ITEM
1. FINANCIAL STATEMENTS
ONE
WORLD PHARMA, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
20,879
|
|
|
$
|
282,380
|
|
Inventory
|
|
|
226,204
|
|
|
|
24,682
|
|
Other
current assets
|
|
|
195,811
|
|
|
|
267,106
|
|
Total current assets
|
|
|
442,894
|
|
|
|
574,168
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets
|
|
|
423,695
|
|
|
|
502,706
|
|
Security deposits
|
|
|
70,895
|
|
|
|
72,527
|
|
Fixed assets,
net
|
|
|
711,950
|
|
|
|
697,863
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,649,434
|
|
|
$
|
1,847,264
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
602,887
|
|
|
$
|
330,521
|
|
Accrued expenses
|
|
|
240,102
|
|
|
|
109,665
|
|
Dividends payable
|
|
|
14,870
|
|
|
|
-
|
|
Current portion
of lease liabilities
|
|
|
58,155
|
|
|
|
55,101
|
|
Convertible notes
payable
|
|
|
-
|
|
|
|
507,332
|
|
Notes
payable
|
|
|
119,274
|
|
|
|
130,000
|
|
Total current liabilities
|
|
|
1,035,288
|
|
|
|
1,132,619
|
|
|
|
|
|
|
|
|
|
|
Long-term lease
liability
|
|
|
377,170
|
|
|
|
453,251
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,412,458
|
|
|
|
1,585,870
|
|
|
|
|
|
|
|
|
|
|
Series A convertible
preferred stock, $0.001 par value, 500,000 shares authorized; 147,833 and -0- issued and outstanding at September 30, 2020
and December 31, 2019, respectively
|
|
|
1,478,330
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit):
|
|
|
|
|
|
|
|
|
Preferred stock,
$0.001 par value, 9,500,000 shares authorized; no shares issued and outstanding at September 30, 2020 and December 31, 2019,
respectively
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.001
par value, 300,000,000 shares authorized; 51,235,305 and 44,804,305 shares issued and outstanding at September 30, 2020 and
December 31, 2019, respectively
|
|
|
51,235
|
|
|
|
44,804
|
|
Additional paid-in
capital
|
|
|
13,595,826
|
|
|
|
8,150,004
|
|
Subscriptions payable, consisting
of 250,000 and 500,000 shares at September 30, 2020 and December 31, 2019, respectively
|
|
|
45,000
|
|
|
|
250,000
|
|
Accumulated other
comprehensive loss
|
|
|
(44,948
|
)
|
|
|
(16,248
|
)
|
Accumulated
(deficit)
|
|
|
(14,888,467
|
)
|
|
|
(8,167,166
|
)
|
Total Stockholders’
Equity (Deficit)
|
|
|
(1,241,354
|
)
|
|
|
261,394
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
and Stockholders’ Equity (Deficit)
|
|
$
|
1,649,434
|
|
|
$
|
1,847,264
|
|
See
accompanying notes to financial statements.
ONE
WORLD PHARMA, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
42,598
|
|
|
$
|
-
|
|
|
$
|
103,384
|
|
|
$
|
-
|
|
Cost of goods sold
|
|
|
7,682
|
|
|
|
-
|
|
|
|
24,433
|
|
|
|
-
|
|
Gross profit
|
|
|
34,916
|
|
|
|
-
|
|
|
|
78,951
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
803,342
|
|
|
|
589,027
|
|
|
|
3,316,715
|
|
|
|
1,633,814
|
|
Professional fees
|
|
|
364,111
|
|
|
|
986,523
|
|
|
|
3,454,966
|
|
|
|
2,430,945
|
|
Total operating expenses
|
|
|
1,167,453
|
|
|
|
1,575,550
|
|
|
|
6,771,681
|
|
|
|
4,064,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,132,537
|
)
|
|
|
(1,575,550
|
)
|
|
|
(6,692,730
|
)
|
|
|
(4,064,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on disposal of fixed assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,087
|
)
|
Interest income
|
|
|
-
|
|
|
|
3,621
|
|
|
|
-
|
|
|
|
3,869
|
|
Interest expense
|
|
|
(7,517
|
)
|
|
|
(225,053
|
)
|
|
|
(28,571
|
)
|
|
|
(380,749
|
)
|
Total other expense
|
|
|
(7,517
|
)
|
|
|
(221,432
|
)
|
|
|
(28,571
|
)
|
|
|
(380,967
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,140,054
|
)
|
|
$
|
(1,796,982
|
)
|
|
$
|
(6,721,301
|
)
|
|
$
|
(4,445,726
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on foreign currency translation
|
|
$
|
(497
|
)
|
|
$
|
(164,122
|
)
|
|
$
|
(28,700
|
)
|
|
$
|
(21,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive loss
|
|
$
|
(1,140,551
|
)
|
|
$
|
(1,961,104
|
)
|
|
$
|
(6,750,001
|
)
|
|
$
|
(4,466,847
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic and fully diluted
|
|
|
48,588,395
|
|
|
|
42,069,859
|
|
|
|
47,982,936
|
|
|
|
39,888,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and fully diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
See
accompanying notes to financial statements.
ONE
WORLD PHARMA, INC.
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
|
|
For
the Three Months Ended September 30, 2019
|
|
|
|
Series
A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Subscriptions
|
|
|
Subscriptions
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Payable
|
|
|
Income
(Loss)
|
|
|
Deficit
|
|
|
Interest
|
|
|
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
39,922,899
|
|
|
$
|
39,923
|
|
|
$
|
4,503,966
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
138,911
|
|
|
$
|
(4,608,726
|
)
|
|
$
|
-
|
|
|
$
|
74,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock sold for
cash
|
|
|
-
|
|
|
|
-
|
|
|
|
4,509,000
|
|
|
|
4,509
|
|
|
|
2,249,991
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,254,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock payable
for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
160,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
160,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless exercise of
common stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
51,040
|
|
|
|
51
|
|
|
|
(51
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of common
stock options issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
430,270
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
430,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion
feature on convertible note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
207,332
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
207,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on foreign currency
translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(164,122
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(164,122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the
three months ended September 30, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,796,982
|
)
|
|
|
-
|
|
|
|
(1,796,982
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September
30, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
44,482,939
|
|
|
$
|
44,483
|
|
|
$
|
7,391,508
|
|
|
$
|
-
|
|
|
$
|
160,000
|
|
|
$
|
(25,211
|
)
|
|
$
|
(6,405,708
|
)
|
|
$
|
-
|
|
|
$
|
1,165,072
|
|
|
|
For
the Three Months Ended September 30, 2020
|
|
|
|
Series A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Subscriptions
|
|
|
Subscriptions
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Payable
|
|
|
Income
(Loss)
|
|
|
Deficit
|
|
|
Interest
|
|
|
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020
|
|
|
40,000
|
|
|
$
|
400,000
|
|
|
|
50,360,305
|
|
|
$
|
50,360
|
|
|
$
|
12,952,647
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(44,451
|
)
|
|
$
|
(13,748,413
|
)
|
|
$
|
-
|
|
|
$
|
(789,857
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock units sold for cash
|
|
|
107,833
|
|
|
|
1,078,330
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
875,000
|
|
|
|
875
|
|
|
|
331,625
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
332,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock payable for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of common stock options
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
326,424
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
326,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(497
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(497
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A convertible preferred stock
declared ($0.60 per share)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(14,870
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(14,870
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended
September 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,140,054
|
)
|
|
|
-
|
|
|
|
(1,140,054
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
|
|
147,833
|
|
|
$
|
1,478,330
|
|
|
|
51,235,305
|
|
|
$
|
51,235
|
|
|
$
|
13,595,826
|
|
|
$
|
-
|
|
|
$
|
45,000
|
|
|
$
|
(44,948
|
)
|
|
$
|
(14,888,467
|
)
|
|
$
|
-
|
|
|
$
|
(1,241,354
|
)
|
|
|
For
the Nine Months Ended September 30, 2019
|
|
|
|
Series A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Subscriptions
|
|
|
Subscriptions
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Payable
|
|
|
Income
(Loss)
|
|
|
Deficit
|
|
|
Interest
|
|
|
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
34,291,905
|
|
|
$
|
34,292
|
|
|
$
|
1,278,352
|
|
|
$
|
(602
|
)
|
|
$
|
-
|
|
|
$
|
(4,090
|
)
|
|
$
|
(1,959,982
|
)
|
|
$
|
(101
|
)
|
|
$
|
(652,131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received on subscriptions receivable
of OWP Ventures, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
602
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock sold for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
8,409,000
|
|
|
|
8,409
|
|
|
|
4,196,091
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,204,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock payable for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
160,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
160,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless exercise of common stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
51,040
|
|
|
|
51
|
|
|
|
(51
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock of OWP Ventures,
Inc. on debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
1,253,493
|
|
|
|
1,253
|
|
|
|
500,144
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
501,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services, OWP
Ventures, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
30
|
|
|
|
14,970
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of common stock options
issued for services, OWP Ventures, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,297
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange of OWP Ventures, Inc. shares
for One World Pharma, Inc. shares (1:1)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,322,501
|
|
|
|
1,323
|
|
|
|
(10,730
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
101
|
|
|
|
(9,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock cancelled pursuant to merger
with OWP Ventures, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
(875,000
|
)
|
|
|
(875
|
)
|
|
|
875
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of common stock options
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
991,228
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
991,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature on convertible
note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
332,332
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
332,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(21,121
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(21,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the nine months ended
September 30, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,445,726
|
)
|
|
|
-
|
|
|
|
(4,445,726
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
44,482,939
|
|
|
$
|
44,483
|
|
|
$
|
7,391,508
|
|
|
$
|
-
|
|
|
$
|
160,000
|
|
|
$
|
(25,211
|
)
|
|
$
|
(6,405,708
|
)
|
|
$
|
-
|
|
|
$
|
1,165,072
|
|
|
|
For
the Nine Months Ended September 30, 2020
|
|
|
|
Series A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Subscriptions
|
|
|
Subscriptions
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Payable
|
|
|
Income
(Loss)
|
|
|
Deficit
|
|
|
Interest
|
|
|
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
44,804,305
|
|
|
$
|
44,804
|
|
|
$
|
8,150,004
|
|
|
$
|
-
|
|
|
$
|
250,000
|
|
|
$
|
(16,248
|
)
|
|
$
|
(8,167,166
|
)
|
|
$
|
-
|
|
|
$
|
261,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock units sold for cash
|
|
|
147,833
|
|
|
|
1,478,330
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock sold for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
|
|
500
|
|
|
|
249,500
|
|
|
|
-
|
|
|
|
(250,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
5,931,000
|
|
|
|
5,931
|
|
|
|
3,335,569
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,341,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock payable for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of common stock options
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,875,623
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,875,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(28,700
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(28,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A convertible preferred
stock declared ($0.60 per share)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(14,870
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(14,870
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the nine months ended
September 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,721,301
|
)
|
|
|
-
|
|
|
|
(6,721,301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
|
|
147,833
|
|
|
$
|
1,478,330
|
|
|
|
51,235,305
|
|
|
$
|
51,235
|
|
|
$
|
13,595,826
|
|
|
$
|
-
|
|
|
$
|
45,000
|
|
|
$
|
(44,948
|
)
|
|
$
|
(14,888,467
|
)
|
|
$
|
-
|
|
|
$
|
(1,241,354
|
)
|
See
accompanying notes to financial statements.
ONE
WORLD PHARMA, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For
the Nine Months Ended
|
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(6,721,301
|
)
|
|
$
|
(4,445,726
|
)
|
Adjustments to reconcile
net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization expense
|
|
|
23,706
|
|
|
|
9,432
|
|
Loss on disposal
of fixed assets
|
|
|
-
|
|
|
|
4,087
|
|
Amortization of
debt discounts
|
|
|
-
|
|
|
|
332,332
|
|
Stock-based compensation
|
|
|
3,386,498
|
|
|
|
175,000
|
|
Amortization of
options issued for services
|
|
|
1,875,623
|
|
|
|
1,079,525
|
|
Decrease (increase)
in assets:
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
(201,522
|
)
|
|
|
(22,097
|
)
|
Other current assets
|
|
|
71,295
|
|
|
|
(235,096
|
)
|
Right-of-use assets
|
|
|
79,011
|
|
|
|
(248,541
|
)
|
Security deposits
|
|
|
1,632
|
|
|
|
(61,301
|
)
|
Increase (decrease)
in liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
272,366
|
|
|
|
23,123
|
|
Accrued expenses
|
|
|
130,437
|
|
|
|
21,986
|
|
Lease
liability
|
|
|
(73,027
|
)
|
|
|
251,789
|
|
Net cash used
in operating activities
|
|
|
(1,155,282
|
)
|
|
|
(3,115,487
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
|
(37,793
|
)
|
|
|
(224,597
|
)
|
Net cash used
in investing activities
|
|
|
(37,793
|
)
|
|
|
(224,597
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
Proceeds from convertible
note payable
|
|
|
-
|
|
|
|
500,000
|
|
Repayment of convertible
note payable
|
|
|
(507,332
|
)
|
|
|
-
|
|
Repayment of advances
from shareholders
|
|
|
-
|
|
|
|
(314,141
|
)
|
Proceeds from notes
payable
|
|
|
261,274
|
|
|
|
-
|
|
Repayment of notes
payable
|
|
|
(272,000
|
)
|
|
|
-
|
|
Proceeds from subscriptions
receivable
|
|
|
-
|
|
|
|
602
|
|
Proceeds
from sale of preferred and common stock
|
|
|
1,478,332
|
|
|
|
4,004,500
|
|
Net cash provided
by financing activities
|
|
|
960,274
|
|
|
|
4,190,961
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
|
|
(28,700
|
)
|
|
|
(21,121
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(261,501
|
)
|
|
|
829,756
|
|
Cash
- beginning
|
|
|
282,380
|
|
|
|
125,846
|
|
Cash - ending
|
|
$
|
20,879
|
|
|
$
|
955,602
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
4,983
|
|
|
$
|
35,402
|
|
Income
taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing transactions:
|
|
|
|
|
|
|
|
|
Fair
value of net assets acquired in merger
|
|
$
|
-
|
|
|
$
|
9,306
|
|
Value of shares
issued for conversion of debt
|
|
$
|
-
|
|
|
$
|
701,397
|
|
Beneficial
conversion feature
|
|
$
|
-
|
|
|
$
|
332,332
|
|
Dividends
payable
|
|
$
|
14,870
|
|
|
$
|
-
|
|
See
accompanying notes to financial statements.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
1 – Nature of Business and Significant Accounting Policies
Nature
of Business
One
World Pharma, Inc. (the “Company,” “we,” “our” or “us”) was incorporated in Nevada
on September 2, 2014. On February 21, 2019, One World Pharma, Inc. (“One World Pharma”) entered into an Agreement
and Plan of Merger with OWP Merger Subsidiary, Inc., our wholly-owned subsidiary, and OWP Ventures, Inc. (“OWP Ventures”),
which is the parent company of One World Pharma SAS, a Colombian company (“OWP Colombia”). Pursuant to the Merger
Agreement, we acquired OWP Ventures (and indirectly, OWP Colombia) by the merger of OWP Merger Subsidiary with and into OWP Ventures,
with OWP Ventures being the surviving entity as our wholly-owned subsidiary (the “Merger”). As a result of the Merger
(a) holders of the outstanding capital stock of OWP Ventures received an aggregate of 39,475,398 shares of our common stock; (b)
options to purchase 825,000 shares of common stock of OWP Ventures at an exercise price of $0.50 automatically converted into
options to purchase 825,000 shares of our common stock at an exercise price of $0.50; (c) the outstanding principal and interest
under a $300,000 convertible note issued by OWP Ventures became convertible, at the option of the holder, into shares of our common
stock at a conversion price equal to the lesser of $0.424 per share or 80% of the price we sell our common stock in a future “Qualified
Offering”; (d) 875,000 shares of our common stock owned by OWP Ventures prior to the Merger were cancelled; and (e) OWP
Ventures’ chief operating officer became our chief operating officer and two of OWP Ventures’ directors became members
of our board of directors. The Company’s headquarters are located in Las Vegas, Nevada, and all of its customers are expected
to be outside of the United States. On January 10, 2019, the Company changed its name from Punto Group, Corp. to One World Pharma,
Inc.
OWP
Ventures is a holding company formed in Delaware on March 27, 2018 to enter and support the cannabis industry, and on May 30,
2018, it acquired OWP Colombia. OWP Colombia is a licensed cannabis cultivation, production and distribution (export) company
located in Popayán, Colombia (nearest major city is Cali). We plan to be a producer of raw cannabis and hemp plant ingredients
for both medical and industrial uses across the globe. We have received licenses to cultivate, produce and distribute the raw
ingredients of the cannabis and hemp plant for medicinal, scientific and industrial purposes. Specifically, we are one of the
few companies in Colombia to receive seed, cultivation, extraction and export licenses from the Colombian government. Currently,
we own approximately 30 acres and have a covered greenhouse built specifically to cultivate high-grade cannabis and hemp. In addition,
we have entered into agreements with local farming co-operatives that include small farmers and indigenous tribe members, under
which they will cultivate cannabis on up to approximately 140 acres of land using our seeds and propagation techniques, and sell
their harvested products to us on an exclusive basis. We planted our first crop of cannabis in 2018, which we began harvesting
in the first quarter of 2019 for the purpose of further research and development activities and quality control testing of the
cannabis we have produced. We began generating revenue from the sale of our seeds in the second quarter of 2020.
The
Merger was accounted for as a reverse merger (recapitalization) with OWP Ventures deemed to be the accounting acquirer. Accordingly,
the financial statements included in this Quarterly Report on Form 10-Q reflect the historical operations of OWP Ventures and
its wholly-owned subsidiary OWP SAS prior to the Merger, and that of the combined company following the Merger. The historical
financial information for One World Pharma, Inc. (formerly Punto Group Corp.) prior to the Merger has been omitted.
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (U.S. GAAP) and the rules of the Securities and Exchange Commission (SEC). Intercompany accounts
and transactions have been eliminated.
The
unaudited condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report
on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Condensed Consolidated
Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Condensed Consolidated Financial
Statements, and the accompanying notes, are prepared in accordance with GAAP and do not contain certain information included in
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. The interim Condensed Consolidated
Financial Statements should be read in conjunction with that Annual Report on Form 10-K. Results for the interim periods presented
are not necessarily indicative of the results that might be expected for the entire fiscal year.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the following entities, all of which were under common
control and ownership at September 30, 2020:
|
|
State
of
|
|
|
Name
of Entity
|
|
Incorporation
|
|
Relationship
|
One
World Pharma, Inc.(1)
|
|
Nevada
|
|
Parent
|
OWP
Ventures, Inc.(2)
|
|
Delaware
|
|
Subsidiary
|
One
World Pharma S.A.S.(3)
|
|
Colombia
|
|
Subsidiary
|
Colombian
Hope, S.A.S.(4)
|
|
Colombia
|
|
Subsidiary
|
(1)
|
Holding
company in the form of a corporation.
|
(2)
|
Holding
company in the form of a corporation and wholly-owned subsidiary of One World Pharma, Inc.
|
(3)
|
Wholly-owned
subsidiary of OWP Ventures, Inc. since May 30, 2018, located in Colombia and legally constituted as a simplified stock company
registered in the Chamber of Commerce of Bogotá on July 18, 2017. Its headquarters are located in Bogotá.
|
(4)
|
Wholly-owned
subsidiary of OWP Ventures, Inc., acquired on November 19, 2019, located in Colombia and legally constituted as a simplified
stock company. This company has yet to incur any income or expenses.
|
The
consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. The Company’s
headquarters are located in Las Vegas, Nevada and substantially all of its production efforts are within Popayán, Colombia.
Foreign
Currency Translation
The
functional currency of the Company is Columbian Peso (COP). The Company has maintained its financial statements using the functional
currency, and translated those financial statements to the US Dollar (USD) throughout this report. Monetary assets and liabilities
denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange
prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated
into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising
from foreign currency transactions are included in the determination of net income (loss) for the respective periods.
Comprehensive
Income
The
Company has adopted the Financial Accounting Standards Boards (“FASB”) Accounting Standards Codification (“ASC”)
220, Reporting Comprehensive Income, which establishes standards for reporting and displaying comprehensive income, its components,
and accumulated balances in a full-set of general-purpose financial statements. Accumulated other comprehensive income represents
the accumulated balance of foreign currency translation adjustments.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Segment
Reporting
ASC
Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting.
The management approach model is based on the way a company’s management organizes segments within the company for making
operating decisions and assessing performance. The Company operates as a single segment and will evaluate additional segment disclosure
requirements as it expands its operations.
Fair
Value of Financial Instruments
Under
ASC 820-10-05, the FASB establishes a framework for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The
adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The
carrying amounts of cash, accounts receivable, accounts payable and accrued expenses reported on the balance sheets are estimated
by management to approximate fair value primarily due to the short-term nature of the instruments.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Cash
in Excess of FDIC Insured Limits
The
Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed
by the Federal Deposit Insurance Corporation (FDIC) up to $250,000, under current regulations. The Company did not have cash in
excess of FDIC insured limits at September 30, 2020.
Revenue
Recognition
The
Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company
recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying
the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3)
determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize
revenue when each performance obligation is satisfied.
There
was no impact on the Company’s financial statements from ASC 606 for the nine months ended September 30, 2020, or the year
ended December 31, 2019. Inventory consisted of $93,560 of raw materials, $42,622 of work in progress and $90,022 of finished
goods at September 30, 2020.
Inventory
Inventories
are stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out
(FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive
levels, deterioration, and other factors in evaluating net realizable value. Our cannabis products consist of cannabis flower
grown in-house, along with produced extracts.
Stock-Based
Compensation
The
Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC
718) and Equity-Based Payments to Non-employees pursuant to ASC 505-50 (ASC 505-50). All transactions in which goods or services
are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration
received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the
fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete
or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently
large disincentives for nonperformance.
Basic
and Diluted Loss Per Share
The
basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding.
Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by
the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, potential
dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.
Recent
Accounting Pronouncements
From
time to time, new accounting pronouncements are issued by the FASB that are adopted by the Company as of the specified effective
date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not
have a material impact on the Company’s financial statements upon adoption.
In
August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820).
The new guidance removes, modifies and adds to certain disclosure requirements on fair value measurements in Topic 820, Fair Value
Measurement. The update is effective for annual reporting periods, including interim periods, beginning after December 15, 2019.
The adoption of the new standard did not have an effect on our financial position, results of operations or cash flows.
In
January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill
Impairment. The update simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test.
An entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with
its carrying amount, and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s
fair value, if applicable. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit.
The same impairment test also applies to any reporting unit with a zero or negative carrying amount. An entity still has the option
to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The
update is effective for annual reporting periods, including interim periods, beginning after December 15, 2019, on a prospective
basis. The adoption of the new standard did not have an effect on our financial position, results of operations or cash flows.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
There
are no other recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material
effect on its financial position, results of operations, or cash flows.
Note
2 –Going Concern
As
shown in the accompanying condensed consolidated financial statements as of September 30, 2020, the Company had cash on hand of
$20,879, negative working capital of $592,394 and an accumulated deficit of $14,888,467, and the Company’s cash on
hand will not be sufficient to sustain operations. These factors raise substantial doubt about the Company’s ability
to continue as a going concern. Management is actively pursuing new customers to generate revenues. In addition, the Company is
currently seeking additional sources of capital to fund short term operations. Management believes these factors will contribute
toward achieving profitability. There can be no assurance that we will be successful in achieving these objectives, becoming profitable
or continuing our business without either a temporary interruption or a permanent cessation. Additional financing may result in
substantial dilution to existing stockholders.
The
condensed consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty
as to the Company’s ability to continue as a going concern. These financial statements also do not include any adjustments
relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that
might be necessary should the Company be unable to continue as a going concern.
Note
3 – Mergers and Acquisitions
Acquisition
On
December 6, 2019, the Company, through its wholly-owned subsidiary OWP Ventures, Inc., acquired 51% of the outstanding shares
of capital stock (the “Shares”) of Colombian Hope, S.A.S., then known as Colcannapy S.A.S., a Colombian company (“Colombian
Hope”), for a purchase price of US$102,000, pursuant to a Share Purchase Agreement (the “Purchase Agreement”)
among OWP Ventures, Inc. and Colombian Hope’s shareholders. Colombian Hope is the holder of a Colombian seed license and
23 registered Colombian cultivars.
Concurrently,
with the Company’s acquisition of the Shares, Federación Colombiana de Consejos Regionales (“Fedecoré”)
was supposed to have purchased the remaining 49% of Colombian Hope’s outstanding shares of capital stock from Colombian
Hope’s shareholders, so that the Company and Fedecoré would be the only shareholders of Colombian Hope. However,
Fedecoré, a non-profit Colombian entity, was unable to acquire such shares, which were then acquired by OWP Ventures, Inc.,
resulting in 100% ownership. No assets or liabilities were acquired pursuant to the acquisition, resulting in $102,000 of goodwill
that was impaired and expensed on December 31, 2019 due to the lack of current operations. To date, Colombian Hope has not incurred
any income or expenses.
Note
4 – Related Parties
Craig
Ellins Separation
On
June 3, 2020, the Company entered into a Separation and Release Agreement with Craig Ellins (the “Separation Agreement”),
pursuant to which Mr. Ellins resigned from all of his positions with the Company and its subsidiaries, including his positions
as Chief Executive Officer and Chairman of the Board of the Company. Pursuant to the Separation Agreement, the Company (i) issued
Mr. Ellins 2,000,000 shares of the Company’s Common Stock, (ii) reimbursed Mr. Ellins for $55,000 of expenses previously
incurred by him on behalf of the Company, and (iii) agreed to make 12 monthly payments to Mr. Ellins in the amount of $8,000 each
in the 12-month period following the date on which the Company has raised $1.5 million in gross proceeds from the sale of its
securities following the date of the Separation Agreement. The Separation Agreement also contains mutual releases and prohibits
Mr. Ellins from competing with the Company for a period of two years.
Appointment
of Isiah L. Thomas III as Chief Executive Officer and Vice Chairman
On
June 3, 2020, Isiah L. Thomas III was appointed to serve as the Company’s Chief Executive Officer and Vice Chairman pursuant
to a letter agreement with the Company (the “Employment Agreement”).
Pursuant
to the Employment Agreement:
|
●
|
Mr.
Thomas is entitled to be paid a base salary of $120,000 in the first year of his employment; $240,000 in the second year of
his employment; and $300,000 in the third year of his employment.
|
|
|
|
|
●
|
The
Company will have the option to pay Mr. Thomas’s salary with shares of the Company’s Common Stock until the Company
has raised gross proceeds of at least $1.5 million from the sale of its securities following the date of his employment. If
the Company so elects to pay his salary with shares of Common Stock, the number of shares of Common Stock shall be issued
be equal to (a) 1.25 times the cash payment to which he would have been otherwise entitled, divided by (b) the closing price
of the Common Stock on the day such cash payment was due.
|
|
|
|
|
●
|
The
Company has awarded Mr. Thomas 500,000 shares of the Company’s Common Stock, and an option (the “Option”)
to purchase 5,500,000 shares of the Company’s Common Stock at an exercise price equal to $0.55 per share. The Option
vests as to 1,500,000 shares immediately, as to 1,000,000 shares 120 days following the issuance of the Option (the “Second
Vesting Date”), and as to the remaining 3,000,000 shares quarterly over the three years following the Second Vesting
Date.
|
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Debt
Repayment, Related Party
On
various dates between, July 2, 2020 and July 6, 2020, the Company repaid a total of $140,983 of indebtedness owed to MCKP Investments
LLC, consisting of $136,000 of principal and $4,983 of interest. The Company’s Chairman of the Board, Dr. Kenneth Perego,
II, is the controlling member of MCKP Investments LLC.
Preferred
Stock Sales
On
September 1, 2020, the Company received proceeds of $26,000 from the sale of 2,600 units to the Company’s Chairman of the
Board, Dr. Ken Perego. Each unit consisted of one share of Series A Preferred Stock and five-year warrants to purchase 50 shares
of common stock at an exercise price of $0.25 per share. The proceeds received were allocated between the preferred stock and
warrants on a relative fair value basis.
On
July 10, 2020, the Company received proceeds of $110,000 from the sale of 11,000 units to the Company’s Chairman of the
Board, Dr. Ken Perego. Each unit consisted of one share of Series A Preferred Stock and five-year warrants to purchase 50 shares
of common stock at an exercise price of $0.25 per share. The proceeds received were allocated between the preferred stock and
warrants on a relative fair value basis.
Common
Stock Issued for Services, Officers and Directors
On
May 31, 2020, the Company awarded 350,000 shares of common stock to the Company’s Chairman of the Board, Dr. Ken Perego,
for services provided. The aggregate fair value of the common stock was $120,000 based on the closing price of the Company’s
common stock on the date of grant.
Common
Stock Options Issued for Services, Directors
On
May 31, 2020, the Company awarded options to purchase 350,000 shares of the Company’s Common Stock at an exercise price
equal to $0.56 per share to the Company’s Chairman of the Board, Dr. Ken Perego. The options will vest as to 116,667 shares immediately, with the remaining 233,333 shares quarterly over the following two years, beginning
October 1, 2020. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 302% and a call option
value of $0.5599, was $195,959. The options are being expensed over the vesting period, resulting in $86,263 of stock-based compensation
expense during the nine months ended September 30, 2020. As of September 30, 2020, a total of $109,696 of unamortized expenses
are expected to be expensed over the vesting period.
On
May 31, 2020, the Company awarded options to purchase 350,000 shares of the Company’s Common Stock at an exercise price
equal to $0.56 per share to one of the Company’s Directors, Bruce Raben. The options will vest as to 116,667 shares immediately, with the remaining 233,333 shares quarterly over the following two years, beginning October
1, 2020. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 302% and a call option value
of $0.5599, was $195,959. The options are being expensed over the vesting period, resulting in $86,263 of stock-based compensation
expense during the nine months ended September 30, 2020. As of September 30, 2020, a total of $109,696 of unamortized expenses
are expected to be expensed over the vesting period.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
5 – Fair Value of Financial Instruments
Under
FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation
framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements
and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50
details the disclosures that are required for items measured at fair value.
The
Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial
assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level
1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability
to access at the measurement date.
Level
2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability
(e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market
data by correlation or other means (market corroborated inputs).
Level
3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset
or liability.
The
following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheet as
of September 30, 2020 and December 31, 2019, respectively:
|
|
Fair
Value Measurements at September 30, 2020
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
20,879
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Right-of-use
asset
|
|
|
-
|
|
|
|
-
|
|
|
|
423,695
|
|
Total
assets
|
|
|
20,879
|
|
|
|
-
|
|
|
|
423,695
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
435,325
|
|
Notes payable
|
|
|
-
|
|
|
|
119,274
|
|
|
|
-
|
|
Total
liabilities
|
|
|
-
|
|
|
|
(119,274
|
)
|
|
|
(435,325
|
)
|
|
|
$
|
20,879
|
|
|
$
|
(119,274
|
)
|
|
$
|
(11,630
|
)
|
|
|
Fair
Value Measurements at December 31, 2019
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
282,380
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Right-of-use
asset
|
|
|
-
|
|
|
|
-
|
|
|
|
502,706
|
|
Total
assets
|
|
|
282,380
|
|
|
|
-
|
|
|
|
502,706
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
508,352
|
|
Convertible note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
507,332
|
|
Notes payable
|
|
|
-
|
|
|
|
130,000
|
|
|
|
-
|
|
Total
liabilities
|
|
|
-
|
|
|
|
130,000
|
|
|
|
1,015,684
|
|
|
|
$
|
282,380
|
|
|
$
|
(130,000
|
)
|
|
$
|
(512,978
|
)
|
There
were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the nine months ended September
30, 2020 or the year ended December 31, 2019.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
6 – Inventory
Inventories
are stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out
(FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive
levels, deterioration, and other factors in evaluating net realizable value. Our cannabis products consist of cannabis flower
grown in-house, along with produced extracts. Inventory consisted of $93,560 of raw materials, $42,622 of work in progress and
$90,022 of finished goods at September 30, 2020, and $24,682 of raw materials at December 31, 2019, respectively.
Note
7 – Other Current Assets
Other
current assets included the following as of September 30, 2020 and December 31, 2019, respectively:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
VAT tax receivable
|
|
$
|
80,987
|
|
|
$
|
54,814
|
|
Prepaid expenses
|
|
|
74,655
|
|
|
|
132,338
|
|
Other receivables
|
|
|
40,469
|
|
|
|
79,954
|
|
Total
|
|
$
|
195,811
|
|
|
$
|
267,106
|
|
Note
8 – Security Deposits
Security
deposits included the following as of September 30, 2020 and December 31, 2019, respectively:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Refundable deposit on
equipment purchase
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
Security deposits on leases held
in Colombia
|
|
|
15,741
|
|
|
|
18,033
|
|
Security deposit on office lease
|
|
|
4,494
|
|
|
|
4,494
|
|
Security deposit
on utilities
|
|
|
660
|
|
|
|
-
|
|
|
|
$
|
70,895
|
|
|
$
|
72,527
|
|
Note
9 – Fixed Assets
Fixed
assets consist of the following at September 30, 2020 and December 31, 2019, respectively:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Land
|
|
$
|
138,248
|
|
|
$
|
138,248
|
|
Buildings
|
|
|
41,665
|
|
|
|
-
|
|
Office equipment
|
|
|
44,027
|
|
|
|
44,027
|
|
Furniture and fixtures
|
|
|
27,914
|
|
|
|
27,914
|
|
Equipment and machinery
|
|
|
176,285
|
|
|
|
174,072
|
|
Construction
in progress
|
|
|
329,146
|
|
|
|
335,231
|
|
|
|
|
757,285
|
|
|
|
719,492
|
|
Less: accumulated
depreciation
|
|
|
(45,335
|
)
|
|
|
(21,629
|
)
|
Total
|
|
$
|
711,950
|
|
|
$
|
697,863
|
|
Construction
in progress consists of equipment and capital improvements on the Popayán farm have not yet been placed in service.
Depreciation
and amortization expense totaled $23,706 and $9,432 for the nine months ended September 30, 2020 and 2019, respectively.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
10 – Accrued Expenses
Accrued
expenses consisted of the following at September 30, 2020 and December 31, 2019, respectively:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Accrued payroll
|
|
$
|
97,132
|
|
|
$
|
67,479
|
|
Accrued withholding taxes and employee
benefits
|
|
|
10,123
|
|
|
|
14,386
|
|
Accrued ICA fees and contributions
|
|
|
83,371
|
|
|
|
1,912
|
|
Accrued interest
|
|
|
49,476
|
|
|
|
25,888
|
|
|
|
$
|
240,102
|
|
|
$
|
109,665
|
|
Note
11 – Leases
The
Company’s corporate offices and operational facility in Colombia under non-cancelable real property lease agreements that
expire on October 31, 2021 and September 30, 2029, respectively. The Company doesn’t have any other office or equipment
leases subject to the recently adopted ASU 2016-02. In the locations in which it is economically feasible to continue to operate,
management expects that lease options will be exercised. The Company’s corporate office is under a real property lease that
contains a one-time renewal option for an additional 36 months that we determined would be reasonably certain to be extended,
while the Company’s operational facility in Colombia contains a 60 month extension option that we did not determine to be
reasonably certain to be extended. The office lease contains provisions requiring payment of property taxes, utilities, insurance,
maintenance and other occupancy costs applicable to the leased premise. As the Company’s leases do not provide an implicit
discount rate, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining
the present value of lease payments.
The
components of lease expense were as follows:
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
|
2020
|
|
Operating lease cost:
|
|
|
|
|
Amortization
of assets
|
|
$
|
45,388
|
|
Interest
on lease liabilities
|
|
|
23,149
|
|
Total lease
cost
|
|
$
|
68,537
|
|
Supplemental
balance sheet information related to leases was as follows:
|
|
September 30,
|
|
|
|
2020
|
|
Operating leases:
|
|
|
|
|
Operating
lease assets
|
|
$
|
423,695
|
|
|
|
|
|
|
Current portion
of operating lease liabilities
|
|
$
|
58,155
|
|
Noncurrent
operating lease liabilities
|
|
|
377,170
|
|
Total
operating lease liabilities
|
|
$
|
435,325
|
|
|
|
|
|
|
Weighted average remaining lease
term:
|
|
|
|
|
Operating leases
|
|
|
9
years
|
|
|
|
|
|
|
Weighted average discount rate:
|
|
|
|
|
Operating leases
|
|
|
6.75
|
%
|
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Supplemental
cash flow and other information related to leases was as follows:
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
|
2020
|
|
Cash paid for amounts included in
the measurement of lease liabilities:
|
|
|
|
|
Operating
cash flows used for operating leases
|
|
$
|
73,027
|
|
|
|
|
|
|
Leased assets obtained in exchange
for lease liabilities:
|
|
|
|
|
Total
operating lease liabilities
|
|
$
|
548,216
|
|
Future
minimum annual lease commitments under non-cancelable operating leases are as follows at September 30, 2020:
|
|
Operating
|
|
|
|
Leases
|
|
|
|
|
|
2020
|
|
$
|
28,566
|
|
2021
|
|
|
80,877
|
|
2022
|
|
|
34,528
|
|
2023
|
|
|
35,909
|
|
2024
|
|
|
37,345
|
|
Thereafter
|
|
|
198,669
|
|
Total minimum
lease payments
|
|
|
415,894
|
|
Less interest
|
|
|
19,431
|
|
Present value
of lease liabilities
|
|
|
435,325
|
|
Less current
portion
|
|
|
58,155
|
|
Long-term
lease liabilities
|
|
$
|
377,170
|
|
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
12 – Convertible Note Payable
Convertible
note payable consists of the following at September 30, 2020 and December 31, 2019, respectively:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
On November 30, 2018,
the Company received proceeds of $300,000 on a secured convertible note that carries a 6% interest rate from CSW Ventures,
LP (“CSW”). The proceeds were used to fund the Company’s purchase of 875,000 shares of common stock, on
a 1:4 split adjusted basis, of One World Pharma, Inc. The Note is due on demand. In the event that the Company consummated
the closing of a public or private offering of its equity securities, resulting in gross proceeds of at least $500,000 (“Qualified
Financing”) at any time prior to the repayment of this note, then the outstanding principal and unpaid interest may,
at the option of the holder, be converted into such equity securities at a conversion price equal to eighty percent (80%)
of the purchase price paid by the investors purchasing the equity securities in the Qualified Financing. A Qualified Financing
subsequently occurred on February 4, 2019; at which time the convertible note became convertible at a fixed conversion
price of $0.40 per share. The Company’s obligations under this Note are secured by a lien on the assets of the Company.
On September 14, 2020, the principal was repaid by the issuance of 30,000 shares of Series A Convertible Preferred Stock to
CSW in satisfaction of obligation to repay such principal.
|
|
$
|
-
|
|
|
$
|
300,000
|
|
|
|
|
|
|
|
|
|
|
On July 22, 2019, a total of $207,332,
consisting of $200,000 of principal and $7,332 of unpaid interest, on two outstanding demand notes owed to CSW that originated
on November 26, 2018 and December 26, 2018, were exchanged for a convertible promissory note in the principal amount of $207,332,
due on demand (the “Second Convertible CSW Note”). The Second Convertible CSW Note bears interest at 6% per annum
and was convertible at the option of the holder into shares of common stock at a price of $0.50 per share. On September
14, 2020, the principal was repaid with $207,332 of such principal paid by the issuance of 20,733 shares of Series
A Convertible Preferred Stock to CSW.
|
|
|
-
|
|
|
|
207,332
|
|
Less: unamortized
debt discounts
|
|
|
-
|
|
|
|
-
|
|
Convertible
note payable
|
|
$
|
-
|
|
|
$
|
507,332
|
|
In
addition, the Company recognized and measured the embedded beneficial conversion feature present in the convertible notes by allocating
a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the
feature was calculated on the commitment date using the effective conversion price of the convertible notes. This intrinsic value
is limited to the portion of the proceeds allocated to the convertible debt.
The
aforementioned accounting treatment resulted in a total debt discounts equal to $332,332 for the year ended December 31, 2019.
The Company recorded finance expense in the amount of $332,332 for the nine months ended September 30, 2019.
The
convertible note limits the maximum number of shares that can be owned by the note holder as a result of the conversions to common
stock to 4.99% of the Company’s issued and outstanding shares.
The
Company recorded interest expense pursuant to the stated interest rates on the convertible notes in the amount of $21,516 and
$17,079 for the nine months ended September 30, 2020 and 2019, respectively, and $332,332 of interest expense related to the debt
discount for the nine months ended September 30, 2019.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
13 – Notes Payable
Notes
payable consists of the following at September 30, 2020 and December 31, 2019, respectively:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
On May 4, 2020, the Company received
an advance of $20,000 from Woodman Management pursuant to an unsecured promissory note due on demand that carried a 6% interest
rate. The advance was repaid by the Company on May 14, 2020.
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
On
various dates between January 29, 2020 and March 31, 2020, the Company received advances
from CSW Ventures, LP aggregating of $116,000, pursuant to unsecured promissory notes
due on demand that carry a 6% interest rate, as follows:
$25,000
– January 29, 2020
$25,000 – February 13, 2020
$15,000 – February
26, 2020
$15,000 – March 11, 2020
$ 6,000 – March 31, 2020
$10,000
– August 17, 2020
$20,000 – August 20, 2020
On
September 14, 2020, the principal was repaid with $116,000 of such principal paid
by the issuance of 11,600 shares of Series A Convertible Preferred Stock to CSW.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On May 4, 2020, the Company, through its wholly-owned subsidiary OWP Ventures, Inc., borrowed $119,274 from Customers Bank (“Lender”), pursuant to a Promissory Note issued by OWP Ventures to Lender (the “PPP Note”). The loan was made pursuant to the Payroll Protection Program established as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Note bears interest at 1.00% per annum, payable monthly beginning December 4, 2020, and is due on May 4, 2022. The PPP Note may be repaid at any time without penalty.
Under the Payroll Protection Program, the Company will be eligible for loan forgiveness up to the full amount of the PPP Note and any accrued interest. The forgiveness amount will be equal to the amount that the Company spends during the 24-week period beginning May 4, 2020 on payroll costs, payment of rent on any leases in force prior to February 15, 2020 and payment on any utility for which service began before February 15, 2020. The maximum amount of loan forgiveness for non-payroll expenses is 40% of the amount of the PPP Note. No assurance is provided that the Company will obtain forgiveness of the PPP Note in whole or in part.
The PPP Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the PPP Note.
|
|
|
119,274
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On April 2, 2020, the Company received
an advance of $6,000 from MCKP Investments LLC, a Company principally owned by the Company’s Chairman of the Board,
Dr. Kenneth Perego, II, on an unsecured promissory note due on demand that carries a 6% interest rate. On July 2, 2020, the
debt was repaid in full, including $90 of interest.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On November 14, 2019, the Company
received an advance of $50,000 from MCKP Investments LLC, pursuant to an unsecured promissory note due on demand that carries
a 6% interest rate. On July 2, 2020, the debt was repaid in full, including $1,882 of interest.
|
|
|
-
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
On November 14, 2019, the Company
received an additional advance of $80,000 from MCKP Investments LLC, pursuant to an unsecured promissory note due on demand
that carries a 6% interest rate. On July 2, 2020, the debt was repaid in full, including $3,011 of interest.
|
|
|
-
|
|
|
|
80,000
|
|
|
|
|
|
|
|
|
|
|
Total notes
payable
|
|
$
|
119,274
|
|
|
$
|
130,000
|
|
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
Company recorded interest expense in the amount of $7,055 and $6,674 for the nine months ended September 30, 2020 and 2019, respectively.
The
Company recognized interest expense for the nine months ended September 30, 2020 and 2019, as follows:
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Interest on convertible
notes
|
|
$
|
21,516
|
|
|
$
|
17,079
|
|
Interest on advances from shareholders
|
|
|
-
|
|
|
|
16,053
|
|
Interest on notes payable
|
|
|
7,055
|
|
|
|
6,674
|
|
Amortization of beneficial conversion
features
|
|
|
-
|
|
|
|
332,332
|
|
Interest on
accounts payable
|
|
|
-
|
|
|
|
8,611
|
|
Total
interest expense
|
|
$
|
28,571
|
|
|
$
|
380,749
|
|
Note
14 – Series A Preferred Stock
Preferred
Stock
The Company has 10,000,000 authorized shares
of $0.001 par value “blank check” preferred stock, of which 500,000 shares have been designated Series A Preferred
Stock. Each share of Preferred Stock is currently convertible into fifty (50) shares of the Company’s common stock. The
Series A Preferred Stock accrues dividends at the rate of 6% per annum, payable annually in cash or additional shares of Series
A Preferred Stock, at the Company’s election. As of September 30, 2020, there were 147,833 shares of Series A Preferred
Stock issued and outstanding. The Series A Preferred Stock is presented as mezzanine equity on the balance sheet due to it
carrying a stated value of $10 per share, and a deemed liquidation clause, which entitles the holder to receive, before and in
preference to any distribution or payment of assets of the Corporation or the proceeds thereof may be made or set apart for the
holders of junior securities an amount in cash equal to the stated value per share, plus an amount equal to any accrued and unpaid
dividends.
Preferred
Stock Sales
On
various dates between April 14, 2020 and September 14, 2020, the Company received total proceeds of $1,478,330 from the sale of
147,833 units, consisting in the aggregate of 147,833 shares of Series A Preferred Stock and five-year warrants to purchase 7,391,650
shares of common stock at an exercise price of $0.25 per share to fourteen accredited investors. The proceeds received were allocated
between the Series A Preferred Stock and warrants on a relative fair value basis.
Preferred
Stock Dividends
The
Series A Preferred Stock accrues dividends at the rate of 6% per annum, payable annually in cash or additional shares of Series
A Preferred Stock, at the Company’s election. A total of $14,870 of dividends were payable as of September 30, 2020.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
15 – Changes in Stockholders’ Equity
Common
Stock
The
Company is authorized to issue an aggregate of 300,000,000 shares of common stock with a par value of $0.001. As of September
30, 2020, there were 51,235,305 shares of common stock issued and outstanding.
Common
Stock Issued on Subscriptions Payable
On
January 6, 2020, the Company issued 500,000 shares of common stock that were purchased on December 31, 2019 at $0.50 per share
for proceeds of $25,000. Prior to the issuance, the purchase price was reflected on the Company’s balance sheet as subscriptions
payable.
Common
Stock Awarded for Subscriptions Payable
On
September 21, 2020, the Company awarded 250,000 shares of common stock to a consultant for services performed. The aggregate fair
value of the common stock was $45,000 based on the closing price of the Company’s common stock on the date of grant.
The shares were subsequently issued on November 18, 2020. Prior to the issuance, the fair value of the shares was reflected on
the Company’s balance sheet as subscriptions payable.
Common
Stock Issued for Services, Employees and Consultants
On
July 1, 2020, the Company awarded an aggregate of 875,000 shares of common stock to four employees and consultants for services
provided. The aggregate fair value of the common stock was $332,500 based on the closing price of the Company’s common stock
on the date of grant.
On
June 3, 2020, the Company awarded 200,000 shares of common stock to a consultant for services performed. The aggregate fair value
of the common stock was $120,000 based on the closing price of the Company’s common stock on the date of grant.
On
various dates between January 4, 2020 and May 31, 2020, the Company awarded an aggregate of 2,006,000 shares of common stock to
ten employees and consultants for services provided. The aggregate fair value of the common stock was $1,318,000 based on the
closing price of the Company’s common stock on the date of grant.
Common
Stock Issued for Services, Officers and Directors
On
June 3, 2020, the Company awarded 500,000 shares of common stock to the Company’s Chief Executive Officer, Isiah L. Thomas
III, as a signing bonus. The aggregate fair value of the common stock was $275,000 based on the closing price of the Company’s
common stock on the date of grant.
On
June 3, 2020, the Company awarded 2,000,000 shares of common stock to the Company’s former Chief Executive Officer, Craig
Ellins, pursuant to a Separation Agreement. The aggregate fair value of the common stock was $1,100,000 based on the closing price
of the Company’s common stock on the date of grant.
On
May 31, 2020, the Company awarded 350,000 shares of common stock to the Company’s Chairman of the Board, Dr. Ken Perego,
for services provided. The aggregate fair value of the common stock was $196,000 based on the closing price of the Company’s
common stock on the date of grant.
Amortization
of Stock-Based Compensation
A
total of $1,875,623 of stock-based compensation expense was recognized from the amortization of options to purchase common stock
over their vesting period during the nine months ended September 30, 2020.
Note
16 – Common Stock Options
Stock
Incentive Plan
On
February 12, 2020, the Company’s stockholders approved our 2019 Stock Incentive Plan (the “2019 Plan”), which
had been adopted by the Company’s Board of Directors (the “Board”) as of December 10, 2019. The 2019 Plan provides
for the issuance of up to 10,000,000 shares of common stock to the Company and its subsidiaries’ employees, officers, directors,
consultants and advisors, stock options (non-statutory and incentive), restricted stock awards, stock appreciation rights (“SARs”),
restricted stock units (“RSUs”) and other performance stock awards. Options granted under the 2019 Plan may either
be intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or may be non-qualified options, and
are exercisable over periods not exceeding ten years from date of grant. Unless sooner terminated in accordance with its terms,
the Stock Plan will terminate on December 10, 2029.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Common
Stock Options Issued for Services
On
July 1, 2020, the Company awarded options to purchase 125,000 shares of the Company’s Common Stock at an exercise price
equal to $0.38 per share to a consultant. The options were issued outside of the Company’s 2019 Plan and are exercisable
over a ten year period. The options will vest quarterly over six months. The estimated value using the Black-Scholes Pricing Model,
based on a volatility rate of 303% and a call option value of $0.3798, was $47,476. The options are being expensed over the vesting
period, resulting in $23,738 of stock-based compensation expense during the nine months ended September 30, 2020. As of September
30, 2020, a total of $23,738 of unamortized expenses are expected to be expensed over the vesting period.
On
July 1, 2020, the Company awarded options to purchase 1,000,000 shares of the Company’s Common Stock at an exercise price
equal to $0.38 per share to a consultant. The options were issued outside of the Company’s 2019 Plan and are exercisable
over a ten year period. The options will vest quarterly over three years. The estimated value using the Black-Scholes Pricing
Model, based on a volatility rate of 303% and a call option value of $0.38, was $379,958. The options are being expensed over
the vesting period, resulting in $31,663 of stock-based compensation expense during the nine months ended September 30, 2020.
As of September 30, 2020, a total of $348,295 of unamortized expenses are expected to be expensed over the vesting period.
On
July 1, 2020, the Company awarded options to purchase 125,000 shares of the Company’s Common Stock at an exercise price
equal to $0.38 per share to a consultant for Advisory Board services. The options were issued outside of the Company’s 2019
Plan and are exercisable over a ten year period. The options will vest quarterly over one year. The estimated value using the
Black-Scholes Pricing Model, based on a volatility rate of 303% and a call option value of $0.3799, was $47,482. The options are
being expensed over the vesting period, resulting in $11,871 of stock-based compensation expense during the nine months ended
September 30, 2020. As of September 30, 2020, a total of $35,611 of unamortized expenses are expected to be expensed over the
vesting period.
On
June 3, 2020, the Company awarded options to purchase 5,500,000 shares of the Company’s Common Stock at an exercise price
equal to $0.55 per share to Isiah L. Thomas III, the Company’s Chief Executive Officer and Vice Chairman. The options were
issued outside of the Company’s 2019 Plan and are exercisable over a ten year period. The options vest as to 1,500,000 shares
immediately, as to 1,000,000 shares 120 days following the issuance of the option (the “Second Vesting Date”), and
as to the remaining 3,000,000 shares vesting quarterly over the three years following the Second Vesting Date. The estimated value
using the Black-Scholes Pricing Model, based on a volatility rate of 301% and a call option value of $0.5499, was $3,024,689.
The options are being expensed over the vesting period, resulting in $1,040,366 of stock-based compensation expense during the
nine months ended September 30, 2020. As of September 30, 2020, a total of $1,984,323 of unamortized expenses are expected to
be expensed over the vesting period.
On
May 31, 2020, the Company awarded options to purchase 350,000 shares of the Company’s Common Stock at an exercise price
equal to $0.56 per share to the Company’s Chairman of the Board, Dr. Ken Perego. The options vest as to 116,667 shares immediately,
with the remaining 233,333 shares vesting quarterly over the following two years, beginning October 1, 2020. The estimated value
using the Black-Scholes Pricing Model, based on a volatility rate of 302% and a call option value of $0.5599, was $195,959. The
options are being expensed over the vesting period, resulting in $86,263 of stock-based compensation expense during the nine months
ended September 30, 2020. As of September 30, 2020, a total of $109,696 of unamortized expenses are expected to be expensed over
the vesting period.
On
May 31, 2020, the Company awarded options to purchase 350,000 shares of the Company’s Common Stock at an exercise price
equal to $0.56 per share to Bruce Raben, a Director of the Company. The options vest as to 116,667 shares immediately, with the
remaining 233,333 shares vesting quarterly over the following two years, beginning October 1, 2020. The estimated value using
the Black-Scholes Pricing Model, based on a volatility rate of 302% and a call option value of $0.5599, was $195,959. The options
are being expensed over the vesting period, resulting in $86,263 of stock-based compensation expense during the nine months ended
September 30, 2020. As of September 30, 2020, a total of $109,696 of unamortized expenses are expected to be expensed over the
vesting period.
On
May 31, 2020, the Company awarded options to purchase an aggregate 2,000,000 shares of the Company’s Common Stock at an
exercise price equal to $0.56 per share to eight consultants and employees. The options vest as to 666,667 shares immediately,
with the remaining 1,333,333 shares vesting quarterly over the following three years, beginning October 1, 2020. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 302% and a call option value of $0.5599, was $1,119,873.
The options are being expensed over the vesting period, resulting in $454,181 of stock-based compensation expense during the nine
months ended September 30, 2020. As of September 30, 2020, a total of $665,692 of unamortized expenses are expected to be expensed
over the vesting period.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
17 – Income Taxes
The
Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides
that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes, referred to as temporary differences.
For
the nine months ended September 30, 2020, and the year ended December 31, 2019, the Company incurred a net operating loss and,
accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to
the uncertainty of the realization of any tax assets. At September 30, 2020, the Company had approximately $5,748,000 of
federal net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2025.
Based
on the available objective evidence, including the Company’s history of its loss, management believes it is more likely
than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation
allowance against its net deferred tax assets at September 30, 2020 and December 31, 2019, respectively.
In
accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.
Note
18 – Subsequent Events
Debt
Financing
On
October 28, 2020, the Company received an advance of $50,000 from the Company’s Chief Executive Officer, Isiah L Thomas,
III, pursuant to an unsecured promissory note due on demand that carried a 6% interest rate.
Preferred
Stock Sales
On
October 28, 2020, the Company received proceeds of $50,000 from the sale of 5,000 units to SWC Medical LLC. Each unit consisted
of one share of Series A Preferred Stock and five-year warrants to purchase 50 shares of common stock at an exercise price of
$0.25 per share. The proceeds received were allocated between the preferred stock and warrants on a relative fair value basis.
Common
Stock Issued on Subscriptions Payable
On
November 19, 2020, the Company issued 250,000 shares of common stock awarded on September 21, 2020 to a consultant for services
performed. Prior to the issuance, the fair value of such shares was reflected on the Company’s balance sheet as subscriptions
payable.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The
information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for
the year ended December 31, 2019 and presumes that readers have access to, and will have read, the “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following
discussion and analysis also should be read together with our financial statements and the notes to the financial statements included
elsewhere in this Form 10-Q.
The
following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including,
without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult
to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should
not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described
in the Form 10-K in the section entitled “Risk Factors” for a description of certain risks that could, among other
things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking
statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited
Financial Statements and notes thereto that appear elsewhere in this report.
Overview
Through
our wholly-owned subsidiary, One World Pharma S.A.S, a licensed cannabis cultivation, production and distribution (export) company
located in Popayán, Colombia (nearest major city is Cali), we plan to produce raw cannabis and hemp plant ingredients for
both medical and industrial uses across the globe. We have received licenses to cultivate, produce and distribute the raw ingredients
of the cannabis and hemp plant for medicinal, scientific and industrial purposes. Specifically, we are one of the few companies
in Colombia to receive seed, cultivation, extraction and export licenses from the Colombian government. Currently, we own approximately
30 acres and have a covered greenhouse built specifically to cultivate high-grade cannabis and hemp. In addition, we have entered
into agreements with local farming co-operatives that include small farmers and indigenous tribe members, under which they will
cultivate cannabis on up to approximately 140 acres of land using our seeds and propagation techniques, and sell their harvested
products to us on an exclusive basis. We planted our first crop of cannabis in 2018, which we began harvesting in the first quarter
of 2019 for the purpose of further research and development activities and quality control testing of the cannabis we have produced.
We generated initial sales of fully registered non-psychoactive seeds during the second quarter of 2020.
On
June 3, 2020, we appointed Isiah L. Thomas III to serve as the Company’s Chief Executive Officer and Vice Chairman pursuant
to a letter agreement with the Company; entered into a Separation and Release Agreement with Craig Ellins, pursuant to which Mr.
Ellins resigned from all of his positions with the Company and its subsidiaries, including his positions as Chief Executive Officer
and Chairman of the Board of the Company; and appointed Dr. Kenneth Perego, II to serve as the Executive Chairman of the Company’s
Board of Directors.
Mr.
Thomas, 59, has been the Chairman and Chief Executive Officer of Isiah International, LLC, a holding company with interests in
a diversified portfolio of businesses, since 2011. Mr. Thomas also has been a Commentator and Analyst for NBA TV, since 2014,
and Turner Sports, since 2012. He previously served as the President & Alternate Governor of the New York Liberty of the Women’s
National Basketball Association from 2015 to February 2019, the Head Basketball Coach at Florida International University, from
2009 to 2012, the General Manager, President of Basketball Operation and Head Coach of the New York Knicks of the National Basketball
Association (“NBA”), from 2006 to 2008, the Head Coach of the Indiana Pacers of the NBA from 2000 to 2003, the Owner
of the Continental Basketball Association from 1998 to 2000, Minority Owner & Executive Vice President of the Toronto Raptors
of the NBA from 1994 to 1998 and point guard for the Detroit Pistons of the NBA from 1981 to 1994. Mr. Thomas has served as a
director of Get in Chicago, an organization focused on stopping gun and related violence in Chicago, since 2013, and as a director
of Madison Square Garden Entertainment Corp. since April 2020. He is also the Founder of Mary’s Court Foundation, a charitable
organization established in 2010.
Results
of Operations for the Three Months Ended September 30, 2020 and 2019:
The
following table summarizes selected items from the statement of operations for the three months ended September 30, 2020 and 2019.
|
|
Three
Months Ended September 30,
|
|
|
Increase
/
|
|
|
|
2020
|
|
|
2019
|
|
|
(Decrease)
|
|
Revenues
|
|
$
|
42,598
|
|
|
$
|
-
|
|
|
$
|
42,598
|
|
Cost of goods
sold
|
|
|
7,682
|
|
|
|
-
|
|
|
|
7,682
|
|
Gross
profit
|
|
|
34,916
|
|
|
|
-
|
|
|
|
34,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
803,342
|
|
|
|
589,027
|
|
|
|
214,315
|
|
Professional
fees
|
|
|
356,486
|
|
|
|
986,523
|
|
|
|
(630,037
|
)
|
Total
operating expenses:
|
|
|
1,159,828
|
|
|
|
1,575,550
|
|
|
|
(415,722
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,124,912
|
)
|
|
|
(1,575,550
|
)
|
|
|
(450,638
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (expense)
|
|
|
(7,517
|
)
|
|
|
(221,432
|
)
|
|
|
(213,915
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,132,429
|
)
|
|
$
|
(1,796,982
|
)
|
|
$
|
(664,553
|
)
|
Revenues
We
began to generate revenues from the sale of seeds in the current year. Revenues were $42,598 for the three months ended September
30, 2020.
Cost
of Goods Sold
Cost
of goods sold for the three months ended September 30, 2020 were $7,682. Cost of goods sold consists primarily of labor, agricultural
raw materials, depreciation and overhead.
General
and Administrative Expenses
General
and administrative expenses for the three months ended September 30, 2020 were $803,342, compared to $589,027 during the three
months ended September 30, 2019, an increase of $214,315, or 36%. The expenses for the current period consisted primarily of compensation
expenses, office rent, and travel costs. General and administrative expenses decreased primarily due to increased stock-based
compensation issued to officers, as offset to a lesser degree by staffing reductions related to the worldwide economic disruption
from COVID-19 in the current period. General and administrative expenses included non-cash, stock-based compensation of $441,567
and $74,758 during the three months ended September 30, 2020 and 2019, respectively.
Professional
Fees
Professional
fees for the three months ended September 30, 2020 were $356,486, compared to $986,523 during the three months ended September
30, 2019, a decrease of $630,037, or 64%. Professional fees included non-cash, stock-based compensation of $254,732 and $515,512
during the three months ended September 30, 2020 and 2019, respectively. Professional fees decreased primarily due to decreased
stock-based compensation and investor relations efforts during the current period.
Other
Income (Expense)
Other
expenses, on a net basis, for the three months ended September 30, 2020 were $7,517, compared to other expenses, on a net basis,
of $221,432 during the three months ended September 30, 2019, a decrease in net expenses of $213,915, or 97%. Other expenses consisted
of $7,517 of interest expense for the three months ended September 30, 2020, compared to $225,053 of interest expense, as offset
by $3,621 of interest income, during the three months ended September 30, 2019.
Net
Loss
Net
loss for the three months ended September 30, 2020 was $1,132,429, or $0.02 per share, compared to $1,796,982, or $0.04 per share,
during the three months ended September 30, 2019, a decrease of $664,553, or 37%. The net loss decreased primarily due to decreased
professional fees and interest expense during the current period, along with reductions in operating costs related to the worldwide
economic disruption from COVID-19 in the current period.
Results
of Operations for the Nine Months Ended September 30, 2020 and 2019:
The
following table summarizes selected items from the statement of operations for the nine months ended September 30, 2020 and 2019.
|
|
Nine
Months Ended September 30,
|
|
|
Increase
/
|
|
|
|
2020
|
|
|
2019
|
|
|
(Decrease)
|
|
Revenues
|
|
$
|
103,384
|
|
|
$
|
-
|
|
|
$
|
103,384
|
|
Cost
of goods sold
|
|
|
24,433
|
|
|
|
-
|
|
|
|
24,433
|
|
Gross
profit
|
|
|
78,951
|
|
|
|
-
|
|
|
|
78,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
3,316,715
|
|
|
|
1,633,814
|
|
|
|
1,682,901
|
|
Professional
fees
|
|
|
3,447,341
|
|
|
|
2,430,945
|
|
|
|
1,016,396
|
|
Total
operating expenses:
|
|
|
6,764,056
|
|
|
|
4,064,759
|
|
|
|
2,699,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(6,685,105
|
)
|
|
|
(4,064,759
|
)
|
|
|
2,620,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (expense)
|
|
|
(28,571
|
)
|
|
|
(380,967
|
)
|
|
|
(352,396
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(6,713,676
|
)
|
|
$
|
(4,445,726
|
)
|
|
$
|
2,267,950
|
|
Revenues
We
began to generate revenues from the sale of seeds in the current year. Revenues were $103,384 for the nine months ended September
30, 2020.
Cost
of Goods Sold
Cost
of goods sold for the nine months ended September 30, 2020 were $24,433. Cost of goods sold consists primarily of labor, agricultural
raw materials, depreciation and overhead.
General
and Administrative Expenses
General
and administrative expenses for the nine months ended September 30, 2020 were $3,316,715, compared to $1,633,814 during the nine
months ended September 30, 2019, an increase of $1,682,901, or 103%. The expenses for the current period consisted primarily of
compensation expenses, office rent, and travel costs. General and administrative expenses increased primarily due to increased
stock-based compensation issued to officers, as offset to a lesser degree by staffing reductions related to the worldwide economic
disruption from COVID-19 in the current period. General and administrative expenses included non-cash, stock-based compensation
of $2,415,366 and $179,581 during the nine months ended September 30, 2020 and 2019, respectively.
Professional
Fees
Professional
fees for the nine months ended September 30, 2020 were $3,447,341, compared to $2,430,945 during the nine months ended September
30, 2019, an increase of $1,016,396, or 42%. Professional fees included non-cash, stock-based compensation of $2,839,132 and $971,647
during the nine months ended September 30, 2020 and 2019, respectively. Professional fees increased primarily due to increased
stock-based compensation during the current period.
Other
Income (Expense)
Other
expenses, on a net basis, for the nine months ended September 30, 2020 were $28,571, compared to other expenses, on a net basis,
of $380,967 during the nine months ended September 30, 2019, a decrease in net expenses of $352,396, or 92%. Other expenses consisted
of $28,571 of interest expense for the nine months ended September 30, 2020, compared to a $4,087 loss on disposal of fixed assets,
and $380,749 of interest expense, as offset by $3,869 of interest income, during the nine months ended September 30, 2019.
Net
Loss
Net
loss for the nine months ended September 30, 2020 was $6,713,676, or $0.14 per share, compared to $4,445,726, or $0.11 per share,
during the nine months ended September 30, 2019, an increase of $2,267,950, or 51%. The net loss increased primarily due to increased
stock-based compensation during the current period, as partially offset by reductions in operating costs related to the worldwide
economic disruption from COVID-19 in the current period.
Liquidity
and Capital Resources
The
following is a summary of the Company’s cash flows provided by (used in) operating, investing, financing activities and
effect of exchange rate changes on cash for the nine months ended September 30, 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
Operating Activities
|
|
$
|
(1,155,282
|
)
|
|
$
|
(3,115,487
|
)
|
Investing Activities
|
|
|
(37,793
|
)
|
|
|
(224,597
|
)
|
Financing Activities
|
|
|
960,274
|
|
|
|
4,190,961
|
|
Effect of Exchange
Rate Changes on Cash
|
|
|
(28,700
|
)
|
|
|
(21,121
|
)
|
Net
Increase (Decrease) in Cash
|
|
$
|
(261,501
|
)
|
|
$
|
829,756
|
|
Net
Cash Used in Operating Activities
During
the nine months ended September 30, 2020, net cash used in operating activities was $1,155,282, compared to net cash used in operating
activities of $3,115,487 for the nine months ended September 30, 2019. The cash used in operating activities was primarily attributable
to our net loss.
Net
Cash Used in Investing Activities
During
the nine months ended September 30, 2020, net cash used in investing activities was $37,793, compared to net cash used in investing
activities of $224,597 for the nine months ended September 30, 2019. The cash used in investing activities consisted of purchases
of fixed assets.
Net
Cash Provided by Financing Activities
During
the nine months ended September 30, 2020, net cash provided by financing activities was $960,274, compared to net cash provided
by financing activities of $4,190,961 for the nine months ended September 30, 2019. The current period consisted of $261,274 of
debt financing, debt repayments of $779,332, and $1,478,332 of proceeds from the sale of stock, compared to $500,000 of net proceeds
received on debt financing, debt repayments of $314,141, and $4,005,102 of equity financing received during the nine months ended
September 30, 2019.
Ability
to Continue as a Going Concern
As of September 30, 2020,
our balance of cash on hand was $20,879, and we had negative working capital of $592,394 and an accumulated deficit of $14,895,712.
We currently do not have sufficient funds to sustain our operations for the next twelve months and we will need
to raise additional cash to fund our operations to the extent necessary to provide working capital.
The
Company has incurred recurring losses from operations resulting in an accumulated deficit, and, as set forth above, the Company’s
cash on hand is not sufficient to sustain operations. These factors raise substantial doubt about the Company’s ability
to continue as a going concern. Management is actively pursuing new customers to generate revenues. In addition, the Company is
currently seeking additional sources of capital to fund short term operations. Management believes these factors will contribute
toward achieving profitability. The accompanying financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern. There can be no assurance that we will be successful in achieving these
objectives, becoming profitable or continuing our business without either a temporary interruption or a permanent cessation. Additional
financing may result in substantial dilution to existing stockholders.
The
condensed consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty
as to the Company’s ability to continue as a going concern. These financial statements also do not include any adjustments
relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that
might be necessary should the Company be unable to continue as a going concern.
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 Form 10-Q, 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
The
Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company
recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying
the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3)
determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize
revenue when each performance obligation is satisfied.
There
was no impact on the Company’s financial statements from ASC 606 for the nine months ended September 30, 2020, or the year
ended December 31, 2019. Inventory consisted of $93,560 of raw materials, $42,622 of work in progress and $90,022 of finished
goods at September 30, 2020, and $24,682 of raw materials at September 30, 2019.
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.