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Exactus, Inc. Reports Third Quarter 2019 Results

Second Half 2019 Highlights

  • Acquired Green Goddess Extracts and launched CBD brands

  • Increased expected harvest of top flower to 30,000 pounds

  • Launched e-Commerce marketplace through Exactushemp.com

  • Entered cosmetic market through acquisition of luxury cosmetics brand LeVor Collection

  • Acquired remaining 49.9% interest in 2019 crop

DELRAY BEACH, Fla., Nov. 14, 2019 (GLOBE NEWSWIRE) -- Exactus Inc. (EXDI) (“Exactus”), a grower of hemp and producer of hemp-derived phytocannabinoid products, today reported financial results for the third quarter ended September 30, 2019.

During the third quarter, Exactus expanded its manufacturing capability and the breadth of its product offerings through its acquisitions of Green Goddess Extracts and LeVor Collection, a luxury cosmetics brand. Subsequent to the close of the third quarter, in October, Exactus launched Exactushemp.com, an E-commerce marketplace through which it can distribute its products directly to consumers. Exactus’ 2019 harvest is exceeding expectations with an expected harvest of 30,000 pounds of top flower, up from its original estimate of 20,000 pounds due to better growing conditions than anticipated. In October, Exactus acquired an additional 49.9% interest in the 2019 harvest, which Exactus expects will provide additional supply that it can monetize beginning in the fourth quarter of 2019.

Emiliano Aloi, President of Exactus stated, “We continue to execute our plan to differentiate our products by providing a traceable supply of quality hemp for all of our CBD products. Our packaged goods have QR coding on every label that allows consumers to view the batch records as well as the internal and third-party laboratory Certificates of Analysis (COA), and product specifications. We believe he Green Goddess and LeVor Collection brands will enable us to expand our product line while leveraging our production of premium hemp.”

Mr. Aloi continued, “Our 2019 harvest is tracking above plan with most recent estimates of 30,000 pounds of top flower. We expect a strong fourth quarter with orders to date totaling over $750,000. This strong momentum is anticipated to continue into 2020 as we build out the product lines under our brands and execute on our current harvest. With the growth of product sales, we anticipate working capital to be a source of cash.”

Third-Quarter 2019 Financial Summary

Financial results are not comparable to the prior year period because Exactus did not begin its hemp based operations until early 2019. Revenue in the third quarter of 2019 was $60 thousand versus $140 thousand in the prior quarter. Loss from operations in the third quarter of 2019 was -$2.1 million versus -$1.1 million in the second quarter. The decline in revenue was primarily attributable to increased costs associated with marketing initiatives, increased compensation as well as increased non-cash charges for stock-based compensation. Exactus expects revenue to improve in the fourth quarter as product from the fall harvest is monetized. To date, Exactus has secured over $750,000 in customer orders from this harvest. Exactus expects gross margins to also improve as it begins using lower cost inventory from its fall harvest.

Conference Call

Management will hold a conference call on Thursday, November 14, 2019 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss its third quarter results and its business outlook. To access this call, dial 1-877-451-6152 (domestic) or 1-201-389-0879 (international). The conference ID is 13696592.

Following the conference call, a replay will be available at 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The replay passcode is 13696592. The conference call will be broadcast and available for replay on the investor relations section of the Exactus’ website at http://public.viavid.com/index.php?id=137014.

To learn more about Exactus, Inc., visit the website at www.exactushemp.com.

Exactus, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net revenues

$

48,013

$

-

$

163,157

$

-

Net revenues - related party

12,140

-

52,659

-

Total net revenues

60,153

-

215,816

-

Cost of sales - related party

100,418

-

216,205

-

Gross profit

(40,265

)

-

(389

)

-

Operating Expenses:

General and administration

1,389,820

301,859

2,892,588

1,446,867

Professional and consulting

662,857

49,068

2,873,895

179,658

Research and development

10,000

75,000

36,975

225,000

Total Operating Expenses

2,062,677

425,927

5,803,458

1,851,525

Loss from Operations

(2,102,942

)

(425,927

)

(5,803,847

)

(1,851,525

)

Other Income (expenses):

Derivative loss

-

(818,355

)

(1,454,729

)

(517,205

)

Loss on stock settlement

-

(223,825

)

-

(477,126

)

(Loss) gain on settlement of debt, net

(3,000

)

-

3,004,629

-

Interest expense

(2,105

)

(127,164

)

(371,537

)

(382,971

)

Total Other Expenses, net

(5,105

)

(1,169,344

)

1,178,363

(1,377,302

)

Loss Before Provision for Income Taxes

(2,108,047

)

(1,595,271

)

(4,625,484

)

(3,228,827

)

Provision for income taxes

-

-

-

-

Net Loss

(2,108,047

)

(1,595,271

)

(4,625,484

)

(3,228,827

)

Net Loss attributable to non-controlling interest

173,680

-

361,628

-

Net Loss Attributable to Exactus, Inc.

(1,934,367

)

(1,595,271

)

(4,263,856

)

(3,228,827

)

Deemed dividend on Preferred Stock

-

-

(904,450

)

-

Net Loss available to Exactus, Inc. common stockholders

$

(1,934,367

)

$

(1,595,271

)

$

(5,168,306

)

$

(3,228,827

)

Net Loss per Common Share - Basic and Diluted

$

(0.05

)

$

(0.33

)

$

(0.15

)

$

(0.69

)

Net Loss attributable to non-controlling interest per Common Share - Basic and Diluted

$

(0.00

)

$

-

$

(0.01

)

$

-

Net Loss available to Exactus, Inc. common stockholders per Common Share - Basic and Diluted

$

(0.05

)

$

(0.33

)

$

(0.16

)

$

(0.69

)

Weighted Average Number of Common Shares Outstanding:

Basic and Diluted

38,951,338

4,812,449

31,173,513

4,647,290

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


Exactus, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

September 30,

December 31,

2019

2018

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

5,686

$

1,960

Accounts receivable, net

75,626

-

Accounts receivable - related party

52,659

-

Inventory

2,332,890

-

Prepaid expenses and other current assets

166,149

12,330

Prepaid expenses and other current assets - related party - current

622,159

-

Total current assets

3,255,169

14,290

Other Assets:

Deposits

40,000

-

Prepaid expenses and other current assets - related party - long-term

2,648,864

-

Property and equipment, net

549,483

-

Intangible assets, net

2,668,005

-

Operating lease right-of-use assets, net

2,287,682

-

Total other assets

8,194,034

-

TOTAL ASSETS

$

11,449,203

$

14,290

LIABILITIES AND EQUITY (DEFICIT)

Current Liabilities:

Accounts payable

$

1,131,883

$

923,429

Accounts payable - related party

8,342

-

Accrued expenses

81,693

46,875

Note payable - related parties

6,500

51,400

Subscription payable

282,500

-

Convertible notes, net of discounts

-

491,788

Derivative liability

-

1,742,000

Settlement payable

-

17,000

Interest payable

8,148

66,300

Due to related party

105,500

-

Operating lease liabilities, current portion

427,888

-

Total current liabilities

2,052,454

3,338,792

Long Term Liabilities:

Convertible notes payable

100,000

100,000

Operating lease liabilities, long-term portion

1,902,073

-

Total long term liabilities

2,002,073

100,000

TOTAL LIABILITIES

4,054,527

3,438,792

Commitment and contingencies (see Note 10)

Equity (Deficit):

Exactus, Inc. Stockholders's Equity (Deficit)

Preferred stock: 50,000,000 authorized; $0.0001 par value, 5,266,466 undesignated shares

issued and outstanding

-

-

Preferred stock Series A: 1,000,000 designated; $0.0001 par value,

583,009 shares issued and outstanding

58

-

Preferred stock Series B-1: 32,000,000 designated; $0.0001 par value,

1,800,000,and 2,800,000 shares issued and outstanding, respectively

180

280

Preferred stock Series B-2: 10,000,000 designated; $0.0001 par value,

7,684,000 and 8,684,000 shares issued and outstanding, respectively

768

868

Preferred stock Series C: 1,733,334 designated; $0.0001 par value,

none and 1,733,334 shares issued and outstanding, respectively

-

173

Preferred stock Series D: 200 designated; $0.0001 par value, 29 and 45

shares issued and outstanding, respectively

-

1

Preferred stock Series E: 10,000 designated; $0.0001 par value, 10,000 and none

shares issued and outstanding, respectively

1

-

Common stock: 650,000,000 shares authorized; $0.0001 par value,

40,024,389 and 6,233,524 shares issued and outstanding, respectively

4,002

623

Common stock to be issued (596,249 and none shares to be issued, respectively)

60

-

Additional paid-in capital

23,457,433

7,111,445

Accumulated deficit

(15,706,198

)

(10,537,892

)

Total Exactus Inc. Stockholders' Equity (Deficit)

7,756,304

(3,424,502

)

Non-controlling interest in subsidiary

(361,628

)

-

Total Equity (Deficit)

7,394,676

(3,424,502

)

TOTAL LIABILITIES AND EQUITY (DEFICIT)

$

11,449,203

$

14,290

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


Exactus, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30,

2019

2018

(Unaudited)

(Unaudited)

Cash Flows From Operating Activities:

Net loss

$

(4,625,484

)

$

(3,228,827

)

Adjustments to reconcile net loss to cash used in operating activities:

Depreciation

36,720

-

Derivative loss

1,454,729

517,205

Stock-based compensation

2,376,050

599,835

Bad debt expense

9,407

-

Amortization of prepaid stock-based expenses

110,416

-

Amortization of discount and debt issuance costs for convertible notes

339,806

345,013

Amortization of intangible assets

558,024

-

Deferred rent

42,279

-

(Gain) loss on settlement of debt

(3,004,629

)

477,126

Changes in operating assets and liabilities:

(Increase) decrease in operating assets:

Accounts receivable

(85,033

)

-

Accounts receivable - related party

(52,659

)

-

Inventory

(2,298,919

)

-

Prepaid expenses and other current assets

(94,758

)

(334

)

Deposit

(40,000

)

-

Increase (decrease) in operating liabilities:

Accounts payable

208,453

112,699

Accounts payable - related party

8,342

-

Accrued expenses

44,818

744,931

Settlement payable

(20,000

)

(3,000

)

Interest payable

4,764

27,428

Net Cash Used In Operating Activities

(5,027,674

)

(407,924

)

Cash Flows From Investing Activities:

Purchase of membership interest in subsidiary

(1,467,500

)

-

Purchase of property and equipment

(586,203

)

-

Net Cash Used in Investing Activities

(2,053,703

)

-

Cash Flows From Financing Activities:

Proceeds from sale of Series D preferred stock

-

50,000

Advances from related party

231,035

-

Repayments on related party advances

(160,535

)

-

Proceeds from sale of Common Stock

7,012,046

-

Payments of principal on notes payable

(32,129

)

-

Proceeds from issuance of notes payable

14,229

101,900

Payments of principal on convertible notes

(186,443

)

(25,000

)

Proceeds from issuance of convertible notes, net of issuance cost

206,900

121,100

Net Cash Provided By Financing Activities

7,085,103

248,000

Net increase (decrease) in cash and cash equivalents

3,726

(159,924

)

Cash and cash equivalents at beginning of period

1,960

161,215

Cash and cash equivalents at end of period

$

5,686

$

1,291

Supplemental Cash Flow Information:

Cash paid for interest

$

26,977

$

-

Cash paid for taxes

$

-

$

-

Non-Cash investing and financing activities:

Proceeds from sale of Series D preferred stock paid directly to settle amounts

due to officers and directors

$

-

$

500,000

Proceeds from sale of Series A preferred stock paid directly to settle debts

$

55,090

$

-

Convertible notes and interest payable settled by Series A preferred stock issued

$

849,360

$

-

Note payable, accrued expense and interest payable settled by common stock issued

$

40,616

$

-

Convertible notes settled by common stock issued

$

196,000

$

34,120

Accounts payable settled by common stock issued

$

-

$

85,934

Common stock issued for purchase of membership interest in subsidiary

$

1,440,000

$

-

Common stock and preferred stock issued for prepaid services

$

3,405,500

$

-

Common stock issued pursuant to asset purchase agreement

$

70,000

$

-

Increase in intangible assets for subscription payable

$

1,866,029

$

-

Increase in inventory for subscription payable

$

33,971

$

-

Initial benefical conversion feature and debt discount on convertible notes

$

206,910

$

151,000

Initial derivative liability on convertible notes

$

-

$

282,000

Preferred deemed dividend

$

904,450

$

-

Operating lease right-of-use assets and operating lease liabilities

recorded upon adoption of ASC 842

$

2,431,362

$

-

Reduction of operating lease right-of-use asset and operating lease liabillities

$

143,680

$

-

Prepaid expenses directly paid by a related party

$

35,000

$

-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


About Exactus:
Exactus Inc. is dedicated to introducing hemp-derived phytocannabinoid products into mainstream consumer markets. Exactus has made investments in farming and has over 200 acres of CBD-rich hemp in Southwest Oregon. Exactus is introducing a range of consumer brands, such as Green Goddess Extracts, Paradise CBD, Levor Collection and Exactus. Hemp is a legal type of cannabis plant containing less than 0.3% THC (tetrahydrocannabinol), which is the psychoactive component of the cannabis plant. After 40 years of prohibition, the Agriculture Improvement Act of 2018, known as the 2018 Farm Bill, legalized hemp at the federal level. Hemp production will be regulated by the United States Department of Agriculture (USDA) and the states. As a result, in 2019 hemp was generally removed from the Controlled Substances Act (CSA) and enforcement by the Drug Enforcement Administration (DEA).

For more information about Exactus: www.exactusinc.com.

Investor Notice:
Investing in our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the risks, uncertainties and forward-looking statements described under "Risk Factors" in Item 1A of our most recent Form 10-K for the fiscal year ended December 31, 2018 filed with the Securities and Exchange Commission (the "SEC") on March 29, 2019, and in other periodic and current reports we file with the SEC. If any of these risks were to occur, our business, financial condition, or results of operations would likely suffer. In that event, the value of our securities could decline, and you could lose part or all of your investment. The risks and uncertainties we describe are not the only ones facing us. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. In addition, our past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results in the future. See "Safe Harbor" below.

Safe Harbor - Forward-Looking Statements:
The information provided in this press release may include forward-looking statements relating to future events or the future financial performance of Exactus, including statements concerning harvest expectations, the impact of Exactus’ acquisition of Green Goddess, LeVor Collection, and interests in the 2019 harvest on its supply and product line expansion, Exactus’ ability to monetize its harvest, Exactus’ ability to expand its product lines and brands, the amount of future orders for Exactus products, and Exactus’ future revenue, gross margins and working capital. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Words such as "anticipates," "plans," "expects," "intends," "will," "potential," "hope" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon current expectations of Exactus and involve assumptions that may never materialize or may prove to be incorrect. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of various risks and uncertainties. Detailed information regarding factors that may cause actual results to differ materially from the results expressed or implied by statements in this press release relating to Exactus may be found in Exactus’ periodic and current filings with the SEC, including the factors described in the sections entitled "Risk Factors", copies of which may be obtained from the SEC's website at www.sec.gov. Any forward-looking statement speaks only as of the date on which such statement is made, and Exactus does not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.

Exactus Contact:

Andrew Johnson
Chief Strategy Officer
Exactus Inc.
509-999-9695
ir@exactusinc.com