Argus Research Initiates Equity Report Coverage on Resonate Blends Inc. (OTCQB: KOAN)

Rhea-AI Summary

Argus Research has initiated equity report coverage on Resonate Blends, Inc. (OTCQB: KOAN), a cannabis holding company based in Calabasas, California. The company has launched a range of wellness products, leveraging advanced science in cannabis. Resonate aims to provide consistent and beneficial experiences to cannabis users. With a competitive edge through innovative product development and established multi-channel distribution, it is poised for success in California's booming adult-use cannabis market. As of March 2021, Resonate reported $1.7 million in cash, fully funding initial production and marketing expenses.

Positive

• Launched the Koan family of cordials in California, targeting a high-demand market.
• Cash reserves increased to $1.7 million as of March 31, 2021, providing funding for product launch.
• Management commitment to strict discipline on share structure and debt control.
• Multi-channel distribution strategy to enhance brand awareness among consumers.

Negative

• None.

NEW YORK, July 1, 2021 /PRNewswire/ -- Argus Research, an independent investment research firm, has launched Equity Report coverage on Resonate Blends, Inc. (OTCQB: KOAN)   

Click here to view Full Argus Equity Report

Excerpts & Highlights from the Report as conveyed by Argus Analyst Steve Silver, follow:

BUSINESS DESCRIPTION:
Based in Calabasas, California, Resonate Blends Inc. is a cannabis holding company that utilizes advanced science as well as a deep understanding of cannabis, its components, and their interactions. The company has formulated and recently commercially launched a series of lifestyle and wellness-enhancing products that it says offer specific, controllable, and repeatable beneficial effects. The company believes the creation of value-added brands will drive enhanced value in the cannabis industry.

Resonate Blends is led by a team that has worked together over a long period of time, and the company has invested in the development of value-driving properties across its business to support its commercial launch strategy. These initiatives span technology and product development, quality control, marketing and branding, manufacturing and distribution supply chain resources, as well as rigorous financial performance, investment banking and investor relations. In our view, this breadth of core competencies should help Resonate avoid some of the missteps that have hampered other companies during the continued evolution of the cannabis industry.

The Resonate System is designed to help demystify cannabis, make it understandable and accessible, and support the lifestyles of cannabis users. The basis of the Resonate System is a deep understanding of plant science, and the intricate interconnections between the components and their physiological and emotional properties. This research is the foundation for a series of products designed to provide cannabis users with a consistent and reliable effect with every use, and to match its customers' desired experience. The testing has spanned multiple demographics and cannabis usage histories in order to finetune product properties and experiences. As well, Resonate Blends uses only plant-derived ingredients, including cannabinoids, terpenes, and other medicinal herbs. There are no additives and, as a result, all components have an FDA "GRAS" designation.

COMPETITIVE ADVANTAGE:
During the second quarter of 2021, Resonate Blends introduced the Koan family of cordials to its target market of California, the largest market in the United States for adult-use cannabis. In our view, California's adult-use market has far exceeded expectations since sales began in early 2018. In 2020, sales increased by 57% to $4.4 billion, PEER COMPARISON according to MJ Biz's Industry Factbook. California accounted for more than 25% of adult-use cannabis sales in the United States that same year.

In 2020, the commercial market for cannabis was boosted by the COVID-19 pandemic, as California declared cannabis an essential service amid widespread industry lockdowns. As a result, regulations were loosened, which resulted in increased use among a broader base of customers. In our view, this helped ease the long-existing stigma over cannabis use. As such, we believe that Resonate Blends is well positioned to enter the California market with a unique product line during a period of high consumer demand.

Resonate's business model is a key competitive advantage, as it is not subject to the myriad of regulatory challenges as well as the supply/demand and pricing dynamics that affect cannabis growers and extractors. The company strategically avoided commoditized services in establishing its model, and focused on the value-add of innovative product and brand development.

Resonate Blends has established a multi-channel distribution strategy to support a successful introduction to the market. The Koan product line will be sold in boutique dispensaries throughout California, which the company expects will drive brand awareness as budtenders provide personalized education and service to consumers. Resonate believes it can serve this niche with a small sales team that can utilize in-store and printed/web-based materials to "educate the educators" and form individual relationships with budtenders.

ANALYST COMMENTARY  ̶  EARNINGS (Click here to view Full Argus Equity Report): 
Resonate Blends shares trade on the OTCQB, under the ticker KOAN. The company anticipates initial sales from the Koan Cordials launch during the second quarter of 2021. As of March 31, 2021, Resonate had $1.7 million in cash and cash equivalents on its balance sheet, compared with $114,000 at the end of 2020. Importantly, the company has fully allocated funding for initial product manufacturing, commercial launch, and marketing-related costs.

As of March 31, 2021, the company had $1.6 million in convertible notes on its balance sheet, which it raised in a private placement among accredited investors. The current note will be converted into equity ultimately, leaving the company debt-free.

We view management's commitment to strict discipline on its share structure and debt control favorably, as compared with many other failed or underperforming companies across the cannabis industry. We are encouraged by the recent addition of Albert Richards as an investment advisor. Mr. Richards has 20-years of financial services expertise, notably as the founder of Alambic Investment Management, where he developed and deployed systematic stock selection strategies, as well as a sell-side analyst and head of research within two large global investment banks, where he focused on the identification and quantification of the key drivers of equity valuation and company quality.

With approximately 44 million shares outstanding, Resonate Blends should be able to consider equity-based financing to help fund future growth and expansion initiatives, while still building value and confidence from its shareholders. We view positively the company's recognition of its investors as key stakeholders, akin to its customer base.

About Resonate Blends, Inc. (OTCQB: KOAN)  www.resonateblends.com
Resonate Blends is a Calabasas, CA-based portfolio of Cannabis Wellness and Lifestyle brands. The company created the Resonate System—a comprehensive system of interconnected experience targets to personalize consumers' relationship with Cannabis through its products.

For more information re: KOAN please contact:

David Thielen
Chief Investment Officer/Director
Resonate Blends, Inc.
david@resonateblends.com
571-888-0009

About Argus Research Corp. Headquartered in NYC, Argus Research (www.argusresearch.com) is a leading independent equity research firm (est. 1934)  ̶  providing fundamental and quantitative research coverage on more than 1,600 companies across all 11 sectors of the S&P 500, as well as macroeconomic and equity market forecasts, thematic research, model portfolios and pre-IPO research.  In addition, Argus now provides sponsored research solutions for small & mid-cap companies seeking coverage.  Our Institutional Asset Management, Bank Trust, sell-side advisor and self-directed investor clients value Argus's proprietary equity research methodology, analysis and commentary.  Argus's Equity Research & earnings estimates are available on major research / earnings estimate aggregator platforms, including Bloomberg, Thomson Reuters, Factset and S&P Global.

For more information re: Argus Research Services please contact: 

Darrell Stone
646-747-5438
dstone@argusresearch.com   

Argus Research Co. has received a flat fee from the company discussed in this report as part of a Sponsored Research agreement between Argus and the company. No part of Argus Research's compensation is directly or indirectly related to the content of this assessment or to other opinions expressed in this report. Please refer to the full Argus report and the disclaimer for complete disclosures.

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SOURCE Argus Research

FAQ

What is the significance of the Argus research report on KOAN?

The Argus research report indicates a positive outlook and coverage initiation for Resonate Blends, signaling potential investor interest in KOAN.

When did Resonate Blends launch its Koan Cordials?

Resonate Blends introduced the Koan family of cordials during the second quarter of 2021.

How much cash did Resonate Blends report as of March 2021?

As of March 31, 2021, Resonate Blends had $1.7 million in cash and cash equivalents.

What market is Resonate Blends targeting with its products?

Resonate Blends is targeting California, the largest market in the U.S. for adult-use cannabis.

What competitive advantage does Resonate Blends have?

Resonate Blends' business model focuses on innovative product and brand development, avoiding regulatory challenges faced by cannabis growers.