SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
We believe that it is important to communicate our future expectations to our
security holders and to the public. This report, therefore, contains statements
about future events and expectations which are "forward-looking statements"
within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the
Securities Exchange Act of 1934, including the statements about our plans,
objectives, expectations and prospects under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations." You
can expect to identify these statements by forward-looking words such as "may,"
"might," "could," "would," "will," "anticipate," "believe," "plan," "estimate,"
"project," "expect," "intend," "seek" and other similar expressions. Any
statement contained in this report that is not a statement of historical fact
may be deemed to be a forward-looking statement. Although we believe that the
plans, objectives, expectations and prospects reflected in or suggested by our
forward-looking statements are reasonable, those statements involve risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by these forward-looking statements, and we
can give no assurance that our plans, objectives, expectations and prospects
will be achieved.
Important factors that might cause our actual results to differ materially from
the results contemplated by the forward-looking statements are contained in the
"Risk Factors" section of and elsewhere in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2021 filed on April 25, 2022, and in our
subsequent filings with the Securities and Exchange Commission. The following
discussion of our results of operations should be read together with our
financial statements and related notes included elsewhere in this report.
Company Overview and Product Brands
The Company was formed as a Nevada corporation on November 26, 2007. The Company
was involved in exploration and development of mining properties until September
30, 2013, when it discontinued operations. On February 6, 2019, the Company
acquired trademarks and intellectual property, which included all rights and
trade secrets to the hemp-derived CBD-infused line of consumer beverages sold
under the "Good Hemp" brand, and the Company subsequently changed its name to
"Good Hemp, Inc." The Company subsequently conducted operations under the "Good
Hemp" trade name and through the http://www.goodhemplivin.com/ website.
Information on this website is not a part of this report on Form 10-Q.
On April 2, 2021, the Company acquired Diamond Creek Group, LLC, a North
Carolina limited liability company, which sells the Diamond Creek brand of high
alkaline water products.
On March 8, 2022, the Company entered into a Plan and Agreement of Merger (the
"PXS Merger Agreement") with Petro X Solutions, Inc. ("PXS"), a Wyoming
corporation, pursuant to which a wholly-owned subsidiary of the Company will
merge (the "PXS Merger") with and into PXS, with PXS becoming our wholly-owned
subsidiary as a result of the PXS Merger. Pursuant to the PXS Merger Agreement,
an aggregate of 100,000,000 shares of Company common stock will be issued to the
shareholders of PXS (the "PXS Shareholders") in the PXS Merger. The PXS Merger
closing is to occur upon the satisfaction of several conditions, including (i)
customary closing conditions, including the receipt of necessary approval from
each of the Company and PXS, the accuracy of the representations and warranties
of the other party, performance by the other party of its obligations under the
PXS Merger Agreement, and the absence of any material adverse changes in the
condition of the other party, and (ii) the reformation of promissory notes
payable to our current management.
On May 11, 2022, the Company and PXS closed the PXS Merger, PXS became a
wholly-owned subsidiary of the Company, and 100,000,000 shares of common stock
were authorized for issuance to the PXS Shareholders pursuant to the PXS Merger
Agreement. 20,000,000 of such shares were issued to the PXS Shareholders, the
balance of the 100,000,000 issuable shares being issued in August 2022, the
Company's CEO and directors resigned, and new officers and directors were
appointed, constituting a change of control of the Company.
On July 12, 2022, the Company changed its name from "Good Hemp, Inc." to
"Accredited Solutions, Inc." as it is no longer only focused on selling hemp
beverages. The Company now has two divisions: (i) a beverage division focused
primarily on selling high alkaline water products under the "Diamond Creek"
brand name; and (ii) a recently acquired division resulting from the PXS Merger,
which markets EnviroXstreamTM cleaner/degreaser and other competitively-priced,
environmentally-friendly products that are designed to work as well as or better
than their toxic competitors.
20
Table of Contents
Products
Diamond Creek Water. Diamond Creek High Alkaline Water is a 9.5pH high alkaline
natural spring water, sourced from the highest quality, award winning springs.
Diamond Creek is available in one gallon, one liter and half liter bottles and
aids in balancing the body's pH while providing superior hydration resulting
from a proprietary ionization process. As of March 31, 2022, Diamond Creek water
was available in over 1,500 stores in the United States.
EnviroXstream. EnviroXstream is, for purposes of assigning an industrial use,
categorized as a cleaner/degreaser product. However, EnviroXstream is not an
ordinary cleaner/degreaser product, as it has several other applications,
including as an office and household cleaner. Additional information relating to
the range of applications for which EnviroXstream is suitable has been provided
to the purchasers of the PXS Units supplementally.
EnviroXstream is a plant-based, non-toxic, safe, yet extremely powerful,
cleaner/degreaser technology that expedites the natural bio-degradation process
of hydrocarbons and other compounds. As discussed below, EnviroXstream is
currently a California South Coast AQMD-Certified Clean Air Solvent and, in the
past has been, an EPA-designated Safer Choice product. EnviroXstream
distinguishes itself by its efficacy, which is buttressed by its "green"
credentials.
Our Growth Strategy
In General. The Company's new management has determined to accelerate growth
through strategic acquisitions and partnerships, continuing the strategy of the
Company's former management, then investing capital, both financial and human,
into the acquired enterprises.
Diamond Creek Water. Expanding our US distribution reach to service national
chain stores; increase awareness of our brand in the United States; securing
additional chain, convenience and key account store listings for all our brands
nationwide and internationally; increasing our warehouse direct to retail
channel; focusing on full-service Class "A" distributors; and focusing on
placing our products in produce, natural and cold sets as opposed to the grocery
aisles.
We will be looking for strategic acquisitions and partnerships in the beverage
and hemp sectors, such as Diamond Creek Group, LLC, to strengthen our backend
supply chain, distribution and relationships with retail customers.
EnvioXstream. The Company's recently acquired Petro X Solutions subsidiary is
focused on expanding its US distribution reach into industry, as well as into
consumer sales channels, including on Amazon®.
Results of Operations
For the nine months ended September 30, 2022, compared to the nine months ended
September 30, 2021
For the Nine Months Ended
September 30,
September 30, 2022 2021 Increase/(Decrease)
Net Sales $ 319,840 $ - $ 319,840
Cost of Sales 251,117 - 251,117
Gross Profit 68,723 - 68,723
Operating Expenses 220,346 30 220,316
Operating Loss (151,623 ) (30 ) (151,593 )
Interest Expense (320,882 ) - (320,882 )
Loan Fees (13,806 ) - (13,806 )
Gain (Loss) on
Derivative Liabilities 3,890,256 - 3,890,256
Loss on Extinguishment
of Debt (1,068,278 ) - (1,068,278 )
Net Income (Loss) $ 2,335,667 $ (30 ) $ 2,335,697
21
Table of Contents
Revenue
During the nine months ended September, 2022, the Company generated $319,840 in
net sales compared to $0 for the same period in 2021. This is due to increasing
beverage sales as a result of acquiring Diamond Creek in mid-2022 and sales of
Diamond Creek beverage products in the nine months ended September 30, 2022 (as
compared to no sales of Diamond Creek products during the nine months ended
September 30, 2021).
Cost of Sales
The Company had cost of sales of $251,117 for the nine months ended September
30, 2022, compared to $0 for the same period in 2021. The increase was due to
the acquisition of Diamond Creek in mid-2022 and selling Diamond Creek beverage
products in the nine months ended September 30, 2022 (as compared to no sales of
Diamond Creek products during the nine months ended September 30, 2021).
Operating Expenses
The Company incurred general and administrative expenses totaling $220,346 for
the nine months ended September 30, 2022, compared to $30 for the same period in
2021. The increase was due to the increased operations with Diamond Creek and
public entity expenses.
Net Income (Loss)
The Company had a net income of $2,335,667 for the nine months ended September
30, 2022, compared to a net loss of $30 for the same period in 2021. This
increase was due to the change in derivative liabilities of $3,890,256, offset
with a loss on extinguishment of debt of $1,068,278 and interest expense of
$320,882.
For the three months ended September 30, 2022 compared to the three months ended
September 30, 2021
For the Three Months Ended
September September 30,
30, 2022 2021 Increase/(Decrease)
Net Sales $ 206,520 $ - $ 206,520
Cost of Sales 168,983 - 168,983
Gross Profit 37,537 - 37,537
Operating Expenses 135,331 - 135,331
Operating Loss (97,794 ) - (97,794 )
Other Income - - -
Gain on Write-off of Debt - - -
Interest Expense (149,307 ) - (149,307 )
Loan Fees (3,996 ) - (3,996 )
Gain (Loss) on Derivative
Liabilities 1,101,870 - 1,101,870
Loss on Extinguishment of
Debt (367,359 ) - (367,359 )
Net Income (Loss) $ 483,414 $ - $ 483,414
22
Table of Contents
Revenue
During the three months ended September 30, 2022, the Company generated $206,520
in net sales compared to $0 for the same period in 2021. This is due to
increasing beverage sales as a result of acquiring Diamond Creek in mid-2022 and
sales of Diamond Creek beverage products in the three months ended September 30,
2022.
Cost of Sales
The Company had cost of sales of $168,983 for the three months ended September
30, 2022, compared to $0 for the same period in 2021. The increase was due to
the acquisition of Diamond Creek in mid-2022 and selling Diamond Creek beverage
products in the three months ended September 30, 2022 (as compared to no sales
of Diamond Creek products during the three months ended September 30, 2021).
Operating Expenses
The Company incurred general and administrative expenses totaling $135,331 for
the three months ended September 30, 2022, compared to $0 for the same period in
2021. The increase was due to the increased operations with Diamond Creek.
Net Income (Loss)
The Company had a net income of $483,414 for the three months ended September
30, 2022, compared to a net income of $0 for the same period in 2021. This
increase was due to the change in derivative liabilities of $1,101,870, offset
with a loss on extinguishment of debt of $367,359 and interest expense of
$149,307.
Liquidity and Capital Resources
We had cash used in operations of $146,674 the nine months ended September 30,
2022, compared to $30 for the nine months ended September 30, 2021. The increase
in cash used in operating activities for the nine months ended September 30,
2022 is attributable to the change in derivative liability of $3,890,256, offset
with stock issued for debt payment of $183,036 and loss on extinguishment of
debt of $1,068,278 compared to the change in derivative liability of $0, offset
with stock issued for debt payment of $0 and loss on extinguishment of debt of
$0 for the nine months ended September 30, 2022 and 2021, respectively.
We had cash used in investing activities of $0 for the nine months ended
September 30, 2022, and $0 for the nine months ended September 30, 2021.
We had cash provided by financing activities of $245,000 for the nine months
ended September 30, 2022, compared to cash provided by $20,000 for the nine
months ended September 30, 2021.
As of September 30, 2022, the Company had cash and cash equivalents of $132,820.
We do not have sufficient resources to effectuate our business. We expect to
incur a minimum of $200,000 in expenses during the next twelve months of
operations. We estimate that these expenses will be comprised primarily of
general expenses including overhead, inventory purchases, legal and accounting
fees.
As of September 30, 2022, and 2021, the Company has primarily been funded by
former directors, Mr. Alessi and Mr. Chumas. In addition, the Company has issued
convertible notes to unrelated third parties. As of September 30, 2022, and
December 31, 2021, related party notes totaled $410,000 and $0, net of
discounts, respectively, and third-party notes totaled $556,331 and $0, net of
discounts, respectively.
At the time of its acquisition, Petro X Solutions, Inc. had approximately
$130,000 in cash, which has been used by the Company for operating expenses.
In July 2022, we obtained a $125,000 loan, net of fees, from 1800 Diagonal
Lending LLC. The loan is due in July 2023 and bears interest at 9% per annum.
The Company has the right to repay the note at a premium ranging from 115% to
125% of the face amount. After the 180th day following July 27, 2022, the
Company has no right of repayment. The Note is convertible into shares of the
Company's common stock at a conversion price equal to 65% of the market price of
the Company's common stock on the date of conversion, any time after the date
that is 180 days after July 27, 2022; provided, however, that 1800 Diagonal may
not convert the Note to the extent that such conversion would result in the
investor's beneficial ownership of the Company's common stock being in excess of
4.99% of the Company's then-issued and outstanding common stock. The proceeds of
this loan have been used for operating expenses.
23
Table of Contents
In August 2022, the Company entered into a Standby Equity Commitment Agreement
("SECA") with Macrab, LLC, whereby MacRab has agreed to purchase, in tranches of
between $10,000 and $200,000, up to $5,000,000 of common stock at a 12% discount
to the then-market. In conjunction with the SECA, the Company issued Macrab a
warrant to purchase 5,555,555 shares of Company common stock at an exercise
price of $.009 per share. The warrant has an exercise term of five years.
Going Concern
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As reflected in the financial
statements, the Company had a working capital deficit of $2,170,455 at September
30, 2022 and had an income of $2,335,667 for the nine months ended September 30,
2022, which raises substantial doubt as to the Company's ability to continue as
a going concern for a period of one year from the issuance of these financial
statements.
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably
likely to have a current or future material effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires us to make a number
of estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. Such estimates and assumptions affect the reported
amounts of revenues and expenses during the reporting period. We base our
estimates on historical experiences and on various other assumptions that we
believe to be reasonable under the circumstances. Actual results may differ
materially from these estimates under different assumptions and conditions. We
continue to monitor significant estimates made during the preparation of our
financial statements. On an ongoing basis, we evaluate estimates and assumptions
based upon historical experience and various other factors and circumstances. We
believe our estimates and assumptions are reasonable in the circumstances;
however, actual results may differ from these estimates under different future
conditions.
Reclassification of Certain Expenses
The results of operations as of September 30, 2022 were prepared on a consistent
basis with prior periods.
© Edgar Online, source Glimpses
ACCREDITED SOLUTIONS, INC. 