UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from          to

Commission File Number: 333-183360

EXACTUS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada	27-1085858
(State or Other Jurisdiction of Incorporation)	(I.R.S. Employer Identification Number)
80 NE 4th Avenue, Suite 28
Delray Beach, FL 33483	33483
(Address of Principal Executive Offices)	(Zip Code)

(804) 205-5036

(Registrant’s Telephone Number, Including Area Code)

 Securities registered pursuant to Section 12(b) of the Act:  

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   ☑    No   ☐

Indicate by checkmark whether the Registrant has submitted electronically any Interactive Data File required to be submitted pursuant to Rule 405 of regulation S-T (Section 232.405) of this chapter during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes  ☑  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  ☑

The registrant had 40,648,558 shares of Common Stock, par value $0.0001 per share, outstanding as of November 13, 2019.

Index

		PAGE
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Changes in the Stockholders’ Deficit	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	39
SIGNATURES		40

-i-

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 and none shares issued and outstanding, respectively	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.

-1-

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.

 

-2-

Exactus, Inc. and Subsidiaries

Condensed Consolidated Statements of Equity (Deficit)

For the Nine Months Ended September 30, 2019 and 2018

(Unaudited)

	Preferred Stock- Series A		Preferred Stock- Series B-1		Preferred Stock- Series B-2		Preferred Stock- Series C		Preferred Stock- Series D		Preferred Stock- Series E		Common Stock		Common Stock - Unissued		Additional Paid in	Accumulated	Non-controlling
	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Capital	Deficit	Interest	Total
Balance, December 31, 2018	-	$-	2,800,000	$280	8,684,000	$868	1,733,334	$173	45	$1	-	$-	6,233,524	$623	-	$-	$7,111,445	$(10,537,892)	$-	$(3,424,502)
Preferred stock issued upon convesion of
convertible debt	849,360	84	-	-	-	-	-	-	-	-	-	-	-	-	-	-	849,276	-	-	849,360
Preferred stock issued for private placement	55,090	6	-	-	-	-	-	-	-	-	-	-	-	-	-	-	55,084	-	-	55,090
Common stock issued for private placement	-	-	-	-	-	-	-	-	-	-	-	-	15,382,090	1,538	-	-	3,308,115	-	-	3,309,653
Common Stock issued for Master Supply	-	-	-	-	-	-	-	-	-	-	-	-	8,385,691	839	-	-	(839)	-	-	-
Common stock issued for debt settlement	-	-	-	-	-	-	-	-	-	-	-	-	203,080	20	-	-	40,596	-	-	40,616
Common stock issued for purchase of membership interest in subsidiary	-	-	-	-	-	-	-	-	-	-	-	-	937,500	94	-	-	989,906	-	-	990,000
Conversion of Series A Preferred Stock to Common Stock	(296,441)	(30)	-	-	-	-	-	-	-	-	-	-	1,482,205	148	-	-	(118)	-	-	-
Conversion of Series B-1 Preferred Stock to Common Stock	-	-	(400,000)	(40)	-	-	-	-	-	-	-	-	50,000	5	-	-	35	-	-	-
Conversion of Series B-2 Preferred Stock to Common Stock	-	-	-	-	(1,000,000)	(100)	-	-	-	-	-	-	125,000	13	-	-	87	-	-	-
Conversion of Series D Prefered Stock to Common Stock	-	-	-	-	-	-	-	-	(4)	(1)	-	-	100,000	10	-	-	(9)	-	-	-
Common stock issued upon convesion of
convertible debt	-	-	-	-	-	-	-	-	-	-	-	-	250,000	25	-	-	195,975	-	-	196,000
Stock warrants granted for services	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	1,114,062	-	-	1,114,062
Stock options granted for services	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	891,799	-	-	891,799
Deemed dividend on Preferred Stock	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	904,450	(904,450)	-	-
Net Loss for the period	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-		(1,374,263)	(35,604)	(1,409,867)
Balance, March 31, 2019	608,009	60	2,400,000	240	7,684,000	768	1,733,334	173	41	-	-	-	33,149,090	3,315	-	-	15,459,864 #	(12,816,605)	(35,604)	2,612,211
Common stock issued and unissued for private placement	-	-	-	-	-	-	-	-	-	-	-	-	1,282,175	128	2,606,958	261	2,168,796	-	-	2,169,185
Common stock unissued for services	-	-	-	-	-	-	-	-	-	-	-	-	-	-	20,000	2	19,498	-	-	19,500
Common stock unissued for purchase of membership interest in subsidiary	-	-	-	-	-	-	-	-	-	-	-	-	-	-	503,298	50	449,950	-	-	450,000
Stock options granted for services	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	58,279	-	-	58,279
Net Loss for the period	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-		(955,226)	(152,344)	(1,107,570)
Balance, June 30, 2019	608,009	60	2,400,000	240	7,684,000	768	1,733,334	173	41	-	-	-	34,431,265	3,443	3,130,256	313	18,156,387	(13,771,831)	(187,948)	4,201,605
Common stock and preferred stock cancelled per Surrender and Release Agreement				-	-	-	(1,733,334)	(173)	-	-	-	-	(180,000)	(18)	-	-	191	-	-	-
Preferred stock issued pursuant to Management and Services Agreement	-	-	-	-	-	-	-	-	-	-	10,000	1	-	-	-	-	3,374,999	-	-	3,375,000
Conversion of Series A Prefered Stock to Common Stock	(25,000)	(2)	-	-	-	-	-	-	-	-	-	-	-	-	125,000	13	(11)	-	-	-
Conversion of Series B-1 Prefered Stock to Common Stock	-	-	(600,000)	(60)	-	-	-	-	-	-	-	-	75,000	7	-	-	53	-	-	-
Conversion of Series D Prefered Stock to Common Stock	-	-	-	-	-	-	-	-	(12)	-	-	-	300,000	30	-	-	(30)	-	-	-
Common stock issued and unissued for private placement	-	-	-	-	-	-	-	-	-	-	-	-	2,237,868	224	271,249	27	1,532,957	-	-	1,533,208
Common stock issued for prepaid services	-	-	-	-	-	-	-	-	-	-	-	-	50,000	5	-	-	30,495	-	-	30,500
Common stock unissued for services	-	-	-	-	-	-	-	-	-	-	-	-	-	-	80,000	8	57,248	-	-	57,256
Common stock unissued for pursuant to Asset Purchase Agreement	-	-	-	-	-	-	-	-	-	-	-	-	-	-	100,000	10	86,865	-	-	86,875
Stock options granted for services	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	218,279	-	-	218,279
Common stock issued for unissued common stock	-	-	-	-	-	-	-	-	-	-	-	-	3,110,256	311	(3,110,256)	(311)	-	-	-	-
Net Loss for the period	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-		(1,934,367)	(173,680)	(2,108,047)
Balance, September 30, 2019	583,009	$58	1,800,000	$180	7,684,000	$768	-	$-	29	$-	10,000	$1	40,024,389	$4,002	596,249	$60	$23,457,433	$(15,706,198)	$(361,628)	$7,394,676

-3-

	Preferred Stock- Series A		Preferred Stock- Series B-1		Preferred Stock- Series B-2		Preferred Stock- Series C		Preferred Stock- Series D		Preferred Stock- Series E		Common Stock		Paid in	Accumulated	Non-controlling
	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Capital	Deficit	Interest	Total
Balance, December 31, 2017	-	$-	2,800,000	$280	8,684,000	$868	1,733,334	$173	-	$-	-	$-	4,383,983	$439	$3,983,171	$(6,200,573)	$-	$(2,215,642)
Common stock issued for debt settlement	-	-	-	-	-	-	-	-	-	-	-	-	214,834	21	343,714	-	-	343,735
Series D preferred stock issued for cash	-	-	-	-	-	-	-	-	5	-	-	-	-	-	50,000	-	-	50,000
Series D preferred stock issued for debt	-	-	-	-	-	-	-	-	40	1	-	-	-	-	499,999	-	-	500,000
Net Loss for the period	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	(1,073,846)	-	(1,073,846)
Balance, March 31, 2018	-	-	2,800,000	280	8,684,000	868	1,733,334	173	45	1	-	-	4,598,817	460	4,876,884	(7,274,419)	-	(2,395,753)
Common stock issued upon convesion of
convertible debt	-	-	-	-	-	-	-	-	-	-	-	-	22,727	2	19,998	-	-	20,000
Series D preferred stock issued for debt	-	-	-	-	-	-	-