NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2019
(unaudited)
NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Social Life Network, Inc. is a technology
company (the “Company”) that has created a Social Network Platform (hereafter referred to as the “Platform”)
that incorporates artificial intelligence and blockchain technology. Since the launch of the company in January of 2013, it has
deployed multiple social networks in niche industries that service the millions of business professionals and consumers in many
sports verticals, the residential real estate industry, and the emerging legal global cannabis industry. As of September 30th,
2019, the platform has a total of 2.07 million monthly active user (MAU) sessions, across all of its serviced niche industries.
MjLink.com, Inc (hereafter referred to as “MjLink”), is a wholly-owned subsidiary of the Company. MjLink was incorporated
in Delaware on September 20, 2018, after operating as the cannabis division of the Company from January 2013 through the incorporation
date. As of September 2019, MjLink operates four separate niche social networks in the global legal cannabis industry,
servicing the marijuana business professionals, industrial hemp business professionals and their consumers, marijuana consumers
and caregivers, and the cannabis industry financial markets. In June of 2019, MjLink launched a financial markets conference,
Micro Capital Conference, that unites private and publicly traded cannabis companies led by seasoned executives with high net
worth investors. MjMicro Conference is held multiple times throughout the year and is complemented 365 days a year by a new online
investor network, MjInvest.com, that was launched by MjLink in Q3 of 2019.
The
Company’s history began with its incorporation in California on August 30, 1985 under the name, C J Industries, Inc. On
February 24, 2004, the Company merged with Calvert Corporation, a Nevada Corporation, changed its name to Sew Cal Logo, Inc.,
and moved its domicile to Nevada.
In
June 2014, the Company 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, the Company, 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. The Company, as the Seller, acted through Robert Stevens, the court-appointed
receiver and White Tiger Partners, LLC, the Company’s 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 the Company’s officers, composed of 59,736,667 shares each to the Company’s Chief
Executive Officer, Kenneth Tapp, and Andrew Rodosevich, the Company’s then-Chief Financial Officer. Pursuant to the terms
of the Agreement and related corporate actions in the Company’s domicile, Nevada:
|
●
|
The
Company cancelled all previously created preferred class of stock;
|
|
|
|
|
●
|
The
Company 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.
|
|
|
|
|
●
|
The
Company’s then officers and directors were terminated, and Kenneth Tapp and Andrew Rodosevich became its Chief Executive
Officer/Director and Chief Financial Officer/Director, respectively;
|
|
|
|
|
●
|
The
Company effected a 5,000 to 1 reverse stock split effective April 11, 2016, with each shareholder retaining a minimum of 100
shares;
|
|
|
|
|
●
|
The
Company changed its name from Sew Cal Logo, Inc. to WeedLife, Inc, and then to Social Life Network, Inc. effective in Nevada
on April 11, 2016;
|
|
|
|
|
●
|
The
Company changed its stock symbol from SEWC to WDLF;
|
|
|
|
|
●
|
The
Company decreased its authorized common stock shares from 2,000,000,000 shares to 500,000,000 shares, effective 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
(the “Securities Act”), ratifying the above actions, and the receiver was discharged on June 7, 2016.
On
September 20, 2018, the Company incorporated MjLink, a Delaware Corporation, as its wholly owned subsidiary.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed financial statements
reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair
statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected
for the full year ending December 31, 2019. These unaudited condensed financial statements should be read in conjunction with
the financial statements and related notes for the year ended December 31, 2018.
Principles
of Consolidation
The
consolidated financial statements include the accounts of Social Life Network, Inc. and its wholly owned subsidiary, MjLink.com,
Inc. 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.
Reclassifications
Certain
reclassifications have been made to the prior period financial information to conform to the presentation used in the financial
statements for the nine months ended September 30, 2019.
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 nine months ended 2019 and the year ended December 31, 2018.
Revenue
Recognition
Revenue
is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration
that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the
nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue
that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies
the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii)
determination of whether the promised goods are performance obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation
of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each
performance obligation.
The
Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is
entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the
scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company
must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction
price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied.
Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.
The
Company generates revenues through four 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); 3) premium monthly digital marketing subscriptions, which provide business director and online review management
for monthly subscriptions; 4) subscription to an online platform for both public and private cannabis companies to present in
a live virtual conference; and 5) an invitational forum that unites publicly-traded cannabis companies led by seasoned executives
with next level, high net worth investors.
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 more likely than not that
the deferred tax asset will be unrealized. 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 September 30, 2019, the Company has not established
a liability for uncertain tax positions.
Research
and Development Costs
The
Company spent zero dollars on research and development as of September 30, 2019 and during the year ended December 31, 2018.
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 September
30, 2019 and December 31, 2018, the Company had no outstanding options and had outstanding warrants of 16,300,020 for year ended
2018 and 9,094,853 as of September 30, 2019, 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, 2018.
The
Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis as of September
30, 2019 and December 31, 2018.
Concentrations
During
the quarter ended September 30, 2019, the Company had a single vendor that accounted for 17.9% of all expenses, and 21.6% of all
expenses during the same period in the prior year.
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 evaluated the impact of this accounting standard update
and noted that it has had no material impact.
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets
and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective
for fiscal years beginning after December 15, 2018 and interim periods in fiscal years 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
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 is in the process of assessing
the impact, if any, on its financial statements.
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. The Company 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.
NOTE
3 – GOING CONCERN
The
Company’s unaudited 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. At September 30, 2019, the Company had an accumulated deficit of $31,383,596 had a net loss of $3,678,050, and used net
cash of $1,684,564 in operating activities for the nine months ended September 30, 2019. 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 it generating profitable operations in the future and/or obtaining the necessary financing to meet obligations
and repay liabilities arising from normal business operations when they come due. The Company’s management intends to finance
operating costs over the next nine months with existing cash then on hand, the sale of its equity securities on a private exempted
basis, or possibly through a Regulation A Offering. 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 or that the Company will succeed in its future operations. The financial
statements of the Company do not include any adjustments that may result from the outcome of these uncertainties.
NOTE
4 – RELATED PARTY TRANSACTIONS
Other
than as disclosed below, there has been no transaction, since January 1, 2019, or currently proposed transaction(s), in which
the Company was or is to be a participant and the amount involved exceeds $5,000, being the lesser of $120,000 or one percent
of our total assets at September 30, 2019, and in which any of the following persons had or will have a direct or indirect material
interest:
|
(a)
|
any
director or executive officer of our company;
|
|
|
|
|
(b)
|
any
person who beneficially owns, directly or indirectly, more than 5% of any class of our voting securities;
|
|
|
|
|
(c)
|
any
person who acquired control of the Company when it was a shell company or any person that is part of a group, consisting of
two or more persons that agreed to act together for the purpose of acquiring, holding, voting or disposing of our common stock,
that acquired control of the Company when it was a shell company; and
|
|
|
|
|
(d)
|
any
member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.
|
On January 2, 2019, the Company completed
an employment agreement with George Jage, President of MjLink, providing him with the ability to receive stock in the company.
The agreement provides that if Mr. Jage resigns as MjLink’s President during the first 24 months of the employment agreement,
all stock previously issued to him are required to be returned to MjLink’s treasury. On June 26, 2019, George Jage resigned
from the Company, and no stock was issued to him.
On
February 6, 2019, the Company authorized an additional 500,000 restricted common stock shares to Mark DiSiena, the Company’s
Chief Financial Officer, valued at $50,000. The shares were issued during the three months ended March 31, 2019.
Our
Chief Executive Officer is also the Chief Technology Officer of our licensees, Real Estate Social Network and Sports Social Network,
and owns approximately 15% of each such entity through a limited liability company of which he is a member of. We have a license
agreement with Real Estate Social Network providing that they will pay us 20% of the net profits from all monthly member subscriptions
and online advertising sales, paid annually, on the 31st day of January for the preceding year. We also have a license agreement
with Sports Social Network providing that they will pay us $125,000 annually for the first two years of this agreement (a total
of $250,000 for the first two years), and thereafter will receive 20% of the net profits from all online advertising sales and
collected E-Commerce fees, paid monthly with the option to pay any outstanding licensing fees annually, and to be received by
us no later than the 31st day of January for the preceding year. Our Chief Executive Officer owns 44.4% of our outstanding shares.
As
of September 30, 2019, LVC Consulting invoiced us zero dollars for upgrades required in the third quarter 2019 for platform code
updates, mobile app updates, and quality testing, which constituted 0.0% and 0.5% of the Company’s total expenses for the
three months and nine months ended September 30, 2019, respectively.
The
Chief Executive Officers of Real Estate Social Network and Sports Social Network negotiated the pricing for the licensing agreements
using a “Royalty Flex-Rate” method per network end-user. The Company’s Chief Executive Officer and prior Chief
Financial Officer represented the Company in the negotiations with Real Estate Social Network and Sports Social Network regarding
the license agreements. This type of licensing is the standard when licensing intellectual property per users. The rates were
determined by existing users in the Sports Social Network, and future predicted users in the Real Estate Social Network. The Company
researched competing Social Network licensing platforms for pricing and features, and determined that the most similar to the
Company’s Network Platform was SocialShared.com (https://www.socialshared.com/plans.html.)
The
Company’s related party revenue for Fiscal Year 2019 was $25,000 or 14.1% of gross revenue.
On
October 19, 2018, the Company granted 3,000,000 shares of common stock to Electrum Partners, LLC for a total value of $360,000.
The Company’s Director, Leslie Bocksor, is the President/Founder of Electrum Partners.
The
Company’s Directors, Leslie Bocskor and Vincent (Tripp) Keber, directly or indirectly, have earned cash compensations of
$45,000 and $160,000, respectively, during the nine months ended September 30, 2019; and $25,000 and $80,000, respectively during
fiscal year 2018, for consulting services rendered to the Company.
On
June 6, 2016, the Company issued 59,736,667 common stock shares to LVC Consulting, LLC. The shares are valued at $0.15, the closing
stock price on the date of grant, for total non-cash expense of $8,960,500. The Managing Member of LVC Consulting is the Company’s
Chief Executive Officer, Kenneth Tapp.
On
June 6, 2016, the Company issued 59,736,667 common stock shares to Rodosevich Investments, LLC. The shares are valued at $0.15,
the closing stock price on the date of grant, for total non-cash expense of $8,960,500. 50,000 of these shares were returned to
the Company on December 7, 2017. On December 14, 2017, the Company issued 5,000,000 restricted common stock shares to Rodosevich
Investments, LLC. The shares are valued at $0.13, the closing stock price on the date of grant, for total non-cash expense of
$650,000. The Managing Member of Rodosevich Investments is the Company’s prior-Chief Financial Officer, Andrew Rodosevich.
On
July 18, 2016, the Company executed a Note Payable with Andrew Rodosevich, the Company’s then Chief Financial Officer, for
$26,400 to pay for public company expenses. The note is unsecured, non-interest bearing and due December 31, 2019. As of December
31, 2018, the note has been fully paid.
On
September 1, 2016, the Company executed a Note Payable with Like RE, Inc. for $53,000. Kenneth Tapp, the Company’s Chief
Executive Officer, is also an officer of Like RE, Inc. The note is unsecured, non-interest bearing and due December 31, 2018.
As of December 31, 2018, the note has been fully paid.
During the nine months
ended September 30, 2019 Kenneth Tapp provided a short term interest free loan of $70,000. As of November 1, 2019, the
loan has been fully paid.
NOTE
5 – SALES RETURNS
For
the period ended September 30, 2019, the Company did not issue any credit memos.
NOTE
6 – STOCK WARRANTS
During
the nine months ended September 30, 2019 and the years ended December 31, 2018, 2017, and 2016, the Company granted 1,594,853,
zero, 9,900,020, and 6,400,000 warrants, respectively, to company advisors and employees, totaling 17,894,873 warrants
(the “17,894,873 Warrants”). Each warrant entitles the holder to one common stock share at an exercise price ranging
from five to twenty cents, with a weighted average price of seven cents. The term of the warrants has 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, 2019 the
17,894,873 Warrants are 100% vested. During the three months ended September 30, 2019, the Company executed a cashless conversion
of 8,800,020 vested warrants in exchange for 4,400,010 common stock shares. The Company expensed $4,400 as a loss for the
distribution of capital stock from conversion. The remaining 9,094,853 outstanding warrants are currently 100% vested to date.
The aggregate fair value of the warrants before conversion totaled $3,977,301 and the aggregate fair value of the warrants after
conversion totaled $2,244,800, 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 $0.07 to $0.65, risk free rates ranging from 1.77% - 2.72%,
volatility ranging from 395% 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
|
|
Outstanding,
December 31, 2016
|
|
|
6,400,000
|
|
|
$
|
0.05
|
|
|
$
|
-
|
|
Issued
|
|
|
9,900,020
|
|
|
$
|
0.05
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Outstanding,
December 31, 2017
|
|
|
16,300,020
|
|
|
$
|
0.05
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2017
|
|
|
8,100,000
|
|
|
$
|
0.05
|
|
|
$
|
|
|
Issued
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Expired
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Outstanding,
December 31, 2018
|
|
|
16,300,020
|
|
|
$
|
0.05
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2018
|
|
|
16,300,020
|
|
|
$
|
0.05
|
|
|
$
|
-
|
|
Issued
|
|
|
1,594,853
|
|
|
|
0.18
|
|
|
$
|
-
|
|
Exercised
|
|
|
(8,800,020
|
)
|
|
|
0.00
|
|
|
$
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding,
September 30, 2019
|
|
|
9,094,853
|
|
|
$
|
0.07
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
September 30, 2019
|
|
|
9,094,853
|
|
|
$
|
0.07
|
|
|
$
|
0.32
|
|
Range
of Exercise Prices
|
|
Number
Outstanding
9/30/2019
|
|
|
Weighted
Average Remaining
Contractual Life
|
|
|
Weighted
Average
Exercise Price
|
|
|
$
|
|
0.00
to 0.20
|
|
|
|
9,094,853
|
|
|
|
3.83
years
|
|
|
$
|
0.07
|
|
NOTE
7 – COMMON STOCK
On
June 10, 2016, the Company issued 1,000,000 common stock shares to Michael Fuller in connection for his Search Optimization and
Content Monitoring Services to us as an independent contractor. The shares are valued at $0.16, the closing stock price on the
date of grant, for total non-cash expense of $160,000. The shares were issued during the twelve months ended December 31, 2018.
On
June 10, 2016, the Company issued 500,000 common stock shares to Bruce Kennedy for his News Monitoring and Article Publishing
Services to the Company as an independent contractor. The shares are valued at $0.16, the closing stock price on the date of grant,
for total non-cash expense of $80,000. The shares were issued during the twelve months ended December 31, 2018.
On
June 10, 2016, the Company issued 1,000,000 common stock shares to Trang Pham for her Accounting Services to us as an independent
contractor. The shares are valued at $0.16, the closing stock price on the date of grant, for total non-cash expense of $160,000.
The shares were issued during the twelve months ended December 31, 2018.
On
June 10, 2016, the Company issued 1,000,000 common stock shares to Lonnie Klaess for her Secretarial and Office Management Services
to the Company as an independent contractor. The shares are valued at $0.16, the closing stock price on the date of grant, for
total non-cash expense of $160,000. The shares were issued during the twelve months ended December 31, 2018.
On
June 30, 2016, the Company sold 200,000 shares of common stock to Justin Dinkel for total cash proceeds of $10,000, which shares
were issued during the three months ended March 31, 2019.
On
June 30, 2016, the Company sold 300,000 shares of common stock to Ryan Falbo for total cash proceeds of $15,000, which shares
were issued during the three months ended March 31, 2019.
From
October 11, 2017 to December 13, 2018, the Company entered into subscription agreements with 30 accredited investors. The Company
sold 1,730,001 common stock shares to the accredited investors at $0.15 per share for total gross proceeds of $259,500. The Company
received $257,500 throughout the fourth quarter 2017 and the remaining $2,000 in March 2018. The shares were issued during the
twelve months ended December 31, 2017.
During
the three months ended March 31, 2019, the Company issued 3,000,000 shares of common stock shares for services. 1,000,000 shares
were issued at $0.10 on April 30, 2018 and 3,000,000 shares were issued at $0.15 on August 29, 2018, based on the closing stock
price on the date of grants, which created a total non-cash expense of $550,000.
On
July 3, 2018, the Company’s Board of Directors adopted the Certificate of Designation of Preferences, Rights and Limitations
of the Class B Common Stock (“Certificate”), including that each Class B Common Stock Share shall have ten (10) votes
on all matters presented to be voted by the holders of Common Stock. Further, the Company’s Board of Directors authorized
the issuance of 5,000,000 Class B Common Stock Shares to Kenneth Tapp, the Company’s Chief Executive Officer, in return
for his services as the Company’s Chief Executive Officer from February 1, 2016 to July 2, 2018. The Class B Common Stock
Shares only have voting power and have no equity, cash or other value. The 5,000,000 Class B Common Stock Shares were never issued,
and effective August 16, 2018 the Company’s Board of Directors cancelled the authorization of issuing the 5,000,000 shares
of Class B Common Stock to its Chief Executive Officer, Kenneth Tapp.
From
July 31, 2018 to September 30, 2018, the Company entered into subscription agreements with 23 accredited investors. The Company
sold 4,200,009 common stock shares to the accredited investors at $0.15 per share for total gross proceeds of $630,001. The shares
were issued during the 12-months ended December 31, 2018.
On
October 1, 2018, the Company authorized the issuance of 60,000 of the total of 250,000 common stock shares to Mali Sanati, Director
of Business Development, for her business development services to the Company. The 60,000 shares were issued during the three
months ended March 31, 2019. The shares were valued at $0.10, the closing stock price on the date of grant, for total non-cash
expense of $6,000. The Company will issue the remaining 190,000 common stock shares as 95,000 shares each on October 1, 2019 and
October 1, 2020.
From
October 1, 2018 to December 31, 2018, the Company entered into subscription agreements with 8 accredited investors. The Company
sold 200,000 common stock shares to 3 accredited investors at $0.15 per share and 3,900,000 common stock shares to 5 accredited
investors at $0.10 per share for total gross proceeds of $420,000. The shares were issued during the twelve-months ended December
31, 2018.
On
October 19, 2018, the Company granted 3,000,000 shares of common stock to Electrum Partners for their professional services. The
shares were issued during the twelve months ended December 31, 2018. Leslie Bocskor, the Company’s Director, is the President
and Founder of Electrum Partners.
On
October 19, 2018, the Company issued 500,000 and 833,333 common stock shares to D. Scott Karnedy for his services as Chief Operating
Officer and to IRTH Communications for their Investor Relations Services, respectively. The shares are valued at $0.12, the closing
stock price on the date of grant, for total non-cash expense of $160,000. The shares were issued during the twelve months ended
December 31, 2018.
On
November 1, 2018, the Company authorized the issuance of 500,000 restricted common stock shares to Mark DiSiena, the Company’s
Chief Financial Officer, for his CFO services. The shares are valued at $0.10 the closing stock price on the date of grant, for
total non-cash expense of $50,000. The shares were issued during the three months ended March 31, 2019.
On January 2, 2019, the Company completed
an employment agreement with George Jage, President of MjLink, providing him with the ability to receive stock in the company.
The agreement provides that if Mr. Jage resigns as MjLink’s President during the first 24 months of the employment agreement,
all stock previously issued to him are required to be returned to MjLink’s treasury. On June 26, 2019, George Jage resigned
from the Company, and no stock was issued to him.
On
February 6, 2019, the Company authorized the issuance of 500,000 common stock shares to Mark DiSiena, Chief Financial Officer,
for his CFO services; 1,000,000 common stock shares to Frederick M. Lehrer for his legal services as an independent contractor;
and 50,000 common stock shares to the Company’s employee, Kelsey Higgins, for her marketing services. The shares are valued
at $0.10, the closing stock price on the date of grant, for total non-cash expense of $155,000. The shares were issued during
the three months ended March 31, 2019.
From January 1, 2019 thru March 31, 2019,
the Company entered into subscription agreements with 9 accredited investors. The Company sold 5,725,000 common stock shares to
the accredited investors, of which 1,200,009 common stock shares were sold at $0.05 per share for total gross proceeds of $60,000,
and 4,025,000 common stock shares were sold at $0.10 per share for total gross proceeds of $402,500; as of March 31, 2019, the
Company received $382,500 out of the $462,500, with $80,000 remaining was paid on April 17, 2019. Accordingly, 3,700,000
of the 5,725,000 shares were issued by March 31, 2019, 1,625,000 were issued by June 30, 2019, and 400,000 remaining shares were
issued during the three months ended December 31, 2019.
On
April 2, 2019, the Company issued 500,000 common stock shares to an employee. The shares are valued at $0.10, the closing
stock price on the date of grant, for total non-cash expense of $50,000. The shares were issued during the three
months ended December 31, 2019.
On
April 15, 2019, the Company completed a Common Stock Purchase Agreement and other related documents with a funding group to generate
$750,000 in additional available resources, earmarking the proceeds of $750,000 for our wholly-owned subsidiary, MjLink. In connection
with this agreement, the Company issued 300,000 common stock shares to a non-profit affiliate of the funding group. On April 20,
2019, the Board of Directors determined not to deliver any purchase notices to this funding group going forward, setting forth
the purchase notice common shares that the Company would have otherwise required the funding group to purchase.
On
April 15, 2019, the Company completed a Standby Equity Commitment Agreement and other related documents with an investor
group to generate $3 million in additional available cash resources with the Investor committed to purchase up to three million
of the Company’s common stock from time-to-time over the course of 36 months with reselling limitations. In connection therewith,
the Company issued 882,353 common stock shares plus 882,353 common stock warrants and reserved 16,900,000 restricted common
shares for conversion. The 882,353 common stock shares will be issued during the three months ended December 31, 2019.
On
May 9, 2019, the Company issued 2,850,000 common 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 $285,000. The shares were issued during
the three months ended June 30, 2019.
As
of September 30, 2019, the Company issued 350,000 common shares to several lenders as inducement for their services. The shares
are valued from $0.10 to $0.17, the closing price of the date of convertible debt liability, for a total non-cash expense of $46,500.
The shares were issued during the six months ended September 30, 2019.
NOTE
8 – CONVERTIBLE NOTES
The
Company has the following convertible notes payable as of September 30, 2019 and December 31, 2018:
Note
|
|
Note
Date
|
|
Maturity
Date
|
|
Interest
Rate
|
|
|
Original
Borrowing
|
|
|
Balance
at
September 30, 2019
|
|
|
Balance
at
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
payable (A)
|
|
April
15, 2019
|
|
November
14, 2019
|
|
|
7
|
%
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
|
|
-
|
|
Note
payable (B)
|
|
April
15, 2019
|
|
April
14, 2022
|
|
|
10
|
%
|
|
$
|
75,000
|
|
|
|
-
|
|
|
|
-
|
|
Note
payable (C)
|
|
May
24, 2019
|
|
December
23, 2019
|
|
|
10
|
%
|
|
$
|
80,000
|
|
|
|
80,000
|
|
|
|
-
|
|
Note
payable (C)
|
|
July
3, 2019
|
|
February
2, 2020
|
|
|
10
|
%
|
|
$
|
160,000
|
|
|
|
80,000
|
|
|
|
-
|
|
Note
payable (D)
|
|
June
12, 2019
|
|
June
11, 2020
|
|
|
12
|
%
|
|
$
|
110,000
|
|
|
|
110,000
|
|
|
|
-
|
|
Note
payable (E)
|
|
June
26, 2019
|
|
March
25, 2020
|
|
|
12
|
%
|
|
$
|
135,000
|
|
|
|
135,000
|
|
|
|
-
|
|
Note
payable (F)
|
|
August
7, 2019
|
|
August
6, 2020
|
|
|
10
|
%
|
|
$
|
100,000
|
|
|
|
100,000
|
|
|
|
|
|
Note
payable (G)
|
|
August
21, 2019
|
|
August
20, 2020
|
|
|
10
|
%
|
|
$
|
148,500
|
|
|
|
49,500
|
|
|
|
-
|
|
Total
notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
654,500
|
|
|
|
-
|
|
Note
discount from beneficial
conversion feature
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Total
notes payable, net of note discount
|
|
|
|
|
|
|
|
|
|
|
|
$
|
654,500
|
|
|
|
-
|
|
|
(A)
|
On
April 15, 2019, the Company completed a 7-month term original issue discount convertible 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 November 10, 2019 of $121,000 after an original issue discount of $11,000. In connection therewith, the Company
issued 150,000 common stock shares, 412,500 common stock warrants, and reserved 1,000,000 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, the Company 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. The Company refunded the initial tranche of $67,500, a 10% redemption fee of the principle amount
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.
|
|
|
|
|
(C1)
|
On
May 24, 2019, the Company 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 $84,000 due seven months from each funding date, totaling $252,000 after
an original issue discount totaling $12,000. In connection therewith, the Company issued 50,000 common stock shares for two
tranches with another 25,000 common stock shares to be issued with the third tranche, and the Company has reserved 8,000,000
restricted common shares for conversion. The shares will be issued during the three months ended September 30, 2019. 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. The Company 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, the Company 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, the Company 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
6, 2020 of $121,000 after an original issue discount of $11,000. In connection with the note, the Company has 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. The Company 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, the Company 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, the Company 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
12, 2020 of $150,000 after an original issue discount of $15,000. In connection with the note, the Company issued 100,000
common stock shares and it has reserved 15,000,000 restricted common shares as reserve for conversion. The shares will be
issued during the three months ended September 30, 2019. 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. The Company 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,
the Company 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, the Company 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 $110,000 after an original issue discount of $10,000. In connection with the note, the Company issued 100,000 common
stock shares and reserved 11,000,000 restricted common shares as reserve for conversion. The shares will be issued during
the three months ended September 30, 2019. 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.
The Company determined that because the conversion price is variable and unknown, it could not determine if the Company had
enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company
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, the Company 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 $55,000 due on August 20, 2020, and 12 months following each tranche,
totaling $165,000, which includes an original issue discount totaling $16,500. In connection therewith, the Company has 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; the Company has reserved 15,714,285 restricted common shares for conversion.
The shares were issued during the three months ended September 30, 2019. 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. The
Company 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, the Company determined that
the beneficial conversion feature of the note created a fair value discount of $79,962 at the date of issuance when the stock
price was approximately $0.07 per share.
|
NOTE
9 – SUBSEQUENT EVENTS
Common
Stock
On
October 15, 2019, in addition to the 150,000 inducement shares issued on April 15, 2019, the Company issued 102,176 common shares
to one of its lenders to accommodate for the price volatility based on an agreed upon formula in the executed documents related
to the convertible promissory Note Payable (A) described above. The shares will be issued during the three months ended December
31, 2019.
On
November 1, 2019, the Company entered into subscription agreements with 6 accredited investors. The Company sold 3,550,000 common
stock shares at $0.10 per share for total gross proceeds of $355,000. The shares will be issued during the twelve-months ended
December 31, 2019.
On November 11, 2019, the Company issued 2,200,000 common stock shares to four employees
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. The shares were issued during the three months ended December 31, 2019.
Since
September 30, 2019, the Company executed a cashless conversion of 1,200,000 vested warrants in exchange for 600,000 common stock
shares, reducing the total number of warrants outstanding to 7,894,853.
Convertible
Note Payable and other Obligations
From
August 30 through October 29, 2019 Kenneth, Tapp, from time-to-time provided short-term interest free loans amounting to
$135,000 for the Company’s operations. As of November 1, 2019, the obligation has been paid in full.
On November 14, 2019, the Company fully met and timely paid its debt obligation to Note Payable (A).
Board
of Director, Company Officers, and Board Appointments
No
subsequent changes after September 30, 2019.