ITEM 1. BUSINESS
Corporate History
We were
incorporated in the State of Nevada on June 5, 2007. Effective June
15, 2011, we completed a merger with our subsidiary, Titan Iron Ore
Corp., a Nevada corporation, which was incorporated solely to
effect a change in our name to “Titan Iron Ore
Corp.”
As of
December 31, 2013, Titan Iron Ore Corp. was a mineral exploration
company. Due to our inability to raise capital to further develop
mining claims and pursue mineral exploration, we decided to exit
the mining business and look for other opportunities.
On
February 3, 2014, we completed a merger with iHookup Social,
Inc., a Delaware corporation (“iHookup”) pursuant to an
Agreement and Plan of Merger and Reorganization (the “Merger
Agreement”) dated January 31, 2014. Pursuant to the Merger
Agreement, we incorporated a new subsidiary called iHookup
Operations Corp, a Delaware corporation, which merged with and into
iHookup, causing the subsidiary’s separate existence to cease
and iHookup to become a wholly-owned subsidiary of the Company.
iHookup’s stockholders exchanged all of their twelve
million (12,000,000) shares of outstanding common stock for fifty
million (50,000,000) shares of the Company’s newly designated
Series A Preferred Stock. Each share of common stock entitles its
holder to one vote on each matter submitted to the
stockholders. The holders of preferred stock are
entitled to cast votes equal to the number of votes equal to the
number of whole shares of common stock into which the shares of
Series A Preferred Stock held by such holder are convertible. The
total aggregate issued shares of Series A Preferred Stock at any
given time regardless of their number shall be convertible into the
number of shares of common stock which equals nine (9) times the
total number of shares of common stock which are issued and
outstanding at the time of any conversion, at the option of the
preferred holders or until the closing of a Qualified Financing
(i.e. the sale and issuance of our equity securities that results
in gross proceeds in excess of $2,500,000) at one time or in the
same round. As a result of the transaction, the former Friendable
stockholders received a controlling interest in the Company due to
the voting rights of the Series A Preferred Stock being connected
to their super-majority conversion rights.
On
April 29, 2014, FINRA approved a 20 for 1 reverse stock split
whereby 937,459,274 shares of the Company’s common stock then
issued and outstanding, were exchanged for 46,872,964 shares of the
Company’s common stock.
On
March 19, 2015, FINRA approved a 100 for 1 reverse stock split
whereby 2,355,489,991, shares of the Company’s common stock
then issued and outstanding, were exchanged for 23,554,923 shares
of the Company’s common stock.
On
October 26, 2015, the Company issued a press release announcing
that FINRA had approved a change to our trading symbol for our
common stock which is quoted on the OTC Pink marketplace. Effective
October 27, 2015 our trading symbol was changed from
“HKUP” to “FDBL”. This change was made in
conjunction with the Company’s filing of a Certificate of
Amendment on September 28, 2015 to its Articles of Incorporation
changing the name of the Company from “iHookup Social,
Inc.” to “Friendable, Inc.” The company had
previously announced a re-branding our app from "iHookup Social" to
"Friendable". As a result, the Company desired to change its name
to match the rebranding so as to be more specific to the
Company’s core values and its products/services, creating a
more recognizable brand that creates less confusion.
On May
31, 2017, the Company filed an Amendment to its Articles of
Incorporation increasing the authorized common stock from
10,000,000,000 to 15,000,000,000 shares. On June 28, 2017, the
Company incorporated a subsidiary, Fan Pass Inc., a Nevada
corporation, which was incorporated to undertake the development of
the mobile application “The Fan Pass App”.
Who We Are
The
Company is a mobile-social technology company focused on connecting
and engaging users through its existing social networking app
“Friendable” and a new application scheduled to roll
out in 2018, Fan Pass.
The
Company’s first product was launched under the same name as
the Company, the
Friendable
app
. The app provides a mobile social network for both iOS
and Android mobile devices/operating systems and allows users to
create one-on-one or group-style meet-ups for food, drinks, live
music venues, or any other occasion, based on location. Since its
inception in 2013, Friendable has generated more than 1 million
downloads, 800,000 registered users, and approximately 600,000 user
profiles, and has been featured in popular music videos such as the
2016 hit “Ain’t Your Mama” by singer Jennifer
Lopez. The Company seeks to explore new opportunities for growth,
partnerships, mergers or acquisitions in 2018.
ITEM 1. BUSINESS
- continued
In
2018, the Company intends to release a beta version of its
Fan Pass mobile application for
user testing as well as complete a version of Fan Pass ready for
commercial release. Additionally, Fan Pass is its own Corporation
that is currently wholly owned by Friendable, Inc., and on a path
to be spun off as a separate entity. The spin-off of Fan Pass, Inc.
is intended to result in a share issuance to all Friendable
shareholders as the Company files an S1 registration statement to
become a stand-alone public company
.
The Fan
Pass app has been designed to capture and monetize content via live
streaming video. Video content will be the focus in which the
Company will build content related assets and allow brands/social
media influencers to unite. The app has the opportunity to provide
fans to capture and/or view exclusive back-stage and uncensored
video content from their favorite performing artists and
celebrities (social media influencers). Fan Pass is currently
working on its application, as well as establishing partnerships
with some of the very same and prominent artists utilized by
Friendable in the past. These artists include Jennifer Lopez,
Austin Mahone, Meghan Trainor, Fetty Wap, and more. Through these
previous celebrity partnerships, Fan Pass believes it can drive
downloads and convert downloads to users, this approach allows Fan
Pass to leverage built-in fan bases into the application’s
initial viewership base, making quick and large scalability a real
possibility.
Mobile Applications
Introduction
The Friendable Mobile Application:
Friendable is a "friends-first" approach to making new connections.
Unlike platforms like Facebook and Instagram where users post what
they did in the past, Friendable’s features are designed and
focused on living in the present and looking forward to the
future:
■
Friendable is a
mobile application where users can create meet-up events that can
be shared to one person or multiple individuals.
■
Users can select
which type of event they would like to create or attend, separated
by categories like “Food,” “Movies,” and
more.
■
Users with similar
interests and locations will be matched together, and will then be
able to chat with one another to coordinate a meet-up time and
place.
■
Users can look up
current events and send gifts to other users.
■
Users can friend
other users to meet-up again, creating a social network of goers
and adventurers.
As of
April 2018, Friendable has been downloaded over 1 million times
across iOS and Android.
ITEM 1. BUSINESS
-
continued
“
Everything
Starts
with
Friendship
.”
Management
believes that its Friendable app and brand, along with its existing
feature set is in need of upgrades, expansion and more intelligent
technology integration to stay competitive in the Social Networking
category. With such upgrades being extremely costly and the
existing user base growing only through search and organic word of
mouth, Friendable intends to seek strategic partners that may
provide new opportunities to create value for the Company’s
shareholders by pivoting the app or its business focus in a new
direction.
The Fan Pass Live Application
(Development
Project)
Fan
Pass will be an online, mobile-based, video application that the
Company believes will empower the end user by attracting brands,
social influencers, artists, musicians and celebrities to build a
significant content base and then deliver live, exclusive video
content to their fan bases/app users. The app is to be available on
both iOS and Android operating systems. Examples of content may
include:
■
Branded Backstage
access before, during or after an event
■
Recording studio
sessions
■
B
ehind-the-scenes
looks on music video, film, or photoshoot sets
■
On-set makeup or
wardrobe trailers
■
Special interviews
or one-on-one video sessions with celebrities
■
Daily looks into
the lives of celebrities, artists, and stars
■
…and more VIP
exclusive content
In
addition, fans will be able to chat with other fans before, during,
and after the live stream; view older, archived live videos; and
subscribe to an individual broadcast instead of a channel. We
believe that, especially for a large event like a music festival or
concert, the option for fans to briefly purchase a broadcast or
view an older broadcast increases the likelihood of added
subscriptions.
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ITEM 1.
BUSINESS
-
continued
For
artists, Fan Pass will offer several levels of revenue-sharing with
them and their agencies. Each artist will be asked to market their
Fan Pass channel to their social followers and fans, ultimately
generating subscription revenue for the Company. The
revenue-sharing ecosystem is designed to help celebrities monetize
their fans and followers at fairer rates compared to other video
streaming applications; Fan Pass will be able to be used in
conjunction with other video applications to bolster their income.
Lastly, Fan Pass will offer video production and recording services
for artists if they do not want to record their own
streams.
“Empowering users, influencers
and artists
everywhere
to deliver
live
,
exclusive
video content.”
Marketing
We
intend to market our applications utilizing a variety of online and
offline marketing activities, brand partnerships and social
influencers that can spread the word far and wide.
The
Company believes various marketing initiatives will combine
celebrity driven outreach to social media followers and fans,
specialized content, digital marketing, and live event marketing to
optimize market reach.
Celebrity Marketing:
Celebrity partners intend to utilize
social media, music videos, live events and existing fan marketing
to market Fan Pass Live and Friendable app.
Event Marketing:
Marketing / business development teams will
market the application at live events around music video releases,
concerts, private events, promotional events, and other
festivities. In addition, video and photography crews will take
pictures and videos at events for public relations and social
media.
Digital Marketing:
The Company intends to utilize digital
marketing avenues such as: celebrity direct-to-fan; digital ad
campaigns on social media and search engines; search engine
optimization; and other digital marketing initiatives that will
utilize celebrity and user generated content for maximum market
reach.
The
Company also intends to utilize online marketing channels such as
Google and social media marketing, display advertising, and online
publications. The Company will continually track cost of user
acquisition, the lifetime value of each customer, and ROI of all
marketing expenditures to reduce expenses and increase overall
profit margins.
The
creation of a business development team that will curate the
Company’s internal and external growth goals, and traditional
forms of advertising such as television and radio are also key
avenues. The goal of using these channels is to create a platform
for the long-term success and brand awareness, a matrix of the
Company’s planned marketing channels is listed
below:
Marketing Initiatives
ITEM
1. BUSINESS
-
continued
Revenue
The
Friendable application is still pre-revenue based on its model to
generates revenue through advertisements on the application,
including sponsorships. Revenue in these areas can only be achieved
through reaching a critical mass of users with daily, weekly and
monthly active users that may be positioned for
monetization.
The
Company believes the Fan Pass application will generate revenue
utilizing various avenues of pursuit:
■
brand sponsorship
and/or monthly branded campaigns
■
social media
influencers and promotion
■
content creation
and development
■
advertising revenue
from both live and archived videos
■
a monthly fee for
special event channels
■
annual subscription
fee for exclusive entitlements
■
a one-time fee for
an individual broadcast
■
branded sales of
merchandise, including t-shirts, hats, and more
Market Opportunity
Market Overview: Fan
Pass
As the need for video streaming grows, so too, the Company
believes, does the market opportunity for platforms like Fan Pass.
Fan Pass will be a video streaming application that offers
exclusive behind-the-scenes video access to celebrities. Consumers
will pay a subscription fee to see videos of their favorite
musicians at concerts, get a glimpse of their daily lives, or even
interact with them. Viewings will include a look inside celebrity
tour busses, rooms, private jets, and recording studio sessions, as
well exclusive first interviews and back stage entry. Fan Pass aims
to increase its market share and build viewership by allowing
celebrities to monetize their respective fan-bases through
exclusive video features
Intellectual Property
The
Company has applied for and been granted protection (copyright
& trademark) on the Fan Pass name, logo and brand. The Company
also intends, in due course, subject to legal advice, to apply for
patent protection in the United States and other jurisdictions. We
regard our intellectual property, including our software and
trademark, as valuable assets and intend to vigorously defend them
against infringement.
While
there can be no assurance that registered trademarks and copyrights
will protect our proprietary information, we intend to file for
protection and assert our intellectual property rights against any
infringer. Although any assertion of our rights can result in a
substantial cost to, and diversion of effort by, our Company,
management believes that the protection of our intellectual
property rights is an important part of our operating
strategy.
Employees and Key Consultants
The
Company has three full time employees and a variety of
partners that serve in various consulting capacities based on the
Company’s specific needs.
Available information
Our
website address is
www.friendable.com
. We do not intend
our website address to be an active link or to otherwise
incorporate by reference the contents of the website into this
Report. The public may read and copy any materials the Company
files with the U.S. Securities and Exchange Commission (the
“SEC”) at the SEC’s Public Reference Room at 100
F Street, NE, Washington, DC 20549. The public may obtain
information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0030. The SEC maintains an Internet
website (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding issuers that
file electronically with the SEC.
ITEM 1A. RISK FACTORS
RISK FACTORS
You
should carefully consider the risks described below, together with
all of the other information included in this annual report in
considering our business and prospects.
The risks and
uncertainties below may not be the only ones the Company faces.
Additional risks and uncertainties not presently known to us or
that we currently deem immaterial also may impair our business
operations.
If any of these risks
actually occur, or others not specified below, the business,
financial condition, operating results and prospects of the Company
could be materially and adversely affected.
Risks Related to Our Business and Industry
Our success depends upon the continued growth and acceptance of
online/mobile advertising, particularly paid listings, as an
effective alternative to traditional, offline advertising and the
continued commercial use of the internet.
Many
advertisers still have limited experience with mobile advertising
and may continue to devote significant portions of their
advertising budgets to traditional offline advertising media.
Accordingly, we continue to compete with traditional advertising
media, including television, radio and print, in addition to a
multitude of websites with high levels of traffic and mobile
advertising networks, for a share of available advertising
expenditures and expect to face continued competition as more
emerging media and traditional offline media companies enter the
online and mobile advertising markets. We believe that the
continued growth and continued acceptance of mobile advertising
generally will depend, to a large extent, on its perceived
effectiveness and the acceptance of related advertising models
(particularly in the case of models that incorporate user targeting
and/or utilize mobile devices), the continued growth in commercial
use of the internet (particularly abroad) and smart devices, the
extent to which web/mobile browsers, software programs and/or
mobile applications that limit or prevent advertising from being
displayed become commonplace and the extent to which the industry
is able to effectively manage click fraud. Any lack of growth in
the market for mobile advertising, particularly for paid
listings, or any decrease in the effectiveness and value of mobile
advertising (whether due to the passage of laws requiring
additional disclosure and/or opt-in policies for advertising that
incorporates user targeting or other developments) would have an
adverse effect on our business, financial condition and results of
operations.
We depend, in part, upon arrangements with third parties to drive
traffic to our various websites and distribute our products and
services.
We
engage in a variety of activities, such as search engine
optimization and application search optimization, designed to
attract traffic to our application and convert visitors into repeat
users and customers. How successful we are in these efforts
depends, in part, upon our continued ability to enter into
arrangements with third parties to drive traffic to our
application, as well as the continued introduction of new and
enhanced features, products and services that resonate with users
and customers generally.
In
addition, we have entered into a number of arrangements with third
parties to promote and deliver mobile advertising to various social
networks or mobile channels. Pursuant to these arrangements, third
parties generally promote our application on various mobile
applications, their websites or through e-mail campaigns and we
either pay on a cost per impression basis (i.e. cost per view) or a
fixed fee when visitors to these websites click through to or
download our application. These arrangements are generally not
exclusive, are short-term in nature and are generally terminable by
either party given notice. If existing arrangements with third
parties are terminated (or are not renewed upon their expiration)
and we fail to replace this traffic and related revenues, or if we
are unable to enter into new arrangements with existing and/or new
third parties in response to industry trends, our business,
financial condition and results of operations could be adversely
affected.
Even if
we succeed in driving traffic to our application, we may not be
able to convert this traffic or otherwise retain users unless we
continue to provide quality products and services. We may not be
able to adapt quickly and/or in cost-effective manner to frequent
changes in user and customer preferences, which can be difficult to
predict, or appropriately time the introduction of enhancements
and/or new products or services to the market. Our inability to
provide quality products and services would adversely affect user
and customer experiences, which would result in decreases in users,
customers and revenues, which would adversely affect our business,
financial condition and results of operations.
As
discussed below, our traffic building and conversion initiatives
also involve the expenditure of considerable sums for marketing, as
well as for the development and introduction of new products,
services and enhancements, infrastructure and other related
efforts.
Marketing efforts designed to drive traffic to our various websites
may not be successful or cost-effective.
Traffic
building and conversion initiatives involve considerable
expenditures for online, mobile and offline advertising and
marketing. We plan to make significant expenditures for online and
mobile display advertising, event-based marketing and traditional
offline advertising in connection with these initiatives, which may
not be successful or cost-effective. In the case of paid
advertising generally, the policies of sellers and publishers of
advertising may limit our ability to purchase certain types of
advertising or advertise some of our products and services, which
could affect our ability to compete effectively and, in turn,
adversely affect our business, financial condition and results of
operations.
ITEM 1A. RISK FACTORS
- continued
In
addition, search engines have increasingly expanded their offerings
into other, non-search related categories, and have in certain
instances displayed their own integrated or related product and
service offerings in a more prominent manner than those of third
parties within their search engine results. Continued expansion and
competition from search engines could result in a substantial
decrease in traffic to our various websites, as well as increased
costs if we were to replace free traffic with paid traffic, which
would adversely affect our business, financial condition and
results of operations.
Lastly,
as discussed above, we also have and will enter into various
arrangements with third parties in an effort to increase traffic,
which arrangements are generally more cost-effective than
traditional marketing efforts. If we are unable to renew existing
(and enter into new) arrangements of this nature, sales and
marketing costs as a percentage of revenue would increase over the
long-term.
Any
failure to attract and acquire new, and retain existing, traffic,
users and customers in a cost-effective manner could adversely
affect our business, financial condition and results of
operations.
We rely in part on application marketplaces and Internet search
engines to drive traffic to our products and services, and if we
fail to appear high up in the search results or rankings, traffic
to our platform could decline and our business and operating
results could be adversely affected.
We rely
on application marketplaces, such as Apple’s App Store, to
drive downloads of our mobile applications. In the future, Apple or
other operators of application marketplaces may make changes to
their marketplaces which may make access to our products and
services more difficult. Our rankings in Apple’s App Store
may also drop based on the following factors:
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the
size and diversity of our registered member and subscriber bases
relative to those of our competitors;
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the
functionality of our application and the attractiveness of their
features and our services and offerings generally to consumers
relative to those of our competitors;
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how
quickly we can enhance our existing technology and services and/or
develop new features and localized opportunities and venue based
monetization opportunities in response to:
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new,
emerging and rapidly changing technologies;
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the
introduction of product and service offerings by our
competitors;
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changes
in consumer requirements and trends in the single community
relative to our competitors; and
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our
ability to engage in cost-effective marketing efforts, including by
way of maintaining relationships with third parties with
which we have entered into alliances, and the recognition and
strength of our various brands relative to those of our
competitors.
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Our estimated income taxes could be materially different from
income taxes that we ultimately pay.
We are
subject to income taxes in the United States. Significant judgment
and estimation is required in determining our provision for income
taxes and related matters. In the ordinary course of our business,
there are many transactions and calculations where the ultimate tax
determinations are uncertain or otherwise subject to
interpretation. Our determination of our income tax liability is
always subject to review by applicable tax authorities and we are
currently subject to audits in a number of jurisdictions. Although
we believe our income tax estimates and related determinations are
reasonable and appropriate, relevant taxing authorities may
disagree. The ultimate outcome of any such audits and reviews could
be materially different from estimates and determinations reflected
in our historical income tax provisions and accruals. Any adverse
outcome of any such audit or review could have an adverse effect on
our financial condition and results of operations.
A variety of new laws, or new interpretations of existing laws,
could subject us to claims or otherwise harm our
business.
We are
subject to a variety of laws in the U.S. and abroad that are costly
to comply with, can result in negative publicity and diversion of
management time and effort and can subject us to claims or other
remedies. Some of these laws, such as income, sales, use,
value-added and other tax laws and consumer protection laws, are
applicable to businesses generally and others are unique to the
various types of businesses in which we are engaged. Many of
these laws were adopted prior to the advent of the internet and
related technologies and, as a result, do not contemplate or
address the unique issues of the internet and related
technologies. Laws that do reference the internet are being
interpreted by the courts, but their applicability and scope remain
uncertain.
ITEM 1A. RISK FACTORS
- continued
For
example, through our various businesses we post and link to third
party content, including third party advertisements, links and
websites, as well as content submitted by users, such as comments,
photographs and videos. We could be subject to liability for
posting or linking to third party content, and while we generally
require third parties to indemnify us for related claims, we may
not be able to enforce our indemnification rights. Some laws,
including the Communications Decency Act, or CDA, and the Digital
Millennium Copyright Act, or DMCA, limit our liability for posting
or linking to third party content. For example, the DMCA generally
protects online service providers from claims of copyright
infringement based on use of third party content, so long as
certain statutory requirements are satisfied. However, the scope
and applicability of the DMCA are subject to judicial
interpretation and, as such, remain uncertain, and the U.S.
Congress may enact legislation limiting the protections afforded by
the DMCA to online service providers. Moreover, similar protections
may not exist in other jurisdictions in which our products are
used. As a result, claims could be threatened and filed under both
U.S. and foreign laws based upon use of third party content
asserting, among other things, defamation, invasion of privacy or
right or publicity, copyright infringement or trademark
infringement.
Any
failure on our part to comply with applicable laws may subject us
to additional liabilities, which could adversely affect our
business, financial condition and results of operations. In
addition, if the laws to which we are currently subject are amended
or interpreted adversely to our interests, or if new adverse laws
are adopted, our products and services might need to be modified to
comply with such laws, which would increase our costs and could
result in decreased demand for our products and services to the
extent that we pass on such costs to our customers.
Specifically, in the case of tax laws, positions that we have taken
or will take are subject to interpretation by the relevant taxing
authorities. While we believe that the positions we have taken to
date comply with applicable law, there can be no assurances that
the relevant taxing authorities will not take a contrary position,
and if so, that such positions will not adversely affect us. Any
events of this nature could adversely affect our business,
financial condition and results of operations.
We may fail to adequately protect our intellectual property rights
or may be accused of infringing the intellectual property rights of
third parties.
We
regard our intellectual property rights, including trademarks,
domain names, trade secrets, copyrights and other similar
intellectual property, as critical to our success. For
example, we currently rely heavily on the trademark
“Friendable” to market our product and seek to build
and maintain brand loyalty and recognition. We intend, in due
course, subject to legal advice, to apply for trademark,
copyright and/or patent protection in the United States and other
jurisdictions. We regard our intellectual property, including our
software and trademark, as valuable assets and intend to vigorously
defend them against infringement. Effective trademark
protection may not be available or may not be sought in every
country in which products and services are made available and
contractual disputes may affect the use of marks governed by
private contract. We have reserved and registered certain
domain names, however not every variation of a domain name may be
available or be registered, even if available.
While
there can be no assurance that registered trademarks and copyrights
will protect our proprietary information, we intend to assert our
intellectual property rights against any infringer. Although any
assertion of our rights can result in a substantial cost to, and
diversion of effort by, our Company, management believes that the
protection of our intellectual property rights is a key component
of our operating strategy.
Our application also relies upon trade secrets and certain
copyrightable and patentable proprietary technologies relating to
its software and related features, products and
services.
We will
rely on a combination of laws and contractual restrictions with
employees, customers, suppliers, affiliates and others to establish
and protect our various intellectual property rights. For
example, we plan to apply to register and renew, or secure by
contract where appropriate, trademarks and service marks as they
are developed and used, and continue to reserve, register and renew
domain names as we deem appropriate.
We also
plan to apply for copyrights and patents or for other similar
statutory protections as we deem appropriate, based on then current
facts and circumstances. No assurances can be given that any
copyright or patent application we file will result in a copyright
or patent being issued, or that any future copyright or patent will
afford adequate protection against competitors and similar
technologies. In addition, no assurances can be given that
third parties will not create new products or methods that achieve
similar results without infringing upon copyrights or patents we
may own in the future.
Despite
these measures, our intellectual property rights may still not be
protected in a meaningful manner, challenges to contractual rights
could arise or third parties could copy or otherwise obtain and use
our intellectual property without authorization. The
occurrence of any of these events could result in the erosion of
our brands and limitations on our ability to control marketing on
or through the internet using our various domain names, as well as
impede our ability to effectively compete against competitors with
similar technologies, any of which could adversely affect our
business, financial conditions and results of
operations.
From
time to time, we may be subject to legal proceedings and claims in
the ordinary course of business, including claims of alleged
infringement of trademarks, copyrights, patents and other
intellectual property rights held by third parties. In
addition, litigation may be necessary in the future to enforce our
intellectual property rights, protect our trade secrets or to
determine the validity and scope of proprietary rights claimed by
others. Any litigation of this nature, regardless of outcome
or merit, could result in substantial costs and diversion of
management and technical resources, any of which could adversely
affect our business, financial condition and results of
operations. Patent litigation tends to be particularly
protracted and expensive.
ITEM 1A. RISK FACTORS
- continued
If we fail to grow our user base, or if user engagement or ad
engagement on the platform declines, the revenue, business and
operating results may be harmed.
The
size of the user base and the users’ level of engagement are
critical to our success. The financial performance has been and
will continue to be significantly determined by success in growing
the number of users and increasing their overall level of
engagement on the platform as well as the number of ad engagements.
We generate a substantial majority of our revenue based upon the
number of downloads, migration to subscription accounts and
engagement by the users with the ads that we display. If people do
not perceive the services to be useful, reliable and trustworthy,
we may not be able to attract users or increase the frequency of
their engagement with the platform and the ads that we display.
There is no guarantee that we will be successful in attracting more
users or not suffer erosion of the user base or engagement levels.
A number of factors could potentially negatively affect user growth
and engagement, including if:
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users
engage with other products, services or activities as an
alternative;
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influential
users, such as celebrities, athletes, journalists and brands or
certain age demographics conclude that an alternative product or
service is more relevant;
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we are
unable to convince potential new users of the value and usefulness
of its products and services;
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there
is a decrease in the perceived quality of the content generated by
our platform;
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we fail
to introduce new and improved products or services or if we
introduce new or improved products or services that are not
favorably received or that negatively affect user
engagement;
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technical
or other problems prevent us from delivering our
products or services in a rapid and reliable manner or otherwise
affect the user experience;
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we are
unable to present users with content that is interesting, useful
and relevant to them;
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users
believe that their experience is diminished as a result of the
decisions we make with respect to the frequency, relevance and
prominence of ads that we display;
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there
are user concerns related to privacy and communication, safety,
security or other factors;
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we
become subject to hostile or inappropriate usage on our
platform;
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there
are adverse changes in our products or services that are mandated
by, or that we elect to make to address, legislation, regulatory
authorities or litigation, including settlements or consent
decrees;
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we fail
to provide adequate customer service to users; or
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we do
not maintain our brand image or its reputation is
damaged.
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If users do not continue to download and use our application and
their engagement is not valuable to other users, we may experience
a decline in the number of users accessing the products and
services and user engagement, which could result in the loss of
advertisers and revenue.
Our
success depends on our ability to provide users with valuable
content, which in turn depends on the profile descriptions and use
of the app by others. We believe that one of our competitive
advantages is the quality, quantity and real-time nature of the
content on Friendable, and that access to unique or real-time
content is one of the main reasons users visit us. We seek to
foster a broad and engaged user community, and we encourage
celebrities, athletes, and others to use our products and services
to meet people and form relationships. If users do not continue to
contribute profiles and we are unable to provide users with
valuable and timely content or other people to engage with, our
user base and user engagement may decline. Additionally, if we are
not able to address user concerns regarding the safety and security
of our products and services or if we are unable to successfully
prevent abusive or other hostile behavior on the platform, the size
of the user base and user engagement may decline.
If we are unable to compete effectively for users and advertiser
spend, the business and operating results could be
harmed.
ITEM 1A. RISK FACTORS
- continued
Competition
for users of its products and services is intense. Although we have
developed a new platform for public self-expression and meeting
people in real time, we face strong competition in this business.
We compete against many companies to attract and engage users,
including companies which have greater financial resources and
substantially larger user bases, such as eHarmony, Match.com and
others which offer a variety of Internet and mobile device-based
products, services and content. As a result, competitors may
acquire and engage users at the expense of the growth or engagement
of our user base, which would negatively affect the
business.
We
believe that our ability to compete effectively for users depends
upon many factors both within and beyond our control,
including:
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the
popularity, usefulness, ease of use, performance and reliability of
our products and services compared to those of our
competitors;
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the
amount, quality and timeliness of content generated by our
users;
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the
timing and market acceptance of our products and
services;
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the
adoption of our products and services internationally;
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its
ability, and the ability of our competitors, to develop new
products and services and enhancements to existing products and
services;
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the
frequency and relative prominence of the ads displayed by us or our
competitors;
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our
ability to establish and maintain relationships with platform
partners that integrate with our platform;
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changes
mandated by, or that we elect to make to address, legislation,
regulatory authorities or litigation, including settlements and
consent decrees, some of which may have a disproportionate effect
on us;
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government
action regulating competition;
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our
ability to attract, retain and motivate talented employees,
particularly engineers, designers and product
managers;
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acquisitions
or consolidation within our industry, which may result in more
formidable competitors; and
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our
reputation and the brand strength relative to our
competitors.
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We also
face significant competition for advertiser spend. We compete
against online and mobile businesses, including those referenced
above, and traditional media outlets, such as television, radio and
print, for advertising budgets. In order to grow our revenue and
improve our operating results, we must increase our share of
spending on advertising relative to our competitors, many of which
are larger companies that offer more traditional and widely
accepted advertising products. In addition, some of our larger
competitors have substantially broader product or service offerings
and leverage their relationships based on other products or
services to gain additional share of advertising
budgets.
We
believe that our ability to compete effectively for advertiser
spend depends upon many factors both within and beyond our control,
including:
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the
size and composition of our user base relative to those of our
competitors;
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our ad
targeting capabilities, and those of our competitors;
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the
timing and market acceptance of our advertising services, and those
of our competitors;
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our
marketing and selling efforts, and those of our
competitors;
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the
pricing for our products relative to the advertising products and
services of our competitors;
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the
return our advertisers receive from their advertising services,
compared to those of our competitors; and
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our
reputation and the strength of our brand relative to our
competitors.
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If we
are not able to compete effectively for users and advertiser spend
our business and operating results would be materially and
adversely affected.
ITEM 1A. RISK FACTORS
- continued
User growth and engagement depend upon effective interoperation
with operating systems, networks, and devices, that we do not
control.
We are
dependent on the interoperability of our products and services with
popular devices, and mobile operating systems that we do not
control. Any changes in such systems or devices that degrade the
functionality of our products and services or give preferential
treatment to competitive products or services could adversely
affect usage of our products and services. Further, if the number
of platforms for which we develop our product expands, it will
result in an increase in our operating expenses. In order to
deliver high quality products and services, it is important that
our products and services work with a range of operating systems
and devices that we do not control. In addition, because our users
access our products and services through mobile devices, we are
particularly dependent on the interoperability of our products and
services with mobile devices and operating systems. We may not be
successful in developing or maintaining relationships with key
participants in the mobile industry or in developing products or
services that operate effectively with these operating systems and
devices. In the event that it is difficult for our users to access
and use our products and services on their mobile devices, our user
growth and engagement could be harmed, and our business and
operating results could be adversely affected.
We have
a limited operating history in a new and unproven market for our
platform, which makes it difficult to evaluate our future prospects
and may increase the risk that we will not be
successful.
We have
developed a mobile app for public self-expression and meeting
people in real time, and the market for our products and services
is relatively new and may not develop as expected, if at all.
People who are not our users may not understand the value of our
products and services and new users may initially find our products
confusing. Convincing potential new users of the value
of our products and services is critical to increasing our user
base and to the success of our business
We have
a limited operating history, and only began to generate revenue in
2013 which makes it difficult to effectively assess our future
prospects or forecast future results. We encounter or may encounter
many risks in this developing and rapidly evolving market. These
risks and challenges include its ability to, among other
things:
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increase
its number of users and user engagement;
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successfully
expand our business;
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develop
a reliable, scalable, secure, high-performance technology
infrastructure that can efficiently handle increased
usage;
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convince
advertisers of the benefits of our products compared to alternative
forms of advertising;
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develop
and deploy new features, products and services;
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successfully
compete with other companies, some of which have substantially
greater resources and market power than us, that are currently in,
or may in the future enter, its industry, or duplicate the features
of our products and services;
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attract,
retain and motivate talented employees, particularly engineers,
designers and product managers;
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process,
store, protect and use personal data in compliance with
governmental regulations, contractual obligations and other
obligations related to privacy and security;
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continue
to earn and preserve its users’ trust, including with respect
to their private personal information; and
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defending
ourselves against litigation, regulatory, intellectual property,
privacy or other claims.
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If we
fail to educate potential users and potential advertisers about the
value of our products and services, if the market for our platform
does not develop as we expect or if we fail to address the needs of
this market, our business will be harmed. We may not be able to
successfully address these risks and challenges or other unforeseen
risks and challenges. Failure to adequately address these risks and
challenges could harm our business and cause our operating results
to suffer.
Our business depends on the continued and unimpeded access to our
products and services on mobile devices by our users and
advertisers. If we or our users experience disruptions in service
or if mobile service providers are able to block, degrade or charge
for access to our products and services, we could incur additional
expenses and the loss of users and advertisers.
ITEM 1A. RISK FACTORS
- continued
We
depend on the ability of our users and advertisers to access mobile
devices. Currently, this access is provided by companies that have
significant market power in the broadband and telecommunications
access marketplace, including incumbent telephone companies, cable
companies, mobile communications companies, government-owned
service providers, device manufacturers and operating system
providers, any of whom could take actions that degrade, disrupt or
increase the cost of user access to our products or services, which
would, in turn, negatively impact our business. We also
rely on other companies to maintain reliable communications network
systems that provide adequate speed, data capacity and security to
us and our users. As the number of mobile device users continues to
grow, frequency of use and amount of data transmitted, the
communications infrastructure that we and our users rely on may be
unable to support the demands placed upon it. The failure of the
mobile communications infrastructure that we and/or our users rely
on, even for a short period of time, could undermine our operations
and harm our operating results.
Abusive activities by certain users could diminish the user
experience on our platform, which could damage our reputation and
deter our current and potential users from using our products and
services.
There
are a range of abusive activities that are prohibited by the our
terms of service and are generally defined as unsolicited, repeated
actions that negatively impact other users with the general goal of
drawing user attention to a given person, account, site, product or
idea. This includes posting large numbers of unsolicited mentions
of a user, duplicate outlets, misleading links (e.g., to malware or
click-jacking pages) or other false or misleading content, and
aggressively following and un-following accounts, adding users to
lists, sending invitations to inappropriately attract attention.
Our terms of service also prohibit the creation of serial or bulk
accounts, both manually or using automation, for disruptive or
abusive purposes. Although we continue to invest
resources to reduce spam and other abusive behavior, we expect
spammers and abusers will continue to seek ways to act
inappropriately on our platform. We will continuously
combat spam and other abusive behaviors, including by suspending or
terminating accounts we believe to be spammers and launching
algorithmic changes focused on curbing abusive activities.
Combatting spam and other abusive behaviors require the diversion
of significant time and focus of our engineering team from
improving our products and services. If spam or abusive behavior
increase, this could hurt our reputation for delivering relevant
content or reduce user growth and user engagement and result in
continuing operational cost to us.
If we fail to effectively manage our growth, our business and
operating results could be harmed.
If we
experience rapid growth in our headcount and operations, it will
place significant demands on our management, operational and
financial infrastructure. We intend to continue to make substantial
investments to expand our operations, research and development,
sales and marketing and general and administrative organizations.
We face significant competition for employees, particularly
engineers, designers and product managers, from other Internet and
high-growth companies, which include both publicly-traded and
privately-held companies, and we may not be able to hire new
employees quickly enough to meet our needs. To attract highly
skilled personnel, we will need to continue to offer, highly
competitive compensation packages. As we continue to grow, we are
subject to the risks of over-hiring, over-compensating our
employees and over-expanding our operating infrastructure, and to
the challenges of integrating, developing and motivating a rapidly
growing employee base. If we fail to effectively manage
our hiring needs and successfully integrate new hires, our
efficiency and ability to meet our forecasts and our employee
morale, productivity and retention could suffer, and our business
and operating results could be adversely affected.
Our business and operating results may be harmed by a disruption in
our service, or by our failure to timely and effectively scale and
adapt our existing technology and infrastructure.
One of
the reasons people use our platform is for real-time information
and personal contact. We may, in the future, experience service
disruptions, outages and other performance problems due to a
variety of factors, including infrastructure changes, human or
software errors, hardware failure, capacity constraints due to an
overwhelming number of people accessing our products and services
simultaneously, computer viruses and denial of service or fraud or
security attacks. Although we are investing significantly to
improve the capacity, capability and reliability of our
infrastructure, we are not currently serving traffic equally
through the data centers that support our platform. Accordingly, in
the event of a significant issue at the data center supporting most
of our network traffic, some of our products and services may
become inaccessible to the public or the public may experience
difficulties accessing our products and services. Any
disruption or failure in our infrastructure could hinder our
ability to handle existing or increased traffic on our platform,
which could significantly harm our business.
As the
number of our users increases and our users generate more content,
including photos and videos hosted by us, we may be required to
expand and adapt our technology and infrastructure to continue to
reliably store, serve and analyze this content. It may become
increasingly difficult to maintain and improve the performance of
our products and services, especially during peak usage times, as
our products and services become more complex and our user traffic
increases. This would negatively impact our ability to attract
users and advertisers and increase engagement of our users. We
expect to continue to make significant investments to maintain and
improve the capacity, capability and reliability of our
infrastructure. To the extent that we do not effectively address
capacity constraints, upgrade our systems as needed and continually
develop our technology and infrastructure to accommodate actual and
anticipated changes in technology, our business and operating
results may be harmed.
If we are unable to maintain and promote our brand, our business
and operating results may be harmed.
ITEM 1A. RISK FACTORS
- continued
We
believe that maintaining and promoting our brand is critical to
expanding our base of users and advertisers. Maintaining and
promoting our brand will depend largely on our ability to continue
to provide useful, reliable and innovative products and services,
which we may not do successfully. We may introduce new features,
products, services or terms of service that users, platform
partners or advertisers do not like, which may negatively affect
our brand. Additionally, the actions of platform partners may
affect our brand if users do not have a positive experience using
third-party applications. Our brand may also be negatively affected
by the actions of users that are hostile or inappropriate to other
people, by users impersonating other people, by users identified as
spam, by users introducing excessive amounts of spam on its
platform or by third parties obtaining control over users’
accounts. Maintaining and enhancing our brand may require
Friendable to make substantial investments and these investments
may not achieve the desired goals. If we fail to successfully
promote and maintain our brand or if we incur excessive expenses in
this effort, our business and operating results could be adversely
affected.
Negative publicity could adversely affect our business and
operating results.
Negative
publicity about us, including about our product quality and
reliability, changes to our products and services, privacy and
security practices, litigation, regulatory activity, the actions of
our users or user experience with our products and services, even
if inaccurate, could adversely affect our reputation and the
confidence in and the use of our products and services. For
example, service outages could result in widespread media reports.
Such negative publicity could also have an adverse effect on the
size, engagement and loyalty of our user base and result in
decreased revenue, which could adversely affect our business and
operating results.
We focus on product innovation and user engagement rather than
short-term operating results.
We
encourage employees to quickly develop and help us launch new and
innovative features. We focus on improving the user experience for
our products and services and on developing new and improved
products and services for the advertisers on our platform. We
prioritize innovation and the experience for users and advertisers
on our platform over short-term operating results. We may make
product and service decisions that may reduce our short-term
operating results if we believe that the decisions are consistent
with its goals to improve the user experience and performance for
advertisers, which we believe will improve our operating results
over the long term. These decisions may not be consistent with the
short-term expectations and may not produce the long-term benefits
that we expect, in which case our user growth and user engagement,
our relationships with advertisers and our business and operating
results could be harmed. In addition, our focus on the user
experience may negatively impact our relationships with existing or
prospective advertisers. This could result in a loss of
advertisers, which could harm our revenue and operating
results.
Our products and services may contain undetected software errors,
which could harm our business and operating results.
Our
products and services incorporate complex software and we encourage
our employees to quickly develop and help us launch new and
innovative features. Our software may now or in the future contain,
errors, bugs or vulnerabilities. Some errors in the software code
may only be discovered after the product or service has been
released. Any errors, bugs or vulnerabilities discovered in our
code after release could result in damage to our reputation, loss
of users, loss of platform partners, loss of advertisers or
advertising revenue or liability for damages, any of which could
adversely affect our business and operating results.
Our business is subject to complex and evolving U.S. laws and
regulations. These laws and regulations are subject to change and
uncertain interpretation, and could result in claims, changes to
its business practices, monetary penalties, increased cost of
operations or declines in user growth, user engagement or ad
engagement, or otherwise harm our business.
We are
subject to a variety of laws and regulations in the United States
that involve matters central to our business, including privacy,
rights of publicity, data protection, content regulation,
intellectual property, competition, protection of minors, consumer
protection and taxation. Many of these laws and regulations are
still evolving and being tested in courts and could be interpreted
or applied in ways that could harm our business, particularly in
the new and rapidly evolving industry in which we operate. The
introduction of new products or services may subject us to
additional laws and regulations. There have been a number of recent
legislative proposals in the United States, at both the federal and
state level, that would impose new obligations in areas such as
privacy. The U.S. government, including the Federal Trade
Commission, or the FTC, and the Department of Commerce, has
announced that it is reviewing the need for greater regulation for
the collection of information concerning user behavior on the
Internet and over mobile devices, including regulation aimed at
restricting certain tracking and targeted advertising
practices.
Additionally,
recent amendments to U.S. patent laws may affect the ability of
companies to protect their innovations and defend against claims of
patent infringement. Having personal information may subject us to
additional regulation. Further, it is difficult to predict how
existing laws and regulations will be applied to its business and
the new laws and regulations to which we may become subject, and it
is possible that they may be interpreted and applied in a manner
that is inconsistent with our practices. These existing and
proposed laws and regulations can be costly to comply with and can
delay or impede the development of new products and services,
result in negative publicity, significantly increase our operating
costs, require significant time and attention of management and
technical personnel and subject us to inquiries or investigations,
claims or other remedies, including fines or demands that we modify
or cease existing business practices.
ITEM 1A. RISK FACTORS
- continued
Even though our platform is for public self-expression conversation
and personal interaction, user trust regarding privacy is important
to the growth of users and the increase in user engagement on our
platform, and privacy concerns relating to our products and
services could damage our reputation and deter current and
potential users and advertisers from using our products and
services.
From
time to time, concerns have been expressed by governments,
regulators and others about whether mobile products, services or
practices compromise the privacy of users and others. Concerns
about, governmental or regulatory actions involving practices with
regard to the collection, use, disclosure or security of personal
information or other privacy-related matters, even if unfounded,
could damage our reputation, cause us to lose users and advertisers
and adversely affect our operating results. While we will strive to
comply with applicable data protection laws and regulations, as we
strive to comply with our own posted privacy policies and other
obligations we may have with respect to privacy and data
protection, the failure or perceived failure to comply may result,
in inquiries and other proceedings or actions against
us by governments, regulators or others. These inquiries
could result in negative publicity and damage to our reputation and
brand, each of which could cause us to lose users and advertisers,
which could have an adverse effect on our business.
Any
systems failure or compromise of our security that results in the
unauthorized access to or release of our users’ or
advertisers’ data could significantly limit the adoption of
our products and services and cause harm to our reputation and
brand and, therefore, our business. We expect to continue to expend
significant resources to protect against security breaches. The
risk that these types of events could seriously harm our business
is likely to increase as we expand the number of products and
services we offer, increase the size of our user base and operate
in other countries.
If our security measures are breached, or if our products and
services are subject to attacks that degrade or deny the ability of
users to access our products and services, our products and
services may be perceived as not being secure, users and
advertisers may curtail or stop using our products and services and
our business and operating results could be harmed.
Our products and services involve the storage and transmission of
users’ and advertisers’ information, and security
breaches expose us to a risk of loss of this information,
litigation and potential liability. We may experience cyber-attacks
of varying degrees, and as a result, unauthorized parties may
obtain, and may in the future obtain, access to its data or its
users’ or advertisers’ data. Our security measures may
also be breached due to employee error, malfeasance or otherwise.
Additionally, outside parties may attempt to fraudulently induce
employees, users or advertisers to disclose sensitive information
in order to gain access to our data or our users’ or
advertisers’ data or accounts or may otherwise obtain access
to such data or accounts. Since our users and advertisers may use
their accounts to establish and maintain online identities,
unauthorized communications from our accounts that have been
compromised may damage their reputations. Any such breach or
unauthorized access could result in significant legal and financial
exposure, damage to our reputation and a loss of confidence in the
security of our products and services that could have an adverse
effect on our business and operating results. Because the
techniques used to obtain unauthorized access, disable or degrade
service or sabotage systems change frequently and often are not
recognized until launched against a target, we may be unable to
anticipate these techniques or to implement adequate preventative
measures. If an actual or perceived breach of security occurs, the
market perception of the effectiveness of our security measures
could be harmed, we could lose users and advertisers and we may
incur significant legal and financial exposure, including legal
claims and regulatory fines and penalties. Any of these actions
could have a material and adverse effect on our business,
reputation and operating results.
We depend on highly skilled personnel to grow and operate our
business, and if we are unable to hire, retain and motivate its
personnel, we may not be able to grow effectively.
Our
future success will depend upon our continued ability to identify,
hire, develop, motivate and retain highly skilled personnel,
including senior management, engineers, designers and product
managers. Our ability to execute efficiently is dependent upon
contributions from our employees, in particular our senior
management team. We do not maintain key person life
insurance for any employee. In addition, from time to time, there
may be changes in our senior management team that may be disruptive
to our business. If our senior management team, including any new
hires that we may make, fails to work together effectively and to
execute our plans and strategies on a timely basis, our business
could be harmed. Our growth strategy also depends on our ability to
expand our organization with highly skilled personnel. Identifying,
recruiting, training and integrating qualified individuals will
require significant time, expense and
attention. Competition for highly skilled personnel is
intense, particularly in the San Francisco Bay Area, where our
headquarters is located. We may need to invest significant amounts
of cash and equity to attract and retain new employees and we may
never realize returns on these investments. If we are not able to
effectively add and retain employees, our ability to achieve our
strategic objectives will be adversely impacted, and our business
will be harmed.
Our business is subject to the risks of earthquakes, fire, power
outages, floods and other catastrophic events, and to interruption
by man-made problems such as terrorism.
A
significant natural disaster, such as an earthquake, fire, flood or
significant power outage could have a material adverse impact on
our business, operating results, and financial condition. Our
headquarters is located in the San Francisco Bay Area, a region
known for seismic activity. Despite any precautions we may take,
the occurrence of a natural disaster or other unanticipated
problems at our data centers could result in lengthy interruptions
in our services. In addition, acts of terrorism and other
geo-political unrest could cause disruptions in our business. All
of the aforementioned risks may be further increased if our
disaster recovery plans prove to be inadequate. We have a disaster
recovery program, which allows us to move production to a back-up
data center in the event of a catastrophe. Although this program is
functional, we do not currently serve network traffic equally from
each data center, so if our primary data center shuts down, there
will be a period of time that our products or services, or certain
of our products or services, will remain inaccessible to our users
or our users may experience severe issues accessing our products
and services. We do not carry business interruption insurance
sufficient to compensate us for the potentially significant losses,
including the potential harm to our business that may result from
interruptions in our ability to provide our products and
services.
ITEM 1A. RISK FACTORS
- continued
Risks Related to Our Company
Messrs. Dean and Robert Rositano, Jr., as our directors and
officers, own a significant percentage of the voting power of our
stock and will be able to exercise significant influence and
control over the matters subject to stockholder approval and our
operations.
-Messrs.
Dean and Robert Rositano
may be deemed to own (directly
and/or beneficially) 94.5% of our Series A preferred stock. As of
April 13, 2018
, the following
entities and individuals own the following shares of our Series A
preferred stock:
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Messrs.
Dean and Robert Rositano each own 2,256 shares;
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Copper
Creek Holdings, LLC, a Nevada limited liability company owned and
managed by Robert Rositano and his wife Stacy Rositano, owns 15,581
shares;
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The holders of preferred stock are entitled to cast votes equal to
the number of votes equal to the number of whole shares of common
stock into which the shares of Series A Preferred Stock held by
such holder are convertible. The total aggregate issued shares of
Series A Preferred Stock at any given time regardless of their
number shall be convertible into the number of shares of common
stock which equals nine (9) times the total number of shares of
common stock which are issued and outstanding at the time of any
conversion, at the option of the preferred holders or until the
closing of a Qualified Financing (i.e. the sale and issuance of our
equity securities that results in gross proceeds in excess of
$2,500,000) at one time or in the same round. As a result of the
Titan Iron Ore Corp. and iHookup merger transaction, the former
iHookup stockholders received a controlling interest in the Company
due to the voting rights of the Series A Preferred Stock being
connected to their super-majority conversion rights.
As a
result of Messrs. Dean and Robert Rositano’s
ownership interests and voting
power described above, Messrs. Dean and Robert Rositano
currently are in a position to
influence and control, subject to our organizational documents and
Nevada law, the composition of our Board of Directors and the
outcome of corporate actions requiring stockholder approval, such
as mergers, business combinations and dispositions of assets, among
other corporate transactions. In addition, this concentration of
voting power could discourage others from initiating a potential
merger, takeover or other change of control transaction that may
otherwise be beneficial to the Company, which could adversely
affect the market price of our securities.
If we are unable to pay the convertible promissory notes when
obligations become due, the note holders may take adverse
proceedings under terms of default.
In the
event of default under terms in the convertible promissory notes,
the note holder may enforce remedies including acceleration of
payment in full plus interest and other charges, and an increase in
interest rates of up to 24% when allowable by law.
Our disclosure controls and procedures and internal control over
financial reporting are not effective, which may cause our
financial reporting to be unreliable and lead to misinformation
being disseminated to the public.
Our
management evaluated our disclosure controls and procedures as of
December 31, 2017 and concluded that as of those dates, our
disclosure controls and procedures were not effective. The
ineffectiveness of our disclosure controls and procedures was due
to (i) inadequate segregation of duties and ineffective risk
assessment; and (ii) insufficient written policies and
procedures for accounting and financial reporting with respect to
the requirements and application of both US GAAP and SEC
guidelines.
As of
the date of this annual report on Form 10-K, we believe that these
material weaknesses continue to exist and our disclosure controls
and procedures and internal control over financial reporting are
not effective. If such material weakness and ineffective controls
are not promptly corrected in the future, our ability to report
quarterly and annual financial results or other information
required to be disclosed on a timely and accurate basis may be
adversely affected. Also such material weakness and ineffective
controls could cause our financial reporting to be unreliable and
lead to misinformation being disseminated to the public. Investors
relying upon this misinformation may make an uninformed investment
decision.
We have a limited operating history on which to base an evaluation
of our business and prospects.
We have
a short operating history, which limits our ability to forecast our
future operating results and subjects us to a number of
uncertainties, including our ability to plan for and model future
growth. We have encountered and will continue to encounter risks
and uncertainties frequently experienced by growing companies in
developing industries. If our assumptions regarding these
uncertainties, which we use to plan our business, are incorrect or
change in reaction to changes in our markets, or if we do not
address these risks successfully, our operating and financial
results could differ materially from our expectations and our
business could suffer.
If we issue additional shares in the future, it will result in the
dilution of our existing shareholders.
As of
December 31, 2017, our articles of incorporation authorize the
issuance of up to 15,000,000,000 shares of common stock with a par
value of $0.0001 per share. Our board of directors may choose to
issue some or all of such shares to acquire one or more companies
or properties and to fund our overhead and general operating
requirements. The issuance of any such shares will reduce the book
value per share and may contribute to a reduction in the market
price of the outstanding shares of our common stock. If we issue
any such additional shares, such issuance will reduce the
proportionate ownership and voting power of all current
shareholders. Further, such issuance may result in a change of
control of our corporation.
ITEM 1A. RISK FACTORS
- continued
The
price of our common stock may be negatively impacted by factors
which are unrelated to our operations.
The
market price of our common stock could fluctuate substantially due
to a variety of factors, including market perception of our ability
to achieve our planned growth, quarterly operating results of our
competitors, trading volume in our common stock, changes in general
conditions in the economy and the financial markets or other
developments affecting our competitors or us. In addition, the
stock market is subject to extreme price and volume fluctuations.
This volatility has had a significant effect on the market price of
securities issued by many companies for reasons unrelated to their
operating performance and could have the same effect on our common
stock.
We do not intend to pay cash dividends on any investment in the
shares of stock of our company.
We have
never paid any cash dividends and currently do not intend to pay
any cash dividends for the foreseeable future. Because we do not
intend to declare cash dividends, any gain on an investment in our
company will need to come through an increase in the stock’s
price. This may never happen and investors may lose all of their
investment in our company.
Trading of our stock is restricted by the Securities Exchange
Commission’s penny stock regulations, which may limit a
stockholder’s ability to buy and sell our common
stock.
The
Securities and Exchange Commission has adopted regulations which
generally define “penny stock” to be any equity
security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to
certain exceptions. Our securities are covered by the penny stock
rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers
and “accredited investors”. The term “accredited
investor” refers generally to institutions with assets in
excess of $5,000,000 or individuals with a net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a
form prepared by the Securities and Exchange Commission, which
provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the
penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements
showing the market value of each penny stock held in the
customer’s account. The bid and offer quotations, and the
broker-dealer and salesperson compensation information, must be
given to the customer orally or in writing prior to effecting the
transaction and must be given to the customer in writing before or
with the customer’s confirmation. In addition, the penny
stock rules require that prior to a transaction in a penny stock
not otherwise exempt from these rules, the broker-dealer must make
a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser’s
written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in
the secondary market for the stock that is subject to these penny
stock rules. Consequently, these penny stock rules may affect the
ability of broker-dealers to trade our securities. We believe that
the penny stock rules discourage investor interest in and limit the
marketability of our common stock.
FINRA sales practice requirements may also limit a
stockholder’s ability to buy and sell our stock.
In
addition to the “penny stock” rules described above,
the Financial Industry Regulatory Authority (known as
“FINRA”) has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have
reasonable grounds for believing that the investment is suitable
for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers
must make reasonable efforts to obtain information about the
customer’s financial status, tax status, investment
objectives and other information. Under interpretations of these
rules, FINRA believes that there is a high probability that
speculative low priced securities will not be suitable for at least
some customers. FINRA requirements make it more difficult for
broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock and
have an adverse effect on the market for our shares.
Our stock price has been volatile and your investment could lose
value.
The
trading price of our common stock has been volatile and could be
subject to wide fluctuations due to various factors. The timing of
announcements in the public market regarding new products, product
enhancements or technological advances by us or our competitors,
and any announcements by us or our competitors of acquisitions,
major transactions or management changes could also affect our
stock price. Our stock price is subject to speculation in the press
and the analyst community, changes in recommendations or earnings
estimates by financial analysts, changes in investors’ or
analysts’ valuation measures for our stock and market trends
unrelated to our performance. A significant drop in our stock price
could also expose us to the risk of securities class action
lawsuits, which could result in substantial costs and divert
management’s attention and resources, which could adversely
affect our business. Moreover, if the per share trading price of
our common stock declines significantly, you may be unable to
resell your shares at or above the public offering price. We cannot
assure you that the per share trading price of our common stock
will not fluctuate or decline significantly in the
future.
ITEM 1A. RISK FACTORS
- continued
The trading price of our common stock has been low, and the sale of
a substantial number of shares in the public market could depress
the price of our common stock.
Our
common stock is traded on the OTC Pink marketplace and
historically has had a low average daily trading price relative to
many other stocks. Thinly traded stocks can have more price
volatility than stocks trading in an active public market, which
can lead to significant price swings even when a relatively small
number of shares are being traded, and can limit an
investor’s ability to quickly sell blocks of stock. If there
continues to be low average daily trading volume or price in our
common stock investors may be unable to quickly liquidate their
investments or at prices investors consider to be
adequate.
Because our common stock is quoted and traded on the OTC Pink
marketplace, short selling could increase the volatility of our
stock price.
Short
selling occurs when a person sells shares of stock which the person
does not yet own and promises to buy stock in the future to cover
the sale. The general objective of the person selling the shares
short is to make a profit by buying the shares later, at a lower
price, to cover the sale. Significant amounts of short selling, or
the perception that a significant amount of short sales could
occur, could depress the market price of our common stock. In
contrast, purchases to cover a short position may have the effect
of preventing or retarding a decline in the market price of our
common stock, and together with the imposition of the penalty bid,
may stabilize, maintain or otherwise affect the market price of our
common stock. As a result, the price of our common stock may be
higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued
at any time. These transactions may be affected on the OTC
Pink marketplace or any other available markets or exchanges. Such
short selling if it were to occur could impact the value of our
stock in an extreme and volatile manner to the detriment of our
shareholders.
Risks Relating to the Early Stage of our Company and Ability to
Raise Capital
We are at a very early stage and our success is subject to the
substantial risks inherent in the establishment of a new business
venture.
The
implementation of our business strategy is in a very early stage
and subject to all of the risks inherent in the establishment of a
new business venture. Accordingly, our intended business and
prospective operations may not prove to be successful in the near
future, if at all. Any future success that we might enjoy will
depend upon many factors, many of which are beyond our control, or
which cannot be predicted at this time, and which could have a
material adverse effect upon our financial condition, business
prospects and operations and the value of an investment in our
company.
We expect to suffer continued operating losses and we may not be
able to achieve profitability.
We
expect to continue to incur significant development and marketing
expenses in the foreseeable future related to the launch and
commercialization of our products and services. As a result, we
will be sustaining substantial operating and net losses, and it is
possible that we will never be able to achieve
profitability.
We may have difficulty raising additional capital, which could
deprive us of necessary resources.
In
order to support the initiatives envisioned in our business plan,
we will need to raise additional funds through public or private
debt or equity financing, collaborative relationships or other
arrangements. Our ability to raise additional financing depends on
many factors beyond our control, including the state of the capital
markets, the market price of our common stock, and the development
of competitive projects by others. Because our common stock is not
listed on a major stock market, many investors may not be willing
or allowed to purchase our common shares or may demand steep
discounts. Sufficient additional financing may not be available to
us or may be available only on terms that would result in further
dilution to the current owners of our common stock.
During
the year ended December 31, 2017, we received $1,277,445 in
convertible note financing. During the quarter ended March 31,
2018, we received $207,000 in convertible note financing. However,
we do not have any firm commitments for funding beyond this recent
financing. If we are unsuccessful in raising additional capital, or
the terms of raising such capital are unacceptable, we may have to
modify our business plan and/or significantly curtail our planned
activities. If we are successful raising additional capital through
the issuance of additional equity, our investor’s interests
will be diluted.
There are substantial doubts about our ability to continue as a
going concern and if we are unable to continue our business, our
shares may have little or no value.
Our
ability to become a profitable operating company is dependent upon
our ability to generate revenues and/or obtain financing adequate
to implement our business plan. Achieving a level of revenues
adequate to support our cost structure has raised doubts about our
ability to continue as a going concern. We plan to attempt to raise
additional equity capital by issuing shares and, if necessary
through one or more private placement or public offerings, and via
the securities purchase agreement/equity line financing. However,
the doubts raised relating to our ability to continue as a going
concern may make our shares an unattractive investment for
potential investors. These factors, among others, may make it
difficult to raise any additional capital.
ITEM 1A. RISK FACTORS
- continued
Failure to effectively manage our growth could place additional
strains on our managerial, operational and financial resources and
could adversely affect our business and prospective operating
results.
Our
anticipated growth is expected to continue to place a strain on our
managerial, operational and financial resources. Further, as we
expand our user and advertiser base, we will be required to manage
multiple relationships. Any further growth by us, or an increase in
the number of our strategic relationships will increase this strain
on our managerial, operational and financial resources. This strain
may inhibit our ability to achieve the rapid execution necessary to
implement our business plan, and could have a material adverse
effect upon our financial condition, business prospects and
prospective operations and the value of an investment in our
company.
We may fail to raise sufficient capital.
To the
extent that we fail to obtain sufficient operating capital, we may
be unable to deal with presently unforeseen contingencies in the
future or be able to fund our operations. In addition, we may have
more difficulty or find it impossible, to raise third party
financing from investors or financial institutions.
Our reserves may be insufficient.
We
intend to establish a reserve fund, as determined in the
Board’s discretion, for normal working capital contingencies.
However, we have been unable to do so. If the reserves are not
available to the Company, it may be necessary to attempt to raise
additional capital or financing. In the event that such
capital or financing is not available on favorable terms, we may be
forced to raise additional capital on unfavorable terms. In fact,
we have been forced to issue several convertible notes at
substantial discounts and interest rates in order to raise the
requisite capital for operations.