10-Q: Resonate Blends Reports Q1 2024 Results, Reflecting Emergent Health Corp. Acquisition and Increased Net Loss

Resonate Blends' Q1 2024 results show increased revenue due to the Emergent Health Corp. acquisition, but also a significant net loss increase.

Summary

• Resonate Blends, Inc. reported financial results for the quarter ended March 31, 2024.
• Revenues increased to $95,050, compared to $10,107 for the same period in 2023, primarily due to the acquisition of Emergent Health Corp. (EMGE).
• The cost of revenues also increased, resulting in a gross profit of $63,846, compared to $1,535 in the prior year.
• Operating expenses rose to $480,674 from $98,421 year-over-year.
• The company reported a net loss of $3,688,470, significantly higher than the $380,952 loss in Q1 2023, with $3,007,627 of the loss attributable to the acquisition of EMGE.
• Basic and diluted loss per share was $0.04, compared to $0.01 in the previous year.
• The company's accumulated deficit as of March 31, 2024, was $30,424,873.
• The company's ability to continue as a going concern is contingent upon securing additional financing and achieving profitable operations.
• The company obtained loans from AJB Capital Investments, LLC and Ray Vollintine, but remains dependent on additional investment capital.
• The company's disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting.

Sentiment

Score: 3

Explanation: The document presents a mixed picture with increased revenue but significantly higher net losses and concerns about the company's ability to continue as a going concern. The identification of material weaknesses in internal control further contributes to a negative sentiment.

Positives

• The acquisition of Emergent Health Corp. led to a significant increase in revenue.
• The company obtained additional financing through loans from AJB Capital Investments, LLC and Ray Vollintine.

Negatives

• The net loss increased significantly, primarily due to the acquisition of Emergent Health Corp.
• The company has a substantial accumulated deficit, raising concerns about its ability to continue as a going concern.
• Material weaknesses in internal control over financial reporting were identified, indicating potential risks in financial reporting accuracy.

Risks

• The company's ability to continue as a going concern is contingent upon securing additional financing and achieving profitable operations.
• The company's disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting.
• The company is dependent on additional investment capital, and there is no guarantee that such capital will be available on acceptable terms.
• The company's recent loans include convertible features, which could lead to dilution of existing shareholders.
• The company's Senior Promissory Note is secured by all of the company's assets.

Future Outlook

The company expects operating expenses to increase for the remainder of 2024 due to the acquisition of EMGE, but no specific prediction can be made.

Industry Context

The document does not provide specific industry context beyond the company's operations in ingestible and topical products and IT consulting solutions.

Management Changes

Related Party Transactions

• Management has periodically advanced funds to the Company for operating expenses; amounts due to related parties were $837,810 and $70,099 as of March 31, 2024 and December 31, 2023, respectively.
• The Company assigned its ownership in Resonate Blends, LLC and Entourage Labs, LLC to Geoffrey Selzer in exchange for the assumption of liabilities and a percentage of future sale proceeds.

Stakeholder Impact

• Shareholders face potential dilution due to the issuance of common stock upon conversion of convertible notes and exercise of warrants.
• The company's ability to continue as a going concern impacts all stakeholders, including employees, customers, and suppliers.
• Creditors face increased risk due to the company's high debt levels and accumulated deficit.

Key Dates

Keywords

financial results, Emergent Health Corp, acquisition, revenue, net loss, going concern, convertible debt, internal control, KOAN, Resonate Blends