One World Products, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

9 Months Ended

Sep. 30, 2022

Note 10 – Leases

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

The Company also leases a residential premise under a non-cancelable real property lease agreement that commenced on September 1, 2021 and expires on August 31, 2024, at a monthly lease term of 3,800,000 COP, or approximately $1,013, with approximately a 3% annual escalation of lease payments commencing September 1, 2022.

The Company leases another residential premise under a non-cancelable real property lease agreement that commenced on June 1, 2022 and expires on May 30, 2024, at a monthly lease term of 1,900,000 COP, or approximately $507, with an 8% annual escalation of lease payments commencing June 1, 2023.

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.

The components of lease expense were as follows:

Schedule of Components of Lease Expense

	For the Nine
	Months Ended
	September 30,
	2022
Operating lease costs:
Amortization of assets	$	93,011
Interest on lease liabilities		76,251
Lease payments on short term leases		31,999
Total lease cost	$	201,261

Supplemental balance sheet information related to leases was as follows:

	September 30,
	2022
Operating leases:
Operating lease assets	$	32,357

Current portion of operating lease liabilities	$	17,106
Noncurrent operating lease liabilities		15,703
Total operating lease liabilities	$	32,809

Weighted average remaining lease term:
Operating leases		1.75 years

Weighted average discount rate:
Operating leases		6.75	%

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

	For the Nine
	Months Ended
	September 30,
	2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	64,067

Early extinguishment of lease:
Lease liability terminated		1,438,830
Right-of use asset terminated		(1,418,682	)
Gain on early extinguishment of lease		20,148

Leased assets obtained in exchange for lease liabilities:
Total operating lease liabilities	$	1,535,706

Future minimum annual lease commitments under non-cancelable operating leases are as follows at September 30, 2022:

	Operating
	Leases

2022 (for the three months remaining)	$	4,653
2023		19,016
2024		11,335
Total minimum lease payments		35,004
Less interest		2,195
Present value of lease liabilities		32,809
Less current portion		17,106
Long-term lease liabilities	$	15,703

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)