Resonate Blends Issues Letter to Shareholders and Provides Corporate Update

Rhea-AI Summary

Resonate Blends, Inc. (OTCQB:KOAN) recently released its Annual 2021 10-K report, highlighting both challenges and achievements in the cannabis sector. Despite facing pandemic-related hurdles and disappointing sales performance, Resonate is optimistic about future growth opportunities. The Koan brand received accolades and product development is underway, including a lower-priced Cordials version. Non-cash expenses related to prior funding affected their financials significantly. The company aims to enhance sales via direct-to-consumer strategies and is considering acquisitions to boost its portfolio.

Positive

• Resonate Blends received 'Best New Brand of 2021' at the Luxury Meets Cannabis Conference.
• Product formulations have received positive feedback from consumers and industry professionals.
• Direct-to-consumer sales strategy is growing rapidly in California's cannabis market.

Negative

• Sales of the first Cordials product were below expectations due to market challenges and high pricing.
• Financial results were impacted by significant non-cash expenses amounting to 67% of the net loss.
• High California taxes and grey market competition hindered revenue growth.

CALABASAS, Calif., April 18, 2022 (GLOBE NEWSWIRE) -- Resonate Blends, Inc. (OTCQB:KOAN), a Wellness Lifestyle cannabis holding company (“Resonate” or “the Company”), today provided a corporate update covering its recently filed Annual 10-K 2021 financial report and the advancement of overall operations. A letter to shareholders from Resonate’s Chairman and CEO, Geoff Selzer, follows:

Dear Shareholders,

We are delighted to have issued our Annual 2021 10-K.

The year was challenging for the cannabis industry overall. We are pleased with our overall progress in many areas, but we are disappointed with our sales performance. We, as with many other companies, faced pandemic related challenges as the cannabis industry was particularly hit hard in 2021. Launching our first brand during this turbulent period was particularly difficult. That said, we have built the foundation for solid growth, innovation and potential acquisitions going forward and remain true to our vision that value-added brands are the future of cannabis.

The Koan brand was awarded “Best New Brand of 2021” at the prestigious “Luxury Meets Cannabis Conference”, and we also won a Clio Cannabis award for design and packaging. The innovation that goes into our branding is equally represented by the discipline that goes into our product formulation and manufacturing. We believe that we have some of the most precise formulations in the industry and we continually receive accolades from partners, users and testers alike. Our reputation as a respected brand is solid and growing in its reach.

Sales of our first product, six targeted formulations of our unique Cordials, were less than we had expected. The pandemic led a large percentage of the California dispensaries to stop taking on new brands and there was a significant movement towards commodity pricing of undifferentiated products. This combined with high California taxes, a vibrant grey market, and that our pricing was set as a unique luxury product, exacerbated the slow sales. In addition, we have found that our product requires more education than other products in the channel and there has been some resistance to the higher-end pricing.

We have found when people try our product, they have extremely positive experiences. We also believe the Cordial’s unique value proposition (mix into the beverage of your choice to achieve the experience you are seeking with precision) is solid. Beyond that, we have taken significant remedial action.

• We are currently in the process of launching a “Singles” version of our Cordials designed as a single impulse purchase at 1/3 the price of our initial product.
• Our previously announced multi-serve version, which will launch in approximately 60 days, will reduce the per-serving price by 60% to 65%. The multi-serve allows consumers a more flexible dosing option which we believe is important to reach a broader consumer base. Feedback from the market is very encouraging.
• Initial prototypes of our first edible product will be priced consistent with the market for mainstream gummies - but designed with innovation consistent with the Koan brand. We expect our edible line to be launched in early Q3. Again, we are receiving great feedback on the designs and form factors.
• Our Love Cordial was launched in the Q1 of 2022.
• The production of our Sleep formulation is underway after completing an exhaustive round of formulation iteration and testing. The Sleep product reviews from our tester community have been “off the charts” and we are excited to get this product into the market.
• We are in early-stage development on a unique Koan pre-roll product that will reflect the values and expertise that we have built over the past years.
• We have established an aggressive IP strategy that includes a number of filed patents and applications to protect our unique innovations in the industry.
  

Beyond product development, we have taken sales and marketing steps to improve our revenue performance. Our retail experience helped us learn more about customer preference and provided us insight into how we could improve sales, refine our marketing messaging and provide “A level” dispensary support. One of our most significant changes was to bring our sales effort in-house. This tight management and support for our sales team is already showing positive results. Our dispensary support also includes engaging and professional budtender training, extraordinary shelf displays and in-store education and sampling events.

We believe that direct-to-consumer (D2C) sales are critical for the future of cannabis. Our e-commerce partner, GrassDoor, is assisting us in implementing compliant, customer-focused newsletters and SMS messages to boost sales in our D2C store. This channel is growing rapidly in the California cannabis market and allows us more control over our messaging and merchandising. The efforts in these areas are already making a major difference as we enter into Q2, and I look forward sharing our updates in future Shareholder Letters.

After becoming a public company in late 2019, we placed a heavy emphasis on creating a strong capital structure to enable flexible fundraising and a framework for potential M&A roll-ups into our holding company built around a consistent strategic vision. We have the structure in place to attract complimentary and innovative wellness cannabis firms into Resonate Blends, Inc. and support our vision of innovation as we build our internal team and external partnerships. We are currently reviewing several potential acquisitions of revenue-producing companies that should add brand synergies and technology to accelerate our growth.

Shareholder value is as important to our team as it is to our valued shareholder community. I’m also pleased with our investment partners, many who have invested in multiple financing rounds, as they continue to support us in our new initiatives to grow the revenue base through business execution, innovation and M&A.

While we expected higher revenue growth in 2021, our financial results reflect significant non-cash expenses and financing costs from our Private Placement Memorandum (PPM) funding from early 2021. Nearly 67% of our net loss is from combined non-cash items due to financing, stock compensation as well as success fees paid for our funding. There is a non-cash derivative liability of $2,011,880 associated with our financing activities and a non-cash share-based compensation item which is due to equity payments to senior management (in lieu of cash due for prior non-paid salaries), vendors, financing and IR activities. Please refer to the detailed financing statements in the 10-K for more specificity.

2021 was a formative year for Resonate Blends. We developed significant IP and formulation knowledge. We launched our first brand, received several prestigious awards and received excellent feedback from customers and industry professionals alike. Our roadmap is robust and our early feedback on the evolution of the Cordial line and our new products has been very positive. We are in discussions on several critical partnerships around distribution, sales, M&A roll-ups and new state partnerships. We expect Resonate Blends to show financial improvement in 2022, and I remain optimistic and passionate about the evolution of the industry and Resonate’s position as a leading innovator.

Resonate Blends, Inc. (OTCQB:KOAN)

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. The Koan Cordials were awarded the “Best New Brand of 2021” at the Luxury Meets Cannabis Conference (LMCC) and a Bronze award for “Brand Design” from the Clio Cannabis Awards.
www.resonateblends.com

Safe Harbor Provision:

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Examples of forward-looking statements include, among others, statements we make regarding: guidance relating to net income; anticipated customer onboardings; and expected operating results, such as revenue growth and earnings. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. In evaluating such statements, prospective investors should review carefully various risks and uncertainties identified in this release and matters set out in the Company's SEC filings. These risks and uncertainties could cause the Company's actual results to differ materially from those indicated in the forward-looking statements.

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

A graphic accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/c671919c-8b0b-4c3a-9346-03876e6ed1df

FAQ

What challenges did Resonate Blends face in 2021?

Resonate Blends faced pandemic-related challenges, leading to disappointing sales performance and competition from the grey market.

What awards did the Koan brand receive?

The Koan brand was awarded 'Best New Brand of 2021' and a Clio Cannabis award for design and packaging.

What is the stock symbol for Resonate Blends?

The stock symbol for Resonate Blends is KOAN.

What actions is Resonate Blends taking to improve sales?

The company is launching a lower-priced Cordials version and enhancing direct-to-consumer sales strategies with e-commerce partners.

How did non-cash expenses affect Resonate Blends’ financial performance?

Nearly 67% of Resonate's net loss in 2021 was attributed to non-cash expenses from financing activities.