ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion should be read in conjunction with our consolidated financial statements and the related notes that appear
elsewhere in this Annual Report. The following discussion contains forward-looking statements that reflect our plans, estimates
and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include those discussed below and elsewhere in this Annual Report on Form10-K.
Overview
We
are a Nevada corporation formed on August 30, 1985. Our headquarters are in Englewood, Colorado. We have been engaged in our current
business model since June of 2016, as a result of our having been discharged from a receivership and acquiring Life Marketing,
Inc., which was in a different industry as our previous business.
We
have experienced recurring losses and negative cash flows from operations since inception, including in our current business model.
We anticipate that our expenses will increase as we ramp up our expansion, which likely will lead to additional losses, until
such time that we approach profitability, or which there are no assurances. We have relied on equity and debt financing to fund
operations to-date. There can be no guarantee that we will ever become profitable, or that adequate additional financing will
be realized in the future or otherwise may be available to us on acceptable terms, or at all. If we are unable to raise capital
when needed, we would be forced to delay, reduce or eliminate our expansion efforts. We will need to generate significant revenues
to achieve profitability, of which there are no assurances.
Trends
and Uncertainties
Our
business is subject to the trends and uncertainties associated with expansion of
|
|
of
niche industry social networks and ecommerce solutions are increasing in popularity and availability. At some point, industry
saturation of technology solutions that we provide to, and support for TBI participant tech startup companies will make it
more difficult for our business model to expand. This will force our company to innovate new technology solutions, which will
undoubtedly cost more money to fund.
|
Going
Concern
The
accompanying consolidated 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 $31,766,214 at December 31, 2020, had a net loss of $202,720 and used net cash of $422,337 in
operating activities for the twelve months ended December 31, 2020. 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. While we believe that we will be successful generating revenue to fund our operations, meet regulatory requirements and
achieve commercial goals, there are no assurances that we will succeed in our future operations.
We
will attempt to overcome the going concern opinion by increasing our revenues, as follows:
|
●
|
By
increasing our TBI licensing to additional tech company startups;
|
The
foregoing goals will increase expenses and lead to possible net losses. There is no assurance that we will ever be profitable.
The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue
as a going concern. There is no assurance we will be successful in any of these goals.
COMPARATIVE
RESULTS FOR FISCAL YEARS
Consolidated
Performance - Results of Operations Years Ended December 31, 2020 and 2019
SOCIAL
LIFE NETWORK, INC
Consolidated
(audited)
|
|
For the Three Months Ended
December 31,
|
|
|
|
|
|
For the Twelve
Months Ended
December 31,
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$ Change
|
|
|
2020
|
|
|
2019
|
|
|
$ Change
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital subscription revenue
|
|
$
|
1,510
|
|
|
$
|
7,396
|
|
|
|
(5,886
|
)
|
|
$
|
24,948
|
|
|
$
|
7,604
|
|
|
|
17,344
|
|
Licensing Revenue – related party
|
|
|
62,500
|
|
|
|
225,000
|
|
|
|
(162,500
|
)
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
-
|
|
Advertising revenue
|
|
|
-
|
|
|
|
(2,096
|
)
|
|
|
2,096
|
|
|
|
-
|
|
|
|
404
|
|
|
|
(404
|
)
|
Event revenue
|
|
|
-
|
|
|
|
35,495
|
|
|
|
35,495
|
|
|
|
-
|
|
|
|
111,480
|
|
|
|
(111,480
|
)
|
Digital marketing revenue
|
|
|
-
|
|
|
|
39,800
|
|
|
|
(39,800
|
)
|
|
|
-
|
|
|
|
113,000
|
|
|
|
(113,000
|
)
|
Total revenue
|
|
|
64,010
|
|
|
|
305,595
|
|
|
|
(256,585
|
)
|
|
|
274,948
|
|
|
|
482,488
|
|
|
|
(207,540
|
)
|
Costs of goods sold
|
|
|
116
|
|
|
|
46,332
|
|
|
|
(46,216
|
)
|
|
|
-
|
|
|
|
231,081
|
|
|
|
(231,081
|
)
|
Gross margin
|
|
|
63,894
|
|
|
|
259,263
|
|
|
|
(210,368
|
)
|
|
|
274,948
|
|
|
|
251,407
|
|
|
|
23,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense
|
|
|
11,183
|
|
|
|
149,714
|
|
|
|
(138,531
|
)
|
|
|
134,511
|
|
|
|
671,852
|
|
|
|
(537,341
|
)
|
Non-cash stock expense
|
|
|
-
|
|
|
|
220,500
|
|
|
|
(220,500
|
)
|
|
|
-
|
|
|
|
2,087,083
|
|
|
|
(2,087,083
|
)
|
Sales and marketing
|
|
|
1,377
|
|
|
|
(5,727
|
)
|
|
|
7,104
|
|
|
|
10,703
|
|
|
|
110,552
|
|
|
|
(99,849
|
)
|
General and administrative
|
|
|
33,784
|
|
|
|
55,181
|
|
|
|
(21,396
|
)
|
|
|
391,293
|
|
|
|
726,225
|
|
|
|
(334,932
|
)
|
Total operating expenses
|
|
|
46,344
|
|
|
|
419,688
|
|
|
|
(373,323
|
)
|
|
|
536,507
|
|
|
|
3,595,712
|
|
|
|
(3,059,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from operations
|
|
|
17,550
|
|
|
|
(160,405
|
)
|
|
|
177,955
|
|
|
|
(261,559
|
)
|
|
|
(3,344,304
|
)
|
|
|
3,082,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (expense) income
|
|
|
(17,789
|
)
|
|
|
30,624
|
|
|
|
48,413
|
|
|
|
(101,673
|
)
|
|
|
(421,627
|
)
|
|
|
523,300
|
|
Other non-operating (expenses) income
|
|
|
149,708
|
|
|
|
(50,117
|
)
|
|
|
199,825
|
|
|
|
160,512
|
|
|
|
(92,017
|
)
|
|
|
68,495
|
|
Total other expenses
|
|
|
131,919
|
|
|
|
(19,493
|
)
|
|
|
(151,412
|
)
|
|
|
58,839
|
|
|
|
(513,644
|
)
|
|
|
(572,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
149,469
|
|
|
$
|
(179,898
|
)
|
|
|
329,367
|
|
|
$
|
(202,720
|
)
|
|
$
|
(3,857,948
|
)
|
|
|
3,655,228
|
|
Consolidated
Performance - Results of Operations for the 3-month periods ended December 31, 2020 and 2019
Revenues
For
the 3-month period ending December 31, 2020, we recognized revenue from licensing of $62,500 compared to $225,000 of revenue for
the 3-month period ending December 31, 2019. The $162,500 decrease is due to a renewed licensing deal with two of our licensees
that provides for a minimum guarantee annual payment of $125,000 from each of our licensees through 2020 rather than relying on
transactional usage of our platform in first quarter 2019.
For
the 3-month period ending December 31, 2020, we recognized $1,510 digital subscription revenue as compared to $7,396 for the 3-month
period ending December 31, 2019. The $5,886 decrease in revenue is primarily attributable to recognizing digital subscription
service of MjLink over twelve months of service.
For
the 3-month period ending December 31, 2020, we recognized zero event revenue as compared to $35,495 for the 3-month period ending
December 31, 2019. The $35,495 decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel
to cancel all in-person contact at tradeshows, with investors, and related travel for the foreseeable future. We also wrote off
$15,000 of unpaid fees due form attendance to our MjLink event in fiscal year 2019 as bad debt expense.
For
the 3-month period ending December 31, 2020, we recognized zero digital marketing revenue as compared to $39,800 for the 3-month
period ending December 31, 2019. The $39,800 decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced
our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future and as a result
there were no marketing campaigns to promote attendees at our events.
For
the 3-month period ending December 31, 2020, we recognized zero advertising revenue as compared to loss of $2,096 for the 3-month
period ending December 31, 2019. The difference is primarily attributable to the mandatory COVID-19 shutdown, which forced our
personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future and as a result
there were no marketing campaigns to promote attendees at our events.
Cost
of Revenue
Cost
of revenue was a $116 for the 3-month period ending December 31, 2020 compared to $46,332 the 3-month period ending December 31,
2019, representing a decrease of $46,216 or 100%. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which
forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future, plus
the recoupment of some of our initial costs to set up events in the first quarter 2020 plus refunds from prepaid costs.
Operating
Expenses
Cash-paid
compensation expense decreased by $138,531 or 93% to $11,183 for the 3-month period ending December 31, 2020 from $149,714 for
the 3-month period ending December 31, 2020. The decrease is primarily attributable to reducing the need for consultants and professionals
that were required to meet MjLink’s growth strategies at the onset of January 2019.
During
the 3-month period ending December 31, 2020, we recognized zero of non-cash stock-based compensation expense for employees, consultants,
and professionals compared to $220,500 for the 3-month period ending December 31, 2019. The decrease is primarily due to a reduced
need for additional headcount, streamlining headcount, and being able to maximize productivity with fewer hires as compared to
our hiring plans in 2019.
During
the 3-month periods ending December 31, 2020 and 2019, we recognized zero of non-cash stock-based compensation expense for warrants
for the respective quarters.
Sales
and marketing expense decreased $7,104 or 124% to negative $1,377 for the 3-month period ending December 31, 2020 from negative
$5,727 for the 3-month period ending December 31, 2019. The increase is primarily attributable to the mandatory COVID-19 shutdown,
which forced MjLink to cancel any in-person events for the foreseeable future including in its first quarter 2020 as opposed to
our investing/ramping-up efforts in 2019 plus refunds of prepaid expenses.
General
and administrative expense decreased by $21,396, or 38% to $33,784 for the 3-month period ending December
31, 2020 from $55,181 for the 3-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory
COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the
foreseeable future. In addition, unrelated to COVID 19, the decrease is also due to a reduced need for additional headcount, streamlining
headcount, and being able to maximize productivity with fewer hires as compared to our hiring plans in 2019 bringing the Company
to a expense level to the level before the MjLink event business was contemplated. We also wrote off $15,000 of unpaid fees
due from attendance to our MjLink event in fiscal year 2019 as bad debt expense.
Other
expense
During
the three months ended December 31, 2020, we incurred $131,920 of other income from gain on conversion of convertible debt of
$149,709 associated with converting our debt into common shares to our debt holders, which offset the interest charges of $17,789
from our convertible debt outstanding. During the three months ended December 31, 2019 we had zero other expenses or income.
Net
Loss
Our
net income for the for the 3-month period ending December 31, 2020 was $149,469 compared to a net loss of $179,898 for the 3-month
period ending December 31, 2019. The decrease in net loss to profitability is a direct result of lack of issuance of non-cash
stock-based compensation expenses to our personnel, decrease in operating expenses, gain from convertible debt conversions, and
reduction in revenue due to the unprecedented and mandatory COVID-19 shutdown.
Consolidated
Performance - Results of Operations for the 12-month periods ended December 31, 2020 and 2019
Revenues
For
the 12-month period ending December 31, 2020, we recognized revenue from licensing of $250,000 compared to $250,000 of revenue
for the 12-month period ending December 31, 2019. The flat revenue is due to a renewed licensing deal with two of our licensees
that provides for a minimum guarantee annual payment of $125,000 from each of our two licensees rather than relying on transactional
usage of our platform in first quarter 2019.
For
the 12-month period ending December 31, 2020, we recognized $24,948 digital subscription revenue as compared to $7,604 for the
12-month period ending December 31, 2019. The increase in revenue is primarily attributable to recognizing digital subscription
service of MjLink over twelve months of service.
For
the 12-month period ending December 31, 2020, we recognized zero advertising revenue as compared to $404 for the 12-month period
ending December 31, 2019. The decrease in revenue is primarily attributable to eliminating our sales and marketing staff during
the latter part of fiscal year 2019.
For
the 12-month period ending December 31, 2020, we recognized zero event revenue as compared to $111,480 for the 12-month period
ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel
to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future. The company also wrote off
$15,000 of unpaid fees due form attendance to our MjLink event in fiscal year 2019 as a bad debt expense.
For
the 12-month period ending December 31, 2020, we recognized zero digital marketing revenue as compared to $113,000 for the 12-month
period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel
to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future and as a result there were
no marketing campaigns to promote attendees at our events.
Cost
of Revenue
Cost
of revenue was zero for the 12-month period ending December 31, 2020 compared to $231,081 the 12-month period ending December
31, 2019, representing a decrease of $231,081 or 100%. The decrease is primarily attributable to the mandatory COVID-19
shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable
future, plus the recoupment of some of our initial costs to set up events in the first quarter 2020 plus refunds from prepaid
costs.
Operating
Expenses
Cash-paid
compensation expense decreased by $537,340 or 80% to $134,511 for the 12-month period ending December 31, 2020 from $671,851 for
the 12-month period ending December 31, 2019. The decrease is primarily attributable to the resignation of George Jage as MjLink’s
President in September 2019, which was not refilled, and reducing the need for consultants and professionals that were required
to meet MjLink’s growth strategies in 2019.
During
the 12-month period ending December 31, 2020, we recognized zero of non-cash stock-based compensation expense for employees, consultants,
and professionals compared to $2,087,083 for the 12-month period ending December 31, 2019. The decrease is primarily due to a
reduced need for additional headcount, streamlining headcount, and being able to maximize productivity with fewer hires as compared
to our hiring plans in 2019.
During
the 912month periods ending December 31, 2020 and 2019, we recognized zero of non-cash stock-based compensation expense for warrants
for the respective quarters.
Sales
and marketing expense decreased $99,849 or 90% to $10,703 for the 12-month period ending December 31, 2020 from $110,552 for the
12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced
MjLink to cancel any in-person events for the foreseeable future including in its first quarter 2020 as opposed to our investing/ramping-up
efforts in the first quarter of 2019.
General
and administrative expense decreased by $334,932 or 46% to $391,293 for the 12-month period ending December
31, 2020 from $726,225 for the 12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory
COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the
foreseeable future. In addition, unrelated to COVID 19, the decrease is also due to a reduced need for additional headcount, streamlining
headcount, and being able to maximize productivity with fewer hires as compared to our hiring plans in 2019 bringing the Company
to an expense spending to the level before the MjLink event business was contemplated. We also wrote off $15,000 of unpaid
fees due from attendance to our MjLink event in fiscal year 2019 as bad debt expense.
Other
expense
During
the 12-months ended December 31, 2020, we incurred $58,840 of other income predominantly due to interest charges of $101,673 from
our convertible debt outstanding which was offset by gain associated with converting $154,112 our debt into common shares to our
debt holders.
Net
Loss
Our
net loss for the for the 12-month period ending December 31, 2020 was $202,720 compared to a net loss of $3,857,948 for the 12-month
period ending December 31, 2019. The decrease in net loss a direct result of lack of issuance of non-cash stock-based compensation
expenses to our personnel and a decrease in operating expenses due to the unprecedented and mandatory COVID-19 shutdown.
Segment
Performance - Results of Operations Years Ended December 31, 2020 and 2019
MJLINK.COM
INC
(audited)
|
|
For the Three Months Ended
December 31,
|
|
|
|
|
|
For the Twelve Months Ended
December 31,
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$ Change
|
|
|
2020
|
|
|
2019
|
|
|
$ Change
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital subscription revenue
|
|
$
|
1,510
|
|
|
$
|
7,396
|
|
|
|
(5,886
|
)
|
|
$
|
24,948
|
|
|
$
|
7,604
|
|
|
|
17,344
|
|
Advertising revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,500
|
|
|
|
(2,500
|
)
|
Event revenue
|
|
|
-
|
|
|
|
35,495
|
|
|
|
(35,495
|
)
|
|
|
-
|
|
|
|
111,480
|
|
|
|
(111,480
|
)
|
Digital marketing revenue
|
|
|
-
|
|
|
|
39,800
|
|
|
|
(39,800
|
)
|
|
|
-
|
|
|
|
113,000
|
|
|
|
(113,000
|
)
|
Total revenue
|
|
|
1,510
|
|
|
|
82,691
|
|
|
|
(81,181
|
)
|
|
|
24,948
|
|
|
|
234,584
|
|
|
|
(209,636
|
)
|
Costs of goods sold
|
|
|
-
|
|
|
|
63,789
|
|
|
|
(63,789
|
)
|
|
|
-
|
|
|
|
244,192
|
|
|
|
(244,192
|
)
|
Gross margin
|
|
|
1,510
|
|
|
|
18,902
|
|
|
|
17,391
|
|
|
|
24,948
|
|
|
|
(9,608
|
)
|
|
|
44,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense
|
|
|
466
|
|
|
|
46,344
|
|
|
|
(45,878
|
)
|
|
|
6,206
|
|
|
|
218,655
|
|
|
|
(212,449
|
)
|
Non-cash stock expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Sales and marketing
|
|
|
-
|
|
|
|
(6,520
|
)
|
|
|
6,520
|
|
|
|
8,144
|
|
|
|
51,152
|
|
|
|
(43,008
|
)
|
General and administrative
|
|
|
15,000
|
|
|
|
26,182
|
|
|
|
(11,182
|
)
|
|
|
18,670
|
|
|
|
63,198
|
|
|
|
(44,528
|
)
|
Total operating expenses
|
|
|
15,466
|
|
|
|
66,006
|
|
|
|
50,540
|
|
|
|
33,021
|
|
|
|
333,006
|
|
|
|
(299,985
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from operations
|
|
|
(13,956
|
)
|
|
|
(47,103
|
)
|
|
|
33,148
|
|
|
|
(8,073
|
)
|
|
|
(342,613
|
)
|
|
|
334,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other non-operating expenses
|
|
|
-
|
|
|
|
15
|
|
|
|
(15
|
)
|
|
|
-
|
|
|
|
(14,535
|
)
|
|
|
14,535
|
|
Total other expenses
|
|
|
-
|
|
|
|
15
|
|
|
|
(15
|
)
|
|
|
-
|
|
|
|
(14,535
|
)
|
|
|
14,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(13,955
|
)
|
|
$
|
(47,118
|
)
|
|
|
33,163
|
|
|
$
|
(8,073
|
)
|
|
$
|
(328,078
|
)
|
|
|
320,005
|
|
Segmented
Performance - Results of Operations for the 3-month periods ended December 31, 2020 and 2019
Revenues
For
the 3-month period ending December 31, 2020, we recognized $1,510 digital subscription revenue as compared to $7,396 for the 3-month
period ending December 31, 2019. The decrease in revenue is primarily attributable to recognizing digital subscription service
of MjLink over twelve months of service.
For
the 3-month period ending December 31, 2020, we recognized zero event revenue as compared to $35,495 for the 3-month period ending
December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel
all in-person contact at tradeshows, with investors and travel for the foreseeable future. The company also wrote off $15,000
of unpaid fees due form attendance to our MjLink event in fiscal year 2019 as a bad debt expense.
For
the 3-month period ending December 31, 2020, we recognized zero digital marketing revenue as compared to $39,800 for the 3-month
period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel
to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future and as a result there were
no marketing campaigns to promote attendees at our events.
For
the 3-month period ending December 31, 2020 and 2019, we recognized zero advertising revenue.
Cost
of Revenue
Cost
of revenue was zero for the 3-month period ending December 31, 2020 compared to $63,789 for the 3-month period ending December
31, 2019, representing a decrease of $63,789 or 100%. The decrease is to maintain the MjLink site and overall drop in cost is
primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows,
with investors and travel for the foreseeable future.
Operating
Expenses
Cash-paid
compensation expense decreased by $45,878 or 99% to $466 for the 3-month period ending December 31, 2020 from $46,344 for the
3-month period ending December 31, 2020. The decrease is primarily attributable to reducing the need for consultants and professionals
that were required to meet MjLink’s growth strategies in 2019.
During
the 3-month periods ending December 31, 2020 and 2019, we recognized zero non-cash stock-based compensation expense for employees,
consultants, and professionals.
Sales
and marketing expense decreased by $6,520 or 100% to zero for the 3-month period ending December 31, 2020 from $6,520 for the
3-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown which forced
MjLink to cancel any in-person events for the foreseeable future including in its first quarter 2020. At this time last year,
the Company was investing and ramping-up its efforts for in-person events for the fourth quarter after a pause in the third quarter.
General
and administrative expense decreased by $11,182, or 42% to $15,000 for the 3-month period ending December
31, 2020 from $26,182 for the 3-month period ending December 31, 2019. The decrease is due to overall drop in cost is primarily
attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with
investors and travel for the foreseeable future. In addition, unrelated to COVID 19 the decrease is also due to a reduced need
for additional headcount, streamlining headcount, and being able to maximize productivity with fewer hires as compared to our
hiring plans in 2019. We also wrote off $15,000 of unpaid fees due from attendance to our MjLink event in fiscal year 2019
as bad debt expense.
Other
expense
During
the three months ended December 31, 2020, we incurred zero other expenses or income related to COVID 19. During the three months
ended December 31, 2019 we had $15 from startup expenses and zero interest.
Net
Loss
Our
net loss for the for the 3-month period ending December 31, 2020 was $13,955 compared to a net loss of $47,188 for the 3-month
period ending December 31, 2019. The net loss is a direct result of recouping some of our initial costs to set up events in the
first quarter 2020 due to suspending all in-person MjLink revenue generating activities from the unprecedented and mandatory COVID-19
shutdown and the need to maintain levels of activities to process the Regulation A+ filing and acceptance.
Segmented
Performance - Results of Operations for the 12-month periods ended December 31, 2020 and 2019
Revenues
For
the 12-month period ending December 31, 2020, we recognized $24,948 digital subscription revenue as compared to $7,604 for the
12-month period ending December 31, 2019. The increase in revenue is primarily attributable to recognizing digital subscription
service of MjLink over twelve months of service.
For
the 12-month period ending December 31, 2020, we recognized zero event revenue as compared to $111,480 for the 12-month period
ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel
to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future. The company also wrote off
$15,000 of unpaid fees due form attendance to our MjLink event in fiscal year 2019 as a bad debt expense.
For
the 12-month period ending December 31, 2020, we recognized zero digital marketing revenue as compared to $113,000 for the 12-month
period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel
to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future and as a result there were
no marketing campaigns to promote attendees at our events.
For
the 12-month period ending December 31, 2020, we recognized zero advertising revenue as compared to $2,500 for the 12-month period
ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel
to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future and as a result there were
no marketing campaigns to promote attendees at our events.
Cost
of Revenue
Cost
of revenue was a zero for the 12-month period ending December 31, 2020 compared to $244,192 the 12-month period ending
December 31, 2019, representing a decrease of or 100.0%. The decrease is primarily attributable to the mandatory COVID-19
shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable
future, plus the recoupment of some of our initial costs to set up events in the first quarter 2020.
Operating
Expenses
Cash-paid
compensation expense decreased by $212,449 or 97% to $6,206 for the 12-month period ending December 31, 2020 from $218,655 for
the 12-month period ending December 31, 2020. The decrease is primarily attributable to reducing the need for consultants and
professionals that were required to meet MjLink’s growth strategies at the onset of January 2019 and the closure of in person
events for fiscal year 2020 due to COVID 19.
During
the 12-month periods ending December 31, 2020 and 2019, we recognized zero non-cash stock-based compensation expense for employees,
consultants, and professionals.
Sales
and marketing expense decreased by $43,008 or 84.0% to $8,144 for the 12-month period ending December 31, 2020 from $51,152 for
the 12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which
forced MjLink to cancel any in-person events for the foreseeable future including in its first quarter 2020. At this time last
year, we were investing and ramping-up its efforts for in-person events.
General
and administrative expense decreased by $44,528, or 71% to $33,021 for the 12-month period ending December
31, 2020 from $63,198 for the 12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory
COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the
foreseeable future. In addition, unrelated to COVID 19 the decrease is also due to a reduced need for additional headcount, streamlining
headcount, and being able to maximize productivity with fewer hires as compared to our hiring plans in the first and second quarter
2019. We also wrote off $15,000 of unpaid fees due from attendance to our MjLink event in fiscal year 2019 as bad debt expense.
Other
expense
During
the twelve months ended December 31, 2020, we incurred zero of other income or expense. During the twelve months ended December
31, 2019 we had $14,535 other income due to refunds related to COVID 19.
Net
Loss
Our
net loss for the for the 12-month period ending December 31, 2020 was $8,073 compared to a net loss of $328,078 for the 12-month
period ending December 31, 2019. The drop in net loss is a direct result of suspending all in-person MjLink revenue generating
activities from the unprecedented and mandatory COVID-19 shutdown
The
following tables summarize the audited GAAP reportable segment for fiscal 2020:
SEGMENTED
STATEMENTS OF OPERATIONS
FOR
THE YEAR ENDED DECEMBER 31, 2020
(audited)
|
|
Consolidated
|
|
|
Social Life Network
|
|
|
MjLink.com
|
|
Revenue
|
|
$
|
274,978
|
|
|
$
|
250,000
|
|
|
$
|
24,948
|
|
Cost of Sales
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Gross Margin
|
|
|
274,978
|
|
|
|
250,000
|
|
|
|
24,948
|
|
Operating Expenses
|
|
|
536,507
|
|
|
|
503,486
|
|
|
|
33,021
|
|
Loss from Operations
|
|
|
(261,560
|
)
|
|
|
(253,487
|
)
|
|
|
(8,073
|
)
|
Other Income/(Expenses)
|
|
|
58,840
|
|
|
|
58,840
|
|
|
|
-
|
|
Net loss
|
|
$
|
(202,720
|
)
|
|
$
|
(194,647
|
)
|
|
$
|
(8,073
|
)
|
SEGMENTED
BALANCE SHEETS
FOR
THE YEAR ENDED DECEMBER 31, 2020
(audited)
|
|
Consolidated
|
|
|
Social Life Network
|
|
|
MjLink.com
|
|
Cash
|
|
$
|
193
|
|
|
$
|
(307
|
)
|
|
$
|
500
|
|
Accounts receivable
|
|
|
28,052
|
|
|
|
-
|
|
|
|
28,052
|
|
Accounts receivable – related party
|
|
|
368,000
|
|
|
|
368,000
|
|
|
|
-
|
|
Other current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total Asset
|
|
$
|
396,245
|
|
|
$
|
367,693
|
|
|
$
|
28,552
|
|
Accounts payable
|
|
|
200,123
|
|
|
|
200,123
|
|
|
|
-
|
|
Other current liabilities
|
|
|
102,720
|
|
|
|
102,720
|
|
|
|
-
|
|
PPP Loan
|
|
|
163,111
|
|
|
|
163,111
|
|
|
|
|
|
Convertible Debt
|
|
|
128,346
|
|
|
|
128,346
|
|
|
|
-
|
|
Intercompany obligations
|
|
|
-
|
|
|
|
(364,689
|
)
|
|
|
364,689
|
|
Equity
|
|
|
(198,055
|
)
|
|
|
138,081
|
|
|
|
(336,137
|
)
|
Total Liabilities & Equity
|
|
$
|
396,245
|
|
|
$
|
367,693
|
|
|
$
|
28,552
|
|
Income
Tax
Deferred
taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating
loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax
rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment. The U.S. federal income tax rate of 21% plus the Colorado income tax rate of 4.63% - combined
rate of 25.63% - is being used due to the new tax law recently enacted.
Net
deferred tax assets consist of the following components as of December 31:
|
|
2020
|
|
|
2019
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
NOL Carryover
|
|
$
|
(452,600
|
)
|
|
$
|
(452,600
|
)
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Less valuation allowance
|
|
|
452,600
|
|
|
|
456,200
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The
income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to tax-effected
income from continuing operations for the period ended December 31, due to the following:
|
|
2020
|
|
|
2019
|
|
Book loss
|
|
$
|
(988,800
|
)
|
|
$
|
(1,188,200
|
)
|
Meals and entertainment
|
|
|
1,200
|
|
|
|
300
|
|
Warrant expense
|
|
|
75,000
|
|
|
|
930,300
|
|
Stock based compensation
|
|
|
460,000
|
|
|
|
288,600
|
|
Valuation allowance
|
|
|
452,600
|
|
|
|
(31,000
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
At
December 31, 2019, the we had net operating loss carry forwards of approximately $0 that may be offset against future taxable
income from the year 2020 to 2036. No tax benefit has been reported in the December 31, 2020 financial statements since the potential
tax benefit is offset by a valuation allowance of the same amount.
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax
reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may
be limited as to use in future years. With few exceptions, the Company is no longer subject to U.S. federal, state and local income
tax examinations by tax authorities for years before 2012.
Liquidity
and Capital Resources
The
following is a summary of our cash flows from operating, investing and financing activities for the years ended December 31, 2020
and 2019.
SOCIAL
LIFE NETWORK, INC
Consolidated
(audited)
|
|
For the Year Ended
|
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
Cash used in operating activities
|
|
$
|
(422,337
|
)
|
|
$
|
(1,902,563
|
)
|
Cash used in investing activities
|
|
|
-
|
|
|
|
-
|
|
Cash provided by financing activities
|
|
|
410,973
|
|
|
|
1,719,069
|
|
Increase in cash
|
|
$
|
193
|
|
|
|
(183,494
|
)
|
Cash
Flows from Operating Activities
We
have not generated positive cash flows from operating activities. For the 12-month period ending December 31, 2020, net cash outflows
used in operating activities was $422,377 compared to net outflows of $1,902,563 for the 12-month period ending December 31, 2019.
The decrease in cash in operating activities is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel
to cancel all in-person contact at tradeshows and travel for the foreseeable future.
Cash
Flows from Investing Activities
None.
Cash
Flows from Financing Activities
For
the 12-month period ending December 31, 2020, net cash flows used in financing activities was $1,719,069 compared to $410,973
for the 12-month period ended December 31, 2019. The decrease in cash in financing activities is primarily attributable to the
mandatory COVID-19 shutdown, unprecedented uncertainty in the financial markets, record unemployment figures, and a near halt
in business activities for the foreseeable future created a dramatic pullback in risk appetite by current and potentially new
investors.
We
are in the early stages of our business. We are required to fund growth from financing activities, and we intend to rely on a
combination of equity and debt financings. Due to market conditions and the early stage of our operations, there is significant
risk that we will be unable to raise such financings at all, or on terms that are not overly dilutive to our existing stockholders.
We can offer no assurance that we will be able to raise such funds.
MJLINK.COM
INC
(audited)
|
|
For the Year Ended
|
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
Cash used in operating activities
|
|
$
|
(5,000
|
)
|
|
$
|
5,500
|
|
Cash used in investing activities
|
|
|
-
|
|
|
|
-
|
|
Cash provided by financing activities
|
|
|
-
|
|
|
|
-
|
|
Increase in cash
|
|
$
|
(5,000
|
)
|
|
|
5,500
|
|
Cash
Flows from Operating Activities
We
have not generated positive cash flows from operating activities. For the 12-month period ending December 31, 2020, net cash flows
used in operating activities was 5,000 compared to $5,500 for the 12-month period ending December 31, 2019. The decrease in cash
in financing activities is primarily attributable to the mandatory COVID-19 shutdown, unprecedented uncertainty in the financial
markets, record unemployment figures, and a near halt in business activities for the foreseeable future created a dramatic pullback
in risk appetite by current and potentially new investors.
Cash
Flows from Investing Activities
None.
Cash
Flows from Financing Activities
For
the 12-month period ending December 31, 2020 and 2019, net cash flows used in financing activities was zero.
Off-Balance
sheet arrangements
We
have no off-balance sheet arrangements.
Critical
Accounting Policies
Basis
of presentation
The
Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America (“U.S. GAAP”).
Use
of estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant
estimates include the estimated useful lives of property and equipment. Actual results could differ from those estimates.
Concentrations
of Credit Risk
We
maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually
monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed
to any significant credit risk on cash.
Cash
equivalents
The
Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
There were no cash equivalents for the year ended December 31, 2020 or 2019.
Accounts
Receivable
Revenues
that have been recognized but not yet received are recorded as accounts receivable. Losses on receivables will be recognized when
it is more likely than not that a receivable will not be collected. An allowance for estimated uncollectible amounts will be recognized
to reduce the amount of receivables to its net realizable value when considered necessary. Any allowance for uncollectible amounts
is evaluated quarterly.
Fair
value of financial instruments
The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial
instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to
measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37
establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three
(3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical
assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by
Paragraph 820-10-35-37 are described below:
Level
1:
|
Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
Level
2:
|
Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable
as of the reporting date.
|
|
|
Level
3:
|
Pricing
inputs that are generally observable inputs and not corroborated by market data.
|
The
carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate
their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value
of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar
financial arrangements at December 31, 2019.
The
Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis as of December
31, 2020 and 2019.
Revenue
recognition
The
Company follows paragraph 605-15-25 of the FASB Accounting Standards Codification for revenue recognition when the right of return
exists. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized
or realizable and earned when all of the following criteria are met: (i) The seller’s price to the buyer is substantially
fixed or determinable at the date of sale, (ii) The buyer has paid the seller, or the buyer is obligated to pay the seller and
the obligation is not contingent on resale of the product. If the buyer does not pay at time of sale and the buyer’s obligation
to pay is contractually or implicitly excused until the buyer resells the product, then this condition is not met., (iii) The
buyer’s obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product,
(iv) The buyer acquiring the product for resale has economic substance apart from that provided by the seller. This condition
relates primarily to buyers that exist on paper, that is, buyers that have little or no physical facilities or employees. It prevents
entities from recognizing sales revenue on transactions with parties that the sellers have established primarily for the purpose
of recognizing such sales revenue, (v) The seller does not have significant obligations for future performance to directly bring
about resale of the product by the buyer, and (vi) The amount of future returns can be reasonably estimated.
The
Company generates revenues through three primary sources: 1) licensing agreements from which the Company receives an annual license
fee or a percentage of net profits; 2) online advertising with priced based on the CPC (cost per click) and CPM (cost per 1000
ad impressions); and 3) premium monthly digital marketing subscriptions, which provide business director and online review management
for monthly subscriptions.
Income
taxes
The
Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax
returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and
tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected
to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than
not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period
that includes the enactment date.
On
December 22, 2018, the Tax Cuts and Jobs Act (TCJA) was signed into law by the President of the United States. TCJA is a tax reform
act that among other things, reduced corporate tax rates to 21 percent effective January 1, 2018. FASB ASC 740, Income Taxes,
requires deferred tax assets and liabilities to be adjusted for the effect of a change in tax laws or rates in the year of enactment,
which is the year in which the change was signed into law. Accordingly, the Company adjusted its deferred tax assets and liabilities
at December 31,2019, using the new corporate tax rate of 21 percent. See Note 7.
The
Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards
to uncertainty income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed
on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit
from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from
such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being
realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties
on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to
its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
Stock-based
Compensation
We
account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50, Equity-Based Payments
to Non-Employees (“ASC 505-50”). ASC 505-50 establishes that equity-based payment transactions with nonemployees
shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever
is more reliably measurable. The fair value of common stock issued for payments to nonemployees is measured at the market price
on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option
valuation model. In general, we recognize the fair value of the equity instruments issued as deferred stock compensation and amortize
the cost over the term of the contract.
We
account for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation—Stock
Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized
in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation
expense and credited to additional paid-in capital over the period during which services are rendered.
Basic
and Diluted Earnings Per Share
Net
income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic
net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common
stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the
weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted
average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as
of the beginning of the first period presented.
As
of December 31, 2020 and 2019, the Company had 9,603,721,664 and 2,179,256,699 potentially dilutive shares; however, the diluted
loss per share is the same as the basic loss per share for the years ended December 31, 2020 and 2019, as the inclusion of any
potential shares would have had an antidilutive effect due to our loss from operations.
Recently
issued accounting pronouncements
In
January 2018, the FASB issued ASU 2018-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The
amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating
whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business
affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for
interim and annual periods beginning after December 15, 2018 and should be applied prospectively on or after the effective date.
The Company is in the process of evaluating the impact of this accounting standard update.
In
November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted
cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash
flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet.
ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The
Company is in the process of evaluating the impact of this accounting standard update on its financial statements.
In
October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory,
which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when
the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption
permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.
In
August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and
Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are
classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for
interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of
evaluating the impact of this accounting standard update on its statements of cash flows.
In
March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting.
ASU 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting
for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows.
ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within annual periods beginning
after December 15, 2016, with early adoption permitted. The Company has evaluating the impact of this accounting standard update
and noted that it has had no material impact.
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), and has since issued amendments thereto, related to the accounting
for leases (collectively referred to as “ASC 842”). ASC 842 establishes a right-of-use (“ROU”) model that
requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.
Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in
the income statement. The Company will adopt ASC 842 on January 1, 2021. A modified retrospective transition approach is required
for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period
presented in the financial statements, with certain practical expedients available. Entities have the option to continue to apply
historical accounting under Topic 840, including its disclosure requirements, in comparative periods presented in the year of
adoption. An entity that elects this option will recognize a cumulative effect adjustment to the opening balance of retained earnings
in the period of adoption instead of the earliest period presented. The Company expects to elect to apply the optional ASC 842
transition provisions beginning on January 1, 2021. Accordingly, the Company will continue to apply Topic 840 prior to January
1, 2021, including Topic 840 disclosure requirements, in the comparative periods presented. The Company expects to elect the package
of practical expedients for all its leases that commenced before January 1, 2021. The Company has evaluated its real estate lease,
its copier leases and its generator rental agreements. The Company expects that the adoption of ASC 842 will materially impact
its balance sheet and have an immaterial impact on its results of operations. Based on the Company’s current agreements,
the Company expects that upon the adoption of ASC 842 on January 1, 2021, it will record an operating lease liability of approximately
$33,000 and corresponding ROU assets based on the present value of the remaining minimum rental payments associated with the Company’s
leases. As the Company’s leases do not provide an implicit rate, nor is one readily available, the Company will use its
incremental borrowing rate based on information available at January 1, 2021 to determine the present value of its future minimum
rental payments.
In
May 2014, August 2015, April 2016 and May 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09
(ASC Topic 606), Revenue from Contracts with Customers, ASU 2015-14 (ASC Topic 606) Revenue from Contracts with Customers, Deferral
of the Effective Date, ASU 2016- from Contracts with Customers, ASU 2015-14 (ASC Topic 606) Revenue from Contracts with Customers,
Deferral of the Effective Date, ASU 2016-10 (ASC Topic 10 (ASC Topic 606) Revenue from Contracts with Customers, Identifying Performance
Obligations and Licensing, and ASU 2016-12 (ASC Topic 606) Revenue from Contracts with 606) Revenue from Contracts with Customers,
Identifying Performance Obligations and Licensing, and ASU 2016-12 (ASC Topic 606) Revenue from Contracts with accounting for
revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific
guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements
users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
The amendments in these ASUs are effective for fiscal years, and interim periods within those years, beginning after December
15, 2018. Early adoption is permitted for annual periods beginning after December 15, 2016. The Company adopted this process
in 2020.
In
January 2017, the FASB issued Accounting Standards Update No. 2017-01 (ASU 2017-01) “Business Combinations (Topic 805):
Clarifying the Definition of a Business.” ASU 2017-01 provides guidance to evaluate whether transactions should be accounted
for as acquisitions (or disposals) of assets or businesses. If substantially all of the fair value of the gross assets acquired
(or disposed of) is concentrated in a single asset or a group of similar assets, the assets acquired (or disposed of) are not
considered a business. We adopted ASU 2017-01 as of January 1, 2017 on a prospective basis and there was no material impact to
our consolidated financial statements.
The
Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact
on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Stock
Warrants
During
the twelve months ended December 31, 2020 and the years ended December 31, 2019, 2018, we granted zero, 1,594,853, and zero warrants,
respectively, to our advisors and employees, totaling 17,894,873 warrants (the “17,894,873 Warrants”). Each warrant
entitles the holder to one Social Life Network common stock share at an exercise price ranging from five to twenty cents, with
a weighted average price of seven cents. The term of our warrants have a range from 3 to 5 years from the initial exercise date.
The warrants will be expensed as they become exercisable beginning January 1, 2018 through April 11, 2024. During the three months
ended September 30, 2019, 300,000 additional warrants vested, and as of September 30, 2020 the 17,894,873 Warrants are 100% vested.
During the twelve months ended December 31, 2019, we executed a cashless conversion of 8,800,020 vested warrants in exchange for
4,400,010 common stock shares and during the twelve months ended December 31, 2019, we executed a cashless conversion of 30,000
vested warrants in exchange for 293,118,280 common stock shares during the twelve months ended December 31, 2020. The remaining
9,064,853 outstanding warrants are currently 100% vested to date and not exercised. The aggregate fair value of the warrants as
of December 31, 2020 total $2,238,800, which values are based on the Black-Scholes-Merton pricing model using the following estimates:
exercise price ranging from $0.00 to $0.20, stock prices ranging from $0.0001 to $0.38, risk free rates ranging from 0.10% - 1.60%,
volatility ranging from 391% to 562%, and expected life of the warrants ranging from 3 to 5 years.
A
summary of the status of the outstanding stock warrants and changes during the periods is presented below:
|
|
Shares available to purchase with warrants
|
|
|
Weighted Average Price
|
|
|
Weighted Average Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2018
|
|
|
16,300,000
|
|
|
$
|
0.05
|
|
|
$
|
|
|
Issued
|
|
|
1,594,853
|
|
|
|
0.18
|
|
|
$
|
-
|
|
Exercised
|
|
|
8,800,020
|
|
|
$
|
0.00
|
|
|
$
|
-
|
|
Expired
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Outstanding, December 31, 2019
|
|
|
9,094,853
|
|
|
$
|
0.07
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2019
|
|
|
9,094,853
|
|
|
$
|
0.07
|
|
|
$
|
-
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding, March 31, 2020
|
|
|
9,094,853
|
|
|
$
|
0.07
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, March 31, 2020
|
|
|
9,094,853
|
|
|
|
0.07
|
|
|
|
-
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding, June 30, 2020
|
|
|
9,094,853
|
|
|
|
0.07
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, June 30, 2020
|
|
|
9,094,853
|
|
|
|
0.07
|
|
|
|
-
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding, September 30, 2020
|
|
|
9,094,853
|
|
|
|
0.07
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, September 30, 2020
|
|
|
9,094,853
|
|
|
$
|
0.07
|
|
|
$
|
-
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
30,000
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding, December 31, 2020
|
|
|
9,064,853
|
|
|
|
0.07
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2020
|
|
|
9,064,853
|
|
|
|
0.07
|
|
|
$
|
0.3185
|
|
Range of Exercise Prices
|
|
|
Number Outstanding 12/3130/2020
|
|
|
Weighted Average Remaining
Contractual Life
|
|
|
Weighted Average
Exercise Price
|
|
$
|
0.00 – 0.20
|
|
|
|
9,064,853
|
|
|
|
2.30 years
|
|
|
$
|
0.0730
|
|
Convertible
Note Payable
We
have the following convertible notes payable as of December 31, 2020 and December 31, 2019:
Note
|
|
Funding Date
|
|
Maturity Date
|
|
Interest Rate
|
|
|
Original Borrowing
|
|
|
Average Conversion Price
|
|
|
Number of Shares Converted
|
|
|
Balance at
December 31, 2020
|
|
|
Balance at
December 31, 2019
|
|
Note payable (A)
|
|
April 15, 2019
|
|
November 14, 2019
|
|
|
7
|
%
|
|
$
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Note payable (B)
|
|
April 15, 2019
|
|
April 14, 2022
|
|
|
10
|
%
|
|
$
|
67,500
|
|
|
$
|
0.0000
|
|
|
|
20,192,296
|
|
|
|
-
|
|
|
|
-
|
|
Note payable (C-1)
|
|
May 24, 2019
|
|
December 23, 2019
|
|
|
10
|
%
|
|
$
|
80,000
|
|
|
$
|
0.00004
|
|
|
|
2,098,755,638
|
|
|
|
-
|
|
|
|
80,000
|
|
Note payable (C-2)
|
|
July 3, 2019
|
|
February 2, 2020
|
|
|
10
|
%
|
|
$
|
80,000
|
|
|
$
|
0.0006
|
|
|
|
631,831,812
|
|
|
|
34,751
|
|
|
|
80,000
|
|
Note payable (D)
|
|
June 12, 2019
|
|
June 11, 2020
|
|
|
12
|
%
|
|
$
|
110,000
|
|
|
$
|
0.0019
|
|
|
|
691,151,660
|
|
|
|
-
|
|
|
|
100,000
|
|
Note payable (E)
|
|
June 26, 2019
|
|
March 25, 2020
|
|
|
12
|
%
|
|
$
|
135,000
|
|
|
$
|
0.00004
|
|
|
|
334,250,000
|
|
|
|
11,219
|
|
|
|
135,000
|
|
Note payable (F)
|
|
August 7, 2019
|
|
August 6, 2020
|
|
|
10
|
%
|
|
$
|
100,000
|
|
|
$
|
0.0007
|
|
|
|
111,115,731
|
|
|
|
35,000
|
|
|
|
100,000
|
|
Note payable (G)
|
|
August 21, 2019
|
|
August 20, 2020
|
|
|
10
|
%
|
|
$
|
148,500
|
|
|
$
|
0.0001
|
|
|
|
151,300,000
|
|
|
|
42,001
|
|
|
|
49,500
|
|
Note payable (H)
|
|
January 28, 2020
|
|
January 27, 2021
|
|
|
10
|
%
|
|
|
63,000
|
|
|
$
|
0.0001
|
|
|
|
1,102,499,999
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.0001
|
|
|
|
5,141,097,136
|
|
|
$
|
122,971
|
|
|
|
544,500
|
|
|
(A)
|
On
April 15, 2019, we completed a 7-month term original issue discount convertible note and other related documents with an unaffiliated
third-party funding group to generate $100,000 in additional available cash resources with a payback provision due and was
paid in full on November 14, 2019 of $117,700 which includes the original issue discount of $10,000 and interest of $7,700.
In connection therewith, we issued 150,000 common stock shares and additional 102,176 common stock shares on October 15, 2019,
per our original agreement, 412,500 common stock warrants, and reserved 301,412,500 restricted common shares for conversion.
The shares were issued during the three months ended June 30, 2019. The conversion price is fixed at $0.15. Pursuant to current
accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $13,333
at the date of issuance when the stock price was at $0.17 per share.
|
|
(B)
|
On
April 15, 2019, we completed convertible debenture at zero interest and other related documents with an unaffiliated third-party
funding group to generate $375,000 in additional available cash resources, the funds of which will be released over the 90
days following execution of the agreement in the amounts of $67,500, $90,000, and $180,000, with a payback provision of $75,000,
$100,000, and $200,000, respectively, over 36 months. In connection therewith, the Company issued 300,000 common stock warrants,
and 20,192,307 restricted common shares as reserve for conversion. The note was unsecured and did not bear interest; however,
the implied interest was determined to be 10% over 36 months since the note was issued at a 10% discount. Subsequently, on
June 26, 2019 we nullified the agreement and other related documents with this funding group after the initial disbursement
of $67,500. We refunded the initial tranche of $67,500, a 10% redemption fee of $7,500 for the principle amount plus for the
original issue discount of $7,500, and other additional administrative fees of $30,000, which totaled $105,000. The 300,000
common stock warrants will remain issued and the reserved common shares will be reduced enough to satisfy the warrants.
|
|
|
|
|
(C)
|
On
May 24, 2019, we completed a 7-month fixed convertible promissory note and other related documents with an unaffiliated third-party
funding group to generate $240,000, which will be distributed in three equal monthly tranches of $80,000, in additional available
cash resources with a payback provision of $80,000 plus the original issue discount of $4,000 or $84,000 due seven months
from each funding date for each tranche, totaling $252,000. We generated $160,000 in additional available cash resources with
a payback provision due on December 23, 2019 and February 2, 2020 totaling $184,800 which includes the original issue discount
of $8,000 plus interest of $16,800. In connection therewith, we issued 50,000 common stock shares for two tranches with another
25,000 common stock shares to be issued with the third tranche, and we have reserved 8,000,000 which was subsequently increased
to 3 billion restricted common shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%)
of the 2 lowest traded prices of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date
of conversion. We determined that because the conversion price is variable and unknown, it could not determine if it had enough
authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined
that the beneficial conversion feature of the note created a fair value discount of $130,633 at the date of issuance when
the stock price was at $0.12 per share.
|
|
(D)
|
On
June 12, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party
funding group to generate $110,000 in additional available cash resources with a payback provision due on June 11, 2020 of
$135,250 which includes the original issue discount of $11,000 plus interest of $14,250. In connection with the note, we have
reserved 14,400,000 restricted common shares as reserve for conversion. The conversion price is a 35% discount to the average
of the two (2) lowest trading prices during the previous twenty (20) trading days to the date of a Conversion Notice. We determined
that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill
the conversion obligation. On December 19, 2019, we converted $10,000 of principle into 495,472,078 shares of common stock
at approximately $0.035 per share. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion
feature of the note created a fair value discount of $59,231 at the date of issuance when the stock price was at $0.11 per
share.
|
|
|
|
|
(E)
|
On
June 26, 2019, we completed a 9-month senior convertible promissory note and other related documents with an unaffiliated
third-party funding group to generate $135,000 in additional available cash resources with a payback provision due on March
25, 2020 of $168,000 which includes the original issue discount of $15,000 plus interest of $18,000. In connection with the
note, we issued 100,000 common stock shares and has reserved 15,000,000, which was subsequently increased to 1 billion restricted
common shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded
prices of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined
that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill
the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion
feature of the note created a fair value discount of $72,692 at the date of issuance when the stock price was at $0.11 per
share.
|
|
(F)
|
On
August 7, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party
funding group to generate $100,000 in additional available cash resources with a payback provision due on August 6, 2020 of
$121,000 which includes the original issue discount of $10,000 plus interest of $11,000. In connection with the note, we issued
100,000 common stock shares and has reserved 677,973,124, which was subsequently increased to 105,769,231, restricted common
shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded prices
of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined
that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill
the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion
feature of the note created a fair value discount of $73,750 at the date of issuance when the stock price was at $0.09 per
share.
|
|
|
|
|
(G)
|
On
August 21, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party
funding group to generate $148,500, which will be distributed in three equal monthly tranches of $49,500, in additional available
cash resources with a payback provision of $49,500 plus the original issue discount of $5,500 or $55,000 due twelve months
from each funding date for each tranche, totaling $165,000. We generated $49,500 in additional available cash resources with
a payback provision due on August 20, 2020 totaling $60,500 which includes the original issue discount of $5,500 plus interest
of $5,500. In connection therewith, we issued 50,000 common stock shares for the first tranche with another 50,000 common
stock shares to be issued with each additional tranche, which will total 150,000 common shares; we have reserved 15,714, which
was subsequently increased to 2 billion restricted common shares for conversion. The conversion price is the 35% discount
to the average of the two (2) lowest trading prices during the previous twenty (20) trading days to the date of a Conversion
Notice. We determined that because the conversion price is variable and unknown, it could not determine if it had enough authorized
shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial
conversion feature of the note created a fair value discount of $26,654 at the date of issuance when the stock price was approximately
$0.07 per share.
|
|
|
|
|
(H)
|
On
January 28, 2020, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party
funding group to generate up to $925,000, which will be distributed in multiple tranches to be determined, in additional available
cash resources with a payback provision of principle debt without an original issue discount plus interest. We generated $63,000
in additional available cash resources with a payback provision due on January 27, 2021 totaling $69,300 which includes the
principle plus interest of $6,300. We have reserved 41,331,475, which was subsequently increased to 1billion restricted common
shares for conversion. The conversion price is the 39% discount to the average of the two (2) lowest trading prices during
the previous fifteen (15) trading days to the date of a Conversion Notice. We determined that because the conversion price
is variable and unknown, it could not determine if it had enough authorized shares to fulfill the conversion obligation. As
such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created
a fair value discount of $40,279 at the date of issuance when the stock price was approximately $0.01 per share. On August
24, 2020, we fully met and timely paid its debt obligation.
|
|
●
|
On
June 26, 2019, we fully met and timely paid its debt obligation to Note Payable (B).
|
|
●
|
On
November 14, 2019, we fully met and timely paid its debt obligation to Note Payable (A).
|
|
●
|
On
July 22, 2020, we fully met and timely paid its debt obligation to Note Payable (D).
|
|
●
|
On
August 24, 2020, we fully met and timely paid its debt obligation to Note Payable (H).
|
|
●
|
On
November 3, 2020, we fully met and timely paid its debt obligation to Note Payable (C-1).
|
Notes
Payable – Related Parties
We
have the following related parties notes payable as of December 31, 2019 and 2018:
Note
|
|
Issuance Date
|
|
Maturity Date
|
|
Interest Rate
|
|
|
Original Borrowing
|
|
|
Balance at
December 31,
2020
|
|
|
Balance at
December 31,
2019
|
|
Short term loan (1)
|
|
December 31, 2019
|
|
December 31, 2020
|
|
|
0.0
|
%
|
|
$
|
145,000
|
|
|
$
|
113,675
|
|
|
$
|
10,000
|
|
Total notes payable – related parties, net
|
|
|
|
|
|
|
|
|
|
$
|
113,675
|
|
|
$
|
10,000
|
|
(1)
|
On
December 31, 2019, Kenneth Tapp, our Chief Executive Officer provided a short term, unsecured, non-interest-bearing loan due
on December 31, 2020 or earlier.
|
Concentrations
During
the year ended December 31, 2020, the Company had a single vendor that accounted for 24.1% of all expenses, and 4.6% of all expenses
in the same period in the prior year.
Recently
Issued Accounting Pronouncements
See
Note 2 of the financial statements for a discussion of recent accounting pronouncements.
Contractual
Obligations
We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not
required to provide the information under this item.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report
of Independent Registered Public Accounting Firm
To
the shareholders and the board of directors of Social Life Network, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Social Life Network, Inc. as of December 31, 2020 and 2019, the related
statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively
referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Substantial
Doubt about the Company’s Ability to Continue as a Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated
deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audit provides a reasonable basis for our opinion.
Critical
Audit Matter
The
critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Revenue
recognition — identification of contractual terms in certain customer arrangements
As
described in Note 2 to the consolidated financial statements, management assesses relevant contractual terms in its customer arrangements
to determine the transaction price and recognizes revenue upon transfer of control of the promised goods or services in an amount
that reflects the consideration the Company expects to receive in exchange for those products or services. Management applies
judgment in determining the transaction price which is dependent on the contractual terms. In order to determine the transaction
price, management may be required to estimate variable consideration when determining the amount and timing of revenue recognition.
The
principal considerations for our determination that performing procedures relating to the identification of contractual terms
in customer arrangements to determine the transaction price is a critical audit matter are there was significant judgment by management
in identifying contractual terms due to the volume and customized nature of the Company’s customer arrangements. This in
turn led to significant effort in performing our audit procedures which were designed to evaluate whether the contractual terms
used in the determination of the transaction price and the timing of revenue recognition were appropriately identified and determined
by management and to evaluate the reasonableness of management’s estimates.
Addressing
the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition
process, including those related to the identification of contractual terms in customer arrangements that impact the determination
of the transaction price and revenue recognition. These procedures also included, among others, (i) testing the completeness and
accuracy of management’s identification of the contractual terms by examining customer arrangements on a test basis, and
(ii) testing management’s process for determining the appropriate amount and timing of revenue recognition based on the
contractual terms identified in the customer arrangements.
/S/
BF Borgers CPA PC
We
have served as the Company's auditor since 2017
Lakewood,
CO
March
31, 2021
SOCIAL
LIFE NETWORK, INC.
CONSOLIDATED
AND CONDENSED BALANCE SHEETS
audited
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
193
|
|
|
$
|
6,057
|
|
Accounts receivable
|
|
|
28,052
|
|
|
|
20,500
|
|
Accounts receivable – related party
|
|
|
368,000
|
|
|
|
257,500
|
|
Other Current Assets
|
|
|
-
|
|
|
|
20,933
|
|
Total Assets
|
|
$
|
396,245
|
|
|
$
|
304,990
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Other payables and accruals
|
|
$
|
189,169
|
|
|
$
|
95,120
|
|
Deferred revenue
|
|
|
-
|
|
|
|
29,396
|
|
Total Current Liabilities
|
|
|
189,169
|
|
|
|
95,120
|
|
Loans payable – related party
|
|
|
113,675
|
|
|
|
10,000
|
|
PPP Loan
|
|
|
163,111
|
|
|
|
-
|
|
Convertible debt plus accrued interest – 3rd parties
|
|
|
128,346
|
|
|
|
616,774
|
|
Total Liabilities
|
|
|
594,301
|
|
|
|
711,298
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit):
|
|
|
|
|
|
|
|
|
Common Stock par value $0.001 10,000,000,000 shares authorized, 6,368,332,350 and 140,777,231 shares issued, respectively
|
|
|
6,368,347
|
|
|
|
140,791
|
|
Additional paid in capital
|
|
|
25,199,811
|
|
|
|
31,016,394
|
|
Common stock to be issued
|
|
|
-
|
|
|
|
-
|
|
Accumulated deficit
|
|
|
(31,766,214
|
)
|
|
|
(31,563,493
|
)
|
Total Stockholders’ Equity (Deficit)
|
|
|
(198,056
|
)
|
|
|
(406,308
|
)
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
396,245
|
|
|
$
|
304,990
|
|
The
accompanying notes are an integral part of these financial statements.
SOCIAL
LIFE NETWORK, INC.
CONSOLIDATED
AND CONDENSED STATEMENTS OF OPERATIONS
audited
|
|
For the Year Ended
|
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Digital subscription
|
|
$
|
24,948
|
|
|
$
|
7,604
|
|
Licensing Revenue – related party
|
|
|
250,000
|
|
|
|
250,000
|
|
Advertising
|
|
|
-
|
|
|
|
404
|
|
Event revenue
|
|
|
-
|
|
|
|
111,480
|
|
Digital marketing revenue
|
|
|
-
|
|
|
|
113,000
|
|
Total Revenue
|
|
|
274,948
|
|
|
|
482,488
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
231,081
|
|
Gross Margin
|
|
|
274,948
|
|
|
|
251,408
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
134,511
|
|
|
|
1,052,787
|
|
Stock based compensation
|
|
|
-
|
|
|
|
2,087,083
|
|
Sales and marketing
|
|
|
10,703
|
|
|
|
110,552
|
|
General and administrative
|
|
|
391,293
|
|
|
|
345,290
|
|
Total operating expenses
|
|
|
536,507
|
|
|
|
3,595,712
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(261,559
|
)
|
|
|
(4,635,865
|
)
|
|
|
|
|
|
|
|
|
|
Other expense
|
|
|
|
|
|
|
|
|
Other Expenses/ (Income)
|
|
|
(58,839
|
)
|
|
|
-
|
|
Total other expense
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net (loss) Income
|
|
$
|
(202,720
|
)
|
|
$
|
(3,344,304
|
)
|
|
|
|
|
|
|
|
|
|
Loss per Share: Basic
|
|
|
(0.00
|
)
|
|
|
(0.03
|
)
|
Loss per Share: Diluted
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
Weighted Average Shares:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
6,368,332,350
|
|
|
|
140,777,231
|
|
Diluted
|
|
|
9,603,721,664
|
|
|
|
2,179,256,699
|
|
The
accompanying notes are an integral part of these financial statements.
SOCIAL
LIFE NETWORK, INC.
CONSOLIDATED
AND CONDENSED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
audited
|
|
Common
Stock B
|
|
|
Common
Stock A
|
|
|
Additional
Paid in
|
|
|
Common
Stock to
|
|
|
Common
Stock
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
be
Issued
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Total
|
|
Balance, December 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
117,817,319
|
|
|
$
|
117,817
|
|
|
$
|
27,763,019
|
|
|
$
|
25,000
|
|
|
$
|
-
|
|
|
$
|
(27,705,545
|
)
|
|
$
|
200,291
|
|
Common stock issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
3,750,000
|
|
|
|
3,750
|
|
|
|
1,207,595
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,211,345
|
|
Common stock issued for services to officers
|
|
|
-
|
|
|
|
-
|
|
|
|
500
|
|
|
|
49,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
Fair value of warrants issued
|
|
|
-
|
|
|
|
—
|
|
|
|
-
|
|
|
|
-
|
|
|
|
292,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
292,500
|
|
Common stock sold for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
14.025,529
|
|
|
|
14,025
|
|
|
|
1,362,315
|
|
|
|
(25,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,350,340
|
|
Common stock from conversion of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
284,373
|
|
|
|
284
|
|
|
|
9,716
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
Beneficial conversion feature
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
429,600
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
429,600
|
|
Common stock from warrant conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
4,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,400
|
|
Net Loss for the year ended December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,857,948
|
)
|
|
|
(3,857,948
|
)
|
Balance, December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
140,777,231
|
|
|
$
|
140,791
|
|
|
$
|
31,016,394
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
(31,563,493
|
)
|
|
$
|
(406,308
|
)
|
Common stock issued for service
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
—
|
|
|
|
-
|
|
|
|
-
|
|
Common stock issued to officers
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common stock from conversion of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
6,277,555,119
|
|
|
|
6,227,555
|
|
|
|
(5,666,864
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
560,691
|
|
Common stock cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Fair value of warrants issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net Loss for quarter ended December 31, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(202,720
|
)
|
|
|
(202,720
|
)
|
Rounding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Balance, December 31, 2020
|
|
|
25,000,000
|
|
|
|
-
|
|
|
|
6,368,332,350
|
|
|
|
6,368,346
|
|
|
|
25,349,530
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(31,766,214
|
)
|
|
|
(102,338
|
)
|
The
accompanying notes are an integral part of these financial statements.
SOCIAL
LIFE NETWORK, INC.
CONSOLIDATED
AND CONDENSED STATEMENTS OF CASH FLOWS
audited
|
|
For the Years Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
Net Loss for the Year
|
|
$
|
(202,720
|
)
|
|
$
|
(3,857,948
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
-
|
|
|
|
1,794,583
|
|
Loss on conversion
|
|
|
-
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(65,447
|
)
|
|
|
(278,000
|
)
|
Prepaids
|
|
|
(343,756
|
)
|
|
|
20,933
|
|
Accounts payable and other accrued expenses
|
|
|
247,638
|
|
|
|
85,120
|
|
Net cash used operating activities
|
|
|
(364,285
|
)
|
|
|
(4,459,669
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities:
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used in) financing activities:
|
|
|
|
|
|
|
|
|
Loans from related parties
|
|
|
103,675
|
|
|
|
10,000
|
|
Proceeds from convertible notes
|
|
|
86,135
|
|
|
|
616,179
|
|
Proceeds from PPP Loan
|
|
|
163,111
|
|
|
|
-
|
|
Proceeds from the sale of warrants
|
|
|
-
|
|
|
|
292,500
|
|
Proceeds from the sale of common stock
|
|
|
-
|
|
|
|
800,390
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
352,921
|
|
|
|
1,719,069
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(11,364
|
)
|
|
|
(183,494
|
)
|
Cash at beginning of year
|
|
|
11,557
|
|
|
|
195,051
|
|
Cash at end of year
|
|
$
|
193
|
|
|
$
|
11,557
|
|
Supplemental Disclosures:
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
15,807
|
|
|
$
|
-
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Supplemental disclosure of non-cash activities:
|
|
|
|
|
|
|
|
|
Warrants issued for services
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial statements.
SOCIAL
LIFE NETWORK, INC
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEAR ENDED DECEMBER 31, 2020
1.
DESCRIPTION OF BUSINESS
Organization
Social
Life Network is a Technology Business Incubator (TBI) that provides tech start-ups with seed technology development and executive
leadership, making it easier for start-up founders to focus on raising capital, perfecting their business model, and growing their
network usership. Our seed technology is an artificial intelligence (AI) powered social network and Ecommerce platform that leverages
blockchain technology to increase speed, security and accuracy on the niche social networks that we license to the companies in
our TBI.
Corporate
Changes
On
August 30, 1985, we were incorporated as a private corporation, CJ Industries, Inc., in California. . On February 24, 2004, we
merged with Calvert Corporation, a Nevada Corporation, changing our name to Sew Cal Logo, Inc., moved its domicile to Nevada,
at which time our common stock became traded under the ticker symbol SEWC.
In
June 2014, Sew Cal Logo, Inc. was 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 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 terms of the Agreement and related corporate actions in our domicile, Nevada:
|
●
|
We
cancelled all previously created preferred class of stock;
|
|
|
|
|
●
|
We
delivered newly issued, common stock shares equivalent to approximately 89.5% of its outstanding shares as a control block
in exchange for 100% of the Buyer’s outstanding shares;
|
|
|
|
|
●
|
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;
|
|
|
|
|
●
|
Our
then officers and directors were terminated, and Kenneth Tapp and Andrew Rodosevich became the Company’s Chief Executive
Officer/Director and Chief Financial Officer/Director, respectively;
|
|
|
|
|
●
|
We
effected a 5,000 to 1 reverse stock split effective April 11, 2016, with each shareholder retaining a minimum of 100 shares;
|
|
|
|
|
●
|
We
changed our name from Sew Cal Logo, Inc. to WeedLife, Inc, and then to Social Life Network, Inc. effective in Nevada on April
11, 2016;
|
|
|
|
|
●
|
We
changed our stock symbol from SEWC to WDLF;
|
|
|
|
|
●
|
We
decreased our authorized common stock shares from 2,000,000,000 shares to 500,000,000 shares, effective in Nevada on March
17, 2016.
|
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
, ratifying the above actions. The receiver was discharged on June 7, 2016.
On
September 20, 2018, we incorporated MjLink.com, Inc. (“MjLink”), a Delaware Corporation. On
February 1, 2020, MjLink.com, Inc. filed its Form 1-A Regulation A Tier 2 initial public offering, which the SEC qualified on
September 28, 2020. As of September 28th, 2020 and March 29, 2020, the Company owned 15.17% of MjLink’s outstanding Class
A common stock shares. We will own 2.26% of MjLink’s outstanding Class A common stock if MjLink raises the full $50,000,000
Regulation Offering Amount.
On
March 4, 2020, our Board increased our number of authorized shares of Common Stock from 500,000,000 to 2,500,000,000 Common Stock
Shares pursuant to an amendment to our Articles of Incorporation with the state of Nevada and adopted the Certificate of Designation
of Preferences, Rights and Limitations of the Class B Common Stock, providing that each Class B Common Stock Share shall have
one-hundred (100) votes on all matters presented to be voted by the holders of Common Stock. The Class B Common Stock Shares only
have voting power and have no equity, cash value or any other value
Effective
March 4, 2020, our board of directors authorized the issuance of twenty five million (25,000,000) Class B Common Stock Shares
to Ken Tapp, our Chief Executive Officer, in return for his services as our Chief Executive Officer from February 1, 2016 to February
29, 2020, which shares are equal to two billion five hundred million (2,500,000,000) votes and have no equity, cash value or any
other value.
Effective
March 28, 2021, our board of directors authorized the issuance of fifty million (50,000,000) Class B Common Stock Shares to Ken
Tapp, our Chief Executive Officer, in return for his services as our Chief Executive Officer for his services from March 1, 2020
to February 28, 2021, which shares are equal to five billion (5,000,000,000) votes and have no equity, cash value or any other
value. As of the date of this filing, our Chief Executive Officer controls approximately 95% of shareholder votes.
On
May 8, 2020, we filed Amended and Restated Articles of Incorporation (“Amended Articles”) in Nevada to increase our
authorized shares from 2,500,000,000 to 10,000,000,000 Shares and our Preferred Shares to 300,000,000 Shares. Additionally, the
Amended Articles authorized us from May 8, 2020 and continuing until March 31, 2021, as determined by our Board of Directors in
its sole discretion, to effect a Reverse Stock Split of not less than 1 share for every 5,000 shares and no more than 1 share
for every 25,000 shares (the “Reverse Stock Split”).
On
December 11, 2020, we filed a Form 8-K stating that we would not be executing the Reverse Stock Split.
Since
its incorporation in September 2018, MjLink functionally operated as our cannabis division and we funded MjLink’s operations;
however, as of August 6, 2020, we no longer funded MjLink, at which time MjLink operated as a separate entity from us. As of December
31, 2020 and the date of this filing, we own 800,000 Class A common stock shares of MjLink.
Going
Concern
The
accompanying consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will
be able to realize its assets and discharge its liabilities and commitments in the normal course of business for the foreseeable
future. The Company had an accumulated deficit of $31,766,214 at December 31, 2020, had a net loss of $202,720 and used net cash
of $422,337 in operating activities for the twelve months ended December 31, 2020. These factors raise substantial doubt about
the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent
upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations
and repay its liabilities arising from normal business operations when they come due. The Company’s management intends to
finance operating costs over the next twelve months with existing cash on hand and public issuance of common stock. While the
Company believes that it will be successful in obtaining the necessary financing and generating revenue to fund its operations,
meet regulatory requirements and achieve commercial goals, there are no assurances that such additional funding will be achieved
and/or that the Company will succeed in its future operations.
There
is no assurance that the Company will ever be profitable or that debt or equity financing will be available to the Company. The
consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to
continue as a going concern.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation
The
consolidated financial statements include the accounts of Social Life Network, Inc. and MjLink.com Inc., a wholly owned subsidiary
of Social Life Network until August 6, 2020. All intercompany transactions and balances have been eliminated in consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant
estimates include the estimated useful lives of property and equipment. Actual results could differ from those estimates.
Property
and Equipment
Property
and equipment are recorded at historical cost and depreciated on a straight-line basis over their estimated useful lives of approximately
five years once the individual assets are placed in service.
Long-Lived
Assets
The
Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value
may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash
flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying
amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available,
or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. No impairment
of long-lived assets was required for the years ended December 31, 2020 and 2019.
Revenue
recognition
The
Company follows paragraph 605-15-25 of the FASB Accounting Standards Codification for revenue recognition when the right of return
exists. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized
or realizable and earned when all of the following criteria are met: (i) The seller’s price to the buyer is substantially
fixed or determinable at the date of sale, (ii) The buyer has paid the seller, or the buyer is obligated to pay the seller and
the obligation is not contingent on resale of the product. If the buyer does not pay at time of sale and the buyer’s obligation
to pay is contractually or implicitly excused until the buyer resells the product, then this condition is not met., (iii) The
buyer’s obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product,
(iv) The buyer acquiring the product for resale has economic substance apart from that provided by the seller. This condition
relates primarily to buyers that exist on paper, that is, buyers that have little or no physical facilities or employees. It prevents
entities from recognizing sales revenue on transactions with parties that the sellers have established primarily for the purpose
of recognizing such sales revenue, (v) The seller does not have significant obligations for future performance to directly bring
about resale of the product by the buyer, and (vi) The amount of future returns can be reasonably estimated.
The
Company generates revenues through three primary sources: 1) licensing agreements from which the Company receives an annual license
fee or a percentage of net profits; 2) online advertising with priced based on the CPC (cost per click) and CPM (cost per 1000
ad impressions); and 3) premium monthly digital marketing subscriptions, which provide business director and online review management
for monthly subscriptions.
Income
Taxes
The
Company accounts for income taxes under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 740 “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities
are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns.
Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting
and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to
reverse. The deferred tax assets of the Company relate primarily to operating loss carry-forwards for federal income tax purposes.
A full valuation allowance for deferred tax assets has been provided because the Company believes it is not more likely than not
that the deferred tax asset will be realized. Realization of deferred tax assets is dependent on the Company generating sufficient
taxable income in future periods.
The
Company periodically evaluates its tax positions to determine whether it is more likely than not that such positions would be
sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their
technical merits. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income
tax provision in the accompanying consolidated statements of operations. As of December 31, 2020 and 2019, the Company has not
established a liability for uncertain tax positions.
Stock
Warrants
During
the twelve months ended December 31, 2020 and the years ended December 31, 2019, 2018, we granted zero, 1,594,853, and zero warrants,
respectively, to our advisors and employees, totaling 17,894,873 warrants (the “17,894,873 Warrants”). Each warrant
entitles the holder to one Social Life Network common stock share at an exercise price ranging from five to twenty cents, with
a weighted average price of seven cents. The term of our warrants have a range from 3 to 5 years from the initial exercise date.
The warrants will be expensed as they become exercisable beginning January 1, 2018 through April 11, 2024. During the three months
ended September 30, 2019, 300,000 additional warrants vested, and as of September 30, 2020 the 17,894,873 Warrants are 100% vested.
During the twelve months ended December 31, 2019, we executed a cashless conversion of 8,800,020 vested warrants in exchange for
4,400,010 common stock shares and during the twelve months ended December 31, 2019, we executed a cashless conversion of 30,000
vested warrants in exchange for 293,118,280 common stock shares during the twelve months ended December 31, 2020. The remaining
9,064,853 outstanding warrants are currently 100% vested to date and not exercised. The aggregate fair value of the warrants as
of December 31, 2020 total $2,238,800, which values are based on the Black-Scholes-Merton pricing model using the following estimates:
exercise price ranging from $0.00 to $0.20, stock prices ranging from $0.0001 to $0.38, risk free rates ranging from 0.10% - 1.60%,
volatility ranging from 391% to 562%, and expected life of the warrants ranging from 3 to 5 years.
A
summary of the status of the outstanding stock warrants and changes during the periods is presented below:
|
|
Shares available to purchase with warrants
|
|
|
Weighted Average Price
|
|
|
Weighted Average Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2018
|
|
|
16,300,000
|
|
|
$
|
0.05
|
|
|
|
$
|
|
Issued
|
|
|
1,594,853
|
|
|
|
0.18
|
|
|
$
|
-
|
|
Exercised
|
|
|
8,800,020
|
|
|
$
|
0.00
|
|
|
$
|
-
|
|
Expired
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Outstanding, December 31, 2019
|
|
|
9,094,853
|
|
|
$
|
0.07
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2019
|
|
|
9,094,853
|
|
|
$
|
0.07
|
|
|
$
|
-
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding, March 31, 2020
|
|
|
9,094,853
|
|
|
$
|
0.07
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, March 31, 2020
|
|
|
9,094,853
|
|
|
|
0.07
|
|
|
|
-
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding, June 30, 2020
|
|
|
9,094,853
|
|
|
|
0.07
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, June 30, 2020
|
|
|
9,094,853
|
|
|
|
0.07
|
|
|
|
-
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding, September 30, 2020
|
|
|
9,094,853
|
|
|
|
0.07
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, September 30, 2020
|
|
|
9,094,853
|
|
|
$
|
0.07
|
|
|
$
|
-
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
30,000
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding, December 31, 2020
|
|
|
9,064,853
|
|
|
|
0.07
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2020
|
|
|
9,064,853
|
|
|
|
0.07
|
|
|
$
|
0.3185
|
|
Range of Exercise
Prices
|
|
Number
Outstanding
12/3130/2020
|
|
|
Weighted
Average
Remaining
Contractual Life
|
|
|
Weighted
Average
Exercise Price
|
|
$ 0.00 – 0.20
|
|
|
9,064,853
|
|
|
|
2.30 years
|
|
|
$
|
0.0730
|
|
Net
Loss Per Share
Basic
net loss per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net
loss per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive
potential common shares consist of incremental common shares issuable upon exercise of stock options. No dilutive potential common
shares were included in the computation of diluted net loss per share because their impact was anti-dilutive. As of December 31,
2020 and 2019, the Company had no outstanding options and had outstanding warrants of 9,094,853 and 9,064,853, respectively; which
were excluded from the computation of net loss per share because they are anti-dilutive.
Fair
Value of Financial Instruments
The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial
instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to
measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37
establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three
(3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical
assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by
Paragraph 820-10-35-37 are described below:
Level
1:
|
Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
Level
2:
|
Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable
as of the reporting date.
|
|
|
Level
3:
|
Pricing
inputs that are generally observable inputs and not corroborated by market data.
|
The
carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate
their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value
of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar
financial arrangements at December 31, 2020.
The
Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis as of December
31, 2020 and 2019.
Concentrations
During
the year ended December 31, 2020, the Company had a single vendor that accounted for 24.1% of all expenses, and 4.6% of all expenses
in the same period in the prior year.
Recent
Accounting Pronouncements
In
January 2018, the FASB issued ASU 2018-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The
amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating
whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business
affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for
interim and annual periods beginning after December 15, 2018 and should be applied prospectively on or after the effective date.
The Company is in the process of evaluating the impact of this accounting standard update.
In
November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted
cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash
flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet.
ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The
Company is in the process of evaluating the impact of this accounting standard update on its financial statements.
In
October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory,
which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when
the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption
permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.
In
August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and
Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are
classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for
interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of
evaluating the impact of this accounting standard update on its statements of cash flows.
In
March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting.
ASU 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting
for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows.
ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within annual periods beginning
after December 15, 2016, with early adoption permitted. The Company has evaluating the impact of this accounting standard update
and noted that it has had no material impact.
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), and has since issued amendments thereto, related to the accounting
for leases (collectively referred to as “ASC 842”). ASC 842 establishes a right-of-use (“ROU”) model that
requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.
Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in
the income statement. The Company will adopt ASC 842 on January 1, 2021. A modified retrospective transition approach is required
for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period
presented in the financial statements, with certain practical expedients available. Entities have the option to continue to apply
historical accounting under Topic 840, including its disclosure requirements, in comparative periods presented in the year of
adoption. An entity that elects this option will recognize a cumulative effect adjustment to the opening balance of retained earnings
in the period of adoption instead of the earliest period presented. The Company expects to elect to apply the optional ASC 842
transition provisions beginning on January 1, 2021. Accordingly, the Company will continue to apply Topic 840 prior to January
1, 2021, including Topic 840 disclosure requirements, in the comparative periods presented. The Company expects to elect the package
of practical expedients for all its leases that commenced before January 1, 2021. The Company has evaluated its real estate lease,
its copier leases and its generator rental agreements. The Company expects that the adoption of ASC 842 will materially impact
its balance sheet and have an immaterial impact on its results of operations. Based on the Company’s current agreements,
the Company expects that upon the adoption of ASC 842 on January 1, 2021, it will record an operating lease liability of approximately
$33,000 and corresponding ROU assets based on the present value of the remaining minimum rental payments associated with the Company’s
leases. As the Company’s leases do not provide an implicit rate, nor is one readily available, the Company will use its
incremental borrowing rate based on information available at January 1, 2021 to determine the present value of its future minimum
rental payments.
In
May 2014, August 2015, April 2016 and May 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09
(ASC Topic 606), Revenue from Contracts with Customers, ASU 2015-14 (ASC Topic 606) Revenue from Contracts with Customers, Deferral
of the Effective Date, ASU 2016- from Contracts with Customers, ASU 2015-14 (ASC Topic 606) Revenue from Contracts with Customers,
Deferral of the Effective Date, ASU 2016-10 (ASC Topic 10 (ASC Topic 606) Revenue from Contracts with Customers, Identifying Performance
Obligations and Licensing, and ASU 2016-12 (ASC Topic 606) Revenue from Contracts with 606) Revenue from Contracts with Customers,
Identifying Performance Obligations and Licensing, and ASU 2016-12 (ASC Topic 606) Revenue from Contracts with accounting for
revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific
guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements
users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
The amendments in these ASUs are effective for fiscal years, and interim periods within those years, beginning after December
15, 2018. Early adoption is permitted for annual periods beginning after December 15, 2016. The Company has implemented this
in 2020.
In
January 2017, the FASB issued Accounting Standards Update No. 2017-01 (ASU 2017-01) “Business Combinations (Topic 805):
Clarifying the Definition of a Business.” ASU 2017-01 provides guidance to evaluate whether transactions should be accounted
for as acquisitions (or disposals) of assets or businesses. If substantially all of the fair value of the gross assets acquired
(or disposed of) is concentrated in a single asset or a group of similar assets, the assets acquired (or disposed of) are not
considered a business. We adopted ASU 2017-01 as of January 1, 2017 on a prospective basis and there was no material impact to
our consolidated financial statements.
The
Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact
on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3.
CONVERTIBLE NOTES PAYABLE
We
have the following convertible notes payable as of December 31, 2020 and December 31, 2019:
Note
|
|
Funding Date
|
|
Maturity Date
|
|
Interest Rate
|
|
|
Original Borrowing
|
|
|
Average Conversion Price
|
|
|
Number of Shares Converted
|
|
|
Balance at
December 31, 2020
|
|
|
Balance at
December 31, 2019
|
|
Note payable (A)
|
|
April 15, 2019
|
|
November 14, 2019
|
|
|
7
|
%
|
|
$
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Note payable (B)
|
|
April 15, 2019
|
|
April 14, 2022
|
|
|
10
|
%
|
|
$
|
67,500
|
|
|
$
|
0.0000
|
|
|
|
20,192,296
|
|
|
|
-
|
|
|
|
-
|
|
Note payable (C-1)
|
|
May 24, 2019
|
|
December 23, 2019
|
|
|
10
|
%
|
|
$
|
80,000
|
|
|
$
|
0.00004
|
|
|
|
2,098,755,638
|
|
|
|
-
|
|
|
|
80,000
|
|
Note payable (C-2)
|
|
July 3, 2019
|
|
February 2, 2020
|
|
|
10
|
%
|
|
$
|
80,000
|
|
|
$
|
0.0006
|
|
|
|
631,831,812
|
|
|
|
34,751
|
|
|
|
80,000
|
|
Note payable (D)
|
|
June 12, 2019
|
|
June 11, 2020
|
|
|
12
|
%
|
|
$
|
110,000
|
|
|
$
|
0.0019
|
|
|
|
691,151,660
|
|
|
|
-
|
|
|
|
100,000
|
|
Note payable (E)
|
|
June 26, 2019
|
|
March 25, 2020
|
|
|
12
|
%
|
|
$
|
135,000
|
|
|
$
|
0.00004
|
|
|
|
334,250,000
|
|
|
|
11,219
|
|
|
|
135,000
|
|
Note payable (F)
|
|
August 7, 2019
|
|
August 6, 2020
|
|
|
10
|
%
|
|
$
|
100,000
|
|
|
$
|
0.0007
|
|
|
|
111,115,731
|
|
|
|
35,000
|
|
|
|
100,000
|
|
Note payable (G)
|
|
August 21, 2019
|
|
August 20, 2020
|
|
|
10
|
%
|
|
$
|
148,500
|
|
|
$
|
0.0001
|
|
|
|
151,300,000
|
|
|
|
42,001
|
|
|
|
49,500
|
|
Note payable (H)
|
|
January 28, 2020
|
|
January 27, 2021
|
|
|
10
|
%
|
|
|
63,000
|
|
|
$
|
0.0001
|
|
|
|
1,102,499,999
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.0001
|
|
|
|
5,141,097,136
|
|
|
$
|
122,971
|
|
|
|
544,500
|
|
|
(A)
|
On
April 15, 2019, we completed a 7-month term original issue discount convertible note and other related documents with an unaffiliated
third-party funding group to generate $100,000 in additional available cash resources with a payback provision due. The note
was paid in full on November 14, 2019 of $117,700 which includes the original issue discount of $10,000 and interest of $7,700.
In connection therewith, we issued 150,000 common stock shares and additional 102,176 common stock shares on October 15, 2019,
per our original agreement, 412,500 common stock warrants, and reserved 301,412,500 restricted common shares for potential
conversion if the note was note paid in full. The shares were issued during the three months ended June 30, 2019. The conversion
price is fixed at $0.15. Pursuant to current accounting guidelines, we determined that the beneficial conversion feature of
the note created a fair value discount of $13,333 at the date of issuance when the stock price was at $0.17 per share. This
note was paid in full on November 14, 2019.
|
|
|
|
|
(B)
|
On
April 15, 2019, we completed convertible debenture at zero interest and other related documents with an unaffiliated third-party
funding group to generate $375,000 in additional available cash resources, the funds of which will be released over the 90
days following execution of the agreement in the amounts of $67,500, $90,000, and $180,000, with a payback provision of $75,000,
$100,000, and $200,000, respectively, over 36 months. In connection therewith, the Company issued 300,000 common stock warrants,
and 20,192,307 restricted common shares as reserve for potential conversion if the note was note paid in full. The note was
unsecured and did not bear interest; however, the implied interest was determined to be 10% over 36 months since the note
was issued at a 10% discount. Subsequently, on June 26, 2019 we nullified the agreement and other related documents with this
funding group after the initial disbursement of $67,500. We refunded the initial tranche of $67,500, a 10% redemption fee
of $7,500 for the principle amount plus for the original issue discount of $7,500, and other additional administrative fees
of $30,000, which totaled $105,000. This note was paid in full on June 26, 2019.
|
|
|
|
|
(C)
|
On
May 24, 2019, we completed a 7-month fixed convertible promissory note and other related documents with an unaffiliated third-party
funding group to generate $240,000, which will be distributed in three equal monthly tranches of $80,000, in additional available
cash resources with a payback provision of $80,000 plus the original issue discount of $4,000 or $84,000 due seven months
from each funding date for each tranche, totaling $252,000. We received only two of the three tranches of $80,000, generating
$160,000 in additional available cash resources with a payback provision due on December 23, 2019 and February 2, 2020 totaling
$184,800 which includes the original issue discount of $8,000 plus interest of $16,800. In connection therewith, we issued
50,000 common stock shares for two tranches with another 25,000 common stock shares to be issued with the third tranche, and
we have reserved 8,000,000 which was subsequently increased to 3 billion restricted common shares for conversion. The conversion
price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded prices of the Common Stock for the twenty (20)
Trading Days immediately preceding the date of the date of conversion. We determined that because the conversion price is
variable and unknown, it could not determine if it had enough reserve shares to fulfill the conversion obligation. As such,
pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair
value discount of $130,633 at the date of issuance when the stock price was at $0.12 per share. This note was paid in full
on January 25, 2021.
|
|
(D)
|
On
June 12, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party
funding group to generate $110,000 in additional available cash resources with a payback provision due on June 11, 2020 of
$135,250 which includes the original issue discount of $11,000 plus interest of $14,250. In connection with the note, we have
reserved 14,400,000 restricted common shares as reserve for conversion. The conversion price is a 35% discount to the average
of the two (2) lowest trading prices during the previous twenty (20) trading days to the date of a Conversion Notice. We determined
that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill
the conversion obligation. On December 19, 2019, we converted $10,000 of principle into 495,472,078 shares of common stock
at approximately $0.035 per share. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion
feature of the note created a fair value discount of $59,231 at the date of issuance when the stock price was at $0.11 per
share. This note was paid in full on February 5, 2021.
|
|
|
|
|
(E)
|
On
June 26, 2019, we completed a 9-month senior convertible promissory note and other related documents with an unaffiliated
third-party funding group to generate $135,000 in additional available cash resources with a payback provision due on March
25, 2020 of $168,000 which includes the original issue discount of $15,000 plus interest of $18,000. In connection with the
note, we issued 100,000 common stock shares and has reserved 15,000,000, which was subsequently increased to 1 billion restricted
common shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded
prices of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined
that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill
the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion
feature of the note created a fair value discount of $72,692 at the date of issuance when the stock price was at $0.11 per
share. This note was paid in full on January 7, 2021.
|
|
|
|
|
(F)
|
On
August 7, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party
funding group to generate $100,000 in additional available cash resources with a payback provision due on August 6, 2020 of
$121,000 which includes the original issue discount of $10,000 plus interest of $11,000. In connection with the note, we issued
100,000 common stock shares and has reserved 677,973,124, which was subsequently increased to 105,769,231, restricted common
shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded prices
of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined
that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill
the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion
feature of the note created a fair value discount of $73,750 at the date of issuance when the stock price was at $0.09 per
share. This note was paid in full on July 28, 2020.
|
|
|
|
|
(G)
|
On
August 21, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party
funding group to generate $148,500, which would be distributed in three equal monthly tranches of $49,500. Only one tranche
of $49,500 was received, and created available cash resources with a payback provision of $49,500 plus the original issue
discount of $5,500 or $55,000 due twelve months from each funding date for each tranche, totaling $165,000. We generated $49,500
in additional available cash resources with a payback provision due on August 20, 2020 totaling $60,500 which includes the
original issue discount of $5,500 plus interest of $5,500. In connection therewith, we issued 50,000 common stock shares for
the first tranche with another 50,000 common stock shares to be issued with each additional tranche, which will total 150,000
common shares; we have reserved 15,714, which was subsequently increased to 2 billion restricted common shares for conversion.
The conversion price is the 35% discount to the average of the two (2) lowest trading prices during the previous twenty (20)
trading days to the date of a Conversion Notice. We determined that because the conversion price is variable and unknown,
it could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current
accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $26,654
at the date of issuance when the stock price was approximately $0.07 per share. This note was paid in full on January 4, 2021.
|
|
(H)
|
On
January 28, 2020, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party
funding group to generate up to $925,000, which will be distributed in multiple tranches to be determined, in additional available
cash resources with a payback provision of principle debt without an original issue discount plus interest. We received only
one tranche and generated $63,000 in additional available cash resources with a payback provision due on January 27, 2021
totaling $69,300 which includes the principle plus interest of $6,300. We reserved 41,331,475, which was subsequently increased
to 1billion restricted common shares for conversion. The conversion price is the 39% discount to the average of the two (2)
lowest trading prices during the previous fifteen (15) trading days to the date of a Conversion Notice. We determined that
because the conversion price is variable and unknown, it could not determine if it had enough authorized shares to fulfill
the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion
feature of the note created a fair value discount of $40,279 at the date of issuance when the stock price was approximately
$0.01 per share. This note was paid in full on August 24, 2020.
|
|
●
|
On
June 26, 2019, we fully met and timely paid its debt obligation to Note Payable (B).
|
|
●
|
On
November 14, 2019, we fully met and timely paid its debt obligation to Note Payable (A).
|
|
●
|
On
July 28, 2020, we fully met and timely paid its debt obligation to Note Payable (F).
|
|
●
|
On
August 24, 2020, we fully met and timely paid its debt obligation to Note Payable (H).
|
|
●
|
On
November 3, 2020, we fully met and timely paid its debt obligation to Note Payable (C-1).
|
|
●
|
On
January 4, 2021, we fully met and timely paid its debt obligation to Note Payable (G).
|
|
●
|
On
January 7, 2021, we fully met and timely paid its debt obligation to Note Payable (E).
|
|
●
|
On
February 5, 2021, we fully met and timely paid its debt obligation to Note Payable (D).
|
|
●
|
On
January 25, 2021, we fully met and timely paid its debt obligation to Note Payable (C-2).
|
4.
NOTES PAYABLE – RELATED PARTIES
The
Company has the following related parties notes payable as of December 31, 2020 and 2019:
Note
|
|
Issuance Date
|
|
Maturity Date
|
|
Interest Rate
|
|
|
Original Borrowing
|
|
|
Balance at
December 31,
2020
|
|
|
Balance at
December 31,
2019
|
|
Short term loan (1)
|
|
December 31, 2019
|
|
December 31, 2020
|
|
|
0.0
|
%
|
|
$
|
113,675
|
|
|
$
|
113,675
|
|
|
$
|
10,000
|
|
Total notes payable – related parties, net
|
|
|
|
|
|
|
|
|
|
$
|
113,675
|
|
|
$
|
10,000
|
|
(1)
|
On
December 31, 2019, Kenneth Tapp, our Chief Executive Officer provided a short term, unsecured, non-interest-bearing loan due
on December 31, 2020 or earlier.
|
5.
COMMON STOCK
Class
A
For
the quarter ending December 31, 2019, we issued 2,200,000 stock shares to three professionals for their services. The shares are
valued at $0.10, the closing stock price on the date of grant, for total non-cash expense of $220,000. In addition, we entered
into subscription agreements with 6 accredited investors. We sold 3,550,000 common stock shares to the accredited investors at
$0.10 per share for total gross proceeds of $355,000. As of March 31, 2020, we received all the funds. We also issued 102,176
common shares to a single lender as inducement for their services at $0.00. Lastly, one lender converted their debt into 284,373
common shares at $0.04 for a value of $10,000. These shares were all issued during the three months ended March 31, 2020.
For
the quarter ending March 31, 2020, several lenders converted their debt into 415,479,876 common shares at an average of $0.00140
for a value of $232,257.
After
unanimous Board of Director approval and Shareholder Approval by consent of over 51% of the Company’s outstanding shares,
filing of the Company’s Definitive Information Statement, and notice to shareholders, we filed an Amended and Restated Articles
of Incorporation to increase its authorized shares with the State of Nevada, which was approved by the State of Nevada on March
4, 2020, and increased our authorized Common Stock Shares to 2.5 billion shares.
After
unanimous Board of Director approval and Shareholder Approval by consent of over 51% of outstanding shares, filing of our Definitive
Information Statement and notice to shareholders, we filed Amended and Restated Articles of Incorporation (“Amended Articles”)
to increase its authorized shares with the State of Nevada, which was approved by the State of Nevada on May 8, 2020, which amended
articles increased our authorized Class A Common Stock Shares to Ten Billion (10,000,000,000) Shares, Class B Common Stock Shares
to Four Hundred Million (400,000,000) Shares, and the Preferred Shares to Three Hundred Million (300,000,000) Shares. Additionally,
the Amended Articles authorized us from May 8, 2020 and continuing until March 31, 2021, as determined by our Board of Directors
in its sole discretion, to effect a Reverse Stock Split of not less than 1 share for every 5,000 shares and no more than 1 share
for every 25,000 shares. On December 11th, 2020, we filed a Form 8-K stating that we would not be executing the Reverse
Stock Split.
For
the quarter ending June 30, 2020, several lenders converted their debt into 774,546,579 common shares at an average of $0.00060
for a value of $44,693.
For
the quarter ending September 30, 2020, several lenders converted their debt into 2,125,389,202 common shares at an average of
$0.00005 for a value of $111,977.
For
the quarter ending December 31, 2020, several lenders converted their debt into 2,619,030,182 common shares at an average of $0.00082
for a value of $133,902.
Class
B
Effective
March 4, 2020, our board of directors authorized the issuance of twenty five million (25,000,000) Class B Common Stock Shares
to Ken Tapp, our Chief Executive Officer, in return for his services as our Chief Executive Officer from February 1, 2016 to February
29, 2020, which shares are equal to two billion five hundred million (2,500,000,000) votes and have no equity, cash value or any
other value.
Effective
March 28, 2021, our board of directors authorized the issuance of fifty million (50,000,000) Class B Common Stock Shares to Ken
Tapp, our Chief Executive Officer, in return for his services as our Chief Executive Officer for his services from March 1, 2020
to February 28, 2021, which shares are equal to five billion (5,000,000,000) votes and have no equity, cash value or any other
value. As of the date of this filing, our Chief Executive Officer controls approximately 95% of shareholder votes.
Board
and Executive Appointments
On
January 21, 2020, we appointed Britt Glassburn, Brian Lazarus, Gregory Todd Markey, and Lynn Murphy as Social Life Board Directors.
Subsequent
Events
Convertible
Debt Notes
Since
December 31, 2020 three of our debt holders have converted $271,174 of principle into 709,449,234 shares of common stock at approximately
$0.0005 per share.
The
following convertible notes, which represent all convertible notes in the company, as of February 5, 2021 have been fully met
and paid:
Note
|
|
Funding Date
|
|
Maturity Date
|
|
Interest Rate
|
|
|
Original Borrowing
|
|
|
Average Conversion Price
|
|
|
Number of Shares Converted
|
|
|
Balance at
March 30, 2021
|
|
Note payable (A)
|
|
April 15, 2019
|
|
November 14, 2019
|
|
|
7
|
%
|
|
$
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Note payable (B)
|
|
April 15, 2019
|
|
April 14, 2022
|
|
|
10
|
%
|
|
$
|
67,500
|
|
|
$
|
0.0000
|
|
|
|
20,192,296
|
|
|
|
-
|
|
Note payable (C-1)
|
|
May 24, 2019
|
|
December 23, 2019
|
|
|
10
|
%
|
|
$
|
80,000
|
|
|
$
|
0.00004
|
|
|
|
2,098,755,638
|
|
|
|
-
|
|
Note payable (C-2)
|
|
July 3, 2019
|
|
February 2, 2020
|
|
|
10
|
%
|
|
$
|
160,000
|
|
|
$
|
0.0006
|
|
|
|
631,866,563
|
|
|
|
-
|
|
Note payable (D)
|
|
June 12, 2019
|
|
June 11, 2020
|
|
|
12
|
%
|
|
$
|
110,000
|
|
|
$
|
0.0019
|
|
|
|
691,151,660
|
|
|
|
-
|
|
Note payable (E)
|
|
June 26, 2019
|
|
March 25, 2020
|
|
|
12
|
%
|
|
$
|
135,000
|
|
|
$
|
0.00004
|
|
|
|
334,261,219
|
|
|
|
-
|
|
Note payable (F)
|
|
August 7, 2019
|
|
August 6, 2020
|
|
|
10
|
%
|
|
$
|
100,000
|
|
|
$
|
0.0007
|
|
|
|
111,150,731
|
|
|
|
-
|
|
Note payable (G)
|
|
August 21, 2019
|
|
August 20, 2020
|
|
|
10
|
%
|
|
$
|
148,500
|
|
|
$
|
0.0001
|
|
|
|
151,300,000
|
|
|
|
-
|
|
Note payable (H)
|
|
January 28, 2020
|
|
January 27, 2021
|
|
|
10
|
%
|
|
|
63,000
|
|
|
$
|
0.0001
|
|
|
|
1,102,499,999
|
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.0001
|
|
|
|
5,141,178,106
|
|
|
$
|
-
|
|
|
●
|
On
June 26, 2019, we fully met and paid its debt obligation to Note Payable (B).
|
|
●
|
On
November 14, 2019, we fully met and paid its debt obligation to Note Payable (A).
|
|
●
|
On
July 28, 2020, we fully met and paid its debt obligation to Note Payable (F).
|
|
●
|
On
August 24, 2020, we fully met and paid its debt obligation to Note Payable (H).
|
|
●
|
On
November 3, 2020, we fully met and paid its debt obligation to Note Payable (C-1).
|
|
●
|
On
January 4, 2021, we fully met and paid its debt obligation to Note Payable (G).
|
|
●
|
On
January 7, 2021, we fully met and paid its debt obligation to Note Payable (E).
|
|
●
|
On
February 5, 2021, we fully met and paid its debt obligation to Note Payable (D).
|
|
|
On January 25, 2021, we fully met and paid its debt obligation to Note Payable (C-2).
|
Other
Obligations
For
the year ending December 31, 2020, Kenneth, Tapp, from time-to-time, provided short-term interest free loans amounting to $113,675
for the Company’s operations. For the first quarter ending 2021, Kenneth Tapp provided an additional net amount of $14,100
in short term interest free loans, totaling $127,775 liquidity as of March 30, 2021.
On
April 21, 2020, under the Payroll Protection Program, we received a forgivable loan of $37,411, and on June 10, 2020, we received
an additional forgivable loan of $125,700. Both loans were given to small businesses by the Small Business Application (SBA) to
help support employees of the companies, as financial aid, in order to sustain businesses during the mandatory COVID-19 lockdown.
We anticipate the loan will be forgiven.
For
the year ending December 31, 2020, MjLink owed Social Life Network $364,688.00. That expense was paid in full on March 12, 2021.
6.
INCOME TAXES
Deferred
taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating
loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax
rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment. The U.S. federal income tax rate of 21% plus the Colorado income tax rate of 4.63% - combined
rate of 25.63% - is being used due to the new tax law recently enacted.
Net
deferred tax assets consist of the following components as of December 31:
|
|
2020
|
|
|
2019
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
NOL Carryover
|
|
$
|
(52,000
|
)
|
|
$
|
(452,600
|
)
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Less valuation allowance
|
|
|
(52,000
|
)
|
|
|
(452,600
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The
income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to tax-effected
income from continuing operations for the period ended December 31, due to the following:
|
|
2020
|
|
|
2019
|
|
Book loss
|
|
$
|
(52,000
|
)
|
|
$
|
(988,800
|
)
|
Meals and entertainment
|
|
|
-
|
|
|
|
1,200
|
|
Warrant expense
|
|
|
-
|
|
|
|
75,000
|
|
Stock based compensation
|
|
|
-
|
|
|
|
460,000
|
|
Valuation allowance
|
|
|
(52,000
|
)
|
|
|
(452,600
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
At
December 31, 2020, the Company had net operating loss carry forwards of approximately $0 that may be offset against future taxable
income from the year 2019 to 2036. No tax benefit has been reported in the December 31, 2020 financial statements since the potential
tax benefit is offset by a valuation allowance of the same amount.
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax
reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may
be limited as to use in future years. With few exceptions, the Company is no longer subject to U.S. federal, state and local income
tax examinations by tax authorities for years before 2012.
7.
COMMITMENTS AND CONTINGENCIES
Operating
Leases
The
Company’s executive and administrative office is located at 3465 Gaylord Court, Suite A509, Englewood, Colorado 80113.
The
Company had total rent expense for the year ended December 31, 2020 and 2019 of $17,052 and $33,406, respectively, which is recorded
as part of General and Administrative expenses in the Statement of Operations.
Litigation
The
Company does not have any pending litigation.
8.
SUBSEQUENT EVENTS
Convertible
Debt Notes
Since
December 31, 2020 three of our debt holders have converted $271,174 of principle into 709,449,234 shares of common stock at approximately
$0.0005 per share.
The
following convertible notes, which represent all convertible notes in the company, as of February 5, 2021 have been fully met
and paid:
Note
|
|
Funding Date
|
|
Maturity Date
|
|
Interest Rate
|
|
|
Original Borrowing
|
|
|
Average Conversion Price
|
|
|
Number of Shares Converted
|
|
|
Balance at
March 30, 2021
|
|
Note payable (A)
|
|
April 15, 2019
|
|
November 14, 2019
|
|
|
7
|
%
|
|
$
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Note payable (B)
|
|
April 15, 2019
|
|
April 14, 2022
|
|
|
10
|
%
|
|
$
|
67,500
|
|
|
$
|
0.0000
|
|
|
|
20,192,296
|
|
|
|
-
|
|
Note payable (C-1)
|
|
May 24, 2019
|
|
December 23, 2019
|
|
|
10
|
%
|
|
$
|
80,000
|
|
|
$
|
0.00004
|
|
|
|
2,098,755,638
|
|
|
|
-
|
|
Note payable (C-2)
|
|
July 3, 2019
|
|
February 2, 2020
|
|
|
10
|
%
|
|
$
|
160,000
|
|
|
$
|
0.0006
|
|
|
|
631,866,563
|
|
|
|
-
|
|
Note payable (D)
|
|
June 12, 2019
|
|
June 11, 2020
|
|
|
12
|
%
|
|
$
|
110,000
|
|
|
$
|
0.0019
|
|
|
|
691,151,660
|
|
|
|
-
|
|
Note payable (E)
|
|
June 26, 2019
|
|
March 25, 2020
|
|
|
12
|
%
|
|
$
|
135,000
|
|
|
$
|
0.00004
|
|
|
|
334,261,219
|
|
|
|
-
|
|
Note payable (F)
|
|
August 7, 2019
|
|
August 6, 2020
|
|
|
10
|
%
|
|
$
|
100,000
|
|
|
$
|
0.0007
|
|
|
|
111,150,731
|
|
|
|
-
|
|
Note payable (G)
|
|
August 21, 2019
|
|
August 20, 2020
|
|
|
10
|
%
|
|
$
|
148,500
|
|
|
$
|
0.0001
|
|
|
|
151,300,000
|
|
|
|
-
|
|
Note payable (H)
|
|
January 28, 2020
|
|
January 27, 2021
|
|
|
10
|
%
|
|
|
63,000
|
|
|
$
|
0.0001
|
|
|
|
1,102,499,999
|
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.0001
|
|
|
|
5,141,178,106
|
|
|
$
|
-
|
|
|
●
|
On
June 26, 2019, we fully met and paid its debt obligation to Note Payable (B).
|
|
●
|
On
November 14, 2019, we fully met and paid its debt obligation to Note Payable (A).
|
|
●
|
On
July 28, 2020, we fully met and paid its debt obligation to Note Payable (F).
|
|
●
|
On
August 24, 2020, we fully met and paid its debt obligation to Note Payable (H).
|
|
●
|
On
November 3, 2020, we fully met and paid its debt obligation to Note Payable (C-1).
|
|
●
|
On
January 4, 2021, we fully met and paid its debt obligation to Note Payable (G).
|
|
●
|
On
January 7, 2021, we fully met and paid its debt obligation to Note Payable (E).
|
|
●
|
On
February 5, 2021, we fully met and paid its debt obligation to Note Payable (D).
|
|
|
On
January 25, 2021, we fully met and paid its debt obligation to Note Payable (C-2).
|
Other
Obligations
For
the year ending December 31, 2020, Kenneth, Tapp, from time-to-time, provided short-term interest free loans amounting to $113,675
for the Company’s operations. For the first quarter ending 2021, Kenneth Tapp provided an additional net amount of $14,100
in short term interest free loans, totaling $127,775 liquidity as of March 30, 2021.
On
April 21, 2020, under the Payroll Protection Program, the Company received a forgivable loan of $37,411, and on June 10, 2020,
the Company received an additional forgivable loan of $125,700. Both loans were given to small businesses by the Small Business
Application (SBA) to help support employees of the companies, as financial aid, in order to sustain businesses during the mandatory
COVID-19 lockdown. We anticipate the loan will be forgiven.
For
the year ending December 31, 2020, MjLink owed Social Life Network $364,688.00. That expense was paid in full on March 12, 2021.