UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterquarterly period ended February 28, 2009
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ____________
333-222709
Commission File Number:
Social Life Network, Inc.
(Exact name of Registrantsmall business issuer as specified in its charter)
| 46-0495298 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
3465 S Gaylord Ct. Suite A509
Englewood, Colorado80113
(Address of principal executive offices) (Zip Code)
(855)933-3277
(Company’s telephone number, including area code: (310) 352-3300
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.
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 ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” “smaller reporting company,” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer | |||
| Non-accelerated filer | Smaller reporting company | |||
| 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).
The Company has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
TABLE OF CONTENTS
| Page | |||
| PART I | — FINANCIAL INFORMATION | ||
| ITEM 1. | Consolidated Financial Statements | F-1 | |
| ITEM | 3 | ||
| ITEM 2. | |||
| ITEM 3. | Quantitative and Qualitative Disclosures | ||
| ITEM 4. | |||
| Controls and Procedures | |||
| PART II | — OTHER INFORMATION | ||
| ITEM 1. | Legal Proceedings | 16 | |
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||
| ITEM 3. | Defaults Upon Senior Securities | ||
| ITEM 4. | Mine Safety Disclosures | 17 | |
| ITEM | |||
| ITEM 6. | Exhibits | 17 | |
PART I
ITEM 1. Consolidated Financial Statements (Unaudited)
SOCIAL LIFE NETWORK, INC.
INDEX TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| F-1 |
SOCIAL LIFE NETWORK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
| September 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 3,518 | $ | - | ||||
| Accounts receivable | - | 52 | ||||||
| Accounts receivable – related party | 408,000 | 368,000 | ||||||
| Prepaid expenses | 45,000 | - | ||||||
| Assets from discontinued operations | - | 28,500 | ||||||
| Total current assets | 456,518 | 396,552 | ||||||
| Total Assets | $ | 456,518 | $ | 396,552 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 110,758 | $ | 189,169 | ||||
| Cash overdraft | - | 307 | ||||||
| Total Current Liabilities | 110,758 | 189,476 | ||||||
| Loans payable – related party | 175,625 | 113,675 | ||||||
| PPP Loan | 163,111 | 163,111 | ||||||
| Convertible debt and accrued interest | - | 128,346 | ||||||
| Total Liabilities | 449,494 | 594,608 | ||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Preferred Stock par value $, million shares authorized, million shares designated as Series A Cumulative Convertible Preferred Stock, -- shares issued and outstanding as of September 30, 2021, and December 31, 2020 | - | - | ||||||
| Common Stock par value $ shares authorized, and shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 7,411,414 | 6,368,347 | ||||||
| Additional paid-in capital | 24,157,744 | 25,199,811 | ||||||
| Accumulated deficit | (31,562,134 | ) | (31,766,214 | ) | ||||
| Total Stockholders’ Equity (Deficit) | 7,024 | (198,056 | ) | |||||
| Total Liabilities and Stockholders’ Equity | $ | 456,518 | $ | 396,552 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F-2 |
SOCIAL LIFE NETWORK, INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues | ||||||||||||||||
| Digital subscription revenue | $ | - | $ | 7,083 | $ | - | $ | 23,438 | ||||||||
| Licensing revenue – related party | 84,889 | 62,500 | 237,389 | 187,500 | ||||||||||||
| Total revenue | 84,889 | 69,583 | 237,389 | 210,938 | ||||||||||||
| Cost of goods sold | 13,349 | 1,756 | 22,238 | 6,921 | ||||||||||||
| Gross margin | 71,540 | 67,827 | 215,151 | 217,859 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Compensation expense | - | 22,745 | 52,681 | 123,328 | ||||||||||||
| Sales and marketing | 2,612 | 1,045 | 15,159 | 9,326 | ||||||||||||
| General and administrative | 86,661 | 55,527 | 391,074 | 364,315 | ||||||||||||
| Total operating expenses | 89,273 | 79,317 | 458,914 | 496,969 | ||||||||||||
| Operating loss | (17,733 | ) | (11,490 | ) | (243,763 | ) | (279,110 | ) | ||||||||
| Oher income (expense) | ||||||||||||||||
| Interest expense | - | (23,320 | ) | - | (83,884 | ) | ||||||||||
| Other income (expense) | - | 6,400 | 110,854 | 10,804 | ||||||||||||
| Total other income (expense) | - | (16,920 | ) | 110,854 | (73,080 | ) | ||||||||||
| Net loss from continuing operations | $ | (17,733 | ) | $ | (28,410 | ) | $ | (132,909 | ) | $ | (352,190 | ) | ||||
| Net loss from discontinued operations | - | - | (27,700 | ) | - | |||||||||||
| Net income (loss) | $ | (17,733 | ) | $ | (28,410 | ) | $ | (160,609 | ) | $ | (352,190 | ) | ||||
| Weighted average number of shares outstanding | ||||||||||||||||
| Basic and diluted | 7,443,135,871 | 3,456,183,888 | 7,078,783,892 | 3,456,183,888 | ||||||||||||
| Net income (loss) per share from continuing operations | ||||||||||||||||
| Basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
| Net income (loss) per share from discontinued operations | ||||||||||||||||
| Basic and diluted | $ | 0.00 | $ | 0.00 | $ | (0.00 | ) | $ | 0.00 | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements includedstatements.
| F-3 |
SOCIAL LIFE NETWORK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
(unaudited)
| Shares | (a) | Shares | Amount | Capital | Deficit | Totals | ||||||||||||||||||||||
| Common Stock B (a) | Common Stock A | Additional Paid In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Totals | ||||||||||||||||||||||
| For the Three Months Ended September 30, 2021 | ||||||||||||||||||||||||||||
| Balance, June 30, 2021 | 75,000,000 | $ | - | 7,413,399,204 | $ | 7,411,414 | $ | 24,157,744 | $ | (31,544,401 | ) | $ | 24,757 | |||||||||||||||
| Issuance of voting shares | ||||||||||||||||||||||||||||
| Issuance of voting shares, shares | ||||||||||||||||||||||||||||
| Conversion of convertible notes | ||||||||||||||||||||||||||||
| Conversion of convertible notes, shares | ||||||||||||||||||||||||||||
| Private placement | ||||||||||||||||||||||||||||
| Private placement, shares | - | - | ||||||||||||||||||||||||||
| MJLink spinoff adjustments | - | - | - | |||||||||||||||||||||||||
| Cancellation of shares issued in prior years | ||||||||||||||||||||||||||||
| Cancellation of shares issued in prior years, shares | - | |||||||||||||||||||||||||||
| Common stock issued to investors | ||||||||||||||||||||||||||||
| Common stock issued to investors, shares | ||||||||||||||||||||||||||||
| Investors | ||||||||||||||||||||||||||||
| Investors, shares | ||||||||||||||||||||||||||||
| Net loss from discontinued operations | - | - | ||||||||||||||||||||||||||
| Net loss from continuing operations | (17,733 | ) | (17,733 | ) | ||||||||||||||||||||||||
| Balance, September 30, 2021 | 75,000,000 | $ | - | 7,413,399,204 | $ | 7,411,414 | $ | 24,157,744 | $ | (31,562,134 | ) | $ | 7,024 | |||||||||||||||
| Common Stock B (a) | Common Stock A | Additional Paid In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Totals | ||||||||||||||||||||||
| For the Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||
| Balance, January 1, 2021 | 25,000,000 | $ | - | 6,368,332,350 | $ | 6,368,346 | $ | 25,199,811 | $ | (31,766,214 | ) | $ | (198,057 | ) | ||||||||||||||
| Issuance of voting shares | 50,000,000 | |||||||||||||||||||||||||||
| Issuance of common stock in connection with: | ||||||||||||||||||||||||||||
| Conversion of convertible notes | - | - | 1,072,803,521 | 1,070,805 | (854,837 | ) | 215,968 | |||||||||||||||||||||
| Private placement | 2,000,000 | 2,000 | 98,000 | 100,000 | ||||||||||||||||||||||||
| MJLink spinoff adjustments | - | (314,967 | ) | 364,689 | 49,722 | |||||||||||||||||||||||
| Cancellation of shares issued in prior years | - | (29,736,667 | ) | (29,737 | ) | 29,737 | - | - | ||||||||||||||||||||
| Net loss from discontinued operations | (27,700 | ) | (27,700 | ) | ||||||||||||||||||||||||
| Net loss from continuing operations | (132,909 | ) | (132,909 | ) | ||||||||||||||||||||||||
| Balance, September 30, 2021 | 75,000,000 | $ | - | 7,413,399,204 | $ | 7,411,414 | $ | 24,157,744 | $ | (31,562,134 | ) | $ | 7,024 | |||||||||||||||
| (a) | The Common B shares presented in all periods only having voting rights |
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F-4 |
SOCIAL LIFE NETWORK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
(unaudited)
| Common Stock B | Common Stock A | Additional Paid In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Totals | ||||||||||||||||||||||
| For the Three Months Ended September 30, 2020 | ||||||||||||||||||||||||||||
| Balance, June 30, 2020 | 25,000,000 | $ | - | 1,330,794,686 | $ | 1,330,809 | $ | 30,122,222 | $ | (31,887,272 | ) | $ | (434,241 | ) | ||||||||||||||
| Common stock issued to investors | - | - | 2,125,389,202 | 2,125,389 | (2,010,264 | ) | 115,125 | |||||||||||||||||||||
| Net loss from continuing operations | (28,410 | ) | (28,410 | ) | ||||||||||||||||||||||||
| Balance, September 30, 2020 | 25,000,000 | $ | - | 3,456,183,888 | $ | 3,456,198 | $ | 28,111,958 | $ | (31,915,682 | ) | $ | (347,526 | ) | ||||||||||||||
| Common Stock B | Common Stock A | Additional Paid In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Totals | ||||||||||||||||||||||
| For the Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||
| Balance, January 1, 2020 | 25,000,000 | $ | - | 140,777,231 | $ | 140,791 | $ | 31,016,394 | $ | (31,563,492 | ) | $ | (406,307 | ) | ||||||||||||||
| Issuance of common stock in connection with: | ||||||||||||||||||||||||||||
| Investors | - | - | 3,315,406,657 | 3,315,407 | (2,904,436 | ) | 410,971 | |||||||||||||||||||||
| Net loss from continuing operations | (352,190 | ) | (352,190 | ) | ||||||||||||||||||||||||
| Balance, September 30, 2020 | 25,000,000 | $ | - | 3,456,183,888 | $ | 3,456,198 | $ | 28,111,958 | $ | (31,915,682 | ) | $ | (347,526 | ) | ||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
SOCIAL LIFE NETWORK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| 2021 | 2020 | |||||||
| For the nine months ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows used in operating activities | ||||||||
| Net loss from continuing operations | $ | (132,909 | ) | $ | (352,190 | ) | ||
| Net loss from discontinued operations | (27,700 | ) | - | |||||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Gain on the extinguishment of convertible promissory notes | 87,622 | - | ||||||
| Gain on sale of discontinued assets | 78,222 | - | ||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | (39,948 | ) | (138,500 | ) | ||||
| Prepaids | (45,000 | ) | 20,467 | |||||
| Cash overdraft | (307 | ) | - | |||||
| Accounts payable and accrued expenses | (78,412 | ) | 47,693 | |||||
| Net cash used in operating activities | (158,432 | ) | (422,530 | ) | ||||
| Cash flows used in investing activities | ||||||||
| Net cash used in investing activities | - | - | ||||||
| Cash flows provided by financing activities | ||||||||
| Proceeds from the sale of common stock – private placement | 100,000 | - | ||||||
| Proceeds from the sale of common stock - convertible note | - | 410,973 | ||||||
| Proceeds from related party loans | 124,050 | - | ||||||
| Payment for related party loans | (62,100 | ) | - | |||||
| Net cash provided by financing activities | 161,950 | 410,973 | ||||||
| Net increase in cash | 3,518 | (11,557 | ) | |||||
| Cash, beginning of period | - | 11,557 | ||||||
| Cash, end of period | $ | 3,518 | $ | 0 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | - | $ | 83,884 | ||||
| Cash paid for taxes | $ | - | $ | - | ||||
| Supplemental disclosure of non-cash information: | ||||||||
| Common stock issued in satisfaction of convertible notes payable | $ | 128,346 | $ | - | ||||
| Cancellation of shares issued in prior years | $ | 29,737 | $ | - | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F-6 |
SOCIAL LIFE NETWORK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
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. Decentral Life is a division of Social Life Network, that is working on a Decentralized Social Networking project, and has launched what we have been prepared bydesignated as a “WDLF Token” on the Company, without audit, pursuantEthereum blockchain.
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, changed our name to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's most recent registration statement on Form SB-2 as amended.
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 common stock shares were issued to our officers, composed of shares each to our Chief Executive Officer, Kenneth Tapp, and Andrew Rodosevich, our then-Chief Financial Officer.
| F-7 |
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS (continued)
Corporate Changes (continued)
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. On January 1, 2021, we ceased operating MjLink as a division and MjLink continued operations as an independent company, in return for MjLink issuing us 15.17% of MjLink’s. outstanding Class A common stock shares.
On March 4, 2020, our Board increased our number of authorized shares of Common Stock from to 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 our Class B Common Stock, providing that each Class B Common Stock Share has 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 () 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 () votes and have no equity, cash value or any other value.
On May 8, 2020, we filed Amended and Restated Articles of Incorporation (“Amended Articles”) in Nevada to increase our authorized shares from to Shares and our Preferred Shares from to Shares. Additionally, the Amended Articles authorized us from May 8, 2020 and continuing until June 30, 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”).
On December 11th, 2020, we filed a Form 8-K stating that we would not be executing the Reverse Stock Split, which Reverse Stock Split expired on March 31st, 2021 pursuant to the May 8, 2020 Amended Articles described immediately above.
Effective March 28, 2021, our Board the issuance of fifty million () 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, 2009,2021, which shares are equal to five billion () votes and have no equity, cash value or any other value. As of the date of this filing, our Chief Executive Officer controls approximately in excess of 98% of shareholder votes via the Company’s issuance of 75,000,000 Class B Shares to Ken Tapp, thereby controlling over 7,500,000,000 votes.
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. Decentral Life is a division of Social Life Network, that is working on a Decentralized Social Networking project, and has launched a WDLF Token on the Ethereum blockchain.
From 2013 through the first half of 2021, we have added niche social networking tech start-ups to our TBI that target consumers and business professionals in the Cannabis and Hemp, 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 their company through a merger or acquisition.
Using our state-of-art AI and Blockchain technologies that are cloud-based, 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.
On August 16, 2021, we announced the launch of a new division that will be focused on, among other objectives, upgrading the seed technology platform that is licensed to our TBI licensees so that it is no longer cloud-based, and is instead a decentralized blockchain application. The new division, Decentral Life, has the following four main objectives:
1. Create a decentralized global social networking platform for user privacy, content control, and universal connectivity to all decentralized networking platforms of the future.
2. Financially empower network users by rewarding their activity with crypto-loyalty points that can be used to make purchases on the network or converted to WDLF Tokens to be used on globally accessible cryptocurrency exchanges.
3. Create and launch a Decentral Life Token on the Ethereum blockchain (“WDLF Token”) that can be used across all TBI licensee networks so that users can convert their crypto-loyalty points into WDLF Tokens.
4. File with the SEC, a registered initial coin offering, that if declared effective by the SEC would enable tokens to be sold to investors and the related statementscreation of operations, stockholders’ equity (deficit), and cash flowsa market created for the three-month and six-month periods ended February 28, 2009 and February 29, 2008. These interimtoken on cryptocurrency exchanges.
| F-8 |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
Our financial statements are the responsibility of the Corporation’s management.
| SEW CAL LOGO, INC. | ||||||||
| BALANCE SHEETS | ||||||||
| February 28, | August 31, | |||||||
| 2008 | 2008 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 2,267 | $ | 15,716 | ||||
| Accounts Receivable, net | 133,628 | 216,108 | ||||||
| Inventory | 46,388 | 70,902 | ||||||
| Prepaid Expenses | 2,200 | 2,200 | ||||||
| Total current assets | 184,483 | 304,926 | ||||||
| Equipment and machinery, net | 114,911 | 141,977 | ||||||
| Security Deposits | 6,000 | 6,000 | ||||||
| Total assets | $ | 305,394 | $ | 452,903 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | 207,755 | 98,693 | ||||||
| Note Payable-shareholder | 328,884 | 353,884 | ||||||
| Other current liabilities | 450,542 | 443,220 | ||||||
| Current Poriton of Long Term Debt | 139,780 | 158,290 | ||||||
| Total current liabilities | 1,126,961 | 1,054,087 | ||||||
| Long-term liabilities | ||||||||
| Note Payable-related party | 21,552 | 25,135 | ||||||
| Convertible Debentures | 2,637,247 | 2,655,975 | ||||||
| Discount on Convertible Debentures | (646,899 | ) | (646,899 | ) | ||||
| Equipment Loans | 7,329 | 9,101 | ||||||
| Total liabilities | 3,146,190 | 3,097,399 | ||||||
| Stockholders' Equity (Deficit) | ||||||||
| Preferred stock, authorized 12,000,000 shares, | ||||||||
| Par value $0.001, issued and outstanding at | ||||||||
| 02/28/2009 and 8/31/08 is 22,300,000 and 300,000 | ||||||||
| respectively | 22,300 | 300 | ||||||
| Common stock, authorized 2,000,000,000 shares, | ||||||||
| $0.001 par value, issued and outstanding at | ||||||||
| February 28, 2009 and August 31, 2008 is | ||||||||
| 271,873,638 and 143,124,535 shares respectively. | 271,874 | 143,125 | ||||||
| Additional Paid in Capital | 4,001,154 | 4,120,649 | ||||||
| Stock Subscribed | - | - | ||||||
| Accumulated Deficit | (7,136,124 | ) | (6,908,570 | ) | ||||
| Total stockholders' equity (deficit) | (2,840,796 | ) | (2,644,496 | ) | ||||
| Total liabilities and stockholders' equity | $ | 305,394 | $ | 452,903 | ||||
| The accompanying notes are an integral part of these statements | ||||||||
| SEW CAL LOGO, INC. | ||||||||||||||||
| STATEMENTS OF OPERATIONS | ||||||||||||||||
| Six Months Ended | Three Months Ended | |||||||||||||||
| February 28, | February 28, | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| Revenue: | ||||||||||||||||
| Sales of Caps, Embroidery and Other | $ | 661,377 | $ | 998,339 | $ | 307,184 | $ | 449,427 | ||||||||
| Total Revenue | 661,377 | 998,339 | 307,184 | 449,427 | ||||||||||||
| Cost of Goods Sold | 583,782 | 933,810 | 287,582 | 466,907 | ||||||||||||
| Gross profit/(loss) | 77,595 | 64,529 | 19,602 | (17,480 | ) | |||||||||||
| Expenses: | ||||||||||||||||
| General and Administrative | 91,666 | 122,681 | 29,027 | 58,583 | ||||||||||||
| Officer and Administrative Compensation | 8,116 | 91,908 | 4,654 | 31,308 | ||||||||||||
| Consulting, Legal and Accounting | 14,007 | 127,798 | 6,000 | 59,667 | ||||||||||||
| Depreciation | 27,065 | 3,118 | 9,012 | 1,559 | ||||||||||||
| Rent | 108,000 | 48,000 | 60,000 | 12,000 | ||||||||||||
| Total expenses | 248,854 | 393,505 | 108,693 | 163,117 | ||||||||||||
| Loss from Operations | (171,259 | ) | (328,976 | ) | (89,091 | ) | (180,597 | ) | ||||||||
| Other Income (Expenses) | ||||||||||||||||
| Interest (Expense) | 56,295 | 37,846 | 28,850 | 17,268 | ||||||||||||
| Total other expenses | 56,295 | 37,846 | 28,850 | 17,268 | ||||||||||||
| Loss before income taxes | (227,554 | ) | (366,822 | ) | (117,941 | ) | (197,865 | ) | ||||||||
| Provision for income taxes | - | - | - | - | ||||||||||||
| Net loss | $ | (227,554 | ) | $ | (366,822 | ) | $ | (117,941 | ) | $ | (197,865 | ) | ||||
| Basic and Diluted Earnings (Loss) per Share | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | ||||
| Weighted Average Number of Common Shares | 232,941,574 | 27,595,484 | 232,941,574 | 27,595,484 | ||||||||||||
| The accompanying notes are an integral part of these statements | ||||||||||||||||
| SEW CAL LOGO, INC. | ||||||||||||||||||||||||||||||||
| STATEMENTS OF STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||||||||||
| ( From Inception to February 28, 2009) | ||||||||||||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid in | Stock | Accumulated | Stockholders' | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Subscribed | (Deficit) | Equity | |||||||||||||||||||||||||
| Balance, August 31, 2005 | 234,800 | $ | 235 | 5,176,168 | $ | 5,176 | $ | 187,517 | $ | 36,000 | $ | (673,814 | ) | $ | (444,886 | ) | ||||||||||||||||
| Shares issued for Services | ||||||||||||||||||||||||||||||||
| at $0.15 per share | 50,000 | 50 | 7,450 | 7,500 | ||||||||||||||||||||||||||||
| Fair Value of Warrants attached to | ||||||||||||||||||||||||||||||||
| Convertible Debentures | 1,081,657 | 1,081,657 | ||||||||||||||||||||||||||||||
| Beneficial Conversion Feature attached to | ||||||||||||||||||||||||||||||||
| Convertible Debentures | 2,500,000 | 2,500,000 | ||||||||||||||||||||||||||||||
| Shares issued for Services | ||||||||||||||||||||||||||||||||
| at $0.10 per share | 33,334 | 33 | 3,300 | 3,333 | ||||||||||||||||||||||||||||
| Shares issued for Conversion of Debt | 290,000 | 290 | 32,741 | 33,031 | ||||||||||||||||||||||||||||
| Net Loss for Year | (2,947,833 | ) | (2,947,833 | ) | ||||||||||||||||||||||||||||
| Balance, August 31, 2006 | 234,800 | 235 | 5,549,502 | 5,549 | 3,812,665 | 36,000 | (3,621,647 | ) | 232,802 | |||||||||||||||||||||||
| Preferred Shares issued for Services | 65,200 | 65 | 1,891 | 1,956 | ||||||||||||||||||||||||||||
| Common Stock Issued for Cash | 61,000 | 61 | 60,939 | (36,000 | ) | 25,000 | ||||||||||||||||||||||||||
| Shares issued for Services | 3,500,200 | 3,501 | 214,000 | 217,501 | ||||||||||||||||||||||||||||
| Shares issued for Conversion of Debt | 24,970,000 | 24,970 | 65,482 | 90,452 | ||||||||||||||||||||||||||||
| Net Income (Loss) for period | (2,570,683 | ) | (2,570,683 | ) | ||||||||||||||||||||||||||||
| Balance, August 31, 2007 | 300,000 | 300 | 34,080,702 | 34,081 | 4,154,977 | - | (6,192,330 | ) | (2,002,972 | ) | ||||||||||||||||||||||
| Shares issued for Services | 9,150,000 | 9,150 | 36,600 | 45,750 | ||||||||||||||||||||||||||||
| Shares issued for Conversion of Debt | 744,833 | 745 | 292 | 1,037 | ||||||||||||||||||||||||||||
| Shares issued for Conversion of Debt | 200,000 | 200 | - | 200 | ||||||||||||||||||||||||||||
| Shares issued for Services | 17,200,000 | 17,200 | (8,450 | ) | 8,750 | |||||||||||||||||||||||||||
| Shares issued for Conversion of Debt | 27,916,000 | 27,916 | (18,411 | ) | 9,505 | |||||||||||||||||||||||||||
| Shares issued for Conversion of Debt | 53,833,000 | 53,833 | (44,359 | ) | 9,474 | |||||||||||||||||||||||||||
| Net Income (Loss) for period | (716,240 | ) | (716,240 | ) | ||||||||||||||||||||||||||||
| Balance, August 31, 2008 | 300,000 | 300 | 143,124,535 | 143,125 | 4,120,649 | - | (6,908,570 | ) | (2,644,796 | ) | ||||||||||||||||||||||
| Shares issued for Conversion of Debt | 128,749,103 | 128,749 | (119,495 | ) | 9,254 | |||||||||||||||||||||||||||
| Shares issued for Services | 2,200,000 | 22,000 | 22,000 | |||||||||||||||||||||||||||||
| Net Income (Loss) for period | (227,554 | ) | (227,554 | ) | ||||||||||||||||||||||||||||
| Balance, February 28, 2009 | 2,500,000 | $ | 22,300 | 271,873,638 | $ | 271,874 | $ | 4,001,154 | $ | - | $ | (7,136,124 | ) | $ | (2,840,796 | ) | ||||||||||||||||
| The accompanying notes are an integral part of these statements | ||||||||||||||||||||||||||||||||
| SEW CAL LOGO, INC. | ||||||||||||||||
| STATEMENTS OF CASH FLOWS | ||||||||||||||||
| Six Months Ended | Three Months Ended | |||||||||||||||
| February 28, | February 28, | |||||||||||||||
| Operating Activities: | 2009 | 2008 | 2009 | 2008 | ||||||||||||
| Net income (loss) | $ | (227,554 | ) | $ | (366,822 | ) | $ | (117,941 | ) | $ | (197,865 | ) | ||||
| Adjustments to reconcile net income (loss) | ||||||||||||||||
| Depreciation | 27,066 | 3,118 | 9,012 | 3,118 | ||||||||||||
| Stock issued for services | 22,000 | 45,950 | - | 200 | ||||||||||||
| Amortization of Discount on Debentures | - | - | - | - | ||||||||||||
| Changes in Assets and Liabilities | ||||||||||||||||
| (Increase) decrease in prepaid expenses | - | (2,200 | ) | - | (2,200 | ) | ||||||||||
| (Increase) decrease in inventory | 24,514 | 17,980 | 24,514 | 3,230 | ||||||||||||
| (Increase) decrease in security deposits | - | 3,800 | - | 3,800 | ||||||||||||
| (Increase) decrease in accounts receivable | 82,480 | (598 | ) | 8,167 | 48,964 | |||||||||||
| Increase (decrease) in accounts payable | 109,062 | 28,687 | 85,295 | 51,598 | ||||||||||||
| Increase (decrease) in other current liabilities | 7,322 | 113,408 | 7,463 | 73,467 | ||||||||||||
| Net cash provided by (used in) operating activities | 44,890 | (156,617 | ) | 16,510 | (156,677 | ) | ||||||||||
| Investing Activities: | ||||||||||||||||
| (Purchases) disposal of equipment | - | 34,591 | - | 15,737 | ||||||||||||
| Cash (used) in investing activities | - | 34,591 | - | 15,737 | ||||||||||||
| Financing Activities: | ||||||||||||||||
| Notes Payable | - | - | - | - | ||||||||||||
| Debentures Payable | (9,474 | ) | 6,000 | - | 6,000 | |||||||||||
| Increase/(Decrease) in shareholder loan | (28,583 | ) | - | (25,000 | ) | - | ||||||||||
| Repayment of loans | (18,510 | ) | (10,312 | ) | - | (5,188 | ) | |||||||||
| Proceeds from equipment loan | (1,772 | ) | (882 | ) | (766 | ) | (882 | ) | ||||||||
| Net cash provided by (used in) financing activities | (58,339 | ) | (5,194 | ) | (25,766 | ) | (70 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents | (13,449 | ) | (127,280 | ) | (9,256 | ) | 80 | |||||||||
| Cash and cash equivalents at beginning of the period | 15,716 | 155,704 | 11,523 | 28,296 | ||||||||||||
| Cash and cash equivalents at end of the period | $ | 2,267 | $ | 28,424 | $ | 2,267 | $ | 28,424 | ||||||||
| Cash Paid For: | ||||||||||||||||
| Interest | $ | 56,295 | $ | 74,566 | $ | 27,445 | $ | 37,846 | ||||||||
| Taxes | $ | - | $ | - | $ | - | $ | - | ||||||||
| Non Cash Activities: | ||||||||||||||||
| Stock issued for services | $ | 22,000 | $ | 45,950 | $ | - | $ | 200 | ||||||||
| Stock issued for convertible debt | $ | 9,254 | $ | 1,237 | $ | 2,114 | $ | 1,037 | ||||||||
| The accompanying notes are an integral part of these statements | ||||||||||||||||
Use of Estimates
The preparation of financial statements have been prepared in conformity with generally accepted accounting principles generally accepted in the United States, which requirerequires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (includingand disclosure of contingent assets and liabilities)liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the estimated useful lives of property and equipment. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
Cash equivalents
We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were 0 cash equivalents period ended on September 30, 2020, and December 31, 2020.
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 andwill not be collected. An allowance for doubtful accountsestimated 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
We follow 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 shown below.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 our financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. Our notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to us for similar financial arrangements at March 31, 2020.
We do 0t have any assets or liabilities measured at fair value on a recurring or a non-recurring basis as of September 30, 2021 and December 31, 2020.
| F-9 |
| 2/28/2009 | 8/31/2008 | |||||||
| Gross Trade Accounts Receivable | $ | 134,978 | $ | 218,343 | ||||
| Allowance for Doubtful Accounts | (1,350 | ) | (2,235 | ) | ||||
| Accounts Receivable, net | $ | 133,628 | $ | 216,108 | ||||
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition
We follow paragraph 605-15-25 of the FASB Accounting Standards Codification for revenue recognition when the right of return exists. We will recognize revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned when all of the following criteria are met: (i) The Company recognizes revenue from product sales upon shipment, which is the point in time when risk of loss is transferredseller’s price to the customer, net of estimated returns and allowances.
| 2/28/2009 | 8/31/2008 | |||||||
| Raw Materials and WIP | $ | 46,388 | $ | 709,025 | ||||
| Finished Goods | - | - | ||||||
| Total Inventory | $ | 43,688 | $ | 70,902 | ||||
| 2/28/2009 | 8/31/2008 | |||||||
| Equipment and Machinery | $ | 980,717 | $ | 942,890 | ||||
| Less: | ||||||||
| Accumulated depreciation | (865,806 | ) | (800,913 | ) | ||||
| $ | 114,911 | $ | 141,977 | |||||
Income taxes
We follow Section 740-10-30 of the Company, including but not limited to any and all equipment owned by the Company, inventory, and outstanding receivables. The balance due at February 28, 2009 is $328,884.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||||||||||||
| Office /warehouse lease | $ | 150,000 | $ | 150,000 | $ | 150,000 | $ | 150,000 | $ | 150,000 | ||||||||||
On December 22, 2018, the Tax Cuts and Jobs Act (TCJA) was signed into law by the cumulative NOLPresident of $7,063,535 the total valuation allowanceUnited States. TCJA is a comparable $1,553,978.
| August 31, | ||||||||
| 2008 | 2007 | |||||||
| Deferred Tax Asset | $ | 157,573 | $ | 565,550 | ||||
| Valuation Allowance | (157,573 | ) | (565,550 | ) | ||||
| Current Taxes Payable | - | - | ||||||
| Income Tax Expense | $ | - | $ | - | ||||
| Year | Amount | Expiration | |||
| 1996 | 2,104 | 2011 | |||
| 1997 | 9,265 | 2012 | |||
| 1998 | 26,317 | 2013 | |||
| 1999 | 21,074 | 2019 | |||
| 2000 | 50,619 | 2020 | |||
| 2001 | 21,675 | 2021 | |||
| 2002 | 319,424 | 2022 | |||
| 2003 | 45,381 | 2023 | |||
| 2005 | 105,366 | 2025 | |||
| 2006 | 2,947,833 | 2026 | |||
| 2007 | 2,570,683 | 2027 | |||
| 2008 | 716,240 | 2028 | |||
| YTD 2009 | 227,554 | 2029 | |||
| Total | $ | 7,063,535 | |||
We 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 at August 31, 2008in the financial statements. Under Section 740-10-25, we may recognize the tax benefit from an uncertain tax position only if it wouldis more likely than not that the tax position will be a long-term asset of $1,553,978. Continued profitabilitysustained on examination by the Company will be a major factortaxing 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. We had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
Stock-based Compensation
We account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). ASC 505-50 establishes that equity-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to nonemployees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments issued as deferred stock compensation and amortize the cost over the term of the contract.
We account being removedfor 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 recordingperiod during which services are rendered.
| F-10 |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Net income (loss) per common share is computed pursuant to section 260-10-45 of this asset.
Recently issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited.
The Company has not yet adopted the provisions of SFAS No. 161, butimplemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not expect it tobelieve that there are any other new pronouncements that have been issued that might have a material impact on its consolidated financial position or results of operations.
NOTE 3 – GOING CONCERN
Our unaudited financial statements have been prepared on a going concern basis, which assumes that we will be able to realize its assets and discharge its liabilities and commitments in the normal course of business for the foreseeable future. We had an accumulated deficit of $31,562,134 at September 30, 2021, and a loss from continuing operations of $132,909. 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 its generating profitable operations in the future and/or to obtain the necessary financing to meet obligations and repay liabilities arising from normal business operations when they come due. Our management intends to finance operating costs over the next three months with existing cash flows.
NOTE 4 –
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 Financial Liabilities—Including an amendmentthe amount involved exceeds $5,000 or one percent of FASB Statement No. 115
| (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. |
We have Technology Business Incubator (TBI) license agreements with MjLink.com Inc., LikeRE.com Inc., HuntPost.com Inc., NetQub, Inc., RacketStar.com Inc., FutPost.com Inc., GolfLynk.com Inc., CycleFans.com Inc., WEnRV.com Inc., RaceScene.com Inc., and SpaceZE.com Inc., which agreements provide 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% common stock payment 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 common stock in FAS 159 are elective; however,each of our licensees. Pricing for the license agreements was established by our board of directors. This type of licensing agreement is standard for technology incubators and tech start-up accelerators.
Our related party revenue year-to-date for Fiscal Year 2021 is $237,389 or 100.0% of our gross revenue.
We paid 1 (one) of our Advisors, Vincent (Tripp) Keber, $30,000 for his consulting services during the first quarter of 2021.
From January 1, 2021 through September 30, 2021, Kenneth Tapp, from time-to-time, provided short-term interest free loans totaling $118,850 for our operations. At September 30, 2021 we owed $170,425 to Kenneth Tapp.
As noted in Note 8, we completed a December 31, 2020 Division Spin-Off Agreement (“Spin-Off Agreement) between MjLink.com, Inc. (“MjLink”) and us whereby the Parties agreed that we would cease our operating MjLink as our cannabis division. and going forward MjLink would conduct its own operations (the “Spin-Off”). We recorded a loss from discontinued operations of $-0- and $27,700 during the three and nine months ended September 30, 2021. In connection with the Spin-Off, MjLink issued us of its outstanding shares for MjLink’s use of our license from January 1st 2020 to December 31, 2020. Ken Tapp is our and MjLink’s Chief Executive Officer and thus the transaction was treated as a related party transaction. Thereafter, toreflect the true intention of the Parties to the Spin-Off Agreement, the Parties then agreed in an amendmentAmended Spin-Off Agreement to FAS 115 Accounting for Certain Investments in Debtreflect an effective date of 12:01 am on January 1, 2021 of the Spin-Off transaction (“Effective Date”). Apart from the Effective Date, there were no further changes to the Spin-Off Agreement.
NOTE 5 – SALES RETURNS
For the period ended September 30, 2021, we did not issue any credit memos.
NOTE 6 – STOCK WARRANTS
During the nine months ended September 30, 2021 and Equity Securities appliesthe years ended December 31, 2020 we granted warrants, Each warrant entitles the holder to all entitiesone common stock share at an exercise price ranging from five to twenty cents, with available for sale or trading securities. Some requirements apply differentlya weighted average price of seven cents. The term of our warrants have a range from 3 to entities that do not report net income. SFAS No. 159 is effective5 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 beginning17,894,873 Warrants are 100% vested. During the twelve months ended December 31, 2019, we executed a cashless conversion of an entities first fiscal year that begins after November 15, 2007. Early adoption is permitted8,800,020 vested warrants in exchange for 4,400,010 common stock shares. 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 beginningBlack-Scholes-Merton pricing model using the following estimates: exercise price ranging from $ to $, stock prices ranging from $ to $, risk free rates ranging from 0.07% - 1.60%, volatility ranging from 391% to 562%, and expected life of the previous fiscal year provided thatwarrants ranging from 3 to 5 years.
A summary of the entity makes that choice instatus of the first 120 days of that fiscal yearoutstanding stock warrants and also electschanges during the periods is presented below:
SCHEDULE OF OUTSTANDING STOCK WARRANTS
| Shares available to purchase with warrants | Weighted Average Price | Weighted Average Fair Value | ||||||||||
| 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 | $ | - | ||||||||
| Issued | - | - | - | |||||||||
| Exercised | 101,003 | - | - | |||||||||
| Expired | - | - | - | |||||||||
| Outstanding, September 31, 2020 | 8,963,850 | 0.07 | $ | - | ||||||||
| Range of Exercise Prices | Number Outstanding 9/30/21 | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | |||||||||||
| $ | – | 8,963,850 | 1.59 years | $ | 0.07 | |||||||||
| F-11 |
NOTE 7 – COMMON STOCK AND CONVERTIBLE DEBT
Common Stock
Class A
For the quarter ending December 31, 2019, we issued stock shares to applythree professionals for their services. The shares are valued at $, the provisions of SFAS No. 157 Fair Value Measurements.
For the quarter ending March 31, 2020, several lenders converted their debt into 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 our outstanding shares, filing of our Definitive Information Statement, No. 158 –
After unanimous Board of Director approval and 132(R)
For the quarter ending June 30, 2020, several lenders converted their debt into 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 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 common shares at an average of $0.00082, for a value of $133,902.
For the quarter ending March 31, 2021, the remaining lenders converted their debt into common shares at an average of $.00523, for a value of $270,174.
For the quarter ending June 30, 2021, we canceled shares issued in prior years at par value, for a total value of $.
Class B
Effective March 4, 2020, our board of directors authorized the issuance of twenty-five million () Class B Common Stock Shares to recognize changesKen Tapp, our Chief Executive Officer, in that funded statusreturn 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 () votes and have no equity, cash value or any other value.
Effective March 28, 2021, our Board authorized the issuance of fifty million () Class B Common Stock Shares to Ken Tapp, our Chief Executive Officer, in the year inreturn for his services as our Chief Executive Officer from March 1, 2020 to February 28, 2021, which the changes occur through comprehensive income of a business entityshares are equal to five billion () votes and have no equity, cash value or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan asany other value. As of the date of its year-end statementthis filing, our Chief Executive Officer controls approximately in excess of financial position,98% of shareholder votes via our issuance of Class B Shares to Ken Tapp, thereby controlling over votes.
As of September 30, 2021, there are shares of Class B shares outstanding
Preferred Stock
As of September 30, 2021 and December 31, 2020 we had shares of preferred stock authorized with limited exceptions.
Based on a unanimous vote of this new Statementour directors, we designated shares of Cumulative Convertible Preferred A shares. On July 6, 2021, the Certificate of Rights and Preferences for those shares was approved. Each Preferred A Share has no material effectthe right to convert each Series A Preferred Share into 20 Common Stock Shares if and only if, we become listed on the Company’s current financial position, resultsNew York Stock Exchange (NYSE) or operations, or cash flows.NASDAQ, and shall have liquidation rights over other series of Preferred Stock. As of September 30, 2021, Preferred A shares have been issued.
| F-12 |
NOTE 7 – COMMON STOCK AND CONVERTIBLE DEBT (continued)
Convertible Debt and Other Obligations
Convertible Debt
We have no convertible notes payable as of September 30, 2021:*
SUMMARY OF CONVERTIBLE NOTES PAYABLE
| Note | Funding Date | Maturity Date | Interest Rate | Original Borrowing | Average Conversion Price | Number of Shares Converted | Balance at September 30, 2021 | |||||||||||||||||
| Note payable (A) | April 15, 2019 | November 14, 2019 | 7 | % | $ | 100,000 | $ | 0.0000 | 810,911,013 | $ | - | |||||||||||||
| Note payable (B) | April 15, 2019 | April 14, 2022 | 10 | % | $ | 67,500 | $ | 0.0000 | 117,869,569 | - | ||||||||||||||
| 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 | $ | 0.0003 | 1,146,297,040 | - | ||||||||||||||
| 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 | 514,781,219 | - | ||||||||||||||
| Note payable (F) | August 7, 2019 | August 6, 2020 | 10 | % | $ | 100,000 | $ | 0.0007 | 158,429,766 | - | ||||||||||||||
| Note payable (G) | August 21, 2019 | August 20, 2020 | 10 | % | $ | 148,500 | $ | 0.0001 | 431,824,675 | - | ||||||||||||||
| Note payable (H) | January 28, 2020 | January 27, 2021 | 10 | % | 63,000 | $ | 0.0001 | 1,102,499,999 | - | |||||||||||||||
| Total | $ | 0.0001 | $ | - | ||||||||||||||||||||
*As indicated below in footnotes A-H, we had various convertible notes with funding dates in 2019 and 2020, which notes were paid in full and completely retired by February 5, 2021, specifically, as follows:
A- November 14, 2019
B - June 26, 2019
C - January 25, 2021
D – February 5, 2021
E – January 7, 2021
F – July 28, 2021
G – January 4, 2021
H – August 24, 2020
| (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 common stock shares and additional common stock shares on October 15, 2019, per our original agreement, common stock warrants, and reserved 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 $ per share. This note was paid in full on November 14, 2019. |
| F-13 |
NOTE 7 – Fair Value MeasurementsCOMMON STOCK AND CONVERTIBLE DEBT (continued)
Convertible Debt and Other Obligations (continued)
Convertible Debt (continued)
| (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, we issued common stock warrants, and 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 common stock shares for two tranches with another common stock shares to be issued with the third tranche, and we have reserved 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 $ per share. This note was paid in full on January 25, 2021. | |
| (D) | On June 12, 2019, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate $110,000 in additional available cash resources with a payback provision due on June 11, 2020 of $135,250 which includes the original issue discount of $11,000 plus interest of $14,250. In connection with the note, we have reserved 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 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 $ 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 common stock shares and has reserved , which was subsequently increased to 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 $ per share. This note was paid in full on January 7, 2021. |
| F-14 |
NOTE 7 – COMMON STOCK AND CONVERTIBLE DEBT (continued)
Convertible Debt and to expand disclosures about fair value measurements. The expanded disclosures include the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effectOther Obligations (continued)
Convertible Debt (continued)
| (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 common stock shares and has reserved , which was subsequently increased to , 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 $ 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 common stock shares for the first tranche with another common stock shares to be issued with each additional tranche, which will total common shares; we have reserved which was subsequently increased to 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 $ per share. This note was paid in full on January 4, 2021. | |
| (H) | On January 28, 2020, we completed a 12-month convertible promissory note and other related documents with an unaffiliated third-party funding group to generate up to $925,000, which will be distributed in multiple tranches to be determined, in additional available cash resources with a payback provision of principle debt without an original issue discount plus interest. We received only one tranche and generated $63,000 in additional available cash resources with a payback provision due on January 27, 2021 totaling $69,300 which includes the principle plus interest of $6,300. We reserved , which was subsequently increased to billion 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 $ 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 January 25, 2021, we fully met and timely paid its debt obligation to Note Payable (C-2). | |
| ● | On February 5, 2021, we fully met and timely paid its debt obligation to Note Payable (D). |
Accordingly, all of fair value on earnings and is applicable whenever other standards require (or permit) assets and liabilities to be measured at fair value. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years.
| F-15 |
NOTE 7 – COMMON STOCK AND CONVERTIBLE DEBT (continued)
Convertible Debt and Other Obligations (continued)
Other Obligations
For the nine months ending September 30, 2021, Kenneth Tapp, from time-to-time provided short-term interest free loans for our operations. Kenneth Tapp provided an additional net amount of $56,750 in short term interest free loans for legal expenses, totaling $118,850 liquidity for year-to-date September 30, 2021.
On April 21, 2020, under the Payroll Protection Program, we received a forgivable loan of $37,411, and on Form SB-2,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 amended, initially filed onfinancial aid, in order to sustain businesses during the mandatory COVID-19 lockdown.
On March 20, 2004. All non-historical information contained in this annual report12, 2021, MjLink.com relieved all its $364,688 debt obligation to us.
Our executive and administrative office is a forward-looking statement. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause the actual results to differ materially from those reflected in the forward-looking statements.
NOTE 8 -DISCONTINUED OPERATIONS
As noted in Note 8, we completed a December 31, 2020 Division Spin-Off Agreement (“Spin-Off Agreement) between MjLink.com, Inc. (“MjLink”) and us whereby the Parties agreed that we would cease our operating MjLink as our cannabis division. and going forward MjLink would conduct its own operations (the “Spin-Off”). We recorded a loss from discontinued operations of $-0- and $27,700 during the three and nine months ended September 30, 2021. In connection with the Spin-Off, MjLink issued us or of its outstanding shares for the quarter ended February 29, 2008, a net decrease of $142,243 The net decrease is a resultMjLink’s use of our continued effortlicense from January 1st 2020 to replace non-profitable with profitable business. Also, overall lossesDecember 31, 2020. Ken Tapp is our and MjLink’s Chief Executive Officer and thus the transaction was treated as a percentagerelated party transaction. Thereafter, to reflect the true intention of sales continuethe Parties to decline. This can be attributed directlythe Spin-Off Agreement, the Parties then agreed in an Amended Spin-Off Agreement to both internal restructuring andreflect an effective date of 12:01 am on January 1, 2021 of the Spin-Off transaction (“Effective Date”). Apart from the Effective Date, there were no further changes to our significant investment in the research and developmentSpin-Off Agreement.
SCHEDULE OF DISCONTINUED OPERATIONS
| Three months ended September 30, 2021 | Nine months ended September 30, 2021 | |||||||
| Operating loss | $ | - | $ | (27,700 | ) | |||
| Income(loss) before provision for income taxes | - | $ | (27,700 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net loss | $ | - | $ | (27,700 | ) | |||
| F-16 |
Board of our new surf based brand. Our line of merchandise is continuing to be developed and advertising and promotional campaigns are initiated and underway.Director, Chief Financial Officer, and Administrative Compensation was $4,654 for the quarter ended February 28, 2009 as comparedBoard Appointments
None.
Risk Factors
Risks Related to $31,308 for the quarter ended February 28,2008,Our Business
Our independent registered public accounting firm has issued a net decrease of $26,654. The net decreasegoing concern opinion; there is due to the continued restructuring and streamlining of management responsibilities, helping facilitate more focused company direction and the anticipated resulting profitability. Total Assets were $305,394 at February 29, 2009 as compared to $452,903 at August 31, 2008, a net decrease of $147,509. The net decrease was primarily due to cash used for development expenses, ongoingsubstantial uncertainty that we will continue operations and reduction of inventory.
Our intent remains the manufacturing, selling and distributing of our own lines of surf wear and to promote this and other lines of goods in appropriate trade journals and other media as they are developed, expanded and distributed. Our first full length movie (surf video) – “Pipeline Posse – Project One” is now for sale in surf shops nationwide as well as available on the website: pipelineposse.com. Adsfinancial statements dated September 30, 2021, have been placed in major surf publications as well asprepared on selected internet websites and the video trailers are available for viewing in our website video section. Private label business is beginning to return in spite of the continuing competition with aggressively marketed inexpensive overseas manufacturing. We continue to advocate the value of “Made in the USA” products and this is having some effect on new business as well as the return of previous customers. Our unique ability to respond to client needs for fast delivery also adds to our value as a domestic producer of quality goods. Shouldgoing concern basis which assumes that we will be able to perpetuaterealize our assets and expand this trenddischarge our liabilities and commitments in the normal course of business for the foreseeable future. We had an accumulated deficit of $31,562,134 at September 30, 2021, had a net loss of $160,609 and used 158,432 in cash from operating activities for the three months ended September 30, 2021. 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 addsucceed 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.
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 existing staff to support expansion and growth of both our private label business and entertainment business now that the writer’s strike has ended and remain cautiously optimistic on both issues.
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.
| 3 |
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.
Our future success will depend on our key executive officers and our ability to attract, retain, and motivate qualified personnel.
We are highly dependent on our management team consisting of Kenneth Tapp, our Chief Executive Officer/Chief Technology Officer. Our future success largely depends upon the continued services of our executive officers and management team. If one or more of our executive officers are unable or unwilling to continue in their present positions, we may be unable to replace them readily, if at all. Additionally, we may incur additional expenses to recruit and retain new executive officers. If any of our executive officers joins a competitor or forms a competing company, we may lose some of our customers and potential customers. Finally, we do not maintain “key person” life insurance on any of our executive officers. Because of these factors, the loss of the services of any of these key persons could have a material adverse effect on our business, results of operations, and financial condition.
Our continuing ability to attract and retain highly qualified personnel will also be critical to our success because we will need to hire and retain additional personnel as its business grows. There can be no assurance that we will be able to attract or retain highly qualified personnel. We face significant competition for skilled personnel in our industries. This competition may make it more difficult and expensive to attract, hire, and retain qualified managers and employees. Because of these factors, we may be unable to effectively manage or grow our business, which could have a material adverse effect on our business, results of operations, and financial condition and as a result, the value of your investment could be significantly reduced or completely lost.
Should we lose our licensing revenues during any given period that have historically represented the majority of our revenues, our financial condition will be negatively affected.
We have generated a majority of our revenue for the 6 months ended 2021 from licensing revenue. The loss of the majority of our revenues in future periods in any of these revenue categories will negatively and materially affect our results of operations.
We expect to incur substantial expenses to meet our reporting obligations as a public company.
We estimate that it will cost approximately $100,000 annually to maintain the proper management and financial controls for our filings required as a public reporting company, funds that would otherwise be spent for our business operations. Our public reporting costs may increase over time, which will increase our expenses and may decrease our potential profitability.
We have generated a majority of our revenue in 2021 and 2020 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.
| 4 |
Certain of our executive officers and directors own a significant percentage of our outstanding capital stock. As of the date of this annual report, our executive officers and directors and their respective affiliates beneficially own approximately 0.80% of our outstanding voting stock, including our Chief Executive Officer who owns 0.94% 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.
Because our directors and executive officers are among our largest voting 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 voting stock. As of the date of this quarterly report, our executive officers and directors and their respective affiliates beneficially own more than 4% of our outstanding voting stock. 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.
| 5 |
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.
We may have difficulty obtaining officer and director coverage or obtaining such coverage on favorable terms or financially be unable to obtain any such coverage, which may make it difficult for our attracting and retaining qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage or financially be unable to obtain such coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
Security breaches and other disruptions could compromise the information that we maintain and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of our business, we may collect and store sensitive data, including intellectual property, our proprietary business information and that of our customers and business partners, and personally identifiable information of our customers, in our data centers and on its networks. The secure processing, maintenance and transmission of this information is critical to our business strategy, information technology and infrastructure and we may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our network, services and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, and disruption to our operations and the services it provides to customers. This often times results in a loss of confidence in our products and services, which could adversely affect our ability to earn revenues and competitive position and could have a material adverse effect on our business, results of operations, and financial condition.
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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 virtual -events 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.
If we are unable to accurately predict and respond to market developments or demands, its business, results of operations and financial condition will be adversely affected.
The cannabis industry is characterized by rapidly evolving technology, government regulations and methodologies, which makes it difficult to predict demand and market acceptance for our services/products. In order to succeed, we need to adapt the products we offer in order to keep up with technological developments and changes in consumer needs. We cannot guarantee that we will succeed in enhancing our services/products or developing or acquiring new services/products or features that adequately address changing technologies, user requirements and market preferences. We also cannot assure you that the products and services we offer will be accepted by end users. If the products and services that we offer are not accepted by customers, they will no longer purchase them, which could have a material adverse effect on our business, results of operations, and financial condition. Changes in technologies, industry standards, the regulatory environment and customer requirements, and new product introductions by existing or future competitors, could render our existing services/products obsolete and unmarketable, or require us to enhance current products/services or develop new products and services. This may require us to expend significant amounts of money, time, and other resources to meet these demands, which could strain its personnel and financial resources. Furthermore, many modernization projects deal with customer mission critical applications, and therefore encapsulate risk for the customer.
We may be unable to identify, purchase or integrate desirable acquisition targets, future acquisitions may be unsuccessful, and we may not realize the anticipated cost savings, revenue enhancements or other synergies from such acquisitions.
We plan to investigate and acquire strategic businesses with the potential to be accretive to earnings, increase our market penetration, brand strength and its market position or enhancement of our existing product and service offerings. There can be no assurance that we will identify or successfully complete transactions with suitable acquisition candidates in the future. Additionally, if we were to undertake a substantial acquisition, the acquisition may need to be financed in part through additional financing through public offerings or private placements of debt or equity securities or through other arrangements. There is no assurance that the necessary acquisition financing will be available to us on acceptable terms if and when required. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. We may also unknowingly inherit liabilities from acquired businesses or assets that arise after the acquisition and that are not adequately covered by indemnities. In addition, if an acquired business fails to meet our expectations, its operating results, business and financial position may suffer.
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.
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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 those inventions conceived by the receiving party in the course of rendering services to us will be our exclusive property.
These confidentiality, inventions and assignment agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case will be unable to prevent the use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive and time consuming and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain meaningful trade secret protection could have a material adverse effect on our business, results of operations, and financial condition.
The consideration being paid to our management is not based on arms-length negotiation.
The compensation and other consideration we have paid or will be paid to our management has not been determined based on arm’s length negotiations. While management believes that the consideration is fair for the work being performed, we cannot assure that the consideration to management reflects the true market value of its services.
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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.
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.
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During 2021 and 2020, we experienced material decreases in our revenues due to Covid-19
During 2021 and 2020, we experienced material decreases in our revenues and results of operations due to Covid-19 when comparing our 2019 results to our 2020 and 2021 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.
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.
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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
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.
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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 currently have no market share data availablemaintain 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 competitionexternal purposes in these areas. We workaccordance 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 each job through personal contactsour current expectations and are frequently the only company contacted for the particular project.
Cautionary Note
We have used forward looking statementssought to discuss future plans and strategies of the Company. Management's ability to predict results or the effect of future plans is inherently uncertain. Factors that could affect results include, without limitation, competitive factors, general economic conditions, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introductions, acceptance, technological change, changes in industry practices and one-time events. These factors should be considered when evaluating the forward looking statements and undue reliance should not be placed on such statements. Should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This document contains “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.
Although we believe that the expectations reflected in any of our forward- looking statements are reasonable, under the circumstances. Actualactual results maycould differ materially from these estimates under different assumptionsthose projected or conditions. We continue to monitor significant estimates made during the preparation ofassumed in any or our financialforward-looking statements.
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 these policies2016, as critical. Policies determineda 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 criticalno 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 those policiesunable 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 niche industry social networks and ecommerce solutions are increasing in popularity and availability. At some point, industry saturation of technology solutions that have the most significant impact on Sew Cal'swe provide to, and support for TBI participant tech startup companies will make it more difficult for our business model to expand. This will force us 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 require managementdischarge our liabilities and commitments in the normal course of business for the foreseeable future. We had an accumulated deficit of $31,562,134 at September 30, 2021, had a net loss of $160,609 and lost $158,432 in operating activities for the nine months ended September 30, 2021. These factors raise substantial doubt about our ability to usecontinue as a greater degree of judgmentgoing 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 estimates. Actual results may differrepay our liabilities arising from those estimates.normal business operations when they come due. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report. Duringintends to finance operating costs over the next twelve months with existing cash on hand. While we expectbelieve that we will be successful generating revenue to takefund our operations, meet regulatory requirements and achieve commercial goals, there are no assurances that we will succeed in our future operations.
We will attempt to overcome the following stepsgoing 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 connection withany of these goals.
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COMPARATIVE RESULTS FOR FISCAL YEARS
Consolidated Performance - Results of Operations for the further developmentthree and nine month periods ended September 30, 2021 and 2020
Revenues
For the three-month and nine-month period ending September 30, 2021, we recognized revenue from licensing of $84,889 and $237,389, respectively, compared to $62,500 and 187,500 for the three-month and nine-month period ending September 30, 2020, respectively.
For the three-month and nine-month period ending September 30, 2021, we recognized zero digital subscription revenue, compared to $7,083 and $23,438 for the three-month and nine-month ending September 30, 2020, respectively, due to the discontinuation of selling digital subscriptions in 2021.
Cost of Revenue
Cost of revenue was zero for the three-month and nine-month period ending September 30, 2021, was $13,349 and $22,238, respectively, compared to $1,756 and $6,921 for the three and nine month period ending June 30, 2020, respectively, the decrease of which is due to the discontinuation of selling digital subscriptions, events and digital marketing in 2021.
Operating Expenses
For the three-month and nine-month period September 30, 2021, we recognized compensation expense of $-0- and $52,681, compared to $22,745 and $128,328 for three-month and nine-month period ending September 30, 2020, respectively, the decrease of which is due to the discontinuation of selling digital subscriptions, events and digital marketing in 2021.
For the three-month and nine-month September 30, 2021, we recognized sales and marketing expense of $2,612 and $15,159, compared to $1,045 and $9,326 for the three-month and nine-month period ending September 30, 2020, respectively. The increase in sales and marketing expense is intended to increase our business
For the three-month and nine-month period September 30, 2021, we recognized general and administrative expense of $86,661 and $391,074, compared to $55,527 and $364,315 for the implementationthree-month and nine-month period ending September 30, 2020, respectively, the increase of which is due to increased business activity in 2021.
Other income
During the three-month and nine-month period ending September 30, 2021, we generated $-0- and $110,854 of other income from the gain from converting our plandebt and accrued interest outstanding into common stock.
Net Loss
During the three-month and nine-month period ending September 30, 2021, we recognized a net loss from continuing operations of $17,733 and $132,909, compared to $28,410 and $352,190 for the three-month and nine-month period ending September 30, 2020, respectively, the increase of which is primarily due to the discontinuation of selling digital subscriptions, events and digital marketing in 2021.
During the three-month and nine-month period ending September 30, 2021, we recognized a net loss from discontinued operations of $-0- and $27,700, compared to $-0- for the three-month and nine-month period ending September 30, 2020, respectively, primarily due to the spinoff of MjLink being treated as discontinued operations.
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Liquidity and Capital Resources
Cash Flows from Operating Activities
Net cash used in operating activities amounted to $158,432 during the nine-month period ending September 30, 2021, compared to $422,530 during the nine-month period ending September 30, 2020, the $264,098 decrease of which is primarily attributable discontinued operations in the fiscal year 2021.
Cash Flows from Financing Activities
Net cash provided by financing activities amounted to $161,950 during the nine-month period ending September 30, 2021, compared to $410,973 during the nine-month period ending September 30, 2020. The decrease of $249,023 in financing proceeds is primarily attributable to $410,973 in convertible note proceeds in 2021 compared to $-0- in 2021; offset to a lesser extent from the private placement of $100,000 in common stock in 2021 and $61,950 in related party loans in 2021 net of repayment, compared to $-0- sales of common stock and $-0- in related party loans in 2020.
Off-Balance Sheet Arrangements
None.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4T. CONTROLS AND PROCEDURES
Disclosure Controls and Chief Financial Officer (“CFO”), has evaluated the effectiveness of ourProcedures
We maintain disclosure controls and procedures as defined in Securities and Exchange Commission (“SEC”) Rule 13a-15(e) and 15d-15(e) as of the end of the period covered by this report. Based upon that evaluation, management has concluded that our disclosure controls and procedures are effectivedesigned to ensure that information we are required to disclosebe disclosed in our reports that we file or submitfiled under the Securities Exchange Act is communicated to management, including the CEO and CFO,of 1934, as appropriate to allow timely decisions regarding required disclosure andamended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
As required by SEC Rule 15d-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were nonot effective in providing reasonable assurance in the reliability of our report as of the end of the period covered by this report. This is because we have not sufficiently developed our segregation of duties nor have we established an audit committee.
Changes in Internal Control over Financial Reporting
We had material changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controlscontrol over financial reporting that occurred during the Thirdour most recently completed fiscal quarter, 2008 that has materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. Legal Proceedings.
Peak One Opportunity Fund, L.P.
On April 9, 2021, we commenced legal action in the United States District Court for the Southern District of Florida against Peak One Opportunity Fund, L.P. (“Peak One”) and Jason Goldstein (“Goldstein”), alleging, among other things, that Peak One is acting as an unregistered dealer in violation of Section 15(a) of the Securities Exchange Act of 1934 (the “Act”) and, therefore, certain debentures and warrants entered into by and between the Company and Peak One should be declared void ab initio and, further, that Peak One is liable for recessionary damages to us pursuant to Section 29(b) of the Act.
On June 11, 2021, Peak One and Goldstein filed a motion to dismiss our complaint, which the Court subsequently granted on June 28, 2021, on procedural grounds, and without prejudice, and closing the action for administrative purposes.
On July 2, 2021, we filed an amended complaint against Peak One, Goldstein, Peak One Investments, LLC (“Peak Investments”, and together with Peak One and Goldstein, the “Peak Parties”) and J.H. Darbie & Co. (“Darbie”), along with a motion to reopen the action, alleging, among other things, that the Peak Parties are acting as unregistered dealers in violation of Section 15(a) of the Act.
On July 8, 2021, the Court denied our motion to reopen the action, without prejudice, as the amended complaint contravened the Eleventh Circuit’s prohibition against “shotgun” pleadings.
On July 22, 2021, we filed a motion for clarification and/or for leave to file its second amended complaint.
On August 5, 2021, Peak One and Goldstein filed opposition to our motion for leave to file a second amended complaint and, further, moved for sanctions pursuant to 28 U.S.C. § 1927.
We intend to litigate the causes of action asserted in the amended complaint against the Peak Parties and Darbie, including but not limited to Peak One is acting as an unregistered dealer in violation of Section 15(a) of the Act and, therefore, we are entitled to have the debentures and warrants entered into by and between us and Peak One declared void ab initio and, further, that Peak One is liable to us for recessionary damages to the Company pursuant to Section 29(b) of the Act. We contend that the foregoing arguments are brought in good faith, particularly in light of recent SEC enforcement actions against other unregistered dealers.
LGH Investments, LLC
On April 19, 2021, we commenced legal action in the United States District Court for the Southern District of California against LGH Investments, LLC (“LGH”) and Lucas Hoppel (“Hoppel”) alleging, among other things, that LGH is acting as unregistered dealer in violation of Section 15(a) of the Securities Exchange Act of 1934 (the “Act”) and, therefore, certain convertible promissory notes and share purchase agreements entered into by and between the Company and Peak One should be declared void ab initio and, further, that Peak One is liable for recessionary damages to the Company pursuant to Section 29(b) of the Act.
On June 25, 2021, LGH and Hoppel filed a motion to dismiss our complaint.
On July 8, 2021, we filed a motion for extension of time to respond to LGH and Hoppel’s motion to dismiss our complaint. The Court granted our motion for an extension of time on July 13, 2021.
On July 16, 2021, we filed our first amended complaint against LGH, Hoppel, and J.H. Darbie (“Darbie”) alleging, among other things, that LGH is acting as unregistered dealers in violation of Section 15(a) of the Act.
In turn, on July 23, 2021, the Court denied LGH and Hoppel’s motion to dismiss as moot.
We intend to litigate the causes of action asserted in the amended complaint against LGH, Hoppel, and Darbie, including but not limited to LGH is acting as an unregistered dealer in violation of Section 15(a) of the Act and, therefore, we are entitled to have the convertible promissory notes and share purchase agreements entered into by and between us and Peak One declared void ab initio and, further, that LGH is liable to the Company for recessionary damages to the Company pursuant to Section 29(b) of the Act. We contend that the foregoing arguments are brought in good faith, particularly in light of recent SEC enforcement actions against other unregistered dealers.
We know of no material pending legal proceedings to which we or our subsidiary is a party or of which any of our properties, or the properties of our subsidiary, is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.
| 16 |
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
For the 12-month period ending December 31, 2019, a lender converted their debt into 284,373 common shares at an average of $0.03517 for a value of $10,000.
For the 12-month period ending December 31, 2020, several lenders converted their debt into 6,102,436,839 common shares at an average of $0.00009 for a value of $548,646.
For the 3-month period ending June 30, 2021, the remaining lenders converted their debt into 709,449,528 common shares at an average of $0.00038 for a value of $271,174.
The stock issuances were exempt under Section 4(2) of the Securities Act of 1933, as amended.
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Mine Safety Disclosures.
None
ITEM 5. Other information
None.
ITEM 6. Exhibits.
EXHIBIT INDEX
Exhibit Number | Description | |
| 31.1 | ||
| 31.2 | ||
| 32.1 | ||
| 32.2 | ||
| 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 |
| 17 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 5, 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) |
| 18 |