8-K: Resonate Blends to Acquire Emergent Health Corp. in Share Exchange Agreement

Resonate Blends, Inc. will acquire Emergent Health Corp. through a share exchange, resulting in a major restructuring and a change in company direction.

Summary

• Resonate Blends, Inc. has entered into a Share Exchange Agreement with Emergent Health Corp. and its preferred shareholders.
• The agreement will result in Emergent Health's preferred shareholders exchanging their equity for preferred stock in Resonate Blends, which will convert into 93% of the company's common stock on a fully diluted basis.
• Current Resonate Blends shareholders will retain approximately 7% of the fully diluted capitalization, assuming certain convertible debt is converted at $0.035 per share.
• The closing of the agreement is subject to several conditions, including the sale of Resonate Blends, LLC and Entourage Labs, LLC, and a minimum capital raise of $500,000.
• Following the closing, the current board of directors will resign, and a new board will be appointed.
• The company will also redomicile to Delaware, reorganize, and change its name to Apollo Health and Wellness, Inc.
• The transaction is expected to close no later than March 1, 2024.

Sentiment

Score: 4

Explanation: The document outlines a major restructuring with significant dilution for existing shareholders, which is generally viewed negatively by the market. While the new direction could be positive, the immediate impact is likely to be negative.

Positives

• The transaction will result in a significant restructuring of Resonate Blends, potentially leading to new strategic directions.
• The new board and management team could bring fresh perspectives and expertise.
• The redomicile to Delaware and reorganization may provide operational and legal benefits.
• The capital raise will provide the company with additional funding.

Negatives

• Current shareholders will experience significant dilution, owning only approximately 7% of the fully diluted capitalization.
• The sale of Resonate Blends, LLC and Entourage Labs, LLC may indicate a shift away from the company's current business focus.
• The transaction is subject to several conditions, which could delay or prevent the closing.
• The company is undergoing a major change in direction and structure which may introduce uncertainty.

Risks

• The closing of the transaction is subject to several conditions, including the sale of subsidiaries and a capital raise, which may not be met.
• The significant dilution of current shareholders could negatively impact the share price.
• The integration of Emergent Health Corp. and the reorganization may present operational challenges.
• The new management team may not be successful in executing the company's new strategy.
• The company is undergoing a major change in direction and structure which may introduce uncertainty.

Future Outlook

The company will redomicile to Delaware, reorganize into a holding company structure, and change its name to Apollo Health and Wellness, Inc. The new entity will focus on new strategic directions under a new board and management team.

Management Comments

• The Exchange Agreement and the transactions contemplated thereby were unanimously approved by the board of directors of the Company, the holder of voting control of the Companys preferred Stock and unanimously approved by the board of directors of EMGE and the EMGE Preferred Shareholders.
• The current Board of Directors of the Company shall submit their respective resignations, and a new Board of Directors of the Company shall be installed by appointment or vote of shareholders.
• The new Board of Directors shall appoint new officers of the Company.

Industry Context

This announcement indicates a significant shift in Resonate Blends' business strategy, moving away from its current operations and towards a new direction under the Apollo Health and Wellness, Inc. banner. This type of restructuring is not uncommon in the small cap market as companies seek to pivot to new opportunities.

Comparison to Industry Standards

• The share exchange agreement is a common method for companies to acquire other businesses, particularly in the small cap market.
• The level of dilution experienced by current shareholders is significant, which is not uncommon in these types of transactions, but is a major risk.
• The redomicile to Delaware is a common practice for companies seeking to take advantage of Delaware's corporate laws.
• The change in management and board is a typical outcome of a major acquisition or restructuring.

Management Changes

Corporate Governance

Stakeholder Impact

• Current shareholders will experience significant dilution.
• Employees may be affected by the changes in management and company direction.
• Customers and suppliers may be impacted by the shift in business strategy.

Next Steps

• The company will complete the sale of Resonate Blends, LLC and Entourage Labs, LLC.
• The company will complete the capital raise of at least $500,000.
• The current board of directors will resign, and a new board will be appointed.
• The company will redomicile to Delaware and reorganize.
• The company will change its name to Apollo Health and Wellness, Inc.

Key Dates

Keywords

share exchange, merger, acquisition, restructuring, redomicile, capital raise, dilution, corporate governance, Apollo Health and Wellness, Emergent Health Corp, Resonate Blends