0001493152-20-008581.txt : 20200514 0001493152-20-008581.hdr.sgml : 20200514 20200514061540 ACCESSION NUMBER: 0001493152-20-008581 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 54 CONFORMED PERIOD OF REPORT: 20191231 FILED AS OF DATE: 20200514 DATE AS OF CHANGE: 20200514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Resonate Blends, Inc. CENTRAL INDEX KEY: 0000897078 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 581588291 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21202 FILM NUMBER: 20875196 BUSINESS ADDRESS: STREET 1: 26565 AGOURA RD., STREET 2: SUITE 200, CITY: CALABASAS STATE: CA ZIP: 91302 BUSINESS PHONE: 571-888-0009 MAIL ADDRESS: STREET 1: 26565 AGOURA RD., STREET 2: SUITE 200, CITY: CALABASAS STATE: CA ZIP: 91302 FORMER COMPANY: FORMER CONFORMED NAME: Textmunication Holdings, Inc. DATE OF NAME CHANGE: 20140610 FORMER COMPANY: FORMER CONFORMED NAME: Textmunications Holdings, Inc. DATE OF NAME CHANGE: 20140610 FORMER COMPANY: FORMER CONFORMED NAME: Textmunication Holdings, Inc. DATE OF NAME CHANGE: 20140110 10-K 1 form10-k.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2019

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

 

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:

 

Title of each class   Name of each exchange on which registered
None   not applicable

 

Securities registered under Section 12(g) of the Exchange Act:

 

Title of each class

Common Stock, par value $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 [X]

 

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 [X]

 

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 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 [X] 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 [X] 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 an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, “and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

[  ] Large accelerated filer [  ] Accelerated filer
[  ] Non-accelerated filer [X] 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 [X]

 

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 registrants most recently completed second fiscal quarter. $876,663

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 22,700,843 common shares as of April 30, 2020

 

 

 

 
 

 

 

TABLE OF CONTENTS

 

    Page
PART I  
   
Item 1. Business 3
Item 1A. Risk Factors 7
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Mine Safety Disclosures 9
PART II  
   
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

9

Item 6. Selected Financial Data 10
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 10
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 14
Item 9A. Controls and Procedures 14
Item 9B. Other Information 14
PART III  
   
Item 10. Directors, Executive Officers and Corporate Governance 14
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 20
Item 13. Certain Relationships and Related Transactions, and Director Independence 20
Item 14. Principal Accountant Fees and Services 21
PART IV  
   
Item 15. Exhibits, Financial Statement Schedules 22

 

 2 

 

 

PART I

 

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 brand-focused vertically integrated cannabis organization offering trusted 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, Inc. 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 research organizations, innovative and emerging brands, and retail channels. The holding 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.

 

The 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 support the industry.

 

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.

 

We are currently finalizing development in cooperation with an award-winning strategic partner in preparation for the launch of our first product line of six products. We believe that these multi-use products will deliver specific, predictable, reliable, effects in a format that is completely unique in the industry. We have formalized contracts with our logistical and marketing partners, and we are on target for our upcoming product release. This release will be followed before year end with our second product line that is already in full development.

 

Our holding company, Resonate Blends, Inc., is now comprised of Resonate Blends LLC, the cannabis operations and product development side of the company. Entourage Labs LLC is our Intellectual Property (IP) subsidiary, and Textmunication, Inc. is our mobile marketing subsidiary for the health, fitness and wellness sectors.

 

Textmunication is a developing player in the mobile marketing and loyalty industry, providing cutting-edge mobile marketing solutions, rewards and loyalty to our clients. With a powerful yet intuitive suite of services, clients are able to reach more customers faster and reward them for repeat business. We help clients reach their marketing and revenue goals by educating clients with the most effective tools in mobile marketing, rewards, paperless redemption and loyalty.

 

In the past 4 years, our mobile marketing business has not been able to generate sufficient revenue to be able to sustain administrative expenses and has been unable to raise sufficient capital from the public market for the current and future competitive environment. The board of directors, with the leadership of our new CEO, has decided to change the company’s business focus to the cannabis industry and has plans to dispose of the mobile marketing business. This determination of the board of directors has been based on evaluating various strategic alternatives and conducting an extensive review of our financial condition, results of operations and business prospects, that attempting to raise additional capital, continuing to operate as a going concern was not reasonably likely to create greater value for our stockholders pursuing the mobile business model.

 

The Company submitted the required information to affect a new corporate name and stock symbol change to Financial Industry Regulatory Authority (FINRA). On December 16, 2019, the new corporate name was announced as Resonate Blends, Inc. and its common stock now trades on the OTCQB under the symbol “KOAN”, a symbol named after the Company’s upcoming product brand.

 

Aspire Consulting Group LLC, an IT Services firm out of Gaithersburg, Maryland is no longer in the holding company as of October 25, 2019.  

 

 3 

 

 

Our principal executive office is located at 26565 Agoura Road, Suite 200, Calabasas, CA 91302 and our mobile marketing offices are located at 1940 Contra Costa Blvd. Pleasant Hill, CA 94523. Our executive telephone number is (571) 888-0009 and our mobile marketing main number is (800) 677-7003.

 

Cannabis Product Business

 

Our Focus

 

Based in Calabasas, California, Resonate Blends, Inc. is a cannabis holding company centered on developing and acquiring proprietary branded holistic Wellness and Lifestyle products. The company strategy is to ignite future growth by building a portfolio of research organizations, innovative and emerging brands, and retail channels. The Company will soon launch a family of premium cannabis-based products based on proprietary formations calibrated to its Resonate Blends Effects System, the foundation of its core ethos—to offer quality consumer cannabis plant-based products that deliver on their promise.

 

Resonate Blends started with a simple mission — to demystify cannabis for the consumer. The Resonate Effects System was developed to make Cannabis plant-based products understandable, accessible and predictable to support the Wellness lifestyle. Resonate Blends empowers people to optimize their lifestyle by developing proprietary and innovative branded products built on the science of plant medicine that best fit their personal needs.

 

The 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 Blends and its shareholders to support and benefit from the growth expected in the Cannabis industry. In support of this philosophy, we believe the Company represents the best-in-class vision on how to create a family of brands designed specifically to support the personal needs of the consumer as the Industry continues to evolve from an underground business to a national consumer facing products business.

 

Resonate’s growth strategy is to create an ecosystem of companies, investments and research that all support the Resonate System. In addition to being product brand focused, the Company plans to incubate and integrate synergistic companies and partners. Using the Resonate System as its lens, Resonate plans to find entrepreneurial companies that support its ethos. By vertically integrating these companies, Resonate believes that it is able to provide consistent product quality that yields expected results and that also manages margins and profitability at scale.

 

Resonate plans to launch its first Koan brand of products in a series of infused products by Q3, but the launch is dependent upon supply chain efficiencies which could be affected by the COVID-19 pandemic. The initial launch will be in California with a state-wide distribution system already assembled. Resonate will be executing a multi-state strategy with the goal of becoming a leading national brand once the California market is optimized. The Company plans to strategically acquire assets and existing businesses in the cannabis space allowing for a vertically integrated organization centered on “wellness lifestyle”.

 

Resonate Blends has finalized development in cooperation with an award-winning strategic partner in preparation for the launch of our first product line of six products. These multi-use products deliver specific, predictable, reliable, effects in a format that is completely unique in the industry. The Company has formalized contracts with the leading logistical and marketing partners, and we are on target for our upcoming product releases.

 

Resonate made an investment into Joiant, the top selling CBD:THC pre-roll brand in California (according to BDS Analytics) with the option to fully acquire the company in 2020. Joiant is led by former Co-Founder of Pandora Media, Jon Kraft and Joiant Founder Lindsey Kirk, a former KIVA Confections ambassador.

 

In addition to preparing for the release of the Koan products, Resonate Blends is refocusing and building the holding company. Resonate Blends’ growth strategy is to avoid investments in heavily commoditized assets and to incubate and integrate synergistic companies and partners. Vertical integration will occur only to support product requirements and to provide consistent product quality that yields expected results.

 

 4 

 

 

As a public company, Resonate Blends can rapidly speed growth through highly targeted acquisitions in the marketplace that support and enhance organic growth. The Company is in the process of restructuring its balance sheet to align capital raising and acquisitions with long-term strategy which means raising and supporting long term capital versus short term capital raises.

 

Referral Partners

 

Resonate has a joint research and development project with Vertosa, an award-winning industry leader in Nano and micro-emulsions and the leading provider of safe, reliable emulsion bases for infused product developers. 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 their offerings follow regulations promulgated by the US Food and Drug Administration and are safe, pure, and effective.

 

The Resonate team believes that Vertosa is the idea partner to support the production of the premium lifestyle-wellness Koan product family. In addition, Resonate has selected respected packaging materials suppliers, manufacturing and distribution partner.

 

Marketing Plan and Personnel

 

Resonate is planning a carefully targeted and monitored soft product launch to dispensaries in the Los Angeles metro area. Within 90 days, the products are expected to be available in additional dispensary expanding around the starter hub. However, we are dependent upon the evolving market conditions around the COVID-19 pandemic, and the timing of our launch is based on market conditions. We believe this plan implementation provides maximum marketing efficiency and effectiveness as geo-targeted media can target customers of several dispensaries at once. The Resonate marketing plan for Koan products includes location-based programmatic content, out-of-home promotion, in dispensary promotion, budtender training, and budtender events. Several high-quality product launch events are also being planned.

 

The products will also be supported by an on-going social media campaign designed by a leading agency with significant experience in the cannabis-wellness industry. Resonate has a Chief of Creative Design and a Marketing Director both responsible for the marketing plans and execution of those plans.

 

Competition

 

While there are a number of high-quality cannabis product manufacturers such as Candescent, Beboe, Dosist, Papa & Barkley each specialize in several product effects or specific delivery systems. Resonate’s Koan products are unique in both their delivery system and their highly targeted experiences.

 

Government Regulation

 

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.

 

Laws and regulations affecting the medical and adult-use marijuana industry are constantly changing, which could detrimentally affect the Company’s clients and, in turn, the Company’s operations. Local, state and federal marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require the Company’s clients and thus the Company itself to incur substantial costs associated with modification of operations to ensure such clients’ compliance. In addition, violations of these laws, or allegations of such violations, could disrupt the Company’s clients’ business and result in a material adverse effect on the Company’s operations. In addition, it is possible that regulations may be enacted in the future that will limit the amount of cannabis growth or related products that the Company’s commercial clients are authorized to produce. The Company cannot predict the nature of any future laws, regulations, interpretations or applications, nor can it determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on its operations.

 

 5 

 

 

Since the use of marijuana is illegal under federal law, there is a compelling argument that banks cannot lawfully except for deposit funds from businesses involved with marijuana. Consequently, businesses involved in the cannabis industry often have trouble finding a bank willing to accept their business. The inability to open bank accounts may make it difficult for the Company’s clients to operate and their reliance on cash can result in a heightened risk of theft, which could harm their businesses and, in turn, harm the Company’s business. Additionally, some courts have denied marijuana-related businesses bankruptcy protection, thus, making it very difficult for lenders to recoup their investments, which may limit the willingness of banks to lend to the Company’s clients and to the Company itself.

 

In the United States, many marijuana-related businesses are subject to a lack of adequate insurance coverage. In addition, many insurance companies may deny claims for any loss relating to marijuana or marijuana-related operations based on their illegality under federal law, noting that a contract for an illegal transaction is unenforceable.

 

Intellectual Property

 

Resonate Blends does its own research and development. It uses third party experts to support its own efforts and controls its own formulation, designs and delivery methods. This company conducts research on refining effects based on the Entourage Effect and in complementary areas of adaptogens and plant medicine.

 

The company is protecting its formulas, designs, marketing language and digital assets through copyright and the United States Patent and Trademark Office. The company currently owns numerous domain names, Koan®; The Active Ingredient is You™ and is in process with several other terms. All of the company’s digital assets and product packaging is being copyrighted.

 

Mobile Marketing Business 

 

Principal Products and Services

 

We are 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. We provide a mobile marketing platform where merchants can send customers the most up-to-date offers, discounts, alerts and events schedules, such as, for instance, happy hours, trivia night, and other campaigns. The consumer can also access specials and promotions that merchants choose to distribute through us by opting keywords designated to the merchant’s keywords. This allows consumers to take their information wherever they go and learn about the latest buzz as soon as it is available, providing the consumer with events, deals, and messages on their cell phone via SMS messaging. We are a mobile marketing platform that connects the mass consumer to the content that they crave – anywhere, anytime, through virtually any mobile device for all local events and promotions.

 

Our mobile marketing solutions apply to any industry, offering a new and innovative way to reach out to a merchant’s customer base. Some examples include:

 

  Gyms – guest promotions, reminders, new rates, fitness tips;
  Bars – happy hours, special events, discount pricing;
  Boutiques – invite only trunk show, spring sale, discount on a clothing line, carrying a new line of clothes;
  Dentists – special promotion for teeth whitening;
  Investor Relations – sending notifications to investors on news alerts and company updates;
  Digital Marketing – promoting marketing updates from global clients using SMS in their portfolio;
  Salons – promotion on products, new line of products, introducing a new stylist;
  Restaurants – Dine about town participation, discount coupons; and
  Real Estate Agents – Introducing a new home on the market, price reduction, or an open house event.

 

Additionally, we are a mobile marketing platform that allows merchants to get more impact out of their promotions. Our merchants will be able to recommend promotions to their customers proactively, which will help merchants increase foot traffic and revenue. Utilizing the information that is being collected, our merchants can better target their clients. This system empowers merchants and enables them to adjust programs at a moment’s notice.

 

Employees

 

We will need to pay our management team and consultants that assist with managerial and administration efforts in the next twelve months. We have six (6) employees at Resonate Blends, Inc., including a CEO, COO, CIO, Product Director, Chief Creative Designer and Marketing Director. Textmunication, Inc., our SMS subsidiary, has 5 full-time employees, including a CEO, VP of Sales, Marketing Director, Customer Service Manager and Lead Technical Developer that assists with development, systems engineering, and platform maintenance. We have employment agreements or written consulting agreements with all our personnel at Resonate Blends, Inc. and an employment agreement with Textmunication, Inc. CEO, Wais Asefi. We don’t have employment agreements with any other employee at Textmunication, Inc. outside of Mr. Asefi.

 

 6 

 

 

In order to compensate all of the above managerial and administrative support, we estimate we will require $850,000 in new revenue and funding over the next twelve months.

 

As we continue to grow, additional resources will be added to assist in advisory services, such as operations, governance, supply chain, product development and wellness expertise.

 

We plan on hiring at least two advisors to Resonate Blends, Inc. to cover the areas listed above. We also look to hire two additional Board Directors with the expertise to guide our holding company. We anticipate the Director and Advisory positions to be paid mainly in restricted stock.

 

Item 1A. Risk Factors

 

For our mobile marketing business, see risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2014 filed on April 15, 2015.

 

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.

 

Further legislative development beneficial to the operations of the Company is not guaranteed

 

The success of the Company’s business depends on the continued development of the cannabis industry and the activity of commercial business and government regulatory agencies within the industry. The continued development of the cannabis industry is dependent upon continued legislative and regulatory authorization of cannabis at the state level and a continued laissez-faire approach by federal enforcement agencies. Any number of factors could slow or halt progress in this area. Further regulatory progress beneficial to the industry cannot be assured. While there may be ample public support for legislative action, numerous factors impact the legislative and regulatory process, including election results, scientific findings or general public events. Any one of these factors could slow or halt progressive legislation relating to cannabis and the current tolerance for the use of cannabis by consumers, which could adversely affect demand for the Company’s product and its operations.

 

 7 

 

 

The cannabis industry could face strong opposition from other industries

 

The Company believes that established businesses in other industries may have a strong economic interest in opposing the development of the cannabis industry. Cannabis may be seen by companies in other industries as an attractive alternative to their products, including recreational marijuana as an alternative to alcohol, and medical marijuana as an alternative to various commercial pharmaceuticals. Many industries that could view the emerging cannabis industry as an economic threat are well established, with vast economic and federal and state lobbying resources. It is possible that companies within these industries could use their resources to attempt to slow or reverse legislation legalizing cannabis. Any inroads these companies make in halting or impeding legislative initiatives that would be beneficial to the cannabis industry could have a detrimental impact on the Company’s clients and, in turn on the Company’s operations.

 

Changing legislation and evolving interpretations of law

 

Laws and regulations affecting the medical and adult-use marijuana industry are constantly changing, which could detrimentally affect the Company’s clients and, in turn, the Company’s operations. Local, state and federal marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require the Company’s clients and thus the Company itself to incur substantial costs associated with modification of operations to ensure such clients’ compliance. In addition, violations of these laws, or allegations of such violations, could disrupt the Company’s clients’ business and result in a material adverse effect on the Company’s operations. In addition, it is possible that regulations may be enacted in the future that will limit the amount of cannabis growth or related products that the Company’s commercial clients are authorized to produce. The Company cannot predict the nature of any future laws, regulations, interpretations or applications, nor can it determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on its operations.

 

Banking regulations could limit access to banking services

 

Since the use of marijuana is illegal under federal law, there is a compelling argument that banks cannot lawfully except for deposit funds from businesses involved with marijuana. Consequently, businesses involved in the cannabis industry often have trouble finding a bank willing to accept their business. The inability to open bank accounts may make it difficult for the Company’s clients to operate and their reliance on cash can result in a heightened risk of theft, which could harm their businesses and, in turn, harm the Company’s business. Additionally, some courts have denied marijuana-related businesses bankruptcy protection, thus, making it very difficult for lenders to recoup their investments, which may limit the willingness of banks to lend to the Company’s clients and to the Company itself.

 

Insurance risks

 

In the United States, many marijuana-related businesses are subject to a lack of adequate insurance coverage. In addition, many insurance companies may deny claims for any loss relating to marijuana or marijuana-related operations based on their illegality under federal law, noting that a contract for an illegal transaction is unenforceable.

 

FDA regulation of marijuana and the possible registration of facilities where medical marijuana is grown could negatively affect the cannabis industry which would directly affect our financial condition.

 

Should the federal government legalize marijuana for medical use, it is possible that the U.S. Food and Drug Administration (FDA) would seek to regulate it under the Food, Drug and Cosmetics Act of 1938. Additionally, the FDA may issue rules and regulations including cGMPs (certified good manufacturing practices) related to the growth, cultivation, harvesting and processing of medical marijuana. Clinical trials may be needed to verify efficacy and safety. It is also possible that the FDA would require that facilities where medical marijuana is grown be registered with the FDA and complies 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 medical marijuana industry, what costs, requirements and possible prohibitions may be enforced. If we are unable to comply with the regulations and or registration as prescribed by the FDA, we may be unable to continue to operate their and our business in its current form or at all.

 

 8 

 

 

Item 2. Properties

 

We currently do not own any real property. Our principal office for our mobile marketing business is located at 1940 Contra Costa Blvd. Pleasant Hill, CA 94523. We currently lease our executive offices at $2,000 per month. Our executive office for Resonate Blends, Inc. is located at 26565 Agoura Road, Suite 200, Calabasas, CA 91302. This office is a co-sharing office and we pay $99 per month.

 

Item 3. Legal Proceedings

 

Resonate Blends, Inc. has no legal proceedings.

 

Item 4: Mine Safety Disclosures

 

N/A

 

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 quoted under the symbol “KOAN” as of December 16, 2019 on the OTCQB operated by OTC Markets Group, Inc. 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 prices for our common stock for the each of the periods indicated as reported by the OTCQB. 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, 2019 
Quarter Ended   High $   Low $ 
December 31, 2019    .22    .10 
September 30, 2019    .16    .07 
June 30, 2019    .42    .12 
March 31, 2019    .70    .30 

 

Fiscal Year Ending December 31, 2018 
Quarter Ended   High $   Low $ 
December 31, 2018    0.95    0.25 
September 30, 2018    1.97    0.07 
June 30, 2018    0.20    0.10 
March 31, 2018    0.60    0.10 

 

On April 30, 2020, the last sales price per share of our common stock on the OTCQB was $.08

 

Penny Stock

 

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

 

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.

 

 9 

 

 

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

 

These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.

 

Holders of Our Common Stock

 

As of April 30, 2020, we had 22,700,843 shares of our common stock issued and outstanding, held by 744 shareholders of record, other than those held in street name.

 

Dividends

 

There are no restrictions in our articles of incorporation or bylaws that prevent 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;
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.

 

We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.

 

Recent Sales of Unregistered Securities  

 

The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.

 

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.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We have an Employee Stock Ownership Program (ESOP) in place for our employees. The plan has 10,000,000 shares available. Through December 31, 2019, we have issued 6,485,000 shares to employees with 3,515,000 shares held in reserve at our Transfer Agent.

 

Item 6. Selected Financial Data

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

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.

 

 10 

 

 

Results of Operations for the Years Ended December 31, 2019 and 2018

 

  

Resonate

Holdings

Inc.

  

Textmunication

Inc.

  

Resonate

Blends

LLC

  

Total

2019

  

Total

2018

 
Revenues        1,050,161    -    1,050,161    1,066,408 
Cost of Revenues   -    392,674         392,674    314,638 
Gross Profit   -    657,487    -    657,487    751,770 

 

Revenues for 2019 and 2018 remains constant primarily due the increase in clients was offset by cancellation few large label customers.

 

Cost of revenues increased for 2019 compared with the 2018 and our margins were less as a result of additional development resources.

 

Operating Expenses

 

  

Resonate

Holdings

Inc.

  

Textmunication

Inc.

  

Resonate

Blends

LLC

  

Total

2019

  

Total

2018

 
Advertising        21,831    38,945    60,776    13,873 
General and Administrative   30.985    142,789    8,157    181,931    132.908 
Legal and Professional   169,628    49,828    -    219,456    256,370 
Officer compensation   95,000    300,910    80,000    475,910    353,700 
Salaries and related   -    213,534    73,500    287,034    132,208 
Sales commission   -    82,236    -    82,236    64,053 
Office rent   -    22,050    -    22,050    20,294 
Impairment of In House Software   -    -    -    -    85,092 
Non Cash management fees   2,650,518    -    -    2,650,518    - 
Total operating expenses   2,946,131    833,178    200,602    3,979,911    1,058,498 

 

Our operating expenses for the year ended December 31, 2019 compared with 2018 increased primarily due to $2,650,518 as a stock-based compensation to our management team and company officers.

 

The increase in officers’ compensation were due to additional hiring of six (6) employees at Resonate Blends, Inc., including a CEO, COO, CIO, Product Director, Chief Creative Designer and Marketing Director.

 

We expect that our operating expenses for the rest of 2020 will be lower to that in the present year due to the departure of our CEO Wais Asefi and other employees employed at our mobile marketing subsidiary. Given our lack of operating capital, we may be forced to issue shares for services rendered to the company. We hope that increased revenues will lessen that trend for 2020 and beyond.

 

Other Income/ Expenses

 

We had net other expenses of $336,179 for the year ended December 31, 2019 and $31,373 for the same period ended December 31, 2018. Other expenses for the year ended December 31, 2019 consisted mainly of $106,961 in the loss on settlement of legal liabilities, $92,791 interest expenses, $118,124 amortization of debt discounts and $43,242 gain on settlement of derivative liabilities, offset by a gain of $24,939 from the settlement of notes payable. Other expense for 2018 consisted of $105,417 loss on settlement of notes payable, $42,534 on the amortization of debt discounts, and $2,792 in interest expense, offset by a $119.370 change in fair value of derivative liabilities based on the Black-Scholes option pricing model.

 

 11 

 

 

Net Income/Loss

 

The Company had a net loss of $3,669,728 for the year ended December 31, 2019, as compared with net loss of $339,753 for the year ended December 31, 2018.

 

Liquidity and Capital Resources

 

As of December 31, 2019, we had total current assets of $105,742. Our total current liabilities as of December 31, 2019 were $717,970. We had a working capital deficit of $612,228 as of December 31, 2019.

 

Cash flows from Operating Activities

 

Operating activities used $809,386 in cash the year ended December 31, 2019, as compared with $54,145 for the year ended December 31, 2018. Our net loss was $3,669,728, offset by $3,035,465 in non-cash expenses, an increase in receivables of $38,037, a decrease in accounts payable and accrued expenses of $137,036 and a decrease in due to related party of $100. Our net loss of $339,753 was the main component of our negative operating cash flow in 2018, offset mainly by non-cash expenses of $73,810, an increase in receivables of $11,667 and an increase in accounts payable and accrued expenses of $221,812.

 

Cash flows from Investing Activities

 

Investing activities used $25,000 in cash the year ended December 31, 2019. Our negative investing cash flow in 2019 is the result of the investment in Joiant.

 

Cash flows from Financing Activities

 

Cash flows provided by financing activities during the year ended December 31, 2019 amounted to $819,012 as compared with $112,500 for the year ended December 31, 2018. Our positive cash flow in 2019 consisted mostly of proceeds from the sale of issuance of common stocks. Our positive cash flow in 2018 consisted mostly of proceeds from the sale of convertible promissory notes, offset by payments on loans payable.

 

Our optimum level of growth for success will be achieved if we are able to raise $1,500,000 in the next twelve months. However, funds are difficult to raise in today’s economic environment. If we are unable to raise $1,500,000, our ability to implement our business plan and achieve our goals will be significantly diminished.

 

We have experienced a history of losses. With Resonate Blends in development stage and Textmunication revenues stable, we are still reliant on outside capital as we have been in the past. We will need at a minimum $1,500,000 in capital to operate in the next 12 months.

 

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 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, 2019, we have an accumulated deficit of $19,159,721. 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, 2019, there were no off-balance sheet arrangements.

 

Critical Accounting Policies

 

Our critical accounting policies are disclosed in Note 2 of our audited financial statements included in the Form 10-K.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

 12 

 

 

Item 8. Financial Statements and Supplementary Data

 

Index to Financial Statements Required by Article 8 of Regulation S-X:

 

Audited Financial Statements:

 

F-1 Report of Independent Registered Public Accounting Firm
F-2 Consolidated Balance Sheets as of December 31, 2019 and 2018
F-3 Consolidated Statements of Operations for the years ended December 31, 2019 and 2018
F-4 Consolidated Statement of Stockholders’ Deficit for the years ended December 31, 2019 and 2018
F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018
F-6 Notes to Consolidated Financial Statements

 

 13 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and

Board of Directors of Resonate Blends, Inc. (formerly Textmunication Holdings, Inc.)

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Resonate Blends, Inc. (formerly Textmunication Holdings, Inc.) (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

 

Basis of Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

 

As discussed in Note 1 to the consolidated financial statements, the Company’s continuing operating losses and accumulated deficit raise substantial doubt about its ability to continue as a going concern for one year from the issuance of these financial statements. Management’s plans are also described in Note 1. The consolidated financial statements do not include adjustments that might result from the outcome of this uncertainty.

 

/s/ Boyle CPA, LLC  

 

We have served as the Company’s auditor since 2018

 

Bayville, NJ

May 13, 2020

 

 

 F-1 

 

 

RESONATE BLENDS, INC.

(FORMERLY TEXTMUNICATION HOLDINGS, INC.)

CONSOLIDATED BALANCE SHEETS

 

   December 31, 2019   December 31, 2018 
ASSETS          
Current assets          
Cash and cash equivalents  $53,139   $68,513 
Receivables   52,603    14,516 
Total current assets   105,742    83,029 
Investment in equity method investee   25,000    450,683 
TOTAL ASSETS   130,742    533,712 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities          
Accounts payable and accrued liabilities   175,243    225,430 
Due to related parties   11,650    11,750 
Convertible notes payable, net of discount   161,404    20,000 
Derivative liability   262,712      
Settlement liability   106,961    360,756 
Total current liabilities   717,970    617,936 
Convertible notes payable, net of discount - Long term          
Total liabilities   717,970    617,936 
Stockholders’ deficit          
Series A - Preferred stock, 10,000,000 shares authorized, $0.0001 par value, 4,000,000 issued and outstanding   400    400 
Series B - Preferred stock, 66,667 shares authorized, $0.0001 par value, 66,667 issued and outstanding   0    7 
Series C - Preferred stock, 2,000,000 shares authorized, $0.0001 par value, 2,000,000 issued and outstanding   200    200 
Common stock; $0.0001 par value; 100,000,000 shares authorized; 17,153,936 and 2,435,179 shares issued and outstanding as of December 31, 2019 and 2018, respectively.   1,715    446 
Additional paid-in capital   18,570,178    15,404,716 
Accumulated deficit   (19,159,721)   (15,489,993)
Total Stockholders’ deficit   (587,228)   (84,224)
TOTAL LIABILITIES AND STOCKHOLDER’S DEFICIT  $130,742   $533,712 

 

  The accompanying notes are an integral part of these consolidated financial statements

 

 F-2 

 

 

RESONATE BLENDS, INC.

(FORMERLY TEXTMUNICATION HOLDINGS, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS

 

   The Year Ended 
   December 31, 2019   December 31, 2018 
REVENUES  $1,050,161   $1,066,408 
COST OF REVENUES   392,674    314,638 
Gross profit   657,487    751,770 
Operating expenses          
Advertising   60,776    13,873 
General and administrative expenses   181,931    132,908 
Legal and Professional fees   219,456    256,370 
Officer Compensation   475,910    353,700 
Salaries and Related   287,034    132,208 
Sales Commission   82,236    64,053 
Office Rent   22,050    20,294 
Impairment of in house software   -    85,092 
Non cash management fees   2,650,518      
Total operating expenses   3,979,911    1,058,498 
Loss from operations   (3,322,424)   (306,728)
Other Income (expense)          
Other Income          
Interest expense   (92,791)   (2,792)
Loss on change of derivative liability   -    - 
Amortization of debt discount   (118,124)   (42,534)
Gain (loss) on settlement of derivative liabilities   (43,242)   119,370 
Legal settlement   (106,961)     
Gain on settlement of notes payable   24,939    (105,417)
Total other expense   (336,179)   (31,373)
Income (loss) from investment in equity method investee   (11,125)   (1,652)
NET INCOME (LOSS)   (3,669,728)   (339,753)
           
Basic weighted average common shares outstanding   11,242,260    4,223,119 
Net Income (loss) per common share: basic and diluted   (0.33)   (0.0805)

 

The accompanying notes are an integral part of these consolidated financial statements

 

 F-3 

 

 

RESONATE BLENDS, INC.

(FORMERLY TEXTMUNICATION HOLDINGS, INC.)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE YEAR ENDED DECEMBER 31, 2019

 

   Preferred stock   Preferred stock - Series B   Preferred stock - Series C   Preferred stock - Series D   Common Stock   Additional
Paid-in
   Accumulated   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
Balance, December 31, 2017   4,000,000   $400    66,667   $7    2,000,000   $200    -    -    2,435,179   $244   $14,676,221   $(15,150,240)  $(473,168)
Proceeds from subscription agreements                                                     150,000         150.000 
Stock issued to settle notes payable                                           2,021,273    202    174,816         175,018 
Settlement of derivative liability                                                     403,679         403,679 
Net loss                                                          (339,753)   (339,753)
                                                                  
Balance, December 31, 2018   4,000,000   $400    66,667   $7    2,000,000   $200        $      4,456,452   $446   $15,404,716   $(15,489,993)  $(84,224)
Settlement of liabilities   -    -    -    -    -    -    -    -    1,718,000    172    360,510         360,682 
Stock issuance for services   -    -    -    -    -    -    -    -    6,685,000    669    2,470,913         2,471,582 
Preferred shares converted to common   -    -    (66,667)   (7)   -    -    -    -    20,000    2    5         - 
Stocks and warrant issued for cash   -    -    -    -    -    -    40,000    4    -    -    199,996         200,000 
Conveyance of ownership of Aspire   -    -    -    -    -    -              (20,000)   (2)   (439,556)        (439,558)
Preferred shares D retired   -    -    -    -    -    -    (40,000)   (4)   -    -    (260,000)        (260,004)
Stock issuance for acquisition of Resonate Blends, LLC and Entourage, LLC   -    -    -    -    -    -              4,274,484    428    833,594         834,022 
Net loss   -    -    -    -    -    -                             (3,669,728)   (3,669,728)
    4,000,000   $400    -   $-    2,000,000   $200    -   $-    17,133,936   $1,715   $18,570,178   $(19,159,721)  $(587,228)

 

 The accompanying notes are an integral part of these consolidated financial statements

 

 F-4 

 

 

RESONATE BLENDS, INC.

(FORMERLY TEXTMUNICATION HOLDINGS, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2019 and 2018

 

   2019   2018 
Cash Flows from Operating Activities          
Net Income (loss)  $(3,669,728)  $(339,753)
Adjustments to reconcile   -      
Amortization of debt discount   118,124    42,534 
Loss on derivative liability   -    45,229 
Impairment of software cost   -      
Non cash interest expense   80,556      
Legal Settlement   106,961      
Share based compensation   2,650,518      
Gain (Loss) on the settlement of debt   24,939    105,417 
Gain on settlement of derivative liabilities   43,242    (119,370)
Income (Loss) from equity method investee   11,125    1,653 
Changes in assets and liabilities   -      
Receivables   (38,087)   (11,667)
Accounts payable and accrued expenses   (137,036)   221,812 
Due to Related party   (100)   - 
Net cash provided by operating activities   (809,386)   (54,145)
Investments in Joiant   (25,000)   - 
Disposal of Investment in Aspire   -    - 
Net cash provided by investing activities   (25,000)   - 
Cash Flows from Financing Activities          
Proceeds from subscription   611,262    150,000 
Proceeds from convertible notes / loans payable   267,750    (37,500)
Proceeds from issuance of stock warrants   200,000    - 
Payments on preferred stocks buy back   (260,000)   - 
Payments on convertible notes payable   -    - 
Acquisition of Resonate Blends   -    - 
Net cash provided by financing activities   819,012    112,500 
Net increase in cash   (15,374)   58,355 
Cash, beginning of period   68,513    10,158 
Cash, end of period   53,139    68,513 
           
Supplemental disclosure of cash flow information          
Cash paid for interest   12,235    6,171 
Cash paid for tax   -      
Non-Cash investing and financing transactions   -      
Conversion of debt for common stock   10,000      
Conversion of convertible notes payable   -    360,756 
Settlement of derivative liability   -    319,041 

 

The accompanying notes are an integral part of these consolidated financial statements

 

 F-5 

 

 

RESONATE BLENDS, INC.

(formerly TEXTMUNICATION HOLDINGS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

 

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.

 

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.

 

 F-6 

 

 

RESONATE BLENDS, INC.

(formerly TEXTMUNICATION HOLDINGS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

 

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.

 

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, 2019 and 2018. 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, 2019, the Company has an accumulated deficit of $19,159,721. 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.

 

 F-7 

 

 

RESONATE BLENDS, INC.

(formerly TEXTMUNICATION HOLDINGS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

 

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. At December 31, 2019 and 2018 no cash balances exceeded the federally insured limit.

 

Accounts receivable and allowance for doubtful accounts

 

Accounts receivable 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, 2019, and 2018 there’s no allowance for doubtful accounts and bad debts. At December 31, 2019 and 2018, one customer represented 51% and 71%, respectively, of the Company’s accounts receivable.

 

Revenue Recognition

 

Revenues are recognized when control of the promised is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

 

The Company currently derives a substantial majority of its revenue from fees associated with our subscription services, which generally include mobile marketing platform services. Customers are billed for the subscription on a monthly basis. For all of the Company’s customers, regardless of the method, the Company uses to bill them; subscription revenue is recorded as deferred revenue in the accompanying consolidated balance sheets. As services are performed, the Company recognizes subscription revenue on a monthly basis over the applicable service period. When the Company provides a free trial period, the Company does not begin to recognize subscription revenue until the trial period has ended and the customer has been billed for the services.

 

Professional services revenues are generated from SMS and RCS packages where client logs into a cloud-based application to send targeted SMS messages to their subscriber’s base. Our custom web application SMS/RCS platform is typically billed on a fixed-price based on the number of SMS/RCS allocated for each package our client purchases. Generally, revenue for SMS/RCS services are recognized immediately as our clients have instant access to their web-based application to send out messages, the number of SMS/RCS messages allocated to a client expires at the end of each month and renews beginning of each month. The Company offers whereby control of the product passes to the customer when delivered and revenue is recognized at the time of delivery.

 

Results for reporting periods beginning after January1, 2018 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 a cumulative impact as of January 1, 2018 due to the adoption of Topic 606 and there was not an impact to our consolidated statement of operations for the year ended December 31, 2018 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.

 

 F-8 

 

 

RESONATE BLENDS, INC.

(formerly TEXTMUNICATION HOLDINGS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

 

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.

 

As of December 31, 2018, there are no financial assets and liabilities measured at fair value.

 

Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended December 31, 2019:

 

   Level 1   Level 2   Level 3   Total 
Liabilities                    
Derivative Financial Instruments  $   $   $262,712   $262,712 

 

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.

 

 F-9 

 

 

RESONATE BLENDS, INC.

(formerly TEXTMUNICATION HOLDINGS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

 

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.

 

Software Development Costs

 

The Company applies the principles of FASB ASC 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product.

 

The Company also applies the principles of FASB ASC 350-40, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use (“ASC 350-40”). ASC 350-40 requires that software development costs incurred before the preliminary project stage be expensed as incurred. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed, and the software will be used to perform the function intended.

 

During 2018, management determined that the software is unable to handle the expanding business and decided to scrap the entire project and recognize as loss for the year. A total cost of $85,092 was written off during the year ended December 31, 2018.

 

Advertising Expenses

 

Advertising expenses are included in General and administrative expenses in the Statements of Operations and are expensed as incurred. The Company incurred $21,831 and $13,873 in advertising expenses for the years ended December 31, 2019 and 2018, respectively.

 

 F-10 

 

 

RESONATE BLENDS, INC.

(formerly TEXTMUNICATION HOLDINGS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

(AUDITED)

 

Recent Accounting Pronouncements

 

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations and includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. ASU 2016-08 is effective January 1, 2018 to be in alignment with the effective date of ASU 2014-09.

 

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments in ASU 2016-10 clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. ASU 2016-10 is effective January 1, 2018 to be in alignment with the effective date of ASU 2014-09.

 

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts from Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments in this update affect the guidance in ASU 2014-09, which is not yet effective. The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2016-12 do not change the core principle of the guidance in Topic 606, but instead affect only the narrow aspects noted in Topic 606. ASU 2016-12 is effective January 1, 2018 to be in alignment with the effective date of ASU 2014-09. The Company will adopt the provisions of Topic 606 effective in January 1, 2018 and does not believe the adoption of the new revenue recognition standard will have a material impact on the Company’s consolidated financial statements.

 

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.

 

 F-11 

 

 

RESONATE BLENDS, INC.

(formerly TEXTMUNICATION HOLDINGS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

(AUDITED)

 

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.

 

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.

 

 F-12 

 

 

RESONATE BLENDS, INC.

(formerly TEXTMUNICATION HOLDINGS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

(AUDITED)

 

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

 

Loans due to related parties are due on demand and have no interest. Amounts outstanding as of December 31, 2019 and 2018 was approximately $11,750 and $11,750, respectively

 

NOTE 4 - CONVERTIBLE NOTE PAYABLE

 

Convertible notes payable consists of the following:

 

   December 31, 2019   December 31, 2018 
Total convertible notes payable   277,750    20,000 
Less discounts   (116,346)   (0)
Convertible notes, net of discount  $161,404   $20,000 

 

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.

 

The following table presents details of the changes in the Company’s derivative liabilities associated with its convertible notes for the year ended December 31, 2019:

 

   Amount 
Balance December 31, 2018  $0 
Add derivative liability due to new convertible notes   219,469 
Change in fair market value of derivative liabilities   43,242 
Balance December 31, 2019  $262,711 

 

Settlement Agreements

 

During the year ended December 31, 2019, the Company issued 1,280,000 shares of common stock with a fair value of $164,033 for the settlement of liabilities payable. The conversion of the derivative liabilities has been recorded through additional paid-in capital.

 

 F-13 

 

 

RESONATE BLENDS, INC.

(formerly TEXTMUNICATION HOLDINGS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

 

NOTE 5 – INVESTMENT IN ASPIRE CONSULTING GROUP, LLC

 

On January 5, 2016, the Company entered into a Share Exchange Agreement with Aspire Consulting Group, LLC, a Virginia limited liability company and certain members of Aspire. Pursuant to the terms of the Exchange Agreement, the Company agreed to acquire 49% of all of the issued and outstanding membership units of Aspire in exchange for the issuance of 66,667 shares of the Company’s newly created Series B Convertible Preferred Stock to the Members valued at $460,002.

 

The Company has concluded that it has the ability to exercise significant influence, but not control, over an Aspire through its acquired 49% equity interest and therefore has accounted for the acquisition of the interest under the equity method.

 

The following table presents details of the Company’s investment in Aspire as of December 31, 2017 and 2016:

 

   Amount 
Balance December 31, 2017  $452,336 
Loss from equity method   (1,653)
Balance December 31, 2018  $450,683 
Loss from equity method   (11,125)
Spin out   (439,558)
Balance December 31, 2019  $- 

 

On October 25, 2019 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.

 

NOTE 6 – COMMITMENTS AND CONTINGENCIES

 

Office Lease

 

On January 6, 2015 the Company signed an amendment to its lease originally signed on May 9, 2008. The amended lease commenced January 1, 2015 and expires on thirty days’ notice. Current month to month lease is for $1,838 a month. Rent expense was approximately $22,049 and $22,294 for the years ended December 31, 2019 and 2018, 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; 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.

 

 F-14 

 

 

RESONATE BLENDS, INC.

(formerly TEXTMUNICATION HOLDINGS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

 

Litigations Claims and Assessments

 

On October 12, 2018, the Company, Wais Asefi, the Company’s former CEO, and David Thielen, the Company’s COO, entered into a Settlement Agreement and Release (the “Agreement”) with Lester Einhaus (“Holder”) concerning a $25,000 convertible note issued by the Company to the Holder on September 23, 2015 (the “Note”). Case detail as follows:

 

Lester Einhaus vs. Textmunication

United States District Court – Northern District

Filed on 6/14/2017

Case: 1:17-cv-04478

 

The Agreement requires the Company to issue to the Holder 475,000 shares of the Company’s common stock, subject to the condition that the Holder does not own more than 4.99% of the Company’s outstanding shares at any time. As such, the shares will be issued out in tranches; with the first such tranche was due within 10 days of signing the Agreement for 198,000 shares. The Holder agreed to a daily leak out of the greater of 10,000 shares or 15% of the trading volume. An anti-dilution provision in the Agreement required an additional 379,386 shares to be issued. During the year ended December 31, 2019, all required shares were issued by the Company and no further liability exists.

 

NOTE 7 – INCOME TAXES

 

For the year ended December 31, 2019, the cumulative net operating loss carry-forward from continuing operations is approximately $19,065,529 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, 2019 and 2018:

 

   2019   2018 
Deferred tax asset attributable to:          
Net operating loss carryover  $4,003,761   $2,597,027 
Valuation allowance   (4,003,761)   (2,587,027)
Net deferred tax asset  $-   $- 

 

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 8 – STOCKHOLDERS’ EQUITY

 

The Company is authorized to issue an aggregate of 100,000,000 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, which includes 4,000,000 shares of Series A preferred stock (“Series A”) and 2,000,000 shares of Series C preferred stock (“Series C”).

 

Under the Certificate of Designation, holders of Series A Preferred Stock will participate on an equal basis per-share with holders of our common stock in any distribution upon winding up, dissolution, or liquidation. Holders of Series A Preferred Stock are entitled to vote together with the holders of our common stock on all matters submitted to shareholders at a rate of three hundred (300) votes for each share held.

 

 F-15 

 

 

RESONATE BLENDS, INC.

(formerly TEXTMUNICATION HOLDINGS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

 

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 shares issues accounted as expenses as follows:

 

Management Fees  $2,074,600 
Payment to subcontractors   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.

 

NOTE 9 – SUBSEQUENT EVENTS

 

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 January 21, 2020, we executed a convertible promissory note with Geneva Roth Remark Holdings, Inc. for $113,300 together with any interest at the rate of 10% per annum from the issue date. If we decide to let this Note convert, the variable conversion price is 75% multiplied by the market price, representing a market discount of 25%. We have the ability to prepay this Note beginning on the Issue Date and ending on the date which is one hundred twenty (120) days following the Issue Date with a prepayment percentage of 113%. The period beginning on the date which is one hundred twenty-one (121) days following the Issue Date and ending on the date which is one hundred eight (180) days following the Issue Date, the prepayment percentage is 118%.

 

 F-16 

 

 

RESONATE BLENDS, INC.

(formerly TEXTMUNICATION HOLDINGS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

 

On March 3, 2020, we executed a settlement agreement with Cicero on both the Note and email marketing program. We agreed to pay back the Note by making payments to Cicero of $10,000 monthly commencing on April 15, 2020 with a balloon payment due on September 15, 2020. Five equal monthly payments of $10,000 each will be made by the 15th of each month starting on April 15, 2020 through August 15, 2020. A final payment of $60,000 will be made on September 15, 2020 to close out the payment of the Note in its entirety. To settle the email marketing program, the Company will issue to Cicero 500,000 shares of restricted common stock upon execution of this Agreement. Such shares will be issued to Cicero within 5 business days of the date hereof. There will be a twelve (12) month leak-out period that will start once the shares are eligible to be resold, with no more than 5,000 shares allowed to be sold on any given trading day. After the issuance of the 500,000 shares, the Contract is paid in full.

 

As previously disclosed, on June 11, 2019, we sold 40,000 shares of our Series D Convertible Preferred Stock (the “Preferred Shares”) for gross proceeds to us of approximately $200,000. The Preferred Shares were sold along with warrants to purchase 83,333 shares of our common stock (the “Warrants”). The Warrants have an exercise price of $0.30 per share and are exercisable sixty months from the issuance date. The Warrants provide for cashless exercise in the event we have not registered the common shares underlying the Warrants. On March 10, 2020, we entered into Exchange Agreements with three Warrant holders to exchange their outstanding Warrants for shares of our common stock. Each Warrant holder shall receive 184,000 shares of our common stock (the “Exchange Shares”) valued at $0.25 per share in exchange for the Warrant holder’s surrender of the Warrant. Each Warrant holder agreed that it will not sell any of the Exchange Shares for sixty (60) days commencing on the Closing Date (“Lockup Period”). After the Lockup Period, each Warrant holder agreed that it will not sell more than 61,333 Exchange Shares, plus any Additional Shares (described below) issued in relation to such Exchange Shares in any calendar month.

 

On March 13, 2020, we entered into Securities Purchase Agreements (the “Purchase Agreements”) with three accredited investors (the “Investors”), pursuant to which we issued and sold to the Investors three promissory notes, dated March 13, 2020, each in the principal amount of $141,999.99 for an aggregate principal amount of $425,999.97 (the “Notes”). We received $399,999.99 from the Notes after applying the original issue discount to the Notes, $232,270.79 of which was used to retire an existing convertible promissory note and the balance to our account, after legal costs, amounted to $157,229.20. The maturity date for repayment of the Notes is April 20, 2021 and the Notes bear interest at 15% per annum. We are required to repay the Notes by making nine equal instalments of $17,613 to each of the three Investors starting on July 13, 2020 and ending on March 13, 2021. As additional consideration, we agreed to issue to each Investor 250,000 shares of our common stock. We are required to issue additional shares in the event our common stock trades at less than $0.20 per share in any 10 day trading period. We have a right to repurchase the total 750,000 shares issued by paying each Investor $50,000 within 170 calendar days. The shares may only be sold under a leak out provision that restricts sales to no more than 10% of our average daily trading volume for the prior 30 days and no more than $35,000 in any calendar month. All principal and accrued interest on the Notes is convertible into shares of our common stock upon an event of default. The conversion price amounts to 65% of the lowest one day VWAP for our common stock during the 10 trading days prior to the issue date. The conversion price is subject to adjustment as provided in the Notes.

 

The company has evaluated subsequent events for recognition and disclosure through March 20, 2019 which is the date the financial statements were available to be issued. No other matters were identified affecting the accompanying financial statements and related disclosures.

 

 F-17 

 

 

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A. 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, 2019. 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.

 

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, 2019 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, 2019, 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, 2020: (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.

 

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     63   Chairman and CEO
Pamela Kerwin   71   Chief Operating Officer
David Thielen   56   Chief Investment Officer and Director

 

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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.

 

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

 

On the mobile marketing side of our business, we have two significant employees.

 

Wais Asefi – CEO of Textmunication, Inc.

 

Wais Asefi has served as our President, CEO and Director since November 17, 2013. He served as the Chief Executive Officer and Director of Textmunication, Inc., our subsidiary, since March of 2009 to the present. From August 2008 to March 2009, he was not employed. From January 2002 until July 2008, he was the founder and CEO of Metro General Insurance, an insurance agency focusing on personal lines, life and commercial insurance products. Mr. Asefi’s background and experience in the mobile marketing business support his service as a director of our company.

 

Mr. Asefi 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.

 

 15 

 

 

Nick Miniello – VP of Sales of Textmunication, Inc.

 

Mr. Miniello has been with our company in sales, but was named VP of Sales on January 1, 2017. His sales leadership began in 2000 within the mobile wireless industry as a Regional Manager for AT&T. As Regional Manager, Mr. Miniello earned “Top Regional Manager” for two consecutive years. After six years with AT&T, he shifted to the fitness industry managing ‘24 Hour Fitness’ clubs for three years taking over a struggling location. His turnaround efforts earned him the “most improved” location award in the San Francisco market.

 

Mr. Miniello 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.

 

On the cannabis side, we have a Director of Creative Design and a Marketing Director, both of whom are responsible for the marketing plans and execution of those plans under the overall supervision of our COO. Although they are not executive officers, we consider these employees significant to our company:

 

Henry Steingieser – Chief of Creative Design and Branding

 

Henry has worked in the advertising, hospitality and entertainment industries as a Creative Director and Designer. He has worked with agencies such as William Morris Endeavor, Saatchi & Saatchi and Deutsch, and was co-owner and creative director at digital design firm Backward Heroes where they garnered FWA, Webby, Marcom and DMAC honors and awards for work with clients such as Capitol Records and New Line Cinema.

 

Mr. Steingieser 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.

 

Sian Seligman – Head of Marketing

 

Sian has served as the Senior Executive in charge of marketing, promotions and strategy for several brands and industries. She has consulted and worked for many Fortune 500 companies and clients, including Burger King, Nestle, Audi, Toyota, Coca-Cola, Ashton Kutcher, 50 Cent, Russell Simmons. Wired Magazine has hailed her work as “Brand Integration to Die For.”

 

Mr. Seligman 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.

 

We also have an employee that provides significant assistance with our company over product development.

 

Skyler Quisenberry – Director of Product Development & Research

 

Skyler has dedicated his adult life to the pursuit and dissemination of knowledge. Educated as an international economist at UCLA, he worked for three years in Japan at Hitachi Ltd.’s Nuclear Department. Since his time in Japan, Skyler has spent years researching the deeper layers of the Cannabis species and has been driven by a desire to understand the role of the dozens of variable molecules that produce the Entourage Effect.

 

Mr. Quisenberry 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.

 

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);

 

 16 

 

 

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.

 

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.

 

 17 

 

 

For the fiscal year ending December 31, 2019, 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, 2019 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 during or with respect to the year ended December 31, 2019, the following 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, 2019:

 

Name and principal position   Number of late reports   Transactions not timely reported   Known failures to file a required form
Wais Asefi Former President, Chairman, CEO and Director   0   2   0
Nick Allen Miniello Former VP of Sales   1   0   0
Geoffrey Selzer CEO and Director   1   0   0
Pamela Kerwin Chief Operating Officer   1   0   0
David Thielen Chief Investment Officer and Director   1   0   0

 

Code of Ethics

 

As of December 31, 2019, 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, 2019 and 2018.

 

Name and principal position  Year   Salary
($)
   Bonus
($)
   Stock
Awards
($)
   Option
Awards
($)
   All Other
Compensation
($) (1)(2)
   Total
($)
 
Wais Asefi   2019   $185,000         385,000              570,000 
Former President, Chairman, CEO and Director  2018   $155,000                          
                                   
Nick Miniello  2019    140,700         231,000              371,700 
Former VP of Sales  2018    126,200                          
                                   
Geoffrey Selzer  2019   $36,000                        36,000 
CEO and Director  2018   $0                          
                                   
David Thielen  2019   $92,500         231,000              323,500 
CIO and Director  2018   $72,500                          
                                   
Pam Kerwin  2019   $24,000                        24,000 
Chief Operating Officer  2019   $0                          

 

 18 

 

 

Narrative to Summary Compensation Table

 

Mr. Asefi was appointed as our President, CEO and Director on November 17, 2013. Mr. Asefi was paid $40,000 in 2012 and $60,000 in 2013 by our wholly-owned subsidiary, Textmunication, Inc. He signed an employment agreement on December 17, 2013 with Textmunication, Inc. to serve as CEO and Chairman and will receive an annual salary of $100,000 and is eligible for bonuses as determined by the Board, and other benefits, such as paid vacation, retirement benefits and life insurance as established by the company. Under the agreement, he also received an $800 per month allowance for an automobile for personal and professional use. In addition, Mr. Asefi agreed not to compete with our business for 3 years and not to solicit employees or customers of our company for a period of twelve months. The agreement has a term until May 1, 2017 but automatically renews for an additional year unless either party provides a notice of termination 90 days prior to scheduled termination. There are provisions that provide for termination for cause and resignation for good reason. We will be required to pay Mr. Asefi severance as provided under the agreement.

 

On March 1, 2017, we appointed David Thielen as of Chief Operating Officer. We do not have an employment agreement with Mr. Thielen. He is 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 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.

 

On January 1, 2017, we appointed Nick Miniello as Vice President of Sales. We do not have an employment agreement with Mr. Miniello and he has not had any material interest in our company in the last two fiscal years. We pay him an annual salary of $108,000.

 

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.

 

 19 

 

 

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, 2019.  

 

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 Pay-out Value of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
 
Wais Asefi   2,500,000    -    -                             
David Thielen   1,500,000                                       
Nick Miniello   1,500,000                                       

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 

 

The following table sets forth, as of April 30, 2020, 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.

 

Name and Address of
Beneficial Owner
  Common Stock   Series A
Preferred Stock
   Series C
Preferred Stock
 
   Number of Shares Owned   Percent of  Class(2)(3)   Number of Shares Owned   Percent of  Class(2)(3)   Number of Shares Owned   Percent of  Class(2)(3) 
Geoff Selzer   1,053,312    4.6%   -    -    -    - 
David Thielen    1,500,000    6.6%   -    -    -    - 
Pam Kerwin   124,228     *    -    -    -    - 
All Directors and Executive Officers as a Group (3 persons)    2,677,540    11.8%   -    -    -    - 
5% Holders                               
Wais Asefi(1)    2,742,019    12%   4,000,000    100%   2,000,000    100%
Nick Miniello   1,500,000    6.6%                    

 

* Less than 1%

 

  (1) Includes 2,722,019 shares of common stock, 4,000,000 shares of Series A Preferred Stock that may convert into 4,000 shares of common stock, and 2,000,000 shares of Series C Preferred Stock that may convert into 16,000 shares of common stock.
  (2) 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.
  (3) The percent of class is based on 22,700,843 shares of common stock outstanding, 4,000,000 shares of Series A Preferred Stock outstanding and 2,000,000 shares of Series C Preferred Stock outstanding as of April 30, 2020.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

Aside from that which is disclosed in “Executive Compensation,” none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction for the last two fiscal years or in any presently proposed transaction which, in either case, has or will materially affect us.

 

 20 

 

 

On October 25, 2019, we 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. Our executive officers, Geoffrey Selzer and Pamela Kerwin, were members of Resonate at the time of acquisition.

 

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.

 

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. Our executive officers, Geoffrey Selzer and Pamela Kerwin, were members of Entourage Labs at the time of acquisition.

 

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.

 

Item 14. Principal Accounting Fees and Services

 

Below is the table of Audit Fees (amounts in US$) billed by our auditor in connection with the audit of the Company’s annual financial statements for the years ended:

 

Financial Statements
for the Year Ended
December 31
  Audit
Services
   Audit Related Fees   Tax Fees   Other Fees 
2019  $18,000   $0   $0   $0 
2018  $18,000   $0   $0   $0 

 

 21 

 

 

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
3.1   Articles of Incorporation, as amended (1)
3.2   Bylaws, as amended (1)
3.3   Certificate of Change(1)
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

 

  1 Incorporated by reference to the Registration Statement on Form S-1 filed on June 6, 2014.

 

 22 

 

 

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

 
     
  May 14, 2020  

 

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

 
     
  May 14, 2020  
     
By: /s/ David Thielen  
  David  
  Chief Investment Officer and Director  
     
  May 14, 2020  

 

 23 

EX-31.1 2 ex31-1.htm

 

Exhibit 31.1

 

CERTIFICATIONS

 

I, Geoffrey Selzer, certify that;

 

1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2019 of Resonate Blends, Inc. (the “registrant”);
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 14, 2020  

 

  /s/ Geoffrey Selzer  
By: Geoffrey Selzer  
Title: CEO and Chairman  

 

 

EX-31.2 3 ex31-2.htm

 

Exhibit 31.2

 

CERTIFICATIONS

 

I, Geoffrey Selzer, certify that;

 

1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2019 of Resonate Blends, Inc. (the “registrant”);
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 14, 2020  

 

  /s/ Geoffrey Selzer  
By: Geoffrey Selzer  
Title:

CEO and Chairman

 

 

 

EX-32.1 4 ex32-1.htm

 

Exhibit 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

 

In connection with the annual Report of Resonate Blends, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (the “Report”), I, Geoffrey Selzer, CEO and Chairman of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
   
2. The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented.

 

By: /s/ Geoffrey Selzer  
Name: Geoffrey Selzer  
Title: CEO and Chairman
Date: May 14, 2020  

 

This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

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Sep. 15, 2020
Mar. 13, 2020
Mar. 10, 2020
Mar. 03, 2020
Jan. 21, 2020
Jun. 11, 2019
Dec. 31, 2019
Dec. 31, 2018
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Series D Preferred Stock [Member]                
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Proceeds from sale of stock           $ 200,000    
Number of warrants to purchase common stock           83,333    
Warrants exercise price           $ 0.30    
Cicero [Member] | Settlement Agreement [Member] | Forecast [Member] | Final Payment [Member]                
Repayments of notes payable, monthly $ 60,000              
Number of restricted shares issued, shares 500,000              
Subsequent Event [Member] | Exchange Agreements [Member]                
Number of warrants exchanged     184,000          
Warrants exchange value, per share     $ 0.25          
Warrants exchange, description     Each Warrant holder agreed that it will not sell any of the Exchange Shares for sixty (60) days commencing on the Closing Date ("Lockup Period"). After the Lockup Period, each Warrant holder agreed that it will not sell more than 61,333 Exchange Shares, plus any Additional Shares (described below) issued in relation to such Exchange Shares in any calendar month.          
Subsequent Event [Member] | Purchase Agreements [Member] | Three Accredited Investors [Member] | July 13, 2020 and Ending on March 13, 2021 [Member]                
Repayments of notes payable, monthly   $ 17,613            
Subsequent Event [Member] | Purchase Agreements [Member] | Accredited Investors One [Member]                
Number of shares issued during period, shares   250,000            
Subsequent Event [Member] | Purchase Agreements [Member] | Accredited Investors Two [Member]                
Number of shares issued during period, shares   250,000            
Subsequent Event [Member] | Purchase Agreements [Member] | Accredited Investors Three [Member]                
Number of shares issued during period, shares   250,000            
Subsequent Event [Member] | Cicero [Member] | Settlement Agreement [Member] | Commencing on April 15, 2020 [Member]                
Repayments of notes payable, monthly       $ 10,000        
Debt instrument maturity date       Sep. 15, 2020        
Repayments of notes, description       Such shares will be issued to Cicero within 5 business days of the date hereof. There will be a twelve (12) month leak-out period that will start once the shares are eligible to be resold, with no more than 5,000 shares allowed to be sold on any given trading day. After the issuance of the 500,000 shares, the Contract is paid in full.        
Subsequent Event [Member] | Cicero [Member] | Settlement Agreement [Member] | April 15, 2020 Through August 15, 2020 [Member]                
Repayments of notes payable, monthly       $ 10,000        
Subsequent Event [Member] | Convertible Promissory Note [Member] | Purchase Agreements [Member] | Accredited Investors [Member]                
Debt instrument, face amount   $ 142,000            
Subsequent Event [Member] | Convertible Promissory Note [Member] | Purchase Agreements [Member] | Three Accredited Investors [Member]                
Debt instrument, face amount   $ 426,000            
Debt instrument, interest rate   15.00%            
Debt instrument maturity date   Apr. 20, 2021            
Proceeds from promissory notes   $ 400,000            
Original issue discount   $ 232,271            
Shares issued price per share   $ 0.20            
Shares repurchase right, descriptions   We are required to issue additional shares in the event our common stock trades at less than $0.20 per share in any 10 day trading period. We have a right to repurchase the total 750,000 shares issued by paying each Investor $50,000 within 170 calendar days. The shares may only be sold under a leak out provision that restricts sales to no more than 10% of our average daily trading volume for the prior 30 days and no more than $35,000 in any calendar month. All principal and accrued interest on the Notes is convertible into shares of our common stock upon an event of default. The conversion price amounts to 65% of the lowest one day VWAP for our common stock during the 10 trading days prior to the issue date. The conversion price is subject to adjustment as provided in the Notes.            
Subsequent Event [Member] | Convertible Promissory Note [Member] | Purchase Agreements [Member] | Debt Balance, After Legal Costs [Member] | Three Accredited Investors [Member]                
Debt instrument, face amount   $ 157,229            
Subsequent Event [Member] | Convertible Promissory Note [Member] | Geneva Roth Remark Holdings, Inc [Member]                
Debt instrument, face amount         $ 113,300      
Debt instrument, interest rate         10.00%      
Debt, conversion price percentage         75.00%      
Debt, market discount percentage         25.00%      
Debt prepayments, description         We have the ability to prepay this Note beginning on the Issue Date and ending on the date which is one hundred twenty (120) days following the Issue Date with a prepayment percentage of 113%. The period beginning on the date which is one hundred twenty-one (121) days following the Issue Date and ending on the date which is one hundred eight (180) days following the Issue Date, the prepayment percentage is 118%.      
XML 15 R32.htm IDEA: XBRL DOCUMENT v3.20.1
Income Taxes (Details Narrative)
12 Months Ended
Dec. 31, 2019
USD ($)
Income Tax Disclosure [Abstract]  
Operating loss carry-forward from continuing operations $ 19,065,529
Operating loss carryforwards expirations date Expire beginning in the year 2030
Percentage on effective income tax rate 21.00%
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Investment in Aspire Consulting Group, LLC
12 Months Ended
Dec. 31, 2019
Schedule of Investments [Abstract]  
Investment in Aspire Consulting Group, LLC

NOTE 5 – INVESTMENT IN ASPIRE CONSULTING GROUP, LLC

 

On January 5, 2016, the Company entered into a Share Exchange Agreement with Aspire Consulting Group, LLC, a Virginia limited liability company and certain members of Aspire. Pursuant to the terms of the Exchange Agreement, the Company agreed to acquire 49% of all of the issued and outstanding membership units of Aspire in exchange for the issuance of 66,667 shares of the Company’s newly created Series B Convertible Preferred Stock to the Members valued at $460,002.

 

The Company has concluded that it has the ability to exercise significant influence, but not control, over an Aspire through its acquired 49% equity interest and therefore has accounted for the acquisition of the interest under the equity method.

 

The following table presents details of the Company’s investment in Aspire as of December 31, 2017 and 2016:

 

    Amount  
Balance December 31, 2017   $ 452,336  
Loss from equity method     (1,653 )
Balance December 31, 2018   $ 450,683  
Loss from equity method     (11,125 )
Spin out     (439,558 )
Balance December 31, 2019   $ -  

 

On October 25, 2019 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.

XML 18 R15.htm IDEA: XBRL DOCUMENT v3.20.1
Subsequent Events
12 Months Ended
Dec. 31, 2019
Subsequent Events [Abstract]  
Subsequent Events

NOTE 9 – SUBSEQUENT EVENTS

 

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 January 21, 2020, we executed a convertible promissory note with Geneva Roth Remark Holdings, Inc. for $113,300 together with any interest at the rate of 10% per annum from the issue date. If we decide to let this Note convert, the variable conversion price is 75% multiplied by the market price, representing a market discount of 25%. We have the ability to prepay this Note beginning on the Issue Date and ending on the date which is one hundred twenty (120) days following the Issue Date with a prepayment percentage of 113%. The period beginning on the date which is one hundred twenty-one (121) days following the Issue Date and ending on the date which is one hundred eight (180) days following the Issue Date, the prepayment percentage is 118%.

 

On March 3, 2020, we executed a settlement agreement with Cicero on both the Note and email marketing program. We agreed to pay back the Note by making payments to Cicero of $10,000 monthly commencing on April 15, 2020 with a balloon payment due on September 15, 2020. Five equal monthly payments of $10,000 each will be made by the 15th of each month starting on April 15, 2020 through August 15, 2020. A final payment of $60,000 will be made on September 15, 2020 to close out the payment of the Note in its entirety. To settle the email marketing program, the Company will issue to Cicero 500,000 shares of restricted common stock upon execution of this Agreement. Such shares will be issued to Cicero within 5 business days of the date hereof. There will be a twelve (12) month leak-out period that will start once the shares are eligible to be resold, with no more than 5,000 shares allowed to be sold on any given trading day. After the issuance of the 500,000 shares, the Contract is paid in full.

 

As previously disclosed, on June 11, 2019, we sold 40,000 shares of our Series D Convertible Preferred Stock (the “Preferred Shares”) for gross proceeds to us of approximately $200,000. The Preferred Shares were sold along with warrants to purchase 83,333 shares of our common stock (the “Warrants”). The Warrants have an exercise price of $0.30 per share and are exercisable sixty months from the issuance date. The Warrants provide for cashless exercise in the event we have not registered the common shares underlying the Warrants. On March 10, 2020, we entered into Exchange Agreements with three Warrant holders to exchange their outstanding Warrants for shares of our common stock. Each Warrant holder shall receive 184,000 shares of our common stock (the “Exchange Shares”) valued at $0.25 per share in exchange for the Warrant holder’s surrender of the Warrant. Each Warrant holder agreed that it will not sell any of the Exchange Shares for sixty (60) days commencing on the Closing Date (“Lockup Period”). After the Lockup Period, each Warrant holder agreed that it will not sell more than 61,333 Exchange Shares, plus any Additional Shares (described below) issued in relation to such Exchange Shares in any calendar month.

 

On March 13, 2020, we entered into Securities Purchase Agreements (the “Purchase Agreements”) with three accredited investors (the “Investors”), pursuant to which we issued and sold to the Investors three promissory notes, dated March 13, 2020, each in the principal amount of $141,999.99 for an aggregate principal amount of $425,999.97 (the “Notes”). We received $399,999.99 from the Notes after applying the original issue discount to the Notes, $232,270.79 of which was used to retire an existing convertible promissory note and the balance to our account, after legal costs, amounted to $157,229.20. The maturity date for repayment of the Notes is April 20, 2021 and the Notes bear interest at 15% per annum. We are required to repay the Notes by making nine equal instalments of $17,613 to each of the three Investors starting on July 13, 2020 and ending on March 13, 2021. As additional consideration, we agreed to issue to each Investor 250,000 shares of our common stock. We are required to issue additional shares in the event our common stock trades at less than $0.20 per share in any 10 day trading period. We have a right to repurchase the total 750,000 shares issued by paying each Investor $50,000 within 170 calendar days. The shares may only be sold under a leak out provision that restricts sales to no more than 10% of our average daily trading volume for the prior 30 days and no more than $35,000 in any calendar month. All principal and accrued interest on the Notes is convertible into shares of our common stock upon an event of default. The conversion price amounts to 65% of the lowest one day VWAP for our common stock during the 10 trading days prior to the issue date. The conversion price is subject to adjustment as provided in the Notes.

 

The company has evaluated subsequent events for recognition and disclosure through March 20, 2019 which is the date the financial statements were available to be issued. No other matters were identified affecting the accompanying financial statements and related disclosures.

XML 19 R19.htm IDEA: XBRL DOCUMENT v3.20.1
Investment in Aspire Consulting Group, LLC (Tables)
12 Months Ended
Dec. 31, 2019
Schedule of Investments [Abstract]  
Schedule of Investment

The following table presents details of the Company’s investment in Aspire as of December 31, 2017 and 2016:

 

    Amount  
Balance December 31, 2017   $ 452,336  
Loss from equity method     (1,653 )
Balance December 31, 2018   $ 450,683  
Loss from equity method     (11,125 )
Spin out     (439,558 )
Balance December 31, 2019   $ -  

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Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2019
Apr. 30, 2020
Jun. 28, 2019
Document And Entity Information [Abstract]      
Entity Registrant Name Resonate Blends, Inc.    
Entity Central Index Key 0000897078    
Document Type 10-K    
Document Period End Date Dec. 31, 2019    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filer No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Non-accelerated Filer    
Entity Small Business Flag true    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 876,663
Entity Common Stock, Shares Outstanding   22,700,843  
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2019    

XML 22 R5.htm IDEA: XBRL DOCUMENT v3.20.1
Consolidated Statements of Stockholders' Deficit - USD ($)
Preferred Stock [Member]
Preferred Stock - Series B [Member]
Preferred Stock - Series C [Member]
Preferred Stock - Series D [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Total
Balance at Dec. 31, 2017 $ 400 $ 7 $ 200 $ 244 $ 14,676,221 $ (15,150,240) $ (473,168)
Balance, shares at Dec. 31, 2017 4,000,000 66,667 2,000,000 2,435,179      
Proceeds from subscription agreements 150,000 150,000
Stock issued to settle notes payable $ 202 174,816 175,018
Stock issued to settle notes payable, shares 2,021,273      
Settlement of derivative liability 403,679 403,679
Net loss (339,753) (339,753)
Balance at Dec. 31, 2018 $ 400 $ 7 $ 200 $ 446 15,404,716 (15,489,993) (84,224)
Balance, shares at Dec. 31, 2018 4,000,000 66,667 2,000,000 4,456,452      
Settlement of liabilities $ 172 360,510 360,682
Settlement of liabilities, shares 1,718,000      
Stock issuance for services $ 669 2,470,913 2,471,582
Stock issuance for services, shares 6,685,000      
Preferred shares converted to common $ (7) $ 2 5
Preferred shares converted to common, shares (66,667) 20,000      
Stocks and warrant issued for cash $ 4 199,996 200,000
Stocks and warrant issued for cash, shares 40,000        
Conveyance of ownership of Aspire $ (2) (439,556) (439,558)
Conveyance of ownership of Aspire, shares (20,000)      
Preferred shares D retired $ (4) (260,000) (260,004)
Preferred shares D retired, shares (40,000)      
Stock issuance for acquisition of Resonate Blends, LLC and Entourage, LLC $ 428 833,594 834,022
Stock issuance for acquisition of Resonate Blends, LLC and Entourage, LLC, shares 4,274,484      
Net loss (3,669,728) (3,669,728)
Balance at Dec. 31, 2019 $ 400 $ 200 $ 1,715 $ 18,570,178 $ (19,159,721) $ (587,228)
Balance, shares at Dec. 31, 2019 4,000,000 2,000,000 17,133,936      
XML 23 Show.js IDEA: XBRL DOCUMENT // Edgar(tm) Renderer was created by staff of the U.S. Securities and Exchange Commission. Data and content created by government employees within the scope of their employment are not subject to domestic copyright protection. 17 U.S.C. 105. var Show={};Show.LastAR=null,Show.showAR=function(a,r,w){if(Show.LastAR)Show.hideAR();var e=a;while(e&&e.nodeName!='TABLE')e=e.nextSibling;if(!e||e.nodeName!='TABLE'){var ref=((window)?w.document:document).getElementById(r);if(ref){e=ref.cloneNode(!0); e.removeAttribute('id');a.parentNode.appendChild(e)}} if(e)e.style.display='block';Show.LastAR=e};Show.hideAR=function(){Show.LastAR.style.display='none'};Show.toggleNext=function(a){var e=a;while(e.nodeName!='DIV')e=e.nextSibling;if(!e.style){}else if(!e.style.display){}else{var d,p_;if(e.style.display=='none'){d='block';p='-'}else{d='none';p='+'} e.style.display=d;if(a.textContent){a.textContent=p+a.textContent.substring(1)}else{a.innerText=p+a.innerText.substring(1)}}} XML 24 R9.htm IDEA: XBRL DOCUMENT v3.20.1
Related Party Transactions
12 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 3 – RELATED PARTY TRANSACTIONS

 

Loans due to related parties are due on demand and have no interest. Amounts outstanding as of December 31, 2019 and 2018 was approximately $11,750 and $11,750, respectively

XML 25 R23.htm IDEA: XBRL DOCUMENT v3.20.1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Cash insured limit
Allowance for doubtful accounts
Property and equipment excess capitalized cost 1,000  
Value of assets acquired 1,000  
Software development costs, written off   85,092
Advertising expenses $ 60,776 $ 13,873
Minimum [Member]    
Estimated useful life 3 years  
Maximum [Member]    
Estimated useful life 7 years  
One Customer [Member] | Accounts Receivable [Member]    
Concentration risk, percentage 51.00% 71.00%
XML 26 R27.htm IDEA: XBRL DOCUMENT v3.20.1
Convertible Note Payable - Schedule of Convertible Notes Payable (Details) - USD ($)
Dec. 31, 2019
Dec. 31, 2018
Debt Disclosure [Abstract]    
Total convertible notes payable $ 277,750 $ 20,000
Less discounts (116,346) 0
Convertible notes net of discount $ 161,404 $ 20,000
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Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

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. At December 31, 2019 and 2018 no cash balances exceeded the federally insured limit.

 

Accounts receivable and allowance for doubtful accounts

 

Accounts receivable 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, 2019, and 2018 there’s no allowance for doubtful accounts and bad debts. At December 31, 2019 and 2018, one customer represented 51% and 71%, respectively, of the Company’s accounts receivable.

 

Revenue Recognition

 

Revenues are recognized when control of the promised is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

 

The Company currently derives a substantial majority of its revenue from fees associated with our subscription services, which generally include mobile marketing platform services. Customers are billed for the subscription on a monthly basis. For all of the Company’s customers, regardless of the method, the Company uses to bill them; subscription revenue is recorded as deferred revenue in the accompanying consolidated balance sheets. As services are performed, the Company recognizes subscription revenue on a monthly basis over the applicable service period. When the Company provides a free trial period, the Company does not begin to recognize subscription revenue until the trial period has ended and the customer has been billed for the services.

 

Professional services revenues are generated from SMS and RCS packages where client logs into a cloud-based application to send targeted SMS messages to their subscriber’s base. Our custom web application SMS/RCS platform is typically billed on a fixed-price based on the number of SMS/RCS allocated for each package our client purchases. Generally, revenue for SMS/RCS services are recognized immediately as our clients have instant access to their web-based application to send out messages, the number of SMS/RCS messages allocated to a client expires at the end of each month and renews beginning of each month. The Company offers whereby control of the product passes to the customer when delivered and revenue is recognized at the time of delivery.

 

Results for reporting periods beginning after January1, 2018 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 a cumulative impact as of January 1, 2018 due to the adoption of Topic 606 and there was not an impact to our consolidated statement of operations for the year ended December 31, 2018 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.

 

As of December 31, 2018, there are no financial assets and liabilities measured at fair value.

 

Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended December 31, 2019:

 

    Level 1     Level 2     Level 3     Total  
Liabilities                                
Derivative Financial Instruments   $     $     $ 262,712     $ 262,712  

 

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.

 

Software Development Costs

 

The Company applies the principles of FASB ASC 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product.

 

The Company also applies the principles of FASB ASC 350-40, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use (“ASC 350-40”). ASC 350-40 requires that software development costs incurred before the preliminary project stage be expensed as incurred. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed, and the software will be used to perform the function intended.

 

During 2018, management determined that the software is unable to handle the expanding business and decided to scrap the entire project and recognize as loss for the year. A total cost of $85,092 was written off during the year ended December 31, 2018.

 

Advertising Expenses

 

Advertising expenses are included in General and administrative expenses in the Statements of Operations and are expensed as incurred. The Company incurred $21,831 and $13,873 in advertising expenses for the years ended December 31, 2019 and 2018, respectively.

 

Recent Accounting Pronouncements

 

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations and includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. ASU 2016-08 is effective January 1, 2018 to be in alignment with the effective date of ASU 2014-09.

 

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments in ASU 2016-10 clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. ASU 2016-10 is effective January 1, 2018 to be in alignment with the effective date of ASU 2014-09.

 

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts from Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments in this update affect the guidance in ASU 2014-09, which is not yet effective. The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2016-12 do not change the core principle of the guidance in Topic 606, but instead affect only the narrow aspects noted in Topic 606. ASU 2016-12 is effective January 1, 2018 to be in alignment with the effective date of ASU 2014-09. The Company will adopt the provisions of Topic 606 effective in January 1, 2018 and does not believe the adoption of the new revenue recognition standard will have a material impact on the Company’s consolidated financial statements.

 

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.

 

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.

XML 30 R4.htm IDEA: XBRL DOCUMENT v3.20.1
Consolidated Statements of Operations - USD ($)
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Income Statement [Abstract]    
REVENUES $ 1,050,161 $ 1,066,408
COST OF REVENUES 392,674 314,638
Gross profit 657,487 751,770
Operating expenses    
Advertising 60,776 13,873
General and administrative expenses 181,931 132,908
Legal and Professional fees 219,456 256,370
Officer Compensation 475,910 353,700
Salaries and Related 287,034 132,208
Sales Commission 82,236 64,053
Office Rent 22,050 20,294
Impairment of in house software 85,092
Non cash management fees 2,650,518
Total operating expenses 3,979,911 1,058,498
Loss from operations (3,322,424) (306,728)
Other Income (expense)    
Other Income
Interest expense (92,791) (2,792)
Loss on change of derivative liability
Amortization of debt discount (118,124) (42,534)
Gain (loss) on settlement of derivative liabilities (43,242) 119,370
Legal settlement (106,961)
Gain on settlement of notes payable 24,939 (105,417)
Total other expense (336,179) (31,373)
Income (loss) from investment in equity method investee (11,125) (1,652)
NET INCOME (LOSS) $ (3,669,728) $ (339,753)
Basic weighted average common shares outstanding 11,242,260 4,223,119
Net Income (loss) per common share: basic and diluted $ (0.33) $ (0.0805)
XML 31 R22.htm IDEA: XBRL DOCUMENT v3.20.1
Basis of Presentation And Going Concern (Details Narrative) - USD ($)
12 Months Ended
Oct. 25, 2019
Jul. 09, 2018
Nov. 16, 2013
Oct. 28, 2013
Dec. 31, 2019
Dec. 31, 2018
Stockholders' equity, reverse stock split   The 1 - 1,000 Reverse Split of "Textmunication Holdings, Inc." (TXHD) common stock took effect at the open of business. All shares and per share amounts have been retroactively adjusted to reflect the reverse split.   1 for 5 reverse split    
Number of shares cancelled during period         $ (260,004)  
Annual salary         475,910 $ 353,700
Accumulated deficit         $ (19,159,721) $ (15,489,993)
Share Exchange Agreement [Member]            
Number of common stock shares issued during the period     65,640,207      
Equity interest percentage     100.00%      
Resonate Purchase Agreement [Member]            
Percentage of common shares issued 5.00%          
Number of shares issued during period 665,072          
Agreement, description 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.          
Entourage Labs Purchase Agreement [Member]            
Percentage of common shares issued 5.00%          
Number of shares issued during period 665,072          
Agreement, description 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.          
Conveyance Agreement [Member] | Mark S Johnson [Member]            
Equity interest percentage 49.00%          
Number of shares cancelled during period $ 20,000          
Employment Agreement [Member]            
Agreement, description 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.          
Employment Agreement [Member] | Geoffrey Selzer, CEO [Member]            
Annual salary $ 180,000          
Employment Agreement [Member] | Pamela Kerwin, COO [Member]            
Annual salary $ 120,000          
XML 32 R26.htm IDEA: XBRL DOCUMENT v3.20.1
Convertible Note Payable (Details Narrative)
12 Months Ended
Dec. 31, 2019
USD ($)
shares
Debt Disclosure [Abstract]  
Number of shares issued under settlement of liabilities payable | shares 1,280,000
Value of shares issued under settlement of liabilities payable | $ $ 164,033
XML 33 R33.htm IDEA: XBRL DOCUMENT v3.20.1
Income Taxes - Schedule of Deferred Tax Assets (Details) - USD ($)
Dec. 31, 2019
Dec. 31, 2018
Income Tax Disclosure [Abstract]    
Net operating loss carryover $ 4,003,761 $ 2,597,027
Valuation allowance (4,003,761) (2,587,027)
Net deferred tax asset
XML 34 R18.htm IDEA: XBRL DOCUMENT v3.20.1
Convertible Note Payable (Tables)
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Schedule of Convertible Notes Payable

Convertible notes payable consists of the following:

 

    December 31, 2019     December 31, 2018  
Total convertible notes payable     277,750       20,000  
Less discounts     (116,346 )     (0 )
Convertible notes, net of discount   $ 161,404     $ 20,000  

Schedule of Derivative Liabilities

The following table presents details of the changes in the Company’s derivative liabilities associated with its convertible notes for the year ended December 31, 2019:

 

    Amount  
Balance December 31, 2018   $ 0  
Add derivative liability due to new convertible notes     219,469  
Change in fair market value of derivative liabilities     43,242  
Balance December 31, 2019   $ 262,711  

XML 35 R10.htm IDEA: XBRL DOCUMENT v3.20.1
Convertible Note Payable
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Convertible Note Payable

NOTE 4 - CONVERTIBLE NOTE PAYABLE

 

Convertible notes payable consists of the following:

 

    December 31, 2019     December 31, 2018  
Total convertible notes payable     277,750       20,000  
Less discounts     (116,346 )     (0 )
Convertible notes, net of discount   $ 161,404     $ 20,000  

 

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.

 

The following table presents details of the changes in the Company’s derivative liabilities associated with its convertible notes for the year ended December 31, 2019:

 

    Amount  
Balance December 31, 2018   $ 0  
Add derivative liability due to new convertible notes     219,469  
Change in fair market value of derivative liabilities     43,242  
Balance December 31, 2019   $ 262,711  

 

Settlement Agreements

 

During the year ended December 31, 2019, the Company issued 1,280,000 shares of common stock with a fair value of $164,033 for the settlement of liabilities payable. The conversion of the derivative liabilities has been recorded through additional paid-in capital.

XML 36 R14.htm IDEA: XBRL DOCUMENT v3.20.1
Stockholders' Equity
12 Months Ended
Dec. 31, 2019
Equity [Abstract]  
Stockholders' Equity

Note 8 – STOCKHOLDERS’ EQUITY

 

The Company is authorized to issue an aggregate of 100,000,000 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, which includes 4,000,000 shares of Series A preferred stock (“Series A”) and 2,000,000 shares of Series C preferred stock (“Series C”).

 

Under the Certificate of Designation, holders of Series A Preferred Stock will participate on an equal basis per-share with holders of our common stock in any distribution upon winding up, dissolution, or liquidation. Holders of Series A Preferred Stock are entitled to vote together with the holders of our common stock on all matters submitted to shareholders at a rate of three hundred (300) votes for each share held.

 

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 shares issues accounted as expenses as follows:

 

Management Fees   $ 2,074,600  
Payment to subcontractors     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.

XML 37 R2.htm IDEA: XBRL DOCUMENT v3.20.1
Consolidated Balance Sheets - USD ($)
Dec. 31, 2019
Dec. 31, 2018
Current assets    
Cash and cash equivalents $ 53,139 $ 68,513
Receivables 52,603 14,516
Total current assets 105,742 83,029
Investment in equity method investee 25,000 450,683
TOTAL ASSETS 130,742 533,712
Current liabilities    
Accounts payable and accrued liabilities 175,243 225,430
Due to related parties 11,650 11,750
Convertible notes payable, net of discount 161,404 20,000
Derivative liability 262,712
Settlement liability 106,961 360,756
Total current liabilities 717,970 617,936
Convertible notes payable, net of discount - Long term
Total liabilities 717,970 617,936
Stockholders' deficit    
Common stock; $0.0001 par value; 100,000,000 shares authorized; 17,153,936 and 2,435,179 shares issued and outstanding as of December 31, 2019 and 2018, respectively. 1,715 446
Additional paid-in capital 18,570,178 15,404,716
Accumulated deficit (19,159,721) (15,489,993)
Total Stockholders' deficit (587,228) (84,224)
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT 130,742 533,712
Series A Preferred Stock [Member]    
Stockholders' deficit    
Preferred stock, value 400 400
Series B Preferred Stock [Member]    
Stockholders' deficit    
Preferred stock, value 0 7
Series C Preferred Stock [Member]    
Stockholders' deficit    
Preferred stock, value $ 200 $ 200
XML 38 R6.htm IDEA: XBRL DOCUMENT v3.20.1
Consolidated Statements of Cash Flows - USD ($)
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Cash Flows from Operating Activities    
Net Income (loss) $ (3,669,728) $ (339,753)
Adjustments to reconcile    
Amortization of debt discount 118,124 42,534
Loss on derivative liability
Impairment of software cost 85,092
Non cash interest expense 80,556
Legal Settlement 106,961
Share based compensation 2,650,518
Gain (Loss) on the settlement of debt 24,939 (105,417)
Gain on settlement of derivative liabilities 43,242 (119,370)
Income (Loss) from equity method investee 11,125 1,652
Changes in assets and liabilities    
Receivables (38,087) (11,667)
Accounts payable and accrued expenses (137,036) 221,812
Due to Related party (100)
Net cash provided by operating activities (809,386) (54,145)
Investments in Joiant (25,000)
Disposal of Investment in Aspire
Net cash provided by investing activities (25,000)
Cash Flows from Financing Activities    
Proceeds from subscription 611,262 150,000
Proceeds from convertible notes / loans payable 267,750 (37,500)
Proceeds from issuance of stock warrants 200,000
Payments on preferred stocks buy back (260,000)
Payments on convertible notes payable
Acquisition of Resonate Blends
Net cash provided by financing activities 819,012 112,500
Net increase in cash (15,374) 58,355
Cash, beginning of period 68,513 10,158
Cash, end of period 53,139 68,513
Supplemental disclosure of cash flow information    
Cash paid for interest 12,235 6,171
Cash paid for tax
Non-Cash investing and financing transactions    
Conversion of debt for common stock 10,000
Conversion of convertible notes payable 360,756
Settlement of derivative liability $ 319,041
XML 39 R20.htm IDEA: XBRL DOCUMENT v3.20.1
Income Taxes (Tables)
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Schedule of Deferred Tax Assets

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, 2019 and 2018:

 

    2019     2018  
Deferred tax asset attributable to:                
Net operating loss carryover   $ 4,003,761     $ 2,597,027  
Valuation allowance     (4,003,761 )     (2,587,027 )
Net deferred tax asset   $ -     $ -  

XML 40 R24.htm IDEA: XBRL DOCUMENT v3.20.1
Summary of Significant Accounting Policies - Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis (Details)
Dec. 31, 2019
USD ($)
Derivative Financial Instruments $ 262,712
Level 1 [Member]  
Derivative Financial Instruments
Level 2 [Member]  
Derivative Financial Instruments
Level 3 [Member]  
Derivative Financial Instruments $ 262,712
XML 41 R28.htm IDEA: XBRL DOCUMENT v3.20.1
Convertible Note Payable - Schedule of Derivative Liabilities (Details)
12 Months Ended
Dec. 31, 2019
USD ($)
Debt Disclosure [Abstract]  
Balance, beginning $ 0
Add derivative liability due to new convertible notes 219,469
Change in fair market value of derivative liabilities 43,242
Balance, ending $ 262,711
XML 42 R12.htm IDEA: XBRL DOCUMENT v3.20.1
Commitments and Contingencies
12 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 6 – COMMITMENTS AND CONTINGENCIES

 

Office Lease

 

On January 6, 2015 the Company signed an amendment to its lease originally signed on May 9, 2008. The amended lease commenced January 1, 2015 and expires on thirty days’ notice. Current month to month lease is for $1,838 a month. Rent expense was approximately $22,049 and $22,294 for the years ended December 31, 2019 and 2018, 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; 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.

 

Litigations Claims and Assessments

 

On October 12, 2018, the Company, Wais Asefi, the Company’s former CEO, and David Thielen, the Company’s COO, entered into a Settlement Agreement and Release (the “Agreement”) with Lester Einhaus (“Holder”) concerning a $25,000 convertible note issued by the Company to the Holder on September 23, 2015 (the “Note”). Case detail as follows:

 

Lester Einhaus vs. Textmunication

United States District Court – Northern District

Filed on 6/14/2017

Case: 1:17-cv-04478

 

The Agreement requires the Company to issue to the Holder 475,000 shares of the Company’s common stock, subject to the condition that the Holder does not own more than 4.99% of the Company’s outstanding shares at any time. As such, the shares will be issued out in tranches; with the first such tranche was due within 10 days of signing the Agreement for 198,000 shares. The Holder agreed to a daily leak out of the greater of 10,000 shares or 15% of the trading volume. An anti-dilution provision in the Agreement required an additional 379,386 shares to be issued. During the year ended December 31, 2019, all required shares were issued by the Company and no further liability exists.

XML 43 R16.htm IDEA: XBRL DOCUMENT v3.20.1
Summary of Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Cash

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. At December 31, 2019 and 2018 no cash balances exceeded the federally insured limit.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable and allowance for doubtful accounts

 

Accounts receivable 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, 2019, and 2018 there’s no allowance for doubtful accounts and bad debts. At December 31, 2019 and 2018, one customer represented 51% and 71%, respectively, of the Company’s accounts receivable.

Revenue Recognition

Revenue Recognition

 

Revenues are recognized when control of the promised is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

 

The Company currently derives a substantial majority of its revenue from fees associated with our subscription services, which generally include mobile marketing platform services. Customers are billed for the subscription on a monthly basis. For all of the Company’s customers, regardless of the method, the Company uses to bill them; subscription revenue is recorded as deferred revenue in the accompanying consolidated balance sheets. As services are performed, the Company recognizes subscription revenue on a monthly basis over the applicable service period. When the Company provides a free trial period, the Company does not begin to recognize subscription revenue until the trial period has ended and the customer has been billed for the services.

 

Professional services revenues are generated from SMS and RCS packages where client logs into a cloud-based application to send targeted SMS messages to their subscriber’s base. Our custom web application SMS/RCS platform is typically billed on a fixed-price based on the number of SMS/RCS allocated for each package our client purchases. Generally, revenue for SMS/RCS services are recognized immediately as our clients have instant access to their web-based application to send out messages, the number of SMS/RCS messages allocated to a client expires at the end of each month and renews beginning of each month. The Company offers whereby control of the product passes to the customer when delivered and revenue is recognized at the time of delivery.

 

Results for reporting periods beginning after January1, 2018 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 a cumulative impact as of January 1, 2018 due to the adoption of Topic 606 and there was not an impact to our consolidated statement of operations for the year ended December 31, 2018 as a result of applying Topic 606.

Fair Value of Financial Instruments

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.

 

As of December 31, 2018, there are no financial assets and liabilities measured at fair value.

 

Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended December 31, 2019:

 

    Level 1     Level 2     Level 3     Total  
Liabilities                                
Derivative Financial Instruments   $     $     $ 262,712     $ 262,712  

Net Income (Loss) Per Common Share

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

 

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

 

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

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

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.

Software Development Costs

Software Development Costs

 

The Company applies the principles of FASB ASC 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product.

 

The Company also applies the principles of FASB ASC 350-40, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use (“ASC 350-40”). ASC 350-40 requires that software development costs incurred before the preliminary project stage be expensed as incurred. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed, and the software will be used to perform the function intended.

 

During 2018, management determined that the software is unable to handle the expanding business and decided to scrap the entire project and recognize as loss for the year. A total cost of $85,092 was written off during the year ended December 31, 2018.

Advertising Expenses

Advertising Expenses

 

Advertising expenses are included in General and administrative expenses in the Statements of Operations and are expensed as incurred. The Company incurred $21,831 and $13,873 in advertising expenses for the years ended December 31, 2019 and 2018, respectively.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations and includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. ASU 2016-08 is effective January 1, 2018 to be in alignment with the effective date of ASU 2014-09.

 

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments in ASU 2016-10 clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. ASU 2016-10 is effective January 1, 2018 to be in alignment with the effective date of ASU 2014-09.

 

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts from Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments in this update affect the guidance in ASU 2014-09, which is not yet effective. The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2016-12 do not change the core principle of the guidance in Topic 606, but instead affect only the narrow aspects noted in Topic 606. ASU 2016-12 is effective January 1, 2018 to be in alignment with the effective date of ASU 2014-09. The Company will adopt the provisions of Topic 606 effective in January 1, 2018 and does not believe the adoption of the new revenue recognition standard will have a material impact on the Company’s consolidated financial statements.

 

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.

 

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.

XML 44 R35.htm IDEA: XBRL DOCUMENT v3.20.1
Stockholders' Equity - Schedule of Compensation and Services Rendered (Details)
12 Months Ended
Dec. 31, 2019
USD ($)
Equity [Abstract]  
Management Fees $ 2,074,600
Payment to subcontractors 446,982
Total $ 2,521,582
XML 45 R31.htm IDEA: XBRL DOCUMENT v3.20.1
Commitments and Contingencies (Details Narrative) - USD ($)
12 Months Ended
Oct. 25, 2019
Oct. 12, 2018
Jan. 06, 2015
Dec. 31, 2019
Dec. 31, 2018
Description on lease     The Company signed an amendment to its lease originally signed on May 9, 2008. The amended lease commenced January 1, 2015 and expires on thirty days' notice.    
Monthly lease payments     $ 1,838    
Rent expense       $ 22,049 $ 22,294
Annual salary       475,910 353,700
Convertible notes payable       $ 277,750 $ 20,000
Employment Agreement [Member]          
Agreement, description 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.        
Employment Agreement [Member] | Geoffrey Selzer, CEO [Member]          
Annual salary $ 180,000        
Employment Agreement [Member] | Pamela Kerwin, COO [Member]          
Annual salary $ 120,000        
Settlement Agreement [Member] | Holder [Member]          
Convertible notes payable   $ 25,000      
Equity method investment, ownership percentage   4.99%      
Settlement Agreement [Member] | Holder [Member] | Common Stock [Member]          
Agreement, description   The Holder agreed to a daily leak out of the greater of 10,000 shares or 15% of the trading volume.      
Number of shares, required for issuance   475,000      
Number of anti-dilution shares issued   379,386      
Settlement Agreement [Member] | Holder [Member] | Common Stock [Member] | First Tranche due [Member]          
Number of shares issued for debt   198,000      
XML 46 R13.htm IDEA: XBRL DOCUMENT v3.20.1
Income Taxes
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 7 – INCOME TAXES

 

For the year ended December 31, 2019, the cumulative net operating loss carry-forward from continuing operations is approximately $19,065,529 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, 2019 and 2018:

 

    2019     2018  
Deferred tax asset attributable to:                
Net operating loss carryover   $ 4,003,761     $ 2,597,027  
Valuation allowance     (4,003,761 )     (2,587,027 )
Net deferred tax asset   $ -     $ -  

 

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%.

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Summary of Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended December 31, 2019:

 

    Level 1     Level 2     Level 3     Total  
Liabilities                                
Derivative Financial Instruments   $     $     $ 262,712     $ 262,712  

XML 48 R34.htm IDEA: XBRL DOCUMENT v3.20.1
Stockholders' Equity (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Dec. 09, 2019
Jul. 09, 2018
Oct. 28, 2013
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2019
Dec. 31, 2018
Common stock, par value             $ 0.0001 $ 0.0001
Common stock, shares authorized             100,000,000 100,000,000
Stockholders' equity, reverse stock split   The 1 - 1,000 Reverse Split of "Textmunication Holdings, Inc." (TXHD) common stock took effect at the open of business. All shares and per share amounts have been retroactively adjusted to reflect the reverse split. 1 for 5 reverse split          
Common stock, shares outstanding             17,153,936 2,435,179
Resonate Blends, LLC, and Entourage LLC [Member]                
Number of shares issued for acquisition, shares             4,274,936  
Recognized loss on acquisitions             $ 834,022  
Common Stock [Member]                
Number of shares issued for services, shares             6,685,000  
Number of shares issued for acquisition, shares             4,274,484  
Common Stock [Member] | Settlement of Liabilities [Member]                
Number of shares issued during period, shares       1,280,000        
Fair market value of the liabilities, recorded as additional paid in capital       $ 164,033        
Common Stock [Member] | Subscription Agreement [Member]                
Common stock, outstanding percentage               9.98%
Common stock, shares outstanding               100,000
Common Stock [Member] | Subscription Agreement [Member] | Convertible Note Payable [Member]                
Shares issued for conversion of debts               1,380,933
Shares issue for conversion of debts, value               $ 354,010
Fair value of debt conversion               $ 866,361
Number of shares issued for services, shares           6,685,000    
Preferred Stock Warrants [Member]                
Number of shares issued during period, shares         40,000      
Proceeds from issuance of preferred stock         $ 200,000      
Board of Directors [Member]                
Stockholders' equity, reverse stock split   (1:1000) reverse stock split            
Series A Preferred Stock [Member]                
Preferred stock, shares authorized             10,000,000 10,000,000
Preferred stock, par value             $ 0.0001 $ 0.0001
Preferred stock, shares issued             4,000,000 4,000,000
Preferred stock, shares outstanding             4,000,000 4,000,000
Votes rights, description             Holders of Series A Preferred Stock are entitled to vote together with the holders of our common stock on all matters submitted to shareholders at a rate of three hundred (300) votes for each share held.  
Series C Preferred Stock [Member]                
Preferred stock, shares authorized             2,000,000 2,000,000
Preferred stock, par value             $ 0.0001 $ 0.0001
Preferred stock, shares issued             2,000,000 2,000,000
Preferred stock, shares outstanding             2,000,000 2,000,000
Series D Convertible Preferred Stock [Member] | Purchasers [Member] | Securities Purchase Agreement [Member]                
Shares sold during period, shares             40,000  
Proceeds from sale of stock             $ 200,000  
Redemption of preferred shares rights, description we exercised our right to redeem the Preferred Shares by paying the Purchasers $260,000 or 130% of the amount paid for the Preferred Shares, as called for under the Securities Purchase Agreement.              
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Investment in Aspire Consulting Group, LLC - Schedule of Investment (Details) - USD ($)
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Schedule of Investments [Abstract]    
Balance at beginning $ 450,683 $ 452,336
Loss from equity method (11,125) (1,653)
Spin out (439,558)
Balance at end $ 25,000 $ 450,683
XML 50 R3.htm IDEA: XBRL DOCUMENT v3.20.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2019
Dec. 31, 2018
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 17,153,936 2,435,179
Common stock, shares outstanding 17,153,936 2,435,179
Series A Preferred Stock [Member]    
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares issued 4,000,000 4,000,000
Preferred stock, shares outstanding 4,000,000 4,000,000
Series B Preferred Stock [Member]    
Preferred stock, shares authorized 66,667 66,667
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares issued 66,667 66,667
Preferred stock, shares outstanding 66,667 66,667
Series C Preferred Stock [Member]    
Preferred stock, shares authorized 2,000,000 2,000,000
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares issued 2,000,000 2,000,000
Preferred stock, shares outstanding 2,000,000 2,000,000
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Basis of Presentation And Going Concern
12 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation And Going Concern

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.

 

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.

 

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, 2019 and 2018. 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, 2019, the Company has an accumulated deficit of $19,159,721. 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.

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Investment in Aspire Consulting Group, LLC (Details Narrative) - USD ($)
12 Months Ended
Oct. 25, 2019
Jan. 05, 2016
Dec. 31, 2019
Nov. 16, 2013
Number of convertible preferred stock newly issued     $ 200,000  
Number of shares cancelled during period     $ (260,004)  
Share Exchange Agreement [Member]        
Equity interest percentage       100.00%
Share Exchange Agreement [Member] | Aspire Consulting Group LLC [Member]        
Equity interest percentage   49.00%    
Share Exchange Agreement [Member] | Aspire Consulting Group LLC [Member] | Series B Convertible Preferred Stock [Member]        
Number of shares issued during period, shares   66,667    
Number of convertible preferred stock newly issued   $ 460,002    
Conveyance Agreement [Member] | Mark S Johnson [Member]        
Equity interest percentage 49.00%      
Number of shares cancelled during period $ 20,000      
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Stockholders' Equity (Tables)
12 Months Ended
Dec. 31, 2019
Equity [Abstract]  
Schedule of Compensation and Services Rendered

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 shares issues accounted as expenses as follows:

 

Management Fees   $ 2,074,600  
Payment to subcontractors     446,982  
Total     2,521,582  

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Related Party Transactions (Details Narrative) - USD ($)
Dec. 31, 2019
Dec. 31, 2018
Related Party Transactions [Abstract]    
Loans payable - related party $ 11,650 $ 11,750