Ladies and gentlemen, thank you for standing-by and welcome to
Exactus Inc.’s Second Quarter 2019 Earnings Conference Call.
My name is ______ 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.
Yesterday, Exactus issued a news release announcing the
company’s financial results for the second quarter 2019 and
filed their Form 10-Q. If you have not reviewed this information,
both are available within the Investor Relations section of
Exactus’s website at www.exactusinc.com and the Form 10-Q 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.
Thank you, good afternoon and welcome to Exactus Inc.’s
second quarter 2019 results conference call. With us today are
Exactus’s President, Emiliano Aloi 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, 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.exactusinc.com.
Since this is our team’s first quarterly earnings call and
reflects the first full quarter under which we are transitioning to
being principally a hemp-derived CBD company, we are not going to
take questions at this juncture. On future calls we will be
happy to take your questions. If you have any questions, you may
review our SEC filings or refer them to me as the company’s
contact person at email@example.com.
It’s only been 8 months since the farm bill was signed into
law and we began to pursue the hemp-derived CBD business and within
these short months, we certainly have accomplished a lot.
This has been a transformational year for the company that started
with the signing of the material supply and development agreement
with Ceed2Med and capped with our own 200 acre farms expected to
yield significant returns to us in the fall.
Through our relationship with Ceed2Med, they have fulfilled a $1
million purchase order from their 2018 harvest and have begun
formulating at two contract manufacturers, one of which is Green
Goddess Extracts, which we acquired just 2 weeks ago.
We have also added to our board of directors who provide expertise
from a variety of industries and are thrilled to announce that not
only has Emiliano Aloi joined us as President, but a founder of
Ceed2Med Bobby Yampolsky has also joined the board.
With that, it's now my pleasure to introduce you to our President,
Thank you, Andrew. Good afternoon everyone and thank you for
joining our second quarter call. I’m honored to be presenting
Exactus on its first earnings call.
Over the past few months we have made significant progress on our
farms. We are in the homestretch for a very successful harvest this
year. The plants are rooted, healthy, the irrigation systems are
performing and I feel confident that we will meet all of your
The farms are the foundation. We have made important
investments to focus on multiple drying systems to ensure the
safety and quality of our crops after harvest. We will begin
our top flower cut in September and will continue to harvest
For those of you that are just getting to know us, we have
assembled 200 acres of prime land in Southwest Oregon’s
Illinois Valley, it's known for its prime climate conditions for
the cultivation of the Cannabis family. We are also building a
knowledge-base of critical data points necessary to successfully
scale an agro-industrial supply chain. The scale and scope of
our operations provide statistically important data for the current
and future management of the crops and their interaction with the
We just purchased state of the art infrastructure for flower
handling and processing to take advantage of the booming market in
pre rolls and premium hemp flower products. I expect to
achieve a top flower selection of over 20,000 pounds, which we are
planning to introduce to the market in multiple
In summary, we have made a great start but do not plan to stop
here. We are proud to support and partner with local farmers
and appreciate the support they have shown us in return. This is
part of our strength, we will aim to continue to grow our acreage,
reasonably and responsibly.
Turning to recent developments, we recently acquired and relaunched
at the CBD Expo in Miami 2 weeks ago an amazing line of existing
products sold under the Green Goddess label. This was the
first of many brands and products in the production pipeline,
including Paradise CBD, an outdoor lifestyle brand, Phenologie, a
high-end cosmetics line, and other future developments to
Over the past few months we launched our commercial division and
are increasing our internal selling efforts. We hired an
experienced sales manager who is building out a dynamic sales force
that has already started to show results and is expected to drive
sales growth starting in the third
With all of this progress, we don’t want to lose sight of why
we are doing what we are doing. We are serious about our
approach where we start with a premier all-natural genetic source
and focus on full traceability throughout the supply chain.
We employ third party testing labs to ensure quality and efficacy
testing at several steps as we produce and manufacture at fully
compliant facilities. I would like to take a moment to explain why
we believe these factors differentiate us from the hundreds of CBD
companies who have not taken the time or spent the resources to
reach the quality and safety standards we have achieved
today. Anyone can work with a great graphic artist and start
a brand. Our expertise starts with the seed, the ground in which it
grows, drying methods that safeguard the harvest, safety and
quality standards that protect our investment, the right extraction
and production methods, all the way to the creation of a finished
product that we are proud to call Exactus.
We have recently added to our Company an experienced Chief
Financial Officer with many years of public company and product and
Finally, with that I would like to hand the call off to Ken Puzder
to give you an update on the company’s financial
Thank you, Emi.
I am extremely pleased to join Exactus at this pivotal
Before we run through our financial results, it is important to
keep in mind that we started off the year transitioning into the
CBD Business and have reported increasing total net revenues in the
first and second quarters. We anticipate a continuation of that
trend in the third quarter of this year and for our revenues to
really start picking up in the fourth quarter.
Now let’s discuss our financial results for the second
quarter of 2019.
For the three months ended June 30, 2019, Exactus reported total
net sales of $139,683, which represents a substantial
increase as compared to net sales of $15,980 for the quarter
ended March 31, 2019.
As revenue and available financial resources continue to grow, the
Company plans to continue it’s focus on market penetration
through new product lines, new sales channels and acquisition
Our operating expenses for the quarter were down by $ 1.5 million
to $ 1.1 million as compared to the first quarter of 2019 of $ 2.6
million. This decrease is attributable to a reduction in our
general and administrative costs, farm payments, and a decrease in
professional and consulting costs which is the result of decreased
warrant costs associated with such contracts.
Net loss available to common shareholders in the second quarter is
down by $1.3 million to $1.0 million as compared to the first
quarter of 2019 of $2.3 million. Included within net loss
available to common shareholders are non-cash charges. Primarily,
these charges include derivative warrant and stock option expenses.
Derivative warrant and stock option expenses are non-cash expenses
that were incurred in the first and second quarters of 2019 as we
built out our management team. Derivative warrant and stock
option expense was $2 million in the first quarter of 2019 and $78
thousand in the second quarter of 2019 or a decrease in Derivative
warrant and stock option, non-cash, expenses of $1.9
Since we are in an aggressive growth stage, margins and ebidta
while important are not yet metrics that we are reporting but may
do so in the future.
Shareholder equity increased
$1,589,394 to $4,201,605 from
$2,612,211 in the first quarter and we ended the second quarter
with $664,645 in cash and cash equivalents.
As reported in our recently filed 10Q we currently have 34,934,563
shares of common stock outstanding and recently improved our
capital structure with the cancellation of all the issued and
outstanding shares of Series C Preferred Stock that were issued in
2018 for services that we never utilized, and we have substantially
reduced our outstanding debt.
We want to thank everyone for dialing in this afternoon and look
forward to keeping you updated on our progress.