Decentral Life, Inc 10-K/A for FY2020
Decentral Life, Inc. (WDLF)
About this 10-K/A
Decentral Life, Inc filed this 10-K/A on May 26, 2021, covering the fiscal year ended December 31, 2020 (FY2020).
Headline figures
Fiscal year ended December 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $274.95K
- down 43.0% from $482.49K a year earlier
- Net loss
- $202.72K
- compared with a net loss of $3.34M a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(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, 2020
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: 333-222709
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.) |
3465 S Gaylord Ct. Suite A509 Englewood, Colorado 80113 (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 Company has 7,435,854,032 common stock shares outstanding as of March 30, 2021.
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
| i |
EXPLANATORY NOTE
We are submitting this Form 10-K/A to add to our financial statements for our fiscal year ended December 31, 2020, only Note 8A (Subsequent Events). Apart from this Subsequent Event, there have been no changes to our year end 2020 financial statements.
| ii |
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; and future economic and other conditions. 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.
Until August 6, 2020, MjLink.com, Inc., a Delaware corporation, operated as our cannabis division, but now operates as a separate entity with its own independent operations. Unless otherwise specified. MjLink.com Inc. is referred to herein as “MjLink”.
Corporate Overview – Formation, Corporate Changes, Material Merger
Organization
Social Life Network, Inc. (referred to herein as “we” or “our” or “us”) is a Technology Business Incubator (TBI) that provides tech start-ups with seed technology development and executive leadership, making it easier for start-up founders to focus on raising capital, perfecting their business model, and growing their network usership. Our seed technology is an artificial intelligence (AI) powered social network and Ecommerce platform that leverages blockchain technology to increase speed, security and accuracy on the niche social networks that we license to the companies in our TBI.
Corporate Changes
On August 30, 1985, we were incorporated as a private corporation, CJ Industries, Inc., in California. . On February 24, 2004, we merged with Calvert Corporation, a Nevada Corporation, changing our name to Sew Cal Logo, Inc., moved our domicile to Nevada, at which time our common stock became traded under the ticker symbol SEWC.
In June 2014, Sew Cal Logo, Inc. was placed into receivership in Nevada’s 8th Judicial District (White Tiger Partners, LLC et al v. Sew Cal Logo, Inc.et al, Case No A-14-697251-C) (Dept. No.: XIII) (the “Receivership”).
On January 29, 2016, we, as the seller (the “Seller”), completed a business combination/merger agreement (the “Agreement”) with the buyer, Life Marketing, Inc., a Colorado corporation (the “Buyer”), its subsidiaries and holdings and all of the Buyer’s securities holders. We acted through the court-appointed receiver and White Tiger Partners, LLC, our judgment creditor. The Agreement provided that the then current owners of the private company, Life Marketing, Inc., become the majority shareholders pursuant to which an aggregate of 119,473,334 common stock shares were issued to our officers, composed of 59,736,667 shares each to our Chief Executive Officer, Kenneth Tapp, and Andrew Rodosevich, our then-Chief Financial Officer. Pursuant to the terms of the Agreement and related corporate actions in our domicile, Nevada:
| ● | We cancelled all previously created preferred class of stock; |
| 1 |
| ● | We delivered newly issued, common stock shares equivalent to approximately 89.5% of its outstanding shares as a control block in exchange for 100% of the Buyer’s outstanding shares; | |
| ● | The court appointed receiver sold its judgment to the Buyer and the Seller agreed to pay the receiver $30,000 and the equivalent of 9.99% of the outstanding stock (post-merger) of the newly issued unregistered exempt shares; | |
| ● | Our then officers and directors were terminated, and Kenneth Tapp and Andrew Rodosevich became the Company’s Chief Executive Officer/Director and Chief Financial Officer/Director, respectively; | |
| ● | We effected a 5,000 to 1 reverse stock split effective April 11, 2016, with each shareholder retaining a minimum of 100 shares; | |
| ● | We changed our name from Sew Cal Logo, Inc. to WeedLife, Inc, and then to Social Life Network, Inc. effective in Nevada on April 11, 2016; | |
| ● | We changed our stock symbol from SEWC to WDLF; | |
| ● | We decreased our authorized common stock shares from 2,000,000,000 shares to 500,000,000 shares, effective in Nevada on March 17, 2016. |
On June 6, 2016, the Court issued an order in the Receivership pursuant to Section 3(a) (10) of the Securities Act of 1933, as amended , ratifying the above actions. The receiver was discharged on June 7, 2016.
On September 20, 2018, we incorporated MjLink.com, Inc. (“MjLink”), a Delaware Corporation. On February 1, 2020, MjLink.com, Inc. filed its Form 1-A Offering Document for a Regulation A Tier 2 initial public offering, which the SEC qualified on September 28, 2020. As of September 28th, 2020 and March 29, 2020, the Company owned 15.17% of MjLink’s outstanding Class A common stock shares. We will own 2.26% of MjLink’s outstanding Class A common stock if MjLink raises the full $50,000,000 Regulation Offering Amount.
On March 4, 2020, our Board increased our number of authorized shares of Common Stock from 500,000,000 to 2,500,000,000 Common Stock Shares pursuant to an amendment to our Articles of Incorporation with the state of Nevada, and submitted to Nevada our Certificate of Designation of Preferences, Rights and Limitations of the Class B Common Stock, providing that each Class B Common Stock Share shall have one-hundred (100) votes on all matters presented to be voted by the holders of Common Stock. The Class B Common Stock Shares only have voting power and have no equity, cash value, or any other value.
Effective March 4, 2020, our Board of Directors (the “Board”) authorized the issuance of twenty five million (25,000,000) Class B Common Stock Shares to Ken Tapp, our Chief Executive Officer, in return for his services as our Chief Executive Officer from February 1, 2016 to February 29, 2020, which shares are equal to two billion five hundred million (2,500,000,000) votes and have no equity, cash value or any other value.
Effective March 28, 2021, our board of directors authorized the issuance of fifty million (50,000,000) Class B Common Stock Shares to Ken Tapp, our Chief Executive Officer, in return for his services as our Chief Executive Officer from March 1, 2020 to February 28, 2021, which shares are equal to five billion (5,000,000,000) votes and have no equity, cash value or any other value. As of the date of this filing, our Chief Executive Officer controls approximately 95% of shareholder votes via his issuance of 75,000,000 Class B Shares and consequently control over 7,500,000,000 votes.
On May 8, 2020, we filed Amended and Restated Articles of Incorporation (“Amended Articles”) in Nevada to increase our authorized shares from 2,500,000,000 to 10,000,000,000 Shares and our Preferred Shares from (100,000,000) to 300,000,000 Shares. Additionally, the Amended Articles authorized us from May 8, 2020 and continuing until March 31, 2021, as determined by our Board in its sole discretion, to effect a Reverse Stock Split of not less than 1 share for every 5,000 shares and no more than 1 share for every 25,000 shares (the “Reverse Stock Split”)..
| 2 |
On December 11th, 2020, we filed a Form 8-K stating that we would not be executing the Reverse Stock Split.
Since its incorporation in September 2018, MjLink functionally operated as our cannabis and hemp division, which we funded; however, effective as of August 6, 2020, MjLink operated independently of us and we no longer funded MjLink. As of December 31, 2020 and thereafter, we have owned 800,000 Class A common stock shares of MjLink at a value of $0.10 per share for an aggregate value of $80,000. The Shares were issued to us for the social networking software license fee from January 2020 through December 2020. The share count of 800,000 MjLink Class A common stock shares represents 15.17% of the total outstanding shares issued from MjLink as of December 31st, 2020.
Our Business
We are a Technology Business Incubator (TBI) that, through individual licensing agreements, provides tech start-ups with seed technology development, legal and executive leadership, makes it easier for start-up founders to focus on raising capital, perfecting their business model, and growing their network usership. Our seed technology is an artificial intelligence (“AI”) powered social network and Ecommerce platform that leverages blockchain technology to increase speed, security and accuracy on the niche social networks that we license to the companies in our TBI.
From 2015 through the first half of 2021, we have added nine additional niche social networking tech start-ups to our TBI that target consumers and business professionals in the Residential Real Estate industry, Space industry, Hunting, Fishing, Camping and RV’ing industry, Racket Sports, Soccer, Golf, Cycling, and Motor Sports industries.
Each of our TBI licensees’ goal is to grow their network usership to a size enabling sale to an acquiring niche industry company, or taking the TBI licensee public or helping them sell through a merger or acquisition.
Using our state-of-art AI and Blockchain technologies, our licensees’ social networking platforms learn from the changing online social behavior of users to better connect the business professionals and consumers together. We also utilize AI in the development and updating of our code, in order to identify and debug our platform faster, and be more cost effective.
Revenue Generation
We generate our revenues through our TBI licensees by charging a 5% fee on their profits, and a 15% stake in the TBI licensees companies if they reach the liquidity event of going public or selling their business.
On September 22, 2020, the Regulation A Tier II Offering of one of our licensees, MjLink, was qualified by the SEC. As of March 2021, two of our licensees, LikeRE.com, Inc. and HuntPost.com, Inc., have begun preparing for their own Regulation A Tier 2 filing with the SEC for their Initial Public Offerings.
Operations
We currently operate and support the ongoing technology development and maintenance of our online social network platforms in ten niche industries, for end-users from more than 120 countries worldwide. Our niche industry executives, advisors, and our board members support each of our TBI licensees. The goal of our operations team is to increase the potential of each tech start-up licensee in our incubator, and to achieve for our licensees an initial public offering or sale through a merger or acquisition. If we are successful in our operational goals, we stand to potentially increase our cash-on-hand as well as the value of the stock that we hold in each TBI licensee as they grow in their own revenue generation and when/if they can reach a liquidity event such as an IPO or Merger-Acquisition.
| 3 |
Target Markets
We have targeted the following industries that fit well with our management experience and software capability:
| ● | Cannabis and Hemp | |
| ● | Travel |
| ● | Outdoorsman Sports | |
| ● | Racket Sports | |
| ● | Cycling | |
| ● | Golf | |
| ● | Motor Sports | |
| ● | Soccer |
| ● | Financial | |
| ● | Residential Real Estate |
We will continue to target niche industries in our technology business incubator based on sub-culture behavior that demands the need for secure, private social networking and ecommerce solutions through the use of our Artificial Intelligence and Blockchain powered technology platform.
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 as a TBI.
Better Practices
We spend a great amount of man hours each year, developing better business practices as a technology business incubator, in our effort to increase the probability of our TBI licensees succeeding.
Sources and Availability of Products and Names of Principal Suppliers
We currently rely on certain key suppliers and vendors in the support and maintenance of our business plan. 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 TBI Licensees
We are not dependent upon one or a few major TBI program licensees and we do not expect to have any significant attrition of TBI licensees.
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.
| 4 |
Cost and Effects of Compliance with Environmental Laws
Our operations are not subject to federal, state or local environmental regulations.
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.
Raw Materials
We do not use raw materials in our business.
Social Life Network, Inc. is referred to hereafter as “we”, “our” or “us”.
An investment in our common stock is highly speculative and should be purchased only by persons who can afford to lose the entire amount invested in the common stock. Before purchasing any of the shares of common stock, you should carefully consider the following factors relating to our business and prospects. If any of the following risks occur, our business, financial condition or operating results could be materially adversely affected. In such case, you may lose all or part of our investment. You should carefully consider the risks described below and the other information in this annual report before in investing in our common stock.
Risks Related to Our Business
Our independent registered public accounting firm has issued a going concern opinion; there is substantial uncertainty that we will continue operations in which case you could lose your investment.
In their report dated March 31, 2021, 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 $31,766,214 at December 31, 2020, had a net loss of $202,720 and used net cash of $422,337 in operating activities for the 12 months ended December 31, 2020. Further, we had an accumulated deficit of $31,766,214 at December 31, 2020, had a net loss of $202,720 and gained net cash deficit of $422,337 in operating activities for the twelve months ended December 31, 2020. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our management intends to finance operating costs over the next twelve months with existing cash on hand 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.
| 5 |
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 MjLink. 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.
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 thereof have a material effect on our business, our revenues and results of operations will be negatively affected.
We expect to incur substantial expenses to meet our reporting obligations as a public company.
We estimate that it will cost approximately $200,000 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.
| 6 |
We have generated a majority of our revenue in 2020 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 report, our executive officers and directors and their respective affiliates beneficially own approximately 95% of our outstanding voting stock, including our Chief Executive Officer who owns 95% 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.
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 will 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 will 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.
| 7 |
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. | |
| ● | 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.
| 8 |
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. |
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.
| 9 |
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.
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.
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.
| 10 |
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.
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.
| 11 |
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.
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.
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 September 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.
| 12 |
COVID-19 RELATED RISKS
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.
The outbreak of the COVID-19 may adversely affect our customers or subscribers and have an adverse effect on our results of operations.
Further, the risks described above could also adversely affect our potential licensee’s financial condition, resulting in reduced spending by our licensee to pay us our license fees. Risks related to an epidemic, pandemic, or other health crisis, such as COVID-19, could negatively impact the results of operations of one or more of our l licensees or potential licensee operations. The ultimate extent of the impact of any epidemic, pandemic or other health crisis on our licensees and 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.
Certain historical data regarding our business, results of operations, financial condition and liquidity does not reflect the impact of the COVID-19 pandemic and related containment measures and therefore does not purport to be representative of our future performance
The information included in this Annual report on Form 10-K and our other reports filed with the SEC includes information regarding our business, results of operations, financial condition and liquidity as of dates and for periods before and during the impact of the COVID-19 pandemic and related containment measures (including quarantines and governmental orders requiring the closure of certain businesses, limiting travel, requiring that individuals stay at home or shelter in place and closing borders). Therefore, certain historical information therefore does not reflect the adverse impacts of the COVID-19 pandemic and the related containment measures. Accordingly, investors are cautioned not to unduly rely on such historical information regarding our business, results of operations, financial condition or liquidity, as that data does not reflect the adverse impact of the COVID-19 pandemic and therefore does not purport to be representative of the future results of operations, financial condition, liquidity or other financial or operating results of us, or our business.
During 2020, we experienced material decreases in our revenues due to Covid-19
During 2020, we experienced material decreases in our revenues and results of operations due to Covid-19 when comparing our 2019 results to our 2020 financial results. Should this downward Covid-19 related trend continue, our revenues and results of operations will continue to be materially and negatively impacted.
THE OUTBREAK OF COVID-19 HAS RESULTED IN A WIDESPREAD HEALTH CRISIS THAT COULD ADVERSELY AFFECT THE ECONOMIES AND FINANCIAL MARKETS WORLDWIDE AND COULD EXPONENTIALLY INCREASE THE RISK FACTORS DESCRIBED ABOVE AND BELOW.
| 13 |
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.
We have authorized 300,000,000 Preferred Shares and 400,000,000 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
| 14 |
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.
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 OTC Markets as maintained by FINRA. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the price of our securities.
Rule 3a51-1 of the Exchange Act establishes the definition of a “penny stock,” for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions that are not available to us. It is likely that our shares will be penny stocks for the immediately foreseeable future. This classification severely and adversely affects any market liquidity for our common stock.
For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’s account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth:
| ● | 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.
| 15 |
If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common stock.
Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The forward-looking statements contained herein report may prove incorrect.
This filing contains certain forward-looking statements, including among others: (i) anticipated trends in our financial condition and results of operations; (ii) our business strategy for expanding our business through regional centers; and (iii) our ability to distinguish ourselves from our current and future competitors. These forward-looking statements are based largely on our current expectations and are subject risks and uncertainties. Actual results could differ materially from these forward-looking statements. In addition to the other risks described elsewhere in this “Risk Factors” discussion, important factors to consider in evaluating such forward-looking statements include: (i) changes to external competitive market factors or in our internal budgeting process which might impact trends in our results of operations; (ii) anticipated working capital or other cash requirements; (iii) changes in our business strategy or an inability to execute our strategy due to unanticipated changes in the environmental cleanup industry; and (iv) various competitive factors that may prevent us from competing successfully in the marketplace. Considering these risks and uncertainties, many of which are described in greater detail elsewhere in this “Risk Factors” discussion, there can be no assurance that the events predicted in forward-looking statements contained in this Prospectus will, in fact, transpire.
Cautionary Note
We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.
Our executive and administrative office is located at 3465 Gaylord Court, Suite A509, Englewood, Colorado 80113 and is adequate for our purposes.
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 are not a party to any legal proceedings.
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.
| 16 |
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 OTC Markets 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
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, 2020 | $ | 0.0071 | $ | 0.0001 | ||||
| September 30, 2020 | $ | 0.0002 | $ | 0.0001 | ||||
| June 30, 2020 | $ | 0.0003 | $ | 0.0001 | ||||
| March 31, 2020 | $ | 0.0275 | $ | 0.0002 | ||||
| December 31, 2019 | $ | 0.1199 | $ | 0.0150 | ||||
| September 30, 2019 | $ | 0.1390 | $ | 0.0731 | ||||
| June 30, 2019 | $ | 0.1900 | $ | 0.1000 | ||||
| March 31, 2019 | $ | 0.1952 | $ | 0.0810 | ||||
On March 30, 2021, the closing price of our common stock as reported by the OTC Markets Group was $0.0198 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 31, 2021, there were 163 holders of record of our common stock and 7,435,854,032 shares of our common stock issued and outstanding.
| 17 |
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.
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 Englewood, Colorado. We have been engaged in our current business model since June of 2016, as a result of our having been discharged from a receivership and acquiring Life Marketing, Inc., which was in a different industry as our previous business.
We have experienced recurring losses and negative cash flows from operations since inception, including in our current business model. We anticipate that our expenses will increase as we ramp up our expansion, which likely will lead to additional losses, until such time that we approach profitability, or which there are no assurances. We have relied on equity and debt financing to fund operations to-date. There can be no guarantee that we will ever become profitable, or that adequate additional financing will be realized in the future or otherwise may be available to us on acceptable terms, or at all. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our expansion efforts. We will need to generate significant revenues to achieve profitability, of which there are no assurances.
Trends and Uncertainties
Our business is subject to the trends and uncertainties associated with expansion of
| of niche industry social networks and ecommerce solutions are increasing in popularity and availability. At some point, industry saturation of technology solutions that we provide to, and support for TBI participant tech startup companies will make it more difficult for our business model to expand. This will force our company to innovate new technology solutions, which will undoubtedly cost more money to fund. |
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which assumes that we will be able to realize our assets and discharge our liabilities and commitments in the normal course of business for the foreseeable future. We had an accumulated deficit of $31,766,214 at December 31, 2020, had a net loss of $202,720 and used net cash of $422,337 in operating activities for the twelve months ended December 31, 2020. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our management intends to finance operating costs over the next twelve months with existing cash on hand. While we believe that we will be successful generating revenue to fund our operations, meet regulatory requirements and achieve commercial goals, there are no assurances that we will succeed in our future operations.
| 18 |
We will attempt to overcome the going concern opinion by increasing our revenues, as follows:
| ● | By increasing our TBI licensing to additional tech company startups; |
The foregoing goals will increase expenses and lead to possible net losses. There is no assurance that we will ever be profitable. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern. There is no assurance we will be successful in any of these goals.
COMPARATIVE RESULTS FOR FISCAL YEARS
Consolidated Performance - Results of Operations Years Ended December 31, 2020 and 2019
SOCIAL LIFE NETWORK, INC
Consolidated
(audited)
| For the Three Months Ended December 31, | For the Twelve Months Ended | |||||||||||||||||||||||
| 2020 | 2019 | $ Change | 2020 | 2019 | $ Change | |||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Digital subscription revenue | $ | 1,510 | $ | 7,396 | (5,886 | ) | $ | 24,948 | $ | 7,604 | 17,344 | |||||||||||||
| Licensing Revenue – related party | 62,500 | 225,000 | (162,500 | ) | 250,000 | 250,000 | - | |||||||||||||||||
| Advertising revenue | - | (2,096 | ) | 2,096 | - | 404 | (404 | ) | ||||||||||||||||
| Event revenue | - | 35,495 | 35,495 | - | 111,480 | (111,480 | ) | |||||||||||||||||
| Digital marketing revenue | - | 39,800 | (39,800 | ) | - | 113,000 | (113,000 | ) | ||||||||||||||||
| Total revenue | 64,010 | 305,595 | (256,585 | ) | 274,948 | 482,488 | (207,540 | ) | ||||||||||||||||
| Costs of goods sold | 116 | 46,332 | (46,216 | ) | - | 231,081 | (231,081 | ) | ||||||||||||||||
| Gross margin | 63,894 | 259,263 | (210,368 | ) | 274,948 | 251,407 | 23,540 | |||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Compensation expense | 11,183 | 149,714 | (138,531 | ) | 134,511 | 671,852 | (537,341 | ) | ||||||||||||||||
| Non-cash stock expense | - | 220,500 | (220,500 | ) | - | 2,087,083 | (2,087,083 | ) | ||||||||||||||||
| Sales and marketing | 1,377 | (5,727 | ) | 7,104 | 10,703 | 110,552 | (99,849 | ) | ||||||||||||||||
| General and administrative | 33,784 | 55,181 | (21,396 | ) | 391,293 | 726,225 | (334,932 | ) | ||||||||||||||||
| Total operating expenses | 46,344 | 419,688 | (373,323 | ) | 536,507 | 3,595,712 | (3,059,205 | ) | ||||||||||||||||
| Income (Loss) from operations | 17,550 | (160,405 | ) | 177,955 | (261,559 | ) | (3,344,304 | ) | 3,082,745 | |||||||||||||||
| Other Expenses: | ||||||||||||||||||||||||
| Interest (expense) income | (17,789 | ) | 30,624 | 48,413 | (101,673 | ) | (421,627 | ) | 523,300 | |||||||||||||||
| Other non-operating (expenses) income | 149,708 | (50,117 | ) | 199,825 | 160,512 | (92,017 | ) | 68,495 | ||||||||||||||||
| Total other expenses | 131,919 | (19,493 | ) | (151,412 | ) | 58,839 | (513,644 | ) | (572,483 | ) | ||||||||||||||
| Net Income (Loss) | $ | 149,469 | $ | (179,898 | ) | 329,367 | $ | (202,720 | ) | $ | (3,857,948 | ) | 3,655,228 | |||||||||||
| 19 |
Consolidated Performance - Results of Operations for the 3-month periods ended December 31, 2020 and 2019
Revenues
For the 3-month period ending December 31, 2020, we recognized revenue from licensing of $62,500 compared to $225,000 of revenue for the 3-month period ending December 31, 2019. The $162,500 decrease is due to a renewed licensing deal with two of our licensees that provides for a minimum guarantee annual payment of $125,000 from each of our licensees through 2020 rather than relying on transactional usage of our platform in first quarter 2019.
For the 3-month period ending December 31, 2020, we recognized $1,510 digital subscription revenue as compared to $7,396 for the 3-month period ending December 31, 2019. The $5,886 decrease in revenue is primarily attributable to recognizing digital subscription service of MjLink over twelve months of service.
For the 3-month period ending December 31, 2020, we recognized zero event revenue as compared to $35,495 for the 3-month period ending December 31, 2019. The $35,495 decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors, and related travel for the foreseeable future. We also wrote off $15,000 of unpaid fees due form attendance to our MjLink event in fiscal year 2019 as bad debt expense.
For the 3-month period ending December 31, 2020, we recognized zero digital marketing revenue as compared to $39,800 for the 3-month period ending December 31, 2019. The $39,800 decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future and as a result there were no marketing campaigns to promote attendees at our events.
For the 3-month period ending December 31, 2020, we recognized zero advertising revenue as compared to loss of $2,096 for the 3-month period ending December 31, 2019. The difference is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future and as a result there were no marketing campaigns to promote attendees at our events.
Cost of Revenue
Cost of revenue was a $116 for the 3-month period ending December 31, 2020 compared to $46,332 the 3-month period ending December 31, 2019, representing a decrease of $46,216 or 100%. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future, plus the recoupment of some of our initial costs to set up events in the first quarter 2020 plus refunds from prepaid costs.
Operating Expenses
Cash-paid compensation expense decreased by $138,531 or 93% to $11,183 for the 3-month period ending December 31, 2020 from $149,714 for the 3-month period ending December 31, 2020. The decrease is primarily attributable to reducing the need for consultants and professionals that were required to meet MjLink’s growth strategies at the onset of January 2019.
During the 3-month period ending December 31, 2020, we recognized zero of non-cash stock-based compensation expense for employees, consultants, and professionals compared to $220,500 for the 3-month period ending December 31, 2019. The decrease is primarily due to a reduced need for additional headcount, streamlining headcount, and being able to maximize productivity with fewer hires as compared to our hiring plans in 2019.
During the 3-month periods ending December 31, 2020 and 2019, we recognized zero of non-cash stock-based compensation expense for warrants for the respective quarters.
| 20 |
Sales and marketing expense decreased $7,104 or 124% to negative $1,377 for the 3-month period ending December 31, 2020 from negative $5,727 for the 3-month period ending December 31, 2019. The increase is primarily attributable to the mandatory COVID-19 shutdown, which forced MjLink to cancel any in-person events for the foreseeable future including in its first quarter 2020 as opposed to our investing/ramping-up efforts in 2019 plus refunds of prepaid expenses.
General and administrative expense decreased by $21,396, or 38% to $33,784 for the 3-month period ending December 31, 2020 from $55,181 for the 3-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future. In addition, unrelated to COVID 19, the decrease is also due to a reduced need for additional headcount, streamlining headcount, and being able to maximize productivity with fewer hires as compared to our hiring plans in 2019 bringing the Company to a expense level to the level before the MjLink event business was contemplated. We also wrote off $15,000 of unpaid fees due from attendance to our MjLink event in fiscal year 2019 as bad debt expense.
Other expense
During the three months ended December 31, 2020, we incurred $131,920 of other income from gain on conversion of convertible debt of $149,709 associated with converting our debt into common shares to our debt holders, which offset the interest charges of $17,789 from our convertible debt outstanding. During the three months ended December 31, 2019 we had zero other expenses or income.
Net Loss
Our net income for the for the 3-month period ending December 31, 2020 was $149,469 compared to a net loss of $179,898 for the 3-month period ending December 31, 2019. The decrease in net loss to profitability is a direct result of lack of issuance of non-cash stock-based compensation expenses to our personnel, decrease in operating expenses, gain from convertible debt conversions, and reduction in revenue due to the unprecedented and mandatory COVID-19 shutdown.
Consolidated Performance - Results of Operations for the 12-month periods ended December 31, 2020 and 2019
Revenues
For the 12-month period ending December 31, 2020, we recognized revenue from licensing of $250,000 compared to $250,000 of revenue for the 12-month period ending December 31, 2019. The flat revenue is due to a renewed licensing deal with two of our licensees that provides for a minimum guarantee annual payment of $125,000 from each of our two licensees rather than relying on transactional usage of our platform in first quarter 2019.
For the 12-month period ending December 31, 2020, we recognized $24,948 digital subscription revenue as compared to $7,604 for the 12-month period ending December 31, 2019. The increase in revenue is primarily attributable to recognizing digital subscription service of MjLink over twelve months of service.
For the 12-month period ending December 31, 2020, we recognized zero advertising revenue as compared to $404 for the 12-month period ending December 31, 2019. The decrease in revenue is primarily attributable to eliminating our sales and marketing staff during the latter part of fiscal year 2019.
For the 12-month period ending December 31, 2020, we recognized zero event revenue as compared to $111,480 for the 12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future. The company also wrote off $15,000 of unpaid fees due form attendance to our MjLink event in fiscal year 2019 as a bad debt expense.
For the 12-month period ending December 31, 2020, we recognized zero digital marketing revenue as compared to $113,000 for the 12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future and as a result there were no marketing campaigns to promote attendees at our events.
| 21 |
Cost of Revenue
Cost of revenue was zero for the 12-month period ending December 31, 2020 compared to $231,081 the 12-month period ending December 31, 2019, representing a decrease of $231,081 or 100%. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future, plus the recoupment of some of our initial costs to set up events in the first quarter 2020 plus refunds from prepaid costs.
Operating Expenses
Cash-paid compensation expense decreased by $537,340 or 80% to $134,511 for the 12-month period ending December 31, 2020 from $671,851 for the 12-month period ending December 31, 2019. The decrease is primarily attributable to the resignation of George Jage as MjLink’s President in September 2019, which was not refilled, and reducing the need for consultants and professionals that were required to meet MjLink’s growth strategies in 2019.
During the 12-month period ending December 31, 2020, we recognized zero of non-cash stock-based compensation expense for employees, consultants, and professionals compared to $2,087,083 for the 12-month period ending December 31, 2019. The decrease is primarily due to a reduced need for additional headcount, streamlining headcount, and being able to maximize productivity with fewer hires as compared to our hiring plans in 2019.
During the 912month periods ending December 31, 2020 and 2019, we recognized zero of non-cash stock-based compensation expense for warrants for the respective quarters.
Sales and marketing expense decreased $99,849 or 90% to $10,703 for the 12-month period ending December 31, 2020 from $110,552 for the 12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced MjLink to cancel any in-person events for the foreseeable future including in its first quarter 2020 as opposed to our investing/ramping-up efforts in the first quarter of 2019.
General and administrative expense decreased by $334,932 or 46% to $391,293 for the 12-month period ending December 31, 2020 from $726,225 for the 12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future. In addition, unrelated to COVID 19, the decrease is also due to a reduced need for additional headcount, streamlining headcount, and being able to maximize productivity with fewer hires as compared to our hiring plans in 2019 bringing the Company to an expense spending to the level before the MjLink event business was contemplated. We also wrote off $15,000 of unpaid fees due from attendance to our MjLink event in fiscal year 2019 as bad debt expense.
Other expense
During the 12-months ended December 31, 2020, we incurred $58,840 of other income predominantly due to interest charges of $101,673 from our convertible debt outstanding which was offset by gain associated with converting $154,112 our debt into common shares to our debt holders.
Net Loss
Our net loss for the for the 12-month period ending December 31, 2020 was $202,720 compared to a net loss of $3,857,948 for the 12-month period ending December 31, 2019. The decrease in net loss a direct result of lack of issuance of non-cash stock-based compensation expenses to our personnel and a decrease in operating expenses due to the unprecedented and mandatory COVID-19 shutdown.
| 22 |
Segment Performance - Results of Operations Years Ended December 31, 2020 and 2019
MJLINK.COM INC
(audited)
| For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | $ Change | 2020 | 2019 | $ Change | |||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Digital subscription revenue | $ | 1,510 | $ | 7,396 | (5,886 | ) | $ | 24,948 | $ | 7,604 | 17,344 | |||||||||||||
| Advertising revenue | - | - | - | - | 2,500 | (2,500 | ) | |||||||||||||||||
| Event revenue | - | 35,495 | (35,495 | ) | - | 111,480 | (111,480 | ) | ||||||||||||||||
| Digital marketing revenue | - | 39,800 | (39,800 | ) | - | 113,000 | (113,000 | ) | ||||||||||||||||
| Total revenue | 1,510 | 82,691 | (81,181 | ) | 24,948 | 234,584 | (209,636 | ) | ||||||||||||||||
| Costs of goods sold | - | 63,789 | (63,789 | ) | - | 244,192 | (244,192 | ) | ||||||||||||||||
| Gross margin | 1,510 | 18,902 | 17,391 | 24,948 | (9,608 | ) | 44,141 | |||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Compensation expense | 466 | 46,344 | (45,878 | ) | 6,206 | 218,655 | (212,449 | ) | ||||||||||||||||
| Non-cash stock expense | - | - | - | - | - | - | ||||||||||||||||||
| Sales and marketing | - | (6,520 | ) | 6,520 | 8,144 | 51,152 | (43,008 | ) | ||||||||||||||||
| General and administrative | 15,000 | 26,182 | (11,182 | ) | 18,670 | 63,198 | (44,528 | ) | ||||||||||||||||
| Total operating expenses | 15,466 | 66,006 | 50,540 | 33,021 | 333,006 | (299,985 | ) | |||||||||||||||||
| Income (Loss) from operations | (13,956 | ) | (47,103 | ) | 33,148 | (8,073 | ) | (342,613 | ) | 334,540 | ||||||||||||||
| Other Expenses: | ||||||||||||||||||||||||
| Interest expense | - | - | - | - | - | - | ||||||||||||||||||
| Other non-operating expenses | - | 15 | (15 | ) | - | (14,535 | ) | 14,535 | ||||||||||||||||
| Total other expenses | - | 15 | (15 | ) | - | (14,535 | ) | 14,535 | ||||||||||||||||
| Net Income (Loss) | $ | (13,955 | ) | $ | (47,118 | ) | 33,163 | $ | (8,073 | ) | $ | (328,078 | ) | 320,005 | ||||||||||
Segmented Performance - Results of Operations for the 3-month periods ended December 31, 2020 and 2019
Revenues
For the 3-month period ending December 31, 2020, we recognized $1,510 digital subscription revenue as compared to $7,396 for the 3-month period ending December 31, 2019. The decrease in revenue is primarily attributable to recognizing digital subscription service of MjLink over twelve months of service.
For the 3-month period ending December 31, 2020, we recognized zero event revenue as compared to $35,495 for the 3-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future. The company also wrote off $15,000 of unpaid fees due form attendance to our MjLink event in fiscal year 2019 as a bad debt expense.
For the 3-month period ending December 31, 2020, we recognized zero digital marketing revenue as compared to $39,800 for the 3-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future and as a result there were no marketing campaigns to promote attendees at our events.
For the 3-month period ending December 31, 2020 and 2019, we recognized zero advertising revenue.
| 23 |
Cost of Revenue
Cost of revenue was zero for the 3-month period ending December 31, 2020 compared to $63,789 for the 3-month period ending December 31, 2019, representing a decrease of $63,789 or 100%. The decrease is to maintain the MjLink site and overall drop in cost is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future.
Operating Expenses
Cash-paid compensation expense decreased by $45,878 or 99% to $466 for the 3-month period ending December 31, 2020 from $46,344 for the 3-month period ending December 31, 2020. The decrease is primarily attributable to reducing the need for consultants and professionals that were required to meet MjLink’s growth strategies in 2019.
During the 3-month periods ending December 31, 2020 and 2019, we recognized zero non-cash stock-based compensation expense for employees, consultants, and professionals.
Sales and marketing expense decreased by $6,520 or 100% to zero for the 3-month period ending December 31, 2020 from $6,520 for the 3-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown which forced MjLink to cancel any in-person events for the foreseeable future including in its first quarter 2020. At this time last year, the Company was investing and ramping-up its efforts for in-person events for the fourth quarter after a pause in the third quarter.
General and administrative expense decreased by $11,182, or 42% to $15,000 for the 3-month period ending December 31, 2020 from $26,182 for the 3-month period ending December 31, 2019. The decrease is due to overall drop in cost is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future. In addition, unrelated to COVID 19 the decrease is also due to a reduced need for additional headcount, streamlining headcount, and being able to maximize productivity with fewer hires as compared to our hiring plans in 2019. We also wrote off $15,000 of unpaid fees due from attendance to our MjLink event in fiscal year 2019 as bad debt expense.
Other expense
During the three months ended December 31, 2020, we incurred zero other expenses or income related to COVID 19. During the three months ended December 31, 2019 we had $15 from startup expenses and zero interest.
Net Loss
Our net loss for the for the 3-month period ending December 31, 2020 was $13,955 compared to a net loss of $47,188 for the 3-month period ending December 31, 2019. The net loss is a direct result of recouping some of our initial costs to set up events in the first quarter 2020 due to suspending all in-person MjLink revenue generating activities from the unprecedented and mandatory COVID-19 shutdown and the need to maintain levels of activities to process the Regulation A+ filing and acceptance.
Segmented Performance - Results of Operations for the 12-month periods ended December 31, 2020 and 2019
Revenues
For the 12-month period ending December 31, 2020, we recognized $24,948 digital subscription revenue as compared to $7,604 for the 12-month period ending December 31, 2019. The increase in revenue is primarily attributable to recognizing digital subscription service of MjLink over twelve months of service.
For the 12-month period ending December 31, 2020, we recognized zero event revenue as compared to $111,480 for the 12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future. The company also wrote off $15,000 of unpaid fees due form attendance to our MjLink event in fiscal year 2019 as a bad debt expense.
For the 12-month period ending December 31, 2020, we recognized zero digital marketing revenue as compared to $113,000 for the 12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future and as a result there were no marketing campaigns to promote attendees at our events.
| 24 |
For the 12-month period ending December 31, 2020, we recognized zero advertising revenue as compared to $2,500 for the 12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future and as a result there were no marketing campaigns to promote attendees at our events.
Cost of Revenue
Cost of revenue was a zero for the 12-month period ending December 31, 2020 compared to $244,192 the 12-month period ending December 31, 2019, representing a decrease of or 100.0%. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future, plus the recoupment of some of our initial costs to set up events in the first quarter 2020.
Operating Expenses
Cash-paid compensation expense decreased by $212,449 or 97% to $6,206 for the 12-month period ending December 31, 2020 from $218,655 for the 12-month period ending December 31, 2020. The decrease is primarily attributable to reducing the need for consultants and professionals that were required to meet MjLink’s growth strategies at the onset of January 2019 and the closure of in person events for fiscal year 2020 due to COVID 19.
During the 12-month periods ending December 31, 2020 and 2019, we recognized zero non-cash stock-based compensation expense for employees, consultants, and professionals.
Sales and marketing expense decreased by $43,008 or 84.0% to $8,144 for the 12-month period ending December 31, 2020 from $51,152 for the 12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced MjLink to cancel any in-person events for the foreseeable future including in its first quarter 2020. At this time last year, we were investing and ramping-up its efforts for in-person events.
General and administrative expense decreased by $44,528, or 71% to $33,021 for the 12-month period ending December 31, 2020 from $63,198 for the 12-month period ending December 31, 2019. The decrease is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows, with investors and travel for the foreseeable future. In addition, unrelated to COVID 19 the decrease is also due to a reduced need for additional headcount, streamlining headcount, and being able to maximize productivity with fewer hires as compared to our hiring plans in the first and second quarter 2019. We also wrote off $15,000 of unpaid fees due from attendance to our MjLink event in fiscal year 2019 as bad debt expense.
Other expense
During the twelve months ended December 31, 2020, we incurred zero of other income or expense. During the twelve months ended December 31, 2019 we had $14,535 other income due to refunds related to COVID 19.
Net Loss
Our net loss for the for the 12-month period ending December 31, 2020 was $8,073 compared to a net loss of $328,078 for the 12-month period ending December 31, 2019. The drop in net loss is a direct result of suspending all in-person MjLink revenue generating activities from the unprecedented and mandatory COVID-19 shutdown
The following tables summarize the audited GAAP reportable segment for fiscal 2020:
SEGMENTED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2020
(audited)
| Consolidated | Social Life Network | MjLink.com | ||||||||||
| Revenue | $ | 274,978 | $ | 250,000 | $ | 24,948 | ||||||
| Cost of Sales | - | - | ||||||||||
| Gross Margin | 274,978 | 250,000 | 24,948 | |||||||||
| Operating Expenses | 536,507 | 503,486 | 33,021 | |||||||||
| Loss from Operations | (261,560 | ) | (253,487 | ) | (8,073 | ) | ||||||
| Other Income/(Expenses) | 58,840 | 58,840 | - | |||||||||
| Net loss | $ | (202,720 | ) | $ | (194,647 | ) | $ | (8,073 | ) | |||
| 25 |
SEGMENTED BALANCE SHEETS
FOR THE YEAR ENDED DECEMBER 31, 2020
(audited)
| Consolidated | Social Life Network | MjLink.com | ||||||||||
| Cash | $ | 193 | $ | (307 | ) | $ | 500 | |||||
| Accounts receivable | 28,052 | - | 28,052 | |||||||||
| Accounts receivable – related party | 368,000 | 368,000 | - | |||||||||
| Other current assets | - | - | - | |||||||||
| Total Asset | $ | 396,245 | $ | 367,693 | $ | 28,552 | ||||||
| Accounts payable | 200,123 | 200,123 | - | |||||||||
| Other current liabilities | 102,720 | 102,720 | - | |||||||||
| PPP Loan | 163,111 | 163,111 | ||||||||||
| Convertible Debt | 128,346 | 128,346 | - | |||||||||
| Intercompany obligations | - | (364,689 | ) | 364,689 | ||||||||
| Equity | (198,055 | ) | 138,081 | (336,137 | ) | |||||||
| Total Liabilities & Equity | $ | 396,245 | $ | 367,693 | $ | 28,552 | ||||||
Income Tax
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate of 21% plus the Colorado income tax rate of 4.63% - combined rate of 25.63% - is being used due to the new tax law recently enacted.
Net deferred tax assets consist of the following components as of December 31:
| 2020 | 2019 | |||||||
| Deferred Tax Assets: | ||||||||
| NOL Carryover | $ | (452,600 | ) | $ | (452,600 | ) | ||
| Deferred tax liabilities: | ||||||||
| Less valuation allowance | 452,600 | 456,200 | ||||||
| Net deferred tax assets | $ | - | $ | - | ||||
| 26 |
The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to tax-effected income from continuing operations for the period ended December 31, due to the following:
| 2020 | 2019 | |||||||
| Book loss | $ | (988,800 | ) | $ | (1,188,200 | ) | ||
| Meals and entertainment | 1,200 | 300 | ||||||
| Warrant expense | 75,000 | 930,300 | ||||||
| Stock based compensation | 460,000 | 288,600 | ||||||
| Valuation allowance | 452,600 | (31,000 | ) | |||||
| $ | - | $ | - | |||||
At December 31, 2019, the we had net operating loss carry forwards of approximately $0 that may be offset against future taxable income from the year 2020 to 2036. No tax benefit has been reported in the December 31, 2020 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2012.
Liquidity and Capital Resources
The following is a summary of our cash flows from operating, investing and financing activities for the years ended December 31, 2020 and 2019.
SOCIAL LIFE NETWORK, INC
Consolidated
(audited)
| For the Year Ended | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
| Cash used in operating activities | $ | (422,337 | ) | $ | (1,902,563 | ) | ||
| Cash used in investing activities | - | - | ||||||
| Cash provided by financing activities | 410,973 | 1,719,069 | ||||||
| Increase in cash | $ | 193 | (183,494 | ) | ||||
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. For the 12-month period ending December 31, 2020, net cash outflows used in operating activities was $422,377 compared to net outflows of $1,902,563 for the 12-month period ending December 31, 2019. The decrease in cash in operating activities is primarily attributable to the mandatory COVID-19 shutdown, which forced our personnel to cancel all in-person contact at tradeshows and travel for the foreseeable future.
Cash Flows from Investing Activities
None.
Cash Flows from Financing Activities
For the 12-month period ending December 31, 2020, net cash flows used in financing activities was $1,719,069 compared to $410,973 for the 12-month period ended December 31, 2019. The decrease in cash in financing activities is primarily attributable to the mandatory COVID-19 shutdown, unprecedented uncertainty in the financial markets, record unemployment figures, and a near halt in business activities for the foreseeable future created a dramatic pullback in risk appetite by current and potentially new investors.
| 27 |
We are in the early stages of our business. We are required to fund growth from financing activities, and we intend to rely on a combination of equity and debt financings. Due to market conditions and the early stage of our operations, there is significant risk that we will be unable to raise such financings at all, or on terms that are not overly dilutive to our existing stockholders. We can offer no assurance that we will be able to raise such funds.
MJLINK.COM INC
(audited)
| For the Year Ended | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
| Cash used in operating activities | $ | (5,000 | ) | $ | 5,500 | |||
| Cash used in investing activities | - | - | ||||||
| Cash provided by financing activities | - | - | ||||||
| Increase in cash | $ | (5,000 | ) | 5,500 | ||||
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. For the 12-month period ending December 31, 2020, net cash flows used in operating activities was 5,000 compared to $5,500 for the 12-month period ending December 31, 2019. The decrease in cash in financing activities is primarily attributable to the mandatory COVID-19 shutdown, unprecedented uncertainty in the financial markets, record unemployment figures, and a near halt in business activities for the foreseeable future created a dramatic pullback in risk appetite by current and potentially new investors.
Cash Flows from Investing Activities
None.
Cash Flows from Financing Activities
For the 12-month period ending December 31, 2020 and 2019, net cash flows used in financing activities was zero.
Off-Balance sheet arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies
Basis of presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the estimated useful lives of property and equipment. Actual results could differ from those estimates.
| 28 |
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
Cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the year ended December 31, 2020 or 2019.
Accounts Receivable
Revenues that have been recognized but not yet received are recorded as accounts receivable. Losses on receivables will be recognized when it is more likely than not that a receivable will not be collected. An allowance for estimated uncollectible amounts will be recognized to reduce the amount of receivables to its net realizable value when considered necessary. Any allowance for uncollectible amounts is evaluated quarterly.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
| Level 1: | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
| Level 2: | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
| Level 3: | Pricing inputs that are generally observable inputs and not corroborated by market data. |
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2019.
The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis as of December 31, 2020 and 2019.
| 29 |
Revenue recognition
The Company follows paragraph 605-15-25 of the FASB Accounting Standards Codification for revenue recognition when the right of return exists. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) The seller’s price to the buyer is substantially fixed or determinable at the date of sale, (ii) The buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product. If the buyer does not pay at time of sale and the buyer’s obligation to pay is contractually or implicitly excused until the buyer resells the product, then this condition is not met., (iii) The buyer’s obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product, (iv) The buyer acquiring the product for resale has economic substance apart from that provided by the seller. This condition relates primarily to buyers that exist on paper, that is, buyers that have little or no physical facilities or employees. It prevents entities from recognizing sales revenue on transactions with parties that the sellers have established primarily for the purpose of recognizing such sales revenue, (v) The seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer, and (vi) The amount of future returns can be reasonably estimated.
The Company generates revenues through three primary sources: 1) licensing agreements from which the Company receives an annual license fee or a percentage of net profits; 2) online advertising with priced based on the CPC (cost per click) and CPM (cost per 1000 ad impressions); and 3) premium monthly digital marketing subscriptions, which provide business director and online review management for monthly subscriptions.
Income taxes
The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period that includes the enactment date.
On December 22, 2018, the Tax Cuts and Jobs Act (TCJA) was signed into law by the President of the United States. TCJA is a tax reform act that among other things, reduced corporate tax rates to 21 percent effective January 1, 2018. FASB ASC 740, Income Taxes, requires deferred tax assets and liabilities to be adjusted for the effect of a change in tax laws or rates in the year of enactment, which is the year in which the change was signed into law. Accordingly, the Company adjusted its deferred tax assets and liabilities at December 31,2019, using the new corporate tax rate of 21 percent. See Note 7.
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
Stock-based Compensation
We account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). ASC 505-50 establishes that equity-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to nonemployees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments issued as deferred stock compensation and amortize the cost over the term of the contract.
| 30 |
We account for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation—Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.
Basic and Diluted Earnings Per Share
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented.
As of December 31, 2020 and 2019, the Company had 9,603,721,664 and 2,179,256,699 potentially dilutive shares; however, the diluted loss per share is the same as the basic loss per share for the years ended December 31, 2020 and 2019, as the inclusion of any potential shares would have had an antidilutive effect due to our loss from operations.
Recently issued accounting pronouncements
In January 2018, the FASB issued ASU 2018-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2018 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of this accounting standard update.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its statements of cash flows.
In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. ASU 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. The Company has evaluating the impact of this accounting standard update and noted that it has had no material impact.
| 31 |
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), and has since issued amendments thereto, related to the accounting for leases (collectively referred to as “ASC 842”). ASC 842 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company will adopt ASC 842 on January 1, 2021. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Entities have the option to continue to apply historical accounting under Topic 840, including its disclosure requirements, in comparative periods presented in the year of adoption. An entity that elects this option will recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption instead of the earliest period presented. The Company expects to elect to apply the optional ASC 842 transition provisions beginning on January 1, 2021. Accordingly, the Company will continue to apply Topic 840 prior to January 1, 2021, including Topic 840 disclosure requirements, in the comparative periods presented. The Company expects to elect the package of practical expedients for all its leases that commenced before January 1, 2021. The Company has evaluated its real estate lease, its copier leases and its generator rental agreements. The Company expects that the adoption of ASC 842 will materially impact its balance sheet and have an immaterial impact on its results of operations. Based on the Company’s current agreements, the Company expects that upon the adoption of ASC 842 on January 1, 2021, it will record an operating lease liability of approximately $33,000 and corresponding ROU assets based on the present value of the remaining minimum rental payments associated with the Company’s leases. As the Company’s leases do not provide an implicit rate, nor is one readily available, the Company will use its incremental borrowing rate based on information available at January 1, 2021 to determine the present value of its future minimum rental payments.
In May 2014, August 2015, April 2016 and May 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09 (ASC Topic 606), Revenue from Contracts with Customers, ASU 2015-14 (ASC Topic 606) Revenue from Contracts with Customers, Deferral of the Effective Date, ASU 2016- from Contracts with Customers, ASU 2015-14 (ASC Topic 606) Revenue from Contracts with Customers, Deferral of the Effective Date, ASU 2016-10 (ASC Topic 10 (ASC Topic 606) Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing, and ASU 2016-12 (ASC Topic 606) Revenue from Contracts with 606) Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing, and ASU 2016-12 (ASC Topic 606) Revenue from Contracts with accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted for annual periods beginning after December 15, 2016. The Company adopted this process in 2020.
In January 2017, the FASB issued Accounting Standards Update No. 2017-01 (ASU 2017-01) “Business Combinations (Topic 805): Clarifying the Definition of a Business.” ASU 2017-01 provides guidance to evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. If substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single asset or a group of similar assets, the assets acquired (or disposed of) are not considered a business. We adopted ASU 2017-01 as of January 1, 2017 on a prospective basis and there was no material impact to our consolidated financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
| 32 |
Stock Warrants
During the twelve months ended December 31, 2020 and the years ended December 31, 2019, 2018, we granted zero, 1,594,853, and zero warrants, respectively, to our advisors and employees, totaling 17,894,873 warrants (the “17,894,873 Warrants”). Each warrant entitles the holder to one Social Life Network common stock share at an exercise price ranging from five to twenty cents, with a weighted average price of seven cents. The term of our warrants have a range from 3 to 5 years from the initial exercise date. The warrants will be expensed as they become exercisable beginning January 1, 2018 through April 11, 2024. During the three months ended September 30, 2019, 300,000 additional warrants vested, and as of September 30, 2020 the 17,894,873 Warrants are 100% vested. During the twelve months ended December 31, 2019, we executed a cashless conversion of 8,800,020 vested warrants in exchange for 4,400,010 common stock shares and during the twelve months ended December 31, 2019, we executed a cashless conversion of 30,000 vested warrants in exchange for 293,118,280 common stock shares during the twelve months ended December 31, 2020. The remaining 9,064,853 outstanding warrants are currently 100% vested to date and not exercised. The aggregate fair value of the warrants as of December 31, 2020 total $2,238,800, which values are based on the Black-Scholes-Merton pricing model using the following estimates: exercise price ranging from $0.00 to $0.20, stock prices ranging from $0.0001 to $0.38, risk free rates ranging from 0.10% - 1.60%, volatility ranging from 391% to 562%, and expected life of the warrants ranging from 3 to 5 years.
A summary of the status of the outstanding stock warrants and changes during the periods is presented below:
| Shares available to purchase with warrants | Weighted Average Price | Weighted Average Fair Value | ||||||||||
| Exercisable, December 31, 2018 | 16,300,000 | $ | 0.05 | $ | ||||||||
| Issued | 1,594,853 | 0.18 | $ | - | ||||||||
| Exercised | 8,800,020 | $ | 0.00 | $ | - | |||||||
| Expired | - | $ | - | |||||||||
| Outstanding, December 31, 2019 | 9,094,853 | $ | 0.07 | $ | - | |||||||
| Exercisable, December 31, 2019 | 9,094,853 | $ | 0.07 | $ | - | |||||||
| Issued | - | - | - | |||||||||
| Exercised | - | - | - | |||||||||
| Expired | - | - | - | |||||||||
| Outstanding, March 31, 2020 | 9,094,853 | $ | 0.07 | $ | - | |||||||
| Exercisable, March 31, 2020 | 9,094,853 | 0.07 | - | |||||||||
| Issued | - | - | - | |||||||||
| Exercised | - | - | - | |||||||||
| Expired | - | - | - | |||||||||
| Outstanding, June 30, 2020 | 9,094,853 | 0.07 | $ | - | ||||||||
| Exercisable, June 30, 2020 | 9,094,853 | 0.07 | - | |||||||||
| Issued | - | - | - | |||||||||
| Exercised | - | - | - | |||||||||
| Expired | - | - | - | |||||||||
| Outstanding, September 30, 2020 | 9,094,853 | 0.07 | $ | - | ||||||||
| Exercisable, September 30, 2020 | 9,094,853 | $ | 0.07 | $ | - | |||||||
| Issued | - | - | - | |||||||||
| Exercised | 30,000 | - | - | |||||||||
| Expired | - | - | - | |||||||||
| Outstanding, December 31, 2020 | 9,064,853 | 0.07 | $ | - | ||||||||
| Exercisable, December 31, 2020 | 9,064,853 | 0.07 | $ | 0.3185 | ||||||||
| Range of Exercise Prices | Number Outstanding 12/3130/2020 |
Weighted Average Remaining Contractual Life |
Weighted Average Exercise Price |
|||||||||||
| $ | 0.00 – 0.20 | 9,064,853 | 2.30 years | $ | 0.0730 | |||||||||
| 33 |
Convertible Note Payable
We have the following convertible notes payable as of December 31, 2020 and December 31, 2019:
| Note | Funding Date | Maturity Date | Interest Rate | Original Borrowing | Average Conversion Price | Number of Shares Converted | Balance at December 31, 2020 | Balance at December 31, 2019 | ||||||||||||||||||||
| Note payable (A) | April 15, 2019 | November 14, 2019 | 7 | % | $ | 100,000 | - | - | $ | - | - | |||||||||||||||||
| Note payable (B) | April 15, 2019 | April 14, 2022 | 10 | % | $ | 67,500 | $ | 0.0000 | 20,192,296 | - | - | |||||||||||||||||
| Note payable (C-1) | May 24, 2019 | December 23, 2019 | 10 | % | $ | 80,000 | $ | 0.00004 | 2,098,755,638 | - | 80,000 | |||||||||||||||||
| Note payable (C-2) | July 3, 2019 | February 2, 2020 | 10 | % | $ | 80,000 | $ | 0.0006 | 631,831,812 | 34,751 | 80,000 | |||||||||||||||||
| Note payable (D) | June 12, 2019 | June 11, 2020 | 12 | % | $ | 110,000 | $ | 0.0019 | 691,151,660 | - | 100,000 | |||||||||||||||||
| Note payable (E) | June 26, 2019 | March 25, 2020 | 12 | % | $ | 135,000 | $ | 0.00004 | 334,250,000 | 11,219 | 135,000 | |||||||||||||||||
| Note payable (F) | August 7, 2019 | August 6, 2020 | 10 | % | $ | 100,000 | $ | 0.0007 | 111,115,731 | 35,000 | 100,000 | |||||||||||||||||
| Note payable (G) | August 21, 2019 | August 20, 2020 | 10 | % | $ | 148,500 | $ | 0.0001 | 151,300,000 | 42,001 | 49,500 | |||||||||||||||||
| Note payable (H) | January 28, 2020 | January 27, 2021 | 10 | % | 63,000 | $ | 0.0001 | 1,102,499,999 | - | - | ||||||||||||||||||
| Total | $ | 0.0001 | 5,141,097,136 | $ | 122,971 | 544,500 | ||||||||||||||||||||||
| (A) | On April 15, 2019, we completed a 7-month term original issue discount convertible note and other related documents with an unaffiliated third-party funding group to generate $100,000 in additional available cash resources with a payback provision due and was paid in full on November 14, 2019 of $117,700 which includes the original issue discount of $10,000 and interest of $7,700. In connection therewith, we issued 150,000 common stock shares and additional 102,176 common stock shares on October 15, 2019, per our original agreement, 412,500 common stock warrants, and reserved 301,412,500 restricted common shares for conversion. The shares were issued during the three months ended June 30, 2019. The conversion price is fixed at $0.15. Pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $13,333 at the date of issuance when the stock price was at $0.17 per share. |
| 34 |
| (B) | On April 15, 2019, we completed convertible debenture at zero interest and other related documents with an unaffiliated third-party funding group to generate $375,000 in additional available cash resources, the funds of which will be released over the 90 days following execution of the agreement in the amounts of $67,500, $90,000, and $180,000, with a payback provision of $75,000, $100,000, and $200,000, respectively, over 36 months. In connection therewith, the Company issued 300,000 common stock warrants, and 20,192,307 restricted common shares as reserve for conversion. The note was unsecured and did not bear interest; however, the implied interest was determined to be 10% over 36 months since the note was issued at a 10% discount. Subsequently, on June 26, 2019 we nullified the agreement and other related documents with this funding group after the initial disbursement of $67,500. We refunded the initial tranche of $67,500, a 10% redemption fee of $7,500 for the principle amount plus for the original issue discount of $7,500, and other additional administrative fees of $30,000, which totaled $105,000. The 300,000 common stock warrants will remain issued and the reserved common shares will be reduced enough to satisfy the warrants. | |
| (C) | On May 24, 2019, we completed a 7-month fixed convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $240,000, which will be distributed in three equal monthly tranches of $80,000, in additional available cash resources with a payback provision of $80,000 plus the original issue discount of $4,000 or $84,000 due seven months from each funding date for each tranche, totaling $252,000. We generated $160,000 in additional available cash resources with a payback provision due on December 23, 2019 and February 2, 2020 totaling $184,800 which includes the original issue discount of $8,000 plus interest of $16,800. In connection therewith, we issued 50,000 common stock shares for two tranches with another 25,000 common stock shares to be issued with the third tranche, and we have reserved 8,000,000 which was subsequently increased to 3 billion restricted common shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded prices of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined that because the conversion price is variable and unknown, it could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $130,633 at the date of issuance when the stock price was at $0.12 per share. |
| (D) | On June 12, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $110,000 in additional available cash resources with a payback provision due on June 11, 2020 of $135,250 which includes the original issue discount of $11,000 plus interest of $14,250. In connection with the note, we have reserved 14,400,000 restricted common shares as reserve for conversion. The conversion price is a 35% discount to the average of the two (2) lowest trading prices during the previous twenty (20) trading days to the date of a Conversion Notice. We determined that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill the conversion obligation. On December 19, 2019, we converted $10,000 of principle into 495,472,078 shares of common stock at approximately $0.035 per share. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $59,231 at the date of issuance when the stock price was at $0.11 per share. | |
| (E) | On June 26, 2019, we completed a 9-month senior convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $135,000 in additional available cash resources with a payback provision due on March 25, 2020 of $168,000 which includes the original issue discount of $15,000 plus interest of $18,000. In connection with the note, we issued 100,000 common stock shares and has reserved 15,000,000, which was subsequently increased to 1 billion restricted common shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded prices of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $72,692 at the date of issuance when the stock price was at $0.11 per share. |
| 35 |
| (F) | On August 7, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $100,000 in additional available cash resources with a payback provision due on August 6, 2020 of $121,000 which includes the original issue discount of $10,000 plus interest of $11,000. In connection with the note, we issued 100,000 common stock shares and has reserved 677,973,124, which was subsequently increased to 105,769,231, restricted common shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded prices of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $73,750 at the date of issuance when the stock price was at $0.09 per share. | |
| (G) | On August 21, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $148,500, which will be distributed in three equal monthly tranches of $49,500, in additional available cash resources with a payback provision of $49,500 plus the original issue discount of $5,500 or $55,000 due twelve months from each funding date for each tranche, totaling $165,000. We generated $49,500 in additional available cash resources with a payback provision due on August 20, 2020 totaling $60,500 which includes the original issue discount of $5,500 plus interest of $5,500. In connection therewith, we issued 50,000 common stock shares for the first tranche with another 50,000 common stock shares to be issued with each additional tranche, which will total 150,000 common shares; we have reserved 15,714, which was subsequently increased to 2 billion restricted common shares for conversion. The conversion price is the 35% discount to the average of the two (2) lowest trading prices during the previous twenty (20) trading days to the date of a Conversion Notice. We determined that because the conversion price is variable and unknown, it could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $26,654 at the date of issuance when the stock price was approximately $0.07 per share. | |
| (H) | On January 28, 2020, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate up to $925,000, which will be distributed in multiple tranches to be determined, in additional available cash resources with a payback provision of principle debt without an original issue discount plus interest. We generated $63,000 in additional available cash resources with a payback provision due on January 27, 2021 totaling $69,300 which includes the principle plus interest of $6,300. We have reserved 41,331,475, which was subsequently increased to 1billion restricted common shares for conversion. The conversion price is the 39% discount to the average of the two (2) lowest trading prices during the previous fifteen (15) trading days to the date of a Conversion Notice. We determined that because the conversion price is variable and unknown, it could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $40,279 at the date of issuance when the stock price was approximately $0.01 per share. On August 24, 2020, we fully met and timely paid its debt obligation. |
| ● | On June 26, 2019, we fully met and timely paid its debt obligation to Note Payable (B). | |
| ● | On November 14, 2019, we fully met and timely paid its debt obligation to Note Payable (A). | |
| ● | On July 22, 2020, we fully met and timely paid its debt obligation to Note Payable (D). | |
| ● | On August 24, 2020, we fully met and timely paid its debt obligation to Note Payable (H). | |
| ● | On November 3, 2020, we fully met and timely paid its debt obligation to Note Payable (C-1). |
| 36 |
Notes Payable – Related Parties
We have the following related parties notes payable as of December 31, 2019 and 2018:
| Note | Issuance Date | Maturity Date | Interest Rate | Original Borrowing | Balance at 2020 | Balance at 2019 | ||||||||||||||
| Short term loan (1) | December 31, 2019 | December 31, 2020 | 0.0 | % | $ | 145,000 | $ | 113,675 | $ | 10,000 | ||||||||||
| Total notes payable – related parties, net | $ | 113,675 | $ | 10,000 | ||||||||||||||||
| (1) | On December 31, 2019, Kenneth Tapp, our Chief Executive Officer provided a short term, unsecured, non-interest-bearing loan due on December 31, 2020 or earlier. |
Concentrations
During the year ended December 31, 2020, the Company had a single vendor that accounted for 24.1% of all expenses, and 4.6% of all expenses in the same period in the prior year.
Recently Issued Accounting Pronouncements
See Note 2 of the financial statements for a discussion of recent accounting pronouncements.
Contractual Obligations
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
| 37 |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Social Life Network, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Social Life Network, Inc. as of December 31, 2020 and 2019, the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue recognition — identification of contractual terms in certain customer arrangements
As described in Note 2 to the consolidated financial statements, management assesses relevant contractual terms in its customer arrangements to determine the transaction price and recognizes revenue upon transfer of control of the promised goods or services in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Management applies judgment in determining the transaction price which is dependent on the contractual terms. In order to determine the transaction price, management may be required to estimate variable consideration when determining the amount and timing of revenue recognition.
The principal considerations for our determination that performing procedures relating to the identification of contractual terms in customer arrangements to determine the transaction price is a critical audit matter are there was significant judgment by management in identifying contractual terms due to the volume and customized nature of the Company’s customer arrangements. This in turn led to significant effort in performing our audit procedures which were designed to evaluate whether the contractual terms used in the determination of the transaction price and the timing of revenue recognition were appropriately identified and determined by management and to evaluate the reasonableness of management’s estimates.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including those related to the identification of contractual terms in customer arrangements that impact the determination of the transaction price and revenue recognition. These procedures also included, among others, (i) testing the completeness and accuracy of management’s identification of the contractual terms by examining customer arrangements on a test basis, and (ii) testing management’s process for determining the appropriate amount and timing of revenue recognition based on the contractual terms identified in the customer arrangements.
/S/ BF Borgers CPA PC
We have served as the Company’s auditor since 2017
Lakewood, CO
March 31, 2021
| 38 |
SOCIAL LIFE NETWORK, INC.
CONSOLIDATED AND CONDENSED BALANCE SHEETS
audited
| December 31, 2020 | December 31, 2019 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 193 | $ | 6,057 | ||||
| Accounts receivable | 28,052 | 20,500 | ||||||
| Accounts receivable – related party | 368,000 | 257,500 | ||||||
| Other Current Assets | - | 20,933 | ||||||
| Total Assets | $ | 396,245 | $ | 304,990 | ||||
| LIABILITIES AND STOCKHOLERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Other payables and accruals | $ | 189,169 | $ | 95,120 | ||||
| Deferred revenue | - | 29,396 | ||||||
| Total Current Liabilities | 189,169 | 95,120 | ||||||
| Loans payable – related party | 113,675 | 10,000 | ||||||
| PPP Loan | 163,111 | - | ||||||
| Convertible debt plus accrued interest – 3rd parties | 128,346 | 616,774 | ||||||
| Total Liabilities | 594,301 | 711,298 | ||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Common Stock par value $0.001 10,000,000,000 shares authorized, 6,368,332,350 and 140,777,231 shares issued, respectively | 6,368,347 | 140,791 | ||||||
| Additional paid in capital | 25,199,811 | 31,016,394 | ||||||
| Common stock to be issued | - | - | ||||||
| Accumulated deficit | (31,766,214 | ) | (31,563,493 | ) | ||||
| Total Stockholders’ Equity (Deficit) | (198,056 | ) | (406,308 | ) | ||||
| Total Liabilities and Stockholders’ Equity | $ | 396,245 | $ | 304,990 | ||||
The accompanying notes are an integral part of these financial statements.
| 39 |
SOCIAL LIFE NETWORK, INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS
audited
| For the Year Ended | ||||||||
| December 31, 2020 | December 31, 2019 | |||||||
| Revenues: | ||||||||
| Digital subscription | $ | 24,948 | $ | 7,604 | ||||
| Licensing Revenue – related party | 250,000 | 250,000 | ||||||
| Advertising | - | 404 | ||||||
| Event revenue | - | 111,480 | ||||||
| Digital marketing revenue | - | 113,000 | ||||||
| Total Revenue | 274,948 | 482,488 | ||||||
| Cost of goods sold | - | 231,081 | ||||||
| Gross Margin | 274,948 | 251,408 | ||||||
| Operating Expenses: | ||||||||
| Compensation | 134,511 | 1,052,787 | ||||||
| Stock based compensation | - | 2,087,083 | ||||||
| Sales and marketing | 10,703 | 110,552 | ||||||
| General and administrative | 391,293 | 345,290 | ||||||
| Total operating expenses | 536,507 | 3,595,712 | ||||||
| Loss from operations | (261,559 | ) | (4,635,865 | ) | ||||
| Other expense | ||||||||
| Other Expenses/ (Income) | (58,839 | ) | - | |||||
| Total other expense | - | - | ||||||
| Net (loss) Income | $ | (202,720 | ) | $ | (3,344,304 | ) | ||
| Loss per Share: Basic | (0.00 | ) | (0.03 | ) | ||||
| Loss per Share: Diluted | (0.00 | ) | (0.00 | ) | ||||
| Weighted Average Shares: | ||||||||
| Basic | 6,368,332,350 | 140,777,231 | ||||||
| Diluted | 9,603,721,664 | 2,179,256,699 | ||||||
The accompanying notes are an integral part of these financial statements.
| 40 |
SOCIAL LIFE NETWORK, INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
audited
| Common Stock B | Common Stock A | Additional Paid in | Common Stock to | Common Stock | Accumulated | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | be Issued | Receivable | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2018 | - | - | 117,817,319 | $ | 117,817 | $ | 27,763,019 | $ | 25,000 | $ | - | $ | (27,705,545 | ) | $ | 200,291 | ||||||||||||||||||||
| Common stock issued for services | - | - | 3,750,000 | 3,750 | 1,207,595 | - | - | - | 1,211,345 | |||||||||||||||||||||||||||
| Common stock issued for services to officers | - | - | 500 | 49,500 | - | - | - | - | 50,000 | |||||||||||||||||||||||||||
| Fair value of warrants issued | - | — | - | - | 292,500 | - | - | - | 292,500 | |||||||||||||||||||||||||||
| Common stock sold for cash | - | - | 14.025,529 | 14,025 | 1,362,315 | (25,000 | ) | - | - | 1,350,340 | ||||||||||||||||||||||||||
| Common stock from conversion of debt | - | - | 284,373 | 284 | 9,716 | - | - | 10,000 | ||||||||||||||||||||||||||||
| Beneficial conversion feature | - | - | - | - | 429,600 | - | - | 429,600 | ||||||||||||||||||||||||||||
| Common stock from warrant conversion | - | - | 4,400 | - | - | - | - | - | 4,400 | |||||||||||||||||||||||||||
| Net Loss for the year ended December 31, 2019 | - | - | - | - | - | - | - | (3,857,948 | ) | (3,857,948 | ) | |||||||||||||||||||||||||
| Balance, December 31, 2019 | - | $ | - | 140,777,231 | $ | 140,791 | $ | 31,016,394 | $ | - | - | $ | (31,563,493 | ) | $ | (406,308 | ) | |||||||||||||||||||
| Common stock issued for service | - | - | - | - | - | - | — | - | - | |||||||||||||||||||||||||||
| Common stock issued to officers | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Common stock from conversion of debt | - | - | 6,277,555,119 | 6,227,555 | (5,666,864 | ) | - | - | - | 560,691 | ||||||||||||||||||||||||||
| Common stock cancelled | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Fair value of warrants issued | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Net Loss for quarter ended December 31, 2020 | - | - | - | - | - | - | - | (202,720 | ) | (202,720 | ) | |||||||||||||||||||||||||
| Rounding | (1 | ) | (1 | ) | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 25,000,000 | - | 6,368,332,350 | 6,368,346 | 25,349,530 | - | - | (31,766,214 | ) | (102,338 | ) | |||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| 41 |
SOCIAL LIFE NETWORK, INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS
audited
| For the Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Cash flow from operating activities: | ||||||||
| Net Loss for the Year | $ | (202,720 | ) | $ | (3,857,948 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | - | 1,794,583 | ||||||
| Loss on conversion | - | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (65,447 | ) | (278,000 | ) | ||||
| Prepaids | (343,756 | ) | 20,933 | |||||
| Accounts payable and other accrued expenses | 247,638 | 85,120 | ||||||
| Net cash used operating activities | (364,285 | ) | (4,459,669 | ) | ||||
| Cash flows used in investing activities: | - | - | ||||||
| Cash flows from (used in) financing activities: | ||||||||
| Loans from related parties | 103,675 | 10,000 | ||||||
| Proceeds from convertible notes | 86,135 | 616,179 | ||||||
| Proceeds from PPP Loan | 163,111 | - | ||||||
| Proceeds from the sale of warrants | - | 292,500 | ||||||
| Proceeds from the sale of common stock | - | 800,390 | ||||||
| Net cash provided by financing activities | 352,921 | 1,719,069 | ||||||
| Net increase (decrease) in cash | (11,364 | ) | (183,494 | ) | ||||
| Cash at beginning of year | 11,557 | 195,051 | ||||||
| Cash at end of year | $ | 193 | $ | 11,557 | ||||
| Supplemental Disclosures: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | 15,807 | $ | - | ||||
| Income taxes | $ | - | $ | - | ||||
| Supplemental disclosure of non-cash activities: | ||||||||
| Warrants issued for services | $ | - | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
| 42 |
SOCIAL LIFE NETWORK, INC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2020
1. DESCRIPTION OF BUSINESS
Organization
Social Life Network is a Technology Business Incubator (TBI) that provides tech start-ups with seed technology development and executive leadership, making it easier for start-up founders to focus on raising capital, perfecting their business model, and growing their network usership. Our seed technology is an artificial intelligence (AI) powered social network and Ecommerce platform that leverages blockchain technology to increase speed, security and accuracy on the niche social networks that we license to the companies in our TBI.
Corporate Changes
On August 30, 1985, we were incorporated as a private corporation, CJ Industries, Inc., in California. . On February 24, 2004, we merged with Calvert Corporation, a Nevada Corporation, changing our name to Sew Cal Logo, Inc., moved its domicile to Nevada, at which time our common stock became traded under the ticker symbol SEWC.
In June 2014, Sew Cal Logo, Inc. was placed into receivership in Nevada’s 8th Judicial District (White Tiger Partners, LLC et al v. Sew Cal Logo, Inc.et al, Case No A-14-697251-C) (Dept. No.: XIII) (the “Receivership”).
On January 29, 2016, we, as the seller (the “Seller”), completed a business combination/merger agreement (the “Agreement”) with the buyer, Life Marketing, Inc., a Colorado corporation (the “Buyer”), its subsidiaries and holdings and all of the Buyer’s securities holders. We acted through the court-appointed receiver and White Tiger Partners, LLC, our judgment creditor. The Agreement provided that the then current owners of the private company, Life Marketing, Inc., become the majority shareholders pursuant to which an aggregate of 119,473,334 common stock shares were issued to our officers, composed of 59,736,667 shares each to our Chief Executive Officer, Kenneth Tapp, and Andrew Rodosevich, our then-Chief Financial Officer. Pursuant to the terms of the Agreement and related corporate actions in our domicile, Nevada:
| ● | We cancelled all previously created preferred class of stock; | |
| ● | We delivered newly issued, common stock shares equivalent to approximately 89.5% of its outstanding shares as a control block in exchange for 100% of the Buyer’s outstanding shares; | |
| ● | The court appointed receiver sold its judgment to the Buyer and the Seller agreed to pay the receiver $30,000 and the equivalent of 9.99% of the outstanding stock (post-merger) of the newly issued unregistered exempt shares; | |
| ● | Our then officers and directors were terminated, and Kenneth Tapp and Andrew Rodosevich became the Company’s Chief Executive Officer/Director and Chief Financial Officer/Director, respectively; | |
| ● | We effected a 5,000 to 1 reverse stock split effective April 11, 2016, with each shareholder retaining a minimum of 100 shares; | |
| ● | We changed our name from Sew Cal Logo, Inc. to WeedLife, Inc, and then to Social Life Network, Inc. effective in Nevada on April 11, 2016; | |
| ● | We changed our stock symbol from SEWC to WDLF; | |
| ● | We decreased our authorized common stock shares from 2,000,000,000 shares to 500,000,000 shares, effective in Nevada on March 17, 2016. |
| 43 |
On June 6, 2016, the Court issued an order in the Receivership pursuant to Section 3(a) (10) of the Securities Act of 1933, as amended , ratifying the above actions. The receiver was discharged on June 7, 2016.
On September 20, 2018, we incorporated MjLink.com, Inc. (“MjLink”), a Delaware Corporation. On February 1, 2020, MjLink.com, Inc. filed its Form 1-A Regulation A Tier 2 initial public offering, which the SEC qualified on September 28, 2020. As of September 28th, 2020 and March 29, 2020, the Company owned 15.17% of MjLink’s outstanding Class A common stock shares. We will own 2.26% of MjLink’s outstanding Class A common stock if MjLink raises the full $50,000,000 Regulation Offering Amount.
On March 4, 2020, our Board increased our number of authorized shares of Common Stock from 500,000,000 to 2,500,000,000 Common Stock Shares pursuant to an amendment to our Articles of Incorporation with the state of Nevada and adopted the Certificate of Designation of Preferences, Rights and Limitations of the Class B Common Stock, providing that each Class B Common Stock Share shall have one-hundred (100) votes on all matters presented to be voted by the holders of Common Stock. The Class B Common Stock Shares only have voting power and have no equity, cash value or any other value
Effective March 4, 2020, our board of directors authorized the issuance of twenty five million (25,000,000) Class B Common Stock Shares to Ken Tapp, our Chief Executive Officer, in return for his services as our Chief Executive Officer from February 1, 2016 to February 29, 2020, which shares are equal to two billion five hundred million (2,500,000,000) votes and have no equity, cash value or any other value.
Effective March 28, 2021, our board of directors authorized the issuance of fifty million (50,000,000) Class B Common Stock Shares to Ken Tapp, our Chief Executive Officer, in return for his services as our Chief Executive Officer for his services from March 1, 2020 to February 28, 2021, which shares are equal to five billion (5,000,000,000) votes and have no equity, cash value or any other value. As of the date of this filing, our Chief Executive Officer controls approximately 95% of shareholder votes.
On May 8, 2020, we filed Amended and Restated Articles of Incorporation (“Amended Articles”) in Nevada to increase our authorized shares from 2,500,000,000 to 10,000,000,000 Shares and our Preferred Shares to 300,000,000 Shares. Additionally, the Amended Articles authorized us from May 8, 2020 and continuing until March 31, 2021, as determined by our Board of Directors in its sole discretion, to effect a Reverse Stock Split of not less than 1 share for every 5,000 shares and no more than 1 share for every 25,000 shares (the “Reverse Stock Split”).
On December 11, 2020, we filed a Form 8-K stating that we would not be executing the Reverse Stock Split.
Since its incorporation in September 2018, MjLink functionally operated as our cannabis and hemp division, which we funded; however, effective as of August 6, 2020, MjLink operated independently of us and we no longer funded MjLink. As of December 31, 2020 and thereafter, we have owned 800,000 Class A common stock shares of MjLink at a value of $0.10 per share for an aggregate value of $80,000. The Shares were issued to us for the social networking software license fee from January 2020 through December 2020. The share count of 800,000 Class A common stock shares represents 15.17% of the total outstanding shares issued from MjLink as of December 31st, 2020.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities and commitments in the normal course of business for the foreseeable future. The Company had an accumulated deficit of $31,766,214 at December 31, 2020, had a net loss of $202,720 and used net cash of $422,337 in operating activities for the twelve months ended December 31, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company’s management intends to finance operating costs over the next twelve months with existing cash on hand and public issuance of common stock. While the Company believes that it will be successful in obtaining the necessary financing and generating revenue to fund its operations, meet regulatory requirements and achieve commercial goals, there are no assurances that such additional funding will be achieved and/or that the Company will succeed in its future operations.
| 44 |
There is no assurance that the Company will ever be profitable or that debt or equity financing will be available to the Company. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Social Life Network, Inc. and MjLink.com Inc., a wholly owned subsidiary of Social Life Network until August 6, 2020. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the estimated useful lives of property and equipment. Actual results could differ from those estimates.
Property and Equipment
Property and equipment are recorded at historical cost and depreciated on a straight-line basis over their estimated useful lives of approximately five years once the individual assets are placed in service.
Long-Lived Assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. No impairment of long-lived assets was required for the years ended December 31, 2020 and 2019.
Revenue recognition
The Company follows paragraph 605-15-25 of the FASB Accounting Standards Codification for revenue recognition when the right of return exists. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) The seller’s price to the buyer is substantially fixed or determinable at the date of sale, (ii) The buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product. If the buyer does not pay at time of sale and the buyer’s obligation to pay is contractually or implicitly excused until the buyer resells the product, then this condition is not met., (iii) The buyer’s obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product, (iv) The buyer acquiring the product for resale has economic substance apart from that provided by the seller. This condition relates primarily to buyers that exist on paper, that is, buyers that have little or no physical facilities or employees. It prevents entities from recognizing sales revenue on transactions with parties that the sellers have established primarily for the purpose of recognizing such sales revenue, (v) The seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer, and (vi) The amount of future returns can be reasonably estimated.
The Company generates revenues through three primary sources: 1) licensing agreements from which the Company receives an annual license fee or a percentage of net profits; 2) online advertising with priced based on the CPC (cost per click) and CPM (cost per 1000 ad impressions); and 3) premium monthly digital marketing subscriptions, which provide business director and online review management for monthly subscriptions.
Income Taxes
The Company accounts for income taxes under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The deferred tax assets of the Company relate primarily to operating loss carry-forwards for federal income tax purposes. A full valuation allowance for deferred tax assets has been provided because the Company believes it is not more likely than not that the deferred tax asset will be realized. Realization of deferred tax assets is dependent on the Company generating sufficient taxable income in future periods.
The Company periodically evaluates its tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying consolidated statements of operations. As of December 31, 2020 and 2019, the Company has not established a liability for uncertain tax positions.
| 45 |
Stock Warrants
During the twelve months ended December 31, 2020 and the years ended December 31, 2019, 2018, we granted zero, 1,594,853, and zero warrants, respectively, to our advisors and employees, totaling 17,894,873 warrants (the “17,894,873 Warrants”). Each warrant entitles the holder to one Social Life Network common stock share at an exercise price ranging from five to twenty cents, with a weighted average price of seven cents. The term of our warrants have a range from 3 to 5 years from the initial exercise date. The warrants will be expensed as they become exercisable beginning January 1, 2018 through April 11, 2024. During the three months ended September 30, 2019, 300,000 additional warrants vested, and as of September 30, 2020 the 17,894,873 Warrants are 100% vested. During the twelve months ended December 31, 2019, we executed a cashless conversion of 8,800,020 vested warrants in exchange for 4,400,010 common stock shares and during the twelve months ended December 31, 2019, we executed a cashless conversion of 30,000 vested warrants in exchange for 293,118,280 common stock shares during the twelve months ended December 31, 2020. The remaining 9,064,853 outstanding warrants are currently 100% vested to date and not exercised. The aggregate fair value of the warrants as of December 31, 2020 total $2,238,800, which values are based on the Black-Scholes-Merton pricing model using the following estimates: exercise price ranging from $0.00 to $0.20, stock prices ranging from $0.0001 to $0.38, risk free rates ranging from 0.10% - 1.60%, volatility ranging from 391% to 562%, and expected life of the warrants ranging from 3 to 5 years.
A summary of the status of the outstanding stock warrants and changes during the periods is presented below:
| Shares available to purchase with warrants | Weighted Average Price | Weighted Average Fair Value | ||||||||||
| Exercisable, December 31, 2018 | 16,300,000 | $ | 0.05 | $ | ||||||||
| Issued | 1,594,853 | 0.18 | $ | - | ||||||||
| Exercised | 8,800,020 | $ | 0.00 | $ | - | |||||||
| Expired | - | $ | - | |||||||||
| Outstanding, December 31, 2019 | 9,094,853 | $ | 0.07 | $ | - | |||||||
| Exercisable, December 31, 2019 | 9,094,853 | $ | 0.07 | $ | - | |||||||
| Issued | - | - | - | |||||||||
| Exercised | - | - | - | |||||||||
| Expired | - | - | - | |||||||||
| Outstanding, March 31, 2020 | 9,094,853 | $ | 0.07 | $ | - | |||||||
| Exercisable, March 31, 2020 | 9,094,853 | 0.07 | - | |||||||||
| Issued | - | - | - | |||||||||
| Exercised | - | - | - | |||||||||
| Expired | - | - | - | |||||||||
| Outstanding, June 30, 2020 | 9,094,853 | 0.07 | $ | - | ||||||||
| Exercisable, June 30, 2020 | 9,094,853 | 0.07 | - | |||||||||
| Issued | - | - | - | |||||||||
| Exercised | - | - | - | |||||||||
| Expired | - | - | - | |||||||||
| Outstanding, September 30, 2020 | 9,094,853 | 0.07 | $ | - | ||||||||
| Exercisable, September 30, 2020 | 9,094,853 | $ | 0.07 | $ | - | |||||||
| Issued | - | - | - | |||||||||
| Exercised | 30,000 | - | - | |||||||||
| Expired | - | - | - | |||||||||
| Outstanding, December 31, 2020 | 9,064,853 | 0.07 | $ | - | ||||||||
| Exercisable, December 31, 2020 | 9,064,853 | 0.07 | $ | 0.3185 | ||||||||
| 46 |
Range of Exercise Prices | Number Outstanding 12/3130/2020 | Weighted Average Remaining | Weighted Average | |||||||||
| $ 0.00 – 0.20 | 9,064,853 | 2.30 years | $ | 0.0730 | ||||||||
Net Loss Per Share
Basic net loss per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental common shares issuable upon exercise of stock options. No dilutive potential common shares were included in the computation of diluted net loss per share because their impact was anti-dilutive. As of December 31, 2020 and 2019, the Company had no outstanding options and had outstanding warrants of 9,094,853 and 9,064,853, respectively; which were excluded from the computation of net loss per share because they are anti-dilutive.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
| Level 1: | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
| Level 2: | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
| Level 3: | Pricing inputs that are generally observable inputs and not corroborated by market data. |
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2020.
The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis as of December 31, 2020 and 2019.
| 47 |
Concentrations
During the year ended December 31, 2020, the Company had a single vendor that accounted for 24.1% of all expenses, and 4.6% of all expenses in the same period in the prior year.
Recent Accounting Pronouncements
In January 2018, the FASB issued ASU 2018-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2018 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of this accounting standard update.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its statements of cash flows.
In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. ASU 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. The Company has evaluating the impact of this accounting standard update and noted that it has had no material impact.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), and has since issued amendments thereto, related to the accounting for leases (collectively referred to as “ASC 842”). ASC 842 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company will adopt ASC 842 on January 1, 2021. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Entities have the option to continue to apply historical accounting under Topic 840, including its disclosure requirements, in comparative periods presented in the year of adoption. An entity that elects this option will recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption instead of the earliest period presented. The Company expects to elect to apply the optional ASC 842 transition provisions beginning on January 1, 2021. Accordingly, the Company will continue to apply Topic 840 prior to January 1, 2021, including Topic 840 disclosure requirements, in the comparative periods presented. The Company expects to elect the package of practical expedients for all its leases that commenced before January 1, 2021. The Company has evaluated its real estate lease, its copier leases and its generator rental agreements. The Company expects that the adoption of ASC 842 will materially impact its balance sheet and have an immaterial impact on its results of operations. Based on the Company’s current agreements, the Company expects that upon the adoption of ASC 842 on January 1, 2021, it will record an operating lease liability of approximately $33,000 and corresponding ROU assets based on the present value of the remaining minimum rental payments associated with the Company’s leases. As the Company’s leases do not provide an implicit rate, nor is one readily available, the Company will use its incremental borrowing rate based on information available at January 1, 2021 to determine the present value of its future minimum rental payments.
| 48 |
In May 2014, August 2015, April 2016 and May 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09 (ASC Topic 606), Revenue from Contracts with Customers, ASU 2015-14 (ASC Topic 606) Revenue from Contracts with Customers, Deferral of the Effective Date, ASU 2016- from Contracts with Customers, ASU 2015-14 (ASC Topic 606) Revenue from Contracts with Customers, Deferral of the Effective Date, ASU 2016-10 (ASC Topic 10 (ASC Topic 606) Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing, and ASU 2016-12 (ASC Topic 606) Revenue from Contracts with 606) Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing, and ASU 2016-12 (ASC Topic 606) Revenue from Contracts with accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted for annual periods beginning after December 15, 2016. The Company has implemented this in 2020.
In January 2017, the FASB issued Accounting Standards Update No. 2017-01 (ASU 2017-01) “Business Combinations (Topic 805): Clarifying the Definition of a Business.” ASU 2017-01 provides guidance to evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. If substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single asset or a group of similar assets, the assets acquired (or disposed of) are not considered a business. We adopted ASU 2017-01 as of January 1, 2017 on a prospective basis and there was no material impact to our consolidated financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
| 49 |
3. CONVERTIBLE NOTES PAYABLE
We have the following convertible notes payable as of December 31, 2020 and December 31, 2019:
| Note | Funding Date | Maturity Date | Interest Rate | Original Borrowing | Average Conversion Price | Number of Shares Converted | Balance at December 31, 2020 | Balance at December 31, 2019 | ||||||||||||||||||||
| Note payable (A) | April 15, 2019 | November 14, 2019 | 7 | % | $ | 100,000 | - | - | $ | - | - | |||||||||||||||||
| Note payable (B) | April 15, 2019 | April 14, 2022 | 10 | % | $ | 67,500 | $ | 0.0000 | 20,192,296 | - | - | |||||||||||||||||
| Note payable (C-1) | May 24, 2019 | December 23, 2019 | 10 | % | $ | 80,000 | $ | 0.00004 | 2,098,755,638 | - | 80,000 | |||||||||||||||||
| Note payable (C-2) | July 3, 2019 | February 2, 2020 | 10 | % | $ | 80,000 | $ | 0.0006 | 631,831,812 | 34,751 | 80,000 | |||||||||||||||||
| Note payable (D) | June 12, 2019 | June 11, 2020 | 12 | % | $ | 110,000 | $ | 0.0019 | 691,151,660 | - | 100,000 | |||||||||||||||||
| Note payable (E) | June 26, 2019 | March 25, 2020 | 12 | % | $ | 135,000 | $ | 0.00004 | 334,250,000 | 11,219 | 135,000 | |||||||||||||||||
| Note payable (F) | August 7, 2019 | August 6, 2020 | 10 | % | $ | 100,000 | $ | 0.0007 | 111,115,731 | 35,000 | 100,000 | |||||||||||||||||
| Note payable (G) | August 21, 2019 | August 20, 2020 | 10 | % | $ | 148,500 | $ | 0.0001 | 151,300,000 | 42,001 | 49,500 | |||||||||||||||||
| Note payable (H) | January 28, 2020 | January 27, 2021 | 10 | % | 63,000 | $ | 0.0001 | 1,102,499,999 | - | - | ||||||||||||||||||
| Total | $ | 0.0001 | 5,141,097,136 | $ | 122,971 | 544,500 | ||||||||||||||||||||||
| (A) | On April 15, 2019, we completed a 7-month term original issue discount convertible note and other related documents with an unaffiliated third-party funding group to generate $100,000 in additional available cash resources with a payback provision due. The note was paid in full on November 14, 2019 of $117,700 which includes the original issue discount of $10,000 and interest of $7,700. In connection therewith, we issued 150,000 common stock shares and additional 102,176 common stock shares on October 15, 2019, per our original agreement, 412,500 common stock warrants, and reserved 301,412,500 restricted common shares for potential conversion if the note was note paid in full. The shares were issued during the three months ended June 30, 2019. The conversion price is fixed at $0.15. Pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $13,333 at the date of issuance when the stock price was at $0.17 per share. This note was paid in full on November 14, 2019. | |
| (B) | On April 15, 2019, we completed convertible debenture at zero interest and other related documents with an unaffiliated third-party funding group to generate $375,000 in additional available cash resources, the funds of which will be released over the 90 days following execution of the agreement in the amounts of $67,500, $90,000, and $180,000, with a payback provision of $75,000, $100,000, and $200,000, respectively, over 36 months. In connection therewith, the Company issued 300,000 common stock warrants, and 20,192,307 restricted common shares as reserve for potential conversion if the note was note paid in full. The note was unsecured and did not bear interest; however, the implied interest was determined to be 10% over 36 months since the note was issued at a 10% discount. Subsequently, on June 26, 2019 we nullified the agreement and other related documents with this funding group after the initial disbursement of $67,500. We refunded the initial tranche of $67,500, a 10% redemption fee of $7,500 for the principle amount plus for the original issue discount of $7,500, and other additional administrative fees of $30,000, which totaled $105,000. This note was paid in full on June 26, 2019. | |
| (C) | On May 24, 2019, we completed a 7-month fixed convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $240,000, which will be distributed in three equal monthly tranches of $80,000, in additional available cash resources with a payback provision of $80,000 plus the original issue discount of $4,000 or $84,000 due seven months from each funding date for each tranche, totaling $252,000. We received only two of the three tranches of $80,000, generating $160,000 in additional available cash resources with a payback provision due on December 23, 2019 and February 2, 2020 totaling $184,800 which includes the original issue discount of $8,000 plus interest of $16,800. In connection therewith, we issued 50,000 common stock shares for two tranches with another 25,000 common stock shares to be issued with the third tranche, and we have reserved 8,000,000 which was subsequently increased to 3 billion restricted common shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded prices of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined that because the conversion price is variable and unknown, it could not determine if it had enough reserve shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $130,633 at the date of issuance when the stock price was at $0.12 per share. This note was paid in full on January 25, 2021. |
| 50 |
| (D) | On June 12, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $110,000 in additional available cash resources with a payback provision due on June 11, 2020 of $135,250 which includes the original issue discount of $11,000 plus interest of $14,250. In connection with the note, we have reserved 14,400,000 restricted common shares as reserve for conversion. The conversion price is a 35% discount to the average of the two (2) lowest trading prices during the previous twenty (20) trading days to the date of a Conversion Notice. We determined that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill the conversion obligation. On December 19, 2019, we converted $10,000 of principle into 495,472,078 shares of common stock at approximately $0.035 per share. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $59,231 at the date of issuance when the stock price was at $0.11 per share. This note was paid in full on February 5, 2021. | |
| (E) | On June 26, 2019, we completed a 9-month senior convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $135,000 in additional available cash resources with a payback provision due on March 25, 2020 of $168,000 which includes the original issue discount of $15,000 plus interest of $18,000. In connection with the note, we issued 100,000 common stock shares and has reserved 15,000,000, which was subsequently increased to 1 billion restricted common shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded prices of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $72,692 at the date of issuance when the stock price was at $0.11 per share. This note was paid in full on January 7, 2021. | |
| (F) | On August 7, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $100,000 in additional available cash resources with a payback provision due on August 6, 2020 of $121,000 which includes the original issue discount of $10,000 plus interest of $11,000. In connection with the note, we issued 100,000 common stock shares and has reserved 677,973,124, which was subsequently increased to 105,769,231, restricted common shares for conversion. The conversion price is the lower of $0.08 or sixty five percent (65%) of the 2 lowest traded prices of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion. We determined that because the conversion price is variable and unknown, it could not determine if we had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $73,750 at the date of issuance when the stock price was at $0.09 per share. This note was paid in full on July 28, 2020. | |
| (G) | On August 21, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $148,500, which would be distributed in three equal monthly tranches of $49,500. Only one tranche of $49,500 was received, and created available cash resources with a payback provision of $49,500 plus the original issue discount of $5,500 or $55,000 due twelve months from each funding date for each tranche, totaling $165,000. We generated $49,500 in additional available cash resources with a payback provision due on August 20, 2020 totaling $60,500 which includes the original issue discount of $5,500 plus interest of $5,500. In connection therewith, we issued 50,000 common stock shares for the first tranche with another 50,000 common stock shares to be issued with each additional tranche, which will total 150,000 common shares; we have reserved 15,714, which was subsequently increased to 2 billion restricted common shares for conversion. The conversion price is the 35% discount to the average of the two (2) lowest trading prices during the previous twenty (20) trading days to the date of a Conversion Notice. We determined that because the conversion price is variable and unknown, it could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $26,654 at the date of issuance when the stock price was approximately $0.07 per share. This note was paid in full on January 4, 2021. |
| 51 |
| (H) | On January 28, 2020, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate up to $925,000, which will be distributed in multiple tranches to be determined, in additional available cash resources with a payback provision of principle debt without an original issue discount plus interest. We received only one tranche and generated $63,000 in additional available cash resources with a payback provision due on January 27, 2021 totaling $69,300 which includes the principle plus interest of $6,300. We reserved 41,331,475, which was subsequently increased to 1billion restricted common shares for conversion. The conversion price is the 39% discount to the average of the two (2) lowest trading prices during the previous fifteen (15) trading days to the date of a Conversion Notice. We determined that because the conversion price is variable and unknown, it could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, we determined that the beneficial conversion feature of the note created a fair value discount of $40,279 at the date of issuance when the stock price was approximately $0.01 per share. This note was paid in full on August 24, 2020. |
| ● | On June 26, 2019, we fully met and timely paid its debt obligation to Note Payable (B). | |
| ● | On November 14, 2019, we fully met and timely paid its debt obligation to Note Payable (A). | |
| ● | On July 28, 2020, we fully met and timely paid its debt obligation to Note Payable (F). | |
| ● | On August 24, 2020, we fully met and timely paid its debt obligation to Note Payable (H). | |
| ● | On November 3, 2020, we fully met and timely paid its debt obligation to Note Payable (C-1). | |
| ● | On January 4, 2021, we fully met and timely paid its debt obligation to Note Payable (G). | |
| ● | On January 7, 2021, we fully met and timely paid its debt obligation to Note Payable (E). | |
| ● | On February 5, 2021, we fully met and timely paid its debt obligation to Note Payable (D). | |
| ● | On January 25, 2021, we fully met and timely paid its debt obligation to Note Payable (C-2). |
4. NOTES PAYABLE – RELATED PARTIES
The Company has the following related parties notes payable as of December 31, 2020 and 2019:
| Note | Issuance Date | Maturity Date | Interest Rate | Original Borrowing | Balance at 2020 | Balance at 2019 | ||||||||||||||
| Short term loan (1) | December 31, 2019 | December 31, 2020 | 0.0 | % | $ | 113,675 | $ | 113,675 | $ | 10,000 | ||||||||||
| Total notes payable – related parties, net | $ | 113,675 | $ | 10,000 | ||||||||||||||||
| (1) | On December 31, 2019, Kenneth Tapp, our Chief Executive Officer provided a short term, unsecured, non-interest-bearing loan due on December 31, 2020 or earlier. |
5. COMMON STOCK
Class A
For the quarter ending December 31, 2019, we issued 2,200,000 stock shares to three professionals for their services. The shares are valued at $0.10, the closing stock price on the date of grant, for total non-cash expense of $220,000. In addition, we entered into subscription agreements with 6 accredited investors. We sold 3,550,000 common stock shares to the accredited investors at $0.10 per share for total gross proceeds of $355,000. As of March 31, 2020, we received all the funds. We also issued 102,176 common shares to a single lender as inducement for their services at $0.00. Lastly, one lender converted their debt into 284,373 common shares at $0.04 for a value of $10,000. These shares were all issued during the three months ended March 31, 2020.
| 52 |
For the quarter ending March 31, 2020, several lenders converted their debt into 415,479,876 common shares at an average of $0.00140 for a value of $232,257.
After unanimous Board of Director approval and Shareholder Approval by consent of over 51% of the Company’s outstanding shares, filing of the Company’s Definitive Information Statement, and notice to shareholders, we filed an Amended and Restated Articles of Incorporation to increase its authorized shares with the State of Nevada, which was approved by the State of Nevada on March 4, 2020, and increased our authorized Common Stock Shares to 2.5 billion shares.
After unanimous Board of Director approval and Shareholder Approval by consent of over 51% of outstanding shares, filing of our Definitive Information Statement and notice to shareholders, we filed Amended and Restated Articles of Incorporation (“Amended Articles”) to increase its authorized shares with the State of Nevada, which was approved by the State of Nevada on May 8, 2020, which amended articles increased our authorized Class A Common Stock Shares to Ten Billion (10,000,000,000) Shares, Class B Common Stock Shares to Four Hundred Million (400,000,000) Shares, and the Preferred Shares to Three Hundred Million (300,000,000) Shares. Additionally, the Amended Articles authorized us from May 8, 2020 and continuing until March 31, 2021, as determined by our Board of Directors in its sole discretion, to effect a Reverse Stock Split of not less than 1 share for every 5,000 shares and no more than 1 share for every 25,000 shares. On December 11th, 2020, we filed a Form 8-K stating that we would not be executing the Reverse Stock Split.
For the quarter ending June 30, 2020, several lenders converted their debt into 774,546,579 common shares at an average of $0.00060 for a value of $44,693.
For the quarter ending September 30, 2020, several lenders converted their debt into 2,125,389,202 common shares at an average of $0.00005 for a value of $111,977.
For the quarter ending December 31, 2020, several lenders converted their debt into 2,619,030,182 common shares at an average of $0.00082 for a value of $133,902.
Class B
Effective March 4, 2020, our board of directors authorized the issuance of twenty five million (25,000,000) Class B Common Stock Shares to Ken Tapp, our Chief Executive Officer, in return for his services as our Chief Executive Officer from February 1, 2016 to February 29, 2020, which shares are equal to two billion five hundred million (2,500,000,000) votes and have no equity, cash value or any other value.
Effective March 28, 2021, our board of directors authorized the issuance of fifty million (50,000,000) Class B Common Stock Shares to Ken Tapp, our Chief Executive Officer, in return for his services as our Chief Executive Officer for his services from March 1, 2020 to February 28, 2021, which shares are equal to five billion (5,000,000,000) votes and have no equity, cash value or any other value. As of the date of this filing, our Chief Executive Officer controls approximately 95% of shareholder votes.
Board and Executive Appointments
On January 21, 2020, we appointed Britt Glassburn, Brian Lazarus, Gregory Todd Markey, and Lynn Murphy as Social Life Board Directors.
Subsequent Events
Convertible Debt Notes
Since December 31, 2020 three of our debt holders have converted $271,174 of principle into 709,449,234 shares of common stock at approximately $0.0005 per share.
| 53 |
The following convertible notes, which represent all convertible notes in the company, as of February 5, 2021 have been fully met and paid:
| Note | Funding Date | Maturity Date | Interest Rate | Original Borrowing | Average Conversion Price | Number of Shares Converted | Balance at March 30, 2021 | |||||||||||||||||
| Note payable (A) | April 15, 2019 | November 14, 2019 | 7 | % | $ | 100,000 | - | - | $ | - | ||||||||||||||
| Note payable (B) | April 15, 2019 | April 14, 2022 | 10 | % | $ | 67,500 | $ | 0.0000 | 20,192,296 | - | ||||||||||||||
| Note payable (C-1) | May 24, 2019 | December 23, 2019 | 10 | % | $ | 80,000 | $ | 0.00004 | 2,098,755,638 | - | ||||||||||||||
| Note payable (C-2) | July 3, 2019 | February 2, 2020 | 10 | % | $ | 160,000 | $ | 0.0006 | 631,866,563 | - | ||||||||||||||
| Note payable (D) | June 12, 2019 | June 11, 2020 | 12 | % | $ | 110,000 | $ | 0.0019 | 691,151,660 | - | ||||||||||||||
| Note payable (E) | June 26, 2019 | March 25, 2020 | 12 | % | $ | 135,000 | $ | 0.00004 | 334,261,219 | - | ||||||||||||||
| Note payable (F) | August 7, 2019 | August 6, 2020 | 10 | % | $ | 100,000 | $ | 0.0007 | 111,150,731 | - | ||||||||||||||
| Note payable (G) | August 21, 2019 | August 20, 2020 | 10 | % | $ | 148,500 | $ | 0.0001 | 151,300,000 | - | ||||||||||||||
| Note payable (H) | January 28, 2020 | January 27, 2021 | 10 | % | 63,000 | $ | 0.0001 | 1,102,499,999 | - | |||||||||||||||
| Total | $ | 0.0001 | 5,141,178,106 | $ | - | |||||||||||||||||||
| ● | On June 26, 2019, we fully met and paid its debt obligation to Note Payable (B). | |
| ● | On November 14, 2019, we fully met and paid its debt obligation to Note Payable (A). | |
| ● | On July 28, 2020, we fully met and paid its debt obligation to Note Payable (F). | |
| ● | On August 24, 2020, we fully met and paid its debt obligation to Note Payable (H). | |
| ● | On November 3, 2020, we fully met and paid its debt obligation to Note Payable (C-1). | |
| ● | On January 4, 2021, we fully met and paid its debt obligation to Note Payable (G). | |
| ● | On January 7, 2021, we fully met and paid its debt obligation to Note Payable (E). | |
| ● | On February 5, 2021, we fully met and paid its debt obligation to Note Payable (D). | |
| On January 25, 2021, we fully met and paid its debt obligation to Note Payable (C-2). |
Other Obligations
For the year ending December 31, 2020, Kenneth, Tapp, from time-to-time, provided short-term interest free loans amounting to $113,675 for the Company’s operations. For the first quarter ending 2021, Kenneth Tapp provided an additional net amount of $14,100 in short term interest free loans, totaling $127,775 liquidity as of March 30, 2021.
On April 21, 2020, under the Payroll Protection Program, we received a forgivable loan of $37,411, and on June 10, 2020, we received an additional forgivable loan of $125,700. Both loans were given to small businesses by the Small Business Application (SBA) to help support employees of the companies, as financial aid, in order to sustain businesses during the mandatory COVID-19 lockdown. We anticipate the loan will be forgiven.
For the year ending December 31, 2020, MjLink owed Social Life Network $364,688.00. That expense was paid in full on March 12, 2021.
6. INCOME TAXES
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate of 21% plus the Colorado income tax rate of 4.63% - combined rate of 25.63% - is being used due to the new tax law recently enacted.
| 54 |
Net deferred tax assets consist of the following components as of December 31:
| 2020 | 2019 | |||||||
| Deferred Tax Assets: | ||||||||
| NOL Carryover | $ | (52,000 | ) | $ | (452,600 | ) | ||
| Deferred tax liabilities: | ||||||||
| Less valuation allowance | (52,000 | ) | (452,600 | ) | ||||
| Net deferred tax assets | $ | - | $ | - | ||||
The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to tax-effected income from continuing operations for the period ended December 31, due to the following:
| 2020 | 2019 | |||||||
| Book loss | $ | (52,000 | ) | $ | (988,800 | ) | ||
| Meals and entertainment | - | 1,200 | ||||||
| Warrant expense | - | 75,000 | ||||||
| Stock based compensation | - | 460,000 | ||||||
| Valuation allowance | (52,000 | ) | (452,600 | ) | ||||
| $ | - | $ | - | |||||
At December 31, 2020, the Company had net operating loss carry forwards of approximately $0 that may be offset against future taxable income from the year 2019 to 2036. No tax benefit has been reported in the December 31, 2020 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2012.
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company’s executive and administrative office is located at 3465 Gaylord Court, Suite A509, Englewood, Colorado 80113.
The Company had total rent expense for the year ended December 31, 2020 and 2019 of $17,052 and $33,406, respectively, which is recorded as part of General and Administrative expenses in the Statement of Operations.
Litigation
The Company does not have any pending litigation.
8. SUBSEQUENT EVENTS
Convertible Debt Notes
Since December 31, 2020 three of our debt holders have converted $271,174 of principle into 709,449,234 shares of common stock at approximately $0.0005 per share.
| 55 |
The following convertible notes, which represent all convertible notes in the company, as of February 5, 2021 have been fully met and paid:
| Note | Funding Date | Maturity Date | Interest Rate | Original Borrowing | Average Conversion Price | Number of Shares Converted | Balance at March 30, 2021 | |||||||||||||||||
| Note payable (A) | April 15, 2019 | November 14, 2019 | 7 | % | $ | 100,000 | - | - | $ | - | ||||||||||||||
| Note payable (B) | April 15, 2019 | April 14, 2022 | 10 | % | $ | 67,500 | $ | 0.0000 | 20,192,296 | - | ||||||||||||||
| Note payable (C-1) | May 24, 2019 | December 23, 2019 | 10 | % | $ | 80,000 | $ | 0.00004 | 2,098,755,638 | - | ||||||||||||||
| Note payable (C-2) | July 3, 2019 | February 2, 2020 | 10 | % | $ | 160,000 | $ | 0.0006 | 631,866,563 | - | ||||||||||||||
| Note payable (D) | June 12, 2019 | June 11, 2020 | 12 | % | $ | 110,000 | $ | 0.0019 | 691,151,660 | - | ||||||||||||||
| Note payable (E) | June 26, 2019 | March 25, 2020 | 12 | % | $ | 135,000 | $ | 0.00004 | 334,261,219 | - | ||||||||||||||
| Note payable (F) | August 7, 2019 | August 6, 2020 | 10 | % | $ | 100,000 | $ | 0.0007 | 111,150,731 | - | ||||||||||||||
| Note payable (G) | August 21, 2019 | August 20, 2020 | 10 | % | $ | 148,500 | $ | 0.0001 | 151,300,000 | - | ||||||||||||||
| Note payable (H) | January 28, 2020 | January 27, 2021 | 10 | % | 63,000 | $ | 0.0001 | 1,102,499,999 | - | |||||||||||||||
| Total | $ | 0.0001 | 5,141,178,106 | $ | - | |||||||||||||||||||
| ● | On June 26, 2019, we fully met and paid its debt obligation to Note Payable (B). | |
| ● | On November 14, 2019, we fully met and paid its debt obligation to Note Payable (A). | |
| ● | On July 28, 2020, we fully met and paid its debt obligation to Note Payable (F). | |
| ● | On August 24, 2020, we fully met and paid its debt obligation to Note Payable (H). | |
| ● | On November 3, 2020, we fully met and paid its debt obligation to Note Payable (C-1). | |
| ● | On January 4, 2021, we fully met and paid its debt obligation to Note Payable (G). | |
| ● | On January 7, 2021, we fully met and paid its debt obligation to Note Payable (E). | |
| ● | On February 5, 2021, we fully met and paid its debt obligation to Note Payable (D). | |
| On January 25, 2021, we fully met and paid its debt obligation to Note Payable (C-2). |
Other Obligations
For the year ending December 31, 2020, Kenneth, Tapp, from time-to-time, provided short-term interest free loans amounting to $113,675 for the Company’s operations. For the first quarter ending 2021, Kenneth Tapp provided an additional net amount of $14,100 in short term interest free loans, totaling $127,775 liquidity as of March 30, 2021.
On April 21, 2020, under the Payroll Protection Program, the Company received a forgivable loan of $37,411, and on June 10, 2020, the Company received an additional forgivable loan of $125,700. Both loans were given to small businesses by the Small Business Application (SBA) to help support employees of the companies, as financial aid, in order to sustain businesses during the mandatory COVID-19 lockdown. We anticipate the loan will be forgiven.
For the year ending December 31, 2020, MjLink owed Social Life Network $364,688.00. That expense was paid in full on March 12, 2021.
8A. Subsequent Event
The Company completed a December 31, 2020 Division Spin-Off Agreement (“Spin-Off Agreement) between MjLink.com, Inc. (“MjLink”) and the Company whereby the Parties agreed to cease the Company operating MjLink as its cannabis division and going forward MjLink would conduct its own operations. The Spin-Off has a subsequent financial effect that could potentially increase the profit margins for the Company by removing the ongoing operating expenses of MjLink as a division. The Company expects a net gain to occur in the first quarter of 2021 as a subsequent event of the spin-off of MjLink as a division. MjLink is expected to be worth more as an independent entity than as a division of the Company. MjLink issued the Company 800,000 of its Common Stock Shares or 15.17% of its outstanding shares for MjLink’s use of the Company’s license from January 1st 2020 to December 31, 2020. Ken Tapp is the Chief Executive Officer of both the Company and MjLink and thus the transaction was treated as a related party transaction. To reflect the true intention of the Parties to the Spin-Off Agreement, the Parties then agreed in an Amended Spin-Off Agreement to reflect an effective date of 12:01 am on January 1, 2021 regarding the Spin-Off transaction (“Effective Date”). Apart from the Effective Date there were no further changes to the Spin-Off Agreement.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
| 56 |
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), our chief executive officer, who is our principal executive officer and principal financial officer, evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this annual report on Form 10-K. Based upon that evaluation, our chief executive officer, concluded that, as at December 31, 2020, our disclosure controls and procedures were not effective: (1) to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure. The conclusion reached by our chief executive officer was a result of the material weaknesses described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses:
| (i) | inadequate segregation of duties and effective risk assessment; and | |
| (ii) | insufficient staffing resources resulting in financial statement closing process. |
To address these material weaknesses, our chief executive officer performed additional analyses and other procedures, including retaining the assistance of qualified accounting professionals to assist with the preparation of our financial statements, to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
Remediation of Material Weaknesses
We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies. We intend to consider the results of our remediation efforts and related testing as part of our year-end 2020 assessment of the effectiveness of our internal control over financial reporting.
Due to our size and nature, segregation of all conflicting duties has not always been possible and may not be economically feasible. However, we are in the process of implementing processes and procedures intended to mitigate any material weaknesses identified.
Subject to receipt of additional financing, we intend to undertake the below remediation measures to address the material weaknesses described in this Form 10-K. Such remediation activities include the following:
| (i) | we intend to update the documentation of our internal control processes, including formal risk assessment of our financial reporting processes; and | |
| (ii) | we intend to implement procedures pursuant to which we can ensure segregation of duties and hire additional resources to ensure appropriate review and oversight. |
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
| 57 |
Internal Control over Financial Reporting
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, our chief executive officer and chief financial officer conducted an assessment, including testing, using the criteria in Internal Control — Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our system of internal control over financial reporting is designed 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Based on our evaluation under the framework in COSO, our chief executive officer and chief financial officer have concluded that our internal controls over financial reporting were ineffective as of December 31, 2020 due to the above-noted material weaknesses with respect to disclosure controls and procedures. The weaknesses and their related risks are not uncommon in a company of our size because of the limitations in the size and number of staff. We believe we have taken initial steps to mitigate these risks by consulting outside advisors where necessary.
Our management believes that because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Company plans to institute NetSuite as our Enterprise Resource Planning (ERP) tool to begin moving towards an adequate internal control over our financial reporting for fiscal year 2020.
None.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
All directors of our company hold office until the next annual meeting of our stockholders or until their successors have been elected and qualified, or until their death, resignation or removal. The executive officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office.
| 58 |
Our directors and executive officers, their ages, positions held, and duration of such, are as follows:
| Name | Position Held with Our Company | Age | Date First Elected or Appointed | |||
| Kenneth Tapp | Chairman, Chief Executive Officer, & Chief Technology Officer of Social Life Network and MjLink | 51 | June 6, 2016 | |||
| Britt Glassburn | Board Member of Social Life Network | 55 | January 21, 2020 | |||
| Brian Lazarus | Board Member of Social Life Network and MjLink | 65 | January 21, 2020 | |||
| Gregory Todd Markey | President of MjMicro and Board Member of Social Life Network and MjLink | 36 | January 21, 2020 | |||
| Lynn Murphy | Board Member of Social Life Network | 57 | January 21, 2020 |
Business Experience
During the past five years, none of the persons identified above has been involved in any bankruptcy or insolvency proceeding or convicted in a criminal proceeding, excluding traffic violations and other minor offenses. There is no arrangement or understanding between the persons described above and any other person pursuant to which the person was selected to his or her office or position.
The following is a brief account of the education and business experience of directors and executive officers during at least the past five years, indicating their principal occupation during the period, and the name and principal business of the organization by which they were employed:
Kenneth Tapp, Chairman of the Board, Chief Executive Officer, Chief Technology Officer
Ken Tapp has served as our Chairman, Chief Executive Officer and Chief Technology Officer since our inception. Ken Tapp has spent 30 years in the internet technology industry, including executive positions at MOVE.com and for the past 25 years as a director or executive at more than two dozen internet technology startups. Mr. Tapp has built and exited, through initial public offerings and acquisitions, 13 technology startups from 1996 through our inception in January of 2013.
Britt Glassburn, Board Member
Britt Glassburn was appointed as our Director on January 21, 2020. Britt Glassburn has spent nearly 30 years in the residential real estate industry, and over the past seven years focusing her attention to increasing the business acumen of real estate professionals through best-in-class technology tools and industry specific coaching.
Brian Lazarus, Board Member
Brian Lazarus was appointed as our Director on January 21, 2020. Brian Lazarus has spent over 40 years producing notable entertainment and experiential events with specialized skills at professional audio, video and digital tech. He is the co-founder and Executive Vice President of Media Star Promotions, one of the nation’s top branding, touring and strategic marketing agencies.
Gregory Todd Markey, Board Member
Todd Markey was appointed as our Director on January 21, 2020. Mr. Markey has more than 10 years of finance and capital markets experience and is a trusted expert for micro-cap to small cap companies in expanding their investor and public relations. Additionally, he has assisted companies in the pre-IPO and up-listing process, from the OTC markets onto Nasdaq and NYSE stock exchanges.
Lynn Murphy, Board Member
Lynn Murphy was appointed as our Director on January 21, 2020. Lynn Murphy has specialized in sales and marketing as the founder and owner of several companies over the past 30 years. With an MBA and extensive C Suite level negotiations experience, he has grown companies from start-up to multi-million dollar revenue generators.
| 59 |
Family Relationships
There are no family relationships between any director or executive officer of our company.
Significant Employees
We do not currently have any significant employees other than our executive officers.
Involvement in Certain Legal Proceedings
None of our directors and executive officers has been involved in any of the following events during the past ten years:
| (a) | any petition under the federal bankruptcy laws or any state insolvency laws filed by or against, or an appointment of a receiver, fiscal agent or similar officer by a court for the business or property of such person, or any partnership in which such person was a general partner at or within two years before the time of such filing, or any corporation or business association of which such person was an executive officer at or within two years before the time of such filing; | |
| (b) | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences); | |
| (c) | being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining such person from, or otherwise limiting, the following activities: (i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; engaging in any type of business practice; or (iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws; | |
| (d) | being the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (c)(i) above, or to be associated with persons engaged in any such activity; | |
| (e) | being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission to have violated a federal or state securities or commodities law, and the judgment in such civil action or finding by the Securities and Exchange Commission has not been reversed, suspended, or vacated; | |
| (f) | being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; | |
| (g) | being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or | |
| (h) | being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
| 60 |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors and persons who own more than 10% of the outstanding Shares to file reports of ownership and changes in ownership concerning their Shares with the SEC and to furnish us with copies of all Section 16(a) forms they file. We are required to disclose delinquent filings of reports by such persons.
Based solely on the copies of such reports and amendments thereto received by us, or written representations that no filings were required, we believe that all Section 16(a) filing requirements applicable to our executive officers and directors and 10% stockholders were met for the year ended December 31, 2020.
Code of Ethics
We have adopted a formal code of ethics within the meaning of Item 406 of Regulation S-K promulgated under the Securities Act, that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions that establishes, among other things, procedures for handling actual or apparent conflicts of interest.
Committees of Board of Directors
Audit
We do not have an audit committee that provides independent review and oversight of a company’s financial reporting processes, internal controls, and independent auditors. Management is responsible for establishing and maintaining adequate internal control over our financial reporting. Our internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report.
Governance
We do not have any defined policy or procedure requirements for our stockholders to submit recommendations or nominations for directors. We do not currently have any specific or minimum criteria for the election of nominees to our board of directors and we do not have any specific process or procedure for evaluating such nominees. Our board of directors assesses all candidates, whether submitted by management or stockholders, and makes recommendations for election or appointment.
Compensation
Our board of directors is responsible for determining compensation for the directors of our company to ensure it reflects the responsibilities and risks of being a director of a public company.
Other Board Committees
We have no committees of our board of directors.
A stockholder who wishes to communicate with our board of directors may do so by directing a written request to the address appearing on the first page of this annual report.
| 61 |
Corporate Governance
General
Our board of directors believes that good corporate governance improves corporate performance and benefits all stockholders. Canadian National Policy 58-201 Corporate Governance Guidelines provides non-prescriptive guidelines on corporate governance practices for reporting issuers such as the Company. In addition, Canadian National Instrument 58-101 Disclosure of Corporate Governance Practices prescribes certain disclosure by our company of its corporate governance practices. This disclosure is presented below.
Orientation and Continuing Education
We have an informal process to orient and educate new recruits to the board regarding their role on the board, our committees and our directors, as well as the nature and operations of our business. This process provides for an orientation with key members of the management staff, and further provides access to materials necessary to inform them of the information required to carry out their responsibilities as a board member. This information includes the most recent board approved budget, the most recent annual report, the audited financial statements and copies of the interim quarterly financial statements.
The board does not provide continuing education for its directors. Each director is responsible to maintain the skills and knowledge necessary to meet his obligations as director.
Ethical Business Conduct
We have adopted a formal code of ethics within the meaning of Item 406 of Regulation S-K promulgated under the Securities Act of 1933, as amended, that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions that establishes, among other things, procedures for handling actual or apparent conflicts of interest.
We have found that the fiduciary duties placed on individual directors by our governing corporate legislation and the common law and the restrictions placed by applicable corporate legislation on an individual director’s participation in decisions of the board of directors in which the director has an interest have been sufficient to ensure that the board of directors operates in the best interests of our company.
Nomination of Directors
As of March 29, 2021, we had not affected any material changes to the procedures by which our stockholders may recommend nominees to our board of directors. Our board of directors does not have a policy with regards to the consideration of any director candidates recommended by our stockholders. Our board of directors has determined that it is in the best position to evaluate our company’s requirements as well as the qualifications of each candidate when the board considers a nominee for a position on our board of directors. If stockholders wish to recommend candidates directly to our board, they may do so by sending communications to the president of our company at the address on the cover of this annual report.
Compensation
Our board of directors is responsible for determining compensation for the directors of our company to ensure it reflects the responsibilities and risks of being a director of a public company.
Other Board Committees
We do not have an audit committee that provides independent review and oversight of a company’s financial reporting processes, internal controls, and independent auditors
We have no committees of our board of directors. We do not have any defined policy or procedure requirements for our stockholders to submit recommendations or nominations for directors. We do not currently have any specific or minimum criteria for the election of nominees to our board of directors and we do not have any specific process or procedure for evaluating such nominees. Our board of directors assesses all candidates, whether submitted by management or stockholders, and makes recommendations for election or appointment.
| 62 |
A stockholder who wishes to communicate with our board of directors may do so by directing a written request to the address appearing on the first page of this annual report.
Assessments
The board intends that individual director assessments be conducted by other directors, taking into account each director’s contributions at board meetings, service on committees, experience base, and their general ability to contribute to one or more of our company’s major needs. However, due to our stage of development and our need to deal with other urgent priorities, the board has not yet implemented such a process of assessment.
Director Independence
We are not currently listed on the Nasdaq Stock Market, which requires independent directors. In evaluating the independence of our members and the composition of the committees of our board of directors, we utilize the definition of “independence” as that term is defined by applicable listing standards of the Nasdaq Stock Market and Securities and Exchange Commission rules, including the rules relating to the independence standards of an audit committee and the non-employee director definition of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended.
According to the Nasdaq definition, we believe Brian Lazarus is an independent director because he is not an officer of our company and not a beneficial owner of a material amount of shares of our common stock and has not received compensation from us in excess of the relevant limits. We believe Lynn Murphy is an independent director because he is not our officer and not a beneficial owner of a material amount of our common stock shares, and we have not paid him compensation in excess of the relevant limits. We believe Britt Glassburn is an independent director because he is not our officer and not a beneficial owner of a material amount of shares of our common stock, and we have not paid him compensation in excess of the relevant limits. We have determined that Kenneth Tapp and Gregory Todd Markey are not independent because they are our employees and they receive compensation directly or indirectly from us for consulting and employment services, respectively.
Our board of directors expects to continue to evaluate its independence standards and whether and to what extent the composition of our board of directors and its committees meets those standards. We ultimately intend to appoint such persons to our board and committees of our board as are expected to be required to meet the corporate governance requirements imposed by a national securities exchange. Therefore, we intend that a majority of our directors will be independent directors of which at least one director will qualify as an “audit committee financial expert,” within the meaning of Item 407(d)(5) of Regulation S-K, as promulgated under the Securities Act of 1933, as amended.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation
The particulars of compensation paid to the following persons:
| (a) | all individuals serving as our principal executive officer during the year ended December 31, 2020; | |
| (b) | each of our two most highly compensated executive officers who were serving as executive officers at the end of the year ended December 31, 2020; and |
| 63 |
who we will collectively refer to as the named executive officers, for all services rendered in all capacities to our company for the years ended December 31, 2020 and December 31, 2019 are set out in the following summary compensation table:
| Summary Compensation Table | ||||||||||||||||||||||||||||||||||||
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||
| Kenneth Tapp (1) | 2020 | (5) | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Chairman, Chief Executive Officer, and Chief Technology Office | 2019 | (4) | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Mark DiSiena (2) | 2020 | (5) | 50,000 | - | - | - | - | 50,000 | ||||||||||||||||||||||||||||
| Former-Chief Financial Officer | 2019 | (4) | 120,000 | - | - | - | - | - | - | 120,000 | ||||||||||||||||||||||||||
| Gregory Todd Markey (3) | 20205 | ) | 20,000 | - | - | - | - | - | - | 20,000 | ||||||||||||||||||||||||||
| Director of Investor Relations(3) | 2019 | (4) | 60,000 | 8,000 | - | - | - | - | 6,000 | 74,000 | ||||||||||||||||||||||||||
| (1) | At our inception, Kenneth Tapp was appointed as our Chief Executive Officer, Chief Technology Officer, and Chairman. |
| (2) | Mark DiSiena was appointed as our Chief Financial Officer on November 1, 2018 and resigned February 24, 2020. Mark DiSiena is currently a contractor and is paid by our company. |
| (3) | Gregory Todd Markey was appointed as our head of investor relations on April 1, 2019; and was appointed as a Board Director as of January 21, 2020. |
| (4) | Year ended December 31, 2019. |
| (5) | Year ended December 31, 2020. |
Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide retirement or similar benefits for our directors or executive officers.
Resignation, Retirement, Other Termination, or Change in Control Arrangements
We have no contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to our directors or board advisors at, following, or in connection with the resignation, retirement or other termination of our directors or executive officers, or a change in control of our company or a change in our directors’ or executive officers’ responsibilities following a change in control.
| 64 |
Compensation of Directors
The table below shows the compensation of our Directors and Board Advisors who were not our named executive officers for the fiscal year ended December 31, 2020:
| Name | Fees earned or paid in cash ($) | Stock awards ($) | Option awards ($) | Non-equity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | |||||||||||||||||||||
| Leslie Bocskor(1) (2) | 35,000 | - | - | - | - | - | 35,000 | |||||||||||||||||||||
| Kenneth Granville(1) (2) | - | - | - | - | - | - | - | |||||||||||||||||||||
| Vincent (Tripp) Keber(1)(3) | 30,000 | - | - | - | - | - | 30,000 | |||||||||||||||||||||
| (1) | Messrs. Bocskor, Granville and Keber were appointed as our directors on August 1, 2018, and resigned on January 21, 2020, but remained as Board Advisors through July 31, 2020. |
| (2) | During the time Leslie Bocskor was our Director and Advisor, he was the President/Founder of Electrum Partners, which received $35,000 in consulting fees for fiscal year 2020. |
| (3) | During Fiscal 2020, we paid our former Director and Advisor, Vincent “Tripp” Keber consulting fees of $30,000. |
Golden Parachute Compensation
For a description of the terms of any agreement or understanding, whether written or unwritten, between our company and any officer or director concerning any type of compensation, whether present, deferred or contingent, that will be based on or otherwise will relate to an acquisition, merger, consolidation, sale or other type of disposition of all or substantially all assets of our company, see above under the heading “Compensation Discussion and Analysis”.
We have no formal plan for compensating our directors for their services in their capacity as directors. Our directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on their behalf other than services ordinarily required of a director.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of March 31, 2021, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of any class of our voting securities and by each of our current directors, our named executive officers and by our current executive officers and directors as a group.
| Name of Beneficial Owner | Title of Class | Amount and Nature of Beneficial Ownership (1) | Percentage of Class (2) | |||||||
| LVC Consulting, LLC c/o Kenneth Tapp 3465 S Gaylord Ct. Suite A509 Englewood, Colorado 80113 | Common Stock | 59,736,667 | (3) | 0.78 | % | |||||
| Media Star Promotions c/o Brian Lazarus 319 Clubhouse Lane Hunt Valley, MD 21031 | Common Stock | 5,000,000 | (4) | 0.07 | % | |||||
| Britt Glassburn 3465 S Gaylord Ct. Suite A509 Englewood, Colorado 80113 | Common Stock | 1,283,333 | (6) | 0.02 | % | |||||
| Gregory Todd Markey 3465 S Gaylord Ct. Suite A509 Englewood, Colorado 80113 | Common Stock | 1,000,000 | (7) | 0.01 | % | |||||
| Lynn Murphy 3465 S Gaylord Ct. Suite A509 Englewood, Colorado 80113 | Common Stock | 608,333 | (8) | 0.01 | % | |||||
| All executive officers and directors as a group (5 persons) | Common Stock | 66,628,333 | 0.89 | % | ||||||
| (1) | Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants but are not deemed outstanding for purposes of computing the percentage ownership of any other person. |
| (2) | Percentage of common stock is based on 7,435,854,032 shares of our common stock issued and outstanding as of March __, 2020 |
| (3) | Kenneth Tapp was appointed as Chief Executive Officer, Chief Technology Officer, and Chairman since our inception. |
| (4) | Brian Lazarus has been a Director since January 21, 2020. |
| (5) | Britt Glassburn has been a Director since January 21, 2020. |
| (6) | Gregory Todd Markey has been a Director since January 21, 2020. |
| (7) | Lynn Murphy has been a Director since January 21, 2020. |
Changes in Control
We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
Other than as disclosed below, there has been no transaction, since January 1, 2021, or currently proposed transaction, in which our company was or is to be a participant and the amount involved exceeds $5,000 or one percent of our total assets at December 31, 2020, and in which any of the following persons had or will have a direct or indirect material interest:
| (a) | any director or executive officer of our company; | |
| (b) | any person who beneficially owns, directly or indirectly, more than 5% of any class of our voting securities; | |
| (c) | any person that is part of a group, consisting of two or more persons that agreed to act together for the purpose of acquiring, holding, voting or disposing of our common stock, that acquired control of our company when it was a shell company; and | |
| (d) | any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons. |
| 65 |
We have Technology Business Incubator (TBI) license agreements with MjLink.com Inc., LikeRE.com Inc., HuntPost.com Inc., RacketStar.com Inc., FutPost.com Inc., GolfLynk.com Inc., CycleFans.com Inc., WEnRV.com Inc., RaceDY.com Inc., and SpaceZE.com Inc. which provides that our TBI licensees pay us a license fee of 5% percentage of annual revenues generated, and 15% of their common stock, issuable immediately prior to a liquidity event such as an IPO or sale of 51% or more, of a licensee’s common stock. The 15% of common stock is non-dilutive prior to a liquidity event described above. Our Chief Executive Office, Kenneth Tapp owns less than 1% of our outstanding shares and is a board member of each of our TBI licensees. Ken Tapp owns less than 9.99% of the outstanding stock in each of our licensees. Pricing for the license agreements was set by our board of directors. This type of licensing agreement is standard for technology incubators and tech start-up accelerators.
Our related party revenue for Fiscal Year 2020 was $250,000 or 96.2% of our gross revenue.
During Fiscal Year 2020, we paid 2 of our Advisors, Leslie Bocskor and Vincent (Tripp) Keber $35,000 and $30,000for their consulting services, during fiscal year 2020.
From January 1, 2019, through December 31, 2020 Kenneth Tapp, from time-to-time provided short-term interest free loans amounting to $145,000 for the Company’s operations; at year end 2020 we owed $113,675 to Kenneth Tapp.
See transactions with related parties in Notes 5 and 13 in the accompanying financial statements included in this document.
Compensation for Executive Officers and Directors
For information regarding compensation for our executive officers and directors, see “Executive Compensation”.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
The following table sets forth the fees billed to our company for the year ended December 31, 2019 and 2018 for professional services rendered our independent registered public accounting firm BF Borgers CPA PC.
| Fees | 2020 | 2019 | ||||||
| Audit Fees | $ | 45,376 | $ | 37,800 | ||||
| Audit Related Fees | - | - | ||||||
| Tax Fees | - | - | ||||||
| Other Fees | - | - | ||||||
| Total Fees | $ | 45,376 | $ | 37,800 | ||||
Pre-Approval Policies and Procedures
Our entire board of directors, which acts as our audit committee, pre-approves all services provided by our independent registered public accounting firm. All of the above services and fees were reviewed and approved by our board of directors before the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by BF Borgers CPA PC and believe that the provision of services for activities unrelated to the audit is compatible with maintaining its respective independence.
| 66 |
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
| Exhibit No. | Description | |
| 31.1 | Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
| 67 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DATE: May 26, 2021 | ||
| SOCIAL LIFE NETWORK, INC. | ||
| By: | /s/ Ken Tapp | |
| Ken Tapp | ||
| Chief Executive Officer | ||
(Principal Executive Officer & Chief Executive Officer) | ||
| By: | /s/ Ken Tapp | |
| Ken Tapp | ||
| Chief Financial Officer | ||
| (Chief Financial Officer/Chief Accounting Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
| DATE: May 26, 2021 | By: | /s/ Britt Glassburn |
| Britt Glassburn, Director |
| DATE: May 26, 2021 | By: | /s/ Brian Lazarus |
| Brian Lazarus, Director |
| DATE: May 26, 2021 | By: | /s/ Todd Markey |
| Gregory Todd Markey, Director |
| DATE: May 26, 2021 | By: | /s/ Lynn Murphy |
| Lynn Murphy, Director |
| 68 |
EXHIBIT 31.1
CERTIFICATION
CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Ken Tapp, certify that:
1. | I have reviewed this Annual Report on Form 10-K/A of Social Life Network, Inc.; |
|
|
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
|
|
|
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
|
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrants’ other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
|
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 26, 2021 | /s/ Ken Tapp |
| Ken Tapp |
| (Principal Executive Officer & Chief Executive Officer) |
EXHIBIT 31.2
CERTIFICATION
CHIEF FINANCIAL OFFICER/CHIEF ACCOUNTING OFFICER
PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Ken Tapp, certify that:
1. | I have reviewed this Annual Report on Form 10-K/A of Social Life Network, Inc.: |
|
|
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
|
|
|
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
|
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrants’ other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
|
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 26, 2021 | /s/ Ken Tapp |
| Ken Tapp |
| Chief Financial Officer/Chief Accounting Officer |
| (Principal Financial Officer and Principal Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of Social Life Network, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Annual Report on Form 10-K/A for the year ended December 31, 2020 (the “Form 10-K/A”) of the Company fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and the information contained in the Form 10-K/A fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-K/A.
| Date: May 26, 2021 | /s/ Ken Tapp |
|
| Ken Tapp |
|
| Principal Executive Officer/Chief Executive Officer |
|
| (Principal Executive Officer and Chief Executive Officer) |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of Social Life Network, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Annual Report on Form 10-K/A for the year ended December 31, 2020 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-K.
| Date: May 26, 2021 | /s/ Ken Tapp |
|
| Ken Tapp, Chief Financial Officer/Chief Accounting Officer |
|
| (Principal Financial Officer/Chief Financial Officer/Principal Accounting Officer) |
The foregoing certifications are being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.