NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD SEPTEMBER 30, 2016
(Expressed in US dollars)
1. NATURE OF BUSINESS AND GOING CONCERN
Friendable, Inc., a Nevada corporation (the “Company”),
was incorporated in the State of Nevada with a plan to produce
user-friendly software that creates interactive digital yearbook
software for schools.
Effective June 15, 2011, the Company completed a merger with its
subsidiary, Titan Iron Ore Corp., a Nevada corporation, which was
incorporated solely to effect a change in the Company’s name
from “Digital Yearbook Inc.” to “Titan Iron Ore
Corp.” The Company then began to pursue business in the area
of mining exploration.
On February 3, 2014, the Company entered into an Agreement and Plan
of Merger and Reorganization (the
“Merger”)
with iHookup Operations Corp., a wholly-owned
Delaware subsidiary of the Company (“Acquisition Sub”)
and iHookup-DE, whereby iHookup-DE was the surviving entity and
became the wholly-owned subsidiary of the Company.
iHookup-DE’s former stockholders exchanged all of their 6,000
shares of outstanding common stock for 25,000 shares of the
Company’s designated Series A Preferred
Stock.
The Merger was regarded as a reverse recapitalization whereby
iHookup-DE was considered to be the accounting acquirer as its
stockholders retained control of the Company after the Merger.
During the year ended December 31, 2014, the Merger was completed
and as a result, iHookup-DE acquired the net liabilities of the
Company.
As a result of the Merger, the Company ceased its prior operations
and its business became the development and dissemination of a
“proximity based” mobile-social media application that
facilitates connections between people, utilizing the intelligence
of global positioning system and localized
recommendations.
On
September 28, 2015 the Company filed a Certificate of Amendment to
its Articles of Incorporation changing the name of the Company from
“iHookup Social, Inc.” to “Friendable,
Inc.”
. On October 27, 2015 the
Company’s trading symbol on the OTC Pink marketplace was
changed from “HKUP” to “FDBL”.
This
change was made in conjunction with the re-branding of the
Company’s app from "iHookup Social" to
"Friendable".
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern,
which implies that the Company would continue to realize its assets
and discharge its liabilities in the normal course of business. The
Company has never paid any dividends and is unlikely to pay
dividends or generate earnings in the immediate or foreseeable
future. As of September 30, 2016, the Company has a working capital
deficiency of $3,165,704 and has an accumulated deficit of
$11,691,403 since inception and its operations continue to be
funded primarily from sales of its stock and issuance of
convertible debentures. These factors raise substantial doubt about
the Company’s ability to continue as a going concern. The
ability of the Company to continue as a going concern is dependent
on the Company’s ability to obtain the necessary financing
from sales of its stock financings. The consolidated financial
statements do not include any adjustments to the recoverability and
classification of recorded asset amounts and classification of
liabilities that might be necessary should the Company be unable to
continue as a going concern.
Management plans to raise financing through the issuance of
convertible notes. No assurance can be given that any such
additional financing will be available, or that it can be obtained
on terms acceptable to the Company and its
stockholders.
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
These consolidated financial statements include the accounts of
Friendable, Inc., from the date of acquisition, and its wholly
owned subsidiary, iHookup-DE from inception.
Interim financial statements
The unaudited interim consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting
principles for interim consolidated financial information and with
the instructions for Securities and Exchange Commission
(“SEC”) Form 10-Q and they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete consolidated financial statements.
Therefore, these consolidated financial statements should be read
in conjunction with the Company’s audited annual consolidated
financial statements and notes thereto for the year ended December
31, 2015, included in the Company’s Annual Report on Form
10-K filed on April 15, 2016, with the SEC.
In the opinion of management, all adjustments (consisting of normal
and recurring accruals) considered necessary for fair presentation
of the Company’s financial position, results of operations
and cash flows have been included. Operating results for the nine
months ended September 30, 2016, are not necessarily indicative of
the results that may be expected for future quarters or the year
ending December 31, 2016.
FRIENDABLE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD SEPTEMBER 30, 2016
(Expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Use of Estimates
The preparation of these statements in accordance with United
States generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses in the reporting
period. The Company regularly evaluates estimates and assumptions
related to the useful life and recoverability of long-lived assets,
valuation of convertible debenture conversion options, deferred
income tax asset valuations, financial instrument valuations,
share-based payments, other equity-based payments, and loss
contingencies. The Company bases its estimates and assumptions on
current facts, historical experience and various other factors that
it believes to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities and the accrual of costs and
expenses that are not readily apparent from other sources. The
actual results experienced by the Company may differ materially and
adversely from the Company’s estimates. To the extent there
are material differences between the estimates and the actual
results, future results of operations will be
affected.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement
exists, delivery has occurred, the fee is fixed or determinable,
and collectability is probable. Revenue generally is recognized net
of allowances for returns and any taxes collected from customers
and subsequently remitted to governmental authorities. The Company
derives revenues from the sale of application software, unlimited
messaging subscriptions for periods varying from one to twelve
months, and arrangements for virtual gifts and access to special
features referred to as coin packs. Revenue from the sale of
application software is recognized upon download. Revenue from
messaging subscriptions is recognized as revenue ratably over the
subscription period beginning on the date the service is made
available to customers. Revenue from coin packs is recognized on a
consumption basis commensurate with the customer utilization of
such resources.
Advertising Costs
The Company’s policy regarding advertising is to expense
advertising when incurred. During the nine months ended September
30, 2016, the Company incurred $1,379,116 (September 30, 2015:
$187,833) in advertising costs.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with
a maturity of three months or less to be cash
equivalents.
Intangible Assets
The Company accounts for intangible assets in accordance with ASC
350, Intangibles – Goodwill and Other. The Company assesses
potential impairments to intangible assets when there is evidence
that events or changes in circumstances indicate that the carrying
amount of an asset may not be recovered.
Intangible assets with estimated lives and other long-lived assets
are reviewed for impairment when events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. Recoverability of intangible assets with estimated
lives and other long-lived assets is measured by comparing the
carrying amount of the asset to its fair value. If the future value
of the asset is lower than its carrying value, the Company
recognizes an impairment loss for the amount by which the carrying
value of the asset exceeds the related estimated fair
value.
Intangible assets with indefinite lives are tested for impairment
annually or more frequently are tested for impairment annually or
more frequently if events or changes in circumstances indicate that
it is more likely than not that the intangible asset is
impaired.
Impairment of Long-Lived Assets
The Company continually monitors events and changes in
circumstances that could indicate carrying amounts of long-lived
assets may not be recoverable. When such events or changes in
circumstances are present, the Company assesses the recoverability
of long-lived assets by determining whether the carrying value of
such assets will be recovered through undiscounted expected future
cash flows.
If the total of the future cash flows is less than the carrying
amount of those assets, the Company recognizes an impairment loss
based on the excess of the carrying amount over the fair value of
the assets. Assets to be disposed of are reported at the lower of
the carrying amount or the fair value less costs to
sell.
FRIENDABLE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD SEPTEMBER 30, 2016
(Expressed in US dollars)
2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC
718, Compensation – Stock Based Compensation and
ASC 505, Equity Based Payments to Non-Employees, which
requires the measurement and recognition of compensation expense
based on estimated fair values for all share-based awards made to
employees and directors, including stock options.
ASC 718 requires companies to estimate the fair value of
share-based awards on the date of grant using an option-pricing
model. The Company uses the Black-Scholes option pricing model as
its method in determining fair value. This model is affected by the
Company’s stock price as well as assumptions regarding a
number of subjective variables. These subjective variables include,
but are not limited to the Company’s expected stock price
volatility over the terms of the awards, and actual and projected
employee stock option exercise behaviors. The value of the portion
of the award that is ultimately expected to vest is recognized as
an expense in the statement of comprehensive loss over the
requisite service period.
All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably
measurable.
Allowance for Doubtful Accounts
The Company receives revenues from sales of its software
application. The Company monitors its outstanding receivables for
timely payments and potential collection issues. During the nine
months ended September 30, 2016, the Company did not have any
allowance for doubtful accounts.
Financial Instruments
Financial assets and financial liabilities are recognized in the
balance sheet when the Company has become party to the contractual
provisions of the instruments.
The Company’s financial instruments consist of accounts
receivable, accounts payable, promissory notes, and convertible
debentures. The fair values of these financial instruments
approximate their carrying value, due to their short term nature,
and current market rates for similar financial instruments. Fair
value of a financial instrument is defined as the price that would
be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date. The Company’s financial instruments recorded at fair
value in the balance sheets are categorized based upon the level of
judgment associated with the inputs used to measure their fair
value.
Basic and Diluted Loss Per Share
The Company computes net loss per share in accordance with ASC 260,
Earnings per Share. ASC 260 requires presentation of
both basic and diluted earnings per share (EPS) on the face of the
statement of comprehensive loss. Basic EPS is computed by dividing
net income (loss) available to common stockholders (numerator) by
the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the
if-converted method. In computing diluted EPS, the average stock
price for the period is used in determining the number of shares
assumed to be purchased from the exercise of stock options or
warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti-dilutive.
As of September 30, 2016, there were approximately 11,286,943,725
potentially dilutive shares outstanding.
Income Taxes
The Company accounts for income taxes using the asset and liability
method in accordance with ASC 740, Income Taxes. The asset and
liability method provides that deferred tax assets and liabilities
are recognized for the expected future tax consequences of
temporary differences between the financial reporting and tax bases
of assets and liabilities and for operating loss and tax credit
carry forwards. Deferred tax assets and liabilities are measured
using the currently enacted tax rates and laws that will be in
effect when the differences are expected to reverse. The Company
records a valuation allowance to reduce deferred tax assets to the
amount that is believed more likely than not to be
realized.
FRIENDABLE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD SEPTEMBER 30, 2016
(Expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent Accounting Pronouncements
In August 2014, the FASB issued ASU No. 2014-15,
“Presentation of Financial Statements - Going Concern
(Subtopic 205-40). Disclosure of Uncertainties about an
Entity’s Ability to Continue as a Going Concern”
(“ASU 2014-15”). ASU 2014-15 is intended to define
management’s responsibility to evaluate whether there is
substantial doubt about an organization’s ability to continue
as a going concern and to provide related footnote disclosure. This
ASU provides guidance to an organization’s management, with
principles and definitions that are intended to reduce diversity in
the timing and content of disclosures that are commonly provided by
organizations today in the financial statement footnotes. The
amendments are effective for annual periods ending after December
15, 2016, and interim periods within annual periods beginning after
December 15, 2016. Early adoption is permitted for annual or
interim reporting periods for which the financial statements have
not previously been issued. The Company is evaluating the impact
the revised guidance will have on its consolidated financial
statements.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from
Contracts with Customers (Topic 606)” (“ASU
2014-09”). ASU 2014-09 supersedes the revenue recognition
requirements in ASC Topic 605, “Revenue Recognition”
and some cost guidance included in ASC Subtopic 605-35, Revenue
Recognition -Construction-Type and Production-Type
Contracts”. 2014-09 requires the disclosure of
sufficient information to enable users of the financial statements
to understand the nature, amount, timing and uncertainty of revenue
and cash flows arising from customer contracts. The Company will
also be required to disclose information regarding significant
judgments and changes in judgments, and assets recognized from
costs incurred to obtain or fulfill a contract. Early adoption is
not allowed. ASU 2014-09 provides two methods of retrospective
application. The first method would require the Company to apply
ASU 2014-09 to each prior reporting period presented. The second
method would require the Company to retrospectively apply with the
cumulative effect of initially applying ASU 2014-09 recognized at
the date of initial application. The Company is currently
evaluating the impact that the adoption of ASU 2014-09 may have on
its consolidated financial statements.
3. INTANGIBLE ASSETS
On June 24, 2015, the Company completed the acquisition of the
Friendable Properties which includes domain names, logos, icons,
and registered trademarks for cash consideration of
$35,000.
4. COMMON AND PREFERRED STOCK
Common Stock:
During the nine months ended September 30, 2016, the Company issued
423,669,721 shares of common stock to various convertible note
holders for full and partial conversion of the notes (Note
10).
During the nine months ended September 30, 2016, the Company issued
43,785,714 shares of common stock to consultants in exchange for
investor relations and advertising services.
During the nine months ended September 30, 2016, the Company issued
62,114,357 shares of common stock to various Series A preferred
stockholders on conversion of 395 preferred shares.
During the nine months ended September 30, 2016, the Company issued
26,993,902 shares of common stock to various warrant holders for
exercise of the warrants.
Preferred Stock:
The Series A Preferred Stock is convertible into nine (9) times the
number of common stock outstanding until the closing of a Qualified
Financing (i.e. the sale and issuance of the Company’s equity
securities that results in gross proceeds in excess of
$2,500,000). The number of shares of common stock issued
on conversion of preferred stock is based on the ratio of the
number of shares of preferred stock converted to the total number
of shares of preferred stock outstanding at the date of conversion
multiplied by nine (9) times the number of common stock outstanding
at the date of conversion.
FRIENDABLE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD SEPTEMBER 30, 2016
(Expressed in US dollars)
5. SHARE PURCHASE WARRANTS
|
|
Weighted
Average Exercise Price
$
|
Balance,
December 31, 2015
|
119,471,154
|
0.014
|
Warrants
exercised
|
(27,609,756
)
|
0.004
|
Warrants
issued
|
464,474,359
|
0.003
|
Balance,
September 30, 2016
|
556,335,757
|
0.006
|
6. STOCK-BASED COMPENSATION
On November 22, 2011, the Board of Directors of Titan Iron Ore
Corp. (see Note 1) approved a stock option plan
(“
2011
Stock Option Plan
”), the
purpose of which is to enhance the Company’s stockholder
value and financial performance by attracting, retaining and
motivating the Company’s officers, directors, key employees,
consultants and its affiliates and to encourage stock ownership by
such individuals by providing them with a means to acquire a
proprietary interest in the Company’s success through stock
ownership. Under the 2011 Stock Option Plan, officers, directors,
employees and consultants who provide services to the Company may
be granted options to acquire common shares of the
Company.
The aggregate number of
options authorized by the plan shall not exceed 4,974 shares of
common stock of the Company.
The following table summarizes the options outstanding and
exercisable under the 2011 Stock Option Plan as of September
30, 2016:
|
|
|
Expiry
Date
|
|
|
December
21, 2021
|
1,680
|
1,725
|
June
21, 2022
|
400
|
500
|
June
25, 2023
|
134
|
850
|
|
$
1,044
|
3,075
|
The Board of Directors and the stockholders holding a majority of
the voting power approved a 2014 Equity Incentive Plan (the
“
2014
Plan
”) on February 28,
2014, with a to be determined effective date. The purpose of the
2014 Plan is to assist the Company and its affiliates in
attracting, retaining and providing incentives to employees,
directors, consultants and independent contractors who serve the
Company and its affiliates by offering them the opportunity to
acquire or increase their proprietary interest in the Company and
to promote the identification of their interests with those of the
stockholders of the Company. The 2014 Plan will also be used to
make grants to further reward and incentivize current employees and
others.
There are 120,679 shares of common stock reserved for issuance
under the 2014 Plan. The Board shall have the power and authority
to make grants of stock options to employees, directors,
consultants and independent contractors who serve the Company and
its affiliates. Any stock options granted under the 2014 Plan shall
have an exercise price equal to or greater than the fair market
value of the Company’s shares of common stock. Unless
otherwise determined by the Board of Directors, stock options shall
vest over a four-year period with 25% being vested after the end of
one (1) year of service and the remainder vesting equally over a
36-month period. The Board may award options that may
vest based upon the achievement of certain performance milestones.
As of September 30, 2016, no options have been awarded under the
2014 Plan.
The following table summarizes the Company’s stock options
outstanding and exercisable:
|
|
Weighted Average Exercise Price
|
Weighted- Average Remaining Contractual Term (years)
$
|
Aggregate Intrinsic Value
$
|
Outstanding
and exercisable, December 31, 2015
|
3,075
|
1,044
|
7.57
|
-
|
Outstanding
and exercisable, September 30, 2016
|
3,075
|
1,044
|
6.82
|
-
|
FRIENDABLE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD SEPTEMBER 30, 2016
(Expressed in US dollars)
7. COMMITMENTS
The
following table summarizes the Company’s significant
contractual obligations as of September 30, 2016:
|
$
|
|
|
Employment
Agreements (1)
|
375,000
|
|
375,000
|
(1) Employment agreements with related parties.
8. RELATED PARTY TRANSACTIONS AND BALANCES
During the nine months ended September 30, 2016, the Company
incurred $332,667 (2015: $334,853) in salaries to officers and
directors with such costs being recorded as general and
administrative expenses.
During the nine months ended September 30, 2016, the Company
incurred $588,204 (2015: $352,811) in app hosting, app development,
office expenses, and rent to a company with two officers and
directors in common with such costs being recorded as general and
administrative and product development expenses.
As of September 30, 2016, the Company had a stock subscription
receivable totaling $4,500 (December 31, 2015: $4,500) from an
officer and director and from a company with an officer and
director in common.
As of September 30, 2016, accounts payable includes $246,775
(December 31, 2015: $236,571) payable to a company with two
officers and directors in common, and $400,000 (December 31, 2015:
$175,000) payable in salaries to directors and officers of the
Company. The amounts are unsecured, non-interest bearing and are
due on demand.
The above transactions were recorded at their exchange amounts,
being the amounts agreed by the related parties.
9. FAIR VALUE MEASUREMENTS
ASC 820, Fair Value Measurements and Disclosures, require an entity
to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. ASC 820 establishes
a fair value hierarchy based on the level of independent, objective
evidence surrounding the inputs used to measure fair value. A
financial instrument’s categorization within the fair value
hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. ASC 820 prioritizes the
inputs into three levels that may be used to measure fair
value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted
prices in active markets for identical assets or liabilities.
Valuations are based on quoted prices that are readily and
regularly available in an active market and do not entail a
significant degree of judgment.
Level 2
Level 2 applies to assets or liabilities for which there are other
than Level 1 observable inputs such as quoted prices for similar
assets or liabilities in active markets; quoted prices for
identical assets or liabilities in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived
valuations in which significant inputs are observable or can be
derived principally from, or corroborated by, observable market
data.
Level 2 instruments require more management judgment and
subjectivity as compared to Level 1 instruments. For instance:
determining which instruments are most similar to the instrument
being priced requires management to identify a sample of similar
securities based on the coupon rates, maturity, issuer, credit
rating and instrument type, and subjectively select an individual
security or multiple securities that are deemed most similar to the
security being priced; and determining whether a market is
considered active requires management judgment.
Level 3
Level 3 applies to assets or liabilities for which there are
unobservable inputs to the valuation methodology that are
significant to the measurement of the fair value of the assets or
liabilities. The determination of fair value for Level 3
instruments requires the most management judgment and
subjectivity.
Pursuant to ASC 825, cash is based on Level 1 inputs. The Company
believes that the recorded values of accounts receivable and
accounts payable approximate their current fair values because of
their nature or respective relatively short durations. The fair
value of the Company’s promissory notes and convertible
debentures approximates their carrying values as the underlying
imputed interest rates approximates the estimated current market
rate for similar instruments.
As of September 30, 2016, there were no assets or liabilities
measured at fair value on a recurring basis presented on
the Company’s balance sheet, other than
cash.
FRIENDABLE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD SEPTEMBER 30, 2016
(Expressed in US dollars)
10. CONVERTIBLE DEBENTURES
Short-term
Convertible Debentures:
|
Issuance
|
|
|
|
|
Maturity Date
|
a )
|
02-Apr-13
|
5,054
|
-
|
5,054
|
0
%
|
02-Jan-14
|
b )
|
05-Aug-15
|
750,000
|
401,515
|
348,485
|
7
%
|
05-Feb-17
|
b )
|
05-Aug-15
|
18,750
|
10,039
|
8,711
|
7
%
|
05-Feb-17
|
d )
|
07-Oct-14
|
15,000
|
-
|
15,000
|
8
%
|
07-Oct-15
|
d )
|
15-Jan-15
|
40,000
|
-
|
40,000
|
8
%
|
15-Jan-16
|
d )
|
15-Feb-15
|
35,000
|
-
|
35,000
|
8
%
|
15-Feb-16
|
d )
|
17-Feb-15
|
102,135
|
-
|
102,135
|
8
%
|
17-Feb-16
|
d )
|
17-Feb-15
|
5,000
|
-
|
5,000
|
8
%
|
17-Feb-16
|
c )
|
27-Feb-15
|
37,500
|
-
|
37,500
|
8
%
|
27-Feb-16
|
c )
|
12-Mar-15
|
37,500
|
-
|
37,500
|
8
%
|
11-Mar-16
|
d )
|
19-Mar-15
|
53,551
|
-
|
53,551
|
8
%
|
19-Mar-16
|
d )
|
19-Mar-15
|
8,000
|
-
|
8,000
|
8
%
|
19-Mar-16
|
c )
|
27-Mar-15
|
50,000
|
-
|
50,000
|
8
%
|
26-Mar-16
|
c )
|
11-May-15
|
50,000
|
-
|
50,000
|
8
%
|
10-May-16
|
d )
|
02-Jun-15
|
29,500
|
-
|
29,500
|
8
%
|
01-Jun-16
|
d )
|
02-Jun-15
|
45,966
|
-
|
45,966
|
8
%
|
01-Jun-16
|
d )
|
02-Jun-15
|
10,000
|
-
|
10,000
|
8
%
|
01-Jun-16
|
d )
|
02-Jun-15
|
58,540
|
-
|
58,540
|
8
%
|
01-Jun-16
|
d )
|
02-Jun-15
|
35,408
|
-
|
35,408
|
8
%
|
01-Jun-16
|
d )
|
02-Jun-15
|
20,757
|
-
|
20,757
|
8
%
|
01-Jun-16
|
c )
|
11-Jun-15
|
50,000
|
-
|
50,000
|
8
%
|
10-Jun-16
|
d )
|
16-Jun-15
|
30,464
|
-
|
30,464
|
8
%
|
15-Jun-16
|
d )
|
19-Jun-15
|
30,000
|
-
|
30,000
|
8
%
|
18-Jun-16
|
d )
|
19-Jun-15
|
35,408
|
-
|
35,408
|
8
%
|
18-Jun-16
|
c )
|
24-Jun-15
|
37,500
|
-
|
37,500
|
8
%
|
23-Jun-16
|
d )
|
24-Jun-15
|
35,000
|
-
|
35,000
|
8
%
|
23-Jun-16
|
c )
|
24-Jun-15
|
37,500
|
-
|
37,500
|
8
%
|
23-Jun-16
|
d )
|
07-Jul-15
|
75,000
|
-
|
75,000
|
8
%
|
07-Oct-15
|
d )
|
17-Jul-15
|
27,000
|
-
|
27,000
|
8
%
|
17-Jul-16
|
d )
|
01-Aug-15
|
17,408
|
-
|
17,408
|
8
%
|
04-Aug-16
|
d )
|
01-Aug-15
|
30,000
|
-
|
30,000
|
8
%
|
01-Aug-16
|
d )
|
01-Aug-15
|
35,408
|
-
|
35,408
|
8
%
|
01-Aug-16
|
d )
|
21-Sep-15
|
64,744
|
-
|
64,744
|
8
%
|
21-Sep-16
|
b )
|
03-May-16
|
50,000
|
46,654
|
3,346
|
8
%
|
03-May-17
|
c )
|
03-May-16
|
50,000
|
-
|
50,000
|
8
%
|
03-May-17
|
d )
|
03-May-16
|
29,500
|
-
|
29,500
|
8
%
|
03-May-17
|
d )
|
03-May-15
|
45,966
|
-
|
45,966
|
8
%
|
03-May-17
|
b )
|
24-May-16
|
61,571
|
58,692
|
2,879
|
8
%
|
24-May-17
|
d )
|
24-May-16
|
30,464
|
-
|
30,464
|
8
%
|
24-May-17
|
b )
|
26-May-16
|
157,500
|
153,511
|
3,989
|
8
%
|
26-May-17
|
d )
|
15-Jun-16
|
50,000
|
47,968
|
2,032
|
8
%
|
15-Jun-17
|
c )
|
07-Apr-16
|
106,500
|
100,021
|
6,479
|
8
%
|
07-Apr-17
|
b )
|
02-Jun-16
|
160,000
|
157,614
|
2,386
|
7
%
|
02-Jun-17
|
b )
|
02-Jun-16
|
4,000
|
3,839
|
161
|
7
%
|
02-Jun-17
|
b )
|
15-Jun-16
|
50,000
|
48,453
|
1,547
|
7
%
|
15-Jun-17
|
b )
|
15-Jun-16
|
1,250
|
1,141
|
109
|
7
%
|
15-Jun-17
|
b )
|
17-May-16
|
100,000
|
97,611
|
2,389
|
7
%
|
08-Sep-17
|
b )
|
17-May-16
|
2,500
|
2,343
|
157
|
7
%
|
08-Sep-17
|
b )
|
19-May-16
|
110,000
|
107,593
|
2,407
|
7
%
|
08-Sep-17
|
b )
|
19-May-16
|
2,750
|
2,591
|
159
|
7
%
|
08-Sep-17
|
b )
|
27-Jan-16
|
250,000
|
50,618
|
199,382
|
7
%
|
27-Jul-17
|
b )
|
08-Mar-16
|
110,000
|
106,112
|
3,888
|
7
%
|
08-Sep-17
|
FRIENDABLE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD SEPTEMBER 30, 2016
(Expressed in US dollars)
10. CONVERTIBLE DEBENTURES (CONTINUED)
b )
|
27-Jan-16
|
18,750
|
-
|
18,750
|
7
%
|
27-Jul-17
|
b )
|
08-Mar-16
|
5,000
|
3,809
|
1,191
|
7
%
|
08-Sep-17
|
b )
|
08-Mar-16
|
90,000
|
86,403
|
3,597
|
7
%
|
08-Sep-17
|
b )
|
07-Jul-16
|
50,000
|
48,754
|
1,246
|
7
%
|
08-Sep-17
|
b )
|
04-Aug-16
|
110,000
|
108,801
|
1,199
|
7
%
|
08-Sep-17
|
b )
|
15-Aug-16
|
157,000
|
155,849
|
1,151
|
7
%
|
08-Sep-17
|
b )
|
12-Sep-16
|
83,000
|
82,262
|
738
|
7
%
|
08-Sep-17
|
b )
|
07-Jul-16
|
1,250
|
1,155
|
95
|
7
%
|
08-Sep-17
|
b )
|
04-Aug-16
|
2,750
|
2,656
|
94
|
7
%
|
08-Sep-17
|
b )
|
15-Aug-16
|
3,925
|
3,833
|
92
|
7
%
|
08-Sep-17
|
b )
|
12-Sep-16
|
2,075
|
2,010
|
65
|
7
%
|
08-Sep-17
|
b )
|
07-Jul-16
|
50,000
|
48,528
|
1,472
|
7
%
|
07-Jul-17
|
b )
|
04-Aug-16
|
110,000
|
108,712
|
1,288
|
7
%
|
04-Aug-17
|
b )
|
15-Aug-16
|
157,500
|
156,296
|
1,204
|
7
%
|
15-Aug-17
|
b )
|
08-Sep-16
|
80,000
|
79,219
|
781
|
7
%
|
08-Sep-17
|
|
|
|
|
|
|
|
4,206,344
|
2,284,602
|
1,921,742
|
|
|
a)
The
conversion price per share equal to the lower of:
i.
100%
of the average price of the Company’s common stock for the 5
trading days preceding the conversion date;
ii.
70%
of the daily average price of the Company’s common stock for
the 10 trading days preceding the conversion date.
b)
The
conversion price is a range of $0.0025-$0.0078.
c)
The
conversion price equal to 50% of the lowest closing bid price of
the Company’s common stock in the 20-25 trading days prior to
the conversion.
d)
The
conversion price of $0.0005.
During the nine months ended September 30, 2016, the Company
received net proceeds from convertible debentures of
$2,251,508.
During the nine months ended September 30, 2016, $213,255 of
convertible debentures were settled by issuing 423,669,721 shares
of common stock of the Company.
During the nine months ended September 30, 2016, the Company
incurred $129,830 in transaction costs in connection with the
issuance of the convertible debentures.
As of September 30, 2016, the Company had debt issuance costs of
$346,343 (December 31, 2015: $200,855).
At September 30, 2016, convertible debentures with the principal
amount of $4,206,344 have a General Security Agreement covering
substantially all of the Company’s assets.
The Company has evaluated whether separate financial instruments
with the same terms as the conversion features above would meet the
characteristics of a derivative instrument as described in
paragraphs ASC 815-15-25. The terms of the contracts do not permit
net settlement, as the shares delivered upon conversion are not
readily convertible to cash. The Company’s trading history
indicated that the shares are thinly traded and the market would
not absorb the sale of the shares issued upon conversion without
significantly affecting the price. As the conversion features would
not meet the characteristics of a derivative instrument as
described in paragraphs ASC 815-15-25, the conversion features are
not required to be separated from the host instrument and accounted
for separately. As a result, at September 30, 2016 the conversion
features and non-standard anti-dilutions provisions would not meet
derivative classification.
FRIENDABLE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD SEPTEMBER 30, 2016
(Expressed in US dollars)
11. SUBSEQUENT EVENTS
a)
|
Subsequent
to September 30, 2016 the Company issued 56,000,000 shares of
common stock in connection with conversion of convertible notes in
the amount of $55,150, issued 12,240,000 shares of common stock for
placement agent fees, and issued 25,406,910 shares of common stock
in connection with conversion of 110 shares of Series A preferred
stock.
|
b)
|
The
Company entered into a Securities Purchase Agreement, dated October
7, 2016 (the “Alpha SPA”) with Alpha Capital Anstalt
(“Alpha Capital”), to issue and sell up to, in
principal amount, $1,615,000 of convertible notes, payable in four
tranches (the “Alpha Notes”). The first tranche of
$465,000 was funded on October 7, 2016 (the “Initial Closing
Date”) and the second, third, and fourth tranches of $375,000
each will be funded, respectively, during the first week of each of
November 2016, December 2016, and January 2017 (the subsequent
closing dates and, with the Initial Closing Date, each a
“Closing”).
Pursuant
to the Alpha SPA, the Company also issued warrants to Alpha Capital
to purchase up to a number of shares of the Company’s common
stock (“Common Stock”) equal to the purchase price of
the Alpha Notes divided by the conversion price in effect as of the
date of Closing (the “Alpha Warrant”). The conversion
price as of the Initial Closing Date was $0.0025, and therefore
warrants to purchase 186,000,000 shares of the Company’s
common stock were issued to Alpha Capital. The Alpha
Warrants’ per share exercise price of $0.0030 is equivalent
to 120% of the conversion price. The Alpha Notes have a beneficial
ownership limitation such that Alpha Capital can never own more
than 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of the Alpha Notes.
For its
services as a placement agent for this transaction, Palladium
Capital Advisors, LLC (“Palladium”) shall receive
compensation of 4% of the aggregate purchase price paid in each
Closing, payable in shares of Common Stock equal to 4% of the Alpha
Warrant, or 7,440,000 shares of Common Stock.
The
Company is using a portion of the proceeds of each Closing to
purchase Series A Convertible Participating Preferred Stock of a
private entity named Hang With, Inc. (“Hang With”).
Alpha Capital is currently Hang With’s majority owner. On
October 7, 2016, the Company entered into a Securities Purchase
Agreement with Hang With (the “Hang With SPA”) to buy
up to 330,397 shares of Hang With’s Series A Convertible
Participating Preferred Stock (the “Preferred Stock”)
for $750,000. On the Initial Closing Date, the Company paid
$225,000 and received 99,118 shares of Preferred Stock. The Company
will pay Hang With $175,000 on each of the subsequent three
Closings. In connection with entering into the Hang With SPA, the
Company and Hang With entered into a Software License Agreement
(the “License Agreement”) in which Hang With is
licensing the intellectual property of its apps to the Company. As
part of the Hang With SPA and as compensation for the Company
entering into the License Agreement and the future development
agreement, Hang With, in addition to issuing 154,185 shares of
Preferred Stock on the Initial Closing Date, issued 100,000 shares
of its common stock to the Company.
|