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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

OR

 

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________

 

Commission file number: 000-56151

 

 

ONE WORLD PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   61-1744826

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

     

6605 Grand Montecito Pkwy, Suite 100,

Las Vegas, Nevada 89149

  89149
(Address of principal executive offices)   (zip code)

 

(800) 605-3210

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐ No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

 

The number of shares of registrant’s common stock outstanding as of November 14, 2023 was 78,308,357.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
PART I - FINANCIAL INFORMATION   1
ITEM 1. FINANCIAL STATEMENTS (Unaudited)   1
  Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022   1
  Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)   2
  Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)   3
  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (Unaudited)   5
  Notes to the Condensed Consolidated Financial Statements (Unaudited)   6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   24
ITEM 4. CONTROLS AND PROCEDURES   24
PART II - OTHER INFORMATION   25
ITEM 1. Legal Proceedings   25
ITEM 1A. RISK FACTORS   25
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   25
ITEM 3. DEFAULTS UPON SENIOR SECURITIES   25
ITEM 4. MINE SAFETY DISCLOSURES   25
ITEM 5. OTHER INFORMATION   25
ITEM 6. EXHIBITS   26
  SIGNATURES   27

 

 

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

ONE WORLD PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2023   2022 
   (Unaudited)     
Assets          
           
Current assets:          
Cash  $10,152   $11,016 
Accounts receivable   12,488    12,355 
Inventory   312,736    54,153 
Other current assets   25,724    45,943 
Total current assets   361,100    123,467 
           
Other assets   213,593    179,927 
Right-of-use assets   -    425,969 
Security deposits   85,000    1,449,808 
Fixed assets, net   2,367,417    988,536 
           
Total Assets  $3,027,110   $3,167,707 
           
Liabilities and Stockholders’ Equity (Deficit)          
           
Current liabilities:          
Accounts payable  $815,841   $798,067 
Accrued expenses   1,238,479    948,458 
Deferred revenues   11,545    11,808 
Dividends payable   181,651    137,843 
Current portion of lease liabilities   -    86,235 
Convertible note payable, related party, current maturities   750,000    - 
Notes payable, related parties, current maturities   1,061,500    99,500 
Notes payable, net of $53,442 of debt discounts at September 30, 2023   454,237    145,524 
Total current liabilities   4,513,253    2,227,435 
           
Long-term lease liability   -    341,680 
Convertible note payable, related party   -    750,000 
Notes payable, related parties, long-term portion   -    900,000 
           
Total Liabilities   4,513,253    4,219,115 
           
Series A convertible preferred stock, $0.001 par value, 500,000 shares authorized; 99,733 and          
70,233 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively   997,330    702,330 
Series B convertible preferred stock, $0.001 par value, 300,000 shares authorized; 248,501 and          
272,168 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively   3,727,515    4,082,520 
           
Stockholders’ Equity (Deficit):          
Preferred stock, $0.001 par value, 9,200,000 shares authorized; no shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively   -    - 
Common stock, $0.001 par value, 300,000,000 shares authorized; 76,736,274 and 67,202,907 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively   76,736    67,203 
Additional paid-in capital   18,062,344    17,123,603 
Subscriptions payable   45,000    - 
Accumulated other comprehensive income (loss)   94,671    (50,699)
Accumulated (deficit)   (24,489,739)   (22,976,365)
Total Stockholders’ Equity (Deficit)   (6,210,988)   (5,836,258)
           
Total Liabilities and Stockholders’ Equity (Deficit)  $3,027,110   $3,167,707 

 

See accompanying notes to financial statements.

 

1

 

 

ONE WORLD PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

   2023   2022   2023   2022 
   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
                 
Revenues  $5,906   $33,373   $8,082   $76,384 
Cost of goods sold   767    23,969    1,866    54,765 
Gross profit (loss)   5,139    9,404    6,216    21,619 
                     
Operating expenses:                    
General and administrative   142,464    378,910    907,595    1,148,100 
Professional fees   236,139    95,946    413,651    380,801 
Depreciation expense   9,274    9,883    25,578    34,540 
Total operating expenses   387,877    484,739    1,346,824    1,563,441 
                     
Operating loss   (382,738)   (475,335)   (1,340,608)   (1,541,822)
                     
Other income (expense):                    
Sublease income   -    -    -    1,000 
Loss on sale of fixed assets   -    (9,041)   -    (9,041)
Gain on early extinguishment of lease   -    20,148    4,397    20,148 
Gain on early extinguishment of debt   -    -    -    121,372 
Interest income   3    -    6    41 
Interest expense   (67,571)   (529,915)   (177,169)   (886,837)
Total other expense   (67,568)   (518,808)   (172,766)   (753,317)
                     
Net loss  $(450,306)  $(994,143)  $(1,513,374)  $(2,295,139)
                     
Other comprehensive loss:                    
Gain (loss) on foreign currency translation  $(32,831)  $2,334   $145,370   $6,806 
                     
Net other comprehensive loss  $(483,137)  $(991,809)  $(1,368,004)  $(2,288,333)
Series A convertible preferred stock declared ($0.60 per share)   (15,083)   (9,866)   (43,808)   (28,971)
Net loss attributable to common shareholders  $(498,220)  $(1,001,675)  $(1,411,812)  $(2,317,304)
                     
Weighted average number of common shares                    
outstanding - basic and diluted   74,958,373    66,080,317    71,436,129    65,850,852 
                     
Net loss per share - basic and diluted  $(0.01)  $(0.02)  $(0.02)  $(0.04)
                     
Dividends declared per share of common stock  $0.00   $0.00   $0.00   $0.00 

 

See accompanying notes to financial statements.

 

2

 

 

ONE WORLD PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

 

   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Payable   Income (Loss)   Deficit   Equity (Deficit) 
   For the Three Months Ended September 30, 2023 
                                   Accumulated         
   Series A Convertible   Series B Convertible           Additional       Other       Total 
   Preferred Stock   Preferred Stock   Common Stock   Paid-In   Subscriptions   Comprehensive   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Payable   Income (Loss)   Deficit   Equity (Deficit) 
Balance, June 30, 2023    99,733   $            997,330             272,168   $    4,082,520    73,369,574   $73,370   $17,594,074   $-   $         127,502   $      (24,039,433)  $        (6,244,487)
Series A preferred stock to be issued for services   -    -    -    -    -    -    -    45,000    -    -    45,000 
Series B preferred stock conversions   -    -    (23,667)   (355,005)   2,366,700    2,366    352,639    -    -    -    355,005 
Common stock issued for services   -    -    -    -    1,000,000    1,000    83,000    -    -    -    84,000 
Amortization of common stock options issued for services   -    -    -    -    -    -    47,714    -    -    -    47,714 
Series A convertible preferred stock dividend declared ($0.60 per share)   -    -    -    -    -    -    (15,083)   -    -    -    (15,083)
Loss on foreign currency translation   -    -    -    -    -    -    -    -    (32,831)   -    (32,831)
Net loss   -    -    -    -    -    -    -    -    -    (450,306)   (450,306)
Balance, September 30, 2023   99,733   $997,330    248,501   $3,727,515    76,736,274   $76,736   $18,062,344   $45,000   $94,671   $(24,489,739)  $(6,210,988)

 

   For the Three Months Ended September 30, 2022 
                                   Accumulated         
   Series A Convertible   Series B Convertible           Additional       Other       Total 
   Preferred Stock   Preferred Stock   Common Stock   Paid-In   Subscriptions   Comprehensive   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Payable   Income (Loss)   Deficit   Equity (Deficit) 
Balance, June 30, 2022            65,233   $        652,330    238,501   $         3,577,515    65,861,631   $65,862   $16,928,274   $         -   $(59,875)  $(21,217,884)  $        (4,283,623)
Series B Convertible Preferred Stock sold for cash   -    -    10,000    150,000    -    -    -    -    -    -    - 
Series B Convertible Preferred Stock issued as a commitment fee on ELOC   -    -    13,667    205,005    -    -    -    -    -    -    - 
Common stock issued for services   -    -    -    -    1,341,276    1,341    132,787    -    -    -    134,128 
Amortization of common stock options issued for services   -    -    -    -    -    -    41,180    -    -    -    41,180 
Series A convertible preferred stock dividend declared ($0.60 per share)   -    -    -    -    -    -    (9,866)   -    -    -    (9,866)
Gain on foreign currency translation   -    -    -    -    -    -    -    -    2,334    -    2,334 
Net loss   -    -    -    -    -    -    -    -    -    (994,143)   (994,143)
Balance, September 30, 2022   65,233   $652,330    262,168   $3,932,520    67,202,907   $67,203   $17,092,375   $-   $(57,541)  $(22,212,027)  $(5,109,990)

 

3

 

 

   For the Nine Months Ended September 30, 2023 
                                   Accumulated         
   Series A Convertible   Series B Convertible           Additional       Other       Total 
   Preferred Stock   Preferred Stock   Common Stock   Paid-In   Subscriptions   Comprehensive   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Payable   Income (Loss)   Deficit   Equity (Deficit) 
Balance, December 31, 2022            70,233   $       702,330            272,168   $  4,082,520    67,202,907   $67,203   $17,123,603   $-   $(50,699)  $(22,976,365)  $        (5,836,258)
Series A Convertible Preferred Stock sold for cash   25,000    250,000    -    -    -    -    -    -    -    -    - 
Series A Convertible Preferred Stock issued for services   4,500    45,000    -    -    -    -    -    45,000    -    -    45,000 
Series B preferred stock conversions   -    -    (23,667)   (355,005)   2,366,700    2,366    352,639    -    -    -    355,005 
Common stock issued for services   -    -    -    -    2,500,000    2,500    171,350    -    -    -    173,850 
Commitment shares issued pursuant to promissory note   -    -    -    -    1,666,667    1,667    40,508    -    -    -    42,175 
Common stock sold for cash   -    -    -    -    3,000,000    3,000    297,000    -    -    -    300,000 
Amortization of common stock options issued for services   -    -    -    -    -    -    121,052    -    -    -    121,052 
Series A convertible preferred stock dividend declared ($0.60 per share)   -    -    -    -    -    -    (43,808)   -    -    -    (43,808)
Loss on foreign currency translation   -    -    -    -    -    -    -    -    145,370    -    145,370 
Net loss   -    -    -    -    -    -    -    -    -    (1,513,374)   (1,513,374)
Balance, September 30, 2023   99,733   $997,330    248,501   $3,727,515    76,736,274   $76,736   $18,062,344   $45,000   $94,671   $(24,489,739)  $(6,210,988)

 

   For the Nine Months Ended September 30, 2022 
                                   Accumulated         
   Series A Convertible   Series B Convertible           Additional       Other       Total 
   Preferred Stock   Preferred Stock   Common Stock   Paid-In   Subscriptions   Comprehensive   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Payable   Income (Loss)   Deficit   Equity (Deficit) 
Balance, December 31, 2021          65,233   $       652,330       238,501   $           3,577,515    65,599,565   $65,600   $16,843,656   $21,725   $(64,347)  $(19,916,888)  $           (3,050,254)
Series B Convertible Preferred Stock sold for cash   -    -    10,000    150,000    -    -    -    -    -    -    - 
Series B Convertible Preferred Stock issued as a commitment fee on ELOC   -    -    13,667    205,005    -    -    -    -    -    -    - 
Common stock issued for services   -    -    -    -    1,603,342    1,603    154,250    (21,725)   -    -    134,128 
Amortization of common stock options issued for services   -    -    -    -    -    -    123,440    -    -    -    123,440 
Series A convertible preferred stock dividend declared ($0.60 per share)   -    -    -    -    -    -    (28,971)   -    -    -    (28,971)
Gain on foreign currency translation   -    -    -    -    -    -    -    -    6,806    -    6,806 
Net loss   -    -    -    -    -    -    -    -    -    (2,295,139)   (2,295,139)
Balance, September 30, 2022   65,233   $652,330    262,168   $3,932,520    67,202,907   $67,203   $17,092,375   $-   $(57,541)  $(22,212,027)  $(5,109,990)

 

See accompanying notes to financial statements.

 

4

 

 

ONE WORLD PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   2023   2022 
   For the Nine Months Ended 
   September 30, 
   2023   2022 
Cash flows from operating activities          
Net loss  $(1,513,374)  $(2,295,139)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization expense   25,578    34,540 
Loss on disposal of fixed assets   -    9,041 
Gain on early extinguishment of lease   (4,397)   (20,148)
Gain on early extinguishment of debt   -    (121,372)
Amortization of debt discounts   26,233    412,673 
Series A preferred stock issued for services   90,000    - 
Common stock issued for services   173,850    339,133 
Stock options issued for services   121,052    123,440 
Decrease (increase) in assets:          
Accounts receivable   (133)   (11,216)
Inventory   (258,583)   (120,625)
Other current assets   20,219    109,578 
Other assets   (33,666)   (33,327)
Right-of-use assets   34,391    84,667 
Security deposits   -    (194,020)
Increase (decrease) in liabilities:          
Accounts payable   17,774    259,049 
Accrued expenses   290,021    357,650 
Deferred revenues   (263)   5,176 
Lease liability   (31,940)   (64,067)
Net cash used in operating activities   (1,043,238)   (1,124,967)
           
Cash flows from investing activities          
Proceeds received on sale of fixed assets   -    6,350 
Purchase of fixed assets   (5,046)   (43,201)
Net cash used in investing activities   (5,046)   (36,851)
           
Cash flows from financing activities          
Proceeds received on convertible note payable   -    750,000 
Repayment of convertible note payable   -    (750,000)
Proceeds from notes payable, related parties   62,000    99,500 
Proceeds from notes payable   262,500    868,081 
Proceeds from sale of preferred and common stock   550,000    150,000 
Net cash provided by financing activities   874,500    1,117,581 
           
Effect of exchange rate changes on cash   172,920    (6,820)
           
Net increase (decrease) in cash   (864)   (51,057)
Cash - beginning   11,016    119,678 
Cash - ending  $10,152   $68,621 
           
Supplemental disclosures:          
Interest paid  $40,693   $79,269 
Income taxes paid  $-   $- 
           
Non-cash investing and financing transactions:          
Dividends payable  $43,808   $28,971 
Initial recognition of right-of-use assets and lease liabilities  $-   $1,535,706 
Deposit on equipment settled with note payable  $35,000   $- 
Value of debt discounts attributable to commitment shares  $42,175   $- 

 

See accompanying notes to financial statements.

 

5

 

 

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 – Nature of Business and Significant Accounting Policies

 

Nature of Business

 

One World Products, Inc. (the “Company,” “we,” “our” or “us”) was incorporated in Nevada on September 2, 2014. On February 21, 2019, we 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., and on November 23, 2021, the Company changed its name to One World Products, Inc. through the merger of One World Products, Inc., a recently formed Nevada corporation wholly-owned by the Company, with and into the Company (the “Name Change Merger”) pursuant to the applicable provisions of the Nevada Revised Statutes (“NRS”). As permitted by the NRS, the articles of merger filed with the Secretary of State of the state of Nevada to effect the Name Change Merger amended Article I of the Company’s Articles of Incorporation to change the Company’s name to “One World Products, Inc.” The Name Change Merger was effected solely to effect the change of the Company’s name, and had no effect on the Company’s officers, directors, operations, assets or liabilities.

 

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 cooperatives 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 began harvesting cannabis in the first quarter of 2019 for the purpose of further research and development activities, quality control testing and extraction. We have been generating revenue from the sale of our seeds since the second quarter of 2020. During the first quarter of 2022, we made payments of approximately $1,400,000 for a state-of-the-art distillation machine that was placed in service during the second quarter of 2023 within our vertically integrated extraction facility.

 

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, 2022. 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.

 

6

 

 

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the following entities, all of which were under common control and ownership at September 30, 2023:

 

    State of    
Name of Entity   Incorporation   Relationship
One World Products, 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
Agrobase, S.A.S.(5)   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 Products, 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 substantive income or expenses.
(5) Wholly-owned subsidiary of OWP Ventures, Inc., formed on September 12, 2019, located in Colombia and legally constituted as a simplified stock company. This company commenced operations during 2023.

 

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 Colombian 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.

 

7

 

 

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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.

 

Cash in Excess of FDIC Insured Limits

 

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000, under current regulations. The Company did not have any cash in excess of FDIC insured limits at September 30, 2023, 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. 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. The Company’s sales to date have primarily consisted of the sale of seeds. These sales include multi-element arrangements whereby the Company collects 50% of the sale upon delivery of the sales, and the remaining 50% upon the completion of the harvest, whether the seeds result in a successful crop, or not. In addition, the Company has a right of first refusal to purchase products resulting from the harvest. At September 30, 2023, the Company had $11,545 of deferred revenues and $6,760 of deferred cost of goods sold, as included in other current assets on the balance sheet, that are expected to be recognized upon the customers’ completion of their future harvests.

 

Inventory

 

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a standard cost basis that approximates the first-in, first-out (FIFO) method. 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 and non-employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718). 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 July 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-03 to amend various SEC paragraphs in the Accounting Standards Codification to primarily reflect the issuance of SEC Staff Accounting Bulletin No. 120. ASU No. 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock.” ASU 2023-03 amends the ASC for SEC updates pursuant to SEC Staff Accounting Bulletin No. 120; SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force (“EITF”) Meeting; and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. These updates were immediately effective and did not have a material impact on our financial statements.

 

8

 

 

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which creates an exception to the general recognition and measurement principle for contract assets and contract liabilities from contracts with customers acquired in a business combination. The new guidance will require companies to apply the definition of a performance obligation under accounting standard codification ASC Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination. Under current GAAP, an acquirer in a business combination is generally required to recognize and measure the assets it acquires and the liabilities it assumes at fair value on the acquisition date. The new guidance will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. These amendments are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The adoption of ASU 2021-08 did not have a material impact on the Company’s financial statements or related disclosures.

 

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity Classified Written Call Options. ASU 2021-04 addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, with early adoption permitted. The adoption of ASU 2021-04 has not had a material impact on the Company’s financial statements or related disclosures.

 

In March 2020, the FASB issued ASU 2020-04 establishing Topic 848, Reference Rate Reform. ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The adoption of ASU 2020-04 did not have a material impact on the Company’s consolidated financial statements, as we transitioned from the London Interbank Offered Rate, commonly referred to as LIBOR, to alternative references rates, as well as utilizing the aforementioned expedients and exceptions provided in ASU 2020-04.

 

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 has not had a material impact on the Company’s financial statements or related disclosures.

 

No other new accounting pronouncements, issued or effective during the period ended September 30, 2023, 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 September 30, 2023, our balance of cash on hand was $10,152, and we had negative working capital of $4,152,153 and an accumulated deficit of $24,489,739. We are too early in our development stage to project future revenue levels, and may not be able to generate sufficient funds to sustain our operations for the next twelve months. Accordingly, we may need to raise additional cash to fund our operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

In the event sales do not materialize at the expected rates, management would seek additional financing and would attempt to conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives; therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern.

 

9

 

 

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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. The condensed consolidated 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. Our ability to scale production and distribution capabilities and further increase the value of our brands, is largely dependent on our success in raising additional capital.

 

Note 3 – Related Party Transactions

 

Common Stock Issued for Services, Related Party

 

On June 15, 2023, the Company issued 1,500,000 shares of common stock to the Company’s President, Joerg Sommer, for services provided. The aggregate fair value of the common stock was $89,850, based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance.

 

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.

 

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, 2023 and December 31, 2022, respectively:

 

   Level 1   Level 2   Level 3 
   Fair Value Measurements at September 30, 2023 
   Level 1   Level 2   Level 3 
Assets               
Cash  $10,152   $-   $   - 
Total assets   10,152    -    - 
Liabilities               
Convertible note payable, related party   -    750,000    - 
Notes payable, related parties   -    1,061,500    - 
Notes payable , net of $53,442 of debt discounts at September 30, 2023   -    454,237    - 
Total liabilities   -    (2,265,737)   - 
Total assets and liabilities  $10,152   $(2,265,737)  $- 

 

   Level 1   Level 2   Level 3 
   Fair Value Measurements at December 31, 2022 
   Level 1   Level 2   Level 3 
Assets               
Cash  $11,016   $-   $- 
Right-of-use asset   -    -    425,969 
Total assets   11,016    -    425,969 
Liabilities               
Lease liabilities        -    427,915 
Convertible notes payable   -    750,000    - 
Notes payable   -    145,524    - 
Notes payable, related parties   -    999,500    - 
Total liabilities   -    (1,895,024)   (427,915)
Total assets and liabilities  $11,016   $(1,895,024)  $(1,946)

 

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, 2023 or the year ended December 31, 2022.

 

10

 

 

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 5 – Inventory

 

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a standard cost basis that approximates the first-in, first-out (FIFO) method. 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 September 30, 2023 and December 31, 2022, respectively.

 

 

   September 30,   December 31, 
   2023   2022 
Raw materials  $21,934   $18,580 
Work in progress   30,174    1,464 
Finished goods   316,100    80,858 
Inventory gross   368,208    100,902 
Less obsolescence   (55,472)   (46,749)
Total inventory  $312,736   $54,153 

 

Note 6 – Other Current Assets

 

Other current assets included the following as of September 30, 2023 and December 31, 2022, respectively:

 

   September 30,   December 31, 
   2023   2022 
Prepaid expenses  $18,964   $39,288 
Deferred cost of goods sold   6,760    6,655 
Total  $25,724   $45,943 

 

Note 7 – Other Assets

 

Other assets consist entirely of VAT receivables in the amounts of $213,593 and $179,927 at September 30, 2023 and December 31, 2022, respectively, which will be repaid to the Company by the applicable taxing authority upon the successful export of the products for which the taxes were originally paid.

 

Note 8 – Security Deposits

 

Security deposits included the following as of September 30, 2023 and December 31, 2022, respectively:

 

   September 30,   December 31, 
   2023   2022 
Refundable deposit on equipment purchase  $85,000   $50,000 
Down payment on distillation equipment   -    1,399,413 
Security deposits on leases held in Colombia   -    395 
Security deposits  $85,000   $1,449,808 

 

11

 

 

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 9 – Fixed Assets

 

Fixed assets consist of the following at September 30, 2023 and December 31, 2022, respectively:

 

   September 30,   December 31, 
   2023   2022 
Land  $138,248   $138,248 
Buildings   473,971    473,971 
Office equipment   30,902    30,902 
Furniture and fixtures   6,495    6,495 
Equipment and machinery   1,828,006    423,547 
Fixed assets, gross   2,477,622    1,073,163 
Less: accumulated depreciation   (110,205)   (84,627)
Total  $2,367,417   $988,536 

 

Depreciation and amortization expense totaled $25,578 and $34,540 for the nine months ended September 30, 2023 and 2022, respectively.

 

Note 10 – Accrued Expenses

 

Accrued expenses consisted of the following at September 30, 2023 and December 31, 2022, respectively:

 

   September 30,   December 31, 
   2023   2022 
Accrued payroll  $771,199   $613,569 
Accrued withholding taxes and employee benefits   42,764    31,632 
Accrued ICA fees and contributions   178,053    167,037 
Accrued interest   246,463    136,220 
Accrued expenses  $1,238,479   $948,458 

 

Note 11 – Deferred Revenues

 

Arrangements with customers include multiple deliverables, consisting of an initial delivery of seeds and a contingent portion of the purchase price that is payable on the customer’s future harvest of the plants grown from such seeds. Deferred revenues associated with these multiple-element arrangements were $11,545 and $11,808 at September 30, 2023 and December 31, 2022, respectively. Related deferred cost of goods sold were $6,760 and $6,655 at September 30, 2023 and December 31, 2022, respectively, resulting in deferred gross margins of $4,785 and $5,153 at September 30, 2023 and December 31, 2022, respectively, that is expected to be recognized upon the customers’ completion of their harvests in future periods.

 

Note 12 – Leases

 

On April 28, 2023, the Company leased commercial property for its extraction facility under a commercial lease contract at a monthly lease rate of 3,000,000 COP (approximately $645) over a one-year term. The lease shall be automatically extended for another one year period with respect to a mutually agreed upon lease rate at the time of extension. Either party can terminate the lease three months prior to the expiration of the lease term.

 

In addition, the Company leases its 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 that would require capitalization. The office lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. In the locations in which it is economically feasible to continue to operate, management expects to enter into a new lease upon expiration. The extraction facility lease contained 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 implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

 

12

 

 

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Terminated Leases

 

The Company leased its 12,400 square foot extraction facility under a non-cancelable real property lease agreement that commenced on January 1, 2022 and was to expire on December 31, 2027, at a monthly lease rate of 57,339,000 COP (approximately $15,290). The Company terminated the lease on September 30, 2022, resulting in termination fees of approximately $7,700. A gain of $20,148 was recognized on the early extinguishment of the lease for the year ended December 31, 2022.

 

On October 1, 2022, the Company entered into a five-year non-cancelable property lease, with an automatic five year extension, for a new extraction facility with combined office space, at a monthly lease term of 29,000,000 COP plus VAT and administration fees (approximately $6,300 in the aggregate), with annual escalation of lease payments equal to the consumer price index, plus 2%. The Company terminated the lease on May 23, 2023, resulting in a gain of $3,825 on the early extinguishment of the lease for the nine months ended September 30, 2023.

 

The Company also leased a residential premise under a non-cancelable real property lease agreement that commenced on September 1, 2021 that was to expire on August 31, 2024, at a monthly lease term of 3,800,000 COP (approximately $1,013), with approximately a 3% annual escalation of lease payments commencing September 1, 2022. The Company terminated the lease on April 1, 2023, resulting in a gain of $372 on the early extinguishment of the lease for the nine months ended September 30, 2023.

 

The Company leased another residential premise under a non-cancelable real property lease agreement that commenced on June 1, 2022 and expires on May 30, 2024, at a monthly lease term of 1,900,000 COP (approximately $507), with an 8% annual escalation of lease payments commencing June 1, 2023. The Company terminated the lease on April 1, 2023, resulting in a gain of $200 on the early extinguishment of the lease for the nine months ended September 30, 2023.

 

The components of lease expense were as follows:

 

   2023   2022 
   For the Nine Months Ended 
   September 30, 
   2023   2022 
Operating lease cost:          
Amortization of right-of-use assets  $34,391   $33,431 
Interest on lease liabilities   11,379    26,463 
Lease payments on short term leases   1,290    12,590 
Total operating lease cost  $47,060   $72,484 

 

Supplemental balance sheet information related to leases was as follows:

 

   September 30,   December 31, 
   2023   2022 
Operating lease:          
Operating lease assets  $-   $425,969 
           
Current portion of operating lease liabilities  $-    86,235 
Noncurrent operating lease liabilities   -    341,680 
Total operating lease liability  $-   $427,915 
           
Weighted average remaining lease term:          
Operating leases   None    4.25 years 
           
Weighted average discount rate:          
Operating lease   6.75%   6.75%

 

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

 

   2023   2022 
   For the Nine Months Ended 
   September 30, 
   2023   2022 
Cash paid for amounts included in the measurement of lease liabilities:          
Operating cash flows used for operating leases  $31,940   $38,725 
           
Leased assets obtained in exchange for lease liabilities:          
Total operating lease liabilities  $-   $1,535,706 
           
Gain on early extinguishment of debt:  $4,397   $- 

 

13

 

 

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 13 – Convertible Note Payable, Related Party

 

Convertible note payable, related party consists of the following at September 30, 2023 and December 31, 2022, respectively:

 

   September 30,   December 31, 
   2023   2022 
On September 27, 2022   750,000    750,000 
On September 27, 2022, the Company completed the sale of a Convertible Promissory Note in the principal amount of $750,000 (the “Convertible McCabe Note”) to Dr. John McCabe, an affiliate investor. The unsecured note matures on September 16, 2024 (the “Maturity Date”), bears interest at a rate of 8% per annum, and the principal and interest is convertible into shares of the Company’s convertible Series B common stock at a conversion price of $15 per share.  $750,000   $750,000 
           
Total convertible note payable, related party   750,000    750,000 
Less: current maturities   -    - 
Convertible note payable, related party, long-term portion  $750,000   $750,000 

 

The Company recorded interest expense pursuant to the stated interest rates on the convertible note, related party in the amount of $44,877 and $43,899 for the nine months ended September 30, 2023 and 2022, respectively.

 

Note 14 – Notes Payable, Related Parties

 

Notes payable, related party, consists of the following at September 30, 2023 and December 31, 2022, respectively:

   September 30,   December 31, 
   2023   2022 
         
On September 11, 2023, the Company received an advance of $52,000 from Dr. Kenneth Perego, II, M.D., our Vice Chairman of the Board pursuant to an unsecured promissory note due on demand that carries a 10% interest rate.  $52,000   $- 
           
On August 31, 2023, the Company received an advance of $4,000 from Dr. Kenneth Perego, II, M.D., our Vice Chairman of the Board pursuant to an unsecured promissory note due on demand that carries a 6% interest rate.   4,000    - 
           
On August 14, 2023, the Company received an advance of $6,000 from Dr. Kenneth Perego, II, M.D., our Vice Chairman of the Board pursuant to an unsecured promissory note due on demand that carries a 6% interest rate.   6,000    - 
           
On August 5, 2022, the Company received an advance of $50,000 from Dr. Kenneth Perego, II, M.D., our Vice Chairman of the Board pursuant to an unsecured promissory note due on demand that carries a 6% interest rate.   50,000    50,000 
           
On August 2, 2022, the Company received an advance of $4,500 from Isiah Thomas, III, our Chairman of the Board and CEO, pursuant to an unsecured promissory note due on demand that carries a 6% interest rate.   4,500    4,500 
           
On June 13, 2022, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $100,000 from Dr. John McCabe, an affiliate investor, pursuant to an unsecured promissory note, maturing on January 1, 2024, that carries an 8% interest rate.   100,000    100,000 
           
On July 7, 2022, the Company received an advance of $5,000 from Dr. Kenneth Perego, II, M.D., our Vice Chairman of the Board pursuant to an unsecured promissory note due on demand that carries a 6% interest rate.   5,000    5,000 
           
On June 3, 2022, the Company received an advance of $10,000 from Isiah Thomas, III, our Chairman of the Board and CEO, pursuant to an unsecured promissory note due on demand that carries a 6% interest rate.   10,000    10,000 
           
On May 5, 2022, the Company received an advance of $10,000 from Isiah Thomas, III, our Chairman of the Board and CEO, pursuant to an unsecured promissory note due on demand that carries a 6% interest rate.   10,000    10,000 
           
On May 5, 2022, the Company received an advance of $20,000 from Dr. Kenneth Perego, II, M.D., our Vice Chairman of the Board pursuant to an unsecured promissory note due on demand that carries a 6% interest rate.   20,000    20,000 
           
On March 1, 2022, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $400,000 from Dr. John McCabe, an affiliate investor, pursuant to an unsecured promissory note, maturing on January 1, 2024, that carries an 8% interest rate.   400,000    400,000 
           
On February 15, 2022, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $200,000 from Dr. John McCabe, an affiliate investor, pursuant to an unsecured promissory note, maturing on January 1, 2024, that carries an 8% interest rate.   200,000    200,000 
           
On December 29, 2021, the Company received an advance of $200,000 from Dr. Kenneth Perego, II, M.D., our Vice Chairman of the Board pursuant to an unsecured promissory note due January 1, 2024 that carries an 8% interest rate.   200,000    200,000 
           
Total notes payable, related party   1,061,500    999,500 
Less: current maturities   1,061,500    99,500 
Notes payable, related party, long-term portion  $-   $900,000 

 

The Company recorded interest expense pursuant to the stated interest rates on the notes payable, related parties, in the amount of $58,804 and $43,763 for the nine months ended September 30, 2023 and 2022, respectively.

 

14

 

 

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 15 – Notes Payable

   September 30,   December 31, 
   2023   2022 
On August 18, 2023, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., issued an unsecured promissory note of $35,000 to LDL8 Consulting, LLC for the purchase of equipment from another vendor. The promissory note bears interest at 10% per annum and is due on demand. In the event of default, the interest rate increases to 15% until repayment.  $35,000   $- 
           
On June 23, 2023, the Company completed the sale of a Promissory Note in the principal amount of $300,000 (the “Third AJB Note”) to AJB Capital Investments LLC (“AJB Capital”) for an aggregate purchase price of $276,000, pursuant to a Securities Purchase Agreement between the Company and AJB Capital (the “Purchase Agreement”). The Company received net proceeds of $262,500 after deduction of an original issue discount of $24,000, $7,500 of legal fees and a $6,000 of broker fee, which are being amortized as a debt discount over the life of the loan.
 
The Third AJB Note matures on March 23, 2024 (the “Maturity Date”), bears interest at a rate of 12% 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 the Volume Weighted Average Price (“VWAP”) during (i) the 10 trading day period preceding the issuance date of the note, or (ii) the 10 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 AJB Capital in the amount of $100,000 (the “Commitment Fee”) in the form of 1,666,667 shares of the Company’s common stock (the “Commitment Fee Shares”). During the period commencing on the six-month anniversary of the closing date and ending on the five-year anniversary of the closing date, AJB Capital is entitled to be issued additional shares of common stock or receive a cash payment to the extent AJB Capital’s sale of the Commitment Fee Shares has resulted in net proceeds in an amount less than the Commitment Fee. The Commitment Fee Shares resulted in a debt discount of $42,175 that is being amortized over the life of the loan.
 
In connection with the issuance of the Third AJB Note and Commitment Fee Shares, the Company entered into a Registration Rights Agreement with AJB Capital in which the Company agreed to file a registration statement with the SEC within 180 days of June 23, 2023, registering the shares of common stock issuable under the Third AJB Note and Purchase Agreement.
   300,000    - 
           
On September 15, 2022, the Company, through its wholly-owned subsidiary, One World Pharma, SAS, received proceeds of 55,488,000 COP, or approximately $12,243, on a loan with a face value of 70,000,000 COP, or approximately $15,445, from an individual pursuant to an unsecured promissory note, bearing interest at 4% per month, or 48% per annum, due on demand. The debt discount of $3,202 was expensed as finance costs at the time of origination. The face value of the note has been adjusted by $1,823 due to foreign currency translation adjustments.   17,268    14,552 
           
On June 17, 2022, the Company, through its wholly-owned subsidiary, One World Pharma, SAS, received proceeds of 230,400,000 COP, or approximately $55,821, on a loan with a face value of 240,000,000 COP, or approximately $58,147, from an individual pursuant to an unsecured promissory note, bearing interest at 4% per month, or 48% per annum, due on demand. The debt discount of $2,326 was expensed as finance costs at the time of origination. The face value of the note has been adjusted by $3,383 due to foreign currency translation adjustments.   59,204    49,894 
           
On May 31, 2022, the Company, through its wholly-owned subsidiary, One World Pharma, SAS, received proceeds of 314,640,000 COP, or approximately $76,231, on a loan with a face value of 360,000,000 COP, or approximately $87,220, from an individual pursuant to promissory note, security by equipment, bearing interest at 2.1% per month, or 25% per annum, which matured on November 28, 2022 and is currently past due. The debt discount of $10,990 was expensed as finance costs at the time of origination. The face value of the note has been adjusted by $1,586 due to foreign currency translation adjustments.   88,806    74,841 
           
On May 30, 2022, the Company, through its wholly-owned subsidiary, One World Pharma, SAS, received a non-interest bearing loan of 20,000,000 COP, or approximately $4,846, from an individual pursuant to an unsecured promissory note, due on demand. The face value of the note has been adjusted by $88 due to foreign currency translation adjustments.   4,934    4,158 
           
On April 29, 2022, the Company, through its wholly-owned subsidiary, One World Pharma, SAS, received a non-interest bearing loan of 10,000,000 COP, or approximately $2,423, from an individual pursuant to an unsecured promissory note, due on demand. The face value of the note has been adjusted by $44 due to foreign currency translation adjustments.   2,467