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 includes all rights and
trade secrets to the hemp-derived CBD-infused line of consumer beverages sold
under the "Good Hemp" brand. Since then, the Company has been conducting
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 February 9, 2021, the Company formed Good Hemp Wellness, LLC, a limited
liability company formed under the laws of the State of North Carolina, to sell
CBD products to customers through chiropractic offices. In October 2021, this
company was dissolved in North Carolina, and it is being treated as discontinued
operations in the consolidated financial statements. The Company plans to sell
Good Hemp Wellness CBD inventory directly.
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.
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 will be issued in the future, the
Company's CEO and directors resigned, and new officers and directors were
appointed, constituting a change of control of the Company.
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The Company now has two divisions: (i) a beverage division focused 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
EnviroXstreamTMcleaner/degreaser and other competitively-priced,
environmentally-friendly products that are designed to work as well as or better
than their toxic competitors.
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.
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 three months ended March 31, 2022 compared to the three months ended
March 31, 2021
Three Months Ended March 31,
Increase/
March 31, 2022 March 31, 2021 (Decrease)
Net Sales $ 204,257 $ 73,804 $ 130,453
Cost of Sales 203,232 55,454 147,778
Gross Profit 1,025 18,350 (17,325 )
Operating Expenses 89,178 1,398,060 (1,308,882 )
Operating Loss (88,153 ) (1,379,710 ) 1,291,557
Other Income 30 - 30
Gain on Write-off of Debt - 38,910 (38,910 )
Interest Expense (37,626 ) (17,186 ) (20,440 )
Gain (Loss) on Derivative
Liabilities 1,023,571 (84,829 ) 1,108,400
Loss on Extinguishment of Debt (60,906 ) - (60,906 )
Loan Fees (28,385 ) - (28,385 )
Net Loss $ 808,531 $ (1,442,815 ) $ 2,251,346
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Revenue
During the three months ended March 31, 2022, the Company generated $2024,257 in
net sales compared to $73,804 for the same period in 2021. This is largely due
to the acquisition of Diamond Creek, which had existing sales.
Cost of Sales
The Company had cost of sales of $203,232 for the three months ended March 31,
2022, compared to $55,454 for the same period in 2021. The increase was
primarily due to increased sales of the Company's products.
Operating Expenses
The Company incurred general and administrative expenses totaling $89,178 for
the three months ended March 31, 2022, compared to $1,398,060 for the same
period in 2021. The decrease was primarily due to the amortization of $1,102,041
of the branding agreement in 2021.
Net Loss
The Company had a net income of $808,531 for the three months ended March 31,
2022, compared to a net loss of $1,442,815 for the same period in 2021. This
increase was primarily due to the decrease in the amortization of the branding
agreement and the change in derivative liabilities of $1,108,400.
Liquidity and Capital Resources
We had cash used in operations of $14,264 the three months ended March 31, 2022,
compared to $324,797 for the three months ended March 31, 2021. The decrease in
cash used in operating activities for the three months ended March 31, 2022 is
attributable to the amortization of the branding agreement of $0 compared to
$1,102,041 and the change in derivative liability of ($1,023,571) compared to
$84,829 for the three months ended March 31, 2022 and 2021, respectively.
We had cash used in investing activities of $0 for the three months ended March
31, 2022, and $600 for the three months ended March 31, 2021.
We had cash provided by financing activities of $0 for the three months ended
March 31, 2022, compared to cash provided by $851,375 for the three months ended
March 31, 2021.
As of March 31, 2022, the Company had cash and cash equivalents of $857. 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 March 31, 2022, and 2021, the Company has primarily been funded by Mr.
Alessi and Mr. Chumas. In addition, the Company has issued convertible notes to
unrelated third parties. As of March 31, 2022, and December 31, 2021, related
party notes totaled $410,000 and $410,000, net of discounts, respectively, and
third-party notes totaled $1,129,426 and $1,202,756, net of discounts,
respectively.
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The Company does not know of any trends, demands, commitments, events or
uncertainties that will result in, or that are reasonable likely to result in,
our liquidity increasing or decreasing in any material way.
The Company does not know of any significant changes in expected sources and
uses of cash.
The Company does not have any commitments or arrangements from any person to
provide it with any equity capital.
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 $4,050,576 at March 31,
2022 and had an income of $808,531 for the three months ended March 31, 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 March 31, 2022 were prepared on a consistent
basis with prior periods.
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