Notes Payable

6 Months Ended

Jun. 30, 2024

Notes Payable

Notes Payable

Note 12 – Notes Payable

	June 30,		December 31,
	2024		2023
On April 19, 2024, the “Company completed the sale of a 12% promissory note to SDT Equities LLC, a Delaware limited liability company (“SDT”) in the principal amount of $1,300,000 and for a purchase price of $1,196,000 pursuant to a Securities Purchase Agreement between the Company and SDT (the “Purchase Agreement”). The Note matures on January 19, 2025 (the “Maturity Date”) and bears interest at a rate of 12% per annum. Subject to certain adjustments and following an event of default only, the Notes are convertible into shares of the Company’s common stock at a conversion price equal to the lowest closing price (i) during the previous ten Trading Day (as defined in the note) period ending on the date of issuance of the note, or (ii) during the previous ten Trading Day period ending on the Conversion Date (as defined in the note), whichever is lower. The note is also subject to covenants, events of default, penalties, default interest, and other terms and conditions customary in transactions of this nature. Pursuant to the Purchase Agreement with SDT, SDT received a pre-funded warrant to purchase 8,666,667 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 $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 relative fair value of the Warrant resulted in a debt discount of $351,638, which is being amortized over the life of the loan. A portion of the proceeds were used to repay the $360,000 Sanguine Group, LLC, and $257,446 of debts owed to the Company’s Vice Chairman, Dr. Kenneth Perego, II. The repayments consisted of aggregate principal of $207,000 and aggregate interest of $50,446.	$	1,300,000	$	-
On April 19, 2024, the “Company completed the sale of a 12% promissory note to AJB Capital Investments LLC, a Delaware limited liability company (“AJB”) in the principal amount of $300,000 for a purchase price of $276,000 (the “Fourth AJB Note”, or the “Note”) pursuant to Securities Purchase Agreement between the Company and AJB (the “SPA”). The Fourth AJB Note matures on January 19, 2025 (the “Maturity Date”) and bears interest at a rate of 12% per annum. Subject to certain adjustments and following an event of default only, the Note is convertible into shares of the Company’s common stock at a conversion price equal to the lowest closing price (i) during the previous ten Trading Day (as defined in the Note) period ending on the date of issuance of the Note, or (ii) during the previous ten Trading Day period ending on the Conversion Date (as defined in the Notes), whichever is lower. The Note is also subject to covenants, events of default, penalties, default interest, and other terms and conditions customary in transactions of this nature. Pursuant to the Purchase Agreement with AJB, the Company paid a $120,000 commitment fee (the “Commitment Fee”) to AJB in form of 2,000,000 shares of the Company’s common stock (the “Commitment Fee Shares”). The SPA with AJB includes a make-whole provision, whereby, if AJB is unable to sell the Commitment Fee Shares for net proceeds equal to at least the Commitment Fee, the Company shall cause the issuance of additional shares of common stock to AJB the sale of which would ultimately generate total net funds equal to the Commitment Fee. The Commitment Fee Shares resulted in a debt discount of $80,185 that is being amortized over the life of the loan.		300,000		-
On March 4, 2024, the Company completed the sale of a promissory note to the Sanguine Group, LLC (“Sanguine”) in the principal amount of $360,000 for a net purchase price of $300,000 after deduction of a $60,000 Original Issue Discount that is being amortized over the life of the loan, pursuant to a securities purchase agreement between the Company and Sanguine. The Note matures on September 4, 2024, and bears interest at a rate of 15% per annum, calculated based on a 360-day year. The Company also paid $15,000 of legal fees and a commitment fee in the form of 2,500,000 shares of common stock, as noted, below. The proceeds were used to repay the Third AJB Note in the principal amount of $300,000. The promissory note was repaid on April 22, 2024 out of proceeds received from debt financing received by SDT Equities LLC. Pursuant to the Purchase Agreement, the Company paid a commitment fee to Sanguine in the form of 2,500,000 shares of the Company’s common stock (the “Commitment Fee Shares”). The Commitment Fee Shares resulted in a debt discount of $73,454 that was amortized over the life of the loan. A total of $363,300, consisting of $360,000 of principal and $3,300 of interest, was repaid on April 22, 2024.		-		-
On August 18, 2023, the Company, through its wholly-owned subsidiary, OWP Ventures, Inc., issued an unsecured promissory note of $35,000 to LDL8 Consulting, LLC for the purchase of equipment from another vendor. The promissory note bears interest at 10% per annum and is due on demand. In the event of default, the interest rate increases to 15% until repayment.		35,000		35,000
On June 23, 2023, the Company completed the sale of a Promissory Note in the principal amount of $300,000 (the “Third AJB Note”) to AJB Capital Investments LLC (“AJB Capital”) for an aggregate purchase price of $276,000, pursuant to a Securities Purchase Agreement between the Company and AJB Capital (the “Purchase Agreement”). The Company received net proceeds of $262,500 after deduction of an original issue discount of $24,000, $7,500 of legal fees and a $6,000 of broker fee, which were amortized as a debt discount over the life of the loan. The Third AJB Note matured on March 23, 2024 (the “Maturity Date”), carried interest at a rate of 12% per annum, and, following an event of default only, was convertible into shares of the Company’s common stock at a conversion price equal to the lesser of the Volume Weighted Average Price (“VWAP”) during (i) the 10-trading day period preceding the issuance date of the note, or (ii) the 10-trading day period preceding date of conversion of the Note. The Note was also subject to covenants, events of defaults, penalties, default interest and other terms and conditions customary in transactions of this nature. Pursuant to the Purchase Agreement, the Company paid a commitment fee to AJB Capital in the amount of $100,000 (the “Commitment Fee”) in the form of 1,666,667 shares of the Company’s common stock (the “Commitment Fee Shares”). During the period commencing on the six-month anniversary of the closing date and ending on the five-year anniversary of the closing date, AJB Capital is entitled to be issued additional shares of common stock or receive a cash payment to the extent AJB Capital’s sale of the Commitment Fee Shares has resulted in net proceeds in an amount less than the Commitment Fee. The Commitment Fee Shares resulted in a debt discount of $42,175 that was amortized over the life of the loan. In connection with the issuance of the Third AJB Note and Commitment Fee Shares, the Company entered into a Registration Rights Agreement with AJB Capital in which the Company agreed to file a registration statement with the SEC within 180 days of June 23, 2023, registering the shares of common stock issuable under the Third AJB Note and Purchase Agreement. The note was repaid on March 14, 2024 out of the proceeds received from the Sanguine Group Note.		-		300,000
Total notes payable		1,635,000		335,000
Less: unamortized debt discounts		434,289		24,136
Notes payable, net of discounts		1,200,711		310,864
Less: current maturities		1,200,711		310,864
Notes payable, long-term portion	$	-	$	-

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

	June 30,		December 31,
	2024		2023
Fair value of commitment shares of common stock	$	153,638	$	42,175
Fair value of pre-funded warrants		351,638		-
Original issue discounts		188,000		24,000
Legal and brokerage fees		43,500		13,500
Total debt discounts		736,776		79,675
Amortization of debt discounts		302,487		26,233
Unamortized debt discounts	$	434,289	$	53,442

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 $326,623 and $2,035 on the amortization of these discounts for the six months ended June 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 $54,169 and $39,046 for the six months ended June 30, 2024 and 2023, respectively.

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

	June 30,		June 30,
	2024		2023
Interest on convertible notes, related party	$	15,123	$	29,753
Interest on notes payable, related parties		72,409		38,764
Interest on notes payable		54,169		39,046
Amortization of debt discounts, related parties		2,686		-
Amortization of debt discounts, common stock		107,224		1,077
Amortization of debt discounts, warrants		92,065		-
Amortization of debt discounts		127,335		958
Total interest expense	$	471,011	$	109,598

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)