Attached files
| file | filename |
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| EX-99.1 - PRESS RELEASE - Exactus, Inc. | ex99-1.htm |
| 8-K - CURRENT REPORT - Exactus, Inc. | exdi8k_may262020.htm |
Exhibit 99.2
Operator:
Ladies and gentlemen, thank you for standing-by and welcome to
Exactus Inc.’s Year End 2019 Earnings Conference Call. My
name is Dean and I will be the conference operator today. At this
time, all participants are in a listen-only mode and as a reminder
this conference call is being recorded.
On May 22nd, Exactus issued a
news release announcing the company’s financial results for
the year end 2019 and filed their Form 10-K. If you have not
reviewed this information, both are available within the Investor
Relations section of Exactus’s website at www.exactushemp.com
and the Form 10-K is also available on the SEC’s
website.
I would now like to turn the conference call over to Andrew
Johnson, Chief Strategy Officer. Please go ahead sir.
Andrew Johnson - Intro and Legalities
Thank you, good afternoon and welcome to Exactus Inc.’s year
end 2019 results conference call. With us today are Exactus’s
Interim Chief Executive Officer, Emiliano Aloi, President, Derek Du
Chesne, and Chief Financial Officer, Kenneth Puzder.
Today's conference call may include forward-looking statements,
including statements related to Exactus’s farming operations,
the timing of future harvests, the number of Exactus brands that
the company will supply in the future, the expansion of the sale of
Exactus products in new markets, plans to add to the management
team, future financial results, business development opportunities,
future cash needs, Exactus’s operating performance in the
future, future investor interest and analyst coverage of Exactus,
the timing and certainty of the closing of a private placement
financing, and whether potential proceeds from the financing will
drive farming and distribution expansion, that are subject to risks
and uncertainties relating to Exactus’s future business
prospects and opportunities as well as anticipated results of
operations. Forward-looking statements represent only the
Company’s estimates on the date of this conference call and
are not intended to give any assurance as to actual future
results.
Because forward-looking statements relate to matters that have not
yet occurred, these statements are inherently subject to risks and
uncertainties. Many factors could cause Exactus’s actual
activities or results to differ materially from the activities and
results anticipated in forward-looking statements. These risk
factors include those contained in Exactus’s Annual Report on
Form 10-K and Form 10-Q most recently filed with the SEC. Please
note that the Company assumes no obligation to update any
forward-looking statements after the date of this conference call
to conform with the forward-looking statements actual results or to
changes in its expectations.
Finally, this conference call is being recorded via webcast. The
webcast will be available at the Investor Relations section of our
website at www.exactushemp.com.
With that, it's now my pleasure to introduce our Interim CEO,
Emiliano Aloi.
-1-
Emi—Introduction and Roadmap Update
Thank you, Andrew. Good afternoon everyone and thank you for
joining our year end 2019 conference call.
I will provide some highlights of our 2019 as well as a general
outlook on our future.
2019 was a transformational year for Exactus as we entered into the
Hemp market in January. With your support, we have completed our
first harvest and have begun moving our biomass into extraction.
The harvest resulted in approximately 30,000 pounds of biomass
eligible to be finished into flower products and 150,000 pounds of
extractable biomass.
2019 also has been deeply transformational for the hemp industry as
a whole. A massive disaggregated infrastructure of the different
steps of the hemp value chain were built around the world, in many
cases very able to deliver high quality crops, ingredients,
formulations, and finished products. As these operating units
specialize in their core competencies, higher efficiencies can be
achieved through specialized third-party processors than through
vertical integration of our company. The supply of the crop itself
has scaled to minor commodity levels worldwide. In an industry
where there was nothing built and everything had to be made from
scratch, today it is the goal of a successful company to shift its
direction from being a builder to becoming an integrator of
existing pieces. As we saw the market evolve and transition into
big food and big pharma compliance and scalability, it became clear
to us that we had to shift with it. Starting in Q4 2019, we began
that transformation. With our deep knowledge of the industry and
direct access to the leading suppliers at each step of the value
chain, we are building a highly scalable network of productivity
beyond the reach that our direct investment could achieve, while
still in full control of quality and traceability. Most
importantly, without the operational and financial burden of the
heavy pieces of the supply chain, we can now direct our efforts to
final products, and the buildout of our customer base and
relationships to drive more profitable and scalable
revenue.
As an ongoing strategy, we have chosen not to pursue the
development of Levor Collection and Green Goddess Extracts further,
but rather focus on generating rapid revenue in our ingredient
sales and establishment of our genetics and white label divisions.
The expectation is to strengthen our foundation to acquire more
established consumer brands in the future, thus avoiding the high
expense and slow development of launching and promoting in house
brands from the start.
For the upcoming 2020 grow season, the company has made the
decision to focus on the customer end by building out our sales and
marketing division to sell our 2019 crop, recouping our 2019
investment and driving the company to cash flow breakeven. We will
be relying on our farming partners and deep industry relationships
to supply us with additional raw materials and finished ingredients
once we sell out of our own inventory.
The company has entered and will continue to enter into additional
supply and service agreements with industry leaders to provide us
with everything from genetics, farming, extraction, raw
ingredients, formulations and finished products as we continue to
scale our sales to monetize our inventory from the 2019
harvest.
-2-
Finally and most importantly, we are undergoing a great
transformation at our core. We are completely reimagining our board
of directors and attracting new key people with experience and
connectivity to the industries of the world with which hemp is now
going to interact more and more. At the management level, we are
very proud to have onboarded Derek Du Chesne to our team. Though we
are up quarter over quarter we have gone through a couple of sales
teams and are pleased that Derek joined us to build out our sales
and marketing division. The progress made has been substantial, and
we have promoted him to President so that he can grow into
overseeing business operations to grow and streamline our supply
chain as well. His work completing the buildout of our digital
marketing and sales infrastructure will be a key factor in
connecting our supply sources and assets with finished products and
ultimately the mainstream distribution channels and the
consumer.
Year end revenues of $345,680 were generated mainly from our flower
sales. Now that our biomass is currently being processed into
finished ingredients, our margins will increase substantially from
the previous bulk sales we have been executing, as will the
scalability of our white label division. This division will not
only deliver high profitability and scalability with a very light
financial load, but will also serve as a launchpad to our upcoming
branded products derived from internal development as well as
acquisitions of established brands.
We now have the team in place to execute our long-term strategy and
are looking forward to growing off of the foundation that we have
built.
It is now with great pleasure that I would like to introduce you to
Derek, who is the newest addition to our executive management team,
and will walk you through some of the key factors of our
transformation and overall growth strategy as a team and as a
business.
Derek - Restructuring and growth strategy
Thank you, Emi, it is a pleasure to introduce myself to everyone on
the call today. I’m extremely pleased to have joined Exactus
at this pivotal time. There has been a tremendous amount of change
since I have joined the team as we have implemented a full
restructuring process.
This process has included a full redesign of our website
www.exactushemp.com,
significantly decreasing our monthly burn, launching our genetics
division, and shifting our focus from a retail strategy including
direct to consumer to bulk raw ingredient sales to rapidly generate
revenue as we look to achieve cash flow break even.
The company is extremely pleased to have brought on experts in
multiple industries to our Board of Directors and Advisory
Board.
These additions include Larry Wert, Justin Viles, Mark Alouf, and
myself.
Moving forward we will be launching a white label platform. This
platform will not only drive revenue, but give us the opportunity
to develop a network of acquisition targets.
-3-
Our acquisition strategy will be based on identifying emerging
growth consumer brands that have an existing distribution channel
that the company will be able to leverage our supply chain
expertise.
We will continue to look into new products and research allowing us
to expand into a wider variety of products and consumer segments,
while our supply and compliance empower these brands to service
bigger and better distribution channels.
I would now like to turn the call over to Ken, who will review our
financials.
Ken - Financial Results
Thank you, Derek and good afternoon everyone.
As mentioned in our last call, we expect to see revenues picking up
substantially in calendar year 2020.
For the twelve months ended December 31, 2019 Exactus reported net
sales of $345,680 versus no comparable sales in the previous year.
So far, in Q1 of 2020, we have already received orders exceeding
our expectations.
For the twelve months ended December 31, 2019, Exactus reported
cost of sales of $2 million. We did not have comparable cost of
sales during the year ended December 31, 2018.
For the twelve months ended December 31, 2019 operating expenses
increased by $6.7 million to $9.2 million as compared to calendar
2018 of $2.4 million. This increase is primarily attributable to
increased costs associated with our farming operations and sales
and marketing initiatives, increased compensation, increased lease
expense as well as increased non-cash charges for stock-based
compensation. We have significantly decreased compensation costs
thus far in calendar year 2020 and we continue to build on sales
infrastructure and position ourselves for revenue
growth.
Other income, net of other expense, increased for the twelve months
ended December 31, 2019 by $2.6 million to $.7 million as compared
to a net expense of $1.9 million for calendar 2018. This net
increase to other income is due primarily to an increase in net
gain on stock settlement of debt in 2019 of $3.6 million, offset by
an increase in derivative loss of $1.0 million.
For the twelve months ended December 31, 2019, net loss available
to common shareholders increased by $6.3 million to $10.6 million
as compared to calendar 2018 of $4.3 million.
Since we are in an aggressive growth stage, margins and EBITDA are
not yet metrics that we are reporting but may do so in the
future.
For the calendar year ended December 31, 2019 shareholders’
equity increased by $7.1 million to $3.7 million in calendar 2019
from a shareholder deficit of $3.4 million in calendar 2018. We
ended calendar year 2019 with $18,405 in cash and cash
equivalents.
As reported in our recently filed 10-K, we currently have
43,819,325 shares of common stock issued and
outstanding.
We want to thank everyone for dialing in this afternoon and look
forward to keeping you updated on our progress.
With that I would like to pass the call off to the operator for
questions.
-4-