms. Buttorff would leave us without executive leadership, which could diminish our business and growth opportunities. Additionally, Ms. Buttorff has business interests outside our company and a real estate holding company each of which hold shares in us as a result of the Sharerecent share exchange under the Exchange Exactus BioSolutions becameAgreement. Accordingly, from time-to-time she may not devote her full time and attention to our affairs, which could have a wholly-owned subsidiarymaterial adverse effect on our operating results, and there can be no assurance that a conflict of Exactus, Inc. Effective March 22, 2016,interest will not arise from her other business ventures. Further, as of December 31, 2022, Ms. Buttorff holds demand promissory notes totaling $14,796,011 at various interest rates ranging from 0% to 12%. Thus, she has the power to call the notes and obtain all our assets. Additionally, we changedhave a line of credit with Ms. Buttorff through which it may borrow up to $5 million at a 10% annual interest rate. The fact that she continues to advance money and is our corporate nameprincipal stockholder reflects her intent to “Exactus, Inc.” viasupport us.
The loss of Ms. Buttorff would have a mergermaterial adverse effect on us. We do not have key man insurance on the life of Ms. Buttorff. Ms. Buttorff’s Employment Agreement with us (the “Employment Agreement”) permits her to resign for good reason which includes our wholly-owned subsidiary, Exactus Acquisition Corp.
If we are unable to develop and maintain our brand and reputation for our product offerings, our business and prospects could be materially harmed.
Our business and prospects depend, in part, on developing and then maintaining and strengthening our brand and reputation in the markets we serve. If problems with our products cause our customers to have a negative experience or replacement manufacturers of our products.
Because we face intense competition, we may not be able to increase our market share which would materially and adversely affect us.
Our industry is highly competitive. It is possible that future competitors could enter our market, thereby causing us to lose market share and revenues or fail to grow our operations and market presence as intended or at all. In addition, some of our current or future competitors have significantly greater financial, technical, marketing and other resources than we do or may have more experience or advantages in the markets in which we will compete that will allow them to offer lower prices or higher quality products. If we do not successfully compete with these competitors, we could fail to develop a sufficient market share to achieve our goals and our future business prospects could be materially adversely affected.
Because the sale of our products involves the potential for product liability, we may incur significant losses and expenses in excess of our insurance coverage.
We face an inherent risk of exposure to product liability claims if the use of our products results in, or is believed to have resulted in, illness or injury. Our products are designed for ingestible or topical use and contain combinations of ingredients, and there is little experience with or knowledge of the long-term effects of these combinations. In addition, interactions of these ingredients and products with other products, prescription medications and over-the-counter treatments have not been approvedfully explored or understood and may have unintended consequences. Future research or results may lead to the discovery of unknown adverse side effects from CBD, which would harm our business.
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Although we believe all our products will be safe when taken as directed by us, there is little long-term research on the effects of human consumption of certain of the new product ingredients or combinations in concentrated form that we use or may in the future use in developing our CBD products. Any instance of illness or negative side effects of ingesting CBD products or applying them topically on the skin could have a material adverse effect on our business and operations by, among other things, exposing us to the risk of costly litigation and/or governmental sanctions and dramatically reducing the demand for commercial sale. Ifsome or all our products.
Any product liability claims or related developments from our products or CBD in general may increase our costs and whenadversely affect our revenue, product demand and operating results. Moreover, liability claims arising from a serious adverse event may increase our costs through higher insurance premiums and deductibles and may make it more difficult to secure adequate insurance coverage in the future. In addition, our product liability insurance may fail to cover future product liability claims, which, if adversely determined, could subject us to substantial monetary damages.
The success of our business will depend upon our ability to create and expand our brand awareness.
The health and wellness and CBD markets we compete in are highly competitive, with many well-known brands leading the industry. Our competitors include CBD companies who have a longer history operating in these markets than we do. Our ability to compete effectively and generate revenue will be based upon our ability to create and expand awareness of our products distinct from those of our competitors. It is imperative that we are able to convey to consumers the benefits of our products both in general and as compared to competitive offerings. However, advertising, packaging and labeling of our products is limited by various regulations. Our success will be dependent upon our ability to convey to consumers that our products are approved for commercial sale, we intendsuperior to develop an in-house teamthose of our competitors while complying with complex and varying regulations in the United Statesmarkets in which we attempt to market and distributesell them.
If we fail to develop and introduce new products it will adversely affect our future prospects.
Our industry is subject to rapid change. New products are constantly introduced to the market. Our ability to remain competitive depends in part on our ability to enhance existing products, to develop and manufacture new products in a timely and cost-effective manner, to adequately anticipate, prepare and execute strategies for market transitions, and to effectively market our products. Management believes that our future financial results will depend to a great extent on the successful expansion of our current product offerings and on the development and introduction of new products. We expectcannot be certain that we will be successful in selecting, developing, manufacturing and marketing new products or in improving upon or enhancing the market for existing products.
The success of new product introductions or expansions to collaboratenew territories depends on various factors, including, without limitation, the following:
● | Successful sales and marketing efforts; |
● | Timely delivery of the products; |
● | Availability of raw materials and/or sufficient production facilities; |
● | Pricing of raw materials and labor; |
● | Regulatory allowance and restrictions of the products; and |
● | Market acceptance and consumer sentiment. |
If we fail to appropriately respond to changing consumer preferences and demand for new products, it could significantly harm our customer relationships and product sales and harm our operating results and financial condition.
Our business is subject to changing consumer trends and preferences, especially with respect to targeted nutrition and natural wellness products. Our success will depend in part on our ability to anticipate and respond to these changes, and we may not respond in a timely or commercially appropriate manner to such changes. Furthermore, the medical communityhealth and wellness industry is characterized by rapid and frequent changes in demand for products and new product introductions and enhancements. Our failure to utilize online marketingaccurately predict these trends could negatively impact consumer opinion of our products, which in turn could harm our customer relationships and product demands and cause the loss of sales. The success of our product offerings depends upon a number of factors, including our ability to:
● | Accurately anticipate consumer needs; |
● | Successfully commercialize new products or product enhancements in a timely manner; |
● | Price our products competitively; |
● | Arrange for the production and delivery our products in sufficient volumes and in a timely manner; |
● | Differentiate our products from those of our competitors; and |
● | Innovate and develop new products or product enhancements that meet these trends. |
If we do not meet these challenges, some of our products could be rendered obsolete, which could negatively impact our operating results and financial condition.
Adverse publicity associated with our products or ingredients, or those of our competitors or similar businesses, could adversely affect our sales and revenue.
Adverse publicity concerning any actual or purported failure by us or our competitors to showcasecomply with applicable laws and create awarenessregulations or concerning any other aspect of our business or the CBD industry could have an adverse effect on the public perception of us and our products. This, in turn, could negatively affect our ability to obtain financing, endorsers and attract distributors, retailers or consumers for our products, which would have a material adverse effect.
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Our distributors’ and customers’ perception of the safety, utility and quality of our products or even similar products distributed by others can be significantly influenced by national media attention, publicized scientific research or findings, product liability claims and other publicity concerning our products or similar products distributed by others. Adverse publicity, whether accurate or not, that causes a perceived connection between consumption of our products or any similar products and illness or other adverse effects, will likely diminish the public’s perception of and in turn the demand for our products. Claims that any products are ineffective, inappropriately labeled or have inaccurate instructions as to their use, could have a material adverse effect on the market demand for our products, including reducing our sales and revenue, which would have a material adverse effect on our business.
If we are unable to manufacture our products in sufficient quantities or at defined quality specifications or are unable to maintain regulatory approvals for our production facility, we may be unable to develop or meet demand for our products and lose time to market and potential revenues.
Commercialization of our products require access to, or development of, facilities to manufacture a sufficient supply of our products. Our initial marketing efforts will target physicians, hospital administrators, hospital service providers, and group purchasing organizations.
We may face competition for access to any third-party supply sources, development or may require substantial resources to correct.
If the market opportunities for our current and potential future products are less lucrative than anticipated, our ability to generate revenues may be quite different from thoseadversely affected and our business may suffer.
Our understanding, expectation and estimates of the FDA,
If we are unable to establish relationships with third parties to carry out sales, marketing, and distribution functions or to create effective marketing, sales, and distribution capabilities, we will be unable to market our products successfully.
Our business strategy includes using third parties to market and sell the products at the retail level. There can be no assurance that we will successfully be able to establish marketing, sales, or distribution relationships with a sufficient number of third parties to meet our goals, that such relationships, if established, will be successful, or that we will be successful in gaining market acceptance for current or future products. To the extent that we enter into any marketing, sales, or distribution arrangements with third parties, our product revenues per unit sold are expected to be lower than
if we marketed, sold, and distributed our products directly, and any revenues we receive will depend upon the efforts of such third parties.
If we are unable to establish such third-party marketing and sales relationships, we would have to establish and grow in-house marketing and sales capabilities. To market any products directly, we would have to build a marketing, sales, and distribution force that requiredhas technical expertise and could support a distribution capability. Competition in the health and wellness and cannabinoid industries for FDA approval. Therefore, we cannot assuretechnically proficient marketing, sales, and distribution personnel is intense, and attracting and retaining such personnel may significantly increase our costs. There can be no assurance that we will be able to satisfyestablish internal marketing, sales, or distribution capabilities or that these capabilities will be sufficient to meet our needs.
Because of the regulatory requirementsRussian Invasion of Ukraine, the effect on the capital markets and the economy is uncertain, and as a result we may have to selldeal with a recessionary economy and economic uncertainty, including possible adverse effects upon our ability to raise capital as and when needed.
As a result of the Russian invasion of Ukraine, certain events are beginning to affect the global and U.S. economy including increased inflation, substantial increases in the prices of oil and gas, large Western companies ceasing to do business in Russia and uncertain capital markets with declines in leading market indexes. The duration of this war and its impact are at best uncertain. Ultimately the economy may turn into a recession with uncertain and potentially severe impacts upon public companies and us, including our ability to raise capital. We cannot predict how this will affect our operations or the industries in which we operate, however any such impact may be material and adverse.
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We have a limited operating history upon which investors can evaluate our future prospects.
Panacea was founded and began operations in the CBD industry in 2017 and we therefore have a limited operating history upon which an evaluation of our business plan or performance and prospects can be made. Our business and prospects must be considered in the light of the potential problems, delays, uncertainties and complications encountered in connection with a business which is still in its early stages in a relatively new industry characterized by unexpected change. The risks include, but are not limited to, the possibility that we fail to develop functional and scalable products, or that although functional and scalable, our products will not be economical to market in order to become or remain profitable; that our competitors hold proprietary rights precluding us from marketing such products; that our competitors offer a superior or equivalent product or otherwise achieve or maintain greater market acceptance than us; that we are unable to upgrade or improve our processes and products to accommodate new features and expand our offerings; or that we fail to receive or maintain necessary regulatory clearances and compliance for our products and operations. In order to grow our revenue, we must develop and improve upon our brand name recognition and competitive advantages for our products and expand into new markets. Even if we accomplish such growth, resulting expenses may be greater than estimated, which could reduce or even eliminate any foreign country.
If we fail to attract new customers in a cost-effective manner, our business may be harmed.
A large part of our success depends on our ability to attract new customers in a cost-effective manner. We have made, and may continue to make, significant investments in attracting new customers through increased advertising spends on social media, radio, podcasts, and targeted email communications, other media and events, sponsorships, and influencer sponsorships. Marketing campaigns can be expensive and may not result in the cost-effective acquisition of customers. Further, as our brand becomes more widely known, future marketing campaigns may not attract new customers at the same rate as past campaigns and the cost of acquiring new customers may increase over time. Additionally, regulation, algorithms, or participants in the digital marketing ecosystem may change rules for our industry or access to available demographics which may result in significant changes in the ability to target key demographic pools, impacting our ability to target our customers effectively. If we are full time.
Even if we meet our growth objectives and Our Business
Our entry into new markets and/or growth in our product offering or consumer base may place a significant strain on our resources and increase demands on our executive management, personnel and operational systems, and our human, administrative and financial resources may be inadequate to meet these demands. We may also be unable to effectively manage any expanded operations or achieve planned growth on a timely or profitable basis, particularly if the number of customers using our products thatsignificantly increases within a short period of time. If we are unable to manage expanded operations effectively, we may experience operating inefficiencies, the quality of our products could decline, and our business and results of operations could be materially adversely affected.
If we cannot manage our growth effectively, our results of operations would be materially and adversely affected.
We expect to experience growth as we raise additional capital. Businesses which grow rapidly often have difficulty managing their growth while maintaining their compliance and quality standards. If we grow as rapidly as anticipated, we will need to expand our management by recruiting and employing additional executive and key personnel capable of providing the necessary support. There can be commercialized.
Existing or future governmental regulations relating to cannabinoid products by the end of 2018. Ourmay harm or prevent our ability to generate revenues from sales will depend, among other things,produce and/or sell our successful completionproduct offerings.
While a majority of clinical trials, regulatory approvals, commercialization and market acceptance of our technologies and products, medical community awareness and changes in regulations.
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Because laws and regulations affecting our industry are evolving, changes to any regulation may materially affect our CBD products.
In conjunction with the enactment of the Agriculture Improvement Act of 2018 (the “Farm Bill”), the Food and Drug Administration (the “FDA”) released a statement about the status of CBD as a nutritional supplement, and the agency’s actions in the short term with regards to CBD will guide the industry. As a company whose products contain CBD, we intend to meet all FDA guidelines as the regulations evolve. Any difficulties in compliance with future government regulation could increase our operating costs and adversely impact our results of operations in future periods.
In addition, as a result of the Farm Bill’s passage, we expect that there will be a constant evolution of laws and regulations affecting the CBD industry which could affect our operations. Local, state and federal hemp laws and regulations may be broad in scope and subject to changing interpretations. These changes may require us to incur substantial costs associated with legal and compliance fees and ultimately require us to alter our business plan. Furthermore, violations of these laws, or alleged violations, could disrupt our business and result in a material adverse effect on our operations. In addition, we cannot predict the nature of any future laws, regulations, interpretations or applications, and it is possible that regulations may be enacted in the future that will be directly applicable to our business.
Unexpected changes in federal and state law could cause any of our current products, as well as products that we intend to develop and launch, containing hemp-derived CBD oil to be illegal, or could otherwise prohibit, limit or restrict any of our products containing CBD.
Our business is based on the production and distribution of products containing hemp-derived CBD. The Farm Bill, which amended various sections of the U.S. Code, and legalized the cultivation and sale of industrial hemp at the federal level, subject to compliance with certain federal requirements and state law. There can be no assurance that the Farm Bill will not be repealed or amended such that our products containing hemp-derived CBD would once again be deemed illegal under federal law.
The Farm Bill delegates the authority to the states to regulate and limit the production of hemp and hemp-derived products within their territories. Although many states have adopted laws and regulations that allow for the production and sale of hemp and hemp-derived products under certain circumstances, no assurance can be given that such state laws may not be repealed or amended such that our intended products containing hemp-derived CBD would once again be deemed illegal under the laws of one or more states now permitting such products, which in turn would render such intended products illegal in those states under federal law even if the federal law is unchanged. In the event of either repeal of federal or of state laws and regulations, or of amendments thereto that are adverse to our intended products, we may be restricted or limited with respect to those products that we may sell or distribute, which could adversely impact our intended business plan with respect to such intended products.
Additionally, the FDA has indicated that certain products containing CBD are not permissible under the Federal Food, Drug, and Cosmetic Act (the “FDCA”), notwithstanding the passage of the Farm Bill. On December 20, 2018, after the Farm Bill became law, then FDA Commissioner Scott Gottlieb issued a statement in which he reiterated the FDA’s position that CBD products that are marketed with a claim of therapeutic benefit must be approved by the FDA for their intended use before they may be distributed in interstate commerce and that the FDCA prohibits interstate distribution of food products containing CBD and marketing products containing CBD as a dietary supplement, regardless of whether the substances are hemp-derived. Although we believe our existing and planned CBD products comply with applicable federal and state laws and regulations, legal proceedings alleging violations of such laws could have a material adverse effect on our results of operations and financial condition. Sources of hemp-derived CBD depend upon legality of cultivation, processing, marketing and sales of products derived from those plants under state law.
Hemp-derived CBD can only be legally produced in states that have laws and regulations that allow for such production and that comply with the Farm Bill, apart from state laws legalizing and regulating medical and recreational cannabis or marijuana, which remains illegal under federal law. This is one of the reasons why we are based in Colorado. Unexpected changes in federal and state law could cause our current CBD production methods or resulting products, as well as products that we intend to develop and launch, to be illegal or could otherwise prohibit, limit or restrict some or all of our products in the event of repeal or amendment of laws and regulations which are now comparatively favorable to the cannabis/hemp industry in certain states, we would be required to locate new suppliers in states with laws and regulations that qualify under the Farm Bill. If we were to be unsuccessful in arranging new sources of supply of our raw ingredients, or if our raw ingredients were to become legally unavailable, our intended business plan with respect to such products could be adversely impacted.
Because we and our distributors may only sell and ship our products containing hemp-derived CBD in states that have adopted laws and regulations qualifying under the Farm Bill, a reduction in the number of states having such qualifying laws and regulations could limit, restrict or otherwise preclude the sale of intended products containing hemp-derived CBD.
The interstate shipment of hemp-derived CBD from one state to another is legal only where both states have laws and regulations that allow for the production and sale of such products and that qualify under the Farm Bill. Therefore, the marketing and sale of our products is limited by such factors and is restricted to such states. Although we believe we may lawfully sell any of our finished products including those containing CBD in a majority of states, a repeal or adverse amendment of laws and regulations that are now favorable to the distribution, marketing and sale of finished products we intend to sell could significantly limit, restrict or prevent us from generating revenue related to our products that contain hemp-derived CBD. Additionally, any such adverse changes or existing legislation in new markets we target may stunt our growth and diminish our prospects. Any such repeal or adverse amendment of laws and regulations could have an adverse impact on our business plan with respect to such products.
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Costs associated with compliance with numerous laws and regulations and quality standards could adversely impact our financial results.
The manufacture, labeling and distribution of CBD products is regulated by various federal, state and local government agencies. These governmental authorities regulate our products and processes to ensure that the products are not adulterated or misbranded. We are subject to regulation by the federal government and other state and local agencies as a result of our CBD products. In addition to the risks associated with the possibility of government enforcement or private litigation due to alleged noncompliance, our compliance costs associated with our day-to-day operations are high and are expected to increase as we expand into new markets and/or develop and market new products. For example, as a “seed to sale” CBD business, meaning a business which handles every step of a CBD product’s manufacture and sale in-house rather than relying on third parties for some or all the production and distribution steps, we are responsible for the quality of our product, and the means by which it is produced and marketed, at every stage. Compliance with regulations imposed on our business model means we must deploy and maintain an advanced computer monitoring system which allows us to track our production and distribution process. We must train our employees and utilize and maintain security measures to ensure our facility functions properly. Compliance with these and other government requirements for product monitoring, quality, labelling and distribution are costly which may limit our profitability.
Our products or third parties with whom we do business may not comply with health, safety and labelling standards.
We do not have control over all of the third parties involved in the sale of our products and their compliance with government health, safety and labelling standards. Even if our products meet these standards, they could otherwise become contaminated or fail, or the standards could be changed in a manner adverse to our operations or those of our business partners. A failure to meet these standards could occur in our operations or those of our distributors or suppliers. This could result in expensive production interruptions, recalls, regulatory investigations and enforcement actions and liability claims. Moreover, negative publicity could be generated from false, unfounded or nominal liability claims or limited recalls. Any of these failures or occurrences could negatively affect our business and financial performance.
If we fail to comply with U.S. laws related to privacy, data security, and data protection, it could adversely affect our operating results and financial condition.
We rely on a variety of marketing techniques, including email, radio, display advertising, and social media marketing, targeted online advertisements, and postal mailings, and we are approvedor may become subject to various laws and regulations that govern such marketing and advertising practices. A variety of federal and state laws and regulations, including those enforced by various federal government agencies such as the Federal Trade Commission, Federal Communications Commission, and state and local agencies, govern the collection, use, retention, sharing, and security of personal data, particularly in the context of online advertising, which we utilize to attract new customers.
The legislative and regulatory bodies or self-regulatory organizations in various jurisdictions inside the United States may expand current laws or regulations, enact new laws or regulations, or issue revised rules or guidance regarding privacy, data protection, consumer protection, information security, and online advertising. California has enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which became operative on January 1, 2020, and its implementing regulations took effect in August 2020. The CCPA requires companies that process personal information on California residents to make new disclosures to consumers about such companies’ data collection, use, and sharing practices and inform consumers of their personal information rights such as deletion rights, allows consumers to opt out of certain data sharing with third parties, and provides a new cause of action for sale,data breaches. In November 2020, California enacted the California Privacy Rights Act of 2020 (the “CPRA”), which amends and expands the scope of the CCPA, while introducing new privacy protections that extend beyond those included in the CCPA and its implementing regulations. The CCPA, as amended and expanded by the CPRA, is one of the most prescriptive general privacy law in the United States and may lead to similar laws being enacted in other U.S. states or at the federal level. For example, the State of Nevada also passed a law effective on October 1, 2019 that amends the state’s online privacy law to allow consumers to submit requests to prevent websites and online service providers (“Operators”) from selling personally identifiable information that Operators collect through a website or online service. Further, on March 2, 2021, the Governor of Virginia signed into law the Virginia Consumer Data Protection Act (the “VCDPA”). The VCDPA creates consumer rights, similar to the CCPA, but also imposes security and assessment requirements for businesses. In addition, on July 7, 2021, Colorado, the state in which we are headquartered, enacted the Colorado Privacy Act (“CoCPA”), becoming the third comprehensive consumer privacy law to be passed in the United States (after the CCPA and VCDPA). Although the CoCPA closely resembles the VCDPA, both of which do not contain a private right of action and will instead be enforced by the respective states’ Attorney General and district attorneys, the two differ in many ways and once they become enforceable in 2023, we must comply with each if our operations fall within the scope of these newly enacted comprehensive mandates. Prior efforts undertaken to comply with other recent privacy-related laws have proven that these initiatives require time to carefully plan, assess gaps in current compliance mechanisms, and implement new policies, processes and remediation efforts. Additionally, the Federal Trade Commission and state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data. Each of these privacy, security, and data protection laws and regulations, and any other such changes or new laws or regulations, could impose significant limitations, require changes to our business model or practices, or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct. In addition, any such changes could compromise our ability to develop an adequate marketing strategy and pursue our growth strategy effectively, which, in turn, could adversely affect our business, financial condition, and results of operations.
While we intend to strive to comply with applicable laws and regulations relating to privacy, data security, and data protection, given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be in conflict across jurisdictions, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us or third-party service providers to comply with privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personal data, may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our operating results and financial condition.
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Our planned expansion into international markets will involve inherent risks that we may not be able to commercialize any of these products. control.
Our products may not reachbusiness plan includes the market for a number of reasons, including:
● | Economic conditions adversely affecting geographic areas in which we intend to do business; |
● | Foreign currency exchange rates; |
● | Political or social unrest or economic instability in a specific country or region; |
● | Higher costs of doing business in foreign countries; |
● | Infringement claims on foreign patents, copyrights or trademark rights; |
● | Difficulties in staffing and managing operations across disparate geographic areas; |
● | Difficulties associated with enforcing agreements and intellectual property rights through foreign legal systems; |
● | Trade protection measures and other regulatory requirements, which may affect our ability to import or export our products from or to various countries; |
● | Adverse tax consequences; |
● | Unexpected changes in legal and regulatory requirements and challenges in complying with varying requirements across jurisdictions; and |
● | Military conflict, terrorist activities, natural disasters and medical epidemics. |
If we are unable to develop commercially viable products,overcome these or other challenges in executing our business, results of operations and financial condition willplanned expansion into international markets, our prospects would be materially and adversely affected.
Risks Related to Intellectual Property
We may become involved in litigation or other proceedings relating to patent and other intellectual property rights.
A third party may sue us or our strategic collaborators for infringing its intellectual property rights. Likewise, we may need to resort to litigation to enforce licensed rights or to determine the scope and validity of third-party intellectual property rights. The cost to us of any litigation or other proceeding relating to intellectual property rights, even if resolved in our favor, could be substantial, and the litigation would divert our efforts. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have a history of operating losses,substantially greater resources. If we do not expectprevail in this type of litigation, we or our strategic collaborators may be required to be profitablepay monetary damages; stop commercial activities relating to the affected products or services; obtain a license in order to continue manufacturing or marketing the affected products or services; or attempt to compete in the near futuremarket with a substantially similar product. Uncertainties resulting from the initiation and our independent registered public accounting firm has expressed doubt as tocontinuation of any litigation could limit our ability to continue as a going concern.
If we become involved in intellectual property litigation, such litigation is likely to be expensive and time-consuming and could be unsuccessful.
Our commercial success will not be sufficient to enabledepend in part on our avoiding infringement on the patents and proprietary rights of third parties for products we license or sell. There is substantial litigation, both within and outside the United States, involving patent and other intellectual property rights in the health and wellness industry, including patent infringement lawsuits, interferences, oppositions, and reexaminations and other post-grant proceedings before the U.S. Patent and Trademark Office, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications which are owned by third parties may exist with products we may license and sell.
Parties making intellectual property claims against us to complete the development of any potential products, including FibriLyzer. See “
To counter infringement or unauthorized use claims against us, we may be required to file infringement claims in response, or we may be required to defend the audit report prepared byvalidity or enforceability of any such intellectual property rights. In an infringement proceeding, a court may decide that either our independent registered public accounting firm relating to our financial statements for the year ended December 31, 2016 includes an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.
Any inability to protect our capital expenditures in a manner sufficient to sustain our operations in accordance with our expectations. The timing and degree of any future capital requirements will depend on many factors, including:
Our business is partly dependent upon our ability to establish, enforcetrademarks, trade secrets, copyrights and maintain strategic arrangements for research, development, clinical testing, manufacturing and marketing;
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The efforts we take to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. In addition, protecting our intellectual property rights is costly and time consuming. There is a risk that we may have insufficient resources to counter adequately such infringements through negotiation or the use of legal remedies. It may not be practicable or cost effective for us on acceptable terms,to fully protect our intellectual property rights in some countries or at all.jurisdictions. If we are unable to raise capital,successfully identify and stop unauthorized use of our intellectual property, we will be forced to delay, reduce or eliminatecould lose potential revenue and experience increased operational and enforcement costs, which could adversely affect our researchfinancial condition, results of operations and development programsbusiness.
The intellectual property behind our products may include unpublished know-how, which is dependent on certain key individuals, as well as existing and may not be able to continue as a going concern.
The commercialization of our products is partially dependent upon know-how and trade secrets held by certain individuals working with and for us. Because the successful development of our lead product candidate, FibriLyzer. If we failexpertise runs deep in these few individuals, if something were to successfully complete its development and commercialization, we will not generate operating revenues.
Risks Related to Our Securities and Our Status as an SEC Reporting Company
Because our Chief Executive Officer, directly and through entities she controls, beneficially owns approximately 61% of our issued and outstanding common stock and voting power on an as-converted basis, she can exert significant control over our business and affairs which may be averse to those of our stockholders, particularly if a conflict of interest arises.
Our Chief Executive Officer and currently one of our two directors, owns approximately 61% of our issued and outstanding shares of common stock and voting power on an as-converted basis. As of December 31, 2022, Ms. Buttorff and or her companies also hold $14.796 million in demand notes which bear interest at a rate ranging from 0 to 12% per annum. The interests of Ms. Buttorff may differ from the interests of our other stockholders, including by virtue of her other businesses operated through her entities and their holdings that are not affiliated with us. As a result, Ms. Buttorff will have significant influence and control over all corporate actions including those actions requiring stockholder approval, irrespective of how our minority stockholders may vote, including the following actions:
● | the election of our directors; |
● | charter or bylaw amendments; |
● | a merger, asset sale or other fundamental corporate transaction; and |
● | any other matter submitted to our stockholders for a vote, subject only to applicable law including the Nevada Revised Statutes. |
This concentration of ownership and the conflicts of interest may have the effect of impeding a merger, consolidation, takeover or other business combination or tender offer for our common stock which other stockholders may deem desirable or could reduce our stock price or prevent our stockholders from realizing a premium over our stock price in such a transaction. Further, to the extent our other stockholders disagree with an action Ms. Buttorff elects to take as a stockholder, their ability to prevent such action or avoid the effect on their shareholdings will range from significantly limited to non-existent due to our current capital structure, subject only to applicable law and our charter documents. Therefore, if Ms. Buttorff has an interest adverse to other stockholders, or if other stockholders otherwise disagree with Ms. Buttorff with respect to a matter before the stockholders, they will have little to no control over that matter and the direction we ultimately take.
The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business.
The federal securities laws require us to comply with SEC reporting requirements relating to our business and securities. Complying with these reporting and other regulatory obligations is time-consuming and will result in increased costs to us which could have a negative effect on our financial condition or business. These increased costs are not reflected in the timing for developmentfinancial statements contained in this Annual Report on Form 10-K because during the periods covered Panacea was a private company not subject to SEC reporting obligations.
As a public company, we are subject to the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. We are required to file annual, quarterly and current reports with the SEC disclosing certain aspects and developments of our technologybusiness and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we will need to commit significant resources, hire additional executive officers and personnel and provide for additional management oversight. We intend to implement additional procedures and processes for the purpose of addressing the standards and requirements applicable to SEC reporting companies. Sustaining our growth will also require us to commit additional managerial, operational and financial resources to identifying competent professionals to join us and to maintain appropriate operational and financial systems to adequately support our intended expansion. These activities may alsodivert management’s attention from other business concerns, which could have a material adverse effect on our results of operations, financial condition or business.
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Due to factors beyond our control, our stock price may be volatile.
Any of the following factors could affect the market price of our common stock:
● | Our failure to generate increasing material revenues from our business; |
● | Our failure to enhance our product offerings or expand into new markets; |
● | A decline in our revenue or growth rate; |
● | Our public disclosure of the terms of any financing which we consummate in the future; |
● | A decline in the economy which impacts the demand for our products and our ability to generate revenue and achieve growth metrics; |
● | Announcements by us or our competitors of significant contracts, new products, acquisitions, commercial relationships, joint ventures or capital commitments; |
● | Changes in laws, regulations or government actions affecting the cannabinoid industry in general or our products in particular; |
● | Our ability to list our common stock on a national securities exchange; |
● | Our ability to attract analyst coverage; |
● | The sale of large numbers of shares of common stock by our shareholders; |
● | Short selling activities; or |
● | Changes in market valuations of similar companies. |
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management’s time and attention, which would otherwise be used to benefit our business.
These broad market and industry factors may have a material adverse effect on the market price of our common stock, regardless of our actual operating performance. These factors could have a material adverse effect on our business, financial condition and results of operations due to the possible absence of financing sources for our operations during such additional periods of time. Although we may pursue other technologies (either developed in-house or acquired), there is no assurance that any other technology will be successfully identified or exploited.
We are focused on Point-of-Care blood diagnostic products, and if this field is substantially unsuccessful, this outcome could jeopardize our success or future results. The occurrence of any of these factors may have a material adverse effect on our business, operating results and financial condition.
The SEC has adopted regulations which makes transactions cumbersome and may reduce the value of an investment in the stock.
Broker-dealers are increasingly reluctant to permit investors to buy or sell speculative unlisted stock and often impose costs which make it uneconomical for small shareholders to do so. Moreover, as a result of apparent regulatory pressure from the SEC and the Financial Industry Regulatory Authority (“FINRA”) a growing number of broker-dealers decline to permit investors to purchase and sell or otherwise make it difficult to sell shares of penny stocks. The “penny stock” designation may have a depressive effect upon our common stock price which the prospective reverse stock split may not sufficiently overcome.
Our ability to continue as a going concern is in doubt unless we obtain adequate new debt or equity financing and achieve sufficient sales levels.
As noted above, we have incurred significant net losses to date. We anticipate that we will continue to lose money for the foreseeable future. Additionally, we have negative cash flows from operations and we our revenue may exceed our expenses in the next 12 months. Since our inception in 2017, we have generated losses from operations. As of December 31, 2021, our accumulated deficit was $16.7 million, and we had $3.8 million in cash and liquid stock. Our continued existence is dependent upon generating sufficient working capital and obtaining adequate new debt or equity financing. These factors raise doubt about our ability to continue as a going concern for a period of 12 months from the issuance date of this report. Management cannot provide assurance that we will ultimately achieve or maintain profitable operations or become cash flow positive or raise additional debt and/or equity capital. Because of our continuing losses, without improvements in our cash flow from operations or new financing, we may have to continue to restrict our expenditures. Working capital limitations may impinge on our day-to-day operations, which may contribute to continued operating losses.
Operational risks such as material weaknesses and other deficiencies in internal control over financial reporting could result in errors, potentially requiring restatements of our historical financial data, leading investors to lose confidence in our reported results.
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There are a number of factors that may impede our efforts to establish and maintain effective internal controls and a sound accounting infrastructure, including our lacking a Chief Financial Officer, our pace of growth, and general uncertainty regarding the operating effectiveness and sustainability of controls. Controls and procedures, no matter how well designed and operated, provide only reasonable assurance that material errors in our financial statements will be prevented or detected on a timely basis. Any failure to establish and maintain effective internal controls over financial reporting increases the risk of material error and/or delay in our financial reporting. Depending on the nature of a failure and any required remediation, ineffective controls could have a material adverse effect on our business and potentially result in additional restatements of our historical financial results. Financial restatements or other issues arising from ineffective controls and our recent change of our auditors could also cause investors to lose confidence in our reported financial information, which would have an adverse effect on the trading price of our securities. Delays in meeting our financial reporting obligations could affect our ability to maintain the listing of our securities. Although we seek to reduce these risks through active efforts relating to properly documented processes, adequate systems, risk culture, compliance with regulations, corporate governance and other factors supporting internal controls, such procedures may not be effective in limiting each of the operational risks.
Potential Impacts of the COVID-19 Pandemic on Our Business Operations
As disclosed in Note 2 to our consolidated financial statements, the COVID-19 pandemic has had a notable impact on general economic conditions, including but not limited to the temporary closures of many businesses, “shelter in place” and other governmental regulations, reduced business and consumer spending due to both job losses and reduced investing activity, among many other effects attributable to the COVID-19 pandemic, and there continue to be many unknowns.
Potential Impacts of Certain Current and Proposed Regulations on Our Business and Operations
A bill titled the Cannabis Administration and Opportunity Act, put forward by Senate Majority leader Chuck Schumer, D-NY, would amend the definition of a dietary supplement to remove the prohibition on marketing CBD as a dietary supplement. Management sees the bill, if enacted, as an exerciseopportunity for the FDA to accelerate their decision to classify CBD products as a dietary supplement. This would be a significant step for hemp/CBD companies as it would open the door to new selling opportunities, such as getting into retail stores, who have largely been hesitant to welcome CBD in their doors without a clear position from the FDA.
Many people are increasingly turning to CBD products for several reasons: CBD is non-psychoactive, so it does not produce a “high” like THC, there are few known contraindications, the properties of different cannabinoids can positively affect a wide range of ailments, and cannabinoids work directly and indirectly with the body’s endocannabinoid system to create balance known as homeostasis. As demand increases, we believe the FDA must provide more clarity about CBD’s legalization, and this bill is a promising first step.
For now, many companies that produce hemp-derived CBD products including us undertake to abide by the same regulations as any other dietary supplements like ingredient filings, good manufacturing practices (GMP), and labeling and marketing provisions. We will continue to sell CBD and other hemp-derived products while still awaiting a clear path from the FDA about how CBD products can be marketed and used.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
XXII has allocated 10 acres of the Needle Rock Farm in Delta County, CO to Panacea. We also lease our laboratory space at 16194 West 45th Drive, Golden, CO 80403 from J&N Real Estate Company, LLC which is owned by its CEO. See Note 5 to our consolidated financials.
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Item 3. Legal Proceedings
We have sued Defendants, Mike Fisher, in his official capacity as Osage County District Attorney ex rel. State of Oklahoma as an investigating and/or prosecuting body, Eddie Virden in his official capacity as the Sheriff of the City of Osage as holder of the property, and the City of Pawhuska as the property seizing body, (collectively the “Government Defendants”) for the return of approximately 17,000 pounds of industrial hemp (the “Property”). We believe we were entitled to possession of the Property pursuant to an August 23, 2018, contract between us and Blue Circle Development, LLC (“BCD”), wherein we agreed to pay and BCD agreed to deliver the Property according to certain terms. Plaintiff performed pursuant to the contract and is entitled to possession of the Property. We believe the Government Defendants wrongfully detained the Property and is responsible for damages to the Property and to us. On or about May 4, 2020, the Government Defendants improperly released the Property to BCD in violation of a Court Order. We have asserted claims against the Government Defendants for interference with the Court Order and BCD for improperly intercepting the Property from us. The case is currently set for a trial date in March 2023.
On February 16, 2021, Henley Group, Inc. filed with the Superior Court of the State of California, San Bernardino County, a complaint (Case #: SIV SB 2105771) against us for breach of contract and fraud related to our non-delivery of product. While we refunded the purchase price, the plaintiff seeks damages including lost profits and costs which plaintiff alleged to have incurred in the amount of approximately $45,000 as well as lost profits from expected future contracts with a prospective third-party buyer which plaintiff alleged to be $720,000. The plaintiff also seeks attorney’s fees and costs, consequential damages and punitive damages. This case was dismissed in May, 2022.
On October 7, 2019, CMI Mechanical (“CMI”) agreed to procure, deliver, and install a dehumidification system (the “System”) at our facility located at 16194 W. 45th Drive, Golden, Colorado 80403 (the “Property”). We believe the System has failed to meet the requirements of the subject contract, and CMI has not remedied that failure for us. We withheld certain payments as permitted under the contract. On December 10, 2020, CMI recorded a lien against the Property in the amount of $108,001.48. On January 27, 2021, the Panacea’s attorney notified CMI that its lien was invalid, overstated, and violated the terms of the contract. The letter also demanded that CMI remove the system at CMI’s own cost. The lien was since dropped. We settled this dispute in February 2022.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our Common Stock is quoted on the OTCQB over-the-counter market under the symbol “PLSH.” Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions. On March 28, 2023 the closing bid price on the OTC Markets for our Common Stock was $0.249.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, per share, subjectother than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to certain exceptions. For anytransactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction involvingin a penny stock, unless exempt,to deliver a standardized risk disclosure document prepared by the rules require: (i) thatSEC, that: (a) contains a broker or dealer approve a person’s accountdescription of the nature and level of risk in the market for transactions in penny stocks in accordance withboth public offerings and secondary trading; (b) contains a description of the provisions of Rule 15g-9 under the Exchange Act; and (ii) the brokerbroker’s or dealer receive from the investor a written agreementdealer’s duties to the transaction, setting forth the identitycustomer and quantity of the penny stock to be purchased, provided that any such purchase shall not be effected less than two business days after the broker or dealer sends such written agreementrights and remedies available to the investor.
The broker-dealer also must provide, prior to be reasonably expected to be capable of evaluating the risks of transactions in penny stocks.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the shares of common stock. Consequently, it may be more difficult to execute trades of our common stock which may have an adverse effect on the liquidity of our common stock.
Holders of preferred stock or exerciseOur Common Stock
As of outstanding warrants to acquireMarch 28, 2023, we had 14,965,317 shares of our common stock issued and outstanding, and approximately 186 shareholders on record.
Dividends
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:
1. We would cause additional dilution which could causenot be able to pay our debts as they become due in the priceusual course of business, or;
2. Our total assets would be less than the sum of our common stocktotal liabilities plus the amount that would be needed to decline.
We have not historically paid cashdeclared any dividends on our common stock, and we do not plan to pay cashdeclare any dividends on our common stock in the foreseeable future.
Item 1B.
A smaller reporting company is not listed on any exchange. The following table sets forthrequired to provide the range of high and low bid prices as reported for each period indicated.
High | Low | |
Fiscal year ended December 31, 2015 | ||
March 31, 2015 | N/A | N/A |
June 30, 2015 | N/A | N/A |
September 30, 2015 | N/A | N/A |
December 31, 2015 | $2.00 | $1.50 |
High | Low | |
Fiscal year ended December 31, 2016 | ||
March 31, 2016 | $3.05 | $3.00 |
June 30, 2016 | 3.05 | 0.55 |
September 30, 2016 | 2.50 | 0.56 |
December 31, 2016 | 1.50 | 0.40 |
Item 7. Management’s DiscussionDiscussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations contains information that management believes is relevant to an assessment and understanding of our results of operations. You should be read this discussion in conjunction with the
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General
We are subjecta Nevada corporation organized in 2008. Exactus, Inc. was our former name. We have pursued opportunities in hemp-based businesses, which we refer to significant risksas “cannabinoids or CBD”. On June 30, 2021 Panacea Life Sciences, Inc. “Panacea” entered into an Exchange Agreement with Exactus and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Except as otherwise required by law, we undertake no obligation to publicly release any updates to forward-looking statements to reflect events after the datea result became a seed-to-sale Cannabinoid company. The former Panacea stockholders have assumed majority control of this yearly report on Form 10-K, including unforeseen events.
Panacea Life Sciences Holdings, Inc. (PLSH) is holding company structured to obtain additional funding necessary to develop our products and maintain liquidity;
Its subsidiary, Panacea Life Sciences, Inc. (PLS) is dedicated to manufacturing, research and producing the highest-quality, hemp-derived cannabinoid, functional mushroom, Kratom and nutraceutical products for consumers and pets. From cultivation to finished goods, the company ensures its Licensing Agreementproducts with Digital Diagnosticsstringent GMP standards and testing protocols employed at every stage of the supply chain.
We are well positioned to develop producenovel hemp extracts as dietary supplements and commercialize blood diagnostic products that utilize certain intellectual property rights owned or licensed by Digital Diagnostics. The Licensing Agreement provides for Exactus BioSolutions and Digital Diagnostics to collaborate through the various stepstopical applications. Our biotechnology plans focus on our research at Colorado State University where we are involved in several health-related research studies.
Results of Operations
Comparison of the productYears Ended December 31, 2022, and device development process, including2021.
The following table sets forth our results of operations for the development, regulatory approvalyears ended December 31, 2022, and commercialization stages.
Years Ended December 31, | Period to | |||||||||||
2022 | 2021 | Period Change | ||||||||||
Revenues from cannabinoid sales | $ | 1,515,448 | $ | 1,933,627 | $ | (418,179 | ) | |||||
Revenues from PPE sales | $ | 111,530 | $ | 66,000 | 45,530 | |||||||
Cost of sales | $ | 1,230,508 | $ | 1,519,049 | $ | (288,541 | ) | |||||
Operating expenses | $ | 4,955,348 | $ | 4,959,059 | $ | (3,710 | ) | |||||
General and administrative | $ | 1,093,364 | $ | 1,518,687 | $ | (425,322 | ) | |||||
Interest expense | $ | (2,048,171 | ) | $ | (1,105,243 | ) | $ | (942,928 | ) | |||
Unrealized gain on marketable securities | $ | (2,660,105 | ) | $ | 1,008,046 | $ | (3,668,151 | ) | ||||
Realized gain on sale of securities | $ | 22,816 | $ | 160,296 | $ | (137,480 | ) | |||||
Other income (loss) | $ | 27,598 | $ | - | $ | 27,598 | ||||||
Employer retention credit | $ | 253,791 | $ | 396,679 | $ | (142,888 | ) | |||||
Rental income | $ | 232,183 | $ | 236,560 | $ | (4,377 | ) | |||||
Loss on sale of assets | $ | - | $ | (297,351 | ) | $ | 297,351 | |||||
Gain on extinguishment of debt | $ | 681,546 | $ | 755,782 | $ | (74,236 | ) |
Year Ended December 31, 2022 and commercialize pursuant to the Licensing Agreement Point-of-Care (“POC”) diagnostics for measuring proteolytic enzymes2021
Net Revenues
We are principally engaged in the blood based on a proprietary detection platform (the “New Business”). business of manufacturing, producing and selling products for nutraceutical companies and our own products made from industrial hemp. Revenue consists of sales of our five category of brand products, white label and contract manufacturing sales to other CBD companies, raw material sales (distillate and isolate), and tolling arrangements.
Our primary product, the FibriLyzer, will employ a disposable test “biosensor” strip combined with a portable and easy to use hand held detection unit that provides a result in less than 30 seconds. The initial markets we intend to pursue for the FibriLyzer are
Cost of 2017.
Cost of Operations
Year Ended | |||
December 31, | |||
2016 | 2015 | change | |
Revenue | $- | $- | $- |
Operating expenses | 1,601,486 | 389,282 | 1,212,204 |
Net loss from operations | (1,601,486) | (389,282) | (1,212,204) |
Total other (loss) income | (1,453) | 31,092 | (32,545) |
Loss from continuing operations | $(1,602,939) | $(358,190) | $(1,244,749) |
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Operating Expenses
Operating expenses of approximately $650,000 resulting from hiring two full time staff in February 2016 and license fees for the New Business, and $95,000 for stock based compensation.
The decrease in general and administrative expenses of $429,032 or 7% to $1,093,364 for the year ended December 31, 2016,2022, as compared to other income of $31,092$1,518,686 for the year ended December 31, 2015. The2021, was primarily due to decreases in sales commissions, sales and marketing activities as well as decreases in professional fees such as legal fees and consulting services.
Within the total G&A category of expenses, sales and marketing expenses decreased from $0.378 million to $0.169 million for the 12 months ended December 31, 2022 when compared to the 12 months ended December 31, 2021.
Also, within the total G&A category of expenses, professional, legal, and consulting fees were $0.478 million for the 12 months ended December 31, 2022, when compared to $0.779 million the 12 months ended December 31, 2021. In 2021, legal fees were related to the XXII farm sale and investment restructuring, the Panacea reverse merger and fees related to obtaining a trademark for our brand.
Other income in 2015 was $41,307 in debt forgiveness offset by $10,215 impairment of marketable securities.
Other income for the year ended December 31, 20162022, decreased by $4,645,111, or 402%, to (3,490,432) as compared to a net loss from continuing operations of $358,190$1,154,769 for the year ended December 31, 2015,2021. This decrease is due primarily to increased interest expense and a changedecrease in value of $1,244,749. the shares of XXII held by the company. In January, 2022 the XXII was trading at $2.17 verses $0.92 at year end.
Summary of Cash Flows
Years ended December 31, | ||||||||
2021 | 2020 | |||||||
Cash (used in) / provided by | ||||||||
Operating activities | $ | (2,399,579 | ) | $ | (3,922,090 | ) | ||
Investing activities | (196,972 | ) | 522,533 | |||||
Financing activities | 2,583,728 | 3,334,953 | ||||||
Net decrease in cash and cash equivalents | $ | (12,823 | ) | $ | (64,605 | ) |
Cash flows from operating activities
Net loss for year period ended December 31, 2016cash used in operating activities was $1,602,939 compared to $357,977$2,399,579 for the year ended December 31, 2015 which included $213 revenue from discontinued operations.
Cash flows from operations included non-cash charges related stock compensation for $100,000 and charges for bad debt, loss on disposal of equipment, and equipment impairment, which collectively totaled $12,543. Increases in accounts payable and accrued liabilities increased net cash from operatinginvesting activities by $547,941.
Net cash used in operatinginvesting activities was $196,972 for the year ended December 31, 2015 was $640,020. We recorded a2022, as compared to net loss of $357,977 for the period. Other items in uses of funds from operations included expenses incurred on behalf of parent company of $358,807 slightly offset by $68,885 expenses paid by related company.
Cash flows from financing activities
During the year ended December 31, 2015 was $0.
During the year ended December 31, 2016 was $1,945,000 largely due to proceeds from our issuance of shares of Series B-2 Preferred Stock and offset by our payment for Series A Preferred Stock. Net2021, cash provided by financing activities totaled $3,334,953 which includes of $2,302,468 from related party notes payable, $1,000,000 from convertible notes, and $243,041 from other loans.
Liquidity and Capital Resources
On December 31, 2022, we had approximately $1.1 million of liquid marketable securities and $7 thousand in cash. Our Chief Executive Officer holds the XXII shares pursuant to the pledge agreement and has the power at any time to permit us to sell the shares to provide working capital. We have borrowed substantial sums from Leslie Buttorff, our Chief Executive Officer, to meet its working capital obligations. On June 30, 2021, Panacea issued an affiliate of Ms. Buttorff a 12% demand promissory note for $4.063 million and issued Ms. Buttorff a 10% demand promissory note for $1.624 million secured by a pledge of certain XXII common stock owned by Panacea. Additionally, we have a line of credit with Ms. Buttorff through which it may borrow up to $5 million at a 10% annual interest rate.
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We may not have sufficient cash resources to sustain our operations for the year ended December 31, 2015 was $598,328 due to $497,156next 12 months, particularly if the large sales contracts we have do not result in proceeds from a related party and $100,000 in proceeds from the issuance of a note payable.
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
December 31, | December 31, | |
2016 | 2015 | |
ASSETS | ||
Current Assets | ||
Cash and cash equivalents | $1,055,336 | $- |
Restricted cash | - | 72,342 |
Due from related parties | - | 7,010 |
Prepaid expenses | 1,019,721 | - |
Total current assets | 2,075,057 | 79,352 |
Property and equipment, net of accumulated depreciation of $0 and $1,914, respectively. | - | 1,453 |
Intangible asset- license agreement | 50,000 | - |
Intellectual property- patents, net | - | 4,080 |
TOTAL ASSETS | $2,125,057 | $84,885 |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||
Current Liabilities | ||
Bank overdraft | $- | $1,172 |
Accounts payable | 566,495 | 75,483 |
Accrued expenses | 58,479 | 1,550 |
Note payable | - | 100,000 |
Total Current Liabilities | 624,974 | 178,205 |
TOTAL LIABILITIES | 624,974 | 178,205 |
Commitments and contingencies (see note 9) | ||
Stockholders' Equity (Deficit) | ||
Preferred stock: 50,000,000 authorized; $0.0001 par value 0 shares issued and outstanding | - | - |
Preferred stock Series A: 5,000,000 and 0 authorized; $0.0001 par value 4,558,042 and 0 shares issued, respectively and 0 shares outstanding | - | - |
Preferred stock Series B-1: 32,000,000 and 0 authorized; $0.0001 par value 2,800,000 and 0 shares issued and outstanding, respectively | 280 | - |
Preferred stock Series B-2: 10,000,000 and 0 authorized; $0.0001 par value 8,584,000 and 0 shares issued and outstanding, respectively | 858 | - |
Preferred stock Series C: 1,733,334 and 0 authorized; $0.0001 par value 1,733,334 and 0 shares issued and outstanding, respectively | 173 | - |
Common stock: 200,000,000 shares authorized; $0.0001 par value 34,071,862 and 515,290 shares issued and outstanding, respectively | 3,407 | 52 |
Additional paid-in capital | 3,835,263 | 643,587 |
Accumulated deficit | (2,339,898) | (736,959) |
Total Stockholders' Equity (Deficit) | 1,500,083 | (93,320) |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $2,125,057 | $84,885 |
The accompanying notes are an integral part of these consolidated financial statements. |
Year Ended December 31, | ||
2016 | 2015 | |
Revenues | $- | $- |
Operating Expenses | ||
General and administration | 759,145 | 108,400 |
Professional | 368,917 | 176,286 |
Research and development | 369,344 | 77,344 |
Impairment | 4,080 | 20,625 |
Stock-based compensation | 100,000 | 5,000 |
Depreciation and amortization | - | 1,627 |
Total operating expenses | 1,601,486 | 389,282 |
Net loss from operations | (1,601,486) | (389,282) |
Other Income (loss) | ||
Impairment on marketable securities | - | (10,215) |
Debt forgiveness | - | 41,307 |
Loss on disposal of equipment | (1,453) | - |
Total other (loss) income | (1,453) | 31,092 |
Net loss before income taxes | (1,602,939) | (358,190) |
Provision for income tax | - | - |
Loss from continuing operations | $(1,602,939) | $(358,190) |
Revenue from discontinued operations | - | 213 |
Net Loss | $(1,602,939) | $(357,977) |
Basic and Diluted Loss per Common Share | $(0.08) | $(0.70) |
Weighted Average Number of Common Shares Outstanding | 19,220,686 | 512,003 |
The accompanying notes are an integral part of these consolidated financial statements. |
Additional | Accumulated | |||||||||||||
Preferred Stock - Series A | Preferred Stock- Series B-1 | Preferred Stock- Series B-2 | Preferred Stock- Series C | Common Stock | Paid in | Other Comprehensive | Accumulated | |||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Income (Loss) | Deficit | Total | |
Balance, December 31, 2014 | - | $- | - | $- | - | $- | - | $- | 511,910 | $51 | $430,905 | $(6,210) | $(378,982) | $45,764 |
Stock issued to related party | - | - | - | - | - | - | - | - | 3,380 | 1 | 4,999 | - | - | 5,000 |
Capital Conribution | - | - | - | - | - | - | - | - | - | - | 207,683 | - | - | 207,683 |
Impairment of investment in marketable securities | - | - | - | - | - | - | - | - | - | - | 6,210 | - | 6,210 | |
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | (357,977) | (357,977) |
Balance, December 31, 2015 | - | $- | - | $- | - | $- | - | $- | 515,290 | $52 | $643,587 | $- | $(736,959) | $(93,320) |
Common Stock Exchanged for Preferred Stock Series A | 4,558,042 | 455 | - | - | - | - | - | - | (393,314) | (39) | (416) | - | - | - |
Preferred Series A Stock purchased and cancelled, February 29, 2016 | (50,000) | (5) | - | - | - | - | - | - | - | - | (49,995) | - | - | (50,000) |
Preferred Series B-1 stock issued for acquisition of Excatus Bioslution, Inc., February 29, 2016 | - | - | 30,000,000 | 3,000 | - | - | - | - | - | - | (2,708) | - | - | 292 |
Preferred Series B-2 stock issued for cash, note payable and liability, February 29, 2016 | - | - | - | - | 2,084,000 | 208 | - | - | - | - | 520,792 | - | - | 521,000 |
Preferred Series A conversion to common stock, March 28, 2016 and March 30, 2016 | (4,508,042) | (450) | - | - | - | - | - | - | 4,508,042 | 450 | - | - | - | - |
Preferred Series B-1 conversion to common stock, June 15, 2016 | - | - | (27,200,000) | (2,720) | - | - | - | - | 27,200,000 | 2,720 | - | - | - | - |
Common stock, Preferred Series C stock, and warrants issued for prepaid services, June 30, 2016 | - | - | - | - | - | - | 1,733,334 | 173 | 1,600,000 | 160 | 999,667 | - | - | 1,000,000 |
Preferred Series B-2 stock issued for cash, July 15, 2016 | - | - | - | - | 500,000 | 50 | - | - | - | - | 124,950 | - | - | 125,000 |
Preferred Series B-2 stock issued for cash, October 27, 2016 | - | - | - | - | 6,000,000 | 600 | - | - | - | - | 1,499,400 | - | - | 1,500,000 |
Common Stock issued, Share based Payment, November 11, 2016 | - | - | - | - | - | - | - | - | 141,844 | 14 | 99,986 | - | - | 100,000 |
Common Stock Issued, Share based Payment, December 13, 2016 | - | - | - | - | - | - | - | 500,000 | 50 | - | - | - | 50 | |
Net Loss | - | - | - | - | - | - | - | - | - | - | - | - | (1,602,939) | (1,602,939) |
Balance, December 31, 2016 | - | $- | 2,800,000 | $280 | 8,584,000 | $858 | 1,733,334 | $173 | 34,071,862 | $3,407 | $3,835,263 | $- | $(2,339,898) | $1,500,083 |
The accompanying notes are an integral part of these consolidated financial statements. |
Year Ended December 31, | ||
2016 | 2015 | |
Cash Flows From Operating Activities: | ||
Net loss | $(1,602,939) | $(357,977) |
Adjustments to reconcile net loss to cash used in operations: | ||
Depreciation and amortization | - | 1,627 |
Expenses incurred on behalf of parent company | - | (358,807) |
Expenses paid by related company | - | 68,885 |
Bad debt | 7,010 | 1,704 |
Debt forgiveness | - | (41,307) |
Loss on disposal of property and equipment | 1,453 | - |
Impairment of equipment | 4,080 | 20,625 |
Impairment of marketable securities | - | 10,215 |
Stock-based compensation | 100,000 | 5,000 |
Bank overdraft write-off | (1,172) | - |
Changes in operating assets and liabilities: | ||
(Increase) decrease in operating assets: | ||
Accounts receivable | - | (213) |
Due from related parties | - | (895) |
Prepaid expenses | (19,671) | 4,167 |
Restricted cash | 72,342 | (72,342) |
Increase (decrease) in operating liabilities: | - | - |
Accounts payable | 491,012 | 84,748 |
Accrued expenses | 56,929 | (5,450) |
Net Cash Used In Operating Activities | (890,956) | (640,020) |
Cash Flows From Investing Activities: | ||
Acquisition of cash balance from Exactus BioSolutions Inc. | 1,292 | - |
Net Cash Provided by Investing Activities | 1,292 | - |
Cash Flows From Financing Activities: | ||
Proceeds from sale of Series B-2 Preferred Stock | 1,995,000 | - |
Payment for Series A Preferred Stock | (50,000) | - |
Proceeds from related party (contributed capital) | - | 497,156 |
Proceeds from issuance of note payable | - | 100,000 |
Bank overdraft | - | 1,172 |
Net Cash Provided By Financing Activities | 1,945,000 | 598,328 |
Net increase (decrease) in cash and cash equivalents | 1,055,336 | (41,692) |
Cash and cash equivalents at beginning of period | - | 41,692 |
Cash and cash equivalents at end of period | $1,055,336 | $- |
Supplemental Cash Flow Information: | ||
Cash paid for interest | $- | $- |
Cash paid for taxes | $- | $- |
Non-Cash transactions: | ||
Purchase of Patent by related party | $- | $450 |
Acquisition of license agreement from Exactus BioSolutions Inc | $50,000 | $- |
Preferred Stock Series B-2 issued as payment for Note payable | $100,000 | $- |
Preferred Stock Series B-2 issued as payment for Exactus shareholder loans | $51,000 | $- |
Preferred Stock Series C, common stock, and warrants issued as part of Master Service Agreement and Stock Subscription Agreement as prepaid expense | $1,000,000 | $- |
The accompanying notes are an integral part of these consolidated financial statements. |
Off Balance Sheet Arrangements
As of December 31, 2022, we had no material off-balance sheet arrangements.
Critical Accounting Estimates and New Accounting Pronouncements
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of our consolidated financial statements requires its management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures. Our management bases its estimates, assumptions and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Different assumptions and judgments would change the estimates used in the preparation of our consolidated financial statements which, in turn, could change the results from those reported. In addition, actual results may differ from these estimates and such differences could be material to our financial position and results of operations.
Critical accounting estimates are those that our management considers the most important to the portrayal of our financial condition and results of operations because they require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting estimates in relation to its consolidated financial statements include those related to:
● | Goodwill and intangible assets | |
● | Fair value of marketable securities | |
● | Incremental Borrowing Rate used Right of Use Asset Calculations | |
● | Business combinations |
Goodwill and Indefinite-Lived Intangibles
We allocate the cost of acquired companies to the identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount classified as goodwill. The identification and valuation of these intangible assets and the determination of the estimated useful lives at the time of acquisition, as well as the completion of impairment tests, require significant management judgments and estimates. These estimates are made based on, among other factors, review of projected future operating results and business plans, economic projections, anticipated highest and best use of future cash flows and the cost of capital. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of goodwill and other intangible assets, and potentially result in a different impact to our results of operations. Further, changes in business strategy and/or market conditions may significantly impact these judgments and thereby impact the fair value of these assets, which could result in an impairment of the goodwill or intangible assets.
Goodwill is not amortized but is tested for impairment annually and whenever events or circumstances change that indicate impairment may have occurred. We tested goodwill for impairment and determined there was no impairment and found not impairment charge based on the excess of a reporting unit’s carrying amount over our fair value.
Fair value of marketable securities
Marketable securities are recorded at fair value using the quoted market prices and changes in fair value are recorded as net realized gains or losses in comprehensive income. We monitor these investments for impairment and make appropriate reductions in carrying values as necessary.
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Incremental Borrowing Rate used Right of Use Asset Calculations
We determine if a contract is a lease or contains a lease at the inception of the contract and reassess that conclusion if the contract is modified. All leases are assessed for classification as an operating lease or a finance lease. Operating lease right-of-use, or ROU, assets are included in non-current other assets on our consolidated balance sheet. Operating lease liabilities are separated into a current portion, included within other accrued liabilities on our consolidated balance sheet, and a non-current portion, included within other long-term liabilities on our consolidated balance sheet. We do not have any finance lease ROU assets or liabilities. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. We do not obtain and control the right to use the identified asset until the lease commencement date.
Our lease liabilities are recognized at the applicable lease commencement date based on the present value of the lease payments required to be paid over the lease term. Because the interest rate implicit in the lease is not readily determinable, we generally use our incremental borrowing rate to discount the lease payments to present value. The estimated incremental borrowing rate is derived from information available at the lease commencement date. We factor in publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. Our ROU assets are also recognized at the applicable lease commencement date. The ROU asset equals the carrying amount of the related lease liability, adjusted for any lease payments made prior to lease commencement and lease incentives provided by the lessor. Variable lease payments are expensed as incurred and do not factor into the measurement of the applicable ROU asset or lease liability.
Business Combinations
We have applied significant estimates and judgments in order to determine the fair value of the identified assets acquired, liabilities assumed and goodwill recognized in connection with our business combinations to ensure the value of the assets and liabilities acquired are recognized at fair value as of the acquisition date. In measuring the fair value, we utilize valuation techniques consistent with the market approach, income approach, or cost approach.
The valuation of the identifiable assets and liabilities includes assumptions made in performing the valuation, such as projected revenue, weighted average cost of capital, discount rates, estimated useful lives, and other relevant assessments. These assessments can be significantly affected by our estimates, judgments, and assumptions. If actual results are not consistent with our estimates, judgments, or assumptions, or if additional or new information arises in the future that affects our fair value estimates, then adjustments to our initial fair value estimates may have a material impact to our purchase accounting or our results of operations. If actual results are not consistent with our estimates, judgments, or assumptions, or if additional or new information arises in the future, beyond our one-year measurement period, that affects our fair value estimates, then adjustments to our initial fair value estimates may have a material impact to our results of operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
A smaller reporting company is not required to provide the information required by this item.
20 |
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Required by Article 8 of Regulation S-X:
Audited Financial Statements:
F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Panacea Life Sciences Holdings, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Panacea Life Sciences Holdings, Inc. (the “Company”) as of December 31, 2022 and 2021 and the related consolidated statements of operations, shareholders’ equity, and cash flows for the two years in the period ended December 31, 2022, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the two years in the period ended December 31, 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
We determined that there are no critical audit matters.
/S/ BF Borgers CPA PC (PCAOB ID 5041) | |
We have served as the Company’s auditor since 2021 | |
Lakewood, CO | |
March 29, 2023 |
F-2 |
Panacea Life Sciences Holdings, Inc. and Subsidiary
Consolidated Balance Sheets
December 31, 2022 | December 31, 2021 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 6,951 | $ | 19,774 | ||||
Accounts receivable, net | 206,127 | 244,496 | ||||||
Other receivables, related party | 500,000 | 500,000 | ||||||
Inventory | 4,448,725 | 4,264,277 | ||||||
Marketable securities related party | 1,107,362 | 3,791,483 | ||||||
Prepaid expenses and other current assets | 113,098 | 278,328 | ||||||
TOTAL CURRENT ASSETS | 6,382,263 | 9,098,358 | ||||||
Operating lease right-of-use asset, net, related party | 3,242,381 | 3,595,100 | ||||||
Property and equipment, net | 7,675,995 | 8,839,982 | ||||||
Intangible assets, net | - | 61,401 | ||||||
Goodwill | 2,188,810 | 2,188,810 | ||||||
TOTAL ASSETS | $ | 19,489,449 | $ | 23,783,651 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable and accrued expenses | $ | 2,666,076 | $ | 1,685,825 | ||||
Operating lease liability, current portion, related party | 2,090,271 | 1,624,090 | ||||||
Note payable-current, related party | 9,871,803 | 6,441,866 | ||||||
Convertible note payable, net | 346,671 | 220,005 | ||||||
Paycheck protection loan, SBA Loan | 99,100 | 99,100 | ||||||
TOTAL CURRENT LIABILITIES: | 15,073,921 | 10,070,886 | ||||||
Operating lease liability, long-term portion, related party | 2,987,208 | 3,347,335 | ||||||
Other long-term liabilities, related party | 3,572,864 | 3,263,028 | ||||||
TOTAL LIABILITIES | 21,633,993 | 16,681,249 | ||||||
Commitments and contingencies | - | - | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Series A Preferred Stock: $ | Par Value, shares designated; and shares issued and outstanding on December 31, 2022 and December 31, 2021 respectively.- | - | ||||||
Series B-1 Preferred: $ | Par Value, shares designated; and shares issued and outstanding on December 31, 2022 and December 31, 2021 respectively.150 | 150 | ||||||
Series B-2 Preferred: $ | Par Value, shares designated; and shares issued and outstanding on December 31, 2022 and December 31, 2021 respectively.600 | 600 | ||||||
Series C Preferred: $ | Par Value, shares designated; and shares issued and outstanding on December 31, 2022 and December 31, 2021 respectively.100 | 100 | ||||||
Series C-1 Preferred: $ | Par Value, shares designated and and shares issued and outstanding on December 31, 2022 and December 31, 2021 respectively.1 | 1 | ||||||
Series C-2 Preferred: $ | Par Value, and shares designated and and shares issued and outstanding on December 31, 2022 and December 31, 2021 respectively.- | 1 | ||||||
Series D Preferred: $ | Par Value, shares designated and and shares issued and outstanding on December 31, 2022 and December 31, 2021 respectively.1 | 1 | ||||||
Preferred Stock, Value | ||||||||
Common Stock: $ | Par Value, shares authorized; and shares issued and outstanding on December 31, 2022 and December 31, 2021 respectively.1,497 | 1,407 | ||||||
Additional paid in capital | 23,760,704 | 23,865,155 | ||||||
Accumulated deficit | (25,907,597 | ) | (16,765,013 | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY | (2,144,544 | ) | 7,102,402 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 19,489,449 | $ | 23,783,651 |
The accompanying notes are an integral part of these consolidated financial statements.
F-3 |
Panacea Life Sciences Holdings, Inc. and Subsidiary
Consolidated Statements of Operations
2022 | 2021 | |||||||
For the year ending December 31, | ||||||||
2022 | 2021 | |||||||
REVENUE | $ | 1,626,978 | $ | 2,059,627 | ||||
COST OF SALES | 1,230,508 | 1,519,049 | ||||||
GROSS PROFIT | 396,470 | 540,578 | ||||||
OPERATING EXPENSES | ||||||||
Production related operating expenses | 4,955,348 | 4,959,059 | ||||||
General and administrative expenses | 1,093,364 | 1,518,687 | ||||||
TOTAL OPERATING EXPENSES | 6,048,712 | 6,477,746 | ||||||
LOSS FROM OPERATIONS | (5,652,242 | ) | (5,937,168 | ) | ||||
OTHER INCOME (EXPENSES) | ||||||||
Interest expense | (2,048,171 | ) | (1,105,243 | ) | ||||
Unrealized gain (loss) on marketable securities, net | (2,660,105 | ) | 1,008,046 | |||||
Realized gain on sale of securities | 22,816 | 160,296 | ||||||
Other income (loss) | 27,598 | - | ||||||
Employer retention credit | 253,791 | 396,679 | ||||||
Rental Income | 232,183 | 236,560 | ||||||
Loss on sale of assets | - | (297,351 | ) | |||||
Gain on extinguishment of debt | 681,546 | 755,782 | ||||||
TOTAL OTHER INCOME (EXPENSE) | (3,490,342 | ) | 1,154,769 | |||||
INCOME (LOSS) BEFORE INCOME TAXES | (9,142,584 | ) | (4,782,399 | ) | ||||
TAXES | - | - | ||||||
NET INCOME (LOSS) | $ | (9,142,584 | ) | $ | (4,782,399 | ) | ||
Per-share data | ||||||||
Basic and diluted loss per share | $ | (0.62 | ) | $ | (0.28 | ) | ||
Weighted average number of common shares outstanding | 14,862,077 | 16,915,706 |
The accompanying notes are an integral part of these consolidated financial statements.
F-4 |
Panacea Life Sciences, Inc.
Statements of Stockholders’ Equity
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Stockholder’s | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
Balance as of December 31, 2021 | 8,530,350 | $ | 853 | 14,073,708 | $ | 1,407 | $ | 23,865,155 | $ | (16,765,013 | ) | $ | 7,102,402 | |||||||||||||||
Shares issued in respect of the merger | - | - | 834,331 | 83 | (83 | ) | - | - | ||||||||||||||||||||
Issuance of common shares for services | 57,278 | 6 | 54,994 | 55,000 | ||||||||||||||||||||||||
Conversion of Series A Preferred to convertible debt and warrants | (350 | ) | (159,362 | ) | (159,362 | ) | ||||||||||||||||||||||
Net Loss | - | - | - | - | - | (9,142,584 | ) | (9,142,584 | ) | |||||||||||||||||||
Balance as of December 31, 2022 | 8,530,000 | $ | 853 | 14,965,317 | $ | 1,497 | $ | 23,760,704 | $ | (25,907,597 | ) | $ | (2,144,544 | ) |
The accompanying notes are an integral part of these consolidated financial statements
F-5 |
Panacea Life Sciences, Inc.
Statements of Cash Flows
2022 | 2021 | |||||||
For the years ended December 31 | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | (9,142,584 | ) | $ | (4,782,399 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Depreciation | 1,669,690 | 1,675,786 | ||||||
Realized gain on sale of securities | (22,816 | ) | (160,296 | ) | ||||
Unrealized (gain)/loss on marketable securities | 2,660,105 | (1,008,046 | ) | |||||
Fixed Asset Disposal Loss | - | 297,351 | ||||||
Non cash settlement of convertible note and accrued interest | (253,791 | ) | (755,782 | ) | ||||
Amortization of intangible assets | 61,401 | 61,400 | ||||||
Amortization of debt discount and non-cash interest expense | 1,067,304 | 117,515 | ||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | 38,369 | (97,194 | ) | |||||
Inventory | (184,448 | ) | (547,910 | ) | ||||
Prepaid expense and other assets | 165,230 | (250,953 | ) | |||||
Accounts payable and accrued expenses | 1,083,188 | 1,069,668 | ||||||
Operating lease liability, net | 458,773 | 458,770 | ||||||
Net cash used in operating activities | (2,399,579 | ) | (3,922,090 | ) | ||||
Cash flows from investing activities | ||||||||
Net cash received from acquisition | - | 9,157 | ||||||
Proceeds from sale of marketable securities | 46,832 | 230,296 | ||||||
Proceeds from sale of fixed assets | - | 446,026 | ||||||
Net fixed asset acquisitions | (243,804 | ) | (162,946 | ) | ||||
Net Cash provided by (used in) investing activities | (196,972 | ) | 522,533 | |||||
Cash flows from financing activities | ||||||||
Repayment of notes payable | (1,100,000 | ) | (75,556 | ) | ||||
Proceeds from payroll protection loan, SBA loan | 253,791 | 243,041 | ||||||
Payments of principal on notes payable | (660,511 | ) | (135,000 | ) | ||||
Proceeds from Notes payable - related party | 4,090,448 | 2,302,468 | ||||||
Proceeds from issuance of convertible notes, net of discount | - | 1,000,000 | ||||||
Cash provided by financing activities | 2,583,728 | 3,334,953 | ||||||
Net increase (decrease) in Cash and Cash Equivalents | (12,823 | ) | (64,605 | ) | ||||
Cash and Cash Equivalents, Beginning of Period | 19,774 | 84,379 | ||||||
Cash and Cash Equivalents, End of Period | $ | 6,951 | $ | 19,774 | ||||
Supplemental Disclosure of Cash Flow Information | ||||||||
Cash paid for income taxes during the year | $ | - | $ | - | ||||
Interest payments during the year | $ | - | $ | - | ||||
Noncash investing and financing activity | ||||||||
Non-cash Receivable - related party | $ | - | $ | 500,000 | ||||
Related party loan repayment with inventory | $ | - | $ | 4,693,367 | ||||
Non-cash fixed asset disposal as part of the reverse acquisition | $ | - | $ | 3,058,457 | ||||
Conversion of Preferred A shares to Note Payable | $ | 385,000 | $ | - | ||||
Issuance of Common Stock for services | $ | 55,000 | $ | - | ||||
Capitalized assets purchased on account - related party | $ | 261,899 | $ | 564,369 | ||||
Liabilities from acquisition | $ | - | $ | 1,096,782 | ||||
Debt retired in merger, related party | $ | - | $ | 12,718,441 | ||||
Preferred Series B-1 Issuance in Acquisition | $ | - | $ | 150 | ||||
Preferred Series B-2 Issuance in Acquisition | $ | - | $ | 600 | ||||
Common stock issued for the reverse merger with Exactus | $ | - | $ | 4,369,085 | ||||
Discounts related to issuance of convertible debt and warrants | $ | - | $ | 997,510 |
The accompanying notes are an integral part of these consolidated financial statements.
F-6 |
PANACEA LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022
NOTE 1 - NATURE OF ORGANIZATION
Organization and Business Description
Panacea Life Sciences Holdings, Inc. (the “Company”, “Panacea Holdings”, “Exactus”, “we”, “us”, “our”) was incorporated on January 18, 2008, in the State of Nevada. In January 2019, the Company added to the scope of its business activities, efforts to produce, market and sell products made from industrial hemp containing cannabidiol (“CBD”). On June 30, 2021, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement”) with Panacea Life Sciences, Inc. (“Panacea”) a CBD company, and the stockholders of Panacea. Pursuant to the Exchange Agreement, the former Panacea stockholders assumed majority control of the Exactus and all operations are now operated by Panacea, which as a result of the share exchange became a wholly-owned subsidiary of the Exactus. In October 2021 the Company changed its name from Exactus, Inc. to Panacea Life Sciences Holdings, Inc.
The Company operates in one segment with a focus on developing and producing high-quality, medically relevant, legal, hemp-derived cannabinoid products for consumers and pets.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
On June 30, 2021 the Company merged with Panacea. The merger is accounted for as a reverse acquisition and recapitalization in accordance with the Financial Accounting Standards Board (ASC 805, Business Combinations). Management evaluated the guidance contained in ASC 805 with respect to the identification of the acquirer in the merger and concluded, based on a consideration of the pertinent facts and circumstances, that Panacea acquired Exactus for financial accounting purposes. This determination is primarily based on Panacea stockholders comprising a relative majority of the voting power of the Company and having the ability to nominate the members of the board of directors of Exactus after the Merger, Panacea’s operations prior to the Merger comprising the only ongoing operations of the Company following the Merger, and Panacea’s senior management prior to the Merger comprising a majority of the senior management of the Company following the Merger. Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Panacea with the Merger being treated as the equivalent of Panacea issuing stock for the net assets of Exactus, accompanied by a recapitalization whereby no goodwill or other intangible assets are recorded. Transactions and balances prior to the Merger are those of Panacea. The shares and net loss per share available to holders of Panacea’s common stock prior to the Merger have been retroactively restated as shares reflecting the exchange ratio established in the Exchange Agreement.
The consolidated financial statements represent the accounts and balances for Panacea through June 30, 2021, and the consolidated balances and activities of the Company and its wholly owned subsidiary, Panacea, from that date forward. All significant consolidated transactions and balances have been eliminated in consolidation.
All share and per share numbers have been retroactively adjusted to give effect to a 1-for-28 reverse stock split effective October 25, 2021.
F-7 |
Going concern
These audited consolidated financial statements are presented on the basis that the Company will continue as a going concern. Panacea has merged with Exactus, so the below items reflect stand-alone historical results of Panacea through June 30, 2021 and the combined financial information thereafter. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Since our inception in later 2017, we have generated losses from operations, except for some slight profits in a few quarters. As of December 31, 2022, our accumulated deficit was $25.9 million, and we had $1.1 million in cash and liquid stock. As of December 31, 2022 the shares of common stock we hold in 22nd Century Group, Inc. (NASDAQ:XXII) (“XXII”) were valued at approximately $1.1 million. The XXII stock is pledged to secure a $4,062,713 promissory note in favor of Quintel-MC, Incorporated (“Quintel”) and a $1,685,685 promissory note in favor of Leslie Buttorff, CEO of the Company, but can be used in operations as the CEO determines. Quintel-MC, Inc. is wholly owned Company of the CEO. These items are shown on the balance sheet as related party loans. The current plan with respect to the XXII stock is to hold this stock during the short-term. We also currently do not have sufficient cash flow to pay our ongoing financial obligations on a consistent basis.
These factors raise doubt about the Company’s ability to continue as a going concern for a period of 12 months from the issuance date of these financial statements. Management plans to raise additional capital to fund operations, until the Company achieves and maintains profitable operations and cash flows. Management cannot provide assurance that the issuance of any additional shares of common stock, preferred stock or convertible securities could be substantially dilutive to our shareholders. In addition, adequate additional funding may not be available to us on acceptable terms, or at all. If we areThese audited consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to raise capital, we will be forced to delay, reduce or eliminate our research and development programs and may not be able to continue as a going concern.
Use of Estimates
The audited consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.
F-8 |
Cash and Cash Equivalents
For purposes of balance sheet presentation and reporting of cash flows, the Company considers all unrestricted demand deposits, money market funds and highly liquid debt instruments with an original maturity of less than 90 days to be cash and cash equivalents. There were no cash equivalents. The Company places its cash and cash equivalents with high-quality financial institutions. At times, balances in the Company’s cash accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) limit. On December 31, 2022 and 2021, the Company’s cash balances did not exceed the FDIC limit.
Accounts Receivable
Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. As of December 31, 2016,2022 and December 31, 2021, we did not believe we needed to reserve for any doubtful accounts, respectively. The Company’s accounts receivable policy changed in 2020 to only provide larger, well-established companies with Net 30 payment terms. For all other sales they are paid by credit card or wires received before the Company's accountsproduct is shipped to the customer.
Inventory
Inventories are stated at lower of cost or net realizable value. Inventories of purchased materials are valuated using a moving average method and managed by first in first out basis (FIFO). Inventories of internally manufactured materials are valuated using a standard costing method and are also managed on a FIFO basis. Production related costs that are capitalized as inventory as part of the standard cost valuation include the direct materials consumed, direct labor used, indirect labor used, and manufacturing overhead. Overhead is calculated based on specific manufacturing process and allocated on an order-by-order basis. Production variances that occur between standard cost valuation and actual costs are expensed as incurred in the income statement as part of cost of goods sold.
Marketable securities
The Company’s marketable securities consist of significant estimates relating to recovery/executionin current assets. (see Note 2 – Going Concern). Securities are valued based on prepayments made on clinical research services.
and shares of XXII as of December 31, 2022 and 2021, respectively, which are classified as available-for-sale and included
Fair Value Measurements.
The Company adopted the provisions of ASCAccounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value, and expands disclosure of fair value measurements
● | Level |
● | Level | |
● | Level 3—Valuations based on inputs that are |
F-9 |
The following table shows, by level within the fair value estimates discussed herein are based upon certain market assumptionshierarchy, the Company’s assets and pertinent information available to managementliabilities at fair value on a recurring basis as of December 31, 2016.
SCHEDULE OF FAIR VALUE ASSETS MEASURED ON RECURRING BASIS
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
Marketable securities | $ | 1,107,362 | $ | 1,107,362 | $ | - | $ | - | $ | 3,791,483 | $ | 3,791,483 | $ | - | $ | - | ||||||||||||||||
Total | $ | 1,107,362 | $ | 1,107,362 | $ | - | $ | - | $ | 3,791,483 | $ | 3,791,483 | $ | - | $ | - |
There were no transfers of three monthsmarketable securities into or less to be cash equivalents. The carrying valueout of those investments approximates their fair market value due to their short maturity and liquidity. Cash and cash equivalents include cash on hand and amounts on deposit with financial institutions, which amounts may at times exceed federally insured limits.
SCHEDULE OF MARKETABLE SECURITIES
December 31, 2022 | ||||
Balance at beginning of year | $ | 3,791,483 | ||
Sale of securities | (46,832 | ) | ||
Realized gain on sale of securities | 22,816 | |||
Unrealized gain on marketable securities, net | (2,660,105 | ) | ||
Balance at end of period | $ | 1,107,362 |
As of December 31, 2016, we had
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight–line method on the various asset classes over their estimated useful lives, which range from three to ten years when placed in service. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.
Intangible Assets and Goodwill
The Company has intangible assets. Goodwill is comprised of the purchase price of business combinations in excess of the fair market value assigned at acquisition to the tangible and intangible assets acquired. Goodwill is not amortized. The Company tests goodwill for impairment on an annual basis. The Company performed its most recent goodwill impairment using a discounted cash flow analysis and cash equivalentsfound that the fair value exceeded the carrying value. It has $2.189 million of $1,055,336,goodwill from the acquisition of the assets of Phoenix Life Sciences, Inc. in October 2017, and intangible assets of $0 as of December 31, 2015, we had cash2022 and cash equivalents of $0 and a bank overdraft of $1,172. As of December 31, 2016, we had approximately $805,336 in excess of FDIC insured limits.
SCHEDULE OF INTANGIBLE ASSETS AND GOODWILL
Estimated Life | ||
Goodwill from Phoenix Acquisition | Tested Yearly for Impairment | |
Intangibles – Formulations | 5 Years |
December 31, 2022 | December 31, 2021 | |||||||
Goodwill | $ | 2,188,810 | $ | 2,188,810 | ||||
Intangibles – Formulations | 307,001 | 307,001 | ||||||
Less accumulated amortization | (307,001 | ) | (245,600 | ) | ||||
Net intangible assets | $ | - | $ | 61,401 |
F-10 |
Leases
The Company determines if an arrangement is a lease at inception. Contracts containing a lease are further evaluated for computer equipmentclassification as an operating or finance lease. In determining the leases classification, the Company assesses among other criteria: (i) 75% or more of the remaining economic life of the underlying asset is a major part of the remaining economic life of that underlying asset; and 5-20 years for production equipment. The carrying amount(ii) 90% or more of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation and amortization period or the unamortized balance is warranted.
The Company uses incremental borrowing rates based on the estimated rate of interest for collateralized borrowing over a similar assets, if available,term of the lease payments at commencement date. The ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or independent appraisals, if required. Ifterminate the lease when it is reasonably certain that the Company will exercise that option. Lease expenses are recognized on a straight-line basis over the lease term or the useful life of the leased asset.
In addition, the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amountROU and fair value of the asset. When fair values are not available, we estimate fair value by using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We recognized impairment losses of $4,080 and $20,625 for the year ended December 31, 2016 and 2015, respectively.
Convertible Notes Payable
The Company has issued convertible notes, which contain variable conversion features, whereby the outstanding principal and accrued interest automatically convert into common shares at a fixed price which may be a discount to the common stock at the time of conversion. Some of the conversion features of these notes are contingent upon future events, whereby, the holder agreed not to convert until the contingent future event has occurred.
Revenue Recognition
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers.
The Company accounts for a contract when it has been approved and committed to, each party’s rights regarding the goods or services to be transferred have been identified, the payment terms have been identified, the contract has commercial substance, and collectability is providedprobable. Revenue is generally recognized net of allowances for certain deferred tax assets if it is more likely thanreturns and any taxes collected from customers and subsequently remitted to governmental authorities. However, the Company’s sales are primarily through retail stores, purchase orders or ecommerce; thus, currently contract liabilities are negligible. The Company does not thathave any multiple-element arrangements.
Some of the Company’s contract liabilities consist of advance customer payments. Contract liability results from transactions in which the Company willhas been paid for products by customers, but for which all revenue recognition criteria have not realize tax assets through future operations.
SCHEDULE OF REVENUE FROM CONTRACT WITH CUSTOMER
December 31, 2022 | December 31, 2021 | |||||||
Balance, beginning of period | $ | 24,585 | $ | 121,300 | ||||
Payments received for unearned revenue | 412,891 | 41,465 | ||||||
Revenue earned | 69,411 | 138,180 | ||||||
Balance, end of period | $ | 368,065 | $ | 24,585 |
Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
Revenue related to the sale of products is recognized once goods have been sold to the customer and the performance obligation has been completed. In both contracted purchase and retail sales, we offer consumer products through our online stores. Revenue is recognized when control of the goods is transferred to the customer. This generally occurs upon our delivery to a third-party carrier or, to the customer directly. Revenue from tolling services is recognized when the performance obligation, such as processing of the material, has been completed and output material has been transferred to the customer.
F-11 |
Revenue is generally recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities. Some of the Company’s contract liabilities consist of advance customer payments. A contract liability results from transactions in which the Company has been paid for products by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the contract liabilities are recognized. However, the Company’s sales are primarily through retail stores, purchase orders or ecommerce. The Company does not have any multiple-element arrangements.
Shipping and Handling Costs
The Company accounts for shipping and handling fees in accordance with ASC 606. The amounts charged to customers for shipping products are recognized as revenues and the related freight costs of shipping products are classified in general and administrative costs as incurred. Shipping costs are included as a component of general and administrative and were $40,409 and $16,564 for December 31, 2022, and December 31, 2021, respectively. The increase is due to higher postage costs and larger freight shipments.
Advertising & Marketing
Advertising costs are expensed when incurred. Included in this category are expenses related to public relations, investor relations, new package design, website design, design of promotional materials, cost of trade shows, cost of products given away as promotional samples, and paid advertising. The Company recorded advertising costs included in general and administrative costs of $209,254 and $377,916 for the years ended December 31, 2022 and 2021, respectively.
Segment Information
The Company follows the provisions of ASC 280-10 Segment Reporting. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions. Segment identification and selection is consistent with the management structure used by the Company’s chief operating decision maker to evaluate performance and make decisions regarding resource allocation, as well as the materiality of financial results consistent with that structure. Based on the Company’s management structure and method of internal reporting, the Company has one operating segment. The Company’s chief operating decision maker does not review operating results on a disaggregated basis; rather, the chief operating decision maker reviews operating results on an aggregate basis.
The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, “
The Business Combination on December 31, 2016 and 2015,2021 was accounted for as a recapitalization of equity structure. In October 2021 the Company had 14,784,001 and 0 dilutive potential commoncompleted 1-for-28 reverse stock split. Pursuant to GAAP, the Company retrospectively recasted the weighted-average shares respectively.
2022 | 2021 | |||||||
Years ended December 31, | ||||||||
2022 | 2021 | |||||||
Convertible note payable | - | - | ||||||
Restricted Stock | - | - | ||||||
Options to purchase common stock | - | - | ||||||
Warrants to purchase common stock | - | - | ||||||
Series A Convertible Preferred | - | 250,000 | ||||||
Series B-1 Convertible Preferred | 6,679 | 6,679 | ||||||
Series B-2 Convertible Preferred | 26,786 | 26,786 | ||||||
Series C Convertible Preferred | 2,289,220 | 2,289,220 | ||||||
Series C-1 Convertible Preferred | 1,064,908 | 1,064,908 | ||||||
Series C-2 Convertible Preferred | 2,050,000 | 2,050,000 | ||||||
Series D Convertible Preferred | 1,628,126 | 1,628,126 | ||||||
Total | - | - |
F-12 |
Income taxes
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and established for all the first quarter of 2015, the company adopted FASB’s guidance on reporting discontinued operations and disclosures of disposals of components of an entity. This standard raises theentities a minimum threshold for a disposal to qualify as a discontinued operationfinancial statement recognition of the benefit of tax positions and requires new disclosures of both discontinued operations and certain other disposalsexpanded disclosures. The provision for income taxes is based upon income or loss after adjustment for those permanent items that doare not meet the definition of a discontinued operation. The adoption of this guidance has not had a material impact on its financial position, results of operations or cash flows.
Recently Issued Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt liability, and amortization of those costs shouldinstruments will be reported as interest expense. Thisa single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas. The ASU is effective for annual and interim periods beginning after December 15, 2015,31, 2021, and early adoption is permitted for financial statements that have not been previously issued. The new guidance should be applied on a retrospective basis for each period presented in the balance sheet. The adoption of this guidance has not had a material impact on its financial position, results of operations or cash flows.
In August 2016,May 2021, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2016-15,
The Company does not expecteddiscuss recent pronouncements that are not anticipated to have a materialan impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
NOTE 3 – PROPERTY, EQUIPMENT, NET OF ACCUMULATED DEPRECIATION
Property and equipment, net including any major improvements, are recorded at historical cost. The cost of repairs and maintenance is charged against operations as incurred. Depreciation is calculated using the Company's consolidated financial statements.
SCHEDULE OF PROPERTY PLANT AND EQUIPMENT USEFUL LIVES
Estimated Life | ||||
Computers and technological assets | 3 – 5 Years | |||
Furniture and fixtures | 3 – 5 Years | |||
Machinery and equipment | 5 – 10 Years | |||
Leasehold improvement | 10 Years |
Property and equipment, net consists of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
December 31, 2022 | December 31, 2021 | |||||||
Computers and technological assets | $ | 3,776,320 | $ | 3,514,421 | ||||
Furniture and fixtures | 55,950 | 55,950 | ||||||
Machinery and equipment | 7,765,466 | 7,530,787 | ||||||
Land | 92,222 | 92,222 | ||||||
Leasehold Improvements | 1,508,915 | 1,508,915 | ||||||
Total | 13,198,873 | 12,702,295 | ||||||
Less accumulated depreciation | (5,522,878 | ) | (3,862,313 | ) | ||||
Total Property and equipment, net | $ | 7,675,995 | $ | 8,839,982 |
Depreciation expenses for the years ended December 31, 2022 and 2021 were $1,669,690 and $1,675,786 respectively.
F-13 |
SCHEDULE OF INVENTORY
December 31, 2022 | December 31, 2021 | |||||||
Raw Materials | $ | 870,530 | $ | 970,393 | ||||
Semi-Finished | 1,863,501 | 1,466,763 | ||||||
Finished Goods | 1,694,574 | 1,805,779 | ||||||
Packaging | 20,120 | 15,549 | ||||||
Trading | - | 5,793 | ||||||
Total | $ | 4,448,725 | $ | 4,264,277 |
NOTE 4. AGREEMENTS
Right of Use
The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, “Leases” (“ASC 842”) on January 1, 2019, the Share Exchange, thestart of our 2019 fiscal year. The Company acquired an exclusive license agreement (the “Licensing Agreement”) between Exactus BioSolutionshas one lease arrangement with a related party entered into on December 22, 2018 for a 3-year term commencing January 1, 2019 for certain laboratory facilities with a nine-year extension option. This lease was extended and Digital Diagnostics Inc. (“Digital Diagnostics”) thatnow expires on December 31, 2030. At inception, the Company recognized a Right of Use Asset and a corresponding lease liability in the amount of $4,595,509. The Company’s lease arrangements may contain both lease and non-lease components. The Company has elected to combine and account for lease and non-lease components as a single lease component. The Company has incorporated residual value obligations in leases for which there is such occurrences. Regarding short-term leases, ASC 842-10-25-2 permits an intangible asset. Pursuantentity to make a policy election not to apply the Licensing Agreement, Digital Diagnostics grantedrecognition requirements of ASC 842 to Exactus BioSolutions an exclusive licenseShort-term leases. The Company has elected not to develop, produce and commercialize certain diagnostic products, includingapply the FibriLyzer and MatriLyzer,ASC 842 recognition criteria to any leases that utilize certain intellectual property rights owned or licensed by Digital Diagnostics. qualify as Short-Term Leases.
The Licensing Agreement provides for Exactus BioSolutions and Digital Diagnostics to collaborate through the various stepsCompany, as of January 1, 2019, leases a portion of the product and device development process, includingproperty (formerly the development, regulatory approval and commercialization stages. Exactus BioSolutions is required to pay Digital Diagnostics,Environmental Protection Agency building) in cash and/or stock, an initial signing payment, milestone fees triggeredGolden, CO from J&N Real Estate, owned by the first regulatory clearance or approvalCEO, a related party with a term expiring on December 31, 2030. The lease consists of eachall laboratory space including testing facilities, water treatment, extraction and production. The lease of the FibriLyzer and the MatriLyzer, and various sales thresholds, and royalty paymentsproperty is based on the fair market rent and triple net saleslease (NNN) values competitive in the marketplace for a cGMP facility. The Company also subleases some of its laboratory space to other CBD companies. This income is presented under the Other Income line items of the products, calculated on a product-by-product basis. In 2016,income statement. The leases vary from short-term monthly leases to 3-year leases but are all month to month.
SCHEDULE OF RIGHT OF USE ASSET AND LIABILITY
December 31, 2022 | December 31, 2021 | |||||||
Right-of-use assets | $ | 3,242,381 | $ | 3,595,100 | ||||
Present value of operating lease liabilities | $ | 3,347,331 | $ | 3,692,392 | ||||
Less: Long-term portion of operating lease liability | (2,987,208 | ) | (3,347,335 | ) | ||||
Short-term portion of operating lease liability | 360,123 | 345,057 | ||||||
Unpaid balances | 1,730,136 | 1,279,033 | ||||||
Total short-term lease liability obligations | $ | 2,090,259 | $ | 1,624,090 | ||||
Weighted-average remaining lease term (Ends December 31, 2030) | 8 years | 9 years | ||||||
Weighted-average discount rate | 3.0 | % |
During years ended December 31, 2022 and 2021, we recognized approximately $458,772 and $458,772, respectively in operating lease costs. Operating lease costs are included in operating expenses in our consolidated statement of operations.
Approximate future minimum lease payments for our right of use assets over the Company paid $50,000 to Digital Diagnosticsremaining lease periods as part of the initial signing payment under the Licensing Agreement and $21,659 in legal expenses. As of December 31, 2016, the Company accrued an additional $171,033 in licensing fees due to closing a financing transaction in the fourth quarter2022, are as follows:
Maturity of 2016. No milestones have been met and no milestone fees have been paid or accrued for through December 31, 2016.
SCHEDULE OF MATURITY OF OPERATING LEASE LIABILITIES
2023 | $ | 455,622 | |||
2024 | $ | 460,178 | |||
2025 | $ | 464,780 | |||
2026 | $ | 469,427 | |||
2027 | $ | 474,122 | |||
Thereafter | $ | 1,451,002 | |||
Total undiscounted operating lease payments | $ | 3,775,131 | |||
Less: Imputed interest | $ | (427,800 | ) | ||
Present value of operating lease liabilities | $ | 3,347,331 |
F-14 |
NOTE 6 – NOTES PAYABLE
Convertible Note Payable
On November 18, 2021, the Company entered into a Master ServicesSecurities Purchase Agreement (the “MSA”(“SPA”) with IntegriumLincoln Park Capital Fund, LLC (“Integrium”(the “Purchaser”) pursuant to which the Company agreed to sell a 10% original issue discount senior convertible promissory note in the principal amount of $1,100,000 (the “Convertible Note”) and PoC Capital, LLC (“PoC Capital”). Under the MSA, Integrium has agreedfive-year warrants to perform clinical research services in support of the development of POC diagnostics devices. Integrium is to conduct one or more studies in compliance with FDA regulations and pursuant to the Company’s specific service orders. PoC Capital has agreed to fund up to the first $1,000,000 in study costs and fees due to Integrium, with all fees in costs in excess of that amount being the Company’s sole responsibility, in exchange for 1,600,000purchase 785,715 shares of the Company’s common stock, 1,733,334 sharespar value $ per share at an exercise price of newly designated Series C Preferred Stock,$1.40 per share (the “Warrants”) pursuant to the terms and 1,666,667 warrants toconditions of the SPA for a total purchase price of $1,000,000. The note was repaid in full on December 20, 2022.
Paycheck Protection Program Funding U.S. Small Business Administration Loan
On May 28, 2020, the Company received a secured, 30-year, Economic Injury Disaster Loan in the amount of $99,100 from the U.S. Small Business Administration. The loan carries interest at a rate of 3.75% per year, requires monthly payments of principal and interest, and matures in 30 years. Installment payments, including principal and interest, of $483 monthly, will begin 12 months from the date of the promissory Note. The SBA loan is secured by a security interest in the Company’s tangible and intangible assets. The loan proceeds are to be used as working capital to alleviate economic injury caused by the Covid-19 disaster occurring in the month of January 31, 2020, and continuing thereafter. As of December 31, 2022 the current principal balance of this note amounted to $99,100 and accrued interest was approximately $2,047 total for the current and non-current total.
Employer Retention Credit
On February 16, 2022, Panacea received an employer retention credit from the federal government of $253,791.
Note payable-current, related party
As part of the agreement in the reverse merger transaction, certain loan balances (“Quintel Loans”) from Quintel-MC Incorporated, an affiliate of the Company’s CEO, (“Quintel”) and historical interest owed of $1,932,358 were combined into a new promissory note with the principal amount of $4.062 million (“Quintel Note”). The Quintel Note bears annual interest at 12% and was secured by a pledge of certain XXII common stock atowned by Panacea (See Note 2 Going concern).
On June 30, 2021, Panacea issued the Company’s CEO, Ms. Buttorff, a price10% promissory note in the amount of $0.60 per share exercisable for three years.$1,624,000 (the “Buttorff Note”). The Buttorff Note was secured by a pledge of certain XXII common stock owned by Panacea (See Note 2 Going concern). This demand note replaced a prior working capital note that Panacea had issued on January 1, 2021. The Company has accounted $1,000,000 as prepaid expensesan additional line of credit note from Ms. Buttorff of $5,000,000 on July 1, 2021. The terms include an annual interest rate of 10% and a maturity date in 2023.
SCHEDULE OF NOTES PAYABLE RELATED PARTY
December 31, 2022 | December 31, 2021 | |||||||
Quintel Note | $ | 4,062,713 | $ | 4,062,713 | ||||
CEO Note | 5,809,090 | 2,379,153 | ||||||
Total related party notes | $ | 9,871,803 | $ | 6,441,866 |
Other long-term liabilities, related party
The Company has recorded a related party liability (“Fixed Asset Loan”) in the balance sheet. See Note 8 below for additional information regarding the Company’s common stock, Series C Preferred Stockamounts of $3,059,474 and warrants.
December 31, 2016 | December 31, 2015 | Estimated Service Lives in Years | |
Production equipment | $- | $900 | 5-20 |
Office and computer | - | 2,467 | 3 |
Total property and equipment | - | 3,367 | |
Less accumulated depreciation | - | 1,941 | |
Property and equipment, net | $- | $1,453 |
In 2020, the Company recorded an additional related party liability in service. Depreciation expense was $0the amount of $513,390 in respect of certain building improvements ,due to J&N Real Estate Company (a company owned by the CEO) (“J&N Building Loan”). The balance bears no interest, and $1,627 forthe maturity date has not yet been determined.
Notes payable is summarized as follows.
SCHEDULE OF NOTES PAYABLE
December 31, 2022 | December 31, 2021 | |||||||
Other long-term liabilities, related party | ||||||||
Fixed Asset Loan | $ | 3,059,474 | $ | 2,749,638 | ||||
J&N Building Loan | 513,390 | 513,390 | ||||||
Total | $ | 3,572,864 | $ | 3,263,028 |
NOTE 7 - STOCKHOLDERS’ EQUITY
Common stock
The Company’s authorized common stock consists of shares with a par value of $ per share.
During the year ended December 31, 2016 and 2015, respectively.
December 31, | December 31, | |
2016 | 2015 | |
Current tax benefit | $(545,000) | $(121,700) |
Valuation allowance | 545,000 | 121,700 |
Total tax expense | $- | $- |
December 31, | December 31, | |
2016 | 2015 | |
Balance forward | $250,500 | $128,800 |
Change in deferred tax asset | 545,000 | 121,700 |
Total deferred tax asset | 795,500 | 250,500 |
Valuation allowance | (795,500) | (250,500) |
Total tax expense | $- | $- |
F-15 |
Common stock options
Stock resultingOption Plan
On June 30, 2021 the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the issuance of a (pre-split) exchange ratiothe form of approximately 1 for 3.15,non-qualified and (ii) one shareholderincentive stock options, restricted stock awards, restricted stock unit awards, warrants and preferred stock. The awards may be granted by the Company’s Board of Directors to its employees, directors and officers and to consultants, agents, advisors and independent contractors who under a separately negotiated agreement, exchanged 742,100 (pre-split) shares common stock for 1,100,000 shares of Series A Preferred Stock, resulting at a (pre-split) exchange ratio of approximately 1.48 for 1. Immediately following such share exchanges,provide services to the Company repurchased 50,000or to a subsidiary of the Company. The exercise price for stock options must not be less than the fair market value of the underlying shares on the date of Series A Preferred Stockgrant. The incentive awards shall either be fully vested and exercisable from a shareholder for a total pricethe date of $50,000. incentive awards in
As part of the merger of Exactus, Panacea assumed the Exactus 2018 Equity Incentive Plan (the “2018 Plan”). The 2018 Plan provides for the issuance of incentive awards in the form of non-qualified and incentive stock options, stock appreciation rights, restricted stock awards, and restricted stock unit awards. The awards may be granted by the Company’s Board of Directors to its employees, directors and officers and to consultants, agents, advisors and independent contractors who provide services to the Company or to a subsidiary of the Company. The exercise price for stock options must not be less than the fair market value of the underlying shares on the date of grant. The incentive awards shall either be fully vested and exercisable from the date of grant or shall vest and become exercisable in such installments as the Board or Compensation Committee may specify. Stock options expire no later than ten years from the date of grant. The aggregate number of shares of common stock which may be issued pursuant to the Plan is . Unless sooner terminated, the Plan shall terminate in years. This plan had fully vested options outstanding at the time of the merger. There have been no options granted under this plan subsequent to the merger.
Stock Options
SCHEDULE OF STOCK OPTIONS
Options Outstanding as of December 31, 2022 | ||||||||||||||||
Number of Shares Subject to Options | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | |||||||||||||
Balance at December 31, 2021 | - | - | - | |||||||||||||
Options assumed in merger | 196,486 | $ | 3.51 | $ | 2,500 | |||||||||||
Options granted | - | - | - | - | ||||||||||||
Options exercised | - | - | - | - | ||||||||||||
Options canceled / expired | - | - | - | - | ||||||||||||
Balance at December 31, 2022 | 196,486 | $ | 3.51 | $ | 2,500 | |||||||||||
Vested and exercisable at December 31, 2022 | 196,486 | $ | 3.51 | $ | 2,500 |
Stock Warrants
On March 3, 2022, the Company entered in an Exchange Agreement with an institutional investor pursuant to which were split into 121,978the Company issued a 10% original issue discount senior convertible promissory note in the principal amount of $385,000 (the “Note”) and five-year warrants to purchase 275,000 shares of the Company’s common stock, par value $ per share at an exercise price of $1.40 per share in exchange for shares of the Company’s Series A Convertible Preferred Stock. As of December 31, 2022, the Company also had outstanding warrants to purchase an aggregate of 56,377 shares of common stock. These warrants were previously issued by the Company prior to the exchange agreement.
The par valueCompany’s outstanding warrants as of December 31, 2022 are summarized as follows, and all were exercisable at that date.
A summary of the commonCompany’s outstanding warrants is presented below:
SCHEDULE OF WARRANTS OUTSTANDING
Warrants Outstanding as of December 31, 2022 | ||||||||||||||||
Number of Shares Subject to Warrants | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | |||||||||||||
Balance on December 31, 2021 | 56,377 | $ | 13.64 | - | ||||||||||||
Options granted | 275,000 | - | - | - | ||||||||||||
Options exercised | - | - | - | - | ||||||||||||
Options canceled / expired | - | - | - | - | ||||||||||||
Balance at December 31, 2022 | 331,377 | $ | 3.48 | $ | - | |||||||||||
Vested and exercisable at December 31, 2022 | 331,377 | $ | 3.48 | $ | - |
As of December 31, 2022, the outstanding warrants have no intrinsic value.
F-16 |
Restricted Stock
SUMMARY OF RESTRICTED STOCK
Restricted Stock Common Stock | ||||
Balance at December 31, 2021 | - | |||
Assumed in merger | 107,993 | |||
Balance at December 31, 2022 | 107,993 |
As of December 31, 2022, there were no unamortized or unvested stock-based compensation costs related to restricted share post-split. All per share informationarrangements. These shares are included in the condensed financial statements gives retroactive effect to the 1 for 29.5849 reverse stock split that was effected on March 22, 2016.
Preferred Stock
The Company’s authorized preferred stock consists of $0.0001. $ . shares with a par value of
On February 17, 2016,March 3, 2022, the Board of Directors votedCompany entered into an Exchange Agreement with the Investor pursuant to designate a class of preferred stock entitled Series A Preferred Stock, consisting of upwhich the company agreed to five million (5,000,000) shares, par value $0.0001. The shares of Series A Preferred Stock were automatically converted to 4,508,042 shares of common stock on March 30, 2016, thirty (30) days afterissue the closing ofNote in the Share Exchange and offering of Series B-2 Preferred Stock. As a result, there are 4,558,042 Series A preferred stock issued and zero outstanding as of December 31, 2016.
NOTE 9. 8 - COMMITMENTS AND CONTINGENCIES
Legal Matters
In the ordinary course of business, we enterthe Company enters into agreements with third parties that include indemnification provisions which, in ourits judgment, are normal and customary for companies in ourthe Company’s industry sector. These agreements are typically with business partners, clinical sites, and suppliers. Pursuant to these agreements, wethe Company generally agreeagrees to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to our product candidates,the Company’s products, use of such product candidates,products, or other actions taken or omitted by us. The maximum potential amountnumber of future payments wethe Company could be required to make under these indemnification provisions is unlimited. We haveThe Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal. Accordingly, we havethe Company has no liabilities recorded for these provisions as of December 31, 2016, and 2015.
Concentrations
The Company has no concentration of business, we may be confronted with issues or eventsvendors that may result in a contingent liability. These generally relate to lawsuits, claims, environmental actions or the action of various regulatory agencies. If necessary, management consults with counsel and other appropriate experts to assess any matters that arise. If, in management’s opinion, we have incurred a probable loss as set forth by accounting principles generally acceptedwould impact production costs in the United States, an estimate is made oflonger term.
On the loss, and the appropriate accounting entries are reflected in our financial statements. We do not anticipate that liabilities arising out of currently pending or threatened lawsuits and claims will have a material adverse effect on our financial position, results of operations or cash flows.
In the 3rd Quarter of 2021, we signed a large contract with a convenience store chain. The revenues from the first shipment of CBD products are 16% of the 2021 revenue. We also have a tolling partner concentration and this contract was 18.8% of revenue in 2021.
The other concentration is in the accounts receivable category, where two customer accounts for 50% of the accounts receivable in 2021. One of the three customer contracts is unique in that we produced all the products for them to sell, and they pay Panacea as disclosed below.
The Company has no other contingencies, material commitments, or purchase obligations or sales obligations.
Executive Employment Agreement
On January 6, 2017, Exactus, Inc. (the “Company”)December 31, 2021 the Company entered into an agreementupdated Employment Agreement with BioCapital Partners, LLC (“BioCapital”)Leslie Buttorff pursuant to which BioCapital will provide general financial advisory and consulting services throughMs. Buttorff serves as the Company’s Chief Executive Officer for an initial term of July 1, 2021 to December 31, 2017. In consideration2024 (the “Employment Agreement). Under her Employment Agreement, Ms. Buttorff receives an annual base salary of $380,000. Ms. Buttorff is also entitled to receive (i) a sales commission of 2% of revenue from sales generated by Ms. Buttorff after revenue exceeds $500,000 for those services, the Company agreed to issue to BioCapital, on or about April 6, 2017, a warrant to purchase the Company’sthree consecutive months, (ii) an award of $ million of shares of common stock equal to four percent of the Company’s issued and outstanding capital stock on a fully-diluted basis (the “Warrant”). The Warrant will have an initial exercise price equal to the par valueupon approval of the Company’s common stock for listing on The Nasdaq Capital Market prior to expiration of the term of the Employment Agreement, and (iii) an annual cash performance bonus of up to 100% of her base salary based on the achievement of performance metrics for the applicable fiscal year to be set by the Board of Directors. To date, Ms. Buttorff has not taken a salary, payments have accrued commencing in January, 2021, and the amount due is included in accounts payable.
Under her Employment Agreement, she is entitled to severance payments under termination provisions which are intended to comply with Section 409A of the Internal Revenue Code of 1986, or $0.0001 per share,the Code, and the Regulations thereunder.
F-17 |
In the event of termination by the Company without “cause” or resignation by Ms. Buttorff for “good reason,” Ms. Buttorff is entitled to receive two years’ base salary, or $780,000, all unreimbursed business expenses and other accrued but unpaid compensation, and any annual bonus earned but not yet paid for any fiscal year ending prior to the fiscal year in which the date of termination occurs. In addition, in the event of termination by the Company without “cause,” subject to certain customary anti-dilution reset adjustments. The Warrant mayexecution of a general release Ms. Buttorff will be exercisedentitled to (i) a settlement amount equal to another two years’ base salary (or a total of $1,560,000) and (ii) an amount equal to the annual bonus which Ms. Buttorff would have been entitled to receive in respect of the year of termination based on the achievement of any performance objectives for the Company.
Generally, “good reason” is defined as (i) any material breach of the Employment Agreement by the holder at any time, in wholeCompany, (ii) the Company’s assignment of Ms. Buttorff to a position that has materially less authority, status, or in part, untilfunctional responsibility than the fourth anniversary of the issuance date.
Under the terms of her Employment Agreement, Ms. Buttorff is subject to non-competition and against Clear Skies Solar, Inc.non-solicitation covenants during the term of her employment and its wholly owned subsidiary Clear Skies Group, Inc. (together, “Clear Skies”), in the amountfollowing termination of $331,132.45,employment with interest accruing at a rate of 9% per year from November 21, 2014 (the “Judgment”). The Judgment remains outstanding. The petition alleges, among other things, that through a series of allegedly fraudulent conveyances occurring before the Judgment was entered against Clear Skies, the major assets of Clear Skies, which were comprised of various patents, were transferred from Clear Skies to Carbon 612 Corporation (“Carbon”), and from Clear Skies and Carbon to the Company. The petition further alleges, among other things, that the transfers were without fair considerationEmployment Agreement also contains customary confidentiality and rendered Clear Skies, the judgment-debtor, insolvent. The petitioner seeks the entry of a judgment against the Companynon-disparagement covenants.
NOTE 9 - RELATED PARTY TRANSACTIONS
Notes Payable and the other respondents in the amount of the outstanding Judgment, with all accrued interest, reasonable attorneys’ fees and costs and disbursements. We believe the claims against the Company are without merit, and we intend to contest petitioner’s claims and defend the matter vigorously. Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, successAccrued Interest – Related Parties
For information on the merits, we cannot estimate the reasonably possible loss or range of loss that may result from this action.
The accrued interest and interest expenses recorded for related party loans are shown below.
SCHEDULE OF RELATED PARTY TRANSACTIONS LOANS
December 31, 2022 | December 31, 2021 | |||||||
Accrued Interest | ||||||||
Related party loan J&N | $ | 796,891 | $ | 249,939 | ||||
Related party loan-CEO loan | 271,585 | 86,060 | ||||||
Related party loan – Line of credit | 282,869 | 29,235 | ||||||
Accrued Interest | 282,869 | 29,235 |
Year ended December 31, 2022 | Year ended December 31, 2021 | |||||||
Interest Expense | ||||||||
Related party loan J&N | $ | 546,952 | $ | 772,463 | ||||
Related party loan-CEO loan | 185,525 | 146,245 | ||||||
Related party loan – Line of Credit | 253,634 | 29,235 | ||||||
Interest Expense | 253,634 | 29,235 |
Other
The Company continues to hold shares of XXII stock which is available for trading. As of December 31, 2021, XXII is a common shareholder of the Company. See Subsequent Events for additional details related to XXII resolution.
NOTE 10 – INCOME TAXES
The Company has incurred aggregate net operating losses of approximately $30.604 million for income tax purposes as of December 31, 2021. The net operating losses carry forward for United States income taxes, which may be available to reduce future years’ taxable income. Management believes that the realization of the benefits from these losses appears not more than likely due to the Company’s limited operating history and continuing losses for United States income tax purposes. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. Management will review this valuation allowance periodically and make adjustments as necessary.
F-18 |
The following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective tax rate for financial statement purposes for the years ended December 31, 2022 and 2021. The company has yet to file income taxes for the year ended December 31, 2021.
SCHEDULE OF EFFECTIVE TAX RATE
December 31, 2022 | ||||
U.S. federal statutory rate | 21.0 | % | ||
Increase (decrease) in taxes resulting from: | ||||
Increase in valuation allowance | (21.9 | )% | ||
ROU Assets/Liabilities | (2.7 | )% | ||
State taxes | 3.6 | % | ||
Income tax (expense) benefit | - | % |
The Company provided a valuation allowance equal to the deferred income tax asset for the year ended December 31, 2022, because it was not known whether future taxable income will be sufficient to utilize the loss carryforward. The increase in the allowance was $9.997 million in fiscal 2022. Additionally, the future utilization of the net operating loss carryforward to offset future taxable income may be subject to an annual limitation, based upon IRC Section 382/383 Ownership change rules that may have or could occur in the future. The Company does not have any uncertain tax positions or events leading to uncertainty in a tax position. The Company’s 2017, 2018, 2019 and 2020 Corporate Income Tax Returns are subject to Internal Revenue Service examination.
NOTE 13 – SUBSEQUENT EVENTS
Panacea Life Sciences Holdings, Inc. announced on January 30, 2023 that the Company has executed a letter of intent to acquire N7 Enterprises, Inc. Pursuant to the terms of the letter of intent, Panacea would acquire all of the outstanding membership interests of N7 Enterprises in consideration for the issuance of common shares of the Company to the existing shareholders of N7 Enterprises. N7 Enterprises operates an expanding Florida chain of kava and kratom lounges under the Lizard Juice™ and N7 Nitro Kava™ brands founded in 2012, and is also a distributor of CBD, hemp, kratom and kava related products through its New Age Distribution subsidiary, founded in 2022. For its two business segments, N7 Enterprises showed $4.1 million in revenue for the 2022 fiscal year and is estimating that net income for the year will exceed $1 million.
PLSH settled a contract with XXII that it would exchange the common shares XXII holds and the $500,000 of hemp to reduce the J&N Panacea loan on the building.
F-19 |
Item 9.
None.
Item 9A. ControlsControls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management carried out an evaluation, with the participation of our principal executive officer (who currently also serves as our principal financial officer) and our former principal financial officer, have evaluatedrequired by Rule 13a-15 or 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) of the effectiveness of our disclosure controls and procedures as defined in Rules 13a – 15(e) and 15d – 15(e)Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),Act. Based on their evaluation, our principal executive officer and our former principal financial officer concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report. We have concludedreport to ensure that based on such evaluation,information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our disclosure controlsmanagement, including our principal executive officer and procedures were not effective dueformer principal financial officer, as appropriate to the material weaknesses in our internal control over financial reporting as of December 31, 2016, as further described below.
Management’s Annual Report on Internal Control over Financial Reporting
Our management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management is responsible for establishing and maintaining adequate internal control over financial reporting.
Our internal control over financial reporting. Management has assessed these deficienciesreporting includes those policies and has determinedprocedures that:
● | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; | |
● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and | |
● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
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Management’s Assessment of the Effectiveness of the Company’s internal Control over Financial Reporting
Our principal executive officer and our former principal financial officer concluded that thereour disclosure controls and procedures were four general categories of material weaknessesnot effective to ensure that the information relating to us is required to be disclosed in internal control over financial reporting. Asour SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management to allow timely decisions regarding required disclosure as a result of our assessment thatthe following material weaknesses in our internal control over financial reporting:
● | The Company does not have sufficient segregation of duties within accounting functions due to only having two officers and limited resources. | |
● | The Company does not have an audit committee; and | |
● | The Company does not have written documentation of our internal control policies and procedures. |
We plan to rectify these weaknesses by establishing written policies and procedures for our internal control of financial reporting existedand hiring additional accounting personnel at such time as ofwe raise sufficient capital to do so.
Changes in Internal Controls over Financial Reporting
There have been no changes in the internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2016, management has concluded2022, that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting was not effective as of December 31, 2016. A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified at least two material weaknesses in our internal control over financial reporting. Specifically, (1) we lack a sufficient number of employees to properly segregate duties and provide adequate review of the preparation of the financial statements and (2) we lack sufficient independent directors on our Board of Directors to maintain Audit and other committees consistent with proper corporate governance standards. We have limited financial resources and only three employees. The lack of personnel is a weakness because it could lead to improper classification of items and other failures to make the entries and adjustments necessary to comply with U.S. GAAP. Accordingly, management’s assessment is that the Company’s internal controls over financial reporting were not effective as of December 31, 2016.
Item 9B. Other Information.
None.
Item 10. Directors, Executive Officers and Corporate Governance.
The Boardfollowing information sets forth the names, ages, and positions of Directorsour current directors and executive officers as of the CompanyMarch 15, 2023.
Name | Age | Present Positions | ||
Leslie Buttorff | 65 | CEO and Chairman | ||
Lawrence J. Wert | 65 | Director | ||
Nick Cavarra | 58 | Senior Vice President Marketing and Sales | ||
Nathan Berman | 35 | Controller | ||
James Baumgartner | 58 | Chief Science Officer and Quality Control |
Directors
Our Board is currently comprised of threetwo (2) members. The following biographical information discloses each director’s age, business experience and other directorships held during the past five years. It also includes the experiences, qualifications, attributes and skills that led to the conclusion that the individual should serve as a director for the Company.
Leslie Buttorff is our Chief Executive Officer and Chairman ofdirector since June 30, 2021. Ms. Buttorff has been the Board in March 2016. He was previously appointed as a member of the Board of Directors on February 29, 2016. Mr. Young was a Founder of Exactus BioSolutions and served as its Chairman, President and Chief Executive Officer. He has served as a Director and Executive Officer for public and private companies for the past 20 years where he has created significant shareholder value, built integrated commercial operations and directed successful M&A transactions. From October 2011 through December 2014, he served as President, Chief Executive Officer and Director for AmpliPhi Biosciences, a global biopharmaceutical company, where he completed a transformational restructuring, collaborations and financings. He was the President, Chief Executive Officer and Director of Osteologix, Inc. from April 2007 – March 2011, where he established corporate offices in Ireland after successfully completing a global divestiture of its lead program. Prior to joining Osteologix, Mr. Young served as an Executive Vice President and Chief Business Officer for InsmedPanacea Life Sciences, Inc., a publicly traded biotechnology company where he directed all financing, commercialwhich manufactures and corporate communications activities. Prior to Insmed Inc., Mr. Young held executive positions at Élan, Neurex, and Pharmacia Corporations. Mr. Young started his management career in the biopharmaceutical industry at Genentech Inc. where he was responsible for their cardiovascular and endocrine product launches sales and marketing.
Lawrence J. Wert was appointed to our Board on April 29, 2020. Mr. Wert has over 40 years in broadcasting. Mr. Wert served as the President of Broadcast Media for Tribune Media Company from 2013 through September of 2019. Mr. Wert previously served on the NAB TV Board of Directors, Fox Board and the CBS Board of Governors. In 2017, Mr. Wert was named “Broadcaster of the Year” by the Illinois Broadcaster’s Association. Currently, he serves on the Board of Directors for several charities, including the Children’s Brittle Bone Foundation, Catholic Charities, the Chicagoland Chamber of Commerce and the 100 Club. Mr. Wert is a member of ourthe Governing Board of Directors in March 2016. Dr. Dimitrov isGilda’s Club of Chicago, an advisor to the FounderChicago Chapter of Make-A-Wish Foundation and Managing Directoran honorary board member of Digital Diagnostics, Pty. Ltd – a spinout startup company fromRAINBOWS, an organization that helps children cope with loss. In 2018, Mr. Wert was inducted into the Australian Institute for Bioengineering and Nanotechnology (AIBN) where Dr. Dimitrov was a Group Leader from 2006 until 2012. Prior to AIBN, he was the Founder and CTOChicago Catholic League Hall of NanoString Technologies (NASDAQ: NSTG) in Seattle (2003-2006), a company he founded to commercialize his invention of fluorescent nanobarcodes for single molecules. Prior to NanoString, Dr. Dimitrov was the Director of the DNA Microarray Laboratory at the Institute for Systems Biology in Seattle (2000-2003), and played a significant role in the formation and early growth of the Institute. During his research career Dr. Dimitrov has made many significant research discoveries. Most importantly he invented and pioneered the barcodes for single-molecule detection, which are currently marketed by NanoString Technologies. More recently Dr. Dimitrov invented and developed products for rapid and sensitive detection of proteolytic activities with handheld electronic devices. These products are currently in the process of clinical testing and commercialization by Exactus, Inc. (OTC: EXDI) and will find applications in detection of fibrinolysis and metastatic degradation of extracellular matrices. Dr. Dimitrov holds a Ph.D. in Biochemistry from Baylor College of Medicine, and M.Sc. in Biotechnology from Sofia University. Dr. Dimitrov is invaluable to ourFame. Mr. Wert also sits on Board of DirectorsTrustees for Fenwick High School in Oak Park, Ill. Mr. Wert was appointed as a recognized leader in the fielddirector as a result of diagnostics and nanotechnology and as the primary developer of the technology upon which our products are dependent.
Executive Officers Who Are Not Directors
The following provides certain biographical information with respect to each executive officer of the Company who is not a director.
See “Directors” above for Ms. Buttorff’s biographical information.
Nick Cavarra is our President of the Company since 2019. Mr. Cavarra brings over 25 years of management, leadership and sales experience at the local and national level in the broadcast/digital media, software and web/mobile development marketplace. His previous career positions include C-Level management experience with AYN and Zapotech Inc., and senior account management positions at KUSA-TV and KMGH-TV.
22 |
Nathan Berman is our Controller since June 30, 2021. Mr. Berman works as the controller for Panacea Life Sciences since December 2019. Prior to Panacea, Mr. Berman worked for Quintel-MC, Inc, and Media Audits International providing audit and management services on behalf of large broadcast corporations. Prior to this, Mr. Berman began his career in the banking industry while pursuing his CFA designation through the CFA Institute.
James R. Erickson, Ph.D.
Employees and Contractual Arrangements
As of January 1, 2018, we employ management and support staff, chemists, extraction specialists, lab technicians order fulfillment and sales executives. We are building our culture around a position he held since October 2013. Previously, Dr. Erickson served as Chief Executive Officer of BayPoint Biosystems, Inc., a proteomic company focusedperformance-based system, and unlike other CBD companies we offer our employees personal time off (PTO) and health and dental benefits. We believe this is important in order to attract the best individuals for these roles. We also have an outsourcing agreement with Canna Software, LLC (ERPCannabis solution based on commercializing diagnostics/research tools-oriented technology fromSAP) to provide back-office operations assistance in the M.D. Anderson Cancer Center, from December 2005 to August 2013.
Family Relationships
There are no family relationships between or among the directors. There are family relationships between our CEO, brother and niece.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any directorsbankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and executive officers.
Audit Committee Financial Expert
Leslie Buttorff serves as the chairman of controlthe audit committee. CFO Squad was previously retained to assist with the audit and business focus, we currently do not have a Code of Ethics.SEC filings and provide other accounting advice. Our Board has determined that Leslie Buttorff is reviewing a Codequalified as an “audit committee financial expert”, as that term is defined under the rules of Ethics that applies to our Chief Executive Officerthe SEC and our Chief Financial Officer as well as to our other senior management. This Code of Ethics will complyin compliance with the requirements imposed by the Sarbanes-Oxley Act of 2002, as amended,2002.
Code of Ethics
On January 9, 2019, our Board adopted a Code of Business Conduct and the rules and regulations issued thereunder for codes of ethicsEthics applicable to such officers. When the Code of Ethics is final, it will be available onall our website, located at http://www.exactusinc.com
Item 11. Executive Compensation.
Compensation Discussion and Analysis
With regard to our full-time executive officer, the goal of the salary component of our compensation policy is to provide reasonable compensation for their full-time service within the constraints faced by a rapidly developing business with significant cash needs for its planned expansion. Equity grants for our full-time executive officers are currently under review by the compensation paid or accruedcommittee. The goal of our anticipated equity grants will be to the persons who servedprovide an appropriate mixture of short term and long-term incentives to increase shareholder value.
On December 31, 2021, we entered into an updated Employment Agreement with Leslie Buttorff pursuant to which Ms. Buttorff serves as our Chief Executive Officer and our two highest-paid executive officers during the last two completed fiscal years whose total compensation exceeded $100,000 for that yearan initial term of July 1, 2021, to December 31, 2024 (the “named executive officers”)“Employment Agreement).
Year | Salary | Bonus | Non-Equity Incentive Plan Compensation(1) | All Other Compensation | Total | |
Philip J. Young | 2016 | $297,917 | $-- | $-- | $-- | $297,917 |
President and Chief Executive Officer | ||||||
Timothy Ryan | 2016 | $110,000 | $-- | $-- | $-- | $110,000 |
Executive Vice President | ||||||
______________ (1) Pursuant to our employment agreements with Mr. Young and Mr. Ryan, we have agreed to grant stock options to these officers as described under “—Employment Agreements” below. We anticipate that our Board of Directors will determine the amount of these awards and grant these stock options following adoption of our Stock Option Plan in the first quarter of 2017. |
Ms. Buttorff is also entitled to which he will serve asreceive (i) a sales commission of 2% of revenue from sales generated by Ms. Buttorff after revenue exceeds $500,000 for three consecutive months, (ii) an award of $2.2 million of shares of common stock upon approval of our President and Chief Executive Officer. Under the termscommon stock for listing on The Nasdaq Capital Market prior to expiration of the employment agreement, Mr. Young will receive a base salary atterm of the Employment Agreement, and (iii) an initial rate of $390,000 per year. For a limited period until we have raised at least $5 million of capital, he will receive a reduced salary of $325,000 per year. Within 30 days after we raise at least $5 million of capital, Mr. Young will receive, as a lump sum bonus payable inannual cash or stock at our discretion, the amount equal to the difference between the amount he would have been paid at his initial rate of $390,000 and the amount he was paid at the reduced salary level. In addition, Mr. Young will have the opportunity to earn an annual performance bonus of up to 75%100% of hisher base salary based on the achievement of performance criteriametrics for the applicable fiscal year to be set by our Board of Directors. Also, pursuant to the employment agreement, we agreed to grant stock options to Mr. Young to purchase shares of our common stock at an exercise price equal to the fair market value of our common stock on the date of grant as reasonably determined by our BoardBoard.
23 |
Director Compensation
Compensation of Directors in good faith. Pursuant toTable
The following table shows the agreement, 50% ofcompensation paid during the options were to vest onyear ended December 31, 20162022 to our non-employee director.
Name | Stock Awards (No.) | Option Awards (No.) | Fees Earned or Paid in Cash ($) | Non-Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||
Leslie Buttorff | (a) | 0 | 0 | 0 | 0 | 0 | 380,000 | 380,000 | ||||||||||||||||||||||||
Executive Chairman | ||||||||||||||||||||||||||||||||
Lawrence J. Wert | (b) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Board Member |
(a) Compensation is deferred.
Equity Awards At Year End
None.
Option Exercises and the other 50% will vest ratably over a thirty-six month period beginning in January 2017. Mr. Young also is entitled to an automobile allowance of $1,500 per month, disability insurance coverage equal to his base salary, life insurance with a $2 million death benefit, reimbursement of certain expenses, health, dental and vision coverage in accordance with our usual practices and participation in all other benefit plans maintained by the Company.
Our named executive officers did not exercise any time for “Cause” (as defined in his employment agreement) and by Mr. Young upon 14 days’ prior written notice, or upon Mr. Young’s death or disability. The employment agreement also provides for termination of Mr. Young’s employment by us without Cause or by Mr. Young for “Changed Circumstances” (as defined in his employment agreement).
Item 12. Security Ownership of Certain Beneficial Owners and ManagementManagement and Related StockholderMatters.
The following table sets forth information as of December 31, 2016,2022, regarding the number of shares of our common stock beneficially owned by each director, each named executive officer and by all directors and executive officers as a group. Beneficial ownership includes shares, if any, held in the name of the spouse, minor children or other relatives of the director or executive officer living in such person’s home, as well as shares, if any, held in the name of another person under an arrangement whereby the director or executive officer can vest title in himself at once or at some future time. Unless otherwise noted, each shareholder’s address is 4870 Sadler Road,5910 S. University Blvd, Suite 300, Glen Allen, VA 23060,C18-193, Greenwood Village, CO 80121, and each shareholder has sole voting power and investment power with respect to securities shown in the table below.
Title of class | Name of beneficial owner | Amount and Nature of Beneficial Ownership (1) | Percent of Class (1) | |||||||
Named Executive Officers: | ||||||||||
Common Stock | Leslie Buttorff (2) | 4,646,953 | 31.5 | % | ||||||
Common Stock | Nathan Berman (3) | 17,749 | * | |||||||
Directors: | ||||||||||
Common Stock | Lawrence J. Wert (4) | 307,868 | 2.1 | % | ||||||
Common Stock | All directors and executive officers as a group (4 persons) (5) | 5,043,564 | 31.5 | % | ||||||
5% Stockholders: | ||||||||||
Common Stock | Quintel-MC Incorporated (7) | 4,047,054 | 27.4 | % | ||||||
Common Stock | 22nd Century Group Inc. (8) | 3,250,573 | 22.0 | % |
(1) | Applicable percentages are based on 14,762,342 of common stock outstanding as of the March 15, 2022, excluding securities held by or for the account of the Company. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days after March 31, 2022, whether upon the exercise of options, warrants or conversion of notes. Unless otherwise indicated in the footnotes to this table, we believe that each of the stockholders named in the table has sole voting and investment power with respect to the shares of common stock indicated as beneficially owned by them. This table does not include any unvested stock options except for those vesting within 60 days. |
(2) | Ms. Buttorff is our Chief Executive Officer, Chief Financial Officer and director. Includes 4,047,054 shares of common stock held by Quintel-MC Incorporated. Ms. Buttorff is the President of Quintel-MC, Incorporated. |
(3) | Mr. Berman is our Controller. |
(4) | Mr. Wert is a director. |
(5) | Directors and Executive Officers as a group. This amount includes ownership by all directors and all current executive officers including those who are not Named Executive Officers under the SEC’s disclosure rules. |
(6) | Quintel-MC Incorporated. Ms. Buttorff was the President of Quintel-MC Incorporated. Address is 5910 South University Suite C18-193, Greenwood Village, CO 80121. Quintel was sold and is in the process of closure. |
(8) | 22nd Century Group Inc. Based on Schedule 13G filed on July 9, 2021. Address is 500 Seneca Street, Suite 507, Buffalo NY 14204. |
Title of Class | Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent ofClass (1) | |||
Common Stock | Philip J. Young | 8,668,000(2) | 25.3% | |||
Common Stock | Kelley A. Wendt | 600,000(3) | 1.7% | |||
Common Stock | Timothy Ryan | 8,618,000(4) | 25.2% | |||
Common Stock | James R. Erickson | 1,600,000 | 4.7% | |||
Common Stock | Krassen Dimitrov | 3,600,000(5) | 10.6% | |||
Directors and executive officers as a group (5 individuals) | 23,086,000 | 65.9% |
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Item 13. Certain Relationships and Related Transactions, and Director Independence.
Our CEO is the Company. In February 2016, we entered into a consulting agreement with Dr. Dimitrov pursuant to which we retained KD Innovations Ltd., a company fully owned by him (“KD Innovations”), for a fee of $25,000 per month during the term of the arrangement, to manage the design and production of our lead device, FibriLyzer, and provide scientific expertise. For the year 2016, we recognized $250,000 in research and development expenses in connection with these consulting services. The consulting agreement does not have a fixed term; however, it may be terminated with immediate effect at any time upon mutual agreement between us and KD Innovations, or by either party with 90-days written notice to the other party.
Director Independence
We are not a “listed issuer” within the meaning of NASDAQItem 407 of Regulation S-K and there are no applicable listing standards.
Item 14. Principal AccountingAccountant Fees and Services.
The following table presents the aggregate fees billed for each of the last two fiscal years by our principal accountant forindependent registered public accounting firm, Borgers, in connection with the audit of our annualconsolidated financial statements review of financial statements included in the quarterly reports and other fees that are normally provided byprofessional services rendered.
Year Ended: | Audit Services | Tax Fees | Other Fees | ||||
December 31, 2022 | $ | 110,000 | n/a | n/a | |||
December 31, 2021 | $ | 25,000 | n/a | n/a |
The following table presents the accountant in connection with statutory and regulatory filings or engagements for the year ended December 31, 2016 and 2015 was $58,000 and $42,000, respectively.
Year Ended: | Audit Services | Tax Fees | Other Fees | ||||
December 31, 2022 | $ | - | n/a | n/a | |||
December 31, 2021 | $ | 165,000 | n/a | n/a |
Pre–Approval Policy of Services Performed by our principal accountant for tax compliance, tax advice and tax planning for the years ended December 31, 2016 and 2015 was $0 each year. These fees related to the preparation of federal income and state franchise tax returns.
The aggregate fees billed for products and services provided by someone other than our principal accountant for the fiscal year ended December 31, 2016 and 2015 was $0 each year.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) Financial Statements and Schedules
The following financial statements and schedules listed below are included in this Form 10-K.
Financial Statements (See Item 8)
* Management contract or |
**Certain portions Exhibits and/or Schedules have been omitted. The Company hereby agrees to furnish to the Securities and Exchange Commission upon request any omitted information.
*** This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
+Portions of this exhibit have been omitted pursuant to a confidential treatment request granted on September 23, 2016, pursuant to Rule 24b-2as permitted by the rules of the Securities Exchange ActSEC. The information excluded is both (i) not material and (ii) the type that the Company customarily and actually treats as private or confidential. The Company undertakes to submit a marked copy of 1934. Omitted informationthis exhibit for review by the SEC Staff, to the extent it has not been filed separately withpreviously provided, and provide supplemental materials to the SecuritiesSEC Staff promptly upon request.
Copies of this Report (including the financial statements) and Exchange Commission.any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to Panacea Life Sciences Holdings, Inc., at the address on the cover page of this Report, Attention: Corporate Secretary.
Item 16. Form 10-K Summary
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Panacea Life Sciences Holdings, Inc. | |||||
Date: March 30, 2023 | By: | /s/ Leslie Buttorff | |||
Chief Executive Officer and Chief Financial Officer (Principal |
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