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
☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
The number of shares of registrant’s common stock outstanding as of August 21, 2024 was .
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
ONE WORLD PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Security deposits | ||||||||
| Licenses | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Dividends payable | ||||||||
| Convertible note payable, related party, current maturities | ||||||||
| Notes payable, related parties, current maturities | ||||||||
| Notes payable, net of $ | ||||||||
| Total current liabilities | ||||||||
| Notes payable, related parties, long-term portion, net of $ | ||||||||
| Total Liabilities | ||||||||
| Series A convertible preferred stock, $ par value, shares authorized; shares issued and outstanding at June 30, 2024 and December 31, 2023 | ||||||||
| Series B convertible preferred stock, $ par value, shares authorized; shares issued and outstanding at June 30, 2024 and December 31, 2023 | ||||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Preferred stock, $ par value, shares authorized; shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Subscriptions payable | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated (deficit) | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 1 |
ONE WORLD PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross loss | ( | ) | ||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Depreciation expense | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Gain (loss) on early extinguishment of debt | ( | ) | ||||||||||||||
| Loss on deconsolidation of foreign subsidiaries | ( | ) | ( | ) | ||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive loss: | ||||||||||||||||
| 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 condensed consolidated financial statements.
| 2 |
ONE WORLD PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
| For the Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Accumulated | Total | |||||||||||||||||||||||||||||||||||||||||
| Convertible | Convertible | Additional | Other | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common Stock | Paid-In | Subscriptions | Comprehensive | Accumulated | Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Payable | Income (Loss) | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Cancellation of common stock held by debt holder in escrow | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Commitment shares issued pursuant to promissory note | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Relative fair value of warrants issued for loan commitment | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Amortization of common stock options issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Series A convertible preferred stock dividend declared ($ per share) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| For the Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Accumulated | Total | |||||||||||||||||||||||||||||||||||||||||
| Convertible | Convertible | Additional | Other | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common Stock | Paid-In | Subscriptions | Comprehensive | Accumulated | Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Payable | Income (Loss) | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Series A Convertible Preferred Stock sold for cash | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Commitment shares issued pursuant to promissory note | - | - | ||||||||||||||||||||||||||||||||||||||||||
| 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, June 30, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| 3 |
| For the Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Accumulated | Total | |||||||||||||||||||||||||||||||||||||||||
| Convertible | Convertible | Additional | Other | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common Stock | Paid-In | Subscriptions | Comprehensive | Accumulated | Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Payable | Income (Loss) | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Common stock issued pursuant to debt modifications | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Commitment shares issued pursuant to promissory note | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Relative fair value of warrants issued for loan commitment | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| 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, June 30, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| For the Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Accumulated | Total | |||||||||||||||||||||||||||||||||||||||||
| Convertible | Convertible | Additional | Other | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common Stock | Paid-In | Subscriptions | Comprehensive | Accumulated | Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Payable | Income (Loss) | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||
| Series A Convertible Preferred Stock sold for cash | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Series A Convertible Preferred Stock issued for services | - | - | ||||||||||||||||||||||||||||||||||||||||||
| 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) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Gain on foreign currency translation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 4 |
ONE WORLD PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| (Gain) loss 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 | ||||||||
| Purchase of fixed assets | ( | ) | ||||||
| Purchase of Pétalo Pharmaceutical, SAS | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from notes payable, related parties | ||||||||
| Repayments of notes payable, related parties | ( | ) | ||||||
| Proceeds from notes payable | ||||||||
| Repayments of 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 in cash | ||||||||
| Cash - beginning | ||||||||
| Cash - ending | $ | $ | ||||||
| Supplemental disclosures: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Non-cash investing and financing transactions: | ||||||||
| Dividends payable | $ | $ | ||||||
| Value of debt discounts attributable to commitment shares to related parties | $ | $ | ||||||
| Value of debt discounts attributable to commitment shares | $ | $ | ||||||
| Value of debt discounts attributable to commitment warrants | $ | $ | ||||||
See accompanying notes to condensed consolidated 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, the Company entered into an Agreement and Plan of Merger with OWP Merger Subsidiary, Inc.,
a wholly-owned subsidiary, and OWP Ventures, Inc. (“OWP Ventures”), which is the parent company of One World Pharma SAS,
a Colombian Simplified Shares Company (“OWP SAS”). Pursuant to the Merger Agreement, we acquired OWP Ventures (and indirectly,
OWP SAS) 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 SAS. OWP SAS is a licensed cannabis cultivation, production and distribution (export) company located in Popayán,
Colombia (nearest major city is Cali). The Company plans to be a producer of and/or source raw and processed cannabis and hemp plant
ingredients for both medical and industrial uses across the globe. The Company has received licenses to cultivate, produce and distribute
the raw ingredients of the cannabis and hemp plant for medicinal, scientific and industrial purposes. Specifically, the Company is 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, the Company owns approximately 30 acres and
has a covered greenhouse built specifically to cultivate high-grade cannabis and hemp. In addition, the Company has 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 OWP SAS on an
exclusive basis. The Company began harvesting cannabis in the first quarter of 2019 for the purpose of further research and development
activities, quality control testing and extraction. OWP SAS has generated revenue since the second quarter of 2020. During the first
quarter of 2022, the Company made payments of approximately $
On December 22, 2023, OWP SAS, filed for protection under Colombian Law 1116 of 2006, which is the primary legislation governing business insolvency proceedings (restructuring and liquidation) (“Reorganization Proceedings”) in Colombia. The Reorganization Proceeds are similar to Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States, whereby the Company intends to restructure its debts and continue to operate.
In connection with the Reorganization Proceedings, OWP SAS paused production and sales of our cannabis operations in Colombia until the Court provides the Company with a plan of reorganization, at which time the Company intends to resume operations and satisfy its obligations in Colombia in accordance with the court’s plan. Furthermore, the Company continued its aggressive cost-cutting actions that included significant personnel reductions. As a result of these actions, OWP SAS has no revenue-producing operations. The Company’s primary operations during the fourth quarter of 2023, and to date in 2024, have consisted of activities associated with completing the Reorganization Proceedings, resolving substantial litigation, claims reconciliation, and preparing for emergence from Reorganization Proceedings as contemplated in the yet to be determined, Proposed Plan.
Upon the date that the Proposed Plan, which is yet to be determined and remains subject to court approval, becomes effective (the “Effective Date”), and subject to the effectiveness of the Proposed Plan, it is contemplated that the near term operations of the Company (also referred to as the “Post-Effective Date Debtors”) will consist of (a) claims administration under the Proposed Plan, (b) addressing the litigation, (c) prosecuting, pursuing, compromising, settling, or otherwise disposing of other retained causes of action, (d) defending the Company against any counterclaims, (e) attempting to realize value, if any, from our assets and (f) satisfying other regulatory requirements.
| 6 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In the future, the Post-Effective Date Debtors expect to explore potential business opportunities, including strategic partnerships, including those designed to maximize the Debtor’s assets, including restoration of the Company’s cannabis operations. No assurance can be made that the Proposed Plan will become effective or that we will be successful in prosecuting any claim or cause of action or that any strategic alternative will be identified and/or would result in profitable operations.
In
accordance with ASC 810-10-15, the Company has deconsolidated its foreign subsidiaries until it emerges from the Reorganization Proceedings
to include the petitioning entity, OWP SAS, as well as the Company’s non-operating shell entities, Agrobase, S.A.S. and Hope Colombia,
S.A.S., given the lack of independently identifiable operations. The deconsolidation resulted in a loss on deconsolidation of foreign
subsidiaries in the amount of $
During March of 2024, the Company, through OWP Ventures, began to sell a CBD based product in the United States, called Pro-11.
On
May 15, 2024, OWP Ventures, Inc., acquired Pétalo Pharmaceutical, S.A.S. (“Pétalo”), a Company located in
Colombia and legally constituted as a simplified stock company that owns licenses to cultivate, produce and distribute the raw
ingredients of the cannabis and hemp plant for medicinal, scientific and industrial purposes from the free trade zone in Colombia.
Pétalo had no operations, other than obtaining four licenses, including seed use, cultivation of non-psychoactive cannabis,
cultivation of psychoactive cannabis, and manufacturing allowing for extraction and export from the free trade zone. The acquisition
was accounted for as an asset purchase, and the $
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, 2023. 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.
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 June 30, 2024:
| Jurisdiction of | ||||
| Name of Entity | Incorporation | Relationship | ||
| (1) | |
| (2) | |
| (3) |
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.
| 7 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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.
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 revenues in the current period consisted of the sale of our CBD rub, and in the prior period revenues consisted entirely of the sale of seeds. The sale of seeds included multi-element arrangements whereby the Company collected 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 had a right of first refusal to purchase products resulting from the harvest.
| 8 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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. Pre-funded warrants to purchase shares of the Company’s common stock at an exercise price of $
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 December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The guidance is effective for the Company’s fiscal years beginning after December 15, 2024, with early adoption permitted. The Company does not expect the adoption of this standard to have any material impact on its financial statements.
There are no other recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material effect on its financial position, results of operations, or cash flows.
Note 2 –Going Concern
As
shown in the accompanying condensed consolidated financial statements as of June 30, 2024, 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.
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.
| 9 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 3 – Deconsolidation of Foreign Subsidiaries
On
December 22, 2023, our wholly-owned subsidiary, One World Products, S.A.S., a Colombian Simplified Shares Company, filed
for protection under Colombian Law 1116 of 2006, which is the primary legislation governing business insolvency proceedings (restructuring
and liquidation) (“Reorganization Proceedings”) in Colombia. The Reorganization Proceeds are similar to Chapter 11
of the Bankruptcy Code in the United States, whereby the Company intends to restructure its debts and continue to operate. The plan of
reorganization and assessment of valid claims has not yet been determined, or approved by the court and creditors, as necessary. OWP
SAS has currently identified approximately 23 creditors, consisting of approximately $
FOREIGN SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2024 | December 31, 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Other assets | ||||||||
| Fixed assets, net | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Notes payable | ||||||||
| Intercompany liabilities owed to OWP Ventures, Inc. | ||||||||
| Total current liabilities | ||||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated (deficit) | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
| 10 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
FOREIGN SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
| For the Three | For the Six | |||||||
| Months Ended | Months Ended | |||||||
| June 30, 2024 | June 30, 2024 | |||||||
| Revenues | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative | ||||||||
| Professional fees | ||||||||
| Depreciation expense | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other expense | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive loss: | ||||||||
| Gain on foreign currency translation | $ | $ | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
FOREIGN SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
| For the Six | ||||
| Months Ended | ||||
| June 30, 2024 | ||||
| Cash flows from operating activities | ||||
| Net loss | $ | ( | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Depreciation and amortization expense | ||||
| Decrease (increase) in assets: | ||||
| Inventory | ||||
| Other current assets | ( | ) | ||
| Other assets | ||||
| Increase (decrease) in liabilities: | ||||
| Accounts payable | ( | ) | ||
| Accrued expenses | ( | ) | ||
| Accrued interest on intercompany loans | ||||
| Net cash used in operating activities | ( | ) | ||
| Cash flows from financing activities | ||||
| Proceeds received from intercompany loan | ||||
| 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 | $ | |||
| 11 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4 – Related Party Transactions
Related Party Debt Repayments
On
April 22, 2024, the Company repaid an aggregate total of $
Common Stock Issued as Consideration for Related Party Debt Modifications
On
March 15, 2024, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., agreed to issue shares of common stock to officers
and directors in consideration for extending the maturity dates and terms of previously received debt financing, as listed below. The
aggregate fair value of the common stock was $
| Aggregate | ||||||||||||||
| Name | Position | Debts Extended | Shares | Fair Value | ||||||||||
| Isiah L. Thomas, III | Chairman and CEO | $ | $ | |||||||||||
| Dr. Kenneth Perego, II | Vice Chairman | |||||||||||||
| Joerg Sommer | President | |||||||||||||
| Dr. John McCabe | >5% Shareholder | |||||||||||||
| $ | $ | |||||||||||||
Common Stock Issued for Services, Related Parties
On
March 15, 2024, the Company issued shares of common stock to officers and directors for services provided, as listed below. The aggregate
fair value of the common stock was $
| Name | Position | Shares | Fair Value | |||||||
| Isiah L. Thomas, III | Chairman and CEO | $ | ||||||||
| Dr. Kenneth Perego, II | Vice Chairman | |||||||||
| Terry Buffalo | Director | |||||||||
| Joerg Sommer | President | |||||||||
| $ | ||||||||||
Note 5 – Fair Value of Financial Instruments
Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.
| 12 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheet as of June 30, 2024 and December 31, 2023, respectively:
| Fair Value Measurements at June 30, 2024 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Total assets | ||||||||||||
| Liabilities | ||||||||||||
| Notes payable, related parties, net of $ | ||||||||||||
| Notes payable, net of $ | ||||||||||||
| Total liabilities | ( | ) | ||||||||||
| $ | $ | ( | ) | $ | ||||||||
| Fair Value Measurements at December 31, 2023 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Total assets | ||||||||||||
| Liabilities | ||||||||||||
| Convertible notes payable, related party | ||||||||||||
| Notes payable, related parties | ||||||||||||
| Notes payable, net of $ | ||||||||||||
| Total liabilities | ( | ) | ||||||||||
| $ | $ | ( | ) | $ | ||||||||
There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the six months ended June 30, 2024 or the year ended December 31, 2023.
Note 6 – 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 CBD products consist entirely of finished goods. Inventory was $
Note 7 – Security Deposits
Security
deposits consisted of refundable deposits on equipment purchases in the amount of $
| 13 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 8 – Licenses
On
May 15, 2024, OWP Ventures, Inc., acquired Pétalo Pharmaceutical, S.A.S. (“Pétalo”), a Company located in
Colombia and legally constituted as a simplified stock company that owns licenses to cultivate, produce and distribute the raw
ingredients of the cannabis and hemp plant for medicinal, scientific and industrial purposes from the free trade zone in Colombia.
Pétalo had no operations, other than obtaining four licenses, including seed use, cultivation of non-psychoactive cannabis,
cultivation of psychoactive cannabis, and manufacturing allowing for extraction and export from the free trade zone. The Company
intends to use these licenses to establish an export business within the free trade zone. The acquisition was accounted for as an
asset purchase, and the $
Note 9 – Accrued Expenses
Accrued expenses consisted of the following at June 30, 2024 and December 31, 2023, respectively:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Accrued compensation | $ | $ | ||||||
| Accrued interest | ||||||||
| $ | $ | |||||||
Note 10 – Convertible Note Payable, Related Party
Convertible note payable, related party consists of the following at June 30, 2024 and December 31, 2023, respectively:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| 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 $
| 14 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 11 – Notes Payable, Related Parties
Notes payable, related parties, consists of the following at June 30, 2024 and December 31, 2023, respectively:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| On March 19, 2024, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | $ | $ | ||||||
| On March 15, 2024, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., issued an unsecured promissory note in the amount of $ | ||||||||
| On March 15, 2024, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., issued an unsecured promissory note in the amount of $ | ||||||||
| On March 15, 2024, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., issued an unsecured promissory note in the amount of $ | ||||||||
| On March 15, 2024, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., issued an unsecured promissory note in the amount of $ | ||||||||
| On March 12, 2024, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On March 1, 2024, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On February 26, 2024, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On January 29, 2024, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On January 11, 2024, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On January 8, 2024, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On November 28, 2023, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On October 11, 2023, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On September 11, 2023, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On August 31, 2023, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On August 14, 2023, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On August 5, 2022, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On August 2, 2022, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., 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, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On June 3, 2022, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On May 5, 2022, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| On May 5, 2022, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., 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, through its wholly-owned subsidiary, OWP Ventures, Inc., received an advance of $ | ||||||||
| Total notes payable, related parties | ||||||||
| Less: unamortized debt discounts | ||||||||
| Notes payable, related parties, net of discounts | ||||||||
| Less: current maturities | ||||||||
| Notes payable, related parties, long-term portion | $ | $ | ||||||
The
Company recorded interest expense pursuant to the stated interest rates on the notes payable, related parties, in the amount of $
| 15 |
ONE WORLD PRODUCTS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 12 – Notes Payable
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
On April 19, 2024, the “Company completed the sale of a
The Note matures on
Pursuant to the Purchase Agreement with SDT, SDT received a pre-funded warrant to purchase shares of the Company’s common stock (the “Warrant”). The Warrant includes a make-whole provision, whereby, if SDT is unable to sell the Warrant Shares (as defined in the Warrant) for net proceeds equal to at least $
A portion of the proceeds were used to repay the $ | $ | $ | ||||||
On April 19, 2024, the “Company completed the sale of a | ||||||||