ITEM
1.
|
FINANCIAL STATEMENTS
|
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
Assets
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
955,602
|
|
|
$
|
125,846
|
|
Other current assets
|
|
|
261,134
|
|
|
|
35,344
|
|
Inventory
|
|
|
22,097
|
|
|
|
-
|
|
Total current assets
|
|
|
1,238,833
|
|
|
|
161,190
|
|
|
|
|
|
|
|
|
|
|
Right-of-use asset
|
|
|
248,541
|
|
|
|
-
|
|
Security deposits
|
|
|
61,301
|
|
|
|
-
|
|
Fixed assets, net
|
|
|
567,517
|
|
|
|
356,439
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
2,116,192
|
|
|
$
|
517,629
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
144,317
|
|
|
$
|
121,194
|
|
Accrued expenses
|
|
|
47,682
|
|
|
|
34,425
|
|
Current portion of lease liability
|
|
|
39,622
|
|
|
|
-
|
|
Convertible notes payable
|
|
|
507,332
|
|
|
|
300,000
|
|
Advances from shareholders
|
|
|
-
|
|
|
|
514,141
|
|
Notes payable
|
|
|
-
|
|
|
|
200,000
|
|
Total current liabilities
|
|
|
738,953
|
|
|
|
1,169,760
|
|
|
|
|
|
|
|
|
|
|
Long-term lease liability
|
|
|
212,167
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
951,120
|
|
|
|
1,169,760
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit):
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 75,000,000 shares authorized; 44,482,939 and 34,291,905 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
|
|
|
44,483
|
|
|
|
34,292
|
|
Additional paid-in capital
|
|
|
7,391,508
|
|
|
|
1,278,352
|
|
Subscriptions receivable, consisting of 6,012,500 shares at December 31, 2018
|
|
|
-
|
|
|
|
(602
|
)
|
Subscriptions payable, consisting of 40,000 shares at September 30, 2019
|
|
|
160,000
|
|
|
|
-
|
|
Accumulated other comprehensive loss
|
|
|
(25,211
|
)
|
|
|
(4,090
|
)
|
Accumulated (deficit)
|
|
|
(6,405,708
|
)
|
|
|
(1,959,982
|
)
|
|
|
|
1,165,072
|
|
|
|
(652,030
|
)
|
Noncontrolling Interest
|
|
|
-
|
|
|
|
(101
|
)
|
Total Stockholders’ Equity (Deficit)
|
|
|
1,165,072
|
|
|
|
(652,131
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity (Deficit)
|
|
$
|
2,116,192
|
|
|
$
|
517,629
|
|
See
accompanying notes to financial statements.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
|
|
For the Three Months Ended
|
|
|
For the Nine
|
|
|
From Inception
|
|
|
|
September 30,
|
|
|
Months Ended
|
|
|
(March 27, 2018) to
|
|
|
|
2019
|
|
|
2018
|
|
|
September 30, 2019
|
|
|
September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
589,027
|
|
|
|
263,204
|
|
|
|
1,633,814
|
|
|
|
388,044
|
|
Professional fees
|
|
|
986,523
|
|
|
|
130,863
|
|
|
|
2,430,945
|
|
|
|
287,840
|
|
Total operating expenses
|
|
|
1,575,550
|
|
|
|
394,067
|
|
|
|
4,064,759
|
|
|
|
675,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,575,550
|
)
|
|
|
(394,067
|
)
|
|
|
(4,064,759
|
)
|
|
|
(675,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on disposal of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,087
|
)
|
|
|
-
|
|
Interest income
|
|
|
3,621
|
|
|
|
10,000
|
|
|
|
3,869
|
|
|
|
10,000
|
|
Interest expense
|
|
|
(225,053
|
)
|
|
|
(3,334
|
)
|
|
|
(380,749
|
)
|
|
|
(5,135
|
)
|
Total other expense
|
|
|
(221,432
|
)
|
|
|
6,666
|
|
|
|
(380,967
|
)
|
|
|
4,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,796,982
|
)
|
|
$
|
(387,401
|
)
|
|
$
|
(4,445,726
|
)
|
|
$
|
(671,019
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on foreign currency translation
|
|
$
|
(164,122
|
)
|
|
$
|
-
|
|
|
$
|
(21,121
|
)
|
|
$
|
18,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive loss
|
|
$
|
(1,961,104
|
)
|
|
$
|
(387,401
|
)
|
|
$
|
(4,466,847
|
)
|
|
$
|
(652,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding -
basic and fully diluted
|
|
|
42,069,859
|
|
|
|
32,805,383
|
|
|
|
39,888,654
|
|
|
|
32,039,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and fully diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.02
|
)
|
See
accompanying notes to financial statements.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
Common
Stock
|
|
|
Additional
Paid-In
|
|
|
Subscriptions
|
|
|
Subscriptions
|
|
|
Accumulated
Other Comprehensive
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Payable
|
|
|
Income
(Loss)
|
|
|
Deficit
|
|
|
Interest
|
|
|
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 27, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock sold for cash
|
|
|
21,050,000
|
|
|
|
21,050
|
|
|
|
(18,935
|
)
|
|
|
(2,105
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2018 (Unaudited)
|
|
|
21,050,000
|
|
|
$
|
21,050
|
|
|
$
|
(18,935
|
)
|
|
$
|
(2,105
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock sold for cash
|
|
|
1,190,476
|
|
|
|
1,190
|
|
|
|
498,810
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for purchase of One World Pharma S.A.S.
|
|
|
10,200,000
|
|
|
|
10,200
|
|
|
|
152,709
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
162,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed
capital
|
|
|
-
|
|
|
|
-
|
|
|
|
136,440
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
136,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,402
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(283,618
|
)
|
|
|
-
|
|
|
|
(283,618
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2018 (Unaudited)
|
|
|
32,440,476
|
|
|
$
|
32,440
|
|
|
$
|
769,024
|
|
|
$
|
(2,105
|
)
|
|
$
|
-
|
|
|
$
|
35,402
|
|
|
$
|
(283,618
|
)
|
|
$
|
-
|
|
|
$
|
551,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock sold for cash
|
|
|
714,286
|
|
|
|
715
|
|
|
|
299,285
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,849
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,849
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(387,401
|
)
|
|
|
-
|
|
|
|
(387,401
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2018 (Unaudited)
|
|
|
33,154,762
|
|
|
$
|
33,155
|
|
|
$
|
1,068,309
|
|
|
$
|
(2,105
|
)
|
|
$
|
-
|
|
|
$
|
18,553
|
|
|
$
|
(671,019
|
)
|
|
$
|
-
|
|
|
$
|
446,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation
of One World Pharma, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
(349,420
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(349,420
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
received on subscriptions receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,503
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock sold for cash
|
|
|
457,143
|
|
|
|
457
|
|
|
|
199,543
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
|
680,000
|
|
|
|
680
|
|
|
|
284,920
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
285,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion feature on convertible note
|
|
|
-
|
|
|
|
-
|
|
|
|
75,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(22,643
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(22,643
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,228,963
|
)
|
|
|
(101
|
)
|
|
|
(1,289,064
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
|
|
34,291,905
|
|
|
$
|
34,292
|
|
|
$
|
1,278,352
|
|
|
$
|
(602
|
)
|
|
$
|
-
|
|
|
$
|
(4,090
|
)
|
|
$
|
(1,959,982
|
)
|
|
$
|
(101
|
)
|
|
$
|
(652,131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
received on subscriptions receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
602
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock sold for cash
|
|
|
3,900,000
|
|
|
|
3,900
|
|
|
|
1,946,100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,950,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock on debt conversions
|
|
|
1,253,493
|
|
|
|
1,253
|
|
|
|
500,144
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
501,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
|
30,000
|
|
|
|
30
|
|
|
|
14,970
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of common stock options issued for services, OWP Ventures, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
88,297
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
of OWP Ventures, Inc. shares for One World Pharma, Inc. shares (1:1)
|
|
|
1,322,501
|
|
|
|
1,323
|
|
|
|
(10,730
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
101
|
|
|
|
(9,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock cancelled pursuant to merger with OWP Ventures, Inc.
|
|
|
(875,000
|
)
|
|
|
(875
|
)
|
|
|
875
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of common stock options issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
165,243
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
165,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion feature on convertible note
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,287
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,287
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,323,516
|
)
|
|
|
-
|
|
|
|
(1,323,516
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2019 (Unaudited)
|
|
|
39,922,899
|
|
|
$
|
39,923
|
|
|
$
|
4,108,251
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(12,377
|
)
|
|
$
|
(3,283,498
|
)
|
|
$
|
-
|
|
|
$
|
852,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of common stock options issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
395,715
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
395,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
151,288
|
|
|
|
-
|
|
|
|
-
|
|
|
|
151,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,325,228
|
)
|
|
|
-
|
|
|
|
(1,325,228
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2019 (Unaudited)
|
|
|
39,922,899
|
|
|
$
|
39,923
|
|
|
$
|
4,503,966
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
138,911
|
|
|
$
|
(4,608,726
|
)
|
|
$
|
-
|
|
|
$
|
74,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock sold for cash
|
|
|
4,509,000
|
|
|
|
4,509
|
|
|
|
2,249,991
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,254,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock payable for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
160,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
160,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless
exercise of common stock options
|
|
|
51,040
|
|
|
|
51
|
|
|
|
(51
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of common stock options issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
430,270
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
430,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion feature on convertible note
|
|
|
-
|
|
|
|
-
|
|
|
|
207,332
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
207,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(164,122
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(164,122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,796,982
|
)
|
|
|
-
|
|
|
|
(1,796,982
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2019 (Unaudited)
|
|
|
44,482,939
|
|
|
$
|
44,483
|
|
|
$
|
7,391,508
|
|
|
$
|
-
|
|
|
$
|
160,000
|
|
|
$
|
(25,211
|
)
|
|
$
|
(6,405,708
|
)
|
|
$
|
-
|
|
|
$
|
1,165,072
|
|
See
accompanying notes to financial statements.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
For the Nine
|
|
|
From Inception
|
|
|
|
Months Ended
|
|
|
(March 27, 2018) to
|
|
|
|
September 30, 2019
|
|
|
September 30, 2018
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,445,726
|
)
|
|
$
|
(671,019
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
9,432
|
|
|
|
850
|
|
Loss on disposal of fixed assets
|
|
|
4,087
|
|
|
|
-
|
|
Debt discounts
|
|
|
332,332
|
|
|
|
-
|
|
Stock-based compensation
|
|
|
175,000
|
|
|
|
-
|
|
Amortization of options issued for services
|
|
|
1,079,525
|
|
|
|
-
|
|
Decrease (increase) in assets:
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
(235,096
|
)
|
|
|
(149,123
|
)
|
Inventory
|
|
|
(22,097
|
)
|
|
|
-
|
|
Right-of-use assets
|
|
|
(248,541
|
)
|
|
|
-
|
|
Security deposits
|
|
|
(61,301
|
)
|
|
|
-
|
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
23,123
|
|
|
|
43,882
|
|
Accrued expenses
|
|
|
21,986
|
|
|
|
26,854
|
|
Lease liability
|
|
|
251,789
|
|
|
|
-
|
|
Net cash used in operating activities
|
|
|
(3,115,487
|
)
|
|
|
(748,556
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Cash acquired in merger
|
|
|
-
|
|
|
|
4,739
|
|
Investment in note receivable
|
|
|
-
|
|
|
|
(50,000
|
)
|
Purchase of fixed assets
|
|
|
(224,597
|
)
|
|
|
(254,248
|
)
|
Net cash used in investing activities
|
|
|
(224,597
|
)
|
|
|
(299,509
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from convertible note payable
|
|
|
500,000
|
|
|
|
-
|
|
Proceeds from shareholders
|
|
|
-
|
|
|
|
208,156
|
|
Proceeds from contributed capital
|
|
|
-
|
|
|
|
136,440
|
|
Repayment of advances from shareholders
|
|
|
(314,141
|
)
|
|
|
-
|
|
Proceeds from subscriptions receivable
|
|
|
602
|
|
|
|
-
|
|
Proceeds from sale of common stock
|
|
|
4,004,500
|
|
|
|
800,010
|
|
Net cash provided by financing activities
|
|
|
4,190,961
|
|
|
|
1,144,606
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(21,121
|
)
|
|
|
18,553
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
829,756
|
|
|
|
115,094
|
|
Cash - beginning
|
|
|
125,846
|
|
|
|
-
|
|
Cash - ending
|
|
$
|
955,602
|
|
|
$
|
115,094
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
35,402
|
|
|
$
|
244
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing transactions:
|
|
|
|
|
|
|
|
|
Fair value of net assets acquired in merger
|
|
$
|
9,306
|
|
|
$
|
-
|
|
Value of shares issued for conversion of debt
|
|
$
|
701,397
|
|
|
$
|
-
|
|
Beneficial conversion feature
|
|
$
|
332,332
|
|
|
$
|
-
|
|
See
accompanying notes to financial statements.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
1 – Nature of Business and Significant Accounting Policies
Nature
of Business
One
World Pharma, Inc. (formerly Punto Group, Corp.) was incorporated in Nevada on September 2, 2014. On February 21, 2019, One World
Pharma, Inc. (“One World Pharma,” the “Company,” “we,” “our” or “us”)
entered into an Agreement and Plan of Merger with OWP Merger Subsidiary, Inc., our wholly-owned subsidiary, and OWP Ventures,
Inc. (“OWP Ventures”), which is the parent company of One World Pharma SAS, a Colombian company (“OWP Colombia”).
Pursuant to the Merger Agreement, we acquired OWP Ventures (and indirectly, OWP Colombia) by the merger of OWP Merger Subsidiary
with and into OWP Ventures, with OWP Ventures being the surviving entity as our wholly-owned subsidiary (the “Merger”).
As a result of the Merger (a) holders of the outstanding capital stock of OWP Ventures received an aggregate of 39,475,398 shares
of our common stock; (b) options to purchase 825,000 shares of common stock of OWP Ventures at an exercise price of $0.50 automatically
converted into options to purchase 825,000 shares of our common stock at an exercise price of $0.50; (c) the outstanding principal
and interest under a $300,000 convertible note issued by OWP Ventures became convertible, at the option of the holder, into shares
of our common stock at a conversion price equal to the lesser of $0.424 per share or 80% of the price we sell our common stock
in a future “Qualified Offering”; (d) 875,000 shares of our common stock owned by OWP Ventures prior to the Merger
were cancelled; and (e) OWP Ventures’ chief operating officer became our chief operating officer and two of OWP Ventures’
directors became members of our board of directors. The Company’s headquarters are located in Las Vegas, Nevada, and all
of its customers are expected to be outside of the United States. On January 10, 2019, the Company changed its name from Punto
Group, Corp. to One World Pharma, Inc.
OWP
Ventures is a holding company formed in Delaware on March 27, 2018 to enter and support the cannabis industry, and on May 30,
2018, it acquired OWP Colombia. OWP Colombia is a licensed cannabis cultivation, production and distribution (export) company
located in Popayán, Colombia (nearest major city is Cali). We plan to be a producer of raw cannabis and hemp plant ingredients
for both medical and industrial uses across the globe. We have received licenses to cultivate, produce and distribute the raw
ingredients of the cannabis and hemp plant for medicinal, scientific and industrial purposes. Specifically, we are one of the
only companies in Colombia to receive seed, cultivation, extraction and export licenses from the Colombian government. Currently,
we own approximately 30 acres and have a covered greenhouse built specifically to cultivate high-grade cannabis and hemp. In addition,
we have entered into agreements with local farming co-operatives that include small farmers and indigenous tribe members, under
which they will cultivate cannabis on up to approximately 140 acres of land using our seeds and propagation techniques, and sell
their harvested products to us on an exclusive basis. We planted our first crop of cannabis in 2018, which we began harvesting
in the first quarter of 2019 for the purpose of further research and development activities and quality control testing of the
cannabis we have produced. To date, we have not yet generated any revenues from our activities.
The
Merger was accounted for as a reverse merger (recapitalization) with OWP Ventures deemed to be the accounting acquirer. Accordingly,
the financial statements included in this Quarterly Report on Form 10-Q reflect the historical operations of OWP Ventures and
its wholly-owned subsidiary OWP SAS prior to the Merger, and that of the combined company following the Merger. The historical
financial information for One World Pharma, Inc. (formerly Punto Group Corp.) prior to the Merger has been omitted.
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (U.S. GAAP) and the rules of the Securities and Exchange Commission (SEC). Intercompany accounts
and transactions have been eliminated.
The
unaudited condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report
on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Condensed Consolidated
Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Condensed Consolidated Financial
Statements, and the accompanying notes, are prepared in accordance with GAAP and do not contain certain information included in
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and Current Report on Form 8-K with
respect to the Merger originally filed with the SEC on February 25, 2019, as amended and restated on July 12, 2019. The interim
Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K and Current Report
on Form 8-K. Results for the interim periods presented are not necessarily indicative of the results that might be expected for
the entire fiscal year.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the following entities, all of which were under common
control and ownership at September 30, 2019:
|
|
State of
|
|
|
Name of Entity
|
|
Incorporation
|
|
Relationship
|
One World Pharma, Inc.(1)
|
|
Nevada
|
|
Parent
|
OWP Ventures, Inc.(2)
|
|
Delaware
|
|
Subsidiary
|
One World Pharma S.A.S.(3)
|
|
Colombia
|
|
Subsidiary
|
(1)Holding
company in the form of a corporation.
(2)Holding
company in the form of a corporation and wholly-owned subsidiary of One World Pharma, Inc.
(3)Wholly-owned
subsidiary of OWP Ventures, Inc. since May 30, 2018, located in Colombia and legally constituted as a simplified stock company
registered in the Chamber of Commerce of Bogotá on July 18, 2017. Its headquarters are located in Bogotá.
The
consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. The Company’s
headquarters are located in Las Vegas, Nevada and substantially all of its production efforts are within Popayán, Colombia.
Foreign
Currency Translation
The
functional currency of the Company is Columbian Peso (COP). The Company has maintained its financial statements using the functional
currency, and translated those financial statements to the US Dollar (USD) throughout this report. Monetary assets and liabilities
denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange
prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated
into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising
from foreign currency transactions are included in the determination of net income (loss) for the respective periods.
Comprehensive
Income
The
Company has adopted ASC 220, Reporting Comprehensive Income, which establishes standards for reporting and displaying comprehensive
income, its components, and accumulated balances in a full-set of general-purpose financial statements. Accumulated other comprehensive
income represents the accumulated balance of foreign currency translation adjustments.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Segment
Reporting
ASC
Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting.
The management approach model is based on the way a company’s management organizes segments within the company for making
operating decisions and assessing performance. The Company operates as a single segment and will evaluate additional segment disclosure
requirements as it expands its operations.
Fair
Value of Financial Instruments
Under
FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant
measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements
as reflected herein. The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses reported on the
balance sheets are estimated by management to approximate fair value primarily due to the short-term nature of the instruments.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash on hand, cash on deposit with various financial institutions in Columbia, and all highly-liquid
investments with original maturities of three months or less at the time of purchase. We have not held any cash equivalents to
date.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Cash
in Excess of FDIC Insured Limits
The
Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed
by the Federal Deposit Insurance Corporation (FDIC) up to $250,000, under current regulations. The Company had $220,279 in excess
of FDIC insured limits at September 30, 2019, and has not experienced any losses in such accounts.
Revenue
Recognition
The
Company has adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from
the sale of commercial sales of products, licensing agreements and contracts. For the comparative periods, revenue has not been
adjusted and continues to be reported under ASC 605 — Revenue Recognition.
There
was no impact on the Company’s financial statements as a result of adopting ASC 606 for the nine months ended September
30, 2019, or the year ended December 31, 2018.
Inventory
Inventories
are stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out
(FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive
levels, deterioration, and other factors in evaluating net realizable value. Our cannabis products consist of cannabis flower
grown in-house, along with produced extracts.
Stock-Based
Compensation
The
Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC
718) and Equity-Based Payments to Non-employees pursuant to ASC 505-50 (ASC 505-50). All transactions in which goods or services
are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration
received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the
fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete
or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently
large disincentives for nonperformance.
Basic
and Diluted Loss Per Share
The
basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding.
Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by
the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, potential
dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.
Adoption
of New Accounting Standards and Recently Issued Accounting Pronouncements
In June 2018, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock Compensation
(Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based
payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718
to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is,
the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The new guidance
is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15,
2018, with early adoption permitted. There was no impact on the Company’s financial statements as a result of
adopting this ASU for the nine month period ending September 30, 2019 or the year ended December 31, 2018.
In February 2018, the FASB issued ASU No.
2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The guidance permits entities
to reclassify tax effects stranded in Accumulated Other Comprehensive Income as a result of tax reform to retained earnings. This
new guidance is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is
permitted in annual and interim periods and can be applied retrospectively or in the period of adoption. There was no impact
on the Company’s financial statements as a result of adopting this ASU for the nine month period ending September 30, 2019
or the year ended December 31, 2018.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
In May 2017, the FASB issued ASU 2017-09,
Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when a change to the terms
or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting
if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change
to the terms and conditions of the award. The new guidance is effective for all entities for annual periods, and interim periods
within those annual periods, beginning after December 15, 2017, with early adoption permitted. There was no impact on the Company’s
financial statements as a result of adopting this ASU for the nine month period ending September 30, 2019 or the year ended December 31,
2018.
In
February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02, which requires lessees to recognize
the rights and obligations created by leases on the balance sheet and disclose key information about leasing arrangements. Topic
842 was subsequently amended by ASU No. 2018-11, Targeted Improvements, ASU No. 2018-10, Codification Improvements to
Topic 842, and ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842. The new standard establishes
a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases
with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern
and classification of expense recognition in the statement of operations.
The
new standard became effective January 1, 2019. A modified retrospective transition approach is required, applying the new standard
to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the
beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity
chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date
of initial application and the effective date. The entity must also recast its comparative period financial statements and provide
the disclosures required by the new standard for the comparative periods. The Company adopted the new standard on January 1, 2019
using the modified retrospective transition approach as of the effective date of the initial application. Consequently, financial
information will not be updated and the disclosures required under the new standard will not be provided for dates and periods
before January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Company elected
the “package of practical expedients”, which permits entities not to reassess under the new lease standard prior conclusions
about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight
or the practical expedient pertaining to land easements.
The
most significant effects of the adoption of the new standard relate to the recognition of new ROU assets and lease labilities
on our balance sheet for office operating leases and providing significant new disclosures about our leasing activities.
The
new standard also provides practical expedients for an entity’s ongoing accounting. The Company has also elected the short-term
leases recognition exemption for all leases that qualify. This means that the Company will not recognize ROU assets or lease liabilities,
and this includes not recognizing ROU assets and lease liabilities, for existing short-term leases of those assets in transition.
The Company also currently expects to elect the practical expedient to not separate lease and non-lease components for its leases.
The new standard did not have a material impact.
In
May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Since ASU 2014-09 was issued, several
additional ASUs have been issued to clarify various elements of the guidance. These standards provide guidance on recognizing
revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity
recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted the new standard
to be effective upon inception. We have completed an initial evaluation of the potential impact from adopting the new standard,
including a detailed review of performance obligations for all material revenue streams. Based on this initial evaluation, adoption
does not have a material impact on our financial position, results of operations, or cash flows. Related disclosures have been
expanded in line with the requirements of the standard.
There
are no other recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material
effect on its financial position, results of operations, or cash flows.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
2 –Going Concern
As
shown in the accompanying condensed consolidated financial statements as of September 30, 2019, the Company has cash on hand of
$955,602, working capital of $499,880 and an accumulated deficit of $6,405,708, and the Company’s cash on hand may not be
sufficient to sustain operations. These factors raise substantial doubt about the Company’s ability to continue as a going
concern. Management is actively pursuing its cannabis cultivation activities and expects to begin revenue generating operations
in the first quarter of 2020. In addition, the Company is currently seeking additional sources of capital to fund short term operations.
Management believes these factors will contribute toward achieving profitability. The accompanying consolidated financial statements
do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The
condensed consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty
as to the Company’s ability to continue as a going concern. These financial statements also do not include any adjustments
relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that
might be necessary should the Company be unable to continue as a going concern.
Note
3 – Reverse Merger
On
February 21, 2019, One World Pharma, Inc. entered into an Agreement and Plan of Merger with OWP Merger Subsidiary, Inc., our wholly-owned
subsidiary, and OWP Ventures, which is the parent company of OWP Colombia. Pursuant to the Merger Agreement, we acquired OWP Ventures
(and indirectly, OWP Colombia) by the merger of OWP Merger Subsidiary with and into OWP Ventures, with OWP Ventures being the
surviving entity as our wholly-owned subsidiary. As a result of the Merger (a) holders of the outstanding capital stock of OWP
Ventures received an aggregate of 39,475,398 shares of our common stock; (b) options to purchase 825,000 shares of common stock
of OWP Ventures at an exercise price of $0.50 automatically converted into options to purchase 825,000 shares of our common stock
at an exercise price of $0.50; (c) the outstanding principal and interest under a $300,000 convertible note issued by OWP Ventures
became convertible, at the option of the holder, into shares of our common stock at a conversion price equal to the lesser of
$0.424 per share or 80% of the price we sell our common stock in a future “Qualified Offering”; (d) 875,000 shares
of our common stock owned by OWP Ventures prior to the Merger were cancelled; and (e) OWP Ventures’ chief operating
officer became our chief operating officer and two of OWP Ventures’ directors became members of our board of directors.
Note
4 – Related Party Transactions
Repayment
and Exchanges of Advances from Shareholders
A
total of $207,000 of demand notes owed to our CEO was repaid over various dates from March of 2019 through May of 2019.
On
various dates between October 25, 2018 and November 23, 2018, our CEO advanced funds to the Company totaling $307,141 under short-term
unsecured demand loans, bearing interest at 6% per annum. On February 13, 2019, these promissory notes were exchanged for an amended
and restated promissory note in the principal amount of $307,141 that bears interest at 6% and is payable upon the earlier of
(i) a public or private offering of our equity securities, resulting in gross proceeds of at least $5,000,000, or (ii) February
13, 2022. All indebtedness outstanding under the Amended Note, consisting of $307,141 of principal and $13,791 of interest, was
repaid in full during September 2019, with $200,000 of such principal paid by the issuance of 400,000 shares of common stock to
the CEO, as described below.
Common
Stock Sale
On
September 4, 2019, the Company sold 400,000 shares of common stock at a price of $0.50 per share for $200,000 to the Company’s
CEO in which the consideration for such shares was paid by the cancellation of $200,000 of outstanding indebtedness owed to the
CEO under the Amended Note, in lieu of cash payment.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
5 – Fair Value of Financial Instruments
Under
FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation
framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements
and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50
details the disclosures that are required for items measured at fair value.
The
Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial
assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level
1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability
to access at the measurement date.
Level
2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability
(e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market
data by correlation or other means (market corroborated inputs).
Level
3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset
or liability.
The
following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheet as
of September 30, 2019 and December 31, 2018, respectively:
|
|
Fair Value Measurements at September 30, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
955,602
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Right-of-use asset
|
|
|
-
|
|
|
|
248,541
|
|
|
|
-
|
|
Total assets
|
|
|
955,602
|
|
|
|
248,541
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
507,332
|
|
Advances from shareholders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Lease liability
|
|
|
-
|
|
|
|
251,789
|
|
|
|
-
|
|
Total liabilities
|
|
|
-
|
|
|
|
(251,789
|
)
|
|
|
(507,332
|
)
|
|
|
$
|
955,602
|
|
|
$
|
(3,248
|
)
|
|
$
|
(507,332
|
)
|
|
|
Fair Value Measurements at December 31, 2018
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
125,846
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
|
|
|
125,846
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
300,000
|
|
Advances from shareholders
|
|
|
-
|
|
|
|
514,141
|
|
|
|
-
|
|
Notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
200,000
|
|
Total liabilities
|
|
|
-
|
|
|
|
(514,141
|
)
|
|
|
(500,000
|
)
|
|
|
$
|
125,846
|
|
|
$
|
(514,141
|
)
|
|
$
|
(500,000
|
)
|
There
were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the nine months ended September
30, 2019 or the year ended December 31, 2018.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
6 – Other Current Assets
Other
current assets included the following as of September 30, 2019 and December 31, 2018, respectively:
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
Security deposit
|
|
$
|
-
|
|
|
$
|
4,494
|
|
Prepaid expenses
|
|
|
189,181
|
|
|
|
30,850
|
|
Other receivables
|
|
|
71,953
|
|
|
|
-
|
|
Total
|
|
$
|
261,134
|
|
|
$
|
35,344
|
|
Note
7 – Fixed Assets
Fixed
assets consist of the following at September 30, 2019 and December 31, 2018, respectively:
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
Land
|
|
$
|
182,377
|
|
|
$
|
-
|
|
Office equipment
|
|
|
24,928
|
|
|
|
18,314
|
|
Furniture and fixtures
|
|
|
32,216
|
|
|
|
23,595
|
|
Software
|
|
|
17,654
|
|
|
|
-
|
|
Equipment and machinery
|
|
|
151,918
|
|
|
|
-
|
|
Construction in progress
|
|
|
169,817
|
|
|
|
316,491
|
|
|
|
|
578,910
|
|
|
|
358,400
|
|
Less: accumulated depreciation
|
|
|
(11,393
|
)
|
|
|
(1,961
|
)
|
Total
|
|
$
|
567,517
|
|
|
$
|
356,439
|
|
Construction
in progress consists of equipment and capital improvements on the Popayán farm have not yet been placed in service.
Depreciation
and amortization expense totaled $9,432 and $850 for the nine months ended September 30, 2019 and September 30, 2018, respectively.
Note
8 – Accrued Expenses
Accrued
expenses consisted of the following at September 30, 2019 and December 31, 2018, respectively:
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
Accrued payroll
|
|
$
|
11,352
|
|
|
$
|
6,327
|
|
Accrued withholding taxes
|
|
|
9,876
|
|
|
|
6,387
|
|
Accrued ICA fees and contributions
|
|
|
9,244
|
|
|
|
8,514
|
|
Accrued interest
|
|
|
17,210
|
|
|
|
12,924
|
|
Deferred rent obligations
|
|
|
-
|
|
|
|
273
|
|
|
|
$
|
47,682
|
|
|
$
|
34,425
|
|
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
9 – Convertible Note Payable
Convertible
note payable consists of the following at September 30, 2019 and December 31, 2018, respectively:
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
On November 30, 2018, the Company received proceeds of $300,000 on a secured convertible note that carries a 6% interest rate from CSW Ventures, LP (“CSW”). The proceeds were used to fund the Company’s purchase of 875,000 shares of common stock, on a 1:4 split adjusted basis, of One World Pharma, Inc. The Note is due on demand. In the event that the Company consummates the closing of a public or private offering of its equity securities, resulting in gross proceeds of at least $500,000 (“Qualified Financing”) at any time prior to the repayment of this note, then the outstanding principal and unpaid interest may, at the option of the holder, be converted into such equity securities at a conversion price equal to eighty percent (80%) of the purchase price paid by the investors purchasing the equity securities in the Qualified Financing. The Company’s obligations under this Note are secured by a lien on the assets of the Company.
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
|
|
|
|
|
|
|
|
|
On January 14, 2019, the Company received proceeds of $500,000 on an unsecured convertible promissory note that carries a 6% interest rate from The Sanguine Group LLC. The Note was due January 14, 2022. In the event that the Company consummated the closing of a public or private offering of its equity securities, resulting in gross proceeds of at least $500,000 (“Qualified Financing”) at any time prior to the repayment of this note, then the outstanding principal and unpaid interest would automatically be converted into such equity securities at a conversion price equal to the lesser of (i) eighty percent (80%) of the purchase price paid by the investors purchasing the equity securities in the Qualified Financing, or (ii) $0.424 per share. The Company’s obligations under this Note were secured by a lien on the assets of the Company. A Qualified Financing subsequently occurred on February 4, 2019, at which time the principal and interest were converted into 1,253,493 shares of the Company’s common stock.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On July 22, 2019, a total of $207,332, consisting of $200,000 of principal and $7,332 of unpaid interest, on two outstanding demand notes owed to CSW that originated on November 26, 2018 and December 26, 2018, were exchanged for a convertible promissory note in the principal amount of $207,332 due on demand (the “Second Convertible CSW Note”). The Second Convertible CSW Note bears interest at 6% per annum and is convertible at the option of the holder into shares of common stock at a price of $0.50 per share.
|
|
|
207,332
|
|
|
|
-
|
|
Less: unamortized debt discounts
|
|
|
-
|
|
|
|
-
|
|
Convertible note payable
|
|
$
|
507,332
|
|
|
$
|
300,000
|
|
In
addition, the Company recognized and measured the embedded beneficial conversion feature present in the convertible notes by allocating
a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the
feature was calculated on the commitment date using the effective conversion price of the convertible notes. This intrinsic value
is limited to the portion of the proceeds allocated to the convertible debt.
The
aforementioned accounting treatment resulted in a total debt discounts equal to $332,332 and $75,000 for the nine months ended
September 30, 2019 and the year ended December 31, 2018, respectively. The Company recorded finance expense in the amount of $332,332
for the nine months ended September 30, 2019.
The
convertible note limits the maximum number of shares that can be owned by the note holder as a result of the conversions to common
stock to 4.99% of the Company’s issued and outstanding shares.
The
Company recorded interest expense pursuant to the stated interest rates on the convertible notes in the amount of $17,079 and
$332,332 of interest expense related to the debt discount for the nine months ended September 30, 2019.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
10 – Advances from Shareholders
Advances
from shareholders consist of the following at September 30, 2019 and December 31, 2018, respectively:
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
On various dates between May 3, 2018 and November 23, 2018, our CEO advanced short-term unsecured demand loans, bearing interest at 6% per annum, of an aggregate $514,141 to the Company, as follows:
$ 10,000 – May 3, 2018
$100,000 – May 3, 2018
$ 82,000 – May 14, 2018
$ 15,000 – May 29, 2018
$ 57,141 – October 25, 2018
$100,000 – October 30, 2018
$ 50,000 – November 9, 2018
$ 50,000 – November 21, 2018
$ 50,000 – November 23, 2018
A total of $207,000 was repaid over various dates from March of 2019 through May of 2019, and $307,141 was exchanged for the note described below.
|
|
$
|
-
|
|
|
$
|
514,141
|
|
|
|
|
|
|
|
|
|
|
On February 13, 2019, a total of $307,141 of the advances from our CEO received from October 25, 2018 to November 23, 2018, as shown above, were exchanged for an amended and restated promissory note in the principal amount of $307,141 (the “Amended Note”). The Amended Note bore interest at 6% and was payable upon the earlier of (i) a public or private offering of our equity securities, resulting in gross proceeds of at least $5,000,000, or (ii) February 13, 2022. All indebtedness outstanding under the Amended Note, consisting of $307,141 of principal and $13,791 of interest, was repaid in full during September 2019, with $200,000 of such principal paid by the issuance of 400,000 shares of common stock as described in Note 4 above.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total advances from shareholders
|
|
$
|
-
|
|
|
$
|
514,141
|
|
The
Company recorded interest expense in the amount of $16,053 and $4,891 for the nine months ended September 30, 2019 and the period
from inception (March 27, 2018) to September 30, 2018, respectively.
Note
11 – Notes Payable
Notes
payable consists of the following at September 30, 2019 and December 31, 2018, respectively:
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
On December 26, 2018, the Company received proceeds of $100,000 from CSW on an unsecured promissory note due on demand that carries a 6% interest rate. On July 22, 2019, the principal and outstanding interest was exchanged for a convertible promissory note (See Note 9).
|
|
$
|
-
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
On November 26, 2018, the Company received proceeds of $100,000 from CSW on an unsecured promissory note due on demand that carries a 6% interest rate. On July 22, 2019, the principal and outstanding interest was exchanged for a convertible promissory note (See Note 9).
|
|
|
-
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
$
|
-
|
|
|
$
|
200,000
|
|
The
Company recorded interest expense in the amount of $6,674 for the nine months ended September 30, 2019.
The
Company recognized interest expense for the nine months ended September 30, 2019 and the period from inception (March 27, 2018)
to September 30, 2018, respectively, as follows:
|
|
September 30, 2019
|
|
|
September 30, 2018
|
|
|
|
|
|
|
|
|
Interest on convertible notes
|
|
$
|
17,079
|
|
|
$
|
-
|
|
Interest on advances from shareholders
|
|
|
16,053
|
|
|
|
4,891
|
|
Interest on notes payable
|
|
|
6,674
|
|
|
|
-
|
|
Amortization of beneficial conversion features
|
|
|
332,332
|
|
|
|
-
|
|
Interest on accounts payable
|
|
|
8,611
|
|
|
|
244
|
|
Total interest expense
|
|
$
|
380,749
|
|
|
$
|
5,135
|
|
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
12 – Leases
The
Company’s corporate offices are within leased facilities. The Company doesn’t have any other office or equipment leases
subject to the recently adopted ASU 2016-02. This real property lease contains a one-time renewal option for an additional 36
months. In the locations in which it is economically feasible to continue to operate, management expects that lease options will
be exercised. The office lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and
other occupancy costs applicable to the leased premise. As the Company’s lease does not provide an implicit discount rate,
the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the
present value of lease payments.
The
components of lease expense were as follows:
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
|
September 30, 2019
|
|
Finance lease cost:
|
|
|
|
|
Amortization of assets
|
|
$
|
30,184
|
|
Interest on lease liabilities
|
|
|
13,510
|
|
Total lease cost
|
|
$
|
43,694
|
|
Supplemental
balance sheet information related to leases were as follows:
|
|
September 30, 2019
|
|
Finance lease:
|
|
|
|
|
Right-of-use asset
|
|
$
|
278,725
|
|
Accumulated amortization
|
|
|
(30,184
|
)
|
Right-of-use asset, net
|
|
$
|
248,541
|
|
|
|
|
|
|
Current portion of finance lease liability
|
|
$
|
39,622
|
|
Long-term finance lease liability
|
|
|
212,167
|
|
Total finance lease liability
|
|
$
|
251,789
|
|
|
|
|
|
|
Weighted average remaining lease term:
|
|
|
|
|
Operating leases
|
|
|
N/A
|
|
Finance leases
|
|
|
5.1 years
|
|
|
|
|
|
|
Weighted average discount rate:
|
|
|
|
|
Operating leases
|
|
|
N/A
|
|
Finance leases
|
|
|
6.75
|
%
|
Supplemental
cash flow and other information related to leases was as follows:
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
|
September 30, 2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash flows used for finance leases
|
|
$
|
40,446
|
|
|
|
|
|
|
Leased assets obtained in exchange for lease liabilities:
|
|
|
|
|
Total operating lease liabilities
|
|
$
|
-
|
|
Total finance lease liabilities
|
|
$
|
251,789
|
|
The
Company’s maturities of lease liabilities under finance leases as of September 30, 2019 are as follows:
|
|
Finance
|
|
|
|
Leases
|
|
|
|
|
|
2019*
|
|
$
|
13,892
|
|
2020
|
|
|
55,824
|
|
2021
|
|
|
57,498
|
|
2022
|
|
|
59,223
|
|
2023
|
|
|
61,000
|
|
Thereafter
|
|
|
51,957
|
|
Total
|
|
|
299,394
|
|
Less interest
|
|
|
47,605
|
|
Present value of lease liabilities
|
|
|
251,789
|
|
Less current portion
|
|
|
39,622
|
|
Long-term lease liabilities
|
|
$
|
212,167
|
|
*
Liability pertains to the remaining three month period from October 1, 2019 through December 31, 2019.
There
were no operating leases as of September 30, 2019.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
13 – Changes in Stockholders’ Equity
One
World Pharma is authorized to issue an aggregate of 75,000,000 shares of common stock with a par value of $0.001. As of September
30, 2019, there were 44,482,939 shares of common stock issued and outstanding. The par value of OWP Ventures’ common stock
was $0.0001 per share. The par value presented for OWP Ventures’ transactions have been retroactively adjusted to reflect
the par value of One World Pharma in this Quarterly Report on Form 10-Q.
Reverse
Stock Split
On
January 10, 2019, One World Pharma, Inc. effected a 1-for-4 reverse stock split. No fractional shares were issued, and no cash
or other consideration was paid in connection with the Reverse Stock Split. Instead, the Company issued one whole share of the
post-Reverse Stock Split common stock to any stockholder who otherwise would have received a fractional share as a result of the
Reverse Stock Split. One World Pharma, Inc. was authorized to issue 75,000,000 shares of common stock prior to the Reverse Stock
Split, which remains unaffected. The Reverse Stock Split did not have any effect on the stated par value of the common stock.
Unless otherwise stated, all share and per share information in this Quarterly Report on Form 10-Q has been retroactively adjusted
to reflect the Reverse Stock Split.
Cash
Received on Subscriptions Receivable
On
various dates between January 30, 2019 and February 5, 2019, the Company received $602 from two of the Company’s founders
for sales of common stock of OWP Ventures during 2018 at $0.001 per share on subscriptions receivable.
Common
Stock Sales
On
various dates between July 18, 2019 and September 4, 2019, the Company sold an aggregate of 4,509,000 shares of common stock at
a price of $0.50 per share for total cash proceeds of $2,254,500, including 400,000 shares purchased by the Company’s CEO
in which the consideration for such shares was paid by the cancelation of $200,000 of outstanding indebtedness owed to the CEO
under a promissory note, in lieu of cash payment.
On
various dates between January 3, 2019 and February 19, 2019, the Company sold an aggregate 3,900,000 shares of common stock of
OWP Ventures at $0.50 per share for total proceeds of $1,950,000.
Common
Stock Issued for Debt Conversion
On
February 4, 2019, a total of 1,253,493 shares of common stock of OWP Ventures were issued pursuant to the conversion of $501,397
of convertible debt owed to The Sanguine Group LLC, consisting of $500,000 of principal and $1,397 of interest.
Common
Stock Options Exercised
On
August 28, 2019, a total of 51,040 shares of common stock were issued upon exercise on a cashless basis of options to purchase
58,331 shares of common stock at a price $0.50 per share.
Common
Stock Issued for Services
On
February 18, 2019, the Company issued 30,000 shares of common stock of OWP Ventures to a consultant for services. The total fair
value of the common stock was $15,000 based recent independent third-party sales at $0.50 per share.
On
September 4, 2019, the Company awarded an investor relations firm 40,000 shares of common stock for services provided. The total
fair value of the common stock was $160,000 based on the closing price of the Company’s common stock on the date of grant,
and was expensed over the requisite service period. The shares have not yet been issued, as such they are presented as Subscriptions
Payable as of September 30, 2019.
Common
Stock Options Issued for Services
On
February 8, 2019, the Company awarded cashless options to a service provider to acquire up to 100,000 shares of common stock,
exercisable at $0.50 per share over a thirty-six (36) month period from the origination date. The options vest as to (i) 8,333
shares on the 8th day of each subsequent month for the following eleven months, and (ii) 8,337 shares on the one-year
anniversary of the effective date.
On
February 8, 2019, the Company awarded cashless options to one of our directors to acquire up to 125,000 shares of common stock,
exercisable at $0.50 per share over a thirty-six (36) month period from the origination date. The options vest as to (i) 10,416
shares on the 8th day of each subsequent month for the following eleven months, and (ii) 10,424 shares on the one-year
anniversary of the effective date.
ONE
WORLD PHARMA, INC.
(Formerly
Punto Group, Corp.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On
January 28, 2019, the Company awarded cashless options to a service provider to acquire up to 500,000 shares of common stock,
exercisable at $0.50 per share over a thirty-six (36) month period from the origination date. The options vest as to (i) 41,666
shares on the 8th day of each subsequent month for the following eleven months, and (ii) 41,674 shares on the one-year
anniversary of the effective date.
On
January 28, 2019, the Company awarded cashless options to a service provider to acquire up to 100,000 shares of common stock,
exercisable at $0.50 per share over a thirty-six (36) month period from the origination date. The options vest as to (i) 8,333
shares on the 8th day of each subsequent month for the following eleven months, and (ii) 8,337 shares on the one-year
anniversary of the effective date.
On
October 24, 2018, the Company issued 50,000 shares of common stock to a consultant in settlement for services. The total fair
value of the common stock was $21,000 based on recent independent third-party sales at $0.42 per share.
A
total of $1,079,525 was expensed during the nine months ending September 30, 2019 pursuant to the options issued for services.
Common
Stock Issued for Share Exchange
On
February 21, 2019, One World Pharma acquired OWP Ventures in the Merger. As a result of the Merger (a) holders of the outstanding
capital stock of OWP Ventures received an aggregate of 39,475,398 shares of our common stock; (b) the options described above
to purchase 825,000 shares of common stock of OWP Ventures at an exercise price of $0.50 automatically converted into options
to purchase 825,000 shares of our common stock at an exercise price of $0.50; (c) the outstanding principal and interest under
a $300,000 convertible note issued by OWP Ventures became convertible, at the option of the holder, into shares of our common
stock at a conversion price equal to the lesser of $0.424 per share or 80% of the price we sell our common stock in a future “Qualified
Offering”; and (d) 875,000 shares of our common stock owned by OWP Ventures prior to the Merger were cancelled.
Note
14 – Income Taxes
The
Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides
that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes, referred to as temporary differences.
For
the nine months ended September 30, 2019 and the year ended December 31, 2018, the Company incurred a net operating loss and,
accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to
the uncertainty of the realization of any tax assets. At September 30, 2019, the Company had approximately $5,000,000 of federal
net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2038.
Based
on the available objective evidence, including the Company’s history of its loss, management believes it is more likely
than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation
allowance against its net deferred tax assets at September 30, 2019 and December 31, 2018, respectively.
In
accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.
Note
15 – Subsequent Events
Common
Stock Sale
On
October 1, 2019, the Company sold 100,000 shares of common stock at a price of $0.50 per share for cash proceeds of $50,000.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The
information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for
the year ended December 31, 2018 and Current Report on Form 8-K with respect to the Merger originally filed with the SEC on February
25, 2019, as amended and restated on July 12, 2019 (the “Super 8-K”), and presumes that readers have access to, and
will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and other information contained in such Form 10-K and Super 8-K. The following discussion and analysis also should be read together
with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.
The
following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including,
without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult
to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should
not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described
in the Super 8-K in the section entitled “Risk Factors” for a description of certain risks that could, among other
things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking
statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited
Financial Statements and notes thereto that appear elsewhere in this report.
Overview
On
February 21, 2019, One World Pharma, Inc. (“Company,” “we” or “our”) entered into an Agreement
and Plan of Merger (“Merger Agreement”) with OWP Merger Subsidiary, Inc. (“OWP Merger Sub), our wholly-owned
subsidiary, and OWP Ventures, Inc. (“OWP Ventures”). Under the Merger Agreement, the acquisition of OWP Ventures by
the Company was effected by the merger of OWP Merger Sub with and into OWP Ventures, with OWP Ventures being the surviving entity
as our wholly-owned subsidiary (the “Merger”). The closing (the “Closing”) of the Merger occurred on February
21, 2019. As a result of the Merger (a) holders of the outstanding capital stock of OWP Ventures received an aggregate of 39,475,398
shares of our common stock; (b) options to purchase 825,000 shares of common stock of OWP Ventures at an exercise price of $0.50
automatically converted into options to purchase 825,000 shares of our common stock at an exercise price of $0.50; (c) the outstanding
principal and interest under a $300,000 convertible note issued by OWP Ventures became convertible, at the option of the holder,
into shares of our common stock at a conversion price equal to the lesser of $0.424 per share or 80% of the price we sell our
common stock in a future “Qualified Offering”; (d) 875,000 shares of our common stock owned by OWP Ventures prior
to the Merger were cancelled; and (e) OWP Ventures’ chief operating officer became our chief operating officer and two of
OWP Ventures’ directors became members of our board of directors.
OWP
Ventures, Inc. is a holding company formed in Delaware on March 27, 2018 to enter and support the cannabis industry, and on May
30, 2018, it acquired One World Pharma S.A.S (“OWP SAS”). One World Pharma S.A.S, is a licensed cannabis cultivation,
production and distribution (export) company located in Popayán, Colombia (nearest major city is Cali). We plan to be a
producer of raw cannabis and hemp plant ingredients for both medical and industrial uses across the globe. We have received licenses
to cultivate, produce and distribute the raw ingredients of the cannabis and hemp plant for medicinal, scientific and industrial
purposes. Specifically, we are one of the only companies in Colombia to receive seed, cultivation, extraction and export licenses
from the Colombian government. Currently, we own approximately 30 acres and have a covered greenhouse built specifically to cultivate
high-grade cannabis and hemp. In addition, we have entered into agreements with local farming co-operatives that include small
farmers and indigenous tribe members, under which they will cultivate cannabis on up to approximately 140 acres of land using
our seeds and propagation techniques, and sell their harvested products to us on an exclusive basis. We planted our first crop
of cannabis in 2018, which we began harvesting in the first quarter of 2019 for the purpose of further research and development
activities and quality control testing of the cannabis we have produced. To date, we have not yet generated any revenues from
our activities.
The
Merger was accounted for as a reverse merger (recapitalization) with OWP Ventures deemed to be the accounting acquirer. Accordingly,
the financial statements included in this Quarterly Report on Form 10-Q and the following discussion reflect the historical operations
of OWP Ventures and its wholly-owned subsidiary OWP SAS prior to the Merger, and that of the combined company following the Merger.
The historical financial information for One World Pharma, Inc. (formerly Punto Group Corp.) prior to the Merger has been omitted.
Results
of Operations for the Three Months Ended September 30, 2019 and 2018:
The
following table summarizes selected items from the statement of operations for the three months ended September 30, 2019 and 2018.
|
|
Three Months Ended September 30,
|
|
|
Increase /
|
|
|
|
2019
|
|
|
2018
|
|
|
(Decrease)
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
589,027
|
|
|
|
263,204
|
|
|
|
325,823
|
|
Professional fees
|
|
|
986,523
|
|
|
|
130,863
|
|
|
|
855,660
|
|
Total operating expenses:
|
|
|
1,575,550
|
|
|
|
394,067
|
|
|
|
1,181,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,575,550
|
)
|
|
|
(394,067
|
)
|
|
|
(1,181,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(221,432
|
)
|
|
|
6,666
|
|
|
|
(228,098
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,796,982
|
)
|
|
$
|
(387,401
|
)
|
|
$
|
(1,409,581
|
)
|
Revenues
We
have not generated any revenues to date, and there were limited expenses in the comparative period prior to the acquisition of
One World Pharma, SAS by OWP Ventures, Inc. on May 30, 2018, when activities were ramped up to develop operations.
General
and Administrative Expenses
General
and administrative expenses for the three months ended September 30, 2019 were $589,027, compared to $263,204 during the three
months ended September 30, 2018, an increase of $325,823, or 124%. The expenses for the current period consisted primarily of
compensation expenses, office rent, and travel costs.
Professional
Fees
Professional
fees for the three months ended September 30, 2019 were $986,523, compared to $130,863 during the three months ended September
30, 2018, an increase of $855,660, or 654%. Professional fees included non-cash, stock-based compensation of $590,270 during the
three months ended September 30, 2019. Professional fees increased primarily due to increased stock-based compensation during
the current period.
Other
Income (Expense)
Other
expenses, on a net basis, for the three months ended September 30, 2019 were $221,432, compared to other income, on a net basis,
of $6,666 during the three months ended September 30, 2018, an increase in net expenses of $228,098, or 3,422%. Other expenses
consisted of $225,053 of interest expense, as offset by $3,621 of interest income for the three months ended September 30, 2019.
Other income during the three months ended September 30, 2018 consisted of $10,000 of interest income, as offset by $3,334 of
interest expense.
Net
Loss
Net
loss for the three months ended September 30, 2019 was $1,796,982, or $0.04 per share, compared to $387,401, or $0.01 per share,
during the three months ended September 30, 2018, an increase of $1,409,581, or 364%. The net loss for the three months ended
September 30, 2019 included non-cash expenses consisting of $4,427 of depreciation, $590,270 of stock-based compensation, and
$218,408 of accrued interest, including $207,332 of amortization on debt discounts.
Results
of Operations for the Nine Months Ended September 30, 2019 and the period from inception (March 27, 2018) to September 30, 2018:
The
following table summarizes selected items from the statement of operations for the nine months ended September 30, 2019 and the
period from inception (March 27, 2018) to September 30, 2018.
|
|
For the
Nine
|
|
|
From
Inception
|
|
|
|
|
|
|
Months
Ended
|
|
|
(March
27, 2018) to
|
|
|
Increase
/
|
|
|
|
September 30, 2019
|
|
|
September 30, 2018
|
|
|
(Decrease)
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
1,633,814
|
|
|
|
388,044
|
|
|
|
1,245,770
|
|
Professional
fees
|
|
|
2,430,945
|
|
|
|
287,840
|
|
|
|
2,143,105
|
|
Total
operating expenses:
|
|
|
4,064,759
|
|
|
|
675,884
|
|
|
|
3,388,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(4,064,759
|
)
|
|
|
(675,884
|
)
|
|
|
(3,388,875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (expense)
|
|
|
(380,967
|
)
|
|
|
4,865
|
|
|
|
(385,832
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(4,445,726
|
)
|
|
$
|
(671,019
|
)
|
|
$
|
(3,774,707
|
)
|
Revenues
We
have not generated any revenues to date, and there were limited expenses in the comparative period prior to the acquisition of
One World Pharma, SAS by OWP Ventures, Inc. on May 30, 2018, when activities were ramped up to develop operations.
General
and Administrative Expenses
General
and administrative expenses for the nine months ended September 30, 2019 were $1,633,814, compared to $388,044 during the period
from inception (March 27, 2018) to September 30, 2018, an increase of $1,245,770, or 321%. The expenses for the current period
consisted primarily of compensation expenses, office rent, and travel costs.
Professional
Fees
Professional
fees for the nine months ended September 30, 2019 were $2,430,945, compared to $287,840 during the nine months ended September
30, 2018, an increase of $2,143,105, or 745%. Professional fees included non-cash, stock-based compensation of $1,254,525 during
the nine months ended September 30, 2019. Professional fees increased primarily due to increased stock-based compensation during
the current period.
Other
Income (Expense)
Other
expenses, on a net basis, for the nine months ended September 30, 2019 were $380,967, compared to other income, on a net basis,
of $4,865 during the period from inception (March 27, 2018) to September 30, 2018, an increase in net expenses of $385,832, or
7,931%. Other expenses consisted of a loss on disposal of assets of $4,087 and $380,749 of interest expense, as offset by $3,869
of interest income for the nine months ended September 30, 2019. Other income during the period from inception (March 27, 2018)
to September 30, 2018 consisted of $10,000 of interest income, as offset by $5,135 of interest expense.
Net
Loss
Net
loss for the nine months ended September 30, 2019 was $4,445,726, or $0.11 per share, compared to $671,019, or $0.02 per share,
during the period from inception (March 27, 2018) to September 30, 2018, an increase of $3,774,707, or 563%. The net loss for
the nine months ended September 30, 2019 included non-cash expenses consisting of $9,432 of depreciation, $1,254,525 of stock-based
compensation and $380,967 of accrued interest, including $332,332 of amortization on debt discounts.
Liquidity
and Capital Resources
The
following is a summary of the Company’s cash flows provided by (used in) operating, investing, financing activities and
effect of exchange rate changes on cash for the nine month period ended September 30, 2019 and the period from inception (March
27, 2018) to September 30, 2018:
|
|
2019
|
|
|
2018
|
|
Operating Activities
|
|
$
|
(3,115,487
|
)
|
|
$
|
(748,556
|
)
|
Investing Activities
|
|
|
(224,597
|
)
|
|
|
(299,509
|
)
|
Financing Activities
|
|
|
4,190,961
|
|
|
|
1,144,606
|
|
Effect of exchange rate changes on cash
|
|
|
(21,121
|
)
|
|
|
18,553
|
|
Net Increase in Cash
|
|
$
|
829,756
|
|
|
$
|
115,094
|
|
Net
Cash Used in Operating Activities
During
the nine months ended September 30, 2019, net cash used in operating activities was $3,115,487, compared to net cash used in operating
activities of $748,556 for the period from inception (March 27, 2018) to September 30, 2018. 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, 2019, net cash used in investing activities was $224,597, compared to net cash used in investing
activities of $299,509 for the period from inception (March 27, 2018) to September 30, 2018. 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, 2019, net cash provided by financing activities was $4,190,961, compared to net cash provided
by financing activities of $1,144,606 for the period from inception (March 27, 2018) to September 30, 2018. The current period
consisted of $500,000 of convertible debt financing that was subsequently converted into 1,253,493 shares of common stock at $0.40
per share, repayments of $314,141 to shareholders on previous advances, proceeds of $602 on subscriptions receivable and $4,004,500
of proceeds received from the sale of stock at $0.50 per share.
Ability
to Continue as a Going Concern
As
of September 30, 2019, our balance of cash on hand was $955,602, and we had working capital of $499,880 and an accumulated deficit
of $6,405,708. We currently may not have sufficient funds to sustain our operations for the next twelve months and we may need
to raise additional cash to fund our operations to the extent necessary to provide working capital.
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 its cannabis cultivation activities and expects to begin revenue
generating export operations in the first quarter of 2020. In addition, the Company is currently seeking additional sources of
capital to fund short term operations. Management believes these factors will contribute toward achieving profitability. In the
event revenues do not materialize at the expected rates, management would seek additional financing or would attempt to conserve
cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives, becoming
profitable or continuing our business without either a temporary interruption or a permanent cessation. Additional financing may
result in substantial dilution to existing stockholders.
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern,
which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
The unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities that might be necessary should 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 has adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from
the sale of commercial sales of products, licensing agreements and contracts. For the comparative periods, revenue has not been
adjusted and continues to be reported under ASC 605 — Revenue Recognition.
There
was no impact on the Company’s financial statements as a result of adopting ASC 606 for the nine months ended September
30, 2019, or the year ended December 31, 2018.
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.