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 2020-09-30 Filed 2020-11-23
10-Q 2020-06-30 Filed 2020-08-14
10-Q 2020-03-31 Filed 2020-06-26
10-K 2019-12-31 Filed 2020-05-29
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 2020-06-03
8-K 2020-05-15
8-K 2020-05-04
8-K 2020-03-30
8-K 2020-02-12
8-K 2019-12-06
8-K 2019-02-21
8-K 2019-01-07
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 - Mergers and Acquisitions
Note 4 - Related Parties
Note 5 - Fair Value of Financial Instruments
Note 6 - Inventory
Note 7 - Other Current Assets
Note 8 - Security Deposits
Note 9 - Fixed Assets
Note 10 - Accrued Expenses
Note 11 - Leases
Note 12 - Convertible Note Payable
Note 13 - Notes Payable
Note 14 - Series A Preferred Stock
Note 15 - Changes in Stockholders' Equity
Note 16 - Common Stock Options
Note 17 - Income Taxes
Note 18 - 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-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Punto Group Earnings 2020-09-30

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, 2020

 

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 [X] 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 20, 2020 was 51,485,305.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page
PART I - FINANCIAL INFORMATION  
ITEM 1. FINANCIAL STATEMENTS (Unaudited)  
  Condensed Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019 1
  Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited) 2
  Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited) 3
  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (Unaudited) 4
  Notes to the Condensed Consolidated Financial Statements (Unaudited) 5
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24
ITEM 4. CONTROLS AND PROCEDURES 25
PART II - OTHER INFORMATION  
ITEM 1. Legal Proceedings 26
ITEM 1A. RISK FACTORS 26
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 26
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 26
ITEM 4. MINE SAFETY DISCLOSURES 26
ITEM 5. OTHER INFORMATION 26
ITEM 6. EXHIBITS
27
  SIGNATURES 28

 

 

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

ONE WORLD PHARMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2020   2019 
   (Unaudited)      
Assets          
Current assets:          
Cash  $20,879   $282,380 
Inventory   226,204    24,682 
Other current assets   195,811    267,106 
Total current assets   442,894    574,168 
           
Right-of-use assets   423,695    502,706 
Security deposits   70,895    72,527 
Fixed assets, net   711,950    697,863 
           
Total Assets  $1,649,434   $1,847,264 
           
Liabilities and Stockholders’ Equity (Deficit)          
           
Current liabilities:          
Accounts payable  $602,887   $330,521 
Accrued expenses   240,102    109,665 
Dividends payable   14,870    - 
Current portion of lease liabilities   58,155    55,101 
Convertible notes payable   -    507,332 
Notes payable   119,274    130,000 
Total current liabilities   1,035,288    1,132,619 
           
Long-term lease liability   377,170    453,251 
           
Total Liabilities   1,412,458    1,585,870 
           
Series A convertible preferred stock, $0.001 par value, 500,000 shares authorized; 147,833 and -0- issued and outstanding at September 30, 2020 and December 31, 2019, respectively   1,478,330    - 
           
Stockholders’ Equity (Deficit):          
Preferred stock, $0.001 par value, 9,500,000 shares authorized; no shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively   -    - 
Common stock, $0.001 par value, 300,000,000 shares authorized; 51,235,305 and 44,804,305 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively   51,235    44,804 
Additional paid-in capital   13,595,826    8,150,004 
Subscriptions payable, consisting of 250,000 and 500,000 shares at September 30, 2020 and December 31, 2019, respectively   45,000    250,000 
Accumulated other comprehensive loss   (44,948)   (16,248)
Accumulated (deficit)   (14,888,467)   (8,167,166)
Total Stockholders’ Equity (Deficit)   (1,241,354)   261,394 
           
Total Liabilities and Stockholders’ Equity (Deficit)  $1,649,434   $1,847,264 

 

See accompanying notes to financial statements.

 

1

 

 

ONE WORLD PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2020   2019   2020   2019 
                 
Revenues  $42,598   $-   $103,384   $- 
Cost of goods sold   7,682    -    24,433    - 
Gross profit   34,916    -    78,951    - 
                     
Operating expenses:                    
General and administrative   803,342    589,027    3,316,715    1,633,814 
Professional fees   364,111    986,523    3,454,966    2,430,945 
Total operating expenses   1,167,453    1,575,550    6,771,681    4,064,759 
                     
Operating loss   (1,132,537)   (1,575,550)   (6,692,730)   (4,064,759)
                     
Other income (expense):                    
Loss on disposal of fixed assets   -    -    -    (4,087)
Interest income   -    3,621    -    3,869 
Interest expense   (7,517)   (225,053)   (28,571)   (380,749)
Total other expense   (7,517)   (221,432)   (28,571)   (380,967)
                     
Net loss  $(1,140,054)  $(1,796,982)  $(6,721,301)  $(4,445,726)
                     
Other comprehensive loss:                    
Loss on foreign currency translation  $(497)  $(164,122)  $(28,700)  $(21,121)
                     
Net other comprehensive loss  $(1,140,551)  $(1,961,104)  $(6,750,001)  $(4,466,847)
                     
Weighted average number of common shares outstanding - basic and fully diluted   48,588,395    42,069,859    47,982,936    39,888,654 
                     
Net loss per share - basic and fully diluted  $(0.02)  $(0.04)  $(0.14)  $(0.11)
                     
Dividends declared per share of common stock  $(0.00)  $(0.00)  $(0.00)  $(0.00)

 

See accompanying notes to financial statements.

 

2

 

 

ONE WORLD PHARMA, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

 

   For the Three Months Ended September 30, 2019 
   Series A                       Accumulated             
   Convertible           Additional           Other           Total 
   Preferred Stock   Common Stock   Paid-In   Subscriptions   Subscriptions   Comprehensive   Accumulated   Noncontrolling   Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Receivable   Payable   Income (Loss)   Deficit   Interest   Equity (Deficit) 
                                             
Balance, June 30, 2019                -   $              -    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 
                                                        
Loss on foreign currency translation   -    -    -    -    -    -    -    (164,122)   -    -    (164,122)
                                                        
Net loss for the three months ended September 30, 2019   -    -    -    -    -    -    -    -    (1,796,982)   -    (1,796,982)
                                                        
Balance, September 30, 2019   -   $-    44,482,939   $44,483   $7,391,508   $-   $160,000   $(25,211)  $(6,405,708)  $-   $1,165,072 

 

   For the Three Months Ended September 30, 2020 
   Series A                       Accumulated             
   Convertible           Additional           Other           Total 
   Preferred Stock   Common Stock   Paid-In   Subscriptions   Subscriptions   Comprehensive   Accumulated   Noncontrolling   Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Receivable   Payable   Income (Loss)   Deficit   Interest   Equity (Deficit) 
                                             
Balance, June 30, 2020   40,000   $400,000    50,360,305   $50,360   $12,952,647   $        -   $-   $(44,451)  $(13,748,413)  $         -   $(789,857)
                                                        
Preferred stock units sold for cash   107,833    1,078,330    -    -    -    -    -    -    -    -    - 
                                                        
Common stock issued for services   -    -    875,000    875    331,625    -    -    -    -    -    332,500 
                                                        
Common stock payable for services   -    -    -    -    -    -    45,000    -    -    -    45,000 
                                                        
Amortization of common stock options issued for services   -    -    -    -    326,424    -    -    -    -    -    326,424 
                                                        
Loss on foreign currency translation   -    -    -    -    -    -    -    (497)   -    -    (497)
                                                        
Series A convertible preferred stock declared ($0.60 per share)   -    -    -    -    (14,870)   -    -    -    -    -    (14,870)
                                                        
Net loss for the three months ended September 30, 2020   -    -    -    -    -    -    -    -    (1,140,054)   -    (1,140,054)
                                                        
Balance, September 30, 2020   147,833   $1,478,330    51,235,305   $51,235   $13,595,826   $-   $45,000   $(44,948)  $(14,888,467)  $-   $(1,241,354)

 

   For the Nine Months Ended September 30, 2019 
   Series A                       Accumulated             
   Convertible           Additional           Other           Total 
   Preferred Stock   Common Stock   Paid-In   Subscriptions   Subscriptions   Comprehensive   Accumulated   Noncontrolling   Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Receivable   Payable   Income (Loss)   Deficit   Interest   Equity (Deficit) 
                                             
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 of OWP Ventures, Inc.   -    -    -    -    -    602    -    -    -    -    602 
                                                        
Common stock sold for cash   -    -    8,409,000    8,409    4,196,091    -    -    -    -    -    4,204,500 
                                                        
Common stock payable for services   -    -    -    -    -    -    160,000    -    -    -    160,000 
                                                        
Cashless exercise of common stock options   -    -    51,040    51    (51)   -    -    -    -    -    - 
                                                        
Issuance of common stock of OWP Ventures, Inc. on debt conversion   -    -    1,253,493    1,253    500,144    -    -    -    -    -    501,397 
                                                        
Common stock issued for services, OWP Ventures, Inc.   -    -    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   -    -    -    -    991,228    -    -    -    -    -    991,228 
                                                        
Beneficial conversion feature on convertible note   -    -    -    -    332,332    -    -    -    -    -    332,332 
                                                        
Loss on foreign currency translation   -    -    -    -    -    -    -    (21,121)   -    -    (21,121)
                                                        
Net loss for the nine months ended September 30, 2019   -    -    -    -    -    -    -    -    (4,445,726)   -    (4,445,726)
                                                        
Balance, September 30, 2019   -   $-    44,482,939   $44,483   $7,391,508   $-   $160,000   $(25,211)  $(6,405,708)  $-   $1,165,072 

 

   For the Nine Months Ended September 30, 2020 
   Series A                       Accumulated             
   Convertible           Additional           Other           Total 
   Preferred Stock   Common Stock   Paid-In   Subscriptions   Subscriptions   Comprehensive   Accumulated   Noncontrolling   Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Receivable   Payable   Income (Loss)   Deficit   Interest   Equity (Deficit) 
                                             
Balance, December 31, 2019   -   $-    44,804,305   $44,804   $8,150,004   $        -   $250,000   $(16,248)  $(8,167,166)  $       -   $261,394 
                                                        
Preferred stock units sold for cash   147,833    1,478,330    -    -    -    -    -    -    -    -    - 
                                                        
Common stock sold for cash   -    -    500,000    500    249,500    -    (250,000)   -    -    -    - 
                                                        
Common stock issued for services   -    -    5,931,000    5,931    3,335,569    -    -    -    -    -    3,341,500 
                                                        
Common stock payable for services   -    -    -    -    -    -    45,000    -    -    -    45,000 
                                                        
Amortization of common stock options issued for services   -    -    -    -    1,875,623    -    -    -    -    -    1,875,623 
                                                        
Loss on foreign currency translation   -    -    -    -    -    -    -    (28,700)   -    -    (28,700)
                                                        

Series A convertible preferred stock declared ($0.60 per share)

   -    -    -    -    (14,870)   -    -    -    -    -    (14,870)
                                                        
Net loss for the nine months ended September 30, 2020   -    -    -    -    -    -    -    -    (6,721,301)   -    (6,721,301)
                                                        
Balance, September 30, 2020   147,833   $1,478,330    51,235,305   $51,235   $13,595,826   $-   $45,000   $(44,948)  $(14,888,467)  $-   $(1,241,354)

 

See accompanying notes to financial statements.

 

3

 

 

ONE WORLD PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   For the Nine Months Ended 
   September 30, 
   2020   2019 
Cash flows from operating activities          
Net loss  $(6,721,301)  $(4,445,726)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization expense   23,706    9,432 
Loss on disposal of fixed assets   -    4,087 
Amortization of debt discounts   -    332,332 
Stock-based compensation   3,386,498    175,000 
Amortization of options issued for services   1,875,623    1,079,525 
Decrease (increase) in assets:          
Inventory   (201,522)   (22,097)
Other current assets   71,295    (235,096)
Right-of-use assets   79,011    (248,541)
Security deposits   1,632    (61,301)
Increase (decrease) in liabilities:          
Accounts payable   272,366    23,123 
Accrued expenses   130,437    21,986 
Lease liability   (73,027)   251,789 
Net cash used in operating activities   (1,155,282)   (3,115,487)
           
Cash flows from investing activities          
Purchase of fixed assets   (37,793)   (224,597)
Net cash used in investing activities   (37,793)   (224,597)
           
Cash flows from financing activities          
Proceeds from convertible note payable   -    500,000 
Repayment of convertible note payable   (507,332)   - 
Repayment of advances from shareholders   -    (314,141)
Proceeds from notes payable   261,274    - 
Repayment of notes payable   (272,000)   - 
Proceeds from subscriptions receivable   -    602 
Proceeds from sale of preferred and common stock   1,478,332    4,004,500 
Net cash provided by financing activities   960,274    4,190,961 
           
Effect of exchange rate changes on cash   (28,700)   (21,121)
           
Net increase (decrease) in cash   (261,501)   829,756 
Cash - beginning   282,380    125,846 
Cash - ending  $20,879   $955,602 
           
Supplemental disclosures:          
Interest paid  $4,983   $35,402 
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 
Dividends payable  $14,870   $- 

 

See accompanying notes to financial statements.

 

4

 

 

ONE WORLD PHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 – Nature of Business and Significant Accounting Policies

 

Nature of Business

 

One World Pharma, Inc. (the “Company,” “we,” “our” or “us”) was incorporated in Nevada on September 2, 2014. On February 21, 2019, One World Pharma, Inc. (“One World Pharma”) 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 few 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. We began generating revenue from the sale of our seeds in the second quarter of 2020.

 

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, 2019. The interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.

 

5

 

 

ONE WORLD PHARMA, INC.

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, 2020:

 

    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
Colombian Hope, S.A.S.(4)   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.
(4) Wholly-owned subsidiary of OWP Ventures, Inc., acquired on November 19, 2019, located in Colombia and legally constituted as a simplified stock company. This company has yet to incur any income or expenses.

 

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 the Financial Accounting Standards Boards (“FASB”) Accounting Standards Codification (“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 ASC 820-10-05, the FASB 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.

 

6

 

 

ONE WORLD PHARMA, INC.

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 did not have cash in excess of FDIC insured limits at September 30, 2020.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.

 

There was no impact on the Company’s financial statements from ASC 606 for the nine months ended September 30, 2020, or the year ended December 31, 2019. Inventory consisted of $93,560 of raw materials, $42,622 of work in progress and $90,022 of finished goods at September 30, 2020.

 

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.

 

Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the FASB that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

 

In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820). The new guidance removes, modifies and adds to certain disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The update is effective for annual reporting periods, including interim periods, beginning after December 15, 2019. The adoption of the new standard did not have an effect on our financial position, results of operations or cash flows.

 

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. The update simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. An entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if applicable. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. The same impairment test also applies to any reporting unit with a zero or negative carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The update is effective for annual reporting periods, including interim periods, beginning after December 15, 2019, on a prospective basis. The adoption of the new standard did not have an effect on our financial position, results of operations or cash flows.

 

7

 

 

ONE WORLD PHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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.

 

Note 2 –Going Concern

 

As shown in the accompanying condensed consolidated financial statements as of September 30, 2020, the Company had cash on hand of $20,879, negative working capital of $592,394 and an accumulated deficit of $14,888,467, and the Company’s cash on hand will 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 new customers to generate revenues. 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. There can be no assurance that we will be successful in achieving these objectives, becoming profitable or continuing our business without either a temporary interruption or a permanent cessation. Additional financing may result in substantial dilution to existing stockholders.

 

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 – Mergers and Acquisitions

 

Acquisition

 

On December 6, 2019, the Company, through its wholly-owned subsidiary OWP Ventures, Inc., acquired 51% of the outstanding shares of capital stock (the “Shares”) of Colombian Hope, S.A.S., then known as Colcannapy S.A.S., a Colombian company (“Colombian Hope”), for a purchase price of US$102,000, pursuant to a Share Purchase Agreement (the “Purchase Agreement”) among OWP Ventures, Inc. and Colombian Hope’s shareholders. Colombian Hope is the holder of a Colombian seed license and 23 registered Colombian cultivars.

 

Concurrently, with the Company’s acquisition of the Shares, Federación Colombiana de Consejos Regionales (“Fedecoré”) was supposed to have purchased the remaining 49% of Colombian Hope’s outstanding shares of capital stock from Colombian Hope’s shareholders, so that the Company and Fedecoré would be the only shareholders of Colombian Hope. However, Fedecoré, a non-profit Colombian entity, was unable to acquire such shares, which were then acquired by OWP Ventures, Inc., resulting in 100% ownership. No assets or liabilities were acquired pursuant to the acquisition, resulting in $102,000 of goodwill that was impaired and expensed on December 31, 2019 due to the lack of current operations. To date, Colombian Hope has not incurred any income or expenses.

 

Note 4 – Related Parties

 

Craig Ellins Separation

 

On June 3, 2020, the Company entered into a Separation and Release Agreement with Craig Ellins (the “Separation Agreement”), pursuant to which Mr. Ellins resigned from all of his positions with the Company and its subsidiaries, including his positions as Chief Executive Officer and Chairman of the Board of the Company. Pursuant to the Separation Agreement, the Company (i) issued Mr. Ellins 2,000,000 shares of the Company’s Common Stock, (ii) reimbursed Mr. Ellins for $55,000 of expenses previously incurred by him on behalf of the Company, and (iii) agreed to make 12 monthly payments to Mr. Ellins in the amount of $8,000 each in the 12-month period following the date on which the Company has raised $1.5 million in gross proceeds from the sale of its securities following the date of the Separation Agreement. The Separation Agreement also contains mutual releases and prohibits Mr. Ellins from competing with the Company for a period of two years.

 

Appointment of Isiah L. Thomas III as Chief Executive Officer and Vice Chairman

 

On June 3, 2020, Isiah L. Thomas III was appointed to serve as the Company’s Chief Executive Officer and Vice Chairman pursuant to a letter agreement with the Company (the “Employment Agreement”).

 

Pursuant to the Employment Agreement:

 

  Mr. Thomas is entitled to be paid a base salary of $120,000 in the first year of his employment; $240,000 in the second year of his employment; and $300,000 in the third year of his employment.
     
  The Company will have the option to pay Mr. Thomas’s salary with shares of the Company’s Common Stock until the Company has raised gross proceeds of at least $1.5 million from the sale of its securities following the date of his employment. If the Company so elects to pay his salary with shares of Common Stock, the number of shares of Common Stock shall be issued be equal to (a) 1.25 times the cash payment to which he would have been otherwise entitled, divided by (b) the closing price of the Common Stock on the day such cash payment was due.
     
  The Company has awarded Mr. Thomas 500,000 shares of the Company’s Common Stock, and an option (the “Option”) to purchase 5,500,000 shares of the Company’s Common Stock at an exercise price equal to $0.55 per share. The Option vests as to 1,500,000 shares immediately, as to 1,000,000 shares 120 days following the issuance of the Option (the “Second Vesting Date”), and as to the remaining 3,000,000 shares quarterly over the three years following the Second Vesting Date.

 

8

 

 

ONE WORLD PHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Debt Repayment, Related Party

 

On various dates between, July 2, 2020 and July 6, 2020, the Company repaid a total of $140,983 of indebtedness owed to MCKP Investments LLC, consisting of $136,000 of principal and $4,983 of interest. The Company’s Chairman of the Board, Dr. Kenneth Perego, II, is the controlling member of MCKP Investments LLC.

 

Preferred Stock Sales

 

On September 1, 2020, the Company received proceeds of $26,000 from the sale of 2,600 units to the Company’s Chairman of the Board, Dr. Ken Perego. Each unit consisted of one share of Series A Preferred Stock and five-year warrants to purchase 50 shares of common stock at an exercise price of $0.25 per share. The proceeds received were allocated between the preferred stock and warrants on a relative fair value basis.

 

On July 10, 2020, the Company received proceeds of $110,000 from the sale of 11,000 units to the Company’s Chairman of the Board, Dr. Ken Perego. Each unit consisted of one share of Series A Preferred Stock and five-year warrants to purchase 50 shares of common stock at an exercise price of $0.25 per share. The proceeds received were allocated between the preferred stock and warrants on a relative fair value basis.

 

Common Stock Issued for Services, Officers and Directors

 

On May 31, 2020, the Company awarded 350,000 shares of common stock to the Company’s Chairman of the Board, Dr. Ken Perego, for services provided. The aggregate fair value of the common stock was $120,000 based on the closing price of the Company’s common stock on the date of grant.

 

Common Stock Options Issued for Services, Directors

 

On May 31, 2020, the Company awarded options to purchase 350,000 shares of the Company’s Common Stock at an exercise price equal to $0.56 per share to the Company’s Chairman of the Board, Dr. Ken Perego. The options will vest as to 116,667 shares immediately, with the remaining 233,333 shares quarterly over the following two years, beginning October 1, 2020. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 302% and a call option value of $0.5599, was $195,959. The options are being expensed over the vesting period, resulting in $86,263 of stock-based compensation expense during the nine months ended September 30, 2020. As of September 30, 2020, a total of $109,696 of unamortized expenses are expected to be expensed over the vesting period.

 

On May 31, 2020, the Company awarded options to purchase 350,000 shares of the Company’s Common Stock at an exercise price equal to $0.56 per share to one of the Company’s Directors, Bruce Raben. The options will vest as to 116,667 shares immediately, with the remaining 233,333 shares quarterly over the following two years, beginning October 1, 2020. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 302% and a call option value of $0.5599, was $195,959. The options are being expensed over the vesting period, resulting in $86,263 of stock-based compensation expense during the nine months ended September 30, 2020. As of September 30, 2020, a total of $109,696 of unamortized expenses are expected to be expensed over the vesting period.

 

9

 

 

ONE WORLD PHARMA, INC.

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, 2020 and December 31, 2019, respectively:

 

   Fair Value Measurements at September 30, 2020 
   Level 1   Level 2   Level 3 
Assets            
Cash  $20,879   $-   $- 
Right-of-use asset   -    -    423,695 
Total assets   20,879    -    423,695 
Liabilities               
Lease liabilities   -    -    435,325 
Notes payable   -    119,274    - 
Total liabilities   -    (119,274)   (435,325)
   $20,879   $(119,274)  $(11,630)

 

   Fair Value Measurements at December 31, 2019 
   Level 1   Level 2   Level 3 
Assets            
Cash  $282,380   $-   $- 
Right-of-use asset   -    -    502,706 
Total assets   282,380    -    502,706 
Liabilities               
Lease liabilities   -    -    508,352 
Convertible note payable   -    -    507,332 
Notes payable   -    130,000    - 
Total liabilities   -    130,000    1,015,684 
   $282,380   $(130,000)  $(512,978)

 

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, 2020 or the year ended December 31, 2019.

 

10

 

 

ONE WORLD PHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 6 – 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. Inventory consisted of $93,560 of raw materials, $42,622 of work in progress and $90,022 of finished goods at September 30, 2020, and $24,682 of raw materials at December 31, 2019, respectively.

 

Note 7 – Other Current Assets

 

Other current assets included the following as of September 30, 2020 and December 31, 2019, respectively:

 

   September 30,   December 31, 
   2020   2019 
VAT tax receivable  $80,987   $54,814 
Prepaid expenses   74,655    132,338 
Other receivables   40,469    79,954 
Total  $195,811   $267,106 

 

Note 8 – Security Deposits

 

Security deposits included the following as of September 30, 2020 and December 31, 2019, respectively:

 

   September 30,   December 31, 
   2020   2019 
Refundable deposit on equipment purchase  $50,000   $50,000 
Security deposits on leases held in Colombia   15,741    18,033 
Security deposit on office lease   4,494    4,494 
Security deposit on utilities   660    - 
   $70,895   $72,527 

 

Note 9 – Fixed Assets

 

Fixed assets consist of the following at September 30, 2020 and December 31, 2019, respectively:

 

   September 30,   December 31, 
   2020   2019 
Land  $138,248   $138,248 
Buildings   41,665    - 
Office equipment   44,027    44,027 
Furniture and fixtures   27,914    27,914 
Equipment and machinery   176,285    174,072 
Construction in progress   329,146    335,231 
    757,285    719,492 
Less: accumulated depreciation   (45,335)   (21,629)
Total  $711,950   $697,863 

 

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 $23,706 and $9,432 for the nine months ended September 30, 2020 and 2019, respectively.

 

11

 

 

ONE WORLD PHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 10 – Accrued Expenses

 

Accrued expenses consisted of the following at September 30, 2020 and December 31, 2019, respectively:

 

   September 30,   December 31, 
   2020   2019 
Accrued payroll  $97,132   $67,479 
Accrued withholding taxes and employee benefits   10,123    14,386 
Accrued ICA fees and contributions   83,371    1,912 
Accrued interest   49,476    25,888 
   $240,102   $109,665 

 

Note 11 – Leases

 

The Company’s corporate offices and operational facility in Colombia under non-cancelable real property lease agreements that expire on October 31, 2021 and September 30, 2029, respectively. The Company doesn’t have any other office or equipment leases subject to the recently adopted ASU 2016-02. In the locations in which it is economically feasible to continue to operate, management expects that lease options will be exercised. The Company’s corporate office is under a real property lease that contains a one-time renewal option for an additional 36 months that we determined would be reasonably certain to be extended, while the Company’s operational facility in Colombia contains a 60 month extension option that we did not determine to be reasonably certain to be extended. 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 leases do 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, 
   2020 
Operating lease cost:     
Amortization of assets  $45,388 
Interest on lease liabilities   23,149 
Total lease cost  $68,537 

 

Supplemental balance sheet information related to leases was as follows:

 

   September 30, 
   2020 
Operating leases:     
Operating lease assets  $423,695 
      
Current portion of operating lease liabilities  $58,155 
Noncurrent operating lease liabilities   377,170 
Total operating lease liabilities  $435,325 
      
Weighted average remaining lease term:     
Operating leases   9 years 
      
Weighted average discount rate:     
Operating leases   6.75%

 

12

 

 

ONE WORLD PHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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

 

   For the Nine 
   Months Ended 
   September 30, 
   2020 
Cash paid for amounts included in the measurement of lease liabilities:     
Operating cash flows used for operating leases  $73,027 
      
Leased assets obtained in exchange for lease liabilities:     
Total operating lease liabilities  $548,216 

 

Future minimum annual lease commitments under non-cancelable operating leases are as follows at September 30, 2020:

 

   Operating 
   Leases 
     
2020  $28,566 
2021   80,877 
2022   34,528 
2023   35,909 
2024   37,345 
Thereafter   198,669 
Total minimum lease payments   415,894 
Less interest   19,431 
Present value of lease liabilities   435,325 
Less current portion   58,155 
Long-term lease liabilities  $377,170 

 

13

 

 

ONE WORLD PHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 12 – Convertible Note Payable

 

Convertible note payable consists of the following at September 30, 2020 and December 31, 2019, respectively:

 

   September 30,   December 31, 
   2020   2019 
         
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 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 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. A Qualified Financing subsequently occurred on February 4, 2019; at which time the convertible note became convertible at a fixed conversion price of $0.40 per share. The Company’s obligations under this Note are secured by a lien on the assets of the Company. On September 14, 2020, the principal was repaid by the issuance of 30,000 shares of Series A Convertible Preferred Stock to CSW in satisfaction of obligation to repay such principal.  $-   $300,000 
           
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 was convertible at the option of the holder into shares of common stock at a price of $0.50 per share. On September 14, 2020, the principal was repaid with $207,332 of such principal paid by the issuance of 20,733 shares of Series A Convertible Preferred Stock to CSW.                    -    207,332 
Less: unamortized debt discounts   -    - 
Convertible note payable  $-   $507,332 

 

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 for the year ended December 31, 2019. 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 $21,516 and $17,079 for the nine months ended September 30, 2020 and 2019, respectively, and $332,332 of interest expense related to the debt discount for the nine months ended September 30, 2019.

 

14

 

 

ONE WORLD PHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 13 – Notes Payable

 

Notes payable consists of the following at September 30, 2020 and December 31, 2019, respectively:

 

   September 30,   December 31, 
   2020   2019 
         
On May 4, 2020, the Company received an advance of $20,000 from Woodman Management pursuant to an unsecured promissory note due on demand that carried a 6% interest rate. The advance was repaid by the Company on May 14, 2020.  $-   $- 
           

On various dates between January 29, 2020 and March 31, 2020, the Company received advances from CSW Ventures, LP aggregating of $116,000, pursuant to unsecured promissory notes due on demand that carry a 6% interest rate, as follows:

$25,000 – January 29, 2020

$25,000 – February 13, 2020

$15,000 – February 26, 2020

$15,000 – March 11, 2020

$ 6,000 – March 31, 2020

$10,000 – August 17, 2020

$20,000 – August 20, 2020

On September 14, 2020, the principal was repaid with $116,000 of such principal paid by the issuance of 11,600 shares of Series A Convertible Preferred Stock to CSW.

   -    - 
           

On May 4, 2020, the Company, through its wholly-owned subsidiary OWP Ventures, Inc., borrowed $119,274 from Customers Bank (“Lender”), pursuant to a Promissory Note issued by OWP Ventures to Lender (the “PPP Note”). The loan was made pursuant to the Payroll Protection Program established as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Note bears interest at 1.00% per annum, payable monthly beginning December 4, 2020, and is due on May 4, 2022. The PPP Note may be repaid at any time without penalty.

 

Under the Payroll Protection Program, the Company will be eligible for loan forgiveness up to the full amount of the PPP Note and any accrued interest. The forgiveness amount will be equal to the amount that the Company spends during the 24-week period beginning May 4, 2020 on payroll costs, payment of rent on any leases in force prior to February 15, 2020 and payment on any utility for which service began before February 15, 2020. The maximum amount of loan forgiveness for non-payroll expenses is 40% of the amount of the PPP Note. No assurance is provided that the Company will obtain forgiveness of the PPP Note in whole or in part.

 

The PPP Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the PPP Note.

   119,274    - 
           
On April 2, 2020, the Company received an advance of $6,000 from MCKP Investments LLC, a Company principally owned by the Company’s Chairman of the Board, Dr. Kenneth Perego, II, on an unsecured promissory note due on demand that carries a 6% interest rate. On July 2, 2020, the debt was repaid in full, including $90 of interest.   -    - 
           
On November 14, 2019, the Company received an advance of $50,000 from MCKP Investments LLC, pursuant to an unsecured promissory note due on demand that carries a 6% interest rate. On July 2, 2020, the debt was repaid in full, including $1,882 of interest.   -    50,000 
           
On November 14, 2019, the Company received an additional advance of $80,000 from MCKP Investments LLC, pursuant to an unsecured promissory note due on demand that carries a 6% interest rate. On July 2, 2020, the debt was repaid in full, including $3,011 of interest.   -    80,000 
           
Total notes payable  $119,274   $130,000 

 

15

 

 

ONE WORLD PHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The Company recorded interest expense in the amount of $7,055 and $6,674 for the nine months ended September 30, 2020 and 2019, respectively.

 

The Company recognized interest expense for the nine months ended September 30, 2020 and 2019, as follows:

 

   September 30,   September 30, 
   2020   2019 
         
Interest on convertible notes  $21,516   $17,079 
Interest on advances from shareholders   -    16,053 
Interest on notes payable   7,055    6,674 
Amortization of beneficial conversion features   -    332,332 
Interest on accounts payable   -    8,611 
Total interest expense  $28,571   $380,749 

 

Note 14 – Series A Preferred Stock

 

Preferred Stock

 

The Company has 10,000,000 authorized shares of $0.001 par value “blank check” preferred stock, of which 500,000 shares have been designated Series A Preferred Stock. Each share of Preferred Stock is currently convertible into fifty (50) shares of the Company’s common stock. The Series A Preferred Stock accrues dividends at the rate of 6% per annum, payable annually in cash or additional shares of Series A Preferred Stock, at the Company’s election. As of September 30, 2020, there were 147,833 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Stock is presented as mezzanine equity on the balance sheet due to it carrying a stated value of $10 per share, and a deemed liquidation clause, which entitles the holder to receive, before and in preference to any distribution or payment of assets of the Corporation or the proceeds thereof may be made or set apart for the holders of junior securities an amount in cash equal to the stated value per share, plus an amount equal to any accrued and unpaid dividends.

 

Preferred Stock Sales

 

On various dates between April 14, 2020 and September 14, 2020, the Company received total proceeds of $1,478,330 from the sale of 147,833 units, consisting in the aggregate of 147,833 shares of Series A Preferred Stock and five-year warrants to purchase 7,391,650 shares of common stock at an exercise price of $0.25 per share to fourteen accredited investors. The proceeds received were allocated between the Series A Preferred Stock and warrants on a relative fair value basis.

 

Preferred Stock Dividends

 

The Series A Preferred Stock accrues dividends at the rate of 6% per annum, payable annually in cash or additional shares of Series A Preferred Stock, at the Company’s election. A total of $14,870 of dividends were payable as of September 30, 2020.

 

16

 

 

ONE WORLD PHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 15 – Changes in Stockholders’ Equity

 

Common Stock

 

The Company is authorized to issue an aggregate of 300,000,000 shares of common stock with a par value of $0.001. As of September 30, 2020, there were 51,235,305 shares of common stock issued and outstanding.

 

Common Stock Issued on Subscriptions Payable

 

On January 6, 2020, the Company issued 500,000 shares of common stock that were purchased on December 31, 2019 at $0.50 per share for proceeds of $25,000. Prior to the issuance, the purchase price was reflected on the Company’s balance sheet as subscriptions payable.

 

Common Stock Awarded for Subscriptions Payable

 

On September 21, 2020, the Company awarded 250,000 shares of common stock to a consultant for services performed. The aggregate fair value of the common stock was $45,000 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on November 18, 2020. Prior to the issuance, the fair value of the shares was reflected on the Company’s balance sheet as subscriptions payable.

 

Common Stock Issued for Services, Employees and Consultants

 

On July 1, 2020, the Company awarded an aggregate of 875,000 shares of common stock to four employees and consultants for services provided. The aggregate fair value of the common stock was $332,500 based on the closing price of the Company’s common stock on the date of grant.

 

On June 3, 2020, the Company awarded 200,000 shares of common stock to a consultant for services performed. The aggregate fair value of the common stock was $120,000 based on the closing price of the Company’s common stock on the date of grant.

 

On various dates between January 4, 2020 and May 31, 2020, the Company awarded an aggregate of 2,006,000 shares of common stock to ten employees and consultants for services provided. The aggregate fair value of the common stock was $1,318,000 based on the closing price of the Company’s common stock on the date of grant.

 

Common Stock Issued for Services, Officers and Directors

 

On June 3, 2020, the Company awarded 500,000 shares of common stock to the Company’s Chief Executive Officer, Isiah L. Thomas III, as a signing bonus. The aggregate fair value of the common stock was $275,000 based on the closing price of the Company’s common stock on the date of grant.

 

On June 3, 2020, the Company awarded 2,000,000 shares of common stock to the Company’s former Chief Executive Officer, Craig Ellins, pursuant to a Separation Agreement. The aggregate fair value of the common stock was $1,100,000 based on the closing price of the Company’s common stock on the date of grant.

 

On May 31, 2020, the Company awarded 350,000 shares of common stock to the Company’s Chairman of the Board, Dr. Ken Perego, for services provided. The aggregate fair value of the common stock was $196,000 based on the closing price of the Company’s common stock on the date of grant.

 

Amortization of Stock-Based Compensation

 

A total of $1,875,623 of stock-based compensation expense was recognized from the amortization of options to purchase common stock over their vesting period during the nine months ended September 30, 2020.

 

Note 16 – Common Stock Options

 

Stock Incentive Plan

 

On February 12, 2020, the Company’s stockholders approved our 2019 Stock Incentive Plan (the “2019 Plan”), which had been adopted by the Company’s Board of Directors (the “Board”) as of December 10, 2019. The 2019 Plan provides for the issuance of up to 10,000,000 shares of common stock to the Company and its subsidiaries’ employees, officers, directors, consultants and advisors, stock options (non-statutory and incentive), restricted stock awards, stock appreciation rights (“SARs”), restricted stock units (“RSUs”) and other performance stock awards. Options granted under the 2019 Plan may either be intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or may be non-qualified options, and are exercisable over periods not exceeding ten years from date of grant. Unless sooner terminated in accordance with its terms, the Stock Plan will terminate on December 10, 2029.

 

17

 

 

ONE WORLD PHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Common Stock Options Issued for Services

 

On July 1, 2020, the Company awarded options to purchase 125,000 shares of the Company’s Common Stock at an exercise price equal to $0.38 per share to a consultant. The options were issued outside of the Company’s 2019 Plan and are exercisable over a ten year period. The options will vest quarterly over six months. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 303% and a call option value of $0.3798, was $47,476. The options are being expensed over the vesting period, resulting in $23,738 of stock-based compensation expense during the nine months ended September 30, 2020. As of September 30, 2020, a total of $23,738 of unamortized expenses are expected to be expensed over the vesting period.

 

On July 1, 2020, the Company awarded options to purchase 1,000,000 shares of the Company’s Common Stock at an exercise price equal to $0.38 per share to a consultant. The options were issued outside of the Company’s 2019 Plan and are exercisable over a ten year period. The options will vest quarterly over three years. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 303% and a call option value of $0.38, was $379,958. The options are being expensed over the vesting period, resulting in $31,663 of stock-based compensation expense during the nine months ended September 30, 2020. As of September 30, 2020, a total of $348,295 of unamortized expenses are expected to be expensed over the vesting period.

 

On July 1, 2020, the Company awarded options to purchase 125,000 shares of the Company’s Common Stock at an exercise price equal to $0.38 per share to a consultant for Advisory Board services. The options were issued outside of the Company’s 2019 Plan and are exercisable over a ten year period. The options will vest quarterly over one year. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 303% and a call option value of $0.3799, was $47,482. The options are being expensed over the vesting period, resulting in $11,871 of stock-based compensation expense during the nine months ended September 30, 2020. As of September 30, 2020, a total of $35,611 of unamortized expenses are expected to be expensed over the vesting period.

 

On June 3, 2020, the Company awarded options to purchase 5,500,000 shares of the Company’s Common Stock at an exercise price equal to $0.55 per share to Isiah L. Thomas III, the Company’s Chief Executive Officer and Vice Chairman. The options were issued outside of the Company’s 2019 Plan and are exercisable over a ten year period. The options vest as to 1,500,000 shares immediately, as to 1,000,000 shares 120 days following the issuance of the option (the “Second Vesting Date”), and as to the remaining 3,000,000 shares vesting quarterly over the three years following the Second Vesting Date. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 301% and a call option value of $0.5499, was $3,024,689. The options are being expensed over the vesting period, resulting in $1,040,366 of stock-based compensation expense during the nine months ended September 30, 2020. As of September 30, 2020, a total of $1,984,323 of unamortized expenses are expected to be expensed over the vesting period.

 

On May 31, 2020, the Company awarded options to purchase 350,000 shares of the Company’s Common Stock at an exercise price equal to $0.56 per share to the Company’s Chairman of the Board, Dr. Ken Perego. The options vest as to 116,667 shares immediately, with the remaining 233,333 shares vesting quarterly over the following two years, beginning October 1, 2020. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 302% and a call option value of $0.5599, was $195,959. The options are being expensed over the vesting period, resulting in $86,263 of stock-based compensation expense during the nine months ended September 30, 2020. As of September 30, 2020, a total of $109,696 of unamortized expenses are expected to be expensed over the vesting period.

 

On May 31, 2020, the Company awarded options to purchase 350,000 shares of the Company’s Common Stock at an exercise price equal to $0.56 per share to Bruce Raben, a Director of the Company. The options vest as to 116,667 shares immediately, with the remaining 233,333 shares vesting quarterly over the following two years, beginning October 1, 2020. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 302% and a call option value of $0.5599, was $195,959. The options are being expensed over the vesting period, resulting in $86,263 of stock-based compensation expense during the nine months ended September 30, 2020. As of September 30, 2020, a total of $109,696 of unamortized expenses are expected to be expensed over the vesting period.

 

On May 31, 2020, the Company awarded options to purchase an aggregate 2,000,000 shares of the Company’s Common Stock at an exercise price equal to $0.56 per share to eight consultants and employees. The options vest as to 666,667 shares immediately, with the remaining 1,333,333 shares vesting quarterly over the following three years, beginning October 1, 2020. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 302% and a call option value of $0.5599, was $1,119,873. The options are being expensed over the vesting period, resulting in $454,181 of stock-based compensation expense during the nine months ended September 30, 2020. As of September 30, 2020, a total of $665,692 of unamortized expenses are expected to be expensed over the vesting period.

 

18

 

 

ONE WORLD PHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 17 – 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, 2020, and the year ended December 31, 2019, 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, 2020, the Company had approximately $5,748,000 of federal net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2025.

 

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, 2020 and December 31, 2019, respectively.

 

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

 

Note 18 – Subsequent Events

 

Debt Financing

 

On October 28, 2020, the Company received an advance of $50,000 from the Company’s Chief Executive Officer, Isiah L Thomas, III, pursuant to an unsecured promissory note due on demand that carried a 6% interest rate.

 

Preferred Stock Sales

 

On October 28, 2020, the Company received proceeds of $50,000 from the sale of 5,000 units to SWC Medical LLC. Each unit consisted of one share of Series A Preferred Stock and five-year warrants to purchase 50 shares of common stock at an exercise price of $0.25 per share. The proceeds received were allocated between the preferred stock and warrants on a relative fair value basis.

 

Common Stock Issued on Subscriptions Payable

 

On November 19, 2020, the Company issued 250,000 shares of common stock awarded on September 21, 2020 to a consultant for services performed. Prior to the issuance, the fair value of such shares was reflected on the Company’s balance sheet as subscriptions payable.

 

19

 

 

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, 2019 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. 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 Form 10-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

 

Through our wholly-owned subsidiary, One World Pharma S.A.S, a licensed cannabis cultivation, production and distribution (export) company located in Popayán, Colombia (nearest major city is Cali), we plan to produce 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 few 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. We generated initial sales of fully registered non-psychoactive seeds during the second quarter of 2020.

 

On June 3, 2020, we appointed Isiah L. Thomas III to serve as the Company’s Chief Executive Officer and Vice Chairman pursuant to a letter agreement with the Company; entered into a Separation and Release Agreement with Craig Ellins, pursuant to which Mr. Ellins resigned from all of his positions with the Company and its subsidiaries, including his positions as Chief Executive Officer and Chairman of the Board of the Company; and appointed Dr. Kenneth Perego, II to serve as the Executive Chairman of the Company’s Board of Directors.

 

Mr. Thomas, 59, has been the Chairman and Chief Executive Officer of Isiah International, LLC, a holding company with interests in a diversified portfolio of businesses, since 2011. Mr. Thomas also has been a Commentator and Analyst for NBA TV, since 2014, and Turner Sports, since 2012. He previously served as the President & Alternate Governor of the New York Liberty of the Women’s National Basketball Association from 2015 to February 2019, the Head Basketball Coach at Florida International University, from 2009 to 2012, the General Manager, President of Basketball Operation and Head Coach of the New York Knicks of the National Basketball Association (“NBA”), from 2006 to 2008, the Head Coach of the Indiana Pacers of the NBA from 2000 to 2003, the Owner of the Continental Basketball Association from 1998 to 2000, Minority Owner & Executive Vice President of the Toronto Raptors of the NBA from 1994 to 1998 and point guard for the Detroit Pistons of the NBA from 1981 to 1994. Mr. Thomas has served as a director of Get in Chicago, an organization focused on stopping gun and related violence in Chicago, since 2013, and as a director of Madison Square Garden Entertainment Corp. since April 2020. He is also the Founder of Mary’s Court Foundation, a charitable organization established in 2010.

 

20

 

 

Results of Operations for the Three Months Ended September 30, 2020 and 2019:

 

The following table summarizes selected items from the statement of operations for the three months ended September 30, 2020 and 2019.

 

   Three Months Ended September 30,   Increase /