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 $ | ||||||||
| 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)
| 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)
| 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 | | $ | | | $ | | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||
See accompanying notes to financial statements.
| 4 |
ONE WORLD PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 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:
| 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.
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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.
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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:
| 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 | ( | ) | ||||||||||
| $ | $ | ( | ) | $ | ||||||||
| 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 | ( | ) | ( | ) | ||||||||
| $ | $ | ( | ) | $ | ( | ) | ||||||
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.
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ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 5 – Inventory
Inventories are stated at the lower of cost or net realizable value. Cost is determined on a standard cost basis that approximates the first-in, first-out (FIFO) method. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net realizable value. Our cannabis products consist of cannabis flower grown in-house, along with produced extracts. Inventory consisted of the following at September 30, 2023 and December 31, 2022, respectively.
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| 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:
| 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:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Refundable deposit on equipment purchase | $ | $ | ||||||
| Down payment on distillation equipment | ||||||||
| Security deposits on leases held in Colombia | ||||||||
| $ | $ | |||||||
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ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 9 – Fixed Assets
Fixed assets consist of the following at September 30, 2023 and December 31, 2022, respectively:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Land | $ | $ | ||||||
| Buildings | ||||||||
| Office equipment | ||||||||
| Furniture and fixtures | ||||||||
| Equipment and machinery | ||||||||
| 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:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accrued payroll | $ | $ | ||||||
| Accrued withholding taxes and employee benefits | ||||||||
| Accrued ICA fees and contributions | ||||||||
| Accrued interest | ||||||||
| $ | $ | |||||||
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.
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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:
| 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:
| 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:
| 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: | $ | $ | ||||||
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ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 13 – Convertible Note Payable, Related Party
Convertible note payable, related party consists of the following at September 30, 2023 and December 31, 2022, respectively:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| On September 27, 2022, 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:
| 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:
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ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 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:
| 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.
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