What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-07-07 compared with 2022-04-19 · 74 added, 162 removed, 21 unchanged (92% of the section changed)

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

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.

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.

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.

believe the careful nurturing of our brand is one of our most important responsibilities as managers of Resonate Blends.

knows our product better than we do, we made the decision to bring the sales process in-house versus having an external salesforce.

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.

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.

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.

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.

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

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.

see a significant uptick in press and other media mentions in the coming months.

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.

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.

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.

of Operations for the Years Ended December 31, 2024 and 2023

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.

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 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 $2,539,288 for the year ended December 31, 2021, as compared with $1,813,958 for the year ended December

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

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 from 2020 – plus vendor payment settlements.

We hope to avoid these settlement expenses for 2022 and compensate employees and vendors with available cash on hand.

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

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.

We expect 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 expenses of $2,341,651 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

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

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.

We reported $1,349,905 (unaudited) and $16,468 (unaudited) in sales for the nine months ended September 30, 2024 (“Interim 2024”)

and 2023 (“Interim 2023”), respectively.

All of our revenues for Interim 2024 were attributable to the business operations

of EMGE for the period from the acquisition date, March 14, 2024.

All revenues reported for Interim 2023 were attributable to the Subsidiary.

For Interim 2024, our cost of revenue was $477,079 (unaudited), compared to cost of revenue of $13,257 (unaudited) for

Interim 2023, resulting in a gross profit of $872,826 (unaudited) for Interim 2024 and a gross profit of $3,211 (unaudited) for Interim

cost of revenue and gross profit for Interim 2024 were attributable to the business operations of EMGE for the period from the acquisition

date, March 14, 2024.

All cost of revenue and gross profit reported for Interim 2023 were attributable to the Subsidiary.

Our operating expenses were $2,219,787 (unaudited) and $195,627 (unaudited) for Interim 2024 and Interim 2023, respectively.

Our operating expenses for the remainder of 2024 can be expected to increase as the effects of the acquisition of EMGE impact on our

operating results.

No prediction as to the level of operating expenses for all of 2024 can be made in this regard, however.

Income/Expense .

We had other expense of $208,805 (unaudited) for Interim 2024, compared to $819,016 (unaudited) in other expense

for Interim 2023.

Income/Loss .

For Interim 2024, we had a net loss of $1,555,767 (unaudited), compared to a net loss of $1,011,432 (unaudited)

for Interim 2023.

and Capital Resources

of December 31, 2021, we had total current assets of $269,519, consisting of $12,913 in cash, $10,830 in advances to suppliers

and $245,776 in Inventories.

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, 2024.

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

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 $.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

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

of December 31, 2024, we had total current assets of $1,044,236 (unaudited), consisting of $68,236 (unaudited) in cash, $6,000 loan receivable

and $970,000 (unaudited) in advances to former acquisition partner-company.

Our total current liabilities as of December 31, 2024, were

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.

Flows from Operating Activities

activities used $2,782,102 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.

Flows from Investing Activities

activities used $36,048 in cash for the year ended December 31, 2021 while we used no cash on investing activities for the year

ended December 31, 2020.

Flows from Financing Activities

flows provided by financing activities during the year ended December 31, 2021 amounted to $2,716,738 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 $515,377.

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.

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 December 31, 2021, we have an accumulated deficit of $25,974,051.

$4,557,634 (unaudited).

Our working capital deficit was $3,513,398 (unaudited) as of December 31, 2024, compared to our working capital

deficit of $2,150,975 (unaudited) as of December 31, 2023.

of December 31, 2024, we have an accumulated deficit of $28,292,170 (unaudited).

Our ability to continue as a going concern is contingent

13 unchanged sentences

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.

There have been no material changes

to our critical accounting policies as described in the footnotes to our financial statements included in our annual report on Form 10-K

for the year ended December 31, 2022;

however, we consider our critical accounting policies to be those related to determining the amount

of revenue to be billed, the timing of revenue recognition, stock-based compensation, capitalization and related amortization of intangible

assets, impairment of assets, and the fair value of liabilities.

Accounting Pronouncements

new accounting pronouncements issued or effective during the fiscal year has had or is expected to have a material impact on the financial

Financial Statements and Supplementary Data

see our Financial Statements beginning on page F-1 of this Annual Report.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

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/A

Item 7. Management’s Discussion and Analysis