UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of
Report (Date of earliest event reported): July 31,
2019
EXACTUS, INC.
(Exact
name of the registrant as specified in its charter)
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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:
(804) 205-5036
______________________________________________________
(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.
[
]
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ITEM 1.01
ITEM 2.01
ITEM 3.02
ITEM
3.03
ITEM
5.03
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ENTRY INTO MATERIAL DEFINITIVE AGREEMENT
COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
UNREGISTERED SALES OF EQUITY SECURITIES
MATERIAL
MODIFICATION TO RIGHT OF SECURITY HOLDERS
AMENDMENTS
TO ARTICLES OF INCORPORATION OF BYLAWS; CHANGE IN FISCAL
YEAR
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Green Goddess Extracts, LLC Acquisition
On July 31, 2019 we entered into an Asset Purchase Agreement (the
“Purchase Agreement”) with Green Goddess Extracts, LLC
(“Green Goddess”), a Florida contract manufacturer and
formulator of hemp and vape products. Under the Purchase Agreement
we acquired the hemp business and assets of Green Goddess and
entered into an option to acquire the seller’s vape business.
Green Goddess manufactures and distributes a premium line of hemp
products sold through distributors and online at
www.greengoddessextracts.com
.
Green Goddess has been a contract manufacturer for our products
since we entered into the hemp-based product business in early 2019
and to Ceed2Med, LLC, our largest shareholder. We will continue to
produce and sell Green Goddess Extracts
tm
brands in addition to
Exactus
tm
and
Paradise
tm
brand products, which will also be
sold through the seller’s existing distribution network and
its online stores. As a result of the acquisition, we also obtained
skilled personnel and assets to formulate, manufacture and
distribute unique and proprietary hemp-based product formulations
in our own secure facilities, which include clean room,
formulation, bottling, shipping and
warehousing.
Under the terms of the Purchase Agreement we agreed to issue
250,000 shares of our restricted Common Stock and pay $250,000 cash
for the acquisition. The shares vest at a rate of 1/24 per month
until fully vested. In addition, we entered into an agreement under
which we may become obligated to issue up to an additional $250,000
of our restricted common stock based upon the volume weighted
average price per share (“VWAP”) for the 20 days prior
to issuance, in the event that sales of products utilizing
seller’s flavored products exceed $500,000 monthly for a
three month average period.
Exactus One World, LLC
As
previously reported in our Current Report on Form 8-K filed March
11, 2019, we acquired, through our majority-owned subsidiary,
Exactus One World, LLC (“EOW”) from our largest
shareholder, Ceed2Med, LLC (“C2M”), certain rights to a
50.1% limited liability membership interest in certain farm leases
and operations in Oregon in order to enter into the business of
hemp farming for the 2019 grow season. During May 2019, we
appointed Emiliano Aloi, the President of the Company, to the
additional position of co-manager of EOW. We currently are farming
approximately 200 acres of hemp for harvest and production during
2019.
On July 31, 2019, we finalized and entered into a Management and
Services Agreement (the “MSA”) in order to provide us
project management and various other benefits associated with the
farming rights, operations and opportunities with C2M, including
assignment by C2M of C2M’s agreements and rights to acquire
approximately 200 acres of hemp farming. Under the terms of the
MSA, C2M agreed to provide further access to the opportunities and
know-how of C2M, consented to the appointment of Emiliano Aloi, a
seasoned hemp veteran previously an advisor and currently our
President, and to provide us and EOW additional services consisting
of, among other things:
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right of
participation for further investment and business opportunities in
order to rapidly expand our business and operations in hemp-derived
CBD;
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executive,
sourcing, vendor, product, production and other expertise and
resources;
●
appointment of Aloi
to the position of President;
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introductions to
farming and other financing;
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designs for
international “Hemp-Café” store design and
franchise opportunities including plans, drawings, approvals and
authorizations, leads and contacts;
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access to leasing
of prime real estate in Delray Beach Florida with an option to
purchase, and the continuing assistance of the founder of C2M in
connection with management, design, and promotion of the
project;
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drawings, designs
and specifications for extraction, production and manufacturing
facilities and resources;
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brand development
and support services.
We finalized the compensation arrangements for C2M as contemplated
in connection with the March 2019 transactions and the additional
agreements with C2M under the MSA following tax, accounting and
legal review including the treatment of the issuance of preferred
stock in connection with the transactions. While the assignment
initially contemplated a $9 million payment from us to C2M, the
parties agreed to payment in a new class of preferred stock,
convertible above market, as more fully described below. As a
further condition to payment of the consideration, the value of the
50.1% interest in EOW was required to be not less than $25 million,
with a third-party valuation and fairness opinion from a
third-party prior to payment. On April 29, 2019, we received an
independent fairness opinion from Scalar, LLC (“Scalar
Report”) that concluded the transaction, including the
consideration to be paid consisting of $10 million of Series E
Preferred (as defined below), was fair from a financial point of
view. The Scalar Report estimated the enterprise value, taking
account of the 2019 harvest, to be between $55 and $74 million,
based upon certain assumptions relied upon in connection with
preparation of the Scalar Report.
Series E 0% Convertible Preferred Stock
On August 1, 2019 we issued 1,000 shares of our newly designated
Series E 0% Convertible Preferred Stock, par value $0.0001 per
share (the “Series E Preferred”) to C2M pursuant to the
MSA. Under the terms of the Series E Preferred, C2M may only
convert such shares of Series E Preferred into shares of the
Company’s common stock, par value $0.0001 per share (the
“Common Stock”), if the closing price of Common Stock
on the principal trading market, shall exceed $2.00 per share for 5
consecutive trading days. Once vested, the shares of Series E
Preferred held by C2M are intended to either by converted at $1.60
per share of Common Stock or optionally redeemed out of the
proceeds of future financings, at the option of C2M.
Each share of Series E Preferred is convertible into 625 shares of
Common Stock and have a stated value of $1,000 per share. The
conversion ratio is subject to adjustment in the event of stock
splits, stock dividends, combination of shares and similar
recapitalization transactions. We are prohibited from effecting
conversions of the Series E Preferred to the extent that, as a
result of such conversion, the holder beneficially owns more than
4.99% (which may be increased to 9.99% upon 61 days’ written
notice), in the aggregate, of the issued and outstanding shares of
our Common Stock calculated immediately after giving effect to the
issuance of shares of Common Stock upon the conversion of the
Series E Preferred. Holders of the Series E Preferred shall be
entitled to vote on all matters submitted to shareholders and shall
be entitled to the number of votes equal to the number of shares of
Common Stock into which the shares of Series E Preferred Stock are
convertible, subject to applicable beneficial ownership
limitations. The Series E Preferred Stock provides a liquidation
preference equal to par value.
The Series E Preferred has a no mandatory redemption rights
however, in the event that we raise $5,000,000 from a capital
raising transaction involving any equity or equity-linked financing
during any fiscal quarter in an amount which would cause our cash
or cash equivalents to exceed $5,000,000 (a “Fundamental
Transaction”) we are required from the proceeds of such
offering, to offer C2M a right to redeem Series E Preferred then
outstanding as follows:
(A) 0% percent of the net proceeds of the Fundamental Transaction,
after deduction of the amount of net proceeds required to leave us
(together with our existing cash on hand immediately prior to the
completion of the Fundamental Transaction) with cash on hand of
$5,000,000; plus
(B) 10% percent of the next $5,000,000 of net proceeds of the
Fundamental Transaction; plus
(C) 100% of the net proceeds of the Fundamental Transaction
thereafter (until the Series E Preferred is redeemed in
full).
The shares of Series E Preferred are convertible into Common Stock,
once vested, at a price of $1.60 per share. We are not obligated to
file a registration statement with respect to the shares of Common
Stock into which Series E Preferred shares may be
converted.
Sales of Common Stock
On July 31, 2019 we accepted subscriptions in the total amount of
$1,990,304 and issued an additional 3,413,044 shares of our Common
Stock. Following these issuances, we had 37,884,309 shares of
Common Stock outstanding, of which C2M currently owns approximately
20%. The foregoing does not take into account the anticipated
cancellation of 180,000 shares of common stock as described under
"Cancellation of Series C Preferred Stock",
below.
The shares of Common Stock and Series E Preferred were issued to
“accredited investors” as such term is defined in the
Securities Act of 1933, as amended (the “Securities
Act”) and were offered and sold in reliance on the exemption
from registration afforded by Section 4(a)(2) and Regulation D
(Rule 506) under the Securities Act and corresponding provisions of
state securities laws.
Cancellation of Series C Preferred Stock
On June 30, 2016, the Board of Directors approved a Certificate of
Designation authorizing a new class of Series C Preferred Stock,
par value $0.0001 per share (the “Series C Preferred”)
convertible into 216,667 shares of Common Stock. The Series C
Preferred, 200,000 shares of Common Stock, and three-year warrants
to purchase 208,333 shares of Common stock at $4.80 per share were
all issued in connection with plans to conduct clinical trials and
to perform clinical research in support of the development of
diagnostic devices. We had been unable to proceed with the clinical
trials and research. On July 31, 2019 we entered a Surrender and
Mutual Release Agreement (the “Cancellation Agreement”)
to terminate the agreements and to cancel all issued and
outstanding shares of Series C Preferred, all but 20,000 shares of
the 200,000 shares of Common Stock, and all warrants issued under
these arrangements.
NASDAQ Listing
During May 2019, we submitted an initial listing application to
NASDAQ seeking approval to list our Common Stock. We received and
are responding to initial comments from the staff. There can be no
assurance that our initial listing application will be approved or
that our Common Stock will be accepted for listing on NASDAQ. At
the present time we do not satisfy several requirements for listing
and there can be no assurance that we will be able to satisfy all
or any of the requirements for uplisting our Common Stock to
NASDAQ.
The foregoing descriptions of the Purchase Agreement, the MSA, the
Series E Preferred Stock, the Scalar Report and the Cancellation
Agreement do not purport to be complete and are qualified in their
entirety by reference to the complete text of the Purchase
Agreement, MSA, Certificate of Designation of Preferences, Rights
and Limitations of Series E Convertible Preferred Stock, Scalar
Report and Cancellation Agreement which are filed as Exhibits 10.1,
10.2, 3.1, 10.3 and 10.4 hereto, and which are incorporated herein
by reference.
ITEM
7.01 REGULATION FD DISCLOSURE
On
August 2, 2019, we will release the press release furnished
herewith as Exhibit 99.1.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
The exhibit listed in the following Exhibit Index is furnished as
part of this Current Report on Form 8-K.
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Exhibit
No.
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Description
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Form
of Certificate of Designation of Preferences, Rights and
Limitations of 0% Series E Convertible Preferred Stock
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Green
Goddess Extracts Purchase Agreement
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Management
and Services Agreement
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Scalar,
LLC Fairness Opinion *
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Cancellation
Agreement for Series C Preferred Stock
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99.1
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Press
Release
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* Incorporated by reference to Current Report on Form 8-K filed May
13, 2019.
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on behalf of the
undersigned hereunto duly authorized.
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EXACTUS,
INC.
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Date:
August 1,
2019
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By:
/s/ Ken
Puzder
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Ken
Puzder
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Chief Financial
Officer
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