PANACEA LIFE SCIENCES HOLDINGS, INC. 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
16 General
We are a
Its subsidiary,
We are well positioned to develop novel hemp extracts as dietary supplements and
topical applications. Our biotechnology plans focus on our research at
Results of Operations
Comparison of the Years Ended
The following table sets forth our results of operations for the years ended
Years Ended December 31, Period to
2022 2021 Period Change
Revenues from cannabinoid sales $ 1,515,448 $ 1,933,627 $ (418,179 )
Revenues from PPE sales $ 111,530 $ 66,000 45,530
Cost of sales $ 1,230,508 $ 1,519,049 $ (288,541 )
Operating expenses $ 4,955,348 $ 4,959,059 $ (3,710 )
General and administrative $ 1,093,364 $ 1,518,687 $ (425,322 )
Interest expense $ (2,048,171 ) $ (1,105,243 ) $ (942,928 )
Unrealized gain on marketable securities
$ 27,598 $ -$ 27,598 Employer retention credit$ 253,791 $ 396,679 $ (142,888 ) Rental income$ 232,183 $ 236,560 $ (4,377 ) Loss on sale of assets $ -$ (297,351 ) $ 297,351 Gain on extinguishment of debt$ 681,546 $ 755,782 $ (74,236 )
Year Ended
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 category of brand products, white label and contract manufacturing sales to other CBD companies, raw material sales (distillate and isolate), and tolling arrangements.
Our revenues for the year ended
Cost of Sales
Cost of sales for the year ended
17 Operating Expenses
Operating expenses for the year ended
The decrease in general and administrative expenses of
Within the total G&A category of expenses, sales and marketing expenses
decreased from
Also, within the total G&A category of expenses, professional, legal, and
consulting fees were
Other income (expense)
Other income for the year ended
Summary of Cash Flows
Years ended December 31,
2021 2020
Cash (used in) / provided by
Operating activities $ (2,399,579 ) $ (3,922,090 )
Investing activities (196,972 ) 522,533
Financing activities 2,583,728 3,334,953
Net decrease in cash and cash equivalents
Cash flows from operating activities
Net cash used in operating activities was
Cash flows from investing activities
Net cash used in investing activities was
Cash flows from financing activities
During the year ended
During the year ended
Liquidity and Capital Resources
On
18
We may 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
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
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
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.
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.
19
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
© Edgar Online, source
