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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

  Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2023

 

  Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from __________ to__________

 

Commission File Number: 000-21202

 

Resonate Blends, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   58-1588291

(State or other jurisdiction

of incorporation or organization)

 

(IRS Employer

Identification No.)

 

26565 Agoura Road, Suite 200

Calabasas, CA 91302

(Address of principal executive offices)

 

571-888-0009

(Registrant’s telephone number)

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.

 

  ☐ Large accelerated filer ☐ Accelerated filer
  Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 81,748,596 common shares as of August 14, 2023

 

 

 

 
 

 

 

TABLE OF CONTENTS

 

    Page
PART I – FINANCIAL INFORMATION 3
     
Item 1: Financial Statements 3
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations 4
Item 3: Quantitative and Qualitative Disclosures About Market Risk 9
Item 4: Controls and Procedures 9
     
PART II – OTHER INFORMATION 11
     
Item 1: Legal Proceedings 11
Item 1A: Risk Factors 11
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 11
Item 3: Defaults Upon Senior Securities 11
Item 4: Mine Safety Disclosures 11
Item 5: Other Information 11
Item 6: Exhibits 11

 

2

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our consolidated financial statements included in this Form 10-Q are as follows:

 

  F-1 Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022;
  F-2 Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (unaudited);
  F-3 Consolidated Statement of Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2023 and 2022 (unaudited);
  F-4 Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited); and
  F-5 Notes to Consolidated Financial Statements.

 

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim three and six months ended June 30, 2023 are not necessarily indicative of the results that can be expected for the full year.

 

3

 

 

Resonate Blends, Inc.

Consolidated Balance Sheets

(Unaudited)

 

   June 30, 2023   December 31, 2022 
ASSETS          
Current assets          
Cash and cash equivalents  $2,260   $64,419 
Inventory   101,019    160,492 
Other receivable   120,000    150,000 
Deposit on acquisition of Pegasus Specialty Vehicles LLC   435,000    - 
Total current assets   658,279    374,911 
           
Fixed assets, net   19,172    24,110 
Investment   100    100 
           
TOTAL ASSETS  $677,551   $399,121 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current liabilities          
Accounts payable and accrued liabilities  $298,397   $319,618 
Due to related parties   70,099    164,946 
Convertible notes payable   1,527,672    988,800 
Senior promissory note   456,305    - 
Derivative liability   424,224    72,487 
Total current liabilities   2,776,697    1,545,851 
           
Total liabilities   2,776,697    1,545,851 
           
Stockholders’ Deficit          
Series B - Preferred stock, 66,667 shares authorized, $0.0001 par value, 0 issued and outstanding   -    - 
Series C - Preferred stock, 2,000,000 shares authorized, $0.0001 par value, 2,000,000 issued and outstanding   200    200 
Series D Preferred stock 40,000 shares authorized, $0.0001 par value 40,000 issued and outstanding   -    - 
Common stock; $0.0001 par value; 200,000,000 shares authorized; 78,328,877 and 75,437,604 shares issued and outstanding   7,833    7,544 
Common stock issuable   -    - 
Stock subscription receivable   (261,059)   (261,059)
Additional paid-in capital   24,257,566    24,427,009 
Accumulated deficit   (26,103,686)   (25,320,424)
Total stockholders’ deficit   (2,099,146)   (1,146,730)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $677,551   $399,121 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-1

 

 

Resonate Blends, Inc.

Consolidated Statements of Operations

(Unaudited)

 

                 
   Three Months Ended   Six Months Ended 
   June 30, 2023   June 30, 2022   June 30, 2023   June 30, 2022 
                 
REVENUES  $6,361   $2,836   $16,468   $30,488 
COST OF REVENUES   4,685    2,421    13,257    15,278 
Gross profit   1,676    415    3,211    15,210 
                     
OPERATING EXPENSES                    
Advertising   153    69,806    13,437    235,277 
General and administrative   24,263    78,987    91,435    106,503 
Legal and professional   25,815    47,663    38,780    73,338 
Officer compensation   -    89,250    5,000    324,250 
Non cash management fees   -    4,505    -    206,462 
Total operating expenses   50,231    290,211    148,652    945,830 
                     
OPERATING LOSS   (48,555)   (289,796)   (145,441)   (930,620)
                     
OTHER INCOME (EXPENSES)                    
Interest expense   (105,706)   (344)   (152,109)   (22,801)
Gain (loss) on change in derivative liability   (211,786)   520,273    (351,737)   1,687,112 
Amortization of issuance costs   (36,263)   -    (133,975)   (31,795)
Gain on settlement of notes payable   -    (18,403)   -    (126)
Total operating income (expense)   (353,755)   501,526    (637,821)   1,632,390 
                     
NET INCOME (LOSS)  $(402,310)  $211,730   $(783,262)  $701,770 
                     
INCOME (LOSS) PER SHARE- basic and diluted  $(0.01)  $0.00   $(0.01)  $0.01 
                     
WEIGHTED AVERAGE SHARES OUTSTANDING   76,480,707    47,846,859    75,962,037    47,846,859 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-2

 

 

Resonate Blends, Inc.

Consolidated Statement of Stockholders’ Deficit

(Unaudited)

 

   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Issuable   Receivable   Deficit   Total 
   Preferred Stock
Series A
   Preferred Stock
Series C
   Common Stock  

Additional

Paid-in

   Common Stock   Subscription   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Issuable   Receivable   Deficit   Total 
Balance, December 31, 2021      -   $-    2,000,000   $200    45,046,637   $4,504   $21,867,416   $-   $-   $(25,974,051)  $(4,101,931)
                                                        
Issuance of common stock in private placement   -    -    -    -    1,065,556    107    260,952    -    (261,059)   -    - 
Issuance of common stock for debt conversions   -    -    -    -    780,000    78    131,447    -    -    -    131,525 
Stock issuance for services   -    -    -    -    904,666    90    201,957    -    -    -    202,047 
Net income   -    -    -    -         -    -    -    -    490,040    490,040 
                                                        
Balance, March 31, 2022   -   $-    2,000,000   $200    47,796,859   $4,779   $22,461,772   $-   $(261,059)  $(25,484,011)  $(3,278,319)
                                                        
Stock issuance for services   -    -    -    -    50,000    5    4,500    -    -    -    4,505 
Net income   -    -    -    -    -    -    -    -    -    211,730    211,730 
                                                        
Balance, June 30, 2022   -   $-    2,000,000   $200    47,846,859   $4,784   $22,466,272   $-   $(261,059)  $(25,272,281)  $(3,062,084)
                                                        
Balance, December 31, 2022   -   $-    2,000,000   $200    75,437,604   $7,544   $24,427,009   $-   $(261,059)  $(25,320,424)  $(1,146,730)
                                                        
Reclassification of convertible debt   -    -    -    -    -    -    (247,142)   -    -    -    (247,142)
Exercise of warrants   -    -    -    -    -    -    -    6,000    -    -    6,000 
Net loss   -    -    -    -    -    -    -    -    -    (380,952)   (380,952)
                                                        
Balance, March 31, 2023   -    -    2,000,000    200    75,437,604    7,544    24,179,867    6,000    (261,059)   (25,701,376)   (1,768,824)
                                                        
Exercise of warrants   -    -    -    -    1,273,273    127    29,873    (6,000)   -    -    24,000 
Stock issuance for services   -    -    -    -    250,000    25    2,278    -    -    -    2,303 
Issuance of common stock for commitment fees   -    -    -    -    1,368,000    137    45,548    -    -    -    45,685 
Net loss   -    -    -    -    -    -    -    -    -    (402,310)   (402,310)
                                                        
Balance, June 30, 2023   -   $-    2,000,000   $200    78,328,877   $7,833   $24,257,566   $-   $(261,059)  $(26,103,686)  $(2,099,146)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-3

 

 

Resonate Blends, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

   June 30, 2023   June 30, 2022 
   Six Months Ended 
   June 30, 2023   June 30, 2022 
Cash Flows from Operating Activities          
Net income (loss)  $(783,262)  $701,770 
Adjustments to reconcile net income (loss) to net cash used in operations          
Gain on derivative liability   351,737    (1,687,112)
Non cash interest expense   133,975    - 
Gain on settlement of notes payable   -    - 
Share professional fees/ compensation   47,988    206,462 
Depreciation and amortization   4,938    4,711 
Stock subscription receivable   -    (261,059)
Changes in operating assets and liabilities          
Inventory   59,473    (20,396)
Advances to suppliers   -    (3,721)
Other receivables   30,000    - 
Accounts payable and accrued expenses   271,639    40,281 
Due to related party   -    9,500 
Net cash provided by (used in) operating activities   116,488    (1,009,564)
           
Cash Flows from Investing Activities          
Deposit on acquisition of Pegasus Specialty Vehicles LLC   (435,000)   - 
Net cash provided by (used in) investing activities   (435,000)   - 
           
Cash Flows from Financing Activities          
Proceeds from issuance of convertible notes   460,000    788,800 
Proceeds from subscription   -    392,674 
Proceeds from warrant exercise   30,000    - 
Repayment of related party advances   (94,847)   - 
Repayment of convertible notes   (138,800)   (150,000)
Net cash provided by (used in) financing activities   256,353    1,031,474 
           
Net increase (decrease) in cash   (62,159)   21,910 
Cash, beginning of period   64,419    12,913 
Cash, end of period  $2,260   $34,823 
           
Supplemental cash flow disclosures          
Cash paid for interest  $-   $- 
Cash paid for taxes  $-   $- 
           
Non-cash investing and financing activities          
Conversion of debt for common stock  $-   $150,000 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-4

 

 

RESONATE BLENDS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023

(UNAUDITED)

 

NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS

 

The Company

 

Resonate Blends, 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.

 

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.

 

F-5

 

 

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. During the quarter ended March 31, 2023, these employment agreements were suspended.

 

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 June 20, 2023, the Company entered into an Agreement and Plan of Merger with Pegasus Specialty Vehicles, LLC, an Ohio limited liability company, and Pegasus Specialty Holdings LLC, an Ohio limited liability company and wholly-owned subsidiary of the Company.

 

Basis of Presentation

 

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

 

Reclassifications

 

Certain reclassifications have been made to the June 30, 2022 classifications to make them comparable to June 30, 2023.

 

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 June 30, 2023, the Company has an accumulated deficit of $26,103,686. 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.

 

F-6

 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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.

 

Consolidation

 

These consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

 

Cash

 

The Company considers all highly liquid instruments purchased with a 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.

 

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 June 30, 2023 and December 31, 2022, there’s no allowance for doubtful accounts and bad debts.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, the core principle of which is that the Company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

 

  Identification of the contract, or contracts, with a customer
  Identification of the performance obligations in the contract
  Determination of the transaction price
  Allocation of the transaction price to the performance obligations in the contract
  Recognition of the revenue when, or as, performance obligations are satisfied

 

Revenue is generally recognized upon purchase of products by customers.

 

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.

 

F-7

 

 

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).

 

Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the quarter ended June 30, 2023 and year ended December 31, 2022.

 

As of June 30, 2023  Level 1   Level 2   Level 3   Total 
Liabilities                    
Derivative Liabilities   -    -   $424,224   $424,224 

 

As of December 31, 2022  Level 1   Level 2   Level 3   Total 
Liabilities                    
Derivative Liabilities   -    -   $72,487   $72,487 

 

Inventory

 

Inventory is stated at the lower of cost or net realizable value. Cost is determined on a first in, first out basis.. Management compares the cost of inventory with the net realizable value and, if applicable, an allowance is made for writing down the inventory to its net realizable value, if lower than cost, inventory is reviewed for potential write-down for estimated obsolescence or unmarketable inventory based upon forecasts for future demand and market conditions. Generally, the Company only keeps inventory on hand for sales made and in which a deposit has been received.

 

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 policies capitalize 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.

 

F-8

 

 

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.

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

Management has periodically advanced funds to the Company for operating expenses. At June 30, 2023 and December 31, 2022, amounts due related parties were $69,100 and $164,946, respectively. These advances are non-interest bearing and payable upon demand.

 

NOTE 4 - CONVERTIBLE NOTE PAYABLE

 

Convertible notes payable consists of the following as of June 30, 2023 and December 31, 2022:

 

   June 30, 2023   December 31, 2022 
Convertible notes face value  $1,540,000   $988,800 
Less: Discounts   (12,328)   - 
Less: Debt issuance cost   -    - 
Net convertible notes  $1,527,672   $988,800 

 

At June 30, 2023 and December 31, 2022, $200,000 of the convertible notes was an 8% Unsecured Convertible Promissory Note from an investor issued March 5, 2021. The note has 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 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.

 

During the year ended December 31, 2022, the Company entered into Securities Purchase Agreements with five accredited investors, pursuant to which we issued and sold to the investors convertible promissory notes with a total principal amount of $715,000. We received $650,000 from the Notes after applying the original issue discount to the Notes. The Securities Purchase Agreements also included 812,500 warrants with a 5 year life and exercise price of $0.40 and 650,000 commitment shares. These notes have a Fixed Conversion Price or, at the option of the Holder in the event that the Borrower fails to complete a Qualified Offering before the five (5) month anniversary of the Issue Date, the Registration Conversion Price . The “Fixed Conversion Price” shall mean $0.15 per share. The “Registration Conversion Price” shall mean 75% multiplied by the Market Price (representing a discount rate of 25%). “Market Price” means 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.

 

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. During the six months ended June 30, 2023, the Company repaid the entire note.

 

F-9

 

 

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. We received $540,000 from the Note after applying the original issue discount to the Note. The note is convertible at a Variable Conversion Price shall equal the volume weighted average trading price (i) during the previous twenty (20) Trading Day period ending on the date of issuance of this Note, or (ii) during the previous twenty (20) Trading Day period ending on the Conversion Date

 

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.

 

The maturity date for repayment of the Notes is nine months from issuance and the Notes bear interest at 10% per annum.

 

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.

 

In connection with the investment, the Company issued Commitment Shares to the Investors in the amount of 5,571,429 shares collectively during the year ended December 31, 2022.

 

As of June 30, 2023 and December 31, 2022, accrued interest payable on notes payable was $202,556 and $265,480 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 – DERIVATIVE LIABILITIES

 

Certain of the above convertible notes contained an embedded conversion option with a conversion price that could result in issuing an undeterminable amount of future common stock to settle the host contract. Accordingly, the embedded conversion option is required to be bifurcated from the host instrument (convertible note) and treated as a liability, which is calculated at fair value, and marked to market at each reporting period.

 

The Company used the Black-Scholes pricing model to estimate the fair value of its embedded conversion option and warrant liabilities on both the commitment date and the remeasurement date with the following inputs:

 

   June 30, 2023   December 31, 2022 
         
Exercise price  $0.024 - $0.031   $0.030 
Expected volatility   473%   220%
Risk-free interest rate   4.64%   1.45%
Expected term (in years)   1.00    .1 
Expected dividend rate   0%   0%

 

F-10

 

 

NOTE 6 – SENIOR PROMISSORY NOTE

 

On June 20, 2023, the Company signed a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued and sold to the accredited investor a 15% original issue discount Senior Promissory Note (non-convertible), dated June 20, 2023, in the principal amount of $575,000. The Senior Promissory Note is secured by all of the Company’s assets under a separate security agreement between the accredited investor and the Company.

 

The Company received $435,000 from the Senior Promissory Note after applying the original issue discount and commissions and fees. The proceeds were utilized as a deposit on the Company’s acquisition of Pegasus Specialty Vehicles, LLC (See Note 7).

 

The maturity date for repayment of the Senior Promissory Note is September 20, 2023 and bears interest at 15% per annum starting 60 days after issuance and interest payable in cash monthly thereafter. The Company may prepay the Senior Promissory Note at any time, but is required to pay a premium of 104% of the principal amount if repaid after 60 days.

 

As additional consideration, the Company issued 1,318,000 shares of its common stock as commitment shares. The Company is required to issue additional commitment shares in the event the Senior Promissory Note is not prepaid at 60 days. Pursuant to a Registration Rights Agreement, the Company has agreed to register the commitment shares with the SEC no later than 90 days from the issuance of the Senior Promissory Note.

 

In the agreements, the Company agreed to certain restrictive covenants, including a restriction on borrowing and a most favored nation clause in favor of the accredited investor for any future offerings not specifically exempted.

 

On June 20, 2023, the Company and Pegasus Specialty Vehicles, LLC entered into a Loan and Security Agreement whereby the Company lent to Pegasus the principal amount of $575,000 secured by all of the Pegasus’ assets, but subordinate to the security interest of accredited investor and another lender of Pegasus.

 

NOTE 7 – AGREEMENT AND PLAN OF MERGER WITH PEGASUS SPECIALTY VEHICLES, LLC

 

On June 20, 2023, the Company entered into an Agreement and Plan of Merger with Pegasus Specialty Vehicles, LLC, an Ohio limited liability company (“Pegasus”), and Pegasus Specialty Holdings LLC, an Ohio limited liability company and wholly-owned subsidiary of the Company (“Pegasus Sub”).

 

The Merger Agreement provides that at the closing, subject to terms and conditions, Pegasus Sub will merge with and into Pegasus, with Pegasus surviving as a wholly-owned subsidiary of the Company. At Closing of the Merger, the issued and outstanding common shares of Pegasus will automatically be converted into the right to receive an aggregate of 623,500 shares of Series AA Preferred Stock of the Company.

 

The Company, Pegasus, and Pegasus Sub have each made various representations and warranties and agreed to certain covenants in the Merger Agreement, including a covenant by the Company that it would raise $3,000,000 less costs in new financing at Closing, with $435,000 loaned pre-Closing to Pegasus under a secured promissory note with a face value of $575,000. Pegasus granted a security interest to the Company in all of Pegasus’ assets on the $575,000 loan, subordinate to other security interests as to the same collateral. The Company received $500,000 from the Note after applying the Original Issue Discount (OID), $30,000 of which was used to pay commission to a broker as placement agent, $30,000 was paid to the lender for its legal fees and $5,000 for a due diligence fee paid to the lender. The balance was tendered to the Company to lend to Pegasus under a Loan and Security Agreement as described below.

 

Consummation of the Merger is subject to the satisfaction or, if permitted by applicable law, waiver, by the Company, Pegasus, or both of various conditions. For Pegasus, these conditions include, without limitation, (i) an agreeable plan to spin out the existing Company cannabis assets and operations, (ii) an agreeable plan to transfer the outstanding shares of Series C Preferred Stock of the Company to Brian Barrington simultaneously to the date of the aforementioned spin-out; (iii) an agreeable plan to retire the Series E Designation; (iv) financing by the Company of $3,000,000 less costs; (v) the filing of the Certificate of Designation for the Series AA Preferred Stock with the Secretary of State of Nevada; and (vi) certain other customary conditions. For the Company, these conditions include, without limitation, (i) a secured promissory note issued by Pegasus to the Company in the amount of $500,000 with the collateral being a UCC lien subordinate to other lenders; (ii) the payback by the Company of certain advances contributed by corporate officers and others in the Company in an amount not to exceed $140,000; (iii) resolutions of the equity holders of Pegasus approving the Merger Agreement and the transactions contemplated; and (iv) certain other customary conditions.

 

F-11

 

 

The Merger Agreement contains certain termination rights including the right of the parties to mutually agree upon termination, and by each of the Company and Pegasus unilaterally if the other party has committed a violation of the covenants, representations and warranties in the Merger Agreement.

 

The Merger Agreement, the Merger, and the transactions contemplated thereby were unanimously approved by the board of directors of Pegasus, and unanimously approved by the board of directors of the Company.

 

The Closing of the Merger is expected to occur as soon as practicable after the satisfaction or waiver of all the conditions to Closing in the Merger Agreement, which is currently expected to be in the 3rd quarter of calendar year 2023.

 

NOTE 8 – 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 $7,539 and $2,502 for the six months ended June 30, 2023 and 2022, 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. These agreements were suspended during the three months ended March 31, 2023.

 

NOTE 9 – STOCKHOLDERS’ EQUITY

 

During the six months ended June 30, 2023, the Company issued the following shares of common stock:

 

  The Company issued 1,273,273 shares of common stock for the exercise of a warrant for proceeds of $30,000;
  The Company issued 250,000 shares of common stock under a consulting agreement with a 1 year term. The shares were valued at $14,250, the fair value at the issuance date. Of this amount, $2,303 was recognized during the six months ended June 30, 2023, with the remaining $11,947 unrecognized.
  The Company issued a total of 1,368,000 shares of common stock as commitment fees under borrowing agreements. The Company recognized $45,685 in expenses, the fair value of the common stock on the issuance dates.

 

During the six months ended June 30, 2022 the Company issued a total of 954,666 shares of common stock to vendors for compensation and services rendered, valued at $200,014.

 

NOTE 10 – SUBSEQUENT EVENTS

 

The Company had one remaining convertible noteholder from the March 12, 2021 Private Placement Memorandum (PPM) that was holding his note, without accrued interest, since the note maturity date of January 3, 2022. On July 10, 2023, the noteholder converted his entire outstanding note into 3,282,219 shares of the Company’s common stock and the note is now fully retired.

 

F-12

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.

 

Actual results may differ materially from these expectations due to uncertainties related to the successful completion of our acquisition of Pegasus Specialty Vehicles, LLC, or our failure to complete such acquisition; the impact of the pendency of our acquisition on our business and operations; the timing and expected financing and the merger; the possibility that any or all of the various conditions to the consummation of the merger may not be satisfied or waived in a timely manner, if at all; the possibility of business disruptions due to transaction-related uncertainty; and the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement.

 

Other factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include but are not limited to changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC, including the risks and uncertainties identified under the heading “Risk Factors” in the Company’s most recent Annual Report on Form 10-K.

 

Overview

 

Our History and Experience in the Cannabis Space

 

On October 25, 2019, we announced our entry into the cannabis industry by acquiring Resonate Blends LLC (“Resonate Blends”), a California-based cannabis wellness lifestyle product company built on a proprietary system of experiential targets. Resonate Blends is a brand-focused cannabis organization offering premium brands of consistent quality. We also acquired Entourage Labs LLC (“Entourage Labs”), a sister company of Resonate Blends. Entourage Labs is the Intellectual Property (IP) subsidiary of Resonate Blends.

 

For the first two years, we concentrated on releasing product and brand building in California and investigated state expansion efforts as well. Resonate followed the launch of its first six Koan products, based on The Resonate System, by releasing “Love” in Q1-2022 and “Sleep” Cordials in Q2-2022. To address the price sensitivity of the market, Resonate also produced multi-serve versions of our most popular Cordials which significantly reduced the cost per serving. The Resonate products were designed for the discriminating wellness— focused consumer and that market has been slower to develop than anticipated. The current buyers of cannabis products seem interested in purchasing the highest level of THC for the least amount of money.

 

While we have won awards for our Koan Cordial brand, such as the LMCC award for “Best New Brand of 2021” and also a Cannabis Clio Award for “Packaging and Design”, the current environment in California has made it difficult to scale our business opportunities in a challenging market environment. Burdens such as overregulation, high taxes, price compression, the growth of the illicit market and the overpopulation of dispensaries in some areas, and no dispensaries in other areas – have made it difficult for many brands in California to succeed.

 

The legal cannabis industry Itself is laden with obstacles. There are significant restrictions on marketing activities and excessively high banking fees for compliant financial institutions. Layer upon layer of taxes raise prices of legal cannabis products so that they become cost prohibitive for customers. Many of the California dispensaries are in financial trouble and are unable to pay for the products that they have purchased. The distributor therefore prevents those accounts from ordering additional products. These and other constraints have made it difficult to build a successful business in the cannabis industry at this time. The cannabis industry is still in its infancy, so we expect continued headwinds. We recently pivoted to the cannabis consumption lounges for new revenue traction. These lounges are becoming popular in California, and we’ve teamed with several new lounges to introduce our six (6) Cordial blends into this new environment.

 

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The Company’s growth strategy is to create an innovative ecosystem of companies, investments and research that all support The Resonate System and its mission of empowering the wellness market. We have a product line of Cordials and have introduced our brand and products to the market through dispensaries in California and now into cannabis consumption lounges. Although we have had some success in establishing our presence in the California market, as of the date of this filing, we have not achieved significant revenues. We have a working capital deficit of $2,118,418 as of June 30, 2023, and we are wholly dependent on capital to fund our business operations. For these reasons, there are no assurances that we will be successful in this or any of our endeavors or become financially viable and continue as a going concern.

 

Since late 2019, we have been attempting to raise money to implement our business plan but have not been able to secure all the funds necessary to do so. The lack of sufficient funds, the present economy, the restrictions on commercial banking and the saturated nature of the cannabis industry have prevented this from happening. We have recently relied on convertible loans for working capital expenses. These loans were mostly on unfavorable terms, such as discounted conversion rights, original discounts, equity incentives and restrictive covenants. As we have been unable to raise the capital necessary to fully implement our business plan, we recently commenced a search for other business opportunities that may benefit our shareholders and allow us to raise capital to build a stronger operation.

 

The Merger Agreement with Pegasus Specialty Vehicles, LLC

 

Recent negotiations with what we believe is a more viable business opportunity for the holding company has emerged. On June 20, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Pegasus Specialty Vehicles, LLC (“Pegasus”), and Pegasus Specialty Holdings LLC, an Ohio limited liability company and our wholly-owned subsidiary (“Merger Sub”).

 

The Merger Agreement provides that at the closing (the “Closing”), subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with Pegasus surviving the Merger as a wholly-owned subsidiary of our company. At Closing of the Merger, the issued and outstanding common shares of Pegasus will automatically be converted into the right to receive an aggregate of 623,500 shares of Series AA Preferred Stock of Parent (the “Merger Consideration”).

 

Each of our company, Pegasus, and Merger Sub has made various representations and warranties and agreed to certain covenants in the Merger Agreement, including a covenant by us that we would raise $3,000,000 less costs in new financing at Closing, with $500,000 of such amount less costs loaned pre-Closing to Pegasus under a secured promissory note. Pegasus has a covenant that it would grant a security interest to us in all of its assets on the $500,000 loan, subordinate to other security interests as to the same collateral.

 

Consummation of the Merger is subject to the satisfaction or, if permitted by applicable law, waiver, by us, Pegasus, or both of various conditions. For Pegasus, these conditions include, without limitation, (i) an agreeable plan to spin out the existing cannabis assets and operations, (ii) an agreeable plan to transfer the outstanding shares of Series C Preferred Stock of our company to Brian Barrington simultaneously to the date of the aforementioned spin-out; (iii) an agreeable plan to retire the Series E Designation; (iv) financing by us of $3,000,000 less costs; (v) the filing of the Certificate of Designation for the Series AA Preferred Stock with the Secretary of State of Nevada; and (vi) certain other customary conditions. For us, these conditions include, without limitation, (i) a secured promissory note issued by Pegasus to us in the amount of $500,000 with the collateral being a UCC lien subordinate to other lenders; (ii) the payback by us of certain advances contributed by corporate officers and others in our company in an amount not to exceed $140,000; (iii) resolutions of the equity holders of Pegasus approving the Merger Agreement and the transactions contemplated; and (iv) certain other customary conditions.

 

The Merger Agreement contains certain termination rights including the right of the parties to mutually agree upon termination, and by each of Pegasus and our company unilaterally if the other party has committed a violation of the covenants, representations and warranties in the Merger Agreement.

 

The Merger Agreement, the Merger, and the transactions contemplated thereby were unanimously approved by the board of directors of our company, and unanimously approved by the board of directors of Pegasus and Merger Sub.

 

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The Closing of the Merger is expected to occur as soon as practicable after the satisfaction or waiver of all the conditions to Closing in the Merger Agreement, which is currently expected to be in the 3rd quarter of calendar year 2023.

 

Also on June 20, 2023, we signed a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”), pursuant to which we issued and sold to the Investor a 15% OID Senior Promissory Note (non-convertible), dated June 20, 2023, in the principal amount of $575,000 (the “Note”). The Note is secured by all of Pegasus’ assets under a separate security agreement between the Investor and Pegasus.

 

We received $500,000 from the Note after applying the original issue discount to the Note, $30,000 of which was used to pay a commission to a broker as placement agent and $30,000 was paid to the lender for its legal fees, and the balance was tendered to us to lend to Pegasus under a Loan and Security Agreement (described below) (the “Loan”).

 

The maturity date for repayment of the Note is September 20, 2023, and the Note bears interest at 15% per annum starting 60 days after issuance and interest payable in cash monthly thereafter. We may prepay the Note at any time, but if we repay the Note after 60 days, it is required to pay a premium of 104% of the principal amount.

 

As additional consideration, we agreed to issue to the Investor 1,318,000 shares of our common stock as commitment shares. We are required to issue additional commitment shares in the event the Note is not prepaid at 60 days. Pursuant to a Registration Rights Agreement (the “Registration Agreement”), we have agreed to register the Investor shares with the SEC no later than 90 days from the issuance of the Note.

 

In the Purchase Agreement, we agreed to certain restrictive covenants, including a restriction on borrowing and a most favored nation clause in favor of Investor for any future offerings not specifically exempted.

 

Also on June 20, 2023, we and Pegasus entered into a Loan and Security Agreement in the principal amount of $575,000 whereby we lent to Pegasus funds received from the June 20, 2023 Purchase Agreement less expenses secured by all of Pegasus’ assets but subordinate to the security interest of Investor and other lenders of Pegasus.

 

Pegasus is a manufacturer built on an innovative business model and manufacturing architecture providing best-in-class traditional, electric (EV) and hydrogen solutions to the multi-billion dollar school bus industry and also the broader specialty vehicle market. This leads us to believe that we will be revising our business plan and focus over the coming weeks and months. If this opportunity does not develop, however, we will continue to both seek new opportunities and look for capital to continue with our efforts in the cannabis industry.

 

The principal executive office is located at 26565 Agoura Road, Suite 200, Calabasas, CA 91302. The executive telephone number is (571) 888-0009.

 

Results of Operation for Three and Six Months Ended June 30, 2023 and 2022

 

Revenues

 

We have generated $6,361 and $16,468 in sales for the three and six months ended June 30, 2023, respectively, as compared with $2,836 and $30,488 in sales for the three and six months ended June 30, 2022, respectively, on our current product line.

 

We anticipate some increased revenues on our seven Cordials including our newly launched Sleep Cordial, for the rest of 2023, but the increase is not expected to be significant as a result the challenging market conditions we have experienced in the cannabis industry in California, as disclosed above. There can be no assurances, however, that customers will positively react to our products. For these reasons, there are no assurances that we will be successful in this or any of our endeavors or become financially viable and continue as a going concern.

 

As explained above, we are currently under contract of the Merger Agreement to enter the electric vehicle (EV) bus and clean energy specialty vehicle sector. If this opportunity develops, subject to closing conditions and the availability of financing, we may be revising our business plan and focus over the coming months.

 

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Gross Profit

 

We paid $4,685 and $13,257 in cost of revenues for the three and six months ended June 30, 2023, respectively, resulting in a gross profit of $1,676 and $3,211 for the three six months ended June 30, 2023, respectively. We paid $2,421 and $15,278 in cost of revenues for the three and six months ended June 30, 2022, respectively, resulting in a gross profit of $415 and $15,210 for the three and six months ended June 30, 2022, respectively.

 

We have had little historical data to compare our margins for the sale of our new products, which were introduced into the retail channel in late Q2 of 2021. Our gross margin, which is the difference between our revenues and our cost of revenues, is expected to increase in future quarters as we work to increase our efficiency and lessen costs. In addition, our gross margin percentage, which was 26% for the three months ended June 30, 2023, and, if we are unable to consummate the Merger Agreement with Pegasus, we hope our work to continue to penetrate the market and implement cost savings will result in a stabilized 35% to 43% gross margin range for the balance of 2023. We are also implementing new packaging configurations which we expect to stabilize our overall gross margin.

 

Operating Expenses

 

Our operating expenses were $50,231 and $148,652 for the three and six months ended June 30, 2023, respectively, as compared with $290,211 and $945,830 for the three and six months ended June 30, 2022, respectively.

 

The main drivers for the overall decrease in operating expenses in 2023 were the reduction of legal, professional fees and salaries as well as a significant decrease in non-cash management fees.

 

Unless we engage in a business combination Pegasus, our continued focus on sales, advertising, marketing and new product development costs to support our planned growth is expected to increase throughout 2023, subject to the issues we have been experiencing in the industry, as explained above.

 

We spent $221,840 less on advertising for the six months ended June 30, 2023, than for the six months ended June 30, 2022. We spent more on advertising for the six months ended June 30, 2022 to introduce our Koan Cordials to the California retail channel, perform Search Engine Optimization (SEO), conduct Programmatic advertising, hire a professional agency to promote our Cordials on social media channels and other general advertising methods.

 

Professional fees decreased by $34,558 for the six months ended June 30, 2023, over the six months ended June 30, 2022. Our professional fees were less for this quarter compared to the same quarter last year, but we expect that professional fees will increase in 2023 as we continue to ramp up operations or if we engage in a business combination with Pegasus as described above.

 

General and administrative expenses increased by $15,068 for the six months ended June 30, 2023, over the six months ended June 30, 2022. We expect general and administrative expenses to remain fairly constant throughout 2023, but expenses could increase significantly if we engage in a business combination with Pegasus.

 

Officer compensation decreased by $319,250 for the six months ended June 30, 2023, over the six months ended June 30, 2022. Our officer compensation was less for this quarter compared to the same quarter last year as we suspended payments of officer salaries during 2023, but we expect that officer compensation will increase in 2023 as we continue to ramp up operations or if we engage in a business combination with Pegasus as described above.

 

Non-cash management fees decreased by $206,462 for the six months ended June 30, 2023, over the six months ended June 30, 2022. Our non-cash management fees were less for this quarter compared to the same quarter last year as we did not issue shares for services during 2023, but non-cash management fees may increase in 2023 as we continue to ramp up operations or if we engage in a business combination with Pegasus as described above.

 

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Other Income / Expense

 

We had other expense of $353,755 and $637,821 for the three and six months ended June 30, 2023, respectively, compared with other income of $501,526 and $1,632,390 for the three and six months ended June 30, 2022, respectively.

 

Our other expense for the six months ended June 30, 2023 was mainly attributable a loss on the change in derivative liability, interest expense and the amortization of debt issuance costs.

 

Our other income for the six months ended June 30, 2022 was mainly attributable the gain on revaluation of derivative liabilities.

 

Net Income / Loss

 

We had net losses of $402,310 and $783,262 for the three and six months ended June 30, 2023, respectively, as compared with net income of $211,730 and $701,770 for the three and six months ended June 30, 2022, respectively.

 

Liquidity and Capital Resources

 

As of June 30, 2023, we had total current assets of $658,279 consisting of $2,260 in cash, $120,000 in other receivables, $435,000 in a deposit on the acquisition of Pegasus Specialty Vehicles and $101,019 in inventories. Our total current liabilities as of June 30, 2023 were $2,776,697. We had a working capital deficit of $2,118,418 as of June 30, 2023 compared with a working capital deficit of $1,170,940 as of December 31, 2022.

 

Cash Flows Provided by / Used in Operating Activities

 

Operating activities provided $116,488 in cash for the six months period ended June 30, 2023, compared with cash used of $1,009,564 for the six months period ended June 30, 2022. Our positive operating cash flow for the six months period ended June 30, 2023, was largely the result of an increase in accounts payable and accrued expenses. Our negative operating cash flow for the six months ended June 30, 2022 was largely the result of our unrealized gain on derivative liability of $1,687,112, offset by our net income of $701,770.

 

Cash Flows Used in Investing Activities

 

For the six months ended June 30, 2023, the company used $435,000 in investing activities as a deposit on the acquisition of Pegasus Specialty Vehicles. We did not use cash for investing activities for the six months ended June 30, 2022.

 

Cash Flows Provided by Financing Activities

 

Cash flows provided by financing activities during the six months ended June 30, 2023 amounted to $256,353, compared with cash flows provided by financing activities of $1,031,474 for the six months ended June 30, 2022. Our positive cash flows for the six months period ended June 30, 2023, consisted of net proceeds from convertible debentures of $321,200, proceeds from the sale of warrants of $30,000 offset by the repayment of related party advances of $94,847. Our positive cash flows for the six months ended June 30, 2022, consisted of proceeds from issuance of common stock of $392,674, proceeds from convertible notes payable of $788,800, offset by payments of notes payable of $150,000.

 

The features of the debt instruments and payables concerning our financing activities are detailed in the footnotes to our financial statements.

 

We are dependent on investment capital to continue our survival. We have raised money through convertible debt, almost always on unfavorable terms. There is no guarantee that these small convertible loans will be available to us in the future or on terms acceptable to us.

 

We recently raised $500,000 from the sale of the Note in connection with the covenant made in the Merger Agreement to raise $3,000,000 in funding, with $500,000 available prior to Closing. We plan to raise money in the sale of our equity and/or debt securities. There can be no assurance of funds from these efforts or that any other type of additional financing will be available to us on acceptable terms, or at all.

 

Any securities offered will not be or have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

 

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Going Concern

 

As of June 30, 2023, we have an accumulated deficit of $26,103,686. Our ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and our ability to achieve and maintain profitable operations. While we are expanding our 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 our ability to continue as a going concern. These financial statements do not include any adjustments that might arise from this uncertainty.

 

Off Balance Sheet Arrangements

 

As of June 30, 2023, there were no off-balance sheet arrangements.

 

Critical Accounting Policies

 

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies are disclosed in Note 2 of our audited financial statements included in the Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission.

 

Recent Accounting Pronouncements

 

No new accounting pronouncements issued or effective during the fiscal year has had or is expected to have a material impact on the financial statements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of June 30, 2023, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2023, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described below.

 

Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

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Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following three material weaknesses that have caused management to conclude that, as of June 30, 2023, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:

 

1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act as of the period ending June 30, 2023. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
3. Effective controls over the control environment were not maintained. Specifically, a formally adopted written code of business conduct and ethics that governs our employees, officers, and directors was not in place. Additionally, management has not developed and effectively communicated to employees its accounting policies and procedures. This has resulted in inconsistent practices. Further, our Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

 

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

 

To remediate the material weakness in our documentation, evaluation and testing of internal controls we plan to engage a third-party firm to assist us in remedying this material weakness once resources become available.

 

We intend to remedy our material weakness with regard to insufficient segregation of duties by hiring additional employees in order to segregate duties in a manner that establishes effective internal controls once resources become available.

 

Changes in Internal Control over Financial Reporting

 

No change in our system of internal control over financial reporting occurred during the period covered by this report, the period ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A: Risk Factors

 

See risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed on April 17, 2023.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933 during the six months ended June 30, 2023:

 

  The Company issued 1,273,273 shares of common stock for the exercise of a warrant for proceeds of $30,000;
     
  The Company issued 250,000 shares of common stock under a one year consulting agreement;
     
  The Company issued a total of 1,368,000 shares of common stock as commitment fees under borrowing agreements; and
     
  The Company issued a total of 954,666 shares of common stock to vendors for compensation and services rendered.

 

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

None

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

Exhibit Number   Description of Exhibit
     
3.1   Certificate of Amendment dated July 20, 2020
31.1   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**   The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Extensible Business Reporting Language (XBRL).
     
    **Provided herewith

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Resonate Blends, Inc.  
     
Date: August 14, 2023  
     
By: /s/ Geoffrey Selzer  
  Geoffrey Selzer  
Title:

President, Chief Executive Officer, Principal

Executive Officer, Principal Financial Officer,

Principal Accounting Officer and Director

 

 

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Exhibit 3.1

 

 

 
 

 

 

 
 

 

 

 

 

 

Exhibit 31.1

 

CERTIFICATIONS

 

I, Geoffrey Selzer, certify that;

 

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2023 of Resonate Blends, Inc. (the “registrant”);
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2023

 

/s/ Geoffrey Selzer  
By: Geoffrey Selzer  
Title: Chief Executive Officer  

 

 

 

 

Exhibit 31.2

 

CERTIFICATIONS

 

I, David Thielen, certify that;

 

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2023 of Resonate Blends, Inc. (the “registrant”);
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2023

 

/s/ David Thielen  
By: David Thielen  
Title: Chief Financial Officer  

 

 

 

 

Exhibit 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly Report of Resonate Blends, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023 filed with the Securities and Exchange Commission (the “Report”), I, Geoffrey Selzer, Chief Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
   
2. The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented.

 

By: /s/ Geoffrey Selzer  
Name: Geoffrey Selzer  
Title: Principal Executive Officer, Principal Accounting Officer and Principal Financial Officer  
Date: August 14, 2023  

 

This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

v3.23.2
Cover - shares
6 Months Ended
Jun. 30, 2023
Aug. 14, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2023  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2023  
Current Fiscal Year End Date --12-31  
Entity File Number 000-21202  
Entity Registrant Name Resonate Blends, Inc.  
Entity Central Index Key 0000897078  
Entity Tax Identification Number 58-1588291  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One 26565 Agoura Road  
Entity Address, Address Line Two Suite 200  
Entity Address, City or Town Calabasas  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 91302  
City Area Code 571  
Local Phone Number 888-0009  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   81,748,596
v3.23.2
Consolidated Balance Sheets (Unaudited) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Current assets    
Cash and cash equivalents $ 2,260 $ 64,419
Inventory 101,019 160,492
Other receivable 120,000 150,000
Deposit on acquisition of Pegasus Specialty Vehicles LLC 435,000
Total current assets 658,279 374,911
Fixed assets, net 19,172 24,110
Investment 100 100
TOTAL ASSETS 677,551 399,121
Current liabilities    
Accounts payable and accrued liabilities 298,397 319,618
Due to related parties $ 70,099 $ 164,946
Other Liability, Related Party, Type [Extensible Enumeration] Related Party [Member] Related Party [Member]
Convertible notes payable $ 1,527,672 $ 988,800
Senior promissory note 456,305
Derivative liability 424,224 72,487
Total current liabilities 2,776,697 1,545,851
Total liabilities 2,776,697 1,545,851
Stockholders’ Deficit    
Preferred stock value
Common stock; $0.0001 par value; 200,000,000 shares authorized; 78,328,877 and 75,437,604 shares issued and outstanding 7,833 7,544
Common stock issuable
Stock subscription receivable (261,059) (261,059)
Additional paid-in capital 24,257,566 24,427,009
Accumulated deficit (26,103,686) (25,320,424)
Total stockholders’ deficit (2,099,146) (1,146,730)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT 677,551 399,121
Series B Preferred Stock [Member]    
Stockholders’ Deficit    
Preferred stock value
Series C Preferred Stock [Member]    
Stockholders’ Deficit    
Preferred stock value 200 200
Series D Preferred Stock [Member]    
Stockholders’ Deficit    
Preferred stock value
v3.23.2
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Jun. 30, 2023
Dec. 31, 2022
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 200,000,000 200,000,000
Common stock shares issued 78,328,877 75,437,604
Common stock, shares outstanding 78,328,877 75,437,604
Series B Preferred Stock [Member]    
Preferred stock, shares authorized 66,667 66,667
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Series C Preferred Stock [Member]    
Preferred stock, shares authorized 2,000,000 2,000,000
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares issued 2,000,000 2,000,000
Preferred stock, shares outstanding 2,000,000 2,000,000
Series D Preferred Stock [Member]    
Preferred stock, shares authorized 40,000 40,000
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares issued 40,000 40,000
Preferred stock, shares outstanding 40,000 40,000
v3.23.2
Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Income Statement [Abstract]        
REVENUES $ 6,361 $ 2,836 $ 16,468 $ 30,488
COST OF REVENUES 4,685 2,421 13,257 15,278
Gross profit 1,676 415 3,211 15,210
OPERATING EXPENSES        
Advertising 153 69,806 13,437 235,277
General and administrative 24,263 78,987 91,435 106,503
Legal and professional 25,815 47,663 38,780 73,338
Officer compensation 89,250 5,000 324,250
Non cash management fees 4,505 206,462
Total operating expenses 50,231 290,211 148,652 945,830
OPERATING LOSS (48,555) (289,796) (145,441) (930,620)
OTHER INCOME (EXPENSES)        
Interest expense (105,706) (344) (152,109) (22,801)
Gain (loss) on change in derivative liability (211,786) 520,273 (351,737) 1,687,112
Amortization of issuance costs (36,263) (133,975) (31,795)
Gain on settlement of notes payable (18,403) (126)
Total operating income (expense) (353,755) 501,526 (637,821) 1,632,390
NET INCOME (LOSS) $ (402,310) $ 211,730 $ (783,262) $ 701,770
INCOME (LOSS) PER SHARE- basic $ (0.01) $ 0.00 $ (0.01) $ 0.01
INCOME (LOSS) PER SHARE- diluted $ (0.01) $ 0.00 $ (0.01) $ 0.01
WEIGHTED AVERAGE SHARES OUTSTANDING 76,480,707 47,846,859 75,962,037 47,846,859
v3.23.2
Consolidated Statement of Stockholders' Deficit (Unaudited) - USD ($)
Series A Preferred Stock [Member]
Preferred Stock [Member]
Series C Preferred Stock [Member]
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Common Stock Issuable [Member]
Subscription Receivable [Member]
Retained Earnings [Member]
Total
Balance at Dec. 31, 2021 $ 200 $ 4,504 $ 21,867,416 $ (25,974,051) $ (4,101,931)
Balance, shares at Dec. 31, 2021 2,000,000 45,046,637          
Issuance of common stock in private placement $ 107 260,952 (261,059)
Issuance of common stock in private placement, shares     1,065,556          
Issuance of common stock for debt conversions $ 78 131,447 131,525
Issuance of common stock for debt conversions, shares     780,000          
Stock issuance for services $ 90 201,957 202,047
Stock issuance for services, shares     904,666          
Net Income (loss) 490,040 490,040
Balance at Mar. 31, 2022 $ 200 $ 4,779 22,461,772 (261,059) (25,484,011) (3,278,319)
Balance, shares at Mar. 31, 2022 2,000,000 47,796,859          
Balance at Dec. 31, 2021 $ 200 $ 4,504 21,867,416 (25,974,051) (4,101,931)
Balance, shares at Dec. 31, 2021 2,000,000 45,046,637          
Net Income (loss)               701,770
Balance at Jun. 30, 2022 $ 200 $ 4,784 22,466,272 (261,059) (25,272,281) (3,062,084)
Balance, shares at Jun. 30, 2022 2,000,000 47,846,859          
Balance at Dec. 31, 2021 $ 200 $ 4,504 21,867,416 (25,974,051) (4,101,931)
Balance, shares at Dec. 31, 2021 2,000,000 45,046,637          
Balance at Dec. 31, 2022 $ 200 $ 7,544 24,427,009 (261,059) (25,320,424) (1,146,730)
Balance, shares at Dec. 31, 2022 2,000,000 75,437,604          
Balance at Mar. 31, 2022 $ 200 $ 4,779 22,461,772 (261,059) (25,484,011) (3,278,319)
Balance, shares at Mar. 31, 2022 2,000,000 47,796,859          
Stock issuance for services $ 5 4,500 4,505
Stock issuance for services, shares     50,000          
Net Income (loss) 211,730 211,730
Balance at Jun. 30, 2022 $ 200 $ 4,784 22,466,272 (261,059) (25,272,281) (3,062,084)
Balance, shares at Jun. 30, 2022 2,000,000 47,846,859          
Balance at Dec. 31, 2022 $ 200 $ 7,544 24,427,009 (261,059) (25,320,424) (1,146,730)
Balance, shares at Dec. 31, 2022 2,000,000 75,437,604          
Net Income (loss) (380,952) (380,952)
Reclassification of convertible debt (247,142) (247,142)
Exercise of warrants 6,000 6,000
Balance at Mar. 31, 2023 $ 200 $ 7,544 24,179,867 6,000 (261,059) (25,701,376) (1,768,824)
Balance, shares at Mar. 31, 2023 2,000,000 75,437,604          
Balance at Dec. 31, 2022 $ 200 $ 7,544 24,427,009 (261,059) (25,320,424) (1,146,730)
Balance, shares at Dec. 31, 2022 2,000,000 75,437,604          
Net Income (loss)               (783,262)
Balance at Jun. 30, 2023 $ 200 $ 7,833 24,257,566 (261,059) (26,103,686) (2,099,146)
Balance, shares at Jun. 30, 2023 2,000,000 78,328,877          
Balance at Mar. 31, 2023 $ 200 $ 7,544 24,179,867 6,000 (261,059) (25,701,376) (1,768,824)
Balance, shares at Mar. 31, 2023 2,000,000 75,437,604          
Stock issuance for services $ 25 2,278 2,303
Stock issuance for services, shares     250,000          
Net Income (loss) (402,310) (402,310)
Exercise of warrants $ 127 29,873 (6,000) 24,000
Exercise of warrants, shares     1,273,273          
Issuance of common stock for commitment fees $ 137 45,548 45,685
Issuance of common stock for commitment fees, shares     1,368,000          
Balance at Jun. 30, 2023 $ 200 $ 7,833 $ 24,257,566 $ (261,059) $ (26,103,686) $ (2,099,146)
Balance, shares at Jun. 30, 2023 2,000,000 78,328,877          
v3.23.2
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Cash Flows from Operating Activities    
Net income (loss) $ (783,262) $ 701,770
Adjustments to reconcile net income (loss) to net cash used in operations    
Gain on derivative liability 351,737 (1,687,112)
Non cash interest expense 133,975
Gain on settlement of notes payable
Share professional fees/ compensation 47,988 206,462
Depreciation and amortization 4,938 4,711
Stock subscription receivable (261,059)
Changes in operating assets and liabilities    
Inventory 59,473 (20,396)
Advances to suppliers (3,721)
Other receivables 30,000
Accounts payable and accrued expenses 271,639 40,281
Due to related party 9,500
Net cash provided by (used in) operating activities 116,488 (1,009,564)
Cash Flows from Investing Activities    
Deposit on acquisition of Pegasus Specialty Vehicles LLC (435,000)
Net cash provided by (used in) investing activities (435,000)
Cash Flows from Financing Activities    
Proceeds from issuance of convertible notes 460,000 788,800
Proceeds from subscription 392,674
Proceeds from warrant exercise 30,000
Repayment of related party advances (94,847)
Repayment of convertible notes (138,800) (150,000)
Net cash provided by (used in) financing activities 256,353 1,031,474
Net increase (decrease) in cash (62,159) 21,910
Cash, beginning of period 64,419 12,913
Cash, end of period 2,260 34,823
Supplemental cash flow disclosures    
Cash paid for interest
Cash paid for taxes
Non-cash investing and financing activities    
Conversion of debt for common stock $ 150,000