Panacea Life Sciences Holdings, Inc.

What they do

The company operates through Panacea Life Sciences, Inc. (PLS), which produces cannabinoid (CBD/CBG), functional mushroom, kratom and nutraceutical products from a 51,000 square foot cGMP facility in Golden, Colorado. A second subsidiary, Panacea Distro, Inc., operates six retail stores and a cash-and-carry distribution warehouse in the Tampa, Florida area selling kava, kratom, hemp, vape and beverage products. The company sells over 50 CBD and CBG SKUs under brand lines including PANA Life, PANA Beauty, PANA Sport, PANA Pet and PANA Health.

Revenue drivers

• Contract manufacturing and nutraceuticals — Largest current revenue source, comprising white label/contract manufacturing for other companies plus raw material (distillate and isolate), tolling and non-CBD nutraceutical sales. The company closed over 40 nutraceutical contracts after pivoting resources to this area in June 2022.
• Branded product lines — Sales of the company's own PANA Life, PANA Beauty, PANA Sport, PANA Pet, PANA Pure and PANA Health products, spanning CBD and CBG SKUs.
• Panacea Distro retail and distribution — Six Tampa-area stores plus a cash-and-carry warehouse selling kava, kratom, hemp, vape and mushroom products. Acquired via the September 30, 2023 N7 Enterprises asset purchase and renamed Panacea Distro, Inc.
• Planned franchising (Pana Kava Java) — A third entity, Pana Kava Java, is intended to become a franchisor offering franchise rights for European-style cafés selling infused coffees, baked goods and vaping, with a scheduled Q3-Q4 2024 launch.

Recent performance

Annual revenue has been uneven: $9.0M in 2020, $2.1M in 2021, $1.6M in 2022 and $2.4M in 2023, while net losses were $8.0M in 2023. Quarterly revenue rose from $347,851 in Q3 2023 to $960,496 in Q4 2023 and $1.1M in Q1 2024. Operating cash flow has been negative each year, improving from -$5.7M in 2019 to -$1.5M in 2023. At March 31, 2024, total assets were $17.4M, total liabilities $27.0M, shareholder equity was negative $9.6M and cash and equivalents were $107,643.

Strategy

The company says it pivoted in June 2022 toward the nutraceutical industry and invested in its bovine and vegan softgel line, leading to over 40 nutraceutical contracts. It is focusing on functional mushrooms and kratom alongside hemp-derived cannabinoids, and plans to convert its Tampa retail stores into franchise locations under the PANA KAVA JAVA name. A new franchisor entity, Pana Kava Java, is slated to launch in Q3-Q4 2024. Management states it is well positioned to develop novel extracts as dietary supplements and topical applications, and runs research at Colorado State University on rare cannabinoid isolation, inflammatory bowel disease, canine and human dementia, and chronic pelvic pain.

Risks

• Going concern doubt — The company states its ability to continue as a going concern is in doubt unless it obtains adequate new debt or equity financing and achieves sufficient sales levels.
• Need for additional capital — The company requires additional capital to execute its business plan and expand operations; failure to obtain capital on acceptable terms could harm its business, results and prospects.
• Equity dilution from planned raise — Management intends to raise capital through the sale of common stock or convertible/exercisable securities soon, which will dilute existing stockholders.
• CEO dependence and related-party loans — The company is highly dependent on CEO Leslie Buttorff, and the loss of her services or a conflict of interest arising from her loans to the company would adversely affect it.

Outlook

Management anticipates launching Pana Kava Java as a franchisor in Q3-Q4 2024 and continues to focus on nutraceuticals, functional mushrooms and kratom as growth areas for 2024. The company expects to raise capital through equity or convertible securities and needs new financing to fund operations. It also plans to expand use of its SAP-based ERPCannabis system for acquisitions and service offerings.