One World Products Inc

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 39,475,398 shares of our common stock; (b) options to purchase 825,000 shares of common stock of OWP Ventures at an exercise price of $0.50 automatically converted into options to purchase 825,000 shares of our common stock at an exercise price of $0.50; (c) the outstanding principal and interest under a $300,000 convertible note issued by OWP Ventures became convertible, at the option of the holder, into shares of the Company’s common stock at a conversion price equal to the lesser of $0.424 per share or 80% of the price the Company sold its common stock in a future “Qualified Offering”; (d)875,000 shares of our common stock owned by OWP Ventures prior to the Merger were cancelled; and (e) OWP Ventures’ chief operating officer became our chief operating officer and two of OWP Ventures’ directors became members of our board of directors. The Company’s headquarters are located in Las Vegas, Nevada, and all of its customers are expected to be outside of the United States. On January 10, 2019, the Company changed its name from Punto Group, Corp. to One World Pharma, Inc., and on November 23, 2021, the Company changed its name to One World Products, Inc. through the merger of One World Products, Inc., a recently formed Nevada corporation wholly-owned by the Company, with and into the Company (the “Name Change Merger”) pursuant to the applicable provisions of the Nevada Revised Statutes (“NRS”). As permitted by the NRS, the articles of merger filed with the Secretary of State of the state of Nevada to effect the Name Change Merger amended Article I of the Company’s Articles of Incorporation to change the Company’s name to “One World Products, Inc.” The Name Change Merger was effected solely to effect the change of the Company’s name, and had no effect on the Company’s officers, directors, operations, assets or liabilities.

OWP Ventures is a holding company formed in Delaware on March 27, 2018 to enter and support the cannabis industry, and on May 30, 2018, it acquired OWP SAS. OWP SAS is a licensed cannabis cultivation, production and distribution (export) company located in Popayán, Colombia (nearest major city is Cali). The Company had intended 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 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 was 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. During the first quarter of 2022, the Company made payments of approximately $1,400,000 for a state-of-the-art distillation machine that cleared customs and is currently located in a warehouse near Bogota.

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 intended to restructure its debts and continue to operate, however, the Company amended its filing on October 1, 2024, to liquidate its assets.

In connection with the Reorganization Proceedings, OWP SAS paused production and sales of our cannabis operations in Colombia until the Court provided the Company with a plan of reorganization, at which time the Company intended to resume operations and satisfy its obligations in Colombia in accordance with the court’s plan, however, the Company now intends to have the Court liquidate its assets and pay its creditors out of the proceeds of the liquidation. 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 Liquidation Proceedings, resolving substantial litigation, claims reconciliation, terminating operations and liquidating its assets, which primarily consist of the farm in Popayán and equipment.

In accordance with ASC 810-10-15, the Company has deconsolidated its foreign subsidiaries 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 $242,631 and $1,564,823 for the nine months ended September 30, 2024 and the year ended December 31, 2023, respectively.

During March of 2024, the Company, through OWP Ventures, began to sell a CBD based product in the United States, called Pro-11. During the fourth quarter of 2024, the Company began to redesign the packaging and engaged a sales representative to focus greater resources on bringing this product to market.

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 $75,000 purchase price of Pétalo was allocated to the fair value of the licenses. The Company intends to establish an export business within the free trade zone using these licenses, but has yet to incur any substantive income or expenses.

During 2024, the Company has also been developing industrial hemp solutions for the automotive market. The Company intends to focus increased efforts on research and development in this area to help the automotive industry meet its goals of achieving carbon neutral manufacturing using renewable material solutions. In October of 2024, the Company, in collaboration with partners in the automotive industry, developed hemp-based molded containers for automotive part packaging applications and received an initial order for 1,400 units of these reusable totes, designed to move and protect automotive parts through the supply chain.

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 September 30, 2024:

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.

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 $250,000, under current regulations. The Company didnot have any cash in excess of FDIC insured limits at September 30, 2024, and has not experienced any losses in such accounts.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. The Company’s 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.

Inventory

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a standard cost basis that approximates the first-in, first-out (FIFO) method. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net realizable value. Our cannabis products consist of cannabis flower grown in-house, along with produced extracts.

Stock-Based Compensation

The Company accounts for equity instruments issued to employees and non-employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718). All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance.

Basic and Diluted Loss Per Share

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

In December 2023*,the FASB issued Accounting Standards Update (“ASU”) 2023-09,“Income Taxes (Topic740): 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 September 30, 2024, our balance of cash on hand was $81,630, and we had negative working capital of $3,154,500 and an accumulated deficit of $30,230,366. We are too early in our development stage to project future revenue levels, and may not be able to generate sufficient funds to sustain our operations for the next twelve months. Accordingly, we may need to raise additional cash to fund our operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

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

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 –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 Procedures are similar to Chapter 11 of the Bankruptcy Code in the United States, whereby the Company would restructure its debts and continue to operate. The plan of reorganization and assessment of valid claims had not yet been determined, or approved by the court and creditors as of October 1, 2024, when the Company amended its filing to completely liquidate the assets of the Company. OWP SAS has currently identified approximately 23 creditors, consisting of approximately $1.2 million of financial obligations, collectively. In accordance with ASC 810-10-15, the Company had deconsolidated its foreign subsidiaries. Given the lack of independently identifiable operations, the Company has also deconsolidated its non-operating shell entities, Agrobase, S.A.S. and Hope Colombia, S.A.S (collectively, the “Foreign Subsidiaries”). The deconsolidation resulted in a loss on deconsolidation of foreign subsidiaries in the amount of $242,631 and $1,564,823 for the nine months ended September 30, 2024 and the year ended December 31, 2023, respectively. There were no income, losses or cash flows within the Foreign Subsidiaries between the date of petition on December 22, 2023 and December 31, 2023. A summary of the deconsolidated condensed combined balance sheets and statement of operations and comprehensive loss of the Foreign Subsidiaries is as follows:

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Note 4 –Related Party Transactions

On July 25, 2024, the Company received proceeds of $150,000 from the sale of 15,000 units, consisting of 15,000 shares of Series A Preferred Stock and five-year warrants to purchase 1,500,000 shares of common stock at an exercise price of $0.25 per share to Dr. Kenneth Perego, II, M.D., our Vice Chairman of the Board. The proceeds received were allocated between the Series A Preferred Stock and warrants on a relative fair value basis. The estimated value of the warrants using the Black-Scholes Pricing Model, based on a weighted average volatility rate of 152% and a weighted average call option value of $0.0272, was $40,873.

Related Party Debt Repayments

On July 26, 2024, the Company partially repaid $150,000 of the $337,000 promissory to Dr. Kenneth Perego, II, M.D., our Vice Chairman of the Board, that originate on March 15, 2024.

On April 22, 2024, the Company repaid an aggregate total of $257,446, consisting of $207,000 of principal and $50,446 of interest, of outstanding debts owed to Kenneth Perego, II, M.D., the Company’s Vice Chairman of the Board.

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 $724,086, based on the closing price of the Company’s common stock on the date of grant, which was recognized as a loss on early extinguishment of debt. The previously issued promissory notes were cancelled in exchange for promissory notes with a maturity date of March 1, 2027, bearing interest at 10% per annum, with the exception of the promissory note issued to Dr. John McCabe, which carries an interest rate of 7% per annum.

Common Stock Issued for Services, Related Parties

On September 25, 2024, the Company issued 600,000 shares of common stock to the Company’s Chief Financial Officer. The fair value of theshares was $15,000, based on the closing price of the Company’s common stock on the date of grant.

On July 1, 2024, the Company issued 250,000 shares of common stock to Todd Peterson as a signing bonus pursuant to his appointment as the Company’s Chief Financial Officer. The fair value of theshares was $11,250, based on the closing price of the Company’s common stock on the date of grant.

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 $429,000, based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance.

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.

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, 2024 and December 31, 2023, respectively:

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, 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 $16,633 and $-0- at September 30, 2024 and December 31, 2023, respectively.

Note 7 –Security Deposits

Security deposits consisted of refundable deposits on equipment purchases in the amount of $85,000 as of September 30, 2024 and December 31, 2023.

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 $75,000 purchase price of Pétalo was allocated to the fair value of the licenses.

Note 9 –Accrued Expenses

Accrued expenses consisted of the following at September 30, 2024 and December 31, 2023, respectively:

Note 10 –Convertible Note Payable, Related Party

Convertible note payable, related party consists of the following at September 30, 2024 and December 31, 2023, respectively:

The Company recorded interest expense pursuant to the stated interest rates on the convertible note, related party in the amount of $15,124 and $44,877 for the nine months ended September 30, 2024 and 2023, respectively.

Note 11 –Notes Payable, Related Parties

Notes payable, related parties, consists of the following at September 30, 2024 and December 31, 2023, respectively:

The Company recorded interest expense pursuant to the stated interest rates on the notes payable, related parties, in the amount of $118,599 and $58,804 for the nine months ended September 30, 2024 and 2023, respectively, including $5,978 on the amortization of debt discounts for the nine months ended September 30, 2024.

Note 12 –Notes Payable

The Company recognized aggregate debt discounts on the notes payable to for the nine months ended September 30, 2024, as follows:

The aggregate debt discounts of $736,776 and $79,675, from the Sanguine, SDT and AJB Notes, respectively, are being amortized over the life of the loans using the straight-line method, which approximates the effective interest method. The Company recorded finance expense in the amount of $523,444 and $26,233 on the amortization of these discounts for the nine months ended September 30, 2024 and 2023, respectively.

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 4.99% of the Company’s issued and outstanding shares.

The Company recorded interest expense pursuant to the stated interest rates on the notes payable in the amount of $103,446 and $47,255 for the nine months ended September 30, 2024 and 2023, respectively.

The Company recognized interest expense for the nine months ended September 30, 2024 and 2023, as follows:

Note 13 –Convertible Preferred Stock

Preferred Stock

The Company has 10,000,000 authorized shares of $0.001 par value “blank check” preferred stock, of which 500,000 shares have been designated Series A Preferred Stock and 600,000 shares have been designated Series B Preferred Stock, as amended on August 2, 2022. The shares of Series A Preferred Stock and Series B Preferred Stock are each currently convertible into one hundred (100) shares of the Company’s common stock. The Series A Preferred Stock accrues dividends at the rate of 6% per annum, payable in cash as and when declared by the Board or upon a liquidation. The shares of Series B Preferred Stock are not entitled to dividends, other than the right to participate in dividends payable to holders of common stock on an as-converted basis. As of September 30, 2024, there were 114,733 and 238,501 shares of Series A Preferred Stock and Series B Preferred Stock, respectively, issued and outstanding. The Series A and B Preferred Stock are presented as mezzanine equity on the balance sheet due because they carry a stated value of $10 and $15 per share, respectively, and a deemed liquidation clause, which entitles the holders thereof to receive proceeds thereof in an amount equal to the stated value per share, plus any accrued and unpaid dividends, before any payment may be made to holders of common stock. Each share of Preferred Stock carries a number of votes equal to the number of shares of common stock into which such Preferred Stock may then be converted. The Preferred Stock generally will vote together with the common stock and not as a separate class.

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.

On July 25, 2024, the Company received proceeds of $150,000 from the sale of 15,000 units, consisting of 15,000 shares of Series A Preferred Stock andfive-year warrants to purchase 1,500,000 shares of common stock at an exercise price of $0.25 per share to Dr. Kenneth Perego, II, M.D., our Vice Chairman of the Board. The proceeds received were allocated between the Series A Preferred Stock and warrants on a relative fair value basis. The estimated value of the warrants using the Black-Scholes Pricing Model, based on a weighted average volatility rate of 152% and a weighted average call option value of $0.0272, was $40,873.

Cancellation of Series A Preferred Stock Subscriptions Payable

On July 3, 2024, a consultant agreed to forfeit 4,500 shares of Series A Preferred Stock, with a fair value of $45,000, that was previously awarded, but hadn’t yet been issued.

Preferred Stock Dividends

The Series A Preferred Stock accrues dividends at the rate of 6% per annum, payable in cash as and when declared by the Board or upon a liquidation. The Company recognized $44,915 and $43,808 for the nine months ended September 30, 2024 and 2023, respectively. A total of $241,649 of dividends had accrued as of September 30, 2024.

Note 14 –Commitments and Contingencies

Debt Commitment Obligations

The Company has entered into various forms of debt financing that require the Company to issue shares of common stock or pre-funded warrants that carry certain make-whole provisions whereby, if the debt holder is unable to sell the commitment fee shares for net proceeds equal to at least the commitment fee, the Company shall pay the shortfall in cash, or cause the issuance of additional shares of common stock, to the debt holder until the sale of which would ultimately generate total net funds equal to the commitment fee, as follows:

Equity Line of Credit

On September 1, 2022, the Company entered into a Purchase Agreement (the “ELOC Purchase Agreement”) with Tysadco Partners, LLC (“Tysadco”). Pursuant to the ELOC Purchase Agreement, Tysadco has agreed to purchase from the Company, from time to time upon delivery by the Company to Tysadco of “Request Notices,” and subject to the other terms and conditions set forth in the ELOC Purchase Agreement, up to an aggregate of $10,000,000 of the Company’s common stock. The purchase price of the shares of common stock to be purchased under the Purchase Agreement will be equal to 88% of the lowest daily “VWAP” during the period of 10 trading days beginning five trading days preceding the applicable Request. Each purchase under the Purchase Agreement will be in a minimum amount of $25,000 and a maximum amount equal to the lesser of (i) $1,000,000 and (ii) 500% of the average daily trading value of the common stock over the seven trading days preceding the delivery of the applicable Request Notice.

In connection with the ELOC Purchase Agreement, the Company entered into a Registration Rights Agreement with Tysadco under which the Company agreed to file a registration statement with the Securities and Exchange Commission covering the shares of common stock issuable under the ELOC Purchase Agreement and conversion of the Commitment Fee Shares (the “Registration Rights Agreement”). There have not been any advances on this arrangement to date.

Note 15 –Changes in Stockholders’ Equity

Common Stock

The Company is authorized to issue an aggregate of 1,000,000,000 shares of common stock with a par value of $0.001, as amended on October 15, 2024. As of September 30, 2024, there were 105,890,570 shares of common stock issued and outstanding.

Common Stock Issued in Escrow Pursuant to Default Provisions of Debt Financing

On March 4, 2024, the Company issued 10,394,610 shares of common stock in escrow pursuant to default provisions on deft financing received from the Sanguine Group. The shares were cancelled pursuant to the subsequent debt repayment on April 22, 2024.

Common Stock Issued as a Promissory Note Commitment

On April 19, 2024, the Company paid a commitment fee to AJB Capital in the form of 2,000,000 shares of common stock in connection with the issuance of the Fourth AJB Note (defined above). The relative fair value of the common stock was $80,185, based on the closing price of the Company’s common stock on the date of grant and the fair value of the debt received. The shares are being amortized as a debt discount over the life of the loan.

On March 19, 2024, the Company paid a commitment fee to Joerg Sommer, the Company’s President, in the form of 250,000 shares of common stock in connection with the issuance of the Second Sommer Note (defined above). The relative fair value of the common stock was $9,839, based on the closing price of the Company’s common stock on the date of grant and the fair value of the debt received. The shares are being amortized as a debt discount over the life of the loan.

On March 4, 2024, the Company paid a commitment fee to The Sanguine Group, LLC in the form of 2,500,000 shares of common stock in connection with the issuance of the First Sanguine Note (defined above). The relative fair value of the common stock was $73,454, based on the closing price of the Company’s common stock on the date of grant and the fair value of the debt received. The shares are being amortized as a debt discount over the life of the loan.

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 $724,086, based on the closing price of the Company’s common stock on the date of grant, which was recognized as a loss on early extinguishment of debt. The previously issued promissory notes were cancelled in exchange for promissory notes with a maturity date of March 1, 2027, bearing interest at 10% per annum, with the exception of the promissory note issued to Dr. John McCabe, which carries an interest rate of 7% per annum.

Common Stock Issued for Services, Related Parties

On September 25, 2024, the Company issued 600,000 shares of common stock to the Company’s Chief Financial Officer. The fair value of theshares was $15,000, based on the closing price of the Company’s common stock on the date of grant.

On July 1, 2024, the Company issued 250,000 shares of common stock to Todd Peterson as a signing bonus pursuant to his appointment as the Company’s Chief Financial Officer. The fair value of theshares was $11,250, based on the closing price of the Company’s common stock on the date of grant.

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 $429,000, based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance.

Common Stock Issued for Services

On September 30, 2024, the Company issued 278,811 shares of common stock to ClearThink Capital Partners, LLC, for services provided for the period ending September 30, 2024. The fair value of the common stock was $8,671, based on the closing price of the Company’s common stock on the date of grant.

On July 1, 2024, the Company issued 200,000 shares of common stock in consideration of consulting services. The fair value of theshares was $9,000, based on the closing price of the Company’s common stock on the date of grant.

On June 30, 2024, the Company awarded 231,840 shares of common stock to ClearThink Capital Partners, LLC, for services provided. The fair value of the common stock was $12,473, based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on August 7, 2024.

On May 10, 2024, the Company issued 1,250,000 shares of common stock in consideration of consulting services. The fair value of theshares was $76,250, based on the closing price of the Company’s common stock on the date of grant.

On March 31, 2024, the Company awarded 381,680 shares of common stock to ClearThink Capital Partners, LLC, for services provided. The fair value of the common stock was $24,695, based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on May 10, 2024.

On March 15, 2024, the Company issued an aggregate 500,000 shares of common stock to two consultants for services provided. The aggregate fair value of the common stock was $33,000, based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance.

On February 9, 2024, the Company issued 149,621 shares of common stock to ClearThink Capital Partners, LLC, for services provided. The fair value of the common stock was $5,386, based on the closing price of the Company’s common stock on the date of grant.

Amortization of Stock-Based Compensation

A total of $11,597 and $121,052 of stock-based compensation expense was recognized from the amortization of options to purchase common stock over their vesting period during the nine months ended September 30, 2024 and 2023, respectively.

Note 16 –Common Stock Options

Stock Incentive Plan

On February 12, 2020, the Company’s stockholders approved our 2019 Stock Incentive Plan (the “2019 Plan”), which had been adopted by the Company’s Board of Directors (the “Board”) as of December 10, 2019. The 2019 Plan provides for the issuance of up to 10,000,000 shares of common stock to the Company and its subsidiaries’ employees, officers, directors, consultants and advisors, stock options (non-statutory and incentive), restricted stock awards, stock appreciation rights (“SARs”), restricted stock units (“RSUs”) and other performance stock awards. Options granted under the 2019 Plan may either be intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or may be non-qualified options, and are exercisable over periods not exceeding ten years from date of grant. Unless sooner terminated in accordance with its terms, the Stock Plan will terminate on December 10, 2029.

Outstanding Options

Options to purchase an aggregate total of 10,892,000 shares of common stock at a weighted average strike price of $0.14, exercisable over a weighted average life of 6.49 years were outstanding as of September 30, 2024.

The Company recognized a total of $11,597 and $121,052 of compensation expense during the nine months ended September 30, 2024 and 2023, respectively, related to common stock options issued in the prior year to officers, directors, and employees that are being amortized over the implied service term, or vesting period, of the options. The remaining unamortized balance of these options is $17,941 as of September 30, 2024.

Note 17 –Warrants

Outstanding Warrants

Warrants to purchase an aggregate total of 24,178,317 shares of common stock at a weighted average strike price of $0.18, exercisable over a weighted average life of 5.1 years were outstanding as of September 30, 2024.

Amendment of Warrants

On September 17, 2024, the Board approved the extension of warrants previously awarded to AJB Capital Investments LLC as part of debt financing that originated on September 24, 2021, whereby the Company’s originally issued warrants consisting of, (i) athree-year warrant to purchase 1,500,000 shares of the Company’s common stock at an initial exercise price of $0.25 per share, and (ii) athree-year warrant to purchase 2,000,000 shares of the Company’s common stock at an initial exercise price of $0.50 per share, were extended for an additional three-year term. All other terms of the warrants were unchanged. The estimated value of the warrants using the Black-Scholes Pricing Model, based on a weighted average volatility rate of 168% and a weighted average call option value of $0.0147, was $51,008 of additional interest expense.

On July 25, 2024, the Company received proceeds of $150,000 from the sale of 15,000 units, consisting of 15,000 shares of Series A Preferred Stock andfive-year warrants to purchase 1,500,000 shares of common stock at an exercise price of $0.25 per share to Dr. Kenneth Perego, II, M.D., our Vice Chairman of the Board. The proceeds received were allocated between the Series A Preferred Stock and warrants on a relative fair value basis. The estimated value of the warrants using the Black-Scholes Pricing Model, based on a weighted average volatility rate of 152% and a weighted average call option value of $0.0272, was $40,873.

Warrants Issued for Debt Financing

On April 19, 2024, the Company completed the sale of a (i) Promissory Note in the principal amount of $1,300,000 on the SDT Equities LLC Note, and (ii) a pre-funded warrant to purchase 8,666,667 shares of the Company’s common stock at an exercise price of $0.00001 per share, for an aggregate purchase price of $1,175,500, pursuant to a Securities Purchase Agreement between the Company and SDT Equities LLC. The proceeds received were allocated between the debt and warrants on a relative fair value basis. 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 $520,000 (the “Make-Whole Amount”) within a certain timeframe, then the Company shall either (i) pay SDT in cash the difference between the Make-Whole Amount and the net proceeds that SDT actually received from the sale of the Warrant Shares or (ii) cause the issuance of additional pre-funded warrants to SDT for shares of common stock the sale of which would ultimately satisfy the Make-Whole Amount. The aggregate estimated value of the warrants using the Black-Scholes Pricing Model, based on a weighted average volatility rate of 146% and a weighted average call option value of $0.0640, was $554,862. The relative fair value of the warrants was $351,638, which is being amortized over the life of the loan as a debt discount, resulting in $209,704 of finance expense during the nine months ended September 30, 2024. As of September 30, 2024, a total of $141,935 of unamortized expenses are expected to be expensed over the remaining life of the loan.

Note 18 –Income Taxes

The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.

For the nine months ended September 30, 2024, and the year ended December 31, 2023, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At September 30, 2024, the Company had approximately $11,388,000 of federal net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2025.

Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at September 30, 2024 and December 31, 2023, respectively.

In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.

Note 19 –Subsequent Events

The Company evaluates events that have occurred after the balance sheet date through the date these financial statements were issued, noting no reportable event, except as follows:

Liquidation Proceeding

Effective October 1, 2024, the Company’s Colombian subsidiary, One World Pharma S.A.S. (“OWP Colombia”), entered into a liquidation proceeding pursuant to Colombian Law 1116 of 2006, under which the creditors of a company can request “judicial liquidation” of such company. The proceeding is expected to last approximately one year. The proceeding was submitted to the Superintendent of Corporations of Colombia as a substitute to the reorganization proceedings previously filed on December 22, 2023.

The operations of OWP Colombia have previously been deconsolidated. As such, we do not expect the judicial liquidation to have a significant impact to the Company’s financial statements.

Increase in Authorized Common Stock

On October 15, 2024, the holders of a majority of the voting power of the Company approved an increase in the number of authorized shares of common stock to 1 billion shares.

Designation of Series C Special Preferred Stock

On October 10, 2024, the Company filed with the State of Nevada a Certificate of Designation (the***“***Certificate of Designation”), which established a Series C Special Preferred Stock. There follows a summary of the rights, preferences, powers, restrictions and limitations of the Series C Special Preferred Stock:

Section 1. Designation, Amount and Par Value. The series of Preferred Stock shall be designated as Series C Special Preferred Stock (the “Series C Special Preferred Stock”) and the number of shares so designated shall be One Hundred (100). Each share of the Series C Special Preferred Stock shall have a par value of $0.001.

Section 2. Fractional Shares. The Series C Special Preferred Stock may not be issued in fractional shares.

Section 3. Voting Rights. The holders of the Series C Special Preferred Stock shall, as a class, have rights in all matters requiring shareholder approval to a number of votes equal to two (2) times the sum of:

(a) The total number of shares of common stock which are issued and outstanding at the time of any election or vote by the shareholders; plus

(b) The number of votes allocated to shares of Preferred Stock issued and outstanding of any other class that shall have voting rights.

Section 4. Dividends. The Series C Special Preferred Stock shall not be entitled to any dividends.

Section 5. Liquidation. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Series C Special Preferred Stock shall not be entitled to any payment.

Section 6. Conversion. The Series C Special Preferred Stock shall have no rights of conversion.

Section 7. Protection Provisions. So long as any shares of Series C Special Preferred Stock are outstanding, the Company shall not, without first obtaining the unanimous written consent of the holders of Series C Special Preferred Stock, alter or change the rights, preferences or privileges of the Series C Special Preferred Stock so as to affect adversely the holders of Series C Special Preferred Stock.

Section 8. Waiver. Any of the rights, powers or preferences of the holders of the Series C Special Preferred Stock may be waived by the affirmative consent or vote of the holders of at least a majority of the shares of Series C Special Preferred Stock then outstanding.

Section 9. No Other Rights or Privileges. Except as specifically set forth herein, the holder(s) of the shares of Series C Special Preferred Stock shall have no other rights, privileges or preferences with respect to the Series C Special Preferred Stock.

Issuance of Series C Special Preferred Stock

Effective November 8, 2024, the Company entered into an Exchange Agreement (the “Thomas Agreement”) with Isiah L. Thomas, III, the Company’s Chairman and Chief Executive Officer, pursuant to which the Company issued 100 shares of Series C Special Preferred Stock in consideration of Mr. Thomas’ forgiveness of $486,512 of accrued salary owed to him, based on the fair value of the Series C Special Preferred Stock, as obtained via an independent valuation. The consummation of the Thomas Agreement resulted in Mr. Thomas acquiring voting control of the Company.