ITEM 1. BUSINESS
Forward-Looking Statements
This annual report contains “forward-looking
statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes
of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items;
any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed
new services, products or developments; future economic conditions or performance; any statements or belief; and any statements
of assumptions underlying any of the foregoing.
Forward-looking statements may include
the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,”
“expect” or “anticipate” or other similar words. These forward-looking statements present our estimates
and assumptions only as of the date of this annual report. Accordingly, readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the dates on which they are made. Except as required by applicable law, we undertake no obligation
to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, even if
experience or future changes make it clear that any projected results or events expressed or implied therein will not be realized.
You are advised, however, to consult any further disclosures we make in future public filings, statements and press releases.
Forward-looking statements in this annual
report include express or implied statements concerning our future revenues, expenditures, capital and funding requirements; the
adequacy of our current cash and working capital to fund present and planned operations and financing needs; our proposed expansion
of our business; and future economic and other conditions both generally and in our specific geographic and product and/or services
markets. These statements are based on currently available operating, financial and competitive information and are subject to
various risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated or implied
in the forward-looking statements due to a number of factors including, but not limited to, those set forth below in the section
entitled “Risk Factors” in this annual report, which you should carefully read. Given those risks, uncertainties and
other factors, many of which are beyond our control, you should not place undue reliance on these forward-looking statements. You
should be prepared to accept any and all of the risks associated with purchasing our securities, including the possible loss of
your entire investment.
Our financial statements are stated in
United States Dollars (US$) unless otherwise stated and are prepared in accordance with United States Generally Accepted Accounting
Principles.
In this annual report, unless otherwise
specified, all references to “common shares” or “common stock shares” refer to restricted common stock
shares.
As used in this annual report on Form 10-K,
the terms “we”, “us” “our” and the “Company” refer to Social Life Network, Inc.,
a Nevada corporation, and its wholly-owned subsidiary, MjLink.com, Inc., a Delaware corporation. Unless otherwise specified. MjLink.com,
Inc. is referred to herein as “MjLink” or “MjLink.com”.
Corporate Overview – Formation,
Corporate Changes, Material Merger
Organization
We were originally incorporated as C J
Industries, Inc. in California on August 30, 1985. On February 24, 2004, we merged with Calvert Corporation, a Nevada Corporation,
changed our name to Sew Cal Logo, Inc., and moved our domicile to Nevada.
In June 2014, we were placed into receivership
in Nevada’s 8th Judicial District (White Tiger Partners, LLC et al v. Sew Cal Logo, Inc.et al, Case No A-14-697251-C) (Dept.
No.: XIII) (the “Receivership”).
On January 29, 2016, we, as the seller
(the “Seller”), completed a business combination/merger agreement (the “Agreement”) with the buyer, Life
Marketing, Inc., a Colorado corporation (the “Buyer”), its subsidiaries and holdings and all of the Buyer’s securities
holders. We acted through Robert Stevens, the court-appointed receiver and White Tiger Partners, LLC, our judgment creditor. The
Agreement provided that the then current owners of the private company, Life Marketing, Inc., become the majority shareholders
pursuant to which an aggregate of 119,473,334 common stock shares were issued to our officers, composed of 59,736,667 shares each
to our Chief Executive Officer, Kenneth Tapp, and Andrew Rodosevich, our then-Chief Financial Officer. Pursuant to the Agreement
terms and related corporate actions:
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We cancelled all previously created preferred class of stock;
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We delivered newly issued, common stock shares equivalent to approximately 89.5% of our outstanding
shares as a control block in exchange for 100% of the Buyer’s outstanding shares;
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The court appointed receiver sold its judgment to the Buyer and the Seller agreed to pay the receiver
$30,000 and the equivalent of 9.99% of the outstanding stock post-merger of the newly issued unregistered exempt shares.
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Our then officers and directors were terminated, and Kenneth Tapp and Andrew Rodosevich became
our Chief Executive Officer/Director and Chief Financial Officer/Director, respectively;
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We effected a 5,000 to 1 reverse stock split effective April 11, 2016, with each shareholder retaining
a minimum of 100 shares;
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We changed our name from Sew Cal Logo, Inc. to WeedLife, Inc, and then to Social Life Network,
Inc. effective in Nevada April 11, 2016;
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We changed our stock symbol from SEWC to WDLF;
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We decreased our authorized common stock shares from 2,000,000,000 shares to 500,000,000 shares,
effective on March 17, 2016.
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On June 6, 2016, the Court issued an order
in the Receivership pursuant to Section 3(a) (10) of the Securities Act of 1933, as amended (the “Securities Act”),
ratifying the above actions. The receiver was discharged on June 7, 2016.
MjLink.com, Inc.
– Wholly Owned Subsidiary
On September
20, 2018, we incorporated MjLink.com, Inc. (“MjLink” or “MjLink.com”), a Delaware Corporation, as our wholly
owned subsidiary.
Our Business
Software as a Service Internet Platform
We are a technology company that licenses
its Social Life Network SaaS (Software as a Service) Internet Platform (hereafter referred to as the “Platform”) to
niche industries for an annual license fee and/or a percentage of profits. The Platform is a cloud-based social network and eCommerce
system that can be accessed by a web browser or mobile application that allows end-users to socially connect with one another and
their customers to market and advertise their products and services. The Platform can be customized to suit virtually any international
niche industry or sub-culture, such as hunting and fishing, tennis, real estate professionals, health and fitness, and charity
causes.
Our Platform licensing agreements are for
a minimum of two years and automatically renew each year thereafter. Our fee structure includes a combination of annual fees and/or
a minimum of 20% of the net profits that are generated by the licensee from monthly subscriptions services, E-Commerce fees and
online advertising sales from their platform users.
We developed our social networking and
E-Commerce Platform specifically for industries that we believe have a passionate consumer base, that communicate in non-public
channels, and their commerce activity is highly based on referral and “copy-cat” consumption; consistent with the foregoing,
we license our Platform to the residential real estate industry and niche sports verticals like hunting and fishing. Our platform
uses machine learning (A.I.) that interpolates the user behavior data through their online social activity to better connect the
right people and businesses together, at the right time when online in our social network. Contrary to other social networks and
E-Commerce systems like Facebook and Amazon where everyone is grouped together and forced to listen to the white-noise, our Platform
increases online user connectivity and stronger relationships between businesses and their customers.
To date, our Platform is accessed by subculture
industries in over 120 countries and is translated in multiple languages. Our language translation files for the Platform include
80% or more of the following languages: English, German, Hungarian, Portuguese, Turkish, Polish, Russian, Swedish, Slovenian, French,
Dutch, Portuguese, Czech, Persian, Ukrainian, Vietnamese, Romanian, Spanish, Italian and Japanese, which will position international
use of our Platform immediately following our launch internationally through individual licensing agreements.
Business of MjLink.com, Inc. (Cannabis
and Hemp Industry Platforms)
We also own and operate cannabis and hemp
industry Platforms through MjLink from which we generate advertising revenue. Our Platforms in the emerging cannabis and hemp industry
world-wide are used to provide a social network for communicating between businesses and consumers so they can learn about the
cannabis and hemp industry, and the use of THC and CBD products. The platforms are only a social network and does not include any
type of E-Commerce functions for businesses to sell their goods. We generate advertising revenue from the following cannabis and
hemp sites:
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WeedLife.com – A Cannabis social network
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WeedCircles.com – A Cannabis business social network
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HempTalk.com – A Hemp and CBD social network
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WeedWorthy.com – A Cannabis/Hemp news network
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WeedPons.com – A Cannabis/Hemp coupon network
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WeedVoice.com – A Cannabis/Hemp video network
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WeedLive.com – A Cannabis/Hemp website search engine
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Weedealio.com – A Cannabis map site for locating dispensaries & deals
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MjLink.com operates as a multinational
cannabis technology and media sales organization with two A.I. powered social networks.
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WeedLife.com, a consumer-to-consumer social network; and
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MjLink.com, a business-to-business social network.
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MjLink.com provides its business customers
with the following online applications:
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Retail store mapping
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Online advertising network
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Digital marketing services for leads and jobs
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Website search indexing
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Press release and News aggregating
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Cloud computing and custom industry applications
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SaaS (Software as a Service)
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Mobile application development
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MjLink includes an event division that
will provide 4 new tradeshows and conferences to its vast audience of members, the majority of which use MjLink.com and WeedLife.com
year-round. Leveraging the power of our rapidly growing multinational user-base in the social networks to drive event revenue,
the events will provide attendees with introduction to capital and consolidation opportunities, branding of industry retailers,
education consumers, and entertainment festivals.
Our 4 planned events are:
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MjMicro
is a
Cannabis MicroCap Investor Conference that is slated to launch in June of 2019 to address the rapidly growing need for
matching private and public companies in the cannabis industry, with investors, private equity groups and investment banks.
There will be 3-5 events scheduled per year around North America to ensure that we are geographically accessible to the more
than over 6,000 businesses that use MjLink.com year-round.
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MjLink Live
is an industry Brand-Retailer tradeshow for state-focused businesses that need to increase awareness of their products and brands to other local and regional retailers. We are planning 6-8 scheduled events per year that are slated to launch in Q3 2019 around North America to ensure we are geographically accessible to the more than over 6,000 businesses that use MjLink.com year-round.
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Home Grow Expo
is a consumer enthusiast event that is one-of-a-kind in the industry, bringing together home growers and smaller suppliers that otherwise financially struggle to participate in larger regional events. We are planning 3-4 scheduled events per year that we will launch in Q1 2020, enabling merchants to reach their new consumers the rest of the year on our e-commerce platform accessible through MjLink.com and WeedLife.com
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WeedLife Live
is a large consumer festival that provides the mainstream consumer, industry associations, activists and entertainers a venue to celebrate the rapidly growing industry. We are planning 2-3 scheduled events per year, launching in Q2 2020.
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Revenue Generation
We generate revenue through:
(a) License Agreements - We generate
revenue through licensing agreements from which we receive an annual license fee or a percentage of net profits.
(b) Online Advertising - Our
advertising program enables advertisers to present online ads to a specific type of cannabis or hemp website audience, depending
on the website and type of content that website provides in our network. We charge advertisers using the cost per thousand (CPM),
which is a marketing term used to denote the price of 1,000 advertisement impressions on one webpage.
We charge $10.00 CPM to an advertiser,
which means the advertiser must pay $10.00 for every 1,000 impressions of its online advertising campaign. The “M” in
CPM represents the Roman numeral for 1,000. Additionally, we provide the advertiser with the ability to purchase the CPM advertising
campaign on specific websites in our cannabis and hemp network. This favors the ads that are most relevant to our webpage visitors,
improving the experience for both the person looking for information in our network and the advertiser looking for targeted interested
customers for their advertised product or service.
Charging advertisers by CPM (1,000
advertisement impressions on one webpage) requires that we have enough website and webpage traffic (visitors viewing the webpages
on a website) to sell to an advertiser. Therefore, we are dependent on marketing and advertising our own websites using print,
radio, TV and online advertising in order to drive new and existing website visitors to our network. The more website traffic we
experience each month, equates to the more advertising revenue we can generate each month.
(c) Digital Marketing - We provide
business professionals with monthly subscriptions that enhance their online marketing and branding through our online business
directory and online review management system. This marketing service allows a business to spotlight their online business listing,
customer reviews and special offers and coupons, to our website network visitors.
(d) In addition to the existing
online applications, MjLink’s management is focused on launching three new divisions that will provide incubation of early
stage cannabis tech companies, B2B and B2C trade-shows, and M&A of cannabis technology companies.
Operations
We currently operate and support the
ongoing technology maintenance of our online social network platform in the cannabis and hemp industry for the users from
about 120 countries that access it each month. We also operate and support the ongoing technology maintenance and upgrades of
our licensees’ social networks in the United States for the Sports Social Network and the Real Estate Social
Network.
Our Market
Our market is intentionally broad and it
includes engagement-based organizations, consumer brands, ad agencies, online marketers, advertisers, sponsors, social media celebrities,
entertainment celebrities and performance artists, large and small enterprise users, religious organizations, health care providers,
network marketing and multi-level marketing companies, media companies, major motion picture studios, social media companies, schools
and training facilities, and virtually any other person or organization that seeks to attract, engage, and communicate with prospects,
customers, consumers, fans, followers, patients, friends, and subscribers, among others, online, utilizing automated, interactive
technology.
Target Markets
We have targeted niche industries through
our various platforms, including the following:
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Cannabis and Hemp
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Sports Industries
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Hunting & Fishing
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Racket Sports
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Cycling
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Golf
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Youth Sports Leagues
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Soccer
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Charities & Industry Associations
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Residential Real Estate.
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We will continue to target niche industries
based on sub-culture behavior and the need for private social networking.
Distribution Methods
Our distribution methods are:
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Prospective customers and clients can subscribe to our Social Life Network software service on a monthly or annual contract through a simple web-based sign-up form accessible on our website (sociallifenetwork.com), as well as through interactive sign-up links that we distribute via email and text, as well as through social media.
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Enterprise users can subscribe to our service and then distribute custom-branded sign-up links to their internal and external staff via email or other electronic means.
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We enter into license or partnership agreements with other social media providers to incorporate our technology into such other providers’ software platform that they offer to their existing and prospective client base.
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We enter into license or partnership agreements with digital marketing companies and advertising agencies to resell our technology to their existing and prospective client base, for monthly fees which are shared with us.
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We employ a direct sales team, as well as outside sales consultants.
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Marketing
We utilize our own proprietary interactive
video platform as the foundation of our ongoing marketing initiatives. Our initiatives include daily, broad-based social media
engagement by a dedicated team of full-time employees and outside consultants; management of our website; email campaigns, as well
as our CEO’s guest appearance at tradeshows and investor conferences; among many other ongoing initiatives designed to increase
awareness of our products and services and drive conversion and adoption rates.
Our marketing consists of:
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Trade shows
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Print advertising
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Digital press advertising
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Online videos
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Social media
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Blogging
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Advertising networks
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Competition
Our business is highly competitive, and
competition presents an ongoing threat to the success of our business.
We face competition in the social networking
sector for the hemp and cannabis community, including WeedLife.com social network, which competes with one of the other social
networks in the cannabis space, Massroots.com, which has 1 million members. Collectively with our licensees, we compete on a larger
scale with Facebook, LinkedIn, eBay, and other social networks and E-Commerce sites for users’ engagement, all of which have
substantially more financial resources, and a significantly larger user-base than we do.
We face significant competition with both our Cannabis/Hemp Social Networks and licensing of our E-Commerce Social Network Platforms, including MassRoots.com, Leafly.com,
Zillow.com, HOUZZ.com, TennisChannel.com, and Cabelas.com, which offer a variety of online advertising and E-Commerce offerings.
These competitors and other competitors have greater financial, operational, and personnel resources than we do. Should we fail
to develop strategies to overcome our competition, our revenues will be negatively impacted.
Competitive Advantages
Our competitive advantage is that we are
solely dedicated to niche industries that business and consumer users that do not feel comfortable sharing content and information
on other social networks like Facebook, LinkedIn and Twitter, as it may either jeopardize their personal and professional reputations
or be completely lost in the white-noise of billions of other posts. Additionally, we have developed specialized features for these
niche industries that incorporates E-Commerce directly in to a users’ social networking account. This integration of E-Commerce
directly in to social networking sets our Platform apart from our current competitors.
Competitive Disadvantages
Our competitive disadvantages are that
we do not have the operational and financial resources that our competitors have, which results in our having fewer resources to
market our social network brands, advertise our digital services, acquire new users on our social networks, and sell our advertising
and digital services to business customers, as compared to our competitors.
Intellectual Property
Our technology platform and associated
applications, features and functionality are comprised of proprietary software, code and know-how that are of key importance to
our business plan.
Research and Development
We spent zero dollars on research and development
during each of the years ended December 31, 2018 and 2017.
Sources and Availability of Products
and Names of Principal Su
ppliers
We currently rely on certain key suppliers
and vendors in the coding and maintenance of our software. Management believes it has mitigated the associated risks of these single-source
vendor relationships by ensuring that we have access to additional qualified vendors and suppliers to provide like or complementary
services.
Dependence on One or a Few Major
Customers
We are not dependent upon one or a few
major customers and we do not expect to have any significant customer concentration.
Government Regulation
Government regulation is of significant
concern for our business. Our management believes it currently possesses all requisite authority to conduct its business as described
in this annual report. Our cannabis/hemp websites with respect to cannabis are dependent on state and Federal laws pertaining
to the cannabis industry (
See
“Risks Related to Cannabis/Hemp Related Government Regulation” for further information regarding government regulation).
Cost and Effects of Compliance with
Environmental Laws
Our operations are not subject to federal,
state or local environmental regulations.
Employees and Consultants
We currently operate with 7 full time employees.
We also employ consultants on an as-needed-basis
to provide specific expertise in areas of software design, development and coding, content creation, and other business functions
including marketing and accounting. To date we have 3 consultants.
By the third quarter 2019 we are planning
to hire as many as 40 full-time sales representatives, 20 full-time marketing and social media employees, 15 full-time production
and customer support employees, and 4 part-time and 3 full-time executives, and management staff for our cannabis and hemp social
network expansion plan, all of which is contingent upon adequate funding and/or financing.
None of our employees or consultants are
currently covered by a collective bargaining agreement. We have had no labor-related work stoppages and we believe our relations
with our employees and consultants are excellent.
Seasonality of Business
We do not have a seasonal business cycle.
Patents and Intellectual Property/Trademarks/Licenses/Franchises
We do not currently own any patents and
have no intention of applying for patents. We have no franchise or royalty agreements. The US Patent and Trademark Office published
our trademark “Weed Life” on May 5, 2015.
Raw Materials
We do not use raw materials in our business.
Significant Developments
During 2018, there were the following significant developments:
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On December 20, 2018, MjLink announced that we launched a new video and display advertising network on our cannabis business
social network.
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On December 28, 2018, we announced that we will launch a new video conferencing paid feature to our LikeRe.com real estate
social network.
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On December 4, 2018, we announced our Chief Executive Officer’s presentation at the December 5, 2018 Virtual Investor
Conference.
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On November 20, 2018, we announced that MjLink would be presenting is corporate presentation at the 11
th
Annual
LD Micro Main Event in Los Angeles, California.
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After our Fiscal Year 2018, there were the following significant
developments in January 2019.
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On January 2, 2019, we announced that we would be launching a new iTunes and Android mobile app for the FutPost.com soccer
social network.
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On January 3, 2019, we appointed George Jage as President of MjLink.
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On January 7, 2019, we announced that the HuntPost.com social network for the hunting and fishing community is launching an
e-commerce marketplace where consumers and industry vendors may sell their goods.
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On January 8, 2019, we announced the appointment of Greg Tella as FutPost’s President, to direct the operations of FutPost,
an A.I. and Blockchain powered soccer social network that connects more than 17 million coaches and players together in the US
and Canada.
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On January 15, 2019, we announced at our attendance at the International Sportsman’s Expo in Sacramento, California,
the launch of a new IOS and Androis mobile app for the HuntPost.com Hunting and Fishing Social Network.
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On January 28, 2019, our CEO presented our Pre-IPO plan at the Nobel Capital Markets Annual Investor Conference in Fort Lauderdale,
Florida.
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Material Agreements
Software License Agreement with Real
Estate Social Network, Inc.
We have a January 1, 2018 Software License
Agreement with Real Estate Social Network, Inc., a Colorado corporation, whereby we, as the licensor, licensed our software as
a service (SaaS) to Real Estate Social Network as the licensee. This agreement provides that we will receive 20% of the net profits
from all monthly subscriptions and online ad sales from the licensee, paid annually, on the 31st day of January for the preceding
year. Early payment or installment payments on a monthly or quarterly basis are allowed. We are required to provide acceptance
testing to establish whether the licensed software operates properly. If the testing does not yield expected results, we, as the
licensor are required to correct errors at our own cost. If later acceptance testing fails to yield the expected results, the
licensee may terminate the agreement upon written notice. We provide a 180-day limited warranty that the licensed software will
conform in all material respects of the documentation specifications. The term of the License Agreement is from the effective
date, January 1, 2018, and continues in effect until termination, which termination may occur as follows: (a) if the Licensee
fails to make payment; (b) by either party for the other Party’s material breach of the agreement that is incurable or uncured
by breaching party for 30 days after being served with notice of breach and demand for cure, effective on written termination
notice to the breaching Party; (c) by the Licensor, effective immediately irrespective of written notice; (d) by both Parties
upon mutual agreement; (e) if we, as the Licensor: (i) are dissolved or liquidated or takes any corporate action for such purposes;
(ii) become insolvent or we are generally unable to pay our debts as they become due; (iii) become the subject of any bankruptcy
proceedings, voluntary or involuntary, under any domestic or foreign bankruptcy or insolvency Law; (iii) make or seek to make
a general assignment for the benefit of its creditors; or (iv) apply for, or consent to, the appointment of a trustee, receiver,
or custodian for a substantial part of its property.
Software License Agreement with Sports
Social Network, Inc.
We have a January 1, 2018 Software License
Agreement with Sports Social Network, Inc., a Colorado corporation, whereby we, as the licensor, licensed our software as a service
(SaaS) to Sports Social Network, Inc. as the licensee. This agreement provides that we will receive $125,000 USD annually each
year for the first two years of this agreement, and thereafter will receive 20% of the net profits from all collected E-Commerce
fees and online advertising sales from the licensee, paid monthly with the option to be paid annually, on the 31st day of January
for the preceding year. Early payment or installment payments on a monthly or quarterly basis are allowed. We are required to provide
acceptance testing to establish whether the licensed software operates properly. If the testing does not yield expected results,
we, as the licensor are required to correct errors at our own cost. If later acceptance testing fails to yield the expected results,
the licensee may terminate the agreement upon written notice. We provide a 180-day limited warranty that the licensed software
will conform in all material respect of the documentation specifications.
The term of the License Agreement is from
the effective date, January 1, 2018, and continues in effect until termination, which termination may occur as follows: (a) if
the Licensee fails to make payment; (b) by either party for the other Party’s material breach of the agreement that is incurable
or uncured by breaching party for 30 days after being served with notice of breach and demand for cure, effective on written termination
notice to the breaching Party; (c) by the Licensor, effective immediately irrespective of written notice; (d) by both Parties upon
mutual agreement; (e) if we, as the Licensee: (i) are dissolved or liquidated or takes any corporate action for such purposes;
(ii) become insolvent or we are generally unable to pay our debts as they become due; (iii) becomes the subject of any bankruptcy
proceedings, voluntary or involuntary, under any domestic or foreign bankruptcy or insolvency Law; (iii) make or seek to make a
general assignment for the benefit of its creditors; or (iv) apply for, or consent to, the appointment of a trustee, receiver,
or custodian for a substantial part of its properties.
ITEM 1A. RISK FACTORS
An investment in our common stock is highly
speculative and should be purchased only by persons who can afford to lose the entire amount invested in the common stock. Before
purchasing any of the shares of common stock, you should carefully consider the following factors relating to our business and
prospects. If any of the following risks occur, our business, financial condition or operating results could be materially adversely
affected. In such case, you may lose all or part of our investment. You should carefully consider the risks described below and
the other information in this annual report before in investing in our common stock.
Risks Related to Our Business
Our independent registered public
accounting firm has issued a going concern opinion; there is substantial uncertainty that we will continue operations in which
case you could lose your investment.
In their report dated March 15, 2019,
our independent registered public accounting firm, B F Borgers CPA PC, stated that our financial statements have been prepared
on a going concern basis which assumes that we will be able to realize our assets and discharge our liabilities and commitments
in the normal course of business for the foreseeable future. We had an accumulated deficit of $27,705,545 at December 31, 2018,
had a net loss of $4,635,865 and used net cash of $4,459,626 in operating activities for the twelve months ended December 31,
2018. (the net loss and accumulated deficit consist of $3,629,801 of non-cash stock-based compensation expense.) These factors
raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent
upon our generating profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay
our liabilities arising from normal business operations when they come due. Our management intends to finance operating costs
over the next twelve months with existing cash on hand and public issuance of common stock. Although we may be successful in obtaining
financing and/or generating revenue to fund our operations, meet regulatory requirements and achieve commercial goals, there are
no assurances that such funding will be achieved at a sufficient level or that we will succeed in our future operations.
If our Social Networking Platform
technology becomes obsolete, our ability to license our Platform and generate revenue from it will be negatively impacted.
If our Platform technology becomes obsolete,
our results of operations will be adversely affected. The market in which we compete is characterized by rapid technological change,
evolving industry standards, introductions of new products, and changes in customer demands that can render existing products obsolete
and unmarketable. Our Platform will require continuous upgrading, or our technology will become obsolete, and our business operations
will be curtailed or terminate.
New social network, online marketplace
or application platform features or changes to existing features could fail to attract new users, retain existing users or generate
revenue.
Our business strategy is dependent on our
ability on behalf of our licensees to develop and maintain networks, online marketplaces, and application platforms and features
to attract new users and retain existing ones. Any of the following events may cause decreased use of our properties:
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Emergence of competing websites and applications;
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Inability to convince potential users to join our network or that of our licensees;
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Technical issues related to mobile and desk top compatibility; and
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Rise in safety or privacy concerns.
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Should any of the above factors or a combination
of such factors have a material effect on our business, our revenues and results of operations will be negatively affected.
If we lose key management, our business
may materially suffer.
We are highly dependent on our management
team: Kenneth Tapp, our Chief Executive Officer/Chief Technology Officer; Mark DiSiena, our Chief Financial Officer; D. Scott Karnedy,
our Chief Operating Officer; as well as George Jage, MjLink’s President. We do not carry “key-man” life insurance
on our officers. If we lose the services of one or more of our officers and are unable to replace them with equally competent officers,
our business may be negatively impacted.
We expect to incur substantial expenses
to meet our reporting obligations as a public company.
We estimate that it will cost approximately
$100,000 annually to maintain the proper management and financial controls for our filings required as a public reporting company,
funds that would otherwise be spent for our business operations. Our public reporting costs may increase over time, which will
increase our expenses and may decrease our potential profitability.
We have generated a majority of our revenue
in 2016, 2017, and 2018 from advertising revenue, digital subscription services, and licensing revenues, respectively; the loss
of the majority of our revenues in future periods will negatively affect our results of operations.
During our 2018 fiscal year and for
the 12-months ended December 31, 2018, $215,000 or 97.5%, and December 31, 2017, $150,000 or 71.6%, respectively, of our total
revenues were generated from related party revenue; there are conflicts of interest between our officers’ interests who are
also officers of our licensees and our shareholders’ interests
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During our 2018 fiscal year ending December
31, 2018, $215,000 or 97.5%, and December 31, 2017, $150,000 or 71.6%, respectively, of our total revenues were derived from license
fees we received from Real Estate Social Network and Sports Social Network, which revenues are related party revenues. We have
a “software as a service” (SaaS) license agreement with Sports Social Network, which provides that Sports Social Network,
Inc. pays a license fee of $125,000 per year for a period of two years and thereafter we receive twenty percentage of their net
profits from the sale of online advertising and collected E-Commerce fees on their niche sports social networks from every country
around the world that they provide access to their websites and mobile apps that we provide through the licensing agreement. They
currently have social networks that are used by the Hunting and Fishing industry, the Racket Sports industry, the Golf industry
and the Soccer industry. They plan to launch over the coming twelve to twenty-four months, a niche Auto Racing social network,
a niche Skiing and Snowboarding social network, and a private little league sports social network for children, parents and coaches.
We have a software as a service (SaaS)
license agreement with Real Estate Social Network, which provides that Real Estate Social Network, Inc. pays a license fee of which
we receive twenty percentage of their net profits from the sale of online advertising and monthly digital subscription fees from
residential real estate professionals using their LikeRE.com social network from every country around the world that they provide
access to their website and mobile app that we provide through the licensing agreement. Both licensees have automatically renewing
annual license agreements with us and they aim to have millions of users on each of their social networks.
Our Chief Executive Office, Kenneth Tapp,
owns 47.5% of our outstanding shares and is also the Chief Technology Officer of Real Estate Social Network. and the Chief Technology
Officer of the Sports Social Network and owns approximately 40% each of those entities through LVC Consulting, LLC, of which he
is the only member. Our prior-Chief Financial Officer, Andrew Rodosevich, owns 11.7% of our outstanding shares and is a Managing
Member of Real Estate Social Network and Sports Social Network and owns approximately 10% of those entities through Rodosevich
Investments, LLC, of which Andrew Rodosevich is the sole member. Our related party revenues present conflicts of interests between
our officers’ interests and our shareholders” interests, which may favor the interests of our officers over that of
our shareholders.
The license fees we received from
our related parties who are also our licensees, Sports Social Network and Real Estate Social Network, may be undervalued because
the license agreements were negotiated between related parties.
Our Chief Executive Officer and Chief Financial
Officer negotiated the license fee agreements with our related parties/licensees, Sports Social Network and Real Estate Social
Network. Our Chief Executive Officer, Kenneth Tapp, owns 47.5% of our outstanding shares and is also the Chief Technology Officer
of Real Estate Social Network and Sports Social Network and owns approximately 40% each of those entities through LVC Consulting,
LLC, of which he is the only member. Our prior-Chief Financial Officer, Andrew Rodosevich, owns 11.7% of our outstanding shares
and is a Managing Member of Real Estate Social Network and Sports Social Network and owns approximately 10% of those entities through
Rodosevich Investments, LLC, of which Andrew Rodosevich is the sole member, and have conflicts of interest between their interests
and our shareholders’ interests.
Because the license agreements were negotiated
between related parties, the license granted to these related parties may have been undervalued, which may have otherwise resulted
in a higher amount of license fees being paid by other licensees to us.
Our business is highly competitive;
competition presents an ongoing threat to the success of our business.
We face significant competition with respect
to both our Cannabis/Hemp Social Networks and licensing of our E-Commerce Social Network Platforms, including MassRoots.com, Leafly.com,
Zillow.com, HOUZZ.com, TennisChannel.com and Cabelas.com which offer a variety of online advertising and E-Commerce offerings.
These competitors and other competitors have greater financial, operational, and personnel resources than we do. Should we fail
to develop strategies to overcome our competition, our revenues will be negatively impacted.
Our Chief Executive Officer has potential
conflicts of interest because of his interests in entities with which we have license agreements.
Our Chief Executive Officer is also the
Chief Technology Officer of our licensees, Real Estate Social Network and Sports Social Network, and owns approximately 40% of
each such entity through a limited liability company of which he is the sole member. We have a license agreement with Real Estate
Social Network providing that they will pay us 20% of the net profits from all monthly member subscriptions and online advertising
sales, paid annually, on the 31st day of January for the preceding year. We also have a license agreement with Sports Social Network
providing that they will pay us $125,000 annually for the first two years of this agreement (a total of $250,000 for the first
two years), and thereafter will receive 20% of the net profits from all online advertising sales and collected E-Commerce fees,
paid monthly with the option to pay any outstanding licensing fees annually, and to be received by us no later than the 31st day
of January for the preceding year. Our Chief Executive Officer owns 47.5% and of our outstanding shares. Accordingly, our Chief
Executive Officer has potential conflicts of interest between his interests in Real Estate Social Network and Sports Social Network
and our interests, which may result in them favoring the interests of those networks over our interests and that of our shareholders.
Because our directors and executive
officers are among our largest stockholders, they can exert significant control over our business and affairs and have actual or
potential interests that may depart from those of investors.
Certain of our executive officers and directors
own a significant percentage of our outstanding capital stock. As of the date of this annual report, our executive officers and
directors and their respective affiliates beneficially own over 75% of our outstanding voting stock, including our Chief Executive
Officer who owns 47.5% of our voting securities. The holdings of our directors and executive officers may increase further in the
future upon vesting or other maturation of exercise rights under any of the options or warrants they may hold or in the future
be granted, or if they otherwise acquire additional shares of our common stock. The interests of such persons may differ from the
interests of our other stockholders. As a result, in addition to their board seats and offices, such persons will have significant
influence and control over all corporate actions requiring stockholder approval, irrespective of how our company’s other
stockholders may vote, including the following actions:
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to elect or defeat the election of our directors;
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to amend or prevent amendment of our certificate of incorporation or by-laws;
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to effect or prevent a merger, sale of assets or other corporate transaction; and
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to control the outcome of any other matter submitted to our stockholders for a vote.
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This concentration of ownership by itself
may have the effect of impeding a merger, consolidation, takeover or other business consolidation, or discouraging a potential
acquirer from making a tender offer for our common stock, which in turn could reduce our stock price or prevent our stockholders
from realizing a premium over our stock price.
We will need substantial additional
funding to continue our operations, which could result in dilution to our stockholders; we may be unable to raise capital when
needed, if at all, which could cause us to have insufficient funds to pursue our operations, or to delay, reduce or eliminate
our development of new programs or commercialization efforts.
We expect to incur additional costs associated
with operating as a public company and to require substantial additional funding to continue to pursue our business and continue
with our expansion plans. We may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors
that may increase our capital needs and/or cause us to spend our cash resources faster than we expect. Accordingly, we expect that
we will need to obtain substantial additional funding in order to continue our operations. To date, we have financed our operations
entirely through equity investments by founders and other investors and the incurrence of debt, and we expect to continue to do
so in the foreseeable future. Additional funding from those or other sources may not be available when or in the amounts needed,
on acceptable terms, or at all. If we raise capital through the sale of equity, or securities convertible into equity, it would
result in dilution to our existing stockholders, which could be significant depending on the price at which we may be able to sell
our securities. If we raise additional capital through the incurrence of additional indebtedness, we would likely become subject
to further covenants restricting our business activities, and holders of debt instruments may have rights and privileges senior
to those of our equity investors. In addition, servicing the interest and principal repayment obligations under debt facilities
could divert funds that would otherwise be available to support development of new programs and marketing to current and potential
new clients. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate
development of new programs or future marketing efforts. Any of these events could significantly harm our business, financial condition
and prospects.
We must successfully maintain and/or
upgrade our information technology systems.
We rely on various information technology
systems, including our newly licensed NetSuite enterprise resource planning (ERP) system, that will be implemented by the end of
first quarter of Fiscal 2019 to manage our operations, which subjects us to inherent costs and risks associated with maintaining,
upgrading, replacing and changing these systems, including impairment of our information technology, potential disruption of our
internal control systems, substantial capital expenditures, demands on management time and other risks of delays or difficulties
in upgrading, transitioning to new systems or of integrating new systems into our current systems
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Our financial statements may not
be comparable to those of other companies.
Pursuant to Section 107(b) of the JOBS
Act, we have elected to use the extended transition period for complying with new or revised accounting standards under Section
102(b)(2) of The JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different
effective dates for public and private companies until those standards apply to private companies. As a result, our financial statements
may not be comparable to companies that comply with public company effective dates, and our stockholders and potential investors
may have difficulty in analyzing our operating results if comparing us to such companies.
We do not have an independent board
of directors which could create a conflict of interests and pose a risk from a corporate governance perspective.
Our Board of Directors consists mostly
of current executive officers and consultants, which means that we do not have any outside or independent directors. The lack of
independent directors:
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May prevent the Board from being independent from management in its judgments and decisions and
its ability to pursue the Board responsibilities without undue influence.
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May present us from providing a check on management, which can limit management taking unnecessary
risks.
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Create potential for conflicts between management and the diligent independent decision-making
process of the Board.
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Present the risk that our executive officers on the Board may have influence over their personal
compensation and benefits levels that may not be commensurate with our financial performance.
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Deprive us of the benefits of various viewpoints and experience when confronting challenges that
we face.
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Because officers serve on our Board of
Directors, it will be difficult for the Board to fulfill its traditional role as overseeing management.
Because we do not have a nominating,
audit or compensation committee, shareholders will have to rely on the entire board of directors, no members of which are independent,
to perform these functions.
We do not have a nominating, audit or compensation
committee or any such committee comprised of independent directors. The board of directors performs these functions. No members
of the board of directors are independent directors. Thus, there is a potential conflict in that board members who are also part
of management will participate in discussions concerning management compensation and audit issues that may affect management decisions.
Our election not to opt out of the
JOBS Act extended accounting transition period may not make our financial statements easily comparable to other companies.
Pursuant to the JOBS Act of 2012, as an
emerging growth company we can elect to opt out of the extended transition period for any new or revised accounting standards that
may be issued by the PCAOB or the SEC. We have elected not to opt out of such extended transition period, which means that when
a standard is issued or revised, and it has different application dates for public or private companies, we, as an emerging growth
company, can adopt the application date for private companies. Our financial statements may therefore not be comparable to those
of companies that comply with such new or revised accounting standards. As of present, there are no new or revised accounting standards
that have been issued by the PCAOB or the SEC applicable to us for which we have adopted the application date for private companies.
The JOBS Act will also allow us to postpone
the date by which we must comply with certain laws and regulations intended to protect investors and to reduce the amount of information
provided in reports filed with the SEC. The recently enacted JOBS Act is intended to reduce the regulatory burden on emerging growth
companies. The Registrant meets the definition of an emerging growth company and so long as it qualifies as an “emerging
growth company,” it will, among other things:
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be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent
registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting;
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be exempt from the “say on pay” provisions (requiring a non-binding shareholder vote
to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding
shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain
other business combinations) of the Dodd-Frank Act and certain disclosure requirements of the Dodd-Frank Act relating to compensation
of its chief executive officer;
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be permitted to omit the detailed compensation discussion and analysis from proxy statements and
reports filed under the Securities Exchange Act of 1934 and instead provide a reduced level of disclosure concerning executive
compensation; and
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be exempt from any rules that may be adopted by the Public Registrant Accounting Oversight Board
requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements.
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We intend to take advantage of some or
all the reduced regulatory and reporting requirements that will be available to it so long as it qualifies as an “emerging
growth company”. We have elected not to opt out of the extension of time to comply with new or revised financial accounting
standards available under Section 102(b) of the JOBS Act. Among other things, this means that the Registrant’s independent
registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control
over financial reporting so long as it qualifies as an emerging growth company, which may increase the risk that weaknesses or
deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an emerging growth
company, we may elect not to provide certain information, including certain financial information and certain information regarding
compensation of executive officers that would otherwise have been required to provide in filings with the SEC, which may make it
more difficult for investors and securities analysts to evaluate the Registrant. As a result, investor confidence and the market
price of our common stock may be adversely affected.
We may have difficulty obtaining
officer and director coverage or obtaining such coverage on favorable terms or financially be unable to obtain any such coverage,
which may make it difficult for our attracting and retaining qualified members of our board of directors, particularly to serve
on our audit committee and compensation committee, and qualified executive officers.
We also expect that being a public company
and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and
we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage or financially be unable to
obtain such coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board
of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
RISKS RELATED TO CANNABIS/HEMP RELATED
GOVERNMENT REGULATION
Our cannabis/hemp websites with respect
to cannabis are dependent on state laws pertaining to the cannabis industry.
Our wholly-owned subsidiary, MJLink, has
several websites in the cannabis/hemp area. As of the date of this statement, there are 29 states and the District of Columbia
that allow their citizens to use medical cannabis. Additionally, Colorado, Washington, Alaska, Oregon and Washington DC have legalized
cannabis for adult use at the state (or district) level. Continued development of the cannabis industry is dependent upon continued
legislative authorization of cannabis at the state level. Any number of factors pertaining to lack of public or legislative support
could slow or halt progress in this area. Further, progress in the cannabis industry is not assured.
Our cannabis/hemp websites are open
to all Internet users, which may result in legal consequences; in such event, our results of operations will be negatively affected.
Our Terms and Conditions contained in our
MJLink sites clearly state that our network and services pertaining to our cannabis/hemp related sites are only to be used by users
who are over 21 years old and located where the use of cannabis/hemp is permissible under state law and only in a manner which
would be permissible under the applicable state law. However, it is impractical to independently verify that all activity occurring
on our network fits into this description. If we become subject to federal and state law enforcement, our brand name and results
of operations will be negatively impacted.
Cannabis remains illegal under Federal
law.
Despite the development of a legal cannabis
industry under the laws of certain states, these state laws legalizing medical and adult cannabis use conflict with the Federal
Controlled Substances Act, which classifies cannabis as a Schedule-I controlled substance and makes cannabis use and possession
illegal on a national level. The United States Supreme Court has ruled that it is the Federal government that has the right to
regulate and criminalize cannabis, even for medical purposes, and thus Federal law criminalizing the use of cannabis preempts state
laws that legalize its use.
As the possession and use of cannabis is
illegal under the Federal Controlled Substances Act, we may be deemed to be aiding and abetting illegal activities through the
services that we provide to users and advertisers. As a result, we may be subject to enforcement actions by law enforcement authorities,
which would materially and adversely affect our business.
Under Federal law, and more specifically
the Federal Controlled Substances Act, the possession, use, cultivation, and transfer of cannabis is illegal. Our business provides
services to customers that were engaged in the business of possession, use, cultivation, and/or transfer of cannabis. As a result,
law enforcement authorities, in their attempt to regulate the illegal use of cannabis, may seek to bring an action or actions against
us, including, but not limited, to a claim of aiding and abetting another’s criminal activities. The Federal aiding and abetting
statute provides that anyone who “commits an offense against the United States or aids, abets, counsels, commands, induces
or procures its commission, is punishable as a principal.” 18 U.S.C. §2(a). Because of such an action, we may be forced
to cease operations and our investors could lose their entire investment. Such an action would have a material negative effect
on sale of our services.
Federal enforcement practices could change
with respect to services providers to participants in the cannabis industry, which could adversely impact us. If the Federal government
were to change its practices or were to expend its resources attacking providers in the cannabis industry, such action could have
a materially adverse effect on our operations, our customers, or the sales of our products.
It is possible that additional Federal
or state legislation could be enacted in the future that would prohibit our advertisers from selling cannabis, and, if such legislation
were enacted, such advertisers may discontinue the use of our services, our potential source of customers would be reduced, causing
revenues could decline. Further, additional government disruption in the cannabis industry could cause potential customers and
users to be reluctant use and advertise on our products, which would be detrimental to the Company. We cannot predict the nature
of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations
or administrative policies and procedures, when and if promulgated,
As the possession and use of cannabis
is illegal under the Federal Controlled Substances Act, we may be deemed to be aiding and abetting illegal activities through the
services that we provide to users and advertisers; as a result, we may be subject to enforcement actions by law enforcement authorities,
which would materially and adversely affect our business.
Under Federal law, and more specifically
the Federal Controlled Substances Act, the possession, use, cultivation, and transfer of cannabis is illegal. Our business provides
services to customers that may be directly or indirectly engaged in the business of possession, use, cultivation, and/or transfer
of cannabis. As a result, law enforcement authorities, in their attempt to regulate the illegal use of cannabis, may seek to bring
an action or actions against us, including, but not limited, to a claim of aiding and abetting another’s criminal activities.
The Federal aiding and abetting statute provides that anyone who “commits an offense against the United States or aids, abets,
counsels, commands, induces or procures its commission, is punishable as a principal.” 18 U.S.C. §2(a). As a result
of such an action, we may be forced to cease operations and our investors could lose their entire investment. Such an action would
have a material negative effect on our business and operations.
Federal enforcement practices could
change with respect to service providers or participants in the cannabis industry, which could adversely impact us. If the Federal
government were to change its practices or were to expend its resources attacking providers in the cannabis industry, such action
could have a materially adverse effect on our operations, our customers, or the sales of our products.
It is possible that additional Federal
or state legislation could be enacted in the future that would prohibit our advertisers from selling cannabis, and if such legislation
were enacted, such advertisers may discontinue the use of our services, our potential source of customers would be reduced, causing
revenues could decline. Further, additional government disruption in the cannabis industry could cause potential customers and
users to be reluctant to advertise on our sites, which would negatively affect our revenues. We cannot predict the nature of any
future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations
or administrative policies and procedures, when and if promulgated, could have on our business.
Participants in the cannabis industry
may have difficulty accessing the service of banks, which may make it difficult for us to operate.
Despite recent rules issued by the United
States Department of the Treasury mitigating the risk to banks who do business with cannabis companies permitted under state law,
as well as recent guidance from the United States Department of Justice, banks remain weary to accept funds from businesses in
the cannabis industry. Since the use of cannabis remains illegal under Federal law, there remains a compelling argument that banks
may be in violation of Federal law when accepting for deposit funds derived from the sale or distribution of cannabis. Consequently,
businesses involved in the cannabis industry continue to have trouble establishing banking relationships. An inability to open
bank accounts may make it difficult for us, or some of our advertisers, to do business.
Federal enforcement practices could
change with respect to services provided to participants in the cannabis industry, which could adversely impact us; if the Federal
government were to expend its resources on enforcement actions against service providers in the cannabis industry under guidance
provided by the Sessions Memo, including asset forfeiture actions, such actions could have a material adverse effect on our operations,
our customers, or our services.
On January 4, 2018, the U.S. Attorney General
Jeff Sessions issued the Sessions Memo stating that the Cole Memo was rescinded effectively immediately. Mr. Sessions stated that
“prosecutors should follow the well-established principles that govern all federal prosecutions,” which require “federal
prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities
set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact
of particular crimes on the community.” Mr. Sessions went on to state in the memorandum that “previous nationwide guidance
specific to marijuana is unnecessary and is rescinded, effective immediately.” It is unclear at this time whether the Sessions
Memo indicates that the Trump administration will strongly enforce the federal laws applicable to cannabis or what types of activities
will be targeted for enforcement. While we do not harvest, distribute or sell cannabis, we may be irreparably harmed by a change
in enforcement policies of the federal government depending on the nature of such change.
Attorney General Order No. 3946-2018 released
by Jeff Sessions on July 19, 2018 shows that he is in favor of law enforcement using civil asset forfeiture as “an effective
tool to reduce crime” and that “its use should be encouraged where appropriate.” It is possible that due to the
recent Sessions Memo our clients may discontinue the use of our services, our potential source of customers may be reduced, and
our revenues may decline. Further, additional government disruption in the cannabis industry could cause potential customers and
users to be reluctant to use our services or buy advertising from us. It is possible that due to the recent Sessions Memo our clients
may discontinue the use of our services, we or our customers may be subject to asset forfeiture actions, our potential source of
customers may be reduced, and our revenues may decline. Further, additional government disruption in the cannabis industry could
cause potential customers and users to be reluctant to use advertising services, which would negatively impact our results of operations.
Recently, the 2018 Farm Bill officially reclassifies hemp for
commercial uses after decades of statutes and legal enforcement conflating hemp and marijuana, the Farm Bill distinguishes between
the two by removing hemp from the Controlled Substances Act. While the two are closely related, hemp lacks the high concentration
of THC that is responsible for the “high” from the use of marijuana. This would effectively move regulation and enforcement
of the crop from the purview of the Drug Enforcement Agency to the U.S. Department of Agriculture.
RISKS RELATED TO OUR SECURITIES
An investment in our shares is highly
speculative
.
The shares of our common stock are highly
speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose the entire
amount invested in the common stock. Before purchasing any of the shares of common stock, you should carefully consider the risk
factors contained herein relating to our business and prospects. If any of the risks presented herein actually occur, our business,
financial condition or operating results could be materially adversely affected. In such case, the trading price of our common
stock could decline, and you may lose all or part of your investment.
The market price of our Common Stock
may fluctuate significantly in the future.
We expect that the market price of our
Common Stock may fluctuate in response to one or more of the following factors, many of which are beyond our control:
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competitive pricing pressures;
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our ability to market our services on a cost-effective and timely basis;
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changing conditions in the market;
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changes in market valuations of similar companies;
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stock market price and volume fluctuations generally;
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regulatory developments;
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fluctuations in our quarterly or annual operating results;
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additions or departures of key personnel; and
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future sales of our Common Stock or other securities.
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The price at which you purchase shares
of our Common Stock may not be indicative of the price that will prevail in the trading market. Shareholders may experience wide
fluctuations in the market price of our securities. These fluctuations may have a negative effect on the market price of our securities
and may prevent a shareholder from obtaining a market price equal to the purchase price such shareholder paid when the shareholder
attempts to sell our securities in the open market. In these situations, the shareholder may be required either to sell our securities
at a market price, which is lower than the purchase price the shareholder paid, or to hold our securities for a longer period than
planned. An inactive or low trading market may also impair our ability to raise capital by selling shares of capital stock. You
may be unable to sell your shares of Common Stock at or above your purchase price, which may result in substantial losses to you
and which may include the complete loss of your investment. Any of the risks described above could adversely affect our sales and
profitability and the price of our Common Stock.
There is no active public trading
market for our common stock and an active market may never develop.
The public trading market for our common
stock on the OTCMarkets OTCQB tier, has reflected an uneven and inactive market. Market liquidity will depend on the perception
of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be
no assurance given that there will be any awareness generated. Consequently, investors may be unable to liquidate their investment
or liquidate it at a price that reflects the value of the business. As a result, holders of our securities may not find purchasers
for our securities should they to sell securities held by them. Consequently, only investors having no need for liquidity in their
investment should purchase our securities and who can hold our securities for an indefinite period.
We have authorized 100,000,000 Preferred
Shares and 100,000,000 Class B Common Shares that may result in our officers having the ability to influence stockholder decisions.
The board of directors has the power to
establish the dividend rates, liquidation preferences, and voting rights of any series of preferred stock, and these rights may
be superior to the rights of holders of the Shares. The board of directors may also establish redemption and conversion terms and
privileges with respect to any shares of preferred stock; as such, if we establish such terms and privileges to our preferred shares
and we sell or issue preferred shares in future transactions to new investors such investors in subsequent transactions could gain
rights, preferences and privileges senior to those of holders of our common stock. Any such preferences may operate to the detriment
of the rights of the holders of the Shares, and further, could be used by the board of directors as a device to prevent a change
in control of the Registrant. Our Board of Directors has not yet established the rights to Class B Common Shares, but such rights
may include additional voting power to our officers giving them control over a majority of our outstanding voting power, they would
then have the power to control future stock-based acquisition transactions, to fund employee equity incentive programs, and give
them the ability to elect certain directors and to determine the outcome of all matters submitted to a vote of our stockholders.
This concentrated control eliminates other stockholders’ ability to influence corporate matters
We expect to seek additional financing
in order to provide working capital to our business. Our board of directors has the power to issue any or all of such authorized
but unissued shares at any price they consider sufficient, without stockholder approval. The issuance of additional shares of common
stock in the future will reduce the proportionate ownership and voting power of current stockholders
Future sales and issuances of our
capital stock, exercise of warrants outstanding or rights to purchase capital stock could result in additional dilution of the
percentage ownership of our stockholders and could cause our stock price to decline.
We may issue additional securities following
the completion of this offering. Future sales and issuances of our capital stock or rights to purchase our capital stock could
result in substantial dilution to our existing stockholders. We may sell common stock, convertible securities and other equity
securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities
in subsequent transactions, investors may be materially diluted. Additionally, because we have 16,300,020 Warrants outstanding,
which are exercisable for five cents per share with a warrant exercise period of 5 years, any material exercise of the Warrants
will because substantial dilution to your shares.
Any market that develops in shares
of our common stock will be subject to the penny stock regulations and restrictions pertaining to low priced stocks that will create
a lack of liquidity and make trading difficult or impossible.
The trading of our securities will be in
the over-the-counter market, which is commonly referred to as the OTCQB as maintained by FINRA. As a result, an investor may find
it difficult to dispose of, or to obtain accurate quotations as to the price of our securities.
Rule 3a51-1 of the Exchange Act establishes
the definition of a “penny stock,” for purposes relevant to us, as any equity security that has a minimum bid price
of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions
that are not available to us. It is likely that our shares will be penny stocks for the immediately foreseeable future. This classification
severely and adversely affects any market liquidity for our common stock.
For any transaction involving a penny stock,
unless exempt, the penny stock rules require that a broker or dealer approve a person’s account for transactions in penny
stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and
quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the
broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable
determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge
and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver,
prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which,
in highlight form, sets forth:
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the basis on which the broker or dealer made the suitability determination, and
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that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Disclosure also must be made about the
risks of investing in penny stock in both public offerings and in secondary trading and commissions payable to both the broker-dealer
and the registered representative, current quotations for the securities and the rights and remedies available to an investor in
cases of fraud in penny stock transactions. Additionally, monthly statements must be sent disclosing recent price information for
the penny stock held in the account and information on the limited market in penny stocks.
Because of these regulations, broker-dealers
may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt
to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares
in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional
sales practice and disclosure requirements could impede the sale of our securities when our securities become publicly traded.
In addition, the liquidity for our securities may decrease, with a corresponding decrease in the price of our securities. Our shares,
probably, will be subject to such penny stock rules for the foreseeable future and our shareholders will, likely, find it difficult
to sell their securities.
Registered Broker-Dealers and Clearing
firms are refusing to trade or clear stocks that are directly or indirectly related to the cannabis and hemp industries, which
may negatively impact the trading of our common stock shares.
Because registered Broker-Dealers and Clearing
firms are refusing to trade or clear stocks that represent companies directly or indirectly related to the cannabis and hemp industries,
certain brokerage firms can no longer trade such stocks on behalf of their clients. Should this trend increase, trading in our
stock may be negatively impacted, including lower trading volume and stock prices.
If we are unable to establish appropriate
internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the
restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors
to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common
stock.
Effective internal controls are necessary
for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system of internal control over financial
reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal
financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles.
The forward-looking statements contained
herein report may prove incorrect
.
This filing contains certain forward-looking
statements, including among others: (i) anticipated trends in our financial condition and results of operations; (ii) our business
strategy for expanding our business through regional centers; and (iii) our ability to distinguish ourselves from our current and
future competitors. These forward-looking statements are based largely on our current expectations and are subject risks and uncertainties.
Actual results could differ materially from these forward-looking statements. In addition to the other risks described elsewhere
in this “Risk Factors” discussion, important factors to consider in evaluating such forward-looking statements include:
(i) changes to external competitive market factors or in our internal budgeting process which might impact trends in our results
of operations; (ii) anticipated working capital or other cash requirements; (iii) changes in our business strategy or an inability
to execute our strategy due to unanticipated changes in the environmental cleanup industry; and (iv) various competitive factors
that may prevent us from competing successfully in the marketplace. Considering these risks and uncertainties, many of which are
described in greater detail elsewhere in this “Risk Factors” discussion, there can be no assurance that the events
predicted in forward-looking statements contained in this Prospectus will, in fact, transpire.
Cautionary Note
We have sought to identify what we believe
to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized
nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such
risk factors before making an investment decision with respect to our common stock.