Quarterly Report (10-q)

Date : 11/14/2019 @ 9:02PM
Source : Edgar (US Regulatory)
Stock : Social Life Network, Inc. (PN) (WDLF)
Quote : 0.07  0.0 (0.00%) @ 8:59PM

Quarterly Report (10-q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____ to ____.

 

000-55961

Commission File Number

 

Social Life Network, Inc.

(Exact name of small business issuer as specified in its charter)

 

NEVADA   46-0495298

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

3465 S Gaylord Ct. Suite A509

Englewood, Colorado 80113

(855) 933-3277

(Address of principal executive offices)

 

(855) 933-3277

(Company’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company) Smaller reporting company [X]
  Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

The Company has 141,092,858 common stock shares outstanding as of November 14, 2019.

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Page
     
  PART I — FINANCIAL INFORMATION F-1
ITEM 1. Consolidated Financial Statements F-1
ITEM 1A. Risk Factors 1
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 12
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 17
ITEM 4. Controls and Procedures 17
     
  PART II — OTHER INFORMATION 18
ITEM 1. Legal Proceedings 18
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
ITEM 3. Defaults Upon Senior Securities 18
ITEM 4. Mine Safety Disclosures 18
ITEM 5. Other Information 18
ITEM 6. Exhibits 19
  Signatures 20

 

 
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. Consolidated Financial Statements (Unaudited)

 

SOCIAL LIFE NETWORK, INC.

INDEX TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

 

Condensed Consolidated Balance Sheets F-2
   
Condensed Consolidated Statements of Operations F-3
   
Condensed Consolidated Statements of Stockholders’ Deficit F-4
   
Condensed Consolidated Statements of Cash Flows F-5
   
Notes to the Condensed Consolidated Financial Statements F-6

 

F-1
 

 

SOCIAL LIFE NETWORK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

    September 30, 2019     December 31, 2018  
ASSETS                
Current Assets:                
Cash   $ 17,038     $ 195,051  
Accounts receivable     27,096       2,096  
Prepaid Expenses     54,760       3,144  
Total Assets   $ 98,894     $ 200,291  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                
Current Liabilities:                
Accounts Payable   $ 25,677     $ -  
Loans payable – related party     70,000       -  
Accrued Expenses     16,450       -  
Deferred Revenue     24,292       -  
Convertible Notes Payable     677,151          
Convertible Notes Discount – Beneficial Conversion Feature     -          
Total Current Liabilities     813,570       -  
Long Term Debt     -       -  
Total Liabilities    $ 813,570      $ -  
                 
Stockholders’ Equity (Deficit):                
Common Stock par value $0.001, 500,000,000 shares authorized, 134,742,858 and 108,823,986 shares issued and outstanding, respectively     134,640       117,817  
Additional paid in capital     30,534,280       27,763,020  
Common Stock to be issued     -       25,000  
Common Stock Receivable     -       -  
Preferred Stock par value $0.00, 5,000,000 Class B shares authorized, 0 and 0 shares issued and outstanding, respectively     -       -  
Accumulated deficit     (31,383,596 )     (27,705,546 )
Total Stockholders’ Equity (Deficit)     (714,676 )     200,291  
Total Liabilities and Stockholders’ Equity   $ 98,894     $ 200,291  

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

F-2
 

 

SOCIAL LIFE NETWORK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

   

For the Three Months Ended

September 30,

   

For the Nine Months Ended

September 30,

 
    2019     2018     2019     2018  
Revenues:                        
Digital marketing revenue   $ 18,000     $ -     $ 73,200     $ -  
Advertising revenue     -       -       2,500       5,592  
Licensing revenue     -       90,000       25,000       215,000  
Event revenue     -       -       75,985       -  
Digital subscriptions revenue     208               208       -  
Total revenue     18,208       90.000       176,893       220,592  
Costs of goods sold     1,283       1,283       184,748       3,956  
Gross margin     16,925       88,717       (7,855 )     216,636  
                                 
Operating Expenses:                                
Compensation expense     206,958       196,173       903,073       305,998  
Non-cash stock expense     65,250       -       1,866,583       2,549,800  
Sales and marketing     7,624       23,277       116,279       67,552  
General and administrative     55,795       243,455       290,109       335,167  
Total operating expenses     335,627       462,905       3,176,044       3,258,517  
                                 
Income (Loss) from operations     (318,702 )     (374,188 )     (3,183,899 )     (3,041,881 )
                                 
Other Expenses:                                
Interest expense     447,228       -       452,251       -  
Other non-operating expenses     4,400       -       41,900          
Total other expenses     451,628       -       494,151       -  
                                 
Net Income (Loss)   $ (770,329 )   $ (374,188 )   $ (3,678,050 )   $ (3,041,881 )
                                 
Income (loss) per share                                
Basic     (0.00 )     (0.00 )     (0.03 )     (0.03 )
Diluted   $ (0.00 )   $ (0.00 )   $ (0.01 )   $ (0.02 )
Weighted average shares outstanding:                                
Basic     134,742,858       108,823,986       134,742,858       108,823,986  
Diluted     246,044,303       125,124,006       246,044,303       125,124,006  

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

F-3
 

 

SOCIAL LIFE NETWORK, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)

(unaudited)

 

    Preferred Stock     Common Stock     Additional Paid     Common
Stock to be
    Common Stock     Accumulated        
    Shares     Amount     Shares     Amount     in Capital     Issued     Receivable     Deficit     Total  
Balance, December 31, 2018      -        -       117,817,319     $ 117,817     $ 27,763,020     $ 25,000     $  -     $ (27,705,546 )   $ 200,291  
Common stock issued for service     -       -       1,550,000       1,550       989,795       -       -       -       991,345  
Common stock issued to officers     -       -       500,000       500       49,500       -       -       -       50,000  
Common stock issued to investors                     14,773,363       14,773       1,009,865       (25,000 )             -       999,638  
Common stock cancelled     -       -       -       -       -       -       -       -       -  
Fair value of warrants issued     -       -       -       -       292,500       -       -       -       292,500  
Fair value of beneficial conversion feature for convertible notes     -       -       -       -       429,600       -       -       -       429,598  
Net Loss for quarter ended Sept 30, 2019     -       -       -       -       -       -       -       (3,678,050 )     (3,678,050 )
Balance, Sept 30, 2019     -       -       134,640,682       134,640     $ 30,534,280     $ -     $ -     $ (31,383,596 )   $ (714,676 )

 

    Preferred Stock     Common Stock     Additional
Paid in
    Common
Stock to be
    Common
Stock
    Accumulated        
    Shares     Amount     Shares     Amount     Capital     Issued     Receivable     Deficit     Total  
Balance, December 31, 2017      -        -       95,393,976     $ 95,394     $ 22,186,186     $ 842,500     $ -     $ (23,580,892 )   $ (456,812 )
Common stock issued for service     -       -       2,200,000       2,200       501,254       -       -       -       503,454  
Common stock issued to officers     -       -       3,000,000       3,000       223,500       -       -       -       226,500  
Common stock issued to investors                     5,230,001       5,230       814,270       (817,500 )     -       -       2,000  
Common stock cancelled     -       -       -       -       -       -       -       -       -  
Fair value of warrants issued     -       -       -       -       2,449,800       -       -       -       2,449,800  
Fair value of beneficial conversion feature for convertible notes     -       -       -       -       -       -       -       -       -  
Net Loss for quarter ended Sept 30, 2018     -       -       -       -       -       -       -       (2,530,668 )     (2,530,668 )
Balance, Sept 30, 2018     -       -       105,823,986       105,824     $ 26,175,010     $ 25,000     $ -     $ (26,111,560 )   $ 194,274  

 

The accompanying notes are an integral part of these financial statements.

 

F-4
 

 

SOCIAL LIFE NETWORK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

    For the Nine Months Ended
September 30,
 
    2019     2018  
Cash flow from operating activities:                
Net Income (Loss)   $ (3,678,050 )   $ (3,041,881 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Non cash stock based compensation     1,574,083       100,000  
Changes in operating assets and liabilities:                
Accounts receivable     (25,000 )     69,253  
Prepaids     (51,616 )     6,941  
Accounts payable and accrued expenses     66,419       -  
Non cash interest expense related to amortization of beneficial conversion feature of convertible note payable     429,600       -  
Net cash used in operating activities     (1,684,564 )     (2,865,687 )
                 
Cash flows used in investing activities:     -       -  
                 
Cash flows from financing activities:                
Loan from related parties     70,000       (54,400 )
Proceeds from the sale of common stock     466,900       630,000  
Proceeds from issuance of convertible note payable     677,151       -  
Non cash warrant expense from convertible note     292,500       2,449,800  
Stock Receivable     -       2,000  
Stock Payable     -       -  
Net cash provided by financing activities     1,506,551       3,027,400  
                 
Net increase / decrease in cash     (178,013 )     161,713  
Cash at beginning of period     195,051       53,721  
Cash at end of period   $ 17,038     $ 215,434  
                 
Supplemental Disclosures:                
Cash paid during the year for:                
Interest   $ 22,651       -  
Income taxes   $ -     $ -  
Supplemental disclosure of non-cash activities:                
Warrants issued for services   $ -     $ -  
Interest related to amortization of beneficial conversion feature   $ 429,600          

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

F-5
 

 

SOCIAL LIFE NETWORK, INC.

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.

 

F-6
 

 

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.

 

F-7
 

 

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.

 

F-8
 

 

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.

 

F-9
 

 

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.

 

F-10
 

 

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.

 

F-11
 

 

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.

 

F-12
 

 

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.

 

F-13
 

 

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.

 

F-14
 

 

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.

 

F-15
 

 

  (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.

 

F-16
 

 

ITEM 1A. Risk Factors

 

Social Life Network, Inc. is referred to hereafter as “we”, “our” or “us”.

 

An investment in our common stock is highly speculative and should be purchased only by persons who can afford to lose the entire amount invested in the common stock. Before purchasing any of our common stock shares, you should carefully consider the following risk factors relating to our business and prospects. If any of the following risks occur, our business, financial condition or operating results could be materially and adversely affected. In such case, you may lose all or part of our investment. You should carefully consider the risks described below and the other information in this annual report before in investing in our common stock.

 

Risks Related to Our Business

 

Our independent registered public accounting firm has issued a going concern opinion; there is substantial uncertainty that we will continue operations in which case you could lose your investment.

 

In their report dated March 15, 2019, our independent registered public accounting firm, B F Borgers CPA PC, stated that our financial statements for our fiscal year ended December 31, 2018 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 $31,383,596 at September 30, 2019, 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 (the net loss and accumulated deficit consist of $1,574,083 of non-cash stock-based compensation expense and $292,500 of new non-cash warrant expense). These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our management intends to finance operating costs over the next twelve months with existing cash then on hand and public issuance of common stock. Although we may be successful in obtaining financing and/or generating revenue to fund our operations, meet regulatory requirements and achieve commercial goals, there are no assurances that such funding will be achieved at a sufficient level or that we will succeed in our future operations.

 

If our Social Networking Platform technology becomes obsolete, our ability to license our Platform and generate revenue from it will be negatively impacted.

 

If our Platform technology becomes obsolete, our results of operations will be adversely affected. The market in which we compete is characterized by rapid technological change, evolving industry standards, new products/services introductions, and changes in customer demands, that can render existing products/services obsolete and unmarketable. Our Platform will require continuous upgrading, or our technology will become obsolete, and our business operations will be curtailed or terminate.

 

New social network, online marketplace or application platform features or changes to existing features could fail to attract new users, retain existing users or generate revenue.

 

Our business strategy is dependent on our ability on behalf of our licensees to develop and maintain networks, online marketplaces, and application platforms and features to attract new users and retain existing ones. Any of the following events may cause decreased use of our properties:

 

  Emergence of competing websites and applications;
     
  Inability to convince potential users to join our network or that of our licensees;
     
  Technical issues related to mobile and desk top compatibility; and
     
  Rise in safety or privacy concerns.

 

Should any of the above factors or a combination of such factors have a material effect on our business, our revenues and results of operations will be negatively affected.

 

1
 

 

If we lose key management, our business may materially suffer.

 

We are highly dependent on our management team consisting of Kenneth Tapp, our Chief Executive Officer/Chief Technology Officer and Mark DiSiena, our Chief Financial Officer. We do not carry “key-man” life insurance for our officers. If we lose the services of one or more of our officers and are unable to replace them with equally competent officers, our business may be negatively impacted.

 

We expect to incur substantial expenses to meet our reporting obligations as a public company.

 

We estimate annual costs of approximately $50,000 to maintain the proper management and financial controls for our filings required as a public reporting company, funds that would otherwise be spent for our business operations. Our public reporting costs may increase over time, which will increase our expenses and may decrease our potential profitability.

 

Should we lose our advertising or digital subscription or licensing or events revenues during any given period where any such revenue areas historically had represented the majority of our revenues, our financial condition will be negatively affected.

 

We have generated a majority of our revenue in 2016, 2017, and 2018 from advertising revenue, digital subscription services, and licensing revenues, respectively, and for the first nine months ended 2019 we have generated a majority of our revenue from digital marketing, microcap events, and software licensing revenue. The loss of the majority of our revenues in future periods will negatively and materially affect our results of operations.

 

During our 2019 fiscal year and for the 9-months ended September 30, 2019, $25,000 or 14.1%, and for the 12 months ended December 31, 2018, $215,000 or 97.5%, respectively, of our total revenues were generated from related party revenue; there are conflicts of interest between our officers’ interests, who are also officers of our licensees, and our shareholders’ interests.

 

During our 2019 fiscal year ending September 30, 2019, $25,000 or 14.1%, and December 31, 2018, $215,000 or 97.5%, respectively, of our total revenues were derived from license fees we received from Real Estate Social Network and Sports Social Network, which revenues are related party revenues. We have a “software as a service” (SaaS) license agreement with Sports Social Network, which provides that Sports Social Network, Inc. pays a license fee of $125,000 per year for a period of two years and thereafter we receive twenty percent of their net profits from the sale of online advertising and collected E-Commerce fees on their niche sports social networks from every country around the world that they provide access to their websites and mobile apps that we provide through the licensing agreement.

 

We have a software as a service (SaaS) license agreement with Real Estate Social Network, which provides that Real Estate Social Network. pays a license fee, of which we receive twenty percentage of their net profits from the sale of online advertising and monthly digital subscription fees from residential real estate professionals using their LikeRE.com social network from every country around the world that they provide access to their website and mobile app that we provide through the licensing agreement. Both licensees have automatically renewing annual license agreements with us and their goal is to have millions of users on each of their social networks.

 

Our Chief Executive Office, Kenneth Tapp, owns 44.4% of our outstanding shares and is also the Chief Technology Officer of Real Estate Social Network. and the Chief Technology Officer of the Sports Social Network and owns approximately 15% each of those entities through LVC Consulting, LLC, of which he is a member. Our related party revenues present conflicts of interests between our officers’ interests and our shareholders” interests, which may favor the interests of our officers and/or Real Estate Social Network and/or Sports Social Network over that of our shareholders.

 

2
 

 

The license fees we received from our related parties who are also our licensees, Sports Social Network and Real Estate Social Network, may be undervalued because the license agreements were negotiated between related parties.

 

Our Chief Executive Officer and Chief Financial Officer negotiated the license fee agreements with our related parties/licensees, Sports Social Network and Real Estate Social Network. Our Chief Executive Officer, Kenneth Tapp, owns 44.4% of our outstanding shares and is also the Chief Technology Officer of Real Estate Social Network and Sports Social Network and owns approximately 15% each of those entities through LVC Consulting, LLC, of which he is a member. As a result, there are potential conflicts of interest between our CEO and our shareholders’ interests. Additionally, because the license agreements were negotiated between related parties, the license granted to these related parties may have been undervalued, which may have otherwise resulted in a higher amount of license fees being paid by other licensees to us.

 

Our Chief Executive Officer has potential conflicts of interest because of his interests in entities with which we have license agreements.

 

Our Chief Executive Officer is also the Chief Technology Officer of our licensees, Real Estate Social Network and Sports Social Network, and owns approximately 15% of each such entity through a limited liability company, of which he is a member. We have a license agreement with Real Estate Social Network providing that they will pay us 20% of the net profits from all monthly member subscriptions and online advertising sales, paid annually, on the 31st day of January for the preceding year. We also have a license agreement with Sports Social Network providing that they will pay us $125,000 annually for the first two years of this agreement (a total of $250,000 for the first two years), and thereafter will receive 20% of the net profits from all online advertising sales and collected E-Commerce fees, paid monthly with the option to pay any outstanding licensing fees annually, and to be received by us no later than the 31st day of January for the preceding year. Our Chief Executive Officer owns 44.4% and of our outstanding shares. Accordingly, our Chief Executive Officer has potential conflicts of interest between his interests in Real Estate Social Network and Sports Social Network and our interests, which may result in them favoring the interests of those networks over our interests and that of our shareholders.

 

Our business is highly competitive; competition presents an ongoing threat to the success of our business.

 

We face significant competition with respect to both our Cannabis/Hemp Social Networks and licensing of our E-Commerce Social Network Platforms, including MassRoots.com, Leafly.com, Zillow.com, HOUZZ.com, TennisChannel.com and Cabelas.com, which offer a variety of online advertising and E-Commerce offerings. These competitors and other competitors have greater financial, operational, and personnel resources than we do. Should we fail to develop strategies to overcome our competition, our revenues will be negatively impacted.

 

Because our directors and executive officers are among our largest stockholders, they can exert significant control over our business and affairs and have actual or potential interests that may depart from those of investors.

 

Certain of our executive officers and directors own a significant percentage of our outstanding capital stock. As of the date of this annual report, our executive officers and directors and their respective affiliates beneficially own approximately 70.4% of our outstanding voting stock, including our Chief Executive Officer who owns 44.4% of our voting securities. The holdings of our directors and executive officers may increase further in the future upon vesting or other maturation of exercise rights under any of the options or warrants they may hold or in the future be granted, or if they otherwise acquire additional shares of our common stock. The interests of such persons may differ from the interests of our other stockholders. As a result, in addition to their board seats and offices, such persons will have significant influence and control over all corporate actions requiring stockholder approval, irrespective of how our other stockholders may vote, including the following actions:

 

  to elect or defeat the election of our directors;

 

3
 

 

  to amend or prevent amendment of our certificate of incorporation or by-laws;
     
  to effect or prevent a merger, sale of assets or other corporate transaction; and
     
  to control the outcome of any other matter submitted to our stockholders for a vote.

 

This concentration of ownership by itself may have the effect of impeding a merger, consolidation, takeover or other business consolidation, or discouraging a potential acquirer from making a tender offer for our common stock, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

 

We will need substantial additional funding to continue our operations, which could result in dilution to our stockholders; we may be unable to raise capital when needed, if at all, which could cause us to have insufficient funds to pursue our operations, or to delay, reduce or eliminate our development of new programs or commercialization efforts.

 

We expect to incur additional costs associated with operating as a public company and to require substantial additional funding to continue to pursue our business and continue with our expansion plans. We may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may increase our capital needs and/or cause us to spend our cash resources faster than we expect. Accordingly, we expect that we will need to obtain substantial additional funding in order to continue our operations. To date, we have financed our operations entirely through equity investments by founders and other investors and the incurrence of debt, and we expect to continue to do so in the foreseeable future. Additional funding from those or other sources may be unavailable when or in the amounts needed, on acceptable terms, or at all. If we raise capital through the sale of equity, or securities convertible into equity, it would result in dilution to our existing stockholders, which could be significant depending on the price at which we may be able to sell our securities. If we raise additional capital through the incurrence of additional indebtedness, we would likely become subject to further covenants restricting our business activities, and holders of debt instruments may have rights and privileges senior to those of our equity investors. In addition, servicing the interest and principal repayment obligations under debt facilities could divert funds that would otherwise be available to support development of new programs and marketing to current and potential new clients. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate development of new programs or future marketing efforts. Any of these events could significantly harm our business, financial condition and prospects.

 

We must successfully maintain and/or upgrade our information technology systems.

 

We rely on various information technology systems, including our newly licensed NetSuite enterprise resource planning (ERP) system, that was implemented at the end of first quarter of Fiscal 2019 to manage our operations, which subjects us to inherent costs and risks associated with maintaining, upgrading, replacing and changing these systems, including impairment of our information technology, potential disruption of our internal control systems, substantial capital expenditures, demands on management time and other risks of delays or difficulties in upgrading, transitioning to new systems or of integrating new systems into our current systems.

 

Our financial statements may not be comparable to those of other companies.

 

Pursuant to Section 107(b) of the JOBS Act, we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of The JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result, our financial statements may not be comparable to companies that comply with public company effective dates, and our stockholders and potential investors may have difficulty in analyzing our operating results if comparing us to such companies.

 

4
 

 

We do not have an independent board of directors which could create a conflict of interests and pose a risk from a corporate governance perspective.

 

Our Board of Directors consists mostly of current executive officers and consultants, which means that we do not have any outside or independent directors. The lack of independent directors:

 

  May prevent the Board from being independent from management in its judgments and decisions and its ability to pursue the Board responsibilities without undue influence.
     
  May present us from providing a check on management, which can limit management taking unnecessary risks.
     
  May create potential for conflicts between management and the Board’s diligent independent decision-making process.
     
  Present the risk that our executive officers on the Board may have influence over their personal compensation and benefits levels that may not be commensurate with our financial performance.
     
  Deprive us of the benefits of various viewpoints and experience when confronting challenges that we face.

 

Because officers serve on our Board of Directors, it will be difficult for the Board to fulfill its traditional role of overseeing management.

 

Because we do not have a nominating, audit or compensation committee, shareholders will have to rely on the entire board of directors, no members of which are independent to perform these functions.

 

We do not have a nominating, audit or compensation committee or any such committee comprised of independent directors. The board of directors performs these functions. No members of the board of directors are independent directors. Thus, there is a potential conflict in that board members who are also part of management will participate in discussions concerning management compensation and audit issues that may affect management decisions.

 

Our election not to opt out of the JOBS Act extended accounting transition period may not make our financial statements easily comparable to other companies.

 

Pursuant to the JOBS Act of 2012, as an emerging growth company we can elect to opt out of the extended transition period for any new or revised accounting standards that may be issued by the PCAOB or the SEC. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the application date for private companies. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. As of present, there are no new or revised accounting standards that have been issued by the PCAOB or the SEC applicable to us for which we have adopted the application date for private companies.

 

The JOBS Act will also allow us to postpone the date by which we must comply with certain laws and regulations intended to protect investors and to reduce the amount of information provided in reports filed with the SEC. The recently enacted JOBS Act is intended to reduce the regulatory burden on emerging growth companies. The Registrant meets the definition of an emerging growth company and so long as it qualifies as an “emerging growth company,” it will, among other things:

 

  be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting;
     
  be exempt from the “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Act and certain disclosure requirements of the Dodd-Frank Act relating to compensation of its chief executive officer;
     
  be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Securities Exchange Act of 1934 and instead provide a reduced level of disclosure concerning executive compensation; and
     
  be exempt from any rules that may be adopted by the Public Registrant Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements.

 

5
 

 

We intend to take advantage of some or all the reduced regulatory and reporting requirements that will be available to it so long as it qualifies as an “emerging growth company”. We have elected not to opt out of the extension of time to comply with new or revised financial accounting standards available under Section 102(b) of the JOBS Act. Among other things, this means that the Registrant’s independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as it qualifies as an emerging growth company, which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an emerging growth company, we may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers that would otherwise have been required to provide in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate the Registrant. As a result, investor confidence and the market price of our common stock may be adversely affected.

 

We may have difficulty maintaining officer and director coverage or obtaining such coverage on favorable terms or financially be unable to obtain any such coverage, which may make it difficult for our attracting and retaining qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.

 

We also expect that being a public company and these new rules and regulations will make it more expensive for us to maintain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage or financially be unable to obtain such coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.

 

RISKS RELATED TO CANNABIS/HEMP RELATED GOVERNMENT REGULATION

 

Our cannabis/hemp websites with respect to cannabis are dependent on state laws pertaining to the cannabis industry.

 

Our wholly owned subsidiary, MJLink, has several websites in the cannabis/hemp area. As of the date of this quarterly report, there are 33 states and the District of Columbia that allow their citizens to use medical cannabis. Additionally, Alaska, California, Colorado, Illinois, Oregon, Maine, Massachusetts, Michigan, Nevada, Vermont, Washington, and Washington DC have legalized cannabis for adult use at the state (or district) level. Continued development of the cannabis industry is dependent upon continued legislative authorization of cannabis at the state level. Any number of factors pertaining to lack of public or legislative support could slow or halt progress in this area. Further, progress in the cannabis industry is not assured.

 

Our cannabis/hemp websites are open to all Internet users, which may result in legal consequences; in such event, our results of operations will be negatively affected.

 

Our Terms and Conditions contained in our MJLink sites clearly state that our network and services pertaining to our cannabis/hemp related sites are only to be used by users who are over 21 years old and located where the use of cannabis/hemp is permissible under state law and only in a manner which would be permissible under the applicable state law. However, it is impractical to independently verify that all activity occurring on our network fits into this description. If we become subject to federal and state law enforcement, our brand name and results of operations will be negatively impacted.

 

6
 

 

Cannabis remains illegal under Federal law.

 

Despite the development of a legal cannabis industry under the laws of certain states, these state laws legalizing medical and adult cannabis use conflict with the Federal Controlled Substances Act, which classifies cannabis as a Schedule-I controlled substance and makes cannabis use and possession illegal on a national level. The United States Supreme Court has ruled that it is the Federal government that has the right to regulate and criminalize cannabis, even for medical purposes, and thus Federal law criminalizing the use of cannabis preempts state laws that legalize its use.

 

As the possession and use of cannabis is illegal under the Federal Controlled Substances Act, we may be deemed to be aiding and abetting illegal activities through the services that we provide to users and advertisers. As a result, we may be subject to enforcement actions by law enforcement authorities, which would materially and adversely affect our business.

 

Under Federal law, and more specifically the Federal Controlled Substances Act, the possession, use, cultivation, and transfer of cannabis is illegal. Our business provides services to customers that are engaged in the business of possession, use, cultivation, and/or transfer of cannabis. As a result, law enforcement authorities, in their attempt to regulate the illegal use of cannabis, may seek to bring an action or actions against us, including, but not limited, to a claim of aiding and abetting another’s criminal activities. The Federal aiding and abetting statute provides that anyone who “commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.” 18 U.S.C. §2(a). Because of such an action, we may be forced to cease operations and our investors could lose their entire investment. Such an action would have a material negative effect on sale of our services.

 

Federal enforcement practices could change with respect to services providers to participants in the cannabis industry, which could adversely impact us. If the Federal government were to change its practices or were to expend its resources attacking providers in the cannabis industry, such action could have a materially adverse effect on our operations, our customers, or the sales of our services.

 

It is possible that additional Federal or state legislation could be enacted in the future that would prohibit our advertisers from selling cannabis, and, if such legislation were enacted, such advertisers may discontinue the use of our services, our potential source of customers would be reduced, causing revenues could decline. Further, additional government disruption in the cannabis industry could cause potential customers and users to be reluctant to use and advertise on our platforms. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated,

 

As the possession and use of cannabis is illegal under the Federal Controlled Substances Act, we may be deemed to be aiding and abetting illegal activities through the services that we provide to users and advertisers; as a result, we may be subject to enforcement actions by law enforcement authorities, which would materially and adversely affect our business.

 

Under Federal law, and more specifically the Federal Controlled Substances Act, the possession, use, cultivation, and transfer of cannabis is illegal. Our business provides services to customers that may be directly or indirectly engaged in the business of possession, use, cultivation, and/or transfer of cannabis. As a result, law enforcement authorities, in their attempt to regulate the illegal use of cannabis, may seek to bring an action or actions against us, including, but not limited, to a claim of aiding and abetting another’s criminal activities. The Federal aiding and abetting statute provides that anyone who “commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.” 18 U.S.C. §2(a). As a result of such an action, we may be forced to cease operations and our investors could lose their entire investment. Such an action would have a material negative effect on our business and operations.

 

7
 

 

Federal enforcement practices could change with respect to service providers or participants in the cannabis industry, which could adversely impact us; if the Federal government were to change its practices or were to expend its resources attacking providers in the cannabis industry, such action could have a materially adverse effect on our operations, our customers, or the sales of our products.

 

It is possible that additional Federal or state legislation could be enacted in the future that would prohibit our advertisers from selling cannabis, and if such legislation were enacted, such advertisers may discontinue the use of our services, our potential source of customers would be reduced, causing revenues could decline. Further, additional government disruption in the cannabis industry could cause potential customers and users to be reluctant to advertise on our sites, which would negatively affect our revenues. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.

 

Participants in the cannabis industry may have difficulty accessing the service of banks, which may make it difficult for us to operate.

 

Despite recent rules issued by the United States Department of the Treasury mitigating the risk to banks who do business with cannabis companies permitted under state law, as well as recent guidance from the United States Department of Justice, banks remain weary to accept funds from businesses in the cannabis industry. Since the use of cannabis remains illegal under Federal law, there remains a compelling argument that banks may be in violation of Federal law when accepting for deposit funds derived from the sale or distribution of cannabis. Consequently, businesses involved in the cannabis industry continue to have trouble establishing banking relationships. An inability to open bank accounts may make it difficult for us, or some of our advertisers, to do business.

 

Federal enforcement practices could change with respect to services provided to participants in the cannabis industry, which could adversely impact us; if the Federal government were to expend its resources on enforcement actions against service providers in the cannabis industry under guidance provided by the Sessions Memo, including asset forfeiture actions, such actions could have a material adverse effect on our operations, our customers, or our services.

 

On January 4, 2018, the then U.S. Attorney General Jeff Sessions issued the Sessions Memo stating that the Cole Memo was rescinded effectively immediately. Mr. Sessions stated that “prosecutors should follow the well-established principles that govern all federal prosecutions,” which require “federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.” Mr. Sessions went on to state in the memorandum that “previous nationwide guidance specific to marijuana is unnecessary and is rescinded, effective immediately.” It is unclear at this time whether the Sessions Memo indicates that the Trump administration will strongly enforce the federal laws applicable to cannabis or what types of activities will be targeted for enforcement. While we do not harvest, distribute or sell cannabis, we may be irreparably harmed by a change in enforcement policies of the federal government depending on the nature of such change.

 

Attorney General Order No. 3946-2018 released by Jeff Sessions on July 19, 2018 shows that he is in favor of law enforcement using civil asset forfeiture as “an effective tool to reduce crime” and that “its use should be encouraged where appropriate.” It is possible that due to the recent Sessions Memo our clients may discontinue the use of our services, our potential source of customers may be reduced, and our revenues may decline. Further, additional government disruption in the cannabis industry could cause potential customers and users to be reluctant to use our services or buy advertising from us. It is possible that due to the Sessions Memo our clients may discontinue the use of our services, we or our customers may be subject to asset forfeiture actions, our potential source of customers may be reduced, and our revenues may decline. Further, additional government disruption in the cannabis industry could cause potential customers and users to be reluctant to use advertising services, which would negatively impact our results of operations.

 

The 2018 Farm Bill officially reclassifies hemp for commercial uses after decades of statutes and legal enforcement conflating hemp and marijuana, the Farm Bill distinguishes between the two by removing hemp from the Controlled Substances Act. While the two are closely related, hemp lacks the high concentration of THC that is responsible for the “high” from the use of marijuana. This would effectively move regulation and enforcement of the crop from the purview of the Drug Enforcement Agency to the U.S. Department of Agriculture.

 

Recent hearing in February 2019, conducted before the House Subcommittee on Consumer Protection and Financial Institutions, focused on access to banking services for legal cannabis-based businesses. Two of the speakers at the hearing — Colorado Rep. Ed Perlmutter and Washington Rep. Denny Heck, both Democratic members of Congress from states with legal marijuana, back the Secure and Fair Enforcement of Banking Act of 2019, or the SAFE Banking Act, as it is more commonly known. The proposed bill, according to lawmakers and reports, would prevent federal regulators from targeting banks that accept deposits from legal cannabis operators. Such prohibition could involve limiting FDIC protections for those deposits or trying to prevent loans to those businesses.

 

On September 28, 2019, the Democratic-controlled House of Representatives voted to pass a bill protecting banks that work with the marijuana industry. The bill aims to give clarification to banks and credit unions that serve cannabis companies with, for instance, business accounts for bill payments. Lobbyists have emphasized that many cannabis businesses end up “unbanked” and operating largely in cash, and that makes them targets for robberies and other crimes. Some analysts are skeptical the measure is likely to become law in 2019 as it faces a tough road in the Republican-controlled Senate while some believe Senator McConnell could go along with a pot banking bill to help Republicans in the 2020 elections.

 

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RISKS RELATED TO OUR SECURITIES

 

An investment in our shares is highly speculative.

 

The shares of our common stock are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose the entire amount invested in the common stock. Before purchasing any of the shares of common stock, you should carefully consider the risk factors contained herein relating to our business and prospects. If any of the risks presented herein actually occur, our business, financial condition or operating results could be materially adversely affected. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment.

 

The market price of our Common Stock may fluctuate significantly in the future.

 

We expect that the market price of our Common Stock may fluctuate in response to one or more of the following factors, many of which are beyond our control:

 

  competitive pricing pressures;
     
  our ability to market our services on a cost-effective and timely basis;
     
  changing conditions in the market;
     
  changes in market valuations of similar companies;
     
  stock market price and volume fluctuations generally;
     
  regulatory developments;
     
  fluctuations in our quarterly or annual operating results;
     
  additions or departures of key personnel; and
     
  future sales of our Common Stock or other securities.

 

The price at which you purchase shares of our Common Stock may not be indicative of the price that will prevail in the trading market. Shareholders may experience wide fluctuations in the market price of our securities. These fluctuations may have a negative effect on the market price of our securities and may prevent a shareholder from obtaining a market price equal to the purchase price such shareholder paid when the shareholder attempts to sell our securities in the open market. In these situations, the shareholder may be required either to sell our securities at a market price, which is lower than the purchase price the shareholder paid, or to hold our securities for a longer period than planned. An inactive or low trading market may also impair our ability to raise capital by selling shares of capital stock. You may be unable to sell your shares of Common Stock at or above your purchase price, which may result in substantial losses to you and which may include the complete loss of your investment. Any of the risks described above could adversely affect our sales and profitability and the price of our Common Stock.

 

There is no active public trading market for our common stock and an active market may never develop.

 

The public trading market for our common stock on the OTCMarkets OTCQB tier, has reflected an uneven and inactive market. Market liquidity will depend on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may be unable to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result, holders of our securities may not find purchasers for our securities should they attempt to sell their securities. Consequently, only investors having no need for liquidity in their investment should purchase our securities and who can hold our securities for an indefinite period.

 

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We have authorized 100,000,000 Preferred Shares and 100,000,000 Class B Common Shares that may result in our officers having the ability to influence stockholder decisions.

 

The board of directors has the power to establish the dividend rates, liquidation preferences, and voting rights of any series of preferred stock, and these rights may be superior to the rights of holders of the Shares. The board of directors may also establish redemption and conversion terms and privileges with respect to any shares of preferred stock; as such, if we establish such terms and privileges to our preferred shares and we sell or issue preferred shares in future transactions to new investors such investors in subsequent transactions could gain rights, preferences and privileges senior to those of holders of our common stock. Any such preferences may operate to the detriment of the rights of the holders of the Shares, and further, could be used by the board of directors as a device to prevent a change in control of the Registrant. Our Board of Directors has established the rights to Class B Common Shares, 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. As such, such rights include additional voting power if Class B Common Stock shares are issued to our officers giving them control over a majority of our outstanding voting power, they would then have the power to control future stock-based acquisition transactions, to fund employee equity incentive programs, and give them the ability to elect certain directors and to determine the outcome of all matters submitted to a vote of our stockholders. This concentrated control eliminates other stockholders’ ability to influence corporate matters

 

You will experience future dilution as a result of future equity offerings.

 

We may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock. Although no assurances can be given that we will consummate new financing, in the event we do, or in the event we sell shares of common stock or other securities convertible into shares of our common stock in the future, additional and substantial dilution will occur. In addition, investors purchasing shares or other securities in the future could have rights superior to investors in prior offerings. Subsequent offerings at a lower price, often referred to as a “down round”, could result in additional dilution.

 

Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which would rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock.

 

In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred securities in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our common stock must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return they may be able to achieve from an investment in our common stock.

 

Future sales and issuances of our capital stock, exercise of warrants outstanding or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline.

 

We may issue additional securities following the completion of this offering. Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders. We may sell common stock, convertible securities and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, investors may be materially diluted. Additionally, because we have 9,094,853 Warrants outstanding, which are exercisable for five cents to twenty cents per share with a warrant exercise period of 3 years to 5 years, any material exercise of the Warrants will cause substantial dilution to your shares.

 

Any market that develops in shares of our common stock will be subject to the penny stock regulations and restrictions pertaining to low priced stocks that will create a lack of liquidity and make trading difficult or impossible.

 

The trading of our securities will be in the over-the-counter market, which is commonly referred to as the OTCQB as maintained by FINRA. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the price of our securities.

 

Rule 3a51-1 of the Exchange Act establishes the definition of a “penny stock,” for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions that are not available to us. It is likely that our shares will be penny stocks for the immediately foreseeable future. This classification severely and adversely affects any market liquidity for our common stock.

 

For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’s account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

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The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth:

 

  the basis on which the broker or dealer made the suitability determination, and
     
  that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Disclosure also must be made about the risks of investing in penny stock in both public offerings and in secondary trading and commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Additionally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities when our securities become publicly traded. In addition, the liquidity for our securities may decrease, with a corresponding decrease in the price of our securities. Our shares, probably, will be subject to such penny stock rules for the foreseeable future and our shareholders will, likely, find it difficult to sell their securities.

 

Registered Broker-Dealers and Clearing firms are refusing to trade or clear stocks that are directly or indirectly related to the cannabis and hemp industries, which may negatively impact the trading of our common stock shares.

 

Because registered Broker-Dealers and Clearing firms are refusing to trade or clear stocks that represent companies directly or indirectly related to the cannabis and hemp industries, certain brokerage firms can no longer trade such stocks on behalf of their clients. Should this trend increase, trading in our stock may be negatively impacted, including lower trading volume and stalled stock prices.

 

If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanctions, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common stock.

 

Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

We have not yet finalized our internal controls policies and procedures over financial reporting.

 

We are in the process of developing and implementing more robust internal controls over financial reporting which is time consuming, costly, and complicated. If we identify material weaknesses in our internal control over financial reporting, if our management is unable to assert, when required, that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to attest, when required, to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources

 

The forward-looking statements contained herein report may prove incorrect.

 

This filing contains certain forward-looking statements, including among others: (i) anticipated trends in our financial condition and results of operations; (ii) our business strategy for expanding our business; and (iii) our ability to distinguish ourselves from our current and future competitors. These forward-looking statements are based largely on our current expectations and are subject risks and uncertainties. Actual results could differ materially from these forward-looking statements. In addition to the other risks described elsewhere in this “Risk Factors” discussion, important factors to consider in evaluating such forward-looking statements include: (i) changes to external competitive market factors, which might impact trends in our results of operations; (ii) anticipated working capital or other cash requirements; (iii) changes in our business strategy or an inability to execute our strategy due to unanticipated changes; and (iv) various competitive factors that may prevent us from competing successfully in the marketplace. Considering these risks and uncertainties, many of which are described in greater detail elsewhere in this “Risk Factors” discussion, there can be no assurance that the events predicted in forward-looking statements contained in this Prospectus will, in fact, transpire.

 

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Cautionary Note

 

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.

 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

FORWARD-LOOKING STATEMENTS

 

This document contains “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

 

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.

 

Although we believe that the expectations reflected in any of our forward- looking statements are reasonable, actual results could differ materially from those projected or assumed in any or our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.

 

Overview

 

We are a Nevada corporation formed on August 30, 1985. Our headquarters are in Denver, 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, of which there are no assurances. We have relied on equity financing to fund our operations. 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.

 

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Trends and Uncertainties

 

Our business is subject to the following trends and uncertainties:

 

  Expansion of live streaming on Facebook could sway our users to spend more time away from our Networks.
     
  Social video is generally reaching saturation across social networks in general.
     
  Social platforms embrace strong governance policies, i.e. when content is inappropriate or violates end user agreement, how much content is posted on our Networks may be affected.
     
  Brands fatigue from new tools and tactics on social networks could result in fewer users embracing some of our new business and E-Commerce tools on our Networks.

 

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 $31,383,596 at September 30, 2019, 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 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 nine months with existing cash then on hand and the sale of our common stock. While the we believe that we will be successful in obtaining the necessary financing and generating revenue to fund our operations, meet regulatory requirements and achieve commercial goals, there are no assurances that such additional funding will be achieved and that we will succeed in its our future operations.

 

We will attempt to overcome the going concern opinion by increasing our revenues from any one, several, or all of the following:

 

  By licensing additional Social Network and E-Commerce Platforms;
     
  By increasing our marketing staff to enhance our “WeedLife” brand to cannabis/hemp related consumers and businesses located throughout the world;
     
  By increasing our social media staff to increase our monthly network traffic from our current 30 million-page views, to support the sales staff growth in online advertising sales on our cannabis/hemp related websites and mobile apps;
     
  By increasing our sales staff for online advertising and monthly digital subscription sales on our cannabis/hemp related websites and mobile apps;
     
  By increasing our licensee tech and R&D support to Sports Social Network for the increase of membership acquisition, page view traffic, online advertising sales and E-Commerce transactions on all of our sports social network websites and mobile apps; and
     
  By increasing our licensee tech and R&D support to Real Estate Social Network. for the sales of online advertising and monthly digital subscription services to real estate professionals on our social network in the international real estate community.

 

The foregoing goals will increase expenses and lead to possible net losses. There is no assurance that we will ever be profitable or that debt or equity financing will be available to us. 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.

 

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COMPARATIVE RESULTS FOR FISCAL YEARS

 

Results of Operations for the 3-month periods ended September 30, 2019 and 2018

 

Revenues

 

For the 3-month period ending September 30, 2019, we recognized digital marketing revenue $18,000 compared to zero dollars of revenue for the 3-month period ending September 30, 2018. The $18,000 increase is due to our launch of this new revenue stream in the second quarter of 2019, which did not exist at the comparative time last year.

 

During the current period, we recognized new revenue from our cannabis focused microcap event of zero dollars compared to zero dollars of revenue for the 3-month period ending September 30, 2018. The lack of revenue in the third quarter 2019 is due to postponing an event previously booked for the late third quarter into the fourth quarter 2019 to better serve optimal timing to achieve maximum attendee participation. Since this is a new revenue stream started in the second quarter of 2019, such revenue did not exist in fiscal year 2018. We current carry $12,000 of deferred revenue related to our rescheduled October 19, 2019 microcap event, which will be recognized in the fourth quarter 2019.

 

During the current period, we recognized revenue from our subscription-based online investor platform of $208 compared to zero dollars of revenue for the 3-month period ending September 30, 2018. The $208 increase is due to our launch of this new revenue stream in the final weeks of the third quarter of 2019, which did not exist at the comparative time last year. We currently carry $12,292 of deferred revenue related to our annual fees charged to subscribers to access to our digital investor platform MjInvest, and each subscriber will be amortized over a 12-month subscription term based on the usage term.

 

During the current period we recognized revenue from licensing of zero dollars compared to $90,000 of revenue for the 3-month period ending September 30, 2018. The decrease is due to the ramp up in transactional usage of our platform in 2019 rather than relying on the minimum guarantee provided in the first quarter 2018. Accordingly, our licensees have temporarily stalled use of our platform to reformulate their business models in the second quarter 2019.

 

During the current period we had advertising revenue of zero dollars compared to zero dollars during the 3-month period ending September 30, 2018. The lack of revenue is primarily attributable to eliminating our sales and marketing staff during the latter part of fiscal year 2018 and refocusing on rehiring, potentially starting in fiscal year 2019 to generate renewed revenue.

 

Cost of Revenue

 

Cost of revenue was $1,283 for the 3-month period ending September 30, 2019 compared to $1,283 for the 3-month period ending September 30, 2018, representing no change. This flat cost is primarily attributable to maintaining a minimal level of services regarding advertising revenue.

 

Operating Expenses

 

Cash-paid compensation expense increased by $10,784 or 5.5% to $206,958 for the 3-month period ending September 30, 2019 from $196,173 for the 3-month period ending September 30, 2018. The $10,784 increase is primarily attributable to stabilized employee headcount, consultants and professionals to meet our immediate growth strategies.

 

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During the 3-month period ending September 30, 2019, we recognized $5,250 of non-cash stock-based compensation expense for employees, consultants, and professionals compared to zero for the 3-month period ending September 30, 2018. The increase is unrelated and is primarily due to issuance of common shares to convertible debt holders as an inducement to execute the related short-term debt agreements.

 

During the 3-month period ending September 30, 2019, we recognized $60,000 of non-cash stock-based expense for warrants compared to zero that became exercisable for the 3-month period ending September 30, 2018. The increase is unrelated and primarily due to the majority of warrants having been issued in fiscal years 2016 through 2017, which warrants had fully vested, and were 100% expensed during fiscal years 2017 and 2018. The $60,000 warrant expense is in connection with the execution of short-term convertible notes.

 

Sales and marketing expense decreased $15,653 or 67.2% to $7,624 for the 3-month period ending September 30, 2019 from $23,277 for the 3-month period ending September 30, 2018. The $15,653 decrease is primarily attributable to reduced cost in branding from fiscal 2018 and the postponement of the new cannabis-focused microcap event from September 2019 to October 2019.

 

General and administrative expense decreased by $187,659 or 77.1% to $55,795 for the 3-month period ending September 30, 2019, from $243,455 for the 3-month period ending September 30, 2018. The $187,659 decrease is primarily attributable to reduction in travel costs and related investor relations expenses.

 

Other expense

 

During the 3-months ended September 30, 2019, we incurred $451,628 of Other Expenses as compared to zero dollars for the 3-month period ending September 30, 2018, primarily due to interest expense accruals of $17,628 and the amortization of the beneficial conversion feature of $429,600 both related to our convertible short-term debt which did not exist during the comparative time last year.

 

Net Loss

 

Our net loss for the for the 3-month period ending September 30, 2019 was $770,329 compared to a net loss of $374,188 for the 3-month period ending September 30, 2018. The $396,141 increase in net loss primarily due to interest expense accruals of $17,628 and the amortization of the beneficial conversion feature of $429,600 both related to our convertible short-term debt which did not exist during the comparative time last year. The $451,628 expenditure is offset by reduction in travel costs, related investor relations expenses, and various expenses to right size expenditures.

 

Results of Operations for the 9-month periods ended September 30, 2019 and 2018

 

Revenues

 

For the 9-month period ending September 30, 2019, we recognized digital marketing revenue of $73,200 compared to zero dollars of revenue for the 9-month period ending September 30, 2018. The $73,200 increase is due to our launch of this new revenue stream in the second quarter of 2019, which did not exist at the comparative time last year.

 

During the current period, we recognized new revenue from our cannabis focused microcap event of $75,985 compared to zero dollars of revenue for the 9-month period ending September 30, 2018; the dampening of revenue is due to postponing an event in the late third quarter into the early fourth quarter, which we believed would maximize attendee participation. This is a new revenue stream started in the second quarter of 2019, which did not exist in fiscal year 2018. We current carry $12,000 of deferred revenue related to our October 19, 2019 microcap event, which will be recognized as additional annual revenue in the fourth quarter 2019.

 

During the current period, we recognized revenue from our subscription-based online investor platform of $208 compared to zero dollars of revenue for the 9-month period ending September 30, 2018. The $208 increase is due to our launch of this new revenue stream in the final weeks of the third quarter of 2019, which did not exist at the comparative time last year. We currently carry $12,292 of deferred revenue related to our annual fees charged to subscribers to access to our digital investor platform, MjInvest, and each subscriber will be amortized over a 12-month subscription term based on the usage term.

 

During the current period we recognized revenue from licensing of $25,000 dollars compared to $215,000 of revenue for the 3-month period ending September 30, 2018. The $190,000 decrease is due to the ramp up in transactional usage of our platform in 2019 rather than relying on the minimum guarantee provided in first quarter 2018. Accordingly, our licensees have temporarily stalled use of our platform to reformulate their business models in the second quarter 2019.

 

During the current period we had advertising revenue of $2,500 compared to $5,592 during the 9-month period ending September 30, 2018. The lack of advertising revenue is primarily attributable to eliminating our sales and marketing staff during the latter part of fiscal year 2018 and a refocus on rehiring starting in fiscal year 2019 to generate renewed revenue.

 

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Cost of Revenue

 

Cost of revenue was $184,748 for the 9-month period ending September 30, 2019 compared to $3,956 for the 9-month period ending September 30, 2018, representing an increase of $180,792 or 4,570%. The $180,792 increase is primarily attributable to the launch of our microcap event in the second quarter 2019, which did not exist at the comparative time last year.

 

Operating Expenses

 

Cash-paid compensation expense increased by $597,075 or 195.1% to $903,073 for the 9-month period ending September 30, 2019 from $305,998 for the 9-month period ending September 30, 2018. The $597,075 increase is primarily attributable to increased employee headcount and adding additional consultants and professionals to meet our immediate growth strategies plus added temporary contractors to launch our cannabis focused event in the second quarter of 2019.

 

During the 9-month period ending September 30, 2019, we recognized $1,866,583 of non-cash stock-based compensation expense for employees, consultants, and professionals compared to 100,000 for the 9-month period ending September 30, 2018. The increase is primarily due to attracting and retaining highly compensated personnel.

 

During the 9-month period ending September 30, 2019, we recognized $292,500 of non-cash stock-based expense for warrants compared to $2,449,800 that became exercisable for the 9-month period ending September 30, 2018. The decrease is unrelated and primarily due to all the warrants being issued in fiscal years 2016 through 2017 having been vested, which warrants were 100% expensed during fiscal years 2017 and 2018. The $292,500 warrant expense is in connection with the execution of short-term convertible notes.

 

Sales and marketing expense increased by $48,727 or 145.4% to $116,279 for the 9-month period ending September 30, 2019 from $67,552 for the 9-month period ending September 30, 2018. The $48,727 increase is primarily attributable to increased cost pertaining to the launch of our new cannabis-focused microcap event in June 2019.

 

General and administrative expense decreased by $206,569 or 6.8% to $290,109 for the 9-month period ending September 30, 2019 from $335,167 for the 9-month period ending September 30, 2018. The decrease is primarily attributable to reduction in travel costs and related investor relations expenses.

 

Other expense

 

During the 9-months ended September 30, 2019, we incurred $494.151 of Other Expenses related to: $37,500 for the September 26, 2019 termination fee from our execution of the April 15, 2019 convertible debenture, $22,651 interest expense accrual and the $429,600 amortization of the beneficial conversion feature both related to our convertible notes, and $4,400 of losses from converting warrants to common stock below par value, all of which did not exist during the comparative time last year.

 

Net Loss

 

Our net loss for the for the 9-month period ending September 30, 2019 was $3,678,050 compared to a net loss of $3,041,881 for the 9-month period ending September 30, 2018. The $636,169 increase in net loss is primarily due to interest expense accruals of $17,628 and the amortization of the beneficial conversion feature of $429,600 both related to our convertible short-term debt which did not exist during the comparative time last year, plus the cost and expenses to ramp up in our new cannabis-focused microcap events, increased employee headcount, and adding additional consultants and professionals to meet our forecasted growth strategies. The losses were dampened by a reduction in travel costs and related investor relations expenses.

 

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Liquidity and Capital Resources

 

Cash Flows from Operating Activities

 

We have not generated positive cash flows from operating activities. For the 9-month period ending September 30, 2019, net cash outflows used in operating activities was $1,684,564 compared to net outflows of $2,865,687 for the 9-month period ending September 30, 2018, representing a decrease of $1,181,123.

 

Cash Flows from Financing Activities

 

For the 9-month period ending September 30, 2019, net cash flows used in financing activities was $1,506,551 compared to $3,027,400 for the 9-month period ended September 30, 2018, representing a decrease of $1,520,849 primarily due to less non-cash warrants being issued and expensed.

 

Off-Balance Sheet Arrangements

 

None.

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable

 

ITEM 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer/Chief Accounting Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As required by SEC Rule 15d-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective in providing reasonable assurance in the reliability of our report as of the end of the period covered by this report. This is because we have not sufficiently developed our segregation of duties nor have we established an audit committee.

 

Changes in Internal Control over Financial Reporting

 

We had material changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter, or are reasonably likely to materially affect, our internal control over financial reporting. We rely on various information technology systems, including our newly licensed NetSuite enterprise resource planning (ERP) system, that was implemented this of first quarter of Fiscal 2019 to manage our operations, We will continue to evaluate the effectiveness of internal controls, procedures, and technology on an on-going basis to maximize efficiency and productivity.

 

17
 

 

PART II – OTHER INFORMATION

 

ITEM 1. Legal Proceedings.

 

We know of no material pending legal proceedings to which we or our subsidiary is a party or of which any of our properties, or the properties of our subsidiary, is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

 

We know of no material proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to us or our subsidiary or has a material interest adverse to our company or our subsidiary.

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

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, we authorized the issuance of 500,000 common stock shares to Mark DiSiena, our 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 $50,000. The shares were issued during the three months ended March 31, 2019.

 

From January 1, 2019 thru March 31, 2019, we entered into subscription agreements with 9 accredited investors. We sold 5,725,000 common stock shares to the accredited investors, of which 1,200,000 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, we received $382,500 out of the $462,500, awaiting on the remaining $80,000. Subsequently, by April 17, 2019, all $80,000 was delivered to our accounts. Accordingly, 3,700,000 of the 5,725,000 shares were issued by March 31, 2019; the rest of the 2,025,000 were issued by May 1, 2019.

 

On April 2, 2019, we issued 500,000 common stock shares to an employee. The shares are valued at $0.19, the closing stock price on the date of grant, for total non-cash expense of $95,000. The shares will be issued during the three months ended December 31, 2019.

 

On May 9, 2019, we 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, we 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.

 

ITEM 3. Defaults Upon Senior Securities

 

None

 

ITEM 4. Mine Safety Disclosures.

 

None

 

ITEM 5. Other information

 

None.

 

18
 

 

ITEM 6. Exhibits.

 

EXHIBIT INDEX

 

Exhibit
Number
  Description
31.1   Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document

 

19
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: November 14, 2019

 

  SOCIAL LIFE NETWORK, INC.
     
  By: /s/ Ken Tapp
    Ken Tapp
    Chief Executive Officer
    (Principal Executive Officer & Chief Executive Officer)

 

  By: /s/ Mark DiSiena
    Mark DiSiena
    Chief Financial Officer
    (Chief Financial Officer/Chief Accounting Officer)

 

20
 

 

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