What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-04-16 compared with 2023-04-17 · 196 added, 92 removed, 29 unchanged (91% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Acquisition, Change in Control and Change in Business Plan

Effective March 14, 2024, Geoffrey Selzer, our former Chief Executive Officer and Director, and Jim Morrison, our

current President and Director, entered into a Securities Purchase Agreement (the Control Agreement), pursuant to which Mr.

all 2,000,000 outstanding shares of the Company’s Series C Preferred Stock to Mr.

Morrison now possesses voting control

of the Company.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .

Acquisition Transaction .

On February 26, 2024, we entered into entered into a Share Exchange Agreement, as amended (the Exchange

Agreement), with Emergent Health Corp., a publicly-traded (symbol:

EMGE) Wyoming corporation (EMGE), and the holders (the EMGE Preferred

Shareholders) of Series Class A Preferred Stock and the Series C Convertible Non-Voting Preferred Stock (collectively, the EMGE Equity

March 14, 2024, the parties closed the Exchange Agreement.

At the closing of the Exchange Agreement:

(a) the EMGE Preferred Shareholders

exchanged all of their respective EMGE Equity Interests for an equal number of shares of the Company’s to-be-designated Series

F Convertible Preferred Stock that shall convert into 93% of the common stock of the Company on a fully-diluted basis (the Series F Preferred

Stock), which shares of Series F Preferred Stock are currently issuable to the EMGE Preferred Shareholders and are to be issued upon

the Company’s filing of a Certificate of Designation with the State of Nevada;

(b) the Company consummated the Conveyance Agreement;

and (c) all persons serving as directors and officers of the Company prior to the consummation of the Exchange Agreement resigned and

appointed four new members of the Company’s Board of Directors.

March 14, 2024, in conjunction with our acquisition of EMGE, we entered into an Agreement of Conveyance, Transfer and Assignment of Subsidiary

(the Conveyance Agreement) with two of our then-wholly-owned subsidiaries, Resonate Blends, LLC, a California limited liability company,

and Entourage Labs, LLC, a California limited liability company (collectively, Resonate Blends, LLC and Entourage Labs, LLC are referred

to as the “Subsidiary”), and our former Chief Executive Officer and Director, Geoffrey Selzer.

Pursuant to the Conveyance

Agreement, we assigned our ownership in the Subsidiary to Mr.

In consideration of our assignment of the Subsidiary, Mr.

(a) assumed and agreed to pay, perform and discharge, fully and completely, all liabilities of the Subsidiary, (b) indemnified us for

any loss arising from or in connection with any of such liabilities and (c) agreed to pay us (i) 20% of any proceeds from the sale of

the Subsidiary that occurs prior to the one-year anniversary of the Conveyance Agreement and (ii) 10% of any proceeds from the sale of

the Subsidiary that occurs after the one-year anniversary and prior to the two-year anniversary of the Conveyance Agreement.

Business Plan .

business plan and operations of EMGE now represent the entirety of our company’s business operations.

The discussion below concerning

our company’s results of operations for the years ended December 31, 2023 and 2022, and the financial condition of our company

at December 31, 2023, relates only to our company prior to the consummation of the Exchange Agreement with the EMGE Preferred Shareholders.

None of the information in the discussion below should be considered to be an indication of our company’s operating results for

the year ending December 31, 2024, and beyond .

connection with the EMGE transaction, we obtained a loan from a third party and, subsequent to the closing of the EMGE transaction, we

have obtained an additional loan from another third party.

We remain, nevertheless, dependent on additional investment capital to

continue our survival.

Historically, we have raised money through convertible debt, almost always on unfavorable terms.

There is no guarantee

that any capital, including through convertible loan transactions, will be available to us in the future or, if available, on terms acceptable

The terms of the recently obtained loans are discussed below.

Capital Investments, LLC .

In March 2024, the Company obtained a loan from AJB Capital Investments, LLC (“AJB”) which

netted the Company $252,000 in proceeds.

In consideration of such loan, the Company issued a $280,000 face amount promissory note (the

“AJB Note”), with OID of $28,000, bearing interest at 12% per annum, with principal and interest payable on September 4,

The Company has the right to repay the AJB Note at any time.

Should the Company be in default, which shall not have been cured,

the AJB Note is convertible into shares of the Company’s common stock at a conversion price that shall equal the volume weighted

average trading price (a) during the previous 20 trading-day period ending on the date of issuance of the AJB Note or (b) during the

previous 20 trading-day period ending on the relevant conversion date, whichever is lower.

AJB Note is secured by all assets of our company.

addition, we issued to AJB a pre-funded common stock purchase warrant (the “AJB Warrant”) to purchase 3,428,571 shares of

our common stock, with a nominal exercise price of $.00001 per share.

The AJB Warrant may be exercised on a cashless basis,

In March 2024, the Company obtained a loan from Ray Vollintine (“Vollintine”) which netted the Company

$250,000 in proceeds.

In consideration of such loan, the Company issued a $280,000 face amount promissory note (the “Vollintine

Note”), with OID of $30,000, bearing interest at 12% per annum, with principal and interest payable on September 29, 2024.

Company has the right to repay the Vollintine Note at any time.

The Vollintine Note is convertible at any time and from time to time

into shares of the Company’s common stock at a conversion price that shall equal to $.035;

provided, however, that, upon an event

of default, the conversion price shall be the lower of (a) $.035 or (b) the volume weighted average trading price during the previous

20 trading-day period ending on the date of issuance of the Vollintine Note or during the previous 20 trading-day period ending on the

relevant conversion date, whichever is lower.

Vollintine Note is unsecured.

addition, we issued to Vollintine a pre-funded common stock purchase warrant (the “Vollintine Warrant”) to purchase 7,200,000

shares of our common stock, with a nominal exercise price of $.00001 per share.

The Vollintine Warrant may be exercised on a cashless

basis, As further consideration for Vollintine’s purchasing the Vollintine Note, we entered into a make-whole agreement that assures

that Vollintine shall derive not less than $250,000 in net proceeds from Vollintine’s sales of the common stock underlying the

Vollintine Warrant.

of Operations for the Years Ended December 31, 2023 and 2022

have generated $49,501 in revenues for the year ended December 31, 2022, as compared with sales of $27,031 for the year ended December

31, 2021 on our current product line.

We have launched our first line of six Cordial products in California, with a seventh introduced

at the end of September 2022, and we have started to generate revenues from the sale of these products.

We anticipate increased revenues on our seven Cordials

including our newly launched Sleep Cordial, for the rest of 2023.

In Q3 2022, we rolled out a new packaging configuration for our Cordials:

to include a one-pack, a 4-pack to replace the 3-pack and a multi-dose bottle which is expected to bring the cost per dose down considerably.

Our family of Cordial products are now fully in the market;

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.

accrued $33,068 in cost of revenues for the year ended December 31, 2022, resulting in a gross profit of $16,433 for the year ended December

We have had little historical data to compare our margins for the sale of our new products, which were introduced into the

retail channel in late Q2 of 2021.

We accrued $19,148 in cost of revenues for the year ended December 31, 2021, resulting in a gross

profit of $7,883 for the year ended December 31, 2021.

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 33.20% for the year ended December 31, 2022, and we hope will stabilize in the 35% to 43% range as we implement

cost saving measures and roll out new products to increase sales for the balance of 2023.

We are also implementing new packaging configurations

which we expect to stabilize our overall gross margin.

Our operating expenses were $1,405,828 for the year

ended December 31, 2022, as compared with $2,539,288 for the year ended December 31, 2021.

The main drivers for the

overall decrease in operating expenses in 2022 were the reduction of legal, professional fees and salaries as well as a significant decrease

in non-cash management fees.

Our continued focus on sales,

advertising, marketing and new product development costs to support our planned growth is expected to increase throughout 2023.

We spent $233,208 less on

advertising for year ended December 31, 2022, than for the year ended 2021.

We spent more on advertising for the year ended December 31,

2021 particularly the first quarter to introduce our Koan Cordials to the California retail channel, perform Search Engine Optimization

generated $16,468 in revenues for the year ended December 31, 2023, as compared with revenues of $49,501 for the year ended December

31, 2022, during which year we launched our first line of cordial products in California.

to our acquisition of EMGE and divestiture of the Subsidiary on March 14, 2024, any revenues reported during the first quarter of 2024

will be attributed to the Subsidiary through March 14, 2024;

thereafter, any revenues reported by our company would be attributable to

the business operations of EMGE.

There are no assurances that we will be successful in the implementation of our EMGE-centered business

plan or become financially viable and continue as a going concern.

accrued $114,140 in cost of revenues for the year ended December 31, 2023, resulting in a gross profit of ($97,762) for the year then

We accrued $33,068 in cost of revenues for the year ended December 31, 2022, resulting in a gross profit of $16,433 for the year

Our negative gross margin was due to promotions and the write down of products.

to our acquisition of EMGE and divestiture of the Subsidiary on March 14, 2024, the gross margin reported during the first quarter of

2024 will be attributed to the Subsidiary through March 14, 2024;

thereafter, gross margin reported by our company would be attributable

to the business operations of EMGE.

operating expenses were $301,551 for the year ended December 31, 2023, as compared with $1,405,828 for the year ended December 31, 2022.

main drivers for the overall decrease in operating expenses in 2023 were the reduction of legal, professional fees and salaries, as well

as a significant decrease in non-cash management fees.

spent $354,934 less on advertising for year ended December 31, 2023, than for the year ended December 31, 2022.

We spent more on advertising

for the year ended December 31, 2022, 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 for the rest of 2023 as the awareness groundwork has been established

to educate the market on our family of Cordial formulations.

Professional fees decreased

by $390,547 for the year ended December 31, 2022, over the year ended 2021.

Our professional fees were less for this year compared to

last year, but we expect that professional fees will increase in 2023 as we continue to ramp up operations.

and administrative expenses increased by $32,793 for the year ended December 31, 2022, over the year ended 2021.

The increased expenses

resulted from establishing our internal sales team, attending strategic trade shows and bringing on consultants and financial analysts

to assist in analyzing our acquisition strategy.

We expect general and administrative expenses to remain fairly constant throughout 2023,

but expenses could increase significantly if we acquire new companies as part of our overall corporate strategy.

also expect that our operating expenses will increase in 2023 over 2022 as we roll out new products along with our existing products,

and the increased expenses associated with operations, and in connection with any acquisitions.

Income/Expenses

We had other income of $2,043,022 for the year ended

December 31, 2022 compared with other expenses of $2,341,651 for the year ended December 31, 2021.

Our other income for the year ended

December 31, 2022 was mainly attributable to the gain on revaluation of derivative liabilities.

Our other expenses for the year ended

December 31, 2021 was mainly attributable to a loss on revaluation of derivative liabilities.

Net Income/Loss

We had net income of $653,627 for the year ended December

31, 2022, as compared with a net loss of $4,873,056 for the year ended December 31, 2021.

Liquidity and Capital Resources

As of December 31, 2022, we had total assets

of $399,121 consisting of $64,419 in cash, $0 in advances to suppliers, $150,000 in other receivable and $160,492 in inventories.

and professional fees decreased by $91,352 for the year ended December 31, 2023, over the year ended December 31, 2022.

It is anticipated

that, for all of 2024, legal and professional fees will be higher than 2023 levels, due to our acquisition of EMGE.

However, no prediction

can be made in this regard.

and administrative expenses decreased by $46,154 for the year ended December 31, 2023, over the year ended December 31, 2022.

It is anticipated

that, for all of 2024, general and administrative expenses will be higher than 2023 levels, due to our acquisition of EMGE.

no prediction can be made in this regard.

compensation decreased by $405,375 for the year ended December 31, 2023, over the year ended December 31, 2022.

Our officer compensation

declined as we suspended payments of officer salaries during 2023, but we expect that officer compensation will increase for all of 2024,

following our acquisition of EMGE.

management fees decreased by $206,462 for the year ended December 31, 2023, over the year ended December 31, 2022.

Our non-cash management

fees were less in 2023 compared to 2022, as we did not issue shares for services during 2023.

It is possible, however, that non-cash

management fees may increase for all of 2024, in light of our acquisition of EMGE.

However, no prediction can be made in this regard.

Income / Expense

had other expense of $1,016,759 and other income of $2,043,022 for the years ended December 31, 2023 and 2022, respectively.

other expense for the year ended December 31, 2023, was mainly attributable to a loss on the change in derivative liability, interest

expense and the amortization of debt issuance costs.

other income for the year ended December 31, 2022, was mainly attributable to the gain on revaluation of derivative liabilities.

are unable to predict our other income/expense for all of 2024.

Income / Loss

had a net loss of $1,415,979 and net income of $653,627 for the years ended December 31, 2023 and 2022, respectively.

is expected that, for all of 2024, we will report a net loss.

However, we are unable to make any prediction, in this regard.

and Capital Resources

In connection with the EMGE transaction, we obtained

a loan from a third party and, subsequent to the closing of the EMGE transaction, we have obtained an additional loan from another third

We remain, nevertheless, dependent on additional investment capital to continue our survival.

Historically, we have raised money

through convertible debt, almost always on unfavorable terms.

There is no guarantee that any capital, including through convertible loan

transactions, will be available to us in the future or, if available, on terms acceptable to us .

The terms of the recently obtained

loans are discussed below.

AJB Capital Investments, LLC .

2024, the Company obtained a loan from AJB Capital Investments, LLC (AJB) which netted the Company $252,000 in proceeds.

In consideration

of such loan, the Company issued a $280,000 face amount promissory note (the AJB Note), with OID of $28,000, bearing interest at 12% per

annum, with principal and interest payable on September 4, 2024.

The Company has the right to repay the AJB Note at any time.

Company be in default, which shall not have been cured, the AJB Note is convertible into shares of the Company’s common stock at

a conversion price that shall equal the volume weighted average trading price (a) during the previous 20 trading-day period ending on

the date of issuance of the AJB Note or (b) during the previous 20 trading-day period ending on the relevant conversion date, whichever

The AJB Note is secured by all assets of our company.

In addition, we issued to AJB a pre-funded common

stock purchase warrant (the AJB Warrant) to purchase 3,428,571 shares of our common stock, with a nominal exercise price of $.00001 per

The AJB Warrant may be exercised on a cashless basis,

Ray Vollintine .

In March 2024, the Company

obtained a loan from Ray Vollintine (Vollintine) which netted the Company $250,000 in proceeds.

In consideration of such loan, the Company

issued a $280,000 face amount promissory note (the Vollintine Note), with OID of $30,000, bearing interest at 12% per annum, with principal

and interest payable on September 29, 2024.

The Company has the right to repay the Vollintine Note at any time.

The Vollintine Note is

convertible at any time and from time to time into shares of the Company’s common stock at a conversion price that shall equal to

provided, however, that, upon an event of default, the conversion price shall be the lower of (a) $.035 or (b) the volume weighted

average trading price during the previous 20 trading-day period ending on the date of issuance of the Vollintine Note or during the previous

20 trading-day period ending on the relevant conversion date, whichever is lower.

The Vollintine Note is unsecured.

In addition, we issued to Vollintine a pre-funded common stock purchase

warrant (the Vollintine Warrant) to purchase 7,200,000 shares of our common stock, with a nominal exercise price of $.00001 per share.

The Vollintine Warrant may be exercised on a cashless basis, As further consideration for Vollintine’s purchasing the Vollintine

Note, we entered into a make-whole agreement that assures that Vollintine shall derive not less than $250,000 in net proceeds from Vollintine’s

sales of the common stock underlying the Vollintine Warrant.

of December 31, 2023, we had total current assets of $976,938 consisting of $6,938 in cash and $970,000 in an advance to Pegasus Specialty

Our total current liabilities as of December 31, 2023, were $3,127,913.

We had a working capital deficit of $1,170,940 as of December 31,

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

Cash Flows from Operating Activities

Operating activities used $1,428,467 in cash year

ended December 31, 2022, compared with cash used of $2,782,102 for the year ended December 31, 2021.

Our negative operating cash flow

for the year ended December 31, 2022 was largely the result of our unrealized gain on derivative liability of $2,213,527, offset by our

net income of $653,627.

Our negative operating cash flow for the year ended December 31, 2021 was largely the result of our net loss of

$4,873,056, offset mainly by the loss on derivative liabilities of $2,011,881.

Cash Flows from Investing Activities

Investing activities used $0 in cash for year ended

December 31, 2022, as compared with $36,048 to purchase computer equipment for the year ended December 31, 2021.

Cash Flows from Financing Activities

Cash flows provided by financing activities during

the year ended December 31, 2022 amounted to $1,479,973, compared with cash flows provided by financing activities of $2,716,738 for the

year ended December 31, 2021.

Our positive cash flows for the year ended December 31, 2022, consisted of proceeds from issuance of common

stock of $91,173 and proceeds from Convertible notes payable of $1,388,800.

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 $515,377.

The 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.

We had a working capital deficit of $2,150,975 as of

December 31, 2023, compared with a working capital deficit of $1,170,940 as of December 31, 2022.

Flows Provided by / Used in Operating Activities

activities provided $11,166 in cash for the year period ended December 31, 2023, compared with cash used of $1,428,467 for the year ended

December 31, 2022.

Our positive operating cash flow for the year ended December 31, 2023, was largely the result of an increase in accounts

payable and accrued expenses.

Our negative operating cash flow for the year ended December 31, 2022, was largely the result of our unrealized

gain on derivative liability of $2,213,527, offset by our net income of $653,627.

light of the EMGE acquisition, we are unable to predict cash flows from operating activities for all of 2024.

Flows Used in Investing Activities

the year ended December 31, 2023, we used $805,000 in investing activities as an advance to Pegasus Specialty Vehicles.

We did not use

cash for investing activities for the year ended December 31, 2022.

light of the EMGE acquisition, we are unable to predict cash flows from investing activities for all of 2024.

Flows Provided by Financing Activities

flows provided by financing activities during the year ended December 31, 2023, amounted to $736,353, compared with cash flows

provided by financing activities of $1,479,973 for the year ended December 31, 2022.

Our positive cash flows for the year

ended December 31, 2023, consisted of net proceeds from convertible debentures of $791,200, proceeds from the sale of warrants of

$30,000, proceeds from the sale of common stock of $10,000 offset by the repayment of related party advances of $94,847.

positive cash flows for the year ended December 31, 2022, consisted of proceeds from issuance of common stock of $91,173 and

proceeds from convertible notes payable of $1,388,800.

light of the EMGE acquisition, we are unable to predict cash flows from financing activities for all of 2024.

of December 31, 2023, we have an accumulated deficit of $26,736,403.

23 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-K

Item 7. Management’s Discussion and Analysis