Quarterly report pursuant to Section 13 or 15(d)

RESTATEMENT OF PRIOR FINANCIAL INFORMATION

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RESTATEMENT OF PRIOR FINANCIAL INFORMATION
6 Months Ended
Jun. 30, 2020
Accounting Changes and Error Corrections [Abstract]  
RESTATEMENT OF PRIOR FINANCIAL INFORMATION

Subsequent to the Company’s external auditor’s periodic review of the Form 10-Q for the Periods Ended September 30, 2019 and March 31, 2020, annual audit for the year ended December 31, 2019 and, in the process of review, the current Form 10-Q for the Period Ended June 30, 2020, the Company conducted further reviews of the consolidated financial statements. Based on such reviews, the following determinations were made:

 

Error in Accounting for Operating Lease Right-of-Use Asset and Operating Lease Liabilities

 

During the second quarter of fiscal 2020, the Company has determined that the commercial lease with Skybar Holding, LLC is not in compliance with current laws or regulations in the City of Delray Beach and does not represent an enforceable contract and was void from the moment of execution. Therefore, the accounting treatment for the recognition of the operating lease right-of -use asset and operating lease liabilities upon adoption of ASC 842 related to this commercial lease was incorrect. As a result of a detailed review of this commercial lease, the Company has made an assessment in the second quarter of fiscal 2020 that the lease is unenforceable and should not have been accounted for under ASC 842. Additionally, the Company reversed previously recorded accrued expenses related to this commercial lease agreement.

In accordance with the guidance provided by the Accounting Standards Codification (“ASC”) 250 – “Accounting Changes and Error Corrections” (“ASC 250”), SEC’s Staff Accounting Bulletin 99, Materiality (“SAB 99”) and Staff Accounting Bulletin 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), the Company has determined that the impact of adjustments relating to the corrections of this accounting error are not material to previously issued annual audited and unaudited financial statements and as such no restatement was necessary. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. Such correction may be made the next time the registrant files the prior year financial statements. Accordingly, these misstatements were corrected during the period ended June 30, 2020 and will be disclosed prospectively.

 

The effect on these revisions on the Company’s consolidated balance sheets is as follows:

 

    As of March 31, 2020    
    Previously   Adjustments   As Corrected  
Reported
Consolidated Balance Sheet              
Current assets   $ 1,661,211   $                 -      $ 1,661,211  
Current liabilities   $ 5,338,486   $     (564,628)   $ 4,773,858  
Working capital (deficit)   $       (3,677,275)   $       564,628   $  (3,112,647)  
Total assets   $ 8,458,826   $  (1,705,115)   $ 6,753,711  
Total liabilities   $ 6,985,191   $  (2,034,232)   $ 4,950,959  
Total stockholders' equity   $ 1,473,635   $       329,117   $ 1,802,752  
                     
    As of December 31, 2019    
    Previously   Adjustments   As Corrected  
Reported
Consolidated Balance Sheet              
Current assets   $ 2,429,235   $                 -      $ 2,429,235  
Current liabilities   $ 4,190,544   $     (382,196)   $ 3,808,348  
Working capital (deficit)   $       (1,761,309)   $       382,196   $  (1,379,113)  
Total assets   $ 9,799,277   $  (1,782,443)   $ 8,016,834  
Total liabilities   $ 6,117,431   $  (1,988,141)   $ 4,129,290  
Total stockholders' equity   $ 3,681,846   $       205,698   $ 3,887,544  
                     
    As of September 30, 2019    
    Previously   Adjustments   As Corrected  
Reported
Consolidated Balance Sheet              
Current assets   $ 3,255,169   $                 -      $ 3,255,169  
Current liabilities   $ 2,052,454   $     (302,196)   $ 1,750,258  
Working capital (deficit)   $         1,202,715   $       302,196   $    1,504,911  
Total assets   $ 11,449,203   $  (1,858,284)   $ 9,590,919  
Total liabilities   $ 4,054,527   $  (1,940,563)   $ 2,113,964  
Total stockholders' equity   $ 7,394,676   $         82,279   $ 7,476,955  
                         

 

 

 

The effect on these revisions on the Company’s consolidated statements of operations is as follows:

 

 

 

    For the Three Months Ended
March 31, 2020
    Previously Reported   Adjustments   As Corrected
Consolidated Statements of Operations            
Revenues   $ 836,000   $                -      $ 836,000
Operating expenses   $ 2,192,767   $     (123,419)   $ 2,069,348
Loss from operations   $    (2,757,023)   $      123,419   $    (2,633,604)
Other income (expenses)   $       (188,480)   $                -      $       (188,480)
Net loss   $    (2,945,503)   $      123,419   $    (2,822,084)
Net Loss available to Exactus, Inc. common stockholders   $    (2,789,684)   $      123,419   $    (2,666,265)
Basic & diluted EPS   $             (0.06)   $                 0   $             (0.06)
                   

 

    For the Year Ended
December 31, 2019
    Previously Reported   Adjustments   As Corrected
Consolidated Statements of Operations            
Revenues   $ 345,680   $                -      $ 345,680
Operating expenses   $ 9,177,988   $     (205,698)   $ 8,972,290
Loss from operations   $  (10,878,442)   $      205,698   $  (10,672,744)
Other income (expenses)   $ 653,936   $                -      $ 653,936
Net loss   $  (10,224,506)   $      205,698   $  (10,018,808)
Net Loss available to Exactus, Inc. common stockholders   $  (10,591,487)   $      205,698   $  (10,385,789)
Basic & diluted EPS   $             (0.31)   $                 0   $             (0.31)

 

    For the Nine Months Ended
September 30, 2019
    Previously Reported   Adjustments   As Corrected
Consolidated Statements of Operations            
Revenues   $ 215,816   $                -      $ 215,816
Operating expenses   $ 5,803,458   $       (82,279)   $ 5,721,179
Loss from operations   $       (5,803,847)   $        82,279   $  (5,721,568)
Other income (expenses)   $ 1,178,363   $                -      $ 1,178,363
Net loss   $       (4,625,484)   $        82,279   $  (4,543,205)
Net Loss available to Exactus, Inc. common stockholders $       (5,168,306)   $        82,279   $  (5,086,027)
Basic & diluted EPS   $                (0.16)   $                 0   $           (0.15)
                   
    For the Three Months Ended
September 30, 2019
    Previously Reported   Adjustments   As Corrected
Consolidated Statements of Operations            
Revenues   $             60,153   $                -      $ 60,153
Operating expenses   $        2,062,677   $       (82,279)   $ 1,980,398
Loss from operations   $       (2,102,942)   $        82,279   $ (2,020,663)
Other income (expenses)   $              (5,105)   $                -      $     (5,105)
Net loss   $ (2,108,047)   $  82,279   $ (2,025,768)
Net Loss available to Exactus, Inc. common stockholders $  (1,934,367)   $  82,279   $ (1,852,088)
Basic & diluted EPS   $       (0.05)   $       0   $     (0.05)
                   

 

The revisions had no effect in the cash used in operating activities on the Company’s consolidated statements of cash flows.