NOTE
1 – BASIS OF PRESENTATION AND GOING CONCERN
The
Company
Resonate
Blends, Inc. formerly Textmunication Holdings, Inc. (the “Company”) was incorporated on in October 1984 in the State
of Georgia as Brock Control Systems. Founded by Richard T. Brock, the Company was in the sales automation market and an early
developer of enterprise customer management systems. The Company went public at the end of March of 1993. In February of 1996,
the Company changed its name to Brock International Inc., and in March of 1998, the Company again changed our name to Firstwave
Technologies, Inc.
In
2007, the Company deregistered its common stock in order to avoid the expenses of being a public company. The Company reported
briefly on the OTC Disclosure & News Service in 2008 but not for long. The Company again changed its name to FSTWV, Inc.
On
October 28, 2013, the Company held a shareholder meeting to reincorporate the company in the State of Nevada and concurrently
change its name to Textmunication Holdings, Inc. The Company also voted to approve a 1 for 5 reverse split of its outstanding
common stock.
On
November 16, 2013, the Company entered into a Share Exchange Agreement (SEA) with Textmunication, Inc. a California corporation,
whereby the sole shareholder of the Company received 65,640,207 new shares of common stock of the Company in exchange for 100%
of the Textmunication’s issued and outstanding shares.
Textmunication
is an online mobile marketing platform service that will connect merchants with their customers and allow them to drive loyalty
and repeat business in a non-intrusive, value added medium. For merchants Textmunication provides a mobile marketing platform
where they can always send the most up-to-date offers/discounts/alerts/events schedule, such as happy hours, trivia night, and
other campaigns. The consumer can also access specials and promotions that merchants choose to distribute through Textmunication
by opting into keywords designated to the merchant’s keywords.
On
July 9, 2018, the 1 – 1,000 Reverse Split of the Company’s common stock took effect at the open of business. All shares
and per share amounts have been retroactively adjusted to reflect the reverse split.
On
June 25, 2019, the Company issued a press release announcing it plans to change its business direction from its current SMS technology
business to focus on the emerging national cannabis market. The Company planned on using its mobile texting platform to enhance
communication efforts with the potential acquisitions.
On
October 25, 2019, the Company entered into a Membership Interest Purchase Agreement (the “Resonate Purchase Agreement”)
with Resonate Blends, LLC, a California limited liability company (“Resonate”), and the members of Resonate. As a
result of the transaction, Resonate became a wholly owned subsidiary of the Company. In accordance with the terms of the Purchase
Agreement, at the closing an aggregate of 5% of the Company’s outstanding shares of common stock for a total of 665,072
shares were issued to the holders of Resonate in exchange for their membership interests of Resonate. These shares have anti-dilution
protection. We have also agreed as part of the purchase price to issue: (ii) such number of shares of Series E Preferred Stock
that will convert into 5% of the outstanding shares of common stock in the Company on a fully-diluted basis upon an annualized
revenue run rate of Ten Million Dollars ($10,000,000.00) for any three (3) consecutive month trailing period; and (iii) such number
of shares of Series E Preferred Stock that will convert into 5% of the outstanding shares of common stock in the Company on a
fully-diluted basis upon the occurrence of the Company’s public market value reaching One Hundred Million US Dollars ($100,000,000).
The shares in (ii) and (iii) shall have anti-dilution protections, except that this provision only applies for 2.5% of the outstanding
shares acquired under each subsection.
Also,
on October 25, 2019, the Company entered into a Membership Interest Purchase Agreement (the “Entourage Labs Purchase Agreement”)
with Entourage Labs, LLC, a California limited liability company (“Entourage Labs”), and the members of Entourage
Labs. As a result of the transaction, Entourage Labs became a wholly owned subsidiary of the Company. In accordance with the terms
of the Purchase Agreement, at the closing an aggregate of 5% of the Company’s outstanding shares of common stock for a total
of 665,072 shares were issued to the holders of Entourage Labs in exchange for their membership interests of Entourage Labs. These
shares have anti-dilution protection. We have also agreed as part of the purchase price to issue: (ii) such number of shares of
Series E Preferred Stock that will convert into 5% of the outstanding shares of common stock in the Company on a fully-diluted
basis upon an annualized revenue run rate of Ten Million Dollars ($10,000,000.00) for any three (3) consecutive month trailing
period; and (iii) such number of shares of Series E Preferred Stock that will convert into 5% of the outstanding shares of common
stock in the Company on a fully-diluted basis upon the occurrence of the Company’s public market value reaching One Hundred
Million US Dollars ($100,000,000). The shares in (ii) and (iii) shall have anti-dilution protections, except that this provision
only applies for 2.5% of the outstanding shares acquired under each subsection.
In
addition, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations
(the “Conveyance Agreement”) with Mark S. Johnson and the Company’s 49% owned subsidiary, Aspire Consulting
Group, LLC, a Virginia limited liability company. Pursuant to the Conveyance Agreement, the Company transferred all assets and
business operations associated with its IT consulting solutions, including all of the capital stock of Aspire Consulting, to Mr.
Johnson. In exchange, Mr. Johnson agreed to cancel 20,000 shares of common stock in the Company and to assume and cancel all liabilities
relating to the Company’s former business.
Finally,
the Company entered into Employment Agreements with the following persons: (i) Geoffrey Selzer as Chief Executive Officer (CEO)
of the Company with an annual salary of $180,000; and (ii) Pamela Kerwin as Chief Operating Officer (COO) of the Company with
an annual salary of $120,000. Both are eligible for salary increases upon milestone achievements and other benefits. The Employment
Agreement for the CEO has a term of 2 years and can’t be terminated without cause. Severance of six (6) weeks is available
for termination of the COO without cause before one-year of service and eight (8) weeks after one-year of service.
On
December 16, 2019 the Company filed Articles of Merger with the Secretary of State of Nevada in order to effectuate a merger with
its wholly owned subsidiary; Resonate Blends, Inc. Shareholder approval was not required under Section 92A.180 of the Nevada Revised
Statutes. As part of the merger, the Company’s board of directors authorized a change in our name to “Resonate Blends,
Inc.” and the Company’s Articles of Incorporation have been amended to reflect this name change.
In
connection with the name change, the Company’s symbol was changed to “KOAN” that more resembles the Company’s
new business focus.
On
December 16, 2019 the Company filed Articles of Merger with the Secretary of State of Nevada in order to effectuate a merger with
its wholly owned subsidiary; Resonate Blends, Inc. Shareholder approval was not required under Section 92A.180 of the Nevada Revised
Statutes. As part of the merger, the Company’s board of directors authorized a change in our name to “Resonate Blends,
Inc.” and the Company’s Articles of Incorporation have been amended to reflect this name change.
On
January 20, 2020, Wais Asefi resigned as Chairman and as a member of our Board of Directors. Mr. Asefi’s resignation is
in support of Resonate Blends strategic direction of becoming a pure play cannabis company. The Company does not believe that
Mr. Asefi has any disagreements on matters relating to our operations, policies or practices. Also, on January 20, 2020, our Board
of Directors appointed Geoffrey Selzer as our Chairman.
In
connection with the name change, the Company’s symbol was changed to “KOAN” that more resembles the Company’s
new business focus.
On
May 22, 2020, Resonate Blends, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “SPA”)
with Wais Asefi, Nick Miniello, Juleon Asefi, and Curt Byers (collectively, the “Asefi Group”) to sell to the Asefi
Group its subsidiary, Textmunication, Inc., a California corporation (“Textmunication”). Textmunication operates the
Company’s SMS business activities. The Company will retain its cannabis operations based in Calabasas, California.
The
consideration for the sale of Textmunication consists of the cancellation by the Asefi Group of 4,822,029 shares of common stock
(the “Shares”) of the Company. The Shares have a market value of $337,542, based on our last sales price of $0.07
per share as of May 26, 2020. Upon the cancellation of the Shares, the Company agreed to execute a general release in favor of
Mr. Asefi.
Also
on May 22, 2020, the Company entered into a Separation and Release Agreement (the “Separation Agreement”) with Wais
Asefi. Pursuant to the Separation Agreement, Mr. Asefi agreed to separate from all officer positions and as a director of the
Company and to further accept the payment of $200,000 from the Company’s future fundraising as consideration of all debts
outstanding under Mr. Asefi’s employment agreement with the Company. Mr. Asefi further agreed to cancel his 4,000,000 shares
of Series A Preferred Stock and to transfer his 2,000,000 shares of Series C Preferred Stock to Geoffrey Selzer, the Company’s
current CEO and Director. Mr. Asefi further released the Company of all claims.
Also
on May 22, 2020, Mr. Selzer signed a Voting Agreement and agreed to vote his newly acquired 2,000,000 shares of Series C Preferred
Stock in favor of the sale of Textmunication to the Asefi Group.
On
May 22, 2020, Resonate Blends, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “SPA”)
with Wais Asefi, Nick Miniello, Juleon Asefi, and Curt Byers (collectively, the “Asefi Group”) to sell to the Asefi
Group its subsidiary, Textmunication, Inc., a California corporation (“Textmunication”). Textmunication operates the
Company’s SMS business activities.
On
July 20, 2020, the parties closed on the transactions contained in the SPA. The Asefi Group cancelled 4,822,029 shares
of common stock (the “Shares”) of the Company. The Shares have a market value of $332,842, based on our last sales
price of $0.07 per share as of May 26, 2020. The Company also executed a general release in favor of Mr. Asefi.
Basis
of Presentation
Our
financial statements are presented in conformity with accounting principles generally accepted in the United States of America,
as reported on our fiscal years ending on December 31, 2019 and 2018. We have summarized our most significant accounting policies.
Going
concern
These
consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to
a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal
course of business. As of December 31, 2020, the Company has an accumulated deficit of $21,100,995. The company’s
ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its
ability to achieve and maintain profitable operations. While the Company is expanding its best efforts to achieve the above plans,
there is no assurance that any such activity will generate funds that will be available for operations. These conditions 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. These consolidated financial statements do not include any adjustments that might arise from this
uncertainty.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
The
Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.
The
Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial
institution. The balance at times may exceed federally insured limits. At December 31, 2020 and 2019 no cash balances exceeded
the federally insured limit.
Accounts
receivable and allowance for doubtful accounts
Accounts
receivable are stated at the amount management expects to collect. The Company generally does not require collateral to support
customer receivables. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts
receivable, historical collection information and existing economic conditions. As of December 31, 2020, and 2019 there’s
no allowance for doubtful accounts and bad debts. At December 31, 2020 and 2019, one customer represented 51% and 71%, respectively,
of the Company’s accounts receivable.
Revenue
Recognition
The
Company did not have any revenues from continuing operations for the periods presented. The Company’s policy is that revenues
will be recognized when control of the product is transferred to our customers, in an amount that reflects the consideration we
expect to be entitled to in exchange for those services.
Results
for reporting periods beginning after January 1, 2020 are presented under Topic 606, while prior period amounts are not adjusted
and continue to be reported in accordance with our historic accounting under Topic 605. We did not have any cumulative impact
as a result of applying Topic 606.
Fair
Value of Financial Instruments
The
carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair
values due to the short maturities of these items.
As
required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted
prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly
or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity
to develop its own assumptions.
The
three levels of the fair value hierarchy are described below:
Level
1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or
liabilities,
Level
2: Quoted prices in markets that are not active, or inputs that is observable, either directly or indirectly, for substantially
the full term of the asset or liability,
Level
3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable
(supported by little or no market activity).
The
fair value of the accounts receivable, accounts payable, notes payable are considered short term in nature and therefore their
value is considered fair value.
Financial
assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended December 31, 2020 and
2019:
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Financial Instruments
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
274,134
|
|
|
$
|
274,134
|
|
Net
income (loss) per Common Share
Basic
net income (loss) per share is computed by dividing the net loss attributable to the common stockholders by the weighted average
number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss
per share except that the denominator is increased to include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common shares were dilutive.
Property
and equipment
Property
and equipment are stated at cost, less accumulated depreciation provided on the straight-line method over the estimated useful
lives of the assets, which range from three to seven years. Expenditures for renewals or betterments are capitalized, and repairs
and maintenance are charged to expense as incurred the cost and accumulated depreciation of assets sold or otherwise disposed
of are removed from the accounts, and any gain or loss thereon is reflected in operations. Company policy capitalizes property
and equipment for cost over $1,000, asset acquired under $1,000 are charge to operations.
Income
Taxes
Income
taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and
liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and
are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax
assets that, based on available evidence, are not expected to be realized. Because the Company has no net income, the tax benefit
of the accumulated net loss has been fully offset by an equal valuation allowance.
Use
of Estimates
The
preparation of financial statements in conformity with 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Stock-Based
Compensation
The
Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation –
Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized
in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation
expense and credited to additional paid-in capital over the period during which services are rendered.
The
Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than
Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants
and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services
provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value
of the option or warrant, whichever can be more clearly determined. The fair value of the equity instrument is charged directly
to compensation expense and additional paid-in capital over the period during which services are rendered.
Advertising
Expenses
Advertising
expenses are included in General and administrative expenses in the Statements of Operations and are expensed as incurred. The
Company incurred $7,350 and $38,945 in advertising expenses for the years ended December 31, 2020 and 2019, respectively.
Recent
Accounting Pronouncements
In
February 2016, the FASB issued ASU 2016-02, Leases, which requires an entity to recognize long-term lease arrangements
as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and lease obligation will
be recorded for all long-term leases, whether operating or financing, while the income statement will reflect lease expense for
operating leases and amortization/interest expense for financing leases. The amendments also require certain new quantitative
and qualitative disclosures regarding leasing arrangements. ASU 2016-02 will be effective for the Company beginning on January
1, 2019. Lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning
of the earliest comparative period presented in the financial statements. Early adoption is permitted. Management does not believe
the adoption of ASU 2016-02 will have a material impact on the Company’s consolidated financial statements.
In
May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments
in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity
to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods,
and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption
in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been
issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance.
Management has reviewed this pronouncement and has determined that it would not have a material impact to the consolidated financial
statements.
In
July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic
815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments
(or embedded features) with down round features. When determining whether certain financial instruments should be classified as
liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument
is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified
instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be
accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity
classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic
260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction
of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down
round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20,
Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of
this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content
in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the
amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after
December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for
all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments
should be reflected as of the beginning of the fiscal year that includes that interim period.
NOTE
3 – RELATED PARTY TRANSACTIONS
As
of December 31, 2020, the Company had notes payable to a related party of $187,500. On May 22, 2020, the Company entered
into a Separation and Release Agreement (the “Separation Agreement”) with Wais Asefi. Pursuant to the Separation Agreement,
Mr. Asefi agreed to separate from all officer positions and as a director of the Company and to further accept the payment of
$200,000 from the Company’s future fundraising as consideration of all debts outstanding under Mr. Asefi’s employment
agreement with the Company. Mr. Asefi further agreed to cancel his 4,000,000 shares of Series A Preferred Stock and to transfer
his 2,000,000 shares of Series C Preferred Stock to Geoffrey Selzer, the Company’s current CEO and Director. Mr. Asefi further
released the Company of all claims.
On
May 22, 2020, the 4,000,000 shares of Series A Preferred Stock were returned to the Company’s transfer agent and cancelled
and on May 22, 2020 the 2,000,000 shares of Series C Preferred Stock were transferred to Mr. Selzer. The parties to the Separation
Agreement agreed to a payment schedule of $200,000 based on future monies raised by the Company - and not on a specific date –
as follows:
|
●
|
$12,500
when the initial $250,000 is raised by the Company;
|
|
●
|
$12,500
when a total of $500,000 is raised by the Company;
|
|
●
|
$10,000
when a total of $750,000 is raised by the Company;
|
|
●
|
$35,000
when a total of $1,750,000 is raised by the Company;
|
|
●
|
$35,000
when a total of $2,750,000 is raised by the Company;
|
|
●
|
$35,000
when a total of $3,750,000 is raised by the Company;
|
|
●
|
$35,000
when a total of $4,750,000 is raised by the Company; and
|
|
●
|
$25,000
when a total of $5,750,000 is raised by the Company.
|
The
Company made a payment of $12,500 on the payable to related parties as of December 31, 2020.
NOTE
4 - CONVERTIBLE NOTE PAYABLE
On
January 22, 2020, we executed a convertible promissory note with Geneva Roth Remark Holdings, Inc. for $113,300 with note discounted
of $10,300 and interest at the rate of 10% per annum from the issue date. This note will mature on January 22, 2021 with penalty
clause of 22% per annum should the note be defaulted. If we decide to let this Note convert, the variable conversion price is
75% multiplied by the market price, representing a market discount of 25%. We have the ability to prepay this Note beginning on
the Issue Date and ending on the date which is one hundred twenty (120) days following the Issue Date with a prepayment percentage
of 113%. The period beginning on the date which is one hundred twenty-one (121) days following the Issue Date and ending on the
date which is one hundred eight (180) days following the Issue Date, the prepayment percentage is 118%.
On
March 3, 2020 Resonate Blends, Inc. (“Resonate”) agreed to pay Cicero Holding, Inc. (“Cicero”) five payments
of $10,000 plus a final balloon payment of $60,000 by September 15, 2020. This settlement was on a previous $100,000 convertible
note issued to Textmunication Holdings, Inc. on October 2, 2019. To date, Resonate has made two payments of $10,000 each –
or $20,000 total. On June 23, 2020, both Parties agreed to amend the settlement agreement dated March 3, 2020. Resonate issued
900,000 common shares to Cicero with a leak-out of 120,000 shares per month to retire the remaining $90,000 owed on the Note.
On
March 13, 2020 we executed a convertible promissory note with Armada Capital Partners LLC. for $142,000 with note discounted of
$8,667 and interest at the rate of 15% per annum from the issue date. This note will mature on April 20, 2021 with penalty clause
of 18% per annum should the note be defaulted. If we decide to let this Note convert, the variable conversion price is 65% multiplied
by the market price, representing a market discount of 35%. We have the ability to prepay this Note beginning on the Issue Date
at our discretion.
On
March 13, 2020 we executed a convertible promissory note with BHP Capital NY for $142,000 with note discounted of $8,667 and interest
at the rate of 15% per annum from the issue date. This note will mature on April 20, 2021 with penalty clause of 18% per annum
should the note be defaulted. If we decide to let this Note convert, the variable conversion price is 65% multiplied by the market
price, representing a market discount of 35%. We have the ability to prepay this Note beginning on the Issue Date at our discretion.
On
March 13, 2020 we executed a convertible promissory note with Jefferson Street Capital LLC for $142,000 with note discounted of
$8,667 and interest at the rate of 15% per annum from the issue date. This note will mature on April 20, 2021 with penalty clause
of 18% per annum should the note be defaulted. If we decide to let this Note convert, the variable conversion price is 65% multiplied
by the market price, representing a market discount of 35%. We have the ability to prepay this Note beginning on the Issue Date
at our discretion.
On
June 18, 2020, we executed a convertible promissory note with Geneva Roth Remark Holdings, Inc. for $85,800 together with any
interest at the rate of 10% per annum from the issue date. If we decide to let this Note convert, the variable conversion price
is 75% multiplied by the market price, representing a market discount of 25%. We have the ability to prepay this Note beginning
on the Issue Date and ending on the date which is one hundred twenty (120) days following the Issue Date with a prepayment percentage
of 113%. The period beginning on the date which is one hundred twenty-one (121) days following the Issue Date and ending on the
date which is one hundred eight (180) days following the Issue Date, the prepayment percentage is 118%.
On
July 20, 2020, we executed a Securities Purchase Agreement (“SPA”) with FirstFire and issued the FirstFire Note with
a principal amount of $225,000, a $25,000 original issue discount and interest at 8% per annum. The principal balance and accrued
but unpaid interest may be converted to our common stock at $0.10 per share or, upon default, at 75% of the lowest trading price
in the last 20 days in our trading market.
On
July 20, 2020, the parties closed on the transactions contained in the SPA. The Asefi Group will cancel 4,822,029 shares of common
stock (the “Shares”) of the Company. The Shares have a market value of $337,542, based on our last sales price of
$0.07 per share as of May 26, 2020. The Company also executed a general release in favor of Mr. Asefi.
On
July 21, 2020, we paid off the Geneva Note in its entirety with proceeds acquired from the below new convertible promissory note
(the FirstFire Note”) we issued to FirstFire Global Opportunities Fund LLC. The amount paid to Geneva was $140,397.01.
Convertible
notes payable consists of the following as of December 31, 2020 and 2019:
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
Convertible
note face value
|
|
$
|
517,544
|
|
|
$
|
227,750
|
|
Less: Discounts
|
|
|
(12,751
|
)
|
|
|
(116,345
|
)
|
Net convertible Notes
|
|
|
504,793
|
|
|
|
161,404
|
|
As
of December 31, 2020 and 2019 accrued interest payable on notes payable were $71,346 and $10,556 respectively.
The
Company accounts for the fair value of the conversion features of its convertible debt in accordance with ASC Topic No. 815-15
“Derivatives and Hedging; Embedded Derivatives” (“Topic No. 815-15”). Topic No. 815-15 requires the Company
to bifurcate and separately account for the conversion features as an embedded derivative contained in the Company’s convertible
debt. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for’ any unrealized
change in fair value as a component of results of operations. The Company values the embedded derivatives using the Black-Scholes
pricing model.
NOTE
5 – COMMITMENTS AND CONTINGENCIES
Office
Lease
On
October 16, 2019, the Company signed a lease agreement that expires on thirty days’ notice. Rent expense was approximately
$740 and 0 for the years ended December 31, 2020 and 2019, respectively.
Executive
Employment Agreement
On
October 25, 2019 the Company entered into Employment Agreements with the following persons: (i) Geoffrey Selzer as Chief Executive
Officer (CEO) of the Company with an annual salary of $180,000; (ii) Pamela Kerwin as Chief Operating Officer (COO) of the Company
with an annual salary of $120,000; (iii) David Thielen as Chief Investment Officer (CIO) of the Company with an annual salary
of $120,000. All are eligible for salary increases upon milestone achievements and other benefits. The Employment Agreement for
the CEO has a term of 2 years and can’t be terminated without cause. Severance of six (6) weeks is available for termination
of the COO and CIO without cause before one-year of service and eight (8) weeks after one-year of service.
NOTE
6 – INCOME TAXES
For
the year ended December 31, 2020, the cumulative net operating loss carry-forward from continuing operations is approximately
$21,100,995 and will expire beginning in the year 2030.
The
cumulative tax effect at the expected rate of 21% of significant items comprising our net deferred tax amount is as follows as
of December 31, 2020 and 2019:
Deferred
tax attributable to:
|
|
2020
|
|
|
2019
|
|
Net
Operating loss carry over
|
|
|
4,431,209
|
|
|
|
3,017,656
|
|
Valuation
allowance
|
|
|
4,431,209
|
|
|
|
3,017,656
|
|
Net
deferred tax assets
|
|
|
-
|
|
|
|
-
|
|
Due
to the enactment of the Tax Reform Act of 2017, the corporate tax rate for those tax years beginning with 2018 has been reduced
to 21%.
Note
7 – STOCKHOLDERS’ EQUITY
The
Company is authorized to issue an aggregate of 200,000,000 shares of common stock with a par value of $0.0001. The Company is
also authorized to issue 10,000,000 shares of “blank check” preferred stock with a par value of $0.0001.
Preferred
Stock
The
board of directors of the Company has designated, out of the 10,000,000 shares of preferred stock authorized, the following series
of preferred stock: 4,000,000 shares of Series A Preferred Stock, 66,667 shares of Series B Preferred Stock, 2,000,000 shares
of Series C Preferred Stock, 40,000 shares of Series D Preferred Stock and 10,000 shares of Series E Preferred Stock.
On
October 25, 2019, 66,667 outstanding shares of Series B Preferred Stock was returned to the Company’s transfer agent and
cancelled.
On
December 9, 2019, the Company exercised its right to redeem the 40,000 outstanding shares of Series D Preferred Stock by paying
the holders $260,000 or 130% of the amount paid for the shares, as called for under the Securities Purchase Agreement.
On
May 22, 2020, 4,000,000 outstanding shares of Series A Preferred Stock were returned to the Company’s transfer agent and
cancelled,
There
were 2,000,000 shares of Series C Preferred Stock issued and outstanding as of December 31, 2020. There are no other series of
preferred stock outstanding as of December 31, 2020.
Common
Stock
During
the year ended December 31, 2018,
|
●
|
the
Company’s Board of Directors approved a one to one thousand (1:1000) reverse stock split, which became effective July
9, 2018. The Company consolidated financial statements have been retroactively restated to the reflect the effect of the stock
split
|
|
●
|
the
Company entered into a subscription agreement for 9.98% of the company common shares outstanding for $100,000.
|
During
the year ended December 31, 2018, the Company issued 1,380,933 shares of common stock with a fair value of $354,010 for the conversion
of convertible notes payable. The converted portion of the notes also had associated derivative liabilities with fair values on
the date of conversion of 866,361. The conversion of the derivative liabilities has been recorded through additional paid-in capital
During
the first quarter of 2019 the company issued a total of 6,685,000 shares to employees and vendors for compensation and services
rendered. The fair market value of the shares issues accounted as expenses as follows:
Management
Fees
|
|
$
|
2,074,600
|
|
Payment
to subcontractor
|
|
|
446,982
|
|
Total
|
|
$
|
2,521,582
|
|
During
the second quarter of 2019 the company issued 40,000 shares of preferred stock warrants for $200,000 cash.
During
the third quarter of 2019 the company issued 1,280,000 common stocks in settlement of liabilities. The fair market value of the
liabilities accounted as additional paid in capital of $164,033.
During
the year ended December 31, 2019, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”)
with the purchasers identified therein (collectively, the “Purchasers”) providing for the issuance and sale to the
Purchasers of an aggregate of up to 40,000 shares of our Series D Convertible Preferred Stock (the “Preferred Shares”)
and related warrants for gross proceeds to the Company of $200,000. On December 9, 2019, we exercised our right to redeem the
Preferred Shares by paying the Purchasers $260,000 or 130% of the amount paid for the Preferred Shares, as called for under the
Securities Purchase Agreement.
During
the last quarter year end December 31, 2019, the company issued 4,274,936 shares of common stocks to acquire Resonate Blends,
LLC, and Entourage LLC, both California limited liability companies. As a result of the transaction, both companies became wholly
owned subsidiaries of the Company. The Company recognized a loss of $834,022 on the acquisitions.
During
the year ended December 31, 2020 the company issued a total of 3,830,408 shares of common stock to management and vendors for
compensation and services rendered. The fair market value of the shares issues accounted as expenses as follows:
Professional
Fees
|
|
$
|
216,693
|
|
Payment
to obtain loan
|
|
|
165,195
|
|
Payment
to management staff
|
|
|
198,514
|
|
|
|
|
580,042
|
|
NOTE
8 – DISCONTINUED OPERATONS
On
July 20, 2020, the Company finalized a Stock Purchase Agreement (the “SPA”) with Wais Asefi, Nick Miniello, Juleon
Asefi, and Curt Byers (collectively, the “Asefi Group”) to sell to the Asefi Group its subsidiary, Textmunication,
Inc., a California corporation (“Textmunication”). Textmunication operates the Company’s SMS business activities.
The Company retained its cannabis operations based in Calabasas, California. The Company has accounted for this spinout as a discontinued
operation and retroactively reclassified all previously presented financial information. The following summarizes the results
of operations for Textmunication, Inc.
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
$
|
477,734
|
|
|
$
|
758,101
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
101,347
|
|
|
|
285,085
|
|
Operating
expenses
|
|
|
468,796
|
|
|
|
581,764
|
|
|
|
|
570,143
|
|
|
|
866,849
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations of discontinued operation
|
|
|
(92,409
|
)
|
|
|
(108,748
|
)
|
Gain
on disposal of discontinued operations
|
|
|
108,206
|
|
|
|
-
|
|
Gain
(loss) from discontinued operations
|
|
$
|
15,797
|
|
|
$
|
(108,748
|
)
|
NOTE
9 – SUBSEQUENT EVENTS
The
Company has evaluated subsequent events for recognition and disclosure through March 31, 2021 which is the date the financial
statements were available to be issued. No other matters were identified affecting the accompanying financial statements and related
disclosures.
On
July 20, 2020, the Company entered into a Securities Purchase Agreement (“SPA”) with FirstFire Global Opportunities
Fund, LLC (“FirstFire”) and convertible promissory note with a principal amount of $225,000, a $25,000 original issue
discount and interest at 8% per annum (the “FirstFire Note”). On September 16, 2020, we executed an addendum with
FirstFire whereby a $138,000 payment would be made followed by two additional payments to retire the FirstFire Note. On September
18, 2020 we made a $138,000 payment to FirstFire that took care of the first three (3) amortized payments due on December 20,
2020, January 20, 2021 and February 20, 2021. There remained two (2) additional payments of $52,500, which equals the remaining
$105,000 due, were scheduled for payment on March 20, 2021 and April 20, 2021. On February 12, 2021, we made the final two (2)
payments of $52,500 to retire the FirstFire Note.
On
March 13, 2020, the Company entered into a Securities Purchase Agreement (“SPA”) with each of BHP Capital NY, Inc.,
Armada Capital Partners LLC, and Jefferson Street Capital LLC, and sold a convertible promissory note to each party with a principal
amount of $141,999. On February 25, 2021, we paid off all three convertible promissory notes with a payment to each note holder
for a total payout of $438,588.45.
On
March 18, 2021, the Company announced the closing of our private placements. From December 1, 2020 through March 15, 2021 (collectively,
the “Closing”), Resonate Blends, Inc. (the “Company”) entered into note subscription agreements (each,
a “ Note Subscription Agreement”) with accredited investors (collectively the “Investors”), pursuant to
which the Company issued and sold units (the “Units”) where each Unit priced at $25,000 consists of (i) an 8.0% Note
in the principal amount of $25,000 convertible into Common Stock (the “Note) and (ii) a warrant for the purchase of 83,333
shares of the Company’s Common Stock (the “Warrant”). We sold 90 Units for total proceeds of $2,265,000. After
paying finder fees of $187,450 and 649,045 warrant shares to Boustead Securities, LLC, the Company netted $2,077,550, which will
be used for working capital.
In
addition, the Company also entered into subscription agreements (the “Equity Subscription Agreements”) with certain
accredited investor subscribers (the “Subscribers”) in connection with an equity placement offering of a maximum of
$2,000,000 in units (the “Equity Units”) where each Equity Unit consists of one share of Common Stock at a purchase
price of $0.15 and a warrant to purchase 0.5 share(s) of Common Stock at an exercise price of $0.225 per share. We sold 6,983,333
Equity Units for total proceeds of $1,047,500. After paying
finder fees of $100,763 and 314,249 warrant shares to Boustead Securities, LLC, the Company netted $946,737, which was used to
pay off the remaining convertible note debt and will also be used for working capital.