UNDISCOVERED
EXACTUS IS
TOP
CANNABIS
CBD
PICK
May 15, 2019 -- InvestorsHub NewsWire --
-
Exactus
(OTC:
EXDI) offers
tinctures, edibles, capsules, and topical solution products
and recently
acquired 200-acre proven producer of high-concentration cannabis
with new crops underway.
-
Scalar
Report
projects potential
$190 million
in sales with
potential
net income of
$127 million over next 3
years
-
Recently
closed over $4 million in new funding, clean Balance Sheet, retired
all convertible notes and placed Preferred Shares convertible to
common at $4.00 per share.
-
Low share
price of $.69,
small market
cap of $22 million,
outstanding shares
of only 32 million after reducing shares in exchange of 1 for
8.
-
Scalar Report
values Exactus
shares
substantially higher than current price and uplist
to
NASDAQ likely in next 12 months.
For good reason, several
cannabis and CBD stocks have been outperforming most
sectors of the stock market. Cannabis
stocks are the
new gold rush today with sales
projected to exceed $46 billion by
2025. The well-known Cowen
Research
report estimates that Cannabis CBD
products will generate $16 billion in annual sales by 2025 just in
the United States. Roth Capital Partners
estimates the U.S. market opportunity
of $12.4 billion in 2025 with a potential $31 - $46B hemp-derived
CBD market longer-term.
Enormous gains have already been made
in some cannabis stocks but there are still a
few undiscovered gems that
are
undervalued and about to soar as they claim their stake in this
explosive new market.
Emerging
MicroCaps
covers
several
promising and
outstanding young
microcap companies and is now initiating
coverage on Exactus,
Inc.
(OTC: EXDI) as our top pick for growth in the cannabis
CBD
sector.
We feel that
Exactus
has thoughtfully developed a business plan that mitigates
some of the biggest risks associated with
cannabis stocks,
has skillfully positioned the company for
rapid growth beginning
in 2019. Shares appear
highly undervalued and
based on very low volume and
almost no
message board chatter, they are
undiscovered
so far and represent an outstanding opportunity before word gets
out.
Operations have already started on the
new 200 acre proven cannabis farms. Exactus
announced
it
is intensifying efforts to lead the industry in the
hemp-derived
Cannabidiol
(CBD) market with the Company's initial planting of seedlings in
approximately 200 prime acres located in southwest Oregon on
its
Exactus
One World ("EOW") farms later this month.
The Company
also disclosed
an independent fairness opinion
from Scalar, LLC
highlighting EOW's estimated enterprise value between approximately
$55 million and $74 million, supporting a robust future of the
growing organization.
At today's capitalization, this translates to a
current
value of between
$1.75 and $2.35 per share compared to the current price of
$.85. Scalar
employed traditional valuation methods including market, income,
and cost valuation approaches, and relied on financial projections
and forecasts prepared and provided by the
Company. Link
to Valuation Report available HERE.
In a
recent
press release,
Philip Young, CEO of
Exactus,
Inc.
said, "At
Exactus
our focus is to carry our business forward with our farming efforts
forming a broad platform.
Our mission is to take responsibility all the way through the value
chain to consumable products marketed directly by us and our
partners.
Our farm based business model allows us to control the quality of
our products throughout the supply chain to the
Exactus
label and white label finished products.
Industry data demonstrates that our profit yield should be many
multiples over the value inherent in the recently completed
valuation model, which merely assumes sale of harvested and dried
biomass.
Taking the farm product to the consumer is our
plan".
Young concluded saying, "Circumstance may arise where we may be
able to sell biomass (for example hemp 'flower' can sell for up to
$500/lb
and is highly coveted as a consumer product in its own right as are
'pre-rolls'), in addition to isolate or distillate. Neither will
become our core business, as we plan to principally focus on
developing avenues for sales directly to consumers, yielding far
superior revenues than would be the case merely from selling
biomass, isolate or distillate to others.
The development of proprietary formulations for tinctures, gel caps
and topical lotions are expected to put
Exactus
in a strong position to build significant customer loyalty by
adhering to our core mission; to be recognized as the most trusted,
transparent CBD company committed to quality and purity in every
product."
Emiliano
Aloi,
President of Exactus
commented,
"Through a combination of carefully selecting the genetics from
renowned Oregon CBD, partnering with experienced farms who have
previously utilized these genetics in the region which is known to
generate successful hemp crops with high CBD percentages, we
believe we have created an excellent platform for successful
harvests in 2019 and beyond.
Although
agriculture is an uncertain science, we are highly
confident.
We
are currently in the process of building out two proprietary drying
facilities in which we will not only have the resources capable of
handling the capacity of our own harvest, we will be able to create
an additional income stream by providing a service
to
a
number of farmers that reside in the region.
We
continue to explore opportunities to acquire extraction and
production assets to complete our plans to fully-integrate. Our
fields have been completely prepped for planting, the planting
crews and equipment are in place and are ready to transfer our
seedlings to ground in the next month. We are very excited and
expect amazing harvests this year and in the future."
On
April
29th,
Exactus
announced
that it had received an
independent fairness opinion from Scalar, LLC ("Scalar") in
connection with the Company's acquisition of two operating farms
located in Southwest
Oregon. Scalar is a
nationwide business valuation firm engaged in valuation services
for tax, financial reporting, transaction advisory, and litigation
consulting, which is regularly engaged in providing transaction
advisory valuation services in connection with mergers and
acquisitions. The Company's Board of Directors selected Scalar to
render the fairness opinion on the basis of Scalar's experience in
similar transactions, its reputation in the professional services
community and its familiarity with the Company and its
business.
The fairness
opinion confirms and concludes that the transaction consideration
to be incurred by the Company in connection with the acquisition is
fair, from a financial point of view, to the
Company.
In arriving at
its opinion, Scalar performed a valuation
analysis.
Scalar
employed traditional valuation methods including market, income,
and cost valuation approaches, and relied on financial projections
and forecasts prepared and provided by the
Company.
Through its
majority-owned subsidiary Exactus
One World, LLC
("One World"), the Company expects to produce over 500,000 pounds
of agricultural biomass in the highly coveted Illinois and Rogue
Valleys of Oregon.
During March
2019 the Company secured genetics (seeds) from Oregon CBD and
commenced planting in April 2019.
The fairness
opinion was based in part on the Company's One World forecast for
its first harvest expected in approximately five to six
months.
Below is an
excerpt from the Company's 2019-2021 Forecast:
(000s)
|
2019
|
2020
|
2021
|
Total Revenue
|
32,557
|
65,113
|
95,288
|
Cost of Sales
|
3,540
|
7,081
|
10,362
|
Net Income
|
21,462
|
43,149
|
63,319
|
Business
Update -
Expansion: During
March 2019 Exactus,
Inc. acquired a majority interest in two industrial hemp farms,
totaling approximately 200 leased acres, from highly regarded hemp
farmers located in Southwest Oregon.
Ceed2Med, LLC,
a shareholder and supplier to the Company, developed the farms at
the request of the Company so the Company can produce its own CBD
biomass, isolate and distillate in 2019 and thereafter. The
minority holders are experienced farmers who have successfully
produced industrial hemp with Ceed2Med in Southwest
Oregon.
The Company
has acquired proprietary genetics (seeds) from Oregon CBD, a
recognized leader in hemp genetics. The seeds purchased have at
least a two
year history of
successful production in Oregon. Planting
activities have commenced, with the starting mix and seed planting
in the Company's greenhouses, which will yield seedlings in
approximately 30 days.
Irrigation and
soil preparation are complete and seedling to soil transplanting is
expected to commence in approximately 30 days.
Production and
Manufacturing:
During April
2019, the Company delivered raw materials (isolate and distillate)
and began oversight of product development at
two locations.
Wholesale and
Retail: During
April 2019, the Company initiated discussions with pharmacy and
physician groups and commenced direct sales to several
customers.
E-Commerce:
An
e-commerce platform is in development and is planned
to
launch in second quarter.
Branding:
The Company
has hired an internal senior director of marketing and has engaged
an outside agency to develop its own Exactus
branded
product lines (tinctures, creams, gel caps, water) as well as to
assist with white label/private label orders.
The brand is
expected to launch in May 2019 including initial lines
and SKUs.
New Product
Development:
The Company is
investigating a broad based number of proprietary CBD derived
products and technology applications for introduction into the
marketplace over the next several quarters.
A copy of the
Scalar Valuation can be seen
here.
Conclusion
Based on 2019
potential
sales and earnings projections of $32,557,000 and $21,462,000
respectively, shares appear highly undervalued.
If
and when they are reported as projected, the current PE ratio of
the S&P
at 15 to 1
suggests a valuation of
closer to
$12.00 per share.
Legal Disclaimer:
Except for the
historical information presented herein, matters discussed in this
release contain forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to
differ materially from any future results, performance or
achievements expressed or implied by such statements.
Emerging MicroCaps
or
its principals have
been compensated
for its services in the form of cash-based compensation or equity
securities in the companies it writes about, or a combination of
the two. The Information contains forward-looking statements, i.e.
statements or discussions that constitute predictions,
expectations, beliefs, plans, estimates, or projections as
indicated by such words as ''expects,'' ''will,'' ''anticipates,''
and ''estimates''; therefore, you should proceed with extreme
caution in relying upon such statements and conduct a full
investigation of the Information and the Profiled Issuer as well as
any such forward-looking statements.