UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~June~~September 30, 2021

☐

Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to__________

Commission File Number: 000-21202

Resonate Blends, Inc.

(Exact name of registrant as specified in its charter)

Nevada

58-1588291

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

~~incorporation or organization)~~

Identification No.)

26565 Agoura Road, Suite 200

Calabasas, CA 91302

(Address of principal executive offices)

571-888-0009

(Registrant’s telephone number)

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 and post such files). ☒ Yes☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.

	☐ Large accelerated filer	☐ Accelerated filer
	☒ Non-accelerated filer	☒Smaller reporting company
		☐Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Securities registered pursuant to Section 12(b) of the Act: None

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~44,770,912~~45,034,137 common shares as of ~~August 16,~~November 15, 2021

TABLE OF CONTENTS

			Page
PART I – FINANCIAL INFORMATION		3

Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	414
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	1122
Item 4:	Controls and Procedures	2311

PART II – OTHER INFORMATION		12

Item 1:	Legal Proceedings	1224
Item 1A:	Risk Factors	1224
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	1324
Item 3:	Defaults Upon Senior Securities	1324
Item 4:	Mine Safety Disclosures	1324
Item 5:	Other Information	1324
Item 6:	Exhibits	1324

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our consolidated financial statements included in this Form 10-Q are as follows:

	F-1	Consolidated Balance Sheets as of ~~June~~September 30, 2021 (unaudited) and December 31, 2020;
	F-2	Consolidated Statements of Operations for the for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 (unaudited);
	F-3	Consolidated Statement of Stockholders’ Equity (Deficit) for the ~~period~~nine months ended ~~June~~September 30, 2021 and 2020 (unaudited);
	F-4	Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 (unaudited); and
	F-5	Notes to Consolidated Financial Statements.

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended ~~June~~September 30, 2021 are not necessarily indicative of the results that can be expected for the full year.

RESONATE BLENDS , INC.

(FORMERLY TEXTMUNICATION HOLDINGS, INC.)

CONSOLIDATED BALANCE SHEETS

	September 30,2021			December 31, 2020
ASSETS
Current assets
Cash and cash equivalents	$	390,534		$	114,325
Receivables					-
Prepaid expenses and other current assets		23,485			54,599
Inventories		234,998			-
Total current assets		649,017			168,924
Fixed assets, net		36,047			-
Investment in equity method investee		100			100
TOTAL ASSETS		685,164			169,024

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities		141,845			198,936
Due to related parties		-			187,500
Convertible notes payable, net of discount		1,865,000			504,793
Derivative liability		3,380,960			274,134
Settlement liability
Current liabilities of discontinued operations					-
Total current liabilities		5,387,805			1,165,363
Total liabilities		5,387,805			1,165,363
Stockholders’ deficit
Preferred stock, 10,000,000 shares authorized, $0.0001 par value, 2,000,000 shares issued.
Series B - Preferred stock, 66,667 shares authorized, $0.0001 par value, 0 issued.					-
Series C - Preferred stock, 2,000,000 shares authorized, $0.0001 par value, 2,000,000 issued and outstanding		200			200
Series D Preferred stock 40,000 shares authorized, $0.0001 par value 40,000 and 0 issued and outstanding, respectively
Preferred stock, value
Common stock; $0.0001 par value; 200,000,000 shares authorized; 44,987,466 and 24,789,981 shares issued and outstanding as of September 30, 2021 December 31, 2020, respectively.		4,498			2,976
Additional paid-in capital		22,734,370			20,101,480
Accumulated deficit		(27,441,709	)		(21,100,995	)
Total Stockholders’ deficit		(4,702,641	)		(996,339	)
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	685,164		$	169,024

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

June 30,2021 December 31, 2020
ASSETS
Current assets
Cash and cash equivalents $ 975,869 $ 114,325
Advances to Suppliers 54,599
Inventories 170,886 -
Total current assets 1,146,755 168,924
Fixed assets, net 21,063 -
Investment in equity method investee 100 100
TOTAL ASSETS 1,167,918 169,024

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities 122,494 198,936
Due to related parties 25,000 187,500
Convertible notes payable, net of discount 1,870,000 504,793
Derivative liability 4,281,046 274,134
Settlement liability
Current liabilities of discontinued operations -
Total current liabilities 6,298,540 1,165,363
Total liabilities 6,298,540 1,165,363
Stockholders’ deficit
Preferred stock, 10,000,000 shares authorized, $0.0001 par value, 2,000,000 shares issued.
Series B - Preferred stock, 66,667 shares authorized, $0.0001 par value, 0 issued. - -
Series C - Preferred stock, 2,000,000 shares authorized, $0.0001 par value, 2,000,000 issued and outstanding 200 200
Series D Preferred stock 40,000 shares authorized, $0.0001 par value 0 issued and outstanding - -
Common stock; $0.0001 par value; 200,000,000 shares authorized; 44,270,912 and 29,769,627 shares issued and outstanding as of June 30, 2021 December 31, 2020 , respectively. 4,427 2,976
Additional paid-in capital 22,405,737 20,101,480
Accumulated deficit (27,540,986 ) (21,100,995 )
Total Stockholders’ deficit (5,130,622 ) (996,339 )
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY $ 1,167,918 $ 169,024

RESONATE BLENDS, INC.

(FORMERLY TEXTMUNICATION HOLDINGS, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS

	1
	The Three Months Ended						The Nine Months Ended
	September 30 2021			September 30 2020			September 30 2021			September 30 2020
REVENUES	$	7,574		$	-		$	7,574		$	-
COST OF REVENUES		12,304			-			12,304			-
Gross profit		(4,730	)		-			(4,730	)		-
Operating expenses
Advertising		224,294			178			435,212			6,875
General and administrative expenses		(31,634	)		112,967			84,518			456,674
Legal and Professional fees		90,920			16,705			517,925			401,095
Officer Compensation		195,251			-			434,365			-
Salaries and Related		2,500			106,000			196,250			381,900
Sales Commission		-			-						-
Office Rent		405			310			1,870			405
Impairment of inhouse software		-						-			-
Non cash management fees		281,176			-			1,267,297			198,514
Total operating expenses		762,912			236,160			2,937,437			1,445,463
Loss from operations		(767,642	)		(236,160	)		(2,942,167	)		(1,445,463	)
Other Income (expense)
Other Income		(154	)					690			-
Interest expense		(38,015	)		(25,988	)		(97,243	)		(54,453	)
Gain on change of derivative liability		961,857			-			(3,168,598	)		(617,769	)
Amortization of debt discount					(29,033	)		(10,583	)		(40,475	)
Amortization of debt issuance costs		(61,771	)					(185,314	)
Gain (loss) on settlement of derivative liabilities		-						-			31,961
Legal settlement		-			(31,889	)		-			(31,889	)
Gain on settlement of notes payable		5,000			-			62,500			-
Total other expense		866,917			(86,910	)		(3,398,548	)		(712,625	)
Income (loss) from investment in equity method investee		-			-			-			-
NET INCOME (LOSS) from continuing operations		99,274			(323,070	)		(6,340,715	)		(2,158,088	)
NET INCOME (LOSS) from discontinued operations					(28,329	)					15,778
NET INCOME (LOSS)		99,274			(351,399	)		(6,340,715	)		(2,142,310	)

Basic weighted average common shares outstanding		31,085,610			23,694,220			31,085,610			19,731,100
Net Income (loss) per common share: basic and diluted	$	0.00		$	(0.01	)	$	(0.20	)	$	(0.11	)

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

~~F-1~~

RESONATE BLENDS , INC.

(FORMERLY TEXTMUNICATION, ~~HOLDINGS,~~ INC.)

CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~STOCKHOLDERS’ DEFICIT

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

1 2 3 4
Six Months Ended Three Months Ended
June 30 2021 June 30 2020 June 30 2021 June 30 2020
REVENUES $ - $ - $ - $ -
COST OF REVENUES - - - -
Gross profit - - - -
Operating expenses
Advertising 210,919 6,697 157,544 197
General and administrative expenses 133,162 335,088 (14,791 ) 126,077
Legal and Professional fees 410,494 297,116 93,350 103,716
Officer Compensation 239,114 - 105,364 -
Salaries and Related 193,750 240,900 68,750 99,400
Sales Commission - -
Office Rent 1,465 - 675 -
Impairment of inhouse software - - -
Non cash management fees 986,121 198,514 986,121 198,514
Total operating expenses 2,175,025 1,079,315 1,397,013 527,904
Loss from operations (2,175,025 ) (1,079,315 ) (1,397,013 ) (527,904 )
Other Income (expense)
Other Income 844 532 -
Interest expense (58,728 ) (19,802 ) (37,198 ) (12,805 )
Loss on change of derivative liability (4,130,456 ) (617,768 ) (3,881,807 ) (699,999 )
Amortization of debt discount (10,583 ) (13,559 ) - (13,559 )
Amortization of debt issuance costs (123,543 ) (123,543 )
Gain (loss) on settlement of derivative liabilities - -
Legal settlement - -
Gain on settlement of notes payable 57,500 31,961 57,500 31,961
Total other expense (4,264,966 ) (619,168 ) (3,984,516 ) (694,402 )
Income (loss) from investment in equity method investee - - - -
NET INCOME (LOSS) from continuing operations (6,439,991 ) (1,698,483 ) (5,381,529 ) (1,222,306 )
NET INCOME (LOSS) from discontinued operations (92,428 ) 40,223
NET INCOME (LOSS) (6,439,991 ) (1,790,911 ) (5,381,529 ) (1,182,083 )

Basic weighted average common shares outstanding
Net Income (loss) per common share: basic and diluted 31,085,610 17,727,765 31,085,610 22,583,232
$ (0.21 ) $ (0.10 ) $ (0.17 ) $ (0.05 )

		Shares		Amount		Shares		Amount		Shares		Amount		Paid-in Capital		Deficit			Deficit
	Preferred Stock Series A				Preferred stock - Series C				Common Stock				Additional		Accumulated			Total Stockholders’
Balance, December 31, 2020		-		-		2,000,000		200		29,769,627		2,976		20,101,480		(21,100,995	)		(996,339	)
Issuance of common stock		-				-				11,633,260		1,163		1,721,338					1,722,501
Non cash compensation
Non cash compensation, shares
Conversion of notes payable
Conversion of notes payable, shares
Cancellation of shares held by Textmunication
Cancellation of shares held by Textmunication, shares
Shares issues for legal settlement
Shares issues for legal settlement, shares
Cancellation of preferred stock
Cancellation of preferred stock, shares
Net Loss for the quarter		-		-		-		-		-		-		-		(1,058,462	)		(1,058,462	)
Balance, March 30, 2021		-	$	-		2,000,000	$	200		41,402,887	$	4,139	$	21,822,818	$	(21,100,995	)	$	(332,300	)
Net Loss for the quarter																(6,439,991	)		(6,439,991	)
Issuance of common stock		-		-		-		-		2,868,025		288		582,920					583,208
Balances June 30, 2021		-	$	-		2,000,000	$	200		44,270,912	$	4,427	$	22,405,738	$	(27,540,986	)	$	(5,130,621	)
Net Loss for the quarter		-		-		-		-		-		-		-	$	99,274		$	99,274
Non cash compensation		-		-		-		-		716,554	$	72	$	328,632				$	328,704
Balances September 30, 2021		-	$	-		2,000,000	$	200		44,987,466	$	4,499	$	22,734,370	$	(27,441,711	)	$	(4,702,641	)

	Preferred Stock Series A				Preferred stock - Series C			Common Stock						Additional			Accumulated			Total Stockholders’
Balance December 31, 2019	4,000,000	$	400		2,000,000	$	200	17,133,936		$	1,715		$	18,570,178		$	(19,159,721	)	$	(587,228	)
Net Loss for the quarter																	(608,828	)		(608,828	)
Common stock issuance	-		-		-		-	2,571,778			255			275,440						275,696
Balance March 31, 2020	4,000,000	$	400		2,000,000	$	200	19,705,714		$	1,970		$	18,845,618		$	(19,768,549	)	$	(920,360	)
Net Loss for the quarter																$	(1,182,083	)		(1,182,083	)
Non-Cash Compensation	-		-		-		-	2,495,129			250			249,265						249,515
Conversion of notes payable	-		-		-		-	750,000			75			74,925						75,000
Common stock issue	-		-		-		-	1,000,000			100			99,900						100,000
Balance June 30, 2020	4,000,000		400		2,000,000		200	23,950,843			2,395			19,269,708			(20,950,632	)		(1,677,928	)
Net Loss for the quarter																	(351,399	)		(351,399	)
Common stock Issuance for Cash	-		-		-		-	2,903,333			290			389,710						390,000
Conversion of notes payable	-		-		-		-	900,000			90			89,910						90,000
Cancellation of shares held by Textmunication	-		-		-		-	(4,755,029	)		(476	)		(332,376	)					(332,852	)
Non cash compensation	-		-		-		-	1,335,279			134			93,336						93,470
Shares issues for legal settlement	-		-	-			-	455,555			46			31,842						31,888
Cancellation of preferred stock	-4000000		-400		-		-							400						-
Balance September 30, 2020	-		-		2,000,000		200	24,789,981			2,479			19,542,530			(21,302,031	)		(1,756,821	)

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

~~F-2~~

RESONATE BLENDS , INC.

(FORMERLY TEXTMUNICATION, INC.)

CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’ DEFICIT~~CASH FLOWS

FOR THE ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2021 AND 2020

Preferred Stock Series A Preferred stock
- Series C Common Stock Additional Accumulated Total Stockholders’
Balance, December 31, 2020 - - 2,000,000 $ 200 29,769,627 $ 2,976 $ 20,101,480 $ (21,100,995 ) $ (996,339 )
Common stock issuance - - - - 11,633,260 1,163 1,721,338 - 1,722,501
Preferred stock issuance - -
Non-Cash Compensation
Non-Cash Compensation, shares
Conversion of notes payable
Conversion of notes payable, shares
Net loss for the quarter - - (1,058,462 ) (1,058,462 )
Balance, March 30, 2021 - - 2,000,000 $ 200 41,402,887 $ 4,139 $ 21,822,818 $ (22,159,457 ) $ (332,300 )
Net loss for the quarter $ (5,381,529 ) $ (5,381,529 )
Issuance of common stock - - - - 2,868,025 288 $ 582,919 - $ 583,207
Balances June 30, 2021 - - 2,000,000 $ 200 44,270,912 $ 4,427 $ 22,405,737 $ (27,540,986 ) $ (5,130,622 )

As of June 30, 2020 Shares Amount Shares Amount Shares Amount Paid-in Capital Deficit Deficit
Balance December 31, 2019 4,000,000 $ 400 2,000,000 $ 200 17,133,936 $ 1,715 $ 18,570,178 $ (19,159,721 ) $ (587,228 )
Net Loss for the quarter (608,828 ) (608,828 )
Common stock issuance - - - - 2,571,778 255 275,440 275,696
Balance March 31, 2020 4,000,000 $ 400 2,000,000 $ 200 19,705,714 $ 1,970 $ 18,845,618 $ (19,768,549 ) $ (920,360 )
Net Loss for the quarter $ (1,182,083 ) (1,182,083 )
Non-Cash Compensation 2,495,129 250 249,265 249,515
Conversion of notes payable 750,000 75 74,925 75,000
Common stock issue - - - - 1,000,000 100 99,900 100,000
Balance June 30, 2020 4,000,000 400 2,000,000 200 23,950,843 2,395 19,269,708 (20,950,632 ) (1,677,929 )

	2021			2020
Cash Flows from Operating Activities
Net Income (loss)	$	(6,340,715	)	$	(2,142,310	)
Net loss from discontinued operations					(15,778	)
Adjustments to reconcile					-
Amortization and depreciation		10,583			40,475
Loss on derivative liability		3,106,826			536,819
Non cash interest expense		16,142			101,014
Legal Settlement					106,961
Share professional fees		82,473			176,627
Share based compensation		1,267,297			198,514
Gain (Loss) on the settlement of debt		(62,500	)		(31,961	)
Gain on settlement of derivative liabilities					(143,293	)
Changes in assets and liabilities					-
Receivables					-
Inventories		(234,998	)
Prepaid expenses and other current assets		(23,485	)
Advances to suppliers		(54,599	)
Accounts payable and accrued expenses		(57,091	)		104,383
Due to Related party		(125,000	)		(332,752	)
Net cash used by operating activities		(2,415,066	)		(1,401,301	)
Net cash provided by (used in) operating activities of discontinued operations					99,638
Net Cash Provided By Used In Operating Activities		(2,415,066	)		(1,301,663	)
Cash Flows from investing activities
Purchase of fixed assets		(36,047	)		-
Net cash used by investing activities		(36,047	)		-
Cash Flows from Financing Activities
Proceeds from subscription		1,367,115			540,000
Proceeds from convertible notes (net)		1,865,000			806,000
Proceeds from notes payables
Payments on preferred stocks buy back
Payments on convertible notes payable		(504,793	)		(226,057	)
Net cash provided by financing activities		2,727,322			1,119,943
Net cash provided by financing activities of discontinued operations					187,619
Net Cash Provided By Used In Financing Activities		2,727,322			1,307,562
Net increase in cash		276,209			5,899
Cash, beginning of period		114,325			3,115
Cash, end of period	$	390,534		$	9,014

Supplemental disclosure of cash flow information
Cash paid for interest	$	38,015		$	12,235
Cash paid for tax		-			-
Non-Cash investing and financing transactions
Conversion of debt for common stock	$	306,858		$	90,000

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

~~F-3~~

~~RESONATE BLENDS , INC.~~

~~(FORMERLY TEXTMUNICATION, INC.)~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020~~

1 2
2021 2020
Cash Flows from Operating Activities
Net Income (loss) $ (6,439,991 ) $ (1,790,911 )
Net loss from discontinued operations - -
Adjustments to reconcile -
Amortization and depreciation 10,583 13,559
Loss on derivative liability 4,006,912 616,768
Non cash interest expense 16,142 18,303
Share professional fees 82,473 251,695
Share based compensation 986,121 198,514
Gain (Loss) on the settlement of debt (57,500 ) (31,961 )
Gain on settlement of derivative liabilities (143,293 )
Changes in assets and liabilities -
Receivables 6,006
Inventories (170,886 )
Advances to suppliers (54,599 )
Accounts payable and accrued expenses (76,442 ) 99,088
Due to Related party (105,000 ) (29 )
Net cash used by operating activities (1,802,187 ) (762,261 )
Net cash provided by discontinued operations -
Net cash used in operations (1,802,187 ) (762,261 )
Cash Flows from investing activities
Purchase of fixed assets (21,063 ) -
Net cash used by investing activities (21,063 ) -
Cash Flows from Financing Activities
Proceeds from subscription 1,319,587 150,000
Proceeds from convertible notes (net) 1,870,000 581,000
Proceeds from notes payables - 187,619
Payments on preferred stocks buy back -
Payments on convertible notes payable (504,793 ) (27,757 )
Net cash provided by financing activities 2,684,794 890,862
Net increase in cash 861,544 128,601
Cash, beginning of period 114,325 53,139
Cash, end of period $ 975,869 $ 181,740

Supplemental disclosure of cash flow information
Cash paid for interest $ 58,728 $ -
Cash paid for tax - -
Non-Cash investing and financing transactions
Conversion of debt for common stock $ 306,858 $ 85,000

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

~~F-4~~

TEXTMUNICATION HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~FOR THE QUARTER ENDED June~~SEPTEMBER 30, 2021

(UNAUDITED)

NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS

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.

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.

In connection with the name change, the Company’s symbol was changed to “KOAN” that more resembles the Company’s new business focus.

On May 22, 2020, Resonate Blends, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “SPA”) with Wais Asefi, Nick Miniello, Juleon Asefi, and Curt Byers (collectively, the “Asefi Group”) to sell to the Asefi Group its subsidiary, Textmunication, Inc., a California corporation (“Textmunication”). Textmunication operates the Company’s SMS business activities. The Company will retain its cannabis operations based in Calabasas, California.

The consideration for the sale of Textmunication consists of the cancellation by the Asefi Group of 4,822,029shares of common stock (the “Shares”) of the Company. The Shares have a market value of $337,542, based on our last sales price of $0.07per share as of May 26, 2020. Upon the cancellation of the Shares, the Company agreed to execute a general release in favor of Mr. Asefi.

Also on May 22, 2020, the Company entered into a Separation and Release Agreement (the “Separation Agreement”) with Wais Asefi. Pursuant to the Separation Agreement, Mr. Asefi agreed to separate from all officer positions and as a director of the Company and to further accept the payment of $200,000from the Company’s future fundraising as consideration of all debts outstanding under Mr. Asefi’s employment agreement with the Company. Mr. Asefi further agreed to cancel his 4,000,000shares of Series A Preferred Stock and to transfer his 2,000,000shares of Series C Preferred Stock to Geoffrey Selzer, the Company’s current CEO and Director. Mr. Asefi further released the Company of all claims.

Also on May 22, 2020, Mr. Selzer signed a Voting Agreement and agreed to vote his newly acquired 2,000,000shares of Series C Preferred Stock in favor of the sale of Textmunication to the Asefi Group.

On July 20, 2020, the parties closed on the transactions contained in the SPA. The Asefi Group cancelled 4,822,029shares of common stock (the “Shares”) of the Company. The Shares have a market value of $332,842, based on our last sales price of $0.07per share as of May 26, 2020. The Company also executed a general release in favor of Mr. Asefi.

~~F-5~~

Basis of Presentation

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

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 ~~June~~September 30, 2021, the Company has an accumulated deficit of $~~27,540,986~~27,441,709. The company’s ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable operations. While the Company is expanding its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. These consolidated financial statements do not include any adjustments that might arise from this uncertainty.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash

The Company considers all highly liquid instruments purchased with a 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. As of ~~June~~September 30, 2021, the company balances exceeded the federally insured limit by approximately $~~1,250,000~~ 140,534deposited under one institution. Management is making certain arrangements to mitigate this risk during the next quarter.

Revenue Recognition

The Company did ~~not~~ have any revenues from continuing operations for the periods presented. The Company’s policy is that revenues will be recognized when control of the product is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

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-6~~

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).

Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the quarter ended ~~June~~September 30, 2021 and year ended December 31, 2020.

SUMMARY OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS

As of June 30, 2021 Level 1 Level 2 Level 3 Total
Liabilities
Derivative Liabilities - - 4,281,046 4,281,046

As of September 30, 2021

Level 1

Level 2

Level 3

Total

Liabilities

Derivative Liabilities

3,380,960

As of December 31, 2020

Level 1

Level 2

Level 3

Total

Liabilities

Derivative Liabilities

274,134

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 capitalize property and equipment for cost over $1,000, asset acquired under $1,000are 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.

~~F-7~~

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.

NOTE 3 – RELATED PARTY TRANSACTIONS

On May 22, 2020, the Company entered into a Separation and Release Agreement (the “Separation Agreement”) with Wais Asefi. Pursuant to the Separation Agreement, Mr. Asefi agreed to separate from all officer positions and as a director of the Company and to further accept the payment of $200,000from the Company’s future fundraising as consideration of all debts outstanding under Mr. Asefi’s employment agreement with the Company. Mr. Asefi further agreed to cancel his 4,000,000shares of Series A Preferred Stock and to transfer his 2,000,000shares of Series C Preferred Stock to Geoffrey Selzer, the Company’s current CEO and Director. Mr. Asefi further released the Company of all claims.

On May 22, 2020, the 4,000,000shares of Series A Preferred Stock were returned to the Company’s transfer agent and cancelled and on May 22, 2020 the 2,000,000shares of Series C Preferred Stock were transferred to Mr. Selzer. The parties to the Separation Agreement agreed to a payment schedule of $200,000based on future monies raised by the Company - and not on a specific date – as follows:

	●	$12,500when the initial $250,000is raised by the Company;
	●	$12,500when a total of $500,000is raised by the Company;
	●	$10,000when a total of $750,000is raised by the Company;
	●	$35,000when a total of $1,750,000is raised by the Company;
	●	$35,000when a total of $2,750,000is raised by the Company;
	●	$35,000when a total of $3,750,000is raised by the Company;
	●	$35,000when a total of $4,750,000is raised by the Company; and
	●	$25,000when a total of $5,750,000is raised by the Company.

On May 13, 2021, we amended the Separation Agreement to state the parties desire to reduce the total amount payable to Wais Asefi from $200,000 USD to $142,500 USD. In addition to the earlier payments made to Mr. Asefi, a payment of $40,000 was made on May 14, 2021 and another payment on June 27, 2021 for $40,000. The final payment ~~due~~was made on August 11, 2021 is for $25,000. The final payment ~~due~~ on August 11, 2021 ~~will settle~~settled this agreement in full. Further under the amendment, Mr. Asefi nominated Textmunication, Inc., our prior subsidiary, as the recipient of the funds due under the Separation Agreement.

The outstanding balances as of ~~June~~September 30, 2021 and December 31, 2020 are $~~25,000~~ 0and $187,500respectively.

~~F-8~~

NOTE 4 - CONVERTIBLE NOTE PAYABLE

Convertible notes payable consists of the following as of ~~June~~September 30, 2021 and December 31, 2020:

SCHEDULE OF CONVERTIBLE NOTES PAYABLE

June 30, 2021 December 31, 2020
Convertible notes face value $ 1,870,000 $ 517,544
Less: Discounts - (12,751 )
Less: Debt issuance cost -
Net convertible notes $ 1,870,000 $ 504,793

~~Explanation of Derivative Liability Loss:~~

	September 30, 2021			December 31, 2020
Convertible notes face value	$	1,865,000		$	517,544
Less: Discounts		-			(12,751	)
Less: Debt issuance cost		(61,771	)
Net convertible notes	$	1,803,229		$	504,793

The convertible notes as of ~~June~~September 30, 2021 are 8% Unsecured Convertible Promissory Notes from various accredited investors issued from January 1, 2021 to ~~June~~September 30, 2021. All notes have an automatic conversion into equity on the maturity date, which is January 2, 2022, or if a Qualified Financing (QF) of $5,000,000 is achieved, whichever occurs first. The maturity date pricing is the lesser of $.10 or 75% of the VWAP with a 20-day lookback. A QF converts into equity at the lesser of $1.00 or 75% of the average selling price of the aggregate offering. ~~The derivative liability loss of $4,281,046~~ ~~is based on the stock conversion occurring at the floor of $.10, but the conversion terms could be at a higher price if a QF event takes place.~~

The three months ended ~~June~~September interest accrued for the convertible notes payable at $12,263, $12,671and $12,263respectively.

Under U.S. GAAP, convertible debt is considered a “hybrid” financial instrument consisting of interest-bearing debt, referred to as the “host”, and certain embedded features requiring evaluation for bifurcation and separate accounting from the host instrument. ASC 815-15-25-1 provides the following guidance for determining whether an embedded feature should be accounted for separately as a derivative:

~~An embedded derivative shall be separated from the host contract and accounted for as a derivative instrument pursuant to Subtopic 815-10 if and only if all of the following criteria are met:~~

~~The economic characteristics and risks of the embedded derivative are not clearly and closely related to the economic characteristics and risks of the host contract.~~

~~The hybrid instrument is not remeasured at fair value under otherwise applicable generally accepted accounting principles (GAAP) with changes in fair value reported in earnings as they occur.~~

~~A separate instrument with the same terms as the embedded derivative would, pursuant to Section 815-10-15, be a derivative instrument subject to the requirements of this Subtopic.~~

If an issuer concludes that any of the embedded features should be bifurcated and accounted for as derivatives, the issuer should determine the fair value of these features upon issuance and record them on the balance sheet as a derivative liability with a corresponding amount recorded as debt discount. This discount should be amortized to interest expense using the effective interest method. Any changes in fair value of the derivative liability subsequent to issuance should be recognized in the income statement in the period in which the change occurs.

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.

NOTE 5 – COMMITMENTS AND CONTINGENCIES

Office Lease

On October 16, 2019, the Company signed a lease agreement that expires on thirty days’ ~~notice.~~notice. Rent expense was approximately $~~675~~ 405and $0 310for the quarter ended ~~June~~September 30, 2021 and 2020, respectively.

Executive Employment Agreement

On October 25, 2019, the Company entered into Employment Agreements with the following persons: (i) Geoffrey Selzer as Chief Executive Officer (CEO) of the Company with an annual salary of $180,000; (ii) Pamela Kerwin as Chief Operating Officer (COO) of the Company with an annual salary of $120,000: and David Thielen as Chief Investment Officer (CIO) with an annual salary of $120,000. All are eligible for salary increases upon milestone achievements and other benefits. The Employment Agreement for the CEO has a term of 2 years and can’t be terminated without cause. Severance of six (6) weeks is available for termination of the COO and CIO without cause before one-year of service and eight (8) weeks after one-year of ~~service.~~service.

~~Other~~

~~On May 13, 2021, we amended the Separation Agreement to state the parties desire to reduce the total amount payable to Wais Asefi from $200,000~~ ~~USD to $142,500~~ ~~USD. In addition to the earlier payments made to Mr. Asefi, a payment of $40,000~~ ~~was made on May 14, 2021 and another $40,000~~ ~~was made on June 27, 2021. The final payment was made on August 11, 2021, for $25,000~~ ~~to settle this agreement in full. Further under the amendment, Mr. Asefi nominated Textmunication, Inc., our prior subsidiary, as the recipient of the funds due under the Separation Agreement.~~

NOTE 6 – STOCKHOLDERS’ EQUITY

During the ~~second~~third quarter of 2021 the company issued a total of ~~2,868,025~~716,554 shares of common stock to vendors for compensation and services rendered. The fair market value of the shares ~~issues~~issued accounted as expenses as follows:

SCHEDULE OF COMPENSATION AND SERVICES RENDERED

Professional Fees	$	328,632
Convertible promissory notes		-
Total	$	328,632

Professional Fees
$ 583,409
Convertible promissory notes -
Total $ 583,409

NOTE 7 – DISCONTINUED OPERATIONS

On July 20, 2020, the Company finalized a Stock Purchase Agreement (the “SPA”) with Wais Asefi, Nick Miniello, Juleon Asefi, and Curt Byers (collectively, the “Asefi Group”) to sell to the Asefi Group its subsidiary, Textmunication, Inc., a California corporation (“Textmunication”). Textmunication operates the Company’s SMS business activities. The Company retained its cannabis operations based in Calabasas, California. The Company has accounted for this spinout as a discontinued operation and retroactively reclassified all previously presented financial information. The following summarizes the results of operations for Textmunication, Inc. for the ~~six~~three months ended June 30, 2020

~~F-9~~

SCHEDULE OF DISCONTINUED OPERATIONS

	2020			2020
Revenues	$	477,734		$	305,590
Cost of Revenues		(114,237	)		(90,559	)
Operating expenses		(455,925	)		(347,565	)
Loss from operations of discontinued operations		(92,428	)		(132,534	)

NOTE 8 – SUBSEQUENT EVENTS

As previously disclosed, on September 9, 2021, Resonate Blends, ~~was granted~~Inc. (the “Company”) entered into binding letter of intent (the “Agreement”) with L & G USA Inc., a ~~Type S: Shared Facility - Adult~~Delaware corporation and ~~Medicinal Cannabis Manufacturing License on July 23, 2021. The license allows Resonate Blends~~L & G Canada Inc., an Ontario corporation (together “Seller”), and the stockholders of Seller (the “Stockholders”), pursuant to ~~manufacture cannabis products at~~which the ~~licensed facility~~Company planned to acquire substantially all of ~~The Galley, QVI, Inc. in Santa Rosa, California.~~the assets from Seller associated with the Lemon & Grass business and the Koan business (the “Acquisition”).

On October 27, 2021, the Company terminated the Agreement. The Company is still in discussions with Seller, and the Company may or may not go through with a transaction with Seller, but if the Company does, the terms will change from the previous Agreement.

~~F-10~~

Item 2. 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” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe-harbor provisions. 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:~~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. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Company Overview

On October 25, 2019, Resonate Blends, Inc. (formerly Textmunication Holdings Inc.) announced its entry into the cannabis industry by acquiring Resonate Blends LLC (“Resonate” or the “Company”), a California-based cannabis wellness lifestyle product company built on a proprietary system of experiential targets. Resonate is building a value-added, brand-focused cannabis organization offering premium brands of consistent quality. The Company also acquired Entourage Labs LLC (“Entourage Labs”), a sister company of Resonate. Entourage Labs is the Intellectual Property (IP) subsidiary of Resonate.

Based in Calabasas, California, Resonate Blends, 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 innovative, trusted national brands, emerging brands, research organizations, and a variety of retail channels. The Company’s focus is finding mutual value between product and consumer by optimizing quality, supply chain resources and financial performance. The Company offers a family of premium cannabis-based products of consistent quality based on unique formations calibrated to Resonate Blends effects system in what we believe is the industry gold standard in user experience.

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 deliver reliable, effective, beneficial experiences.

Resonate is committed to helping you live the life you love. We do not make the medicinal vs. recreational distinction. This is a temporary legal separation in some states that we expect will soon cease to exist. We believe in wellness for the whole person. We know that people with pain or anxiety also want to enjoy friends, concerts and have satisfying intimate experiences. We are designing experiences which will improve all areas of our lives.

To accomplish this, Resonate is Mastering the Art of Experience. This is our mission. By integrating science, technology, education, branding, marketing, sales and delivery - with every customer interaction we aim to provide exceptional experiences. Cannabis has a broad range of unique characteristics, and we are dedicated to harnessing and amplifying those characteristics to support healthy empowered and engaged lifestyles. From product development through customer communication, we prefect and demystify cannabis bringing innovative products to an increasingly sophisticated market. Resonate Blends has a strong social mission and the Resonate team is building a successful business by focusing our knowledge, skill and energy on creating wellness-lifestyle products which will improve community by helping individuals live more satisfying, meaningful and connected lives. The need for these products ~~at this time~~currently is crucial.

To communicate the breadth of wellness products that Resonate is developing, our team created The Resonate System. The Resonate System graphically represents a spectrum of wellness products based on cannabis scaffolding. This system helps users easily select which product they want. Products based on The Resonate System deliver relaxation, freedom from pain and anxiety, boosts in focus and creativity, sensuality, human connection and joy. Our products are formulated around a system of interconnected experience targets that will allow you to know exactly what to expect when using them.

While respecting and honoring the natural power of plant medicine, Resonate also employs advanced science, leading technology and a deep understanding of how various cannabis compounds, when working in the body, simultaneously can create unique effects and benefits (referred to as the “Entourage Effect”). Our product developers blend cannabinoids and terpenes to formulate products with specific, controllable and repeatable, beneficial effects. Through innovation, experimentation, testing and an iterative product development strategy, our team has unlocked new plant constituent combinations resulting in unique, enjoyable and extremely effective wellness products unlike anything else in the marketplace. Resonate has filed a provisional patent for protection of these formulations and products in the future.

Koan, the Resonate Blends product family, is based around a comprehensive system of interconnected experience targets that allow people to select the products that best fit their lifestyle and health objectives. Koan products are dedicated to the efficacy and precision of functional experience targets across a broad range of product categories.

Resonate’s initial products are a completely unique class of products called Cordials. These blends offer a wide range of experiences not currently available in the cannabis market. Our Cordials are water-soluble and use nano-emulsification technology to allow for quick onset and a sustained and nuanced experience. Single dose, healthful, subtle in taste, cordials are an ideal way for people to ~~gently~~ intentionally improve their well-being. They can be shipped directly or substituted for alcohol as a cocktail mixer.

Resonate’s Cordials have been developed in partnership with an award-winning advanced infusion technology partner and were launched to the retail channel in late Q2 of 2021. The company is offering six unique blends at its initial release and expects to have additional blends by ~~the end of 2021.~~late 2021 into early 2022.

We have formalized contracts with our logistical and marketing partners and are building a digital native strategy supporting direct to consumer sales. ~~This release~~Based on customer demand, the company is creating a “singles” option for the Cordials which will be ~~followed with our second product line that is already~~available later 2021 and a multi-dose option shipping in ~~full development and is expected for targeted commercial release before the end of 2021.~~Q1 2022.

~~Partnerships~~Intellectual Property

~~Product Development:~~

Intellectual Property (“IP”) development and protection continues as a core area of value creation for Resonate. The Company ~~signed a custom development contract~~has developed the world’s first Cannabis Cordial. The Koan Cordials combine THC (psychoactive), CBD (non-psychoactive) with ~~Vertosa in March~~botanical terpenes to deliver an all-natural, plant-derived, single-dosed experience that can be enjoyed straight out of ~~2020,~~ the leading provider of safe, reliable emulsion bases for infused product developers. This contract was a major milestone for the Company as it selected its strategic partners to develop innovative products and solutions.

~~Vertosa is an award-winning strategic partner who will assist the Company in the launch of its first unique category of six water soluble products.~~bottle or poured into any beverage. These multi-use products deliver specific, predictable, reliable, effects in a format that is completely unique in the industry. ~~The first product developed collaboratively is the Cordial product line, but both companies expect several other products to be developed over time utilizing Vertosa’s emulsification technology.~~

The Vertosa and Resonate teams share a mission of maximizing the benefits of cannabinoids and plant medicine. Resonate selected Vertosa as a development partner because the Vertosa systems’ industry leading emulsification technology makes them highly stable, bioavailable, and water compatible. All of Vertosa’s inactive base materials are FDA approved and are lab tested for quality. Vertosa’s Hemp-derived CBD Emulsion System is now certified organic by ~~CCOF~~~~, a United States Department of Agriculture-accredited certifier and non-profit advocacy group, and the company has also received its~~ ~~Good Manufacturing Practice (GMP) certification~~~~, confirming that its offerings follow regulations promulgated by the US Food and Drug Administration and are safe, pure, and effective.~~

~~Manufacturing:~~

The Company partnered with The Galley, a California licensed Type N – Infused Products Manufacturer based in Santa Rosa, California. The Galley produces and packages premium award-winning products and has worked with some ofbelieves the ~~most popular brands~~greatest long-term value creation in the Cannabis industry will be in the establishment of high-quality consumer brands that deliver the expected experience. As cultivation, supplies and services become quickly commoditized, value-added brands represent the best opportunity for Resonate and its shareholders to support and benefit from the growth expected in the Cannabis industry. ~~The Galley~~It is ~~built~~therefore critical for Resonate to ~~FDA~~protect its methods, formulations and ~~CDPH standards and is focused on high demand areas of production – Edibles, Topicals, Tinctures, Chocolate, Hard Candies, Gummies, Pre-Rolls, Flower, Vapes and Beverages.~~packaging.

Resonate and The Galley entered into a Master Services Agreement in which The Galley will manufacture and package Resonate’s first family of products to precise specifications. The Galley also has a Bureau of Cannabis Control (BCC) issued distribution license in California and, along with other select distribution partners, will distribute Resonate’s products to retail establishments throughout the state.

The Galley and Resonate have been in frequent contact throughout Resonate’s development period and are now supporting the production of the Company’s unique family of wellness lifestyle products. Resonate’s first of its kind offerings are emulsified through the advanced infusion technology provided by award-winning Vertosa and collaboratively developed to push the state of the art in its cannabis products.

~~Distribution:~~

Because of the unique nature of Resonate’s Koan products and the recent expansion of home delivery services in the cannabis industry, Resonate has prioritized a direct-to-consumer method as their primary sales strategy. Resonate has identified a technology partner who will add an e-commerce feature to the Koan web site that will allowOn June 14, 2021, the Company successfully filed a Provisional Patent Application with the US Patent & Trademark Office (USPTO) entitled “Cannabis Nano-Emulsions for Achieving a Reliable, Targeted, Specific and Repeatable User Experience.” The invention relates to ~~sell products directly~~methods and formulations including a combination of cannabinoids and terpenes calculated and specifically formulated to ~~consumers using~~achieve a ~~licensed California state-wide delivery network for fulfilment.~~

In addition to direct sales, the company plans to offer products to select premium dispensaries throughout California. These products will be delivered to retail establishments by a leading cannabis full service distributor.targeted, specific and repeatable user experience. The Company contracted with MARS Distribution to provide logistics and statewide distribution for Resonate’s Koan Cordials, its product line of unique experience blends currently available in California. MARS is the leading logistics and sales partner for cannabis beverages and top cannabis brands in California.

MARS was built to support the massive growth in the cannabis industry and bring efficiency and consistency to it. With a focus on beverages, MARS is the only distributor equipped to support the movement, storage, and sales of beverages in California. With hubs in Costa Mesa, Sacramento, Nevada and three more hubs under way, MARS delivers orders to retailers in 72 hours or less.

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

~~Marketing and Sales Plan~~

~~The cannabis industry is changing daily in response to updated regulations, customer~~filing for patent protection on its unique product education, new interest from various demographics and now the COVID-19 pandemic. As a result, we are constantly attentive to these changes as they affect the marketing of our products. Our initial marketing strategy was to launch in select dispensaries in Los Angeles and to support the launch with dispensary promotional material and location-based marketing. However, in the current market the Company has decided to modify this strategy. Paradoxically, retail restrictions and safety regulations were actually beneficial for us, as these allowed us to reprioritize our sales approach and to build a marketing plan around on-line dispensaries with wide delivery networks. Although retail restrictions will eventually be relaxed, we do not expect that storefront dispensaries will return to the dominant role they played in the cannabis industry before COVID-19 for several reasons. Dispensaries are generally small, making social distancing difficult. Limitations on a customers’ ability to touch and smell products reduces the value of in-person shopping. Restrictions on the number of people allowed in these small spaces will create waiting lines outside stores, which will be inconvenient and even embarrassing for some. Finally, we have learned that a significant number of customers, particularly in our targeted demographic, really prefer the privacy and convenience of having products delivered to their homes. For all these reasons, we have decided to focus our marketing budget for at least the next six to nine months on supporting online and delivery outlets.

In response to the sudden change in customer buying preferences, Resonate has accelerated our plan to sell directly to consumers. We are in the process of partnering with an on-line platform which will allow us to communicate the value of our products directly to consumers. This platform will connect consumers to a licensed retail and California-wide home delivery network. This direct-to-consumer approach has significant benefits for us. First, it allows us to control our brand messaging and to assure that we are able to provide the information and education customers need to make confident and informed product choices. Through this method, we also have access to customer information which is not available from dispensaries, which allows us to employ successful marketing techniques used by leading on-line retailers such as customer loyalty programs, memberships, ambassadors, etc., to build brand awareness and increase sales. It is also better for us financially as it increases our profit margin.

Therefore, our marketing budget and energy is now being channeled into appropriate programmatic advertising, developing informational materials for customers on our website, and developing professional and effective social media, search engine optimization and direct to consumer marketing campaigns. We will also offer training and market support to select premium California dispensaries. We expect that building our brand online will complement retail sales by increasing customer awareness and creating “pull-through” at brick-and-mortar facilities.

Resonate has partnered with Good People LLC as its statewide Koan Cordial sales team. Good People is working closely with Resonate Blends’ marketing team to plan events, train budtenders, schedule and track relevant promotions and inform the innovation pipeline with field insights. Koan Cordials dispensary buyer sample kits are now available through Good People and dispensaries are now stocking the product in strategic geographical locations.packaging.

Future Koan Product - Resonate Growth Plans

For the first 1212-18 months, Resonate will concentrate on releasing product and brand building in our home state of California. Resonate plans to follow the launch of its first six Koan products with others based on The Resonate System at regular intervals. Our formulas, combined with the proprietary Vertosa technology, will allow the Company to quickly deliver controlled, predictable, enjoyable effects in beverages, teas, and gummies. Vertosa is the leading provider of emulsification technology for cannabis manufacturers. Emulsification allows cannabinoids to become water-soluble so that they can be added to Cordials, beverages, gummies, etc. Vertosa and Resonate are engaged in joint research focusing on effects of various emulsification methods on cannabinoids. We are working on methods that improve user experience by refining effects and managing bioavailability. Vertosa will also be providing the emulsification required for formulas in Resonate’s product line.

The cannabis industry is in its infancy. Resonate’s growth strategy is to create an innovative ecosystem of companies, investments and research that all support The Resonate System and our mission of empowering the wellness market. In addition to creating our “house” brands, the Company is also looking for other quality brands which could be incubated or targeted as either strategic partners or as acquisitions. Integrating these companies, we believe will provide consistent product quality that yields expected results and that also allows us to build a stable, successful company overall.

Resonate’s first commercial release is a family of six precisely targeted effect blends. These products are category-breaking offerings as they are neither tinctures nor beverages but have the benefits of both. They are emulsified, water soluble, ~~single-dose formulas~~single-serving blends that can be enjoyed privately or shared socially. Resonate ~~plans to make~~offers these ~~available initially in~~across California in stylish mini bottles, each containing a single ~~dose.~~serving. They can be sipped directly from the bottle or poured into beverages. Koan products offer the very high bioavailability of tinctures not possible to deliver with edibles, take effect generally within minutes and provide benefits for approximately 3 hours. Significantly, these formulas all provide a pleasant predictable experience, a gentle onset and exit and have no unpleasant sensations or aftereffects sometimes associated with cannabis products. Our current products are as follows:

Calm

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

Wonder

Our highest THC offering, Wonder is carefully crafted to bring back that youthful sense of wonder and awe we feel when we are fully engaged with our senses and environment.

Balance

Balance is a subtle combination of cannabinoids and terpenes formulated to bring your mind, body and spirit back to an even state of harmony and homeostasis.

Create

Create is formulated to stimulate your senses, spark your imagination and channel your inner muse. Led by a stimulative blend of terpenes and just the right amount of THC to inspire and facilitate the artist in you.

Play

We formulated Play to help you become fully immersed in the moment and the people around you. From the park to the beach to the dance floor, Play helps you find your groove and keep it going.

Delight

Put on your rose-colored glasses and give everything some extra sparkle with Delight. Designed to open up your senses, raise your spirits and brighten your day.

Acquisition of Assets

On September 9, 2021, we entered into a binding letter of intent with L & G USA Inc., a Delaware corporation and L & G Canada Inc., an Ontario corporation (together “Seller”), and the stockholders of Seller, pursuant to which the Company planned to acquire substantially all of the assets from Seller associated with the Lemon & Grass business and the Koan business (the “Acquisition”).

On October 27, 2021, the Company terminated the agreement. The Company is still in discussions with Seller, and the Company may or may not go through with a transaction with Seller, but if the Company does, the terms will change from the previous agreement.

Competitive Landscape

The cannabis market still primarily consists of products of varying quality and poor branding. Much of the branding is heavy “stoner” or hospital medicinal, and differentiation between products is difficult. As a result, finding a product with controllable, consistent effects is difficult. Even products of high and reliable quality all look alike and have no shelf appeal. In addition, there is a mismatch between the fastest growing demographic and many current product offerings, which are designed to be inhaled. This is exactly why we have developed Koan Cordials, tasty, single ~~dose,~~serving, healthy cannabis products with timeless, exceptional branding. As the market matures, some companies are recognizing the importance of branding. Branded category leaders represent the 10 spots among best-selling products and sales data supports the desire among consumers for branded products. This is further supported by Headset, data (the leading industry provider of retail buying patterns), which shows that brands are leading every category in cannabis. Further, branded products command higher prices. Some branded products generate pricing as high as 151%, over industry average. The Resonate team excels in product branding.

There is no product in the marketplace exactly like our Koan products ~~at this time.~~currently. Other companies offer tinctures (which are concentrated herbal extracts made by soaking the bark, berries, leaves (dried or fresh), or roots from one or more plants in alcohol or vinegar), tea, salves, patches, and cosmetics and vapes, and some of them provide effects which may be similar to those the Koan products will provide, but we believe that none are equal to ours with respect to quality, efficacy, consistency and scope. Our products are water soluble and can be enjoyed privately or poured in beverages and shared socially. We believe that the total experience offered by our products cannot be found elsewhere in the industry.

While there are ~~a number of~~several very fine products in the premium cannabis space, there is not yet a dominant brand in any category. Some are leading but no brand dominates. Data indicates that our targeted demographic seeks out trusted brands when making product selections. Resonate is bringing to market custom, reliable, experience-targeted products. which can be sipped or shared, offered under a well-crafted brand supported by an accessible information system. We provide The Resonate System so customers can understand what to expect and can make informed confident selections.

Marketing and Sales Plan

The cannabis industry is changing daily in response to updated regulations, customer product education, new interest from various demographics and now the COVID-19 pandemic. As a result, we are constantly attentive to these changes as they affect the marketing of our products. Our initial marketing strategy was to launch in select dispensaries in Los Angeles and to support the launch with dispensary promotional material and location-based marketing. However, in the current market the Company has decided to modify this strategy. Paradoxically, retail restrictions and safety regulations were beneficial for us, as these allowed us to reprioritize our sales approach and to build a marketing plan around on-line dispensaries with wide delivery networks. Although retail restrictions will eventually be relaxed, we do not expect that storefront dispensaries will return to the dominant role they played in the cannabis industry before COVID-19 for several reasons.

Dispensaries are generally small, making social distancing difficult. Limitations on a customers’ ability to touch and smell products reduces the value of in-person shopping. Restrictions on the number of people allowed in these small spaces will create waiting lines outside stores, which will be inconvenient and even embarrassing for some. Finally, we have learned that a significant number of customers, particularly in our targeted demographic, really prefer the privacy and convenience of having products delivered to their homes. For all these reasons, we have decided to focus our sales efforts on select high-end retail dispensaries and on-line, delivery and e-commerce outlets.

In response to the sudden change in customer buying preferences, Resonate has implemented a plan to sell directly to consumers. We are partnering with an on-line platform which will allow us to communicate the value of our products directly to consumers. This platform will connect consumers to a licensed retail and California-wide home delivery network. This direct-to-consumer approach has significant benefits for us. First, it allows us to control our brand messaging and to assure that we can provide the information and education customers need to make confident and informed product choices. Through this method, we also have access to customer information, which is not available from dispensaries, which allows us to employ successful marketing techniques used by leading on-line retailers such as customer loyalty programs, memberships, ambassadors, etc., to build brand awareness and increase sales. It is also better for us financially as it increases our profit margin.

Therefore, our marketing budget and energy is now being channeled into appropriate programmatic advertising, developing informational materials for customers on our website, and developing professional and effective social media, search engine optimization and direct to consumer marketing campaigns. We also offer market suppose and to select premium California dispensaries both in person and thorough the Leaf.VIP budtender training program. We expect that building our brand online will complement retail sales by increasing customer awareness and creating “pull-through” at brick-and-mortar facilities.

Resonate has partnered with Good People LLC as its state-wide Koan Cordial sales team. Good People is working closely with Resonate Blends’ marketing team to plan events, train budtenders, schedule and track relevant promotions and inform the innovation pipeline with field insights. In addition, Resonate is currently recruiting two internal sales managers to oversee all sales efforts in Northern and Southern California. Koan Cordials dispensary buyer sample kits are now available through Good People and dispensaries are now stocking the product in strategic geographical locations.

Partnerships

Product Development:

The Company signed a custom development contract with Vertosa in March of 2020, the leading provider of safe, reliable emulsion bases for infused product developers. This contract was a major milestone for the Company as it selected its strategic partners to develop innovative products and solutions.

Vertosa is an award-winning strategic partner who will assist the Company in the launch of its first unique category of six water soluble products. These multi-use products deliver specific, predictable, reliable, effects in a format that is completely unique in the industry. The first product developed collaboratively is the Cordial product line, but both companies expect several other products to be developed over time utilizing Vertosa’s emulsification technology.

The Vertosa and Resonate teams share a mission of maximizing the benefits of cannabinoids and plant medicine. Resonate selected Vertosa as a development partner because the Vertosa systems’ industry leading emulsification technology makes them highly stable, bioavailable, and water compatible. All of Vertosa’s inactive base materials are FDA approved and are lab tested for quality. Vertosa’s Hemp-derived CBD Emulsion System is now certified organic by CCOF, a United States Department of Agriculture-accredited certifier and non-profit advocacy group, and the company has also received its Good Manufacturing Practice (GMP) certification, confirming that its offerings follow regulations promulgated by the US Food and Drug Administration and are safe, pure, and effective.

In addition, Vertosa is expanding into other legal states, and this paves the way for Resonate to follow behind moving beyond California while still assuring strict standards and high production quality for our products.

Manufacturing:

The Company partnered with The Galley, a California licensed Type N – Infused Products Manufacturer based in Santa Rosa, California. The Galley produces and packages premium award-winning products and has worked with some of the most popular brands in the industry. The Galley is built to FDA and CDPH standards and is focused on high demand areas of production – Edibles, Topicals, Tinctures, Chocolate, Hard Candies, Gummies, Pre-Rolls, Flower, Vapes and Beverages. Resonate Blends was granted a Type S: Shared Facility - Adult and Medicinal Cannabis Manufacturing License on July 23, 2021. The license allows Resonate Blends to manufacture cannabis products at the licensed facility of The Galley.

Resonate and The Galley entered into a Master Services Agreement in which The Galley will manufacture and package Resonate’s first family of products to precise specifications.

Distribution:

In addition to direct sales, the company plans to offer products to select premium dispensaries throughout California. These products will be delivered to retail establishments by a leading cannabis full-service distributor. The Company contracted with The Vault 3PL to provide logistics and state-wide distribution for Resonate’s Koan Cordials, its product line of unique experience blends currently available in California.

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

To summarize, we have signed and announced definitive agreements with various partners to execute on our overall business strategy. Our partner Vertosa is expected to develop our unique formulations through its advanced nano-emulsification process, The Galley is expected to assemble and package, the Good People to sell the products, ~~MARS~~the Vault 3PL Distribution to distribute our products and, ~~Way To Blue is expected~~we just engaged with The Flower Agency to actively market ~~and deliver~~our social media channels to the California market. ~~This release will be followed with our second product line that is already in full development and is expected for targeted commercial release before the end of 2021.~~

Our principal executive office is located at 26565 Agoura Road, Suite 200, Calabasas, CA 91302. Our executive telephone number is (571) 888-0009.

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

Revenues

We have generated no$7,574 and $7,574 in sales for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, as compared with no sales for the three and ~~six~~nine months ended ~~June~~September 30, 2020 on our current product line, but sales of ~~$172,144~~$0 and $477,734 from the discontinued operations of our sold subsidiary, Textmunication, Inc., for the three and ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2020, respectively. We recently launched our first line of six Cordial products ~~to the retail channel~~ in California and ~~will start~~we have started to generate revenues from the ~~sales~~sale of these ~~products in Q3.~~products.

We anticipate increased revenues on our six Cordials for the rest of the ~~year, along with~~year. We anticipate a rollout of new packaging configurations by early 2022 for our ~~second product line before year’s end,~~Cordials; to include both a one-pack and a multi-dose bottle which will bring the cost per dose down considerably. We also plan on launching additional Cordial formulations by early 2022, which we hope will contribute to increasing our revenues. As we have just launched our products, ~~to the retail channel,~~ however, it may take some time for the markets to react, gain traction and result in brand awareness among our customers. There can be no assurances, however, that customers will positively react to our products.

Operating Expenses

Our operating expenses were ~~$1,397,013~~$762,912 for the three months ended ~~June~~September 30, 2021, as compared with ~~$527,904~~$236,160 for the three months ended ~~June~~September 30, 2020. Our operating expenses were ~~$2,175,025~~$2,937,437 for the ~~six~~nine months ended ~~June~~September 30, 2021, as compared with ~~$1,079,315~~$1,445,463 for the ~~six~~nine months ended ~~June~~September 30, 2020.

The main ~~reason~~reasons for the increased operating expense in 2021 was a result of ~~non-cash management~~our efforts to increase spending on advertising, as well as increased legal and professional fees ~~in this quarter of $986,121, while in 2020 we only had $198,515 in~~and non-cash management fees. ~~Non-cash expenses appear on an income statement because accounting principles require them to be recorded despite not actually being paid for with cash.~~

~~The non-cash management fees resulted from salary deferrals for insiders from 2020 that we issued in shares of common stock. Stock-based compensation is a non-cash expense item.~~

We expect that our operating expenses will increase in 2021 over 2020 ~~as a result~~because of our product launch and the increased expenses associated with ~~our increased~~ operations. ~~If we are not able to meet the salaries of our management and are required to issue out stock as compensation, these non-cash expenses will also increase our operating expenses in future quarters.~~

Other ~~Income~~Income/Expenses

We had other ~~expenses~~income of ~~$3,984,516~~$866,917 for the three months ended ~~June~~September 30, 2021 compared with other expenses of ~~$694,402~~$86,910 for the same period ended ~~June~~September 30, 2020. We had other expenses of ~~$4,264,966~~$3,398,548 for the ~~six~~nine months ended ~~June~~September 30, 2021 compared with other expenses of ~~$619,168~~$712,625 for the same period ended ~~June~~September 30, 2020.

~~The main reason~~We recorded a gain on revaluation of derivative liabilities in the amount of $961,857 that contributed to our other income for ~~our increased~~the quarter ended September 30, 2021. Our other expenses infor the nine months ended September 30, 2021 was mainly attributable to a ~~result of~~ loss on revaluation of derivative liabilities.

Net ~~Income/~~Loss

We had net ~~loss~~income of ~~$5,381,529~~$99,274 for the three months ended ~~June~~September 30, 2021, as compared with net loss of ~~$1,182,083~~$351,399 for the three months ended ~~June~~September 30, 2020. We had net loss of ~~$6,439,991~~$6,340,715 for the ~~six~~nine months ended ~~June~~September 30, 2021, as compared with net loss of ~~$1,790,911~~$2,142,310 for the ~~six~~nine months ended ~~June~~September 30, 2020.

Liquidity and Capital Resources

As of ~~June~~September 30, 2021, we had total current assets of ~~$1,146,755~~$649,017, consisting of ~~$975,869~~$390,534 in cash and ~~$170,886~~$258,483 in ~~advances to suppliers.~~prepaids and inventory. Our total current liabilities as of ~~June~~September 30, 2021 were ~~$6,298,540.~~$5,387,805. We had a working capital deficit of ~~$5,151,785~~$4,738,788 as of ~~June~~September 30, 2021, compared with a working capital deficit of $996,439 as of December 31, 2020.

Cash Flows from Operating Activities

Operating activities used ~~$1,802,187~~$2,415,066 in cash for the ~~six~~nine months ended ~~June~~September 30, 2021, compared with cash used of ~~$762,261~~$1,401,301 for the ~~six~~nine months ended ~~June~~September 30, 2020. Our negative operating cash flow for the ~~six~~nine months ended ~~June~~September 30, 2021 was largely the result of our net loss of ~~$6,439,991,~~$6,340,714, offset by share based compensation of ~~$986,121.~~$1,267,297. Our negative operating cash flow for the ~~six~~nine months ended ~~June~~September 30, 2020 was largely the result of our net loss of ~~$1,790,911.~~$2,142,310, offset by loss on derivative liability of $536,819 and share based compensation of $198,514.

Cash Flows from Investing Activities

We used ~~$21,063 in cash used in investing activities for the six months ended June 30, 2021 for the purchase of fixed assets. We had no~~ cash on investing activities to purchase computer equipment for the ~~six~~nine months ended ~~June~~September 30, 2021 with no cash used for the same period ended 2020.

Cash Flows from Financing Activities

Cash flows provided by financing activities during the ~~six~~nine months ended ~~June~~September 30, 2021 amounted to ~~$2,684,794~~$2,727,322 compared with cash flows provided by financing activities of ~~$890,862~~$1,119,943 for the ~~six~~nine months ended ~~June~~September 30, 2020. Our positive cash flows for the ~~six~~nine months ended ~~June~~September 30, 2021 consisted of proceeds from issuance of common stock of ~~$1,319,587,~~$1,367,115, proceeds from Convertible notes payable of ~~$1,870,000,~~$1,865,000, offset by payments of notes payable of $504,793. Our positive cash flows for the ~~six~~nine months ended ~~June~~September 30, 2020 consisted ~~primarily~~ of ~~convertible notes,~~proceeds from issuance of common stocks $540,000, proceeds from Convertible notes payable ~~and stock subscriptions.~~$806,000, offset by payments of notes payable of $226,057.

From December 1, 2020 through March 15, 2021, we sold units priced at $25,000 per unit where each unit consisted of (i) an 8.0% Note in the principal amount of $25,000 convertible into Common Stock (the “Note) and (ii) a warrant for the purchase of 83,333 shares of the Company’s Common Stock (the “Warrant”).

We sold 90 Units for total proceeds of $2,265,000. After paying finder fees of $187,450 to our placement agent, we netted $2,077,550, which will be used for working capital.

In addition, we also entered into subscription agreements in connection with an equity placement offering of a maximum of $2,000,000 in units (the “Equity Units”) where each Equity Unit consists of one share of Common Stock at a purchase price of $0.15 and a warrant to purchase 0.5 share(s) of Common Stock at an exercise price of $0.225 per share. We sold 6,983,333 Equity Units for total proceeds of $1,047,500. After paying finder fees of $100,763 to our placement agent, we netted $946,737, which was used to pay off the remaining convertible note debt and will also be used for working capital. ~~We also issued our placement agent 250,000 shares in restricted stock on May 21, 2020 as part of the Placement Agent and Advisory Services Agreement.~~

Until we ~~are able to~~can generate sufficient revenues to sustain operations, we are dependent on investment capital to continue our survival. 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 ~~June~~September 30, 2021, we have an accumulated deficit of ~~$27,540,986.~~$27,441,709. Our ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and our ability to achieve and maintain profitable operations. 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 ~~June~~September 30, 2021, there were no off-balance sheet arrangements.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective, or complex judgments, often ~~as a result~~because of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies are disclosed in Note 2 of our audited financial statements included in the Form 10-K filed with the Securities and Exchange Commission.

Recent Accounting Pronouncements

No new accounting pronouncements issued or effective during the fiscal year has had or is expected to have a material impact on the financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of ~~June~~September 30, ~~2021,~~2020, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of ~~June~~September 30, 2021, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described below.

Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following three material weaknesses that have caused management to conclude that, as of ~~June~~September 30, 2021, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:

1.	We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act as of the period ending ~~June~~September 30, 2021. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

2.	We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

3.	Effective controls over the control environment were not maintained. Specifically, a formally adopted written code of business conduct and ethics that governs our employees, officers, and directors was not in place. Additionally, management has not developed and effectively communicated to employees its accounting policies and procedures. This has resulted in inconsistent practices. Further, our Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

To remediate the material weakness in our documentation, evaluation and testing of internal controls we plan to engage a third-party firm to assist us in remedying this material weakness once resources become available.

We intend to remedy our material weakness ~~with regard to~~regarding insufficient segregation of duties by hiring additional employees ~~in order~~ to segregate duties in a manner that establishes effective internal controls once resources become available.

Changes in Internal Control over Financial Reporting

No change in our system of internal control over financial reporting occurred during the period covered by this report, the period ended ~~June~~September 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A: Risk Factors

For our cannabis operations, see risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed on April 15, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933.

During the ~~six month ended June 30,~~third quarter of 2021 the company issued a total of ~~2,868,025~~716,554 shares of common stock to vendors for compensation and services rendered.

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

Item 6. Exhibits

Exhibit Number		Description of Exhibit

31.1**31.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2**31.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2021 formatted in Extensible Business Reporting Language (XBRL).

**Provided herewith

SIGNATURES

Pursuant to the requirements of the Securities 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.

Date:	~~August 18,~~November 22, 2021

By:	/s/ Geoffrey Selzer
	Geoffrey Selzer
Title:	President, Chief Executive Officer, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and Director

	June 30,2021			December 31, 2020
ASSETS
Current assets
Cash and cash equivalents	$	975,869		$	114,325
Advances to Suppliers					54,599
Inventories		170,886			-
Total current assets		1,146,755			168,924
Fixed assets, net		21,063			-
Investment in equity method investee		100			100
TOTAL ASSETS		1,167,918			169,024

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities		122,494			198,936
Due to related parties		25,000			187,500
Convertible notes payable, net of discount		1,870,000			504,793
Derivative liability		4,281,046			274,134
Settlement liability
Current liabilities of discontinued operations					-
Total current liabilities		6,298,540			1,165,363
Total liabilities		6,298,540			1,165,363
Stockholders’ deficit
Preferred stock, 10,000,000 shares authorized, $0.0001 par value, 2,000,000 shares issued.
Series B - Preferred stock, 66,667 shares authorized, $0.0001 par value, 0 issued.		-			-
Series C - Preferred stock, 2,000,000 shares authorized, $0.0001 par value, 2,000,000 issued and outstanding		200			200
Series D Preferred stock 40,000 shares authorized, $0.0001 par value 0 issued and outstanding		-			-
Common stock; $0.0001 par value; 200,000,000 shares authorized; 44,270,912 and 29,769,627 shares issued and outstanding as of June 30, 2021 December 31, 2020 , respectively.		4,427			2,976
Additional paid-in capital		22,405,737			20,101,480
Accumulated deficit		(27,540,986	)		(21,100,995	)
Total Stockholders’ deficit		(5,130,622	)		(996,339	)
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	1,167,918		$	169,024

	1			2			3			4
	Six Months Ended						Three Months Ended
	June 30 2021			June 30 2020			June 30 2021			June 30 2020
REVENUES	$	-		$	-		$	-			$	-
COST OF REVENUES		-			-			-				-
Gross profit		-			-			-				-
Operating expenses
Advertising		210,919			6,697			157,544				197
General and administrative expenses		133,162			335,088			(14,791	)			126,077
Legal and Professional fees		410,494			297,116			93,350				103,716
Officer Compensation		239,114			-			105,364				-
Salaries and Related		193,750			240,900			68,750				99,400
Sales Commission					-							-
Office Rent		1,465			-			675				-
Impairment of inhouse software		-						-				-
Non cash management fees		986,121			198,514			986,121				198,514
Total operating expenses		2,175,025			1,079,315			1,397,013				527,904
Loss from operations		(2,175,025	)		(1,079,315	)		(1,397,013	)			(527,904	)
Other Income (expense)
Other Income		844						532				-
Interest expense		(58,728	)		(19,802	)		(37,198	)			(12,805	)
Loss on change of derivative liability		(4,130,456	)		(617,768	)		(3,881,807	)			(699,999	)
Amortization of debt discount		(10,583	)		(13,559	)		-				(13,559	)
Amortization of debt issuance costs		(123,543	)					(123,543	)
Gain (loss) on settlement of derivative liabilities		-						-
Legal settlement		-						-
Gain on settlement of notes payable		57,500			31,961			57,500				31,961
Total other expense		(4,264,966	)		(619,168	)		(3,984,516	)			(694,402	)
Income (loss) from investment in equity method investee		-			-			-				-
NET INCOME (LOSS) from continuing operations		(6,439,991	)		(1,698,483	)		(5,381,529	)			(1,222,306	)
NET INCOME (LOSS) from discontinued operations					(92,428	)						40,223
NET INCOME (LOSS)		(6,439,991	)		(1,790,911	)		(5,381,529	)			(1,182,083	)

Basic weighted average common shares outstanding
Net Income (loss) per common share: basic and diluted		31,085,610			17,727,765			31,085,610				22,583,232
	$	(0.21	)	$	(0.10	)	$	(0.17	)		$	(0.05	)


	Preferred Stock Series A			Preferred stock - Series C				Common Stock				Additional		Accumulated			Total Stockholders’
Balance, December 31, 2020		-	-		2,000,000	$	200		29,769,627	$	2,976	$	20,101,480	$	(21,100,995	)	$	(996,339	)
Common stock issuance		-	-		-		-		11,633,260		1,163		1,721,338		-			1,722,501
Preferred stock issuance					-		-
Non-Cash Compensation
Non-Cash Compensation, shares
Conversion of notes payable
Conversion of notes payable, shares
Net loss for the quarter		-	-												(1,058,462	)		(1,058,462	)
Balance, March 30, 2021		-	-		2,000,000	$	200		41,402,887	$	4,139	$	21,822,818	$	(22,159,457	)	$	(332,300	)
Net loss for the quarter														$	(5,381,529	)	$	(5,381,529	)
Issuance of common stock		-	-		-		-		2,868,025		288	$	582,919		-		$	583,207
Balances June 30, 2021		-	-		2,000,000	$	200		44,270,912	$	4,427	$	22,405,737	$	(27,540,986	)	$	(5,130,622	)

As of June 30, 2020	Shares		Amount		Shares		Amount		Shares		Amount		Paid-in Capital		Deficit			Deficit
Balance December 31, 2019		4,000,000	$	400		2,000,000	$	200		17,133,936	$	1,715	$	18,570,178	$	(19,159,721	)	$	(587,228	)
Net Loss for the quarter																(608,828	)		(608,828	)
Common stock issuance		-		-		-		-		2,571,778		255		275,440					275,696
Balance March 31, 2020		4,000,000	$	400		2,000,000	$	200		19,705,714	$	1,970	$	18,845,618	$	(19,768,549	)	$	(920,360	)
Net Loss for the quarter															$	(1,182,083	)		(1,182,083	)
Non-Cash Compensation										2,495,129		250		249,265					249,515
Conversion of notes payable										750,000		75		74,925					75,000
Common stock issue		-		-		-		-		1,000,000		100		99,900					100,000
Balance June 30, 2020		4,000,000		400		2,000,000		200		23,950,843		2,395		19,269,708		(20,950,632	)		(1,677,929	)

	June 30, 2021		December 31, 2020
Convertible notes face value	$	1,870,000	$	517,544
Less: Discounts		-		(12,751	)
Less: Debt issuance cost		-
Net convertible notes	$	1,870,000	$	504,793

Professional Fees	$	583,409
Convertible promissory notes		-
Total	$	583,409