ITEM
1. BUSINESS
Forward-Looking
Statements
This
annual report contains “forward-looking statements”. All statements other than statements of historical fact are “forward-looking
statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings,
revenue or other financial items; any statements of the plans, strategies and objections of management for future operations;
any statements concerning proposed new services, products or developments; future economic conditions or performance; any statements
or belief; and any statements or assumptions underlying any of the foregoing.
Forward-looking
statements may include the words “may,” “could,” “estimate,” “intend,” “continue,”
“believe,” “expect” or “anticipate” or other similar words. These forward-looking statements
present our estimates and assumptions only as of the date of this annual report. Accordingly, readers are cautioned not to place
undue reliance on forward-looking statements, which speak only as of the dates on which they are made. Except as required by applicable
law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future
events or otherwise, even if experience or future changes make it clear that any projected results or events expressed or implied
therein will not be realized. You are advised, however, to consult further disclosures we make in future public filings, statements
and press releases.
Forward-looking
statements in this annual report include express or implied statements concerning our future revenues, expenditures, capital and
funding requirements; the adequacy of our current cash and working capital to fund present and planned operations and financing
needs; our proposed expansion of our business; and future economic and other conditions, both generally and in our specific geographic
and product and/or services markets. These statements are based on currently available operating, financial and competitive information
and are subject to various risks, uncertainties and assumptions that could cause actual results to differ materially from those
anticipated or implied in the forward-looking statements due to a number of factors including, but not limited to, those set forth
below in the section entitled “Risk Factors” in this annual report, which you should carefully read. Given those risks,
uncertainties and other factors, many of which are beyond our control, you should not place undue reliance on these forward-looking
statements. You should be prepared to accept any and all of the risks associated with purchasing our securities, including the
possible loss of your entire investment.
Our
financial statements are stated in United States Dollars (US$) unless otherwise stated and are prepared in accordance with United
States Generally Accepted Accounting Principles.
In
this annual report, unless otherwise specified, all references to “common shares” or “common stock shares”
refer to restricted common stock shares.
As
used in this annual report on Form 10-K, the terms “we”, “us” “our” refer to Social Life Network,
Inc., a Nevada corporation, and its wholly-owned subsidiary, MjLink.com Inc., a Delaware corporation. Unless otherwise specified.
MjLink.com Inc. is referred to herein as “MjLink” or “MjLink.com”.
Corporate
Overview – Formation, Corporate Changes, Material Merger
Organization
Social
Life Network, Inc – Parent Holding Company
Our
history began with incorporation in California on August 30, 1985 under the name, C J Industries, Inc. On February 24, 2004, we
merged with Calvert Corporation, a Nevada Corporation, changed our name to Sew Cal Logo, Inc., and moved our domicile to Nevada.
In
June 2014, we were placed into receivership in Nevada’s 8th Judicial District (White Tiger Partners, LLC et al v. Sew Cal
Logo, Inc.et al, Case No A-14-697251-C) (Dept. No.: XIII) (the “Receivership”).
On
January 29, 2016, we, as the seller (the “Seller”), completed a business combination/merger agreement (the “Agreement”)
with the buyer, Life Marketing, Inc., a Colorado corporation (the “Buyer”), its subsidiaries and holdings, and all
of the Buyer’s securities holders. We, as the Seller, acted through Robert Stevens, the court-appointed receiver and White
Tiger Partners, LLC, our judgment creditor. The Agreement provided that the then current owners of the private company, Life Marketing,
Inc., become the majority shareholders, pursuant to which an aggregate of 119,473,334 common stock shares were issued to our officers,
composed of 59,736,667 shares each to our Chief Executive Officer, Kenneth Tapp, and Andrew Rodosevich, our then-Chief Financial
Officer. Pursuant to the terms of the Agreement and related corporate actions in our domicile, Nevada:
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We
cancelled all previously created preferred class of stock;
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We
delivered newly issued, common stock shares equivalent to approximately 89.5% of our outstanding shares as a control
block in exchange for 100% of the Buyer’s outstanding shares;
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The
court appointed receiver sold its judgment to the Buyer, and the Seller agreed to pay the receiver $30,000 and the equivalent
of 9.99% of the outstanding stock (post-merger) of the newly issued unregistered exempt shares.
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Our
then officers and directors were terminated, and Kenneth Tapp and Andrew Rodosevich became our Chief Executive
Officer/Director and Chief Financial Officer/Director, respectively;
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We
effected a 5,000 to 1 reverse stock split effective April 11, 2016, with each shareholder retaining a minimum of 100 shares;
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We
changed our name from Sew Cal Logo, Inc. to WeedLife, Inc, and then to Social Life Network, Inc. effective in Nevada
on April 11, 2016;
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We
changed our s stock symbol from SEWC to WDLF;
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We
decreased our authorized common stock shares from 2,000,000,000 shares to 500,000,000 shares, effective on March 17, 2016.
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On
June 6, 2016, we issued an order in the Receivership pursuant to Section 3(a) (10) of the Securities Act of 1933, as amended (the
“Securities Act”), ratifying the above actions, and the receiver was discharged on June 7, 2016.
On
September 20, 2018, we incorporated MjLink, a Delaware Corporation, as our wholly owned subsidiary.
MjLink.com
Inc. – Wholly Owned Subsidiary
Prior
to its incorporation in Delaware on September 20, 2018, MjLink functionally operated as our cannabis division. MjLink continues
to operate as our cannabis division but in corporate form as our wholly owned subsidiary.
Cannabis
and Hemp companies face ongoing difficulties around the world with marketing and advertising their products and brands to consumers,
both with online and through traditional advertising. The global consumer base for these companies and brands have been growing
at an exponential rate, as more and more states, provinces and countries legalize the use of cannabis and hemp products, either
medically or recreationally.
In
the United States, according to BDS Analytics, the consumer base has grown to more than 70 Million people who have purchased legal
cannabis since Colorado passed the legalization of recreational marijuana on November 6, 2012. We launched MjLink in January of
2013 as a direct response of online advertising and marketing restrictions placed by Google, Facebook and other social media networks
that year.
MjLink
is a leading social networking platform and event company that has in part helped expedite the growth of the cannabis industry
worldwide. MjLink is one of the largest social and digital media cannabis/hemp related platforms for connecting professionals
to businesses, and marketing products to consumers.
Our
Business
Business
of Social Life Network, Inc. (Software as a Service Internet Platform)
We
are a technology company that licenses its Social Life Network SaaS (Software as a Service) Internet Platform (hereafter referred
to as the “Platform”) to niche industries for an annual license fee and/or a percentage of profits. The Platform is
a cloud-based social network and eCommerce system that can be accessed by a web browser or mobile application that allows end-users
to socially connect with one another and their customers to market and advertise their products and services. The Platform can
be customized to suit virtually any international niche industry or sub-culture, such as hunting and fishing, tennis, real estate
professionals, health and fitness, and charity causes.
Our
Platform licensing agreements are for a minimum of two years and automatically renew each year thereafter. Our fee structure includes
a combination of annual fees and/or a minimum of 20% of the net profits that are generated by the licensee from monthly subscriptions
services, E-Commerce fees and online advertising sales from their platform users.
We
developed our social networking and E-Commerce Platform specifically for industries that we believe have a passionate consumer
base, that communicate in non-public channels, and their commerce activity is highly based on referral and “copy-cat”
consumption; consistent with the foregoing, we license our Platform to the residential real estate industry and niche sports verticals
like hunting and fishing. Our platform uses machine learning (A.I.) that interpolates the user behavior data through their online
social activity to better connect the right people and businesses together, at the right time when online in our social network.
Contrary to other social networks and E-Commerce systems like Facebook and Amazon where everyone is grouped together and forced
to listen to the white noise, our Platform increases online user connectivity and stronger relationships between businesses and
their customers.
To
date, our Platform is accessed by subculture industries in over 120 countries and is translated in multiple languages. Our language
translation files for the Platform include 80% or more of the following languages: English, German, Hungarian, Portuguese, Turkish,
Polish, Russian, Swedish, Slovenian, French, Dutch, Portuguese, Czech, Persian, Ukrainian, Vietnamese, Romanian, Spanish, Italian
and Japanese, which will position international use of our Platform immediately following our launch internationally through individual
licensing agreements.
Business
of MjLink.com Inc. (Cannabis and Hemp Industry Platforms)
MjLink’s
technology platform consists of four separate and unique private social networks powered by AI and Blockchain technology, with
a total of 21 sites and apps in the entire MjLink network. In total, the MjLink network provides the cannabis industry with a
singular platform for social networking, product and dispensary search, digital content distribution, advertising, video conferencing
and virtual investment conferences, mobile app and website building tools, learning management, and online event solutions. MjLink
supports user groups that make up the cannabis industry worldwide, attracting an average of more than 4 million visits each month
throughout our combined sites and apps, from an average of more than 120 countries worldwide.
MjLink’s
goal is to become the highest regarded technology and event company in the cannabis and hemp industry worldwide. Due to MjLink’s
unique positioning after 7 years of operations, and having developed four separate and unique social networks that are used in
more than 120 countries, we believe that there are considerable monetization opportunities by executing MjLink’s business
plan in which traditional trade shows and conferences are complimented 365 days a year by its niche social networks and business
application tools.
Neither
we or MjLink cultivate, dispense or sell hemp, cannabis or any derivatives of the cannabis plant, such as infused products.
MjLink’s
Cannabis and Hemp Industry Social Networks and Event Platform
MjLink’s
technology platform consists of four separate and unique private social networks depicted below that is powered by AI and Blockchain
technology, with a total of 21 sites and apps in the entire MjLink network. In total, the MjLink network provides the cannabis
industry with a singular platform for:
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Social
Networking powered by AI social matching and blockchain technology
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Product
and Dispensary Search
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Digital
Content Distribution
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Video
and HTML5 interactive AI powered advertising
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Live
Video Conferencing and Virtual Conferences
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Mobile
App and Website Building Tools
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Learning
Management System
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Digital
Event SaaS
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5G-compliant
Big Data
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5G-compliant
simulcasting of events and social networking
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5G-compliant
Internet of things (for seed to sale tracking applications)
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MjLink
support user groups that make up the cannabis industry worldwide attract an average of more than 4 million visits each month throughout
its combined sites and apps of more than 120 countries worldwide.
1.
MjLink.com Social Network
MjLink.com
is a B2B social network that operates similar to LinkedIn, connecting industry operators and entrepreneurs together online and
through regional and national cannabis events; however, MjLink operates with important distinguishing characteristics by providing
cannabis and hemp related business professionals with better cannabis/hemp networking platform compared to LinkedIn, that is:
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free
of spammers
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free
of white noise
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specifically
designed for the type of Cannabis or Hemp business and according to how each business operates
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2.
Weedlife.com Social Network
WeedLife.com
is a C2C social network that functions much like Facebook and MeetUps for cannabis enthusiasts. Launched in January 2013, it is
now one of the largest cannabis-only social networks worldwide used by people in more than 120 countries. WeedLife is used primarily
by consumers and caregivers online, as well as bud tenders and dispensaries that connect with their customers.
3.
HempTalk.com Social Network
HempTalk.com
is a social marketplace for industrial hemp and CBD companies, consumers and industry experts. HempTalk is designed for distributing
information and education materials about the emerging hemp industry. HempTalk.com allows for CBD and hemp companies to use ecommerce
and affiliate marketing to reach and service more online customers.
4.
MjInvest.com Social Network
MjInvest.com
is a private investor network for the cannabis industry. The investor network is complimented by MjLink’s New York and Los
Angeles based MjMicro Conferences. MjInvest provides public and private C-level executives the ability to connect and pitch their
companies online to existing and potential shareholders, analysts, family offices, venture funds and accredited investors.
MjMicro
Conference, produced by the MjInvest Social Network
The
MjMicro Conference is an invitational forum that unites publicly traded and private cannabis companies led by seasoned executives
with next level, high net worth investors. C-level executives from presenting firms have the opportunity to meet one-on-one with
next-level private and institutional investors, with a focus on discussing structured investments that will provide opportunities
for business expansion and growth. The investment conference draws in speakers from the top investment firms and accredited investors,
looking to connect with top C-level executives in the cannabis and hemp industry. MjInvest then provides those same investors
and C-level executives the ability to virtually connect and present year-round, through the MjInvest.com investor network and
through monthly virtual conferences that take place one to three times monthly.
The
MjLink network of websites and apps are built into our four social networks described above with a total of 21 individual domains
and applications.
A.I.
and Blockchain Technology
MjLink
connects the millions of international cannabis and hemp consumers, business professionals, companies and brands every year that
make up the growing industry. MjLink uses state-of-art A.I. and Blockchain technology in our networks that allows our platforms
to learn the online social behavior of the users, to better connect people together with brands, advertising and one another.
The end result is strong user retention, longer session times, and greater advertising opportunities for the professionals and
brands in the cannabis and hemp industries.
Cannabis
and Hemp Event Platforms
MjLink
is changing the way industry events and post their live event(s) are conducted by integrating them into our social networking
platforms the rest of the year. Think of LinkedIn, producing career fairs and industry trade shows around the country, to further
enhance usefulness of their platform. MjLink enhances its platform by leveraging the user-ship from our cannabis and hemp industry
social networks, and then connect those users with local, regional and national events to conduct business both in person, and
online with our four unique social networks, WeedLife.com, MjLink.com, HempTalk.com and MjInvest.com.
MjLink
launched the first of its social network “powered” conferences in 2019, the MjMicro Investor Conference, and plans
to launch three new event scale consumer festivals.
MjLink
intends to develop and drive our revenue growth through the MjMicro Physical Conferences and the MjMicro Virtual Conferences that
are held on our MjInvest.com investor network. We will accomplish this by dedicating capital raised through a debt or equity offering
or a Regulation A Offering and by devoting additional corporate resources necessary to the production of more frequent online
events and increasingly larger physical events that will be held in emerging growth markets in both the cannabis and hemp industries.
MjLink’s goal with this strategic approach is to enhance our financial performance, while increasing both profit and gross
margins. As legalization of cannabis for both medical and recreational markets continue to develop nationally and internationally,
MjLink believes that its strategic shift to providing larger investor events in developing markets, as well as more frequent online
events, will position it as the leader in virtual and physical investor events in the industry worldwide.
As
a proof of model, MjLink held its first MjMicro Virtual Conference on January 29th, 2020, with an average online attendance per
company of 91 investors watching each of the presenters live. This was more than 400% the average audience size for presenters
that pitched at the MjMicro physical conferences that we held in NYC and Beverly Hills in 2019. Over the 7 days following the
live virtual conference event, an average of 150 additional online investors watched the recordings of each presenting company,
overwhelming proof that the online investor audience using the MjInvest.com investor platform (the same audience that is invited
to the MjMicro physical conferences) find great value and convenience in getting access to companies, their C-level execs and
the investment opportunities, online.
Revenue
Generation
Social
Life Network generates revenues through 4 primary sources:
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License
Agreements - We generate revenue through licensing agreements from which we receive an annual license fee or a percentage
of net profits.
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Online
Advertising - Our advertising program enables advertisers to present online ads to a
specific type of cannabis or hemp website audience, depending on the website and type
of content that website provides in our network. We charge advertisers using the cost
per thousand (CPM), which is a marketing term used to denote the price of 1,000 advertisement
impressions on one webpage.
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We
charge $10.00 CPM to an advertiser, which means the advertiser must pay $10.00 for every
1,000 impressions of its online advertising campaign. The “M” in CPM represents
the Roman numeral for 1,000. Additionally, we provide the advertiser with the ability
to purchase the CPM advertising campaign on specific websites in our cannabis and hemp
network. This favors the ads that are most relevant to our webpage visitors, improving
the experience for both the person looking for information in our network and the advertiser
looking for targeted interested customers for their advertised product or service.
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Charging
advertisers by CPM (1,000 advertisement impressions on one webpage) requires that we
have enough website and webpage traffic (visitors viewing the webpages on a website)
to sell to an advertiser. Therefore, we are dependent on marketing and advertising our
own websites using print, radio, TV and online advertising in order to drive new and
existing website visitors to our network. The more website traffic we experience each
month, equates to the more advertising revenue we can generate each month.
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Digital
Marketing - We provide business professionals with monthly subscriptions that enhance
their online marketing and branding through our online business directory and online
review management system. This marketing service allows a business to spotlight their
online business listing, customer reviews and special offers and coupons, to our website
network visitors.
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In
addition to the existing online applications, MjLink’s management is focused on launching three new divisions that will
provide incubation of early stage cannabis tech companies, B2B and B2C trade-shows, and M&A of cannabis technology companies.
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MjLink
generates revenues through five primary sources:
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Online
advertising throughout all four of our social networks and the 21 websites and mobile apps that we operate;
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Monthly
digital subscriptions, providing business professionals with digital services that boost their marketing and online influence;
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3.
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Annual
subscription, providing investor platform for C-level execs to conduct live and pre-recorded investment pitches and roadshows;
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4.
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Attendance
and sponsorships to participate at our MjMicro Investor Conferences that MjLink produces one to three times per year; and
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Monthly
MjMicro Virtual Online Conferences, produced one to three times per month, where companies pay us an annual fee for allowing
executives to present their companies to our online investor audience.
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Revenue
is generally impacted by the number of events, size of attendance, volume of sponsorship and attendee sales, admission prices,
and access fees to MjInvest.com. Event costs are included in direct operating expenses and are typically substantial in relation
to revenues. Since the fees and costs are typically within a range for these events, significant increases or decreases in event
revenue will generally result in comparable changes to operating income.
We
utilize a sales force that creates and maintains relationships with sponsors through a combination of strategic, international,
national and local opportunities that allow businesses to reach customers through the MjMicro Events, including advertising on
our websites, co-sponsorship arrangements and commercial vendor booths at MjMicro. MjMicro drives increased advertising scale
to further monetize the MjInvest platform through branded media content, corporate sponsorship and allowing those seeking investments
to find investors. We work with our clients to help create marketing programs that drive their business goals and connect investors
directly with Minivet’s audience. We also work with other commercial businesses operating within the cannabis industry by
providing vendors with tables and trade booths to help drive awareness of the vendor’s business by connecting with MjMicro’s
vast international investor base.
Contingent
upon adequate financing, MjMicro plans to conduct one to three virtual events per month, that are complemented by one to three
physical events per year.
Operations
We
currently operate and support the ongoing technology maintenance of our online social network platform in the cannabis and hemp
industry for users from about 120 countries that access it each month. We also operate and support the ongoing technology maintenance
and upgrades of our licensees’ social networks in the United States for the Sports Social Network and the Real Estate Social
Network.
Our
Market
Our
market is intentionally broad and includes engagement-based organizations, consumer brands, ad agencies, online marketers, advertisers,
sponsors, social media celebrities, entertainment celebrities and performance artists, large and small enterprise users, religious
organizations, health care providers, network marketing and multi-level marketing companies, media companies, major motion picture
studios, social media companies, schools and training facilities, and virtually any other person or organization that seeks to
attract, engage, and communicate with prospects, customers, consumers, fans, followers, patients, friends, and subscribers, among
others, online, utilizing automated, interactive technology.
Target
Markets
We
have targeted niche industries through our various platforms, including the following:
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Cannabis
and Hemp
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Sports
Industries
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Hunting
& Fishing
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Racket
Sports
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Cycling
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Golf
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Youth
Sports Leagues
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Soccer
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Charities
& Industry Associations
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Residential
Real Estate.
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We
will continue to target niche industries based on sub-culture behavior and the need for private social networking.
Distribution
Methods
Our
distribution methods are:
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Prospective
customers and clients can subscribe to our Social Life Network software service on a monthly or annual contract through a
simple web-based sign-up form accessible on our website (sociallifenetwork.com), as well as through interactive sign-up links
that we distribute via email and text, as well as through social media.
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2.
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Enterprise
users can subscribe to our service and then distribute custom-branded sign-up links to their internal and external staff via
email or other electronic means.
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3.
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We
enter into license or partnership agreements with other social media providers to incorporate our technology into such other
providers’ software platform that they offer to their existing and prospective client base.
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4.
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We
enter into license or partnership agreements with digital marketing companies and advertising agencies to resell our technology
to their existing and prospective client base, for monthly fees which are shared with us.
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5.
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We
employ a direct sales team, as well as outside sales consultants.
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Marketing
We
utilize our own proprietary interactive video platform as the foundation of our ongoing marketing initiatives. Our initiatives
include daily, broad-based social media engagement by a dedicated team of full-time employees and outside consultants; management
of our website; email campaigns, as well as our CEO’s guest appearance at tradeshows and investor conferences; among many
other ongoing initiatives designed to increase awareness of our products and services and drive conversion and adoption rates.
Our
marketing consists of:
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Trade
Shows & Conferences
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Print
Advertising
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Public
Relations and IR
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Digital
Advertising
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Social
Media
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Online
Influencers
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Competition
Our
business is highly competitive, and competition presents an ongoing threat to the success of our business. We face significant
competition with both our Cannabis/Hemp Social Networks and licensing of our E-Commerce Social Network Platforms, including MassRoots.com,
Leafly.com, Zillow.com, HOUZZ.com, TennisChannel.com, and Cabelas.com, which offer a variety of online advertising and E-Commerce
offerings. These competitors and other competitors have greater financial, operational, and personnel resources than we do. Should
we fail to develop strategies to overcome our competition, our revenues will be negatively impacted.
Competitive
Advantages
Our
competitive advantage is that we are solely dedicated to niche industries that business and consumer users that do not feel comfortable
sharing content and information on other social networks like Facebook, LinkedIn and Twitter, as it may either jeopardize their
personal and professional reputations or be completely lost in the white-noise of billions of other posts. Additionally, we have
developed specialized features for these niche industries that incorporates E-Commerce directly into a users’ social networking
account. This integration of E-Commerce directly into social networking sets our Platform apart from our current competitors.
MjLink,
launched in 2013, is one of the oldest and largest technology platform for the cannabis and hemp industry globally, with the largest
technology tool-set ever built into one single platform; that includes a social networking platform, API connectivity to other
platforms and industry software, artificial intelligence (AI) and blockchain powered data science (AI Big Data), free and premium
marketing applications for business users (a website builder and mobile app builder platform for business users), AI driven user
profiling for better connection recommendations, blockchain powered search algorithm that indexes ever cannabis and hemp website
in the world, AI driven privacy and monitoring system for user safety, and an e-commerce marketplace for legal hemp retail businesses
to sell and manage inventory online.
Contingent
upon adequate financing, we plan to identify and acquire best-in-breed technology companies that service the industry worldwide.
Our technology platform was built from day-1 with this intent in mind, ready for easy and fast integration of other technology
platforms into ours. Over the past 7 years, we have successfully tested and integrated our platform with other tech companies
programming, to include PHP, JAVA, Python, ColdFusion, ASP.NET, JavaScript, C++, HTML, CSS, SQL, Ruby and Google Go. With this
technology edge, we will actively look to “role-up” the best, available technology companies in the industry in effort
to make MjLink the “Google” of the cannabis and hemp industry worldwide.
Competitive
Disadvantages
Our
competitive disadvantages are that we do not have the operational and financial resources that our competitors have, which results
in our having fewer resources to market our social network brands, advertise our digital services, acquire new users on our social
networks, and sell our advertising and digital services to business customers, as compared to our competitors.
Planned
Future Growth
As
the legalization of cannabis and hemp markets continue to develop globally, we believe that a strategic shift to focusing on larger
developed industry segments like the emerging CBD industry, the international investment community, and the networking of small
business professionals, will present us with attractive growth and opportunities. Furthermore, we have identified the opportunity
to use our social networks in each of these industry segments to drive attendance to the conferences and trade shows that we are
launching. This will create a synergistic relationship between these events that are held throughout the year, and our social
networks that connect the attendees the rest of the year. We believe that growing this part of our business will result in longer
usage and increased user acquisition of our social networks (from existing and potential members), resulting in greater long-term
revenue potential.
Intellectual
Property
Our
technology platform and associated applications, features and functionality are comprised of proprietary software, code and know-how
that are of key importance to our business plan.
Research
and Development
We
spent zero dollars on research and development during each of the years ended December 31, 2019 and 2018.
Sources
and Availability of Products and Names of Principal Suppliers
We
currently rely on certain key suppliers and vendors in the coding and maintenance of our software. Management believes it has
mitigated the associated risks of these single-source vendor relationships by ensuring that we have access to additional qualified
vendors and suppliers to provide like or complementary services.
Dependence
on One or a Few Major Customers
We
are not dependent upon one or a few major customers and we do not expect to have any significant customer concentration.
Government
Regulation
Government
regulation is of significant concern for our business. Our management believes it currently possesses all requisite authority
to conduct its business as described in this annual report. Our cannabis/hemp websites with respect to cannabis are dependent
on state and Federal laws pertaining to the cannabis industry (See “Risks Related to Cannabis/Hemp Related Government
Regulation” for further information regarding government regulation).
Cost
and Effects of Compliance with Environmental Laws
Our
operations are not subject to federal, state or local environmental regulations.
Employees
and Consultants
We
currently operate with 7 full time employees and we also employ consultants on an as-needed-basis to provide specific expertise
in areas of software design, development and coding, content creation, and other business functions including marketing and accounting.
To date we have 6 consultants.
By
year end 2020, we are planning to hire as many as 20 full-time sales representatives, 10 full-time marketing and social media
employees, 5 full-time production and customer support employees, and 4 part-time and 3 full-time executives, and management staff
for our cannabis and hemp social network expansion plan, all of which is contingent upon adequate funding and/or financing.
None
of our employees or consultants are currently covered by a collective bargaining agreement. We have had no labor-related work
stoppages and we believe our relations with our employees and consultants are excellent.
Seasonality
of Business
We
do not have a seasonal business cycle.
Patents
and Intellectual Property/Trademarks/Licenses/Franchises
We
do not currently own any patents and have no intention of applying for patents. We have no franchise or royalty agreements. The
US Patent and Trademark Office published our trademark “Weed Life” on May 5, 2015.
Raw
Materials
We
do not use raw materials in our business.
Significant
Developments
During
2018, there were the following significant developments:
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On
December 4, 2018, our Chief Executive Officer presented at the December 5, 2018 Virtual
Investor Conference.
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On
December 4, 2018, MjLink presented its corporate presentation at the 11th
Annual LD Micro Main Event in Los Angeles, California.
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On
December 20, 2018, MjLink launched a new video and display advertising network on our cannabis business social network.
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On
December 28, 2018, we launched a new video conferencing paid feature to our LikeRe.com real estate social network.
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There
were the following significant developments in 2019.
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On
January 2, 2019, we launched a new iTunes and Android mobile app for the FutPost.com
soccer social network.
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On
January 7, 2019, HuntPost.com social network, which is directed to the hunting
and fishing community, launched an e-commerce marketplace where consumers and industry
vendors may sell their goods.
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On
January 15, 2019, we launched a new iTunes and Android mobile app for the HuntPost.com
hunting and fishing social network.
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On
January 21, 2019, we launched a new iTunes and Android mobile app for the LikeRE.com
real estate social network.
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On
June 25, 2019, we launched a new division, the MjMicro Cap Conference in New York, New
York.
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On
October 16, 2019, we held our second MjMicro Cap Conference in Beverly Hills, sponsored
by PiperJaffray, Roth Capital Partners and 54 of the top hemp and cannabis companies
in North America.
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Material
Agreements
Software
License Agreement with Real Estate Social Network, Inc.
We
have a January 1, 2018 Software License Agreement with Real Estate Social Network, Inc., a Colorado corporation, whereby we, as
the licensor, licensed our software as a service (SaaS) to Real Estate Social Network as the licensee. This agreement provides
that we will receive 20% of the net profits from all monthly subscriptions and online ad sales from the licensee, paid annually,
on the 31st day of January for the preceding year. Early payment or installment payments on a monthly or quarterly basis are allowed.
We are required to provide acceptance testing to establish whether the licensed software operates properly. If the testing does
not yield expected results, we, as the licensor are required to correct errors at our own cost. If later acceptance testing fails
to yield the expected results, the licensee may terminate the agreement upon written notice. We provide a 180-day limited warranty
that the licensed software will conform in all material respects of the documentation specifications. The term of the License
Agreement is from the effective date, January 1, 2018, and continues in effect until termination, which termination may occur
as follows: (a) if the Licensee fails to make payment; (b) by either party for the other Party’s material breach of the
agreement that is incurable or uncured by breaching party for 30 days after being served with notice of breach and demand for
cure, effective on written termination notice to the breaching Party; (c) by the Licensor, effective immediately irrespective
of written notice; (d) by both Parties upon mutual agreement; (e) if we, as the Licensor: (i) are dissolved or liquidated or takes
any corporate action for such purposes; (ii) become insolvent or we are generally unable to pay our debts as they become due;
(iii) become the subject of any bankruptcy proceedings, voluntary or involuntary, under any domestic or foreign bankruptcy or
insolvency Law; (iii) make or seek to make a general assignment for the benefit of its creditors; or (iv) apply for, or consent
to, the appointment of a trustee, receiver, or custodian for a substantial part of its property.
Software
License Agreement with Sports Social Network, Inc.
We
have a January 1, 2018 Software License Agreement with Sports Social Network, Inc., a Colorado corporation, whereby we, as the
licensor, licensed our software as a service (SaaS) to Sports Social Network, Inc. as the licensee. This agreement provides that
we will receive $125,000 USD annually each year for the first two years of this agreement, and thereafter will receive 20% of
the net profits from all collected E-Commerce fees and online advertising sales from the licensee, paid monthly with the option
to be paid annually, on the 31st day of January for the preceding year. Early payment or installment payments on a monthly or
quarterly basis are allowed. We are required to provide acceptance testing to establish whether the licensed software operates
properly. If the testing does not yield expected results, we, as the licensor are required to correct errors at our own cost.
If later acceptance testing fails to yield the expected results, the licensee may terminate the agreement upon written notice.
We provide a 180-day limited warranty that the licensed software will conform in all material respect of the documentation specifications.
The
term of the License Agreement is from the effective date, January 1, 2018, and continues in effect until termination, which termination
may occur as follows: (a) if the Licensee fails to make payment; (b) by either party for the other Party’s material breach
of the agreement that is incurable or uncured by breaching party for 30 days after being served with notice of breach and demand
for cure, effective on written termination notice to the breaching Party; (c) by the Licensor, effective immediately irrespective
of written notice; (d) by both Parties upon mutual agreement; (e) if we, as the Licensee: (i) are dissolved or liquidated or takes
any corporate action for such purposes; (ii) become insolvent or we are generally unable to pay our debts as they become due;
(iii) becomes the subject of any bankruptcy proceedings, voluntary or involuntary, under any domestic or foreign bankruptcy or
insolvency Law; (iii) make or seek to make a general assignment for the benefit of its creditors; or (iv) apply for, or consent
to, the appointment of a trustee, receiver, or custodian for a substantial part of its properties.
ITEM
1A. RISK FACTORS
An
investment in our common stock is highly speculative and should be purchased only by persons who can afford to lose the entire
amount invested in the common stock. Before purchasing any of the shares of common stock, you should carefully consider the following
factors relating to our business and prospects. If any of the following risks occur, our business, financial condition or operating
results could be materially adversely affected. In such case, you may lose all or part of our investment. You should carefully
consider the risks described below and the other information in this annual report before in investing in our common stock.
Risks
Related to Our Business
Our
independent registered public accounting firm has issued a going concern opinion; there is substantial uncertainty that we will
continue operations in which case you could lose your investment.
In
their report dated March 19, 2019, our independent registered public accounting firm, B F Borgers CPA PC, stated that our financial
statements have been prepared on a going concern basis which assumes that we will be able to realize our assets and discharge
our liabilities and commitments in the normal course of business for the foreseeable future. We had an accumulated deficit of
$31,563,493 at December 31, 2019, had a net loss of $3,857,948 and used net cash of 1,902,563 in operating activities for the
twelve months ended December 31, 2019. (the net loss and accumulated deficit consist of $2,087,083 of non-cash stock-based compensation
expense.) These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a
going concern is dependent upon our generating profitable operations in the future and/or to obtain the necessary financing to
meet our obligations and repay our liabilities arising from normal business operations when they come due. Our management intends
to finance operating costs over the next twelve months with existing cash on hand and public issuance of common stock. Although
we may be successful in obtaining financing and/or generating revenue to fund our operations, meet regulatory requirements and
achieve commercial goals, there are no assurances that such funding will be achieved at a sufficient level or that we will succeed
in our future operations.
If
our Social Networking Platform technology becomes obsolete, our ability to license our Platform and generate revenue from it will
be negatively impacted.
If
our Platform technology becomes obsolete, our results of operations will be adversely affected. The market in which we compete
is characterized by rapid technological change, evolving industry standards, introductions of new products, and changes in customer
demands that can render existing products obsolete and unmarketable. Our Platform will require continuous upgrading, or our technology
will become obsolete, and our business operations will be curtailed or terminate.
Customer
complaints and negative publicity regarding our products and services may hurt our business and reputation.
We
may receive complaints or claims from threatened legal action or lawsuits from dissatisfied customers regarding the quality of
media content distributed through our brand, networking events, promotions, and MjInvest. These claims may not be covered by our
insurance policies. Any resulting negative publicity and/or litigation could be costly for us, divert management attention, result
in increased costs of doing business, or otherwise have a material adverse effect on our business and results of operations.
Litigation
may adversely affect our business, financial condition, and results of operations
From
time to time in the normal course of its business operations, we may become subject to litigation that may result in liability
material to our financial statements as a whole or may negatively affect our s operating results if changes to our business operations
are required. The cost to defend such litigation may be significant and may require a diversion of resources. There also may be
adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether
the allegations are valid or whether we are ultimately found liable. Insurance may be unavailable at all or in sufficient amounts
to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of the insurance coverage
for any claims could have a material adverse effect on our business, results of operations, and financial condition.
If
we fail to develop or acquire technologies that adequately serve changing consumer behaviors and support our evolving business
needs, our business, financial condition and prospects may be adversely affected.
In
order to respond to changing consumer behaviors, we need to invest in new technologies and platforms to deliver content and provide
products and services where consumers demand it. If we fail to develop or acquire the necessary consumer-facing technologies or
if the technologies we develop or acquire are not received favorably by consumers, our business, financial condition and prospects
may be adversely affected. In addition, as our business evolves and we develop new revenue streams, we must develop or invest
in new technology and infrastructure that satisfy the needs of the changing business; if we fail to do so, our business, financial
condition and prospects may suffer. Further, if we fail to update our current technology and infrastructure to minimize the potential
for business disruption, our business, financial condition and prospects may be adversely affected.
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:
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Emergence
of competing websites and applications;
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Inability
to convince potential users to join our network or that of our licensees;
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Technical
issues related to mobile and desk top compatibility; and
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Rise
in safety or privacy concerns.
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Should
any of the above factors or a combination of such factors have a material effect on our business, our revenues and results of
operations will be negatively affected.
Our
future success will depend on our key executive officers and our ability to attract, retain, and motivate qualified personnel.
We
are highly dependent on our management team consisting of Kenneth Tapp, our Chief Executive Officer/Chief Technology Officer,
and Mark DiSiena, our Chief Financial Officer. Our future success largely depends upon the continued services of our executive
officers and management team. If one or more of our executive officers are unable or unwilling to continue in their present positions,
we may be unable to replace them readily, if at all. Additionally, we may incur additional expenses to recruit and retain new
executive officers. If any of our executive officers joins a competitor or forms a competing company, we may lose some of our
customers and potential customers. Finally, we do not maintain “key person” life insurance on any of our executive
officers. Because of these factors, the loss of the services of any of these key persons could have a material adverse effect
on our business, results of operations, and financial condition.
Our
continuing ability to attract and retain highly qualified personnel will also be critical to our success because we will need
to hire and retain additional personnel as its business grows. There can be no assurance that we will be able to attract or retain
highly qualified personnel. We face significant competition for skilled personnel in our industries. This competition may make
it more difficult and expensive to attract, hire, and retain qualified managers and employees. Because of these factors, we may
be unable to effectively manage or grow our business, which could have a material adverse effect on our business, results of operations,
and financial condition and as a result, the value of your investment could be significantly reduced or completely lost.
Should
we lose our advertising or digital subscription or digital marketing or events revenues during any given period that have historically
represented the majority of our revenues, our financial condition will be negatively affected.
We
have generated a majority of our revenue for the first nine months ended 2019 from digital marketing, microcap events, and digital
subscription services of MjInvest.com. The loss of the majority of our revenues in future periods in any of these revenue categories
will negatively and materially affect our results of operations.
We
expect to incur substantial expenses to meet our reporting obligations as a public company.
We
estimate that it will cost approximately $100,000 annually to maintain the proper management and financial controls for our filings
required as a public reporting company, funds that would otherwise be spent for our business operations. Our public reporting
costs may increase over time, which will increase our expenses and may decrease our potential profitability.
We
have generated a majority of our revenue in 2018, and 2019 from licensing, event, and digital marketing revenues, respectively;
the loss of the majority of our revenues in future periods will negatively affect our results of operations.
Because
our directors and executive officers are among our largest stockholders, they can exert significant control over our business
and affairs and have actual or potential interests that may depart from those of investors.
Certain
of our executive officers and directors own a significant percentage of our outstanding capital stock. As of the date of this
annual report, our executive officers and directors and their respective affiliates beneficially own approximately 45.5% of our
outstanding voting stock, including our Chief Executive Officer who owns 33.8% of our voting securities. The holdings of our directors
and executive officers may increase further in the future upon vesting or other maturation of exercise rights under any of the
options or warrants they may hold or in the future be granted, or if they otherwise acquire additional shares of our common stock.
The interests of such persons may differ from the interests of our other stockholders. As a result, in addition to their board
seats and offices, such persons will have significant influence and control over all corporate actions requiring stockholder approval,
irrespective of how our other stockholders may vote, including the following actions:
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to
elect or defeat the election of our directors;
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to
amend or prevent amendment of our certificate of incorporation or by-laws;
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to
effect or prevent a merger, sale of assets or other corporate transaction; and
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to
control the outcome of any other matter submitted to our stockholders for a vote.
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This
concentration of ownership by itself may have the effect of impeding a merger, consolidation, takeover or other business consolidation,
or discouraging a potential acquirer from making a tender offer for our common stock, which in turn could reduce our stock price
or prevent our stockholders from realizing a premium over our stock price.
During
our 2019 fiscal year and for the 12-months ended December 31, 2018, $250,000 or 51.8%, and December 31, 2018, $215,000 or 97.5%,
respectively, of our total revenues were generated from related party revenue; there are conflicts of interest between our officers’
interests who are also officers of our licensees and our shareholders’ interests.
During
our 2019 fiscal year and for the 12-months ended December 31, 2018, $250,000 or 51.8%, and December 31, 2018, $215,000 or 97.5%,
respectively, of our total revenues were derived from license fees we received from Real Estate Social Network and Sports Social
Network, which revenues are related party revenues. We have a “software as a service” (SaaS) license agreement with
Sports Social Network, which provides that Sports Social Network, Inc. pays a license fee of $125,000 per year for a period of
two years and thereafter we receive twenty percentage of their net profits from the sale of online advertising and collected E-Commerce
fees on their niche sports social networks from every country around the world that they provide access to their websites and
mobile apps that we provide through the licensing agreement. They currently have social networks that are used by the Hunting
and Fishing industry, the Racket Sports industry, the Golf industry and the Soccer industry. They plan to launch over the coming
twelve to twenty-four months, a niche Auto Racing social network, a niche Skiing and Snowboarding social network, and a private
little league sports social network for children, parents and coaches.
We
have a software as a service (SaaS) license agreement with Real Estate Social Network, which provides that Real Estate Social
Network, Inc. pays a license fee of which we receive twenty percentage of their net profits from the sale of online advertising
and monthly digital subscription fees from residential real estate professionals using their LikeRE.com social network from every
country around the world that they provide access to their website and mobile app that we provide through the licensing agreement.
Both licensees have automatically renewing annual license agreements with us and they aim to have millions of users on each of
their social networks.
Our
Chief Executive Office, Kenneth Tapp, owns 28.1% of our outstanding shares and is also the Chief Technology Officer of Real Estate
Social Network. and the Chief Technology Officer of the Sports Social Network and owns approximately 40% each of those entities
through LVC Consulting, LLC, of which he is the only member. Our prior-Chief Financial Officer, Andrew Rodosevich, owns 6.9% of
our outstanding shares and is a Managing Member of Real Estate Social Network and Sports Social Network and owns approximately
10% of those entities through Rodosevich Investments, LLC, of which Andrew Rodosevich is the sole member. Our related party revenues
present conflicts of interests between our officers’ interests and our shareholders” interests, which may favor the
interests of our officers over that of our shareholders.
The
license fees we received from our related parties who are also our licensees, Sports Social Network and Real Estate Social Network,
may be undervalued because the license agreements were negotiated between related parties.
Our
Chief Executive Officer and Chief Financial Officer negotiated the license fee agreements with our related parties/licensees,
Sports Social Network and Real Estate Social Network. Our Chief Executive Officer, Kenneth Tapp, owns 28.1% of our outstanding
shares and is also the Chief Technology Officer of Real Estate Social Network and Sports Social Network and owns approximately
40% each of those entities through LVC Consulting, LLC, of which he is the only member. Our prior-Chief Financial Officer, Andrew
Rodosevich, owns 6.9% of our outstanding shares and is a Managing Member of Real Estate Social Network and Sports Social Network
and owns approximately 10% of those entities through Rodosevich Investments, LLC, of which Andrew Rodosevich is the sole member,
and have conflicts of interest between their interests and our shareholders’ interests.
Because
the license agreements were negotiated between related parties, the license granted to these related parties may have been undervalued,
which may have otherwise resulted in a higher amount of license fees being paid by other licensees to us.
Our
MjLink related business is highly competitive; competition presents an ongoing threat to the success of our business.
We
face significant competition with respect to our Cannabis/Hemp Social Networks, including WeedMaps.com, Leafly.com, Akerna, which
offer a variety of online advertising and e-commerce offerings. Cannabis information, networking, state specific legal cannabis
businesses, and are intensely competitive. As such, we expect competition to intensify further in the future and we will be subject
to competition for advertisers, well-established commercial cannabis information providers, media companies. Many of our competitors,
including the competitors stated above, have greater capital resources, facilities and diversity of services and product lines,
which will enable them to compete more effectively in this market. Competition may increase as a result of consolidation within
the industry. We may be unable to differentiate our products and services from those of our competitors, or successfully develop
and introduce new products and services that are less costly than, or superior to, those of our competitors, which could have
a material adverse effect on our business, results of operations and financial condition.
We
face significant competition across the media landscape, including from event productions, digital publishers, social media platforms,
search platforms, digital and advertising/marketing services, which we expect will continue, and as a result we may be unable
to maintain or improve our operating results.
We
compete with other event planners for market share and for the time and attention of consumers. The proliferation of choices available
to consumers for information and business connections has resulted in audience fragmentation and has negatively affected overall
consumer demand for visiting events. We also compete with digital publishers and other forms of media, including social media
platforms, search platforms, portals and digital marketing services. The competition we face has intensified as a result of the
growing popularity of mobile devices, such as smartphones and social-media platforms, and the shift in consumer preference from
print media to digital media for the delivery and consumption of content, including video content. websites or use our digital
applications directly. Given the ever-growing and rapidly changing number of digital media options available on the Internet,
we may be unable to increase our online traffic sufficiently and retain or grow a base of frequent visitors to our websites and
applications on mobile devices. In addition, the ever-growing and rapidly changing number of digital media options available on
the Internet may lead to technologies and alternatives that we are unable to offer.
The
proliferation of new platforms available to advertisers may affect both the amount of advertising that we are able to sell as
well as the rates advertisers are willing to pay. Our ability to compete successfully for advertising also depends on our ability
to drive scale, engage digital audiences and prove the value of our advertising and the effectiveness of our digital platforms,
including the value of advertising adjacent to high quality content, and on our ability to use our brands to continue to offer
advertisers unique, and multi-platform advertising programs. If we are unable to demonstrate to advertisers the continuing value
of our digital platforms or offer advertisers unique advertising programs tied to our brands, business, financial condition and
results of operations may be adversely affected.
Our
Chief Executive Officer has potential conflicts of interest because of his interests in entities with which we have license agreements.
Our
Chief Executive Officer is also the Chief Technology Officer of our licensees, Real Estate Social Network and Sports Social Network,
and owns approximately 40% of each such entity through a limited liability company of which he is the sole member. We have a license
agreement with Real Estate Social Network providing that they will pay us 20% of the net profits from all monthly member subscriptions
and online advertising sales, paid annually, on the 31st day of January for the preceding year. We also have a license agreement
with Sports Social Network providing that they will pay us $125,000 annually for the first two years of this agreement (a total
of $250,000 for the first two years), and thereafter will receive 20% of the net profits from all online advertising sales and
collected E-Commerce fees, paid monthly with the option to pay any outstanding licensing fees annually, and to be received by
us no later than the 31st day of January for the preceding year. Our Chief Executive Officer owns 28.1% and of our outstanding
shares. Accordingly, our Chief Executive Officer has potential conflicts of interest between his interests in Real Estate Social
Network and Sports Social Network and our interests, which may result in them favoring the interests of those networks over our
interests and that of our shareholders.
Because
our directors and executive officers are among our largest stockholders, they can exert significant control over our business
and affairs and have actual or potential interests that may depart from those of investors.
Certain
of our executive officers and directors own a significant percentage of our outstanding capital stock. As of the date of this
annual report, our executive officers and directors and their respective affiliates beneficially own less than 75% of our outstanding
voting stock, including our Chief Executive Officer who owns 28.1% of our voting securities. The holdings of our directors and
executive officers may increase further in the future upon vesting or other maturation of exercise rights under any of the options
or warrants they may hold or in the future be granted, or if they otherwise acquire additional shares of our common stock. The
interests of such persons may differ from the interests of our other stockholders. As a result, in addition to their board seats
and offices, such persons will have significant influence and control over all corporate actions requiring stockholder approval,
irrespective of how our company’s other stockholders may vote, including the following actions:
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to
elect or defeat the election of our directors;
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to
amend or prevent amendment of our certificate of incorporation or by-laws;
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to
effect or prevent a merger, sale of assets or other corporate transaction; and
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to
control the outcome of any other matter submitted to our stockholders for a vote.
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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 would result in dilution to our existing stockholders, which could be significant depending
on the price at which we may be able to sell our securities. If we raise additional capital through the incurrence of additional
indebtedness, we would likely become subject to further covenants restricting our business activities, and holders of debt instruments
may have rights and privileges senior to those of our equity investors. In addition, servicing the interest and principal repayment
obligations under debt facilities could divert funds that would otherwise be available to support development of new programs
and marketing to current and potential new clients. If we are unable to raise capital when needed or on attractive terms, we could
be forced to delay, reduce or eliminate development of new programs or future marketing efforts. Any of these events could significantly
harm our business, financial condition and prospects.
Consolidation
of our competitors in the markets in which we operate could place us at a competitive disadvantage and reduce our potential profitability.
We
operate in an industry which is highly fragmented due to the regulatory environment. However, there may be a trend or competitive
advantage among our competitors to consolidate or acquire value-added assets or scale operations through brand recognition. Consolidation
of our competitors may jeopardize the strength of our competitive position in one or more of the markets in which we operate and
any operational advantages or assets that we own. Losing some of those advantages or assets could have a material adverse effect
on our business, results of operations, and financial condition.
The
outbreak of the coronavirus may negatively impact our business, results of operations and financial condition.
In
December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread
throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization
declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.”
On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United
States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized
the outbreak as a “pandemic”. The significant outbreak of COVID-19 has resulted in a widespread health crisis that
could adversely affect the economies and financial markets worldwide, and could adversely affect our business, results of
operations and financial condition, including attendance at our MjMicro events. The ultimate extent of the impact of
any epidemic, pandemic or other health crisis on our business, financial condition and results of operations will depend on future
developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity
of such epidemic, pandemic or other health crisis and actions taken to contain or prevent their further spread, among others. These
and other potential impacts of an epidemic, pandemic or other health crisis, such as COVID-19, could therefore materially and
adversely affect our business, financial condition and results of operations.
We
must successfully maintain and/or upgrade our information technology systems.
We
rely on various information technology systems, including our newly licensed NetSuite enterprise resource planning (ERP) system,
that was implemented in the first quarter of Fiscal 2019 to manage our operations, which subjects us to inherent costs and risks
associated with maintaining, upgrading, replacing and changing these systems, including impairment of our information technology,
potential disruption of our internal control systems, substantial capital expenditures, demands on management time and other risks
of delays or difficulties in upgrading, transitioning to new systems or of integrating new systems into our current systems.
Our
financial statements may not be comparable to those of other companies.
Pursuant
to Section 107(b) of the JOBS Act, we have elected to use the extended transition period for complying with new or revised accounting
standards under Section 102(b)(2) of The JOBS Act. This election allows us to delay the adoption of new or revised accounting
standards that have different effective dates for public and private companies until those standards apply to private companies.
As a result, our financial statements may not be comparable to companies that comply with public company effective dates, and
our stockholders and potential investors may have difficulty in analyzing our operating results if comparing us to such companies.
We
do not have an independent board of directors which could create a conflict of interests and pose a risk from a corporate governance
perspective.
Our
Board of Directors consists mostly of current executive officers and consultants, which means that we do not have any outside
or independent directors. The lack of independent directors:
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prevent the Board from being independent from management in its judgments and decisions and its ability to pursue the Board
responsibilities without undue influence.
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present us from providing a check on management, which can limit management taking unnecessary risks.
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Create
potential for conflicts between management and the diligent independent decision-making process of the Board.
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Present
the risk that our executive officers on the Board may have influence over their personal compensation and benefits levels
that may not be commensurate with our financial performance.
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Deprive
us of the benefits of various viewpoints and experience when confronting challenges that we face.
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Because
officers serve on our Board of Directors, it will be difficult for the Board to fulfill its traditional role as overseeing management.
Because
we do not have a nominating, audit or compensation committee, shareholders will have to rely on the entire board of directors,
no members of which are independent, to perform these functions.
We
do not have a nominating, audit or compensation committee or any such committee comprised of independent directors. The board
of directors performs these functions. No members of the board of directors are independent directors. Thus, there is a potential
conflict in that board members who are also part of management will participate in discussions concerning management compensation
and audit issues that may affect management decisions.
Our
election not to opt out of the JOBS Act extended accounting transition period may not make our financial statements easily comparable
to other companies.
Pursuant
to the JOBS Act of 2012, as an emerging growth company we can elect to opt out of the extended transition period for any new or
revised accounting standards that may be issued by the PCAOB or the SEC. We have elected not to opt out of such extended transition
period, which means that when a standard is issued or revised, and it has different application dates for public or private companies,
we, as an emerging growth company, can adopt the application date for private companies. Our financial statements may therefore
not be comparable to those of companies that comply with such new or revised accounting standards. As of present, there are no
new or revised accounting standards that have been issued by the PCAOB or the SEC applicable to us for which we have adopted the
application date for private companies.
The
JOBS Act will also allow us to postpone the date by which we must comply with certain laws and regulations intended to protect
investors and to reduce the amount of information provided in reports filed with the SEC. The recently enacted JOBS Act is intended
to reduce the regulatory burden on emerging growth companies. The Registrant meets the definition of an emerging growth company
and so long as it qualifies as an “emerging growth company,” it will, among other things:
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exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting
firm provide an attestation report on the effectiveness of its internal control over financial reporting;
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be
exempt from the “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain
executive officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to
approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business
combinations) of the Dodd-Frank Act and certain disclosure requirements of the Dodd-Frank Act relating to compensation of
its chief executive officer;
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be
permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Securities
Exchange Act of 1934 and instead provide a reduced level of disclosure concerning executive compensation; and
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be
exempt from any rules that may be adopted by the Public Registrant Accounting Oversight Board requiring mandatory audit firm
rotation or a supplement to the auditor’s report on the financial statements.
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We
intend to take advantage of some or all the reduced regulatory and reporting requirements that will be available to it so long
as it qualifies as an “emerging growth company”. We have elected not to opt out of the extension of time to comply
with new or revised financial accounting standards available under Section 102(b) of the JOBS Act. Among other things, this means
that the Registrant’s independent registered public accounting firm will not be required to provide an attestation report
on the effectiveness of our internal control over financial reporting so long as it qualifies as an emerging growth company, which
may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise,
so long as it qualifies as an emerging growth company, we may elect not to provide certain information, including certain financial
information and certain information regarding compensation of executive officers that would otherwise have been required to provide
in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate the Registrant. As
a result, investor confidence and the market price of our common stock may be adversely affected.
We
may have difficulty obtaining officer and director coverage or obtaining such coverage on favorable terms or financially be unable
to obtain any such coverage, which may make it difficult for our attracting and retaining qualified members of our board of directors,
particularly to serve on our audit committee and compensation committee, and qualified executive officers.
We
also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director
and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain
coverage or financially be unable to obtain such coverage. These factors could also make it more difficult for us to attract and
retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and
qualified executive officers.
Security
breaches and other disruptions could compromise the information that we maintain and expose us to liability, which would cause
our business and reputation to suffer.
In
the ordinary course of our business, we may collect and store sensitive data, including intellectual property, our proprietary
business information and that of our customers and business partners, and personally identifiable information of our customers,
in our data centers and on its networks. The secure processing, maintenance and transmission of this information is critical to
our business strategy, information technology and infrastructure and we may be vulnerable to attacks by hackers or breached due
to employee error, malfeasance or other disruptions. Any such breach could compromise our network, services and the information
stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could
result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties,
and disruption to our operations and the services it provides to customers. This often times results in a loss of confidence in
our products and services, which could adversely affect our ability to earn revenues and competitive position and could have a
material adverse effect on our business, results of operations, and financial condition.
The
products and services that we develop will result in increased costs.
We
expect that our development costs to increase in future periods as we expand into new areas, and such increased costs could negatively
affect our future operating results. We expect to continue to expend substantial financial and other resources on our current
business operations and the creation of organized live-event experiences and digital marketing and advertising initiatives. Furthermore,
we intend to invest in marketing, licensing and product development programs, as well as associated sales and marketing programs,
and general administration. These investments may not result in increased revenue or growth in the business. Our failure to materially
increase our revenues could have a material adverse effect on our business, results of operations, and financial condition.
Our
inability to effectively control costs and still maintain our business relationships, could have a material adverse effect on
our business, results of operations, and financial condition.
It
is critical that we appropriately align our cost structure with prevailing market conditions to minimize the effect of economic
downturns our its operations and, in particular, to build and maintain our user relationships. Our inability to align our cost
structure in response to economic downturns on a timely basis could have a material adverse effect on our business, results of
operations, and financial condition. Conversely, adjusting the cost structure to fit economic downturn conditions may have negative
effects during an economic upturn or periods of increasing demand for services/products. If we too aggressively reduce our costs,
we may not have sufficient resources to capture opportunities for expansion and growth and meet customer demand. Our inability
to effectively manage resources and capacity to capitalize on periods of economic upturn could have a material adverse effect
on our business, results of operations, and financial condition.
If
we are unable to accurately predict and respond to market developments or demands, its business, results of operations and financial
condition will be adversely affected.
The
cannabis industry is characterized by rapidly evolving technology, government regulations and methodologies, which makes it difficult
to predict demand and market acceptance for our services/products. In order to succeed, we need to adapt the products we offer
in order to keep up with technological developments and changes in consumer needs. We cannot guarantee that we will succeed in
enhancing our services/products or developing or acquiring new services/products or features that adequately address changing
technologies, user requirements and market preferences. We also cannot assure you that the products and services we offer will
be accepted by end users. If the products and services that we offer are not accepted by customers, they will no longer purchase
them, which could have a material adverse effect on our business, results of operations, and financial condition. Changes in technologies,
industry standards, the regulatory environment and customer requirements, and new product introductions by existing or future
competitors, could render our existing services/products obsolete and unmarketable, or require us to enhance current products/services
or develop new products and services. This may require us to expend significant amounts of money, time, and other resources to
meet these demands, which could strain its personnel and financial resources. Furthermore, many modernization projects deal with
customer mission critical applications, and therefore encapsulate risk for the customer.
We
may be unable to identify, purchase or integrate desirable acquisition targets, future acquisitions may be unsuccessful, and we
may not realize the anticipated cost savings, revenue enhancements or other synergies from such acquisitions.
We
plan to investigate and acquire strategic businesses with the potential to be accretive to earnings, increase our market penetration,
brand strength and its market position or enhancement of our existing product and service offerings. There can be no assurance
that we will identify or successfully complete transactions with suitable acquisition candidates in the future. Additionally,
if we were to undertake a substantial acquisition, the acquisition may need to be financed in part through additional financing
through public offerings or private placements of debt or equity securities or through other arrangements. There is no assurance
that the necessary acquisition financing will be available to us on acceptable terms if and when required. Acquisitions could
also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results.
We may also unknowingly inherit liabilities from acquired businesses or assets that arise after the acquisition and that are not
adequately covered by indemnities. In addition, if an acquired business fails to meet our expectations, its operating results,
business and financial position may suffer.
We
have not conducted an evaluation of the effectiveness of our internal control over financial reporting and will not be required
to do so until 2020; if we are unable to implement and maintain effective internal control over financial reporting, investors
may lose confidence in the accuracy and completeness of our financial reports and our common stock market price may be negatively
affected.
As
a public company, we will be required to maintain internal control over financial reporting for the year ending December 31, 2020
and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”) requires that we evaluate and determine the effectiveness of our internal control over financial reporting and,
beginning with our annual report for the fiscal year ending December 31, 2020, provide a management report on the internal control
over financial reporting, which must be attested to by its independent registered public accounting firm to the extent we decide
not to avail ourselves of the exemption provided to an emerging growth company, as defined by Jobs Act. Since we have not conducted
an evaluation of the effectiveness of its internal control over financial reporting, we may have undiscovered material weaknesses.
If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and
our financial statements may be materially misstated. We are in the process of designing and implementing the internal control
over financial reporting required to comply with this obligation, which process may be time consuming, costly, and complicated.
If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements
of Section 404 of the Sarbanes-Oxley Act in a timely manner, we may be unable to assert that our internal control over financial
reporting are effective, or if its independent registered public accounting firm is unable to express an opinion as to the effectiveness
of its internal control over financial reporting, if and when required, investors may lose confidence in the accuracy and completeness
of our financial reports and the market price of our common stock could be negatively affected and/or we may become subject to
regulatory actions.
If
we fail to maintain an effective system of internal controls, we may be unable to accurately report our financial results or prevent
fraud; as a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our
business and the trading price of our stock.
Effective
internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide
reliable financial reports or prevent fraud, our brand and operating results will likely be harmed. We may in the future discover
areas of our internal controls that need improvement. We cannot be certain that any measures we implement will ensure that we
achieve and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required
new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to
fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported
financial information and materially harm our business, which would have a negative effect on our operations.
We
have not yet finalized our internal controls policies and procedures over financial reporting.
We are in the process
of developing and implementing more robust internal controls over financial reporting, which is time consuming, costly,
and complicated. If we identify material weaknesses in our internal control over financial reporting, if our management is unable
to assert, when required, that our internal control over financial reporting is effective, or if our independent registered public
accounting firm is unable to attest, when required, to the effectiveness of our internal control over financial reporting, investors
may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be
negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the
SEC, or other regulatory authorities, which could require additional financial and management resources
We
may be unable to effectively manage our growth or improve our operational, financial, and management information systems, which
could have a material adverse effect on our business, results of operations, and financial condition.
In
the near term and contingent upon raising adequate funds from this Offering, we intend to expand our operations significantly
to foster growth. Growth may place a significant strain on our business and administrative operations, finances, management and
other resources, as follows:
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need for continued development of financial and information management systems;
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need to manage strategic relationships and agreements with manufacturers, customers and partners; and
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Difficulties
in hiring and retaining skilled management, technical, and other personnel necessary to support and manage the business.
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Should
we fail to successfully manage growth could, our results of operations will be negatively affected.
If
we fail to protect or develop our intellectual property, business, operations and financial condition could be adversely affected.
Any
infringement or misappropriation of our intellectual property could damage its value and limit its ability to compete. We may
have to engage in litigation to protect the rights to our intellectual property, which could result in significant litigation
costs and require a significant amount of management time and attention. In addition, our ability to enforce and protect our intellectual
property rights may be limited in certain countries outside the United States, which could make it easier for competitors to capture
market position in such countries by utilizing technologies that are similar to those that we develop.
We
may also find it necessary to bring infringement or other actions against third parties to seek to protect its intellectual property
rights. Litigation of this nature, even if successful, is often expensive and time-consuming to prosecute and there can be no
assurance that we will have the financial or other resources to enforce its rights or prevent other parties from developing similar
technology or designing around our intellectual property.
Our
trade secrets may be difficult to protect.
Our
success depends upon the skills, knowledge, and experience of our technical personnel, consultants and advisors. Because we operate
in several highly competitive industries, we rely in part on trade secrets to protect our proprietary technology and processes.
However, trade secrets are difficult to protect. We enter into confidentiality or non-disclosure agreements with our corporate
partners, employees, consultants, outside scientific collaborators, developers, and other advisors. These agreements generally
require that the receiving party keep confidential and not disclose to third party’s confidential information developed
by the receiving party or made known to the receiving party by us during the course of the receiving party’s relationship
with us. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services
to us will be our exclusive property.
These
confidentiality, inventions and assignment agreements may be breached and may not effectively assign intellectual property rights
to us. Our trade secrets also could be independently discovered by competitors, in which case will be unable to prevent the use
of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our
trade secrets could be difficult, expensive and time consuming and the outcome would be unpredictable. In addition, courts outside
the United States may be less willing to protect trade secrets. The failure to obtain or maintain meaningful trade secret protection
could have a material adverse effect on our business, results of operations, and financial condition.
The
consideration being paid to our management is not based on arms-length negotiation.
The
compensation and other consideration we have paid or will be paid to our management has not been determined based on arm’s
length negotiations. While management believes that the consideration is fair for the work being performed, we cannot assure that
the consideration to management reflects the true market value of its services.
There
are risks associated with the proposal expansion of our business.
Any
expansion plans that we undertake to increase or expand our operations entail risks, which may negatively impact our potential
profitability. Consequently, investors must assume the risk that (i) such expansion may ultimately involve expenditures of funds
beyond the resources available to us at that time, and (ii) management of such expanded operations may divert management’s
attention and resources away from its existing operations, any of which factors could have a material adverse effect on our business,
results of operations, and financial condition. We cannot assure investors that our products, services, or controls will be adequate
to support anticipated growth of our operations.
We
are subject to data privacy and security risks
Our
business activities are subject to laws and regulations governing the collection, use, sharing, protection and retention of personal
data, which continue to evolve and have implications for how such data is managed. In addition, the Federal Trade Commission (the
“FTC”) continues to expand its application of general consumer protection laws to commercial data practices,
including to the use of personal and profiling data from online users to deliver targeted Internet advertisements. Most states
have also enacted legislation regulating data privacy and security, including laws requiring businesses to provide notice to state
agencies and to individuals whose personally identifiable information has been disclosed as a result of a data breach.
Similar
laws and regulations have been implemented in many of the other jurisdictions in which we operate, including the European Union.
Recently, the European Union adopted the General Data Protection Regulation (“GDPR”), which is intended to provide
a uniform set of rules for personal data processing throughout the European Union and to replace the existing Data Protection
Directive (Directive 95/46/EC). Fully enforceable as of May 25, 2018, the GDPR expands the regulation of the collection, processing,
use and security of personal data, contains stringent conditions for consent from data subjects, strengthens the rights of individuals,
including the right to have personal data deleted upon request, continues to restrict the trans-border flow of such data, requires
mandatory data breach reporting and notification, increases penalties for non-compliance and increases the enforcement powers
of the data protection authorities. In response to such developments, industry participants in the U.S., and Europe have taken
steps to increase compliance with relevant industry-level standards and practices, including the implementation of self-regulatory
regimes for online behavioral advertising that impose obligations on participating companies, such as us, to give consumers a
better understanding of advertisements that are customized based on their online behavior. We continue to monitor pending legislation
and regulatory initiatives to ascertain relevance, analyze impact and develop strategic direction surrounding regulatory trends
and developments, including any changes required in our data privacy and security compliance programs.
We
are an Emerging Growth Company and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies
will make our Common Stock less attractive to investors.
For
as long as we continue to be an Emerging Growth Company, we intend to take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We
cannot predict if investors will find our Common Stock less attractive because it will rely on these exemptions. If some investors
find our Common Stock less attractive as a result, there may be a less active trading market for its Common Stock and its stock
price may be more volatile.
We
will remain an Emerging Growth Company until the earliest of (i) the end of the fiscal year in which the market value of its Common
Stock that is held by non-affiliates exceeds $700 million as of June 30, (ii) the end of the fiscal year in which it has total
annual gross revenue of $1 billion or more during such fiscal year, (iii) the date on which it issues more than $1 billion in
non-convertible debt in a three-year period or (iv) five years from the date of this proxy statement.
RISKS
RELATED TO CANNABIS/HEMP RELATED GOVERNMENT REGULATION
Our
cannabis/hemp websites with respect to cannabis are dependent on state laws pertaining to the cannabis industry.
Our
wholly-owned subsidiary, MjLink, has several websites in the cannabis/hemp area. As of the date of this statement, there are 29
states and the District of Columbia that allow their citizens to use medical cannabis. Additionally, Colorado, Washington, Alaska,
Oregon and Washington DC have legalized cannabis for adult use at the state (or district) level. Continued development of the
cannabis industry is dependent upon continued legislative authorization of cannabis at the state level. Any number of factors
pertaining to lack of public or legislative support could slow or halt progress in this area. Further, progress in the cannabis
industry is not assured.
Our
cannabis/hemp websites are open to all Internet users, which may result in legal consequences; in such event, our results of operations
will be negatively affected.
Our
Terms and Conditions contained in our MjLink sites clearly state that our network and services pertaining to our cannabis/hemp
related sites are only to be used by users who are over 21 years old and located where the use of cannabis/hemp is permissible
under state law and only in a manner which would be permissible under the applicable state law. However, it is impractical to
independently verify that all activity occurring on our network fits into this description. If we become subject to federal and
state law enforcement, our brand name and results of operations will be negatively impacted.
Cannabis
remains illegal under Federal law.
Despite
the development of a legal cannabis industry under the laws of certain states, these state laws legalizing medical and adult cannabis
use conflict with the Federal Controlled Substances Act, which classifies cannabis as a Schedule-I controlled substance and makes
cannabis use and possession illegal on a national level. The United States Supreme Court has ruled that it is the Federal government
that has the right to regulate and criminalize cannabis, even for medical purposes, and thus Federal law criminalizing the use
of cannabis preempts state laws that legalize its use.
As
the possession and use of cannabis is illegal under the Federal Controlled Substances Act, we may be deemed to be aiding and abetting
illegal activities through the services that we provide to users and advertisers. As a result, we may be subject to enforcement
actions by law enforcement authorities, which would materially and adversely affect our business.
Under
Federal law, and more specifically the Federal Controlled Substances Act, the possession, use, cultivation, and transfer of cannabis
is illegal. Our business provides services to customers that were engaged in the business of possession, use, cultivation, and/or
transfer of cannabis. As a result, law enforcement authorities, in their attempt to regulate the illegal use of cannabis, may
seek to bring an action or actions against us, including, but not limited, to a claim of aiding and abetting another’s criminal
activities. The Federal aiding and abetting statute provides that anyone who “commits an offense against the United States
or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.” 18 U.S.C. §2(a).
Because of such an action, we may be forced to cease operations and our investors could lose their entire investment. Such an
action would have a material negative effect on sale of our services.
Federal
enforcement practices could change with respect to services providers to participants in the cannabis industry, which could adversely
impact us. If the Federal government were to change its practices or were to expend its resources attacking providers in the cannabis
industry, such action could have a materially adverse effect on our operations, our customers, or the sales of our products.
It
is possible that additional Federal or state legislation could be enacted in the future that would prohibit our advertisers from
selling cannabis, and, if such legislation were enacted, such advertisers may discontinue the use of our services, our potential
source of customers would be reduced, causing revenues could decline. Further, additional government disruption in the cannabis
industry could cause potential customers and users to be reluctant use and advertise on our products, which would be detrimental
to the Company. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine
what effect additional governmental regulations or administrative policies and procedures, when and if promulgated,
As
the possession and use of cannabis is illegal under the Federal Controlled Substances Act, we may be deemed to be aiding and abetting
illegal activities through the services that we provide to users and advertisers; as a result, we may be subject to enforcement
actions by law enforcement authorities, which would materially and adversely affect our business.
Under
Federal law, and more specifically the Federal Controlled Substances Act, the possession, use, cultivation, and transfer of cannabis
is illegal. Our business provides services to customers that may be directly or indirectly engaged in the business of possession,
use, cultivation, and/or transfer of cannabis. As a result, law enforcement authorities, in their attempt to regulate the illegal
use of cannabis, may seek to bring an action or actions against us, including, but not limited, to a claim of aiding and abetting
another’s criminal activities. The Federal aiding and abetting statute provides that anyone who “commits an offense
against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.”
18 U.S.C. §2(a). As a result of such an action, we may be forced to cease operations and our investors could lose their entire
investment. Such an action would have a material negative effect on our business and operations.
Federal
enforcement practices could change with respect to service providers or participants in the cannabis industry, which could adversely
impact us. If the Federal government were to change its practices or were to expend its resources attacking providers in the cannabis
industry, such action could have a materially adverse effect on our operations, our customers, or the sales of our products.
It
is possible that additional Federal or state legislation could be enacted in the future that would prohibit our advertisers from
selling cannabis, and if such legislation were enacted, such advertisers may discontinue the use of our services, our potential
source of customers would be reduced, causing revenues could decline. Further, additional government disruption in the cannabis
industry could cause potential customers and users to be reluctant to advertise on our sites, which would negatively affect our
revenues. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine
what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have
on our business.
Participants
in the cannabis industry may have difficulty accessing the service of banks, which may make it difficult for us to operate.
Despite
recent rules issued by the United States Department of the Treasury mitigating the risk to banks who do business with cannabis
companies permitted under state law, as well as recent guidance from the United States Department of Justice, banks remain weary
to accept funds from businesses in the cannabis industry. Since the use of cannabis remains illegal under Federal law, there remains
a compelling argument that banks may be in violation of Federal law when accepting for deposit funds derived from the sale or
distribution of cannabis. Consequently, businesses involved in the cannabis industry continue to have trouble establishing banking
relationships. An inability to open bank accounts may make it difficult for us, or some of our advertisers, to do business.
Federal
enforcement practices could change with respect to services provided to participants in the cannabis industry, which could adversely
impact us; if the Federal government were to expend its resources on enforcement actions against service providers in the cannabis
industry under guidance provided by the Sessions Memo, including asset forfeiture actions, such actions could have a material
adverse effect on our operations, our customers, or our services.
On
January 4, 2018, the U.S. Attorney General Jeff Sessions issued the Sessions Memo stating that the Cole Memo was rescinded effectively
immediately. Mr. Sessions stated that “prosecutors should follow the well-established principles that govern all federal
prosecutions,” which require “federal prosecutors deciding which cases to prosecute to weigh all relevant considerations,
including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of
criminal prosecution, and the cumulative impact of particular crimes on the community.” Mr. Sessions went on to state in
the memorandum that “previous nationwide guidance specific to marijuana is unnecessary and is rescinded, effective immediately.”
It is unclear at this time whether the Sessions Memo indicates that the Trump administration will strongly enforce the federal
laws applicable to cannabis or what types of activities will be targeted for enforcement. While we do not harvest, distribute
or sell cannabis, we may be irreparably harmed by a change in enforcement policies of the federal government depending on the
nature of such change.
Attorney
General Order No. 3946-2018 released by Jeff Sessions on July 19, 2018 shows that he is in favor of law enforcement using civil
asset forfeiture as “an effective tool to reduce crime” and that “its use should be encouraged where appropriate.”
It is possible that due to the recent Sessions Memo our clients may discontinue the use of our services, our potential source
of customers may be reduced, and our revenues may decline. Further, additional government disruption in the cannabis industry
could cause potential customers and users to be reluctant to use our services or buy advertising from us. It is possible that
due to the recent Sessions Memo our clients may discontinue the use of our services, we or our customers may be subject to asset
forfeiture actions, our potential source of customers may be reduced, and our revenues may decline. Further, additional government
disruption in the cannabis industry could cause potential customers and users to be reluctant to use advertising services, which
would negatively impact our results of operations.
The
2018 Farm Bill officially reclassifies hemp for commercial uses after decades of statutes and legal enforcement conflating hemp
and marijuana, the Farm Bill distinguishes between the two by removing hemp from the Controlled Substances Act. While the two
are closely related, hemp lacks the high concentration of THC that is responsible for the “high” from the use of marijuana.
This would effectively move regulation and enforcement of the crop from the purview of the Drug Enforcement Agency to the U.S.
Department of Agriculture.
Recent
hearing in February 2019, conducted before the House Subcommittee on Consumer Protection and Financial Institutions, focused on
access to banking services for legal cannabis-based businesses. Two of the speakers at the hearing — Colorado Rep. Ed Perlmutter
and Washington Rep. Denny Heck, both Democratic members of Congress from states with legal marijuana, back the Secure and Fair
Enforcement of Banking Act of 2019, or the SAFE Banking Act, as it is more commonly known. The proposed bill, according to lawmakers
and reports, would prevent federal regulators from targeting banks that accept deposits from legal cannabis operators. Such prohibition
could involve limiting FDIC protections for those deposits or trying to prevent loans to those businesses.
On
September 28, 2019, the Democratic-controlled House of Representatives voted to pass a bill protecting banks that work with the
marijuana industry called the Secure and Fair Enforcement (SAFE) Banking Act of 2019. The bill aims to give clarification to banks
and credit unions that serve cannabis companies with, for instance, business accounts for bill payments. Lobbyists have emphasized
that many cannabis businesses end up “unbanked” and operating largely in cash, and that makes them targets for robberies
and other crimes. Some analysts are skeptical the measure is likely to become law in 2019 as it faces a tough road in the Republican-controlled
Senate while some believe Senator McConnell could go along with a pot banking bill to help Republicans in the 2020 elections.
Laws
and regulations affecting the medical marijuana industry are constantly changing, which could detrimentally affect our business,
and we cannot predict the impact that future regulations may have on us.
Local,
state and federal medical marijuana laws and regulations are broad in scope and they are subject to evolving interpretations,
which could require us to incur substantial costs associated with compliance. In addition, violations of these laws, or allegations
of such violations, could disrupt our business and result in a material adverse effect on our revenues, profitability, and financial
condition.
In
addition, it is possible that regulations may be enacted in the future that will be directly applicable to our business. We cannot
predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional
governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business. These
potential effects could include, however, requirements for the revisions to our products to meet new standards, the recall or
discontinuance of certain products, or additional record keeping and reporting requirements. Any or all these requirements could
have a material adverse effect on our business, financial condition, and results of operations.
U.S.
Federal and foreign regulation and enforcement may adversely affect the implementation of cannabis laws and regulations and may
negatively impact our revenues, or we may be found to be violating the Controlled Substances Act or other U.S. federal, state,
or foreign laws.
In
December 2018, the Farm Bill was signed into law. Under section 10113 of the Farm Bill, state departments of agriculture must
consult with the state’s governor and chief law enforcement officer to devise a plan that must be submitted to the Secretary
of USDA. A state’s plan to license and regulate hemp can only commence once the Secretary of USDA approves that state’s
plan. In states opting not to devise a hemp regulatory program, USDA will construct a regulatory program under which hemp cultivators
in those states must apply for licenses and comply with a federally run program. This system of shared regulatory programming
is similar to options states had in other policy areas such as health insurance marketplaces under ACA, or workplace safety plans
under OSHA—both of which had federally-run systems for states opting not to set up their own systems. Non-cannabis hemp
is a highly regulated crop in the United States for both personal and industrial production.
The
law outlines actions that are considered violations of federal hemp law (including such activities as cultivating without a license
or producing cannabis with more than 0.3 percent THC). The law details possible punishments for such violations, pathways for
violators to become compliant, and even which activities qualify as felonies under the law, such as repeated offenses.
Section
12619 of the Farm Bill removes hemp-derived products from its Schedule I status under the Controlled Substances Act, but the legislation
does not legalize CBD generally. CBD, with some minor exceptions, remains a Schedule I substance under federal law. The Farm Bill
ensures that any cannabinoid—a set of chemical compounds found in the cannabis plant—that is derived from hemp will
be legal, if and only if that hemp is produced in a manner consistent with the Farm Bill, associated federal regulations, association
state regulations, and by a licensed grower. All other cannabinoids, produced in any other setting, remain a Schedule I substance
under federal law and are thus illegal.
In
October 2018, the United States Drug Enforcement Agency (“DEA”) rescheduled drugs approved by the United States Food
and Drug Administration (“FDA”) which contain CBD derived from cannabis and no more than 0.1 percent tetrahydrocannabinols
from Schedule I, the highest level of restriction with a high potential for abuse, to Schedule V, the lowest restriction with
the lowest potential for abuse under the Controlled Substances Act (“CSA”). This ruling does not apply to Cannabidiol
(“CBD”) products such as oils, tinctures, extracts, and other foods because they are not FDA approved.
In
October 2018, the FDA was advised by the DEA that removing CBD from the CSA would violate international drug treaties to which
the United States is a signatory. Specifically, the DEA explained that the United States would “not be able to keep obligations
under the 1961 Single Convention on Narcotic Drugs if CBD were decontrolled under the CSA”.
Consequently,
the FDA revised its recommendation and advised the DEA to place CBD in Schedule V—which applies to drugs with demonstrated
medical value and deemed unlikely to cause harm, abuse, or addiction—instead. Nonetheless, the FDA declared that “[i]f
treaty obligations do not require control of CBD, or the international controls on CBD…are removed at some future time,
the above recommendation for Schedule V under the CSA would need to be revisited promptly.”
On
May 22, 2018, the DEA released the Internal Directive Regarding the Presence of Cannabinoids in Products and Materials Made from
the Cannabis Plant, which states “The mere presence of cannabinoids is not itself dispositive as to whether a substance
is within the scope of the CSA; the dispositive question is whether the substance falls within the CSA definition of marijuana.”
Many
CBD products are derived from cannabis. Some come from marijuana (“Marijuana-CBD”). Marijuana-CBD remains a Schedule
I substance. Marijuana-CBD products may be legal under state law in states like Washington, Oregon, and California but their sale
is only permitted through a state-regulated marijuana market in the respective state of legal cultivation. Marijuana-CBD products
are only legal in states where they were cultivated and these products are heavily regulated at all stages of production, from
seed-to-sale. These products come from licensed producers, are developed by licensed processors or manufacturers, and are sold
to the public through licensed retailers or dispensaries. Marijuana-CBD products may also contain significant levels of THC.
On
the other hand, CBD derived from industrial hemp (“Hemp-CBD”) can be argued as falling completely outside the CSA
because the cultivation of industrial hemp was legalized by Section 7606 of the Agricultural Act of 2014 (the “2014 Farm
Bill”). Industrial hemp is defined as the cannabis plant with less than .3% THC. The 2014 Farm Bill also requires that industrial
hemp to be cultivated under a state agricultural pilot program. Some states also require a license to cultivate or process industrial
hemp into other products like Hemp-CBD.
The
distribution of Hemp-CBD products is arguably legal under federal law because the 2014 Farm Bill does not explicitly limit distribution.
In oral arguments during HIA v. DEA, the DEA admitted that the 2018 Farm Bill pre-empted the CSA with regards to industrial hemp.
The DEA has rarely taken any enforcement action against distributors of Hemp-CBD, in part because Congress has limited the DEA’s
ability to use federal funds to do so and because the DEA would have to legally establish that the CSA does in fact cover Hemp-CBD.
However, the DEA, FDA, and other federal agencies issued guidance in 2016 stating that the 2014 Farm Bill did not permit the interstate
transfer or commercial sale of industrial hemp. Several states like Idaho prohibit the distribution of Hemp-CBD. Other states
like Ohio, Michigan, and California significantly restrict the distribution of Hemp-CBD.
Even
though Hemp-CBD does not fall within the CSA, Hemp-CBD products have not been approved by the FDA. This is also true of Marijuana-CBD.
This means that even cannabis derived Marijuana-CBD and Hemp-CBD products containing less than .1% THC are not approved CBD drugs
for lack of FDA approval.
There
is always some risk of enforcement action against Hemp-CBD distributors, as the budgetary restriction that prevented the DEA from
using funds to prosecute industrial hemp distributors expired on September 30, 2018. It is also possible that the FDA could take
a more aggressive approach to limit the distribution of CBD products.
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:
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competitive
pricing pressures;
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our
ability to market our services on a cost-effective and timely basis;
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changing
conditions in the market;
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changes
in market valuations of similar companies;
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stock
market price and volume fluctuations generally;
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regulatory
developments;
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fluctuations
in our quarterly or annual operating results;
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additions
or departures of key personnel; and
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future
sales of our Common Stock or other securities.
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The
price at which you purchase shares of our Common Stock may not be indicative of the price that will prevail in the trading market.
Shareholders may experience wide fluctuations in the market price of our securities. These fluctuations may have a negative effect
on the market price of our securities and may prevent a shareholder from obtaining a market price equal to the purchase price
such shareholder paid when the shareholder attempts to sell our securities in the open market. In these situations, the shareholder
may be required either to sell our securities at a market price, which is lower than the purchase price the shareholder paid,
or to hold our securities for a longer period than planned. An inactive or low trading market may also impair our ability to raise
capital by selling shares of capital stock. You may be unable to sell your shares of Common Stock at or above your purchase price,
which may result in substantial losses to you and which may include the complete loss of your investment. Any of the risks described
above could adversely affect our sales and profitability and the price of our Common Stock.
There
is no active public trading market for our common stock and an active market may never develop.
The
public trading market for our common stock on the OTCMarkets OTCQB tier, has reflected an uneven and inactive market. Market liquidity
will depend on the perception of our operating business and any steps that our management might take to bring us to the awareness
of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may be unable
to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result, holders of our
securities may not find purchasers for our securities should they to sell securities held by them. Consequently, only investors
having no need for liquidity in their investment should purchase our securities and who can hold our securities for an indefinite
period.
We
have authorized 100,000,000 Preferred Shares and 100,000,000 Class B Common Shares that may result in our officers having the
ability to influence stockholder decisions.
The
board of directors has the power to establish the dividend rates, liquidation preferences, and voting rights of any series of
preferred stock, and these rights may be superior to the rights of holders of the Shares. The board of directors may also establish
redemption and conversion terms and privileges with respect to any shares of preferred stock; as such, if we establish such terms
and privileges to our preferred shares and we sell or issue preferred shares in future transactions to new investors such investors
in subsequent transactions could gain rights, preferences and privileges senior to those of holders of our common stock. Any such
preferences may operate to the detriment of the rights of the holders of the Shares, and further, could be used by the board of
directors as a device to prevent a change in control of the Registrant, include additional voting power to our officers giving
them control over a majority of our outstanding voting power, enabling them to control future stock-based acquisition transactions,
to fund employee equity incentive programs, and give them the ability to elect certain directors and to determine the outcome
of all matters submitted to a vote of our stockholders. This concentrated control eliminates other stockholders’ ability
to influence corporate matters
We
expect to seek additional financing in order to provide working capital to our business. Our board of directors has the power
to issue any or all of such authorized but unissued shares at any price they consider sufficient, without stockholder approval.
The issuance of additional shares of common stock in the future will reduce the proportionate ownership and voting power of current
stockholders
Future
sales and issuances of our capital stock, exercise of warrants outstanding or rights to purchase capital stock could result in
additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline.
We
may issue additional securities and future sales and issuances of our capital stock or rights to purchase our capital stock could
result in substantial dilution to our existing stockholders. We may sell common stock, convertible securities and other equity
securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities
in subsequent transactions, investors may be materially diluted. Additionally, because we have 16,300,020 Warrants outstanding,
which are exercisable for five cents per share with a warrant exercise period of 5 years, any material exercise of the Warrants
will because substantial dilution to your shares.
Any
market that develops in shares of our common stock will be subject to the penny stock regulations and restrictions pertaining
to low priced stocks that will create a lack of liquidity and make trading difficult or impossible.
The
trading of our securities will be in the over-the-counter market, which is commonly referred to as the OTCQB as maintained by
FINRA. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the price of our securities.
Rule
3a51-1 of the Exchange Act establishes the definition of a “penny stock,” for purposes relevant to us, as any equity
security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject
to a limited number of exceptions that are not available to us. It is likely that our shares will be penny stocks for the immediately
foreseeable future. This classification severely and adversely affects any market liquidity for our common stock.
For
any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’s
account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction
setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions
in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person
and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has
sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
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:
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the
basis on which the broker or dealer made the suitability determination, and
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that
the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Disclosure
also must be made about the risks of investing in penny stock in both public offerings and in secondary trading and commissions
payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock transactions. Additionally, monthly statements must be sent
disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Because
of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or
may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders
or other holders to sell their shares in any secondary market and have the effect of reducing the level of trading activity in
any secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities when
our securities become publicly traded. In addition, the liquidity for our securities may decrease, with a corresponding decrease
in the price of our securities. Our shares, probably, will be subject to such penny stock rules for the foreseeable future and
our shareholders will, likely, find it difficult to sell their securities.
Registered
Broker-Dealers and Clearing firms are refusing to trade or clear stocks that are directly or indirectly related to the cannabis
and hemp industries, which may negatively impact the trading of our common stock shares.
Because
registered Broker-Dealers and Clearing firms are refusing to trade or clear stocks that represent companies directly or indirectly
related to the cannabis and hemp industries, certain brokerage firms can no longer trade such stocks on behalf of their clients.
Should this trend increase, trading in our stock may be negatively impacted, including lower trading volume and stock prices.
If
we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet
our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory
scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on
the market price for shares of our common stock.
Effective
internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system
of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal
executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles.
The
forward-looking statements contained herein report may prove incorrect.
This
filing contains certain forward-looking statements, including among others: (i) anticipated trends in our financial condition
and results of operations; (ii) our business strategy for expanding our business through regional centers; and (iii) our ability
to distinguish ourselves from our current and future competitors. These forward-looking statements are based largely on our current
expectations and are subject risks and uncertainties. Actual results could differ materially from these forward-looking statements.
In addition to the other risks described elsewhere in this “Risk Factors” discussion, important factors to consider
in evaluating such forward-looking statements include: (i) changes to external competitive market factors or in our internal budgeting
process which might impact trends in our results of operations; (ii) anticipated working capital or other cash requirements; (iii)
changes in our business strategy or an inability to execute our strategy due to unanticipated changes in the environmental cleanup
industry; and (iv) various competitive factors that may prevent us from competing successfully in the marketplace. Considering
these risks and uncertainties, many of which are described in greater detail elsewhere in this “Risk Factors” discussion,
there can be no assurance that the events predicted in forward-looking statements contained in this Prospectus will, in fact,
transpire.
Cautionary
Note
We
have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to
what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise.
Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.