Resonate Blends, Inc. 10-K

10-K 1 form10-k.htm UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 ☐ TRANSITION REPORT UNDER SECTION 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) (I.R.S. Employer Identification No.) 26565 Agoura Road, Suite 200 Calabasas, CA 91302 (Address of principal executive offices) (Zip Code) Registrant’s telephone number: 571-888-0009 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Title of each class Common Stock, par value of $0.0001 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by checkmark 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 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 such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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 aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $14,258,608. Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 47,796,859 common shares as of April 14, 2022. TABLE OF CONTENTS Page PART I Item 1. Business 3 Item 1A. Risk Factors 9 Item 1B. Unresolved Staff Comments 19 Item 2. Properties 19 Item 3. Legal Proceedings 19 Item 4. Mine Safety Disclosures 19 PART II Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities 20 Item 6. Selected Financial Data 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 Item 8. Financial Statements and Supplementary Data 25 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 26 Item 9A. Controls and Procedures 26 Item 9B. Other Information 27 Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 27 PART III Item 10. Directors, Executive Officers and Corporate Governance 27 Item 11. Executive Compensation 30 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 32 Item 13. Certain Relationships and Related Transactions, and Director Independence 32 Item 14. Principal Accountant Fees and Services 33 PART IV Item 15. Exhibits, Financial Statement Schedules 34 Item 16. Form 10-K Summary 34 2 PART I Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. 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.” 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. 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. 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. Item 1. Business Overview 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 value-added, brand-focused cannabis organization offering premium 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 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 innovative, trusted national brands, emerging brands, research organizations, and a variety of retail channels. The 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 the Company believes is the industry gold standard in user experience. Resonate 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 deliver reliable, effective and beneficial experiences. Resonate is committed to helping people live the life they love, but they do not make the medicinal vs. recreational distinction. This is a temporary legal separation in some states that should soon cease to exist. The Company believes in wellness for the whole person, including people with insomnia, pain or anxiety who also want to enjoy friends, concerts and have satisfying intimate experiences. Resonate is designing experiences which should improve all areas of ones’ life. To accomplish this, Resonate is Mastering the Art of Experience. This is the Company’s mission. By integrating science, technology, education, branding, marketing, sales and delivery - with every customer interaction they aim to provide exceptional experiences. Cannabis has a broad range of unique characteristics, and they are dedicated to harnessing and amplifying those characteristics to support healthy empowered and engaged lifestyles. From product development through customer communication, they prefect and demystify cannabis bringing innovative products to an increasingly sophisticated market. Resonate Blends has a strong social mission and the Resonate team is building a successful business by focusing its knowledge, skill and energy on creating wellness-lifestyle products which will improve community by helping individuals live more satisfying, meaningful and connected lives. The need for these products currently is crucial. 3 To communicate the breadth of wellness products that Resonate is developing, the Company created The Resonate System. The Resonate System graphically represents a spectrum of wellness products based on cannabis scaffolding. This system helps users easily select which product they want. Products based on The Resonate System deliver relaxation, freedom from pain and anxiety, boosts in focus and creativity, sensuality, human connection and joy. Koan products are formulated around a system of interconnected experience targets that will allow you to know exactly what to expect when using them. While respecting and honoring the natural power of plant medicine, Resonate also employs advanced science, leading technology and a deep understanding of how various cannabis compounds, when working in the body, simultaneously can create unique effects and benefits (referred to as the “Entourage Effect”). Product developers blend cannabinoids and terpenes to formulate products with specific, controllable and repeatable beneficial effects. Through innovation, experimentation, testing and an iterative product development strategy, the Koan team has unlocked new plant constituent combinations resulting in unique, enjoyable and extremely effective wellness products unlike anything else in the marketplace. Resonate has filed a provisional patent for protection of these formulations and products in the future. 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. Resonate’s initial products are a completely unique class of products called Cordials. These blends offer a wide range of experiences not currently available in the cannabis market. Cordials are water-soluble and use nano-emulsification technology to allow for quick onset and a sustained and nuanced experience. Single dose, healthful, subtle in taste, cordials are an ideal way for people to intentionally improve their well-being. They can be shipped directly or substituted for alcohol as a cocktail mixer. A significant competitive advantage is that the Cordials allow users to select both the experience they want and the beverage they choose to enjoy them in. Resonate’s Cordials have been developed in partnership with an award-winning advanced infusion technology partner and were launched to the retail channel in late Q2 of 2021. The company is offering six unique formulations and expects to launch an additional blend “Love” by Q1 2022 and a “Sleep” formulation in Q2 2022. The Cordials were awarded the Golden Leaf Award as “Best New Brand of 2021” at the “Luxury Meets Cannabis Conference” held in New York City in December. Resonate also won a Cannabis Clio Award for “Brand Design” also in December. Resonate has formalized contracts with logistical, sales and marketing partners to build a digital native strategy supporting Direct-to-Consumer sales. The Direct-to-Consumer (D2C) sales platform launched in October and now allows California consumers the ability to order on-line and have the Cordials home delivered in most metro areas within four hours. Based on customer demand, the Company is creating a “singles” option for the Cordials which will be available in early 2022 and a multi-dose option shipping in early Q2 2022. The principal executive office is located at 26565 Agoura Road, Suite 200, Calabasas, CA 91302. The executive telephone number is (571) 888-0009. Partnerships Product Development: The Company signed a custom development contract with Vertosa in March of 2020, the leading provider of safe, reliable emulsion bases for infused product developers. This contract was a major milestone for the Company as it selected its strategic partners to develop innovative products and solutions. Vertosa is an award-winning strategic partner who will assist the Company in the launch of its first unique category of six water soluble products. These multi-use products deliver specific, predictable, reliable, effects in a format that is completely unique in the industry. The first product developed collaboratively is the Cordial product line, but both companies expect several other products to be developed over time utilizing Vertosa’s emulsification technology. In addition to the new Cordial blends, the company also expects to launch a unique edible product line to the market in mid-2022. 4 The Vertosa and Resonate teams share a mission of maximizing the benefits of cannabinoids and plant medicine. Resonate selected Vertosa as a development partner because the Vertosa systems’ industry leading emulsification technology makes them highly stable, bioavailable, and water compatible. 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 that its offerings follow regulations promulgated by the US Food and Drug Administration and are safe, pure, and effective. In addition, Vertosa is expanding into other legal states, and this paves the way for Resonate to follow behind moving beyond California while still assuring strict standards and high production quality for Koan products. Manufacturing: The Company partnered with The Galley, a California licensed Type N – Infused Products Manufacturer based in Santa Rosa, California. The Galley produces and packages premium award-winning products and has worked with some of the most popular brands in the industry. The Galley is built to FDA and CDPH standards and is focused on high demand areas of production – Edibles, Topicals, Tinctures, Chocolate, Hard Candies, Gummies, Pre-Rolls, Flower, Vapes and Beverages. Resonate Blends was granted a Type S: Shared Facility - Adult and Medicinal Cannabis Manufacturing License on July 23, 2021. The license allows Resonate Blends to manufacture cannabis products at the licensed facility of The Galley. Resonate and The Galley entered into a Master Services Agreement in which The Galley will manufacture and package Resonate’s first family of products to precise specifications. The Galley and Resonate have been in frequent contact throughout Resonate’s development period and are now supporting the production of the Company’s unique family of wellness lifestyle products. Resonate’s first of its kind offerings are emulsified through the advanced infusion technology provided by award-winning Vertosa and collaboratively developed to push the state of the art in its cannabis products. Distribution: Because of the unique nature of Resonate’s Koan products and the recent expansion of home delivery services in the cannabis industry, Resonate has prioritized a direct-to-consumer method as a key sales strategy. Resonate has identified a technology partner who will add an e-commerce feature to the Koan web site that will allow the Company to sell products directly to consumers using a licensed California state-wide delivery network for fulfilment. In addition to direct sales, the company plans to offer products to select premium dispensaries throughout California. These products will be delivered to retail establishments by a leading cannabis full-service distributor. The Company contracted with The Vault 3PL to provide logistics and state-wide distribution for Resonate’s Koan Cordials, its product line of unique experience blends currently available in California. Resonate is also developing relationships with a variety of complementary distribution channels such as subscription box companies and other non-storefront reseller organizations. The Company partnered with leading e-commerce technology provider Grassdoor in October to allow online sales of Koan Cordials throughout California. The Grassdoor partnership powers same-day delivery service of Resonate’s six precision-calibrated formulas throughout Northern and Southern California. 5 To summarize, Resonate has signed and announced definitive agreements with various partners to execute on its overall business strategy. Vertosa is expected to develop unique formulations through its advanced nano-emulsification process, The Galley is expected to assemble and package, Grassdoor’s e-commerce solution is expected to offer online sales and home delivery in California of Cordials and Vault 3PL Distribution to distribute the products. Resonate engaged with The Flower Agency to actively market social media channels to the California market. Marketing and Sales Plan The cannabis industry is changing daily in response to updated regulations, customer product education, new interest from various demographics and now the COVID-19 pandemic. As a result, we are constantly attentive to these changes as they affect the marketing of Koan products. The initial marketing strategy was to launch in select dispensaries in Los Angeles and to support the launch with dispensary promotional material and location-based marketing. However, in the current market the Company has decided to modify this strategy. Paradoxically, retail restrictions and safety regulations were beneficial, as these allowed Resonate to reprioritize their sales approach and to build a marketing plan around on-line dispensaries with wide delivery networks. Although retail restrictions will eventually be relaxed, the Company doesn’t expect that storefront dispensaries will return to the dominant role they played in the cannabis industry before COVID-19 for several reasons. Dispensaries are generally small, making social distancing difficult. Limitations on a customers’ ability to touch and smell products reduces the value of in-person shopping. Restrictions on the number of people allowed in these small spaces will create waiting lines outside stores, which will be inconvenient and even embarrassing for some. Finally, a significant number of customers, particularly in targeted demographics, prefer the privacy and convenience of having products delivered to their homes. For all these reasons, Resonate has decided to focus sales efforts on select high-end retail dispensaries and on-line, delivery and e-commerce outlets. In response to the sudden change in customer buying preferences, Resonate has implemented a plan to sell directly to consumers, by partnering with an on-line platform which will allows them to communicate the value of their products directly to consumers. This platform will connect consumers to a licensed retail and California-wide home delivery network. This direct-to-consumer approach has significant benefits for us. First, it allows Resonate to control brand messaging and to assure that we can provide the information and education customers need to make confident and informed product choices. Through this method, they have access to customer information, which is not available from dispensaries, which allows them to employ successful marketing techniques used by leading on-line retailers such as customer loyalty programs, memberships, ambassadors, etc., to build brand awareness and increase sales. It is also better for them financially as it increases profit margin. Therefore, the marketing budget and energy is now being channeled into appropriate programmatic advertising, developing informational materials for customers on the website, and developing professional and effective social media, search engine optimization and direct to consumer marketing campaigns. We also offer market support to select premium California dispensaries both in person and thorough the Leaf.VIP budtender training program. The Company expects that building its brand online will complement retail sales by increasing customer awareness and creating “pull-through” at brick-and-mortar facilities. Resonate is currently recruiting two internal sales managers to oversee all sales efforts in Northern and Southern California. The Company is planning an in-house sales strategy for early Q1 2022 to maximize both the dispensary outreach and budtender education – and to increase Direct-to-Consumer (D2C) sales platform activity. While wellness dispensaries will be a focus for the Company, the customer acquisition focus will be heavily tilted towards the D2C portal starting in 2022. Multi-state expansion through licensing arrangements with the Cordials is also being planned. Several retailers in multiple states have reached out to Resonate requesting the Cordials to be stocked in their dispensaries. The Company is currently evaluating where and when to open new states outside of California. 6 Acquisition of Assets On September 9, 2021, we entered into a binding letter of intent with L & G USA Inc., a Delaware corporation and L & G Canada Inc., an Ontario corporation (together “Seller”), and the stockholders of Seller, 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 and the Acquisition. 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. Current Products Resonate’s first commercial release was a family of six precisely targeted effect blends. These products are category-breaking offerings as they are neither tinctures nor beverages but have the benefits of both. They are emulsified, water soluble, single-serving blends that can be enjoyed privately or shared socially. Resonate offers these across California in stylish mini bottles, each containing a single serving. They can be sipped directly from the bottle or poured into beverages. Koan products offer the very high bioavailability of tinctures not possible to deliver with edibles, take effect generally within minutes and provide benefits for approximately 3 hours. Significantly, these formulas all provide a pleasant predictable experience, a gentle onset and exit and have no unpleasant sensations or aftereffects sometimes associated with cannabis products. The current products are as follows: Calm CBD rich with a hint of THC, Calm is formulated to quiet your mind and ease you into a gentle sense of wellbeing. Wonder Our highest THC offering, Wonder is carefully crafted to bring back that youthful sense of wonder and awe we feel when we are fully engaged with our senses and environment. Balance Balance is a subtle combination of cannabinoids and terpenes formulated to bring your mind, body and spirit back to an even state of harmony and homeostasis. Create Create is formulated to stimulate your senses, spark your imagination and channel your inner muse. Led by a stimulative blend of terpenes and just the right amount of THC to inspire and facilitate the artist in you. Play We formulated Play to help you become fully immersed in the moment and the people around you. From the park to the beach to the dance floor, Play helps you find your groove and keep it going. Delight Put on your rose-colored glasses and give everything some extra sparkle with Delight. Designed to open up your senses, raise your spirits and brighten your day. 7 Future Products - Resonate Growth Plans For the first 12-18 months, Resonate concentrated on releasing product and brand building in California, and possibly new state expansion if the proper opportunities exist. Resonate is following the launch of its first six Koan products with others based on The Resonate System at regular intervals, and they plan to release their “Love” in Q1 2022 and “Sleep” Cordials in Q2. The formulas, combined with the proprietary Vertosa technology, will allow the Company to quickly deliver controlled, predictable, enjoyable effects in beverages, teas, and gummies. Vertosa is the leading provider of emulsification technology for cannabis manufacturers. Emulsification allows cannabinoids to become water-soluble so that they can be added to Cordials, beverages, gummies, etc. Vertosa and Resonate are engaged in joint research focusing on effects of various emulsification methods on cannabinoids. Resonate is working on methods that improve user experience by refining effects and managing bioavailability. Vertosa will also be providing the emulsification required for formulas in Resonate’s product line. The cannabis industry is in its infancy. Resonate’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. In addition to creating “house” brands, the Company is also looking for other quality brands which could be incubated or targeted as either strategic partners or as acquisitions. Integrating these companies should provide consistent product quality that yields expected results and that also allows scalability to make a successful company overall. The Company is actively seeking potential acquisition roll-ups into the holding company that could offer product synergies, new product development and shared resources in critical areas of the Company. Intellectual Property Intellectual Property (“IP”) development and protection continues as a core area of value creation for Resonate. The Company has developed the world’s first Cannabis Cordial. The Koan Cordials combine THC (psychoactive), CBD (non-psychoactive) with botanical terpenes to deliver an all-natural, plant-derived, single-dosed experience that can be enjoyed straight out of the bottle or poured into any beverage. These multi-use products deliver specific, predictable, reliable, effects in a format that is completely unique in the industry. The Company believes the greatest long-term value creation in the Cannabis industry will be in the establishment of high-quality value-added consumer brands that deliver the expected experience. As cultivation, supplies and services become quickly commoditized, value-added brands represent the best opportunity for Resonate and its shareholders to support and benefit from the growth expected in the Cannabis industry. It is therefore critical for Resonate to protect its methods, formulations and packaging. On June 14, 2021, the Company successfully filed a Provisional Patent Application with the US Patent & Trademark Office (USPTO) entitled “Cannabis Nano-Emulsions for Achieving a Reliable, Targeted, Specific and Repeatable User Experience.” The invention relates to methods and formulations including a combination of cannabinoids and terpenes calculated and specifically formulated to achieve a targeted, specific and repeatable user experience. The Company is also filing for patent protection on its unique product packaging and anticipates filing for other protections on new product development. Competitive Landscape The cannabis market still primarily consists of products of varying quality and poor branding. Much of the branding is heavy “stoner” or hospital medicinal, and differentiation between products is difficult. As a result, finding a product with controllable, consistent effects is difficult. Even products of high and reliable quality all look alike and have no shelf appeal. In addition, there is a mismatch between the fastest growing demographic and many current product offerings, which are designed to be inhaled. This is exactly why Resonate has developed Koan Cordials, tasty, single dose, healthy cannabis products with timeless, exceptional branding. As the market matures, some companies are recognizing the importance of branding. Branded category leaders represent the 10 spots among best-selling products and sales data supports the desire among consumers for branded products. This is further supported by Headset, data (the leading industry provider of retail buying patterns), which shows that brands are leading every category in cannabis. Further, branded products command higher prices. Some branded products generate pricing as high as 150%, over industry average. The Resonate team excels in product branding. There is no product in the marketplace exactly like Koan products at this time. Other companies offer tinctures (which are concentrated herbal extracts made by soaking the bark, berries, leaves (dried or fresh), or roots from one or more plants in alcohol or vinegar), tea, salves, patches and cosmetics and vapes, and some of them provide effects which may be similar to those the Koan products will provide, but few are equal to Koan with respect to quality, efficacy, consistency and scope. Koan products are water soluble and can be enjoyed privately or poured in beverages and shared socially. Resonate believes the total experience offered by Koan products cannot be found elsewhere in the industry. 8 While there are a number of very fine products in the premium cannabis space, there is not yet a dominant brand in any category. Some are leading but no brand dominates. Data indicates that Resonate’s targeted demographic seeks out trusted brands when making product selections. Resonate is bringing to market custom, reliable, experience-targeted products which can be sipped or shared; and offered under a well-crafted brand supported by an accessible information system. The Company provides The Resonate System so customers can understand what to expect and can make informed confident selections. Employees Currently, there are six employees, comprised of 3 C-level executives and managers of brand, marketing and sales. Item 1A. Risk Factors Risk Factors Associated with COVID-19 The extent to which the coronavirus (“COVID-19”) outbreak impacts our business, results of operations and financial condition will depend on future developments, which cannot be predicted. The COVID-19 pandemic has caused us to modify our business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities. The extent to which COVID-19 impacts our business, results of operations and financial condition will depend on future developments, which are uncertain and cannot be predicted, including, but not limited to: ● the duration and scope of the pandemic; ● governmental, business and individual actions taken in response to the pandemic and the impact of those actions on global economic activity; ● the actions taken in response to economic disruption; ● the impact of business disruptions; ● the increase in business failures that we may utilize as industry partners and the customers we serve; ● uncertainty as to the impact or staff availability during and post the pandemic; and ● our ability to provide our services, including as a result of our employees or our customers and suppliers working remotely and/or closures of offices and facilities. Even after the coronavirus outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future. Risk Factors Associated with the Cannabis Industry Marijuana remains illegal under United States federal law. 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. 9 The Company’s operations are subject to various laws, regulations and guidelines relating to the manufacture, management, transportation, storage and disposal of cannabis but also including laws and regulations relating to health and safety, the conduct of operations and the protection of the environment. The Company both directly and indirectly engages in the medical and adult-use cannabis industry in the United States where local state law permits such activities. Investors are cautioned that in the United States, cannabis is largely regulated at the state level. To the Company’s knowledge, there are to date a total of 38 states, and the District of Columbia, that have now legalized cannabis in some form, including California, Nevada, New York, Florida, Illinois and Arizona. Notwithstanding the permissive regulatory environment of cannabis at the state level, cannabis continues to be categorized as a controlled substance under the CSA and as such, cultivation, distribution, sale and possession of cannabis violates federal law in the United States. The inconsistency between federal and state laws and regulations is a major risk factor and there can be no assurance that the federal government will not seek to prosecute cases involving cannabis businesses that are otherwise compliant with state law. Violations of any federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conducted by either the federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of business activities or divestiture. This could have a material adverse effect on the Company, including its reputation and ability to conduct business, its holding (directly or indirectly) of medical and adult-use cannabis licenses in the United States, the listing of its securities on applicable exchanges, its financial position, operating results, profitability or liquidity or the market price of our Common Stock. The Company believes the cannabis industry is highly dependent upon consumer perception regarding the safety, efficacy and quality of the cannabis produced. Consumer perception of the Company’s products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of cannabis products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the medical cannabis market or any product, or consistent with earlier publicity The Company and its wholly owned subsidiaries face an inherent risk of exposure to product liability claims, regulatory action and litigation if its products are alleged to have caused significant loss or injury. Greater access to medical cannabis, through home and designated growing and illegal dispensaries, may decrease the number of patients registering with the Company and may cause registered patients to leave the Company and grow for themselves. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact the business, financial condition and operating results of the Company and if the Company is unable to continually innovate and increase efficiencies, its ability to attract new customers may be adversely affected. The Company may become party to litigation, mediation and/or arbitration from time to time in the ordinary course of business which could adversely affect its business The Company expects to derive a substantial portion of its revenues from the cannabis industry in certain states of the United States, which industry is illegal under United States federal law. The Company is directly involved (through its subsidiaries) in the cannabis industry in the United States where local state laws permit such activities. The United States federal government regulates drugs through the Controlled Substances Act (21 U.S.C. § 811), which places controlled substances, including cannabis, in a schedule. Cannabis is classified as a Schedule I drug. Under United States federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of accepted safety for the use of the drug under medical supervision. The United States Food and Drug Administration has not approved marijuana as a safe and effective drug for any indication. In the United States marijuana is largely regulated at the state level. State laws regulating cannabis are in direct conflict with the federal Controlled Substances Act, which makes cannabis use and possession federally illegal. Although certain states authorize medical or recreational cannabis production and distribution by licensed or registered entities, under U.S. federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal and any such acts are criminal acts under federal law. The Supremacy Clause of the United States Constitution establishes that the United States Constitution and federal laws made pursuant to it are paramount and in case of conflict between federal and state law, the federal law shall apply. 10 On January 4, 2018, U.S. Attorney General Jeff Sessions issued a memorandum to U.S. district attorneys which rescinded previous guidance from the U.S. Department of Justice specific to cannabis enforcement in the United States. U.S. federal prosecutors have been given discretion in determining whether to prosecute cannabis related violations of U.S. federal law. If the Department of Justice policy was to aggressively pursue financiers or equity owners of cannabis-related business, and United States Attorneys followed such Department of Justice policies through pursuing prosecutions, then the Company could face (i) seizure of its cash and other assets used to support or derived from its cannabis subsidiaries, (ii) the arrest of its employees, directors, officers, managers and investors, and charges of ancillary criminal violations of the CSA for aiding and abetting and conspiring to violate the CSA by virtue of providing financial support to cannabis companies that service or provide goods to state-licensed or permitted cultivators, processors, distributors, and/or retailers of cannabis, and/or (iii) barring employees, directors, officers, managers and investors who are not U.S. citizens from entry into the United States for life. There is no guarantee that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. Unless and until the United States Congress amends the Controlled Substances Act with respect to medical and/or adult-use cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current federal law. If the federal government begins to enforce federal laws relating to cannabis in states where the sale and use of cannabis is currently legal, or if existing applicable state laws are repealed or curtailed, the Company’s business, results of operations, financial condition and prospects would be materially adversely affected. Possible yet unanticipated changes in federal and state law could cause any products that we intend to launch, containing hemp-derived CBD oil to be illegal, or could otherwise prohibit, limit or restrict any of our products containing CBD. Until 2014, when 7 U.S. Code §5940 became federal law as part of the Agricultural Act of 2014 (the “2014 Farm Act”), products containing oils derived from hemp, notwithstanding a minimal or non-existing THC content, were classified as Schedule I illegal drugs. The 2014 Farm Act expired on September 30, 2018, and was thereafter replaced by the Agricultural Improvement Act of 2018 on December 20, 2018 (the “2018 Farm Act “), which amended various sections of the U.S. Code, thereby removing hemp, defined as cannabis with less than 0.3% of THC, from Schedule 1 status under the Controlled Substances Act (“CSA”), and legalizing the cultivation and sale of hemp at the federal level, subject to compliance with certain federal requirements and state law, amongst other things. THC is the psychoactive component of plants in the cannabis family generally identified as marihuana or marijuana. The 2018 Farm Bill also shifted regulatory authority from the Drug Enforcement Administration to the Department of Agriculture. The 2018 Farm Bill did not change the United States Food and Drug Administration’s (“FDA”) oversight authority over CBD products. The 2018 Farm Act delegated the authority to the states to regulate and limit the production of hemp and hemp derived products within their territories. Although many states have adopted laws and regulations that allow for the production and sale of hemp and hemp derived products under certain circumstances, no assurance can be given that such state laws may not be repealed or amended such that our intended products containing hemp-derived CBD would once again be deemed illegal under the laws of one or more states now permitting such products, which in turn would render such intended products illegal in those states under federal law even if the federal law is unchanged. In the event of either repeal of federal or of state laws and regulations, or of amendments thereto that are adverse to our intended medical CBD products, we may be restricted or limited with respect to those products that we may sell or distribute, which could adversely impact our intended business plan with respect to such intended products. Additionally, the FDA has indicated its view that certain types of products containing CBD may not be permissible under the United States Federal Food, Drug and Cosmetic Act (“FDCA”). The FDA’s position is related to its approval of Epidiolex, a marijuana-derived prescription medicine to be available in the United States. The active ingredient in Epidiolex is CBD. On December 20, 2018, after the passage of the 2018 Farm Bill, FDA Commissioner Scott Gottlieb issued a statement in which he reiterated the FDA’s position that, among other things, the FDA requires a cannabis product (hemp-derived or otherwise) that is marketed with a claim of therapeutic benefit, or with any other disease claim, to be approved by the FDA for its intended use before it may be introduced into interstate commerce and that the FDCA prohibits introducing into interstate commerce food products containing added CBD, and marketing products containing CBD as a dietary supplement, regardless of whether the substances are hemp-derived. Although we believe our existing and planned CBD product offerings comply with applicable federal and state laws and regulations, legal proceedings alleging violations of such laws could have a material adverse effect on our business, financial condition and results of operations. 11 FDA regulation could negatively affect the hemp industry, which would directly affect our financial condition. The FDA may seek expanded regulation of hemp under the FDCA. Additionally, the FDA may issue rules and regulations, including certified good manufacturing practices, or cGMPs, related to the growth, cultivation, harvesting and processing of hemp. Clinical trials may be needed to verify efficacy and safety. It is also possible that the FDA would require that facilities where hemp is grown register with the FDA and comply with certain federally prescribed regulations. In the event that some or all of these regulations are imposed, we do not know what the impact would be on the hemp industry, including what costs, requirements and possible prohibitions may be enforced. If we or our partners are unable to comply with the regulations or registration as prescribed by the FDA, we and or our partners (including C2M) may be unable to continue to operate their and our business in its current or planned form or at all. Sources of hemp-derived CBD depend upon legality of cultivation, processing, marketing and sales of products derived from those plants under state law of the United States. Hemp-derived CBD can only be legally produced in states that have laws and regulations that allow for such production and that comply with the 2018 Farm Act, apart from state laws legalizing and regulating medical and recreational cannabis or marijuana, which remains illegal under federal law and regulations. In addition, as described in the preceding risk factor, in the event of repeal or amendment of laws and regulations which are now favorable to the cannabis/hemp industry in such states, we would be required to locate new suppliers in states with laws and regulations that qualify under the 2018 Farm Act. If we were to be unsuccessful in arranging new sources of supply of our raw ingredients, or if our raw ingredients were to become legally unavailable, our intended business plan with respect to such products could be adversely impacted. Because our distributors may only sell and ship our products containing hemp-derived CBD in states that have adopted laws and regulations qualifying under the 2018 Farm Act, a reduction in the number of states having such qualifying laws and regulations could limit, restrict or otherwise preclude the sale of intended products containing hemp-derived CBD. The interstate shipment of hemp-derived CBD from one state to another is legal only where both states have laws and regulations that allow for the production and sale of such products and that qualify under the 2018 Farm Act. Therefore, the marketing and sale of our intended products containing hemp-derived CBD is limited by such factors and is restricted to such states. Although we believe we may lawfully sell any of our finished products, including those containing CBD, in a majority of states, a repeal or adverse amendment of laws and regulations that are now favorable to the distribution, marketing and sale of finished products we intend to sell could significantly limit, restrict or prevent us from generating revenue related to our products that contain hemp-derived CBD. Any such repeal or adverse amendment of now favorable laws and regulations could have an adverse impact on our business plan with respect to such products. Due to recent expansion into the Cannabis industry, we may have a difficult time obtaining the various insurances that are desired to operate our business, which may expose us to additional risk and financial liability . Insurance that is otherwise readily available, such as general liability, and directors and officer’s insurance, may become more difficult for us to find, and more expensive, due to our intended launch of certain products containing Cannabis. There are no guarantees that we will be able to find such insurances in the future, or that the cost will be affordable to us. If we are forced to go without such insurances, it may prevent us from entering into certain business sectors, may inhibit our growth, and may expose us to additional risk and financial liabilities. Our products may not meet health and safety standards or could become contaminated. We have adopted various quality, environmental, health and safety standards. We do not have control over all of the third parties involved in the manufacturing of our products and their compliance with government health and safety standards. Even if our products meet these standards, they could otherwise become contaminated. A failure to meet these standards or contamination could occur in our operations or those of our manufacturers, distributors or suppliers. This could result in expensive production interruptions, recalls and liability claims. Moreover, negative publicity could be generated from false, unfounded or nominal liability claims or limited recalls. Any of these failures or occurrences could negatively affect our business and financial performance. 12 The sale of our products involves product liability and related risks that could expose us to significant insurance and loss expenses. We face an inherent risk of exposure to product liability claims if the use of our products results in, or is believed to have resulted in, illness or injury. Our products contain combinations of ingredients, and there is little long-term experience with the effect of these combinations. In addition, interactions of these products with other products, prescription medicines and over-the-counter drugs have not been fully explored or understood and may have unintended consequences. While our third-party manufacturers perform tests in connection with the formulations of our products, these tests are not designed to evaluate the inherent safety of our products. Any product liability claim may increase our costs and adversely affect our revenue and operating income. Moreover, liability claims arising from a serious adverse event may increase our costs through higher insurance premiums and deductibles and may make it more difficult to secure adequate insurance coverage in the future. In addition, our product liability insurance may fail to cover future product liability claims, which, if adversely determined, could subject us to substantial monetary damages. Confusion between legal Cannabis and illegal Cannabis. There is risk that confusion or uncertainty surrounding our products with regulated cannabis could occur on the state or federal level and impact us. We may have difficulty with establishing banking relationships, working with investment banks and brokers who would be willing to offer and sell our securities or accept deposits from shareholders, and auditors willing to certify our financial statements if we are confused with businesses that are in the cannabis business. Any of these additional factors, should they occur, could also affect our business, prospects, assets or results of operation could have a material adverse effect on the business, prospects, results of operations or financial condition of the Company. There exists U.S. state regulatory uncertainty. The rulemaking process for cannabis operators at the state level in any state will be ongoing and result in frequent changes. As a result, a compliance program is essential to manage regulatory risk. All operating policies and procedures implemented in the operation will be compliance-based and derived from the state regulatory structure governing ancillary cannabis businesses and their relationships to state-licensed or permitted cannabis operators, if any. Notwithstanding the Company’s efforts, regulatory compliance and the process of obtaining regulatory approvals can be costly and time-consuming. No assurance can be given that the Company will receive the requisite licenses, permits or cards to operate its businesses. In addition, local laws and ordinances could restrict the Company’s business activity. Although legal under the laws of the states in which the Company’s business will operate, local governments have the ability to limit, restrict, and ban cannabis businesses from operating within their jurisdiction. Land use, zoning, local ordinances, and similar laws could be adopted or changed, and have a material adverse effect on the Company’s business. The Company is aware that multiple states are considering special taxes or fees on businesses in the marijuana industry. It is a potential yet unknown risk at this time that other states are in the process of reviewing such additional fees and taxation. This could have a material adverse effect upon the Company’s business, results of operations, financial condition or prospects. 13 There is no assurance that the Company will obtain and retain any relevant licenses. State licenses in the U.S. are subject to ongoing compliance and reporting requirements. Failure by the Company to comply with the requirements of licenses or any failure to maintain licenses would have a material adverse impact on the business, financial condition and operating results of the Company. Should any state in which the Company considers a license important not grant, extend or renew such license or should it renew such license on different terms, or should it decide to grant more than the anticipated number of licenses, the business, financial condition and results of the operation of the Company could be materially adversely affected. The cannabis laws and regulations of states in which we operate limit the granting and number of licenses granted for dispensaries and cultivation and production facilities. The number of licenses by category, and issuance of individual licenses, may be limited, delayed, denied or otherwise unissued. This separate treatment of individual licenses as well as license categories, along with limits set on the number of licenses granted in each of these operating categories, can result in market and supply chain risks including, for example, mismatch between cultivation and production facilities and dispensaries relating to availability and production of cannabis products. This can result in, among other things, market, pricing and supply risks, which may have a material effect on the Company’s business, financial condition and operations. The Company is subject to restricted access to banking. Because the manufacture, distribution, and dispensation of cannabis remains illegal under the CSA, banks and other financial institutions providing services to cannabis-related businesses risk violation of federal anti-money laundering statutes (18 U.S.C. §§ 1956 and 1957), the unlicensed money-remitter statute (18 U.S.C. § 1960) and the U.S. Bank Secrecy Act. These statutes can impose criminal liability for engaging in certain financial and monetary transactions with the proceeds of a “specified unlawful activity” such as distributing controlled substances which are illegal under federal law, including cannabis, and for failing to identify or report financial transactions that involve the proceeds of cannabis-related violations of the CSA. In February 2014, the Financial Crimes Enforcement Network (“FinCEN”) bureau of the U.S. Treasury Department issued guidance (which is not law) with respect to financial institutions providing banking services to cannabis business, including burdensome due diligence expectations and reporting requirements. This guidance does not provide any safe harbors or legal defenses from examination or regulatory or criminal enforcement actions by the Department of Justice, FinCEN or other federal regulators. Thus, most banks and other financial institutions in the United States do not appear to be comfortable providing banking services to cannabis-related businesses, or relying on this guidance, which can be amended or revoked at any time by the Trump Administration. In addition to the foregoing, banks may refuse to process debit card payments and credit card companies generally refuse to process credit card payments for cannabis-related businesses. As a result, the Company may have limited or no access to banking or other financial services in the United States. In addition, federal money laundering statutes and Bank Secrecy Act regulations discourage financial institutions from working with any organization that sells a controlled substance, regardless of whether the state it resides in permits cannabis sales. The inability or limitation in the Company’s ability to open or maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments may make it difficult for the Company to operate and conduct its business as planned or to operate efficiently. On March 18, 2021, the Secure and Fair Enforcement Banking Act (the “SAFE Banking Act”) was reintroduced in the House of Representatives. On March 23, 2021, the bill was reintroduced in the Senate as well. The House previously passed the SAFE Banking Act in September 2019, but the measure stalled in the Senate. Most recently, on February 4, 2022, the House approved the America COMPETES Act of 2022, which includes the provisions of the SAFE Banking Act. The America COMPETES Act now advances to the Senate for consideration. As written, the SAFE Banking Act would allow financial institutions to provide their services to state-legal cannabis clients and ancillary businesses serving state-legal cannabis businesses without fear of federal sanctions. There is no guarantee the SAFE Banking Act will become law in its current form, if at all. The Company is subject to constraints on marketing products. The development of the Company’s business and operating results may be hindered by applicable restrictions on sales and marketing activities imposed by government regulatory bodies. The regulatory environment in the United States limits the Company’s ability to compete for market share in a manner similar to other industries. If the Company is unable to effectively market its products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for its products, the Company’s sales and operating results could be adversely affected. 14 The Company is subject to unfavorable tax treatment of cannabis businesses. Under Section 280E (“Section 280E”) of the United States Internal Revenue Code of 1986, as amended (the “U.S. Tax Code”), “no deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.” This provision has been applied by the U.S. Internal Revenue Service to cannabis operations, prohibiting them from deducting expenses directly associated with the sale of cannabis. Section 280E therefore has a significant impact on the retail side of cannabis, but a lesser impact on cultivation and manufacturing operations. A result of Section 280E is that an otherwise profitable business may, in fact, operate at a loss, after taking into account its U.S. income tax expenses. The Company is subject to a risk of civil asset forfeiture. Because the cannabis industry remains illegal under U.S. federal law, any property owned by participants in the cannabis industry which are either used in the course of conducting such business, or are the proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture. Even if the owner of the property were never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which, with minimal due process, it could be subject to forfeiture. The Company is subject to proceeds of crime statutes. The Company will be subject to a variety of laws and regulations domestically and in the United States that involve money laundering, financial recordkeeping and proceeds of crime, including the Currency and Foreign Transactions Reporting Act of 1970 (commonly known as the Bank Secrecy Act), as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), as amended and the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the United States In the event that any of the Company’s license agreements, or any proceeds thereof, in the United States were found to be in violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more of the statutes noted above or any other applicable legislation. This could be materially adverse to the Company and, among other things, could restrict or otherwise jeopardize the ability of the Company to declare or pay dividends. The Company is subject to product liability. The Company faces an inherent risk of exposure to product liability claims, regulatory action and litigation if its products are alleged to have caused significant loss or injury. In addition, the sale of the Company’s products would involve the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption of the Company’s products alone or in combination with other medications or substances could occur. The Company may be subject to various product liability claims, including, among others, that the Company’s products caused injury or illness or death, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action against the Company could result in increased costs, could adversely affect the Company’s reputation with its clients and consumers generally, and could have a material adverse effect on the business, results of operations and financial condition of the Company. There can be no assurances that the Company will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of the Company’s potential products. 15 The Company is subject to product recalls. Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. If any of the Company’s products are recalled due to an alleged product defect or for any other reason, the Company could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. The Company may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. In addition, a product recall may require significant management attention. Although the Company has detailed procedures in place for testing its products, there can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits. Additionally, if one of the Company’s significant brands were subject to recall, the image of that brand and the Company could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for the Company’s products and could have a material adverse effect on the results of operations and financial condition of the Company. Additionally, product recalls may lead to increased scrutiny of the Company’s operations by the U.S. Food and Drug Administration, or other regulatory agencies, requiring further management attention and potential legal fees and other expenses. Controlled substance legislation differs between countries and legislation in certain countries may restrict or limit our ability to sell hemp-based consumer products. Most countries are parties to the Single Convention on Narcotic Drugs 1961, which governs international trade and domestic control of narcotic substances, including cannabis extracts. Countries may interpret and implement their treaty obligations in a way that creates a legal obstacle to our obtaining regulatory approval for our hemp-based consumer products in those countries. These countries may not be willing or able to amend or otherwise modify their laws and regulations to permit our hemp-based consumer products to be marketed or achieving such amendments to the laws and regulations may take a prolonged period of time. In the case of countries with similar obstacles, we would be unable to market our hemp-based consumer products in countries in the near future or perhaps at all if the laws and regulations in those countries do not change. Owners of properties located in close proximity to our properties may assert claims against us regarding the use of the property as a marijuana dispensary or marijuana cultivation and processing facility, which if successful, could materially and adversely affect our business. Owners of properties located in close proximity to our properties may assert claims against us regarding the use of our properties, including assertions that the use of the property constitutes a nuisance that diminishes the market value of such owner’s nearby property. Such property owners may also attempt to assert such a claim in federal court as a civil matter under the Racketeer Influenced and Corrupt Organizations Act. If a property owner were to assert such a claim against us, we may be required to devote significant resources and costs to defending ourselves against such a claim, and if a property owner were to be successful on such a claim, our tenants may be unable to continue to operate their business in its current form at the property, which could materially adversely impact the tenant’s business and the value of our property, our business and financial results and the trading price of our securities. Laws and regulations affecting the regulated cannabis and marijuana industry are constantly changing, which could materially adversely affect our operations, and we cannot predict the impact that future regulations may have on us. Local, state and federal marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on its operations. In addition, it is possible that regulations may be enacted in the future that will be directly applicable to our proposed business. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business. 16 Risks Relating to Our Securities If a market for our common stock does not develop, shareholders may be unable to sell their shares. Our common stock is quoted under the symbol “KOAN” on the OTCQB. We do not currently have a consistent active trading market. There can be no assurance that a consistent active and liquid trading market will develop or, if developed, that it will be sustained. Our securities are thinly traded. Accordingly, it may be difficult to sell shares of our common stock without significantly depressing the value of the stock. Unless we are successful in developing continued investor interest in our stock, sales of our stock could continue to result in major fluctuations in the price of the stock. The price of our common stock is volatile, which may cause investment losses for our stockholders. The market price of our common stock has been and is likely in the future to be volatile. Our common stock price may fluctuate in response to factors such as: ● Announcements by us regarding liquidity, significant acquisitions, equity investments and divestitures, strategic relationships, addition or loss of significant customers and contracts, capital expenditure commitments and litigation; ● Issuance of convertible or equity securities and related warrants for general or merger and acquisition purposes; ● Issuance or repayment of debt, accounts payable or convertible debt for general or merger and acquisition purposes; ● Sale of a significant number of shares of our common stock by stockholders; ● General market and economic conditions; ● Quarterly variations in our operating results; ● Investor and public relation activities; ● Announcements of technological innovations; ● New product introductions by us or our competitors; ● Competitive activities; and ● Additions or departures of key personnel. These broad market and industry factors may have a material adverse effect on the market price of our common stock, regardless of our actual operating performance. These factors could have a material adverse effect on our business, financial condition and results of operations. Transfers of our securities may be restricted by virtue of state securities “blue sky” laws, which prohibit trading absent compliance with individual state laws. These restrictions may make it difficult or impossible to sell shares in those states. Without cannabis banking laws in place, the ability to clear restricted stock is difficult. Transfers of our common stock may be restricted under the securities or securities regulations laws promulgated by various states and foreign jurisdictions, commonly referred to as “blue sky” laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities held by many of our stockholders have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them should be aware that there may be significant state blue sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. These restrictions may prohibit the secondary trading of our common stock. Investors should consider the secondary market for our securities to be a limited one. The restricted access to cannabis banking makes it more difficult for cannabis investors to clear their stock from a Transfer Agent (“TA”) to their brokerage of choice. We can provide no assurances to investors of our stock that they will have the ability to move their restricted stock from the TA to their brokerage until federal banking laws are enacted. 17 The sale of a significant number of our shares of common stock could depress the price of our common stock. Sales or issuances of a large number of shares of common stock in the public market or the perception that sales may occur could cause the market price of our common stock to decline. Significant shares of common stock are held by our principal stockholders, other company insiders and other large stockholders. As “affiliates” of Resonate, as defined under Securities and Exchange Commission Rule 144 under the Securities Act of 1933, our principal stockholders, other of our insiders and other large stockholders may only sell their shares of common stock in the public market pursuant to an effective registration statement or in compliance with Rule 144. Future issuance of additional shares of common stock and/or preferred stock could dilute existing stockholders. We have and may issue preferred stock that could have rights that are preferential to the rights of common stock that could discourage potentially beneficially transactions to our common stockholders. Pursuant to our Articles of Incorporation, we currently have authorized 200,000,000 shares of common stock and 10,000,000 shares of preferred stock. To the extent that common shares are available for issuance, subject to compliance with applicable stock exchange listing rules, our board of directors has the ability to issue additional shares of common stock in the future for such consideration as the board of directors may consider sufficient. The issuance of any additional securities could, among other things, result in substantial dilution of the percentage ownership of our stockholders at the time of issuance, result in substantial dilution of our earnings per share and adversely affect the prevailing market price for our common stock. An issuance of additional shares of preferred stock could result in a class of outstanding securities that would have preferences with respect to voting rights and dividends and in liquidation over our common stock and could, upon conversion or otherwise, have all of the rights of our common stock. Our Board of Directors’ authority to issue preferred stock could discourage potential takeover attempts or could delay or prevent a change in control through merger, tender offer, proxy contest or otherwise by making these attempts more difficult or costly to achieve. The issuance of preferred stock could impair the voting, dividend and liquidation rights of common stockholders without their approval. Future capital raises may dilute our existing stockholders’ ownership and/or have other adverse effects on our operations. If we raise additional capital by issuing equity securities, our existing stockholders’ percentage ownership will be reduced, and these stockholders may experience substantial dilution. We may also issue equity securities that provide for rights, preferences and privileges senior to those of our common stock. If we raise additional funds by issuing debt securities, these debt securities would have rights senior to those of our common stock and the terms of the debt securities issued could impose significant restrictions on our operations, including liens on our assets. If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish some rights to our technologies or candidate products, or to grant licenses on terms that are not favorable to us. We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business, and we do not anticipate paying any cash dividends on our capital stock in the foreseeable future. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. 18 Anti-takeover provisions may limit the ability of another party to acquire our company, which could cause our stock price to decline. Our Articles of Incorporation, as amended, our bylaws and Nevada law contain provisions that could discourage, delay or prevent a third party from acquiring our company, even if doing so may be beneficial to our stockholders. In addition, these provisions could limit the price investors would be willing to pay in the future for shares of our common stock. Our Articles of Incorporation allow for our board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock; our outstanding Preferred Stock contains provisions that restrict our ability to take certain actions without the consent of a certain percentage of Preferred Stock then outstanding. Our Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board of Directors also has the authority to issue preferred stock without further stockholder approval. As a result, our Board of Directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our Board of Directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing stockholders. Provisions in the Nevada Revised Statutes and our Bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions. Members of our board of directors and our officers will have no liability for breaches of their fiduciary duty of care as a director or officer, except in limited circumstances, pursuant to provisions in the Nevada Revised Statutes and our Bylaws as authorized by the Nevada Revised Statutes. Specifically, Section 78.138 of the Nevada Revised Statutes provides that a director or officer is not individually liable to the company or its shareholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that (1) the director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer and (2) his or her breach of those duties involved intentional misconduct, fraud or a knowing violation of law. This provision is intended to afford directors and officers protection against and to limit their potential liability for monetary damages resulting from suits alleging a breach of the duty of care by a director or officer. Accordingly, you may be unable to prevail in a legal action against our directors or officers even if they have breached their fiduciary duty of care. In addition, our Bylaws allow us to indemnify our directors and officers from and against any and all costs, charges and expenses resulting from their acting in such capacities with us. This means that if you were able to enforce an action against our directors or officers, in all likelihood, we would be required to pay any expenses they incurred in defending the lawsuit and any judgment or settlement they otherwise would be required to pay. Accordingly, our indemnification obligations could divert needed financial resources and may adversely affect our business, financial condition, results of operations and cash flows, and adversely affect prevailing market prices for our common stock. Item 1B. Unresolved Staff comments None Item 2. Properties Currently, we do not own any real estate. Our principal executive offices are located at 26565 Agoura Road, Suite 200, Calabasas, CA 91302. We pay rent of $99.00 per month at this location. We believe that our properties are adequate for our current needs, but growth potential may require larger facilities due to anticipated addition of personnel. We do not have any policies regarding investments in real estate, securities or other forms of property. Item 3. Legal Proceedings We have no current legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 19 PART II 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, 2021 Quarter Ended High $ Low $ March 31, 2021 .93 .11 June 30, 2021 .67 .23 September 30, 2021 .49 .34 December 31, 2021 .42 .20 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 On April 14, 2022, the last sales price per share of our common stock was $.11 Holders of Our Common Stock As of April 14, 2022, we had 47,796,859 shares of our common stock issued and outstanding, held by approximately 164 shareholders of record at our transfer agent, with approximately 47 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. 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 20 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, 2021 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 From December 1, 2020 through March 15, 2021, we sold units priced at $25,000 per unit where each unit consisted of (i) an 8.0% Note in the principal amount of $25,000 convertible into Common Stock (the “Note) and (ii) a warrant at an exercise price of $0.15 for the purchase of 83,333 shares of the Company’s Common Stock (the “Warrant”). We sold 90 Units for total proceeds of $2,265,000. After paying finder fees of $187,450 to our placement agent, we netted $2,077,550, which will be used for working capital. In addition, we also entered into subscription agreements in connection with an equity placement offering of a maximum of $2,000,000 in units (the “Equity Units”) where each Equity Unit consists of one share of Common Stock at a purchase price of $0.15 and a warrant to purchase 0.5 share(s) of Common Stock at an exercise price of $0.225 per share. We sold 6,983,333 Equity Units for total proceeds of $1,047,500. After paying finder fees of $100,763 to our placement agent, we netted $946,737, which was used to pay off the remaining convertible note debt and will also be used for working capital. During the six-month ended June 30, 2021, the company issued a total of 2,868,025 shares of common stock to vendors for compensation and services rendered. 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. During the fourth quarter of 2021 the company issued a total of 59,171 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 6. Selected Financial Data Not required under Regulation S-K for “smaller reporting companies.” Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We continue to make headway with our strategic objectives to position our company for long-term growth. We are laying the groundwork to scale with key sales channels now operational, including our recently launched Direct-to-Consumer sales platform. Working closely with industry-leading sales, marketing, and logistics partners for our flagship Koan Cordials product line, we have built a multi-channel distribution strategy. Following our launch into the retail chain and the opening of our e-commerce sales platform, we are turning our focus to three critical areas - education, targeted marketing, and controlling the sales process. 21 We took an ambitious approach to our original dispensary rollout and were met with a high amount of interest in our product, reflected by the roughly 80 dispensaries who requested sample kits. While the reception was very positive, we found reluctance for the dispensaries to acquire new brands particularly with the advent of the Delta variant of COVID. While the recent threat of a potential COVID-related retail lockdown in California slowed our progress on the dispensary front, we expect to gain momentum in the retail market as it starts to open up again by revisiting each of these dispensaries. Many of those initial dispensary requests have been followed up by commitments to buy once they begin bringing new brands into the stores. We believe the careful nurturing of our brand is one of our most important responsibilities as managers of Resonate Blends. Since nobody knows our product better than we do, we made the decision to bring the sales process in-house versus having an external salesforce. We are confident this move will have an immediate positive impact on revenues and allow our team to better control the narrative within the retail network in California. We plan to soon offer several packaging variations for our Cordials based on dispensary and consumer feedback. In addition to our Cordial 3-pack, we plan to soon have a single-packaged Cordial, and a multi-blends sampler SKU. We believe having these options encourages the consumer to try more blends and will allow us to do more sampling and upselling promotions. We are also designing a multi-dose bottle which will be more cost-effective for those who use our blends daily. Together, these new packaging configurations should help accelerate our sales revenue by providing consumers convenient options. We also expect to introduce two new formulations and other unique product lines that will showcase our focus on continual product development and brand innovation within our family of Koan products. While we expect to ramp up our retail footprint in the quarters ahead, we did make several key entry points to dispensaries. To that end, we recently announced nine (9) new California One Plant dispensaries and are working closely with them to co-market the Cordials across their vast network. The collaboration and communication with the One Plant team is deep and we will be exploring creative and unique marketing efforts at two of their flagship stores. We are an approved vendor for the Joy Reserve located in the Westfield Centre in Union Square (San Francisco). The Joy Reserve is the first cannabis dispensary located in a mall setting and offers consumers education and guidance to select the best products for their lifestyles. We just launched with The Joy Reserve dispensary, which is focused on bringing a better understanding of the many benefits of cannabis and how to safely pick quality products such as the Koan Cordials. This unique showcase will be used to educate consumers about plant-based wellness with an open browsing floor, free consultations and workshops. We feel this setup is ideal to introduce consumers to our Cordials and are excited to participate in this groundbreaking approach. 22 Marketing and branding are core components of our targeted customer acquisition strategy. We have invested significantly to our overall marketing efforts, including cannabis conferences, social media outreach, Search Engine Optimization (SEO), and marketing events with our dispensary partners. We recently consolidated our digital marketing to the Flower Agency, a full digital marketing agency that assists lifestyle, wellness and cannabis brands with customer acquisition, awareness and re-engagement. Importantly, our patent-pending Koan Cordials, the world’s first cannabis-infused cordial, are starting to gain national recognition from cannabis industry leaders. We expect to see a significant uptick in press and other media mentions in the coming months. We are very encouraged with our Koan Cordials winning the show’s Gold Leaf Award for “Best New Brand of 2021” at the invitation-only “Luxury Meets Cannabis Conference”. The Gold Leaf Awards honor those visionary crossover brands, retailers, and founders that are going above and beyond both in and outside of the cannabis space — across beauty, skincare, food/beverage, and everyday wellness sectors. The interest since this award announcement for potential acquisitions and new state expansion has been extremely gratifying. Koan Cordials also won a Bronze 2021 Clio Cannabis Award for brand design in the packaging category. The Clio Awards is an annual global award program recognizing innovation and creative excellence in advertising, design and communication. Clio Cannabis recognizes and elevates creative contributions from top design talent in the rapidly growing cannabis market. With an established statewide infrastructure in California for manufacturing, distribution and sales, we are well-equipped to make progress with our go-forward focus on revenue generation. We are uniquely positioned to be a positive disruptive force in the wellness/lifestyle segment of the industry built on a growing body of proprietary IP, and we firmly believe that value-added brands are the future of the Cannabis industry. Over the long-term, we believe that cannabis, as a part of the wellness lifestyle, will become the largest segment in the burgeoning industry and we plan to be one of the leaders in this segment. Results of Operations for the Years Ended December 31, 2021 and 2020 Revenues We have generated $27,031 in revenues for the year ended December 31, 2021, as compared with no sales for the year ended December 31, 2020 on our current product line, and also no sales from the discontinued operations of our sold subsidiary, Textmunication, Inc., for the years ended December 31, 2021 and 2020, respectively. We have launched our first line of six Cordial products in California and we have started to generate revenues from the sale of these products. We anticipate increased revenues on our six Cordials for the rest of 2022. We anticipate a rollout of new packaging configurations by early Q2 2022 for our Cordials; to include both a one-pack and a multi-dose bottle which is expected to bring the cost per dose down considerably. We also plan on launching additional Cordial formulations by Q2 2022 and a new line of edibles in mid-2022, which we anticipate will contribute to increasing our revenues. As we have just launched our products, however, it may take some time for the markets to react, gain traction and result in brand awareness among our customers. There can be no assurances, however, that customers will positively react to our products. Operating Expenses Our operating expenses were $2,534,577 for the year ended December 31, 2021, as compared with $1,813,958 for the year ended December 31, 2020. The main drivers for the overall increase in operating expenses in 2021 was our focus on advertising to support our planned growth and non-cash items related to broker and employee equity compensation. We paid both cash fees and stock compensation to a broker on our Private Placement Memorandum in Q1. Within the operating expenses, there were a variety of increases, the largest of which was an increase in non-cash management fees of $400,349 as a result of issuing stock in 2021 in settlement of accrued but unpaid management and employee salaries in 2020. We hope that to avoid these settlement expenses for 2022 and compensate employees with available cash on hand. However, if we are forced to defer salaries and settle with shares for employees this year, due to a lack of funds, we should expect our non-cash compensation expense in 2022 to resemble that of 2021. In 2021 and 2020, we compensated a broker with combined share and cash compensation valued at $512,312 and $34,250, respectively for its services as placement agent. We expect to incur similar broker expenses as long as we are dependent on additional financing for our operations, and we expect that will be the case for the rest of 2022. We spent $604,564 more on advertising in 2021 than in 2020. This money was used 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. We believe our advertising efforts will pay dividends throughout 2022 as the awareness groundwork has been established to educate the market on our family of Cordial formulations. Professional fees increased by $45,175 in 2021 compared with 2020. With more focus on operations, we have spent more on professional fees. We expect that professional fees will increase in 2022 as we continue to ramp up operations. General and administrative expenses decreased by $520,409 in 2021 compared with 2020. This resulted from bringing several outside services in-house and not having to address outstanding debt liabilities from our previous spin-out of Textmunication Holdings, Inc. in 2020. We expect general and administrative expenses to remain fairly constant throughout 2022 due to internal changes we’ve implemented. Other Income We had other expenses of $2,346,362 for the year ended December 31, 2021 compared with other expenses of $143,113 for the year ended December 31, 2020. Our other expenses for the year ended December 31, 2021 was mainly attributable to a loss on revaluation of derivative liabilities. 23 Net Income/Loss We had net loss of $4,873,056 for the year ended December 31, 2021, as compared with net loss of $1,941,274 for the year ended December 31, 2020. Our increased loss in 2021 is mainly from a lack of revenue, combined with increased advertising to support our growth and significant non-cash expenses related to broker and employee equity compensation. We believe that our increased marketing activity and compensating valuable employees and partners will pay off with increased brand exposure that we expect will generate more sales for the upcoming year. Liquidity and Capital Resources As of December 31, 2021, we had total current assets of $269,518, consisting of $12,913 in cash, $10,830 in advances to suppliers and $245,776 in Inventories. Our total current liabilities as of December 31, 2021 were $4,402,886. We had a working capital deficit of $4,133,368 as of December 31, 2021, compared with a working capital deficit of $996,439 as of December 31, 2020. Cash Flows from Operating Activities Operating activities used $2,792,687 in cash for the year ended December 31, 2021, compared with cash used of $1,381,003 for the year ended December 31, 2020. Our negative operating cash flow for the year ended December 31, 2021 was largely the result of our net loss, offset mainly by the loss on derivative liabilities. Our negative operating cash flow for the year ended December 31, 2020 was largely the result also of our net loss, offset mainly by share based compensation. Cash Flows from Investing Activities Investing activities used $36,047 in cash for the year ended December 31, 2021 while we used no cash on investing activities for the year ended December 31, 2020. Cash Flows from Financing Activities Cash flows provided by financing activities during the year ended December 31, 2021 amounted to $2,727,322 compared with cash flows provided by financing activities of $1,492,213 for the year ended December 31, 2020. Our positive cash flows for the year ended December 31, 2021 consisted of proceeds from issuance of common stock of $1,367,115, proceeds from Convertible notes payable of $1,865,000, offset by payments of notes payable of $504,793. 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. 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 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, 2021, we have an accumulated deficit of $25,974,051. 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, 2021, 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. 24 Item 8. Financial Statements and Supplementary Data Index to Financial Statements Required by Article 8 of Regulation S-X: Audited Financial Statements: F-1 Consolidated Balance Sheets as of December 31, 2021 and 2020; F-2 Consolidated Statements of Operations for the years ended December 31, 2021 and 2020; F-3 Consolidated Statement of Stockholders’ Equity for the year ended December 31, 2020; F-3 Consolidated Statement of Stockholders’ Equity for the year ended December 31, 2020; F-4 Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020; and F-5 Notes to Consolidated Financial Statements 25 RESONATE BLENDS, INC. (FORMERLY TEXTMUNICATION HOLDINGS, INC.) CONSOLIDATED BALANCE SHEET December 31, 2021 December 31, 2020 ASSETS Current assets Cash and cash equivalents $ 12,913 $ 114,325 Receivables - Prepaid expenses and other current assets 10,830 54,599 Inventories 245,776 - Total current assets 269,518 168,924 Fixed assets, net 31,337 - Investment in equity method investee 100 100 TOTAL ASSETS 300,955 169,024 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities Accounts payable and accrued liabilities 206,872 198,936 Due to related parties 45,000 187,500 Convertible notes payable, net of discount 1,865,000 504,793 Derivative liability 2,286,014 274,134 Settlement liability Current liabilities of discontinued operations - Total current liabilities 4,402,886 1,165,363 Total liabilities 4,402,886 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 - - Common stock; $0.0001 par value; 200,000,000 shares authorized; 45,046,637 and 29,769,627 shares issued and outstanding as of December 31, 2021 December 31, 2020, respectively. 4,504 2,976 Additional paid-in capital 21,867,416 20,101,480 Accumulated deficit (25,974,051 ) (21,100,995 ) Total Stockholders’ deficit (4,101,931 ) (996,339 ) TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY $ 300,955 $ 169,024 The accompanying notes are an integral part of these consolidated financial statements F- 1 RESONATE BLENDS, INC. (FORMERLY TEXTMUNICATION HOLDINGS, INC.) CONSOLIDATED STATEMENT OF OPERATION The Three Months Ended The Twelve Months Ended December 31 2021 December 31 2020 December 31 2021 December 31 2020 REVENUES $ 19,457 $ - $ 27,031 $ - COST OF REVENUES 6,844 - 19,148 - Gross profit 12,613 - 7,883 - Operating expenses Advertising 176,702 475 611,914 7,350 General and administrative expenses 74,417 222,670 158,935 679,344 Legal and Professional fees 49,101 120,755 567,025 521,850 Officer Compensation 122,500 210,400 556,865 210,400 Salaries and Related 40,000 (185,400 ) 236,250 196,500 Sales Commission - - - - Office Rent 1,369 (405 ) 3,239 - Impairment of inhouse software - - - - Non cash management fees (866,949 ) - 400,349 198,514 Total operating expenses (402,860 ) 368,495 2,534,577 1,813,958 Loss from operations 415,473 (368,495 ) (2,526,694 ) (1,813,958 ) Other Income (expense) Other Income - - 690 - Interest expense (38,048 ) (206 ) (135,292 ) (54,659 ) Gain on change of derivative liability 1,156,717 592,769 (2,011,881 ) (25,000 ) Amortization of debt discount - (15,875 ) (10,583 ) (56,350 ) Amortization of debt issuance costs (61,771 ) - (247,085 ) - Gain (loss) on settlement of derivative liabilities - (7,175 ) - 24,786 Legal settlement - (1 ) - (31,890 ) Gain on settlement of notes payable - - 62,500 - Depreciation expense (4,711 ) (4,711 ) Total other expense 1,052,187 569,512 (2,346,362 ) (143,113 ) Income (loss) from investment in equity method investee - - - - NET INCOME (LOSS) from continuing operations 1,467,659 201,017 (4,873,056 ) (1,957,071 ) NET INCOME (LOSS) from discontinued operations 15,797 NET INCOME (LOSS) 1,467,659 201,017 (4,873,056 ) (1,941,274 ) Basic weighted average common shares outstanding 31,085,610 25,455,550 31,085,610 25,455,550 Net Income (loss) per common share: basic and diluted $ 0.02 $ 0.01 $ (0.19 ) $ (0.08 ) The accompanying notes are an integral part of these consolidated financial statements F- 2 RESONATE BLENDS, INC. (FORMERLY TEXTMUNICATION, INC.) CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020 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 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 - $ - - $ 200 44,987,466 $ 4,499 $ 22,734,370 $ (27,441,711 ) $ (4,702,642 ) Net Loss for the quarter - - - - - - - $ 577,647 $ 577,647 Non cash compensation - - - - 59,171 $ 5 $ 23,059 $ 23,064 Balances December 31, 2021 - $ - - $ 200 45,046,637 $ 4,504 $ 22,757,429 $ (26,864,064 ) $ (4,101,931 ) Shares Amount Shares Amount Shares Amount Paid-in Capital Deficit Deficit 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 ) (1,677,929 ) Net Loss for the quarter - - - - - - - (351,380 ) (351,380 ) 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 (21,302,012 ) (1,756,803 ) Net Gain for the quarter - - - - - - - $ 201,017 201,017 Net Gain (Loss) for the quarter $ 201,017 201,017 Non-Cash Compensation - Conversion of notes payable - Common stock issue 4,979,646 497 558,950 559,447 Issuance of common stock 4,979,646 497 558,950 559,447 Balance December 30, 2020 - - 2,000,000 200 29,769,627 2,976 20,101,480 (21,100,995 ) (996,339 ) The accompanying notes are an integral part of these consolidated financial statements F- 3 RESONATE BLENDS, INC. (FORMERLY TEXTMUNICATION, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS For nine months ended September 30 2021 2020 Cash Flows from Operating Activities Net Income (loss) $ (4,873,056 ) $ (1,941,274 ) Net loss from discontinued operations 15,797 Adjustments to reconcile - Amortization and depreciation 10,583 56,350 Impairment of investments - 25,000 Loss on derivative liability 2,011,880 - Non cash interest expense 16,142 54,659 Legal Settlement 31,980 Share professional fees 82,473 165,435 Share based compensation 400,349 342,984 Gain (Loss) on the settlement of debt (62,500 ) - Gain on settlement of derivative liabilities (24,786 ) Changes in assets and liabilities - Receivables Inventories (245,777 ) Prepaid expenses and other current assets (10,830 ) Advances to suppliers (54,599 ) 54,599 Accounts payable and accrued expenses 7,936 (451,874 ) Accumulated Depreciation 4,711 Due to Related party (80,000 ) 187,500 Net cash used by operating activities (2,792,687 ) (1,483,630 ) Net cash provided by (used in) operating activities of discontinued operations 102,627 Net cash used in operations (2,792,687 ) (1,381,003 ) 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 1,011,113 Proceeds from convertible notes (net) 1,865,000 850,100 Proceeds from notes payables Payments on preferred stocks buy back Payments on convertible notes payable (504,793 ) (369,000 ) Net cash provided by financing activities 2,727,322 1,492,213 Net cash provided by financing activities of discontinued operations Net cash used in finance 2,727,322 1,492,213 Net increase in cash (101,412 ) 111,210 Cash, beginning of period 114,325 3,115 Cash, end of period $ 12,913 $ 114,325 Supplemental disclosure of cash flow information Cash paid for interest $ 38,048 $ (54,659 ) Cash paid for tax - - Non-Cash investing and financing transactions Conversion of debt for common stock $ 306,858 $ 10,000 Settlement of derivative liability $ - $ 500,422 The accompanying notes are an integral part of these consolidated financial statements F- 4 RESONATE BLENDS, INC. (formerly TEXTMUNICATION HOLDINGS, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2021 and 2020 NOTE 1 – BASIS OF PRESENTATION AND GOING CONCERN The Company Resonate Blends, Inc. formerly Textmunication Holdings, Inc. (the “Company”) was incorporated on in October 1984 in the State of Georgia as Brock Control Systems. Founded by Richard T. Brock, the Company was in the sales automation market and an early developer of enterprise customer management systems. The Company went public at the end of March of 1993. In February of 1996, the Company changed its name to Brock International Inc., and in March of 1998, the Company again changed our name to Firstwave Technologies, Inc. In 2007, the Company deregistered its common stock in order to avoid the expenses of being a public company. The Company reported briefly on the OTC Disclosure & News Service in 2008 but not for long. The Company again changed its name to FSTWV, Inc. On October 28, 2013, the Company held a shareholder meeting to reincorporate the company in the State of Nevada and concurrently change its name to Textmunication Holdings, Inc. The Company also voted to approve a 1 for 5 reverse split of its outstanding common stock. On November 16, 2013, the Company entered into a Share Exchange Agreement (SEA) with Textmunication, Inc. a California corporation, whereby the sole shareholder of the Company received 65,640,207 new shares of common stock of the Company in exchange for 100% of the Textmunication’s issued and outstanding shares. Textmunication is an online mobile marketing platform service that will connect merchants with their customers and allow them to drive loyalty and repeat business in a non-intrusive, value added medium. For merchants we provide a mobile marketing platform where they can always send the most up-to-date offers/discounts/alerts/events schedule, such as happy hours, trivia night, and other campaigns. The consumer can also access specials and promotions that merchants choose to distribute through Textmunication by opting into keywords designated to the merchant’s keywords. On July 9, 2018, the 1 – 1,000 Reverse Split of the Company’s common stock took effect at the open of business. All shares and per share amounts have been retroactively adjusted to reflect the reverse split. On June 25, 2019, the Company issued a press release announcing it plans to change its business direction from its current SMS technology business to focus on the emerging national cannabis market. The Company planned on using its mobile texting platform to enhance communication efforts with the potential acquisitions. On October 25, 2019, the Company entered into a Membership Interest Purchase Agreement (the “Resonate Purchase Agreement”) with Resonate Blends, LLC, a California limited liability company (“Resonate”), and the members of Resonate. As a result of the transaction, Resonate became a wholly owned subsidiary of the Company. In accordance with the terms of the Purchase Agreement, at the closing an aggregate of 5% of the Company’s outstanding shares of common stock for a total of 665,072 shares were issued to the holders of Resonate in exchange for their membership interests of Resonate. These shares have anti-dilution protection. We have also agreed as part of the purchase price to issue: (ii) such number of shares of Series E Preferred Stock that will convert into 5% of the outstanding shares of common stock in the Company on a fully-diluted basis upon an annualized revenue run rate of Ten Million Dollars ($10,000,000.00) for any three (3) consecutive month trailing period; and (iii) such number of shares of Series E Preferred Stock that will convert into 5% of the outstanding shares of common stock in the Company on a fully-diluted basis upon the occurrence of the Company’s public market value reaching One Hundred Million US Dollars ($100,000,000). The shares in (ii) and (iii) shall have anti-dilution protections, except that this provision only applies for 2.5% of the outstanding shares acquired under each subsection. F- 5 Also, on October 25, 2019, the Company entered into a Membership Interest Purchase Agreement (the “Entourage Labs Purchase Agreement”) with Entourage Labs, LLC, a California limited liability company (“Entourage Labs”), and the members of Entourage Labs. As a result of the transaction, Entourage Labs became a wholly owned subsidiary of the Company. In accordance with the terms of the Purchase Agreement, at the closing an aggregate of 5% of the Company’s outstanding shares of common stock for a total of 665,072 shares were issued to the holders of Entourage Labs in exchange for their membership interests of Entourage Labs. These shares have anti-dilution protection. We have also agreed as part of the purchase price to issue: (ii) such number of shares of Series E Preferred Stock that will convert into 5% of the outstanding shares of common stock in the Company on a fully-diluted basis upon an annualized revenue run rate of Ten Million Dollars ($10,000,000.00) for any three (3) consecutive month trailing period; and (iii) such number of shares of Series E Preferred Stock that will convert into 5% of the outstanding shares of common stock in the Company on a fully-diluted basis upon the occurrence of the Company’s public market value reaching One Hundred Million US Dollars ($100,000,000). The shares in (ii) and (iii) shall have anti-dilution protections, except that this provision only applies for 2.5% of the outstanding shares acquired under each subsection. In addition, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations (the “Conveyance Agreement”) with Mark S. Johnson and the Company’s 49% owned subsidiary, Aspire Consulting Group, LLC, a Virginia limited liability company. Pursuant to the Conveyance Agreement, the Company transferred all assets and business operations associated with its IT consulting solutions, including all of the capital stock of Aspire Consulting, to Mr. Johnson. In exchange, Mr. Johnson agreed to cancel 20,000 shares of common stock in the Company and to assume and cancel all liabilities relating to the Company’s former business. Finally, the Company entered into Employment Agreements with the following persons: (i) Geoffrey Selzer as Chief Executive Officer (CEO) of the Company with an annual salary of $180,000; and (ii) Pamela Kerwin as Chief Operating Officer (COO) of the Company with an annual salary of $120,000. Both are eligible for salary increases upon milestone achievements and other benefits. The Employment Agreement for the CEO has a term of 2 years and can’t be terminated without cause. Severance of six (6) weeks is available for termination of the COO without cause before one-year of service and eight (8) weeks after one-year of service. On December 16, 2019 the Company filed Articles of Merger with the Secretary of State of Nevada in order to effectuate a merger with its wholly owned subsidiary; Resonate Blends, Inc. Shareholder approval was not required under Section 92A.180 of the Nevada Revised Statutes. As part of the merger, the Company’s board of directors authorized a change in our name to “Resonate Blends, Inc.” and the Company’s Articles of Incorporation have been amended to reflect this name change. In connection with the name change, the Company’s symbol was changed to “KOAN” that more resembles the Company’s new business focus. On January 20, 2020, Wais Asefi resigned as Chairman and as a member of our Board of Directors. Mr. Asefi’s resignation is in support of Resonate Blends strategic direction of becoming a pure play cannabis company. The Company does not believe that Mr. Asefi has any disagreements on matters relating to our operations, policies or practices. Also, on January 20, 2020, our Board of Directors appointed Geoffrey Selzer as our Chairman. On 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 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. F- 6 The consideration for the sale of Textmunication consists of the cancellation by the Asefi Group of 4,822,029 shares of common stock (the “Shares”) of the Company. The Shares have a market value of $337,542, based on our last sales price of $0.07 per share as of May 26, 2020. Upon the cancellation of the Shares, the Company agreed to execute a general release in favor of Mr. Asefi. Also on May 22, 2020, the Company entered into a Separation and Release Agreement (the “Separation Agreement”) with Wais Asefi. Pursuant to the Separation Agreement, Mr. Asefi agreed to separate from all officer positions and as a director of the Company and to further accept the payment of $200,000 from the Company’s future fundraising as consideration of all debts outstanding under Mr. Asefi’s employment agreement with the Company. Mr. Asefi further agreed to cancel his 4,000,000 shares of Series A Preferred Stock and to transfer his 2,000,000 shares of Series C Preferred Stock to Geoffrey Selzer, the Company’s current CEO and Director. Mr. Asefi further released the Company of all claims. Also on May 22, 2020, Mr. Selzer signed a Voting Agreement and agreed to vote his newly acquired 2,000,000 shares of Series C Preferred Stock in favor of the sale of Textmunication to the Asefi Group. On May 22, 2020, Resonate Blends, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “SPA”) with Wais Asefi, Nick Miniello, Juleon Asefi, and Curt Byers (collectively, the “Asefi Group”) to sell to the Asefi Group its subsidiary, Textmunication, Inc., a California corporation (“Textmunication”). Textmunication operates the Company’s SMS business activities. On July 20, 2020, the parties closed on the transactions contained in the SPA. The Asefi Group cancelled 4,755,209 shares of common stock (the “Shares”) of the Company. The Shares have a market value of $332,842, based on our last sales price of $0.07 per share as of May 26, 2020. The Company also executed a general release in favor of Mr. Asefi. Basis of Presentation Our financial statements are presented in conformity with accounting principles generally accepted in the United States of America, as reported on our fiscal years ending on December 31, 2021 and 2020. We have summarized our most significant accounting policies. Going concern These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As of December 31, 2021, the Company has an accumulated deficit of $25,974,051 . The company’s ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable operations. While the Company is expanding its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. These consolidated financial statements do not include any adjustments that might arise from this uncertainty. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. On December 31, 2021 and 2020 no cash balances exceeded the federally insured limit. F- 7 Accounts receivable and allowance for doubtful accounts Accounts receivables are stated at the amount management expects to collect. The Company generally does not require collateral to support customer receivables. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. As of December 31, 2021, and 2020 there’s no allowance for doubtful accounts and bad debts. Revenue Recognition The Company’s policy is that revenues will be recognized when control of the product is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. Results for reporting periods beginning after January 1, 2020 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605. We did not have any cumulative impact as a result of applying Topic 606. Fair Value of Financial Instruments The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The three levels of the fair value hierarchy are described below: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities, Level 2: Quoted prices in markets that are not active, or inputs that is observable, either directly or indirectly, for substantially the full term of the asset or liability, Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). The fair value of the accounts receivable, accounts payable, notes payable are considered short term in nature and therefore their value is considered fair value. Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended December 31, 2021 and 2020: SUMMARY OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS Level 1 Level 2 Level 3 Total Liabilities Derivative Financial Instruments $ — $ — $ 2,286,014 $ 2,286,014 F- 8 Net income (loss) per Common Share Basic net income (loss) per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Property and equipment Property and equipment are stated at cost, less accumulated depreciation provided on the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Expenditures for renewals or betterments are capitalized, and repairs and maintenance are charged to expense as incurred the cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts, and any gain or loss thereon is reflected in operations. Company policy capitalizes property and equipment for cost over $1,000, asset acquired under $1,000 are charge to operations. Income Taxes Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. Because the Company has no net income, the tax benefit of the accumulated net loss has been fully offset by an equal valuation allowance. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Stock-Based Compensation The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation – Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered. The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital over the period during which services are rendered. Advertising Expenses Advertising expenses are included in General and administrative expenses in the Statements of Operations and are expensed as incurred. The Company incurred $611,914 and $7,350 in advertising expenses for the years ended December 31, 2021 and 2020, respectively. F- 9 Recent Accounting Pronouncements In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments including requirements to measure most equity investments at fair value with changes in fair value recognized in net income, to perform a qualitative assessment of equity investments without readily determinable fair values, and to separately present financial assets and liabilities by measurement category and by type of financial asset on the balance sheet or the accompanying notes to the financial statements. ASU 2016-01 will be effective for the Company beginning on January 1, 2018 and will be applied by means of a cumulative effect adjustment to the balance sheet, except for effects related to equity securities without readily determinable values, which will be applied prospectively. Management has reviewed this pronouncement and has determined that it would not have a material impact to the consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases , which requires an entity to recognize long-term lease arrangements as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all long-term leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The amendments also require certain new quantitative and qualitative disclosures regarding leasing arrangements. ASU 2016-02 will be effective for the Company beginning on January 1, 2019. Lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. Management does not believe the adoption of ASU 2016-02 will have a material impact on the Company’s consolidated financial statements. In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging: Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships, which clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument would not, in and of itself, be considered a termination of the derivative instrument, provided that all other hedge accounting criteria continue to be met. ASU 2016-05 is effective for the Company beginning on January 1, 2017. Early adoption is permitted, including in an interim period. Management evaluated ASU 2016-05 and determined that the adoption of this new accounting standard did not have a material impact on the Company’s consolidated financial statements. In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments, which aims to reduce the diversity of practice in identifying embedded derivatives in debt instruments. ASU 2016-06 clarifies that the nature of an exercise contingency is not subject to the “clearly and closely” criteria for purposes of assessing whether the call or put option must be separated from the debt instrument and accounted for separately as a derivative. ASU 2016-06 is effective for the Company beginning on January 1, 2017. Management evaluated ASU 2016-06 and determined that the adoption of this new accounting standard did not have a material impact on the Company’s consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies several aspects of the accounting and presentation of share-based payment transactions, including the accounting for related income taxes consequences and certain classifications within the statement of cash flows. ASU 2016-09 is effective for the Company beginning on January 1, 2017. Management evaluated the impact of adopting ASU 2016-09 and determined that the new accounting standard did not have a material impact on the Company’s consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance for all periods presented. Management has reviewed this pronouncement and has determined that it would not have a material impact to the consolidated financial statements. F- 10 In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. Management has reviewed this pronouncement and has determined that it would not have a material impact to the consolidated financial statements. In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. NOTE 3 – RELATED PARTY TRANSACTIONS As of December 31, 2021, the Company completed the notes payable to a related party. On May 22, 2020, the Company entered into a Separation and Release Agreement (the “Separation Agreement”) with Wais Asefi. Pursuant to the Separation Agreement, Mr. Asefi agreed to separate from all officer positions and as a director of the Company and to further accept the payment of $200,000 from the Company’s future fundraising as consideration of all debts outstanding under Mr. Asefi’s employment agreement with the Company. Mr. Asefi further agreed to cancel his 4,000,000 shares of Series A Preferred Stock and to transfer his 2,000,000 shares of Series C Preferred Stock to Geoffrey Selzer, the Company’s current CEO and Director. Mr. Asefi further released the Company of all claims. On May 22, 2020, the 4,000,000 shares of Series A Preferred Stock were returned to the Company’s transfer agent and cancelled and on May 22, 2020 the 2,000,000 shares of Series C Preferred Stock were transferred to Mr. Selzer. The parties to the Separation Agreement agreed to a payment schedule of $200,000 based on future monies raised by the Company - and not on a specific date – as follows: ● $12,500 when the initial $250,000 is raised by the Company; ● $12,500 when a total of $500,000 is raised by the Company; F- 11 ● $10,000 when a total of $750,000 is raised by the Company; ● $35,000 when a total of $1,750,000 is raised by the Company; ● $35,000 when a total of $2,750,000 is raised by the Company; ● $35,000 when a total of $3,750,000 is raised by the Company; ● $35,000 when a total of $4,750,000 is raised by the Company; and ● $25,000 when a total of $5,750,000 is raised by the Company. On May 13, 2021, we amended the Separation Agreement to state the parties desire to reduce the total amount payable to Wais Asefi from $200,000 USD to $142,500 USD. In addition to the earlier payments made to Mr. Asefi, a payment of $40,000 was made on May 14, 2021 and another payment on June 27, 2021 for $40,000 . The final payment due on August 11, 2021 was for $25,000 . The final payment was made on August 11, 2021 and settled this agreement in full. Further under the amendment, Mr. Asefi nominated Textmunication, Inc., our prior subsidiary, as the recipient of the funds due under the Separation Agreement. The outstanding balances as of December 31, 2021 and December 31, 2020 are $45,000 and $187,500 respectively. NOTE 4 - CONVERTIBLE NOTE PAYABLE Convertible notes payable consists of the following as of December 31, 2021 and December 31, 2020: SCHEDULE OF CONVERTIBLE NOTES PAYABLE December 31, 2021 December 31, 2020 Convertible notes face value $ 1,865,000 $ 517,544 Less: Discounts - (12,751 ) Less: Debt issuance cost - - Net convertible notes $ 1,865,000 $ 504,793 The convertible notes as of December 31, 2021 are 8% Unsecured Convertible Promissory Notes from various accredited investors issued from January 1, 2021 to March 31, 2021 from the Company’s Reg D 506(c) private placement. All notes have a mandatory conversion into equity on the maturity date, which is January 2, 2022, or at a Qualified Financing (QF) of $5,000,000, whichever occurs first. The maturity date conversion 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 QF offering. On December 28, 2021, some of the accredited investors (“Investors”) offered to extend the maturity date on the Notes to July 3, 2022 (the “Extension Period”). The interest shall accrue during the Extension Period at the rate of the Note pre default, and all other provisions in the Note shall remain in full force and effect, except for the amended terms listed below. Under the Note amendment, all principal together with accrued and unpaid interest, will be automatically converted into shares of Common Stock at $.10, but Investors will no longer have the option of the lesser of $0.10 and 75% of the volume weighted average closing price of the Common Stock for the prior 20 trading day period. In exchange for the Extension Period, the Company shall add $2,500 for every $25,000 in principal on the Note and the entire amount of principal and accrued interest shall be due at the end of the Extension Period. As of December 31, 2021 and 2020 accrued interest payable on notes payable were $134,758.63 and $54,659 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. F- 12 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 $3,239 and $740 for the years ended December 31, 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; (iii) David Thielen as Chief Investment Officer (CIO) of the Company with an annual salary of $120,000. All are eligible for salary increases upon milestone achievements and other benefits. The Employment Agreement for the CEO has a term of 2 years and can’t be terminated without cause. Severance of six (6) weeks is available for termination of the COO and CIO without cause before one-year of service and eight (8) weeks after one-year of service. NOTE 6 – INCOME TAXES For the year ended December 31, 2021, the cumulative net operating loss carry-forward from continuing operations is approximately $26,837,896 and will expire beginning in the year 2030. The cumulative tax effect at the expected rate of 21% of significant items comprising our net deferred tax amount is as follows as of December 31, 2021 and 2020: SCHEDULE OF DEFERRED TAX ASSETS Deferred tax attributable to: 2021 2020 Net Operating loss carry over 3,413,282 3,017,656 Valuation allowance 3,413,282 3,017,656 Net deferred tax assets - - Due to the enactment of the Tax Reform Act of 2017, the corporate tax rate for those tax years beginning with 2018 has been reduced to 21%. Note 7 – STOCKHOLDERS’ EQUITY The Company is authorized to issue an aggregate of 200,000,000 shares of common stock with a par value of $ 0.0001 . The Company is also authorized to issue 10,000,000 shares of “blank check” preferred stock with a par value of $ 0.0001 . Preferred Stock The board of directors of the Company has designated, out of the 10,000,000 shares of preferred stock authorized, the following series of preferred stock: 4,000,000 shares of Series A Preferred Stock, 66,667 shares of Series B Preferred Stock, 2,000,000 shares of Series C Preferred Stock, 40,000 shares of Series D Preferred Stock and 10,000 shares of Series E Preferred Stock. On October 25, 2019, 66,667 outstanding shares of Series B Preferred Stock was returned to the Company’s transfer agent and cancelled. On December 9, 2019, the Company exercised its right to redeem the 40,000 outstanding shares of Series D Preferred Stock by paying the holders $260,000 or 130% of the amount paid for the shares, as called for under the Securities Purchase Agreement. F- 13 On May 22, 2020, 4,000,000 outstanding shares of Series A Preferred Stock were returned to the Company’s transfer agent and cancelled, There were 2,000,000 shares of Series C Preferred Stock issued and outstanding as of December 31, 2021. There are no other series of preferred stock outstanding as of December 31, 2021. Common Stock During the year ended December 31, 2018, ● the Company’s Board of Directors approved a one to one thousand (1:1000) reverse stock split, which became effective July 9, 2018. The Company consolidated financial statements have been retroactively restated to the reflect the effect of the stock split ● the Company entered into a subscription agreement for 9.98% of the company common shares outstanding for $100,000. During the year ended December 31, 2018, the Company issued 1,380,933 shares of common stock with a fair value of $354,010 for the conversion of convertible notes payable. The converted portion of the notes also had associated derivative liabilities with fair values on the date of conversion of 866,361. The conversion of the derivative liabilities has been recorded through additional paid-in capital During the first quarter of 2019 the company issued a total of 6,685,000 shares to employees and vendors for compensation and services rendered. The fair market value of the share issues accounted as expenses as follows: SCHEDULE OF COMPENSATION AND SERVICES RENDERED Management Fees $ 2,074,600 Payment to subcontractor 446,982 Total $ 2,521,582 During the second quarter of 2019 the company issued 40,000 shares of preferred stock warrants for $200,000 cash. During the third quarter of 2019 the company issued 1,280,000 common stocks in settlement of liabilities. The fair market value of the liabilities accounted as additional paid in capital of $164,033. During the year ended December 31, 2019, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with the purchasers identified therein (collectively, the “Purchasers”) providing for the issuance and sale to the Purchasers of an aggregate of up to 40,000 shares of our Series D Convertible Preferred Stock (the “Preferred Shares”) and related warrants for gross proceeds to the Company of $200,000. On December 9, 2019, we exercised our right to redeem the Preferred Shares by paying the Purchasers $260,000 or 130% of the amount paid for the Preferred Shares, as called for under the Securities Purchase Agreement. During the last quarter year end December 31, 2019, the company issued 4,274,936 shares of common stocks to acquire Resonate Blends, LLC, and Entourage LLC, both California limited liability companies. As a result of the transaction, both companies became wholly owned subsidiaries of the Company. The Company recognized a loss of $834,022 on the acquisitions. During the year ended December 31, 2021 the company issued a total of 3,427,990 shares of common stock to management and vendors for compensation and services rendered. The fair market value of the share issues accounted as expenses as follows: Professional Fees $ 201,619 Payment to obtain loan 408,674 Payment to management staff 166,309 Share issued accounted as expense 776,603 F- 14 NOTE 8 – DISCONTINUED OPERATONS On July 20, 2020, the Company finalized a Stock Purchase Agreement (the “SPA”) with Wais Asefi, Nick Miniello, Juleon Asefi, and Curt Byers (collectively, the “Asefi Group”) to sell to the Asefi Group its subsidiary, Textmunication, Inc., a California corporation (“Textmunication”). Textmunication operates the Company’s SMS business activities. The Company retained its cannabis operations based in Calabasas, California. The Company has accounted for this spinout as a discontinued operation and retroactively reclassified all previously presented financial information. The following summarizes the results of operations for Textmunication, Inc. SCHEDULE OF DISCONTINUED OPERATIONS 2020 2019 Revenues $ 477,734 $ 758,101 Cost of revenues 101,347 285,085 Operating expenses 468,815 581,764 570,162 866,849 Loss from operations of discontinued operation (92,428 ) (108,748 ) Gain on disposal of discontinued operations 108,206 - Gain (loss) from discontinued operations $ 15,778 $ (108,748 ) NOTE 9 – SUBSEQUENT EVENTS On January 28, 2022, we entered into Securities Purchase Agreements (the “Purchase Agreements”) with two accredited investors, pursuant to which we issued and sold to the investors two convertible promissory notes, dated January 28, 20022, each in the principal amount of $275,000 for an aggregate principal amount of $550,000. We received $500,000 from the Notes after applying the original issue discount to the Notes. The Purchase Agreements allow for additional notes to be issued to investors up to $ 750,000 . On February 4, 2022, we issued and sold to two accredited investors (the “Investors”) convertible promissory notes in the principal amount of $55,000 (the “Note”) under a Securities Purchase Agreement of the same date. We received $150,000 from the Notes after applying the original issue discount to the Notes. On March 3, 2022, we issued and sold to an accredited investor a convertible promissory note the principal amount of $55,000 (the “Note”) under a Securities Purchase Agreement of the same date. We received $50,000 from the Note after applying the original issue discount to the Note. The maturity date for repayment of the Notes is nine months from issuance and the Notes bear interest at 10% per annum. We may prepay the Notes provided that we shall make payment to the investors of an amount in cash equal to the sum of: the then outstanding principal amount of this Notes, plus interest on the unpaid principal amount of the Notes, plus any Default Interest on the amounts, plus any amounts owed to the Investor pursuant to the Purchase Agreement. All principal and accrued interest on the Notes are convertible into shares of our common stock. The conversion price shall equal a fixed price of $0.15 per share or, at the option of the Investor in the event that we fail to complete a Qualified Offering before the five (5) month anniversary of the issue date, the Registration Conversion Price. The “Registration Conversion Price” shall mean 75% multiplied by the volume weighted average of the Common Stock during the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. The Investors shall be entitled to add to the principal amount of the Note $750.00 for each conversion to cover investor’s deposit fees associated with each Notice of Conversion. “Qualified Offering” means any offer and sale by us of an original issuance of equity securities, comprised of either Common Stock or preferred stock of the Company, in a single transaction to investors pursuant to which at least an aggregate of $2,000,000.00 gross proceeds are received by the Company. In the event that by the five (5) month anniversary of the issue date a Qualified Offering (as defined above) has not occurred, then we shall file with the SEC a registration statement on Form S-1 covering the resale of the maximum number of Registrable Securities, defined as the Commitment Shares, Conversion Shares and Warrant Shares. In connection with the investment, we issued Commitment Shares to the investor in the amount of 60,000 shares and we also issued a warrant (the “Warrant”) to the Investor to purchase 62,500 shares of our common stock at an exercise price of $0.40 per share. In the event that there is no effective registration statement five months from the issue date registering the shares underlying the Warrant, then the Investors may exercise the Warrant using a cashless feature. 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. F- 15 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure None Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being December 31, 2021. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Investment Officer, to allow timely decisions regarding required disclosure. Based upon that evaluation, including our Chief Executive Officer and Chief Investment Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report. 26 Management’s Annual Report on Internal Control over Financing Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of December 31, 2021, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines. We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2022: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Item 9B. Other Information None Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. None PART III Item 10. Directors, Executive Officers and Corporate Governance The following table sets forth the name and positions of our executive officer and director as of the date hereof. Name Age Positions Geoffrey Selzer 65 Chairman and CEO Pamela Kerwin 73 Chief Operating Officer David Thielen 58 Chief Investment Officer and Director Set forth below is a brief description of the background and business experience of our executive officer and director: Geoffrey Selzer – Chief Executive Officer and Chairman Mr. Selzer has built his career through over two decades of hands-on corporate finance, management, creative and production experience. Former roles include CEO of Emergent Game Technologies, a video game software company, and the Creative Head of Disney Interactive’s edutainment studio. Geoffrey is the founder of Resonate Blends and has a passion for building organizations and delivering results. Mr. Selzer does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940. 27 Pamela Kerwin – Chief Operating Officer Ms. Kerwin has extensive senior management experience with both start-up and Fortune 500 companies. As the Vice President and General Manager of Pixar Animation Studios, Pamela played a critical role in the company’s successful IPO and transition from a tech company to a blockbuster studio. Pam is a company builder who specializes in identifying competitive advantages and executing successful marketing strategies. Ms. Kerwin does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940. David Thielen – Chief Investment Officer and Board Member Mr. Thielen’s career includes roles in Management, Sales, Business Development, Start-ups and Strategy Management as Vice President, COO and CEO. Prior to joining Textmunication Holdings, Inc. in 2017 as COO, he served as Area Vice President of DeRoyal, a global healthcare manufacture doing $500 million in annual revenues. In 2014, he founded Aspire Consulting Group based in Washington, D.C., an IT Services government system integrator that continues to operate as Veteran Owned company. Mr. Thielen does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940. Term of Office Our directors are elected to hold office until the next annual meeting of the shareholders and until their respective successors have been elected and qualified. Our executive officers are appointed by our board of directors and hold office until removed by our board of directors or until their successors are appointed. Family Relationships There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers. Significant Employees We have no significant employees. Involvement in Certain Legal Proceedings During the past 10 years, none of our current directors, nominees for directors or current executive officers has been involved in any legal proceeding identified in Item 401(f) of Regulation S-K, including: 1. Any petition under the Federal bankruptcy laws or any state insolvency law filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he or she was a general partner at or within two years before the time of such filing, or any corporation or business association of which he or she was an executive officer at or within two years before the time of such filing; 2. Any conviction in a criminal proceeding or being named a subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); 28 3. Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from, or otherwise limiting, the following activities: i. Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; ii. Engaging in any type of business practice; or iii. Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; 4. Being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any type of business regulated by the Commodity Futures Trading Commission, securities, investment, insurance or banking activities, or to be associated with persons engaged in any such activity; 5. Being found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; 6. Being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; 7. Being subject to, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: i. Any Federal or State securities or commodities law or regulation; or ii. Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or iii. Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or 8. Being subject to, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. Audit Committee We do not have a separately designated standing audit committee. The entire board of directors performs the functions of an audit committee, but no written charter governs the actions of the board of directors when performing the functions of that would generally be performed by an audit committee. The board of directors approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the board of directors reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. 29 We do not have an audit committee financial expert because of the size of our company and our board of directors at this time. We believe that we do not require an audit committee financial expert at this time because we retain outside consultants who possess these attributes as needed. For the fiscal year ending December 31, 2021, the board of directors: 1. Reviewed and discussed the audited financial statements with management, and 2. Reviewed and discussed the written disclosures and the letter from our independent auditors on the matters relating to the auditor’s independence. Based upon the board of directors’ review and discussion of the matters above, the board of directors authorized inclusion of the audited financial statements for the year ended December 31, 2021 to be included in this Annual Report on Form 10-K and filed with the Securities and Exchange Commission. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us, no persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act during fiscal year ended December 31, 2021. Code of Ethics As of December 31, 2021, we had not adopted a Code of Ethics. We feel that the small size of our board and management did not warrant the adoption of a Code of Ethics. Item 11. Executive Compensation The table below summarizes all compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended December 31, 2021 and 2020. Name and principal position Year Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) All Other Compensation ($) (1)(2) Total ($) Wais Asefi 2021 $ 0 0 Former President, Chairman, CEO and Director 2020 $ 92,250 92,250 Nick Miniello 2021 $ 0 0 Former VP of Sales 2020 $ 70,350 70,350 Geoffrey Selzer 2021 $ 180,000 CEO and Director 2020 $ 104,400 104,400 David Thielen 2021 $ 120,000 CIO and Director 2020 $ 55,000 55,000 Pam Kerwin 2021 $ 120,000 Chief Operating Officer 2020 $ 55,000 55,000 30 Narrative to Summary Compensation Table On March 1, 2017, we appointed David Thielen as of Chief Operating Officer. We do not have an employment agreement with Mr. Thielen. He was CEO of Aspire in which we used to own a 49% equity interest. We pay Mr. Thielen an annual salary of $60,000. On October 25, 2019, Mr. Thielen resigned as COO of Textmunication and accepted a new role as Chief Investment Officer (CIO) and Director. Mr. Thielen has an employment agreement and is paid $120,000 annually. He can also receive equity shares through assigned revenue and company milestones set by the Board of Directors. With the merger of Resonate Blends LLC and Entourage Labs LLC on October 25, 2019, Mr. Selzer was announced as Chief Executive Officer of the holding company. His annual salary is $180,000 and his team has 10% non-dilutive stock, with Mr. Selzer controlling 51% of this amount. Mr. Selzer also has equity milestones in place for meeting preassigned revenue and market valuation goals. Mr. Selzer’s term of employment is for two years. He may request to terminate his employment contract and forfeit all benefits and equity grants, if provided, with a 30-day notice. Should he terminate his employment before two years, he will forfeit the right to earn any future milestone achievement benefits entirely regardless of how close the company may be to achieving them. At the end of his employment term, an option to continue employment at an annual contract or at-will employment will be available if agreed upon by both parties. The Company may not terminate his employment without Cause. Ms. Pamela Kerwin was announced as Chief Operating Officer of the holding company on October 25, 2019. Ms. Kerwin’s salary is $120,000 annually and she also participates in the 10% of non-dilutive stock of the holding company. Her term of employment is for two years. She may request to terminate her employment contract and forfeit all benefits and equity grants, if provided, with a 30-day notice. Should she terminate her employment before two years, she will forfeit the right to earn any future milestone achievement benefits entirely regardless of how close the company may be to achieving them. However, should a change of control occur resulting in the sale of the business anytime within 9 months of termination, all milestone achievements shall be deemed accomplished and all rights to the shares shall immediately vest prior to the close of such Change of Control event. Outstanding Equity Awards at Fiscal Year-End The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officers as of December 31, 2021. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END OPTION AWARDS STOCK AWARDS Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) David Thielen   Pam Kerwin Geoffrey Selzer 31 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS The following table sets forth, as of April 14, 2022, certain information as to shares of our common stock owned by (i) each person known by us to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, and (iii) all of our executive officers and directors as a group. Unless otherwise stated, the address for each beneficial owner is at 26565 Agoura Road, Suite 200 Calabasas, CA 91302. Common Stock Series C Preferred Stock Number of Shares Owned Percent of Class(1)(2) Number of Shares Owned Percent of Class(1)(2) Geoffrey Selzer 1,406,112 2.9 % 2,000,000 100 % David Thielen 1,765,667 3.7 % - - Pam Kerwin 880,895 1.8 % - - All Directors and Executive Officers as a Group (3 persons) 4,043,674 8.48 % 2,000,000 100 % 5% Holders Richard Hoge 5,198,640 10.90 % (1) Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and also any shares which the shareholder has the right to acquire within 60 days, including upon exercise of common shares purchase options or warrants. (2) The percent of class is based on 47,796,859 shares of common stock outstanding and 2,000,000 shares of Series C Preferred Stock outstanding as of April 14, 2022. Item 13. Certain Relationships and Related Transactions, and Director Independence Other than described below or the transactions described under the heading “Executive Compensation” (or with respect to which such information is omitted in accordance with SEC regulations), there have not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a participant in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. 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. 32 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. As of December 31, 2021, the Company made all of its required payments to Mr. Asefi. The outstanding balances as of December 31, 2021 and December 31, 2020 are $45,000 and $187,500 respectively. Item 14. Principal Accounting Fees and Services Below are tables of Audit Fees (amounts in US$) billed by our auditors in connection with the audit of the Company’s annual financial statements and review of the quarterly financial statements for the years ended: Boyle CPA, LLC Financial Statements for the Year Ended December 31 Audit Services Audit Related Fees Tax Fees Other Fees 2020 $ 18,000 $ - $ - $ - 2021 $ 20,000 $ - $ - $ - 33 PART IV Item 15. Exhibits, Financial Statements Schedules (a) Financial Statements and Schedules The following financial statements and schedules listed below are included in this Form 10-K. Financial Statements (See Item 8) (b) Exhibits Exhibit Number Description 2.1 Stock Purchase Agreement (1) 2.2 Membership Interest Purchase Agreement (2) 2.3 Membership Interest Purchase Agreement (2) 2.4 Agreement of Conveyance (2) 2.5 Letter of Intent (11) 3.1 Articles of Incorporation (3) 3.2 Certificate of Change (3) 3.3 Certificate of Amendment (4) 3.4 Amendment to Certificate of Designation for Series C Preferred Stock (5) 3.5 Certificate of Designation for Series E Preferred Stock (7) 3.6 Certificate of Amendment (8) 3.7 Bylaws, as amended (3) 4.1 Secured Convertible Promissory Note (6) 4.2 8% Unsecured Convertible Promissory Note (10) 4.3 Warrant (10) 4.4 Warrant (10) 4.5 Convertible Promissory Note (12) 4.6 Convertible Promissory Note (12) 4.7 Common Stock Purchase Warrant (12) 4.8 Common Stock Purchase Warrant (12) 4.9 Convertible Promissory Note (13) 4.10 Convertible Promissory Note (13) 4.11 Common Stock Purchase Warrant (13) 4.12 Common Stock Purchase Warrant (13) 4.13 Convertible Promissory Note (14) 4.14 Common Stock Purchase Warrant (14) 10.1 Separation Agreement and Release (1) 10.2 Voting Agreement (1) 10.3 Employment Agreement (2) 10.4 Employment Agreement (2) 10.5 Securities Purchase Agreement (6) 10.6 Addendum to Securities Purchase Agreement (9) 10.7 Securities Purchase Agreement (12) 10.7 Securities Purchase Agreement (12) 31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), 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.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) 1 Incorporated by reference to the Current Report on Form 8-K filed on July 20, 2020. 2 Incorporated by reference to the Current Report on Form 8-K filed on October 31, 2019. 3 Incorporated by reference to the Registration Statement on Form S-1 filed on June 6, 2014. 4 Incorporated by reference to the Quarterly Report on Form 10-Q filed on November 23, 2020. 5 Incorporated by reference to the Current Report on Form 8-K filed on May 21, 2019. 6 Incorporated by reference to the Current Report on Form 8-K filed on July 23, 2020. 7 Incorporated by reference to the Current Report on Form 8-K filed on August 10, 2020. 8 Incorporated by reference to the Quarterly Report on Form 10-Q filed on August 14, 2020. 9 Incorporated by reference to the Current Report on Form 8-K filed on September 21, 2020. 10 Incorporated by reference to the Current Report on Form 8-K filed on March 18, 2021. 11 Incorporated by reference to the Current Report on Form 8-K filed on September 13, 2021. 12 Incorporated by reference to the Current Report on Form 8-K filed on February 3, 2022. 13 Incorporated by reference to the Current Report on Form 8-K filed on February 10, 2022. 14 Incorporated by reference to the Current Report on Form 8-K filed on March 8, 2022. Item 16. Form 10-K Summary None. 34 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the 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. By: /s/ Geoffrey Selzer Geoffrey Selzer President, Chief Executive Officer, Principal Executive Officer, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer and Director April 15, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Geoffrey Selzer Geoffrey Selzer President, Chief Executive Officer, Principal Executive Officer, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer and Director April 15, 2022 By: /s/ David Thielen David Chief Investment Officer and Director April 15, 2022 35