Company Quick10K Filing
Punto Group
Price-0.00 EPS-0
Shares44 P/E0
MCap-0 P/FCF0
Net Debt-0 EBIT-4
TEV-0 TEV/EBIT0
TTM 2019-09-30, in MM, except price, ratios
10-Q 2019-09-30 Filed 2019-11-14
S-1 2019-09-12 Public Filing
10-Q 2019-06-30 Filed 2019-08-13
10-Q 2019-03-31 Filed 2019-05-29
10-K 2018-12-31 Filed 2019-04-01
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-21
10-K 2017-12-31 Filed 2018-04-04
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-21
10-Q 2017-03-31 Filed 2017-05-22
10-K 2016-12-31 Filed 2017-04-26
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-17
10-K 2015-12-31 Filed 2016-04-14
10-K 2015-09-30 Filed 2015-10-22
10-Q 2015-06-30 Filed 2015-08-17
8-K 2020-05-15 Other Events
8-K 2020-05-04 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2020-03-30 Other Events
8-K 2020-02-12 Officers, Amend Bylaw, Shareholder Vote, Other Events, Exhibits
8-K 2019-12-06 Enter Agreement, Other Events, Exhibits
8-K 2019-02-21 Enter Agreement, M&A, Off-BS Arrangement, Sale of Shares, Accountant, Control, Officers, Shell Status, Exhibits
8-K 2019-01-07 Shareholder Rights, Amend Bylaw, Exhibits
8-K 2018-11-30

PNTTE 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1 - Nature of Business and Significant Accounting Policies
Note 2 -Going Concern
Note 3 - Reverse Merger
Note 4 - Related Party Transactions
Note 5 - Fair Value of Financial Instruments
Note 6 - Other Current Assets
Note 7 - Fixed Assets
Note 8 - Accrued Expenses
Note 9 - Convertible Note Payable
Note 10 - Advances From Shareholders
Note 11 - Notes Payable
Note 12 - Leases
Note 13 - Changes in Stockholders' Equity
Note 14 - Income Taxes
Note 15 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex31-1.htm
EX-32.1 ex32-1.htm

Punto Group Earnings 2019-09-30

Balance SheetIncome StatementCash Flow
2.41.91.40.80.3-0.22013201520172020
Assets, Equity
0.1-0.3-0.7-1.0-1.4-1.82015201620182020
Rev, G Profit, Net Income
2.51.81.00.3-0.5-1.22013201520172020
Ops, Inv, Fin

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________

 

Commission file number: 333-200529

 

 

ONE WORLD PHARMA, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   61-1744826

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

     
3471 W. Oquendo Road, Suite 301, Las Vegas, NV   89118
(Address of principal executive offices)   (zip code)

 

(800) 605-3210

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
    Emerging growth company [X]

 

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. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes [  ] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

 

The number of shares of registrant’s common stock outstanding as of November 12, 2019 was 44,582,939.

 

 

 

   

 

 

TABLE OF CONTENTS

 

  Page
PART I - FINANCIAL INFORMATION  
ITEM 1.   FINANCIAL STATEMENTS (Unaudited)  
    Condensed Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018 3
    Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and the Three Months Ended September 30, 2018 and the Period from Inception (March 27, 2018) to September 30, 2018 (Unaudited) 4
    Consolidated Statement of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019 (Unaudited) and the Year Ended December 31, 2018 5
    Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and the Period from Inception (March 27, 2018) to September 30, 2018 (Unaudited) 6
    Notes to the Condensed Consolidated Financial Statements (Unaudited) 7
ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19
ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 23
ITEM 4.   CONTROLS AND PROCEDURES 24
PART II - OTHER INFORMATION  
ITEM 1.   Legal Proceedings 25
ITEM 1A.   RISK FACTORS 25
ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 25
ITEM 3.   DEFAULTS UPON SENIOR SECURITIES 25
ITEM 4.   MINE SAFETY DISCLOSURES 25
ITEM 5.   OTHER INFORMATION 25
ITEM 6.   EXHIBITS 26
    SIGNATURES 27

 

 2 
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30, 2019   December 31, 2018 
Assets   (Unaudited)      
           
Current assets:          
Cash  $955,602   $125,846 
Other current assets   261,134    35,344 
Inventory   22,097    - 
Total current assets   1,238,833    161,190 
           
Right-of-use asset   248,541    - 
Security deposits   61,301    - 
Fixed assets, net   567,517    356,439 
           
Total Assets  $2,116,192   $517,629 
           
Liabilities and Stockholders’ Equity (Deficit)          
           
Current liabilities:          
Accounts payable  $144,317   $121,194 
Accrued expenses   47,682    34,425 
Current portion of lease liability   39,622    - 
Convertible notes payable   507,332    300,000 
Advances from shareholders   -    514,141 
Notes payable   -    200,000 
Total current liabilities   738,953    1,169,760 
           
Long-term lease liability   212,167    - 
           
Total Liabilities   951,120    1,169,760 
           
Stockholders’ Equity (Deficit):          
Common stock, $0.001 par value, 75,000,000 shares authorized; 44,482,939 and 34,291,905 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively   44,483    34,292 
Additional paid-in capital   7,391,508    1,278,352 
Subscriptions receivable, consisting of 6,012,500 shares at December 31, 2018   -    (602)
Subscriptions payable, consisting of 40,000 shares at September 30, 2019   160,000    - 
Accumulated other comprehensive loss   (25,211)   (4,090)
Accumulated (deficit)   (6,405,708)   (1,959,982)
    1,165,072    (652,030)
Noncontrolling Interest   -    (101)
Total Stockholders’ Equity (Deficit)   1,165,072    (652,131)
           
Total Liabilities and Stockholders’ Equity (Deficit)  $2,116,192   $517,629 

 

See accompanying notes to financial statements.

 

 3 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

   For the Three Months Ended   For the Nine   From Inception 
   September 30,   Months Ended   (March 27, 2018) to 
   2019   2018   September 30, 2019   September 30, 2018 
                 
Revenue:  $-   $-   $-   $- 
                     
Operating expenses:                    
General and administrative   589,027    263,204    1,633,814    388,044 
Professional fees   986,523    130,863    2,430,945    287,840 
Total operating expenses   1,575,550    394,067    4,064,759    675,884 
                     
Operating loss   (1,575,550)   (394,067)   (4,064,759)   (675,884)
                     
Other income (expense):                    
Loss on disposal of assets   -    -    (4,087)   - 
Interest income   3,621    10,000    3,869    10,000 
Interest expense   (225,053)   (3,334)   (380,749)   (5,135)
Total other expense   (221,432)   6,666    (380,967)   4,865 
                     
Net loss  $(1,796,982)  $(387,401)  $(4,445,726)  $(671,019)
                     
Other comprehensive loss:                    
Gain on foreign currency translation  $(164,122)  $-   $(21,121)  $18,553 
                     
Net other comprehensive loss  $(1,961,104)  $(387,401)  $(4,466,847)  $(652,466)
                     
Weighted average number of common shares outstanding - basic and fully diluted   42,069,859    32,805,383    39,888,654    32,039,630 
                     
Net loss per share - basic and fully diluted  $(0.04)  $(0.01)  $(0.11)  $(0.02)

  

See accompanying notes to financial statements.

 

 4 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

 

   Common Stock   Additional Paid-In   Subscriptions   Subscriptions   Accumulated Other Comprehensive   Accumulated   Noncontrolling   Total Stockholders’ 
   Shares   Amount   Capital   Receivable   Payable   Income (Loss)   Deficit   Interest   Equity (Deficit) 
                                     
Balance, March 27, 2018   -   $-   $-   $-   $-   $-   $-   $-   $- 
                                              
Common stock sold for cash   21,050,000    21,050    (18,935)   (2,105)   -    -    -    -    10 
                                              
Net loss   -    -    -    -    -    -    -    -    - 
                                              
Balance, March 31, 2018 (Unaudited)

   21,050,000   $21,050   $(18,935)  $(2,105)  $-   $-   $-   $    $10 
                                              
Common stock sold for cash   1,190,476    1,190    498,810    -    -    -    -    -    500,000 
                                              
Common stock issued for purchase of One World Pharma S.A.S.   10,200,000    10,200    152,709    -    -    -    -    -    162,909 
                                              
Contributed capital   -    -    136,440    -    -    -    -    -    136,440 
                                              
Loss on foreign currency translation   -    -    -    -    -    35,402    -    -    35,402 
                                              
Net loss   -    -    -    -    -    -    (283,618)   -    (283,618)
                                              
Balance, June 30, 2018 (Unaudited)   32,440,476   $32,440   $769,024   $(2,105)  $-   $35,402   $(283,618)  $-   $551,143 
                                              
Common stock sold for cash   714,286    715    299,285    -    -    -    -    -    300,000 
                                              
Loss on foreign currency translation   -    -    -    -    -    (16,849)   -    -    (16,849)
                                              
Net loss   -    -    -    -    -    -    (387,401)   -    (387,401)
                                              
Balance, September 30, 2018 (Unaudited)   33,154,762   $33,155   $1,068,309   $(2,105)  $-   $18,553   $(671,019)  $-   $446,893 
                                              
Consolidation of One World Pharma, Inc.   -    -    (349,420)   -    -    -    -    -    (349,420)
                                              
Cash received on subscriptions receivable   -    -    -    1,503    -    -    -    -    1,503 
                                              
Common stock sold for cash   457,143    457    199,543    -    -    -    -    -    200,000 
                                              
Common stock issued for services   680,000    680    284,920    -    -    -    -    -    285,600 
                                              
Beneficial conversion feature on convertible note   -    -    75,000    -    -    -    -    -    75,000 
                                              
Loss on foreign currency translation   -    -    -    -    -    (22,643)   -    -    (22,643)
                                              
Net loss   -    -    -    -    -    -    (1,228,963)   (101)   (1,289,064)
                                              
Balance, December 31, 2018   34,291,905   $34,292   $1,278,352   $(602)  $-   $(4,090)  $(1,959,982)  $(101)  $(652,131)
                                              
Cash received on subscriptions receivable   -    -    -    602    -    -    -    -    602 
                                              
Common stock sold for cash   3,900,000    3,900    1,946,100    -    -    -    -    -    1,950,000 
                                              
Issuance of common stock on debt conversions   1,253,493    1,253    500,144    -    -    -    -    -    501,397 
                                              
Common stock issued for services   30,000    30    14,970    -    -    -    -    -    15,000 
                                              
Amortization of common stock options issued for services, OWP Ventures, Inc.   -    -    88,297    -    -    -    -    -    88,297 
                                              
Exchange of OWP Ventures, Inc. shares for One World Pharma, Inc. shares (1:1)   1,322,501    1,323    (10,730)   -    -    -    -    101    (9,306)
                                              
Common stock cancelled pursuant to merger with OWP Ventures, Inc.   (875,000)   (875)   875    -    -    -    -    -    - 
                                              
Amortization of common stock options issued for services   -    -    165,243    -    -    -    -    -    165,243 
                                              
Beneficial conversion feature on convertible note   -    -    125,000    -    -    -    -    -    125,000 
                                              
Gain on foreign currency translation   -    -    -    -    -    (8,287)   -    -    (8,287)
                                              
Net loss   -    -    -    -    -    -    (1,323,516)   -    (1,323,516)
                                              
Balance, March 31, 2019 (Unaudited)   39,922,899   $39,923   $4,108,251   $-   $-   $(12,377)  $(3,283,498)  $-   $852,299 
                                              
Amortization of common stock options issued for services   -    -    395,715    -    -    -    -    -    395,715 
                                              
Gain on foreign currency translation   -    -    -    -    -    151,288    -    -    151,288 
                                              
Net loss   -    -    -    -    -    -    (1,325,228)   -    (1,325,228)
                                              
Balance, June 30, 2019 (Unaudited)   39,922,899   $39,923   $4,503,966   $-   $-   $138,911   $(4,608,726)  $-   $74,074 
                                              
Common stock sold for cash   4,509,000    4,509    2,249,991    -    -    -    -    -    2,254,500 
                                              
Common stock payable for services   -    -    -    -    160,000    -    -    -    160,000 
                                              
Cashless exercise of common stock options   51,040    51    (51)   -    -    -    -    -    - 
                                              
Amortization of common stock options issued for services   -    -    430,270    -    -    -    -    -    430,270 
                                              
Beneficial conversion feature on convertible note   -    -    207,332    -    -    -    -    -    207,332 
                                              
Gain on foreign currency translation   -    -    -    -    -    (164,122)   -    -    (164,122)
                                              
Net loss   -    -    -    -    -    -    (1,796,982)   -    (1,796,982)
                                              
Balance, September 30, 2019 (Unaudited)   44,482,939   $44,483   $7,391,508   $-   $160,000   $(25,211)  $(6,405,708)  $-   $1,165,072 

 

See accompanying notes to financial statements.

 

 5 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

   For the Nine   From Inception 
   Months Ended   (March 27, 2018) to 
   September 30, 2019   September 30, 2018 
Cash flows from operating activities          
Net loss  $(4,445,726)  $(671,019)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization expense   9,432    850 
Loss on disposal of fixed assets   4,087    - 
Debt discounts   332,332    - 
Stock-based compensation   175,000    - 
Amortization of options issued for services   1,079,525    - 
Decrease (increase) in assets:          
Other current assets   (235,096)   (149,123)
Inventory   (22,097)   - 
Right-of-use assets   (248,541)   - 
Security deposits   (61,301)   - 
Increase (decrease) in liabilities:          
Accounts payable   23,123    43,882 
Accrued expenses   21,986    26,854 
Lease liability   251,789    - 
Net cash used in operating activities   (3,115,487)   (748,556)
           
Cash flows from investing activities          
Cash acquired in merger   -    4,739 
Investment in note receivable   -    (50,000)
Purchase of fixed assets   (224,597)   (254,248)
Net cash used in investing activities   (224,597)   (299,509)
           
Cash flows from financing activities          
Proceeds from convertible note payable   500,000    - 
Proceeds from shareholders   -    208,156 
Proceeds from contributed capital   -    136,440 
Repayment of advances from shareholders   (314,141)   - 
Proceeds from subscriptions receivable   602    - 
Proceeds from sale of common stock   4,004,500    800,010 
Net cash provided by financing activities   4,190,961    1,144,606 
           
Effect of exchange rate changes on cash   (21,121)   18,553 
           
Net increase in cash   829,756    115,094 
Cash - beginning   125,846    - 
Cash - ending  $955,602   $115,094 
           
Supplemental disclosures:          
Interest paid  $35,402   $244 
Income taxes paid  $-   $- 
           
Non-cash investing and financing transactions:          
Fair value of net assets acquired in merger  $9,306   $- 
Value of shares issued for conversion of debt  $701,397   $- 
Beneficial conversion feature  $332,332   $- 

 

See accompanying notes to financial statements.

 

 6 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 – Nature of Business and Significant Accounting Policies

 

Nature of Business

 

One World Pharma, Inc. (formerly Punto Group, Corp.) was incorporated in Nevada on September 2, 2014. On February 21, 2019, One World Pharma, Inc. (“One World Pharma,” the “Company,” “we,” “our” or “us”) entered into an Agreement and Plan of Merger with OWP Merger Subsidiary, Inc., our wholly-owned subsidiary, and OWP Ventures, Inc. (“OWP Ventures”), which is the parent company of One World Pharma SAS, a Colombian company (“OWP Colombia”). Pursuant to the Merger Agreement, we acquired OWP Ventures (and indirectly, OWP Colombia) by the merger of OWP Merger Subsidiary with and into OWP Ventures, with OWP Ventures being the surviving entity as our wholly-owned subsidiary (the “Merger”). As a result of the Merger (a) holders of the outstanding capital stock of OWP Ventures received an aggregate of 39,475,398 shares of our common stock; (b) options to purchase 825,000 shares of common stock of OWP Ventures at an exercise price of $0.50 automatically converted into options to purchase 825,000 shares of our common stock at an exercise price of $0.50; (c) the outstanding principal and interest under a $300,000 convertible note issued by OWP Ventures became convertible, at the option of the holder, into shares of our common stock at a conversion price equal to the lesser of $0.424 per share or 80% of the price we sell our common stock in a future “Qualified Offering”; (d) 875,000 shares of our common stock owned by OWP Ventures prior to the Merger were cancelled; and (e) OWP Ventures’ chief operating officer became our chief operating officer and two of OWP Ventures’ directors became members of our board of directors. The Company’s headquarters are located in Las Vegas, Nevada, and all of its customers are expected to be outside of the United States. On January 10, 2019, the Company changed its name from Punto Group, Corp. to One World Pharma, Inc.

 

OWP Ventures is a holding company formed in Delaware on March 27, 2018 to enter and support the cannabis industry, and on May 30, 2018, it acquired OWP Colombia. OWP Colombia is a licensed cannabis cultivation, production and distribution (export) company located in Popayán, Colombia (nearest major city is Cali). We plan to be a producer of raw cannabis and hemp plant ingredients for both medical and industrial uses across the globe. We have received licenses to cultivate, produce and distribute the raw ingredients of the cannabis and hemp plant for medicinal, scientific and industrial purposes. Specifically, we are one of the only companies in Colombia to receive seed, cultivation, extraction and export licenses from the Colombian government. Currently, we own approximately 30 acres and have a covered greenhouse built specifically to cultivate high-grade cannabis and hemp. In addition, we have entered into agreements with local farming co-operatives that include small farmers and indigenous tribe members, under which they will cultivate cannabis on up to approximately 140 acres of land using our seeds and propagation techniques, and sell their harvested products to us on an exclusive basis. We planted our first crop of cannabis in 2018, which we began harvesting in the first quarter of 2019 for the purpose of further research and development activities and quality control testing of the cannabis we have produced. To date, we have not yet generated any revenues from our activities.

 

The Merger was accounted for as a reverse merger (recapitalization) with OWP Ventures deemed to be the accounting acquirer. Accordingly, the financial statements included in this Quarterly Report on Form 10-Q reflect the historical operations of OWP Ventures and its wholly-owned subsidiary OWP SAS prior to the Merger, and that of the combined company following the Merger. The historical financial information for One World Pharma, Inc. (formerly Punto Group Corp.) prior to the Merger has been omitted.

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and the rules of the Securities and Exchange Commission (SEC). Intercompany accounts and transactions have been eliminated.

 

The unaudited condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Condensed Consolidated Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Condensed Consolidated Financial Statements, and the accompanying notes, are prepared in accordance with GAAP and do not contain certain information included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and Current Report on Form 8-K with respect to the Merger originally filed with the SEC on February 25, 2019, as amended and restated on July 12, 2019. The interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K and Current Report on Form 8-K. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.

 

 7 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the following entities, all of which were under common control and ownership at September 30, 2019:

 

   State of   
Name of Entity  Incorporation  Relationship
One World Pharma, Inc.(1)  Nevada  Parent
OWP Ventures, Inc.(2)  Delaware  Subsidiary
One World Pharma S.A.S.(3)  Colombia  Subsidiary

 

(1)Holding company in the form of a corporation.

(2)Holding company in the form of a corporation and wholly-owned subsidiary of One World Pharma, Inc.

(3)Wholly-owned subsidiary of OWP Ventures, Inc. since May 30, 2018, located in Colombia and legally constituted as a simplified stock company registered in the Chamber of Commerce of Bogotá on July 18, 2017. Its headquarters are located in Bogotá.

 

The consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. The Company’s headquarters are located in Las Vegas, Nevada and substantially all of its production efforts are within Popayán, Colombia.

 

Foreign Currency Translation

 

The functional currency of the Company is Columbian Peso (COP). The Company has maintained its financial statements using the functional currency, and translated those financial statements to the US Dollar (USD) throughout this report. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income (loss) for the respective periods.

 

Comprehensive Income

 

The Company has adopted ASC 220, Reporting Comprehensive Income, which establishes standards for reporting and displaying comprehensive income, its components, and accumulated balances in a full-set of general-purpose financial statements. Accumulated other comprehensive income represents the accumulated balance of foreign currency translation adjustments.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Segment Reporting

 

ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

 

Fair Value of Financial Instruments

 

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair value primarily due to the short-term nature of the instruments.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, cash on deposit with various financial institutions in Columbia, and all highly-liquid investments with original maturities of three months or less at the time of purchase. We have not held any cash equivalents to date.

 

 8 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Cash in Excess of FDIC Insured Limits

 

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000, under current regulations. The Company had $220,279 in excess of FDIC insured limits at September 30, 2019, and has not experienced any losses in such accounts.

 

Revenue Recognition

 

The Company has adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the sale of commercial sales of products, licensing agreements and contracts. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition.

 

There was no impact on the Company’s financial statements as a result of adopting ASC 606 for the nine months ended September 30, 2019, or the year ended December 31, 2018.

 

Inventory

 

Inventories are stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out (FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net realizable value. Our cannabis products consist of cannabis flower grown in-house, along with produced extracts.

 

Stock-Based Compensation

 

The Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718) and Equity-Based Payments to Non-employees pursuant to ASC 505-50 (ASC 505-50). All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance.

 

Basic and Diluted Loss Per Share

 

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

 

Adoption of New Accounting Standards and Recently Issued Accounting Pronouncements

 

In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The new guidance is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. There was no impact on the Company’s financial statements as a result of adopting this ASU for the nine month period ending September 30, 2019 or the year ended December 31, 2018.

 

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The guidance permits entities to reclassify tax effects stranded in Accumulated Other Comprehensive Income as a result of tax reform to retained earnings. This new guidance is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted in annual and interim periods and can be applied retrospectively or in the period of adoption. There was no impact on the Company’s financial statements as a result of adopting this ASU for the nine month period ending September 30, 2019 or the year ended December 31, 2018.

 

 9 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when a change to the terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. The new guidance is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. There was no impact on the Company’s financial statements as a result of adopting this ASU for the nine month period ending September 30, 2019 or the year ended December 31, 2018.

 

In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02, which requires lessees to recognize the rights and obligations created by leases on the balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-11, Targeted Improvements, ASU No. 2018-10, Codification Improvements to Topic 842, and ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.

 

The new standard became effective January 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. The Company adopted the new standard on January 1, 2019 using the modified retrospective transition approach as of the effective date of the initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients”, which permits entities not to reassess under the new lease standard prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements.

 

The most significant effects of the adoption of the new standard relate to the recognition of new ROU assets and lease labilities on our balance sheet for office operating leases and providing significant new disclosures about our leasing activities.

 

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company has also elected the short-term leases recognition exemption for all leases that qualify. This means that the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets and lease liabilities, for existing short-term leases of those assets in transition. The Company also currently expects to elect the practical expedient to not separate lease and non-lease components for its leases. The new standard did not have a material impact.

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Since ASU 2014-09 was issued, several additional ASUs have been issued to clarify various elements of the guidance. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted the new standard to be effective upon inception. We have completed an initial evaluation of the potential impact from adopting the new standard, including a detailed review of performance obligations for all material revenue streams. Based on this initial evaluation, adoption does not have a material impact on our financial position, results of operations, or cash flows. Related disclosures have been expanded in line with the requirements of the standard.

 

There are no other recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material effect on its financial position, results of operations, or cash flows.

 

 10 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2 –Going Concern

 

As shown in the accompanying condensed consolidated financial statements as of September 30, 2019, the Company has cash on hand of $955,602, working capital of $499,880 and an accumulated deficit of $6,405,708, and the Company’s cash on hand may not be sufficient to sustain operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing its cannabis cultivation activities and expects to begin revenue generating operations in the first quarter of 2020. In addition, the Company is currently seeking additional sources of capital to fund short term operations. Management believes these factors will contribute toward achieving profitability. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The condensed consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. These financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 3 – Reverse Merger

 

On February 21, 2019, One World Pharma, Inc. entered into an Agreement and Plan of Merger with OWP Merger Subsidiary, Inc., our wholly-owned subsidiary, and OWP Ventures, which is the parent company of OWP Colombia. Pursuant to the Merger Agreement, we acquired OWP Ventures (and indirectly, OWP Colombia) by the merger of OWP Merger Subsidiary with and into OWP Ventures, with OWP Ventures being the surviving entity as our wholly-owned subsidiary. As a result of the Merger (a) holders of the outstanding capital stock of OWP Ventures received an aggregate of 39,475,398 shares of our common stock; (b) options to purchase 825,000 shares of common stock of OWP Ventures at an exercise price of $0.50 automatically converted into options to purchase 825,000 shares of our common stock at an exercise price of $0.50; (c) the outstanding principal and interest under a $300,000 convertible note issued by OWP Ventures became convertible, at the option of the holder, into shares of our common stock at a conversion price equal to the lesser of $0.424 per share or 80% of the price we sell our common stock in a future “Qualified Offering”; (d) 875,000 shares of our common stock owned by OWP Ventures prior to the Merger were cancelled; and (e) OWP Ventures’ chief operating officer became our chief operating officer and two of OWP Ventures’ directors became members of our board of directors.

 

Note 4 – Related Party Transactions

 

Repayment and Exchanges of Advances from Shareholders

 

A total of $207,000 of demand notes owed to our CEO was repaid over various dates from March of 2019 through May of 2019.

 

On various dates between October 25, 2018 and November 23, 2018, our CEO advanced funds to the Company totaling $307,141 under short-term unsecured demand loans, bearing interest at 6% per annum. On February 13, 2019, these promissory notes were exchanged for an amended and restated promissory note in the principal amount of $307,141 that bears interest at 6% and is payable upon the earlier of (i) a public or private offering of our equity securities, resulting in gross proceeds of at least $5,000,000, or (ii) February 13, 2022. All indebtedness outstanding under the Amended Note, consisting of $307,141 of principal and $13,791 of interest, was repaid in full during September 2019, with $200,000 of such principal paid by the issuance of 400,000 shares of common stock to the CEO, as described below.

 

Common Stock Sale

 

On September 4, 2019, the Company sold 400,000 shares of common stock at a price of $0.50 per share for $200,000 to the Company’s CEO in which the consideration for such shares was paid by the cancellation of $200,000 of outstanding indebtedness owed to the CEO under the Amended Note, in lieu of cash payment.

 

 11 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 5 – Fair Value of Financial Instruments

 

Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

The Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

 

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheet as of September 30, 2019 and December 31, 2018, respectively:

 

   Fair Value Measurements at September 30, 2019 
   Level 1   Level 2   Level 3 
Assets               
Cash  $955,602   $-   $- 
Right-of-use asset   -    248,541    - 
Total assets   955,602    248,541    - 
Liabilities               
Convertible note payable   -    -    507,332 
Advances from shareholders   -    -    - 
Notes payable   -    -    - 
Lease liability   -    251,789    - 
Total liabilities   -    (251,789)   (507,332)
   $955,602   $(3,248)  $(507,332)

 

   Fair Value Measurements at December 31, 2018 
   Level 1   Level 2   Level 3 
Assets               
Cash  $125,846   $-   $- 
Total assets   125,846    -    - 
Liabilities               
Convertible note payable   -    -    300,000 
Advances from shareholders   -    514,141    - 
Notes payable   -    -    200,000 
Total liabilities   -    (514,141)   (500,000)
   $125,846   $(514,141)  $(500,000)

 

There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the nine months ended September 30, 2019 or the year ended December 31, 2018.

 

 12 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 6 – Other Current Assets

 

Other current assets included the following as of September 30, 2019 and December 31, 2018, respectively:

 

   September 30, 2019   December 31, 2018 
Security deposit  $-   $4,494 
Prepaid expenses   189,181    30,850 
Other receivables   71,953    - 
Total  $261,134   $35,344 

 

Note 7 – Fixed Assets

 

Fixed assets consist of the following at September 30, 2019 and December 31, 2018, respectively:

 

   September 30, 2019   December 31, 2018 
Land  $182,377   $- 
Office equipment   24,928    18,314 
Furniture and fixtures   32,216    23,595 
Software   17,654    - 
Equipment and machinery   151,918    - 
Construction in progress   169,817    316,491 
    578,910    358,400 
Less: accumulated depreciation   (11,393)   (1,961)
Total  $567,517   $356,439 

 

Construction in progress consists of equipment and capital improvements on the Popayán farm have not yet been placed in service.

 

Depreciation and amortization expense totaled $9,432 and $850 for the nine months ended September 30, 2019 and September 30, 2018, respectively.

 

Note 8 – Accrued Expenses

 

Accrued expenses consisted of the following at September 30, 2019 and December 31, 2018, respectively:

 

   September 30, 2019   December 31, 2018 
Accrued payroll  $11,352   $6,327 
Accrued withholding taxes   9,876    6,387 
Accrued ICA fees and contributions   9,244    8,514 
Accrued interest   17,210    12,924 
Deferred rent obligations   -    273 
   $47,682   $34,425 

 

 13 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 9 – Convertible Note Payable

 

Convertible note payable consists of the following at September 30, 2019 and December 31, 2018, respectively:

 

   September 30, 2019   December 31, 2018 
         
On November 30, 2018, the Company received proceeds of $300,000 on a secured convertible note that carries a 6% interest rate from CSW Ventures, LP (“CSW”). The proceeds were used to fund the Company’s purchase of 875,000 shares of common stock, on a 1:4 split adjusted basis, of One World Pharma, Inc. The Note is due on demand. In the event that the Company consummates the closing of a public or private offering of its equity securities, resulting in gross proceeds of at least $500,000 (“Qualified Financing”) at any time prior to the repayment of this note, then the outstanding principal and unpaid interest may, at the option of the holder, be converted into such equity securities at a conversion price equal to eighty percent (80%) of the purchase price paid by the investors purchasing the equity securities in the Qualified Financing. The Company’s obligations under this Note are secured by a lien on the assets of the Company.  $300,000   $300,000 
           
On January 14, 2019, the Company received proceeds of $500,000 on an unsecured convertible promissory note that carries a 6% interest rate from The Sanguine Group LLC. The Note was due January 14, 2022. In the event that the Company consummated the closing of a public or private offering of its equity securities, resulting in gross proceeds of at least $500,000 (“Qualified Financing”) at any time prior to the repayment of this note, then the outstanding principal and unpaid interest would automatically be converted into such equity securities at a conversion price equal to the lesser of (i) eighty percent (80%) of the purchase price paid by the investors purchasing the equity securities in the Qualified Financing, or (ii) $0.424 per share. The Company’s obligations under this Note were secured by a lien on the assets of the Company. A Qualified Financing subsequently occurred on February 4, 2019, at which time the principal and interest were converted into 1,253,493 shares of the Company’s common stock.   -    - 
           
On July 22, 2019, a total of $207,332, consisting of $200,000 of principal and $7,332 of unpaid interest, on two outstanding demand notes owed to CSW that originated on November 26, 2018 and December 26, 2018, were exchanged for a convertible promissory note in the principal amount of $207,332 due on demand (the “Second Convertible CSW Note”). The Second Convertible CSW Note bears interest at 6% per annum and is convertible at the option of the holder into shares of common stock at a price of $0.50 per share.   207,332    - 
Less: unamortized debt discounts   -    - 
Convertible note payable  $507,332   $300,000 

 

In addition, the Company recognized and measured the embedded beneficial conversion feature present in the convertible notes by allocating a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the feature was calculated on the commitment date using the effective conversion price of the convertible notes. This intrinsic value is limited to the portion of the proceeds allocated to the convertible debt.

 

The aforementioned accounting treatment resulted in a total debt discounts equal to $332,332 and $75,000 for the nine months ended September 30, 2019 and the year ended December 31, 2018, respectively. The Company recorded finance expense in the amount of $332,332 for the nine months ended September 30, 2019.

 

The convertible note limits the maximum number of shares that can be owned by the note holder as a result of the conversions to common stock to 4.99% of the Company’s issued and outstanding shares.

 

The Company recorded interest expense pursuant to the stated interest rates on the convertible notes in the amount of $17,079 and $332,332 of interest expense related to the debt discount for the nine months ended September 30, 2019.

 

 14 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 10 – Advances from Shareholders

 

Advances from shareholders consist of the following at September 30, 2019 and December 31, 2018, respectively:

 

   September 30, 2019   December 31, 2018 
         

On various dates between May 3, 2018 and November 23, 2018, our CEO advanced short-term unsecured demand loans, bearing interest at 6% per annum, of an aggregate $514,141 to the Company, as follows:

$ 10,000 – May 3, 2018
$100,000 – May 3, 2018
$ 82,000 – May 14, 2018
$ 15,000 – May 29, 2018
$ 57,141 – October 25, 2018
$100,000 – October 30, 2018
$ 50,000 – November 9, 2018
$ 50,000 – November 21, 2018
$ 50,000 – November 23, 2018

A total of $207,000 was repaid over various dates from March of 2019 through May of 2019, and $307,141 was exchanged for the note described below.

  $        -   $514,141 
           
On February 13, 2019, a total of $307,141 of the advances from our CEO received from October 25, 2018 to November 23, 2018, as shown above, were exchanged for an amended and restated promissory note in the principal amount of $307,141 (the “Amended Note”). The Amended Note bore interest at 6% and was payable upon the earlier of (i) a public or private offering of our equity securities, resulting in gross proceeds of at least $5,000,000, or (ii) February 13, 2022. All indebtedness outstanding under the Amended Note, consisting of $307,141 of principal and $13,791 of interest, was repaid in full during September 2019, with $200,000 of such principal paid by the issuance of 400,000 shares of common stock as described in Note 4 above.   -    - 
           
Total advances from shareholders  $-   $514,141 

 

The Company recorded interest expense in the amount of $16,053 and $4,891 for the nine months ended September 30, 2019 and the period from inception (March 27, 2018) to September 30, 2018, respectively.

 

Note 11 – Notes Payable

 

Notes payable consists of the following at September 30, 2019 and December 31, 2018, respectively:

 

   September 30, 2019   December 31, 2018 
         
On December 26, 2018, the Company received proceeds of $100,000 from CSW on an unsecured promissory note due on demand that carries a 6% interest rate. On July 22, 2019, the principal and outstanding interest was exchanged for a convertible promissory note (See Note 9).  $-   $100,000 
           
On November 26, 2018, the Company received proceeds of $100,000 from CSW on an unsecured promissory note due on demand that carries a 6% interest rate. On July 22, 2019, the principal and outstanding interest was exchanged for a convertible promissory note (See Note 9).              -    100,000 
           
Total notes payable  $-   $200,000 

 

The Company recorded interest expense in the amount of $6,674 for the nine months ended September 30, 2019.

 

The Company recognized interest expense for the nine months ended September 30, 2019 and the period from inception (March 27, 2018) to September 30, 2018, respectively, as follows:

 

   September 30, 2019   September 30, 2018 
         
Interest on convertible notes  $17,079   $- 
Interest on advances from shareholders   16,053    4,891 
Interest on notes payable   6,674    - 
Amortization of beneficial conversion features   332,332    - 
Interest on accounts payable   8,611    244 
Total interest expense  $380,749   $5,135 

 

 15 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 12 – Leases

 

The Company’s corporate offices are within leased facilities. The Company doesn’t have any other office or equipment leases subject to the recently adopted ASU 2016-02. This real property lease contains a one-time renewal option for an additional 36 months. In the locations in which it is economically feasible to continue to operate, management expects that lease options will be exercised. The office lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. As the Company’s lease does not provide an implicit discount rate, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

 

The components of lease expense were as follows:

 

   For the Nine 
   Months Ended 
   September 30, 2019 
Finance lease cost:     
Amortization of assets  $30,184 
Interest on lease liabilities   13,510 
Total lease cost  $43,694 

  

Supplemental balance sheet information related to leases were as follows:

 

   September 30, 2019 
Finance lease:     
Right-of-use asset  $278,725 
Accumulated amortization   (30,184)
Right-of-use asset, net  $248,541 
      
Current portion of finance lease liability  $39,622 
Long-term finance lease liability   212,167 
Total finance lease liability  $251,789 
      
Weighted average remaining lease term:     
Operating leases   N/A 
Finance leases   5.1 years 
      
Weighted average discount rate:     
Operating leases   N/A 
Finance leases   6.75%

 

Supplemental cash flow and other information related to leases was as follows:

 

   For the Nine 
   Months Ended 
   September 30, 2019 
Cash paid for amounts included in the measurement of lease liabilities:     
Operating cash flows used for finance leases  $40,446 
      
Leased assets obtained in exchange for lease liabilities:     
Total operating lease liabilities  $- 
Total finance lease liabilities  $251,789 

 

The Company’s maturities of lease liabilities under finance leases as of September 30, 2019 are as follows:

 

   Finance 
   Leases 
     
2019*  $13,892 
2020   55,824 
2021   57,498 
2022   59,223 
2023   61,000 
Thereafter   51,957 
Total   299,394 
Less interest   47,605 
Present value of lease liabilities   251,789 
Less current portion   39,622 
Long-term lease liabilities  $212,167 

 

* Liability pertains to the remaining three month period from October 1, 2019 through December 31, 2019.

 

There were no operating leases as of September 30, 2019.

 

 16 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 13 – Changes in Stockholders’ Equity

 

One World Pharma is authorized to issue an aggregate of 75,000,000 shares of common stock with a par value of $0.001. As of September 30, 2019, there were 44,482,939 shares of common stock issued and outstanding. The par value of OWP Ventures’ common stock was $0.0001 per share. The par value presented for OWP Ventures’ transactions have been retroactively adjusted to reflect the par value of One World Pharma in this Quarterly Report on Form 10-Q.

 

Reverse Stock Split

 

On January 10, 2019, One World Pharma, Inc. effected a 1-for-4 reverse stock split. No fractional shares were issued, and no cash or other consideration was paid in connection with the Reverse Stock Split. Instead, the Company issued one whole share of the post-Reverse Stock Split common stock to any stockholder who otherwise would have received a fractional share as a result of the Reverse Stock Split. One World Pharma, Inc. was authorized to issue 75,000,000 shares of common stock prior to the Reverse Stock Split, which remains unaffected. The Reverse Stock Split did not have any effect on the stated par value of the common stock. Unless otherwise stated, all share and per share information in this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the Reverse Stock Split.

 

Cash Received on Subscriptions Receivable

 

On various dates between January 30, 2019 and February 5, 2019, the Company received $602 from two of the Company’s founders for sales of common stock of OWP Ventures during 2018 at $0.001 per share on subscriptions receivable.

 

Common Stock Sales

 

On various dates between July 18, 2019 and September 4, 2019, the Company sold an aggregate of 4,509,000 shares of common stock at a price of $0.50 per share for total cash proceeds of $2,254,500, including 400,000 shares purchased by the Company’s CEO in which the consideration for such shares was paid by the cancelation of $200,000 of outstanding indebtedness owed to the CEO under a promissory note, in lieu of cash payment.

 

On various dates between January 3, 2019 and February 19, 2019, the Company sold an aggregate 3,900,000 shares of common stock of OWP Ventures at $0.50 per share for total proceeds of $1,950,000.

 

Common Stock Issued for Debt Conversion

 

On February 4, 2019, a total of 1,253,493 shares of common stock of OWP Ventures were issued pursuant to the conversion of $501,397 of convertible debt owed to The Sanguine Group LLC, consisting of $500,000 of principal and $1,397 of interest.

 

Common Stock Options Exercised

 

On August 28, 2019, a total of 51,040 shares of common stock were issued upon exercise on a cashless basis of options to purchase 58,331 shares of common stock at a price $0.50 per share.

 

Common Stock Issued for Services

 

On February 18, 2019, the Company issued 30,000 shares of common stock of OWP Ventures to a consultant for services. The total fair value of the common stock was $15,000 based recent independent third-party sales at $0.50 per share.

 

On September 4, 2019, the Company awarded an investor relations firm 40,000 shares of common stock for services provided. The total fair value of the common stock was $160,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period. The shares have not yet been issued, as such they are presented as Subscriptions Payable as of September 30, 2019.

 

Common Stock Options Issued for Services

 

On February 8, 2019, the Company awarded cashless options to a service provider to acquire up to 100,000 shares of common stock, exercisable at $0.50 per share over a thirty-six (36) month period from the origination date. The options vest as to (i) 8,333 shares on the 8th day of each subsequent month for the following eleven months, and (ii) 8,337 shares on the one-year anniversary of the effective date.

 

On February 8, 2019, the Company awarded cashless options to one of our directors to acquire up to 125,000 shares of common stock, exercisable at $0.50 per share over a thirty-six (36) month period from the origination date. The options vest as to (i) 10,416 shares on the 8th day of each subsequent month for the following eleven months, and (ii) 10,424 shares on the one-year anniversary of the effective date.

 

 17 
 

 

ONE WORLD PHARMA, INC.

(Formerly Punto Group, Corp.)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

On January 28, 2019, the Company awarded cashless options to a service provider to acquire up to 500,000 shares of common stock, exercisable at $0.50 per share over a thirty-six (36) month period from the origination date. The options vest as to (i) 41,666 shares on the 8th day of each subsequent month for the following eleven months, and (ii) 41,674 shares on the one-year anniversary of the effective date.

 

On January 28, 2019, the Company awarded cashless options to a service provider to acquire up to 100,000 shares of common stock, exercisable at $0.50 per share over a thirty-six (36) month period from the origination date. The options vest as to (i) 8,333 shares on the 8th day of each subsequent month for the following eleven months, and (ii) 8,337 shares on the one-year anniversary of the effective date.

 

On October 24, 2018, the Company issued 50,000 shares of common stock to a consultant in settlement for services. The total fair value of the common stock was $21,000 based on recent independent third-party sales at $0.42 per share.

 

A total of $1,079,525 was expensed during the nine months ending September 30, 2019 pursuant to the options issued for services.

 

Common Stock Issued for Share Exchange

 

On February 21, 2019, One World Pharma acquired OWP Ventures in the Merger. As a result of the Merger (a) holders of the outstanding capital stock of OWP Ventures received an aggregate of 39,475,398 shares of our common stock; (b) the options described above to purchase 825,000 shares of common stock of OWP Ventures at an exercise price of $0.50 automatically converted into options to purchase 825,000 shares of our common stock at an exercise price of $0.50; (c) the outstanding principal and interest under a $300,000 convertible note issued by OWP Ventures became convertible, at the option of the holder, into shares of our common stock at a conversion price equal to the lesser of $0.424 per share or 80% of the price we sell our common stock in a future “Qualified Offering”; and (d) 875,000 shares of our common stock owned by OWP Ventures prior to the Merger were cancelled.

 

Note 14 – Income Taxes

 

The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.

 

For the nine months ended September 30, 2019 and the year ended December 31, 2018, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At September 30, 2019, the Company had approximately $5,000,000 of federal net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2038.

 

Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at September 30, 2019 and December 31, 2018, respectively.

 

In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.

 

Note 15 – Subsequent Events

 

Common Stock Sale

 

On October 1, 2019, the Company sold 100,000 shares of common stock at a price of $0.50 per share for cash proceeds of $50,000.

 

 18 
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended December 31, 2018 and Current Report on Form 8-K with respect to the Merger originally filed with the SEC on February 25, 2019, as amended and restated on July 12, 2019 (the “Super 8-K”), and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K and Super 8-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.

 

The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in the Super 8-K in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.

 

Overview

 

On February 21, 2019, One World Pharma, Inc. (“Company,” “we” or “our”) entered into an Agreement and Plan of Merger (“Merger Agreement”) with OWP Merger Subsidiary, Inc. (“OWP Merger Sub), our wholly-owned subsidiary, and OWP Ventures, Inc. (“OWP Ventures”). Under the Merger Agreement, the acquisition of OWP Ventures by the Company was effected by the merger of OWP Merger Sub with and into OWP Ventures, with OWP Ventures being the surviving entity as our wholly-owned subsidiary (the “Merger”). The closing (the “Closing”) of the Merger occurred on February 21, 2019. As a result of the Merger (a) holders of the outstanding capital stock of OWP Ventures received an aggregate of 39,475,398 shares of our common stock; (b) options to purchase 825,000 shares of common stock of OWP Ventures at an exercise price of $0.50 automatically converted into options to purchase 825,000 shares of our common stock at an exercise price of $0.50; (c) the outstanding principal and interest under a $300,000 convertible note issued by OWP Ventures became convertible, at the option of the holder, into shares of our common stock at a conversion price equal to the lesser of $0.424 per share or 80% of the price we sell our common stock in a future “Qualified Offering”; (d) 875,000 shares of our common stock owned by OWP Ventures prior to the Merger were cancelled; and (e) OWP Ventures’ chief operating officer became our chief operating officer and two of OWP Ventures’ directors became members of our board of directors.

 

OWP Ventures, Inc. is a holding company formed in Delaware on March 27, 2018 to enter and support the cannabis industry, and on May 30, 2018, it acquired One World Pharma S.A.S (“OWP SAS”). One World Pharma S.A.S, is a licensed cannabis cultivation, production and distribution (export) company located in Popayán, Colombia (nearest major city is Cali). We plan to be a producer of raw cannabis and hemp plant ingredients for both medical and industrial uses across the globe. We have received licenses to cultivate, produce and distribute the raw ingredients of the cannabis and hemp plant for medicinal, scientific and industrial purposes. Specifically, we are one of the only companies in Colombia to receive seed, cultivation, extraction and export licenses from the Colombian government. Currently, we own approximately 30 acres and have a covered greenhouse built specifically to cultivate high-grade cannabis and hemp. In addition, we have entered into agreements with local farming co-operatives that include small farmers and indigenous tribe members, under which they will cultivate cannabis on up to approximately 140 acres of land using our seeds and propagation techniques, and sell their harvested products to us on an exclusive basis. We planted our first crop of cannabis in 2018, which we began harvesting in the first quarter of 2019 for the purpose of further research and development activities and quality control testing of the cannabis we have produced. To date, we have not yet generated any revenues from our activities.

 

The Merger was accounted for as a reverse merger (recapitalization) with OWP Ventures deemed to be the accounting acquirer. Accordingly, the financial statements included in this Quarterly Report on Form 10-Q and the following discussion reflect the historical operations of OWP Ventures and its wholly-owned subsidiary OWP SAS prior to the Merger, and that of the combined company following the Merger. The historical financial information for One World Pharma, Inc. (formerly Punto Group Corp.) prior to the Merger has been omitted.

 

 19 
 

 

Results of Operations for the Three Months Ended September 30, 2019 and 2018:

 

The following table summarizes selected items from the statement of operations for the three months ended September 30, 2019 and 2018.

 

   Three Months Ended September 30,   Increase / 
   2019   2018   (Decrease) 
Revenues  $-   $-   $- 
                
Operating expenses:               
General and administrative   589,027    263,204    325,823 
Professional fees   986,523    130,863    855,660 
Total operating expenses:   1,575,550    394,067    1,181,483 
                
Operating loss   (1,575,550)   (394,067)   (1,181,483)
                
Total other income (expense)   (221,432)   6,666    (228,098)
                
Net loss  $(1,796,982)  $(387,401)  $(1,409,581)

 

Revenues

 

We have not generated any revenues to date, and there were limited expenses in the comparative period prior to the acquisition of One World Pharma, SAS by OWP Ventures, Inc. on May 30, 2018, when activities were ramped up to develop operations.

 

General and Administrative Expenses

 

General and administrative expenses for the three months ended September 30, 2019 were $589,027, compared to $263,204 during the three months ended September 30, 2018, an increase of $325,823, or 124%. The expenses for the current period consisted primarily of compensation expenses, office rent, and travel costs.

 

Professional Fees

 

Professional fees for the three months ended September 30, 2019 were $986,523, compared to $130,863 during the three months ended September 30, 2018, an increase of $855,660, or 654%. Professional fees included non-cash, stock-based compensation of $590,270 during the three months ended September 30, 2019. Professional fees increased primarily due to increased stock-based compensation during the current period.

 

Other Income (Expense)

 

Other expenses, on a net basis, for the three months ended September 30, 2019 were $221,432, compared to other income, on a net basis, of $6,666 during the three months ended September 30, 2018, an increase in net expenses of $228,098, or 3,422%. Other expenses consisted of $225,053 of interest expense, as offset by $3,621 of interest income for the three months ended September 30, 2019. Other income during the three months ended September 30, 2018 consisted of $10,000 of interest income, as offset by $3,334 of interest expense.

 

Net Loss

 

Net loss for the three months ended September 30, 2019 was $1,796,982, or $0.04 per share, compared to $387,401, or $0.01 per share, during the three months ended September 30, 2018, an increase of $1,409,581, or 364%. The net loss for the three months ended September 30, 2019 included non-cash expenses consisting of $4,427 of depreciation, $590,270 of stock-based compensation, and $218,408 of accrued interest, including $207,332 of amortization on debt discounts.

 

 20 
 

 

Results of Operations for the Nine Months Ended September 30, 2019 and the period from inception (March 27, 2018) to September 30, 2018:

 

The following table summarizes selected items from the statement of operations for the nine months ended September 30, 2019 and the period from inception (March 27, 2018) to September 30, 2018.

 

   For the Nine   From Inception     
   Months Ended   (March 27, 2018) to   Increase / 
   September 30, 2019   September 30, 2018   (Decrease) 
Revenues  $-   $-   $- 
                
Operating expenses:               
General and administrative   1,633,814    388,044    1,245,770 
Professional fees   2,430,945    287,840    2,143,105 
Total operating expenses:   4,064,759    675,884    3,388,875 
                
Operating loss   (4,064,759)   (675,884)   (3,388,875)
                
Total other income (expense)   (380,967)   4,865    (385,832)
                
Net loss  $(4,445,726)  $(671,019)  $(3,774,707)

 

Revenues

 

We have not generated any revenues to date, and there were limited expenses in the comparative period prior to the acquisition of One World Pharma, SAS by OWP Ventures, Inc. on May 30, 2018, when activities were ramped up to develop operations.

 

General and Administrative Expenses

 

General and administrative expenses for the nine months ended September 30, 2019 were $1,633,814, compared to $388,044 during the period from inception (March 27, 2018) to September 30, 2018, an increase of $1,245,770, or 321%. The expenses for the current period consisted primarily of compensation expenses, office rent, and travel costs.

 

Professional Fees

 

Professional fees for the nine months ended September 30, 2019 were $2,430,945, compared to $287,840 during the nine months ended September 30, 2018, an increase of $2,143,105, or 745%. Professional fees included non-cash, stock-based compensation of $1,254,525 during the nine months ended September 30, 2019. Professional fees increased primarily due to increased stock-based compensation during the current period.

 

Other Income (Expense)

 

Other expenses, on a net basis, for the nine months ended September 30, 2019 were $380,967, compared to other income, on a net basis, of $4,865 during the period from inception (March 27, 2018) to September 30, 2018, an increase in net expenses of $385,832, or 7,931%. Other expenses consisted of a loss on disposal of assets of $4,087 and $380,749 of interest expense, as offset by $3,869 of interest income for the nine months ended September 30, 2019. Other income during the period from inception (March 27, 2018) to September 30, 2018 consisted of $10,000 of interest income, as offset by $5,135 of interest expense.

 

Net Loss

 

Net loss for the nine months ended September 30, 2019 was $4,445,726, or $0.11 per share, compared to $671,019, or $0.02 per share, during the period from inception (March 27, 2018) to September 30, 2018, an increase of $3,774,707, or 563%. The net loss for the nine months ended September 30, 2019 included non-cash expenses consisting of $9,432 of depreciation, $1,254,525 of stock-based compensation and $380,967 of accrued interest, including $332,332 of amortization on debt discounts.

 

 21 
 

 

Liquidity and Capital Resources

 

The following is a summary of the Company’s cash flows provided by (used in) operating, investing, financing activities and effect of exchange rate changes on cash for the nine month period ended September 30, 2019 and the period from inception (March 27, 2018) to September 30, 2018: