exdi-8ka
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of
Report (Date of earliest event reported): March 10,
2020
EXACTUS, INC.
(Exact
name of the registrant as specified in its charter)
Nevada
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000-55828
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27-1085858
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(State or other
jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS Employer
Identification
No.)
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80 NE 4th Avenue, Suite 28, Delray Beach, FL 33483
(Address
of principle executive offices) (Zip code)
Registrant’s
telephone number, including area code: (561) 455-4822
__________________________________________
(Former
name or address if changed since last report)
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the Registrant
under any of the following provisions (see General Instruction A.2
below):
[ ]
Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425).
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12).
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b)).
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c)).
Indicate
by check mark whether the registrant is an emerging growth company
as defined in as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this
chapter).
[ ]
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.
[
]
Explanatory Note
– The original version of this Current Report, filed on March
16, 2020 (the “Original Report”), incorrectly
identified the Date of Report as February 4, 2020. As disclosed in
Item 1.01 and 5.02, below, the date of the earliest event reported
in the Original Report is March 10, 2020, being the date of
resignation of the person serving as President of the Company,
after which the position of President became vacant. This Amendment
No. 1 to the Original Report is filed to correct the Date of Report
on the cover page. No other changes have been made to the Original
Report.
SECTION 1- Registrant’s Business and Operations
Item 1.01
Entry into a Material Definitive Agreement.
On
February 4, 2020, Exactus, Inc. (the “Company”)
announced it had entered into a Supply and Distribution Agreement
with Hemptown, USA, enabling the Company to purchase and sell
Hemptown’s Cannabigerol (CBG) and Cannabidiol (CBD) products,
including top flower, biomass and extracts (crude, isolates,
distillates, and water soluble). Ceed2Med, LLC, the Company’s
largest shareholder, is also a significant investor in Hemptown USA
and is party to a distribution agreement with the Company. The
Chief Executive Officer and Ceed2Med, LLC will cooperate in
developing plans to coordinate the Company’s efforts to
introduce CBG and expand its efforts to sell CBD products. During
Q1 2020, purchase orders for approximately $950,000 of CBD and CBG
products have been received.
On
November 27, 2019 the Company entered into a series of agreements
(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, which is
the only borrowing the Company has made under the Notes, as more
fully described in the Company’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on December 4,
2019. During March 2020, the Company obtained waivers of certain
provisions of the Purchase Agreements in order to defer required
registration of Common Stock of the Company and extend payment of
amounts of installments of principal and interest, among other
things.
SECTION 5 – CORPORATE GOVERNANCE AND MANAGEMENT
Item 5.02
Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers
On
March 5, 2020 the board of directors unanimously approved the
appointment of Derek Du Chesne to the additional position of
President of the Company. Prior to this appointment, Mr. Du Chesne
served as Chief Growth Officer since February 2020, a newly-created
position. Emiliano Aloi, who previously served as President and
Interim Chief Executive Officer, will continue to serve as Interim
Chief Executive Officer of the Company.
Derek
Du Chesne, age 32, was the Chief Growth Officer for
EcoGen Laboratories, the largest vertically-integrated manufacturer
and supplier of hemp-derived specialty ingredients in the U.S.A,
since January of 2019. He was a consultant for EcoGen
prior to becoming a partner at the company. Mr. Du Chesne is
a brand management professional who has a proven track record
of success through concept, development, and launch, building
iconic brands by orchestrating successful campaign deployment on
both a global and regional scale. He is a strategic leader
who has repeatedly led teams to maximize performance in order to
achieve stakeholders’ goals on time and in full. From
July of 2016 until February of 2019, Mr. Du Chesne co-founded and
launched Healing Ventures, a full-service agency and
digital marketplace dedicated to servicing the hemp
industry. From September of 2014 until July of 2016, he served
as Chief Marketing Officer of Klique, Inc., a group dating platform
created to help curb sexual assaults on campuses. Prior to
that Derek was a film and television producer and actor, who has
worked with Bruce Willis, Robert DeNiro, and other
actors.
Mr. Du
Chesne was retained under the terms of an Employment Agreement
dated February 18, 2020 (the “Agreement”) as previously
disclosed in our Current Report on Form 8-K filed with the
Securities and Exchange Commission on February 20, 2020. In
connection with acceptance of his appointment to the position of
President, Mr. Du Chesne will receive 1 million shares of
restricted common stock, and the exercise price of 1 million
previously awarded options will be reduced to 90% of the market
price of such shares on the date of issuance. Mr. Du Chesne is
expected to assume the position of President following completion
of an ongoing restructuring of the Company, as more fully described
in Item 8.01 below.
Section 8.- OTHER EVENTS
Item 8.01 Other Events.
COVID-19 -
The
Company is providing the following update on its business
operations. As result of the global outbreak of the COVID-19 virus,
on March 13, 2020 the Company evaluated its ongoing effort to
prepare and file its annual report on Form 10-K for the fiscal year
ended December 31, 2019.
Certain
Company officers and management as well as professional staff and
consultants are unable to conduct work required to prepare our
financial report for the year ended December 31, 2019. In addition,
we are concerned with issues raised concerning our inventory
located in Oregon, Florida and Nevada, where COVID-19 infections
have been identified. Each of these states has declared a state of
emergency and travel safety and concerns are
paramount.
As a
result, the Company expects to be unable to compile and review
certain information required in order to permit the Company to file
a timely and accurate annual report on Form 10-K for its year ended
December 31, 2019 by the prescribed date without unreasonable
effort or expense due to circumstances related to
COVID-19.
On
March 4, 2020 the Securities and Exchange Commission (the "SEC")
issued an Order under Section 36 (Release No. 34-88318) of the
Securities Exchange Act of 1934 ("Exchange Act") granting
exemptions from specified provisions of the Exchange Act and
certain rules thereunder (the "Order"). The Orderprovides that a
registrant (as defined in Exchange Act Rule 12b-2) subject to the
reporting requirements of Exchange Act Section 13(a) or 15(d), and
any person required to make any flings with respect to such a
registrant, is exempt from any requirement to file or furnish
materials with the Commission under Exchange Act Sections 13(a),
13(f), 13(g), 14(a), 14(c), 14(f), 15(d) and Regulations 13A,
Regulation 13D-G (except for those provisions mandating the fling
of Schedule 13D or amendments to Schedule 13D), 14A, 14C and 15D,
and Exchange Act Rules 13f-1, and 14f-1, as applicable, where
certain conditions are satisfied.
The
Company is relying on this Order for filing of its Form 8-K the
later of March 31, 2020 or original filing deadline of the report
and expects to file its annual report on Form 10-K approximately 45
days after March 31, 2020.
The
Company is supplementing the risk factors previously disclosed in
the Company's Annual Report on Form 10-K for the year ended
December 31, 2018 and its subsequent Quarterly Reports on Form 10-Q
and Current Reports on From 8-K, with the following risk
factor:
War, terrorism, other acts of violence or natural or manmade
disasters such as a global pandemic may affect the markets in which
the Company operates, the Company's customers, the Company's
delivery of products and customer service, and could have a
material adverse impact on our business, results of operations, or
financial condition.
The
Company's business may be adversely affected by instability,
disruption or destruction in a geographic region in which it
operates, regardless of cause, including war, terrorism, riot,
civil insurrection or social unrest, and natural or manmade
disasters, including famine, food, fire, earthquake, storm or
pandemic events and spread of disease (including the recent
outbreak of the coronavirus commonly referred to as "COVID- 19").
Such events may cause customers to suspend their decisions on using
the Company's products and services, make it impossible to attend
or sponsor trade shows or other conferences in which our products
and services are presented to distributors, customers and potential
customers, for our customers to visit our farms, extraction
facilities, manufacturing locations or other physical locations,
cause restrictions, postponements and cancellations of events that
attract large crowds and public gatherings such as trade shows at
which we have historically presented our products, and give rise to
sudden significant changes in regional and global economic
conditions and cycles that could interfere with purchases of goods
or services, commitments to develop new brands and white label
products, or agriculture and farming. Furthermore, our agriculture
and farming depends on the availability of labor which in turn
isdependent upon the ability of agricultural/farm workers to
travel, sometimes from foreign countries, and the ability of third
parties to contract with us for services on which we depend. The
inability or delays in preparing farms for future crops startingin
2020, and planting, harvesting, drying, trimming, warehousing and
transportation disruptions in 2020 and later could result from
events such as COVID-19. These events also pose significant risks
to the Company's personnel and to physical facilities,
transportation and operations, which could materially adversely
affect the Company's financial results.
Any
significant disruption to communications and travel, including
travel restrictions and other potential protective quarantine
measures against COVID-19 by governmental agencies, may increase
the difficulty and could make it impossible for the Company to
deliver goods services to its customers. Travel restrictions and
protective measures against COVID-19 could cause the Company to
incur additional unexpected labor costs and expenses or could
restrain the Company's ability to retain the highly skilled
personnel the Company needs for its operations. The extent to which
COVID-19 impacts the Company's business, sales and results of
operations will depend on future developments, which are highly
uncertain and cannot be predicted.
We
believe the novel coronavirus (COVID-19) has negatively affected
our corporate operations necessary to prepare and maintain accurate
accounting and reporting, and could continue to do so in the
foreseeable future. The coronavirus has resulted in restrictions,
postponements and cancelations and the impact, extent and duration
of the government imposed restrictions on travel and public
gatherings as well as the overall effect of the COVID-19 virus is
currently unknown.
The
ongoing circumstances resulting from the COVID-19 virus outbreak
magnify the challenges faced from our continuing efforts to
introduce and sell our products in a challenging environment and
could have an impact on our business and financial
results.
Company Restructuring Efforts -
Since
January 2020, the Company has been re-evaluating its activities
during a difficult market in which prices of flower, biomass,
isolate and distillate, the Company’s principal products
offered for sale, have fallen dramatically in the face of
oversupply, diminishing demand and regulatory uncertainty.
Considering these market changes, the Company has endeavored to
focus on bulk raw ingredient sales as well as a rebrand and
redesign of its consumer products for launch. As a result, the
Company has accepted the resignations and terminated 9 employees
and independent contractors responsible for marketing and sales,
including the recently retained Vice President of Sales and
Marketing and Chief Information Officer. During this period, the
Company also faced challenges that required seeking extension of
certain payments to vendors and others, and received waivers and
amendments to certain financing agreements, as more fully described
in Item 1.01, above. During March 2020, the Company extended offers
to each of its terminated employees and independent contractors to
pay separation payments that would provide them with full payment
of all amounts due and owing. Certain amounts claimed to be due,
the compensation rate of certain persons, and terms of employment
have been disputed by the Company. The total amounts claimed to be
due, whether or not disputed, represent approximately $153,000. On
March 3, 2020, the Company received notice of a lawsuit filed by
two of its terminated employees entitled Ryan Borcherds and Miriam Martinez v.
Exactus, Inc., pending in the circuit court, Palm Beach
County, Case No. 890 (February 26, 2020). Mr. Borcherds and Ms.
Martinez each seek approximately $10,000 in unpaid wages and have
asserted claims including breach of contract and violation of the
Fair Labor Standards Act (“FSLA”). One of the named
plaintiffs was terminated “for cause” for alleged
violations of Company policies and procedures. The Company disputes
allegations of existence of any employment agreement and disputes
claims under the FLSA, since as a small business ,the Company is
not subject to the FLSA.
Cautionary Note Regarding Forward-Looking Statements
This
Current Report on Form 8-K contains statements as to the Company's
beliefs and expectations of the outcome of future events that are
forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. You can identify thesestatements by
the fact that they do not relate strictly to historical or current
facts. Examples of these statements include, but are not limited
to, statements regarding the anticipated impact of the COVID-19
outbreak on travel and physical locations, the anticipated impact
of such outbreak on our results of operations, and possible effect
of the postponement and cancellation of trade shows and events on
our overall revenues. These forward- looking statements are subject
to risks and uncertainties that could cause actual results to
differ materially from the statements made. These risks and
uncertainties include, but are not limited to, the effects of the
COVID- 19 outbreak, including on our agricultural activities
(including our hemp farms located in Oregon and other sources of
CBD and CBG biomass for the 2020 grow season) and levels of
consumer, business and economic confidence generally. The duration
of the COVID-19 outbreak and severity of such outbreak, the pace of
recovery following the COVID-19 outbreak, the effect on our supply
chain, our ability to implement cost containment and business
recovery strategies; and the adverse effects of the COVID-19
outbreak on our business or the market price of our common stock
and the risk factors described in our Annual Report on Form 10-K
for the year ended December□31, 2018 and our subsequent
filings with the U.S. Securities and Exchange Commission, including
subsequent quarterly reports on Forms 10-Q and current reports on
Form 8-K are uncertain. Except as required by law, the Company does
not undertake any obligation to release publicly any revisions to
forward-looking statements made by it to reflect events or
circumstances occurring after the date hereof or the occurrence of
unanticipated events.
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this amended report to be signed on behalf of the
undersigned hereunto duly authorized.
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EXACTUS,
INC.
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Date: March 17,
2020
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By: /s/ Kenneth
Puzder
Kenneth Puzder
Chief Financial Officer
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