RISK
FACTORS
An
investment in our securities involves a high degree of risk. You should carefully consider the following risk factors in addition
to other information in this prospectus before purchasing our securities. The risks and uncertainties described below are those
that we currently deem to be material and that we believe are specific to our company, our industry and our securities. In addition
to these risks, our business may be subject to risks currently unknown to us. If any of these or other risks actually occurs,
our business may be adversely affected, the trading price of our common securities may decline and you may lose all or part of
your investment.
Risks
Relating to our Business
Limited
Operating History
We
are an early stage company that has not generated any revenues and, we have a limited operating history upon which our business
and future prospects may be evaluated. To date, we have suffered recurring losses from operations and have an accumulated deficit
of approximately $4,608,726 as of June 30, 2019. We will be subject to all of the business risks and uncertainties associated
with any new business enterprise, including the risk that we will not achieve our operating goals. In order for us to meet future
operating requirements, we will need to successfully grow, harvest and sell our cannabis products. Until such time as we are able
to fund our business from operations, we will be required to raise funds through various sources, including the sale of equity
and debt securities, Failure to generate cash from operations and to reach profitability may adversely affect our success.
Change
of Cannabis Laws, Regulations and Guidelines
Cannabis
laws and regulations are dynamic and subject to evolving interpretations which could require us to incur substantial costs associated
with compliance or alter certain aspects of our business plan. Regulations may be enacted in the future that will be directly
applicable to certain aspects of our businesses. We cannot predict the nature of any future laws, regulations, interpretations
or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures,
when and if promulgated, could have on our business. Management expects that the legislative and regulatory environment in the
cannabis industry in Colombia and internationally will continue to be dynamic and will require innovative solutions to try to
comply with this changing legal landscape in this nascent industry for the foreseeable future. Compliance with any such legislation
may have a material adverse effect on our business, financial condition and results of operations.
Public
opinion can also exert a significant influence over the regulation of the cannabis industry. A negative shift in the public’s
perception of the cannabis industry could affect future legislation or regulation in different jurisdictions.
Reliance
on Colombian Licenses, Authorizations and Quotas
Our
ability to import seeds, grow, store and sell cannabis and hemp in Colombia or internationally is dependent on our ability
to sustain and/or obtain the necessary licenses and authorizations by certain authorities in Colombia and/or the importing jurisdiction.
The licenses and authorizations are subject to ongoing compliance and reporting requirements and our ability to obtain, sustain
or renew any such licenses and authorizations on acceptable terms is subject to changes in regulations and policies and to the
discretion of the applicable authorities or other governmental agencies in foreign jurisdictions. Failure to comply with the requirements
of the licenses or authorizations or any failure to maintain the licenses or authorizations would have a material adverse impact
on our business, financial condition and operating results. In addition, Colombian regulators limit the cultivation and sale of
psychoactive cannabis by Quotas issued on an annual basis to licensed producers.
Although
we believe that we will meet the requirements to obtain, sustain or renew the necessary licenses and authorizations, there can
be no guarantee that the applicable authorities will issue these licenses or authorizations. In addition, to date we have not
been issued Quotas that would allow us to commence the commercial sale of psychoactive cannabis products. Should the authorities
fail to issue the necessary licenses or authorizations, including required Quotas, we may be curtailed or prohibited from the
production and/or distribution of cannabis and hemp or from proceeding with the development of our operations as currently proposed
and our business, financial condition and results of the operation may be materially adversely affected.
Regulatory
Compliance Risks
Achievement
of our business objectives is contingent, in part, upon compliance with regulatory requirements enacted by applicable governmental
authorities and obtaining all regulatory approvals, where necessary, for the sale of our products in Colombia and other jurisdictions
where we intend to distribute and sell our products. We will incur ongoing costs and obligations related to regulatory compliance.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder,
including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective
measures requiring capital expenditures, installation of additional equipment, or remedial actions. Civil or criminal fines or
penalties may be imposed on us for violations of applicable laws or regulations. Vigorous enforcement of these laws could require
extensive changes to our operations, increase our compliance costs or give rise to material liabilities, which could have a material
adverse effect on our business, results of operations and financial condition.
Competition
There
are many companies engaged in the cannabis business who we will compete with, including larger and more established companies
with substantially greater marketing, financial, human and other resources than we have. These companies include PharmaCielo,
CannaVida, Empresa Colombiana de Cannabis, Khiron Life Sciences Corp., MedCan, Canopy Growth Corporation, and Clever Leaves. Although
we believe we are competitively positioned to be a leader in the medicinal cannabis industry given our early entry into the market,
the management team’s expertise in medical product branding, marketing, quality control, and market relationships,
competition in the medical cannabis industry is growing quickly. As more competitors enter the market, prices may be reduced.
We believe our approach in creating brand loyalty will allow us to effectively compete in the market but there is no assurance
that will be the case, and our competitors may adopt a similar or identical approach. To date, we have obtained four licenses
in Colombia that authorize us to engage in cannabis activities, and there are currently few authorized producers there. However,
Colombia offers an open process to apply for licenses and there are no significant barriers to entry. As a result, our ability
to generate revenues and earnings may be reduced as competition intensifies, thereby causing a material adverse effect on our
business and financial condition.
Ability
to Establish and Maintain Bank Accounts
Many
banking institutions in countries where we or our prospective customers operate will not accept payments related to the cannabis
industry, whether owing to domestic laws and regulations or pressure exerted by the United States on banks with laws subject to
the laws of the United States (including, the Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (USA PATRIOT Act)). Failure to conduct our business through normal banking channels may impede our ability
to make payments for goods and services and transact business in the ordinary course. Failure to operate in normal banking channels
may also increase our cost of doing business and negatively affect our business. In the event financial service providers do not
accept accounts or transactions related to the cannabis industry, it is possible that we may be required to seek alternative payment
solutions. If the industry was to move towards alternative payment solutions we would have to adopt policies and protocols to
manage our volatility and exchange rate risk exposures. Our inability to manage such risks may adversely affect our operations
and financial performance.
Anti-money
Laundering Laws and Regulations
We
are subject to a variety of laws and regulations within Colombia and internationally that involve money laundering, financial
recordkeeping and proceeds of crime. In the event that any of our investments, or any proceeds thereof, any dividends or distributions
therefrom, or any profits or revenues accruing from such investments are found to be in violation of money laundering legislation
or otherwise, such transactions may be viewed as proceeds of crime under applicable legislation. Money laundering laws could restrict
or otherwise jeopardize our ability to declare or pay dividends, effect other distributions or subsequently cause the repatriation
of such funds back to the United States or to any shareholders’ jurisdiction of residence. Furthermore, while we have no
current intention to declare or pay dividends on our Common Stock in the foreseeable future, in the event that a determination
was made that the revenues from our cannabis operations could reasonably be shown to constitute proceeds of crime, we may decide
or be required to suspend declaring or paying dividends without advance notice and for an indefinite period of time.
Foreign
Trade Policies
Our
prospective international operations are subject to inherent risks, including changes in the regulations governing the flow of
cannabis products between countries, fluctuations in currency values, discriminatory fiscal policies, unexpected changes in local
regulations and laws and the uncertainty of enforcement of remedies in foreign jurisdictions. In addition, foreign jurisdictions
could impose tariffs, quotas, trade barriers and other similar restrictions on our international sales and subsidize competing
cannabis products. All of these risks could result in increased costs or decreased revenues.
United
States Regulation
Although
we do not believe that our limited U.S. activity will subject us to regulation under U.S. federal or state laws applicable to
the sale of cannabis and marijuana, we cannot assure you that current or future U.S. laws and regulations will not detrimentally
affect our business. Local, state and federal cannabis laws and regulations in the United States are constantly changing and they
are subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or to alter
one or more of our product or service offerings. In addition, violations of these laws, or allegations of such violations, could
disrupt our business and result in a material adverse effect on our revenues, profitability, and financial condition. We cannot
predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional
governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.
Liability,
Enforcement, Complaints, etc.
Our
participation in the cannabis and hemp industries may lead to litigation, formal or informal complaints, enforcement actions,
and inquiries by third parties, other companies and/or various governmental authorities against us. Litigation, complaints, and
enforcement actions involving us could consume considerable amounts of financial and other corporate resources, which could have
an adverse effect on our future cash flows, earnings, results of operations and financial condition.
Legal
Proceedings
From
time to time, we may be a party to legal and regulatory proceedings, including matters involving governmental agencies, entities
with whom we do business and other proceedings arising in the ordinary course of business. We will evaluate our exposure to these
legal and regulatory proceedings and establish reserves for the estimated liabilities in accordance with generally accepted accounting
principles. Assessing and predicting the outcome of these matters involves substantial uncertainties. Unexpected outcomes in these
legal proceedings, or changes in management’s evaluations or predictions and accompanying changes in established reserves,
could have an adverse impact on our financial results.
Environmental
Regulations
We
are subject to Colombian environmental laws governing the use of natural resources, which prohibit such use that causes harm to
the interests of the community or of third parties. Parties that cause environmental damage while acting under the authority of
a permit are responsible for incurring the costs to rectify the damage. The imposition of environmental sanctions is in addition
to civil and criminal penalties that may be imposed. Environmental damage caused while a party is acting without a license may
lead to the imposition of sanctions, in addition to civil or criminal proceedings. Parties that cause environmental damage, in
addition to sanctions or penalties that apply, are also required to carry out studies to assess the characteristics of the damage.
Colombian environmental authorities may investigate potential claims, authorize preventative measures, or impose sanctions on
parties breaching environmental law. Any such measures imposed on us could have a material adverse effect on our business.
Demand
for Cannabis and Derivate Products
The
global sale of cannabis and hemp products is a new industry as a result of recent legal and regulatory changes. Although we expect
the demand for licensed cannabis to be in excess of the supply being produced by the licensed producers, there is a risk that
such demand does not develop as anticipated. Further, there is a risk that the adoption rate by pharmacies to sell medical cannabis
is lower than expected or that such adoption rate may take longer than anticipated. There is also a risk that the international
export market for medicinal cannabis and extracts, such as CBD, CBG and CBC, will not materialize as projected or not be commercially
viable. Should any of such events materialize, they may have a material adverse effect on our business, results of operations
and financial condition.
Weather,
Climate Change and Risks Inherent in an Agricultural Business
Our
business involves growing cannabis, which is an agricultural product. Although our medical cannabis is intended to be grown in
greenhouses, hemp used as feedstock for medicinal extracts and derivatives will be grown both outdoors and in greenhouses. Further,
our prospective Colombian medicinal cannabis operations will initially focus on outdoor production. The occurrence of severe adverse
weather conditions, especially droughts, hail, floods or frost, is unpredictable and may have a potentially devastating impact
on agricultural production and may otherwise adversely affect the supply of cannabis and hemp. Adverse weather conditions may
be exacerbated by the effects of climate change and may result in the introduction and increased frequency of pests and diseases.
The effects of severe adverse weather conditions may reduce our yields or require us to increase our level of investment to maintain
yields. Additionally, higher than average temperatures and rainfall can contribute to an increased presence of insects and pests,
which could negatively affect cannabis crops. Future droughts could reduce the yield and quality of our cannabis production, which
could materially and adversely affect our business, financial condition and results of operations.
The
occurrence and effects of plant disease, insects and pests can be unpredictable and devastating to agriculture, potentially rendering
all or a substantial portion of the affected harvests unsuitable for sale. Even when only a portion of the production is damaged,
our results of operations could be adversely affected because all or a substantial portion of the production costs may have been
incurred. Although some plant diseases are treatable, the cost of treatment can be high and such events could adversely affect
our operating results and financial condition. Furthermore, if we fail to control a given plant disease and the production is
threatened, we may be unable to supply our customers, which could adversely affect our business, financial condition and results
of operations. There can be no assurance that natural elements will not have a material adverse effect on any such production.
Product
Liability
As
a manufacturer and distributor of products designed to be ingested or inhaled by humans, we face an inherent risk of exposure
to product liability claims, regulatory action and litigation if our products are alleged to have caused damages, loss or injury.
In addition, the sale of our products involve the risk of injury to consumers due to tampering by unauthorized third parties or
product contamination. Adverse reactions resulting from human consumption of our products alone or in combination with other medications
or substances could occur. We may be subject to various product liability claims, including, among others, that our products caused
injury or illness, include inadequate instructions for use or include inadequate warnings concerning health risks, possible side
effects or interactions with other substances. A product liability claim or regulatory action against us could result in increased
costs, could adversely affect our reputation with our clients and consumers generally, and could have a material adverse effect
on our results of operations and financial condition. There can be no assurances that we will be able to obtain or maintain product
liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and
may not be available in the future on acceptable terms, or at all.
Energy
Prices and Supply
We
require substantial amounts of diesel and electric energy and other resources for our harvest activities and to transport cannabis
and hemp. We rely upon third parties for our supply of energy resources used in our operations. The prices for and availability
of energy resources may be subject to change or curtailment, respectively, due to, among other things, new laws or regulations,
imposition of new taxes or tariffs, interruptions in production by suppliers, imposition of restrictions on energy supply by government,
worldwide price levels and market conditions. If our energy supply is cut for an extended period of time and we are unable to
find replacement sources at comparable prices, or at all, our business, financial condition and results of operations would be
materially and adversely affected.
Retention
and Acquisition of Skilled Personnel
We
will be required to attract and retain top quality talent to compete in the marketplace. We believe our future growth and
success will depend in part on our abilities to attract and retain highly skilled managerial, product development, sales and marketing,
and finance personnel. There can be no assurance of success in attracting and retaining such personnel. Shortages in qualified
personnel could limit our ability to be successful. At present and for the near future, we will depend upon a relatively small
number of employees primarily in Colombia to develop, manufacture, market, sell and distribute our products. As the size of our
business increases, we will seek to hire additional employees in other jurisdictions. Expansion of marketing and distribution
of our products will require us to find, hire and retain additional capable employees who can understand, explain, market and
sell our products and/or our ability to enter into satisfactory logistic arrangements to sell our products. There is intense competition
for capable personnel in all of these areas and we may not be successful in attracting, training, integrating, motivating, or
retaining new personnel or subcontractors for these required functions.
Emerging
Market Risks
Emerging
market investment generally poses a greater degree of risk than investment in more mature market economies because the economies
in the developing world are more susceptible to destabilization resulting from domestic and international developments.
Colombia’s
legal and regulatory requirements in connection with companies conducting agricultural activities, banking system and controls
as well as local business culture and practices are different from those in the United States. Our officers and directors must
rely, to a great extent, on our local legal counsel and local consultants retained by us in order to keep abreast of material
legal, regulatory and governmental developments as they pertain to and affect our business operations, and to assist us with our
governmental relations. We must rely, to some extent, on the members of management who have previous experience working and conducting
business in Colombia to enhance our understanding of and appreciation for the local business culture and practices in such countries.
We also rely on the advice of local experts and professionals in connection with current and new regulations that develop in respect
of banking, financing and tax matters. Any developments or changes in such legal, regulatory or governmental requirements or in
local business practices are beyond our control and may adversely affect our business.
We
also bear the risk that changes can occur to the Government in Colombia and a new government may void or change the laws and regulations
that we are relying upon. Currently, there are no restrictions on the repatriation from Colombia of earnings to foreign entities
and Colombia has never imposed such restrictions. However, there can be no assurance that restrictions on repatriation of earnings
will not be imposed in the future. Exchange control regulations for Colombia require that any proceeds in foreign currency originated
on exports of goods from Colombia be repatriated to Colombia. However, purchase of foreign currency is allowed through Colombian
authorized financial entities for purposes of payments to foreign suppliers, repayment of foreign debt, payment of dividends to
foreign stockholders and other foreign expenses.
Due
to our location in Colombia, our business, financial position and results of operations may be affected by the general conditions
of the Colombian economy, price instabilities, currency fluctuations, inflation, interest rates, regulatory changes, taxation
changes, social instabilities, political unrest and other developments in or affecting Colombia, over which we do not have control.
Risks
Related to Conducting Operations in Colombia
We
recently were granted medicinal cannabis licenses in Colombia. Over the past 10 to 15 years, the Government of Colombia has made
strides in improving the social, political, economic, legal and fiscal regimes. However, operations in Colombia will still be
subject to risk due to the potential for social, political, economic, legal and fiscal instability. The Government of Colombia
faces ongoing problems including, but not limited to, unemployment and inequitable income distribution and unstable neighboring
countries. The instability in neighboring countries could result in an influx of immigrants resulting in a humanitarian crisis
and/or increased illegal activities. Colombia is also home to a number of insurgency groups and large swaths of the countryside
are under guerrilla influence. In addition, Colombia experiences narcotics-related violence, a prevalence of kidnapping, extortion
and thefts and civil unrest in certain areas of the country. Such instability may require us to suspend operations on our properties.
Other
risks exist relating to the conduct of business in Colombia. These risks include the future imposition of special taxes or similar
charges, as well as foreign exchange fluctuations and currency convertibility and controls. Other risks of doing business in Colombia
include our ability to enforce our contractual rights or the taking or nationalization of property without fair compensation,
restrictions on the use of expatriates in our operations, renegotiation or nullification of existing concessions, licenses, permits
and contracts, changes in taxation policies, or other matters.
The
Government of Colombia recently reached a peace accord with the country’s largest guerrilla group. The Government of Colombia
also entered into and dissolved formal discussions with the country’s second largest guerrilla group due to their unwillingness
to cease criminal and violent crimes. There is no certainty that the agreements will be adhered to by all of the members of the
guerrilla groups or that a peace agreement will be ultimately reached with the country’s second largest guerrilla group.
There is a risk that any peace agreement might contain new laws or change existing laws that could have a material adverse effect
on us. Furthermore, the achievement of peace with the country’s guerrilla groups could create additional social or political
instability in the immediate aftermath, which could have a material adverse effect on our operations.
Global
Economy
Financial
and commodity markets in Colombia are influenced by the economic and market conditions in other countries, including other South
American and emerging market countries and other global markets. Although economic conditions in these countries may differ significantly
from economic conditions in Colombia, investors’ reactions to developments in these other countries, such as the recent
developments in the global financial markets, may substantially affect the capital flows into, and the market value of securities
of issuers with operations in Colombia.
Insurance
Coverage
Our
production is, in general, subject to different risks and hazards, including adverse weather conditions, fires, plant diseases
and pest infestations, other natural phenomena, industrial accidents, labor disputes, changes in the legal and regulatory framework
applicable to us, and environmental contingencies. We will endeavor to obtain appropriate insurance covering these risks in amounts
sufficient to support a downturn in the sale of our products due to these potential production risks. The cost of such insurance
may be high and we may not be able to obtain sufficient amount of insurance to cover these risks.
Operations
in Spanish
As
a result of our conducting most of our operations in Colombia, our regulatory licenses and books and records, including key documents
such as material contracts and financial documentation, are principally negotiated and entered into in the Spanish language and
English translations may not exist or be readily available.
General
Business Risks
Inability
to Manage Growth
We
may not be able to effectively manage our growth. Our strategy envisions growing our business. We plan to expand our production
and manufacturing capability and create a distribution network on a global basis. Any growth in or expansion of our business is
likely to continue to place a strain on our management and administrative resources, infrastructure and systems. As with other
growing businesses, we expect that we will need to further refine and expand our business development capabilities, our systems
and processes and our access to financing sources. We also will need to hire, train, supervise and manage new employees. These
processes are time consuming and expensive, will increase management responsibilities and will divert management attention. We
cannot assure you that we will be able to:
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expand our systems effectively
or efficiently or in a timely manner;
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create a distribution network
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allocate our human resources optimally;
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meet our capital needs;
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identify and hire qualified employees or retain
valued employees; or
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obtain and maintain necessary licenses in relevant
jurisdictions
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Our
inability or failure to manage our growth and expansion effectively could harm our business and materially and adversely affect
our operating results and financial condition.
Speculative
Forecasts
Any
forecasts we provide will be highly speculative in nature and we cannot predict results in a development stage company with a
high degree of accuracy. Any financial projections, especially those based on ventures with minimal operating history, are inherently
subject to a high degree of uncertainty, and their ultimate achievement depends on the timing and occurrence of a complex series
of future events, both internal and external to the enterprise. There can be no assurance that potential revenues or expenses
we project will be accurate.
Limited
Management Team
Our
limited senior management team size may hamper our ability to effectively manage a publicly traded company while operating our
business. Our management team has experience in the management of publicly traded companies and complying with federal securities
laws, including compliance with recently adopted disclosure requirements on a timely basis. They realize it will take significant
resources to meet these requirements while simultaneously working on cultivating, developing and distributing our products. Our
management will be required to design and implement appropriate programs and policies in responding to increased legal, regulatory
compliance and reporting requirements, and any failure to do so could lead to the imposition of fines and penalties and harm our
business.
Risks
Related to our Common Stock and this Offering
Limited
Trading
Although
prices for shares of our Common Stock are quoted on the OTC Markets, there is little current trading and no assurance can be given
that an active public trading market will develop or, if developed, that it will be sustained. The OTC Markets is generally regarded
as a less efficient and less prestigious trading market than other national markets. There is no assurance if or when our Common
Stock will be quoted on another more prestigious exchange or market. The market price of our Common Stock is likely to be highly
volatile because for some time there will likely be a thin trading market for the stock, which causes trades of small blocks of
stock to have a significant impact on the stock price.
Penny
Stock Risk
Because
our Common Stock is a “penny stock,” trading therein will be subject to regulatory restrictions. Our Common Stock
is currently, and in the near future will likely continue to be, considered a “penny stock.” The SEC has adopted rules
that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks generally are equity securities
with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to transactions in such securities is provided by the
exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny
stocks and the nature and significance of risks of the penny stock market. The broker-dealer also must provide the customer with
bid and offer quotations for the penny stock, the compensation of the broker-dealer and any salesperson in the transaction, and
monthly account statements indicating the market value of each penny stock held in the customer’s account. In addition,
the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer
must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s
written agreement to the transaction. These disclosure and other requirements may adversely affect the trading activity in the
secondary market for our Common Stock.
No
Dividend Payments
We
have not paid dividends in the past and we do not expect to pay dividends for the foreseeable future, and any return on investment
may be limited to potential future appreciation on the value of our Common Stock. Our payment of any future dividends will be
at the discretion of our board of directors after taking into account various factors, including without limitation, our financial
condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the
time. To the extent we do not pay dividends, our stock may be less valuable because a return on investment will only occur if
and to the extent the stock price appreciates, which may never occur. In addition, shareholders must generally rely on sales of
the shares they own after price appreciation as the only way to realize their investment, and if the price of our Common Stock
does not appreciate, then there will be no return on investment.
Control
of Common Stock will Influence Decision Making
Our
officers, directors and principal stockholders are able to exert significant influence over us and may make decisions that are
not in the best interests of all stockholders. Our officers, directors and principal stockholders (greater than 5% stockholders)
collectively own approximately 30.2% of our fully-diluted Common Stock. As a result of such ownership, these stockholders are
able to affect the outcome of, or exert significant influence over, all matters requiring stockholder approval, including the
election and removal of directors and any change in control. In particular, this concentration of ownership of our Common Stock
could have the effect of delaying or preventing a change of control of our company or otherwise discouraging or preventing a potential
acquirer from attempting to obtain control of our company. This, in turn, could have a negative effect on the market price of
our Common Stock. It could also prevent our stockholders from realizing a premium over the market prices for their shares of our
Common Stock.
We
are an Emerging Growth Company Within the Meaning of the Securities Act.
We
are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may
take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are
not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports
and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access
to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances
could cause us to lose that status earlier, including if the market value of our Common Stock held by non-affiliates exceeds $700
million as of the end of any second quarter of a fiscal year, in which case we would no longer be an emerging growth company as
of the end of such fiscal year. We cannot predict whether investors will find our securities less attractive because we will rely
on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the
trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our
securities and the trading prices of our securities may be more volatile.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have
elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different
application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at
the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another
public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended
transition period difficult or impossible because of the potential differences in accountant standards used.
Antitakeover
Protections
Anti-takeover
provisions may limit the ability of another party to acquire us, which could cause our stock price to decline. Our articles of
incorporation, as amended, bylaws and Nevada law contain provisions that could discourage, delay or prevent a third party from
acquiring us, even if doing so may be beneficial to our stockholders. In addition, these provisions could limit the price investors
would be willing to pay in the future for shares of our Common Stock.
Increased
Compliance Costs
The
requirements of being a public company, including compliance with the reporting requirements of the Securities Exchange Act of
1934, as amended, and the requirements of the Sarbanes-Oxley Act of 2002, may strain our resources, increase our costs and distract
management, and we may be unable to comply with these requirements in a timely or cost-effective manner. As a public company,
we need to comply with laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act of
2002, related regulations of the SEC, and requirements of the principal trading market upon which our Common Stock may trade,
with which we are not required to comply as a private company. As a result, the combined business will incur significant legal,
accounting and other expenses that a private company would not incur. Complying with these statutes, regulations and requirements
will occupy a significant amount of the time of our board of directors and management, will require us to have additional finance
and accounting staff, may make it more difficult to attract and retain qualified officers and members of our board of directors,
particularly to serve on the audit committee, and may make some activities more difficult, time consuming and costly. We will
need to:
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institute a more comprehensive
compliance function;
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establish new internal policies, such as those
relating to disclosure controls and procedures and insider trading;
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design, establish, evaluate and maintain a system
of internal control over financial reporting in compliance with the requirements of the Sarbanes-Oxley Act of 2002 and the
related rules and regulations of the SEC and the Public Company Accounting Oversight Board;
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prepare and distribute periodic reports in compliance
with its obligations under the federal securities laws including the Securities Exchange Act of 1934, as amended, or Exchange
Act;
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|
|
●
|
involve and retain to a greater degree outside
counsel and accountants in the above activities; and
|
|
|
|
|
●
|
establish an investor relations function.
|
If
we are unable to accomplish these objectives in a timely and effective fashion for our business, our ability to comply with financial
reporting requirements and other rules that apply to reporting companies could be impaired. If our finance and accounting personnel
insufficiently support our business in fulfilling these public-company compliance obligations, or if we are unable to hire adequate
finance and accounting personnel, we could face significant legal liability, which could have a material adverse effect on our
financial condition and results of operations. Furthermore, if we identify any issues in complying with those requirements (for
example, if our company or the independent registered public accountants identified a material weakness or significant deficiency
in our company’s internal control over financial reporting), we could incur additional costs rectifying those issues, and
the existence of those issues could adversely affect, our reputation or investor perceptions of our company.
MARKET
PRICE AND DIVIDENDS
Market
Price for our Common Stock
Our
Common Stock is currently quoted on the OTC Markets under the trading symbol “OWPC.” Prior to February 7, 2019, the
symbol for our Common Stock was “PNTT.” Since the commencement of trading, there has been an extremely limited market
for our Common Stock. The following table sets forth, for the fiscal quarters indicated, the high and low bid information for
our Common Stock, as reported on the OTC Markets, and have not been adjusted for the one-for-four reverse stock split of our Common
Stock effected on January 10, 2019. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
|
|
High
|
|
|
Low
|
|
Fiscal Year Ended December 31, 2017
|
|
|
|
|
|
|
First Quarter
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
Second Quarter
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
Third Quarter
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
Fourth Quarter
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
Second Quarter
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
Third Quarter
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
Fourth Quarter
|
|
$
|
4.04
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending December 31, 2019
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
4.10
|
|
|
$
|
0.78
|
|
Second Quarter
|
|
$
|
4.00
|
|
|
$
|
2.00
|
|
Third Quarter
|
|
$
|
4.00
|
|
|
$
|
3.00
|
|
Fourth Quarter (through October 2, 2019)
|
|
$
|
3.00
|
|
|
$
|
1.34
|
|
Holders
As
of October 2, 2019, there were approximately 105 registered holders of record of our Common Stock.
Dividends
We
do not anticipate paying dividends in the foreseeable future and currently intend to retain any future earnings to support the
development and expansion of our business. The declaration and payment of dividends is subject to the discretion of our board
of directors and to certain limitations imposed under Nevada statutes. The timing, amount and form of dividends, if any, will
depend upon, among other things, our results of operation, financial condition, cash requirements, and other factors deemed relevant
by our board of directors.
OUR
BUSINESS
On
February 21, 2019, we 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 us 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.
Immediately
prior to the Closing, we were a public “shell” company with nominal assets. As of the Closing, we are no longer a
public shell. As a result of the Merger, we are engaged in OWP Ventures’ business, including the business of its wholly-owned
subsidiary, One World Pharma, S.A.S., a Colombian company (“OWP Colombia”). With respect to this discussion, the terms
“we,” “us,” “our” and “our company” refers to One World Pharma, Inc. and its wholly-owned
direct and indirect subsidiaries, OWP Ventures and OWP Colombia.
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 from Colombian regulators 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 first companies in Colombia to receive
licenses for seed, cultivation, extraction and export from the Colombian government (the “Licenses”).
We
planted our first crop of cannabis in Popayan, Colombia in 2018, and began initial 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 intend
to commence limited shipping of non-psychoactive products to customers in the first quarter of 2020. Although we hold the four
Colombian Licenses, we will need to obtain additional approvals from Colombian regulators before we can fully execute our business
plan, particularly with respect to the sale psychoactive products. As described further under “Regulation” below,
|
●
|
We will
need to obtain quota approvals from the Colombian authorities before we can commence commercial sale of our psychoactive products
under our Cannabis Manufacturing License and Psychoactive Cultivation License;
|
|
●
|
We will need to
register the distinct cannabis strains we expect to sell on Colombia’s National Registrar; and
|
|
●
|
We will need to
be issued sanitary registrations before we can sell products intended for human consumption.
|
Our
first cultivation and extraction sites are located in Popayan, Colombia. Our facility encompasses approximately 30 acres and includes
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
employ modern propagation and cultivation techniques drawn from U.S. practices that allow us to rapidly multiply the cells of
a specific plant strain to produce large numbers of genetically consistent progeny plants using our own plant tissue culture method.
We believe this technique allows us to cultivate plants which are stable, robust and able to produce genetically superior cannabis
and hemp derived products. We intend to have our processes and products certified as compliant with international standards, including
Good Agricultural Practices (“GAP”), Good Manufacturing Practice (“GMP”) and the standards set forth in
EU Pharmacopoeia, a publication that sets forth quality standards applicable to the European pharmaceutical industry.
We
intend to build additional covered greenhouse capacity in excess of 1 million square feet. We are building out our extraction
and production facility and expect it to be operational before the end of 2019. In addition, we have a contractual relationship
with a local co-operative under which they agree to assist us in cultivation at our facility.
We
have received approval from the Instituto Colombiano Agropecuario (the “ICA”) to begin cultivating 13 proprietary
high THC cannabis strains and 2 high CBD strains. We have also received approval to grow 68 mother plants to begin this characterization
process, which we have commenced. If we are successful in this process, the strains will be entered in the ICA cultivar registry.
Only registered strains may be sold under Colombian law.
We
believe there is a large and growing market for cannabis and hemp products around the world. The market for CBD has shown particular
demand and growth. We will pursue sales into this market using a direct sales force to establish direct customer relationships
and distributor relationships. We will seek out customers who have large and recurring needs and demands. Countries that we intend
to focus on include EU countries, the UK, Poland, Israel, and Canada.
We
expect to commence limited shipping of non-psychoactive products to customers in the first quarter of 2020. However, we are subject
to numerous risks that may delay the date of first sale, including regulatory requirements imposed or that may in the future be
imposed by the Colombian regulating authorities. In addition, we will need to obtain quota approval from Colombian regulators
before making we can make sales of our psychoactive products.
History
and Background
One
World Pharma S.A.S., is a Colombian company (“OWP Colombia”), incorporated on July 14, 2017 with the goal of procuring
the following Colombian Licenses.
On
December 20, 2017, the Colombian Ministry of Health, by means of resolution No. 5251 of 2017, granted OWP Colombia its license
for the production of cannabis derivatives for domestic use and export, allowing OWP Colombia to extract high tetrahydrocannabinol
(“THC”) compounds (“Cannabis Manufacturing License”). This license will expire on December 20, 2022.
On
December 26, 2017, the Colombian Ministry of Justice, by means of resolution No. 1087 of 2017, granted OWP Colombia its license
to use seeds for sowing for sale or delivery of seeds and/or for scientific research purposes, allowing for genetic and seed bank
registration (“Cannabis Seed Possession License”). This license will expire on December 26, 2022.
On
December 26, 2017, the Colombian Ministry of Justice, by means of resolution No. 1088 of 2017, granted OWP Colombia its license
to grow non-psychoactive cannabis plants (less than 1.0% THC). Under this license, OWP Colombia can produce seeds for planting,
deliver and make sales of the cannabis crop in order to produce cannabis derivatives and deliver and make sales of the cannabis
crop for industrial purposes (“Cannabis Non-Psychoactive Cultivation License”). This license will expire on December
26, 2022.
On
January 4, 2018, the Colombian Ministry of Justice, by means of resolution No. 0015 of 2018, granted OWP Colombia its license
to grow psychoactive cannabis plants (greater than 1.0% THC) (“Psychoactive Cultivation License”). Under this license,
OWP Colombia can produce seeds for planting, and deliver and make sales of the cannabis crop in order to produce cannabis derivatives.
This license will expire on January 4, 2023.
Six
months prior to the expiration of each of the Licenses, we can apply for successive renewals for additional five-year periods.
In each renewal application, the corresponding Ministry will assess compliance with all the relevant requirements in determining
whether or not to renew the License.
On
March 27, 2018, OWP Ventures, Inc. was formed as a Delaware corporation for the purpose of acquiring OWP Colombia.
On
May 30, 2018, OWP Ventures entered into a Stock Purchase Agreement with the shareholders of OWP Colombia whereby the shareholders
of OWP Colombia transferred their shares in OWP Colombia to OWP Ventures in exchange for 10,200,000 shares of common stock of
OWP Ventures.
OWP
Colombia planted its first crop of cannabis in 2018, which it 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.
Products
We
are focused on cultivating, processing and supplying crude cannabis oil, distillate and isolate to customers’ specification.
We plan to sell as a wholesaler to industrial companies making cannabis related products. We also plan on supplying the hemp plant
bio-mass remaining after our extraction process to industry participants that utilize hemp in the manufacture of their products.
Hemp is used to make a variety of commercial and industrial products, including rope, textiles, clothing, shoes, food, paper,
bioplastics, insulation and biofuel.
We
are currently in the process of cultivating medicinal cannabis at our facility in Popayán, Colombia for a variety of medical
conditions. We have registered 25 varieties or strains of cannabis with the Colombian Ministry of Health and intend to register
additional varieties by the end of 2019. See “Operations - Strains of Cannabis”. The development of these strains
enables us to select mother plants and identify the concentrations of cannabinoids required for the products which we intend to
distribute. The cannabis will be produced in accordance with GMP Standards. We are committed to developing final products consistent
with medicinal cannabis industry standards and pharmaceutical procedures. Our products will include a variety of cannabinoids
and terpenes designed to address specific medical conditions. The composition of the strains will include a wide range
of THC and CBD ratios.
Industry
Medicinal
cannabis refers to the use of cannabis and its constituent cannabinoids and terpenes to treat disease or ameliorate symptoms such
as pain, muscle spasticity, nausea and other indications. Cannabinoid is a blanket term covering a family of complex chemicals,
both natural and man-made, that bind with cannabinoid receptors (protein molecules on the surface of cells) and effect a wide
number of responses. Cannabinoid receptors in the human body are part of a system called the endocannabinoid system. This system
produces chemicals called endocannabinoids, which also bind with cannabinoid receptors. Cannabinoid receptors are found in the
brain and throughout the body. Scientists have found that cannabinoid receptors in the endocannabinoid system are involved in
a vast array of functions in our bodies, including helping to modulate brain and nerve activity (including memory and pain), energy
metabolism, heart function, the immune system and even reproduction. While there are a large number of active cannabinoids found
in cannabis, the two most common currently used for medical purposes are tetrahydrocannabinol and cannabidiol. Although no clinical
trials have been completed in the United States to validate the effectiveness of tetrahydrocannabinol or cannabidiol in managing
disease and improving symptoms, scientific studies have identified that they, alone and/or in combination, may potentially provide
treatment benefits for a large number of medical conditions. For example, tetrahydrocannabinol, a psychotropic cannabinoid, has
been shown to activate pathways in the central nervous system which work to block pain signals and has shown potential to assist
patients with Post Traumatic Stress Disorder (PTSD) and stimulate appetite in patients following chemotherapy. Cannabidiol, on
the other hand, is non-psychotropic and has shown potential to relieve convulsion and inflammation, and is the active ingredient
in Epidolex, which in June 2018 was approved by the FDA for the treatment of two rare and severe forms of epilepsy.
Regulation
Our
active business operations are currently conducted solely within Colombia, and as such, the discussion below is limited to Colombian
laws and regulations applicable to our business, which require us to hold the relevant licenses, quotas and other permits, as
described below. Our activities in the United States consist solely of corporate administrative activities at our Las Vegas headquarters,
including accounting, finance and SEC compliance functions. We believe that our current activities in the United States will not
subject us to regulation under the U.S. Controlled Substances Act or other applicable U.S. federal or state laws with respect
to our proposed business plans. All export activities will be conducted from Colombia, and we do not intend to export any of our
products to jurisdictions where such sales are not legal under local law. Accordingly, we do not currently intend to export our
products to the United States to the extent such products may be subject to regulation under the U.S. Controlled Substances Act
or other applicable U.S. federal or state regulations.
Regulatory
Authorities
Several
authorities interact in the Colombian cannabis industry. The Ministry of Health is in charge of granting the Cannabis Manufacturing
and Distribution License and exercises administrative control over the production of cannabis derivatives. The Ministry of Justice,
through the subsection for the Control and Supervision of Chemical Substances and Narcotic Drugs, is the competent authority for
issuing the Cannabis Seeds Possession License, the Cannabis Psychoactive Cultivation License and the Cannabis Non-Psychoactive
Cultivation License and for exercising administrative control over cannabis operations and cultivation. The National Narcotics
Fund (“FNE”) exercises administrative and operational control over activities related to the management of psychoactive
and non-psychoactive cannabis and its derivatives. The National Food and Drug Surveillance Institute (“INVIMA”) is
in charge of issuing and monitoring compliance under the health and phytosanitary registrations that may be applicable to products
containing cannabis derivatives. The Colombian Agricultural Institute (“ICA”) is responsible for maintaining the registry
of the Genetic Pool or ¨Fuente Semillera” and the registration of cannabis seeds and strains under the “Registro
Nacional de Cultivares Comerciales”.
In
exercising the administrative and operational control activities discussed above the Ministry of Justice, Ministry of Health,
ICA and FNE are required to coordinate their activities to the extent necessary, according to their competencies, with the Ministry
of Agriculture and Rural Development through ICA, as well as with the National Police.
Licenses
Under
Colombian law, there are four types of cannabis licenses that authorize different activities concerning the various stages of
the production line of the medical cannabis industry: (i) the Cannabis Seeds Possession License; which is required for the domestic
sale and delivery of seeds (but not export) and for scientific research purposes; (ii) the Cannabis Psychoactive Cultivation License,
which is required for the production of seeds for sowing; for grain production; production of cannabis derivatives; for scientific
research purposes, for storage, and for final disposal; (iii) the Cannabis Non-Psychoactive Cultivation License, which is required
for the production of grain and seeds for sowing; production of cannabis derivatives; for industrial purposes; for scientific
research purposes; for storage; and for final disposal; and (iv) the Cannabis Manufacturing and Distribution License, which is
required for the production of cannabis derivatives for domestic use; production of cannabis derivatives for scientific research
purposes; and production of cannabis derivatives for exportation. OWP Colombia holds all of these licenses.
The
legal framework currently in force in Colombia regarding medical cannabis is established in Law 1787 of 2016 (the “Law”)
and the Decree 613 of 2017 (the “Decree”). Cannabis licenses must be issued by the Ministry of Health or the Ministry
of Justice in an estimated time of 60 days, however, in practice, this process can take between four and six months. In accordance
with Colombia’s international obligations, there is a limit in the amount of Cannabis allowed for fabrication or cultivation
assigned by the Colombian Government (specific crop or manufacturing quotas) that must be requested by each licensee when applying
for a Cannabis Psychoactive Cultivation License or a Cannabis Manufacturing License. The activities of cultivation and manufacturing
can only be started once the specific quotas have been granted to the licensee.
Duration
of Licenses
The
Cannabis Seeds Possession License, the Cannabis Psychoactive Cultivation License, the Cannabis Non-Psychoactive License, and the
Cannabis Manufacturing and Distribution License are granted by the Ministry of Justice and/or the Ministry of Health (as applicable),
when the applicant fulfills the general criteria described in Article 2.8.11.2.1.5 of the Decree, and the specific requirements
for each type of license. Each of these licenses is valid for up to five years. The Ministry of Justice and the Ministry of Health
(as applicable) maintain the right to monitor the activities performed by the corresponding licensee, and in the event of a breach
by the licensee of the obligations and duties set forth in the Decree, the licenses may be revoked. The relevant Ministry may
renew these licenses for additional and successive five-year periods. In each renewal application, the Ministry will assess compliance
with all the relevant requirements in determining whether or not to renew the license.
Quotas
As
described above, regulations of cannabis in Colombia provides an additional requirement applicable to the Cannabis Psychoactive
Cultivation License and Cannabis Manufacturing License, which require the grant of crop and manufacturing quotas (the “Quotas”).
According to Article 2.8.11.2.6.2 of the Decree, the assignment of Quotas is collectively made by the Ministry of Health, the
Ministry of Justice, the ICA, the INVIMA, and the FNE.
According
to Article 2.8.11.2.6.5 of the Decree, there are two types of Quotas: (i) crop quotas for psychoactive cannabis (for holders of
the Cannabis Psychoactive Cultivation License) which are granted by the Ministry of Justice; and (ii) the manufacturing quotas
for psychoactive cannabis (for holders of the Cannabis Manufacturing License) which are granted by the Ministry of Health.
These
Quotas are requested by the licensees no later than the last calendar day of April of each year, and, if they are granted by the
corresponding authority, they can only be used by the licensees during the next calendar year (for instance, if a licensee requests
a specific crop Quota in March, 2018, and this Quota is granted by the Ministry of Justice, the licensee will be allowed to use
the Quota from January 1, 2019 to December 31, 2019). In extraordinary events, the licensees can request a supplementary Quota
that will apply to the calendar year requested (the issuance of these Quotas depends on the special circumstances defined by the
Colombian governmental authorities).
On
December 3, 2018, by means of resolution 1256 of 2018, Colombia´s Ministry of Justice granted OWP Colombia a supplementary
Quota for growing psychoactive mother plants; six for each of 13 varieties, for a total of 78 “mother” plants. However,
before we commence the commercial sale of our psychoactive products (greater than 1% THC content), we will need to obtain Quotas
from the Ministry of Health. This will require us to conduct successful agricultural characterization tests approved by and registered
with the ICA/Ministry of Agriculture and Rural Development, and stabilized extracts characterization tests approved by INVIMA/Ministry
of Health, of product samples grown by us under Quotas obtained from the Ministry of Justice. We have already requested from the
Ministry of Health and Justice our annual Quotas for the export sale of psychoactive ingredients in 2020, and are awaiting the
issuance of such Quotas in order to start our production process.
Strains
of Cannabis
Strains
of cannabis are registered in Colombia in two manners:
|
●
|
Registration
of the Genetic Pool or “Fuente Semillera”: Under Article 2.8.11.11.1 of the Decree, licensed producers of
cannabis had until December 31, 2018 to register the genetics of strains of cannabis with the ICA. Under this transitory
article, the government allowed a limited period for licensed producers of cannabis to source genetics currently
available in Colombia and register these as their “fuente semillera”. We registered 25 varieties under this
article. This registration enables us to grow our own strains of cannabis as opposed to having to purchase registered
strains from other licensed producers.
|
|
|
|
|
●
|
Registration Under the “Registro Nacional
de Cultivares Comerciales”: Licensed producers of cannabis have to be granted a breeding/research license to be able
to develop, select and trial stabilized cannabis cultivars. This registration allows licensed producers to register unique
and stable varieties of cannabis for commercial production within Colombia. We were granted such license in the first quarter
of 2018. Licensed producers can then request from ICA a registration trial, which is a field flowering trial with the supervision
of ICA officials. The data collected in these trials can lead to registration of the cultivar in the National Registrar. Only
registered varieties will be allowed to be produced commercially. We are in the final phase of field flowering trials and
intend to apply to register additional strains under this provision by the end of 2019.
|
Sanitary
Registration
The
commercialization of cannabis-based finished products intended for human consumption requires the issuance of sanitary registrations
by the INVIMA, and in the case of products intended for animal consumption, by the ICA.
Environmental
Under
Colombian law, general principles of environmental law are set out in Law 99 of 1993 and Article 9 of the National Code of Natural
Resources and Protection of the Environment. These laws establish principles governing the use of natural resources, including
that use must occur without causing harm to the interests of the community or of third parties. Parties that cause environmental
damage while acting under the authority of a permit are responsible for incurring the costs to rectify the damage. The imposition
of environmental sanctions is in addition to civil and criminal penalties that may be imposed. Environmental damage caused while
a party is acting without a license constitutes a breach of Law 99 of 1993 and may lead to the imposition of sanctions, in addition
to civil or criminal proceedings that may result. Parties that cause environmental damage, in addition to sanctions or penalties
that apply, will also be required to carry out studies to assess the characteristics of the damage. Under Colombian law, liability
for environmental damage creates a presumption of liability in case of a: (i) breach of environmental laws; (ii) environmental
damage; and (iii) breach of environmental license or any other administrative act from the environmental authorities. The Environmental
Authorities may investigate potential claims, authorize preventative measures, or impose sanctions on parties breaching environmental
law.
Competition
The
market for medicinal cannabis is characterized by unsatisfied patient demand, with few authorized producers. Although competition
in the market is growing and Colombia offers an open process to apply for the licenses, we believe we are competitively positioned
to satisfy the demand for medicinal cannabis given our early entry into the market, the management team’s expertise in medical
product branding, marketing, quality control and domestic market relationships. In addition, the Colombian government has published
for comment a draft decree that requires any applicant for any of the four Licenses to furnish evidence that it has completed
the seed registration process before the ICA and obtained the corresponding technical sheet for the cannabis plants and varieties.
If enacted, this new regulation will result in stricter requirements on potential competitors seeking a Colombian License.
Cultivation
in Colombia has natural cost advantages. However, management believes the more sustainable competitive advantage is to create
patient loyalty and brand preference, as opposed to the distribution of more homogeneous products. Domestically our competition
consists of PharmaCielo, CannaVida, Empresa Colombiana de Cannabis, Khiron Life Sciences Corp., MedCan, Canopy Growth Corporation,
and Clever Leaves.
Intellectual
Property
Our
success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this,
we rely on trade secrets, including know-how, employee and third-party nondisclosure agreements and other contractual rights to
establish and protect our proprietary rights in our technology.
Seasonality
Colombia
and its vertical offering of microclimates is the ideal country for year-round growing and processing of all possible varieties
of cannabis in a natural, environmentally friendly manner.
DESCRIPTION
OF PROPERTY
Our
principal executive offices are located at 3471 West Oquendo Rd., Suite 301, Las Vegas, Nevada 89118, Telephone No.: (800) 605-3210.
Our leased premises are 3,210 square feet and are utilized for corporate business offices. Our Nevada premises are subject to
a lease agreement expiring October 31, 2021. In addition, OWP Colombia leases land in Popayan, Colombia at a rate of 8,000,000
COP per month on a renewable lease expiring on September 30, 2022. Our anticipated future lease commitments on a calendar year
basis in US dollars, excluding common area maintenance, are as follows:
2019
|
|
$
|
84,074
|
|
2020
|
|
|
85,700
|
|
2021
|
|
|
77,553
|
|
2022
|
|
|
22,407
|
|
Total
|
|
$
|
269,734
|
|
We
believe that our current facilities are adequate for our current needs. We intend to secure new facilities or expand existing
facilities as necessary to support future growth. We believe that suitable additional space will be available on commercially
reasonable terms as needed to accommodate our operations.
Employees
As
of October 2, 2019, we had 28 full-time employees. Since inception, we have never had a work stoppage, and our employees
are not represented by labor unions. We consider our relationship with our employees to be positive.
LEGAL
PROCEEDINGS
We
are not party to any legal proceedings.
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This
Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other parts of this prospectus
contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this prospectus
are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number
of factors, including those set forth in the section captioned “Risk Factors” on page 3 of this prospectus.
The following should be read in conjunction with our audited financial statements included elsewhere herein.
Overview
On
February 21, 2019, we entered into the Merger Agreement with OWP Merger Sub, our wholly-owned subsidiary, and OWP Ventures. Under
the Merger Agreement, the acquisition of OWP Ventures by us 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 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. 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 prospectus the following discussion reflect the historical operations of OWP Ventures
and its wholly-owned subsidiary One World Pharma S.A.S 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.
Results
of Operations for the Three Months Ended June 30, 2019 and 2018:
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.
The
following table summarizes selected items from the statement of operations for the three months ended June 30, 2019 and 2018.
|
|
Three Months Ended June 30,
|
|
|
Increase /
|
|
|
|
2019
|
|
|
2018
|
|
|
(Decrease)
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
565,167
|
|
|
|
124,840
|
|
|
|
440,327
|
|
Professional fees
|
|
|
741,542
|
|
|
|
156,977
|
|
|
|
584,565
|
|
Total operating expenses:
|
|
|
1,306,709
|
|
|
|
281,817
|
|
|
|
1,024,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,306,709
|
)
|
|
|
(281,817
|
)
|
|
|
(1,024,892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
|
|
(18,519
|
)
|
|
|
(1,801
|
)
|
|
|
(16,718
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,325,228
|
)
|
|
$
|
(283,618
|
)
|
|
$
|
(1,041,610
|
)
|
General
and Administrative Expenses
General
and administrative expenses for the three months ended June 30, 2019 were $565,167, compared to $124,840 during the three months
ended June 30, 2018, an increase of $440,327, or 353%. 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 June 30, 2019 were $741,542, compared to $156,977 during the three months ended June 30, 2018,
an increase of $584,565, or 372%. Professional fees included non-cash, stock-based compensation of $395,715 during the three months
ended June 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 June 30, 2019 were $18,519, compared to $1,801 during the three months ended
June 30, 2018, an increase of $16,718, or 928%. Other expenses consisted of a loss on disposal of assets of $4,087 and $14,579
of interest expense, as offset by $147 of interest income for the three months ended June 30, 2019. Other expenses during the
three months ended June 30, 2018 consisted of $1,801 of interest expense.
Net
Loss
Net
loss for the three months ended June 30, 2019 was $1,325,228, or $0.03 per share, compared to $283,618, or $0.01 per share, during
the three months ended June 30, 2018, an increase of $1,041,610, or 367%. The net loss for the three months ended June 30, 2019
included non-cash expenses consisting of $2,436 of depreciation, $395,715 of stock-based compensation and $14,579 of accrued interest.
Results
of Operations for the Six Months Ended June 30, 2019 and the period from inception (March 27, 2018) to June 30, 2018:
The
following table summarizes selected items from the statement of operations for the six months ended June 30, 2019 and the period
from inception (March 27, 2018) to June 30, 2018.
|
|
For the Six
|
|
|
From Inception
|
|
|
|
|
|
|
Months Ended
|
|
|
(March 27, 2018) to
|
|
|
Increase /
|
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
(Decrease)
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
1,044,787
|
|
|
|
124,840
|
|
|
|
919,947
|
|
Professional fees
|
|
|
1,444,422
|
|
|
|
156,977
|
|
|
|
1,287,445
|
|
Total operating expenses:
|
|
|
2,489,209
|
|
|
|
281,817
|
|
|
|
2,207,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,489,209
|
)
|
|
|
(281,817
|
)
|
|
|
(2,207,392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
|
|
(159,535
|
)
|
|
|
(1,801
|
)
|
|
|
(157,734
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,648,744
|
)
|
|
$
|
(283,618
|
)
|
|
$
|
(2,365,126
|
)
|
General
and Administrative Expenses
General
and administrative expenses for the six months ended June 30, 2019 were $1,044,787, compared to $124,840 during the period from
inception (March 27, 2018) to June 30, 2018, an increase of $919,947, or 737%. The expenses for the current period consisted primarily
of compensation expenses, office rent, and travel costs.
Professional
Fees
Professional
fees for the six months ended June 30, 2019 were $1,444,422, compared to $156,977 during the six months ended June 30, 2018, an
increase of $1,287,445, or 820%. Professional fees included non-cash, stock-based compensation of $664,255 during the period from
inception (March 27, 2018) to June 30, 2018. 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 six months ended June 30, 2019 were $159,535, compared to $1,801 during the six months ended
June 30, 2018, an increase of $157,734, or 8,758%. Other expenses consisted of a loss on disposal of assets of $4,087 and $155,696
of interest expense, as offset by $248 of interest income for the six months ended June 30, 2019. Other expenses during the period
from inception (March 27, 2018) to June 30, 2018 consisted of $1,801 of interest expense.
Net
Loss
Net
loss for the six months ended June 30, 2019 was $2,648,744, or $0.07 per share, compared to $283,618, or $0.01 per share, during
the period from inception (March 27, 2018) to June 30, 2018, an increase of $2,365,126, or 834%. The net loss for the six months
ended June 30, 2019 included non-cash expenses consisting of $5,005 of depreciation, $664,255 of stock-based compensation and
$155,696 of accrued interest, including $125,000 of amortization on debt discounts.
Results
of Operations from Inception (March 27, 2018) to December 31, 2018
General
and Administrative Expense: General and administrative expenses were $903,913 for the year ended December 31, 2018.
Professional
Fees: Professional fees were $917,936 for the year ended December 31, 2018.
Bad
Debts Expense: Bad debts expense of $50,000 for the year ended December 31, 2018 related to an allowance for doubtful accounts
on the uncertain collection of a note receivable.
Other
Expense: Other expense was $88,234 for the year ended December 31, 2018. Other expense consisted of $88,234 of interest expense.
Loss
on Foreign Currency Translation: Loss on foreign currency translation was $4,090 for the year ended December 31, 2018.
Net
Loss: Net loss was $1,960,083 for the period of inception (March 27, 2018) to December 31, 2018.
Liquidity
and Capital Resources
The
following is a summary of our cash flows provided by (used in) operating, investing, financing activities and effect of exchange
rate changes on cash for the six month period ended June 30, 2019 and the period from inception (March 27, 2018) to June 30, 2018:
|
|
2019
|
|
|
2018
|
|
Operating Activities
|
|
$
|
(1,933,479
|
)
|
|
$
|
(285,897
|
)
|
Investing Activities
|
|
|
(366,585
|
)
|
|
|
(11,585
|
)
|
Financing Activities
|
|
|
2,243,602
|
|
|
|
707,000
|
|
Effect of exchange rate changes on cash
|
|
|
143,001
|
|
|
|
35,402
|
|
Net Increase in Cash
|
|
$
|
86,539
|
|
|
$
|
444,920
|
|
Net
Cash Used in Operating Activities
During
the six months ended June 30, 2019, net cash used in operating activities was $1,933,479, compared to net cash used in operating
activities of $285,897 for the period from inception (March 27, 2018) to June 30, 2018. Net cash used in operating activities
was $1,268,497 for the period from inception (March 27, 2018) to December 31, 2018. The cash used in operating activities was
primarily attributable to our net losses.
Net
Cash Used in Investing Activities
During
the six months ended June 30, 2019, net cash used in investing activities was $366,585, compared to net cash used in investing
activities of $11,585 for the period from inception (March 27, 2018) to June 30, 2018. Net cash used in investing activities was
$753,661 for the period from inception (March 27, 2018) to December 31, 2018. The cash used in investing activities consisted
of purchases of fixed assets.
Net
Cash Provided by Financing Activities
During
the six months ended June 30, 2019, net cash provided by financing activities was $2,243,602, compared to net cash used in financing
activities of $707,000 for the period from inception (March 27, 2018) to June 30, 2018. The current period consisted of $500,000
of convertible debt financing that was subsequently converted into 1,253,493 shares of common stock at $0.40 per share, repayments
of $207,000 to shareholders on previous advances, proceeds of $602 on subscriptions receivable and $1,950,000 of proceeds received
from the sale of stock at $0.50 per share. Net cash provided by financing activities was $2,152,094 for the period from inception
(March 27, 2018) to December 31, 2018, and consisted of the proceeds from the sale of common stock, a secured convertible note
payable, unsecured advances payable on demand by shareholders, notes payable and contributed capital.
Ability
to Continue as a Going Concern
Prior to the $2,054,500
of proceeds from of our recent stock sales, our balance of cash on hand was $212,385, and we had a working capital deficit
of $745,796 and an accumulated deficit of $4,608,726 as of June 30, 2019. We currently may not have sufficient funds
to sustain our operations for the next twelve months and we may need to raise additional cash to fund our operations to the extent
necessary to provide working capital.
We
have incurred recurring losses from operations resulting in an accumulated deficit, and, as set forth above, our cash on hand
is not sufficient to sustain operations. These factors raise substantial doubt about our ability to continue as a going concern.
Management is actively pursuing its cannabis cultivation activities and expects to begin revenue generating export operations
in the first quarter of 2020. In addition, we are currently seeking additional sources of capital to fund short- term operations.
Management believes these factors will contribute toward achieving profitability. In the event revenues do not materialize at
the expected rates, management would seek additional financing or would attempt to conserve cash by further reducing expenses.
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
accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates
continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. The unaudited
consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going
concern.
Off-Balance
Sheet Arrangements
We
have no outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage
in trading activities involving non-exchange traded contracts.
Critical
Accounting Policies and Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and
related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant
to the preparation of our financial statements. These accounting policies are important for an understanding of our financial
condition and results of operations. Critical accounting policies are those that are most important to the presentation of our
financial condition and results of operations and require management’s subjective or complex judgment, often as a result
of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the
possibility that future events affecting the estimate may differ significantly from management’s current judgments.
While
our significant accounting policies are more fully described in notes to our consolidated financial statements appearing elsewhere
in this prospectus, we believe that the following accounting policies are the most critical to aid you in fully understanding
and evaluating our reported financial results and affect the more significant judgments and estimates that we used in the preparation
of our financial statements.
Revenue
Recognition
We
have adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, we recognize 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 our financial statements as a result of adopting ASC 606 for the six months ended June 30, 2019, or the year
ended December 31, 2018.
Stock-Based
Compensation
We
account 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.
INDEX
TO FINANCIAL STATEMENTS
ONE
WORLD PHARMA, INC. AND SUBSIDIARIES
Table
of Contents
|
Page
|
|
|
Condensed Consolidated Balance Sheets as of June 30, 2019 (Unaudited) and December 31, 2018.
|
F-2
|
|
|
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and the Three Months Ended June 30, 2018 and the Period from Inception (March 27, 2018) to June 30, 2018 (Unaudited)
|
F-3
|
|
|
Consolidated Statement of Stockholders’ Equity for the Six Months Ended June 30, 2019 (Unaudited) and the Year Ended December 31, 2018
|
F-4
|
|
|
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and the Period from Inception (March 27, 2018) to June 30, 2018 (Unaudited)
|
F-5
|
|
|
Notes to Condensed Consolidated Financial Statements
|
F-6
|
|
|
Report of Independent Registered Public Accounting Firm – M&K CPAS PLLC
|
F-18
|
|
|
Consolidated Balance Sheet of OWP Ventures as of December 31, 2018
|
F-19
|
|
|
Consolidated Statement of Operations and Comprehensive Income of OWP Ventures for the period from inception (March 27, 2018) through December 31, 2018
|
F-20
|
|
|
Consolidated Statement of Stockholders’ Equity (Deficit) OWP Ventures for the year ended December 31, 2018
|
F-21
|
|
|
Consolidated Statement of Cash Flows OWP Ventures for the period from inception (March 27, 2018) through December 31, 2018
|
F-22
|
|
|
Notes to Financial Statements
|
F-23
|
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
June
30, 2019
|
|
|
December
31, 2018
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
212,385
|
|
|
$
|
125,846
|
|
Other
current assets
|
|
|
136,779
|
|
|
|
35,344
|
|
Inventory
|
|
|
24,978
|
|
|
|
-
|
|
Total
current assets
|
|
|
374,142
|
|
|
|
161,190
|
|
|
|
|
|
|
|
|
|
|
Right-of-use
asset
|
|
|
258,754
|
|
|
|
-
|
|
Security
deposits
|
|
|
69,542
|
|
|
|
-
|
|
Fixed
assets, net
|
|
|
713,932
|
|
|
|
356,439
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
1,416,370
|
|
|
$
|
517,629
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
175,129
|
|
|
$
|
121,194
|
|
Accrued
expenses
|
|
|
99,107
|
|
|
|
34,425
|
|
Current
portion of lease liability
|
|
|
38,561
|
|
|
|
-
|
|
Convertible
note payable
|
|
|
300,000
|
|
|
|
300,000
|
|
Advances
from shareholders
|
|
|
307,141
|
|
|
|
514,141
|
|
Notes
payable
|
|
|
200,000
|
|
|
|
200,000
|
|
Total
current liabilities
|
|
|
1,119,938
|
|
|
|
1,169,760
|
|
|
|
|
|
|
|
|
|
|
Long-term
lease liability
|
|
|
222,358
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
1,342,296
|
|
|
|
1,169,760
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity (Deficit):
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value, 75,000,000 shares authorized; 39,922,899 and 34,291,905 shares issued and outstanding at June 30,
2019 and December 31, 2018, respectively
|
|
|
39,923
|
|
|
|
34,292
|
|
Additional
paid-in capital
|
|
|
4,503,966
|
|
|
|
1,278,352
|
|
Subscriptions
receivable, consisting of 6,012,500 shares at December 31, 2018
|
|
|
-
|
|
|
|
(602
|
)
|
Accumulated
other comprehensive loss
|
|
|
138,911
|
|
|
|
(4,090
|
)
|
Accumulated
(deficit)
|
|
|
(4,608,726
|
)
|
|
|
(1,959,982
|
)
|
|
|
|
74,074
|
|
|
|
(652,030
|
)
|
Noncontrolling
Interest
|
|
|
-
|
|
|
|
(101
|
)
|
Total
Stockholders’ Equity (Deficit)
|
|
|
74,074
|
|
|
|
(652,131
|
)
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders’ Equity (Deficit)
|
|
$
|
1,416,370
|
|
|
$
|
517,629
|
|
See
accompanying notes to financial statements.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
|
|
For
the Three Months Ended
June 30,
|
|
|
For
the Six
Months
Ended
|
|
|
From
Inception
(March
27, 2018) to
|
|
|
|
2019
|
|
|
2018
|
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
565,167
|
|
|
|
124,840
|
|
|
|
1,044,787
|
|
|
|
124,840
|
|
Professional
fees
|
|
|
741,542
|
|
|
|
156,977
|
|
|
|
1,444,422
|
|
|
|
156,977
|
|
Total
operating expenses
|
|
|
1,306,709
|
|
|
|
281,817
|
|
|
|
2,489,209
|
|
|
|
281,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(1,306,709
|
)
|
|
|
(281,817
|
)
|
|
|
(2,489,209
|
)
|
|
|
(281,817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on disposal of assets
|
|
|
(4,087
|
)
|
|
|
-
|
|
|
|
(4,087
|
)
|
|
|
-
|
|
Interest
income
|
|
|
147
|
|
|
|
-
|
|
|
|
248
|
|
|
|
-
|
|
Interest
expense
|
|
|
(14,579
|
)
|
|
|
(1,801
|
)
|
|
|
(155,696
|
)
|
|
|
(1,801
|
)
|
Total
other expense
|
|
|
(18,519
|
)
|
|
|
(1,801
|
)
|
|
|
(159,535
|
)
|
|
|
(1,801
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,325,228
|
)
|
|
$
|
(283,618
|
)
|
|
$
|
(2,648,744
|
)
|
|
$
|
(283,618
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on foreign currency translation
|
|
$
|
151,288
|
|
|
$
|
-
|
|
|
$
|
143,001
|
|
|
$
|
35,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
other comprehensive loss
|
|
$
|
(1,173,940
|
)
|
|
$
|
(283,618
|
)
|
|
$
|
(2,505,743
|
)
|
|
$
|
(248,216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic and fully diluted
|
|
|
39,922,899
|
|
|
|
29,777,996
|
|
|
|
38,779,975
|
|
|
|
29,410,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and fully diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.01
|
)
|
See
accompanying notes to financial statements.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Stockholders’
|
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Subscriptions
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Income
(Loss)
|
|
|
Deficit
|
|
|
Interest
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 27, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation
of One World Pharma, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
(349,420
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(349,420
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock sold for cash
|
|
|
23,411,905
|
|
|
|
23,412
|
|
|
|
978,703
|
|
|
|
(602
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,001,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
|
680,000
|
|
|
|
680
|
|
|
|
284,920
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
285,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion feature on convertible note
|
|
|
-
|
|
|
|
-
|
|
|
|
75,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,090
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,090
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,959,982
|
)
|
|
|
(101
|
)
|
|
|
(1,960,083
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 of OWP Ventures, Inc. sold for cash
|
|
|
3,900,000
|
|
|
|
3,900
|
|
|
|
1,946,100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,950,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
-
|
|
|
|
-
|
|
|
|
560,958
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
560,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion feature on convertible note
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
143,001
|
|
|
|
-
|
|
|
|
-
|
|
|
|
143,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,648,744
|
)
|
|
|
-
|
|
|
|
(2,648,744
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2019 (Unaudited)
|
|
|
39,922,899
|
|
|
$
|
39,923
|
|
|
$
|
4,503,966
|
|
|
$
|
-
|
|
|
$
|
138,911
|
|
|
$
|
(4,608,726
|
)
|
|
$
|
-
|
|
|
$
|
74,074
|
|
See
accompanying notes to financial statements.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
For
the Six
|
|
|
From
Inception
|
|
|
|
Months
Ended
|
|
|
(March
27, 2018) to
|
|
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,648,744
|
)
|
|
$
|
(283,618
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization expense
|
|
|
5,005
|
|
|
|
103
|
|
Loss
on disposal of fixed assets
|
|
|
4,087
|
|
|
|
|
|
Debt
discounts
|
|
|
125,000
|
|
|
|
-
|
|
Stock-based
compensation
|
|
|
15,000
|
|
|
|
-
|
|
Amortization
of options issued for services
|
|
|
649,255
|
|
|
|
-
|
|
Decrease
(increase) in assets:
|
|
|
|
|
|
|
|
|
Other
current assets
|
|
|
(110,741
|
)
|
|
|
-
|
|
Inventory
|
|
|
(24,978
|
)
|
|
|
-
|
|
Right-of-use
assets
|
|
|
(258,754
|
)
|
|
|
-
|
|
Security
deposits
|
|
|
(69,542
|
)
|
|
|
(13,092
|
)
|
Increase
(decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
53,935
|
|
|
|
7,957
|
|
Accrued
expenses
|
|
|
66,079
|
|
|
|
2,753
|
|
Lease
liability
|
|
|
260,919
|
|
|
|
-
|
|
Net
cash used in operating activities
|
|
|
(1,933,479
|
)
|
|
|
(285,897
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
|
(366,585
|
)
|
|
|
(11,585
|
)
|
Net
cash used in investing activities
|
|
|
(366,585
|
)
|
|
|
(11,585
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds
from convertible note payable
|
|
|
500,000
|
|
|
|
-
|
|
Proceeds
from shareholders
|
|
|
-
|
|
|
|
207,000
|
|
Repayment
of advances from shareholders
|
|
|
(207,000
|
)
|
|
|
-
|
|
Proceeds
from subscriptions receivable
|
|
|
602
|
|
|
|
-
|
|
Proceeds
from sale of common stock
|
|
|
1,950,000
|
|
|
|
500,000
|
|
Net
cash provided by financing activities
|
|
|
2,243,602
|
|
|
|
707,000
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
143,001
|
|
|
|
35,402
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash
|
|
|
86,539
|
|
|
|
444,920
|
|
Cash
- beginning
|
|
|
125,846
|
|
|
|
-
|
|
Cash
- ending
|
|
$
|
212,385
|
|
|
$
|
444,920
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
14,965
|
|
|
$
|
-
|
|
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
|
|
$
|
501,397
|
|
|
$
|
-
|
|
Beneficial
conversion feature
|
|
$
|
125,000
|
|
|
$
|
-
|
|
See
accompanying notes to financial statements.
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.
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 June 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.
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 didn’t have any
amounts in excess of FDIC insured limits at June 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 six months ended June 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, 2017, with early adoption permitted. The Company does not expect the
adoption of this ASU to have a material impact on its financial statements.
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. The Company is currently in the process of evaluating the impact of adoption on its financial statements.
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.
The Company does not expect the adoption of this ASU to have a material impact on its financial statements.
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.
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 June 30, 2019, the Company has cash on hand of $212,385,
a working capital deficit of $745,796 and an accumulated deficit of $4,608,726, 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 export 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.
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 June 30, 2019 and December 31, 2018, respectively:
|
|
Fair
Value Measurements at June 30, 2019
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
212,385
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Right-of-use
asset
|
|
|
-
|
|
|
|
258,754
|
|
|
|
-
|
|
Total
assets
|
|
|
212,385
|
|
|
|
258,754
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
300,000
|
|
Advances
from shareholders
|
|
|
-
|
|
|
|
307,141
|
|
|
|
-
|
|
Notes
payable
|
|
|
-
|
|
|
|
-
|
|
|
|
200,000
|
|
Lease
liability
|
|
|
-
|
|
|
|
260,919
|
|
|
|
-
|
|
Total
liabilities
|
|
|
-
|
|
|
|
(568,060
|
)
|
|
|
(500,000
|
)
|
|
|
$
|
212,385
|
|
|
$
|
(309,306
|
)
|
|
$
|
(500,000
|
)
|
|
|
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 six months ended June
30, 2019 or the year ended December 31, 2018.
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 June 30, 2019 and December 31, 2018, respectively:
|
|
June
30, 2019
|
|
|
December
31, 2018
|
|
Security
deposit
|
|
$
|
4,518
|
|
|
$
|
4,494
|
|
Prepaid
expenses
|
|
|
67,350
|
|
|
|
30,850
|
|
Other
receivables
|
|
|
64,911
|
|
|
|
-
|
|
Total
|
|
$
|
136,779
|
|
|
$
|
35,344
|
|
Note
7 – Fixed Assets
Fixed
assets consist of the following at June 30, 2019 and December 31, 2018, respectively:
|
|
June
30, 2019
|
|
|
December
31, 2018
|
|
Land
|
|
$
|
179,731
|
|
|
$
|
-
|
|
Office
equipment
|
|
|
23,469
|
|
|
|
18,314
|
|
Furniture
and fixtures
|
|
|
32,216
|
|
|
|
23,595
|
|
Software
|
|
|
17,654
|
|
|
|
-
|
|
Equipment
and machinery
|
|
|
310,919
|
|
|
|
-
|
|
Construction
in progress
|
|
|
156,909
|
|
|
|
316,491
|
|
|
|
|
720,898
|
|
|
|
358,400
|
|
Less:
accumulated depreciation
|
|
|
(6,966
|
)
|
|
|
(1,961
|
)
|
Total
|
|
$
|
713,932
|
|
|
$
|
356,439
|
|
Construction
in progress consists of equipment and capital improvements on the Popayán farm that have not yet been placed in service.
Depreciation
and amortization expense totaled $5,005 and $103 for the six months ended June 30, 2019 and June 30, 2018, respectively.
Note
8 – Accrued Expenses
Accrued
expenses consisted of the following at June 30, 2019 and December 31, 2018, respectively:
|
|
June
30, 2019
|
|
|
December
31, 2018
|
|
Accrued
payroll
|
|
$
|
53,681
|
|
|
$
|
6,327
|
|
Accrued
withholding taxes
|
|
|
6,232
|
|
|
|
6,387
|
|
Accrued
ICA fees and contributions
|
|
|
11,936
|
|
|
|
8,514
|
|
Accrued
interest
|
|
|
27,258
|
|
|
|
12,924
|
|
Deferred
rent obligations
|
|
|
-
|
|
|
|
273
|
|
|
|
$
|
99,107
|
|
|
$
|
34,425
|
|
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 June 30, 2019 and December 31, 2018, respectively:
|
|
June
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.
|
|
|
-
|
|
|
|
-
|
|
Less:
unamortized debt discounts
|
|
|
-
|
|
|
|
-
|
|
Convertible
note payable
|
|
$
|
300,000
|
|
|
$
|
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 discount equal to $125,000 and $75,000 for the six months ended June
30, 2019 and the year ended December 31, 2018, respectively. The Company recorded finance expense in the amount of $125,000 for
the six months ended June 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 $10,323 and
$125,000 of interest expense related to the debt discount for the six months ended June 30, 2019.
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 June 30, 2019 and December 31, 2018, respectively:
|
|
June
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 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.
|
|
|
307,141
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
advances from shareholders
|
|
$
|
307,141
|
|
|
$
|
514,141
|
|
The
Company recorded interest expense in the amount of $12,457 for the six months ended June 30, 2019.
Note
11 – Notes Payable
Notes
payable consists of the following at June 30, 2019 and December 31, 2018, respectively:
|
|
June
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.
|
|
$
|
100,000
|
|
|
$
|
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.
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable
|
|
$
|
200,000
|
|
|
$
|
200,000
|
|
The
Company recorded interest expense in the amount of $5,951 for the six months ended June 30, 2019.
The
Company recognized interest expense for the six months ended June 30, 2019 and the period from inception (March 27, 2018) to June
30, 2018, respectively, as follows:
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
|
|
|
|
|
|
|
Interest
on convertible notes
|
|
$
|
10,323
|
|
|
$
|
-
|
|
Interest
on advances from shareholders
|
|
|
12,457
|
|
|
|
1,761
|
|
Interest
on notes payable
|
|
|
5,951
|
|
|
|
-
|
|
Amortization
of beneficial conversion features
|
|
|
125,000
|
|
|
|
-
|
|
Interest
on accounts payable
|
|
|
1,965
|
|
|
|
40
|
|
Total
interest expense
|
|
$
|
155,696
|
|
|
$
|
1,801
|
|
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 Six Months Ended
|
|
|
|
June
30, 2019
|
|
Finance
lease cost:
|
|
|
|
|
Amortization
of assets
|
|
$
|
19,971
|
|
Interest
on lease liabilities
|
|
|
9,158
|
|
Total
lease cost
|
|
$
|
29,129
|
|
Supplemental
balance sheet information related to leases were as follows:
|
|
June
30, 2019
|
|
Finance
lease:
|
|
|
|
|
Right-of-use
asset
|
|
$
|
278,725
|
|
Accumulated
amortization
|
|
|
(19,971
|
)
|
Right-of-use
asset, net
|
|
$
|
258,754
|
|
|
|
|
|
|
Current
portion of finance lease liability
|
|
$
|
38,561
|
|
Long-term
finance lease liability
|
|
|
222,358
|
|
Total
finance lease liability
|
|
$
|
260,919
|
|
|
|
|
|
|
Weighted
average remaining lease term:
|
|
|
|
|
Operating
leases
|
|
|
N/A
|
|
Finance
leases
|
|
|
5.5
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 Six Months Ended
|
|
|
|
June
30, 2019
|
|
Cash
paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating
cash flows used for finance leases
|
|
$
|
26,964
|
|
|
|
|
|
|
Leased
assets obtained in exchange for lease liabilities:
|
|
|
|
|
Total
operating lease liabilities
|
|
$
|
-
|
|
Total
finance lease liabilities
|
|
$
|
260,919
|
|
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
Company’s maturities of lease liabilities under finance leases as of June 30, 2019 are as follows:
|
|
Finance
|
|
|
|
Leases
|
|
|
|
|
|
2019
|
|
$
|
27,234
|
|
2020
|
|
|
55,824
|
|
2021
|
|
|
57,498
|
|
2022
|
|
|
59,223
|
|
2023
|
|
|
61,000
|
|
Thereafter
|
|
|
51,957
|
|
Total
|
|
|
312,876
|
|
Less
interest
|
|
|
56,461
|
|
Present
value of lease liabilities
|
|
|
260,919
|
|
Less
current portion
|
|
|
38,561
|
|
Long-term
lease liabilities
|
|
$
|
222,358
|
|
There
were no operating leases as of June 30, 2019.
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 June 30,
2019, there were 39,922,899 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 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 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.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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.
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 recent independent third-party sales at $0.42 per share.
A
total of $560,958 was expensed during the six months ending June 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 six months ended June 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 June 30, 2019, the Company had approximately $3,681,600 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 June 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 Exchanged for Debt, Officer
On
September 4, 2019, the Company’s CEO purchased 400,000 shares of common stock at a price of $0.50 per share. The consideration
for such shares was paid by the cancellation of $200,000 of outstanding indebtedness of the Company to the CEO under a promissory
note, dated February 13, 2019.
Common
Stock Sales
On
various dates between July 18, 2019 and September 4, 2019, the Company sold an aggregate of 4,109,000 shares of common stock at
a price of $0.50 per share for total cash proceeds of $2,054,500.
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.
Debt
Exchange
On
July 22, 2019, the Company exchanged two outstanding demand notes bearing 6% interest (See Note 11), in the aggregate amount of
$207,332, consisting of $200,000 of principal and $7,332 of accrued interest, for a convertible promissory note in the principal
amount of $207,332, bearing 6% interest, due on demand and convertible into common stock at a fixed conversion price of $0.50
per share.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Stockholders
of OWP Ventures, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheet of OWP Ventures, Inc. (the Company) for the period from inception (March
27, 2018) to December 31, 2018, and the related consolidated statement of operations, comprehensive income, stockholders’
equity, and consolidated cash flows for the period from inception (March 27, 2018) to December 31, 2018, and the related notes
and schedules (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations
and its cash flows for the period from inception (March 27, 2018) to December 31, 2018, in conformity with accounting principles
generally accepted in the United States of America.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 2 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency,
which raises substantial doubt about its ability to continue as a going concern. Managements plans regarding those matters are
also discussed in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/
M&K CPAS, PLLC
We
have served as the Company’s auditor since 2018.
Houston,
TX
April
29, 2019
OWP
VENTURES, INC.
CONSOLIDATED
BALANCE SHEET
|
|
December
31,
|
|
|
|
2018
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash
|
|
$
|
125,846
|
|
Other
current assets
|
|
|
35,344
|
|
Total
current assets
|
|
|
161,190
|
|
|
|
|
|
|
Fixed
assets, net
|
|
|
356,439
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
517,629
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
121,194
|
|
Accrued
expenses
|
|
|
34,425
|
|
Convertible
note payable
|
|
|
300,000
|
|
Advances
from shareholders
|
|
|
514,141
|
|
Notes
payable
|
|
|
200,000
|
|
Total
current liabilities
|
|
|
1,169,760
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
1,169,760
|
|
|
|
|
|
|
Stockholders’
Equity (Deficit):
|
|
|
|
|
Preferred
stock, $0.0001 par value, 5,000,000 shares authorized;
no
shares issued and outstanding
|
|
|
-
|
|
Common
stock, $0.0001 par value, 200,000,000 shares authorized; 34,291,905
shares issued and outstanding
|
|
|
3,429
|
|
Additional
paid-in capital
|
|
|
1,309,215
|
|
Subscriptions
receivable, consisting of 6,012,500 shares
|
|
|
(602
|
)
|
Accumulated
other comprehensive loss
|
|
|
(4,090
|
)
|
Accumulated
(deficit)
|
|
|
(1,959,982
|
)
|
|
|
|
(652,030
|
)
|
Noncontrolling
Interest
|
|
|
(101
|
)
|
Total
Stockholders’ Equity (Deficit)
|
|
|
(652,131
|
)
|
|
|
|
|
|
Total
Liabilities and Stockholders’ Equity (Deficit)
|
|
$
|
517,629
|
|
The
accompanying notes are an integral part of these financial statements.
OWP
VENTURES, INC.
CONSOLIDATED
STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
|
|
From
Inception
|
|
|
|
(March
27, 2018) to
|
|
|
|
December
31, 2018
|
|
|
|
|
|
Revenue:
|
|
$
|
-
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
General
and administrative
|
|
|
903,913
|
|
Professional
fees
|
|
|
917,936
|
|
Bad
debts expense
|
|
|
50,000
|
|
Total
operating expenses
|
|
|
1,871,849
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,871,849
|
)
|
|
|
|
|
|
Other expense:
|
|
|
|
|
Interest
expense
|
|
|
(88,234
|
)
|
Total
other expense
|
|
|
(88,234
|
)
|
|
|
|
|
|
Net loss
|
|
$
|
(1,960,083
|
)
|
Less:
Net loss attributable to the noncontrolling interest
|
|
|
101
|
|
Net loss attributable
to OWP Ventures, Inc.
|
|
$
|
(1,959,982
|
)
|
|
|
|
|
|
Other comprehensive
income:
|
|
|
|
|
Loss
on foreign currency translation
|
|
$
|
(4,090
|
)
|
|
|
|
|
|
Net other comprehensive
loss
|
|
$
|
(1,964,072
|
)
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic and fully diluted
|
|
|
31,992,168
|
|
|
|
|
|
|
Net
loss per share - basic and fully diluted
|
|
$
|
(0.06
|
)
|
The
accompanying notes are an integral part of these financial statements.
OWP
VENTURES, INC.
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Additional
Paid-In
|
|
|
Subscriptions
|
|
|
Other
Comprehensive
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Stockholders’
Equity
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Income
(Loss)
|
|
|
Deficit
|
|
|
Interest
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 27, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation
of One World Pharma, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
(349,420
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(349,420
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock sold for cash
|
|
|
23,411,905
|
|
|
|
2,341
|
|
|
|
999,774
|
|
|
|
(602
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,001,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
|
680,000
|
|
|
|
68
|
|
|
|
285,532
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
285,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for purchase of One World Pharma S.A.S.
|
|
|
10,200,000
|
|
|
|
1,020
|
|
|
|
161,889
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
162,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed
capital
|
|
|
-
|
|
|
|
-
|
|
|
|
136,440
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
136,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion feature on convertible note
|
|
|
-
|
|
|
|
-
|
|
|
|
75,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,090
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,090
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,959,982
|
)
|
|
|
(101
|
)
|
|
|
(1,960,083
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
|
|
34,291,905
|
|
|
$
|
3,429
|
|
|
$
|
1,309,215
|
|
|
$
|
(602
|
)
|
|
$
|
(4,090
|
)
|
|
$
|
(1,959,982
|
)
|
|
$
|
(101
|
)
|
|
$
|
(652,131
|
)
|
The
accompanying notes are an integral part of these financial statements.
OWP
VENTURES, INC.
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
|
From
Inception
|
|
|
|
(March
27, 2018) to
|
|
|
|
December
31, 2018
|
|
Cash
flows from operating activities
|
|
|
|
|
Net loss
|
|
$
|
(1,959,982
|
)
|
Minority
interest in net loss
|
|
|
(101
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
Bad
debts expense
|
|
|
50,000
|
|
Depreciation
and amortization expense
|
|
|
1,961
|
|
Debt
discount amortization
|
|
|
75,000
|
|
Stock
issued for services
|
|
|
285,600
|
|
Decrease
(increase) in assets:
|
|
|
|
|
Other
current assets
|
|
|
131,488
|
|
Increase
(decrease) in liabilities:
|
|
|
|
|
Accounts
payable
|
|
|
123,870
|
|
Accrued
expenses
|
|
|
23,667
|
|
Net
cash used in operating activities
|
|
|
(1,268,497
|
)
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
Cash
acquired in One World Pharma, Inc. investment
|
|
|
4,739
|
|
Investment
in note receivable
|
|
|
(50,000
|
)
|
Investment
in One World Pharma, Inc.
|
|
|
(350,000
|
)
|
Purchase
of fixed assets
|
|
|
(358,400
|
)
|
Net
cash used in investing activities
|
|
|
(753,661
|
)
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
Proceeds
from convertible note payable
|
|
|
300,000
|
|
Proceeds
from advances from shareholders
|
|
|
514,141
|
|
Proceeds
from notes payable
|
|
|
200,000
|
|
Proceeds
from contributed capital
|
|
|
136,440
|
|
Proceeds
from sale of common stock
|
|
|
1,001,513
|
|
Net
cash provided by financing activities
|
|
|
2,152,094
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
(4,090
|
)
|
|
|
|
|
|
Net increase (decrease)
in cash
|
|
|
125,846
|
|
Cash
- beginning
|
|
|
-
|
|
Cash
- ending
|
|
$
|
125,846
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
Interest
paid
|
|
$
|
310
|
|
Income
taxes paid
|
|
$
|
-
|
|
|
|
|
|
|
Non-cash financing
transactions:
|
|
|
|
|
Beneficial
conversion feature
|
|
$
|
75,000
|
|
The
accompanying notes are an integral part of these financial statements.
OWP
VENTURES, INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
Note
1 – Nature of Business and Significant Accounting Policies
Nature
of Business
OWP
Ventures, Inc. was incorporated in Delaware on March 27, 2018. OWP Ventures, Inc. and its subsidiary (“OWP,” the “Company,”
“we,” “our” or “us”) is a holding company formed to enter and support the cannabis industry.
Through its subsidiary, One World Pharma S.A.S (“OWP SAS”), a licensed cannabis cultivation, production and distribution
(export) company located in Popayán, Colombia (nearest major city is Cali) plans to be a global leader in the distribution
of medical cannabis and cannabis extracts for medical and scientific purposes, which includes manufacture, acquisition in any
capacity, import, export, storage, transportation, marketing, and distribution of psychoactive and non-psychoactive cannabis derivatives.
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). The Company has adopted
a December 31 year-end.
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 December 31, 2018:
|
|
State
of
|
|
|
Name
of Entity
|
|
Incorporation
|
|
Relationship
|
OWP
Ventures, Inc.(1)
|
|
Delaware
|
|
Parent
|
One
World Pharma, Inc.(2)
|
|
Nevada
|
|
Subsidiary
|
One
World Pharma S.A.S.(3)
|
|
Colombia
|
|
Subsidiary
|
(1)
|
Holding
company in the form of a corporation as of December 31, 2018.
|
(2)
|
Subsidiary
as of December 31, 2018, following November 22, 2018 purchase of 66.2% of the issued and outstanding shares of One World Pharma,
Inc. (f/k/a Punto Group, Corp.) by OWP Ventures, Inc. The shares were cancelled and returned to treasury pursuant to a merger
on February 21, 2019, by a wholly-owned subsidiary of One World Pharma, Inc. with and into OWP Ventures, Inc. Following the
merger, One World Pharma, Inc. is the parent company.
|
(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 sole headquarters is located in Bogotá.
|
The
consolidated financial statements herein contain the operations of the wholly-owned subsidiary listed above. All significant inter-company
transactions have been eliminated in the preparation of these financial statements. The Company’s headquarters are located
in Las Vegas, Nevada and substantially all of its production efforts are within Popayán, Colombia.
These
statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary
for fair presentation of the information contained therein.
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.
OWP
VENTURES, INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
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
The
Company adopted ASC 820, Fair Value Measurements and Disclosures (ASC 820). ASC 820 defines fair value, establishes a three-level
valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The
three levels are defined as follows:
-
|
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
-
|
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial
instrument.
|
-
|
Level
3 inputs to valuation methodology are unobservable and significant to the fair measurement.
|
The
carrying value of cash, accounts receivable, accounts payables and accrued expenses 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.
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 any funds
in excess of FDIC insured limits at December 31, 2018, and has not experienced any losses in such accounts.
Property
and Equipment
Property
and equipment are stated at cost, less accumulated depreciation, and we depreciate it on a straight-line basis over the estimated
useful lives of the assets. Additions and improvements (including interest costs for construction of qualifying long-lived assets)
are capitalized. Maintenance and repair expenses are charged to expense as incurred. The cost of property and equipment sold or
disposed of and the related accumulated depreciation are eliminated from the property and related accumulated depreciation accounts,
and any gain or loss is credited or charged to other income (expense).
We
generally provide for depreciation over the following estimated useful service lives. Additionally, if there are indicators that
certain assets may be potentially impaired, we will analyze such assets in accordance with the related GAAP standard. The estimated
useful lives for significant property and equipment categories are as follows:
Software
|
3
years
|
Furniture
and Fixtures and Office Equipment
|
5
years
|
Machinery
|
7
years
|
OWP
VENTURES, INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
Revenue
Recognition
The
Company recognizes revenue when products are fully delivered, or services have been provided and collection is reasonably assured.
The
Company has adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from
the commercial sales of products, licensing agreements and contracts 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. We have not yet generated any revenue.
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.
Income
Taxes
The
Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets
and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be
recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such
assets to be more likely than not.
Uncertain
Tax Positions
In
accordance with ASC 740, “Income Taxes” (“ASC 740”), the Company recognizes the tax benefit from an uncertain
tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing
authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These
standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure,
and transition.
Various
taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s
tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions.
In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records
allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established,
is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.
The
assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with
the Company’s various filing positions.
Various
taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s
tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions.
In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records
allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established,
is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.
Recent
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, 2017, with early adoption permitted. The Company does not expect the
adoption of this ASU to have a material impact on its financial statements.
OWP
VENTURES, INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
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. The Company is currently in the process of evaluating the impact of adoption on its financial statements.
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.
The Company does not expect the adoption of this ASU to have a material impact on its financial statements.
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 will be 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 expects to adopt the new standard on January
1, 2019 using the effective date as of 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 expects to elect 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.
While
the Company continues to assess all of the effects of adoption, it currently believes that most significant effects 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 currently expects to elect
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.
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.
OWP
VENTURES, INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
Note
2 –Going Concern
As
shown in the accompanying consolidated financial statements, the Company has incurred recurring losses from operations resulting
in an accumulated deficit of ($1,959,982), and as of December 31, 2018, 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 new customers to increase 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. 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
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 – Acquisition
Common
Stock Issued for Acquisition of One World Pharma, SAS
On
May 30, 2018, the Company issued an aggregate 10,200,000 shares of common stock to the shareholders of One World Pharma SAS pursuant
to a stock purchase agreement whereby OWP Ventures, Inc. acquired 100% of the common stock of One World Pharma SAS. The net fair
value of assets and liabilities assumed has been deemed to be more representative of the fair value of the 10,200,000 shares issued
as consideration than the non-trading shares of common stock issued in consideration, resulting in the valuation of the shares
at $162,909.
According
to the purchase method of accounting, the Company recognized the identifiable assets acquired and liabilities assumed as follows:
|
|
May
30,
|
|
|
|
2018
|
|
Assets
Acquired:
|
|
|
|
Cash
|
|
|
26,446
|
|
Prepaid Expenses(1)
|
|
|
55,293
|
|
Fixed
Assets
|
|
|
103,296
|
|
Total
|
|
|
185,035
|
|
|
|
|
|
|
Liabilities
Assumed:
|
|
|
|
|
Accounts Payable
|
|
|
16,365
|
|
Accrued
Expenses
|
|
|
5,761
|
|
Total
|
|
|
22,126
|
|
|
|
|
|
|
Net
Assets (Liabilities)
|
|
|
162,909
|
|
(1)
Prepaid expenses include $29,356 of costs incurred in obtaining the licenses. No further adjustment to fair value was necessary
due to the highly speculative nascent stage of Colombia’s legal cannabis industry, uncertain regulatory and unrestricted
Colombian licensing environment, and additional permissions and authorizations necessary to execute the Company’s business
plan.
Note
4 – Investment
Common
Stock Purchase
On
November 22, 2018, the Company purchased 875,000 shares of the issued and outstanding common stock, on a 1:4 split adjusted basis,
of One World Pharma, Inc. from the majority shareholder. The shares represented 66.2% of the issued and outstanding shares of
the Company’s common stock. Subsequently, a wholly-owned subsidiary of One World Pharma, Inc. was formed and merged with
and into OWP Ventures, Inc. on February 21, 2019, and the 875,000 shares were cancelled and returned to treasury.
OWP
VENTURES, INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
This
acquisition was accounted for as a business combination under the purchase method of accounting. The purchase resulted in $349,420
of goodwill. According to the purchase method of accounting, the Company recognized the identifiable assets acquired and liabilities
assumed as follows:
|
|
November
22,
|
|
|
|
2018
|
|
Consideration:
|
|
|
|
Cash paid
at closing
|
|
$
|
350,000
|
|
Accounts
payable
|
|
|
198
|
|
Fair
value of total consideration exchanged
|
|
$
|
350,198
|
|
|
|
|
|
|
Fair
value of identifiable assets acquired assumed:
|
|
|
|
|
Other
current assets
|
|
$
|
778
|
|
Total
fair value of assets assumed
|
|
|
778
|
|
Consideration
paid in excess of fair value (Goodwill)(1)
|
|
$
|
349,420
|
|
|
(1)The
consideration paid in excess of the net fair value of assets acquired and liabilities assumed has been recognized as additional
paid-in capital due to the subsequent reverse merger.
|
Note
5 – Related Party Transactions
Advances
from Shareholders
See
Note 12 for disclosures on short-term related party loans.
Common
Stock Sales
On
March 27, 2018, the Company sold 100 shares of common stock at $0.10 per share to its Chief Executive Officer for proceeds of
$10 as part of the formation of the entity.
On
March 27, 2018, the Company sold 4,844,900 shares of common stock at $0.0001 per share to its Chief Executive Officer on subscriptions
receivable. The proceeds of $485 were subsequently received on November 9, 2018.
On
March 27, 2018, the Company sold an aggregate of 16,205,000 shares of common stock to nine of the Company’s founders at
$0.0001 per share on subscriptions receivable. The total proceeds of $1,620 were subsequently received between November 5, 2018
and February 5, 2019.
Note
6 – 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.
OWP
VENTURES, INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
The
following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheet as
of December 31, 2018:
|
|
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 year ended December 31,
2018.
Note
7 – Note Receivable
A
note receivable of $50,000 owed by KRG Logistics, Inc. (“KRG”) was impaired and recognized as bad debts expense as
of December 31, 2018.
On
July 2, 2018, the Company loaned $50,000 to KRG in exchange for a 90-day, unsecured promissory note, requiring the repayment of
$60,000, consisting of $50,000 of principal and $10,000 of interest on October 2, 2018. The promissory note provides the Company
with a right of first refusal to purchase KRG at terms to be determined, or the right to apply the total amount due from KRG against
amounts that may be owed by the Company to KRG for services provided to the Company, which could include sublease rent, logistics
operations, import and export services and any other services provided KRG at the lowest current rates charged to any other customer(s).
The note has been extended until June 30, 2019.
Note
8 – Other Current Assets
Other
current assets included the following as of December 31, 2018:
|
|
December
31,
|
|
|
|
2018
|
|
Security
deposit
|
|
$
|
4,494
|
|
Prepaid
expenses
|
|
|
30,850
|
|
|
|
$
|
35,344
|
|
Note
9 – Fixed Assets
Fixed
assets consist of the following at December 31, 2018:
|
|
December
31,
|
|
|
|
2018
|
|
Office
equipment
|
|
$
|
18,314
|
|
Furniture and fixtures
|
|
|
23,595
|
|
Construction in progress
|
|
|
316,491
|
|
|
|
|
358,400
|
|
Less: accumulated depreciation
|
|
|
(1,961
|
)
|
Total
|
|
$
|
356,439
|
|
Construction
in progress consists of equipment and capital improvements on the Popayán farm that have not yet been placed in service.
OWP
VENTURES, INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
Depreciation
and amortization expense totaled $1,961 for the year ended December 31, 2018.
Note
10 – Accrued Expenses
Accrued
expenses consisted of the following at December 31, 2018:
|
|
December
31,
|
|
|
|
2018
|
|
Accrued
payroll
|
|
$
|
6,327
|
|
Accrued withholding
taxes
|
|
|
6,387
|
|
Accrued ICA fees
and contributions
|
|
|
8,514
|
|
Accrued interest
|
|
|
12,924
|
|
Deferred
rent obligations
|
|
|
273
|
|
|
|
$
|
34,425
|
|
Note
11 – Convertible Note Payable
Convertible
note payable consists of the following at December 31, 2018:
|
|
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
|
|
Less:
unamortized debt discounts
|
|
|
-
|
|
Convertible
note payable
|
|
$
|
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 discount equal to $75,000. The Company recorded finance expense in
the amount of $75,000, attributed to the aforementioned debt discount, during the year ended December 31, 2018.
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 $1,529 for the
year ended December 31, 2018.
OWP
VENTURES, INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
Note
12 – Advances from Shareholders
Advances
from shareholders consist of the following at December 31, 2018:
|
|
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
|
|
$
|
514,141
|
|
|
|
|
|
|
Total
advances from shareholders
|
|
$
|
514,141
|
|
The
Company recorded interest expense in the amount of $10,738 for the year ended December 31, 2018.
Note
13 – Notes Payable
Notes
payable consists of the following at December 31, 2018:
|
|
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.
|
|
$
|
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.
|
|
|
100,000
|
|
|
|
|
|
|
Total
notes payable
|
|
$
|
200,000
|
|
The
Company recorded interest expense in the amount of $658 for the year ended December 31, 2018.
Note
14 – Stockholders’ Equity
Company
is authorized to issue an aggregate of 200,000,000 shares of common stock with a par value of $0.0001. As of December 31, 2018,
there were 34,291,905 shares of common stock issued and outstanding.
Common
Stock Sales
On
December 14, 2018, the Company sold 100,000 shares of common stock at $0.50 per share for proceeds of $50,000.
On
October 4, 2018, the Company sold 357,143 shares of common stock at $0.42 per share for proceeds of $150,000.
On
September 20, 2018, the Company sold 238,095 shares of common stock at $0.42 per share for proceeds of $100,000.
On
July 28, 2018, the Company sold 476,191 shares of common stock at $0.42 per share for proceeds of $200,000.
On
June 15, 2018, the Company sold 1,190,476 shares of common stock at $0.42 per share for proceeds of $500,000.
On
March 27, 2018, the Company sold 100 shares of common stock at $0.10 per share to its Chief Executive Officer for proceeds of
$10 as part of the formation of the entity.
OWP
VENTURES, INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
On
March 27, 2018, the Company sold 4,844,900 shares of common stock at $0.0001 per share to its Chief Executive Officer on subscriptions
receivable. The proceeds of $485 were subsequently received on November 9, 2018.
On
March 27, 2018, the Company sold an aggregate 16,205,000 shares of common stock to nine of the Company’s founders at $0.0001
per share on subscriptions receivable. The total proceeds of $1,620 were subsequently received between November 5, 2018 and February
5, 2019.
Common
Stock Issued for Services
On
October 30, 2018, the Company issued 630,000 shares of common stock to a consultant for services. The total fair value of the
common stock was $264,600 based recent independent third-party sales at $0.42 per share.
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 recent independent third-party sales at $0.42 per share.
Common
Stock Issued for Share Exchange
On
May 30, 2018, the Company issued an aggregate 10,200,000 shares of common stock to the shareholders of One World Pharma SAS as
part of a stock purchase agreement whereby OWP Ventures, Inc. acquired 100% of the common stock of One World Pharma SAS. The net
fair value of assets and liabilities assumed has been deemed to be more representative of the fair value of the 10,200,000 shares
issued as consideration than the non-trading shares of common stock issued in consideration, resulting in the valuation of the
shares at $162,909.
Adjustments
to Additional Paid-In Capital
Pursuant
to the purchase of 66.2% of the outstanding common stock of One World Pharma, Inc for $350,000 on November 30, 2018, the Company
realized goodwill of $349,420 on the consideration paid in excess of the net fair value of assets and liabilities assumed, which
has been recognized as contributed capital due to the subsequent reverse merger between the two entities on February 21, 2019.
On
various dates between April 16, 2018 and June 20, 2018, total capital contributions of $136,440 were received from the Company’s
CEO, Craig Ellins.
Note
15 – 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 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 December 31, 2018, the Company had approximately $1,506,000 of federal net operating losses. The net operating loss
carry forwards, if not utilized, will begin to expire in 2038.
The
effective income tax rate for the year ended December 31, 2018 consisted of the following:
|
|
December
31,
|
|
|
|
2018
|
|
Federal
statutory income tax rate
|
|
|
21
|
%
|
State
income taxes
|
|
|
-
|
%
|
Change
in valuation allowance
|
|
|
(21
|
)%
|
Net
effective income tax rate
|
|
|
-
|
|
OWP
VENTURES, INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
The
components of the Company’s deferred tax asset are as follows:
|
|
December 31,
|
|
|
|
2018
|
|
Deferred tax assets:
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
1,506,000
|
|
|
|
|
|
|
Net deferred tax assets before valuation allowance
|
|
$
|
316,260
|
|
Less: Valuation allowance
|
|
|
(316,260
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
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 December 31, 2018.
In
accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.
Note
16 – Subsequent Events
Promissory
Notes, Related Party
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 (the “Amended Note”). The Amended Note bears interest
at 6% and is payable upon the earlier of (i) a public or private offering of its equity securities, resulting in gross proceeds
of at least $5,000,000, or (ii) February 13, 2022.
Convertible
Promissory Note
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.
Common
Stock Sales
On
various dates between January 3, 2019 and February 19, 2019, the Company sold an aggregate 3,900,000 shares of common stock at
$0.50 per share for total proceeds of $1,950,000.
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.
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.
ONE
WORLD PHARMA INC.
Common
Stock
Shares
P
R O S P E C T U S
October
__, 2019