Executive Summary / Key Takeaways

• One World Products ($OWPC) is undergoing a radical strategic pivot, shifting from a failed Colombian cannabis cultivation model (now in liquidation) to nascent ventures in U.S. CBD product sales and industrial hemp solutions for the automotive sector.
• The company faces severe financial distress, evidenced by a significant negative working capital of $3.10 million as of December 31, 2024, recurring net losses ($3.94 million in 2024), and a going concern warning from its auditor, necessitating substantial external financing.
• Recent financial performance reflects this transition, with minimal revenue ($4,863 in 2024) primarily from new U.S. CBD sales, dramatically lower cost of goods sold compared to prior cultivation activities, and losses heavily influenced by non-cash expenses and debt-related costs.
• The new strategic focus includes selling the Pro-11 CBD product in the U.S. and developing hemp-based molded containers for automotive packaging, securing an initial order for 1400 units in October 2024, representing the company's attempt to build new revenue streams leveraging renewable materials.
• Key risks include the ability to secure sufficient future financing, successful execution in entirely new markets against established competitors, resolving significant outstanding litigation related to the former Colombian operations, and addressing identified material weaknesses in internal controls.

Setting the Scene: A Pivotal Shift

One World Products, Inc. ($OWPC) stands at a critical juncture, marked by a dramatic departure from its origins and a bold, albeit financially constrained, leap into new markets. Incorporated in 2014, the company's trajectory fundamentally changed in 2019 with the acquisition of OWP Ventures, bringing Colombian cannabis cultivation and export ambitions to the forefront. For a period, the vision centered on leveraging licenses for medicinal, scientific, and industrial cannabis and hemp from a 30-acre farm in Popayán, Colombia. This era, however, proved challenging.

Operational hurdles and difficult economic conditions in Colombia led to significant financial strain, culminating in the company's Colombian subsidiary, OWP SAS, filing for insolvency protection in late 2023. By October 1, 2024, this had transitioned to a judicial liquidation proceeding, effectively ending OWPC's primary revenue-generating activities in Colombian cannabis cultivation and forcing a strategic re-evaluation.

This challenging backdrop has necessitated a pivot towards entirely new ventures. OWPC is now attempting to establish a foothold in the U.S. market with a CBD-based product and, more notably, is exploring the potential of industrial hemp solutions, specifically targeting the automotive sector's growing demand for sustainable, carbon-neutral materials. This represents a fundamental shift in business model, moving from agricultural production to product development, sales, and material science applications.

The Colombian Chapter Closes: Financial Fallout

The winding down of the Colombian operations has left a significant mark on OWPC's financial statements. The accumulation of approximately $1.20 million in past due financial obligations by OWP SAS was a primary driver for the insolvency proceedings. The subsequent deconsolidation of the foreign subsidiaries, including OWP SAS, resulted in a substantial loss of $1.56 million for the year ended December 31, 2023. In 2024, the company recognized an additional loss on investment of $245,272 related to supporting these ongoing bankruptcy proceedings.

The cessation of large-scale cultivation dramatically impacted the cost of goods sold. In 2023, COGS stood at $173,122, contributing to a negative gross profit of $165,533. In contrast, 2024 saw COGS plummet to just $948, associated with the new U.S. CBD product, resulting in a positive, albeit minimal, gross profit of $3,915 and a significantly improved gross margin of approximately 81%. This stark contrast highlights the operational shift but also underscores the minimal revenue generated by the new activities compared to the costs previously incurred in Colombia.

General and administrative expenses also saw a notable decrease, falling from $1.29 million in 2023 to $653,983 in 2024, largely due to reduced operational scale and associated costs in Colombia. However, professional fees increased substantially from $591,416 to $1.06 million, driven primarily by higher non-cash stock-based compensation expenses ($622,714 in 2024 vs. $278,353 in 2023). Overall operating expenses decreased slightly year-over-year, from $1.92 million to $1.88 million.

Despite reduced operating expenses, total other expenses surged from $1.87 million in 2023 to $2.06 million in 2024. This increase was primarily due to a significant loss on the early extinguishment of debts ($724,086) and higher interest expense ($1.09 million in 2024 vs. $308,741 in 2023), reflecting the company's reliance on debt financing and the costs associated with restructuring or modifying those obligations.

Consequently, OWPC reported a net loss of $3.94 million in 2024, only a slight improvement from the $3.95 million loss in 2023. These losses were significantly impacted by non-cash items, including stock-based compensation ($1.18 million in 2024), amortization of debt discounts ($722,716 in 2024), impairment expense ($160,000 in 2024, including forfeited equipment deposits and the dissolved Pétalo Pharmaceutical investment), and the aforementioned losses related to the Colombian deconsolidation and bankruptcy support.

The New Direction: U.S. CBD and Industrial Hemp

With the Colombian chapter closing, OWPC's strategic focus has shifted to developing new revenue streams. In March 2024, the company initiated sales of a CBD-based product, Pro-11, in the United States through its subsidiary OWP Ventures. Efforts in the fourth quarter of 2024 included redesigning packaging and engaging a sales representative, signaling an intent to increase market penetration for this product. However, revenue from this activity remained minimal in 2024, totaling only $4,863.

Simultaneously, OWPC is directing its attention to the industrial hemp market, specifically targeting the automotive industry. This initiative centers on research and development aimed at creating sustainable material solutions that align with the automotive sector's push for carbon-neutral manufacturing. Despite lacking proprietary, quantifiable technology differentiators, the strategic intent is clear: to leverage renewable hemp to offer environmentally conscious solutions. A notable early achievement in this area was the development of hemp-based molded containers for automotive part packaging applications in collaboration with industry partners, leading to an initial order for 1400 reusable totes in October 2024. This marks a tangible step in validating the potential of this new business line.

The acquisition of Pétalo Pharmaceutical in May 2024, another Colombian entity with cannabis and hemp licenses, initially appeared to be part of a strategy to establish an export business from a free trade zone. However, this entity was dissolved in the fourth quarter of 2024, resulting in a $75,000 impairment expense, indicating that this particular avenue did not materialize as planned and reinforcing the company's current focus away from Colombian cultivation assets.

Competitive Positioning in Nascent Markets

OWPC is entering or pivoting within markets that include both established players and numerous smaller participants. In the U.S. CBD market, competition is fragmented, with companies ranging from large consumer goods entities to numerous smaller brands. Success hinges on product differentiation, brand building, effective marketing, and navigating complex and evolving state-level regulations. OWPC's Pro-11 product competes for consumer attention and market share in this crowded space.

In the industrial hemp solutions market, particularly for automotive applications, the competitive landscape involves material science companies, agricultural firms exploring industrial uses for hemp, and potentially automotive suppliers developing their own sustainable materials. While direct, quantifiable comparisons with specific competitors in this niche are challenging, the competitive analysis offers insights into broader industry dynamics. Compared to larger, more established cannabis/hemp players like Tilray Brands (TLRY) and Canopy Growth (CGC), OWPC operates at a significantly smaller scale. Tilray and Canopy have substantially higher revenues (TLRY TTM P/S Ratio 1.69, CGC TTM P/S Ratio 2.57 vs. OWPC TTM P/S Ratio 733.86, indicating vastly different revenue bases relative to market cap), more extensive operations, and broader product portfolios. Competitive analysis suggests OWPC might have potential cost advantages in raw material processing (though this seems linked to the former cultivation model), but it lags significantly in areas like R&D investment (OWPC 5% of revenue vs. WM Technology 10%), processing speed (20% slower than Tilray), and overall scale (15% lower throughput than Canopy).

WM Technology (MAPS), focused on cannabis tech and distribution, represents a different kind of competitor, highlighting the increasing importance of technology and efficient supply chains in the broader industry. OWPC's lack of a comparable tech platform puts it at a disadvantage in areas like order fulfillment speed (WM Technology 30% faster).

OWPC's strategic response appears to be focusing on specific product niches (U.S. CBD rub) and developing specialized industrial applications (automotive packaging). Its competitive moat in these new areas is still being built, relying on the successful development and market adoption of its new products and materials. The initial automotive order is a positive step, but scaling this business will require significant investment and execution against potentially larger, better-funded competitors in the materials science space.

Liquidity, Financing, and Going Concern Risk

The most pressing challenge for OWPC is its precarious financial position. As of December 31, 2024, the company had current assets of only $68,300 against current liabilities of $3.17 million, resulting in a negative working capital of $3.10 million. The company explicitly states it does not have sufficient funds to cover operations at current levels for the next twelve months and expects to continue experiencing net negative cash flows.

Cash on hand was a mere $42,456. The company explicitly states it does not have sufficient funds to cover operations at current levels for the next twelve months and expects to continue experiencing net negative cash flows.

This severe liquidity crunch has led the independent auditor to include a going concern qualification in its report, highlighting substantial doubt about the company's ability to continue operations without additional financing. Management acknowledges this dependency and is actively seeking new capital.

Financing activities in 2024 and early 2025 underscore this need. The company raised funds through notes payable, including significant debt financing from related parties and entities like SDT Equities LLC and AJB Capital Investments LLC. These arrangements often involved the issuance of common stock and warrants as commitment fees or in consideration for debt modifications, contributing to stock-based compensation and debt discount amortization expenses. Some debt agreements include "make-whole" provisions, potentially requiring future share issuances or cash payments if the proceeds from previously issued commitment shares/warrants do not meet a specified amount, adding a layer of contingent liability and potential future dilution.

An existing Equity Line of Credit with Tysadco Partners, LLC for up to $10 million provides a potential source of future funding, but no advances have been made under this agreement to date. The ability to draw upon this or secure other financing on acceptable terms is critical for the company's survival and ability to pursue its new strategic initiatives.

Risks and Challenges Ahead

Beyond the immediate financial distress and going concern risk, OWPC faces numerous challenges inherent in its current stage and strategic pivot.

• Limited Operating History in New Ventures: The company has minimal revenue and limited experience specifically in the U.S. CBD market and industrial hemp materials production at scale. Success is highly uncertain.
• Future Losses: Management expects losses to continue, and there is no guarantee of achieving profitability.
• Colombian Liquidation Proceedings: While deconsolidated, the liquidation process involves resolving substantial litigation (23 lawsuits with an estimated potential liability of $310,000, potentially higher), which could consume resources and attention.
• Regulatory Compliance: Navigating varying and evolving CBD regulations at the state level in the U.S. presents ongoing compliance risks.
• Banking Access: Challenges in establishing and maintaining banking relationships due to the nature of the industry can impede operations and increase costs.
• Management Team Size: The limited size of the senior management team may strain resources and ability to effectively manage both public company requirements and business operations.
• Internal Control Weaknesses: Identified material weaknesses in financial reporting controls (lack of formal related-party transaction policy, lack of written procedures, insufficient segregation of duties) pose risks to financial reporting reliability and compliance.
• Dilution: Future equity financing, necessary to fund operations, will likely result in substantial dilution for existing stockholders.
• Related Party Control: The issuance of Series C Special Preferred Stock to CEO Isiah L. Thomas, III, in November 2024 granted him voting control, concentrating decision-making power.

Conclusion

One World Products is in the midst of a profound transformation, attempting to shed the weight of its unsuccessful Colombian cannabis venture and forge a new path in the U.S. CBD and industrial hemp markets. The strategic pivot is clear, moving towards product sales and material science applications, highlighted by the launch of the Pro-11 CBD product and the initial automotive hemp tote order. However, this transition is occurring under immense financial pressure, with significant accumulated losses, negative working capital, and a critical dependence on securing future financing to remain operational.

The company's ability to execute on its new strategy, scale its nascent business lines, and achieve sustainable revenue growth will be paramount. Success hinges on overcoming significant competitive hurdles in crowded or specialized markets and effectively managing the substantial financial and operational risks outlined in its filings. While the move into industrial hemp offers a potentially intriguing long-term opportunity aligned with broader market trends towards sustainability, it is still in its early stages. For investors, OWPC represents a highly speculative opportunity, dependent on a successful turnaround and the ability to raise sufficient capital to navigate the challenging period ahead and demonstrate the viability of its new ventures. The going concern warning underscores the urgency of these efforts.