NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2022 and 2021
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 we provide 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
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.
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 4,755,209 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, 2022 and 2021. 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, 2022 the Company has an accumulated deficit of $25,320,424.
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. On December 31, 2022 and 2021 no cash balances exceeded the federally insured
limit.
Accounts
receivable and allowance for doubtful accounts
Accounts
receivables 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, 2022, and 2021 there’s no allowance for doubtful accounts
and bad debts.
Revenue
Recognition
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, 2022 and 2021:
SUMMARY
OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS
| As of December 31, 2022 | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| Liabilities | |
| | | |
| | | |
| | | |
| | |
| Derivative Liabilities | |
| - | | |
| - | | |
| 72,487 | | |
| 72,487 | |
| As of December 31, 2021 | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| Liabilities | |
| | | |
| | | |
| | | |
| | |
| Derivative Liabilities | |
| - | | |
| - | | |
| 2,286,014 | | |
| 2,286,014 | |
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 $378,706 and $611,914 in advertising expenses for the years ended December 31, 2022 and 2021, respectively.
Recent
Accounting Pronouncements
In
January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial
Liabilities. ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments
including requirements to measure most equity investments at fair value with changes in fair value recognized in net income, to perform
a qualitative assessment of equity investments without readily determinable fair values, and to separately present financial assets and
liabilities by measurement category and by type of financial asset on the balance sheet or the accompanying notes to the financial statements.
ASU 2016-01 will be effective for the Company beginning on January 1, 2018 and will be applied by means of a cumulative effect adjustment
to the balance sheet, except for effects related to equity securities without readily determinable values, which will be applied prospectively.
Management has reviewed this pronouncement and has determined that it would not have a material impact to the consolidated financial
statements.
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
March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging: Effect of Derivative Contract Novations on Existing Hedge Accounting
Relationships, which clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument
would not, in and of itself, be considered a termination of the derivative instrument, provided that all other hedge accounting criteria
continue to be met. ASU 2016-05 is effective for the Company beginning on January 1, 2017. Early adoption is permitted, including in
an interim period. Management evaluated ASU 2016-05 and determined that the adoption of this new accounting standard did not have a material
impact on the Company’s consolidated financial statements.
In
March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments, which
aims to reduce the diversity of practice in identifying embedded derivatives in debt instruments. ASU 2016-06 clarifies that the nature
of an exercise contingency is not subject to the “clearly and closely” criteria for purposes of assessing whether the call
or put option must be separated from the debt instrument and accounted for separately as a derivative. ASU 2016-06 is effective for the
Company beginning on January 1, 2017. Management evaluated ASU 2016-06 and determined that the adoption of this new accounting standard
did not have a material impact on the Company’s consolidated financial statements.
In
March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting.
ASU 2016-09 simplifies several aspects of the accounting and presentation of share-based payment transactions, including the accounting
for related income taxes consequences and certain classifications within the statement of cash flows. ASU 2016-09 is effective for the
Company beginning on January 1, 2017. Management evaluated the impact of adopting ASU 2016-09 and determined that the new accounting
standard did not have a material impact on the Company’s consolidated financial statements.
In
August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are
presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017.
The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required
to apply the amendments prospectively as of the earliest date practicable.
In
November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows
explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.
This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption
permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance
for all periods presented. Management has reviewed this pronouncement and has determined that it would not have a material impact to
the 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, 2021, the Company completed the notes payable to a related party. 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. |
On
May 13, 2021, we amended the Separation Agreement to state the parties desire to reduce the total amount payable to Wais Asefi from $200,000
USD to $142,500 USD. In addition to the earlier payments made to Mr. Asefi, a payment of $40,000 was made on May 14, 2021 and another
payment on June 27, 2021 for $40,000. The final payment due on August 11, 2021 was for $25,000. The final payment was made on August
11, 2021 and settled this agreement in full. Further under the amendment, Mr. Asefi nominated Textmunication, Inc., our prior subsidiary,
as the recipient of the funds due under the Separation Agreement.
The
outstanding balances as of December 31, 2022 and December 31, 2021 are $38,500
and $45,000
respectively. The remaining balance as of December
31, 2022 is due to Mr. Selzer, CEO of Resonate, as he has provided several loans to the Company.
NOTE
4 - CONVERTIBLE NOTE PAYABLE
Convertible
notes payable consists of the following as of December 31, 2022 and December 31, 2021:
SCHEDULE
OF CONVERTIBLE NOTES PAYABLE
| | |
December 31, 2022 | | |
December 31, 2021 | |
| Convertible notes face value | |
$ | 988,800 | | |
$ | 1,865,000 | |
| Less: Discounts | |
| - | | |
| - | ) |
| Less: Debt issuance cost | |
| | | |
| | |
| Net convertible notes | |
$ | 988,800 | | |
$ | 1,865,000 | |
The
convertible notes as of December 31, 2022 are 8%
Unsecured Convertible Promissory Notes (“Notes”) from various accredited investors issued from January 1, 2021 to March 16,
2021. All
notes have an automatic conversion into equity on the maturity date, which was July
3, 2022,
or if a Qualified Financing (QF) of $5,000,000
is
achieved, whichever occurs first. The maturity date pricing is $0.10. A QF converts into equity at the lesser of $1.00 or 75% of the
average selling price of the aggregate offering. The
outstanding balance as of December 31, 2022 for this Unsecured Convertible Promissory Notes amounts to $200,000.
The remaining noteholder has expressed to the Company not to convert his Note into shares in the near term. Consequently, we have mutually
agreed not to accrue interest on the this Note going forward.
On
January 28, 2022, we entered into Securities Purchase Agreements (the “Purchase Agreements”) with two accredited investors,
pursuant to which we issued and sold to the investors two convertible promissory notes, dated January 28, 2022, each in the principal
amount of $275,000 for an aggregate principal amount of $550,000. We received $500,000 from the Notes after applying the original issue
discount to the Notes.
The
Purchase Agreements allow for additional notes to be issued to investors up to $750,000. On February 4, 2022, we issued and sold to two
accredited investors (the “Investors”) convertible promissory notes in the principal amount of $55,000 under a Securities
Purchase Agreement of the same date. We received $150,000 from the Notes after applying the original issue discount to the Notes.
On
March 3, 2022, we issued and sold to an accredited investor a convertible promissory note the principal amount of $55,000 under a Securities
Purchase Agreement of the same date. We received $50,000 from the Note after applying the original issue discount to the Note.
The
maturity date for repayment of the Notes is nine months from issuance and the Notes bear interest at 10% per annum.
All
principal and accrued interest on the Notes are convertible into shares of our common stock. The conversion price shall equal a fixed
price of $0.15 per share or, at the option of the Investor in the event that we fail to complete a Qualified Offering before the five
(5) month anniversary of the issue date, the Registration Conversion Price. The “Registration Conversion Price” shall mean
75% multiplied by the volume weighted average of the Common Stock during the twenty (20) Trading Day period ending on the latest complete
Trading Day prior to the Conversion Date. The Investors shall be entitled to add to the principal amount of the Note $750.00 for each
conversion to cover investor’s deposit fees associated with each Notice of Conversion. “Qualified Offering” means any
offer and sale by us of an original issuance of equity securities, comprised of either Common Stock or preferred stock of the Company,
in a single transaction to investors pursuant to which at least an aggregate of $2,000,000.00 gross proceeds are received by the Company.
In
connection with the investment, we issued Commitment Shares to the Investors in the amount of 650,000 shares collectively and we also
issued a warrant (the “Warrant”) to the Investors to purchase 812,500 shares collectively of our common stock at an exercise
price of $0.40 per share.
The
Securities Purchase Agreement contain a most favored nation provision that allows the Investor to claim any lower price from any future
securities six months after this closing and a blocker on issuing variable rate investments.
On
June 27, 2022, we issued and sold to an accredited investor a convertible promissory note the principal amount of $138,800 under a Securities
Purchase Agreement of the same date. We received $128,500 from the Note after applying the original issue discount to the Note.
The
Notes are convertible into shares of common stock, $0.0001 par value per share, of the Company upon the terms and subject to the limitations
and conditions set forth in such Note. On the Closing Date (i) the Buyer shall pay the purchase price for the Note to be issued and sold
to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company,
in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the
Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver
such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price .
Finally,
on September 8, 2022, we issued and sold a senior secured convertible promissory note to AJB Capital Investments LLC for a principal
amount of $600,000,
together with guaranteed interest of 12%
per year calendar from the date hereof. All Principal and Interest owing hereunder, along with any and all other amounts, shall be
due and owing on the Maturity Date March
8, 2023.
The
Maturity Date may be extended at the sole discretion of the Borrower up to six (6) months following the date of the original Maturity
Date hereunder. In the event that the Maturity Date is extended, the interest rate shall equal fifteen percent (15%) per annum for any
period following the original Maturity Date, payable monthly.
We
received $540,000 from the Note after applying the original issue discount to the Note.
In
connection with the investment, we issued Commitment Shares to the Investors in the amount of 5,571,429 shares collectively. A total
of 3,000,000 of those shares can be returned to treasury if the Note is paid off within six (6) months.
As
of December 31, 2022 and 2021 accrued interest payable on notes payable were $265,480 and $134,758 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 $10,591
and $3,239 for the years ended December 31, 2022 and 2021, 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, 2022, the cumulative net operating loss carry-forward from continuing operations is approximately $25,604,413
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, 2022 and December 31, 2021:
SCHEDULE
OF DEFERRED TAX ASSETS
| Deferred tax attributable to: | |
2022 | | |
2021 | |
| Net Operating loss carry over | |
| 5,376,927 | | |
| 3,413,282 | |
| Valuation allowance | |
| 5,376,927 | | |
| 3,413,282 | |
| 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, 2022.
There were 10,000 shares of Series E Preferred Stock
authorized and 0 outstanding as of December 31, 2022. There are no other series of preferred stock outstanding as of December 31, 2022.
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 share issues accounted as expenses as follows:
SCHEDULE
OF COMPENSATION AND SERVICES RENDERED
| | |
| | |
| Management Fees | |
$ | 2,074,600 | |
| Professional Fees | |
| | |
| Payment to obtain loan | |
| | |
| Payment to management staff | |
| | |
| 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, 2021 the company issued a total of 3,427,990 shares of common stock to management and vendors for compensation
and services rendered. The fair market value of the share issues accounted as expenses as follows:
During
the year ended December 31, 2022 the company issued a total 1,004,666 shares of common stock to management and vendors for compensation
and services rendered. The fair market value of the share issues accounted as expenses as follows:
NOTE
8 – DISCONTINUED OPERATIONS
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.
SCHEDULE
OF DISCONTINUED OPERATIONS
| | |
2020 | | |
2019 | |
| Revenues | |
$ | 477,734 | | |
$ | 758,101 | |
| | |
| | | |
| | |
| Cost of revenues | |
| 101,347 | | |
| 285,085 | |
| Operating expenses | |
| 468,815 | | |
| 581,764 | |
| Income (loss) from operations | |
| 570,162 | | |
| 866,849 | |
| | |
| | | |
| | |
| Loss from operations of discontinued operation | |
| (92,428 | ) | |
| (108,748 | ) |
| Gain on disposal of discontinued operations | |
| 108,206 | | |
| - | |
| Gain (loss) from discontinued operations | |
$ | 15,778 | | |
$ | (108,748 | ) |
NOTE
9 – SUBSEQUENT EVENTS
In
accordance with FASB ASC 855-10, Subsequent Events, the Company has analyzed its operations subsequent to December 31, 2022 to the date
these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these consolidated
financial statements.