Panacea Life Sciences Holdings, Inc 10-K for FY2023
Panacea Life Sciences Holdings, Inc. (PLSH)
About this 10-K
Panacea Life Sciences Holdings, Inc filed this 10-K on April 1, 2024, covering the fiscal year ended December 31, 2023 (FY2023).
Headline figures
Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.38M
- up 46.6% from $1.63M a year earlier
- Net loss
- $8.02M
- compared with a net loss of $9.14M a year earlier
- Diluted EPS
- -$0.48
- compared with -$0.62 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For
the fiscal year ended:
For the transition period from _____________ to _____________
Commission
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(Exact name of registrant as specified in its charter)
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by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
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The
aggregate market value of 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, June 30, 2022, was approximately $
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of common stock, par value $0.0001 per share, outstanding as of March 15, 2024.
TABLE OF CONTENTS
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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. (OTCQB: PLSH) is a holding company organized as a plant-based natural health ingredient and product company, specializing in the development, manufacturing, research, and distribution of products within the $134B and rapidly growing natural health and wellness market segment for both humans and animals.
Established in 2017, the company’s first subsidiary, Panacea Life Sciences, Inc. (PLS), is dedicated to the production, distribution, research, and manufacturing of premium-quality nutraceuticals, cannabinoids, mushrooms, kratom, and other natural, plant-based ingredients and products. Operating from a cutting-edge 51,000 square foot cGMP facility located in Golden, Colorado, PLS is committed to delivering high-quality solutions in the field of natural health and well-being. 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.
Panacea Distro, the second subsidiary of Panacea Life Sciences Holdings, Inc., manages six retail locations and a distribution center situated in the Tampa, Florida area. These establishments provide a diverse range of products, including Nitro Kava, Kratom, Hemp, VAPE products, and various beverages, with a primary focus on promoting alternative health and wellness. The Panacea Distro business is segmented into two distinct areas—the retail stores and the cash & carry distribution warehouse. The retail stores are poised to evolve into franchise stores, with the intention of eventually adopting the name “PANA KAVA JAVA.” This strategic move is part of our plan to establish a franchise model based on the success of these existing retail locations.
In the coming months, a third business entity, Pana Kava Java (PKJ), is set to emerge as the franchisor company, with a scheduled launch in Q3-Q4 2024. Pana Kava Java is committed to establishing a unique franchise model, drawing inspiration from the European-style café concept. Patrons will have the opportunity to savor infused coffees and beverages, indulge in vaping, and enjoy an array of infused baked goods in a welcoming atmosphere. Pana Kava Java, as the franchisor, will offer franchise rights to individuals interested in opening stores/cafés, enabling them to sell products or services under the PKJ brand, leveraging our expertise and intellectual property. Currently, active efforts are underway in developing the franchisor plan, encompassing aspects such as business development, flagship store establishment, legal document preparation, marketing and packaging strategies, as well as the recruitment and training of franchisees.
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 40 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 2024.
On September 30, 2023, PLSH completed an asset purchase agreement for N7 Enterprises which was a rapidly growing corporation that operates a chain of botanical tea bars focused on promoting health and wellness. The company is dedicated to providing customers with premium quality organic teas and wellness products, fostering a culture of well-being and mindful consumption. The core of N7 Enterprises comprised eight meticulously curated botanical tea bars strategically located in the Tampa Bay metropolitan area, serving as hubs for health-conscious consumers seeking natural and revitalizing beverages. These retail locations offer a diverse range of handcrafted, ethically sourced herbal teas, blended to cater to various health preferences and dietary needs. Each store is designed to provide an immersive and tranquil atmosphere, encouraging customers to embrace a holistic lifestyle.
In addition to the retail stores, N7 Enterprises operates a robust cash and carry warehouse, which serves as the central distribution center for all retail locations. This strategically positioned facility enables efficient supply chain management, ensuring that each store is consistently stocked with an array of premium organic teas, wellness products, and related merchandise. The warehouse plays a pivotal role in supporting the seamless operation of the retail branches, thereby facilitating the company’s mission to provide accessible and sustainable wellness solutions to its diverse customer base.
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N7 Enterprises was renamed to Panacea Distro, Inc. and is a subsidiary of PLSH. The Company plans to separate out the cash and carry/distribution business from the retail stores. The retail stores will be branded under the Pana Kava Java ™ name and they will form the basis for the PKJ Group Franchisor. They will be corporate owned franchises and use as promotion and templates for expanding and acquiring additional franchisees. The retail stores will be reconfigured to infused café lounges as we continue to sell kava and kratom nitro teas, coffee, hemp and Vape products along with infused bakery goods.
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. PLSH subsidiaries control the complete value chain.
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.
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.
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. Another 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®. In the nutraceutical and supplement business line we are developing unique formulations that will add to our intellectual property.
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.
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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
With the acquisition of N7 we now have access to not only our corporate owned stores in the Tampa Florida area but additional access to all the distribution stores in which we sell products.
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 40 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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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.
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 application of existing laws and regulations to the internet and commercial 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.
Human Capital
On December 31, 2023, we had over 40 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 skills, experience and industry knowledge of our key employees significantly benefit our operations and performance.
Employee health and safety in the workplace is one of our core values. Employee levels are managed to align with the pace of business and management believes it has sufficient human capital to operate 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 company 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 those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information which appears on our corporate website is not part of this report.
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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 Risk Factors below occur, our business, financial condition, results of operations 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 principal 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 h 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; |
| ● | 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. |
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Risks Related to Our Business and the Hemp 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 loans 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 services 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 recent share exchange under the Exchange Agreement. Accordingly, from time-to-time she may not devote her full time and attention to our affairs, which could have a material adverse effect on our operating results, and there can be no assurance that a conflict of interest will not arise from her other business ventures. Further, as of December 31, 2023, Ms. Buttorff holds demand promissory notes totaling $11,397,617 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 have a line of credit with Ms. Buttorff through which it may borrow up to $8 million at a 10% annual interest rate. The fact that she continues to advance money and is our principal stockholder reflects her intent to support us.
The loss of Ms. Buttorff would have a material 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 material breach of the Employment Agreement including our failure to pay her. In the event Ms. Buttorff terminates her Employment Agreement for good reason, this would result in the us owing her approximately $760,000 in severance pay plus any deferred compensation and earned bonuses and other benefits and would leave us without an executive officer which may have a material adverse effect upon us, your investment, and hamper our ability to continue operations. If we fail to procure the services of additional executive management or implement and execute an effective contingency or succession plan for Ms. Buttorff, the loss of Ms. Buttorff would significantly disrupt our business from which we may not be able to recover.
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 failure or delay in the delivery of our products to our customers, our brand and reputation could be diminished. If we fail to develop, promote and maintain our brand and reputation successfully, our business and prospects could be materially harmed.
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.
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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 fully explored or understood and may have unintended consequences. Future research or results may lead to the discovery of unknown adverse side effects from hemp, KAVA and Kratom, which would harm our business.
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 hemp products. Any instance of illness or negative side effects of ingesting hemp 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 some or all our products.
Any product liability claims or related developments from our products or hemp in general may increase our costs and adversely 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 hemp markets we compete in are highly competitive, with many well-known brands leading the industry. Our competitors include hemp 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 superior to those of our competitors while complying with complex and varying regulations in the markets in which we attempt to market and sell 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 cannot 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 new 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. |
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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 health and wellness industry are characterized by rapid and frequent changes in demand for products and new product introductions and enhancements. Our failure to accurately 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 comply with applicable laws and regulations or concerning any other aspect of our business or the hemp 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.
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. In the future we may face difficulties in the development, production or distribution of our products.
We may face competition for access to any third-party supply sources, development or production partners and facilities such as hemp growers and may be subject to production delays if any of those third parties give their other business partners a higher priority than they give to us. Even if we are able to identify additional or replacement third parties, the delays and costs associated with establishing and maintaining a relationship with such third parties may have a material adverse effect on us. Further, a reduction in the control of our production efforts would be inherent in any such outsourcing, which exposes us to a greater risk of liability, including regulatory enforcement actions for alleged noncompliance with law and product liability claims. This could also result in lower product quality which could negatively impact demand for our offerings or our competitive advantage. Any of these challenges could prevent us from achieving our business objectives and harm your investment in us.
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If the market opportunities for our current and potential future products are less lucrative than anticipated, our ability to generate revenues may be adversely affected and our business may suffer.
Our understanding, expectation and estimates of the market for our current and future products may prove to be incorrect, and new test results or studies, reports, legislative or regulatory developments or other factors beyond our control may result in the market for our products being lower than anticipated on a regional, national or global scale. The number of individuals in the U.S. who are willing to purchase our products may be lower than expected, or expectations for repetitive purchases and consumption may prove to be incorrect. These occurrences could materially adversely affect our prospects and operational results.
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 has technical expertise and could support a distribution capability. Competition in the health and wellness and cannabinoid industries for technically 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 establish internal marketing, sales, or distribution capabilities or that these capabilities will be sufficient to meet our needs.
Because of the Russian Invasion of Ukraine, the effect on the capital markets and the economy is uncertain, and as a result we may have to deal 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.
We have a limited operating history upon which investors can evaluate our future prospects.
Panacea was founded and began operations in the hemp 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 revenue gains for which such endeavors were made. There are no assurances that we can successfully address these challenges. If we are unsuccessful, our business, financial condition and operating results could be materially and adversely affected.
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If the market for hemp products declines, it would materially and adversely affect our business.
Following the passage of the 2018 Farm Bill described below, our industry experienced an influx of hemp farmers and producers which resulted in a saturated marketplace. As a result, the supply for hemp and related products has in the past exceeded demand. This trend could force us to reduce our prices to remain competitive or could result in lower sales levels than we have experienced in the past, either of which would result in a decline in revenue or growth rate and could materially adversely affect our financial condition and prospects.
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 unable to attract new customers, or fail to do so in a cost-effective manner, our business may be harmed.
Even if we meet our growth objectives and our enter into new markets as intended, we may face difficulties evaluating our current and future business prospects, and we may be unable to effectively manage any growth associated with these achievements, which would increase the risk of your investment losing value and could harm our business, financial condition, and results of operations.
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 significantly 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 no assurance that management, along with staff, will be able to effectively manage our growth nor can there be any assurance that growth in our product offerings, customer base or contracts will translate to an increase in revenue or profitability. Any failure to meet the challenges associated with rapid growth could materially and adversely affect our business and operating results.
Existing or future governmental regulations relating to cannabinoid products may harm or prevent our ability to produce and/or sell our product offerings.
While a majority of state governments in the United States have legalized the growing, production, and use of hemp in some form and subject to certain restrictions, cannabis remains illegal under federal law. In addition, in July 2017, the United States Drug Enforcement Agency issued a statement that certain hemp extractions fall within the definition of marijuana and are therefore a Schedule I controlled substance under the Controlled Substances Act of 1970, as amended. Thus, the cannabis industry, including companies which sell products containing hemp, faces significant uncertainty surrounding regulation by the federal government, which could claim supremacy over state regulatory regimes including those with a “friendlier” view toward hemp products. While the federal government has for several years chosen to not intervene in the cannabis business conducted legally within the states that have legislated such activities, there is, nonetheless, potential that the federal government may at any time choose to begin enforcing its laws against the manufacture, possession, or use of cannabis-based products such as hemp. Similarly, there is the possibility that the federal government may enact legislation or rules that authorize the manufacturing, possession or use of those products under specific guidelines. Local, state and federal cannabis laws and regulations are broad in scope and subject to evolving interpretations. In the event the federal government was to tighten its regulation of the industry, we would likely suffer a material adverse effect on our business, including potentially substantial losses.
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Because laws and regulations affecting our industry are evolving, changes to any regulation may materially affect our hemp 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 hemp as a nutritional supplement, and the agency’s actions in the short term with regards to hemp will guide the industry. As a company whose products contain hemp, 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 hemp 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 averse 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 hemp 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 hemp 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 hemp and marketing products containing hemp as a dietary supplement, regardless of whether the substances are hemp-derived. Although we believe our existing and planned hemp 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.
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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 hemp 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.
Costs associated with compliance with numerous laws and regulations and quality standards could adversely impact our financial results.
The manufacture, labeling and distribution of hemp 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 hemp 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” hemp business, meaning a business which handles every step of a hemp 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.
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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 or 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 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 laws 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 control.
Our business plan includes the eventual marketing and sale of our products in international markets. Specifically, we do not currently have a set time frame for entering these markets. Accordingly, our operating results could be materially and adversely affected by a variety of uncontrollable and changing factors relating to international business operations, 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 overcome these or other challenges in executing our planned expansion into international markets, our prospects would be materially 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 substantially greater resources. If we do not prevail in this type of litigation, we or our strategic collaborators may be required to pay 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 market with a substantially similar product. Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue some of our operations. In addition, a court may require that we pay expenses or damages, and litigation could distract management or disrupt our commercial activities.
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 depend 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 may obtain injunctive or other equitable relief, which could block our ability to further develop and commercialize one or more products. Defense of these claims, regardless of their merit, involves substantial litigation expense and would be a substantial diversion of our management’s attention from our business. If a claim of infringement against us succeeds, we may have to pay substantial damages, possibly including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
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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 validity or enforceability of any such intellectual property rights. In an infringement proceeding, a court may decide that either our or one or more of our licensors’ intellectual property rights are not valid or is unenforceable or may refuse to stop the other party from using the underlying concepts or technology at issue because our intellectual property rights do not cover those elements. In any event, intellectual property litigation is expensive and time consuming and we may be unsuccessful in defending or enforcing such claims, which would materially harm our business.
Any inability to protect our intellectual property rights could reduce the value of our products and brands, which could adversely affect our financial condition, results of operations and business.
Our business is partly dependent upon our trademarks, trade secrets, copyrights and other intellectual property rights. Effective intellectual property rights protection, however, may not be available under the laws of every country in which we and our sub-licensees may operate. There is a risk of certain valuable trade secrets being exposed to potential infringers. Regardless of whether our compounds and technology are or becomes protected by patents or otherwise, there is a risk that other companies may employ such compounds or technology without authorization and without recompensing us.
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 to fully protect our intellectual property rights in some countries or jurisdictions. If we are unable to successfully identify and stop unauthorized use of our intellectual property, we could lose potential revenue and experience increased operational and enforcement costs, which could adversely affect our financial condition, results of operations and business.
The intellectual property behind our products may include unpublished know-how, which is dependent on certain key individuals, as well as existing and pending intellectual property protection.
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 expertise runs deep in these few individuals, if something were to happen to any or all of these individuals, the ability to properly manufacture our products without compromising quality and performance could be diminished greatly. Further, [while our employees and contractors are subject to non-disclosure obligations,] any misappropriation of confidential information including trade secrets and know-how could allow our competitors and others to overcome any advantage we have and reduce our market share and viability.
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. |
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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 elect 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 financial 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 business 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 divert management’s attention from other business concerns, which could have a material adverse effect on our results of operations, financial condition or business.
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. |
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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.
We are subject to the “penny stock” rules which will adversely affect the liquidity of our common stock.
The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock on the OTCQB is presently less than $5.00 per share and therefore we are considered a “penny stock” company according to SEC rules. While we intend to effect a reverse stock split pending compliance with SEC Rules, including the filing of a Schedule 14C, to increase our stock price, until such time as our stock price rises above $5.00 per share (which may not occur following the reverse stock split or at all), the “penny stock” designation requires any broker-dealer selling our securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of broker-dealers to solicit purchases of our common stock and therefore reduce the liquidity of the public market for our shares.
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, 2023, our accumulated deficit was $33.9 million, and we had $0.1 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.
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.
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Potential Impacts of Certain Current and Proposed Regulations on Our Business and Operations
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.
People are increasingly turning to hemp 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.
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.
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
Not applicable.
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, 2024, the closing bid price on the OTC Markets for our Common Stock was $0.19.
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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, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.
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 trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of March 28, 2024, we had 17,645,352 shares of our common stock issued and outstanding, and approximately 190 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 not be able to pay our debts as they become due in the usual course of business, or;
2. Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.
Item 6. Selected Financial Data
A smaller reporting company is not required to provide the information required by this Item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements because of several factors, including those set forth under the Part I, Item 1A, Risk Factors and Business sections in our 2021 10-K, this report, and our other filings with the Securities and Exchange Commission. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this report.
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General
We are a Nevada corporation organized in 2008. Exactus, Inc. was our former name. We have pursued opportunities in hemp-based businesses, which we refer to as “cannabinoids or CBD”. On June 30, 2021, Panacea Life Sciences, Inc. “Panacea” entered into an Exchange Agreement with Exactus and as a result became a seed-to-sale Cannabinoid company. The former Panacea stockholders have assumed majority control of us, and all our operations are now operated through Panacea which because of the share exchange became our wholly owned subsidiary. Leslie Buttorff, became our Chief Executive Officer and a director upon the closing of the share exchange, also became our principal stockholder through common stock and Convertible Preferred Stock issued to her and entities she controls.
Panacea Life Sciences Holdings, Inc. (PLSH) is holding company structured to support the life sciences and health and wellness industry. Panacea, which was founded by Leslie Buttorff in 2017 as a woman-owned business, attracted a $14 million investment from 22nd Century Group, Inc., or XXII, a plant biotechnology company which also has a focus on hemp products and technology, during 2019. XXII has retained a 15.19% stake in us following the share exchange. Through Panacea, we are dedicated to developing and producing the highest-quality, most medically relevant, legal, hemp-derived cannabinoid products for consumers and pets. Beginning at a farm Panacea owns a parcel of located at Needle Rock, Colorado and leases laboratory space located within a 51,000 square foot, state-of-the-art, cGMP, extraction, manufacturing, testing and fulfillment center located in Golden, Colorado, Panacea operates in every segment of the hemp product value chain. From cultivation to finished goods, Panacea ensures its 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: PANA Life®, PANA Beauty®, PANA Sport™, PANA Pet®, PANA PURE™ and PANA Health™.
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 products with stringent GMP standards and testing protocols employed at every stage of the supply chain.
We are well positioned to develop novel hemp extracts as dietary supplements and topical applications. Our biotechnology plans focus on our research at Colorado State University where we are involved in several health-related research studies.
Panacea Distro, the second subsidiary of Panacea Life Sciences Holdings, Inc., manages six retail locations and a distribution center situated in the Tampa, Florida area. These establishments provide a diverse range of products, including Nitro Kava, Kratom, Hemp, VAPE products, and various beverages, with a primary focus on promoting alternative health and wellness. The Panacea Distro business is segmented into two distinct areas—the retail stores and the cash & carry distribution warehouse. The retail stores are poised to evolve into franchise stores, with the intention of eventually adopting the name “PANA KAVA JAVA.” This strategic move is part of our plan to establish a franchise model based on the success of these existing retail locations.
In 2024, a third business entity, Pana Kava Java (PKJ), is set to emerge as the franchisor company, with a scheduled launch in Q3-Q4 2024. Pana Kava Java is committed to establishing a unique franchise model, drawing inspiration from the European-style café concept. Patrons will have the opportunity to savor infused coffees and beverages, indulge in vaping, and enjoy an array of infused baked goods in a welcoming atmosphere. Pana Kava Java, as the franchisor, will offer franchise rights to individuals interested in opening stores/cafés, enabling them to sell products or services under the PKJ brand, leveraging our expertise and intellectual property. Currently, active efforts are underway in developing the franchisor plan, encompassing aspects such as business development, flagship store establishment, legal document preparation, marketing and packaging strategies, as well as the recruitment and training of franchisees.
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Results of Operations
Comparison of the Years Ended December 31, 2023, and 2022.
The following table sets forth our results of operations for the years ended December 31, 2023, and December 31, 2022.
| Years Ended December 31, | Period to | |||||||||||
| 2023 | 2022 | Period Change | ||||||||||
| Revenues from nutraceutical and CBD sales | $ | 1,762,903 | $ | 1,515,448 | $ | 247,455 | ||||||
| Revenues from PPE sales | $ | - | $ | 111,530 | $ | (111,530 | ) | |||||
Revenues from Pana Distro sales | $ | 595,549 | $ | - | $ | 595,549 | ||||||
| Cost of sales | $ | 1,262,979 | $ | 1,230,508 | $ | (32,471 | ) | |||||
| Production related operating expenses | $ | 5,211,719 | $ | 4,955,348 | $ | 256,371 | ||||||
| General and administrative | $ | 1,456,412 | $ | 1,093,364 | $ | 363,048 | ) | |||||
| Interest expense | $ | (1,555,877 | ) | $ | (2,048,171 | ) | $ | (492,294 | ) | |||
| Unrealized gain on marketable securities | $ | (1,092,429 | ) | $ | (2,660,105 | $ | (1,567,676 | ) | ||||
| Realized gain on sale of securities | $ | - | $ | 22,816 | $ | (22,816 | ) | |||||
| Other income (loss) | $ | - | $ | 27,598 | $ | (27,598 | ) | |||||
| Employer retention credit | $ | - | $ | 253,791 | $ | (253,791 | ) | |||||
| Rental income | $ | 178,411 | $ | 232,183 | $ | (53,772 | ) | |||||
Year Ended December 31, 2023, and 2022
Net Revenues
We are principally engaged in the 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 categories of brand products, white label and contract manufacturing sales to other hemp companies, raw material sales (distillate and isolate), and tolling arrangements.
Our revenues for the year ended December 31, 2023, increased by $757,978, or 47%, to $2,384,956 as compared to $1,626,978 for the year ended December 31, 2022. The increase in sales is in 2023 was due to the company’s increased focus on contract manufacturing for nutraceutical companies.
Cost of Sales
Cost of sales for the year ended December 31, 2023, increased by $32,471, or 3%, to $1,262,979 as compared to $1,230,508 for the year ended December 31, 2022. The increase in cost of sales was due primarily to more material procurement from increased revenues. The primary components of cost of sales include the cost of procuring raw materials and the cost of manufacturing the associated products.
Operating Expenses
Operating expenses for the year ended December 31, 2023, increased by $619,419, or 10%, to $6,668,131 as compared to $6,048,712 for the year ended December 31, 2022. The increase in operating expenses was primarily due to increased production related operating expenses as well as increased general and administrative expenses.
The increase in production relating expenses of $256,371 or 5% to 5,211,719 for the year ended December 31, 2023, as compared to $4,955,348 for the year ended December 31, 2022, was primarily due to increased storage costs and increased building costs.
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The increase in general and administrative expenses of $363,048 or 33% to 1,456,412 for the year ended December 31, 2023, as compared to $1,093,364 for the year ended December 31, 2022, was primarily due to increased bad debt write-offs. Included in this increased bad debt expense was a write-off of a $500,000 receivable representative of hemp due to the company from XXII. This receivable was deemed uncollectible and subsequently expensed.
Other income (expense)
Other income for the year ended December 31, 2023, increased by $1,021,196, or 29%, to (2,469,147) as compared to (3,490,432) for the year ended December 31, 2022. This increase is due primarily to decreased interest expense and a smaller unrealized loss related to the value of the shares of XXII held by the company. On January 3, 2022, XXII closed at $3.12 per share. On January 3, 2023, XXII closed at $0.91 and on December 29, 2023, closed at $0.20 per share. The stock and was also subject to a reverse share split of 15 to 1 that took place on July 5, 2023.
Summary of Cash Flows
| Years ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash (used in) / provided by | ||||||||
| Operating activities | $ | (1,524,463 | ) | $ | (2,399,579 | ) | ||
| Investing activities | (65,322 | ) | (196,972 | ) | ||||
| Financing activities | 1,683,756 | 2,583,728 | ||||||
| Net increase (decrease) in cash and cash equivalents | $ | 93,971 | $ | (12,823 | ) | |||
Cash flows from operating activities
Net cash used in operating activities was $1,524,463 for the year ended December 31, 2023, as compared to $2,399,579 for the year ended December 31, 2022. The decrease in 2023 was due primarily to decreasing operating and SG&A expenses. The largest source of operating cash is from our customers CBD sales are processed online with payment due at checkout, and the associated credit card payments are collected and paid within 1-2 business days. Other white label and contract manufacturing customers generally pay before the products are released or some larger customers are given either net 10, 2% or 30 day net terms.
Cash flows from investing activities
Net cash used in investing activities was $65,322 for the year ended December 31, 2023, as compared to $196,972 for the year ended December 31, 2022. The decrease of cash used in 2023 was due primarily to fewer fixed asset purchases.
Cash flows from financing activities
Net cash used in financing activities was $1,683,756 for the year ended December 31, 2023, as compared to $2,583,728 for the year ending December 31, 2022.
During the year ended December 31, 2023 cash provided by financing activities totaled $1,683,756 which included repayment of $135,000 on a convertible note, repayment of related party notes in the amount of $272,075 and proceeds of $2,090,831 from related party notes.
During the year ended December 31, 2022, cash provided by financing activities totaled $2,583,728 which included proceeds of $4,090,448 from related party notes and $253,791 from a related party payroll protection loan partially offset by repayments of convertible notes of $1,100,000 and repayment of related party notes payable in the amount of $660,511. In 2023 the primary financing was cash provided by Company’s CEO.
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Liquidity and Capital Resources
On December 31, 2023, we had approximately $14,933 of liquid marketable securities and $100,922 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 $8 million at a 10% annual interest rate.
We will not have sufficient cash resources to sustain our operations for the next 12 months, particularly if the large sales contracts we have do not result in the revenue anticipated. This raises substantial doubt as a going concern as we are dependent on obtaining financing from one or more debt or equity offerings or further loans from Ms. Buttorff assuming she agrees to advance further funds.
These consolidated financial statements are presented on the basis that we will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business. No adjustment has been made to the carrying amount and classification of our assets and the carrying amount of our liabilities based on the going concern uncertainty. These factors raise substantial 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 profitable operations or become cash flow positive or raise additional debt and/or equity capital. In addition, due to insufficient revenue, we will need to obtain further funding through public or private equity offerings, debt financing, collaboration arrangements or other sources in order to maintain active business operations. We currently do not have sufficient cash flow to pay our ongoing financial obligations on a consistent basis. The issuance of any additional shares of common stock, preferred stock or convertible securities could be substantially dilutive to our stockholders. In addition, adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital, we will be forced to borrow additional sums from our Chief Executive Officer or delay, reduce or eliminate our research and development programs, we may not be able to continue as a going concern, and we may be forced to discontinue operations. These 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 we be unable to continue as a going concern.
Off Balance Sheet Arrangements
As of December 31, 2023, 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 |
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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.
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.
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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, 2023 and 2022 and the related consolidated statements of operations, shareholders’ equity, and cash flows for the two years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for the two years in the period ended December 31, 2023 and 2022, 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/
|
|
| We have served as the Company’s auditor since 2021 | |
| March 29, 2024 |
| F-2 |
Panacea Life Sciences Holdings, Inc. and Subsidiary
Unaudited Condensed Consolidated Balance Sheets
| December 31, 2023 | December 31, 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Other receivables, related party | ||||||||
| Inventory | ||||||||
| Marketable securities related party | ||||||||
| Prepaid expenses and other current assets | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Operating lease right-of-use asset, net, related party | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Operating lease liability, current portion, related party | ||||||||
| Note payable-current, related party | ||||||||
| First Bank note payable | ||||||||
| Convertible note payable, net | ||||||||
| Paycheck protection loan, SBA Loan | ||||||||
| TOTAL CURRENT LIABILITIES: | ||||||||
| Operating lease liability, long-term portion, related party | ||||||||
| Other long-term liabilities, related party | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Series A Preferred Stock: $ Par Value, shares designated; and shares issued and outstanding on December 31, 2023 and December 31, 2022 respectively. | ||||||||
| Series B-1 Preferred: $ Par Value, shares designated; and shares issued and outstanding on December 31, 2023 and December 31, 2022 respectively. | ||||||||
| Series B-2 Preferred: $ Par Value, shares designated; and shares issued and outstanding on December 31, 2023 and December 31, 2022 respectively. | ||||||||
| Series C Preferred: $ Par Value, shares designated; and shares issued and outstanding on December 31, 2023 and December 31, 2022 respectively. | ||||||||
| Series C-1 Preferred: $ Par Value, shares designated and and shares issued and outstanding on December 31, 2023 and December 31, 2022 respectively. | ||||||||
| Series C-2 Preferred: $ Par Value, and shares designated and and shares issued and outstanding on December 31, 2023 and December 31, 2022 respectively. | ||||||||
| Series D Preferred: $ Par Value, shares designated and and shares issued and outstanding on December 31, 2023 and December 31, 2022 respectively. | ||||||||
| Series E Preferred: $ Par Value, shares designated and issued on December 31, 2023. | ||||||||
| Preferred stock, value | ||||||||
| Common Stock: $ Par Value, shares authorized; and shares issued and outstanding on December 31, 2023 and December 31, 2022 respectively. | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
Panacea Life Sciences Holdings, Inc. and Subsidiary
Unaudited Condensed Consolidated Statements of Operations
| 2023 | 2022 | |||||||
| For the year ending December 31 | ||||||||
| 2023 | 2022 | |||||||
| REVENUE | $ | $ | ||||||
| COST OF SALES | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Production related operating expenses | ||||||||
| General and administrative expenses | ||||||||
| TOTAL OPERATING EXPENSES | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSES) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Unrealized gain (loss) on marketable securities, net | ( | ) | ( | ) | ||||
| Realized gain on sale of securities | ||||||||
| Other income (loss) | ||||||||
| Employer retention credit | ||||||||
| Rental Income | ||||||||
| Gain on extinguishment of debt | ||||||||
| TOTAL OTHER INCOME (EXPENSE) | ( | ) | ( | ) | ||||
| INCOME (LOSS) BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| TAXES | ||||||||
| NET INCOME (LOSS) | $ | ( | ) | $ | ( | ) | ||
| Per-share data | ||||||||
| Basic and diluted loss per share | $ | ) | $ | ) | ||||
| Weighted average number of common shares outstanding | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
PANACEA LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(unaudited)
| 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, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Sale of shares to investors | - | |||||||||||||||||||||||||||
| Issuance of common shares for services | ||||||||||||||||||||||||||||
| Issuance of restricted shares to employees | ( | ) | ||||||||||||||||||||||||||
| Shares issued in settlement of convertible note | - | |||||||||||||||||||||||||||
| Preferred Series E shares issued in acquisition | - | |||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
| F-5 |
Panacea Life Sciences, Inc.
Statements of Cash Flows
| For the years ended December 31 | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation | ||||||||
| Realized gain on sale of securities | ( | ) | ||||||
| Unrealized (gain)/loss on marketable securities | ||||||||
| Inventory Insurance Disposal | ||||||||
| Non cash settlement of convertible note and accrued interest | ( | ) | ||||||
| Amortization of intangible assets | ||||||||
| Amortization of debt discount and non-cash interest expense | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ||||||||
| Inventory | ( | ) | ||||||
| Prepaid expense and other assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Operating lease liability, net | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Proceeds from sale of marketable securities | ||||||||
| Net fixed asset acquisitions | ( | ) | ( | ) | ||||
| Net Cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Proceeds from payroll protection loan, SBA loan | ||||||||
| Payments of principal on notes payable | ( | ) | ( | ) | ||||
| Proceeds from Notes payable - related party | ||||||||
| Proceeds from notes payable | ||||||||
| Cash provided by financing activities | ||||||||
| Net increase (decrease) in Cash and Cash Equivalents | ( | ) | ||||||
| Cash and Cash Equivalents, Beginning of Period | ||||||||
| Cash and Cash Equivalents, End of Period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Cash paid for income taxes during the year | $ | $ | ||||||
| Interest payments during the year | $ | $ | ||||||
| Noncash investing and financing activity | ||||||||
| Goodwill recorded in acquisition | $ | $ | ||||||
| Preferred shares issued in acquisition | $ | $ | ||||||
| Inventory recorded in acquisition | $ | ( | ) | $ | ||||
| Assets from acquisition | $ | ( | ) | $ | ||||
| Conversion of Preferred A shares to Note Payable | $ | |||||||
| Issuance of Common Stock for services | $ | $ | ||||||
| Capitalized assets purchased on account - related party | $ | $ | ||||||
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, 2023
NOTE 1 - NATURE OF ORGANIZATION
Organization and Business Description
Panacea Life Sciences Holdings, Inc. (the “Company”, “Panacea Holdings”, “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”).
Panacea Life Sciences Holdings, Inc. is a holding company organized as a plant-based natural health ingredient and product company, specializing in the development, manufacturing, research, and distribution of products within the $134B and rapidly growing natural health and wellness market segment for both humans and animals.
The
company’s first subsidiary, Panacea Life Sciences, Inc. (PLS), is dedicated to the production, distribution, research, and manufacturing
of premium-quality nutraceuticals, cannabinoids, mushrooms, kratom, and other natural, plant-based ingredients and products. Operating
from a cutting-edge
Panacea Distro, the second subsidiary of Panacea Life Sciences Holdings, Inc., manages six retail locations and a distribution center situated in the Tampa, Florida area. These establishments provide a diverse range of products, including Nitro Kava, Kratom, Hemp, VAPE and mushroom products, and various beverages, with a primary focus on promoting alternative health and wellness.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
On September 30, 2023 the Company completed an Asset Purchase Agreement with N7 Enterprises. The results for N7 for the 4th quarter were consolidated.
Going concern
These
audited consolidated financial statements are presented on the basis that the Company will continue as a going concern. 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, 2023, our
accumulated deficit was $
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. These 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 continue as a going concern.
| F-7 |
Use of Estimates
The audited consolidated financial statements have been prepared in conformity with US GAAP and required management of the Company to make estimates and assumptions in preparation of these statements. Actual results may differ significantly from those estimates. Significant estimates made by management include but are not limited to the useful life of property and equipment, incremental borrowing rate used in the calculation of right of use asset and lease liability, reserves for inventory, allowance for doubtful accounts, revenue allocations, valuation allowance on deferred tax assets, assumptions used in assessing impairment of long-term assets, assumptions used in the calculation of net realizable value of inventory and fair value of non-cash equity transactions.
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, 2023 and 2022, 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. 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 product 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 and shares of XXII as of December 31, 2023 and 2022, respectively, which are classified as available-for-sale and included in current assets. (see Note 2 – Going Concern). Securities are valued based on market prices for identical assets using third party certified pricing sources. Available-for-sale securities are carried at fair value with unrealized and realized gains and losses reported as a component of income (loss). Realized gains and losses, if any, are calculated on the specific identification method and are included in other income in the consolidated statements of operations.
| F-8 |
Fair Value Measurements
The Company adopted the provisions of Accounting 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. The guidance prioritizes the inputs used in measuring fair value and establishes a three-tier value hierarchy that distinguishes among the following:
| ● | Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. | |
| ● | Level 2—Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. | |
| ● | Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The following table shows, by level within the fair value hierarchy, the Company’s assets and liabilities at fair value on a recurring basis as of December 31, 2023, and December 31, 2022:
SCHEDULE OF FAIR VALUE ASSETS MEASURED ON RECURRING BASIS
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Marketable securities | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
There were no transfers of marketable securities into or out of Level 1 during the years ended December 31, 2023, or 2022.
SCHEDULE OF MARKETABLE SECURITIES
| December 31, 2023 | ||||
| Balance at beginning of year | $ | |||
| Unrealized gain (loss) on marketable securities, net | ( | ) | ||
| Balance at end of period | $ | |||
As of December 31, 2023, the Company has no liabilities that are re-measured at fair value.
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 to
Intangible Assets and Goodwill
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 found that the fair value exceeded the carrying
value. It has $
SCHEDULE OF INTANGIBLE ASSETS AND GOODWILL
| Estimated Life | ||
| Goodwill from Phoenix Acquisition | ||
| Goodwill from N7 Acquisition |
| F-9 |
| December 31, 2023 | December 31, 2022 | |||||||
| Goodwill from Phoenix Acquisition | $ | $ | ||||||
| Goodwill from N7 Acquisition | ||||||||
| Total | $ | $ | ||||||
Leases
The Company determines if an arrangement is a lease at inception. Contracts containing a lease are further evaluated for classification 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 (ii) 90% or more of the fair value of the underlying asset comprises substantially all of the fair value of the underlying asset. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities and long-term operating lease liabilities in the Company’s consolidated balance sheets. Finance leases are included in property, plant and equipment, net, other current liabilities, and long-term finance lease liabilities in the Company’s consolidated balance sheets. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. For leases with terms greater than 12 months, the Company records the ROU asset and liability at commencement date based on the present value of lease payments according to their term.
The Company uses incremental borrowing rates based on the estimated rate of interest for collateralized borrowing over a similar 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 terminate 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 ROU and lease liabilities are remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Convertible Notes Payable
None.
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 probable. Revenue is generally recognized net of allowances for returns 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 have 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 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. The Company recorded $
| F-10 |
SCHEDULE OF REVENUE FROM CONTRACT WITH CUSTOMER
| December 31, 2023 | December 31, 2022 | |||||||
| Balance, beginning of period | $ | $ | ||||||
| Payments received for unearned revenue | ||||||||
| Revenue earned | ||||||||
| Balance, end of period | $ | $ | ||||||
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.
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 $
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 $
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.
| F-11 |
The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, “Earnings per Share”. Basic earnings per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if preferred stock converted to common stock and warrants are exercised. Preferred stock and warrants are excluded from the diluted earnings per share calculation if their effect is anti-dilutive.
| 2023 | 2022 | |||||||
| Years ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Restricted Stock | ||||||||
| Options to purchase common stock | ||||||||
| Warrants to purchase common stock | ||||||||
| Series B-1 Convertible Preferred | ||||||||
| Series B-2 Convertible Preferred | ||||||||
| Series C Convertible Preferred | ||||||||
| Series C-1 Convertible Preferred | ||||||||
| Series C-2 Convertible Preferred | ||||||||
| Series D Convertible Preferred | ||||||||
| Series E Convertible Preferred | ||||||||
| Total | ||||||||
| Anti-dilutive securities | ||||||||
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 entities a minimum threshold for financial statement recognition of the benefit of tax positions and requires certain expanded disclosures. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse. The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
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 instruments will be reported as a 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 31, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements.
| F-12 |
In May 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” which clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. An entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as follows: i) for a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a “debt” or “debt instrument”), as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged; ii) for all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
The Company does not discuss recent pronouncements that are not anticipated to have an 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 straight-line method over the estimated useful lives of the related assets, generally as follows:
SCHEDULE OF PROPERTY PLANT AND EQUIPMENT USEFUL LIVES
| Estimated Life | ||||
| Computers and technological assets | ||||
| Furniture and fixtures | ||||
| Machinery and equipment | ||||
| Leasehold improvement |
Property and equipment, net consists of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
| December 31, 2023 | December 31, 2022 | |||||||
| Computers and technological assets | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Machinery and equipment | ||||||||
| Land | ||||||||
| Leasehold Improvements | ||||||||
| Total | ||||||||
| Total Property and equipment, gross | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Total Property and equipment, net | $ | $ | ||||||
Depreciation
expenses for the years ended December 31, 2023 and 2022 were $
| F-13 |
NOTE 4 – INVENTORY
Inventory consists of the following components:
SCHEDULE OF INVENTORY
| December 31, 2023 | December 31, 2022 | |||||||
| Raw Materials | $ | $ | ||||||
| Semi-Finished | ||||||||
| Finished Goods | ||||||||
| Packaging | ||||||||
| Total | $ | $ | ||||||
NOTE 5 –OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES – RELATED PARTY
Right of Use
The
Company adopted Accounting Standards Update (“ASU”) No. 2016-02, “Leases” (“ASC 842”) on January
1, 2019, the start of our 2019 fiscal year. The Company has 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 now expires on
The
Company, as of January 1, 2019, leases a portion of the property (formerly the Environmental Protection Agency building) in Golden, CO
from J&N Real Estate, owned by the CEO, a related party with a term expiring on
SCHEDULE OF RIGHT OF USE ASSET AND LIABILITY
| December 31, 2023 | December 31, 2022 | |||||||
| Right-of-use assets | $ | $ | ||||||
| Present value of operating lease liabilities | $ | $ | ||||||
| Less: Long-term portion of operating lease liability | ( | ) | ( | ) | ||||
| Short-term portion of operating lease liability | ||||||||
| Unpaid balances | ||||||||
| Total short-term lease liability obligations | $ | $ | ||||||
| Weighted-average remaining lease term (Ends December 31, 2030) | ||||||||
| Weighted-average discount rate | % | |||||||
During
years ended December 31, 2023, and 2022, we recognized approximately $
| F-14 |
Approximate future minimum lease payments for our right of use assets over the remaining lease periods as of December 31, 2023, are as follows:
Maturity of operating lease liabilities for the following years ended:
SCHEDULE OF MATURITY OF OPERATING LEASE LIABILITIES
| 2024 | $ | |||
| 2025 | $ | |||
| 2026 | $ | |||
| 2027 | $ | |||
| Thereafter | $ | |||
| Total undiscounted operating lease payments | $ | |||
| Less: Imputed interest | $ | ( | ) | |
| Present value of operating lease liabilities | $ |
NOTE 6 – NOTES PAYABLE
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 $
First Bank Loan
On
July 6, 2023, the company completed a promissory note with its bank, First Bank. The maturity on the loan is July 1, 2030, at a
Note payable-current, related party
As
part of the agreement in the reverse merger transaction, certain loan balances (“J&N Loans”) from J&N Real Estate
Company, LLC an affiliate of the Company’s CEO, (“J&N”) and historical interest owed of $
On
June 30, 2021, Panacea issued the Company’s CEO, Ms. Buttorff, a
SCHEDULE OF NOTES PAYABLE RELATED PARTY
| December 31, 2023 | December 31, 2022 | |||||||
| J&N Note | $ | $ | ||||||
| CEO Note | ||||||||
| Total related party notes | $ | $ | ||||||
Other long-term liabilities, related party
The
Company has recorded a related party liability (“Fixed Asset Loan”) in the amount of $
| F-15 |
In
2020, the Company recorded an additional related party liability in the amount of $
Other long-term liabilities, related party are summarized as follows.
SCHEDULE OF NOTES PAYABLE
| December 31, 2023 | December 31, 2022 | |||||||
| Other long-term liabilities, related party | ||||||||
| Fixed Asset Loan | $ | $ | ||||||
| J&N Building Loan | ||||||||
| Total | $ | $ | ||||||
NOTE 7 - STOCKHOLDERS’ EQUITY
Common stock
The Company’s authorized common stock consists of shares with a par value of $ per share.
On
March 3, 2022, the Series A preferred stock was converted to a convertible loan for $
Common stock options
Stock Option 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 incentive awards in the form of non-qualified and incentive 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 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 of Directors 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.
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 10 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.
| F-16 |
Stock Options
SCHEDULE OF STOCK OPTIONS
| Options Outstanding as of December 31, 2023 | ||||||||||||||||
| 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, 2022 | $ | |||||||||||||||
| Options granted | - | |||||||||||||||
| Options exercised | - | - | ||||||||||||||
| Options canceled / expired | - | - | ||||||||||||||
| Balance at December 31, 2023 | $ | $ | ||||||||||||||
| Vested and exercisable at December 31, 2023 | $ | $ | ||||||||||||||
Stock Warrants
On
November 18, 2021, the Company entered into a Securities Purchase Agreement (“SPA”) with Lincoln Park Capital Fund, LLC (the
“Purchaser”) pursuant to which the Company agreed to sell a
On
March 3, 2022, the Company entered in an Exchange Agreement with an institutional investor pursuant to which the Company issued a
The Company’s outstanding warrants as of December 31, 2023, are summarized as follows, and all were exercisable at that date.
A summary of the Company’s outstanding warrants is presented below:
SCHEDULE OF WARRANTS OUTSTANDING
| Warrants Outstanding as of December 31, 2023 | ||||||||||||||||
| 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, 2022 | $ | |||||||||||||||
| Options granted | - | - | ||||||||||||||
| Options exercised | - | - | ||||||||||||||
| Options canceled / expired | - | - | ||||||||||||||
| Balance at December 31, 2023 | $ | $ | ||||||||||||||
| Vested and exercisable at December 31, 2023 | $ | $ | ||||||||||||||
As of December 31, 2023, the outstanding warrants have no intrinsic value.
| F-17 |
Restricted Stock
SUMMARY OF RESTRICTED STOCK
| Restricted Stock Common Stock | ||||
| Balance at December 31, 2022 | ||||
| Balance at December 31, 2023 | ||||
As
of December 31, 2023, there were
Preferred Stock
The Company’s authorized preferred stock consists of shares with a par value of $.
On September 30, 2023, an asset purchase agreement with N7 Enterprises was closed. The original agreement was to award N7 shares of preferred E stock. Each share is convertible into shares of common stock. The agreement contained a provision permitting the total number of shares to be adjusted based on projected sales targets being achieved. Due to these sales targets not being met, subsequent to the original award, the preferred shares were reduced to .
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Legal Matters
In the ordinary course of business, the Company enters into agreements with third parties that include indemnification provisions which, in its judgment, are normal and customary for companies in the Company’s industry sector. These agreements are typically with business partners, and suppliers. Pursuant to these agreements, the Company generally agrees to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to the Company’s products, use of such products, or other actions taken or omitted by us. The maximum potential number of future payments the Company could be required to make under these indemnification provisions is unlimited. The 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, the Company has no liabilities recorded for these provisions as of December 31, 2022.
Concentrations
The Company has no concentration of vendors that would impact production costs in the longer term.
On
the revenue side, for the year ended December 31, 2023, there was a concentration of two customers. Both were nutraceutical contract
manufacturing customers who represent
For
the year ended December 31, 2022, there was a concentration of two customers. Both are tolling partners who represent
The
other concentration is in the accounts receivable category, where three customer accounts for
| F-18 |
The Company has no other contingencies, material commitments, or purchase obligations or sales obligations.
Executive Employment Agreement
On
December 31, 2021, the Company entered into an updated Employment Agreement with Leslie Buttorff pursuant to which Ms. Buttorff serves
as the Company’s Chief Executive Officer for an initial term of July 1, 2021, to December 31, 2024 (the “Employment Agreement).
Under her Employment Agreement, Ms. Buttorff receives an annual base salary of $
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 the Code, and the Regulations thereunder.
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 $
Generally, “good reason” is defined as (i) any material breach of the Employment Agreement by the Company, (ii) the Company’s assignment of Ms. Buttorff to a position that has materially less authority, status, or functional responsibility than the position with the Company as of the commencement date, or the assignment to her of duties that are not those of an executive at the management level, (iii) the reduction of Ms. Buttorff’s base salary, (iv) the requirement that Ms. Buttorff move her primary place of employment more than 30 miles from her initial place of employment, or (v) upon any change of control event as defined in Treasury Regulation Section 1.409A-3(i)(5) provided that within 12 months of the change of control event the Company terminates Ms. Buttorff or fails to obtain an agreement from any successor to perform the Employment Agreement.
Under the terms of her Employment Agreement, Ms. Buttorff is subject to non-competition and non-solicitation covenants during the term of her employment and following termination of employment with the Company. The Employment Agreement also contains customary confidentiality and non-disparagement covenants.
NOTE 9 - RELATED PARTY TRANSACTIONS
Notes Payable and Accrued Interest – Related Parties
For information on related party loans to the Company and other related party transactions, see Notes 5 and 6, Operating Lease and Notes Payable.
The accrued interest and interest expenses recorded for related party loans are shown below.
SCHEDULE OF RELATED PARTY TRANSACTIONS LOANS
| December 31, 2023 | December 31, 2022 | |||||||
| Accrued Interest | ||||||||
| Related party loan J&N | $ | $ | ||||||
| Related party loan-CEO loan | ||||||||
| Related party loan – Line of credit | ||||||||
| Accrued Interest | ||||||||
| F-19 |
| Year ended December 31, 2023 | Year ended December 31, 2022 | |||||||
| Interest Expense | ||||||||
| Related party loan J&N | $ | $ | ||||||
| Related party loan-CEO loan | ||||||||
| Related party loan – Line of Credit | ||||||||
| Interest Expense | ||||||||
NOTE 10 – INCOME TAXES
The
Company has incurred aggregate net operating losses of approximately $
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, 2023 and 2022. The company has yet to file income taxes for the year ended December 31, 2023.
SCHEDULE OF EFFECTIVE TAX RATE
| December 31, 2023 | ||||
| U.S. federal statutory rate | % | |||
| Increase (decrease) in taxes resulting from: | ||||
| Increase in valuation allowance | ( | )% | ||
| ROU Assets/Liabilities | ( | )% | ||
| State taxes | % | |||
| Income tax (expense) benefit | % | |||
The
Company provided a valuation allowance equal to the deferred income tax asset for the year ended December 31, 2023, because it was not
known whether future taxable income will be sufficient to utilize the loss carryforward. The increase in the allowance was $
NOTE 13 – SUBSEQUENT EVENTS
On
January 1, 2024 Company decided to not move forward with the Pur Life Medical deal as the deal terms could not be met. The Company was
sold to a private company owned by PLSH CEO and President of which they own
In
March 5, 2024 the Company came to agreement with its previous Preferred A shareholder to resolve the $
| F-20 |
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls 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, required 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 Rule 13a-15(e) or 15d-15(e) under the Exchange 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 report to ensure that 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 management, including our principal executive officer and former principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management, under the supervision and with the participation of our principal executive officer and financial officer, evaluated the effectiveness of our internal control over financial reporting as of the end of the period covered by this report. Our management’s evaluation of our internal control over financial reporting was based on the framework in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. In designing and evaluating the disclosure controls and procedures, management recognizes that because of inherent limitations, any controls and procedures, no matter how well designed and operated, may not prevent or detect misstatements and can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Our internal control over financial reporting includes those policies and procedures 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. |
Management’s Assessment of the Effectiveness of the Company’s internal Control over Financial Reporting
Our principal executive officer and financial officer concluded that our disclosure controls and procedures were not effective to ensure that the information relating to us is required to be disclosed in our 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 the 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 and hiring additional accounting personnel at such time as we raise sufficient capital to do so.
| 25 |
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, 2022, that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
The following information sets forth the names, ages, and positions of our current directors and executive officers as of March 15, 2023.
| Name | Age | Present Positions | ||
| Leslie Buttorff | 66 | CEO and Chairman | ||
| Lawrence J. Wert | 66 | Director | ||
| Nick Cavarra | 59 | President | ||
| Nathan Berman | 36 | Controller |
Directors
Our Board is currently comprised of two (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 our director.
Leslie Buttorff is our Chief Executive Officer and director since June 30, 2021. Ms. Buttorff has been the Chief Executive Officer of Panacea Life Sciences Holding s, Inc., a company which manufactures and develops pharma-grade hemp-related products since 2017. In addition, Ms. Buttorff has been the Chairman of the Board of Quintel-MC, Inc. a company that focuses on SAP ERP (Enterprise Resource Planning) implementations since 2002. Ms. Buttorff formed Quintel-MC, Inc. in 2002. Before establishing Quintel, Ms. Buttorff was the global practice leader for Arthur D. Little’s Utilities and Energy practice and was responsible for the alliance with Perot Systems. Ms. Buttorff is also a member of the Boards of Active Youth Network (provides revenue and enables information for sports teams, high schools and clubs) and JobZology (a CSU spinoff focused on matching people and jobs for employers). Ms. Buttorff was appointed to our Board as a result of her knowledge of the business, ownership and position with the Company.
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 the Governing Board of Gilda’s Club of Chicago, an advisor to the Chicago Chapter of Make-A-Wish Foundation and an honorary board member of RAINBOWS, an organization that helps children cope with loss. In 2018, Mr. Wert was inducted into the Chicago Catholic League Hall of Fame. Mr. Wert also sits on Board of Trustees for Fenwick High School in Oak Park, Ill. Mr. Wert was appointed as a director as a result of his prior experience with Exactus, Inc.
| 26 |
Executive Officers
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.
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.
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 performance-based system, and unlike other cannabinoid 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. Overall, we currently have over 45 individuals working under PLSH.
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 bankruptcy 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 other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Audit Committee Financial Expert
Leslie Buttorff serves as the chairman of the audit committee. Our Board has determined that Leslie Buttorff is qualified as an “audit committee financial expert”, as that term is defined under the rules of the SEC and in compliance with the Sarbanes-Oxley Act of 2002.
Code of Ethics
On January 9, 2019, our Board adopted a Code of Business Conduct and Ethics applicable to all our directors, executive officers, and employees.
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 committee. The goal of our anticipated equity grants will be to provide an appropriate mixture of short term and long-term incentives to increase shareholder value.
| 27 |
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 for an initial term of July 1, 2021, to December 31, 2024 (the “Employment Agreement). Under her Employment Agreement, Ms. Buttorff receives an annual base salary of $380,000. To date, Ms. Buttorff has not taken a salary and payments have accrued commencing in January 2021. In 2023, Ms. Buttorff received restricted stock in lieu of any employment compensation.
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 three consecutive months, (ii) an award of $2.2 million of shares of common stock upon approval of our common stock for listing on The Nasdaq Capital Market prior to expiration of the term of the Employment Agreement, and (iii) an annual cash performance bonus of up to 100% of her base salary based on the achievement of performance metrics for the applicable fiscal year to be set by our Board.
Director Compensation
Compensation of Directors Table
The following table shows the compensation paid during the year ended December 31, 2023 to our non-employee director.
| Name | Stock Awards (No.) | Option Awards (No.) | Fees Earned or Paid in Cash ($) | Non-Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total Shares | |||||||||||||||||||||||
| Leslie Buttorff | (a) | 760,000 | 0 | 0 | 0 | 0 | 0 | 760,000 | ||||||||||||||||||||||
| Executive Chairman | ||||||||||||||||||||||||||||||
| Lawrence J. Wert | (a) | 300,000 | 0 | 0 | 0 | 0 | 0 | 300,000 | ||||||||||||||||||||||
| Board Member | ||||||||||||||||||||||||||||||
(a) Compensation was awarded in common stock.
Equity Awards at Year End
None.
Option Exercises and Stock Vested
Our named executive officers did not exercise any stock option awards during the year ended December 31, 2023.
| 28 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information as of December 31, 2023, 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. Unless otherwise noted, each shareholder’s address is 5910 S. University Blvd, Suite 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) | 1,359,899 | 7.71 | % | ||||||
| Common Stock | Nathan Berman (3) | 67,749 | 0.38 | % | ||||||
| Common Stock | Nicholas J Cavarra (4) | 796,957 | 4.52 | % | ||||||
| Directors: | ||||||||||
| Common Stock | Lawrence J. Wert (5) | 607,868 | 3.45 | % | ||||||
| Common Stock | All directors and executive officers as a group (4 persons) (6) | 2,035,516 | 16.06 | % | ||||||
| 5% Stockholders: | ||||||||||
| Common Stock | J&N Real Estate Company LLC (7) | 7,297,627 | 41.36 | % | ||||||
(1)
|
Applicable percentages are based on 17,645,352 of common stock outstanding as of the March 15, 2023, 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, 2023, 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. |
(3) (4) |
Mr. Berman is our Controller. Mr. Cavarra is our President. |
| (5) | Mr. Wert is a director. |
| (6) | 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. |
| (7) | J & N Real Estate Company, LLC Ms. Buttorff is the owner. Address is 5910 South University Suite C18-193, Greenwood Village, CO 80121. |
Item 13. Certain Relationships and Related Transactions, and Director Independence
Our CEO is the owner of related parties J&N Real Estate LLC. J&N is a major shareholder and holds a note of Panacea and is the leaseholder for the laboratory in Golden. See Note 6: Notes for Related Party Transactions.
Director Independence
We are not a “listed issuer” within the meaning of Item 407 of Regulation S-K and there are no applicable listing standards for determining the independence of our directors. Applying the definition of independence set forth in Rule 4200(a)(15) of The Nasdaq Stock Market, Inc., we believe that Larry Wert is an independent director.
Item 14. Principal Accountant Fees and Services
The following table presents the aggregate fees billed for each of the last two fiscal years by our independent registered public accounting firm, Borgers, in connection with the audit of our consolidated financial statements and other professional services rendered.
| Year Ended: | Audit Services | Tax Fees | Other Fees | |||||
| December 31, 2023 | $ | 201,000 | n/a | n/a | ||||
| December 31, 2022 | $ | 135,000 | n/a | n/a | ||||
Pre–Approval Policy of Services Performed by Independent Registered Public Accounting Firm
The Board policy is to pre–approve all audit and non–audit related services, tax services and other services. The independent registered public accounting firm and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre–approval and the fees for the services performed to date.
| 29 |
PART IV
Item 15. Exhibits, Financial Statements 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)
| 30 |
| 10.12 | Asset Purchase Agreement dated January 29, 2024, by and between the Issuer and PLM Holdings, Inc. | 8-K | 2/5/24 | 10.3 | Filed | |||||
| 10.13 | Ex. 10.14 to 10-K__Form of Amendment No. 1 to Promissory Note dated March 5, 2024 by and between the Issuer and FirstFire Global Opportunities Fund LLC | Furnished | ||||||||
| 23.1 | Consent of BF Borgers CPA PC | Filed | ||||||||
| 31.1 | Certification of Principal Executive Officer and Principal Financial Officer (302) | Filed | ||||||||
| 32.1 | Certification of Principal Executive and Principal Financial Officer (906) | Furnished*** | ||||||||
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed | ||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed | ||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed | ||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed | ||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed | ||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Management contract or compensatory plan or arrangement.
** 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 as permitted by the rules of the SEC. 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 this exhibit for review by the SEC Staff, to the extent it has not been previously provided, and provide supplemental materials to the SEC Staff promptly upon request.
Copies of this Report (including the financial statements) and 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.
| 31 |
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: April 1, 2024 | By: | /s/ Leslie Buttorff |
| Leslie Buttorff | ||
Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) | ||
| 32 |
Exhibit 3.10
FORM OF
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES N-7 CONVERTIBLE PREFERRED STOCK
The undersigned, Chief Executive Officer of Panacea Life Sciences Holdings, Inc., a Nevada corporation (the “Corporation”), DOES HEREBY CERTIFY that the following resolutions were duly adopted by the Board of Directors of the Corporation by unanimous written consent on June 30, 2023;
WHEREAS, the Board of Directors is authorized within the limitations and restrictions stated in the Articles of Incorporation of the Corporation, as amended, to provide by resolution or resolutions for the issuance of 50,000,000 shares of Preferred Stock, par value $0.0001 per share, of the Corporation, in such series and with such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions as the Corporation’s Board of Directors shall fix by resolution or resolutions providing for the issuance thereof duly adopted by the Board of Directors; and
WHEREAS, it is the desire of the Board of Directors of the Company, pursuant to its authority as aforesaid in accordance with the corporation law of the State of Nevada, and as set forth in this Certificate of Designations, Preferences, Rights and Limitations of Series N-7 Convertible Preferred Stock, to designate the rights, preferences, restrictions and other matters relating to the Series N-7 Convertible Preferred Stock, which will consist of 78,530 shares of Series N-7 Convertible Preferred Stock, par value $0.0001 per share, which the Company has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of Preferred Stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of Preferred Stock as follows:
RESOLVED, FURTHER, that the chairman, chief executive officer, chief financial officer, president or any vice-president, and the secretary or any assistant secretary, of the Company be and they hereby are authorized and directed to prepare and file a Certificate of Designations, Preferences, Rights and Limitations of Series N-7 Preferred Stock in accordance with the foregoing resolution and the provisions of Nevada law.
ARTICLE I
Series N-7 Preferred Stock
Section 1. Designation and Amount. The Corporation shall be authorized to issue 38,530 shares of Series N-7 Convertible Preferred Stock, par value $0.0001 per share (the “Series N-7 Preferred Stock”), which will not be subject to increase without the consent of the holders (each a “Holder” and collectively, the “Holders”) of a majority of the outstanding shares of Series N-7 Preferred Stock. The designations, powers, preferences, rights and restrictions granted or imposed upon the Series N-7 Preferred Stock are as set forth in this Certificate of Designation (this “Certificate of Designations”). Each share of Series N-7 Preferred Stock shall have a stated value of $100.00 (the “Stated Value”).
Section 2. Ranking and Voting.
Ranking. The Series N-7 Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends and right of liquidation with the Corporation’s common stock, par value 0.001 per share (“Common Stock”), and (b) junior with respect to dividends and right of liquidation to all existing and future indebtedness of the Corporation and existing and outstanding preferred stock of the Corporation.
Voting. Except as required by applicable law or as set forth herein, the holders of shares of Series N-7 Preferred Stock will have no right to vote on any matters, questions or proceedings of this Corporation including, without limitation, the election of directors. With respect to any voting rights of the Series N-7 Preferred Stock set forth herein, the Series N-7 Preferred Stock shall vote as a class, each share of Series N-7 Preferred Stock shall have one vote on any such matter, and any such approval may be given via a written consent in lieu of a meeting of the Series N-7 Holders. Any reference herein to a determination, decision or election being made by the “Majority Holders” shall mean the determination, decision or election as made by Holders holding a majority of the issued and outstanding shares of Series N-7 Preferred Stock at such time.
Section 3. Protective Provisions.
A. So long as any shares of Series N-7 Preferred Stock are outstanding, the Corporation may not, without the affirmative approval of the Majority Holders, (i) alter or change adversely the powers, preferences or rights given to the Series N-7 Preferred Stock or alter or amend this Certificate of Designations, (ii) amend its Articles of Incorporation, as amended, or other charter documents in breach of any of the provisions hereof, (iii) increase the authorized number of shares of Series N-7 Preferred Stock; or (iv) enter into any binding agreement with respect to any of the foregoing.
Section 4. Liquidation.
A. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or upon any Deemed Liquidation Event (as defined below), after payment or provision for payment of debts and other liabilities of the Corporation, and after payment or provision for any liquidation preference payable to the holders of any Preferred Stock ranking senior upon liquidation to the Series N-7 Preferred Stock, if any, but prior to any distribution or payment made to the holders of Common Stock or the holders of any Preferred Stock ranking junior upon liquidation to the Series N-7 Preferred Stock by reason of their ownership thereof, the Holders will be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders an amount with respect to each share of Series N-7 Preferred Stock equal to (i) the Stated Value plus (ii) any accrued but unpaid dividends, the Default Adjustment (as defined herein), if applicable, Failure to Deliver Fees (as defined herein), if any, and any other fees as set forth herein (the amounts in this clause (ii) collectively, the “Adjustment Amount”).
B. A “Deemed Liquidation Event” means: (a) a merger or consolidation in which the Corporation is a constituent party or a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of the surviving or resulting corporation or, if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.
B. If, upon any liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event, the assets of the Corporation will be insufficient to make payment in full to all Holders of the liquidation preferences hereunder, then such assets will be distributed among the Holders at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled.
Section 5. Conversion.
A. Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the Issuance Date, to convert all or any part of the outstanding Series N-7 Preferred Stock into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issuance Date, or any shares of capital stock or other securities of the Corporation into which such Common Stock shall hereafter be changed or reclassified at the Conversion Rate determined as provided herein (a “Conversion”); provided, however, that in no event shall any Holder be entitled to convert any portion of the Series N-7 Preferred Stock in excess of that number of Series N-7 Preferred Stock that upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by such Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Series N-7 Preferred Stock or the unexercised or unconverted portion of any other security of the Corporation subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of the Series N-7 Preferred Stock with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership limitations on conversion as set forth in the section may NOT be waived by the Holder. The number of shares of Common Stock to be issued upon each conversion of Series N-7 Preferred Stock shall be determined by multiplying the Conversion Amount (as defined herein) by the Conversion Rate (as defined herein) then in effect on the date specified in the notice of conversion (the “Notice of Conversion”), attached hereto as Exhibit A, delivered to the Corporation by a Holder in accordance with the terms hereof; provided that the Notice of Conversion is submitted by e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Corporation before 6:00 p.m., Denver, Colorado time on such conversion date (the “Conversion Date”); however, if the Notice of Conversion is sent after 6:00 p.m., Denver, Colorado time the Conversion Date shall be the next business day.
B. Conversion Rate. Each share of Series N-7 Preferred Stock convert into fully paid and non-assessable shares of Common Stock in an amount equal to 100 shares of the Corporation’s common stock, par value $0.0001 per share (the “Common Stock”) for each one share of Series N-7 Preferred Stock surrendered (the “Conversion Rate”). The Corporation shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Corporation shall round such fraction of a share of Common Stock up to the nearest whole share.
C. Authorized Shares. The Corporation covenants that during the period the conversion right exists, the Corporation shall reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of the Series N-7 Preferred Stock issued. The Corporation represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Corporation shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Series N-7 Preferred Stock shall be convertible at the then current Conversion Rate, the Corporation shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Series N-7 Preferred Stock. The Corporation (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Series N-7 Preferred Stock, and (ii) agrees that its issuance of the Series N-7 Preferred Stock shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of the Purchase Agreement and the Series N-7 Preferred Stock.
D. Method of Conversion.
i. Mechanics of Conversion. As set forth in hereof, the shares of Series N-7 Preferred Stock may be converted by the Holder thereof, either as to all of such Holder’s shares of Series N-7 Preferred Stock or as to a portion of such Holder’s shares of Series N-7 Preferred Stock, at any time from time to time after one hundred eighty (180) days following the Issuance Date, by submitting to the Corporation a Notice of Conversion (by e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and within five (5) days following such conversion surrendering the converted Series N-7 Preferred Stock to the Corporation’s transfer agent.
ii. Surrender of Series N-7 Preferred Stock Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of the Series N-7 Preferred Stock in accordance with the terms hereof, the converting Holder shall be required to physically surrender any certificate representing the Series N-7 Preferred Stock being converted to the Corporation (or its transfer agent) and, in the event that less than all of the Series N-7 Stock represented by such certificate is being converted, the Corporation shall return to the applicable Holder a new certificate representing the unconverted shares of Series N-7 Preferred Stock.
iii. Delivery of Common Stock Upon Conversion. Upon receipt by the Corporation from a Holder of an e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as set forth herein, and the certificate representing the Series N-7 Preferred Stock as required herein, the Corporation shall issue and deliver or cause to be issued and delivered to or upon the order of the applicable Holder certificates for the Common Stock issuable upon such conversion, and any replacement certificate representing the unconverted shares of Series N-7 Preferred Stock, if applicable, within ten (10) business days after such receipt (the “Deadline”). Upon receipt by the Corporation of a Notice of Conversion, the applicable Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding Series N-7 Preferred Stock held by such applicable Holder shall be reduced to reflect such conversion, and, unless the Corporation defaults on its obligations hereunder, all rights with respect to the shares of Series N-7 Preferred Stock being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the applicable Holder shall have given a Notice of Conversion as provided herein and comply with the other requirements herein, the Corporation’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the applicable Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Corporation to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the applicable Holder of any obligation to the Corporation, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to the applicable Holder in connection with such conversion.
iv. Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Corporation is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program, upon request of the applicable Holder and its compliance with the provisions set forth herein, the Corporation shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the applicable Holder by crediting the account of applicable Holder’s Prime Broker with DTC through its Deposit and Withdrawal at Custodian system.
vi. Concerning the Shares. The shares of Common Stock issuable upon conversion of the Series N-7 Preferred Stock may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Securities Act of 1933, as amended (together with the rules and regulations thereunder, the “Securities Act”) or (ii) the Corporation or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) (“Rule 144”); or (iii) such shares are transferred to an “affiliate” (as defined in Rule 144) of the applicable Holder who agrees to sell or otherwise transfer the shares only in accordance with this section and who is an accredited investor (as defined in Rule 501 under Regulation D promulgated pursuant to the Securities Act). Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of the Series N-7 Preferred Stock shall be removed and the Corporation shall issue to the applicable Holder a new certificate therefore free of any transfer legend if the Corporation or its transfer agent shall have received an opinion of counsel from applicable Holder’s counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Securities Act, which opinion shall be accepted by the Corporation so that the sale or transfer is effected; or (ii) in the case of the Common Stock issuable upon conversion of the Series N-7 Preferred Stock such security is registered for sale by the applicable Holder under an effective registration statement filed under the Securities Act.
E. Effect of Certain Events.
i. Adjustment Due to Merger, Consolidation, Etc. If, at any time when the Series N-7 Preferred Stock are outstanding and prior to conversion of all of the Series N-7 Preferred Stock, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Corporation shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Corporation or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Corporation other than in connection with a plan of complete liquidation of the Corporation, then each Holder shall thereafter have the right to receive upon conversion of the Series N-7 Preferred Stock, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which such Holder would have been entitled to receive in such transaction had the Series N-7 Preferred Stock been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holders to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Rate and of the number of shares issuable upon conversion of the Series N-7 Preferred Stock) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Corporation shall not effect any transaction described in this section unless (a) it first gives, to the extent practicable, ten (10) days’ prior written notice (but in any event at least five (5) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets, or the resulting successor or acquiring entity (if not the Corporation) assumes by written instrument the rights, preferences afforded to the Holders hereunder and obligations set forth herein. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
ii. Adjustment Due to Distributions. If the Corporation shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Corporation’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then each Holder shall be entitled to receive the applicable portion of such Distribution on an as-converted-to-Common-Stock basis, assuming that the Series N-7 Preferred Stock were converted to Common Stock on the day immediately prior to the record date for holders of the Common Stock entitled to receive such Distribution, but, for the avoidance of doubt, without any conversion to Common Stock actually being required.
iii. Corporation’s Redemption Option. Notwithstanding anything herein to the contrary, at any time during the period beginning on the date of the issuance of shares of Series N-7 Preferred Stock (the “Issuance Date”) and ending on the date which is one hundred eighty (180) days following the Issuance Date (the “Redemption Period”), the Corporation shall have the right, at the Corporation’s option, to redeem all or any portion of the shares of Series N-7 Preferred Stock, exercisable on not more than three (3) business days prior written notice to the Holders, in full, in accordance with this Section E(iii). Any notice of redemption hereunder (an “Optional Redemption Notice”) shall be delivered to each Holder at its registered addresses and shall state: (1) that the Company is exercising its right to redeem the Series N-7 Preferred Stock; and (2) the date of redemption which shall be not more than three (3) business days from the date of the Optional Redemption Notice. On the date fixed for redemption in the Optional Redemption Notice (the “Optional Redemption Date”), the Company shall make payment of the Optional Redemption Amount (as defined herein) to the applicable Holder. If the Company exercises its right to redeem the Series N-7 Preferred Stock, the Company shall make payment to the applicable Holder(s) of an amount in cash equal to (i) the total number of Series N-7 Preferred Stock held by the applicable Holder multiplied by (ii) the Stated Value (the “Optional Redemption Amount”). If the Corporation delivers an Optional Redemption Notice and fails to pay the Optional Redemption Amount due to the applicable Holder within five (5) business days following the Optional Redemption Date, the Corporation shall forever forfeit its right to redeem the Series N-7 Preferred Stock pursuant to this Section E(iii).
F. Stock Register. The Corporation will keep at the offices of the transfer agent, a register of the Series N-7 Preferred Stock, which shall be prima facie indicia of ownership of all outstanding shares of Series N-7 Preferred Stock and amounts so converted and the dates of such conversions. Upon the surrender of any certificate representing Series N-7 Preferred Stock at such place, the Corporation, at the request of the record Holder of such certificate, will execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate. Each such new certificate will be registered in such name and will represent such number of shares as is requested by the Holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate.
G. Taxes. The Corporation shall pay any and all documentary, stamp, transfer (but only in respect of the registered Holder thereof), issuance and other similar taxes that may be payable with respect to the issuance and delivery of shares of Common Stock upon the conversion of Series N-7 Preferred Stock.
Section 6. Miscellaneous.
A. Lost or Mutilated Preferred Stock Certificate. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered Holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Series N-7 Preferred Stock, and in the case of any such loss, theft or destruction upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the Holder is a financial institution or other institutional investor its own agreement will be satisfactory) or in the case of any such mutilation upon surrender of such certificate, the Corporation will, at its expense, execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.
B. Failure or Indulgence Not Waiver. No failure or delay on the part of a Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
C. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery or email to a Holder, to the address of the Holder as set forth in the books and records of the Corporation. Any notice or other communication required or permitted to be given hereunder shall be deemed effective: (a) upon hand delivery or delivery by email, with accurate confirmation (if delivered on a business day during normal business hours where such notice is to be received), or the first (1st) business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second (2nd) business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
D. Jurisdiction. Any action brought by any party against any other concerning this Certificate of Designations shall be brought only in the state courts or in the federal courts located in the State of Nevada. The Corporation and each Holder hereby irrevocably waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Corporation and each Holder waives trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Certificate of Designations is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Certificate of Designations. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with the Series N-7 Preferred Stock by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
E. Remedies. The Corporation and each Holder acknowledge that a breach by it of its obligations hereunder will cause irreparable harm to the Corporation or the Holder, as applicable, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Corporation and each Holder acknowledges that the remedy at law for a breach of its obligations under this Certificate of Designations will be inadequate and agrees, in the event of a breach or threatened breach of the provisions of this Certificate of Designations, that the Corporation or the Holders, as applicable, shall be entitled, in addition to all other available remedies at law or in equity, (the parties will not be entitled of any punitive damages or penalties, but, only real and actual damages), to an injunction or injunctions restraining, preventing or curing any breach of this Certificate of Designations and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
G. Further Assurances. The Corporation shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as ant Holder may reasonably request in order to carry out the intent and accomplish the purposes of this Designation and any of the rights and preferences set forth herein including but not limited to the conversion of the Series N-7 Preferred Shares into shares of common stock whether by Rule 144 or a court approved settlement of conversion of the Series N-7 Preferred Shares into shares of common stock pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended.
F. Headings. The headings contained herein are for convenience only and will not be deemed to limit or affect any of the provisions hereof.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this June 29, 2023.
| PANACEA LIFE SCIENCES HOLDINGS, INC. | ||
| Name: | Leslie Buttorff | |
| Title: | Chief Executive Officer | |
EXHIBIT A
PANACEA LIFE SCIENCES HOLDINGS, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences, Rights and Limitations of the Series N-7 Convertible Preferred Stock of PANACEA LIFE SCIENCES HOLDINGS, INC. (the “Certificate of Designations”). In accordance with and pursuant to the Certificate of Designations, the undersigned hereby elects to convert the number of shares of Series N-7 Convertible Preferred Stock, $0.0001 par value per share (the “Preferred Shares”), of PANACEA LIFE SCIENCES HOLDINGS, INC., a Nevada corporation (the “Company”), indicated below into shares of common stock, $0.0001 par value per share (the “Common Stock”), of the Corporation, as of the date specified below.
Date of Conversion: __________________________________________________
Number of Preferred Shares to be converted:____________________________
Share certificate no(s). of Preferred Shares to be converted: _______________
Tax ID Number (If applicable): _________________________________________
Conversion Rate: 100
Number of shares of Common Stock to be issued: ________________________
Please issue the shares of Common Stock into which the Preferred Shares are being converted in the following name and to the following address:
Issue to: _____________________________________________________________
______________________________________________________________
Address: _____________________________________________________________
Telephone Number: ___________________________________________________
Email: _____________________________________________________
Holder: _______________________________________________________________
By: __________________________________________________
Title: ________________________________________________
Dated: _______________________________________________
Account Number (if electronic book entry transfer):
____________________________________
Transaction Code Number (if electronic book entry transfer): ____________________________
Exhibit 10.10
Exhibit 10.13
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation in this Annual report on Form 10-K of our report dated March 28, 2024, relating to the consolidated financial statements of Panacea Life Sciences Holdings, Inc. as of December 31, 2023, and to all references to our firm included in this Annual Report.
Certified Public Accountants
Lakewood, CO
April 1, 2024
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
I, Leslie Buttorff, certify that:
1. I have reviewed this annual report on Form 10-K of Panacea Life Sciences Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: April 1, 2024
| /s/ Leslie Buttorff | |
| Leslie Buttorff | |
| Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive Officer and Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Panacea Life Sciences Holdings, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Leslie Buttorff, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: April 1, 2024
| /s/ Leslie Buttorff | |
| Leslie Buttorff | |
| Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive Officer and Principal Financial Officer) |