EXCHANGE AGREEMENT BETWEEN EXACTUS, INC. AND PANACEA LIFE SCIENCES, INC.

12 Months Ended

Dec. 31, 2021

Exchange Agreement Between Exactus Inc. And Panacea Life Sciences Inc.

EXCHANGE AGREEMENT BETWEEN EXACTUS, INC. AND PANACEA LIFE SCIENCES, INC.

NOTE 10 – EXCHANGE AGREEMENT BETWEEN EXACTUS, INC. AND PANACEA LIFE SCIENCES, INC.

On June 30, 2021, Exactus legally acquired Panacea pursuant to the Exchange Agreement with the shareholders of Panacea including its founder Leslie Buttorff and 22^nd Century Group, Inc., (“XXII”), a principal investor. Panacea, which was founded by Leslie Buttorff in 2017 as a woman-owned business, attracted $14 million in investment ($7M convertible debt, 1,297,017 XXII shares of common stock and $5 million in cash) from XXII (NASDAQ) during 2019, a leading plant biotechnology company focused on technology to decrease nicotine in tobacco plants also uses its expertise for genetic engineering of hemp plants to modify cannabinoid levels used in manufacturing CBD, CBG and CBN. The transaction was accounted for as a reverse merger with Panacea the accounting acquirer. Following the closing, XXII owns approximately 15.19% stake in the Company on a fully diluted basis.

Shares Issuances

Pursuant to the Exchange Agreement, on June 30, 2021 the Company issued a total of 16,915,705 shares of common stock, 1,000,000 shares of Series C convertible into 2,289,220 shares of common stock, 10,000 shares of Series C-1 convertible into 1,064,907 shares of common stock and 10,000 shares of Series D convertible into 1,628,125 shares of common stock to the former Panacea stockholders, in exchange for one-hundred (100%) percent of the shares of capital stock of Panacea. On a fully diluted basis, Ms. Buttorff beneficially owns approximately 62% of outstanding Common Stock consisting of the Common Stock issuable upon conversion preferred shares and shares of Common Stock. The Company changed its name to Panacea Life Sciences Holdings, Inc., in October, 2021.

On June 29, 2021 the Company filed with the Secretary of State of the State of Nevada three new series of preferred stock (“Preferred Stock”) designated as Series C Convertible Preferred Stock, Series C-1 Preferred Stock and Series D Preferred Stock and authorized the filing of a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock, Series C-1 Convertible Preferred Stock and Series D Convertible Preferred Stock in the State of Nevada. The Board designated for issuance 1,000,000, 10,000 and 10,000 shares, respectively, for issuance. Each share of Preferred Stock is convertible into shares of the Company’s Common Stock as provided in the Certificate of Designation, therefore. These are reflected in the Equity sections of the balance sheet for December 31, 2021.

Also, on December 31, 2021, Panacea and XXII agreed to dissolve their business relationship. In terms of the agreement the following transactions occurred in consideration for the XXII investment in Panacea of $14 million. The below four items explain how the $14 million was accounted for.

1.	Series B Preferred ($7,000,000) converted to Exactus common stock
2.	$500,000 of the $7,000,000 convertible debt converted to Exactus common stock.
3.	Panacea sold to XXII the real property and improvements located in Delta County, Colorado, and comprised of approximately 234.394 acres of land. Panacea has the right to acquire 10 acres of the land for its own use. The agreed upon amount was $2,200,000 for an allocated value as follows: (i) $1,770,000 for the real property and improvements which constitute a part of the Farm Parcel; and (ii) $430,000 for the equipment, machinery and other personal property owned by Panacea. As a part of the agreement XXII will deliver to Panacea $500,000 of hemp from the 2021 grow season. This is recorded as a receivable. As a part of this transaction XXII also returned 1,013,333 shares of Panacea stock which were converted to 719,404 Exactus shares in the Exchange Agreement. There was no gain or loss on this part of the transaction.
4.	J&N Real Estate Company LLC (J&N), owned by Leslie Buttorff, assumed a $4.3 million note payable to XXII. In consideration of J&N’s issuance of a $4.3 million mortgage note to XXII on real property owned by J&N, Panacea issued J&N 10,000 shares of newly designated Series D.

On December 31, 2021, the Board authorized the Company to file a certificate of amendment (the “Amendment”) to its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada in order to effectuate a reverse stock split of the Company’s issued and outstanding common stock, par value $0.0001 per share on a one (1) for twenty-eight (28) basis (the “Reverse Stock Split”). The Reverse Stock Split was effective October 25, 2021.

As disclosed in Note 1 and 2 the Company has accounted for this share exchange as a reverse merger and recapitalization.