NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS
Accredited Solutions, Inc. (the “Company” or “Accredited Solutions”), formerly known as Good Hemp, Inc., Keyser Resources, Inc., and Lone Star Gold, Inc., was incorporated in the State of Nevada on November 26, 2007.
The Company was involved in the 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.” in September of 2019. 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 with Petro X Solutions, Inc., a Wyoming corporation (“Petro X Solutions”), 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, for an aggregate of 100,000,000 shares of Company common stock. On May 11, 2022, the Company closed this transaction, Petro X Solutions became a wholly-owned subsidiary of the Company, and 100,000,000 shares of common stock were authorized for issuance to Petro X Solutions’s pre-closing shareholders. 20,000,000 of such shares were issued to the Petro X Solutions shareholders, the balance of the 100,000,000 issuable shares being issued in August 2022, the Company’s then-CEO and then-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 is now focused primarily on selling (i) high alkaline water products under the “Diamond Creek” brand name, and (i) the EnviroXstreamTM cleaner/degreaser and other competitively-priced, environmentally-friendly products that are designed to work as well as or better than their toxic competitors.
We may experience impact from quarantines, market downturns and changes in customer behavior related to pandemic fears and impact on our workforce if the virus continues to spread. In addition, one or more of our customers, partners, service providers or suppliers may experience financial distress, delayed or defaults on payment, file for bankruptcy protection, sharp diminishing of business, or suffer disruptions in their business due to the outbreak. The extent to which the coronavirus impacts our results will depend on future developments and reactions throughout the world, which are highly uncertain and will include emerging information concerning the severity of the coronavirus and the actions taken by governments and private businesses to attempt to contain the coronavirus. It is likely to result in a potential material adverse impact on our business, results of operations and financial condition. Wider-spread COVID-19 globally could prolong the deterioration in economic conditions and could cause decreases in or delays in advertising spending and reduce and/or negatively impact our short-term ability to grow our revenues. Any decreased collectability of accounts receivable, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America and has a year-end of December 31st.
On May 11, 2022, the Company closed a transaction in which Petro X Solutions became a wholly-owned subsidiary of the Company, constituting a change of control of the Company. This transaction was treated as a reverse merger for accounting purposes. Therefore, the previous year to the current year comparisons are not consistent. The nine-month results of operations include the operating results for Accredited Solutions and Diamond Creek Group from May 11, 2022 through September 30, 2022. Consequently, the nine-month period is not a direct comparison between December 31, 2021 and September 30, 2022. This does not change the result of the operations, but affects the presentation of some balance sheet, statement of operations and statement of cash flow accounts.
Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Accredited Solutions, Inc. and its wholly owned subsidiaries, Diamond Creek Group, LLC and Petro X Solutions, Inc. (collectively, the “Company”). All intercompany accounts have been eliminated upon consolidation.
Condensed Financial Statements
The unaudited condensed financial statements of the Company for the nine month periods ended September 30, 2022 and 2021 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2021 was derived from the audited financial statements included in the Company’s financial statements as of and for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 25, 2022. These unaudited condensed financial statements should be read in conjunction with that report.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make 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 and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the recoverability of long-lived assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Impairment of Long-Lived Assets
Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for impairment annually or when indicators of a potential impairment are present. Our impairment testing of goodwill is performed separately from our impairment testing of indefinite-lived intangibles. The annual evaluation for impairment of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans. We believe such assumptions are also comparable to those that would be used by other marketplace participants. We evaluate a number of factors to determine whether an indefinite life is appropriate, including the competitive environment, market share, brand history, product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold. When certain events or changes in operating conditions occur, an impairment assessment is performed and indefinite-lived brands may be adjusted to a determinable life. The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. Customer relationships, brands and other non-contractual intangible assets with determinable lives are amortized over periods generally ranging from 5 to 30 years. When certain events or changes in operating conditions occur, an impairment assessment is performed and lives of intangible assets with determinable lives may be adjusted.
Fair Value of Financial Instruments
The FASB issued ASC 820-10, Fair Value Measurements and Disclosures, for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:
- Level 1: Quoted prices in active markets for identical assets or liabilities
- Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
- Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter.
Cash and Cash Equivalents
For purposes of the statement of cash flows, cash equivalents include demand deposits, money market funds, and all highly liquid debt instructions with original maturities of three months or less.
The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Inventory
Inventory consisting of raw materials and finished product is stated at the lower of cost (first in, first out method) or net realizable value.
Concentration and Credit Risk
The Company does not have any financial asset and therefore is not exposed to any credit risks.
Cash - The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable consists of product sales to customers. Trade accounts receivable are generally due 30 days after issuance of the invoice. Receivables past due more than 120 days are considered delinquent. Delinquent receivables are written off based on specific circumstances of the customer. At September 30, 2022, an allowance was not deemed necessary.
Derivative Financial Instruments
For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Commitment and Contingencies
The Company follows ASC 450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
The Company follows ASC 440-10, Commitments, to report accounting for certain commitments.
Net Loss Per Common Share
The Company computes net income or loss per share in accordance with ASC 260 Earnings per Share. Under the provisions of the Earnings per Share Topic ASC, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.
Income Taxes
The Company accounts for its income taxes in accordance with ASC 740 Income Taxes, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is provided for the amount of deferred tax assets that would otherwise be recorded for income tax benefits primarily relating to operating loss carryforwards as realization cannot be determined to be more likely than not.
The statement establishes a more-likely-than-not threshold for recognizing the benefits of tax return positions in the financial statements. Also, the statement implements a process for measuring those tax positions which meet the recognition threshold of being ultimately sustained upon examination by the taxing authorities. There are no uncertain tax positions taken by the Company on its tax returns and the adoption of the statement had no material impact to the Company’s financial statements. The Company files tax returns in the US and states in which it has operations and is subject to taxation. Tax years subsequent to 2014 remain open to examination by U.S. federal and state tax jurisdictions.
Revenue Recognition
Revenue is recognized in accordance with ASC 606. The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The Company recognizes revenue upon completion of our performance obligations or expiration of the contractual time to use services such as professional service hours purchased in bulk for a given time period.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by 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.
NOTE 3 – GOING CONCERN
The Company’s unaudited condensed consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has recurring operating losses, an accumulated deficit and a working capital deficiency. Management’s plans include raising capital in the debt and equity markets. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until its operations become established enough to be considered reliably profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 a gain of $2,335,667 for the nine months ended September 30, 2022, mainly from the change in derivative liabilties, which raises substantial doubt as to the Company’s ability to continue as a going concern in the future.
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company is unable to continue as a going concern.
NOTE 4 – INTANGIBLE ASSETS
On February 6, 2019, the Company, entered into an Intellectual Property Purchase Agreement (the “Agreement”) with S. Mark Spoone, a Colorado corporation (the “Seller”), to acquire all of Mr. Spoone’s intellectual property associated with Mr. Spoone’s “Good Hemp” hemp-derived CBD-infused line of consumer beverages, for a purchase price consisting of 12,000,000 shares of the Company’s Class A preferred shares for a total value of $12,000. The transaction was completed on February 12, 2019.
On April 30, 2019, the Company acquired from S. Mark Spoone the CANNA HEMP and CANNA trademarks including all rights and trade secrets and related inventory for consideration totaling $32,462.39. At March 31, 2022, the Company had not attributed any value to the acquired trademarks.
On April 1, 2021, the Company entered into an agreement to purchase Diamond Creek Group, LLC, a North Carolina limited liability company which sells the Diamond Creek brand of high alkaline water products, for a total purchase price of $643,000. On April 2, 2021, the Company closed the acquisition and paid the initial $500,000 portion of the purchase price, and on April 23, 2021, paid the $143,000 purchase price balance. The purchase price was allocated as follows:
Purchase Price Allocation | | Amount | |
Acquisition cost | | $ | 643,000 | |
Assets acquired | | | | |
Cash and cash equivalents | | | 38,635 | |
Accounts receivable | | | 41,611 | |
Property and equipment | | | 97,228 | |
Trademark | | | 100,000 | |
Total assets acquired | | | 277,474 | |
| | | | |
Liabilities assumed | | | | |
Accounts payable and accrued liabilities | | | 77,998 | |
Note payable | | | 20,000 | |
Total liabilities assumed | | | 97,998 | |
| | | 463,524 | |
Impairment of goodwill | | | 161,309 | |
Goodwill | | $ | 302,215 | |
NOTE 5 – NOTES PAYABLE
On March 26, 2021, the Company entered into a securities purchase agreement with Leonite Capital LLC (“Leonite”) pursuant to which the Company agreed to issue to the Investor an 8% Convertible Promissory Note, dated March 26, 2021, in the principal amount of $568,182. The note was funded by the Investor on March 26, 2021, and on such date pursuant to the securities purchase agreement, the Company reimbursed the Investor for expenses for legal fees and due diligence of $2,000. The securities purchase agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. The note matures 12 months after the date of the note on March 26, 2022. The note is convertible into shares of the Company’s common stock beginning on the date which is 180 days from the date of the note, at a conversion price equal to 65% multiplied by the lowest closing bid price during the 20 trading day period ending on the last complete trading day prior to the date of conversion; provided, however, that the Investor 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 issued and outstanding common stock. The beneficial ownership limitation may not be waived by the Investor. The note carries a prepayment penalty if the note is paid off in 30, 60, 90, 120, 150, or 180 days following the note date. The prepayment penalty is based on the then-outstanding principal at the time of payoff, plus accrued and unpaid interest, multiplied by 112%, 115%, 118%, 125%, 130%, and 135% respectively. After the expiration of 180 days following the issue date, the Company shall have no right of prepayment. The financing required the Company to issue 65,000 shares of common stock to Leonite (see Note 9).
On April 21, 2021, the Company entered into a securities purchase agreement (the “GS Capital SPA”) with GS Capital Partners, LLC, a New York limited liability company, pursuant to which the Company agreed to issue to the investor a 5% Convertible Redeemable Promissory Note (the “GS Capital Note”), dated April 21, 2021, in the principal amount of $85,750. The GS Capital Note included a $8,000 original issue discount, and was funded by the investor on April 22, 2021, and on such date pursuant to the GS Capital SPA, the Company reimbursed the investor for legal fees of $3,750, receiving net funding of $74,000. The GS Capital SPA includes customary representations, warranties and covenants by the Company and customary closing conditions. The GS Capital Note matures 12 months after the date of the note on April 21, 2022. The note is convertible into shares of the Company’s common stock at any time at a conversion price equal to 65% multiplied by the lowest closing bid price during the 20 trading day period prior to the date of conversion (and including the conversion date); provided, however, that the investor 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 issued and outstanding common stock. The note carries a prepayment penalty if it is paid off in 180 days following the note date. The prepayment penalty is based on the then-outstanding principal at the time of payoff, plus accrued and unpaid interest, multiplied by 105% if prepaid within 60 days, 120% if prepaid from 61 days-120 days, and 125% if prepaid between 121 days-180 days of issuance. After the expiration of 180 days, the Company shall have no right of prepayment.
On May 4, 2021, the Company entered into a securities purchase agreement with Metrospaces, Inc., a Florida corporation, pursuant to which the Company agreed to issue to the investor a 5% Convertible Redeemable Note, dated April 4, 2021, in the principal amount of $50,000. The note was funded by the investor on May 4, 2021, with the Company receiving funding of $50,000. The securities purchase agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. The note matures 12 months after the date of the note on May 4, 2022. The note is convertible into shares of the Company’s common stock at any time at a conversion price equal to 65% multiplied by the lowest closing price during the 20 trading day period prior to the date of conversion (and including the conversion date); provided, however, that the investor 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 9.9% of the Company’s issued and outstanding common stock. The note carries a prepayment penalty if it is paid off in 180 days following the note date. The prepayment penalty is based on the then-outstanding principal at the time of payoff, plus accrued and unpaid interest, multiplied by 115% if prepaid within 60 days, 120% if prepaid from 61 days-120 days, and 125% if prepaid between 121 days-180 days of issuance. After the expiration of 180 days, the Company shall have no right of prepayment.
On August 13, 2021, the Company entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc., a New York corporation, pursuant to which the Company agreed to issue to the investor a Convertible Note, dated August 13, 2021, in the principal amount of $250,375. The Note included a $25,375 original issue discount and was funded by the investor on August 13, 2021, with the Company receiving funding of $225,000. The note carries a one-time interest charge of 10% of $25,037. The note has mandatory monthly payments of $27,541 starting on September 30, 2021 until the note is paid in full. The securities purchase agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. The note matures 12 months after the date of the note on August 13, 2022. The note is convertible into shares of the Company’s common stock at any time at a conversion price equal to 75% multiplied by the lowest closing price during the previous trading day period prior to the date of conversion (and including the conversion date); provided, however, that the investor 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 issued and outstanding common stock.
Effective October 5, 2021, the Company entered into a securities purchase agreement with Jefferson Street Capital, LLC, a New Jersey limited liability company, pursuant to which the Company agreed to issue to the investor a 10% Convertible Redeemable Note, dated October 5, 2021, in the principal amount of $275,000. The note was funded by the investor on October 5, 2021, with the Company receiving funding of $250,000. The securities purchase agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. The note matures on August 20, 2022. The Company must begin making monthly payments in February 2022 and March 2022 of $6,000, then five payments of $58,100 from April through August 2022. The note is convertible into shares of the Company’s common stock at any time at a conversion price equal to 75% multiplied by the lowest closing price during the 10 trading day period prior to the date of conversion (and including the conversion date); provided, however, that the investor 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 9.9% of the Company’s issued and outstanding common stock.
Effective October 19, 2021, the Company entered into a securities purchase agreement with Sixth Street Lending, LLC, a Virginia limited liability company, pursuant to which the Company agreed to issue to the investor a 5% Convertible Redeemable Note, dated October 19, 2021, in the principal amount of $87,500. The note was funded by the investor on October 19, 2021, with the Company receiving funding of $85,000. The securities purchase agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. The note matures 12 months after the date of the note on October 19, 2022. The note is convertible into shares of the Company’s common stock at any time at a conversion price equal to 65% multiplied by the lowest closing price during the 20 trading day period prior to the date of conversion (and including the conversion date); provided, however, that the investor 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 9.9% of the Company’s issued and outstanding common stock.
Effective July 27, 2022, the Company, entered into a securities purchase agreement (the “1800 Diagonal SPA”) with 1800 Diagonal Lending LLC, a Virginia limited partnership (“1800 Diagonal”), pursuant to which the Company agreed to issue to 1800 Diagonal a 9% Promissory Note (the “Note”), dated July 27, 2022, in the principal amount of $129,250. The Note was funded by 1800 Diagonal on August 1, 2022, with the Company receiving funding of $125,000, net of legal fees of $3,000 and a due diligence fee of $1,250. The 1800 Diagonal SPA includes customary representations, warranties and covenants by the Company and customary closing conditions. The Note matures 12 months after the date of the note on July 27, 2023. 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.
NOTE 6 – RELATED PARTY TRANSACTIONS
All related party transactions are recorded at the exchange amount which is the value established and agreed to by the related party.
Petro X Solutions Merger. On March 8, 2022, the Company entered into a plan and agreement of merger with Petro X Solutions, Inc., a Wyoming corporation, 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, for an aggregate of 100,000,000 shares of Company common stock. On May 11, 2022, the Company closed this transaction, Petro X Solutions became a wholly-owned subsidiary of the Company, and 100,000,000 shares of common stock were authorized for issuance to the Petro X Solutions shareholders. 20,000,000 of such shares were issued to the Petro X Solutions shareholders, the balance of the 100,000,000 issuable shares being issued in August 2022, the Company’s then-CEO and then-directors resigned, and new officers and directors were appointed, constituting a change of control of the Company.
The Company’s new officers and directors were issued shares of the Company’s common stock in the Petro X Solutions merger, as follows:
Name Officer/Director | | Number of Shares | |
Ron F. Sickels (1) | | | 28,333,333 | |
Fabian G. Deneault | | | 28,333,333 | |
William E. Sluss | | | 10,000,000 | |
Eric Newlan | | | 14,416,667 | |
(1) | Ron F. Sickels resigned as the Company’s CEO and a Director in June 2022. |
Class A Preferred Shares. Mr. William Alessi is the former CEO and former director of the Company. The JanBella Group is an entity controlled by Mr. Alessi. Chris Chumas is a former director of the Company.
On or about July 22, 2019, the Company purchased shares of its Class A Preferred Shares from the following persons:
| | Class A | | | | |
Name | | Preferred Shares | | | Consideration | |
William Alessi | | | 12,000,000 | | | $ | 200,000 | (1) |
| | | | | | | | |
Chris Chumas | | | 6,000,000 | | | $ | 100,000 | (1) |
____________
(1) Payment for the preferred shares was in the form of notes. The notes bear interest at 8% per year, are due and payable on October 31, 2022, and are unsecured.
The following table presents principal amounts due, and common and preferred shares held by William Alessi and Chris Chumas as of September 30, 2022:
| | | | | Interest | | | Common Shares | | | Preferred Shares | |
Name | | Principal | | | rate | | | # | | | # | |
Chris Chumas | | $ | 100,000 | | | | 10 | % | | | 7,000,000 | | | nil | |
| | | | | | | | | | | | | | | |
William Alessi | | | 200,000 | | | | 10 | % | | | 6,971,050 | (1) | | nil | |
| | | | | | | | | | | | | | | |
JanBella Group (2) | | | 110,000 | | | | 10 | % | | nil | | | nil | |
| | | | | | | | | | | | | | | |
Total | | $ | 410,000 | | | | | | | | | | | | |
(1) Includes 6,971,000 shares held in the name of Mr. Alessi’s trust, and 50 shares held in the name of Mr. Alessi’s IRA.
(2) Mr. Alessi’s entity.
NOTE 7 – DERIVATIVE LIABILITIES
The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of September 30, 2021. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes valuation model.
For the nine months ended September 30, 2022, the assumptions utilized in estimating fair values of the liabilities measured on a recurring basis are as follows:
| | Nine months ended | |
| | September 30, 2022 | |
Expected term | | 1.00 years | |
Expected average volatility | | | 459.8 | % |
Expected dividend yield | | | - | |
Risk-free interest rate | | | 7.00 | % |
The fair value measurements of the derivative liabilities at June 30, 2022 are summarized:
Total | | | Level 1 | | | Level 2 | | | Level 3 | |
$ | 1,081,627 | | | $ | - | | | $ | - | | | $ | 1,081,627 | |
The fair value measurements of the derivative liabilities at December 31, 2021 are summarized:
Total | | | Level 1 | | | Level 2 | | | Level 3 | |
$ | 3,220,927 | | | $ | - | | | $ | - | | | $ | 3,220,927 | |
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows. As of November 14, 2022, the Company did not have any legal actions pending against it.
Commitments
None
NOTE 9 – CAPITAL STOCK
On May 11, 2022, the Company cancelled 42,110,632 shares of common stock with the acquisition of Petro X Solutions, Inc. This acquisition was treated as a reverse merger and the stock was valued at $129,351.
On May 13, 2022, the Company issued 1,408,284 shares of common stock to Geneva Roth Remark Holdings, Inc. for a conversion of $23,800 in convertible debt.
On May 15, 2022, the Company issued 1,469,161 shares of common stock to Jefferson Street Capital, LLC for a conversion of $9,600 in convertible debt and $1,000 in loan fees.
On May 17, 2022, the Company issued 1,403,509 shares of common stock to Geneva Roth Remark Holdings, Inc. for a conversion of $16,000 in convertible debt.
On May 23, 2022, the Company issued 1,408,000 shares of common stock to Leonite Capital, LLC for a conversion of $10,159 in convertible debt.
On May 25, 2022, the Company issued 1,403,670 shares of common stock to Geneva Roth Remark Holdings, Inc. for a conversion of $30,600 in convertible debt.
On May 25, 2022, the Company issued 1,403,670 shares of common stock to Geneva Roth Remark Holdings, Inc. for a conversion of $30,600 in convertible debt.
On May 26, 2022, the Company issued 1,404,762 shares of common stock to Geneva Roth Remark Holdings, Inc. for a conversion of $29,500 in convertible debt.
On May 27, 2022, the Company issued 1,408,000 shares of common stock to Leonite Capital, LLC for a conversion of $10,159 in convertible debt.
On May 27, 2022, the Company issued 20,000,000 shares of common stock issuable to the shareholders of Petro X Solutions, Inc., pursuant to the Petro X Solutions merger.
On May 31, 2022, the Company issued 2,314,286 shares of common stock to Geneva Roth Remark Holdings, Inc. for a conversion of $48,600 in convertible debt.
On June 1, 2022, the Company issued 2,309,261 shares of common stock to Geneva Roth Remark Holdings, Inc. for a conversion of $44,104 in convertible debt.
On June 2, 2022, the Company issued 2,425,502 shares of common stock to Jefferson Street Capital, LLC for a conversion of $16,500 in convertible debt and $1,000 in loan fees.
On June 3, 2022, the Company issued 2,308,725 shares of common stock to Geneva Roth Remark Holdings, Inc. for a conversion of $34,400 in convertible debt.
On June 3, 2022, the Company issued 3,503,077 shares of common stock to Leonite Capital, LLC for a conversion of $10,159 in convertible debt.
On June 6, 2022, the Company issued 869,156 shares of common stock to Geneva Roth Remark Holdings, Inc. for a conversion of $12,950 in convertible debt.
On June 6, 2022, the Company issued 3,566,675 shares of common stock to Jefferson Street Capital, LLC for a conversion of $32,500 in convertible debt and $1,000 in loan fees.
On June 7, 2022, the Company issued 3,535,354 shares of common stock to Sixth Street Lending, LLC for a conversion of $35,000 in convertible debt.
On June 8, 2022, the Company issued 830,605 shares of common stock to GS Capital, LLC for a conversion of $4,760 in convertible debt and $265 in accrued interest.
On June 9, 2022, the Company issued 1,310,949 shares of common stock to Leonite Capital, LLC for a conversion of $12,313 in convertible debt.
On June 10, 2022, the Company issued 3,560,606 shares of common stock to Sixth Street Lending, LLC for a conversion of $35,250 in convertible debt.
On June 13, 2022, the Company issued 3,565,657 shares of common stock to Sixth Street Lending, LLC for a conversion of $35,300 in convertible debt.
On June 15, 2022, the Company issued 2,161,822 shares of common stock to Sixth Street Lending, LLC for a conversion of $25,700 in convertible debt.
On June 21, 2022, the Company issued 3,534,065 shares of common stock to Jefferson Street Capital, LLC for a conversion of $39,200 in convertible debt and $1,000 in loan fees.
On July 11, 2022, the Company issued 4,974,666 shares of common stock to Jefferson Street Capital, LLC for a conversion of $53,000 in convertible debt and $1,000 in loan fees.
On July 12, 2022, the Company filed a Certificate of Amendment to its Articles of Incorporation that (1) changed its corporate name from “Good Hemp, Inc.” to “Accredited Solutions, Inc.” and (2) increased the number of authorized shares of common stock from 150,000,000 shares to 750,000,000 shares.
On July 21, 2022, the Company issued 5,239,209 shares of common stock to Leonite Capital, LLC for a conversion of $37,801 in convertible debt.
On July 23, 2022, the Company issued 1,364,764 shares of common stock to Metrospace for a conversion of $8,370 in convertible debt and $2,630 in accrued interest.
On July 26, 2022, the Company issued 1,634,864 shares of common stock to GS Capital, LLC for a conversion of $14,840 in convertible debt and $3,119 in accrued interest and fees.
On July 29, 2022, the Company issued 5,898,562 shares of common stock to Leonite Capital, LLC for a conversion of $42,558 in convertible debt.
On August 1, 2022, the Company issued 4,852,071 shares of common stock to Jefferson Street Capital, LLC for a conversion of $40,000 in convertible debt and $1,000 in loan fees.
On August 2, 2022, the Company issued the balance, 80,000,000 shares, of common stock issuable at June 30, 2022, to the shareholders of Petro X Solutions, Inc., pursuant to the Petro X Solutions merger.
On August 3, 2022, the Company issued 10,427,019 shares of common stock to Leonite Capital, LLC for a conversion of $75,231 in convertible debt.
On August 4, 2022, the Company issued 1,758,242 shares of common stock to Metrospace for a conversion of $12,000 in accrued interest and fees.
On August 11, 2022, the Company issued 10,427,019 shares of common stock to Leonite Capital, LLC for a conversion of $53,543 in convertible debt.
On August 23, 2022, the Company issued 4,923,076 shares of common stock to Jefferson Street Capital, LLC for a conversion of $23,000 in convertible debt and $1,000 in loan fees.
On August 30, 2022, the Company issued 10,447,327 shares of common stock to Leonite Capital, LLC for a conversion of $38,707 in convertible debt.
On September 13, 2022, the Company issued 12,322,355 shares of common stock to Leonite Capital, LLC for a conversion of $33,640 in convertible debt.
On September 19, 2022, the Company issued 10,407,239 shares of common stock to Jefferson Street Capital, LLC for a conversion of $22,000 in convertible debt and $1,000 in loan fees.
See Part II – Unregistered Sales of Equity Securities and Use of Proceeds regarding the sale of unregistered securities and use of proceeds.
NOTE 10 – SUBSEQUENT EVENTS
Management has evaluated subsequent events, in accordance with FASB ASC Topic 855, “Subsequent Events,” through the date which the financial statements were available to be issued, and there are no material subsequent events requiring disclosure except as set forth below.
On October 11, 2022, the Company filed a Certificate of Designation with the State of Nevada to designate the rights of its Series A Preferred Stock. 15,000 shares of the Company’s authorized preferred stock were designated as Series A Preferred Stock, with rights and preferences summarized as follows: (i) holders of the Series A Preferred Stock shall in the aggregate have voting rights equal to two times the sum of (a) the number of outstanding shares of common stock plus (b) the number of votes allocated to any other class of preferred stock; (ii) each share of Series A Preferred Stock shall be convertible at the election of the holder into a number of shares of Company common stock equal to 0.001 percent (0.001%) of the number of outstanding shares of Company common stock on the date of conversion (such that 1,000 shares of Series A Preferred Stock would convert into one percent (1%) of the number of outstanding shares of Company common stock); (iii) the Series A Preferred Stock shall be treated pari passu with the common stock, except that the dividend on each share of Series A Preferred Stock shall be equal to the amount of the dividend paid on each share of common stock multiplied by the conversion rate described above; and (iv) upon liquidation, payments to the holders of Series A Preferred Stock shall be treated pari passu with the common stock, except that the payment on each share of Series A Preferred Stock shall be equal to the amount of the payment on each share of common stock multiplied by the conversion rate described above.
On October 11, 2022, the Company entered into three separate securities exchange agreements (collectively, the “Exchange Agreements”) with (a) Fabian G. Deneault (the “Deneault Agreement”), Executive Vice President and a Director of the Company, (b) Eric Newlan (the “Newlan Agreement”), Vice President and a Director of the Company; and (c) William E. Sluss (the “Sluss Agreement”), a Director of the Company, pursuant to which the Company is to issue a total of 13,000 shares of its Series A Preferred Stock in exchange for a total of 33,166,670 shares of common stock, as follows:
Exchange Agreement | | Number of Shares of Common Stock Exchanged | | Number of Shares of Series A Preferred Stock Issued |
Deneault Agreement | | 14,083,330 shares | | 5,500 shares |
Newlan Agreement | | 14,083,340 shares | | 5,500 shares |
Sluss Agreement | | 5,000,000 shares | | 2,000 shares |
On October 13, 2022, the 13,000 shares of Series A Preferred Stock were issued in exchange for 33,166,670 shares of common stock, which shares of common stock were cancelled and returned to the status of authorized and unissued.