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 all four licenses,
including seed use, cultivation of non-psychoactive cannabis, cultivation of psychoactive cannabis, and manufacturing allowing for extraction
and export. 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, 2020. 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 March 31, 2021:
|
|
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.
Reclassifications
Certain
reclassifications have been made to the prior years’ financial statements to conform to current year presentation. These
reclassifications had no effect on previously reported results of operations or retained earnings.
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 of America
requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and 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 these estimates.
Segment
Reporting
ASC
Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting.
The management approach model is based on the way a company’s management organizes segments within the company for making
operating decisions and assessing performance. The Company operates as a single segment and will evaluate additional segment disclosure
requirements as it expands its operations.
Fair
Value of Financial Instruments
The
Company discloses the fair value of certain assets and liabilities in accordance with ASC 820 – Fair Value Measurement and
Disclosures (ASC 820). 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 had $416,373 of cash
in excess of FDIC insured limits at March 31, 2021, and has not experienced any losses in such accounts.
Revenue
Recognition
The
Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers (ASC 606). 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 three months ended March 31, 2021, or the year
ended December 31, 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 2020, the FASB issued ASU No. 2020-06, Debt–Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging–Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts
in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for convertible instruments by reducing the number
of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate
diluted earnings per share for convertible instruments and requires the use of the if converted method. The
new guidance is effective for all entities for annual periods, and interim periods within those annual periods, beginning after
December 15, 2021, with early adoption permitted. The adoption of ASU 2020-06 is not expected to have a material impact on the
Company’s financial statements or related disclosures.
In
May 2020, the SEC adopted final rules that amend the financial statement requirements for significant business acquisitions and
dispositions. Among other changes, the final rules modify the significance tests and improve the disclosure requirements for acquired
or to be acquired businesses and related pro forma financial information, the periods those financial statements must cover, and
the form and content of the pro forma financial information. The final rules do not modify requirements for the acquisition and
disposition of significant amounts of assets that do not constitute a business. The final rules were effective January 1, 2021.
The Company has considered these final rules and updated its disclosures, as applicable.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
In
November 2019, the FASB issued ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The
amendments in ASU 2019-12 are part of an initiative to reduce complexity in accounting standards and simplify the accounting for
income taxes by removing certain exceptions from Topic 740 and making minor improvements to the codification. ASU 2019-12
and its related amendments are effective for public entities for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2020. The provisions of this update did not have a material impact on the Company’s financial
position or results of operations.
No
other new accounting pronouncements, issued or effective during the period ended March 31, 2021, have had or are expected to have
a significant impact on the Company’s financial statements.
Note
2 –Going Concern
As
shown in the accompanying condensed consolidated financial statements as of March 31, 2021, the Company had cash on hand of $875,004,
negative working capital of $271,356 and an accumulated deficit of $17,172,543, and the Company’s cash on hand will not be sufficient
to sustain operations, however, we have received a commitment from ISIAH International, LLC, a company under the control of our CEO,
Isiah L. Thomas, III, to fund us with $3,000,000 by July 12, 2021. As of May 17, 2021, we have received approximately, $2,000,010.
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 – Related Parties
Debt
Repayment, Related Party
On
March 29, 2021, the Company repaid a total of $27,201 of indebtedness owed to the Company’s Chairman of the Board, Dr. Kenneth
Perego, II, M.D., consisting of $26,000 of principal and $1,201 of interest.
Series
B Preferred Stock Sales
On
February 7, 2021, the Company and ISIAH International, LLC (“ISIAH International”), entered into a Securities Purchase
Agreement (the “Purchase Agreement”) under which ISIAH International agreed to purchase from the Company, on the dates
provided for in the Purchase Agreement, an aggregate of 200,000 shares of the Company’s newly designated Series B Preferred
Stock (“Series B Preferred Stock”), convertible into an aggregate of 20,000,000 shares of the Company’s common
stock, par value $0.001 per share (“Common Stock”), for a purchase price of $15.00 per share of Preferred Stock, and
an aggregate purchase price of $3 million. Each share of Series B Preferred Stock has a Stated Value of $15.00 and is convertible
into Common Stock at a conversion price equal to $0.15. Isiah Thomas, the Company’s Chief Executive Officer, is the sole
member and Chief Executive Officer of ISIAH International. Pursuant to the Purchase Agreement, ISIAH International has agreed
to purchase shares of Series B Preferred Stock from the Company according to the following schedule:
Date
|
|
Shares
|
|
|
Purchase
Price
|
|
Initial
Closing Date
|
|
|
16,666
|
|
|
$
|
249,990
|
|
February 22,
2021
|
|
|
16,667
|
|
|
$
|
250,005
|
|
March 8, 2021
|
|
|
16,667
|
|
|
$
|
250,005
|
|
March 22,
2021
|
|
|
16,667
|
|
|
$
|
250,005
|
|
April 5, 2021
|
|
|
16,666
|
|
|
$
|
249,990
|
|
April 19,
2021
|
|
|
16,667
|
|
|
$
|
250,005
|
|
May 17, 2021
|
|
|
33,334
|
|
|
$
|
500,010
|
|
June 14, 2021
|
|
|
33,333
|
|
|
$
|
499,995
|
|
July
12, 2021
|
|
|
33,333
|
|
|
$
|
499,995
|
|
Total
|
|
|
200,000
|
|
|
$
|
3,000,000
|
|
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
As
of March 31, 2021, a total of 66,667 shares Series B Preferred Stock have been purchased in accordance with the above schedule,
for total proceeds of $1,000,005.
Series
B 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 Options Issued for Services, Directors
On
January 1, 2021, the Company awarded options to purchase 5,500,000 shares of the Company’s Common Stock at an exercise price
equal to $0.13 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 vested immediately as
to 2,750,000 shares, and vest as to the remaining 2,750,000 shares quarterly in 250,000 increments over the following eleven quarters.
The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 192% and a call option value of $0.1174,
was $645,624. The options are being expensed over the vesting period, resulting in $322,812 of stock-based compensation expense
during the three months ended March 31, 2021. As of March 31, 2021, a total of $322,812 of unamortized expenses are expected to
be expensed over the vesting period.
On
January 1, 2021, the Company awarded options to purchase 350,000 shares of the Company’s Common Stock under the Company’s
2019 Plan at an exercise price equal to $0.13 per share, exercisable over a ten year period to the Company’s Chairman of
the Board, Dr. Ken Perego. The options vest in equal quarterly installments over one year. The estimated value using the Black-Scholes
Pricing Model, based on a volatility rate of 192% and a call option value of $0.1170, was $40,943. The options are being expensed
over the vesting period, resulting in $10,235 of stock-based compensation expense during the three months ended March 31, 2021.
As of March 31, 2021, a total of $30,708 of unamortized expenses are expected to be expensed over the vesting period.
On
January 1, 2021, the Company awarded options to purchase 475,000 shares of the Company’s Common Stock under the Company’s
2019 Plan at an exercise price equal to $0.13 per share, exercisable over a ten year period to Bruce Raben, the Company’s
Interim Chief Financial Officer and a Director of the Company. The options vest in equal quarterly installments over one year.
The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 192% and a call option value of $0.1170,
was $55,565. The options are being expensed over the vesting period, resulting in $13,892 of stock-based compensation expense
during the three months ended March 31, 2021. As of March 31, 2021, a total of $41,673 of unamortized expenses are expected to
be expensed over the vesting period.
Note
4 – 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.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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 March 31, 2021 and December 31, 2020, respectively:
|
|
Fair
Value Measurements at March 31, 2021
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
875,004
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Right-of-use
asset
|
|
|
-
|
|
|
|
-
|
|
|
|
183,804
|
|
Total
assets
|
|
|
875,004
|
|
|
|
-
|
|
|
|
183,804
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
190,561
|
|
Notes
payable
|
|
|
-
|
|
|
|
388,762
|
|
|
|
-
|
|
Total
liabilities
|
|
|
-
|
|
|
|
(388,762
|
)
|
|
|
(190,561
|
)
|
|
|
$
|
875,004
|
|
|
$
|
(388,762
|
)
|
|
$
|
(6,757
|
)
|
|
|
Fair
Value Measurements at December 31, 2020
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
28,920
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Right-of-use
asset
|
|
|
-
|
|
|
|
-
|
|
|
|
195,029
|
|
Total
assets
|
|
|
28,920
|
|
|
|
-
|
|
|
|
195,029
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
201,520
|
|
Notes
payable
|
|
|
-
|
|
|
|
334,841
|
|
|
|
-
|
|
Total
liabilities
|
|
|
-
|
|
|
|
334,841
|
|
|
|
201,525
|
|
|
|
$
|
28,920
|
|
|
$
|
(334,841
|
)
|
|
$
|
(6,496
|
)
|
There
were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the three months ended March
31, 2021 or the year ended December 31, 2020.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
5 – 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 the following at March 31, 2021 and December 31, 2020, respectively.
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2021
|
|
|
2020
|
|
Raw
materials
|
|
$
|
38,567
|
|
|
$
|
27,514
|
|
Work
in progress
|
|
|
243,374
|
|
|
|
181,272
|
|
Finished
goods
|
|
|
90,603
|
|
|
|
104,673
|
|
|
|
|
372,544
|
|
|
|
313,459
|
|
Less
obsolescence
|
|
|
(42,535
|
)
|
|
|
(46,307
|
)
|
Total
inventory
|
|
$
|
330,009
|
|
|
$
|
267,152
|
|
Note
6 – Other Current Assets
Other
current assets included the following as of March 31, 2021 and December 31, 2020, respectively:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2021
|
|
|
2020
|
|
VAT
tax receivable
|
|
$
|
70,435
|
|
|
$
|
99,199
|
|
Prepaid
expenses
|
|
|
22,910
|
|
|
|
19,226
|
|
Other
receivables
|
|
|
2,435
|
|
|
|
486
|
|
Total
|
|
$
|
95,780
|
|
|
$
|
118,911
|
|
Note
7 – Security Deposits
Security
deposits included the following as of March 31, 2021 and December 31, 2020, respectively:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2021
|
|
|
2020
|
|
Utility
deposits
|
|
$
|
1,090
|
|
|
$
|
660
|
|
Refundable
deposit on equipment purchase
|
|
|
50,000
|
|
|
|
50,000
|
|
Security
deposits on leases held in Colombia
|
|
|
2,246
|
|
|
|
9,960
|
|
Security
deposit on office lease
|
|
|
14,029
|
|
|
|
4,494
|
|
|
|
$
|
67,365
|
|
|
$
|
65,114
|
|
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
8 – Fixed Assets
Fixed
assets consist of the following at March 31, 2021 and December 31, 2020, respectively:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2021
|
|
|
2020
|
|
Land
|
|
$
|
138,248
|
|
|
$
|
138,248
|
|
Buildings
|
|
|
41,665
|
|
|
|
41,665
|
|
Office
equipment
|
|
|
48,277
|
|
|
|
44,027
|
|
Furniture
and fixtures
|
|
|
27,914
|
|
|
|
27,914
|
|
Equipment
and machinery
|
|
|
331,899
|
|
|
|
185,169
|
|
Construction
in progress
|
|
|
352,044
|
|
|
|
345,036
|
|
|
|
|
940,047
|
|
|
|
782,059
|
|
Less:
accumulated depreciation
|
|
|
(65,123
|
)
|
|
|
(55,239
|
)
|
Total
|
|
$
|
874,924
|
|
|
$
|
726,820
|
|
Construction
in progress consists of equipment and capital improvements on the Popayán farm have not yet been placed in service.
Depreciation
and amortization expense totaled $9,884 and $5,912 for the three months ended March 31, 2021 and 2020, respectively.
Note
9 – Accrued Expenses
Accrued
expenses consisted of the following at March 31, 2021 and December 31, 2020, respectively:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2021
|
|
|
2020
|
|
Accrued
payroll
|
|
$
|
188,922
|
|
|
$
|
266,230
|
|
Accrued
withholding taxes and employee benefits
|
|
|
11,906
|
|
|
|
18,889
|
|
Accrued
ICA fees and contributions
|
|
|
122,316
|
|
|
|
200,335
|
|
Accrued
interest
|
|
|
67,258
|
|
|
|
65,081
|
|
|
|
$
|
390,402
|
|
|
$
|
550,535
|
|
Note
10 – Leases
The
Company’s corporate offices and operational facility in Colombia under short-term non-cancelable real property lease agreements
that expire within a year. 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. 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.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
components of lease expense were as follows:
|
|
For
the Three
|
|
|
|
Months
Ended
|
|
|
|
March
31,
|
|
|
|
2021
|
|
Operating
lease cost:
|
|
|
|
|
Amortization
of assets
|
|
$
|
11,225
|
|
Interest
on lease liabilities
|
|
|
3,339
|
|
Lease
payments on short term leases
|
|
|
10,892
|
|
Total
lease cost
|
|
$
|
25,456
|
|
Supplemental
balance sheet information related to leases was as follows:
|
|
March
31,
|
|
|
|
2021
|
|
Operating
leases:
|
|
|
|
|
Operating
lease assets
|
|
$
|
183,804
|
|
|
|
|
|
|
Current
portion of operating lease liabilities
|
|
$
|
46,471
|
|
Noncurrent
operating lease liabilities
|
|
|
144,090
|
|
Total
operating lease liabilities
|
|
$
|
190,561
|
|
|
|
|
|
|
Weighted
average remaining lease term:
|
|
|
|
|
Operating
leases
|
|
|
3.58
years
|
|
|
|
|
|
|
Weighted
average discount rate:
|
|
|
|
|
Operating
leases
|
|
|
6.75
|
%
|
Supplemental
cash flow and other information related to leases was as follows:
|
|
For
the Three
|
|
|
|
Months
Ended
|
|
|
|
March
31,
|
|
|
|
2021
|
|
Cash
paid for amounts included in the measurement of lease liabilities:
|
|
|
|
Operating
cash flows used for operating leases
|
|
$
|
10,964
|
|
Future
minimum annual lease commitments under non-cancelable operating leases are as follows at March 31, 2021:
|
|
Operating
|
|
|
|
Leases
|
|
|
|
|
|
2021
(for the nine months remaining)
|
|
$
|
43,195
|
|
2022
|
|
|
59,223
|
|
2023
|
|
|
61,000
|
|
2024
|
|
|
52,098
|
|
Total
minimum lease payments
|
|
|
215,516
|
|
Less
interest
|
|
|
24,955
|
|
Present
value of lease liabilities
|
|
|
190,561
|
|
Less
current portion
|
|
|
46,471
|
|
Long-term
lease liabilities
|
|
$
|
144,090
|
|
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
11 – Notes Payable
Notes
payable consists of the following at March 31, 2021 and December 31, 2020, respectively:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
On
January 20, 2021, the Company completed the sale of a Promissory Note in the principal
amount of $290,000 (the “Note”) to AJB Capital Investments LLC (the “Investor”)
for a purchase price of $281,300, pursuant to a Securities Purchase Agreement between
the Company and the Investor (the “Purchase Agreement”). The Company received
net proceeds of $268,250 after deductions of debt discounts, consisting of $8,700 pursuant
to an original issue discount, $7,250 of legal fees and $5,800 of brokerage fees.
The
Note matures on October 20, 2021 (the “Maturity Date”), bears interest at a rate
of 10% per annum, and, following an event of default only, is convertible into shares of the
Company’s common stock at a conversion price equal to the lesser of 90% of the lowest
trading price during (i) the 20 trading day period preceding the issuance date of the note,
or (ii) the 20 trading day period preceding date of conversion of the Note. The Note is also
subject to covenants, events of defaults, penalties, default interest and other terms and
conditions customary in transactions of this nature.
Pursuant
to the Purchase Agreement, the Company paid a commitment fee to the Investor in the amount
of $200,000 (the “Commitment Fee”) in the form of 2,000,000 shares of the Company’s
common stock (the “Commitment Fee Shares”). During the six month period following
the six month anniversary of the closing date (the “Adjustment Period”), the Investor
shall be entitled to be issued additional shares of common stock of the Company to the extent
the Investor’s sale of the Commitment Fee Shares has resulted in net proceeds in an
amount less than the Commitment Fee. If the Company repays the Note on or prior to the Maturity
Date, the Company may redeem 1,000,000 of the Commitment Fee Shares for a nominal redemption
price of $1.00. The Commitment Fee Shares resulted in a debt discount of $268,250 that is
being amortized over the life of the loan.
The
obligations of the Company to the Investor under the Note and the Purchase Agreement are secured
by a lien on the Company’s assets pursuant to a Security Agreement between the Company
and the Investor.
|
|
$
|
290,000
|
|
|
$
|
-
|
|
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On
February 3, 2020, the Company, through its wholly-owned subsidiary, One World Pharma SAS, received an advance of 100,000,000
COP, or $29,134 USD, from an individual pursuant to an unsecured promissory note due on demand that carried a 6% interest
rate. The Company repaid 50,000,000 COP, or $14,567 USD, during the year ended December 31, 2020.
|
|
|
14,567
|
|
|
|
14,567
|
|
|
|
|
|
|
|
|
|
|
On
December 16, 2020, the Company received an advance of $125,000 from our CEO, Isiah Thomas, III pursuant to an unsecured promissory
note due on demand that carried a 6% interest rate.
|
|
|
125,000
|
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
On
October 28, 2020, the Company received an advance of $50,000 from its CEO, Isiah Thomas, III pursuant to an unsecured promissory
note due on demand that carries a 6% interest rate.
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
On
September 14, 2020, the Company received an advance of $26,000 from its Chairman, Dr. Kenneth Perego, II, M.D. pursuant to
an unsecured promissory note due on demand that carried a 6% interest rate. The advance was repaid by the Company on March
29, 2021.
|
|
|
-
|
|
|
|
26,000
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
119,274
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable
|
|
|
598,841
|
|
|
|
334,841
|
|
Less
unamortized debt discounts
|
|
|
210,079
|
|
|
|
-
|
|
Notes
payable, net of discounts
|
|
$
|
388,762
|
|
|
$
|
334,841
|
|
The
Company recognized interest expense for the three months ended March 31, 2021 and 2020, as follows:
|
|
March
31,
|
|
|
March
31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Interest
on convertible notes
|
|
$
|
-
|
|
|
$
|
7,589
|
|
Interest
on notes payable
|
|
|
9,069
|
|
|
|
2,526
|
|
Amortization
of debt discounts, including $73,927 of stock-based discounts
|
|
|
79,921
|
|
|
|
-
|
|
Interest
on accounts payable
|
|
|
4,471
|
|
|
|
394
|
|
Total
interest expense
|
|
$
|
93,461
|
|
|
$
|
10,509
|
|
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
12 – Convertible 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 and 300,000 shares have been designated Series B Preferred Stock. The shares of
Series A Preferred Stock and Series B Preferred Stock are each currently convertible into one hundred (100) shares of the Company’s
common stock. The Series A Preferred Stock accrues dividends at the rate of 6% per annum, payable in cash as and when declared
by the Board or upon a liquidation. The shares of Series B Preferred Stock are not entitled to dividends, other than the right
to participate in dividends payable to holders of common stock on an as-converted basis. As of March 31, 2021, there were 125,233
and 101,835 shares of Series A Preferred Stock and Series B Preferred Stock, respectively, issued and outstanding. The Series
A and B Preferred Stock are presented as mezzanine equity on the balance sheet due because they carry a stated value of $10 and
$15 per share, respectively, and a deemed liquidation clause, which entitles the holders thereof to receive proceeds thereof in
an amount equal to the stated value per share, plus any accrued and unpaid dividends, before any payment may be made to holders
of common stock. Each share of Preferred Stock carries a number of votes equal to the number of shares of common stock into which
such Preferred Stock may then be converted. The Preferred Stock generally will vote together with the common stock and not as
a separate class.
The
Series A and B Preferred Stock have been classified outside of permanent equity and liabilities. the Series A Preferred Stock
embodies conditional obligations that the Company may settle by issuing a variable number of equity shares, and in both the Series
A and B Preferred Stock, monetary value of the obligation is based on a fixed monetary amount known at inception.
Series
A Preferred Stock Sales
No
shares of Series A Preferred Stock were sold during the three months ending March 31, 2021.
Series
A Preferred Stock Conversions
On
March 24, 2021, a shareholder converted 10,000 shares of Series A Preferred Stock into 1,000,000 shares of common stock. The shares
of common stock were subsequently issued on April 7, 2021.
On
January 26, 2021, a shareholder converted 5,000 shares of Series A Preferred Stock into 500,000 shares of common stock.
On
January 12, 2021, a shareholder converted 10,000 shares of Series A Preferred Stock into 1,000,000 shares of common stock.
Preferred
Stock Dividends
The
Series A Preferred Stock accrues dividends at the rate of 6% per annum, payable in cash as and when declared by the Board or upon
a liquidation. A total of $59,463 of dividends had accrued as of March 31, 2021.
Series
B Preferred Stock Sales
On
February 7, 2021, the Company and ISIAH International, LLC (“ISIAH International”), entered into a Securities Purchase
Agreement (the “Purchase Agreement”) under which ISIAH International agreed to purchase from the Company, on the dates
provided for in the Purchase Agreement, an aggregate of 200,000 shares of the Company’s newly designated Series B Preferred
Stock (“Series B Preferred Stock”), convertible into an aggregate of 20,000,000 shares of the Company’s common
stock, par value $0.001 per share (“Common Stock”), for a purchase price of $15.00 per share of Preferred Stock, and
an aggregate purchase price of $3 million. Each share of Series B Preferred Stock has a Stated Value of $15.00 and is convertible
into Common Stock at a conversion price equal to $0.15. Isiah Thomas, the Company’s Chief Executive Officer, is the sole
member and Chief Executive Officer of ISIAH International. Pursuant to the Purchase Agreement, ISIAH International has agreed
to purchase shares of Series B Preferred Stock from the Company according to the following schedule:
Date
|
|
Shares
|
|
|
Purchase
Price
|
|
Initial
Closing Date
|
|
|
16,666
|
|
|
$
|
249,990
|
|
February 22,
2021
|
|
|
16,667
|
|
|
$
|
250,005
|
|
March 8, 2021
|
|
|
16,667
|
|
|
$
|
250,005
|
|
March 22,
2021
|
|
|
16,667
|
|
|
$
|
250,005
|
|
April 5, 2021
|
|
|
16,666
|
|
|
$
|
249,990
|
|
April 19,
2021
|
|
|
16,667
|
|
|
$
|
250,005
|
|
May 17, 2021
|
|
|
33,334
|
|
|
$
|
500,010
|
|
June 14, 2021
|
|
|
33,333
|
|
|
$
|
499,995
|
|
July
12, 2021
|
|
|
33,333
|
|
|
$
|
499,995
|
|
Total
|
|
|
200,000
|
|
|
$
|
3,000,000
|
|
Through
March 31, 2021, a total of 66,667 shares of
Series B Preferred Stock were purchased in accordance with the above schedule, for total proceeds of $1,000,005.
In
addition to the shares sold to ISIAH International, the Company received total proceeds of $477,510 on various dates between March
9, 2021 and March 15, 2021 from the sale of an additional 31,834 shares of Series B Preferred Stock at a price of $15.00 per share
to five accredited investors.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
13 – 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 March 31,
2021, there were 57,335,305 shares of common stock issued and outstanding.
Common
Stock Issued on Subscriptions Payable
On
March 1, 2021, the Company issued 750,000 shares of common stock on a Subscriptions Payable for the November 27, 2020 sale of
common stock at $0.10 per share for proceeds of $75,000.
Common
Stock Issued as a Promissory Note Commitment
As
disclosed in Note 11, above, pursuant to the Purchase Agreement with AJB Capital, the Company paid a commitment fee to the Investor
in the form of 2,000,000 shares of the Company’s common stock. During the six month period following the six month anniversary
of the closing date (the “Adjustment Period”), the Investor shall be entitled to be issued additional shares of common
stock of the Company to the extent the Investor’s sale of the Commitment Fee Shares has resulted in net proceeds in an amount
less than the $200,000 Commitment Fee. If the Company repays the Note on or prior to the Maturity Date, the Company may redeem
1,000,000 of the Commitment Fee Shares for a nominal redemption price of $1.00. The Commitment Fee Shares resulted in a debt discount
of $268,250 that is being amortized over the life of the loan, resulting in $73,927 of finance expense during the three months
ended March 31, 2021.
Amortization
of Stock-Based Compensation
A
total of $428,090 of stock-based compensation expense was recognized from the amortization of options to purchase common stock
over their vesting period during the three months ended March 31, 2021.
Note
14 – 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.
Common
Stock Options Issued for Services
On
January 1, 2021, the Company awarded options to purchase 5,500,000 shares of the Company’s Common Stock at an exercise price
equal to $0.13 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 vested immediately as
to 2,750,000 shares, and vest as to the remaining 2,750,000 shares quarterly in 250,000 increments over the following eleven quarters.
The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 192% and a call option value of $0.1174,
was $645,624. The options are being expensed over the vesting period, resulting in $322,812 of stock-based compensation expense
during the three months ended March 31, 2021. As of March 31, 2021, a total of $322,812 of unamortized expenses are expected to
be expensed over the vesting period.
On
January 1, 2021, the Company awarded options to purchase 350,000 shares of the Company’s Common Stock under the Company’s
2019 Plan at an exercise price equal to $0.13 per share, exercisable over a ten year period to the Company’s Chairman of
the Board, Dr. Ken Perego. The options vest in equal quarterly installments over one year. The estimated value using the Black-Scholes
Pricing Model, based on a volatility rate of 192% and a call option value of $0.1170, was $40,943. The options are being expensed
over the vesting period, resulting in $10,235 of stock-based compensation expense during the three months ended March 31, 2021.
As of March 31, 2021, a total of $30,708 of unamortized expenses are expected to be expensed over the vesting period.
ONE
WORLD PHARMA, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On
January 1, 2021, the Company awarded options to purchase 475,000 shares of the Company’s Common Stock under the Company’s
2019 Plan at an exercise price equal to $0.13 per share, exercisable over a ten year period to Bruce Raben, the Company’s
Interim Chief Financial Officer and a Director of the Company. The options vest in equal quarterly installments over one year.
The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 192% and a call option value of $0.1170,
was $55,565. The options are being expensed over the vesting period, resulting in $13,892 of stock-based compensation expense
during the three months ended March 31, 2021. As of March 31, 2021, a total of $41,673 of unamortized expenses are expected to
be expensed over the vesting period.
On
January 1, 2021, the Company awarded options to purchase an aggregate 1,842,000 shares of the Company’s Common Stock under
the Company’s 2019 Plan at an exercise price equal to $0.13 per share, exercisable over a ten year period to seven consultants
and employees. in equal quarterly installments over one year. The aggregate estimated value using the Black-Scholes Pricing Model,
based on a volatility rate of 192% and a call option value of $0.1170, was $215,475. The options are being expensed over the vesting
period, resulting in $53,868 of stock-based compensation expense during the three months ended March 31, 2021. As of March 31,
2021, a total of $161,607 of unamortized expenses are expected to be expensed over the vesting period.
Note
15 – Income Taxes
The
Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides
that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes, referred to as temporary differences.
For
the three months ended March 31, 2021, and the year ended December 31, 2020, 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 March 31, 2021, the Company had approximately $6,323,000 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 March 31, 2021 and December 31, 2020, respectively.
In
accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.
Note
16 – Subsequent Events
Series
A Preferred Stock Conversions
On
April 6, 2021, a shareholder converted 30,000 shares of Series A Preferred Stock into 3,000,000 shares of common stock.
Preferred
Stock Sales
On various dates in May, 2021, the Company received
total proceeds of $50,010 from the sale of an aggregate of 3,334 shares of Series B Preferred Stock at a price of $15.00 per share to
trusts whose beneficiaries are adult children of Isiah L. Thomas III’. Mr. Thomas disclaims beneficial ownership of the shares
held by these trusts.
On April 19, 2021, the Company received proceeds of
$250,005 from ISIAH International pursuant to the sale of 16,667 shares of Series B Preferred Stock at a price of $15.00 per share pursuant
to the February 7, 2021 Purchase Agreement.
On
April 5, 2021, the Company received proceeds of $249,990 from ISIAH International pursuant to the sale of 16,666 shares of Series
B Preferred Stock at a price of $15.00 per share pursuant to the February 7, 2021 Purchase Agreement.
Common
Stock Issued on Subscriptions Payable
On
April 7, 2021, the Company issued 1,000,000 shares of common stock to a Series A Preferred Stockholder pursuant to a March 24,
2021 conversion of 10,000 shares of Series A Preferred Stock. Prior to the issuance, the fair value of such shares was reflected
on the Company’s balance sheet as subscriptions payable in the amount of $100,000.
Common
Stock Issued for Services
On
May 12, 2021, the Company entered into a Settlement Agreement with COR Prominence, LLC. Pursuant to the Settlement Agreement,
the Company issued 118,150 shares of common stock. In addition, the Company engaged COR Prominence, LLC to provide investor relation
services to the Company, in consideration for the payment of $7,500 per month in cash, and $5,000 per month with shares of Common Stock
of the Company valued at 125% of the closing price of the Common Stock of the Company on the date of issuance.