Resonate Blends, Inc. 10-K

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded under the symbol “KOAN” on the OTCQB. Only a limited market exists for our securities. There is no assurance that a regular trading market will develop, or if developed, that it will be sustained. Therefore, a shareholder may be unable to resell his securities in our company. The following tables set forth the range of high and low bid information for our common stock for the each of the periods indicated. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Fiscal Year Ending December 31, 2020 Quarter Ended High $ Low $ March 31, 2020 .20 .03 June 30, 2020 .27 .05 September 30, 2020 .19 .07 December 31, 2020 .20 .08 Fiscal Year Ending December 31, 2019 Quarter Ended High $ Low $ March 31, 2019 .70 .30 June 30, 2019 .42 .12 September 30, 2019 .16 .07 December 31, 2019 .22 .10 On March 31, 2021, the last sales price per share of our common stock was $.40. Holders of Our Common Stock As of March 31, 2021, we had 38,652,887 shares of our common stock issued and outstanding, held by approximately 187 shareholders of record at our transfer agent, with approximately 33 additional shareholders holding our shares in street name. Dividends We currently intend to retain future earnings for the operation of our business. We have never declared or paid cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future. In the event that a dividend is declared, common stockholders on the record date are entitled to share ratably in any dividends that may be declared from time to time on the common stock by our board of directors from funds legally available. 19 There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend: 1. We would not be able to pay our debts as they become due in the usual course of business; or 2. Our total assets would be less than the sum of our total liabilities, plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution. Securities Authorized for Issuance under Equity Compensation Plans On March 19, 2019, our Board of Directors adopted the 2019 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to attract and retain the best available personnel for positions of substantial responsibility with us, to provide additional incentive to employees, directors and consultants, and to promote our success. Under the Plan, we are currently able to issue up to an aggregate total of 10,000,000 incentive or non-qualified options to purchase our common stock, stock awards and other offerings. Equity Compensation Plans as of December 31, 2019 Equity Compensation Plans Approved by the Shareholders Number of Securities to be issued upon exercise of outstanding options Weighted- average exercise price of outstanding options Number of Securities remaining available for future issuance under equity compensation plans (a) (b) (c) 2019 Equity Compensation Plan - - 10,000,000 Other Equity Compensation (restricted stock awards) - - - Total - - 10,000,000 Recent Sales of Unregistered Securities During the year ended December 31, 2020 the company issued a total of 3,830,408 shares of common stock to management and vendors for compensation and services rendered 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 6. Selected Financial Data Not required under Regulation S-K for “smaller reporting companies.” 20 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations for the Years Ended December 31, 2020 and 2019 Revenues We have generated no revenues in our cannabis holding company or from our operating subsidiaries, Resonate Blends, LLC or Entourage Labs, LLC, for the years ended December 31, 2020 and 2019. We anticipate booking revenue from the Resonate Koan product line in early 2nd quarter of 2021. Operating Expenses Our operating expenses were $1,813,958 for the year ended December 31, 2020, as compared with $3,178,000 for the year ended December 31, 2019. The main reason for our decreased operating expenses in 2020 was a result of non-cash management fees in 2019 of $2,650,518, while this year we only have $198,514 non-cash management fees. We expect that our operating expenses will increase in 2021 over 2020 as a result of our product launch and the increased expenses associated with operations. Other Income We had other expenses of $143,113 for the year ended December 31, 2020 compared with other expenses of $320,974 for the year ended December 31, 2019. The main reason for our increased other expenses in 2020 was a result of loss on revaluation of derivative liabilities. Net Income/Loss We had net loss of $1,941,274 for the year ended December 31, 2020, as compared with net loss of $3,669,728 for the year ended December 31, 2019. Liquidity and Capital Resources As of December 31, 2020, we had total current assets of $168,924, consisting of $114,325 in cash and $54,599 in advances to suppliers. Our total current liabilities as of December 31, 2020 were $1,165,363. We had a working capital deficit of $996,439 as of December 31, 2020, compared with a working capital deficit of $612,330 as of December 31, 2019. Cash Flows from Operating Activities Operating activities used $1,381,003 in cash for the year ended December 31, 2020, compared with cash used of $790,897 for the year ended December 31, 2019. Our negative operating cash flow for the year ended December 31, 2020 was largely the result of our net loss of $1,941,274, offset by share based compensation of $508,419. Our negative operating cash flow for the year ended December 31, 2019 was largely the result of our net loss of $3,510,101, offset mainly by share based compensation of $2,650,518. Cash Flows from Investing Activities We used no cash on investing activities for the year ended December 31, 2020, but we had $25,000 used in connection with an investment in Joaint in 2019. Cash Flows from Financing Activities Cash flows provided by financing activities during the year ended December 31, 2020 amounted to $1,492,213 compared with cash flows provided by financing activities of $819,012 for the year ended December 31, 2019. Our positive cash flows for the year ended December 31, 2020 consisted of proceeds from issuance of common stock $1,011,113, proceeds from Convertible notes payable $850,100, offset by payments of notes payable of $369,000. Our positive cash flows for the year ended December 31, 2019 consisted of proceeds from the issuance of preferred stock and warrants of $811,262 and proceeds from convertible notes of $267,750. 21 The features of the debt instruments and payables concerning our financing activities are detailed in the footnotes to our financial statements. Our optimum level of growth for success will be achieved if we are able to raise $1,500,000 in the next twelve months. However, funds are difficult to raise in today’s economic environment. We have experienced a history of losses. If we are unable to raise $1,500,000, our ability to implement our business plan and achieve our goals will be significantly diminished. 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 also plan to raise money in the sale of our equity and 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. Going Concern As of December 31, 2020, we have an accumulated deficit of $21,100,995. 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 December 31, 2020, 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 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. 22