Resonate Blends, Inc. 10-K

Item 1. Business Overvie w On October 25, 2019, Resonate Blends, Inc. (Formerly Textmunication Holdings Inc.) announced its entry into the cannabis industry by acquiring Resonate Blends LLC (“Resonate” or the “Company”); a California-based cannabis wellness lifestyle product company built on a proprietary system of experiential targets. Resonate is building a brand-focused vertically integrated cannabis organization offering trusted brands of consistent quality. The Company also acquired Entourage Labs LLC (“Entourage Labs”), a sister company of Resonate. Entourage Labs is the Intellectual Property (IP) subsidiary of Resonate. Based in Calabasas, California, Resonate Blends, Inc. is a cannabis holding company centered on valued-added holistic Wellness and Lifestyle brands. The company’s strategy is to ignite future growth by building a purpose-driven portfolio of research organizations, innovative and emerging brands, and retail channels. The holding company’s focus is finding mutual value between product and consumer by optimizing quality, supply chain resources and financial performance. The Company offers a family of premium cannabis-based products of consistent quality based on unique formations calibrated to Resonate Blends effects system in what we believe is the industry gold standard in user experience. The Company believes the greatest long-term value creation in the Cannabis industry will be in the establishment of high quality and consistent consumer brands. Resonate hopes to become a national leader through its vision in creating a family of brands designed specifically to support the industry. Koan, the Resonate Blends product family, is based around a comprehensive system of interconnected experience targets that allow people to select the products that best fit their lifestyle and health objectives. Koan products are dedicated to the efficacy and precision of functional experience targets across a broad range of product categories. We are currently finalizing development in cooperation with an award-winning strategic partner in preparation for the launch of our first product line of six products. We believe that these multi-use products will deliver specific, predictable, reliable, effects in a format that is completely unique in the industry. We have formalized contracts with our logistical and marketing partners, and we are on target for our upcoming product release. This release will be followed before year end with our second product line that is already in full development. Our holding company, Resonate Blends, Inc., is now comprised of Resonate Blends LLC, the cannabis operations and product development side of the company. Entourage Labs LLC is our Intellectual Property (IP) subsidiary, and Textmunication, Inc. is our mobile marketing subsidiary for the health, fitness and wellness sectors. Textmunication is a developing player in the mobile marketing and loyalty industry, providing cutting-edge mobile marketing solutions, rewards and loyalty to our clients. With a powerful yet intuitive suite of services, clients are able to reach more customers faster and reward them for repeat business. We help clients reach their marketing and revenue goals by educating clients with the most effective tools in mobile marketing, rewards, paperless redemption and loyalty. In the past 4 years, our mobile marketing business has not been able to generate sufficient revenue to be able to sustain administrative expenses and has been unable to raise sufficient capital from the public market for the current and future competitive environment. The board of directors, with the leadership of our new CEO, has decided to change the company’s business focus to the cannabis industry and has plans to dispose of the mobile marketing business. This determination of the board of directors has been based on evaluating various strategic alternatives and conducting an extensive review of our financial condition, results of operations and business prospects, that attempting to raise additional capital, continuing to operate as a going concern was not reasonably likely to create greater value for our stockholders pursuing the mobile business model. The Company submitted the required information to affect a new corporate name and stock symbol change to Financial Industry Regulatory Authority (FINRA). On December 16, 2019, the new corporate name was announced as Resonate Blends, Inc. and its common stock now trades on the OTCQB under the symbol “KOAN”, a symbol named after the Company’s upcoming product brand. Aspire Consulting Group LLC, an IT Services firm out of Gaithersburg, Maryland is no longer in the holding company as of October 25, 2019. 3 Our principal executive office is located at 26565 Agoura Road, Suite 200, Calabasas, CA 91302 and our mobile marketing offices are located at 1940 Contra Costa Blvd. Pleasant Hill, CA 94523. Our executive telephone number is (571) 888-0009 and our mobile marketing main number is (800) 677-7003. Cannabis Product Business Our Focus Based in Calabasas, California, Resonate Blends, Inc. is a cannabis holding company centered on developing and acquiring proprietary branded holistic Wellness and Lifestyle products. The company strategy is to ignite future growth by building a portfolio of research organizations, innovative and emerging brands, and retail channels. The Company will soon launch a family of premium cannabis-based products based on proprietary formations calibrated to its Resonate Blends Effects System, the foundation of its core ethos—to offer quality consumer cannabis plant-based products that deliver on their promise. Resonate Blends started with a simple mission — to demystify cannabis for the consumer. The Resonate Effects System was developed to make Cannabis plant-based products understandable, accessible and predictable to support the Wellness lifestyle. Resonate Blends empowers people to optimize their lifestyle by developing proprietary and innovative branded products built on the science of plant medicine that best fit their personal needs. The Company believes the greatest long-term value creation in the Cannabis industry will be in the establishment of high-quality consumer brands that deliver the expected experience. As cultivation, supplies and services become quickly commoditized, value added brands represent the best opportunity for Resonate Blends and its shareholders to support and benefit from the growth expected in the Cannabis industry. In support of this philosophy, we believe the Company represents the best-in-class vision on how to create a family of brands designed specifically to support the personal needs of the consumer as the Industry continues to evolve from an underground business to a national consumer facing products business. Resonate’s growth strategy is to create an ecosystem of companies, investments and research that all support the Resonate System. In addition to being product brand focused, the Company plans to incubate and integrate synergistic companies and partners. Using the Resonate System as its lens, Resonate plans to find entrepreneurial companies that support its ethos. By vertically integrating these companies, Resonate believes that it is able to provide consistent product quality that yields expected results and that also manages margins and profitability at scale. Resonate plans to launch its first Koan brand of products in a series of infused products by Q3, but the launch is dependent upon supply chain efficiencies which could be affected by the COVID-19 pandemic. The initial launch will be in California with a state-wide distribution system already assembled. Resonate will be executing a multi-state strategy with the goal of becoming a leading national brand once the California market is optimized. The Company plans to strategically acquire assets and existing businesses in the cannabis space allowing for a vertically integrated organization centered on “wellness lifestyle”. Resonate Blends has finalized development in cooperation with an award-winning strategic partner in preparation for the launch of our first product line of six products. These multi-use products deliver specific, predictable, reliable, effects in a format that is completely unique in the industry. The Company has formalized contracts with the leading logistical and marketing partners, and we are on target for our upcoming product releases. Resonate made an investment into Joiant, the top selling CBD:THC pre-roll brand in California (according to BDS Analytics) with the option to fully acquire the company in 2020. Joiant is led by former Co-Founder of Pandora Media, Jon Kraft and Joiant Founder Lindsey Kirk, a former KIVA Confections ambassador. In addition to preparing for the release of the Koan products, Resonate Blends is refocusing and building the holding company. Resonate Blends’ growth strategy is to avoid investments in heavily commoditized assets and to incubate and integrate synergistic companies and partners. Vertical integration will occur only to support product requirements and to provide consistent product quality that yields expected results. 4 As a public company, Resonate Blends can rapidly speed growth through highly targeted acquisitions in the marketplace that support and enhance organic growth. The Company is in the process of restructuring its balance sheet to align capital raising and acquisitions with long-term strategy which means raising and supporting long term capital versus short term capital raises. Referral Partners Resonate has a joint research and development project with Vertosa, an award-winning industry leader in Nano and micro-emulsions and the leading provider of safe, reliable emulsion bases for infused product developers. All of Vertosa’s inactive base materials are FDA approved and are lab tested for quality. Vertosa’s Hemp-derived CBD Emulsion System is now certified organic by CCOF , a United States Department of Agriculture-accredited certifier and non-profit advocacy group, and the company has also received its Good Manufacturing Practice (GMP) certification , confirming their offerings follow regulations promulgated by the US Food and Drug Administration and are safe, pure, and effective. The Resonate team believes that Vertosa is the idea partner to support the production of the premium lifestyle-wellness Koan product family. In addition, Resonate has selected respected packaging materials suppliers, manufacturing and distribution partner. Marketing Plan and Personnel Resonate is planning a carefully targeted and monitored soft product launch to dispensaries in the Los Angeles metro area. Within 90 days, the products are expected to be available in additional dispensary expanding around the starter hub. However, we are dependent upon the evolving market conditions around the COVID-19 pandemic, and the timing of our launch is based on market conditions. We believe this plan implementation provides maximum marketing efficiency and effectiveness as geo-targeted media can target customers of several dispensaries at once. The Resonate marketing plan for Koan products includes location-based programmatic content, out-of-home promotion, in dispensary promotion, budtender training, and budtender events. Several high-quality product launch events are also being planned. The products will also be supported by an on-going social media campaign designed by a leading agency with significant experience in the cannabis-wellness industry. Resonate has a Chief of Creative Design and a Marketing Director both responsible for the marketing plans and execution of those plans. Competition While there are a number of high-quality cannabis product manufacturers such as Candescent, Beboe, Dosist, Papa & Barkley each specialize in several product effects or specific delivery systems. Resonate’s Koan products are unique in both their delivery system and their highly targeted experiences. Government Regulation Marijuana is a Schedule-I controlled substance under the Controlled Substances Act and is illegal under federal law. It remains illegal under United States federal law to grow, cultivate, sell or possess marijuana for any purpose or to assist or conspire with those who do so. Additionally, 21 U.S.C. 856 makes it illegal to “knowingly open, lease, rent, use, or maintain any place, whether permanently or temporarily, for the purpose of manufacturing, distributing, or using any controlled substance.” Even in those states in which the use of marijuana has been authorized, its use remains a violation of federal law. Since federal law criminalizing the use of marijuana is not pre-empted by state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in the Company’s clients’ inability to proceed with their operations, which would adversely affect demands for the Company’s products. Laws and regulations affecting the medical and adult-use marijuana industry are constantly changing, which could detrimentally affect the Company’s clients and, in turn, the Company’s operations. Local, state and federal marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require the Company’s clients and thus the Company itself to incur substantial costs associated with modification of operations to ensure such clients’ compliance. In addition, violations of these laws, or allegations of such violations, could disrupt the Company’s clients’ business and result in a material adverse effect on the Company’s operations. In addition, it is possible that regulations may be enacted in the future that will limit the amount of cannabis growth or related products that the Company’s commercial clients are authorized to produce. The Company cannot predict the nature of any future laws, regulations, interpretations or applications, nor can it determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on its operations. 5 Since the use of marijuana is illegal under federal law, there is a compelling argument that banks cannot lawfully except for deposit funds from businesses involved with marijuana. Consequently, businesses involved in the cannabis industry often have trouble finding a bank willing to accept their business. The inability to open bank accounts may make it difficult for the Company’s clients to operate and their reliance on cash can result in a heightened risk of theft, which could harm their businesses and, in turn, harm the Company’s business. Additionally, some courts have denied marijuana-related businesses bankruptcy protection, thus, making it very difficult for lenders to recoup their investments, which may limit the willingness of banks to lend to the Company’s clients and to the Company itself. In the United States, many marijuana-related businesses are subject to a lack of adequate insurance coverage. In addition, many insurance companies may deny claims for any loss relating to marijuana or marijuana-related operations based on their illegality under federal law, noting that a contract for an illegal transaction is unenforceable. Intellectual Property Resonate Blends does its own research and development. It uses third party experts to support its own efforts and controls its own formulation, designs and delivery methods. This company conducts research on refining effects based on the Entourage Effect and in complementary areas of adaptogens and plant medicine. The company is protecting its formulas, designs, marketing language and digital assets through copyright and the United States Patent and Trademark Office. The company currently owns numerous domain names, Koan®; The Active Ingredient is You™ and is in process with several other terms. All of the company’s digital assets and product packaging is being copyrighted. Mobile Marketing Business Principal Products and Services We are an online mobile marketing platform service that will connect merchants with their customers and allow them to drive loyalty and repeat business in a non-intrusive, value added medium. We provide a mobile marketing platform where merchants can send customers the most up-to-date offers, discounts, alerts and events schedules, such as, for instance, happy hours, trivia night, and other campaigns. The consumer can also access specials and promotions that merchants choose to distribute through us by opting keywords designated to the merchant’s keywords. This allows consumers to take their information wherever they go and learn about the latest buzz as soon as it is available, providing the consumer with events, deals, and messages on their cell phone via SMS messaging. We are a mobile marketing platform that connects the mass consumer to the content that they crave – anywhere, anytime, through virtually any mobile device for all local events and promotions. Our mobile marketing solutions apply to any industry, offering a new and innovative way to reach out to a merchant’s customer base. Some examples include: ● Gyms – guest promotions, reminders, new rates, fitness tips; ● Bars – happy hours, special events, discount pricing; ● Boutiques – invite only trunk show, spring sale, discount on a clothing line, carrying a new line of clothes; ● D entists – special promotion for teeth whitening; ● Investor Relations – sending notifications to investors on news alerts and company updates; ● Digital Marketing – promoting marketing updates from global clients using SMS in their portfolio; ● Salons – promotion on products, new line of products, introducing a new stylist; ● Restaurants – Dine about town participation, discount coupons; and ● Real Estate Agents – Introducing a new home on the market, price reduction, or an open house event. Additionally, we are a mobile marketing platform that allows merchants to get more impact out of their promotions. Our merchants will be able to recommend promotions to their customers proactively, which will help merchants increase foot traffic and revenue. Utilizing the information that is being collected, our merchants can better target their clients. This system empowers merchants and enables them to adjust programs at a moment’s notice. Employees We will need to pay our management team and consultants that assist with managerial and administration efforts in the next twelve months. We have six (6) employees at Resonate Blends, Inc., including a CEO, COO, CIO, Product Director, Chief Creative Designer and Marketing Director. Textmunication, Inc., our SMS subsidiary, has 5 full-time employees, including a CEO, VP of Sales, Marketing Director, Customer Service Manager and Lead Technical Developer that assists with development, systems engineering, and platform maintenance. We have employment agreements or written consulting agreements with all our personnel at Resonate Blends, Inc. and an employment agreement with Textmunication, Inc. CEO, Wais Asefi. We don’t have employment agreements with any other employee at Textmunication, Inc. outside of Mr. Asefi. 6 In order to compensate all of the above managerial and administrative support, we estimate we will require $850,000 in new revenue and funding over the next twelve months. As we continue to grow, additional resources will be added to assist in advisory services, such as operations, governance, supply chain, product development and wellness expertise. We plan on hiring at least two advisors to Resonate Blends, Inc. to cover the areas listed above. We also look to hire two additional Board Directors with the expertise to guide our holding company. We anticipate the Director and Advisory positions to be paid mainly in restricted stock.