One World Products, Inc 10-Q for FY2023 Q3
One World Products, Inc. (OWPC)
About this 10-Q
One World Products, Inc filed this 10-Q on November 15, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $5906
- down 82.3% from $33.37K a year earlier
- Net loss
- $450.31K
- compared with a net loss of $994.14K a year earlier
- Diluted EPS
- -$0.01
- compared with -$0.02 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | ||
| SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (zip code) |
(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.
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).
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 | ☐ |
| ☒ | 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
☐
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 .
TABLE OF CONTENTS
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 | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Other assets | ||||||||
| Right-of-use assets | ||||||||
| Security deposits | ||||||||
| Fixed assets, net | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenues | ||||||||
| Dividends payable | ||||||||
| Current portion of lease liabilities | ||||||||
| Convertible note payable, related party, current maturities | ||||||||
| Notes payable, related parties, current maturities | ||||||||
| Notes payable, net of $ | ||||||||
| Notes payable | ||||||||
| Total current liabilities | ||||||||
| Long-term lease liability | ||||||||
| Convertible note payable, related party | ||||||||
| Notes payable, related parties, long-term portion | ||||||||
| Total Liabilities | ||||||||
| Series A convertible preferred stock, $ par value, shares authorized; and | ||||||||
| shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Series B convertible preferred stock, $ par value, shares authorized; and | ||||||||
| shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Preferred stock, $ par value, shares authorized; shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Subscriptions payable | ||||||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Accumulated (deficit) | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
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 | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit (loss) | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Depreciation expense | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Sublease income | ||||||||||||||||
| Loss on sale of fixed assets | ( | ) | ( | ) | ||||||||||||
| Gain on early extinguishment of lease | ||||||||||||||||
| Gain on early extinguishment of debt | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive loss: | ||||||||||||||||
| Gain (loss) on foreign currency translation | $ | ( | ) | $ | $ | $ | ||||||||||
| Net other comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Series A convertible preferred stock declared ($ per share) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares | ||||||||||||||||
| outstanding - basic and diluted | ||||||||||||||||
| Net loss per share - basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Dividends declared per share of common stock | $ | $ | $ | $ | ||||||||||||
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 | | $ | | | $ | | $ | $ | $ | $ | | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
| Series A preferred stock to be issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Series B preferred stock conversions | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of common stock options issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Series A convertible preferred stock dividend declared ($ per share) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Loss on foreign currency translation | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| 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 | | $ | | $ | | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
| Series B Convertible Preferred Stock sold for cash | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Series B Convertible Preferred Stock issued as a commitment fee on ELOC | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of common stock options issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Series A convertible preferred stock dividend declared ($ per share) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Gain on foreign currency translation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||
| 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 | | $ | | | $ | | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Series A Convertible Preferred Stock sold for cash | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Series A Convertible Preferred Stock issued for services | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Series B preferred stock conversions | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Commitment shares issued pursuant to promissory note | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Common stock sold for cash | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of common stock options issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Series A convertible preferred stock dividend declared ($ per share) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Loss on foreign currency translation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| 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 | | $ | | | $ | | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Balance | | $ | | | $ | | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Series B Convertible Preferred Stock sold for cash | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Series B Convertible Preferred Stock issued as a commitment fee on ELOC | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Amortization of common stock options issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Series A convertible preferred stock dividend declared ($ per share) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Gain on foreign currency translation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Gain on foreign currency translation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||
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 | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| Loss on disposal of fixed assets | ||||||||
| Gain on early extinguishment of lease | ( | ) | ( | ) | ||||
| Gain on early extinguishment of debt | ( | ) | ||||||
| Amortization of debt discounts | ||||||||
| Series A preferred stock issued for services | ||||||||
| Common stock issued for services | ||||||||
| Stock options issued for services | ||||||||
| Decrease (increase) in assets: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Other current assets | ||||||||
| Other assets | ( | ) | ( | ) | ||||
| Right-of-use assets | ||||||||
| Security deposits | ( | ) | ||||||
| Increase (decrease) in liabilities: | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Deferred revenues | ( | ) | ||||||
| Lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Proceeds received on sale of fixed assets | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds received on convertible note payable | ||||||||
| Repayment of convertible note payable | ( | ) | ||||||
| Proceeds from notes payable, related parties | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from sale of preferred and common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| Net increase (decrease) in cash | ( | ) | ( | ) | ||||
| Cash - beginning | ||||||||
| Cash - ending | $ | $ | ||||||
| Supplemental disclosures: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Non-cash investing and financing transactions: | ||||||||
| Dividends payable | $ | $ | ||||||
| Initial recognition of right-of-use assets and lease liabilities | $ | $ | ||||||
| Deposit on equipment settled with note payable | $ | $ | ||||||
| Value of debt discounts attributable to commitment shares | $ | $ | ||||||
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
shares of our common stock; (b) options to purchase shares of common stock of OWP Ventures at an exercise price of
$ automatically converted into options to purchase shares of our common stock at an exercise price of $; (c) the outstanding
principal and interest under a $
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 $
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:
Schedule of Common Control and Ownership Interest
| State of | ||||
| Name of Entity | Incorporation | Relationship | ||
| (1) |
| (2) |
| (3) | |
| (4) | |
| (5) |
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 $
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 $
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.
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.
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 $
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 shares of common stock to the Company’s President, Joerg Sommer, for services provided.
The aggregate fair value of the common stock was $
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:
Schedule of Valuation of Financial Instruments at Fair Value on a Recurring Basis
| Level 1 | Level 2 | Level 3 | ||||||||||
| Fair Value Measurements at September 30, 2023 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Total assets | ||||||||||||
| Liabilities | ||||||||||||
| Convertible note payable, related party | ||||||||||||
| Notes payable, related parties | ||||||||||||
| Notes payable , net of $ | ||||||||||||
| Total liabilities | ( | ) | ||||||||||
| Total assets and liabilities | $ | $ | ( | ) | $ | |||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Fair Value Measurements at December 31, 2022 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Right-of-use asset | ||||||||||||
| Total assets | ||||||||||||
| Liabilities | ||||||||||||
| Lease liabilities | ||||||||||||
| Convertible notes payable | ||||||||||||
| Notes payable | ||||||||||||
| Notes payable, related parties | ||||||||||||
| Total liabilities | ( | ) | ( | ) | ||||||||
| Total assets and liabilities | $ | $ | ( | ) | $ | ( | ) | |||||
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.
Schedule of Inventory
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Inventory gross | ||||||||
| Less obsolescence | ( | ) | ( | ) | ||||
| Total inventory | $ | $ | ||||||
Note 6 – Other Current Assets
Other current assets included the following as of September 30, 2023 and December 31, 2022, respectively:
Schedule of Other Current Assets
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Prepaid expenses | $ | $ | ||||||
| Deferred cost of goods sold | ||||||||
| Total | $ | $ | ||||||
Note 7 – Other Assets
Other
assets consist entirely of VAT receivables in the amounts of $
Note 8 – Security Deposits
Security deposits included the following as of September 30, 2023 and December 31, 2022, respectively:
Schedule of Security Deposits
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Refundable deposit on equipment purchase | $ | $ | ||||||
| Down payment on distillation equipment | ||||||||
| Security deposits on leases held in Colombia | ||||||||
| Security deposits | $ | $ | ||||||
| 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:
Schedule of Fixed Assets
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Land | $ | $ | ||||||
| Buildings | ||||||||
| Office equipment | ||||||||
| Furniture and fixtures | ||||||||
| Equipment and machinery | ||||||||
| Fixed assets, gross | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Depreciation
and amortization expense totaled $
Note 10 – Accrued Expenses
Accrued expenses consisted of the following at September 30, 2023 and December 31, 2022, respectively:
Schedule of Accrued Expenses
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accrued payroll | $ | $ | ||||||
| Accrued withholding taxes and employee benefits | ||||||||
| Accrued ICA fees and contributions | ||||||||
| Accrued interest | ||||||||
| Accrued expenses | $ | $ | ||||||
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 $
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
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
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
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
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
The components of lease expense were as follows:
Schedule of Components of Lease Expense
| 2023 | 2022 | |||||||
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Operating lease cost: | ||||||||
| Amortization of right-of-use assets | $ | $ | ||||||
| Interest on lease liabilities | ||||||||
| Lease payments on short term leases | ||||||||
| Total operating lease cost | $ | $ | ||||||
Supplemental balance sheet information related to leases was as follows:
Schedule of Supplemental Balance Sheet Information Related to Leases
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Operating lease: | ||||||||
| Operating lease assets | $ | $ | ||||||
| Current portion of operating lease liabilities | $ | |||||||
| Noncurrent operating lease liabilities | ||||||||
| Total operating lease liability | $ | $ | ||||||
| Weighted average remaining lease term: | ||||||||
| Operating leases | None | |||||||
| Weighted average discount rate: | ||||||||
| Operating lease | % | % | ||||||
Supplemental cash flow and other information related to operating leases was as follows:
Schedule of Supplemental Cash Flow Related to Operating Leases
| 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 | $ | $ | ||||||
| Leased assets obtained in exchange for lease liabilities: | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Gain on early extinguishment of debt: | $ | $ | ||||||
| 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:
Schedule of Convertible Note Payable Related Party
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| On September 27, 2022 | ||||||||
| On September 27, 2022, the Company completed the sale of a Convertible Promissory Note in the principal amount of $ | $ | $ | ||||||
| Total convertible note payable, related party | ||||||||
| Less: current maturities | ||||||||
| Convertible note payable, related party, long-term portion | $ | $ | ||||||
The
Company recorded interest expense pursuant to the stated interest rates on the convertible note, related party in the amount of $
Note 14 – Notes Payable, Related Parties
Notes payable, related party, consists of the following at September 30, 2023 and December 31, 2022, respectively:
Schedule of Notes Payable Related Party
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| On September 11, 2023, the Company received an advance of $ | $ | $ | ||||||
| On August 31, 2023, the Company received an advance of $ | ||||||||
| On August 14, 2023, the Company received an advance of $ | ||||||||
| On August 5, 2022, the Company received an advance of $ | ||||||||
| On August 2, 2022, the Company received an advance of $ | ||||||||
| On June 13, 2022, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On July 7, 2022, the Company received an advance of $ | ||||||||
| On June 3, 2022, the Company received an advance of $ | ||||||||
| On May 5, 2022, the Company received an advance of $ | ||||||||
| On May 5, 2022, the Company received an advance of $ | ||||||||
| On March 1, 2022, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On February 15, 2022, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On December 29, 2021, the Company received an advance of $ | ||||||||
| Total notes payable, related party | ||||||||
| Less: current maturities | ||||||||
| Notes payable, related party, long-term portion | $ | $ | ||||||
The
Company recorded interest expense pursuant to the stated interest rates on the notes payable, related parties, in the amount of $
| 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 $ | $ | $ | ||||||
| On June 23, 2023, the Company completed the sale of a Promissory Note in the principal amount of $ The Third AJB Note matures on Pursuant to the Purchase Agreement, the Company paid a commitment fee to AJB Capital in the amount of $ 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. | ||||||||
| On September 15, 2022, the Company, through its wholly-owned subsidiary, One World Pharma, SAS, received proceeds of | ||||||||
| On June 17, 2022, the Company, through its wholly-owned subsidiary, One World Pharma, SAS, received proceeds of | ||||||||
| On May 31, 2022, the Company, through its wholly-owned subsidiary, One World Pharma, SAS, received proceeds of | ||||||||
| On May 30, 2022, the Company, through its wholly-owned subsidiary, One World Pharma, SAS, received a non-interest bearing loan of | ||||||||
| On April 29, 2022, the Company, through its wholly-owned subsidiary, One World Pharma, SAS, received a non-interest bearing loan of | ||||||||
| Total notes payable | ||||||||
| Less: unamortized debt discounts | ||||||||
| Notes payable, net of discounts | ||||||||
| Less: current maturities | ||||||||
| Notes payable, long-term portion | $ | $ | ||||||
The Company recognized aggregate debt discounts on the notes payable to AJB Capital for the nine months ended September 30, 2023, as follows:
| 15 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Schedule of Notes Payable Debt Discounts
| September 30, | ||||
| 2023 | ||||
| Fair value of | $ | |||
| Original issue discounts | ||||
| Legal and brokerage fees | ||||
| Total debt discounts | ||||
| Amortization of debt discounts | ||||
| Unamortized debt discounts | $ | |||
The
aggregate debt discounts of $
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
The
Company recorded interest expense pursuant to the stated interest rates on the notes payable in the amount of $
The Company recognized interest expense for the nine months ended September 30, 2023 and 2022, as follows:
Schedule of Interest Expenses
| September 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| Finance cost on equity line of credit | $ | $ | ||||||
| Interest on convertible notes, related party | ||||||||
| Interest on notes payable, related parties | ||||||||
| Interest on notes payable | ||||||||
| Amortization of debt discounts | ||||||||
| Amortization of debt discounts, common stock | ||||||||
| Amortization of debt discounts, warrants | ||||||||
| Series B preferred stock issued as a commitment on an ELOC | ||||||||
| Common stock issued as a commitment on the 2nd AJB Note | ||||||||
| Interest on accounts payable | ||||||||
| Total interest expense | $ | $ | ||||||
Note 16 – Convertible Preferred Stock
Preferred Stock
The
Company has authorized shares of $ par value “blank check” preferred stock, of which shares have
been designated Series A Preferred Stock and shares have been designated Series B Preferred Stock, as amended on August 2, 2022.
The Series A and B Preferred Stock have been classified outside of permanent equity and liabilities. the Series A Preferred Stock embodies conditional obligations that the Company may settle by issuing a variable number of equity shares, and in both the Series A and B Preferred Stock, monetary value of the obligation is based on a fixed monetary amount known at inception.
| 16 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Series A Preferred Stock Sales
On
various dates between January 4, 2023 and April 3, 2023, the Company received total proceeds from four accredited investors of $
Series A Preferred Stock Payable, Consultants
On
July 1, 2023, the Company was obligated to issue shares of series A preferred stock in consideration of consulting services. The
fair value of the shares was $
Series A Preferred Stock Issued for Services, Consultants
On
January 1, 2023, the Company issued shares of series A preferred stock in consideration of consulting services. The fair value
of the shares was $
Preferred Stock Dividends
The
Series A Preferred Stock accrues dividends at the rate of
Series B Preferred Stock Issuances
On September 12, 2023, a shareholder converted shares of Series B Preferred Stock into shares of common stock.
On July 7, 2023, a shareholder converted shares of Series B Preferred Stock into shares of common stock.
Note 17 – Commitments and Contingencies
Equity Line of Credit
On
September 1, 2022, the Company entered into a Purchase Agreement (the “ELOC Purchase Agreement”) with Tysadco Partners, LLC
(“Tysadco”). Pursuant to the ELOC Purchase Agreement, Tysadco has agreed to purchase from the Company, from time to time
upon delivery by the Company to Tysadco of “Request Notices,” and subject to the other terms and conditions set forth in
the ELOC Purchase Agreement, up to an aggregate of $
In connection with the ELOC Purchase Agreement, the Company entered into a Registration Rights Agreement with Tysadco under which the Company agreed to file a registration statement with the Securities and Exchange Commission covering the shares of common stock issuable under the ELOC Purchase Agreement and conversion of the Commitment Fee Shares (the “Registration Rights Agreement”). There have not been any advances on this arrangement to date.
Contingent Compensation
On
August 22, 2023, the Company entered into an advisor agreement with an individual to provide consulting and business advisory services
to the Company. Pursuant to the agreement, the Company has agreed to compensate the consultant a fee of $
On
May 23, 2023, the Company appointed Joerg Sommer to be the Company’s President. In connection
with his appointment, the Company entered into an offer letter with Mr. Sommer (the “Offer Letter”) under which he will initially
be paid an annual base salary of $
$
$
$
$
Note 18 – Changes in Stockholders’ Equity
Common Stock
The Company is authorized to issue an aggregate of shares of common stock with a par value of $. As of September 30, 2023, there were shares of common stock issued and outstanding.
Common Stock Sales
On
February 14, 2023, the Company sold shares of common stock at a price of $ per share for total cash proceeds of $
| 17 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Common Stock Issued as a Commitment Fee
On
June 23, 2023, the Company paid a commitment fee to AJB Capital in the form of shares of common stock in connection with the
issuance of the Third AJB Note (defined above). The aggregate fair value of the common stock was $
Common Stock Issued for Services, Related Party
On
June 15, 2023, the Company issued shares of common stock to the Company’s President, Joerg Sommer, for services provided.
The aggregate fair value of the common stock was $
Common Stock Issued for Services
On
September 18, 2023, the Company issued shares of common stock to ClearThink Capital Partners, LLC, for services provided. The
aggregate fair value of the common stock was $
Amortization of Stock-Based Compensation
A
total of $
Stock Incentive Plan
On February 12, 2020, the Company’s stockholders approved our 2019 Stock Incentive Plan (the “2019 Plan”), which had been adopted by the Company’s Board of Directors (the “Board”) as of December 10, 2019. The 2019 Plan provides for the issuance of up to shares of common stock to the Company and its subsidiaries’ employees, officers, directors, consultants and advisors, stock options (non-statutory and incentive), restricted stock awards, stock appreciation rights (“SARs”), restricted stock units (“RSUs”) and other performance stock awards. Options granted under the 2019 Plan may either be intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or may be non-qualified options, and are exercisable over periods not exceeding ten years from date of grant. Unless sooner terminated in accordance with its terms, the Stock Plan will terminate on December 10, 2029.
Outstanding Options
Options to purchase an aggregate total of shares of common stock at a weighted average strike price of $, exercisable over a weighted average life of years were outstanding as of September 30, 2023.
Options Granted
On
August 22, 2023, the Company awarded options to purchase shares of common stock under the 2019 Plan at an exercise price equal
to $ per share, exercisable over a period to a consultant. The estimated value using the Black-Scholes Pricing Model, based
on a volatility rate of % and a call option value of $, was $. The options were fully vested, resulting in $
The
Company recognized a total of $, and $ of compensation expense during the nine months ended September 30, 2023 and 2022,
respectively, related to common stock options issued in the prior year to officers, directors, and employees that are being amortized
over the implied service term, or vesting period, of the options. The remaining unamortized balance of these options is $
Note 20 – Warrants
Outstanding Warrants
Warrants
to purchase an aggregate total of
Warrants Granted
On
April 3, 2023, the Company received proceeds of $
| 18 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
On
January 27, 2023, the Company received proceeds of $
On
January 9, 2023, the Company received proceeds of $
On
January 4, 2023, the Company received proceeds of $
Note 21 – 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, 2023, and the year ended December 31, 2022, 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, 2023, the Company had approximately $
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, 2023 and December 31, 2022, respectively.
In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.
Note 22 – Subsequent Events
The Company evaluates events that have occurred after the balance sheet date through the date these financial statements were issued.
Related Party Debt Financing
On
October 11, 2023, the Company received an advance of $
Common Stock Sales
On
October 2, 2023, the Company sold shares of common stock at a price of $ per share for total cash proceeds of $
Common Stock Issued for Services
On
October 4, 2023, the Company issued shares of common stock to ClearThink Capital Partners, LLC, for services provided. The aggregate
fair value of the common stock was $
| 19 |
| 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, 2022 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.
The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in the Form 10-K in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.
Overview
Through our wholly-owned subsidiary, One World Pharma S.A.S, we are 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 from the Colombian government 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 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 planted our first crop of cannabis in 2018, which we began harvesting in the first quarter of 2019 for the purpose of further research and development activities and quality control testing of the cannabis we have produced.
We have been generating revenue from the sale of our seeds since the second quarter of 2020. Between August 2021 and March 2022, we made payments of approximately $1,400,000 for the purchase of a state-of-the-art distillation machine that cleared customs and was placed in service within our vertically integrated extraction facility during the second quarter of 2023. The installation of this equipment makes us one of the only companies in Colombia to both, hold licenses and possess the capability to extract high-quality CBD and THC oils.
We added to our product pipeline premium coffee certified by the Colombian National Coffee Federation infused with CBD, teas infused with CBD and a series of wellness products, including sports CBD energy drinks for optimum performance, CBD facial and body creams for anti-inflammatory and anti-aging use. We expect to start exporting products in the beginning of 2024, including CBD flower and distillate oil, while developing white label commercial agreements with partners in Europe, USA, and Latin America.
Results of Operations for the Three Months Ended September 30, 2023 and 2022:
The following table summarizes selected items from the statement of operations for the three months ended September 30, 2023 and 2022.
| Three Months Ended September 30, | Increase / | |||||||||||
| 2023 | 2022 | (Decrease) | ||||||||||
| Revenues | $ | 5,906 | $ | 33,373 | $ | (27,467 | ) | |||||
| Cost of goods sold | 767 | 23,969 | (23,202 | ) | ||||||||
| Gross profit (loss) | 5,139 | 9,404 | (4,265 | ) | ||||||||
| Operating expenses: | ||||||||||||
| General and administrative | 142,464 | 378,910 | (236,446 | ) | ||||||||
| Professional fees | 236,139 | 95,946 | 140,193 | |||||||||
| Depreciation expense | 9,274 | 9,883 | (609 | ) | ||||||||
| Total operating expenses: | 387,877 | 484,739 | (96,862 | ) | ||||||||
| Operating loss | (382,738 | ) | (475,335 | ) | (92,597 | ) | ||||||
| Total other expense | (67,568 | ) | (518,808 | ) | (451,240 | ) | ||||||
| Net loss | $ | (450,306 | ) | $ | (994,143 | ) | $ | (543,837 | ) | |||
| 20 |
Revenues
Revenues during the three months ended September 30, 2023 were $5,906, compared to $33,373 during the three months ended September 30, 2022, a decrease of $27,467, or 82%. Revenues decreased as we transitioned to new management at our operating facility.
Cost of Goods Sold
Cost of goods sold for the three months ended September 30, 2023 were $767, compared to $23,969 for the three months ended September 30, 2022, a decrease of $23,202, or 97%. Cost of goods sold consists primarily of labor, agricultural raw materials, depreciation and overhead. Costs of goods sold decreased as we transitioned to new management at our operating facility.
General and Administrative Expenses
General and administrative expenses for the three months ended September 30, 2023 were $142,464, compared to $378,910 during the three months ended September 30, 2022, a decrease of $236,446, or 62%. The expenses for the current period consisted primarily of compensation expenses, office rent, and travel costs. General and administrative expenses decreased primarily due to decreased salaries and wages and lease expenses in Colombia over the comparative period, as we transitioned to new management. General and administrative expenses included non-cash, stock-based compensation of $29,347 during the each of the three months ended September 30, 2023 and 2022.
Professional Fees
Professional fees for the three months ended September 30, 2023 were $236,139, compared to $95,946 during the three months ended September 30, 2022, an increase of $140,193, or 146%. Professional fees included non-cash, stock-based compensation of $147,367 and $11,833 during the three months ended September 30, 2023 and 2022, respectively. Professional fees increased primarily due to increased stock-based compensation issued to consultants during the current period.
Depreciation Expense
Depreciation expense for the three months ended September 30, 2023 was $9,274, compared to $9,883 during the three months ended September 30, 2022, a decrease of $609, or 6%. Depreciation expense decreased due to the prior year disposal of office equipment.
Other Income (Expense)
Other expenses, on a net basis, for the three months ended September 30, 2023 were $67,568, compared to other expenses, on a net basis, of $518,808 during the three months ended September 30, 2022, a decrease in net expenses of $451,240, or 87%. Other expenses consisted of $67,571 of interest expense, including $12,684 of stock-based finance costs on the amortization of debt discounts, as partially offset by $3 of interest income, for the three months ended September 30, 2023, compared to $529,915 of interest expense, including $109,969 of stock-based finance costs on the amortization of debt discounts, $339,133 of stock-based commitment fees on debt and equity financing, and a loss on the sale of fixed assets of $9,041, as partially offset by a gain of $20,148 on the early extinguishment of our extraction facility lease in Colombia, during the three months ended September 30, 2022.
Net Loss
Net loss for the three months ended September 30, 2023 was $450,306, or $0.01 per share, compared to $994,143, or $0.02 per share, during the three months ended September 30, 2022, a decrease of $543,837, or 55%. The net loss decreased primarily due to decreased compensation and office expenses during the current period as we transitioned to new management over our Colombian subsidiary.
| 21 |
Results of Operations for the Nine Months Ended September 30, 2023 and 2022:
The following table summarizes selected items from the statement of operations for the nine months ended September 30, 2023 and 2022.
| Nine Months Ended September 30, | Increase / | |||||||||||
| 2023 | 2022 | (Decrease) | ||||||||||
| Revenues | $ | 8,082 | $ | 76,384 | $ | (68,302 | ) | |||||
| Cost of goods sold | 1,866 | 54,765 | (52,899 | ) | ||||||||
| Gross profit | 6,216 | 21,619 | (15,403 | ) | ||||||||
| Operating expenses: | ||||||||||||
| General and administrative | 907,595 | 1,148,100 | (240,505 | ) | ||||||||
| Professional fees | 413,651 | 380,801 | 32,850 | |||||||||
| Depreciation expense | 25,578 | 34,540 | (8,962 | ) | ||||||||
| Total operating expenses: | 1,346,824 | 1,563,441 | (216,617 | ) | ||||||||
| Operating loss | (1,340,608 | ) | (1,541,822 | ) | (201,214 | ) | ||||||
| Total other expense | (172,766 | ) | (753,317 | ) | (580,551 | ) | ||||||
| Net loss | $ | (1,513,374 | ) | $ | (2,295,139 | ) | $ | (781,765 | ) | |||
Revenues
Revenues during the nine months ended September 30, 2023 were $8,082, compared to $76,384 during the nine months ended September 30, 2022, a decrease of $68,302, or 89%. Revenues decreased as we transitioned to new management at our operating facility.
Cost of Goods Sold
Cost of goods sold for the nine months ended September 30, 2023 were $1,866, compared to $54,765 for the nine months ended September 30, 2022, a decrease of $52,899, or 97%. Cost of goods sold consists primarily of labor, agricultural raw materials, depreciation and overhead. Costs of goods sold decreased as we transitioned to new management at our operating facility.
General and Administrative Expenses
General and administrative expenses for the nine months ended September 30, 2023 were $907,595, compared to $1,148,100 during the nine months ended September 30, 2022, a decrease of $240,505, or 21%. The expenses for the current period consisted primarily of compensation expenses, office rent, and travel costs. General and administrative expenses decreased primarily due to decreased salaries and wages and lease expenses in Colombia over the prior year, as we transitioned to new management. General and administrative expenses included non-cash, stock-based compensation of $177,891 and $88,041 during the nine months ended September 30, 2023 and 2022, respectively.
Professional Fees
Professional fees for the nine months ended September 30, 2023 were $177,512, compared to $284,855 during the nine months ended September 30, 2022, a decrease of $107,343, or 38%. Professional fees included non-cash, stock-based compensation of $207,011 and $35,399 during the nine months ended September 30, 2023 and 2022, respectively. Professional fees decreased primarily due to decreased legal fees during the current period.
Depreciation Expense
Depreciation expense for the nine months ended September 30, 2023 was $25,578, compared to $34,540 during the nine months ended September 30, 2022, a decrease of $8,962, or 26%. Depreciation expense decreased due to the prior year disposal of office equipment.
Other Income (Expense)
Other expenses, on a net basis, for the nine months ended September 30, 2023 were $172,766, compared to other expenses, on a net basis, of $753,317 during the nine months ended September 30, 2022, a decrease in net expenses of $580,551, or 77%. Other expenses consisted of $177,169 of interest expense, including $12,684 of stock-based finance costs on the amortization of debt discounts, as partially offset by a gain on early extinguishment of debt of $4,397 on the termination of long term leases and $6 of interest income, for the nine months ended September 30, 2023, compared to $886,837 of interest expense, including $361,921 of stock-based finance costs on the amortization of debt discounts, $339,133 of stock-based commitment fees on debt and equity financing, and a loss on the sale of fixed assets of $9,041, as partially offset by a gain of $20,148 on the early extinguishment of our extraction facility lease in Colombia, $1,000 of sublet income on our office space, a gain on early extinguishment of debt of $121,372 on the forgiveness of a PPP Loan and $41 of interest income, during the nine months ended September 30, 2022.
Net Loss
Net loss for the nine months ended September 30, 2023 was $1,513,374, or $0.02 per share, compared to $2,295,139, or $0.03 per share, during the nine months ended September 30, 2022, a decrease of $781,765, or 34%. The net loss decreased primarily due to decreased interest expense on our debt financing.
| 22 |
Liquidity and Capital Resources
The following is a summary of the Company’s cash flows provided by (used in) operating, investing, financing activities and effect of exchange rate changes on cash for the nine months ended September 30, 2023 and 2022:
| 2023 | 2022 | |||||||
| Operating Activities | $ | (1,043,238 | ) | $ | (1,124,967 | ) | ||
| Investing Activities | (5,046 | ) | (36,851 | ) | ||||
| Financing Activities | 874,500 | 1,117,581 | ||||||
| Effect of Exchange Rate Changes on Cash | 172,920 | (6,820 | ) | |||||
| Net Decrease in Cash | $ | (864 | ) | $ | (51,057 | ) | ||
Net Cash Used in Operating Activities
During the nine months ended September 30, 2023, net cash used in operating activities was $1,043,238, compared to net cash used in operating activities of $1,124,967 for the nine months ended September 30, 2022. 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, 2023, net cash used in investing activities was $5,046, compared to net cash used in investing activities of $36,851 for the nine months ended September 30, 2022. The cash used in investing activities during the current period consisted entirely of purchases of fixed assets, as compared to the purchases of fixed assets, as partially offset by proceeds received on the sale of fixed assets in the comparative period.
Net Cash Provided by Financing Activities
During the nine months ended September 30, 2023, net cash provided by financing activities was $874,500, compared to net cash provided by financing activities of $1,117,581 for the nine months ended September 30, 2022. The current period consisted of $250,000 of proceeds received on the sale of preferred stock, $300,000 from the sale of common stock and $262,500 of proceeds received on debt financing and $62,000 of proceeds received on debt financing received by related parties, compared to $1,117,581 of proceeds received on debt financing and $150,000 of proceeds received on the sale of preferred stock, as partially offset by $750,000 of repayments on debt, compared to $947,000 of proceeds received on debt financing and $3,577,505 received on the sale of preferred and common stock, less debt repayments of $455,567, during the nine months ended September 30, 2022.
Ability to Continue as a Going Concern
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 will 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.
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.
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.
| 23 |
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.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item
| ITEM 4. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective as of September 30, 2023.
Changes in Internal Control over Financial Reporting
There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or in other factors that occurred during the period of our evaluation or subsequent to the date we carried out our evaluation which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any system of controls and procedures will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
| 24 |
PART II - OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
We are not a party to any legal or administrative proceedings that we believe, individually or in the aggregate, would be likely to have a material adverse effect on our financial condition or results of operations.
| ITEM 1A. | RISK FACTORS |
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
The following issuances of equity securities by the Company during the three month period ended September 30, 2023 were exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof and Regulation D thereunder:
Series B Preferred Stock Conversions
On September 12, 2023, a shareholder converted 10,000 shares of Series B Preferred Stock into 1,000,000 shares of common stock, restricted in accordance with Rule 144.
On July 7, 2023, a shareholder converted 13,667 shares of Series B Preferred Stock into 1,366,700 shares of common stock, restricted in accordance with Rule 144.
Common Stock Issued for Services
On September 18, 2023, the Company issued 1,000,000 shares of common stock, restricted in accordance with Rule 144, to ClearThink Capital Partners, LLC, for services provided. The aggregate fair value of the common stock was $84,000, based on the closing price of the Company’s common stock on the date of grant.
In connection with the above security issuances, we did not pay any underwriting discounts or commissions. None of the sales of securities described or referred to above was registered under the Securities Act. In making the sales without registration under the Securities Act, we relied upon one or more of the exemptions from registration contained in Section 4(2) of the Securities Act, and in Regulation D promulgated under the Securities Act. No general solicitation or advertising was used in connection with the sales.
All of these transactions described above were exempt from registration in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving a public offering. We did not pay any underwriting discounts or commissions in any of these transactions. The recipients of securities in each of these transactions represented their intention to acquire these securities for investment only and not with a view to offer or sell, in connection with any distribution of the securities, and appropriate legends were affixed to the share certificates and instruments issued in such transactions.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
| ITEM 5. | OTHER INFORMATION |
None
| 25 |
| ITEM 6. | Exhibits |
* Filed herewith.
+ Compensatory plan or agreement.
| 26 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: November 15, 2023 | |
| One World Products, Inc. | |
| /s/ Isiah L. Thomas III | |
| Isiah L. Thomas III | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| /s/ Timothy Woods | |
| Timothy Woods | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
| 27 |
EXHIBIT 31.1
CERTIFICATIONS
PURSUANT TO
RULE 13A-14(A) OR RULE 15D-14(A),
AS ADOPTED PURSUANT TO
RULE 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Isiah L. Thomas III, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of One World Products, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Isiah L. Thomas III | |
| Isiah L. Thomas III | |
| Chief Executive Officer |
Dated: November 15, 2023
EXHIBIT 31.2
CERTIFICATIONS
PURSUANT TO
RULE 13A-14(A) OR RULE 15D-14(A),
AS ADOPTED PURSUANT TO
RULE 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Timothy Woods, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of One World Products, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Timothy Woods | |
| Timothy Woods | |
| Chief Financial Officer |
Dated: November 15, 2023
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of One World Products, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2023 (the “Report”) I, Isiah L. Thomas III, Chief Executive Officer of the Company, certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 15, 2023 | |
| /s/ Isiah L. Thomas III | |
| Name: Isiah L. Thomas III | |
| Title: Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of One World Products, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2023 (the “Report”) I, Timothy Woods, Principal Financial Officer of the Company, certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 15, 2023 | |
| /s/ Timothy Woods | |
| Name: Timothy Woods | |
| Title: Chief Financial Officer |