UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

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

 

For the fiscal year ended: December 31, 2019

 

or

 

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

 

For the transition period from ____________ to ____________

 

Commission File No: 000-55961

 

Social Life Network, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   46-0495298
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

8100 East Union Ave. Suite 1809

Denver, Colorado 80237

(Address of principal executive office, including zip code)

 

(855) 933-3277

(Registrant’s telephone number, including area code)

 
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.001 par value per share
 
Name of exchange on which registered:
Not Applicable
 
Securities registered pursuant to Section 12(g) of the Act:
None

 

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 [  ] 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 aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $15,427,552.

 

The Company has 306,775,379 common stock shares outstanding as of March 19, 2020.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).

 

Not Applicable

 

 

 

     
 

 

TABLE OF CONTENTS

 

PART I 1
ITEM 1. BUSINESS 1
ITEM 1A. RISK FACTORS 12
ITEM 2. PROPERTIES 32
ITEM 3. LEGAL PROCEEDINGS 32
ITEM 4. MINE SAFETY DISCLOSURES 32
PART II 32
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 32
ITEM 6. SELECTED FINANCIAL DATA 41
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 41
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 57
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 57
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 78
ITEM 9A. CONTROLS AND PROCEDURES 78
ITEM 9B. OTHER INFORMATION 80
PART III 80
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 80
ITEM 11. EXECUTIVE COMPENSATION 86
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 88
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 89
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 90
PART IV 91
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 91

 

  i  
 

 

PART I

 

ITEM 1. BUSINESS

 

Forward-Looking Statements

 

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

 

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this annual report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. Except as required by applicable law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future changes make it clear that any projected results or events expressed or implied therein will not be realized. You are advised, however, to consult further disclosures we make in future public filings, statements and press releases.

 

Forward-looking statements in this annual report include express or implied statements concerning our future revenues, expenditures, capital and funding requirements; the adequacy of our current cash and working capital to fund present and planned operations and financing needs; our proposed expansion of our business; and future economic and other conditions, both generally and in our specific geographic and product and/or services markets. These statements are based on currently available operating, financial and competitive information and are subject to various risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements due to a number of factors including, but not limited to, those set forth below in the section entitled “Risk Factors” in this annual report, which you should carefully read. Given those risks, uncertainties and other factors, many of which are beyond our control, you should not place undue reliance on these forward-looking statements. You should be prepared to accept any and all of the risks associated with purchasing our securities, including the possible loss of your entire investment.

 

Our financial statements are stated in United States Dollars (US$) unless otherwise stated and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

In this annual report, unless otherwise specified, all references to “common shares” or “common stock shares” refer to restricted common stock shares.

 

As used in this annual report on Form 10-K, the terms “we”, “us” “our” refer to Social Life Network, Inc., a Nevada corporation, and its wholly-owned subsidiary, MjLink.com Inc., a Delaware corporation. Unless otherwise specified. MjLink.com Inc. is referred to herein as “MjLink” or “MjLink.com”.

 

Corporate Overview – Formation, Corporate Changes, Material Merger

 

Organization

 

Social Life Network, Inc – Parent Holding Company

 

Our history began with incorporation in California on August 30, 1985 under the name, C J Industries, Inc. On February 24, 2004, we merged with Calvert Corporation, a Nevada Corporation, changed our name to Sew Cal Logo, Inc., and moved our domicile to Nevada.

 

In June 2014, we were placed into receivership in Nevada’s 8th Judicial District (White Tiger Partners, LLC et al v. Sew Cal Logo, Inc.et al, Case No A-14-697251-C) (Dept. No.: XIII) (the “Receivership”).

 

On January 29, 2016, we, as the seller (the “Seller”), completed a business combination/merger agreement (the “Agreement”) with the buyer, Life Marketing, Inc., a Colorado corporation (the “Buyer”), its subsidiaries and holdings, and all of the Buyer’s securities holders. We, as the Seller, acted through Robert Stevens, the court-appointed receiver and White Tiger Partners, LLC, our judgment creditor. The Agreement provided that the then current owners of the private company, Life Marketing, Inc., become the majority shareholders, pursuant to which an aggregate of 119,473,334 common stock shares were issued to our officers, composed of 59,736,667 shares each to our Chief Executive Officer, Kenneth Tapp, and Andrew Rodosevich, our then-Chief Financial Officer. Pursuant to the terms of the Agreement and related corporate actions in our domicile, Nevada:

 

  We cancelled all previously created preferred class of stock;
     
  We delivered newly issued, common stock shares equivalent to approximately 89.5% of our  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.

 

  1  
 

 

  Our then officers and directors were terminated, and Kenneth Tapp and Andrew Rodosevich became our  Chief Executive Officer/Director and Chief Financial Officer/Director, respectively;
     
  We effected a 5,000 to 1 reverse stock split effective April 11, 2016, with each shareholder retaining a minimum of 100 shares;
     
  We changed our  name from Sew Cal Logo, Inc. to WeedLife, Inc, and then to Social Life Network, Inc. effective in Nevada on April 11, 2016;
     
  We changed our s stock symbol from SEWC to WDLF;
     
  We decreased our authorized common stock shares from 2,000,000,000 shares to 500,000,000 shares, effective on March 17, 2016.

 

On June 6, 2016, we 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, we incorporated MjLink, a Delaware Corporation, as our wholly owned subsidiary.

 

MjLink.com Inc. – Wholly Owned Subsidiary

 

Prior to its incorporation in Delaware on September 20, 2018, MjLink functionally operated as our cannabis division. MjLink continues to operate as our cannabis division but in corporate form as our wholly owned subsidiary.

 

Cannabis and Hemp companies face ongoing difficulties around the world with marketing and advertising their products and brands to consumers, both with online and through traditional advertising. The global consumer base for these companies and brands have been growing at an exponential rate, as more and more states, provinces and countries legalize the use of cannabis and hemp products, either medically or recreationally.

 

In the United States, according to BDS Analytics, the consumer base has grown to more than 70 Million people who have purchased legal cannabis since Colorado passed the legalization of recreational marijuana on November 6, 2012. We launched MjLink in January of 2013 as a direct response of online advertising and marketing restrictions placed by Google, Facebook and other social media networks that year.

 

MjLink is a leading social networking platform and event company that has in part helped expedite the growth of the cannabis industry worldwide. MjLink is one of the largest social and digital media cannabis/hemp related platforms for connecting professionals to businesses, and marketing products to consumers.

 

  2  
 

 

 

Our Business

 

Business of Social Life Network, Inc. (Software as a Service Internet Platform)

 

We are a technology company that licenses its Social Life Network SaaS (Software as a Service) Internet Platform (hereafter referred to as the “Platform”) to niche industries for an annual license fee and/or a percentage of profits. The Platform is a cloud-based social network and eCommerce system that can be accessed by a web browser or mobile application that allows end-users to socially connect with one another and their customers to market and advertise their products and services. The Platform can be customized to suit virtually any international niche industry or sub-culture, such as hunting and fishing, tennis, real estate professionals, health and fitness, and charity causes.

 

Our Platform licensing agreements are for a minimum of two years and automatically renew each year thereafter. Our fee structure includes a combination of annual fees and/or a minimum of 20% of the net profits that are generated by the licensee from monthly subscriptions services, E-Commerce fees and online advertising sales from their platform users.

 

We developed our social networking and E-Commerce Platform specifically for industries that we believe have a passionate consumer base, that communicate in non-public channels, and their commerce activity is highly based on referral and “copy-cat” consumption; consistent with the foregoing, we license our Platform to the residential real estate industry and niche sports verticals like hunting and fishing. Our platform uses machine learning (A.I.) that interpolates the user behavior data through their online social activity to better connect the right people and businesses together, at the right time when online in our social network. Contrary to other social networks and E-Commerce systems like Facebook and Amazon where everyone is grouped together and forced to listen to the white noise, our Platform increases online user connectivity and stronger relationships between businesses and their customers.

 

To date, our Platform is accessed by subculture industries in over 120 countries and is translated in multiple languages. Our language translation files for the Platform include 80% or more of the following languages: English, German, Hungarian, Portuguese, Turkish, Polish, Russian, Swedish, Slovenian, French, Dutch, Portuguese, Czech, Persian, Ukrainian, Vietnamese, Romanian, Spanish, Italian and Japanese, which will position international use of our Platform immediately following our launch internationally through individual licensing agreements.

 

Business of MjLink.com Inc. (Cannabis and Hemp Industry Platforms)

 

MjLink’s technology platform consists of four separate and unique private social networks powered by AI and Blockchain technology, with a total of 21 sites and apps in the entire MjLink network. In total, the MjLink network provides the cannabis industry with a singular platform for social networking, product and dispensary search, digital content distribution, advertising, video conferencing and virtual investment conferences, mobile app and website building tools, learning management, and online event solutions. MjLink supports user groups that make up the cannabis industry worldwide, attracting an average of more than 4 million visits each month throughout our combined sites and apps, from an average of more than 120 countries worldwide.

 

MjLink’s goal is to become the highest regarded technology and event company in the cannabis and hemp industry worldwide. Due to MjLink’s unique positioning after 7 years of operations, and having developed four separate and unique social networks that are used in more than 120 countries, we believe that there are considerable monetization opportunities by executing MjLink’s business plan in which traditional trade shows and conferences are complimented 365 days a year by its niche social networks and business application tools.

 

Neither we or MjLink cultivate, dispense or sell hemp, cannabis or any derivatives of the cannabis plant, such as infused products.

 

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MjLink’s Cannabis and Hemp Industry Social Networks and Event Platform

 

MjLink’s technology platform consists of four separate and unique private social networks depicted below that is powered by AI and Blockchain technology, with a total of 21 sites and apps in the entire MjLink network. In total, the MjLink network provides the cannabis industry with a singular platform for:

 

  Social Networking powered by AI social matching and blockchain technology
     
  Product and Dispensary Search
     
  Digital Content Distribution
     
  Video and HTML5 interactive AI powered advertising
     
  Live Video Conferencing and Virtual Conferences
     
  Mobile App and Website Building Tools
     
  Learning Management System
     
  Digital Event SaaS
     
  5G-compliant Big Data
     
  5G-compliant simulcasting of events and social networking
     
  5G-compliant Internet of things (for seed to sale tracking applications)

 

MjLink support user groups that make up the cannabis industry worldwide attract an average of more than 4 million visits each month throughout its combined sites and apps of more than 120 countries worldwide.

 

1. MjLink.com Social Network

 

MjLink.com is a B2B social network that operates similar to LinkedIn, connecting industry operators and entrepreneurs together online and through regional and national cannabis events; however, MjLink operates with important distinguishing characteristics by providing cannabis and hemp related business professionals with better cannabis/hemp networking platform compared to LinkedIn, that is:

 

  free of spammers
     
  free of white noise
     
  specifically designed for the type of Cannabis or Hemp business and according to how each business operates

 

2. Weedlife.com Social Network

 

WeedLife.com is a C2C social network that functions much like Facebook and MeetUps for cannabis enthusiasts. Launched in January 2013, it is now one of the largest cannabis-only social networks worldwide used by people in more than 120 countries. WeedLife is used primarily by consumers and caregivers online, as well as bud tenders and dispensaries that connect with their customers.

 

3. HempTalk.com Social Network

 

HempTalk.com is a social marketplace for industrial hemp and CBD companies, consumers and industry experts. HempTalk is designed for distributing information and education materials about the emerging hemp industry. HempTalk.com allows for CBD and hemp companies to use ecommerce and affiliate marketing to reach and service more online customers.

 

  4  
 

 

4. MjInvest.com Social Network

 

MjInvest.com is a private investor network for the cannabis industry. The investor network is complimented by MjLink’s New York and Los Angeles based MjMicro Conferences. MjInvest provides public and private C-level executives the ability to connect and pitch their companies online to existing and potential shareholders, analysts, family offices, venture funds and accredited investors.

 

MjMicro Conference, produced by the MjInvest Social Network

 

The MjMicro Conference is an invitational forum that unites publicly traded and private cannabis companies led by seasoned executives with next level, high net worth investors. C-level executives from presenting firms have the opportunity to meet one-on-one with next-level private and institutional investors, with a focus on discussing structured investments that will provide opportunities for business expansion and growth. The investment conference draws in speakers from the top investment firms and accredited investors, looking to connect with top C-level executives in the cannabis and hemp industry. MjInvest then provides those same investors and C-level executives the ability to virtually connect and present year-round, through the MjInvest.com investor network and through monthly virtual conferences that take place one to three times monthly.

 

The MjLink network of websites and apps are built into our four social networks described above with a total of 21 individual domains and applications.

 

A.I. and Blockchain Technology

 

MjLink connects the millions of international cannabis and hemp consumers, business professionals, companies and brands every year that make up the growing industry. MjLink uses state-of-art A.I. and Blockchain technology in our networks that allows our platforms to learn the online social behavior of the users, to better connect people together with brands, advertising and one another. The end result is strong user retention, longer session times, and greater advertising opportunities for the professionals and brands in the cannabis and hemp industries.

 

Cannabis and Hemp Event Platforms

 

MjLink is changing the way industry events and post their live event(s) are conducted by integrating them into our social networking platforms the rest of the year. Think of LinkedIn, producing career fairs and industry trade shows around the country, to further enhance usefulness of their platform. MjLink enhances its platform by leveraging the user-ship from our cannabis and hemp industry social networks, and then connect those users with local, regional and national events to conduct business both in person, and online with our four unique social networks, WeedLife.com, MjLink.com, HempTalk.com and MjInvest.com.

 

MjLink launched the first of its social network “powered” conferences in 2019, the MjMicro Investor Conference, and plans to launch three new event scale consumer festivals.

 

MjLink intends to develop and drive our revenue growth through the MjMicro Physical Conferences and the MjMicro Virtual Conferences that are held on our MjInvest.com investor network. We will accomplish this by dedicating capital raised through a debt or equity offering or a Regulation A Offering and by devoting additional corporate resources necessary to the production of more frequent online events and increasingly larger physical events that will be held in emerging growth markets in both the cannabis and hemp industries. MjLink’s goal with this strategic approach is to enhance our financial performance, while increasing both profit and gross margins. As legalization of cannabis for both medical and recreational markets continue to develop nationally and internationally, MjLink believes that its strategic shift to providing larger investor events in developing markets, as well as more frequent online events, will position it as the leader in virtual and physical investor events in the industry worldwide.

 

As a proof of model, MjLink held its first MjMicro Virtual Conference on January 29th, 2020, with an average online attendance per company of 91 investors watching each of the presenters live. This was more than 400% the average audience size for presenters that pitched at the MjMicro physical conferences that we held in NYC and Beverly Hills in 2019. Over the 7 days following the live virtual conference event, an average of 150 additional online investors watched the recordings of each presenting company, overwhelming proof that the online investor audience using the MjInvest.com investor platform (the same audience that is invited to the MjMicro physical conferences) find great value and convenience in getting access to companies, their C-level execs and the investment opportunities, online.

 

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Revenue Generation

 

Social Life Network generates revenues through 4 primary sources:

 

  1. License Agreements - We generate revenue through licensing agreements from which we receive an annual license fee or a percentage of net profits.
     
  2.

Online Advertising - Our advertising program enables advertisers to present online ads to a specific type of cannabis or hemp website audience, depending on the website and type of content that website provides in our network. We charge advertisers using the cost per thousand (CPM), which is a marketing term used to denote the price of 1,000 advertisement impressions on one webpage. 

     
   

We charge $10.00 CPM to an advertiser, which means the advertiser must pay $10.00 for every 1,000 impressions of its online advertising campaign. The “M” in CPM represents the Roman numeral for 1,000. Additionally, we provide the advertiser with the ability to purchase the CPM advertising campaign on specific websites in our cannabis and hemp network. This favors the ads that are most relevant to our webpage visitors, improving the experience for both the person looking for information in our network and the advertiser looking for targeted interested customers for their advertised product or service. 

     
   

Charging advertisers by CPM (1,000 advertisement impressions on one webpage) requires that we have enough website and webpage traffic (visitors viewing the webpages on a website) to sell to an advertiser. Therefore, we are dependent on marketing and advertising our own websites using print, radio, TV and online advertising in order to drive new and existing website visitors to our network. The more website traffic we experience each month, equates to the more advertising revenue we can generate each month. 

     
  3.

Digital Marketing - We provide business professionals with monthly subscriptions that enhance their online marketing and branding through our online business directory and online review management system. This marketing service allows a business to spotlight their online business listing, customer reviews and special offers and coupons, to our website network visitors. 

     
  4. In addition to the existing online applications, MjLink’s management is focused on launching three new divisions that will provide incubation of early stage cannabis tech companies, B2B and B2C trade-shows, and M&A of cannabis technology companies.

 

MjLink generates revenues through five primary sources:

 

  1. Online advertising throughout all four of our social networks and the 21 websites and mobile apps that we operate;
     
  2. Monthly digital subscriptions, providing business professionals with digital services that boost their marketing and online influence;
     
  3. Annual subscription, providing investor platform for C-level execs to conduct live and pre-recorded investment pitches and roadshows;
     
  4. Attendance and sponsorships to participate at our MjMicro Investor Conferences that MjLink produces one to three times per year; and
     
  5. Monthly MjMicro Virtual Online Conferences, produced one to three times per month, where companies pay us an annual fee for allowing executives to present their companies to our online investor audience.

 

  6  
 

 

Revenue is generally impacted by the number of events, size of attendance, volume of sponsorship and attendee sales, admission prices, and access fees to MjInvest.com. Event costs are included in direct operating expenses and are typically substantial in relation to revenues. Since the fees and costs are typically within a range for these events, significant increases or decreases in event revenue will generally result in comparable changes to operating income.

 

We utilize a sales force that creates and maintains relationships with sponsors through a combination of strategic, international, national and local opportunities that allow businesses to reach customers through the MjMicro Events, including advertising on our websites, co-sponsorship arrangements and commercial vendor booths at MjMicro. MjMicro drives increased advertising scale to further monetize the MjInvest platform through branded media content, corporate sponsorship and allowing those seeking investments to find investors. We work with our clients to help create marketing programs that drive their business goals and connect investors directly with Minivet’s audience. We also work with other commercial businesses operating within the cannabis industry by providing vendors with tables and trade booths to help drive awareness of the vendor’s business by connecting with MjMicro’s vast international investor base.

 

Contingent upon adequate financing, MjMicro plans to conduct one to three virtual events per month, that are complemented by one to three physical events per year.

 

Operations

 

We currently operate and support the ongoing technology maintenance of our online social network platform in the cannabis and hemp industry for users from about 120 countries that access it each month. We also operate and support the ongoing technology maintenance and upgrades of our licensees’ social networks in the United States for the Sports Social Network and the Real Estate Social Network.

 

Our Market

 

Our market is intentionally broad and includes engagement-based organizations, consumer brands, ad agencies, online marketers, advertisers, sponsors, social media celebrities, entertainment celebrities and performance artists, large and small enterprise users, religious organizations, health care providers, network marketing and multi-level marketing companies, media companies, major motion picture studios, social media companies, schools and training facilities, and virtually any other person or organization that seeks to attract, engage, and communicate with prospects, customers, consumers, fans, followers, patients, friends, and subscribers, among others, online, utilizing automated, interactive technology.

 

Target Markets

 

We have targeted niche industries through our various platforms, including the following:

 

  Cannabis and Hemp
     
  Sports Industries

 

  Hunting & Fishing
     
  Racket Sports
     
  Cycling

 

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  Golf
     
  Youth Sports Leagues
     
  Soccer

 

  Charities & Industry Associations
     
  Residential Real Estate.

 

We will continue to target niche industries based on sub-culture behavior and the need for private social networking.

 

Distribution Methods

 

Our distribution methods are:

 

  1. Prospective customers and clients can subscribe to our Social Life Network software service on a monthly or annual contract through a simple web-based sign-up form accessible on our website (sociallifenetwork.com), as well as through interactive sign-up links that we distribute via email and text, as well as through social media.
     
  2. Enterprise users can subscribe to our service and then distribute custom-branded sign-up links to their internal and external staff via email or other electronic means.
     
  3. We enter into license or partnership agreements with other social media providers to incorporate our technology into such other providers’ software platform that they offer to their existing and prospective client base.
     
  4. We enter into license or partnership agreements with digital marketing companies and advertising agencies to resell our technology to their existing and prospective client base, for monthly fees which are shared with us.
     
  5. We employ a direct sales team, as well as outside sales consultants.

 

Marketing

 

We utilize our own proprietary interactive video platform as the foundation of our ongoing marketing initiatives. Our initiatives include daily, broad-based social media engagement by a dedicated team of full-time employees and outside consultants; management of our website; email campaigns, as well as our CEO’s guest appearance at tradeshows and investor conferences; among many other ongoing initiatives designed to increase awareness of our products and services and drive conversion and adoption rates.

 

Our marketing consists of:

 

  Trade Shows & Conferences
     
  Print Advertising
     
  Public Relations and IR
     
  Digital Advertising
     
  Social Media
     
  Online Influencers

 

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Competition

 

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

 

Competitive Advantages

 

Our competitive advantage is that we are solely dedicated to niche industries that business and consumer users that do not feel comfortable sharing content and information on other social networks like Facebook, LinkedIn and Twitter, as it may either jeopardize their personal and professional reputations or be completely lost in the white-noise of billions of other posts. Additionally, we have developed specialized features for these niche industries that incorporates E-Commerce directly into a users’ social networking account. This integration of E-Commerce directly into social networking sets our Platform apart from our current competitors.

 

MjLink, launched in 2013, is one of the oldest and largest technology platform for the cannabis and hemp industry globally, with the largest technology tool-set ever built into one single platform; that includes a social networking platform, API connectivity to other platforms and industry software, artificial intelligence (AI) and blockchain powered data science (AI Big Data), free and premium marketing applications for business users (a website builder and mobile app builder platform for business users), AI driven user profiling for better connection recommendations, blockchain powered search algorithm that indexes ever cannabis and hemp website in the world, AI driven privacy and monitoring system for user safety, and an e-commerce marketplace for legal hemp retail businesses to sell and manage inventory online.

 

Contingent upon adequate financing, we plan to identify and acquire best-in-breed technology companies that service the industry worldwide. Our technology platform was built from day-1 with this intent in mind, ready for easy and fast integration of other technology platforms into ours. Over the past 7 years, we have successfully tested and integrated our platform with other tech companies programming, to include PHP, JAVA, Python, ColdFusion, ASP.NET, JavaScript, C++, HTML, CSS, SQL, Ruby and Google Go. With this technology edge, we will actively look to “role-up” the best, available technology companies in the industry in effort to make MjLink the “Google” of the cannabis and hemp industry worldwide.

 

Competitive Disadvantages

 

Our competitive disadvantages are that we do not have the operational and financial resources that our competitors have, which results in our having fewer resources to market our social network brands, advertise our digital services, acquire new users on our social networks, and sell our advertising and digital services to business customers, as compared to our competitors.

 

Planned Future Growth

 

As the legalization of cannabis and hemp markets continue to develop globally, we believe that a strategic shift to focusing on larger developed industry segments like the emerging CBD industry, the international investment community, and the networking of small business professionals, will present us with attractive growth and opportunities. Furthermore, we have identified the opportunity to use our social networks in each of these industry segments to drive attendance to the conferences and trade shows that we are launching. This will create a synergistic relationship between these events that are held throughout the year, and our social networks that connect the attendees the rest of the year. We believe that growing this part of our business will result in longer usage and increased user acquisition of our social networks (from existing and potential members), resulting in greater long-term revenue potential.

 

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Intellectual Property

 

Our technology platform and associated applications, features and functionality are comprised of proprietary software, code and know-how that are of key importance to our business plan.

 

Research and Development

 

We spent zero dollars on research and development during each of the years ended December 31, 2019 and 2018.

 

Sources and Availability of Products and Names of Principal Suppliers

 

We currently rely on certain key suppliers and vendors in the coding and maintenance of our software. Management believes it has mitigated the associated risks of these single-source vendor relationships by ensuring that we have access to additional qualified vendors and suppliers to provide like or complementary services.

 

Dependence on One or a Few Major Customers

 

We are not dependent upon one or a few major customers and we do not expect to have any significant customer concentration.

 

Government Regulation

 

Government regulation is of significant concern for our business. Our management believes it currently possesses all requisite authority to conduct its business as described in this annual report. Our cannabis/hemp websites with respect to cannabis are dependent on state and Federal laws pertaining to the cannabis industry (See “Risks Related to Cannabis/Hemp Related Government Regulation” for further information regarding government regulation).

 

Cost and Effects of Compliance with Environmental Laws

 

Our operations are not subject to federal, state or local environmental regulations.

 

Employees and Consultants

 

We currently operate with 7 full time employees and we also employ consultants on an as-needed-basis to provide specific expertise in areas of software design, development and coding, content creation, and other business functions including marketing and accounting. To date we have 6 consultants.

 

By year end 2020, we are planning to hire as many as 20 full-time sales representatives, 10 full-time marketing and social media employees, 5 full-time production and customer support employees, and 4 part-time and 3 full-time executives, and management staff for our cannabis and hemp social network expansion plan, all of which is contingent upon adequate funding and/or financing.

 

None of our employees or consultants are currently covered by a collective bargaining agreement. We have had no labor-related work stoppages and we believe our relations with our employees and consultants are excellent.

 

Seasonality of Business

 

We do not have a seasonal business cycle.

 

Patents and Intellectual Property/Trademarks/Licenses/Franchises

 

We do not currently own any patents and have no intention of applying for patents. We have no franchise or royalty agreements. The US Patent and Trademark Office published our trademark “Weed Life” on May 5, 2015.

 

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Raw Materials

 

We do not use raw materials in our business.

 

Significant Developments

 

During 2018, there were the following significant developments:

 

 

On December 4, 2018, our Chief Executive Officer presented at the December 5, 2018 Virtual Investor Conference.

     
 

On December 4, 2018, MjLink presented its corporate presentation at the 11th Annual LD Micro Main Event in Los Angeles, California.

     
  On December 20, 2018, MjLink launched a new video and display advertising network on our cannabis business social network.
     
  On December 28, 2018, we launched a new video conferencing paid feature to our LikeRe.com real estate social network.

 

There were the following significant developments in 2019.

 

 

On January 2, 2019, we launched a new iTunes and Android mobile app for the FutPost.com soccer social network.

     
 

On January 7, 2019, HuntPost.com social network, which is directed to the hunting and fishing community, launched an e-commerce marketplace where consumers and industry vendors may sell their goods.

     
 

On January 15, 2019, we launched a new iTunes and Android mobile app for the HuntPost.com hunting and fishing social network.

     
 

On January 21, 2019, we launched a new iTunes and Android mobile app for the LikeRE.com real estate social network.

     
 

On June 25, 2019, we launched a new division, the MjMicro Cap Conference in New York, New York.

     
 

On October 16, 2019, we held our second MjMicro Cap Conference in Beverly Hills, sponsored by PiperJaffray, Roth Capital Partners and 54 of the top hemp and cannabis companies in North America.

 

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Material Agreements

 

Software License Agreement with Real Estate Social Network, Inc.

 

We have a January 1, 2018 Software License Agreement with Real Estate Social Network, Inc., a Colorado corporation, whereby we, as the licensor, licensed our software as a service (SaaS) to Real Estate Social Network as the licensee. This agreement provides that we will receive 20% of the net profits from all monthly subscriptions and online ad sales from the licensee, paid annually, on the 31st day of January for the preceding year. Early payment or installment payments on a monthly or quarterly basis are allowed. We are required to provide acceptance testing to establish whether the licensed software operates properly. If the testing does not yield expected results, we, as the licensor are required to correct errors at our own cost. If later acceptance testing fails to yield the expected results, the licensee may terminate the agreement upon written notice. We provide a 180-day limited warranty that the licensed software will conform in all material respects of the documentation specifications. The term of the License Agreement is from the effective date, January 1, 2018, and continues in effect until termination, which termination may occur as follows: (a) if the Licensee fails to make payment; (b) by either party for the other Party’s material breach of the agreement that is incurable or uncured by breaching party for 30 days after being served with notice of breach and demand for cure, effective on written termination notice to the breaching Party; (c) by the Licensor, effective immediately irrespective of written notice; (d) by both Parties upon mutual agreement; (e) if we, as the Licensor: (i) are dissolved or liquidated or takes any corporate action for such purposes; (ii) become insolvent or we are generally unable to pay our debts as they become due; (iii) become the subject of any bankruptcy proceedings, voluntary or involuntary, under any domestic or foreign bankruptcy or insolvency Law; (iii) make or seek to make a general assignment for the benefit of its creditors; or (iv) apply for, or consent to, the appointment of a trustee, receiver, or custodian for a substantial part of its property.

 

Software License Agreement with Sports Social Network, Inc.

 

We have a January 1, 2018 Software License Agreement with Sports Social Network, Inc., a Colorado corporation, whereby we, as the licensor, licensed our software as a service (SaaS) to Sports Social Network, Inc. as the licensee. This agreement provides that we will receive $125,000 USD annually each year for the first two years of this agreement, and thereafter will receive 20% of the net profits from all collected E-Commerce fees and online advertising sales from the licensee, paid monthly with the option to be paid annually, on the 31st day of January for the preceding year. Early payment or installment payments on a monthly or quarterly basis are allowed. We are required to provide acceptance testing to establish whether the licensed software operates properly. If the testing does not yield expected results, we, as the licensor are required to correct errors at our own cost. If later acceptance testing fails to yield the expected results, the licensee may terminate the agreement upon written notice. We provide a 180-day limited warranty that the licensed software will conform in all material respect of the documentation specifications.

 

The term of the License Agreement is from the effective date, January 1, 2018, and continues in effect until termination, which termination may occur as follows: (a) if the Licensee fails to make payment; (b) by either party for the other Party’s material breach of the agreement that is incurable or uncured by breaching party for 30 days after being served with notice of breach and demand for cure, effective on written termination notice to the breaching Party; (c) by the Licensor, effective immediately irrespective of written notice; (d) by both Parties upon mutual agreement; (e) if we, as the Licensee: (i) are dissolved or liquidated or takes any corporate action for such purposes; (ii) become insolvent or we are generally unable to pay our debts as they become due; (iii) becomes the subject of any bankruptcy proceedings, voluntary or involuntary, under any domestic or foreign bankruptcy or insolvency Law; (iii) make or seek to make a general assignment for the benefit of its creditors; or (iv) apply for, or consent to, the appointment of a trustee, receiver, or custodian for a substantial part of its properties.

 

ITEM 1A. RISK FACTORS

 

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

 

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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 19, 2019, our independent registered public accounting firm, B F Borgers CPA PC, stated that our financial statements have been prepared on a going concern basis which assumes that we will be able to realize our assets and discharge our liabilities and commitments in the normal course of business for the foreseeable future. We had an accumulated deficit of $31,563,493 at December 31, 2019, had a net loss of $3,857,948 and used net cash of 1,902,563 in operating activities for the twelve months ended December 31, 2019. (the net loss and accumulated deficit consist of $2,087,083 of non-cash stock-based compensation expense.) These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our management intends to finance operating costs over the next twelve months with existing cash on hand and public issuance of common stock. Although we may be successful in obtaining financing and/or generating revenue to fund our operations, meet regulatory requirements and achieve commercial goals, there are no assurances that such funding will be achieved at a sufficient level or that we will succeed in our future operations.

 

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

 

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

 

Customer complaints and negative publicity regarding our products and services may hurt our business and reputation.

 

We may receive complaints or claims from threatened legal action or lawsuits from dissatisfied customers regarding the quality of media content distributed through our brand, networking events, promotions, and MjInvest. These claims may not be covered by our insurance policies. Any resulting negative publicity and/or litigation could be costly for us, divert management attention, result in increased costs of doing business, or otherwise have a material adverse effect on our business and results of operations.

 

Litigation may adversely affect our business, financial condition, and results of operations

 

From time to time in the normal course of its business operations, we may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our s operating results if changes to our business operations are required. The cost to defend such litigation may be significant and may require a diversion of resources. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. Insurance may be unavailable at all or in sufficient amounts to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of the insurance coverage for any claims could have a material adverse effect on our business, results of operations, and financial condition.

 

If we fail to develop or acquire technologies that adequately serve changing consumer behaviors and support our evolving business needs, our business, financial condition and prospects may be adversely affected.

 

In order to respond to changing consumer behaviors, we need to invest in new technologies and platforms to deliver content and provide products and services where consumers demand it. If we fail to develop or acquire the necessary consumer-facing technologies or if the technologies we develop or acquire are not received favorably by consumers, our business, financial condition and prospects may be adversely affected. In addition, as our business evolves and we develop new revenue streams, we must develop or invest in new technology and infrastructure that satisfy the needs of the changing business; if we fail to do so, our business, financial condition and prospects may suffer. Further, if we fail to update our current technology and infrastructure to minimize the potential for business disruption, our business, financial condition and prospects may be adversely affected.

 

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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.

 

Our future success will depend on our key executive officers and our ability to attract, retain, and motivate qualified personnel.

 

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. Our future success largely depends upon the continued services of our executive officers and management team. If one or more of our executive officers are unable or unwilling to continue in their present positions, we may be unable to replace them readily, if at all. Additionally, we may incur additional expenses to recruit and retain new executive officers. If any of our executive officers joins a competitor or forms a competing company, we may lose some of our customers and potential customers. Finally, we do not maintain “key person” life insurance on any of our executive officers. Because of these factors, the loss of the services of any of these key persons could have a material adverse effect on our business, results of operations, and financial condition.

 

Our continuing ability to attract and retain highly qualified personnel will also be critical to our success because we will need to hire and retain additional personnel as its business grows. There can be no assurance that we will be able to attract or retain highly qualified personnel. We face significant competition for skilled personnel in our industries. This competition may make it more difficult and expensive to attract, hire, and retain qualified managers and employees. Because of these factors, we may be unable to effectively manage or grow our business, which could have a material adverse effect on our business, results of operations, and financial condition and as a result, the value of your investment could be significantly reduced or completely lost.

 

Should we lose our advertising or digital subscription or digital marketing or events revenues during any given period that have historically represented the majority of our revenues, our financial condition will be negatively affected.

 

We have generated a majority of our revenue for the first nine months ended 2019 from digital marketing, microcap events, and digital subscription services of MjInvest.com. The loss of the majority of our revenues in future periods in any of these revenue categories will negatively and materially affect our results of operations.

 

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

 

We estimate that it will cost approximately $100,000 annually to maintain the proper management and financial controls for our filings required as a public reporting company, funds that would otherwise be spent for our business operations. Our public reporting costs may increase over time, which will increase our expenses and may decrease our potential profitability.

 

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We have generated a majority of our revenue in 2018, and 2019 from licensing, event, and digital marketing revenues, respectively; the loss of the majority of our revenues in future periods will negatively affect our results of operations.

 

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 45.5% of our outstanding voting stock, including our Chief Executive Officer who owns 33.8% 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;
     
  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.

 

During our 2019 fiscal year and for the 12-months ended December 31, 2018, $250,000 or 51.8%, and 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 and for the 12-months ended December 31, 2018, $250,000 or 51.8%, 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 percentage of their net profits from the sale of online advertising and collected E-Commerce fees on their niche sports social networks from every country around the world that they provide access to their websites and mobile apps that we provide through the licensing agreement. They currently have social networks that are used by the Hunting and Fishing industry, the Racket Sports industry, the Golf industry and the Soccer industry. They plan to launch over the coming twelve to twenty-four months, a niche Auto Racing social network, a niche Skiing and Snowboarding social network, and a private little league sports social network for children, parents and coaches.

 

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

 

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Our Chief Executive Office, Kenneth Tapp, owns 28.1% of our outstanding shares and is also the Chief Technology Officer of Real Estate Social Network. and the Chief Technology Officer of the Sports Social Network and owns approximately 40% each of those entities through LVC Consulting, LLC, of which he is the only member. Our prior-Chief Financial Officer, Andrew Rodosevich, owns 6.9% of our outstanding shares and is a Managing Member of Real Estate Social Network and Sports Social Network and owns approximately 10% of those entities through Rodosevich Investments, LLC, of which Andrew Rodosevich is the sole member. Our related party revenues present conflicts of interests between our officers’ interests and our shareholders” interests, which may favor the interests of our officers over that of our shareholders.

 

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

 

Our Chief Executive Officer and Chief Financial Officer negotiated the license fee agreements with our related parties/licensees, Sports Social Network and Real Estate Social Network. Our Chief Executive Officer, Kenneth Tapp, owns 28.1% of our outstanding shares and is also the Chief Technology Officer of Real Estate Social Network and Sports Social Network and owns approximately 40% each of those entities through LVC Consulting, LLC, of which he is the only member. Our prior-Chief Financial Officer, Andrew Rodosevich, owns 6.9% of our outstanding shares and is a Managing Member of Real Estate Social Network and Sports Social Network and owns approximately 10% of those entities through Rodosevich Investments, LLC, of which Andrew Rodosevich is the sole member, and have conflicts of interest between their interests and our shareholders’ interests.

 

Because the license agreements were negotiated between related parties, the license granted to these related parties may have been undervalued, which may have otherwise resulted in a higher amount of license fees being paid by other licensees to us.

 

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

 

We face significant competition with respect to our Cannabis/Hemp Social Networks, including WeedMaps.com, Leafly.com, Akerna, which offer a variety of online advertising and e-commerce offerings. Cannabis information, networking, state specific legal cannabis businesses, and are intensely competitive. As such, we expect competition to intensify further in the future and we will be subject to competition for advertisers, well-established commercial cannabis information providers, media companies. Many of our competitors, including the competitors stated above, have greater capital resources, facilities and diversity of services and product lines, which will enable them to compete more effectively in this market. Competition may increase as a result of consolidation within the industry. We may be unable to differentiate our products and services from those of our competitors, or successfully develop and introduce new products and services that are less costly than, or superior to, those of our competitors, which could have a material adverse effect on our business, results of operations and financial condition.

 

We face significant competition across the media landscape, including from event productions, digital publishers, social media platforms, search platforms, digital and advertising/marketing services, which we expect will continue, and as a result we may be unable to maintain or improve our operating results.

 

We compete with other event planners for market share and for the time and attention of consumers. The proliferation of choices available to consumers for information and business connections has resulted in audience fragmentation and has negatively affected overall consumer demand for visiting events. We also compete with digital publishers and other forms of media, including social media platforms, search platforms, portals and digital marketing services. The competition we face has intensified as a result of the growing popularity of mobile devices, such as smartphones and social-media platforms, and the shift in consumer preference from print media to digital media for the delivery and consumption of content, including video content. websites or use our digital applications directly. Given the ever-growing and rapidly changing number of digital media options available on the Internet, we may be unable to increase our online traffic sufficiently and retain or grow a base of frequent visitors to our websites and applications on mobile devices. In addition, the ever-growing and rapidly changing number of digital media options available on the Internet may lead to technologies and alternatives that we are unable to offer.

 

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The proliferation of new platforms available to advertisers may affect both the amount of advertising that we are able to sell as well as the rates advertisers are willing to pay. Our ability to compete successfully for advertising also depends on our ability to drive scale, engage digital audiences and prove the value of our advertising and the effectiveness of our digital platforms, including the value of advertising adjacent to high quality content, and on our ability to use our brands to continue to offer advertisers unique, and multi-platform advertising programs. If we are unable to demonstrate to advertisers the continuing value of our digital platforms or offer advertisers unique advertising programs tied to our brands, business, financial condition and results of operations may be adversely affected.

 

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

 

Our Chief Executive Officer is also the Chief Technology Officer of our licensees, Real Estate Social Network and Sports Social Network, and owns approximately 40% of each such entity through a limited liability company of which he is the sole member. We have a license agreement with Real Estate Social Network providing that they will pay us 20% of the net profits from all monthly member subscriptions and online advertising sales, paid annually, on the 31st day of January for the preceding year. We also have a license agreement with Sports Social Network providing that they will pay us $125,000 annually for the first two years of this agreement (a total of $250,000 for the first two years), and thereafter will receive 20% of the net profits from all online advertising sales and collected E-Commerce fees, paid monthly with the option to pay any outstanding licensing fees annually, and to be received by us no later than the 31st day of January for the preceding year. Our Chief Executive Officer owns 28.1% and of our outstanding shares. Accordingly, our Chief Executive Officer has potential conflicts of interest between his interests in Real Estate Social Network and Sports Social Network and our interests, which may result in them favoring the interests of those networks over our interests and that of our shareholders.

 

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

 

Certain of our executive officers and directors own a significant percentage of our outstanding capital stock. As of the date of this annual report, our executive officers and directors and their respective affiliates beneficially own less than 75% of our outstanding voting stock, including our Chief Executive Officer who owns 28.1% of our voting securities. The holdings of our directors and executive officers may increase further in the future upon vesting or other maturation of exercise rights under any of the options or warrants they may hold or in the future be granted, or if they otherwise acquire additional shares of our common stock. The interests of such persons may differ from the interests of our other stockholders. As a result, in addition to their board seats and offices, such persons will have significant influence and control over all corporate actions requiring stockholder approval, irrespective of how our company’s other stockholders may vote, including the following actions:

 

  to elect or defeat the election of our directors;
     
  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.

 

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

 

We expect to incur additional costs associated with operating as a public company and to require substantial additional funding to continue to pursue our business and continue with our expansion plans. We may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may increase our capital needs and/or cause us to spend our cash resources faster than we expect. Accordingly, we expect that we will need to obtain substantial additional funding in order to continue our operations. To date, we have financed our operations entirely through equity investments by founders and other investors and the incurrence of debt, and we expect to continue to do so in the foreseeable future. Additional funding from those or other sources may not be available when or in the amounts needed, on acceptable terms, or at all. If we raise capital through the sale of equity, or securities convertible into equity, it would result in dilution to our existing stockholders, which could be significant depending on the price at which we may be able to sell our securities. If we raise additional capital through the incurrence of additional indebtedness, we would likely become subject to further covenants restricting our business activities, and holders of debt instruments may have rights and privileges senior to those of our equity investors. In addition, servicing the interest and principal repayment obligations under debt facilities could divert funds that would otherwise be available to support development of new programs and marketing to current and potential new clients. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate development of new programs or future marketing efforts. Any of these events could significantly harm our business, financial condition and prospects.

 

Consolidation of our competitors in the markets in which we operate could place us at a competitive disadvantage and reduce our potential profitability.

 

We operate in an industry which is highly fragmented due to the regulatory environment. However, there may be a trend or competitive advantage among our competitors to consolidate or acquire value-added assets or scale operations through brand recognition. Consolidation of our competitors may jeopardize the strength of our competitive position in one or more of the markets in which we operate and any operational advantages or assets that we own. Losing some of those advantages or assets could have a material adverse effect on our business, results of operations, and financial condition.

 

The outbreak  of the coronavirus may negatively impact our business, results of operations and financial condition.

 

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. The significant outbreak of COVID-19 has resulted in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and could adversely affect our business, results of operations and financial condition, including attendance at our MjMicro events.  The ultimate extent of the impact of any epidemic, pandemic or other health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic or other health crisis and actions taken to contain or prevent their further spread, among others. These and other potential impacts of an epidemic, pandemic or other health crisis, such as COVID-19, could therefore materially and adversely affect our business, financial condition and results of operations.

 

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 in the 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.

 

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.
     
  Create potential for conflicts between management and the diligent independent decision-making process of the Board.

 

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  Present the risk that our executive officers on the Board may have influence over their personal compensation and benefits levels that may not be commensurate with our financial performance.
     
  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 as overseeing management.

 

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

 

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

 

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

 

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

 

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

 

  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.

 

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

 

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

 

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

 

Security breaches and other disruptions could compromise the information that we maintain and expose us to liability, which would cause our business and reputation to suffer.

 

In the ordinary course of our business, we may collect and store sensitive data, including intellectual property, our proprietary business information and that of our customers and business partners, and personally identifiable information of our customers, in our data centers and on its networks. The secure processing, maintenance and transmission of this information is critical to our business strategy, information technology and infrastructure and we may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our network, services and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, and disruption to our operations and the services it provides to customers. This often times results in a loss of confidence in our products and services, which could adversely affect our ability to earn revenues and competitive position and could have a material adverse effect on our business, results of operations, and financial condition.

 

The products and services that we develop will result in increased costs.

 

We expect that our development costs to increase in future periods as we expand into new areas, and such increased costs could negatively affect our future operating results. We expect to continue to expend substantial financial and other resources on our current business operations and the creation of organized live-event experiences and digital marketing and advertising initiatives. Furthermore, we intend to invest in marketing, licensing and product development programs, as well as associated sales and marketing programs, and general administration. These investments may not result in increased revenue or growth in the business. Our failure to materially increase our revenues could have a material adverse effect on our business, results of operations, and financial condition.

 

Our inability to effectively control costs and still maintain our business relationships, could have a material adverse effect on our business, results of operations, and financial condition.

 

It is critical that we appropriately align our cost structure with prevailing market conditions to minimize the effect of economic downturns our its operations and, in particular, to build and maintain our user relationships. Our inability to align our cost structure in response to economic downturns on a timely basis could have a material adverse effect on our business, results of operations, and financial condition. Conversely, adjusting the cost structure to fit economic downturn conditions may have negative effects during an economic upturn or periods of increasing demand for services/products. If we too aggressively reduce our costs, we may not have sufficient resources to capture opportunities for expansion and growth and meet customer demand. Our inability to effectively manage resources and capacity to capitalize on periods of economic upturn could have a material adverse effect on our business, results of operations, and financial condition.

 

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If we are unable to accurately predict and respond to market developments or demands, its business, results of operations and financial condition will be adversely affected.

 

The cannabis industry is characterized by rapidly evolving technology, government regulations and methodologies, which makes it difficult to predict demand and market acceptance for our services/products. In order to succeed, we need to adapt the products we offer in order to keep up with technological developments and changes in consumer needs. We cannot guarantee that we will succeed in enhancing our services/products or developing or acquiring new services/products or features that adequately address changing technologies, user requirements and market preferences. We also cannot assure you that the products and services we offer will be accepted by end users. If the products and services that we offer are not accepted by customers, they will no longer purchase them, which could have a material adverse effect on our business, results of operations, and financial condition. Changes in technologies, industry standards, the regulatory environment and customer requirements, and new product introductions by existing or future competitors, could render our existing services/products obsolete and unmarketable, or require us to enhance current products/services or develop new products and services. This may require us to expend significant amounts of money, time, and other resources to meet these demands, which could strain its personnel and financial resources. Furthermore, many modernization projects deal with customer mission critical applications, and therefore encapsulate risk for the customer.

 

We may be unable to identify, purchase or integrate desirable acquisition targets, future acquisitions may be unsuccessful, and we may not realize the anticipated cost savings, revenue enhancements or other synergies from such acquisitions.

 

We plan to investigate and acquire strategic businesses with the potential to be accretive to earnings, increase our market penetration, brand strength and its market position or enhancement of our existing product and service offerings. There can be no assurance that we will identify or successfully complete transactions with suitable acquisition candidates in the future. Additionally, if we were to undertake a substantial acquisition, the acquisition may need to be financed in part through additional financing through public offerings or private placements of debt or equity securities or through other arrangements. There is no assurance that the necessary acquisition financing will be available to us on acceptable terms if and when required. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. We may also unknowingly inherit liabilities from acquired businesses or assets that arise after the acquisition and that are not adequately covered by indemnities. In addition, if an acquired business fails to meet our expectations, its operating results, business and financial position may suffer.

 

We have not conducted an evaluation of the effectiveness of our internal control over financial reporting and will not be required to do so until 2020; if we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and our common stock market price may be negatively affected.

 

As a public company, we will be required to maintain internal control over financial reporting for the year ending December 31, 2020 and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our annual report for the fiscal year ending December 31, 2020, provide a management report on the internal control over financial reporting, which must be attested to by its independent registered public accounting firm to the extent we decide not to avail ourselves of the exemption provided to an emerging growth company, as defined by Jobs Act. Since we have not conducted an evaluation of the effectiveness of its internal control over financial reporting, we may have undiscovered material weaknesses. If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We are in the process of designing and implementing the internal control over financial reporting required to comply with this obligation, which process may be time consuming, costly, and complicated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, we may be unable to assert that our internal control over financial reporting are effective, or if its independent registered public accounting firm is unable to express an opinion as to the effectiveness of its internal control over financial reporting, if and when required, 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/or we may become subject to regulatory actions.

 

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If we fail to maintain an effective system of internal controls, we may be unable to accurately report our financial results or prevent fraud; as a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.

 

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our brand and operating results will likely be harmed. We may in the future discover areas of our internal controls that need improvement. We cannot be certain that any measures we implement will ensure that we achieve and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information and materially harm our business, which would have a negative effect on our operations.

 

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

 

We may be unable to effectively manage our growth or improve our operational, financial, and management information systems, which could have a material adverse effect on our business, results of operations, and financial condition.

 

In the near term and contingent upon raising adequate funds from this Offering, we intend to expand our operations significantly to foster growth. Growth may place a significant strain on our business and administrative operations, finances, management and other resources, as follows:

 

  The need for continued development of financial and information management systems;
     
  The need to manage strategic relationships and agreements with manufacturers, customers and partners; and
     
  Difficulties in hiring and retaining skilled management, technical, and other personnel necessary to support and manage the business.

 

Should we fail to successfully manage growth could, our results of operations will be negatively affected.

 

If we fail to protect or develop our intellectual property, business, operations and financial condition could be adversely affected.

 

Any infringement or misappropriation of our intellectual property could damage its value and limit its ability to compete. We may have to engage in litigation to protect the rights to our intellectual property, which could result in significant litigation costs and require a significant amount of management time and attention. In addition, our ability to enforce and protect our intellectual property rights may be limited in certain countries outside the United States, which could make it easier for competitors to capture market position in such countries by utilizing technologies that are similar to those that we develop.

 

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We may also find it necessary to bring infringement or other actions against third parties to seek to protect its intellectual property rights. Litigation of this nature, even if successful, is often expensive and time-consuming to prosecute and there can be no assurance that we will have the financial or other resources to enforce its rights or prevent other parties from developing similar technology or designing around our intellectual property.

 

Our trade secrets may be difficult to protect.

 

Our success depends upon the skills, knowledge, and experience of our technical personnel, consultants and advisors. Because we operate in several highly competitive industries, we rely in part on trade secrets to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentiality or non-disclosure agreements with our corporate partners, employees, consultants, outside scientific collaborators, developers, and other advisors. These agreements generally require that the receiving party keep confidential and not disclose to third party’s confidential information developed by the receiving party or made known to the receiving party by us during the course of the receiving party’s relationship with us. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to us will be our exclusive property.

 

These confidentiality, inventions and assignment agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case will be unable to prevent the use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive and time consuming and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain meaningful trade secret protection could have a material adverse effect on our business, results of operations, and financial condition.

 

The consideration being paid to our management is not based on arms-length negotiation.

 

The compensation and other consideration we have paid or will be paid to our management has not been determined based on arm’s length negotiations. While management believes that the consideration is fair for the work being performed, we cannot assure that the consideration to management reflects the true market value of its services.

 

There are risks associated with the proposal expansion of our business.

 

Any expansion plans that we undertake to increase or expand our operations entail risks, which may negatively impact our potential profitability. Consequently, investors must assume the risk that (i) such expansion may ultimately involve expenditures of funds beyond the resources available to us at that time, and (ii) management of such expanded operations may divert management’s attention and resources away from its existing operations, any of which factors could have a material adverse effect on our business, results of operations, and financial condition. We cannot assure investors that our products, services, or controls will be adequate to support anticipated growth of our operations.

 

We are subject to data privacy and security risks

 

Our business activities are subject to laws and regulations governing the collection, use, sharing, protection and retention of personal data, which continue to evolve and have implications for how such data is managed. In addition, the Federal Trade Commission (the “FTC”) continues to expand its application of general consumer protection laws to commercial data practices, including to the use of personal and profiling data from online users to deliver targeted Internet advertisements. Most states have also enacted legislation regulating data privacy and security, including laws requiring businesses to provide notice to state agencies and to individuals whose personally identifiable information has been disclosed as a result of a data breach.

 

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Similar laws and regulations have been implemented in many of the other jurisdictions in which we operate, including the European Union. Recently, the European Union adopted the General Data Protection Regulation (“GDPR”), which is intended to provide a uniform set of rules for personal data processing throughout the European Union and to replace the existing Data Protection Directive (Directive 95/46/EC). Fully enforceable as of May 25, 2018, the GDPR expands the regulation of the collection, processing, use and security of personal data, contains stringent conditions for consent from data subjects, strengthens the rights of individuals, including the right to have personal data deleted upon request, continues to restrict the trans-border flow of such data, requires mandatory data breach reporting and notification, increases penalties for non-compliance and increases the enforcement powers of the data protection authorities. In response to such developments, industry participants in the U.S., and Europe have taken steps to increase compliance with relevant industry-level standards and practices, including the implementation of self-regulatory regimes for online behavioral advertising that impose obligations on participating companies, such as us, to give consumers a better understanding of advertisements that are customized based on their online behavior. We continue to monitor pending legislation and regulatory initiatives to ascertain relevance, analyze impact and develop strategic direction surrounding regulatory trends and developments, including any changes required in our data privacy and security compliance programs.

 

We are an Emerging Growth Company and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.

 

For as long as we continue to be an Emerging Growth Company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our Common Stock less attractive because it will rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for its Common Stock and its stock price may be more volatile.

 

We will remain an Emerging Growth Company until the earliest of (i) the end of the fiscal year in which the market value of its Common Stock that is held by non-affiliates exceeds $700 million as of June 30, (ii) the end of the fiscal year in which it has total annual gross revenue of $1 billion or more during such fiscal year, (iii) the date on which it issues more than $1 billion in non-convertible debt in a three-year period or (iv) five years from the date of this proxy statement.

 

RISKS RELATED TO CANNABIS/HEMP RELATED GOVERNMENT REGULATION

 

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

 

Our wholly-owned subsidiary, MjLink, has several websites in the cannabis/hemp area. As of the date of this statement, there are 29 states and the District of Columbia that allow their citizens to use medical cannabis. Additionally, Colorado, Washington, Alaska, Oregon and Washington DC have legalized cannabis for adult use at the state (or district) level. Continued development of the cannabis industry is dependent upon continued legislative authorization of cannabis at the state level. Any number of factors pertaining to lack of public or legislative support could slow or halt progress in this area. Further, progress in the cannabis industry is not assured.

 

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

 

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

 

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Cannabis remains illegal under Federal law.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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.

 

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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 called the Secure and Fair Enforcement (SAFE) Banking Act of 2019. 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.

 

Laws and regulations affecting the medical marijuana industry are constantly changing, which could detrimentally affect our business, and we cannot predict the impact that future regulations may have on us.

 

Local, state and federal medical marijuana laws and regulations are broad in scope and they are subject to evolving interpretations, which could require us to incur substantial costs associated with compliance. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our revenues, profitability, and financial condition.

 

In addition, it is possible that regulations may be enacted in the future that will be directly applicable to our business. 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. These potential effects could include, however, requirements for the revisions to our products to meet new standards, the recall or discontinuance of certain products, or additional record keeping and reporting requirements. Any or all these requirements could have a material adverse effect on our business, financial condition, and results of operations.

 

U.S. Federal and foreign regulation and enforcement may adversely affect the implementation of cannabis laws and regulations and may negatively impact our revenues, or we may be found to be violating the Controlled Substances Act or other U.S. federal, state, or foreign laws.

 

In December 2018, the Farm Bill was signed into law. Under section 10113 of the Farm Bill, state departments of agriculture must consult with the state’s governor and chief law enforcement officer to devise a plan that must be submitted to the Secretary of USDA. A state’s plan to license and regulate hemp can only commence once the Secretary of USDA approves that state’s plan. In states opting not to devise a hemp regulatory program, USDA will construct a regulatory program under which hemp cultivators in those states must apply for licenses and comply with a federally run program. This system of shared regulatory programming is similar to options states had in other policy areas such as health insurance marketplaces under ACA, or workplace safety plans under OSHA—both of which had federally-run systems for states opting not to set up their own systems. Non-cannabis hemp is a highly regulated crop in the United States for both personal and industrial production.

 

The law outlines actions that are considered violations of federal hemp law (including such activities as cultivating without a license or producing cannabis with more than 0.3 percent THC). The law details possible punishments for such violations, pathways for violators to become compliant, and even which activities qualify as felonies under the law, such as repeated offenses.

 

Section 12619 of the Farm Bill removes hemp-derived products from its Schedule I status under the Controlled Substances Act, but the legislation does not legalize CBD generally. CBD, with some minor exceptions, remains a Schedule I substance under federal law. The Farm Bill ensures that any cannabinoid—a set of chemical compounds found in the cannabis plant—that is derived from hemp will be legal, if and only if that hemp is produced in a manner consistent with the Farm Bill, associated federal regulations, association state regulations, and by a licensed grower. All other cannabinoids, produced in any other setting, remain a Schedule I substance under federal law and are thus illegal.

 

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In October 2018, the United States Drug Enforcement Agency (“DEA”) rescheduled drugs approved by the United States Food and Drug Administration (“FDA”) which contain CBD derived from cannabis and no more than 0.1 percent tetrahydrocannabinols from Schedule I, the highest level of restriction with a high potential for abuse, to Schedule V, the lowest restriction with the lowest potential for abuse under the Controlled Substances Act (“CSA”). This ruling does not apply to Cannabidiol (“CBD”) products such as oils, tinctures, extracts, and other foods because they are not FDA approved.

 

In October 2018, the FDA was advised by the DEA that removing CBD from the CSA would violate international drug treaties to which the United States is a signatory. Specifically, the DEA explained that the United States would “not be able to keep obligations under the 1961 Single Convention on Narcotic Drugs if CBD were decontrolled under the CSA”.

 

Consequently, the FDA revised its recommendation and advised the DEA to place CBD in Schedule V—which applies to drugs with demonstrated medical value and deemed unlikely to cause harm, abuse, or addiction—instead. Nonetheless, the FDA declared that “[i]f treaty obligations do not require control of CBD, or the international controls on CBD…are removed at some future time, the above recommendation for Schedule V under the CSA would need to be revisited promptly.”

 

On May 22, 2018, the DEA released the Internal Directive Regarding the Presence of Cannabinoids in Products and Materials Made from the Cannabis Plant, which states “The mere presence of cannabinoids is not itself dispositive as to whether a substance is within the scope of the CSA; the dispositive question is whether the substance falls within the CSA definition of marijuana.”

 

Many CBD products are derived from cannabis. Some come from marijuana (“Marijuana-CBD”). Marijuana-CBD remains a Schedule I substance. Marijuana-CBD products may be legal under state law in states like Washington, Oregon, and California but their sale is only permitted through a state-regulated marijuana market in the respective state of legal cultivation. Marijuana-CBD products are only legal in states where they were cultivated and these products are heavily regulated at all stages of production, from seed-to-sale. These products come from licensed producers, are developed by licensed processors or manufacturers, and are sold to the public through licensed retailers or dispensaries. Marijuana-CBD products may also contain significant levels of THC.

 

On the other hand, CBD derived from industrial hemp (“Hemp-CBD”) can be argued as falling completely outside the CSA because the cultivation of industrial hemp was legalized by Section 7606 of the Agricultural Act of 2014 (the “2014 Farm Bill”). Industrial hemp is defined as the cannabis plant with less than .3% THC. The 2014 Farm Bill also requires that industrial hemp to be cultivated under a state agricultural pilot program. Some states also require a license to cultivate or process industrial hemp into other products like Hemp-CBD.

 

The distribution of Hemp-CBD products is arguably legal under federal law because the 2014 Farm Bill does not explicitly limit distribution. In oral arguments during HIA v. DEA, the DEA admitted that the 2018 Farm Bill pre-empted the CSA with regards to industrial hemp. The DEA has rarely taken any enforcement action against distributors of Hemp-CBD, in part because Congress has limited the DEA’s ability to use federal funds to do so and because the DEA would have to legally establish that the CSA does in fact cover Hemp-CBD. However, the DEA, FDA, and other federal agencies issued guidance in 2016 stating that the 2014 Farm Bill did not permit the interstate transfer or commercial sale of industrial hemp. Several states like Idaho prohibit the distribution of Hemp-CBD. Other states like Ohio, Michigan, and California significantly restrict the distribution of Hemp-CBD.

 

Even though Hemp-CBD does not fall within the CSA, Hemp-CBD products have not been approved by the FDA. This is also true of Marijuana-CBD. This means that even cannabis derived Marijuana-CBD and Hemp-CBD products containing less than .1% THC are not approved CBD drugs for lack of FDA approval.

 

There is always some risk of enforcement action against Hemp-CBD distributors, as the budgetary restriction that prevented the DEA from using funds to prosecute industrial hemp distributors expired on September 30, 2018. It is also possible that the FDA could take a more aggressive approach to limit the distribution of CBD products.

 

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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 to sell securities held by them. Consequently, only investors having no need for liquidity in their investment should purchase our securities and who can hold our securities for an indefinite period.

 

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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, include additional voting power to our officers giving them control over a majority of our outstanding voting power, enabling them to control future stock-based acquisition transactions, to fund employee equity incentive programs, and give them the ability to elect certain directors and to determine the outcome of all matters submitted to a vote of our stockholders. This concentrated control eliminates other stockholders’ ability to influence corporate matters

 

We expect to seek additional financing in order to provide working capital to our business. Our board of directors has the power to issue any or all of such authorized but unissued shares at any price they consider sufficient, without stockholder approval. The issuance of additional shares of common stock in the future will reduce the proportionate ownership and voting power of current stockholders

 

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

 

We may issue additional securities and future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders. We may sell common stock, convertible securities and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, investors may be materially diluted. Additionally, because we have 16,300,020 Warrants outstanding, which are exercisable for five cents per share with a warrant exercise period of 5 years, any material exercise of the Warrants will because substantial dilution to your shares.

 

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

 

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

 

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

 

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

 

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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 stock prices.

 

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

 

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

 

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

 

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

 

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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. PROPERTIES

 

Our executive and administrative office is located at 3465 Gaylord Court, Suite A509, Englewood, Colorado 80113.

 

ITEM 3. LEGAL PROCEEDINGS

 

We are not a party to any legal proceedings. From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

 

We know of no other material pending legal proceedings to which our company or any of our subsidiaries is a party or of which any of our assets or properties, or the assets or properties of any of our subsidiaries, 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 our company or any of our subsidiaries or has a material interest adverse to our company or any of our subsidiaries.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market information

 

Our common stock is not traded on any exchange but is currently available for trading in the over-the-counter market and is quoted on the OTCQB operated by OTC Markets Group, Inc. under the symbol “WDLF” Trading in stocks quoted on these markets is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s operations or business prospects.

 

The SEC also has rules that regulate broker/dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities listed on certain national exchanges, provided that the current price and volume information with respect to transactions in that security is provided by the applicable exchange or system). The penny stock rules require a broker/dealer, before effecting a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing before effecting the transaction, and must be given to the customer in writing before or with the customer’s confirmation. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for shares of our common stock. As a result of these rules, investors may find it difficult to sell their shares

 

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Set forth below are the range of high and low bid quotations for the periods indicated as reported by the OTC Bulletin Board. The market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.

 

Quarter Ended   High Bid     Low Bid  
December 31, 2019   $ 0.125     $ 0.015  
September 30, 2019   $ 0.139     $ 0.072  
June 30, 2019   $ 0.190     $ 0.070  
March 31, 2019   $ 0.195     $ 0.081  
December 31, 2018   $ 0.150     $ 0.150  
September 30, 2018   $ 0.127     $ 0.127  
June 30, 2018   $ 0.120     $ 0.120  
March 31, 2018   $ 0.095     $ 0.158  

 

On March 18, 2020, the closing price of our common stock as reported by the OTC Markets Group was $0.0002 per share.

 

Transfer Agent

 

Our transfer agent is Pacific Stock Transfer Company, located at 6725 Via Austin Parkway #300, Las Vegas, NV 89119. Their telephone number is (702) 361-3033 and their fax number is (702) 433-1979.

 

Holders of Common Stock

 

As of March 19, 2019, there were 163 holders of record of our common stock and 306,775,379 shares of our common stock issued and outstanding.

 

Dividends

 

We have never declared or paid dividends. We do not intend to pay cash dividends on our common stock for the foreseeable future, but currently intend to retain any future earnings to fund the development and growth of our business. The payment of dividends if any, on our common stock will rest solely within the discretion of our board of directors and will depend, among other things, upon our earnings, capital requirements, financial condition, and other relevant factors.

 

Stock Warrants

 

During the twelve months ended December 31, 2019 and the years ended December 31, 2018, 2017, and 2016, we granted 1,594,853, zero, 9,900,020, and 6,400,000 warrants, respectively, to our parent’s company advisors and employees, totaling 17,894,873 warrants (the “17,894,873 Warrants”). Each warrant entitles the holder to one of our common stock share at an exercise price ranging from five to twenty cents, with a weighted average price of seven cents. The term of our parent’s 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 twelve months ended December 31, 2019, our parent executed a cashless conversion of 8,800,020 vested warrants in exchange for 4,400,010 common stock shares. 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 $0.015 to $0.65, risk free rates ranging from 1.60% - 2.72%, volatility ranging from 389% to 562%, and expected life of the warrants ranging from 3 to 5 years.

 

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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, December 31, 2019     9,094,853     $ 0.07     $ -  
                         
Exercisable, December 31, 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     3.53 years   $ 0.07  

 

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Convertible Note Payable

 

We have the following convertible notes payable as of December 31, 2019 and December 31, 2019:

 

Note   Funding Date   Maturity Date   Interest Rate     Original Borrowing     Balance at
December 31, 2019
    Balance at
December 31, 2018
 
                                 
Note payable (A)   April 15, 2019   November 14, 2019     7 %   $ 100,000     $ -       -  
Note payable (B)   April 15, 2019   April 14, 2022     10 %   $ 67,500       -       -  
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       100,000       -  
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                             544,500       -  
Note discount from beneficial conversion feature                             -       -  
Total notes payable, net of note discount                           $ 544,500       -  

 

  (A) On April 15, 2019, we completed a 7-month term original issue discount convertible note and other related documents with an unaffiliated third-party funding group to generate $100,000 in additional available cash resources with a payback provision due and was paid in full on November 14, 2019 of $117,700 which includes the original issue discount of $10,000 and interest of $7,700. In connection therewith, we issued 150,000 common stock shares and additional 102,176 common stock shares on October 15, 2019, per our original agreement, 412,500 common stock warrants, and reserved 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, we completed convertible debenture at zero interest and other related documents with an unaffiliated third-party funding group to generate $375,000 in additional available cash resources, the funds of which will be released over the 90 days following execution of the agreement in the amounts of $67,500, $90,000, and $180,000, with a payback provision of $75,000, $100,000, and $200,000, respectively, over 36 months. In connection therewith, the Company issued 300,000 common stock warrants, and 20,192,307 restricted common shares as reserve for conversion. The note was unsecured and did not bear interest; however, the implied interest was determined to be 10% over 36 months since the note was issued at a 10% discount. Subsequently, on June 26, 2019 we nullified the agreement and other related documents with this funding group after the initial disbursement of $67,500. We refunded the initial tranche of $67,500, a 10% redemption fee of $7,500 for the principle amount plus for the original issue discount of $7,500, and other additional administrative fees of $30,000, which totaled $105,000. The 300,000 common stock warrants will remain issued and the reserved common shares will be reduced enough to satisfy the warrants.

 

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  (C) On May 24, 2019, we completed a 7-month fixed convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $240,000, which will be distributed in three equal monthly tranches of $80,000, in additional available cash resources with a payback provision of $80,000 plus the original issue discount of $4,000 or $84,000 due seven months from each funding date for each tranche, totaling $252,000. We generated $160,000 in additional available cash resources with a payback provision due on December 23, 2019 and February 2, 2020 totaling $184,800 which includes the original issue discount of $8,000 plus interest of $16,800. In connection therewith, we issued 50,000 common stock shares for two tranches with another 25,000 common stock shares to be issued with the third tranche, and we have reserved 8,000,000, which was subsequently increased to 14,216,385, restricted common shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded prices of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined that because the conversion price is variable and unknown, it could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $130,633 at the date of issuance when the stock price was at $0.12 per share.
     
  (D) On June 12, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $110,000 in additional available cash resources with a payback provision due on June 11, 2020 of $135,250 which includes the original issue discount of $11,000 plus interest of $14,250. In connection with the note, we have reserved 14,400,000 restricted common shares as reserve for conversion. The conversion price is a 35% discount to the average of the two (2) lowest trading prices during the previous twenty (20) trading days to the date of a Conversion Notice. We determined that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill the conversion obligation. On December 19, 2019, we converted $10,000 of principle into 284,373 shares of common stock at approximately $0.035 per share. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $59,231 at the date of issuance when the stock price was at $0.11 per share.
     
  (E) On June 26, 2019, we completed a 9-month senior convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $135,000 in additional available cash resources with a payback provision due on March 25, 2020 of $168,000 which includes the original issue discount of $15,000 plus interest of $18,000. In connection with the note, we issued 100,000 common stock shares and has reserved 15,000,000, which was subsequently increased to 175,000,000, restricted common shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded prices of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $72,692 at the date of issuance when the stock price was at $0.11 per share.
     
  (F) On August 7, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $100,000 in additional available cash resources with a payback provision due on August 6, 2020 of $121,000 which includes the original issue discount of $10,000 plus interest of $11,000. In connection with the note, we issued 100,000 common stock shares and has reserved 11,000,000, which was subsequently increased to 105,769,231, restricted common shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded prices of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $73,750 at the date of issuance when the stock price was at $0.09 per share.

 

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  (G) On August 21, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $148,500, which will be distributed in three equal monthly tranches of $49,500, in additional available cash resources with a payback provision of $49,500 plus the original issue discount of $5,500 or $55,000 due twelve months from each funding date for each tranche, totaling $165,000. We generated $49,500 in additional available cash resources with a payback provision due on August 20, 2020 totaling $60,500 which includes the original issue discount of $5,500 plus interest of $5,500. In connection therewith, we issued 50,000 common stock shares for the first tranche with another 50,000 common stock shares to be issued with each additional tranche, which will total 150,000 common shares; we have reserved 15,714, which was subsequently increased to 80,000,000, restricted common shares for conversion. The conversion price is the 35% discount to the average of the two (2) lowest trading prices during the previous twenty (20) trading days to the date of a Conversion Notice. We determined that because the conversion price is variable and unknown, it could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $26,654 at the date of issuance when the stock price was approximately $0.07 per share.

 

On November 14, 2019, we fully met and timely paid its debt obligation to Note Payable (A).

 

Notes Payable – Related Parties

 

From August 30 through December 31, 2019 Kenneth, Tapp, from time-to-time provided short-term interest free loans amounting to $145,000 for the Company’s operations. As of year-end 2019, a $10,000 obligation remains.

 

Common Stock

 

From October 11, 2017 to December 13, 2018, we entered into subscription agreements with 30 accredited investors. We sold 1,730,001 common stock shares to the accredited investors at $0.15 per share for total gross proceeds of $259,500. We received $257,500 throughout the fourth quarter 2017 and the remaining $2,000 in March 2018. The shares were issued during the twelve months ended December 31, 2017.

 

During the nine months ended September 30, 2018, we 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.

 

During the three months ended March 31, 2018, we 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, our 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, our Board of Directors authorized the issuance of 5,000,000 Class B Common Stock Shares to Kenneth Tapp, our Chief Executive Officer, in return for his services as our 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 value or any other value. The 5,000,000 Class B Common Stock Shares were never issued; effective August 16, 2018 our Board of Directors cancelled the authorization of issuing the 5,000,000 shares of Class B Common Stock to our Chief Executive Officer.

 

From July 31, 2018 to September 30, 2018, we entered into subscription agreements with 23 accredited investors. We 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.

 

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On October 1, 2018, we authorized the issuance of 60,000 of 250,000 common stock shares available to Mali Sanati, Director of Business Development, for her business development services to us. 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 remaining shares have not been issued subsequent to her departure from the company.

 

From October 1, 2018 to December 31, 2018, we entered into subscription agreements with 8 accredited investors. We 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 shar for total gross proceeds of $420,000. The shares were issued during the twelve-months ended December 31, 2018.

 

On October 19, 2018, we 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, our Director, is the President and Founder of Electrum Partners.

 

On October 19, 2018, we 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, we 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, we 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, Chief Financial Officer, for his CFO services; 1,000,000 common stock shares to Frederick M. Lehrer for his legal services as an independent contractor; and 50,000 common stock shares to the Company’s employee, Kelsey Higgins, for her marketing services. The shares are valued at $0.10, the closing stock price on the date of grant, for total non-cash expense of $155,000. The shares were issued during the three months ended March 31, 2019.

 

From January 1, 2019 thru March 31, 2019, we entered into subscription agreements with 9 accredited investors. We sold 5,725,000 common stock shares to the accredited investors, of which 1,200,009 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, we 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, we 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, we 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, we 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.

 

  38  
 

 

On April 15, 2019, we 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 our common stock from time-to-time over the course of 36 months with reselling limitations. In connection therewith, we issued 882,353 common stock shares plus 882,353 common stock warrants and reserved 16,900,000 restricted common shares for conversion.

 

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.

 

On October 15, 2019, in addition to the 150,000 inducement shares issued on April 15, 2019, we 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.

 

On November 1, 2019, we 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 were issued during the twelve-months ended December 31, 2019.

 

On November 11, 2019, we 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.

 

On December 19, 2019. one of our debt holders converted $10,000 of principle into 284,373 shares of common stock at approximately $0.035 per share.

 

Board and Executive Appointments

 

From January 2, 2019 through June 25 George Jage served as President of MjLink and a member of our Board Directors.

 

Subsequent Events

 

Convertible Debt Notes

 

On August 21, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate up to $925,000, which will be distributed in multiple tranches to be determined, in additional available cash resources with a payback provision of principle debt without an original issue discount plus interest. We generated $63,000 in additional available cash resources with a payback provision due on January 27, 2021 totaling $69,300 which includes the principle plus interest of $6,300. We have reserved 41,331,475 restricted common shares for conversion. The conversion price is the 39% discount to the average of the two (2) lowest trading prices during the previous fifteen (15) trading days to the date of a Conversion Notice. We determined that because the conversion price is variable and unknown, it could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $40,279 at the date of issuance when the stock price was approximately $0.01 per share.

 

Since December 31, 2019 three of our debt holders have converted $173,926 of principle into 165,998,148 shares of common stock at approximately $0.0011 per share.

 

  39  
 

 

We have the following convertible notes payable as of March 19, 2020:

 

Note   Funding Date   Maturity Date   Interest Rate     Original Borrowing     Average Conversion Price     Number of Shares Converted     Balance at
March 19, 2020
 
Note payable (A)   April 15, 2019   November 14, 2019     7 %   $ 100,000       -       -     $ -  
Note payable (B)   April 15, 2019   April 14, 2022     10 %   $ 67,500       -       -       -  
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     $ 0.0028       39,632,417       29,618  
Note payable (E)   June 26, 2019   March 25, 2020     12 %   $ 135,000     $ 0.0017       15,250,000       96,455  
Note payable (F)   August 7, 2019   August 6, 2020     10 %   $ 100,000     $ 0.0005       111,115,731       35,000  
Note payable (G)   August 21, 2019   August 20, 2020     10 %   $ 148,500       -       -       49,500  
Note payable (H)   January 28, 2020   January 27, 2021     10 %     63,000       -       -       63,000  
Total                           $ 0.0011       165,998,148     $ 433,573  

 

Since December 31, 2019, Kenneth Tapp, our Chief Executive Officer provided an additional $17,500 short term, unsecured, non-interest-bearing loan due on December 31, 2020 which totals $27,500.

 

Common Stock

 

On February 7, 2020 MjLink.com Inc increased the subsidiary’s authorized common shares from 1,500 to 400 million.

 

On March 2, 2020, Social Life Network, Inc increased the parent’s authorized common shares from 500 million to 2.5 billion and have increased our convertible reserve minimum to approximately 2.4 billion common shares.

 

Board and Executive Appointments

 

After the current reporting period, on January 21, 2020, we appointed Britt Glassburn, Brian Lazarus, Gregory Todd Markey, and Lynn Murphy as Social Life Board Directors. Mr. Lazarus and Mr. Markey were also appointed Directors of our MjLink subsidiary. Kenneth Granville and Vincent “Tripp” Keber have both stepped down as Directors of both entities. Leslie Bocskor has stepped down as our Director of Social Life and remains a Director of MjLink. Vincent Keber remains as an Advisor to our Board.

 

Apart from the above event, management has evaluated subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statements were available to be issued and has determined that there are no other material subsequent events that require disclosure in the financial statements.

 

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with our consolidated financial statements and the related notes that appear elsewhere in this Annual Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Annual Report on Form10-K.

 

Overview

 

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

 

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 $31,563,493 at December 31, 2019, had a net loss of $3,857,948 and used net cash of 1,902,563 in operating activities for the twelve months ended December 31, 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 twelve months with existing cash 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.

 

  41  
 

 

We will attempt to overcome the going concern opinion by increasing our revenues, as follows:

 

  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 in our attempt 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

 

Consolidated Performance - Results of Operations Years Ended December 31, 2019 and 2018

 

SOCIAL LIFE NETWORK, INC

Consolidated

(audited)

 

   

For the

Three Months Ended
December 31,

         

For the

Twelve Months Ended
December 31,

       
    2019     2018     $ Change     2019     2018     $ Change  
Revenues:                                                
Digital subscription revenue   $ 7,396     $ -       7,396     $ 7,604     $ -       7,604  
Licensing Revenue – related party     225,000       -       225,000       250,000       215,000       35,000  
Advertising revenue     (2,096 )     -       (2,096 )     404       5,592       (5,188 )
Event revenue     35,495       -       35,495       111,480       -       111,480  
Digital marketing revenue     39,800       -       39,800       113,000       -       113,000  
Total revenue     305,595       -       305,595       482,488       220,592       261,896  
Costs of goods sold     46,332       1,283       45,050       231,081       5,239       225,842  
Gross margin     259,263       (1,283 )     260,545       251,408 )     215,353       36,055  
                                                 
Operating Expenses:                                                
Compensation expense     149,714       186,504       (36,790 )     1,052,787       492,502       560,285  
Non-cash stock expense     220,500       1,180,001       (959,501 )     2,087,083       3,729,801       (1,642,718 )
Sales and marketing     (5,727 )     158,539       (164,265 )     110,552       226,091       (115,538 )
General and administrative     55,181       67,659       (12,478 )     345,290       402,824       (57,534 )
Total operating expenses     416,668       1,592,702       (1,173,034 )     3,595,712       4,851,218       (1,255,506 )
                                                 
Income (Loss) from operations     (160,405 )     (1,593,985 )     (1,433,580 )     (3,344,304 )     (4,635,865 )     1,291,561  
                                                 
Other Expenses:                                                
Interest expense     (30,624 )     -       (30,624 )     421,627       -       421,627  
Other non-operating expenses     50,117       -       50,117       92,017 )     15       92,002  
Total other expenses     19,493       -       19,493       513,644 )     15       513,629  
                                                 
Net Income (Loss)   $ (179,898 )   $ (1,593,985 )     1,414,087     $ (3,857,948 )   $ (4,635,880 )     777,932  

 

Revenues

 

For the 12-month period ending December 31, 2019, we recognized net revenue from digital subscription revenue of $7,604 compared to $0 of revenue for the 12-month period ending December 31, 2018, representing an increase of $7,404 or 100%. The increase in digital subscription revenue is primarily attributable to launching of MjLink’s MjInvest online networking platform that launched in middle of September 2019 and the revenue is recognized evenly over their 12 months subscription service, resulting in a deferred revenue of $29,400.

 

For the 12-month period ending December 31, 2019, we recognized licensing revenue from related parties of $250,000 compared to $215,000 for the 12-month period ending December 31, 2018, representing an increase of $35,000 or 14.0%. The increase in licensing revenue is attributable to our established licensing agreements of $125,000 per year each with Sports Social Network and LikeRE. Both of these entities are controlled by related parties.

 

  43  
 

 

For the 12-month period ending December 31, 2019, we recognized net revenue (less returns) from advertising revenue of $400 compared to $5,600 of revenue for the 12-month period ending December 31, 2018, representing a decrease of $5,200 or 93%. The decrease in adverting revenue is primarily attributable to the temporary reduction of sales force personnel to focus on MjLink’s growth with regard to MjMico, MjInvest and other related entities.

 

For the 12-month period ending December 31, 2019, we recognized event revenue of $111,500 compared to $0 for the 12-month period ending December 31, 2018, representing an increase of $111,500 or 100.0%. The increase in event revenue is attributable to launching MjLink’s MjMicro networking events, which were held on June 25, 2019 in New York City, NY and on October 16, 2019 in Beverly Hills, CA. For the 3-month period ending December 31, 2019, we recognized event revenue of $35,500 for the October 2019 event.

 

For the 12-month period ending December 31, 2019, we recognized digital marketing revenue of $113,000 compared to $0 for the 12-month period ending December 31, 2018, representing an increase of $113,000 or 100.0%. The increase in event revenue is attributable to launching MjLink’s MjMicro networking event by promoting the attendees, which was held on June 25, 2019 in New York City, NY and on October 16, 2019 in Beverly Hills, CA. For the 3-month period ending December 31, 2019, we recognized event revenue of $39,800 for the October 2019 event.

 

Cost of Revenue

 

Cost of revenue was $231,000 for the 12-month period ending December 31, 2019 compared to $5,200 for the 12-month period ending December 31, 2018, representing an increase of $225,800 or 4342%. The increase is primarily attributable to launching our MjMicro networking event by promoting the attendees, which was held on June 25, 2019 in New York City, NY and on October 16, 2019 in Beverly Hills, CA. For the 3-month period ending December 31, 2019, our cost of revenue of $46,300 for the October 2019 event and $185,000 for the June 2019 event. The drop is attributed to learned efficiencies.

 

Operating Expenses

 

Compensation expense increased $560,000 or 53.1% to $493,000 for the 12-month period ending December 31, 2019 from $1,053,000 for the 12-month period ending December 31, 2018. The increase is primarily attributable to hiring temporary personnel to work our MjMicro networking event, which was held on June 25, 2019 in New York City, NY and on October 16, 2019 in Beverly Hills, CA. For the 3-month period ending December 31, 2019, our compensation expense decreased of $36,800 for the October 2019 event due to learned efficiencies and scaling back the required personnel required to work the event.

 

During the 12-month period ending December 31, 2019, we recognized $2,100,000 of non-cash stock-based compensation expense for employee compensation issued and warrants that became exercisable during the period as compared to $3,700,000 that became exercisable for the 12-month period ending December 31, 2018 or a net decrease of $1,600,000 or 44.0%. The decrease is from an increase of $1,700,000 in stock compensation expense incurred during the fiscal year which was offset with a decrease of 3,300,000 of warrant expenses as all the warrants issued prior to fiscal year 2019 completely vested by December 31, 2018. The non-cash stock-based compensation expense during the 3-month period ending December 31, 2019 was primarily attributed for warrants issued and vested relating to our holding of convertible notes.

 

General and administrative expense decreased by $58,000, or 14.3% to $345,000 for the 12-month period ending December 31, 2019 from $403,000 for the 12-month period ending December 31, 2018. General and administrative expense decreased by $12,500, or 18.4.3% to $55,000 for the 3-month period ending December 31, 2019 from $67,500 for the 3-month period ending December 31, 2018. The decreases are primarily attributable to a decrease in advertising and promotion, tradeshow fees, roadshow travel costs, and other general expenses.

 

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Other expense

 

Other expenses increased $514,000 or 100% to $514,000 for the 12-month period ending December 31, 2019 from $15 for the 12-month period ending December 31, 2018. Other expenses increased by $19,500, or 100% for the 3-month period ending December 31, 2019. The increases are primarily attributable to accrued interest, beneficial conversion factor expenses, and non-operating costs and fees related to assumption of our convertible debt.

 

Net Loss

 

Our net loss for the for the 12-month period ending December 31, 2019 was $3,858,000 compared to the net loss of $4,636,000 for the 12-month period ending December 31, 2018; a net decrease of 778,000 or 16.8% The reduction in net loss is a direct result of non-cash stock-based expenses which offset the increase in compensation expenses.

 

Our net loss for the for the 3-month period ending December 31, 2019 was $180,000 compared to net loss of $1,594,000 for the 3-month period ending December 31, 2018; a net decrease of 1,414,000 or 88.7% The reduction in net loss is a direct result of non-cash stock-based expenses as well as most aspects of our operating expenses.

 

Segment Performance - Results of Operations Years Ended December 31, 2019 and 2018

 

MJLINK.COM INC

(audited)

 

   

For the

Three Months Ended
December 31,

         

For the

Twelve Months Ended
December 31,

       
    2019     2018     $ Change     2019     2018     $ Change  
Revenues:                                    
Digital subscription revenue   $ 7,396     $ -       7,396     $ 7,604     $ -       7,604  
Advertising revenue     -       -       -       2,500       -       2,500  
Event revenue     35,495       -       35,495       111,480       -       111,480  
Digital marketing revenue     39,800                     39,800       113,000             -       113,000  
Total revenue     82,691       -       82,691       234,584       -       234,584  
Costs of goods sold     63,789       -       63,789       244,192       -       244,192  
Gross margin     18,208       -       18,208       (9,608 )     -       (9,608 )
                                                 
Operating Expenses:                                                
Compensation expense     46,344       -       46,344       218,655       -       218,655  
Non-cash stock expense     -       -       -       -       -       -  
Sales and marketing     (6,520 )     -       (6,520 )     51,152       -       51,152  
General and administrative     26,182       -       26,182       63,198       -       63,198  
Total operating expenses     66,005       -       66,005       333,006       -       333,006  
                                                 
Income (Loss) from operations     (47,103 )     -       (47,103 )     (342,613 )     -       (342,613 )
                                                 
Other Expenses:                                                
Interest expense     -       -       -       -       -       -  
Other non-operating expenses     -       -       -       14,550 )     -       14,550  
Total other expenses     -       -       -       14,550 )     -       14,550  
                                                 
Net Income (Loss)   $ (47,103 )   $ -       (47,103 )   $ 328,063 )   $ -       328,063  

 

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Revenues

 

For the 12-month period ending December 31, 2019, MjLink recognized net revenue from digital subscription revenue of $7,600 compared to $0 of revenue for the 12-month period ending December 31, 2018, representing an increase of $7,400 or 100%. The increase in digital subscription revenue is primarily attributable to launching of MjLink’s MjInvest online networking platform that launched in middle of September 2019 and the revenue is recognized evenly over their 12 months subscription service, resulting in a deferred revenue of $29,400.

 

For the 12-month period ending December 31, 2019, MjLink recognized event revenue of $111,500 compared to $0 for the 12-month period ending December 31, 2018, representing an increase of $111,500 or 100.0%. The increase in event revenue is attributable to our launching of MjLink’s MjMicro networking event, which was held on June 25, 2019 in New York City, NY and on October 16, 2019 in Beverly Hills, CA. For the 3-month period ending December 31, 2019, we recognized event revenue of $35,500 for the October 2019 event.

 

For the 12-month period ending December 31, 2019, MjLink’s digital marketing revenue of $113,000 compared to $0 for the 12-month period ending December 31, 2018, represents an increase of $113,000 or 100.0%. The increase in event revenue is attributable to our launching of MjLink’s MjMicro networking event by promoting the attendees, which was held on June 25, 2019 in New York City, NY and on October 16, 2019 in Beverly Hills, CA. For the 3-month period ending December 31, 2019, we recognized event revenue of $39,800 for the October 2019 event.

 

Cost of Revenue

 

Cost of revenue was $244,000 for the 12-month period ending December 31, 2019 compared to $0 for the 12-month period ending December 31, 2018, representing an increase of $244,000 or 100%. The increase is primarily attributable to MjLink launching its MjMicro networking event by promoting the attendees, which was held on June 25, 2019 in New York City, NY and on October 16, 2019 in Beverly Hills, CA. For the 3-month period ending December 31, 2019, our cost of revenue of $46,300 for the October 2019 event and $185,000 for the June 2019 event. The drop is attributed to learned efficiencies.

 

Operating Expenses

 

Compensation expense increased $218,000 or 100% to $218,000 for the 12-month period ending December 31, 2019 from $0 for the 12-month period ending December 31, 2018. The increase is primarily attributable to hiring temporary personnel to work our MjMicro networking event, which was held on June 25, 2019 in New York City, NY and on October 16, 2019 in Beverly Hills, CA, and the salary of our former President of MjLink. For the 3-month period ending December 31, 2019, MjLink compensation expense decreased of $36,800 for the October 2019 event due to learned efficiencies and scaling back the required personnel required to work the event.

 

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During the 12-month period ending December 31, 2019, we recognized $0 of non-cash stock-based compensation expense. All non-cash stock expenses were attributed to MjLink’s parent company, Social Life Network.

 

General and administrative expense increased by $333,000, or 100% to $333,000 for the 12-month period ending December 31, 2019 from $0 for the 12-month period ending December 31, 2018. General and administrative expense increased by $66,000, or 100% to $66,000 for the 3-month period ending December 31, 2019 from $0 for the 3-month period ending December 31, 2018. The increases are primarily attributable to an increase in promotion, and other general expenses related to launching our wholly-owned subsidiary MjLink as a separate stand-alone entity, commencing activities on January 2, 2019.

 

Other expense

 

MjLink did not have other expenses for fiscal years 2019 and 2018.

 

Net Loss

 

Our net loss for the for the 12-month and 3-month periods ending December 31, 2019 is a direct result of launching our wholly owned subsidiary MjLink as a separate stand-alone entity, commencing activities on January 2, 2019.

 

The following tables summarize the audited GAAP reportable segment for fiscal 2019:

 

SEGMENTED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2019

(audited)

 

    Consolidated     Social Life Network     MjLink.com  
Revenue   $ 482,488     $ 247,904     $ 234,584  
Cost of Sales     231,081       (13,111 )     244,192  
Gross Margin     251,408       261,015       (9,607 )
Operating Expenses     3,595,712       3,262,706       333,006  
Loss from Operations     (3,344,304 )     (3,001,691 )     (342,613 )
Other Expenses     (515,996 )     (530,531 )     14,535  
Net loss   $ (3,860,300 )   $ (3,532,221 )   $ (328,079 )

 

SEGMENTED BALANCE SHEETS

FOR THE YEAR ENDED DECEMBER 31, 2019

(audited)

 

    Consolidated     Social Life Network     MjLink.com  
Cash   $ 6,057     $ 6,057     $ -  
Accounts receivable     20,500       10,000       10,500  
Accounts receivable – related party     257,500       225,000       32,500  
Other current assets     26,433       16,275       10,158  
Total Asset   $ 304,990     $ 251,832     $ 53,158  
Accounts payable     15,724       15,725       -  
Other current liabilities     50,000       50,000       -  
Deferred revenue     29,395       5,000       24,895  
Convertible Debt     616,179       616,179       -  
Intercompany obligations     -       (381,222 )     381,222  
Equity     (406,308 )     (78,245 )     (328,063 )
Total Liabilities & Equity   $ 304,990     $ 251,832     $ 53,158  

 

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Income Tax

 

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate of 21% plus the Colorado income tax rate of 4.63% - combined rate of 25.63% - is being used due to the new tax law recently enacted.

 

Net deferred tax assets consist of the following components as of December 31:

 

    2019     2018  
Deferred Tax Assets:                
NOL Carryover   $ (452,600 )   $ 31,000  
Deferred tax liabilities:                
Less valuation allowance     452,600       (31,000 )
Net deferred tax assets   $ -     $ -  

 

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to tax-effected income from continuing operations for the period ended December 31, due to the following:

 

    2019     2018  
Book loss   $ (988,800 )   $ (1,188,200 )
Meals and entertainment     1,200       300  
Warrant expense     75,000       930,300  
Stock based compensation     460,000       288,600  
Valuation allowance     452,600       (31,000 )
    $ -     $ -  

 

At December 31, 2019, the we had net operating loss carry forwards of approximately $0 that may be offset against future taxable income from the year 2019 to 2036. No tax benefit has been reported in the December 31, 2019 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

 

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2012.

 

Liquidity and Capital Resources

 

The following is a summary of our cash flows from operating, investing and financing activities for the years ended December 31, 2019 and 2018.

 

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SOCIAL LIFE NETWORK, INC

Consolidated

(audited)

 

    For the Year Ended  
   

December 31, 2019

   

December 31, 2018

 
Cash used in operating activities   $ (1,902,563 )   $ (4,459,672 )
Cash used in investing activities     -       -  
Cash provided by financing activities     1,719,069       4,401,002  
Increase in cash   $ (183,494 )     141,330  

 

Cash Flows from Operating Activities

 

We have not generated positive cash flows from operating activities. For the 12-month period ending December 31, 2019, net cash flows used in operating activities was 1,902,563 compared to $214,489 for the 12-month period ending December 31, 2018, primarily due to ramping up our business activities in 2019.

 

Cash Flows from Investing Activities

 

None.

 

Cash Flows from Financing Activities

 

For the 12-month period ending December 31, 2019, net cash flows used in financing activities was $1,719,069 compared to $4,401,002 for the 12-month period ended December 31, 2018. Our cash provided by financing activities in 2019 resulted from proceeds from the sale of common stock shares and convertible debt.

 

We are in the early stages of our business. We are required to fund growth from financing activities, and we intend to rely on a combination of equity and debt financings. Due to market conditions and the early stage of our operations, there is significant risk that we will be unable to raise such financings at all, or on terms that are not overly dilutive to our existing stockholders. We can offer no assurance that we will be able to raise such funds.

 

MJLINK.COM INC

(audited)

 

    For the Year Ended  
   

December 31, 2019

   

December 31, 2018

 
Cash used in operating activities   $ 5,500     $ 15  
Cash used in investing activities     -       -  
Cash provided by financing activities     -       -  
Increase in cash   $ 5,500       15  

 

Cash Flows from Operating Activities

 

We have not generated positive cash flows from operating activities. For the 12-month period ending December 31, 2019, net cash flows used in operating activities was 5,500 compared to $15 for the 12-month period ending December 31, 2018, primarily due to ramping up our business activities in 2019.

 

Cash Flows from Investing Activities

 

None.

 

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Cash Flows from Financing Activities

 

For the 12-month period ending December 31, 2019 and 2018, net cash flows used in financing activities was zero.

 

Off-Balance sheet arrangements

 

We have no off-balance sheet arrangements.

 

Critical Accounting Policies

 

Basis of presentation

 

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Use of estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the estimated useful lives of property and equipment. Actual results could differ from those estimates.

 

Concentrations of Credit Risk

 

We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.

 

Cash equivalents

 

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the year ended December 31, 2019 or 2018.

 

Accounts Receivable

 

Revenues that have been recognized but not yet received are recorded as accounts receivable. Losses on receivables will be recognized when it is more likely than not that a receivable will not be collected. An allowance for estimated uncollectible amounts will be recognized to reduce the amount of receivables to its net realizable value when considered necessary. Any allowance for uncollectible amounts is evaluated quarterly.

 

Fair value of financial instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

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Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
   
Level 3: Pricing inputs that are generally observable inputs and not corroborated by market data.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2019.

 

The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis as of December 31, 2019 and 2018.

 

Revenue recognition

 

The Company follows paragraph 605-15-25 of the FASB Accounting Standards Codification for revenue recognition when the right of return exists. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) The seller’s price to the buyer is substantially fixed or determinable at the date of sale, (ii) The buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product. If the buyer does not pay at time of sale and the buyer’s obligation to pay is contractually or implicitly excused until the buyer resells the product, then this condition is not met., (iii) The buyer’s obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product, (iv) The buyer acquiring the product for resale has economic substance apart from that provided by the seller. This condition relates primarily to buyers that exist on paper, that is, buyers that have little or no physical facilities or employees. It prevents entities from recognizing sales revenue on transactions with parties that the sellers have established primarily for the purpose of recognizing such sales revenue, (v) The seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer, and (vi) The amount of future returns can be reasonably estimated.

 

The Company generates revenues through three primary sources: 1) licensing agreements from which the Company receives an annual license fee or a percentage of net profits; 2) online advertising with priced based on the CPC (cost per click) and CPM (cost per 1000 ad impressions); and 3) premium monthly digital marketing subscriptions, which provide business director and online review management for monthly subscriptions.

 

Income taxes

 

The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period that includes the enactment date.

 

On December 22, 2018, the Tax Cuts and Jobs Act (TCJA) was signed into law by the President of the United States. TCJA is a tax reform act that among other things, reduced corporate tax rates to 21 percent effective January 1, 2018. FASB ASC 740, Income Taxes, requires deferred tax assets and liabilities to be adjusted for the effect of a change in tax laws or rates in the year of enactment, which is the year in which the change was signed into law. Accordingly, the Company adjusted its deferred tax assets and liabilities at December 31,2019, using the new corporate tax rate of 21 percent. See Note 7.

 

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The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

 

Stock-based Compensation

 

We account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). ASC 505-50 establishes that equity-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to nonemployees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments issued as deferred stock compensation and amortize the cost over the term of the contract.

 

We account for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation—Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.

 

Basic and Diluted Earnings Per Share

 

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is comp