Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 15, 2021 | |
Cover [Abstract] | ||
Entity Registrant Name | Exactus, Inc. | |
Entity Central Index Key | 0001552189 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity Incorporation, State or Country Code | NV | |
Entity File Number | 001-38190 | |
Entity Common Stock, Shares Outstanding | 0 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Current Assets: | ||
Cash and cash equivalents | $ 19,721 | $ 25,139 |
Inventory, net | 10,712 | 10,712 |
Prepaid expenses and other current assets | 10,556 | 15,258 |
Total current assets | 40,989 | 51,109 |
Property and equipment, net | 17,069 | 20,159 |
Total assets | 58,058 | 71,268 |
Current Liabilities: | ||
Accounts payable | 1,388,871 | 2,027,507 |
Accounts payable - related parties | 506,585 | 506,585 |
Accrued expenses | 579,990 | 620,391 |
Notes payable - current portion | 130,344 | 130,344 |
Note payable - related parties | 135,517 | 115,517 |
Subscription payable | 250,000 | 250,000 |
Convertible notes, net of discounts | 100,000 | 646,036 |
Convertible notes - related party | 0 | 50,250 |
Derivative liability | 0 | 237,022 |
Interest payable | 51,789 | 52,051 |
Operating lease liabilities, current portion | 269,115 | 269,115 |
Total current liabilities | 3,412,211 | 4,904,818 |
Notes payable - long-term portion | 205,166 | 205,166 |
Total liabilities | 3,617,377 | 5,109,984 |
Commitments and contingencies (see Note 7) | ||
(Deficit): | ||
Common stock: 650,000,000 shares authorized; $0.0001 par value, 99,724,710 and 56,356,431 shares issued and outstanding, respectively | 9,975 | 5,636 |
Common stock to be issued (100,000 shares to be issued) | 10 | 10 |
Additional paid-in capital | 33,967,970 | 27,485,796 |
Due from related party | (128,489) | (128,489) |
Accumulated deficit | (35,391,296) | (30,384,380) |
Total Exactus Inc. stockholders' (deficit) | (1,541,080) | (3,020,477) |
Non-controlling interest in subsidiary | (2,018,239) | (2,018,239) |
Total (deficit) | (3,559,319) | (5,038,716) |
Total liabilities and (deficit) | 58,058 | 71,268 |
Series A Preferred Stock | ||
(Deficit): | ||
Preferred stock | 0 | 32 |
Total (deficit) | 0 | 32 |
Series A COD Preferred Stock | ||
Current Liabilities: | ||
Total liabilities | ||
(Deficit): | ||
Total (deficit) | 0 | 0 |
Series B-1 Preferred Stock | ||
(Deficit): | ||
Preferred stock | 150 | 165 |
Total (deficit) | 150 | 165 |
Series B-2 Preferred Stock | ||
(Deficit): | ||
Preferred stock | 600 | 752 |
Total (deficit) | 600 | 752 |
Series C Preferred Stock | ||
(Deficit): | ||
Preferred stock | 0 | 0 |
Total (deficit) | 0 | 0 |
Series D Preferred Stock | ||
(Deficit): | ||
Preferred stock | 0 | 0 |
Total (deficit) | 0 | 0 |
Series E Preferred Stock | ||
(Deficit): | ||
Preferred stock | 0 | 1 |
Total (deficit) | $ 0 | $ 1 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2021 | Dec. 31, 2020 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, par value per share | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 650,000,000 | 650,000,000 |
Common stock, par value per share | $ 0.0001 | $ 0.0001 |
Common stock, shares issued | 99,724,710 | 56,356,431 |
Common stock, shares outstanding | 99,724,710 | 56,356,431 |
Common stock to be issued | 100,000 | |
Series A COD Preferred Stock | ||
Preferred stock, shares authorized | 1,000 | 1,000 |
Preferred stock, par value per share | $ .0001 | $ 0.0001 |
Preferred stock, shares issued | 500 | 0 |
Preferred stock, shares outstanding | 500 | 0 |
Series A Preferred Stock | ||
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, par value per share | $ .0001 | $ 0.0001 |
Preferred stock, shares issued | 0 | 353,109 |
Preferred stock, shares outstanding | 0 | 353,109 |
Series B-1 Preferred Stock | ||
Preferred stock, shares authorized | 32,000,000 | 32,000,000 |
Preferred stock, par value per share | $ .0001 | $ 0.0001 |
Preferred stock, shares issued | 1,500,000 | 650,000 |
Preferred stock, shares outstanding | 1,500,000 | 650,000 |
Series B-2 Preferred Stock | ||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, par value per share | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 6,000,000 | 7,516,000 |
Preferred stock, shares outstanding | 6,000,000 | 7,516,000 |
Series C Preferred Stock | ||
Preferred stock, shares authorized | 1,733,334 | 1,733,334 |
Preferred stock, par value per share | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Series D Preferred Stock | ||
Preferred stock, shares authorized | 200 | 200 |
Preferred stock, par value per share | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 0 | 18 |
Preferred stock, shares outstanding | 0 | 18 |
Series E Preferred Stock | ||
Preferred stock, shares authorized | 10,000 | 10,000 |
Preferred stock, par value per share | $ .0001 | $ 0.0001 |
Preferred stock, shares issued | 0 | 10,000 |
Preferred stock, shares outstanding | 0 | 10,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Statement [Abstract] | ||
Net revenues | $ 0 | $ 520,200 |
Net revenues - related party | 0 | 315,800 |
Net revenues | 0 | 836,000 |
Cost of sales | 0 | 1,042,473 |
Cost of sales - related party | 0 | 357,783 |
Total cost of sales | 0 | 1,400,256 |
Gross profit (loss) | 0 | (564,256) |
Operating Expenses: | ||
General and administration | 3,457,728 | 1,060,587 |
Selling and marketing expenses | 26,097 | 280,890 |
Professional and consulting | 69,207 | 727,871 |
Total operating expenses | 3,553,032 | 2,069,348 |
Loss from operations | (3,553,032) | (2,633,604) |
Other Income (Expenses): | ||
Derivative (loss) gain | (1,407,062) | 106,486 |
Gain (loss) on extinguishment of debt, net | 153,931 | (6,500) |
Interest expense | (200,753) | (288,466) |
Total other income (expenses), net | (1,453,884) | (188,480) |
Loss before provision for income taxes | (5,006,916) | (2,822,084) |
Provision for income taxes | 0 | 0 |
Net loss | (5,006,916) | (2,822,084) |
Net loss attributable to non-controlling interest | 0 | 155,819 |
Net loss attributable to Exactus, Inc. | (5,006,916) | (2,666,265) |
Deemed dividend on preferred stock | (1,927,343) | 0 |
Net loss available to Exactus, Inc. common stockholders | $ (3,079,573) | $ (2,666,265) |
Net loss per common share - basic and diluted | $ (0.06) | $ (0.06) |
Net loss attributable to non-controlling interest per common share - basic and diluted | .00 | .00 |
Net loss available to Exactus, Inc. common stockholders per common share - basic and diluted | $ (.04) | $ (0.06) |
Weighted Average Number of Common Shares Outstanding: | ||
Basic and diluted | 84,321,861 | 45,293,865 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' (Deficit) Equity (Unaudited) - USD ($) | Preferred Stock | Common Stock | Common Stock - Unissued | Additional Paid in Capital | Due From Related Party | Accumulated Deficit | Non-controlling Interest | Total |
Beginning balance, shares at Dec. 31, 2019 | 0 | 4,381,232 | 664,580 | |||||
Beginning balance, amount at Dec. 31, 2019 | $ 0 | $ 4,382 | $ 66 | $ 25,343,293 | $ 0 | $ (20,923,681) | $ (537,469) | $ 3,887,544 |
Common stock issued for private placement, shares | 500,000 | |||||||
Common stock issued for private placement, amount | $ 50 | 99,950 | 100,000 | |||||
Common stock issued for unissued common stock, shares | 287,500 | (287,500) | ||||||
Common stock issued for unissued common stock, amount | $ 29 | $ (29) | 0 | |||||
Conversion of preferred stock to common stock, shares | 150,450 | |||||||
Conversion of preferred stock to common stock, amount | $ 15 | (12) | 0 | |||||
Common stock issued for services, shares | 765,000 | |||||||
Common stock issued for services, amount | $ 77 | 378,446 | 378,523 | |||||
Stock-based compensation in connection with restricted common stock award grants, shares | 209,727 | (68,750) | ||||||
Stock-based compensation in connection with restricted common stock award grants, amount | $ 21 | $ (7) | 117,889 | 117,903 | ||||
Stock options granted for services | 140,866 | 140,866 | ||||||
Net loss for the period | (2,666,265) | (155,819) | (2,822,084) | |||||
Ending balance, shares at Mar. 31, 2020 | 0 | 4,573,200 | 308,330 | |||||
Ending balance, amount at Mar. 31, 2020 | $ 0 | $ 4,574 | $ 30 | 26,080,432 | 0 | (23,589,946) | (693,288) | 1,802,752 |
Beginning balance, shares at Dec. 31, 2020 | 9,499,037 | 56,356,431 | 100,000 | |||||
Beginning balance, amount at Dec. 31, 2020 | $ 950 | $ 5,636 | $ 10 | 27,485,796 | (128,489) | (30,384,380) | (2,018,239) | (5,038,716) |
Common stock issued for settlement of accounts payable, shares | 10,605,240 | |||||||
Common stock issued for settlement of accounts payable, amount | $ 1,061 | 1,723,046 | 1,724,107 | |||||
Common stock issued for settlement of convertible notes payables - related party, shares | 2,383,841 | |||||||
Common stock issued for settlement of convertible notes payables - related party, amount | $ 238 | 443,156 | 443,394 | |||||
Stock-based compensation in connection with equity awards, shares | 10,345,538 | |||||||
Stock-based compensation in connection with equity awards, amount | $ 1,035 | 2,032,527 | 2,033,562 | |||||
Conversion of preferred stock to common stock, shares | (1,999,037) | 20,033,660 | ||||||
Conversion of preferred stock to common stock, amount | $ (200) | $ 2,005 | 784,445 | 786,250 | ||||
Conversion of convertible note into preferred, shares | 9,500 | |||||||
Conversion of convertible note into preferred, amount | $ 0 | 1,499,000 | 1,499,000 | |||||
Net loss for the period | (5,066,916) | (5,006,916) | ||||||
Ending balance, shares at Mar. 31, 2021 | 7,500,500 | 99,724,710 | 100,000 | |||||
Ending balance, amount at Mar. 31, 2021 | $ 750 | $ 9,975 | $ 10 | $ 33,967,970 | $ (128,489) | $ (35,391,296) | $ (2,018,239) | $ (3,559,319) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (5,006,916) | $ (2,822,084) |
Adjustments to reconcile net loss to cash used in operations: | ||
Depreciation | 3,090 | 26,727 |
Derivative (gain) loss | 1,407,062 | (106,486) |
Stock-based compensation | (3,385,038) | 637,292 |
Bad debt expense | 0 | 18,592 |
Inventory reserve | 0 | 553,440 |
Amortization of prepaid stock-based expenses | 0 | 195,299 |
Amortization of discount and debt issuance costs for convertible notes | 0 | 268,350 |
Amortization of intangible assets | 0 | 246,250 |
Deferred rent | 0 | 3,418 |
Loss (gain) on settlement of debt | (153,931) | 6,500 |
Non-cash interest expense | 186,692 | 0 |
(Increase) decrease in operating assets: | ||
Accounts receivable | 0 | (236,360) |
Accounts receivable - related party | 0 | (88,800) |
Inventory | 0 | 387,271 |
Advance to supplier - related party | 0 | 0 |
Prepaid expenses and other current assets - current | (4,702) | 88,240 |
Prepaid expenses and other current assets - long term | 0 | (15,959) |
Deposit | 0 | 40,000 |
Increase (decrease) in operating liabilities: | ||
Accounts payable | 25,423 | 552,292 |
Accounts payable - related party | 0 | 0 |
Accrued expenses | (110,231) | 411,149 |
Unearned revenues | 0 | (215,000) |
Interest payable | (13,191) | 9,005 |
Net cash used In operating activities | (25,418) | (164,283) |
Cash Flows From Investing Activities: | ||
Net cash used in investing activities | 0 | 0 |
Cash Flows From Financing Activities: | ||
Advances from related party | 0 | 85,000 |
Proceeds from sale of common stock | 0 | 100,000 |
Proceeds from issuance of notes payable | 20,000 | 20,419 |
Payments of principal on convertible notes | 0 | (50,000) |
Net cash provided by financing activities | 20,000 | 155,419 |
Net (decrease) in cash and cash equivalents | (5,418) | (8,864) |
Cash and cash equivalents at beginning of year | 25,139 | 18,405 |
Cash and cash equivalents at end of period | 19,721 | 9,541 |
Supplemental Cash Flow Information: | ||
Cash paid for interest and finance charges | 0 | 11,111 |
Cash paid for taxes | 0 | 0 |
Non-Cash transactions investing and financing activity: | ||
Conversion of preferred stock to common stock | 2,005 | 0 |
Convertible notes and interest payable settled by common stock issued | 50,250 | 0 |
Accounts payable, accrued expense and interest payable settled by common stock issued | 828,144 | 0 |
Reduction of operating lease right-of-use asset and operating lease liabilities | $ 0 | $ 116,887 |
NATURE OF ORGANIZATION
NATURE OF ORGANIZATION | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF ORGANIZATION | Organization and Business Description Exactus, Inc. (the “Company”, “we”, “us”, “our”) was incorporated on January 18, 2008 as an alternative energy research and development company. During much of its history the Company had designed solar monitoring and charging systems which were discontinued in 2016 to focus on developing point-of-care diagnostic devices. In January 2019, the Company added to the scope of its business activities, efforts to produce, market and sell products made from industrial hemp containing cannabidiol (“CBD”). The Company operates in one segment. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis of presentation and principles of consolidation The Company’s unaudited condensed consolidated financial statements include the financial statements of its 50.1% subsidiary, Exactus One World, LLC (“EOW”) and 51% subsidiary, Paradise Medlife. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information, which includes consolidated unaudited interim financial statements and present the consolidated unaudited interim financial statements of the Company and its majority-owned subsidiary as of March 31, 2021. All intercompany transactions and balances have been eliminated. In the opinion of management, all adjustments necessary to present fairly our financial position, results of operations, stockholders’ equity (deficit) and cash flows as of March 31, 2021 and 2020, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. Certain information and note disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2020 and footnotes thereto included in the Company’s Report on Form 10K filed with the SEC on April 23, 2020. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year. Going concern The accompanying consolidated financial statements are presented on the basis that the Company 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 the Company’s assets and the carrying amount of its liabilities based on the going concern uncertainty. As reflected in the accompanying condensed consolidated financial statements, the Company had a net loss attributable to Exactus Inc. common stockholders of $3.1 million as of March 31, 2021. The net cash used in operating activities was approximately $25,000 for the three months ended March 31, 2021. Additionally, the Company had an accumulated deficit of $35.4 million and working capital deficit of $3.4 million as of March 31, 2021. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. The Company is seeking to raise capital through additional debt and/or equity financings to fund its operations in the future. Although the Company has historically raised capital from sales of common and preferred shares and from the issuance of convertible promissory notes, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending soon, management expects that the Company will need to further curtail its operations. The accompanying condensed 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 the Company be unable to continue as a going concern. The Company expects to realize revenue through its efforts, if successful, to sell wholesale and retail products to third parties. However, as the Company is in a start-up phase, in a new business venture, in a rapidly evolving industry, many of its costs and challenges are new and unknown. In order to fund the Company’s activities, the Company will need to raise additional capital either through the issuance of equity and/or the issuance of debt. The COVID-19 pandemic has resulted in a global slowdown of economic activity which is likely to continue to reduce the future demand for a broad variety of goods and services, while also disrupting sales channels, marketing activities and supply chains for an unknown period of time until the virus is fully contained. The Company’s business operations have been negatively impacted by the COVID-19 pandemic and related events and the Company expects this disruption to continue to have a negative impact on its revenue and results of operations, the size and duration of which is currently difficult to predict. The impact to date has included a decline in product and sales demand. Although the Company is unable to predict the full impact and duration of COVID-19 on its business, the Company is actively managing its financial expenditures in response to the current uncertainty. The impact of the COVID-19 pandemic and related events, including actions taken by various government authorities in response, have increased market volatility and make the estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes more difficult. As of the date of issuance of the financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates, judgments or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Use of Estimates The Company prepares its condensed consolidated financial statements in conformity with GAAP which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. In preparing the condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated balance sheet, and revenues and expenses for the period then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include but are not limited to the fair value of derivative liabilities, useful life of property and equipment, fair value of right of use assets, assumptions used in assessing impairment of long-term assets, income taxes, contingent liabilities, and fair value of non-cash equity transactions. Recently Adopted Accounting Pronouncements There have been no changes to the Company’s accounting policies or recent accounting pronouncement as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed on April 23, 2021 with the exception of the adoption of ASU 2020-06 Debt – Debt with Conversion and Other Options and Derivatives and Hedging. ASU 2020-06 Debt – Debt with Conversion and Other Options and Derivatives and Hedging Fair Value Measurements The Company adopted the provisions of Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value, and expands disclosure of fair value measurements. The guidance prioritizes the inputs used in measuring fair value and establishes a three-tier value hierarchy that distinguishes among the following: ● Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. ● Level 2—Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. ● Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Company measures certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2021 and December 31, 2020: At March 31, 2021 At December 31, 2020 Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Derivative liabilities — — $ — — — $ 237,022 A roll forward of the level 3 valuation financial instruments is as follows: March 31, 2021 Balance at beginning of year $ 237,022 Transfers out due to conversions of convertible notes (1,644,084 ) Change in fair value included in derivative 1,407,062 Balance at end of year $ — As of March 31, 2021, the Company has no assets that are re-measured at fair value. Prepaid Expenses and Other Current Assets Prepaid expenses and other assets consisted of the following: March 31, 2021 December 31, 2020 Prepaid insurance 7,556 9,288 Other assets 6,000 6,000 $ 10,556 $ 15,258 Earnings per Share The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, “ Earnings per Share For the three months ended March 31, 2021 and 2020, the following potentially dilutive shares were excluded from the computation of diluted earnings per shares because their impact was anti-dilutive: March 31, 2021 2020 Stock options 7,236,124 3,751,749 Stock warrants 1,578,549 1,578,549 Restricted stock to be issued upon vesting 2,457,348 2,960,810 Convertible preferred stock 7,500,500 9,460,845 Convertible debt 290,000 14,145,825 Total 19,062,521 31,897,778 Troubled Debt Restructuring In February 2021, the Company agreed to settle certain debt instruments through the issuance of Series A Preferred Shares. Due to the Company financial condition and the relative value of the Series A Preferred Shares in relation to the debt, we determined the transaction to be a troubled debt restructuring. See Note 5 for further discussion. Preferred share exchange offering In January 2021, the Company offered a modification to the terms of the Series A Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares with the intention of inducing conversion to common shares (collectively the “Inducement Securities”. In accordance with ASC 470, Debt |
INVENTORY
INVENTORY | 3 Months Ended |
Mar. 31, 2021 | |
Inventory Disclosure [Abstract] | |
INVENTORY | Inventory, net consisted of the following: March 31, 2021 December 31, 2020 Finished goods – CBD $ 10,712 $ 10,712 During the three months ended March 31, 2020, the Company recorded a reserve or inventory write-off related to damaged inventory of $553,440 due to mold and is included in cost of sales as reflected in the accompanying unaudited condensed consolidated statements of operations. |
OPERATING LEASE RIGHT-OF-USE AS
OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES | 3 Months Ended |
Mar. 31, 2021 | |
Leases [Abstract] | |
OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES | On January 22, 2021, the Company entered into a Settlement and Release Agreement (Settlement and Release Agreement) with Ceed2Med, LLC (C2M), a former affiliate of the company. Over the course of 2018-2019 the Company entered into a series of agreements for product and funding with C2M in connection with the seed-to-sale strategy for our hemp-derived CBD business, to secure farming rights and expertise, and to secure product, distribution, and funding. The Company previously issued 10,000 shares of Series E Preferred Stock convertible into 6,250,000 shares of common stock to C2M. Pursuant to the Settlement and Release Agreement, C2M permitted the Company to transfer all outstanding shares of Series E Preferred stock to settle various third-party claims and obligations, avoiding dilution in furtherance of ongoing restructuring efforts. The Company issued 3,000,000 common shares to a vendor to settle $575,000 of commercial accounts payable with a vendor resulting in the Company recognizing a $20,000 gain on the settlement of debt. The Company issued an officer of the Company 1,250,000 as compensation in negotiating the settlement. As as result, the Company recognized approximately $231,000 of stock-based compensation. Under the Settlement and Release Agreement with Ceed2Med, all existing agreements, obligations and claims have been cancelled and rescinded, the parties exchanged full mutual releases. and the Company is to receive a cash payment of $200,000, of which $54,737 has been paid as of March 31, 2021. If the remaining balance is not paid, the agreement with C2M may not be effectuated. |
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
DEBT | The Company’s debt obligations are summarized as follows: U.S. Small Business Administration Loan On May 28, 2020, the Company received a Secured Disaster Loan in the amount of $99,100 from the U.S. Small Business Administration. The loan carries interest at a rate of 3.75% per year, requires monthly payments of principal and interest, and matures in thirty (30) years. Installment payments, including principal and interest, of $483 monthly, will begin twelve (12) months from the date of the promissory Note. The SBA loan is secured by a security interest in the Company's tangible and intangible assets. The loan proceeds are to be used as working capital to alleviate economic injury caused by the Covid-19 disaster occurring in the month of January 31, 2020 and continuing thereafter. As of March 31, 2021, the principal balance of this note amounted to $99,100 and accrued interest was approximately $2,047 Paycheck Protection Program Funding On May 22, 2020, the Company received federal funding in the amount of $236,410 through the Paycheck Protection Program (the “PPP”). PPP funds have certain restrictions on use of the funding proceeds, and generally must be repaid within two (2) years at 1% interest. The PPP loan may, under circumstances, be forgiven. There shall be no payment due by the Company during the six months period beginning on the date of this note (“Deferral Period”). Commencing one month after the expiration of the Deferral Period, the Company was to pay the lender monthly payments of principal and interest, each in equal amount required to fully amortize by the maturity date. As no payment has been made, the lender shall charge a late fee of up to 5% of the unpaid portion of the regularly scheduled payment. As of March 31, 2021, the principal balance of this note amounted to $236,410 and accrued interest was approximately $3,146. The Company has formally applied for forgiveness of this PPP loan. Notes payable to unrelated parties is summarized below: March 31, 2021 December 31, 2020 Principal amount $ 335,510 $ 335,510 Less: current portion (130,344 ) (130,344 Notes payable - long term portion $ 205,166 $ 205,166 Minimum principal payments under notes payable to unrelated parties at March 31, 2021 are as follows: Year ended December 31, 2021 $ 11,859 Year ended December 31, 2022 155,501 Year ended December 31, 2023 68,392 Year ended December 31, 2024 2,091 Year ended December 31, 2025 and thereafter 97,667 Total principal payments $ 335,510 Notes payable – related party During the fourth quarter 2020, the Company received $37,000 in cash proceeds from the former Chief Executive Officer and stockholder of the Company as an unsecured obligation with no term or stated interest. The Company is currently negotiating to settle the outstanding obligation with the issuance of the Company’s common stock. As of March 31, 2021, and December 31, 2020, the principal balance due is $37,000 and is currently in default. During February 2020, the Company entered a short-term promissory note for principal amount of $22,461 and gross cash proceeds of $20,419 (original issue discount of $2,042) with a stockholder of the Company. The note became due and payable on March 8, 2020 and bore interest at a rate of eighteen (18%) percent per annum prior to the maturity date, and eighteen (18%) per annum if unpaid following the maturity date. The note is an unsecured obligation of the Company. In addition, the note carries a 10% original issue discount of $2,042 which have been amortized and recorded in interest expense on the accompanying statements of operations. The Company is currently negotiating to extend the maturity date of the related party note. As of March 31, 2021, and December 31, 2020, the principal balance of this note amounted to $22,461 and is currently in default. During October 2019, the Company entered a short-term promissory notes with an officer of the Company, for an aggregate principal amount of $55,556. The note originally became due and payable between October 18, 2019 and December 16, 2019 and bore interest at a rate of twelve (12%) percent per annum prior to the maturity date, and eighteen (18%) per annum if unpaid following the maturity date. The current interest rate is 18%. The note is an unsecured obligations of the Company. The notes carry a 10% original issue discount of $5,556 which has been amortized and recorded in interest expense on the accompanying condensed consolidated statements of operations. As of March 31, 2021, and December 31, 2020, the principal balance under the note was $55,556. The Company is currently negotiating on extending the maturity date of the related party note. During February 2021, the Company entered a short-term promissory note for principal amount of $20,000 with a stockholder of the Company. The note is payable on demand and bears interest at a rate of eight (8%) percent per annum. The note is unsecured obligation of the Company. As of March 31, 2021, the principal balance of this note amounted to $20,000 and accrued interest was $340. Convertible notes payable Convertible Notes in the aggregate amount of $100,000 were issued on March 22, 2018. The Notes bear interest at a rate of 5% per annum and mature on February 1, 2023. If a qualified financing from which at least $5 million of gross proceeds are raised occurs prior to the maturity date, then the outstanding principal balance of the notes, together with all accrued and unpaid interest thereon, shall be automatically converted into a number of shares of the Company’s Common Stock at $0.40 per Share. The Notes offers registration rights wherein the Company agrees that within 45 days of a Qualified Offering, prior to the Maturity Date, the Company shall file a registration statement with the SEC registering for resale of the shares of Company’s Common Stock into which the Notes are convertible. The Company shall send a written conversion notice to the lender pursuant to the note agreement and as such the principal balance of the convertible note remains outstanding as of December 31, 2020 and 2019. The Company reclassed the principal balance to current portion as of December 31, 2020. During the second quarter 2021, the Company notified the holders the shares will be converted into common as the Company met the conversion requirements in 2019. The following is a summary of the carrying amounts of all convertible notes as of March 31, 2021 and December 31, 2020: March 31, 2021 December 31, 2020 Principal Amount $ 100,000 $ 933,333 Add: additional principal 50,250 Add: amortization of redemption premium 88,889 Less: redemption premium payments (20,800 ) Less: principal payments and conversions (356,186 ) Less: unamortized debt discount and debt issuance costs - Total convertible debt less unamortized debt discount and debt issuance costs $ 100,000 $ 696,286 Sale of Convertible Note The Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a single institutional investor (the “Purchaser”), pursuant to which the Company agreed to sell to Purchaser in a series of 3 closings up to $1,944,444 in aggregate principal amount of the Company’s senior secured convertible promissory notes (the “Notes”) and warrants to purchase shares of the Company’s Common Stock (the “Warrants”). On November 27, 2019 (the “Initial Closing Date”), the Company issued a Note in the principal amount of $833,333, and a two-year Warrant to purchase 275,612 shares of Common Stock at an exercise price of $0.756 per share. The Notes were issued at a 10% original issue discount and bear an interest rate of 8%. The Notes matured one year after their issuance unless accelerated due to an event of default. The Notes were redeemable, in whole or in part, at any time at the discretion of the Company. At the Initial Closing Date, the Company received net proceeds, after the original issue discount and the Purchaser’s counsel fees, of $730,000. Each note was convertible at the option of the note holder at any time into shares of common stock at the fixed conversion rate of $0.50 per share subject to adjustments. On November 12, 2020, 3i provided notice of default to the Company, accelerating its obligations to pay the entire remaining principal balance of the Note, plus interest. Under the terms of the Note, upon an “Event of Default,” Exactus is required to pay to 3i an “Event of Default Redemption Amount” equal to 135% of the sum of the outstanding principal and accrued pre- and post-default interest under the Note. On February 8, 2021, 3i sold the Note to FFG. In connection with the sale of the Note to FFG, Exactus agreed to repurchase said Note and the related warrants in exchange for 500 shares of Series A Preferred Shares. The Series A Preferred Shares are convertible into 10,000,000 common shares at the option of the holder. In February 2021, the Company settled convertible debt with a carrying value of $732,728 and a derivative liability with a balance of $1,644,084 with 500 shares of Series A Preferred Shares, valued at $1,499,000. This transaction was accounted for as a troubled debt restructuring and resulted in the recognition of a gain on settlement of $0.9 million or $0.00 per share. The sale of the notes were accounted for as an extinguishment of debt in recognition of the revisions of the note agreement and transfer of value to the Company. Under the extinguishment model, a deemed dividend was recognized within additional paid in capital which represented the fair value of issued Preferred Stock plus the incremental fair value of repricing the Preferred Stock held by the Investor, less the fair value of the consideration transferred, less the carrying value of the outstanding Preferred Stock, and warrants to purchase Common Stock. The amount of the deemed dividend totaled approximately $1.9 million. The changes in convertible debt for the quarter ended March 31, 2021 are: Beginning balance $ 696,286 Cash payments Stock settlement 596,286 * Ending balance 100,000 *excludes accrued interest and penalties of $136,442, which was reported in the interest payable |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) | 3 Months Ended |
Mar. 31, 2021 | |
(Deficit): | |
STOCKHOLDERS' EQUITY (DEFICIT) | Common Stock The Company’s authorized Common Stock consists of 650,000,000 shares with a par value of $0.0001 per share. During the first quarter 2021, the Company issued 8,186,240 shares of common stock to an officer of the Company in settlement of $26,995 of payables due, $150,632 of accrued payroll, and $11,946 of interest due on a note with the officer. The fair value of the common shares amounted to approximately $1,310,000 resulting in the Company recognizing approximately $1,120,00 of additional stock-based compensation. During the first quarter 2021, the Company issued 2,419,000 shares of common stock to various vendors in settlement of $62,063 of commercial accounts payables. The fair value of the common shares amounted to approximately $414,000 resulting in the Company recognizing approximately $352,000 of loss on settlement of debt. During the first quarter 2021, the Company issued 2,383,841 shares of common stock to a related party in settlement of a convertible note payable with a principal balance of $50,250 and accrued interest of $1,508. The fair value of the common shares amounted to approximately $444,000 resulting in the Company recognizing approximately $391,000 of loss on settlement of debt. Common Stock Options Stock Option Plan In September 2018, the Company’s stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”). The 2018 Plan provides for the issuance of incentive awards in the form of non-qualified and incentive stock options, stock appreciation rights, restricted stock awards, and restricted stock unit awards. The awards may be granted by the Company’s Board of Directors to its employees, directors and officers and to consultants, agents, advisors and independent contractors who provide services to the Company or to a subsidiary of the Company. The exercise price for stock options must not be less than the fair market value of the underlying shares on the date of grant. The incentive awards shall either be fully vested and exercisable from the date of grant or shall vest and become exercisable in such installments as the Board or Compensation Committee may specify. Stock options expire no later than ten years from the date of grant. The aggregate number of shares of Common Stock which may be issued pursuant to the Plan is 9,500,000. Unless sooner terminated, the Plan shall terminate in 10 years. A summary of the stock option activity is presented below: Options Outstanding Weighted Weighted Average Average Number of Exercise Remaining Aggregate Shares Subject Price Per Contractual Intrinsic to Options Share Life (in years) Value Balance at December 31, 2020 3,751,749 $ 0.41 8.0 Options granted 3,500,000 $ 0.025 Options exercised Options canceled / expired Balance at March 31, 2021 7,251,749 $ 0.13 4.89 $ 667,500 Vested and exercisable at March 31, 2021 5,220,499 $ 0.17 5.76 $ 373,750 Restricted Common Stock A summary of the restricted stock activity is presented below: Restricted Stock Common Stock Weighted Average Grant-Date Fair Value Per Share Balance at December 31, 2020 2,023,486 $ 0.41 Granted — — Vested 351,813 — Forfeited — — Balance at December 31, 2020 2,375,299 $ 0.72 As of March 31, 2021, unamortized or unvested stock-based compensation costs related to restricted share arrangements was approximately $.2 million and will be recognized over a weighted average period of 0.72 years. Preferred Stock The Company’s authorized preferred stock consists of 50,000,000 shares with a par value of $0.0001. Preferred Stock Series A Series A Series B-1 Series B-2 Series C Series D Series E Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance, December 31, 2019 353,109 $ 35 - - 1,650,000 $ 165 7,516,000 $ 752 - $ - 18 $ - 10,000 $ 1 Conversion of Series A Preferred Stock to Common Stock (3,090 ) (3 ) - - - - - - - - - - - - Balance, March 31, 2020 350,019 $ 32 - - 1,650,000 $ 165 7,516,000 $ 752 - $ - 18 $ - 10,000 $ 1 Preferred Stock Series A Series A Series B-1 Series B-2 Series C Series D Series E Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance, December 31, 2020 323,019 $ 32 - $ - 1,650,000 $ 165 7,516,000 $ 752 - $ - 18 $ - 10,000 $ 1 Conversion of Preferred Stock to Common Stock (323,019 ) (32 ) 500 (150,000 ) (15 ) (1,516,000 ) (152 ) - - (18 ) - (10,000 ) (1 ) Balance, March 31, 2021 - $ - 500 $ - 1,500,000 $ 150 6,000,000 $ 600 - $ - - $ - $ - During the quarter ended March 31, 2021, the Company offered to modify the conversion price of the outstanding Series A Preferred Shares (from $0.20 to $0.025), Series B-1 Preferred Shares and Series B-2 Preferred Shares (from 0.25 to 0.125) the “Exchange Offering”). As a result of the Exchange offering, the holders converted 323,019 Series A Preferred Stock into 12,917,160 shares of common stock, 150,000 Series B-1 Preferred Stock into 37,500 shares of common stock, 1,516,000 Series B-2 Preferred Stock into 379,000 shares of common stock. This resulted in a gain of conversion of $1,923,343, The gain was reported as a credit to additional paid in capital and reflected as a deemed dividend in reporting earnings available to common shareholders. In addition to the Exchange Offering, 18 Series D Preferred Stock converted into 450,000 shares of common stock, and 10,000 Series E Preferred Stock converted into 6,250,000 shares of common stock. On February 16, 2021, the Company entered into a Securities Purchase Agreement with 3i, LP (“ 3i Investor Note In addition, the Company entered into an Exchange Agreement with the Investor and filed with the Secretary of State of the State of Nevada a Certificate of Designation of Preferences, Rights and Limitations for Series A Preferred Stock under which the Note in the original principal amount of $750,000 would be exchanged for 500 shares of a new series of our preferred stock designated 0% Series A Convertible Preferred Stock (the “ Series A Preferred Stated Value The Company authorized the issuance of a total of 1,000 ($1,000,000) of Series A Preferred for issuance. Each share of Series A Preferred is convertible at the option of the Holder, into that number of shares of our common stock, par value $0.0001 per share) (the “ Common Stock Conversion Price The Company is prohibited from effecting the conversion of the Series A Preferred to the extent that, as a result of such conversion, the holder beneficially owns more than 4.99% (which may be increased to 9.99% upon 61 days’ written notice to the Company), in the aggregate, of the issued and outstanding shares of the Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the conversion of the Series A Preferred. Holders of the Series A Preferred shall be entitled to vote on all matters submitted to the Company’s stockholders and shall be entitled to the number of votes equal to the number of shares of Common Stock into which the shares of Series A Preferred Stock are convertible, subject to applicable beneficial ownership limitations. The Series A Preferred Stock provides a liquidation preference equal to the Stated Value, plus any accrued and unpaid dividends, fees or liquidated damages. The Series A Preferred can be redeemed at the Company’s option upon payment of a redemption premium between 120% to 135% of the Stated Value of the outstanding Series A Preferred redeemed. The Company is not obligated to file a registration statement under the Securities Act of 1933, as amended (the “ Act On February 16, 2021 the Company offered to our prior Series A preferred stock enhanced conversion inducements to voluntarily convert preferred shares into our Common Stock and filed a Certificate of Cancellation and Withdrawal with the Secretary of State of the State of Nevada cancelling our prior Certificate of Designation of Preferences, Rights and Limitations for Series A Preferred Stock, all of which has been converted to Common Stock, in order to issue the new Series A Preferred stock described herein. On April 7, 2021 the Company filed a Certificate of Cancellation and Withdrawal with the Secretary of State of the State of Nevada cancelling our prior Certificate of Designation of Preferences, Rights and Limitations for Series C Preferred Stock, Series D Preferred Stock, and Series E Preferred Stock, all of which has been cancelled or converted into Common Stock. On February 16, 2021, the Company offered to our Series E preferred stock accelerated vesting to voluntarily convert preferred shares into our Common Stock. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Legal Matters In the ordinary course of business, the Company enters into agreements with third parties that include indemnification provisions which, in its judgment, are normal and customary for companies in the Company’s industry sector. These agreements are typically with business partners, clinical sites, and suppliers. Pursuant to these agreements, the Company generally agrees to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to the Company’s product candidates, use of such product candidates, or other actions taken or omitted by us. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal. Accordingly, the Company has no liabilities recorded for these provisions as of December 31, 2020 or 2019. On February 26, 2020 a complaint was filed against the Company in the Circuit Court, Palm Beach County, Florida on behalf of two former employees of the Company. The case is entitled Ryan Borcherds and Miriam Martinez vs. Exactus, Inc. (Case No. 103978709). These former employees were hired in January 2020. The complaint alleged the Company failed to pay wages and compensation to 2 employees under the Fair Labor Standards Act, breach of contract and violation of various Florida statutes, including allegations on behalf of other similarly situated persons. On May 8, 2020, an amended complaint was filed against the Company in the Circuit Court, Palm Beach County, Florida on behalf of six former employees, with one additional employee added to the suit in June 2020. The amended case is entitled Ryan Bocherds, Marc Reiss, Jeannine Boffa, Benjamin Blair, Miriam Martinez and Michael Amoroso vs. Exactus, Inc, (Case No. 50-2020-CA-002274-MB). The other four former employees were hired between April 2019 and December 2019. As of December 31, 2019, the Company has recorded total accrued salaries of $26,494 related to these former employees. On September 8, 2020, the Company entered into settlement agreements and mutual releases with all plaintiffs. Under the settlement agreements, the Company is obligated to pay a total of $131,130 (including $16,000 in legal fees and excluding any applicable payroll taxes) to the plaintiffs. Under the settlement agreements, the Company paid each plaintiff 50% of the settlement amount at the time of signing and are obligated to pay the remaining settlement amounts in six monthly installments. The 50% amount as well as the first monthly installment for each plaintiff was paid and we are in default for the remaining 5 monthly payments. On October 26, 2020 two complaints were filed in the Circuit Court, Palm Beach County, Florida on behalf of a former vendors of the Company. The cases entitled SEP COMMUNICATIONS LLC V EXACTUS INC. 50-2020-CA-011680-XXXX-MB and SOUTHEASTERN PRINTING COMPANY V EXACTUS INC 50-2020-CC-009475-XXXX-SB seeks approximately $54,612.80 & $19,528.36 respectively, plus interests and court costs. |
RELATED PARTY CONSIDERATIONS
RELATED PARTY CONSIDERATIONS | 3 Months Ended |
Mar. 31, 2021 | |
Related Party Transactions [Abstract] | |
RELATED PARTY CONSIDERATIONS | Some of the officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available. They may face a conflict in selecting between the Company and other business interests. We have not formulated a policy for the resolution of such conflicts. On January 8, 2019, the Company entered into a Master Product Development and Supply Agreement with C2M. As of December 31, 2020, C2M is a majority stockholder of the Company. On January 21, 2021, the Company entered into a Settlement Agreement with Ceed2Med, LLC and certain of its principals cancelling all agreements, obligations and claims and providing full mutual releases of the Company and such persons, see note 4 for additional details. |
CONCENTRATION OF REVENUE AND SU
CONCENTRATION OF REVENUE AND SUPPLIERS | 3 Months Ended |
Mar. 31, 2021 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATION OF REVENUE AND SUPPLIERS | During the three months ended March 31, 2020, total sale of CBD products and hemp flowers to two customers represented approximately 89% (51%, and 38% - related party) of the Company’s net sales. As of December 31, 2020, total accounts payable with one vendor was approximately 27% of total accounts payable. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | On April 26, 2021, we received a loan in the principal amount of $236,410 from the U.S. Small Business Administration under the Paycheck Protection Program. The loan, which is documented by a Note and Loan Agreement, bears interest at a rate of 1% per year and is due in five (5) years. No payments under the Note are due during the time that payments are deferred under the Coronavirus Aid, Relief, and Economic Security Act, Paycheck Protection Program Flexibility Act of 2020, and the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Act”). One month after the deferral period provided under the Act expires, we will be required to make monthly payments of principal and interest in such equal amounts as are required to fully amortize the loan by the maturity date. The Note may be prepaid at any time without penalty. Upon fulfillment of conditions for forgiveness provided by the Paycheck Protection Program under the Act, the loan may be forgiven in whole or in part. On March 31, 2021, a majority of our shareholders approved a reverse split of our common stock by written consent. The consenting shareholders approved a reverse split of our common stock, par value $0.001 per share, at by a ratio of not less than one-for-twenty five and not more than one-for-one hundred to take effect at any time prior to December 31, 2021, with the exact ratio to be set at a whole number within this range as determined by the Company’s board of directors in its sole discretion. The effective date of the reverse split, if undertaken in the discretion of the board of directors, will be as determined by the board in coordination with FINRA. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Principles of Consolidation | The Company’s unaudited condensed consolidated financial statements include the financial statements of its 50.1% subsidiary, Exactus One World, LLC (“EOW”) and 51% subsidiary, Paradise Medlife. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information, which includes consolidated unaudited interim financial statements and present the consolidated unaudited interim financial statements of the Company and its majority-owned subsidiary as of March 31, 2021. All intercompany transactions and balances have been eliminated. In the opinion of management, all adjustments necessary to present fairly our financial position, results of operations, stockholders’ equity (deficit) and cash flows as of March 31, 2021 and 2020, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. Certain information and note disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2020 and footnotes thereto included in the Company’s Report on Form 10K filed with the SEC on April 23, 2020. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year. |
Going Concern | The accompanying consolidated financial statements are presented on the basis that the Company 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 the Company’s assets and the carrying amount of its liabilities based on the going concern uncertainty. As reflected in the accompanying condensed consolidated financial statements, the Company had a net loss attributable to Exactus Inc. common stockholders of $3.1 million as of March 31, 2021. The net cash used in operating activities was approximately $25,000 for the three months ended March 31, 2021. Additionally, the Company had an accumulated deficit of $35.4 million and working capital deficit of $3.4 million as of March 31, 2021. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. The Company is seeking to raise capital through additional debt and/or equity financings to fund its operations in the future. Although the Company has historically raised capital from sales of common and preferred shares and from the issuance of convertible promissory notes, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending soon, management expects that the Company will need to further curtail its operations. The accompanying condensed 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 the Company be unable to continue as a going concern. The Company expects to realize revenue through its efforts, if successful, to sell wholesale and retail products to third parties. However, as the Company is in a start-up phase, in a new business venture, in a rapidly evolving industry, many of its costs and challenges are new and unknown. In order to fund the Company’s activities, the Company will need to raise additional capital either through the issuance of equity and/or the issuance of debt. The COVID-19 pandemic has resulted in a global slowdown of economic activity which is likely to continue to reduce the future demand for a broad variety of goods and services, while also disrupting sales channels, marketing activities and supply chains for an unknown period of time until the virus is fully contained. The Company’s business operations have been negatively impacted by the COVID-19 pandemic and related events and the Company expects this disruption to continue to have a negative impact on its revenue and results of operations, the size and duration of which is currently difficult to predict. The impact to date has included a decline in product and sales demand. Although the Company is unable to predict the full impact and duration of COVID-19 on its business, the Company is actively managing its financial expenditures in response to the current uncertainty. The impact of the COVID-19 pandemic and related events, including actions taken by various government authorities in response, have increased market volatility and make the estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes more difficult. As of the date of issuance of the financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates, judgments or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. |
Use of Estimates | The Company prepares its condensed consolidated financial statements in conformity with GAAP which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. In preparing the condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated balance sheet, and revenues and expenses for the period then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include but are not limited to the fair value of derivative liabilities, useful life of property and equipment, fair value of right of use assets, assumptions used in assessing impairment of long-term assets, income taxes, contingent liabilities, and fair value of non-cash equity transactions. There have been no changes to the Company’s accounting policies or recent accounting pronouncement as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed on April 23, 2021 with the exception of the adoption of ASU 2020-06 Debt – Debt with Conversion and Other Options and Derivatives and Hedging. |
Recently Adopted Accounting Pronouncements | There have been no changes to the Company’s accounting policies or recent accounting pronouncement as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed on April 23, 2021 with the exception of the adoption of ASU 2020-06 Debt – Debt with Conversion and Other Options and Derivatives and Hedging. ASU 2020-06 Debt – Debt with Conversion and Other Options and Derivatives and Hedging |
Fair Value Measurements | The Company adopted the provisions of Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value, and expands disclosure of fair value measurements. The guidance prioritizes the inputs used in measuring fair value and establishes a three-tier value hierarchy that distinguishes among the following: ● Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. ● Level 2—Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. ● Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Company measures certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2021 and December 31, 2020: At March 31, 2021 At December 31, 2020 Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Derivative liabilities — — $ — — — $ 237,022 A roll forward of the level 3 valuation financial instruments is as follows: March 31, 2021 Balance at beginning of year $ 237,022 Transfers out due to conversions of convertible notes (1,644,084 ) Change in fair value included in derivative 1,407,062 Balance at end of year $ — As of March 31, 2021, the Company has no assets that are re-measured at fair value. |
Accounts Receivable and Allowance for Doubtful Accounts | |
Prepaid Expenses and Other Current Assets | Prepaid expenses and other assets consisted of the following: March 31, 2021 December 31, 2020 Prepaid insurance 7,556 9,288 Other assets 6,000 6,000 $ 10,556 $ 15,258 |
Earnings per Share | The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, “ Earnings per Share For the three months ended March 31, 2021 and 2020, the following potentially dilutive shares were excluded from the computation of diluted earnings per shares because their impact was anti-dilutive: March 31, 2021 2020 Stock options 7,236,124 3,751,749 Stock warrants 1,578,549 1,578,549 Restricted stock to be issued upon vesting 2,457,348 2,960,810 Convertible preferred stock 7,500,500 9,460,845 Convertible debt 290,000 14,145,825 Total 19,062,521 31,897,778 |
Troubled Debt Restructuring | In February 2021, the Company agreed to settle certain debt instruments through the issuance of Series A Preferred Shares. Due to the Company financial condition and the relative value of the Series A Preferred Shares in relation to the debt, we determined the transaction to be a troubled debt restructuring. See Note 5 for further discussion. |
Preferred share exchange offering | In January 2021, the Company offered a modification to the terms of the Series A Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares with the intention of inducing conversion to common shares (collectively the “Inducement Securities”. In accordance with ASC 470, Debt |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Financial instruments at fair value on a recurring basis | At March 31, 2021 At December 31, 2020 Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Derivative liabilities — — $ — — — $ 237,022 |
Roll forward of the level 3 valuation financial instruments | March 31, 2021 Balance at beginning of year $ 237,022 Transfers out due to conversions of convertible notes (1,644,084 ) Change in fair value included in derivative 1,407,062 Balance at end of year $ — |
Prepaid expenses and other current assets | March 31, 2021 December 31, 2020 Prepaid insurance 7,556 9,288 Other assets 6,000 6,000 $ 10,556 $ 15,258 |
Anti-dilutive securities | March 31, 2021 2020 Stock options 7,236,124 3,751,749 Stock warrants 1,578,549 1,578,549 Restricted stock to be issued upon vesting 2,457,348 2,960,810 Convertible preferred stock 7,500,500 9,460,845 Convertible debt 290,000 14,145,825 Total 19,062,521 31,897,778 |
INVENTORY (Tables)
INVENTORY (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Inventory Disclosure [Abstract] | |
Inventory | March 31, 2021 December 31, 2020 Finished goods – CBD $ 10,712 $ 10,712 |
DEBT (Tables)
DEBT (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Notes payable to unrelated parties | March 31, 2021 December 31, 2020 Principal amount $ 335,510 $ 335,510 Less: current portion (130,344 ) (130,344 Notes payable - long term portion $ 205,166 $ 205,166 |
Minimum principal payments under notes payable | Year ended December 31, 2021 $ 11,859 Year ended December 31, 2022 155,501 Year ended December 31, 2023 68,392 Year ended December 31, 2024 2,091 Year ended December 31, 2025 and thereafter 97,667 Total principal payments $ 335,510 |
Convertible notes payable | March 31, 2021 December 31, 2020 Principal Amount $ 100,000 $ 933,333 Add: additional principal 50,250 Add: amortization of redemption premium 88,889 Less: redemption premium payments (20,800 ) Less: principle payments and conversions (356,186 ) Less: unamortized debt discount and debt issuance costs - Total convertible debt less unamortized debt discount and debt issuance costs $ 100,000 $ 696,286 |
Change in convertible debt | Beginning balance $ 696,286 Cash payments Stock settlement 596,286 * Ending balance 100,000 |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
(Deficit): | |
Stock option activity | Options Outstanding Weighted Weighted Average Average Number of Exercise Remaining Aggregate Shares Subject Price Per Contractual Intrinsic to Options Share Life (in years) Value Balance at December 31, 2020 3,751,749 $ 0.41 8.0 Options granted 3,500,000 $ 0.025 Options exercised Options canceled / expired Balance at March 31, 2021 7,251,749 $ 0.13 4.89 $ 667,500 Vested and exercisable at March 31, 2021 5,220,499 $ 0.17 5.76 $ 373,750 |
Restricted stock activity | Restricted Stock Common Stock Weighted Average Grant-Date Fair Value Per Share Balance at December 31, 2020 2,023,486 $ 0.41 Granted — — Vested 351,813 — Forfeited — — Balance at December 31, 2020 2,375,299 $ 0.72 |
Preferred stock | Preferred Stock Series A Series A Series B-1 Series B-2 Series C Series D Series E Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance, December 31, 2019 353,109 $ 35 - - 1,650,000 $ 165 7,516,000 $ 752 - $ - 18 $ - 10,000 $ 1 Conversion of Series A Preferred Stock to Common Stock (3,090 ) (3 ) - - - - - - - - - - - - Balance, March 31, 2020 350,019 $ 32 - - 1,650,000 $ 165 7,516,000 $ 752 - $ - 18 $ - 10,000 $ 1 Preferred Stock Series A Series A Series B-1 Series B-2 Series C Series D Series E Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance, December 31, 2020 323,019 $ 32 - $ - 1,650,000 $ 165 7,516,000 $ 752 - $ - 18 $ - 10,000 $ 1 Conversion of Preferred Stock to Common Stock (323,019 ) (32 ) 500 (150,000 ) (15 ) (1,516,000 ) (152 ) - - (18 ) - (10,000 ) (1 ) Balance, March 31, 2021 - $ - 500 $ - 1,500,000 $ 150 6,000,000 $ 600 - $ - - $ - $ - |
NATURE OF ORGANIZATION (Details
NATURE OF ORGANIZATION (Details Narrative) | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Date of incorporation | Jan. 18, 2008 |
State of incorporation | NV |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Derivative liabilities | $ 0 | $ 237,022 |
Level 1 | ||
Derivative liabilities | 0 | 0 |
Level 2 | ||
Derivative liabilities | 0 | 0 |
Level 3 | ||
Derivative liabilities | $ 0 | $ 237,022 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Accounting Policies [Abstract] | |
Balance, beginning | $ 237,022 |
Transfers out due to conversions of convertible notes into common shares | (1,644,084) |
Change in fair value included in derivative | 1,407,062 |
Balance, ending | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Accounting Policies [Abstract] | ||
Prepaid insurance | $ 7,556 | $ 9,288 |
Other assets | 6,000 | 6,000 |
Prepaid expenses and other current assets | $ 10,556 | $ 15,258 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - shares | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Anti-dilutive securities | 19,062,521 | 31,897,778 |
Stock Options | ||
Anti-dilutive securities | 7,236,124 | 3,751,749 |
Stock Warrants | ||
Anti-dilutive securities | 1,578,549 | 1,578,549 |
Restricted Stock to be Issued Upon Vesting | ||
Anti-dilutive securities | 2,457,348 | 2,582,353 |
Convertible Preferred Stock | ||
Anti-dilutive securities | 7,500,500 | 9,460,845 |
Convertible Debt | ||
Anti-dilutive securities | 290,000 | 14,145,825 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Accounting Policies [Abstract] | |||
Net loss | $ (3,079,573) | $ (2,666,265) | |
Net cash used in operations | (25,418) | (164,283) | |
Accumulated deficit | (35,391,296) | $ (30,384,380) | |
Working capital deficit | (3,900,000) | ||
Allowance for doubtful accounts | 0 | $ 0 | |
Bad debt expense | $ 0 | $ 18,592 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Inventory Disclosure [Abstract] | ||
Finished goods - CBD | $ 10,712 | $ 10,712 |
INVENTORY (Details Narrative)
INVENTORY (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | ||
Inventory write-off | $ 0 | $ 553,440 |
DEBT (Details 1)
DEBT (Details 1) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Debt Disclosure [Abstract] | ||
Principal amount | $ 335,510 | $ 335,510 |
Less: current portion | (130,344) | (130,344) |
Notes payable - long-term portion | $ 205,166 | $ 205,166 |
DEBT (Details 2)
DEBT (Details 2) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Debt Disclosure [Abstract] | ||
Year ended December 31, 2021 | $ 11,859 | |
Year ended December 31, 2022 | 155,501 | |
Year ended December 31, 2023 | 68,392 | |
Year ended December 31, 2024 | 2,091 | |
Year ended December 31, 2025 and thereafter | 97,667 | |
Total principal payments | $ 335,510 | $ 335,510 |
DEBT (Details 3)
DEBT (Details 3) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Debt Disclosure [Abstract] | ||
Principal amount | $ 100,000 | $ 933,333 |
Add: additional principal | 0 | 50,250 |
Add: amortization of redemption premiums | 0 | 88,889 |
Less: redemption premium payments | 0 | (20,800) |
Less: principal payments and conversions | 0 | (356,186) |
Less unamortized debt discount and debt issuance costs | 0 | 0 |
Total convertible debt less unamortized debt discount and debt issuance costs | $ 100,000 | $ 696,286 |
DEBT (Details 4)
DEBT (Details 4) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Debt Disclosure [Abstract] | |
Convertible debt, beginning balance | $ 646,036 |
Cash payments | 0 |
Stock settlement | 596,286 |
Ending balance | $ 100,000 |
STOCKHOLDERS' EQUITY (DEFICIT_2
STOCKHOLDERS' EQUITY (DEFICIT) (Details) | 3 Months Ended |
Mar. 31, 2021USD ($)$ / sharesshares | |
(Deficit): | |
Options outstanding, beginning | shares | 3,751,749 |
Granted | shares | 3,500,000 |
Exercised | shares | 0 |
Canceled / expired | shares | 0 |
Options outstanding, ending | shares | 7,251,749 |
Options exercisable | shares | 5,220,499 |
Weighted average exercise price outstanding, beginning | $ / shares | $ .41 |
Granted | $ / shares | .025 |
Exercised | $ / shares | 0 |
Canceled / expired | $ / shares | .00 |
Weighted average exercise price outstanding, ending | $ / shares | 0.13 |
Weighted average exercise price exercisable | $ / shares | $ 0.17 |
Weighted average remaining contractual life outstanding, beginning | 8 years |
Weighted average remaining contractual life outstanding, ending | 4 years 10 months 20 days |
Weighted average remaining contractual life exercisable | 5 years 9 months 3 days |
Aggregate intrinsic value outstanding, ending | $ | $ 667,500 |
Aggregate intrinsic value exercisable | $ | $ 373,750 |
STOCKHOLDERS' EQUITY (DEFICIT_3
STOCKHOLDERS' EQUITY (DEFICIT) (Details 1) | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
(Deficit): | |
Restricted stock outstanding, beginning | shares | 2,023,486 |
Granted | shares | 0 |
Vested | shares | 351,813 |
Forfeited | shares | 0 |
Restricted stock outstanding, ending | shares | 2,375,299 |
Weighted average grant date fair value outstanding, beginning | $ / shares | $ .41 |
Granted | $ / shares | .00 |
Vested | $ / shares | .00 |
Forfeited | $ / shares | .00 |
Weighted average grant date fair value outstanding, ending | $ / shares | $ .72 |
STOCKHOLDERS' EQUITY (DEFICIT_4
STOCKHOLDERS' EQUITY (DEFICIT) (Details 2) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Beginning balance, amount | $ (5,038,716) | $ 3,887,544 |
Conversion of preferred stock to common stock, amount | 786,250 | 0 |
Ending balance, amount | $ (3,559,319) | $ 1,802,752 |
Series A Preferred Stock | ||
Beginning balance, shares | 323,019 | 353,109 |
Beginning balance, amount | $ 32 | $ 35 |
Conversion of preferred stock to common stock, shares | (323,019) | (3,090) |
Conversion of preferred stock to common stock, amount | $ (32) | $ (3) |
Ending balance, shares | 0 | 350,019 |
Ending balance, amount | $ 0 | $ 32 |
Series A COD Preferred Stock | ||
Beginning balance, shares | 0 | |
Beginning balance, amount | $ 0 | |
Conversion of preferred stock to common stock, shares | 500 | |
Conversion of preferred stock to common stock, amount | $ 0 | |
Ending balance, shares | 500 | |
Ending balance, amount | $ 0 | |
Series B-1 Preferred Stock | ||
Beginning balance, shares | 1,650,000 | 1,650,000 |
Beginning balance, amount | $ 165 | $ 165 |
Conversion of preferred stock to common stock, shares | (150,000) | 0 |
Conversion of preferred stock to common stock, amount | $ (15) | $ 0 |
Ending balance, shares | 1,500,000 | 1,650,000 |
Ending balance, amount | $ 150 | $ 165 |
Series B-2 Preferred Stock | ||
Beginning balance, shares | 7,516,000 | 7,516,000 |
Beginning balance, amount | $ 752 | $ 752 |
Conversion of preferred stock to common stock, shares | (1,516,000) | 0 |
Conversion of preferred stock to common stock, amount | $ (152) | $ 0 |
Ending balance, shares | 6,000,000 | 7,516,000 |
Ending balance, amount | $ 600 | $ 752 |
Series C Preferred Stock | ||
Beginning balance, shares | 0 | 0 |
Beginning balance, amount | $ 0 | $ 0 |
Conversion of preferred stock to common stock, shares | 0 | 0 |
Conversion of preferred stock to common stock, amount | $ 0 | $ 0 |
Ending balance, shares | 0 | 0 |
Ending balance, amount | $ 0 | $ 0 |
Series D Preferred Stock | ||
Beginning balance, shares | 18 | 18 |
Beginning balance, amount | $ 0 | $ 0 |
Conversion of preferred stock to common stock, shares | (18) | 0 |
Conversion of preferred stock to common stock, amount | $ 0 | $ 0 |
Ending balance, shares | 0 | 18 |
Ending balance, amount | $ 0 | $ 0 |
Series E Preferred Stock | ||
Beginning balance, shares | 10,000 | 10,000 |
Beginning balance, amount | $ 1 | $ 1 |
Conversion of preferred stock to common stock, shares | (10,000) | 0 |
Conversion of preferred stock to common stock, amount | $ (1) | $ 0 |
Ending balance, shares | 0 | 10,000 |
Ending balance, amount | $ 0 | $ 1 |
STOCKHOLDERS' EQUITY (DEFICIT_5
STOCKHOLDERS' EQUITY (DEFICIT) (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
(Deficit): | |||
Common stock, shares authorized | 650,000,000 | 650,000,000 | |
Common stock, par value per share | $ 0.0001 | $ 0.0001 | |
Unamortized or unvested stock-based compensation costs related to restricted share arrangements | |||
Stock-based compensation in connection with vested restricted common stock grants | $ 582,403 | $ 13,500 | |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 | |
Preferred stock, par value per share | $ 0.0001 | $ 0.0001 |
CONCENTRATION OF REVENUE AND _2
CONCENTRATION OF REVENUE AND SUPPLIERS (Details Narrative) | 3 Months Ended |
Mar. 31, 2020 | |
Net Sales | |
Concentration risk | 89.00% |
Customer 1 | Net Sales | |
Concentration risk | 51.00% |
Customer 2 | Net Sales | |
Concentration risk | 38.00% |
Vendor 1 | Accounts Payable | |
Concentration risk | 27.00% |