What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-20 compared with 2021-11-22 · 170 added, 343 removed, 72 unchanged (88% of the section changed)

16 unchanged sentences

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

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.

13 unchanged sentences

Entourage Labs is the Intellectual Property (IP) subsidiary of Resonate.

in Calabasas, California, Resonate Blends, Inc.

is a cannabis holding company centered on valued-added holistic Wellness and Lifestyle

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

we believe is the industry gold standard in user experience.

Company believes the greatest long-term value creation in the cannabis industry will be in the establishment of high quality and consistent

consumer brands.

Resonate hopes to become a national leader through its vision in creating a family of brands designed specifically to

deliver reliable, effective, beneficial experiences.

is committed to helping you live the life you love.

We do not make the medicinal vs.

in Calabasas, California, Resonate Blends is a cannabis holding company centered on value-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.

believes the greatest long-term value creation in the cannabis industry will be in the establishment of high quality and consistent consumer

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.

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 we expect will soon cease to exist.

We believe in wellness for the whole person.

We know that people with

pain or anxiety also want to enjoy friends, concerts and have satisfying intimate experiences.

We are designing experiences which will

improve all areas of our lives.

This is a temporary

legal separation in some states that should soon cease to exist.

The Company believes in wellness for the whole person, especially 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.

accomplish this, Resonate is Mastering the Art of Experience.

This is our mission.

By integrating science, technology, education, branding,

marketing, sales and delivery - with every customer interaction we aim to provide exceptional experiences.

Cannabis has a broad range

of unique characteristics, and we are dedicated to harnessing and amplifying those characteristics to support healthy empowered and engaged

From product development through customer communication, we 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 our knowledge, skill and energy on creating wellness-lifestyle products which will improve community by helping individuals

live more satisfying, meaningful and connected lives.

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.

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.

communicate the breadth of wellness products that Resonate is developing, our team 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.

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

Products based on The Resonate System deliver relaxation, freedom from pain and anxiety, boosts in focus and creativity, sensuality,

human connection and joy.

Our products are formulated around a system of interconnected experience targets that will allow you to know

Koan products are formulated around a system of interconnected experience targets that will allow you to know

exactly what to expect when using them.

2 unchanged sentences

“Entourage Effect”).

Our product developers blend cannabinoids and terpenes to formulate products with specific, controllable

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, our team

has unlocked new plant constituent combinations resulting in unique, enjoyable and extremely effective wellness products unlike anything

else in the marketplace.

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.

6 unchanged sentences

available in the cannabis market.

Our 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.

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

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.

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 blends at its initial release and expects to have additional blends by

late 2021 into early 2022.

have formalized contracts with our logistical and marketing partners and are building a digital native strategy supporting direct to

consumer sales.

Based on customer demand, the company is creating a “singles” option for the Cordials which will be available later

2021 and a multi-dose option shipping in Q1 2022.

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.

Company believes the greatest long-term value creation in the Cannabis industry will be in the establishment of high-quality consumer

brands that deliver the expected experience.

As cultivation, supplies and services become quickly commoditized, value-added brands represent

the best opportunity for Resonate and its shareholders to support and benefit from the growth expected in the Cannabis industry.

therefore critical for Resonate to protect its methods, formulations and packaging.

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.

Koan Product - Resonate Growth Plans

the first 12-18 months, Resonate will concentrate on releasing product and brand building in our home state of California.

plans to follow the launch of its first six Koan products with others based on The Resonate System at regular intervals.

Our 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.

We are 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.

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 our mission of empowering the wellness market.

In addition to creating our “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, we believe will provide consistent product quality that yields expected results and that also

allows us to build a stable, successful company overall.

first commercial release is 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.

Our current products are as follows:

rich with a hint of THC, Calm is formulated to quiet your mind and ease you into a gentle sense of wellbeing.

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.

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.

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.

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.

on your rose-colored glasses and give everything some extra sparkle with Delight.

Designed to open your senses, raise your spirits and

brighten your day.

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”).

October 27, 2021, the Company terminated the agreement.

The Company is still in discussions with Seller, and the Company may or may not

go through with a transaction with Seller, but if the Company does, the terms will change from the previous agreement.

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 we

have developed Koan Cordials, tasty, single serving, 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 151%, over industry average.

The Resonate team excels in product

is no product in the marketplace exactly like our Koan products currently.

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

we believe that none are equal to ours with respect to quality, efficacy, consistency and scope.

Our products are water soluble and can

be enjoyed privately or poured in beverages and shared socially.

We believe that the total experience offered by our products cannot

be found elsewhere in the industry.

there are several 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 our targeted demographic seeks out trusted brands when making product selections.

is bringing to market custom, reliable, experience-targeted products.

which can be sipped or shared, offered under a well-crafted brand

supported by an accessible information system.

We provide The Resonate System so customers can understand what to expect and can make

informed confident selections.

and Sales Plan

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 our products.

Our 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 for us, as these allowed us to reprioritize our sales approach and to build

a marketing plan around on-line dispensaries with wide delivery networks.

Although retail restrictions will eventually be relaxed, we

do not expect that storefront dispensaries will return to the dominant role they played in the cannabis industry before COVID-19 for

several reasons.

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, we have learned that a significant number of customers, particularly

in our targeted demographic, really prefer the privacy and convenience of having products delivered to their homes.

For all these reasons,

we have decided to focus our sales efforts on select high-end retail dispensaries and on-line, delivery and e-commerce outlets.

response to the sudden change in customer buying preferences, Resonate has implemented a plan to sell directly to consumers.

We are partnering

with an on-line platform which will allow us to communicate the value of our 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

First, it allows us to control our 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, we also have access to customer information, which is not available

from dispensaries, which allows us 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 us financially as it increases

our profit margin.

our marketing budget and energy is now being channeled into appropriate programmatic advertising, developing informational materials

for customers on our website, and developing professional and effective social media, search engine optimization and direct to consumer

marketing campaigns.

We also offer market suppose and to select premium California dispensaries both in person and thorough the Leaf.VIP

budtender training program.

We expect that building our brand online will complement retail sales by increasing customer awareness and

The company is now offering seven unique formulations and expects to have its Sleep Cordial in production

The Sleep Cordial has been thoroughly tested and is ready for launch once the multi-serve bottles are available.

will only come in a multi-serve bottle based on the anticipated consumer usage patterns and testing data available to the Company.

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” in 2021.

Resonate has formalized contracts with logistical,

sales and marketing partners to build a digital native strategy supporting Direct-to-Consumer (D2C) sales.

The D2C sales platform launched

in October 2021 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-serve bottle option shipping in early Q3 2022.

Company offers 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.

has partnered with Good People LLC as its state-wide Koan Cordial sales team.

Good People is working closely with Resonate Blends’

marketing team to plan events, train budtenders, schedule and track relevant promotions and inform the innovation pipeline with field

In addition, Resonate is currently recruiting two internal sales managers to oversee all sales efforts in Northern and Southern

Koan Cordials dispensary buyer sample kits are now available through Good People and dispensaries are now stocking the product

in strategic geographical locations.

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.

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.

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.

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.

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.

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 our products.

Manufacturing:

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.

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.

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:

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.

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.

is also developing relationships with a variety of complementary distribution channels such as subscription box companies and other non-storefront

reseller organizations.

summarize, we have signed and announced definitive agreements with various partners to execute on our overall business strategy.

partner Vertosa is expected to develop our unique formulations through its advanced nano-emulsification process, The Galley is expected

to assemble and package, the Good People to sell the products, the Vault 3PL Distribution to distribute our products and, we

just engaged with The Flower Agency to actively market our social media channels to the California market.

The social media strategy was brought in-house during Q1 to both

reduce overall costs and control the messaging to the appropriate audience for the Cordials.

recently hired an internal sales manager to oversee all sales efforts in Southern California and expects to hire a sales manager for

Northern California in the near future.

The Company implemented an in-house sales strategy in Q1 2022 to maximize both the

dispensary outreach and budtender education – and to increase D2C sales platform activity.

While wellness dispensaries will be

a focus for the Company, the customer acquisition focus will now be towards the D2C portal.

The Company added several new retail

partners in Q1 to include Atrium, Cornerstone Wellness, 99 High Tide and Canni Delivery.

With the new in-house sales strategy in

place, new wellness dispensaries are expected to grow throughout 2022 in addition to the D2C sales platform activity.

dispensaries are the main target due to the demographics of the consumer and the thorough educational process these dispensaries

offer to buyers in their stores.

Multi-state expansion through licensing arrangements with the Cordials is also being planned.

Several retailers and leading brands 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.

new unique edible line is currently being developed and is expected to be released in Q3.

The form factor for the edible line will be

similar to one of the leading candies in the market and also have the ability to target the desired experience of the consumer –

similar to the Cordials.

principal executive office is located at 26565 Agoura Road, Suite 200, Calabasas, CA 91302.

Our executive telephone number is (571) 888-0009.

of Operation for Three and Nine Months Ended September 30, 2021 and 2020

have generated $7,574 and $7,574 in sales for the three and nine months ended September 30, 2021, respectively, as compared with no sales

for the three and nine months ended September 30, 2020 on our current product line, but sales of $0 and $477,734 from the discontinued

operations of our sold subsidiary, Textmunication, Inc., for the three and nine months ended September 30, 2020, respectively.

We recently launched our first line of six Cordial products in California and we have started to generate revenues from the sale of these

anticipate increased revenues on our six Cordials for the rest of the year.

We anticipate a rollout of new packaging

configurations by early 2022 for our Cordials;

to include both a one-pack and a multi-dose bottle which will bring the cost per dose

down considerably.

We also plan on launching additional Cordial formulations by early 2022, which we hope 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.

The executive telephone number is (571) 888-0009.

of Operation for Three Months Ended March 31, 2022 and 2021

have generated $27,652 in sales for the three months ended March 31, 2022, as compared with no sales for the three months ended March

31, 2021 on our current product line.

We launched our first line of seven Cordial products in California and we have started to generate

revenues from the sale of these products.

anticipate increased revenues on our six Cordials for the rest of 2022.

We anticipate a rollout of new packaging configurations in 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 hope 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 were $762,912 for the three months ended September 30, 2021, as compared with $236,160 for the three months ended

September 30, 2020.

Our operating expenses were $2,937,437 for the nine months ended September 30, 2021, as compared with $1,445,463

for the nine months ended September 30, 2020.

main reasons for the increased operating expense in 2021 was a result of our efforts to increase spending on advertising, as

well as increased legal and professional fees and non-cash management fees.

expect that our operating expenses will increase in 2021 over 2020 because of our product launch and the increased expenses associated

with operations.

Income/Expenses

had other income of $866,917 for the three months ended September 30, 2021 compared with other expenses of $86,910 for

the same period ended September 30, 2020.

We had other expenses of $3,398,548 for the nine months ended September 30, 2021 compared

with other expenses of $712,625 for the same period ended September 30, 2020.

recorded a gain on revaluation of derivative liabilities in the amount of $961,857 that contributed to our other income for the quarter

ended September 30, 2021.

Our other expenses for the nine months ended September 30, 2021 was mainly attributable to a loss on revaluation

of derivative liabilities.

had net income of $99,274 for the three months ended September 30, 2021, as compared with net loss of $351,399 for the three months ended

September 30, 2020.

We had net loss of $6,340,715 for the nine months ended September 30, 2021, as compared with net loss of $2,142,310

for the nine months ended September 30, 2020.

and Capital Resources

of September 30, 2021, we had total current assets of $649,017, consisting of $390,534 in cash and $258,483 in prepaids and inventory.

Our total current liabilities as of September 30, 2021 were $5,387,805.

We had a working capital deficit of $4,738,788 as of September

30, 2021, compared with a working capital deficit of $996,439 as of December 31, 2020.

We paid $12,857 in cost of revenues for the three months ended March

31, 2022, resulting in a gross profit of $14,795 for the quarter.

We have not had any historical data to compare our margins for the

sale of our new products.

Our gross margin, which is the difference between our revenues and our cost of revenues, is expected to increase

in future quarters as we work to increase our efficiency and lessen costs.

In addition, our gross margin percentage, which was 54% for

the three months ended March 31, 2022, we hope will stabilize in the 45% to 55% range as we implement cost saving measures and roll out

new products to increase sales for the balance of 2022.

operating expenses were $655,619 for the three months ended March 31, 2022, as compared with $778,012 for the three months ended

March 31, 2021.

main drivers for the overall decrease in operating expenses in Q1 2022 were the lack of cash fees and stock compensation we paid to a

broker in 2021 for our Private Placement Memorandum and employee equity compensation for deferred salaries.

We hope to avoid these settlement

expenses for 2022 and compensate employees and vendors 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

continued focus on advertising and marketing costs to support our planned growth is expected to increase throughout 2022.

spent $112,096 more on advertising in 2022 than in 2021.

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.

fees decreased by $304,924 in 2022 compared with 2021.

Our professional fees were less for this period compared to last period, but we

expect that professional fees will increase in 2022 as we continue to ramp up operations.

and administrative expenses decreased by $111,151 in 2022 compared with 2021.

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.

general and administrative expenses to remain fairly constant throughout 2022 due to internal changes we’ve implemented.

expect that our operating expenses will increase in 2022 over 2021 as we roll out new products along with our existing products, and

the increased expenses associated with operations.

had other income of $1,130,864 for the three months ended March 31, 2022 compared with other expenses of $280,450 for the

same period ended March 31, 2021.

main reason for our increased other expenses in 2021 was a result of loss on revaluation of derivative liabilities.

We had net income of $490,040 for the

three months ended March 31, 2022, as compared with net loss of $1,058,462 for the three months ended March 31, 2021.

Liquidity and Capital Resources

As of March 31, 2022,

we had total current assets of $477,615, consisting of $184,527 in cash, $23,781 in advances to suppliers and $269,307 in

Our total current liabilities as of March 31, 2022 were $3,784,367.

We had a working capital deficit of $3,306,752

as of March 31, 2022 compared with a working capital deficit of $4,133,368 as of December 31, 2021.

Flows from Operating Activities

activities used $2,415,066 in cash for the nine months ended September 30, 2021, compared with cash used of $1,401,301 for the

nine months ended September 30, 2020.

Our negative operating cash flow for the nine months ended September 30, 2021 was largely the result

of our net loss of $6,340,714, offset by share based compensation of $1,267,297.

Our negative operating cash flow for the nine months

ended September 30, 2020 was largely the result of our net loss of $2,142,310, offset by loss on derivative liability of $536,819 and

share based compensation of $198,514.

activities used $478,386 in cash for the three months ended March 31, 2022, compared with cash used of $957,982 for the three months

ended March 31, 2021.

The decrease in our cash utilized in operating activities primarily related to a decline in operating expenses

during the three months ended March 31, 2022, as well as decreases in inventory purchases during the three months ended March 31,

The Company purchased inventory for the launch of its’ KOAN product line during the three months ended March 31,

Flows from Investing Activities

used cash on investing activities to purchase computer equipment for the nine months ended September 30, 2021 with no

cash used for the same period ended 2020.

activities used $0 in cash for the three months ended March 31, 2022, as compared with $20,333 to purchase various office furniture and

equipment for the three months ended March 31, 2021.

Flows from Financing Activities

flows provided by financing activities during the nine months ended September 30, 2021 amounted to $2,727,322 compared with cash flows

provided by financing activities of $1,119,943 for the nine months ended September 30, 2020.

Our positive cash flows for the nine months

ended September 30, 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 nine months ended September 30, 2020 consisted

of proceeds from issuance of common stocks $540,000, proceeds from Convertible notes payable $806,000, offset by payments of notes payable

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 for the purchase of 83,333 shares

of the Company’s Common Stock (the “Warrant”).

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.

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.

we can generate sufficient revenues to sustain operations, we are dependent on investment capital to continue our survival.

be no assurance of funds from these efforts or that any other type of additional financing will be available to us on acceptable terms,

of September 30, 2021, we have an accumulated deficit of $27,441,709.

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.

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.

flows provided by financing activities during the three months ended March 31, 2022 amounted to $650,000, compared with cash flows provided

by financing activities of $2,437,707 for the three months ended March 31, 2021.

Our positive cash flows for the three months ended March

31, 2022 consisted of proceeds from Convertible notes payable of $650,000.

Our positive cash flows for the three months ended March 31,

2021 consisted of proceeds from issuance of common stock of $1,347,500 proceeds from Convertible notes payable of $1,595,000, offset

by payments of notes payable of $504,793.

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

are dependent on investment capital to continue our survival.

We have raised money through convertible debt, almost always on unfavorable

There is no guarantee that these small convertible loans will be available to us in the future or on terms acceptable to us.

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.

of March 31, 2022, we have an accumulated deficit of $25,484,011.

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.

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.

2 unchanged sentences

Balance Sheet Arrangements

of September 30, 2021, there were no off-balance sheet arrangements.

of March 31, 2022, there were no off-balance sheet arrangements.

Accounting Policies

3 unchanged sentences

company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often

because 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.

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.

Accounting Pronouncements

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis