Resonate Blends, Inc. 10-Q

Item 1. Financial Statements Our consolidated financial statements included in this Form 10-Q are as follows: F-1 Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020; F-2 Consolidated Statements of Operations for the for the three and nine months ended September 30, 2021 and 2020 (unaudited); F-3 Consolidated Statement of Stockholders’ Equity (Deficit) for the nine months ended September 30, 2021 and 2020 (unaudited); F-4 Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (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 period ended September 30, 2021 are not necessarily indicative of the results that can be expected for the full year. 3 RESONATE BLENDS , INC. (FORMERLY TEXTMUNICATION HOLDINGS, INC.) CONSOLIDATED BALANCE SHEETS September 30,2021 December 31, 2020 ASSETS Current assets Cash and cash equivalents $ 390,534 $ 114,325 Receivables - Prepaid expenses and other current assets 23,485 54,599 Inventories 234,998 - Total current assets 649,017 168,924 Fixed assets, net 36,047 - Investment in equity method investee 100 100 TOTAL ASSETS 685,164 169,024 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities Accounts payable and accrued liabilities 141,845 198,936 Due to related parties - 187,500 Convertible notes payable, net of discount 1,865,000 504,793 Derivative liability 3,380,960 274,134 Settlement liability Current liabilities of discontinued operations - Total current liabilities 5,387,805 1,165,363 Total liabilities 5,387,805 1,165,363 Stockholders’ deficit Preferred stock, 10,000,000 shares authorized, $ 0.0001 par value, 2,000,000 shares issued. Series B - Preferred stock, 66,667 shares authorized, $ 0.0001 par value, 0 issued. - 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 and 0 issued and outstanding, respectively Preferred stock, value Common stock; $ 0.0001 par value; 200,000,000 shares authorized; 44,987,466 and 24,789,981 shares issued and outstanding as of September 30, 2021 December 31, 2020, respectively. 4,498 2,976 Additional paid-in capital 22,734,370 20,101,480 Accumulated deficit ( 27,441,709 ) ( 21,100,995 ) Total Stockholders’ deficit ( 4,702,641 ) ( 996,339 ) TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY $ 685,164 $ 169,024 The accompanying notes are an integral part of these unaudited consolidated financial statements 4 RESONATE BLENDS, INC. (FORMERLY TEXTMUNICATION HOLDINGS, INC.) CONSOLIDATED STATEMENTS OF OPERATIONS 1 The Three Months Ended The Nine Months Ended September 30 2021 September 30 2020 September 30 2021 September 30 2020 REVENUES $ 7,574 $ - $ 7,574 $ - COST OF REVENUES 12,304 - 12,304 - Gross profit ( 4,730 ) - ( 4,730 ) - Operating expenses Advertising 224,294 178 435,212 6,875 General and administrative expenses ( 31,634 ) 112,967 84,518 456,674 Legal and Professional fees 90,920 16,705 517,925 401,095 Officer Compensation 195,251 - 434,365 - Salaries and Related 2,500 106,000 196,250 381,900 Sales Commission - - - Office Rent 405 310 1,870 405 Impairment of inhouse software - - - Non cash management fees 281,176 - 1,267,297 198,514 Total operating expenses 762,912 236,160 2,937,437 1,445,463 Loss from operations ( 767,642 ) ( 236,160 ) ( 2,942,167 ) ( 1,445,463 ) Other Income (expense) Other Income ( 154 ) 690 - Interest expense ( 38,015 ) ( 25,988 ) ( 97,243 ) ( 54,453 ) Gain on change of derivative liability 961,857 - ( 3,168,598 ) ( 617,769 ) Amortization of debt discount ( 29,033 ) ( 10,583 ) ( 40,475 ) Amortization of debt issuance costs ( 61,771 ) ( 185,314 ) Gain (loss) on settlement of derivative liabilities - - 31,961 Legal settlement - ( 31,889 ) - ( 31,889 ) Gain on settlement of notes payable 5,000 - 62,500 - Total other expense 866,917 ( 86,910 ) ( 3,398,548 ) ( 712,625 ) Income (loss) from investment in equity method investee - - - - NET INCOME (LOSS) from continuing operations 99,274 ( 323,070 ) ( 6,340,715 ) ( 2,158,088 ) NET INCOME (LOSS) from discontinued operations ( 28,329 ) 15,778 NET INCOME (LOSS) 99,274 ( 351,399 ) ( 6,340,715 ) ( 2,142,310 ) Basic weighted average common shares outstanding 31,085,610 23,694,220 31,085,610 19,731,100 Net Income (loss) per common share: basic and diluted $ 0.00 $ ( 0.01 ) $ ( 0.20 ) $ ( 0.11 ) The accompanying notes are an integral part of these unaudited consolidated financial statements 5 RESONATE BLENDS , INC. (FORMERLY TEXTMUNICATION, INC.) CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020 Shares Amount Shares Amount Shares Amount Paid-in Capital Deficit Deficit Preferred Stock Series A Preferred stock - Series C Common Stock Additional Accumulated Total Stockholders’ Balance, December 31, 2020 - - 2,000,000 200 29,769,627 2,976 20,101,480 ( 21,100,995 ) ( 996,339 ) Issuance of common stock - - 11,633,260 1,163 1,721,338 1,722,501 Non cash compensation Non cash compensation, shares Conversion of notes payable Conversion of notes payable, shares Cancellation of shares held by Textmunication Cancellation of shares held by Textmunication, shares Shares issues for legal settlement Shares issues for legal settlement, shares Cancellation of preferred stock Cancellation of preferred stock, shares Net Loss for the quarter - - - - - - - ( 1,058,462 ) ( 1,058,462 ) Balance, March 30, 2021 - $ - 2,000,000 $ 200 41,402,887 $ 4,139 $ 21,822,818 $ ( 21,100,995 ) $ ( 332,300 ) Net Loss for the quarter ( 6,439,991 ) ( 6,439,991 ) Issuance of common stock - - - - 2,868,025 288 582,920 583,208 Balances June 30, 2021 - $ - 2,000,000 $ 200 44,270,912 $ 4,427 $ 22,405,738 $ ( 27,540,986 ) $ ( 5,130,621 ) Net Loss for the quarter - - - - - - - $ 99,274 $ 99,274 Non cash compensation - - - - 716,554 $ 72 $ 328,632 $ 328,704 Balances September 30, 2021 - $ - 2,000,000 $ 200 44,987,466 $ 4,499 $ 22,734,370 $ ( 27,441,711 ) $ ( 4,702,641 ) Preferred Stock Series A Preferred stock - Series C Common Stock Additional Accumulated Total Stockholders’ Balance December 31, 2019 4,000,000 $ 400 2,000,000 $ 200 17,133,936 $ 1,715 $ 18,570,178 $ ( 19,159,721 ) $ ( 587,228 ) Net Loss for the quarter ( 608,828 ) ( 608,828 ) Common stock issuance - - - - 2,571,778 255 275,440 275,696 Balance March 31, 2020 4,000,000 $ 400 2,000,000 $ 200 19,705,714 $ 1,970 $ 18,845,618 $ ( 19,768,549 ) $ ( 920,360 ) Net Loss for the quarter $ ( 1,182,083 ) ( 1,182,083 ) Non-Cash Compensation - - - - 2,495,129 250 249,265 249,515 Conversion of notes payable - - - - 750,000 75 74,925 75,000 Common stock issue - - - - 1,000,000 100 99,900 100,000 Balance June 30, 2020 4,000,000 400 2,000,000 200 23,950,843 2,395 19,269,708 ( 20,950,632 ) ( 1,677,928 ) Net Loss for the quarter ( 351,399 ) ( 351,399 ) Common stock Issuance for Cash - - - - 2,903,333 290 389,710 390,000 Conversion of notes payable - - - - 900,000 90 89,910 90,000 Cancellation of shares held by Textmunication - - - - ( 4,755,029 ) ( 476 ) ( 332,376 ) ( 332,852 ) Non cash compensation - - - - 1,335,279 134 93,336 93,470 Shares issues for legal settlement - - - - 455,555 46 31,842 31,888 Cancellation of preferred stock - 4000000 - 400 - - 400 - Balance September 30, 2020 - - 2,000,000 200 24,789,981 2,479 19,542,530 ( 21,302,031 ) ( 1,756,821 ) The accompanying notes are an integral part of these unaudited consolidated financial statements 6 RESONATE BLENDS , INC. (FORMERLY TEXTMUNICATION, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020 2021 2020 Cash Flows from Operating Activities Net Income (loss) $ ( 6,340,715 ) $ ( 2,142,310 ) Net loss from discontinued operations ( 15,778 ) Adjustments to reconcile - Amortization and depreciation 10,583 40,475 Loss on derivative liability 3,106,826 536,819 Non cash interest expense 16,142 101,014 Legal Settlement 106,961 Share professional fees 82,473 176,627 Share based compensation 1,267,297 198,514 Gain (Loss) on the settlement of debt ( 62,500 ) ( 31,961 ) Gain on settlement of derivative liabilities ( 143,293 ) Changes in assets and liabilities - Receivables - Inventories ( 234,998 ) Prepaid expenses and other current assets ( 23,485 ) Advances to suppliers ( 54,599 ) Accounts payable and accrued expenses ( 57,091 ) 104,383 Due to Related party ( 125,000 ) ( 332,752 ) Net cash used by operating activities ( 2,415,066 ) ( 1,401,301 ) Net cash provided by (used in) operating activities of discontinued operations 99,638 Net Cash Provided By Used In Operating Activities ( 2,415,066 ) ( 1,301,663 ) Cash Flows from investing activities Purchase of fixed assets ( 36,047 ) - Net cash used by investing activities ( 36,047 ) - Cash Flows from Financing Activities Proceeds from subscription 1,367,115 540,000 Proceeds from convertible notes (net) 1,865,000 806,000 Proceeds from notes payables Payments on preferred stocks buy back Payments on convertible notes payable ( 504,793 ) ( 226,057 ) Net cash provided by financing activities 2,727,322 1,119,943 Net cash provided by financing activities of discontinued operations 187,619 Net Cash Provided By Used In Financing Activities 2,727,322 1,307,562 Net increase in cash 276,209 5,899 Cash, beginning of period 114,325 3,115 Cash, end of period $ 390,534 $ 9,014 Supplemental disclosure of cash flow information Cash paid for interest $ 38,015 $ 12,235 Cash paid for tax - - Non-Cash investing and financing transactions Conversion of debt for common stock $ 306,858 $ 90,000 The accompanying notes are an integral part of these unaudited consolidated financial statements 7 TEXTMUNICATION HOLDINGS, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2021 (UNAUDITED) NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS The Company Resonate Blends, Inc. formerly Textmunication Holdings, Inc. (the “Company”) was incorporated on in October 1984 in the State of Georgia as Brock Control Systems. Founded by Richard T. Brock, the Company was in the sales automation market and an early developer of enterprise customer management systems. The Company went public at the end of March of 1993. In February of 1996, the Company changed its name to Brock International Inc., and in March of 1998, the Company again changed our name to Firstwave Technologies, Inc. On January 20, 2020, Wais Asefi resigned as Chairman and as a member of our Board of Directors. Mr. Asefi’s resignation is in support of Resonate Blends strategic direction of becoming a pure play cannabis company. The Company does not believe that Mr. Asefi has any disagreements on matters relating to our operations, policies or practices. Also, on January 20, 2020, our Board of Directors appointed Geoffrey Selzer as our Chairman. In connection with the name change, the Company’s symbol was changed to “KOAN” that more resembles the Company’s new business focus. On May 22, 2020, Resonate Blends, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “SPA”) with Wais Asefi, Nick Miniello, Juleon Asefi, and Curt Byers (collectively, the “Asefi Group”) to sell to the Asefi Group its subsidiary, Textmunication, Inc., a California corporation (“Textmunication”). Textmunication operates the Company’s SMS business activities. The Company will retain its cannabis operations based in Calabasas, California. The consideration for the sale of Textmunication consists of the cancellation by the Asefi Group of 4,822,029 shares of common stock (the “Shares”) of the Company. The Shares have a market value of $ 337,542 , based on our last sales price of $ 0.07 per share as of May 26, 2020. Upon the cancellation of the Shares, the Company agreed to execute a general release in favor of Mr. Asefi. Also on May 22, 2020, the Company entered into a Separation and Release Agreement (the “Separation Agreement”) with Wais Asefi. Pursuant to the Separation Agreement, Mr. Asefi agreed to separate from all officer positions and as a director of the Company and to further accept the payment of $ 200,000 from the Company’s future fundraising as consideration of all debts outstanding under Mr. Asefi’s employment agreement with the Company. Mr. Asefi further agreed to cancel his 4,000,000 shares of Series A Preferred Stock and to transfer his 2,000,000 shares of Series C Preferred Stock to Geoffrey Selzer, the Company’s current CEO and Director. Mr. Asefi further released the Company of all claims. Also on May 22, 2020, Mr. Selzer signed a Voting Agreement and agreed to vote his newly acquired 2,000,000 shares of Series C Preferred Stock in favor of the sale of Textmunication to the Asefi Group. On May 22, 2020, Resonate Blends, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “SPA”) with Wais Asefi, Nick Miniello, Juleon Asefi, and Curt Byers (collectively, the “Asefi Group”) to sell to the Asefi Group its subsidiary, Textmunication, Inc., a California corporation (“Textmunication”). Textmunication operates the Company’s SMS business activities. On July 20, 2020, the parties closed on the transactions contained in the SPA. The Asefi Group cancelled 4,822,029 shares of common stock (the “Shares”) of the Company. The Shares have a market value of $ 332,842 , based on our last sales price of $ 0.07 per share as of May 26, 2020. The Company also executed a general release in favor of Mr. Asefi. 8 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. 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 September 30, 2021, the Company has an accumulated deficit of $ 27,441,709 . The company’s ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable operations. While the Company is expanding its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. These consolidated financial statements do not include any adjustments that might arise from this uncertainty. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash The Company considers all highly liquid instruments purchased with 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. As of September 30, 2021, the company balances exceeded the federally insured limit by approximately $ 140,534 deposited under one institution. Management is making certain arrangements to mitigate this risk during the next quarter. Revenue Recognition The Company did have any revenues from continuing operations for the periods presented. The Company’s policy is that revenues will be recognized when control of the product is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. 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. 9 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 September 30, 2021 and year ended December 31, 2020. SUMMARY OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS As of September 30, 2021 Level 1 Level 2 Level 3 Total Liabilities Derivative Liabilities - - 3,380,960 3,380,960 As of December 31, 2020 Level 1 Level 2 Level 3 Total Liabilities Derivative Liabilities - - 274,134 274,134 Net income (loss) per Common Share Basic net income (loss) per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Property and equipment Property and equipment are stated at cost, less accumulated depreciation provided on the straight-line method over the estimated useful lives of the assets, which range from three to seven years . Expenditures for renewals or betterments are capitalized, and repairs and maintenance are charged to expense as incurred the cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts, and any gain or loss thereon is reflected in operations. Company policy 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. 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. 10 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 On May 22, 2020, the Company entered into a Separation and Release Agreement (the “Separation Agreement”) with Wais Asefi. Pursuant to the Separation Agreement, Mr. Asefi agreed to separate from all officer positions and as a director of the Company and to further accept the payment of $ 200,000 from the Company’s future fundraising as consideration of all debts outstanding under Mr. Asefi’s employment agreement with the Company. Mr. Asefi further agreed to cancel his 4,000,000 shares of Series A Preferred Stock and to transfer his 2,000,000 shares of Series C Preferred Stock to Geoffrey Selzer, the Company’s current CEO and Director. Mr. Asefi further released the Company of all claims. On May 22, 2020, the 4,000,000 shares of Series A Preferred Stock were returned to the Company’s transfer agent and cancelled and on May 22, 2020 the 2,000,000 shares of Series C Preferred Stock were transferred to Mr. Selzer. The parties to the Separation Agreement agreed to a payment schedule of $ 200,000 based on future monies raised by the Company - and not on a specific date – as follows: ● $ 12,500 when the initial $ 250,000 is raised by the Company; ● $ 12,500 when a total of $ 500,000 is raised by the Company; ● $ 10,000 when a total of $ 750,000 is raised by the Company; ● $ 35,000 when a total of $ 1,750,000 is raised by the Company; ● $ 35,000 when a total of $ 2,750,000 is raised by the Company; ● $ 35,000 when a total of $ 3,750,000 is raised by the Company; ● $ 35,000 when a total of $ 4,750,000 is raised by the Company; and ● $ 25,000 when a total of $ 5,750,000 is raised by the Company. On May 13, 2021, we amended the Separation Agreement to state the parties desire to reduce the total amount payable to Wais Asefi from $ 200,000 USD to $ 142,500 USD. In addition to the earlier payments made to Mr. Asefi, a payment of $ 40,000 was made on May 14, 2021 and another payment on June 27, 2021 for $ 40,000 . The final payment was made on August 11, 2021 for $ 25,000 . The final payment on August 11, 2021 settled this agreement in full. Further under the amendment, Mr. Asefi nominated Textmunication, Inc., our prior subsidiary, as the recipient of the funds due under the Separation Agreement. The outstanding balances as of September 30, 2021 and December 31, 2020 are $ 0 and $ 187,500 respectively. 11 NOTE 4 - CONVERTIBLE NOTE PAYABLE Convertible notes payable consists of the following as of September 30, 2021 and December 31, 2020: SCHEDULE OF CONVERTIBLE NOTES PAYABLE September 30, 2021 December 31, 2020 Convertible notes face value $ 1,865,000 $ 517,544 Less: Discounts - ( 12,751 ) Less: Debt issuance cost ( 61,771 ) Net convertible notes $ 1,803,229 $ 504,793 The convertible notes as of September 30, 2021 are 8 % Unsecured Convertible Promissory Notes from various accredited investors issued from January 1, 2021 to September 30, 2021. All notes have an automatic conversion into equity on the maturity date, which is January 2, 2022 , or if a Qualified Financing (QF) of $ 5,000,000 is achieved, whichever occurs first. The maturity date pricing is the lesser of $.10 or 75% of the VWAP with a 20-day lookback. A QF converts into equity at the lesser of $1.00 or 75% of the average selling price of the aggregate offering. The three months ended September interest accrued for the convertible notes payable at $ 12,263 , $ 12,671 and $ 12,263 respectively. The Company accounts for the fair value of the conversion features of its convertible debt in accordance with ASC Topic No. 815-15 “Derivatives and Hedging; Embedded Derivatives” (“Topic No. 815-15”). Topic No. 815-15 requires the Company to bifurcate and separately account for the conversion features as an embedded derivative contained in the Company’s convertible debt. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for’ any unrealized change in fair value as a component of results of operations. The Company values the embedded derivatives using the Black-Scholes pricing model. NOTE 5 – COMMITMENTS AND CONTINGENCIES Office Lease On October 16, 2019, the Company signed a lease agreement that expires on thirty days’ notice . Rent expense was approximately $ 405 and $ 310 for the quarter ended September 30, 2021 and 2020, 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 : and David Thielen as Chief Investment Officer (CIO) with an annual salary of $ 120,000 . All are eligible for salary increases upon milestone achievements and other benefits. The Employment Agreement for the CEO has a term of 2 years and can’t be terminated without cause. Severance of six (6) weeks is available for termination of the COO and CIO without cause before one-year of service and eight (8) weeks after one-year of service . NOTE 6 – STOCKHOLDERS’ EQUITY During the third quarter of 2021 the company issued a total of 716,554 shares of common stock to vendors for compensation and services rendered. The fair market value of the shares issued accounted as expenses as follows: SCHEDULE OF COMPENSATION AND SERVICES RENDERED Professional Fees $ 328,632 Convertible promissory notes - Total $ 328,632 12 NOTE 7 – DISCONTINUED OPERATIONS On July 20, 2020, the Company finalized a Stock Purchase Agreement (the “SPA”) with Wais Asefi, Nick Miniello, Juleon Asefi, and Curt Byers (collectively, the “Asefi Group”) to sell to the Asefi Group its subsidiary, Textmunication, Inc., a California corporation (“Textmunication”). Textmunication operates the Company’s SMS business activities. The Company retained its cannabis operations based in Calabasas, California. The Company has accounted for this spinout as a discontinued operation and retroactively reclassified all previously presented financial information. The following summarizes the results of operations for Textmunication, Inc. for the three months ended June 30, 2020 SCHEDULE OF DISCONTINUED OPERATIONS 2020 Revenues $ 305,590 Cost of Revenues ( 90,559 ) Operating expenses ( 347,565 ) Loss from operations of discontinued operations ( 132,534 ) NOTE 8 – SUBSEQUENT EVENTS As previously disclosed, on September 9, 2021, Resonate Blends, Inc. (the “Company”) entered into binding letter of intent (the “Agreement”) with L & G USA Inc., a Delaware corporation and L & G Canada Inc., an Ontario corporation (together “Seller”), and the stockholders of Seller (the “Stockholders”), pursuant to which the Company planned to acquire substantially all of the assets from Seller associated with the Lemon & Grass business and the Koan business (the “Acquisition”). On October 27, 2021, the Company terminated the Agreement. The Company is still in discussions with Seller, and the Company may or may not go through with a transaction with Seller, but if the Company does, the terms will change from the previous Agreement. 13