Enterprise Overview
The Firm is a
alternatives in Cannabidiol, which we seek advice from as “CBD”, since
after we expanded our focus to pursue alternatives in hemp-derived CBD.
Efficient
Holdings, Inc.
Settlement with Panacea and the Panacea stockholders and because of this turned a
seed-to-sale CBD firm. The previous Panacea stockholders have assumed majority
management of the Firm, and all our operations at the moment are operated by means of Panacea
which due to the share trade turned a wholly-owned subsidiary of the
Firm.
director upon the closing of the share trade, additionally turned our principal
stockholder by means of widespread inventory and Convertible Most popular Inventory issued to her
and entities she controls.
Panacea, the Firm’s subsidiary after the share trade, which was based by
funding from twenty second Century Group, Inc., or XXII, a plant biotechnology firm
which additionally has a concentrate on CBD merchandise and know-how, throughout 2019. XXII has
retained a 15% stake within the Firm following the share trade. Via
Panacea, we’re devoted to creating and producing the highest-quality, most
medically related, authorized, hemp-derived cannabinoid merchandise for customers and
pets. Starting at a farm Panacea has the choice to personal a parcel of the farm
situated at Needle Rock,
sq. foot, state-of-the-art, cGMP, extraction, manufacturing, testing and
success middle situated in
phase of the CBD product worth chain. From cultivation to completed items,
Panacea ensures its merchandise with stringent testing protocols employed at each
stage of the provision chain. Panacea endeavors to supply pure pure cures
inside product traces for each facet of life: PANA Well being®, PANA Magnificence®, PANA
Sport®, PANA Pet®, PANA Pure® and PANA Life®
As of
and CBG merchandise. As well as, we provide “white label” licensing to retail
companies and contract manufacturing providers to smaller CBD firms and
softgel manufacturing to nutraceutical firms.
In July, 2022 we shifted a few of our focus to acquiring extra contract
manufacturing contracts within the nutraceutical business. Thus far now we have secured
ten new contracts that ought to begin yielding revenues within the 4th quarter.
We consider that our aggressive benefits are derived from being vertically
built-in that enables for extraction, enrichment and manufacturing below a cGMP
high quality setting: 1) Utilizing pharmaceutical formulation strategies to optimize the
supply of assorted hemp merchandise, 2) Creating each full spectrum and THC-free
merchandise, 3) Hemp provide, and 4) make the most of Good Manufacturing Follow to supply
items which can be protected and high quality merchandise that ship constant dosing. The
capability to supply each full spectrum merchandise (those who include <0.3%) and
THC-free merchandise permits us to optimize dosage and supply to numerous human
situations. Elimination of the THC from merchandise is a tough and costly
course of, however we consider that is important for particular affected person populations; such
as, athletes the place testing constructive for THC would result in disqualification,
first responders who could be terminated for testing constructive for THC, and in
animal merchandise the place even a small quantity of THC can result in toxicity and
potential lethality. Industrial hemp extracts are discovered to have specific
software as neuroprotectants, for instance in limiting neurological injury and
rising pace of restoration with traumatic mind harm. The cannabinoids have
additionally been reported to deal with human illness situations the place at present a number of
pharmacologicals are wanted to deal with, e.g., Put up Traumatic Stress Dysfunction
(PTSD), or the place there isn’t any present remedy akin to Alzheimer’s, Parkinson’s
Illness, and age-related dementia, to call just a few.
Though quite a few experiences describe hashish/hemp extract well being advantages the
business lacks enough medical information and high quality management to offer affected person
profit. We’re combining human and pet medical research with Good Manufacturing
Course of manufacturing to generate a panel of merchandise. Our merchandise are
formulated with supply strategies for well being advantages together with an mental
property portfolio enabling improvement of topical lotions, sublinguals, oral
tender gel capsules, patches, and sprays. Our merchandise are derived from natural
practices industrial hemp grown in
We consider a mess (a whole lot) of firms, massive and small, have launched
or intend to launch retail manufacturers and white label merchandise containing
cannabinoids like CBD, together with retail and seed-to-sale firms which can be
bigger and higher capitalized than we’re and/or which supply merchandise just like
ours with a bigger geographic scope of operations and a market presence. Lots of
these are dependent upon third events to offer uncooked materials stock for
sale. We consider this makes lots of the members within the business susceptible
to shortages, high quality points, reliability, and pricing variability. Our business
relationships might permit us to construct an environment friendly provide chain that can put us
among the many few firms that preserve a aggressive pricing and provide
benefit. The CBD-based shopper product business is very fragmented with
quite a few firms. There are additionally massive, well-funded firms that at present
don’t supply hemp-based shopper merchandise together with massive agribusiness firms
however might achieve this sooner or later and develop into vital rivals. Our objective is to
be a pacesetter in wholesale and retail gross sales channels for end-products, akin to
nutraceuticals, dietary supplements and pet and farm merchandise. As authorities regulation
of CBD and associated merchandise turns into extra lenient in sure jurisdictions, and
different boundaries to entry decline, we anticipate experiencing a rise in
competitors and an intensifying aggressive setting, together with probably
the introduction of latest seed-to-sale firms and/or the enlargement of
operations by present rivals. Additional, quite a few different elements are anticipated
to be vital to our capability to be and stay aggressive in our enterprise and
targets, together with product high quality and costs, model power, manufacturing and
distribution capabilities and geographic scope of operations and market
presence. Moreover, market situations can shift demand for CBD merchandise,
akin to aggressive pricing, the consequences of inflation, regulatory adjustments and
financial or geopolitical turmoil.
22 Our Industrial Hemp Provide
In 2019, Panacea acquired
2020 hemp crop was grown at
a
inventory and
XXII agreed to dissolve the settlement and agreed on the next: the popular
inventory was transformed to widespread inventory; a
laboratory area owned by
and tools could be transferred to XXII in trade for a discount of
million
Panacea,
15-year settlement for hemp provide could be finalized after the deal was
accomplished. In 2021 XXII was the grower at NRF and achieved USDA Natural
certification for the farm. As of the date of this Report, XXII has not
delivered the
plot of land. Nevertheless, we even have the 2020 NRF crop and several other hemp tolling
contracts during which the output of crude and or distillate is shared with the
growers to course of.
Partnership with Universities
The grand opening of the
middle are underway for isolation of uncommon cannabinoids, inspecting cannabidiol’s
results as described beneath.
? Fixing Business Points
? Downside: The hemp plant is a hyperaccumulator, which means hint parts within the
soil during which the plant is grown, akin to heavy metals, pesticides, and others,
are readily absorbed within the plant, probably contaminating hemp oil and
rendering the fabric unusable.
? Resolution: Utilizing analytical strategies, now we have developed a technique for full
removing of generally used pesticides to remediate contaminated hemp oil to
produce a protected and usable hemp product. This work has been submitted for
publication to the
? Sustainability and Entry to Minor Cannabinoids
? Downside: Along with CBD and THC, every of the opposite 118 cannabinoids are
anticipated to have distinctive and helpful well being advantages. Nevertheless, as a result of
they’re current at lower than 1% in hemp extracts, there are points in each
acquiring enough portions and figuring out the purity of every of the minor
cannabinoids.
? Resolution: The byproduct created through the distillation means of crude hemp
oil is usually thrown away to enter the waste stream. In nearer examination
of the byproduct, the CRC decided that there are substantial minor
cannabinoids current, akin to cannabidivarin (CBDV), Cannabichromene (CBC),
Cannabicyclol (CBL), and Cannabielsoin (CBE). Utilizing the superior know-how in
the CRC, the group can now entry these low abundance cannabinoids whereas additionally
helping Panacea (as a member of
in achieving its sustainability targets by reducing waste streams.
? Supporting Medical Trials
? To achieve additional perception on cannabinoid exercise, Panacea and the CRC are
collaborating to launch particular medical trials in a number of areas. The primary
two research have launched this 12 months (2022):
1. In collaboration with Dr.
CBD results in a translational mannequin of Alzheimer's illness. On this examine, carried out in aged canines which have cognitive impairment similar to human AD, not solely will CBD be evaluated for capability to sluggish illness development, however shall be one of many first research to correlate how a lot consumed CBD enters the mind.
2. In collaboration with Dr.
York, Panacea and the CRC have launched an open label examine evaluating CBD and
CBG for results on irritable bowel syndrome, a situation affecting over 30
million American with no confirmed therapy.
We now have additionally signed an settlement with the
of creating hemp-based sustainability merchandise.
23
Firm Data Know-how Infrastructure
The ERPCannabis system relies on an SAP structure and was used to develop
the bottom set up. All monetary, human useful resource, payroll, procurement,
manufacturing planning and supplies administration enterprise processes are represented
on this system. As well as, the system is linked to our e-Commerce web site
www.panacealife.com. This method permits us to replace product costing and
decide stock ranges which shall be vital as the corporate expands. In
addition, refined monetary and payroll processing are inherent within the
resolution; thus, providing traders detailed accounting outcomes associated to
firm investments. We plan to broaden on the usage of this infrastructure for
acquisitions and repair choices.
Outcomes of Operations
Set forth beneath is the dialogue of the outcomes of operations of the Firm
for the three months ended
Panacea which below relevant accounting guidelines are handled because the operation of
the Firm.
Three Months Ended
Internet Revenues
We’re principally engaged within the enterprise of manufacturing and promoting merchandise
produced from industrial hemp. Income consists of gross sales of our six class of
model merchandise, white label and contract manufacturing gross sales to different CBD
firms, uncooked materials gross sales (distillate and isolate), tolling merchandise, and
leasing area. We even have income from the sale of our Private Safety
Gear (PPE) stock and non-CBD nutraceutical firms.
Our revenues for the three months ended
manufacturing from hemp toll-arrangement offers and our gearing up for the contract
manufacturing nutraceutical enterprise.
Price of Gross sales
Price of gross sales for the three months ended
uncooked materials prices and stock preparation for the nutraceutical contracts.
The first parts of value of gross sales embody the price of manufacturing the
CBD merchandise.
Working Bills
Working bills for the three months ended
ended
working bills.
Manufacturing associated working bills for the three months ended
2022
the three months ended
working bills is primarily as a result of decreased subcontract and software program prices.
Normal and administrative bills for the three months ended
2022
the three months ended
administrative prices is primarily as a result of decreased authorized and audit prices.
24 Different revenue (expense)
Different revenue for the three months ended
ended
unrealized lack of XXII’s marketable securities held and elevated curiosity
expense.
9 Months Ended
Internet Revenues
We’re principally engaged within the enterprise of manufacturing and promoting merchandise
produced from industrial hemp. Income consists of gross sales of our six class of
model merchandise, white label and contract manufacturing gross sales to different CBD
firms, uncooked materials gross sales (distillate and isolate), tolling merchandise, and
leasing area. We even have income from the sale of our Private Safety
Gear (PPE) stock and non-CBD nutraceutical firms however these are
insignificant presently.
Our revenues for the 9 months ended
ended
decreased manufacturing from toll-arrangement offers.
Price of Gross sales
Price of gross sales for the 9 months ended
uncooked materials prices and elevated gross sales. The first parts of value of gross sales
embody the price of manufacturing the CBD merchandise.
Working Bills
Working bills for the 9 months ended
ended
and basic and administrative bills.
Manufacturing associated working bills for the 9 months ended
2022
through the 9 months ended
associated working bills is primarily as a result of elevated prices related to
constructing upkeep.
Normal and administrative bills for the 9 months ended
2022
the 9 months ended
administrative prices is primarily as a result of prices related to the formation of
the
the
Different revenue (expense)
Different revenue for the 9 months ended
ended
unrealized lack of the XXII: NASDAQ marketable securities held.
25
Liquidity and Capital Assets
Money flows from working actions
The most important supply of working money is from our clients. A big majority of
our clients buy CBD on-line, so bank card funds are collected and
paid inside 1-2 enterprise days. Different white label and contract manufacturing
clients pay earlier than the merchandise are launched. Some bigger clients have
both web 10-, 2%- or 30-day web phrases. Internet money utilized in working actions
was
2021, respectively. Roughly
2022 was non-cash.
Money flows from investing actions
Money outlay for the acquisition of mounted property comprised nearly all of this
class and had been
2022
Money flows from financing actions
Internet money offered by financing actions for the 9 months ended
30, 2022
CEO. In 2022 there was a money fee obtained of
mortgage program. In 2021 there was a money fee obtained of
identical program.
As of
The Chief Government Officer of the Firm holds the XXII shares pursuant to the
pledge settlement and has the facility at any time to allow the Firm to promote the
shares to offer working capital. Panacea has borrowed substantial sums from
obligations. As of
demand promissory notice for
notice for
by Panacea. On
notice at 10% annual charge, which
elevated the road of credit score to
We would not have enough money assets to maintain our operations for the subsequent
12 months, significantly if the massive gross sales agreements and buy orders we
have don’t outcome within the income anticipated. We could also be depending on acquiring
financing from a number of debt or fairness choices or additional loans from
Buttorff
These unaudited condensed consolidated monetary statements are offered on the
foundation that the Firm will proceed as a going concern. The going concern
idea contemplates the conclusion of property and satisfaction of liabilities
within the regular course of enterprise. No adjustment has been made to the carrying
quantity and classification of the Firm’s property and the carrying quantity of its
liabilities based mostly on the going concern uncertainty. These elements elevate
substantial doubt in regards to the Firm’s capability to proceed as a going concern for
a interval of 12 months from the issuance date of this report. Administration can not
present assurance that the Firm will in the end obtain worthwhile operations
or develop into money stream constructive or elevate further debt and/or fairness capital. In
addition, as a result of inadequate income, we might want to get hold of additional funding
by means of public or non-public fairness choices, debt financing, collaboration
preparations or different sources with the intention to preserve lively enterprise operations.
We at present would not have enough money stream to pay our ongoing monetary
obligations on a constant foundation. The issuance of any further shares of
widespread inventory, most well-liked inventory or convertible securities may very well be considerably
dilutive to our stockholders. As well as, sufficient further funding might not
be out there to us on acceptable phrases, or in any respect. If we’re unable to boost
capital, we shall be compelled to borrow further sums from our Chief Government
Officer or delay, cut back or get rid of our analysis and improvement packages, we
might not be capable of proceed as a going concern, and we could also be compelled to
discontinue operations. These unaudited condensed consolidated monetary
statements don’t embody any changes associated to the recoverability and
classification of property or the quantities and classification of liabilities that
could be essential ought to the Firm be unable to proceed as a going concern.
Off Stability Sheet Preparations
As of
Potential Impacts of Sure Present and Proposed Rules on Our Enterprise
and Operations
Just lately, a invoice titled the
ahead by Senate Majority chief
definition of a dietary complement to take away the prohibition on advertising and marketing CBD as
a dietary complement. Administration sees the invoice, if enacted, as a chance
for the FDA to speed up their determination to categorise CBD merchandise as a dietary
complement. This might be a major step for hemp/CBD firms as it will
open the door to new promoting alternatives, akin to entering into retail shops,
who’ve largely been hesitant to welcome CBD of their doorways with no clear
place from the FDA.
26
Many individuals are more and more turning to CBD merchandise for a number of causes: CBD is
non-psychoactive, so it doesn’t produce a “excessive” like THC, there are few recognized
contraindications, the properties of various cannabinoids can positively
have an effect on a variety of illnesses, and cannabinoids work immediately and not directly
with the physique’s endocannabinoid system to create stability often called homeostasis.
As demand will increase, we consider the FDA should present extra readability about CBD’s
legalization, and this invoice is a promising first step.
For now, many firms that produce hemp-derived CBD merchandise together with Panacea
undertake to abide by the identical rules as some other dietary dietary supplements like
ingredient filings, good manufacturing practices (GMP), and labeling and
advertising and marketing provisions. Panacea will proceed to promote CBD and different hemp-derived
merchandise whereas nonetheless awaiting a transparent path from the FDA about how CBD merchandise
could be marketed and used.
Cautionary Assertion Relating to Ahead-Wanting Statements
This quarterly report on Kind 10-Q (this “Report”) incorporates forward-looking
statements throughout the which means of the Personal Securities Litigation Reform Act of
1995, together with statements concerning the effectiveness of our merchandise, research
concerning the long run results of COVID-19, future research that we might conduct
, our operations within the hemp business by means of Panacea, our anticipated income
development, proposed federal laws and its potential affect on the CBD
business, our enterprise relationship with XXII, our plans to boost capital, and
our liquidity. Phrases akin to “expects,” “anticipates,” “plans,” “believes,”
“seeks,” “estimates,” “might,” “would,” “might,” “intends,” “targets” and comparable
expressions or variations of such phrases are meant to establish forward-looking
statements however should not the unique technique of figuring out forward-looking
statements on this Report. The identification of sure statements as
“forward-looking” just isn’t meant to imply that different statements not particularly
recognized should not forward-looking. All statements apart from statements about
historic info are statements that may very well be deemed forward-looking statements,
together with, however not restricted to, statements that relate to our future income,
product improvement, buyer demand, market acceptance, development charge,
competitiveness, gross margins, and expenditures.
Though forward-looking statements on this Report mirror the great religion
judgment of our administration, such statements can solely be based mostly on info and
elements at present recognized by us. Additional info on the dangers and
uncertainties affecting our enterprise is contained in our filings with the
includingour Annual Report on Kind 10-Okay for the fiscal 12 months ended
2021
forward-looking statements, whether or not as the results of new info, future
occasions or in any other case. Such dangers, uncertainties and adjustments in situation,
significance, worth, and impact might trigger our precise outcomes to vary
materially from these expressed herein and in methods not readily foreseeable.
Readers are urged to not place undue reliance on these forward-looking
statements, which communicate solely as of the date of this Report and are based mostly on
info at present and fairly recognized to us. We undertake no obligation to
revise or replace any forward-looking statements to mirror any occasion or
circumstance that will come up after the date of this Report, apart from as
required by legislation. Readers are urged to rigorously assessment and think about the assorted
disclosures made on this Report, which try to advise events of
the dangers and elements that will have an effect on our enterprise, monetary situation, outcomes
of operations and prospects.
Vital Accounting Estimates and New Accounting Pronouncements
New Accounting Pronouncements
See Observe 2, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES to the unaudited
condensed consolidated monetary statements contained in Half I, Merchandise 1 of this
modification No. 1 to the Quarterly Report on Kind 10-Q.
Vital Accounting Estimates
The dialogue and evaluation of the Firm’s monetary situation and outcomes of
operations relies upon the Firm’s condensed consolidated monetary
statements, which have been ready in accordance with US GAAP. The preparation
of the Firm’s condensed consolidated monetary statements requires its
administration to make estimates and judgments that have an effect on the reported quantities of
property, liabilities, income and bills and associated disclosures. The Firm’s
administration bases its estimates, assumptions and judgments on historic
expertise and numerous different elements which can be believed to be affordable below
the circumstances, the outcomes of which type the premise for making judgments
in regards to the carrying values of property and liabilities that aren’t readily
obvious from different sources. Completely different assumptions and judgments would change
the estimates used within the preparation of the Firm’s condensed consolidated
monetary statements which, in flip, might change the outcomes from these
reported. As well as, precise outcomes might differ from these estimates and such
variations may very well be materials to the Firm’s monetary place and outcomes of
operations.
27
Vital accounting estimates are those who the Firm’s administration considers
a very powerful to the portrayal of the Firm’s monetary situation and
outcomes of operations as a result of they require administration’s most tough,
subjective or advanced judgments, usually on account of the necessity to make estimates
in regards to the impact of issues which can be inherently unsure. The Firm’s
vital accounting estimates in relation to its condensed consolidated
monetary statements embody these associated to:
?Goodwill and intangible property ? Truthful worth of marketable securities ? Incremental Borrowing Price used Proper of Use Asset Calculations ? Enterprise mixtures
We allocate the price of acquired firms to the identifiable tangible and
intangible property acquired and liabilities assumed, with the remaining quantity
labeled as goodwill. The identification and valuation of those intangible
property and the willpower of the estimated helpful lives on the time of
acquisition, in addition to the completion of impairment checks, require vital
administration judgments and estimates. These estimates are made based mostly on, amongst
different elements, assessment of projected future working outcomes and enterprise plans,
financial projections, anticipated highest and greatest use of future money flows and
the price of capital. Using different estimates and assumptions might
improve or lower the estimated truthful worth of goodwill and different intangible
property, and probably lead to a distinct affect to our outcomes of
operations. Additional, adjustments in enterprise technique and/or market situations might
considerably affect these judgments and thereby affect the truthful worth of those
property, which might lead to an impairment of the goodwill or intangible
property.
occasions or circumstances change that point out impairment might have occurred. We
examined goodwill for impairment and decided there was no impairment and located
not impairment cost based mostly on the surplus of a reporting unit’s carrying quantity
over our truthful worth.
Truthful worth of marketable securities
Marketable securities are recorded at truthful worth utilizing the quoted market costs
and adjustments in truthful worth are recorded as web realized beneficial properties or losses in
complete revenue. We monitor these investments for impairment and make
applicable reductions in carrying values as essential.
Incremental Borrowing Price used Proper of Use Asset Calculations
We decide if a contract is a lease or incorporates a lease on the inception of
the contract and reassess that conclusion if the contract is modified. All
leases are assessed for classification as an working lease or a finance lease.
Working lease right-of-use, or ROU, property are included in non-current different
property on our consolidated stability sheet. Working lease liabilities are
separated right into a present portion, included inside different accrued liabilities on
our consolidated stability sheet, and a non-current portion, included inside different
long-term liabilities on our consolidated stability sheet. We would not have any
finance lease ROU property or liabilities. ROU property signify our proper to make use of
an underlying asset for the lease time period and lease liabilities signify our
obligation to make lease funds arising from the lease. We don’t get hold of and
management the correct to make use of the recognized asset till the lease graduation date.
28
Our lease liabilities are acknowledged on the relevant lease graduation date
based mostly on the current worth of the lease funds required to be paid over the
lease time period. As a result of the rate of interest implicit within the lease just isn’t readily
determinable, we typically use our incremental borrowing charge to low cost the
lease funds to current worth. The estimated incremental borrowing charge is
derived from info out there on the lease graduation date. We consider
publicly out there information for devices with comparable traits when
calculating our incremental borrowing charges. Our ROU property are additionally acknowledged
on the relevant lease graduation date. The ROU asset equals the carrying
quantity of the associated lease legal responsibility, adjusted for any lease funds made
previous to lease graduation and lease incentives offered by the lessor.
Variable lease funds are expensed as incurred and don’t issue into the
measurement of the relevant ROU asset or lease legal responsibility.
Enterprise Mixtures
We now have utilized vital estimates and judgments with the intention to decide the
truthful worth of the recognized property acquired, liabilities assumed and goodwill
acknowledged in reference to our enterprise mixtures to make sure the worth of
the property and liabilities acquired are acknowledged at truthful worth as of the
acquisition date. In measuring the truthful worth, we make the most of valuation strategies
in line with the market method, revenue method, or value method.
The valuation of the identifiable property and liabilities contains assumptions
made in performing the valuation, akin to projected income, weighted common
value of capital, low cost charges, estimated helpful lives, and different related
assessments. These assessments could be considerably affected by our estimates,
judgments, and assumptions. If precise outcomes should not in line with our
estimates, judgments, or assumptions, or if further or new info arises
sooner or later that impacts our truthful worth estimates, then changes to our
preliminary truthful worth estimates might have a cloth affect to our buy
accounting or our outcomes of operations. If precise outcomes should not constant
with our estimates, judgments, or assumptions, or if further or new
info arises sooner or later, past our one-year measurement interval, that
impacts our truthful worth estimates, then changes to our preliminary truthful worth
estimates might have a cloth affect to our outcomes of operations.
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