UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For
the fiscal year ended: December 31, 2019
or
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For
the transition period from __________________ to
__________________
Commission
file number: 000-52917
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FRIENDABLE,
INC. |
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(Exact
name of registrant as specified in its charter) |
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Nevada |
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98-0546715 |
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State
or other jurisdiction of |
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(I.R.S.
Employer |
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incorporation
or organization |
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Identification
No.) |
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1821
S Bascom Ave., Suite 353, Campbell, California
95008 |
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(Address
of principal executive offices and Zip Code) |
Registrant’s
telephone number, including area
code (855)
473-7473
Securities
registered pursuant to Section 12(b) of the Act
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Title
of each class |
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Name
of each exchange on which registered |
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None |
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N/A |
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Securities
registered pursuant to Section 12(g) of the Act
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Common
Stock, par value $0.0001 per share |
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(Title
of Class) |
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes o No
x
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes o No
x
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No
o
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit and post such files).
Yes x No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (§ 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
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Large
accelerated filer |
o |
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Accelerated
filer |
o |
| Non-accelerated
filer |
o |
(Do
not check if a smaller reporting company) |
Smaller
reporting company |
x |
| |
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Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act).
Yes o No
x
As of
June 30, 2019, the last business day of the registrant’s most
recently completed second fiscal quarter the aggregate market value
of the voting and non-voting common stock held by non-affiliates of
the registrant was approximately $560,212, based on the closing
price (last sale of the day) for the registrant’s common stock on
the OTC Pink marketplace on June 30, 2018 of $1.78 per
share.
Indicate
the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date. As of
June 23, 2020, there were 14,793,099 shares of the registrant’s
common stock issued and outstanding.
Documents
Incorporated By Reference: None.
TABLE
OF CONTENTS
Cautionary Statement Regarding Forward-looking
Information
This
annual report on Form 10-K contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. The use of words such as “anticipates,”
“estimates,” “expects,” “intends,” “plans” and “believes,” among
others, generally identify forward-looking statements. These
forward-looking statements include, among others, statements
relating to: the Company’s future financial performance, the
Company’s business prospects and strategy, anticipated trends and
prospects in the industries in which the Company’s businesses
operate and other similar matters. These forward-looking statements
are based on the Company’s management’s expectations and
assumptions about future events as of the date of this annual
report, which are inherently subject to uncertainties, risks and
changes in circumstances that are difficult to predict.
Actual
results could differ materially from those contained in these
forward-looking statements for a variety of reasons, including,
among others, the risk factors set forth below. Other unknown or
unpredictable factors that could also adversely affect the
Company’s business, financial condition and results of operations
may arise from time to time. In light of these risks and
uncertainties, the forward-looking statements discussed in this
annual report may not prove to be accurate. Accordingly, you should
not place undue reliance on these forward-looking statements, which
only reflect the views of the Company’s management as of the date
of this annual report. The Company does not undertake to update
these forward-looking statements
In
this annual report on Form 10-K, unless otherwise specified, all
dollar amounts are expressed in United States dollars and all
references to “common shares” refer to the common shares in our
capital stock.
An
investment in our common stock involves a number of very
significant risks. You should carefully consider the following
risks and uncertainties in addition to other information in this
annual report on Form 10-K in evaluating our company and our
business before purchasing shares of our common stock. Our
business, operating results and financial condition could be
seriously harmed as a result of the occurrence of any of the
following risks. You could lose all or part of your investment due
to any of these risks. You should invest in our common stock only
if you can afford to lose your entire investment.
As
used in this report, the terms “we”, “us”, “our”, “our company,”
“Friendable” and “the Company” mean Friendable, Inc. unless the
context clearly indicates otherwise.
PART I
ITEM 1. BUSINESS
Corporate
History
Friendable,
Inc., a Nevada corporation (the “Company”), was incorporated in the
State of Nevada.
Friendable,
Inc. is a mobile-focused technology and marketing company,
connecting and engaging users through two distinctly branded
applications. The Company initially released its flagship product
Friendable, as a social application where users can create
one-on-one or group-style meetups. In 2019 the Company has moved
the Friendable app closer to a traditional dating application with
its focus on building revenue, as well as reintroducing the brand
as a non-threatening, all-inclusive place where “Everything starts
with Friendship”…meet, chat & date.
On
June 28, 2017, the Company formed a wholly owned Nevada subsidiary
called Fan Pass Inc.
Fan
Pass is the Company’s most recent or second app/brand, scheduled
for release in 2020. Fan Pass believes in connecting Fans of their
favorite celebrity or artist, to an exclusive VIP or Backstage
experience, right from their smartphone or other connected devices.
Fan Pass allows an artist’s fanbase to experience something they
would otherwise never have the opportunity to afford or
geographically attend. The Company aims to establish both
Friendable and Fan Pass as premier brands and mobile platforms that
are dedicated to connecting and engaging users from anywhere around
the World.
On
August 8, 2019 the Company filed a Designation of Series B
convertible Preferred Stock with the state of Nevada, designating
1,000,000 shares of the Series B Preferred Stock with a stated
value of $1.00 per share. A holder of Series B Preferred Stock has
the right to convert their Series B Preferred Stock into fully paid
and non-assessable shares of Common Stock. Initially, the
conversion price for the Series B Preferred Stock is $.25 per
share, subject to standard anti-dilution adjustments. Additionally,
each share of Series B Preferred Stock shall be entitled to, as a
dividend, a pro rata portion of an amount equal to 10% (Ten
Percent) of the Net Revenues (“Net Revenues” being Gross Sales
minus Cost of Goods Sold) derived from the subscriptions and other
sales, but excluding and net of Vimeo fees, processing fees and up
sells, generated by Fan Pass Inc., the wholly-owned subsidiary of
the Corporation. The Series B Dividend shall be calculated and paid
on a monthly basis in arrears starting on the day 30 days following
the first day of the month following the initial issuance of the
Series B Preferred and continuing for a period of 60 (Sixty)
months. The holders of Series B Preferred stock shall have no
voting rights. The holders of Series B Preferred stock shall not be
entitled to receive any dividends. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company
or deemed liquidation event, the holders of shares of Series B
Preferred Stock shall be entitled to be paid the liquidation
amount, as defined out of the assets of the Company available for
distribution to its shareholders, after distributions to holders of
the Series A Preferred Stock and before distributions to holders of
Common Stock.
On
August 27, 2019, a 1 for 18,000 reverse stock split of our common
stock became effective. All share and per shar information in the
accompanying consolidated financial statements and footnotes has
been retroactively adjusted for the effects of the reverse
split.
On
November 25, 2019 the Company filed a Designation of Series C
convertible Preferred Stock with the state of Nevada, designating
1,000,000 shares of the Series C Preferred Stock with a stated
value of $1.00 per share. The Series C Preferred Stock will, with
respect to dividend rights and rights upon liquidation, winding-up
or dissolution, rank: (a) senior with respect to dividends with the
Company’s common stock, par value 0.0001 per share (“Common
Stock”)(the Series C Preferred Stock will convert into common stock
immediately upon liquidation and be pari passu with the common
stock in the event of litigation), and (b) junior with respect to
dividends and right of liquidation to all existing and future
indebtedness of the Company. The Series C Preferred Stock does not
have any voting rights. Each share of Series C Preferred Stock will
carry an annual dividend in the amount of eight percent (8%) of the
Stated Value of $1.00 (the “Divided Rate”), which shall be
cumulative and compounded daily, payable solely upon redemption,
liquidation or conversion and increase to 22% upon an event of
default as defined. In the event of any default other than the
Company’s failure to issue shares upon conversion, the stated price
will be $1.50. In a default event where the Company fails to issue
shares upon conversion, the stated price will $2.00. The holder
shall have the right six months following the issuance date, to
convert all or any part of the outstanding Series C Preferred Stock
into shares of common stock of the Company. The conversion price
shall equal the Variable Conversion Price. The “Variable Conversion
Price” shall mean 71% multiplied by the market price, representing
a discount rate of 29%. Market price means the average of the two
lowest trading prices for the Company’s common stock during the
twenty trading day period ending on the latest complete trading day
prior to the conversion date. Upon any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, or
upon any deemed liquidation event, after payment or provision for
payment of debts and other liabilities of the Company, and after
payment or provision for any liquidation preference payable to the
holders of any Preferred Stock ranking senior upon liquidation to
the Series C Preferred Stock, if any, but prior to any distribution
or payment made to the holders of Common Stock or the holders of
any Preferred Stock ranking junior upon liquidation to the Series C
Preferred Stock by reason of their ownership thereof, the Holders
will be entitled to be paid out of the assets of the Company
available for distribution to its stockholders. The Company will
have the right, at the Company’s option, to redeem all or any
portion of the shares of Series C Preferred Stock, exercisable on
not more than three trading days prior written notice to the
Holders, in full, in accordance with Section 6 of the designations
at a premium of up to 35% for up to six months. Company’s mandatory
redemption: On the earlier to occur of (i) the date which is
twenty-four (24) months following the Issuance Date and (ii) the
occurrence of an Event of Default (the “Mandatory Redemption
Date”), the Company shall redeem all of the shares of Series C
Preferred Stock of the Holders (which have not been previously
redeemed or converted).
Friendable, Inc. – About Us:
Company
Overview
About Friendable, Inc.
Friendable,
Inc. is a mobile-focused technology and marketing company,
connecting and engaging users through two distinctly branded
applications:
The
Friendable and Fan Pass Mobile Applications.
The
Company initially released its flagship product Friendable, as a
social application where users can create one-on-one or group-style
meetups. In 2019 the Company has moved the Friendable app closer to
a traditional dating application with its focus on building
revenue, as well as reintroducing the brand as a non-threatening,
all-inclusive place where “Everything starts with Friendship”…meet,
chat & date.
Fan
Pass is the Company’s most recent or second app/brand, scheduled
for release in 2020. Fan Pass believes in connecting Fans of their
favorite celebrity or artist, to an exclusive VIP or Backstage
experience, right from their smartphone or other connected devices.
Fan Pass allows an artist’s fanbase to experience something they
would otherwise never have the opportunity to afford or
geographically attend. The Company aims to establish both
Friendable and Fan Pass as premier brands and mobile platforms that
are dedicated to connecting and engaging users from anywhere around
the World.
Friendable,
Inc. was founded by Robert A. Rositano Jr. and Dean Rositano, two
brothers with over 27 years of working together on
technology-related ventures.
Highlights
Friendable
has partnered with notable artists like Jennifer Lopez, Fifth
Harmony, Fetty Wap, Meghan Trainor, Red Foo and Austin Mahone and
has generated over 1.5 Million historical downloads, approximately
900k registered users and most recently released a new upgraded
“Friendable” mobile app in January 2019.
Celebrity
Relationships have led the Company in the direction of “Live
Streaming Video” and a soon to be released Mobile Application by
the name of “Fan Pass”, designed to connect fans to the “Backstage
or VIP Experience” of their favorite artists
Fan
Pass Market Opportunity
Executive
Leadership
Our
two founders are a team of Entrepreneurs who have over 25 years of
tech related startup experience, recruiting talent, building teams
and turning ideas into big business opportunities, as well as exits
for investors. Together raising over $40M in capital, spanning
various companies, with a history dating back to the first ever
Internet IPO (Netcom Online Communications - 1993), as well as the
development of the first ever World Wide Web Directory (sold to
McMillan Publishing 1995) and even deploying a first mover social
network by the name of nettaxi.com – 1998 - 2002, which was
prior to Facebook and resulted in a top 10 most trafficked web site
in the World, with a market cap of approximately $700M upon exiting
the public company. Relationships developed over the years include
such companies as Apple, eBay and AT&T, as well as joint
ventures with Music Industry Giants, including Nocturne
Productions, Herbie Herbert (Manager of the Band Journey)
and Music.com; an early adopter offering digital music
downloads.
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Robert
A Rositano Jr.
Chief Executive Officer |
| |
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Mr.
Rositano, Jr. is a serial entrepreneur with 25+ years of experience
in technology and bringing more than $60M in liquidity events for
the companies he has hatched or managed. Prior to starting the
Company, Mr. Rositano began as the 3rd employee and member of the
Internet’s first IPO in 1993, Netcom Online Communications, Inc.,
which was sold to ICG Communications and later sold to EarthLink in
1997. Mr. Rositano has co-founded a number of successful ventures
following his experience with new technologies, trends and markets.
Some of which included Simply Internet, Inc., Nettaxi.com,
America’s Biggest, Inc., Zippi Networks, Inc (an eBay partner),
CheckMate Mobile, Inc. and AppBuilder 360, a mobile app developer.
He was also an author the first Web Directory to ever be published,
later selling the rights to Macmillan Publishing. His most recent
venture, Friendable, Inc. has resulted in a growing business
opportunity in the ever-popular mobile technology space.
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Dean
Rositano
President & Chief Technology
Officer |
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Dean
is the President and Chief Technology Officer of Friendable, Inc.
and is responsible for the day to day operations and guiding of the
technical direction of the company. With over 20 years of
experience in executive management, Internet architecture and high
technology operations, Mr. Rositano has successfully assisted in
raising funds in both private and public transactions. Prior to
Friendable, Inc., Mr. Rositano co- founded Checkmate Mobile, Inc,
Latitude Venture Partners, LLC, Zippi Networks, Inc, America’s
Biggest, Inc, and most notably, was the co-founder and president
and CTO of Silicon Valley based Nettaxi.com, which went public in
1998 when it quickly reached a valuation of over $600M. With over
3M unique visitors daily and a top 5 worldwide, website rank. As
President and CTO, Mr. Rositano was responsible for designing,
architecting, and scaling the Nettaxi server infrastructure from 0
to over 10 million visitors per day.
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Frank
Garcia
Chief Financial Officer |
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Mr.
Garcia has an extensive background in public accounting and
finance, with his most recent role serving as Chief Financial
Officer Titan Iron Corp. (OTCQB: TFER). From 1997 to 2006, he was
employed in senior management positions by UK based Misys PLC, a
global software and solutions company serving customers in
international banking and securities, international healthcare, and
retail financial services. Prior to 1997 Mr. Garcia held executive
positions with CEMEX, a world leader in the construction materials
industry. Mr. Garcia received his Bachelor of Science –Business
Administration—Major in Accounting from the University of Arizona
in 1981.
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Investor
Communications Contacts: |
Robert
A. Rositano, Jr., |
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Web |
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Friendable,
Inc. (855) 473-7473 |
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CEO
Friendable, Inc. |
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www.friendable.com |
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Xt701 |
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1821 S.
Bascom |
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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
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.
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:
|
● |
the
size and diversity of our registered member and subscriber bases
relative to those of our competitors; |
|
● |
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; |
|
● |
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; |
|
● |
the
introduction of product and service offerings by our
competitors; |
|
● |
changes
in consumer requirements and trends in the single community
relative to our competitors; and |
|
● |
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. |
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.
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 “iHookup” 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.
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:
|
● |
users
engage with other products, services or activities as an
alternative; |
|
● |
influential
users, such as celebrities, athletes, journalists and brands or
certain age demographics conclude that an alternative product or
service is more relevant; |
|
● |
we
are unable to convince potential new users of the value and
usefulness of its products and services; |
|
● |
there
is a decrease in the perceived quality of the content generated by
our platform; |
|
● |
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; |
|
● |
technical
or other problems prevent us from delivering our products or
services in a rapid and reliable manner or otherwise affect the
user experience; |
|
● |
we
are unable to present users with content that is interesting,
useful and relevant to them; |
|
● |
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; |
|
● |
there
are user concerns related to privacy and communication, safety,
security or other factors; |
|
● |
we
become subject to hostile or inappropriate usage on our
platform; |
|
● |
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 |
|
● |
we do
not maintain our brand image or its reputation is
damaged. |
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 iHookup, 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.
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; |
|
● |
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; |
|
● |
acquisitions
or consolidation within our industry, which may result in more
formidable competitors; and |
|
● |
our
reputation and the brand strength relative to our
competitors. |
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; |
|
● |
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; |
|
● |
our
marketing and selling efforts, and those of our
competitors; |
|
● |
the
pricing for our products relative to the advertising products and
services of our competitors; |
|
● |
the
return our advertisers receive from their advertising services,
compared to those of our competitors; and |
|
● |
our
reputation and the strength of our brand relative to our
competitors. |
If we
are not able to compete effectively for users and advertiser spend
our business and operating results would be materially and
adversely affected.
User
growth and engagement depend upon effective interoperation with
operating systems, networks, and devices, that we do not
control.
Currently,
our application is available only on Apple’s iOS. 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 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:
|
● |
increase
its number of users and user engagement; |
|
● |
successfully
expand our business; |
|
● |
develop
a reliable, scalable, secure, high-performance technology
infrastructure that can efficiently handle increased
usage; |
|
● |
convince
advertisers of the benefits of our products compared to alternative
forms of advertising; |
|
● |
develop
and deploy new features, products and services; |
|
● |
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; |
|
● |
attract,
retain and motivate talented employees, particularly engineers,
designers and product managers; |
|
● |
process,
store, protect and use personal data in compliance with
governmental regulations, contractual obligations and other
obligations related to privacy and security; |
|
● |
continue
to earn and preserve its users’ trust, including with respect to
their private personal information; and |
|
● |
defending
ourselves against litigation, regulatory, intellectual property,
privacy or other claims. |
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.
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.
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 iHookup
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.
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.
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) 94.1% of our Series A preferred stock. As of
June 23, 2020, the following entities and individuals own the
following shares of our Series A preferred stock:
|
● |
Messrs.
Dean and Robert Rositano each own 1,942 shares; |
|
● |
Copper
Creek Holdings, LLC, a Nevada limited liability company owned and
managed by Robert Rositano and his wife Stacy Rositano, owns 14,730
shares; |
The holders of Series A 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, 2019 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, 2019, our articles of incorporation authorize the
issuance of up to 1,000,000,000 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.
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.
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 effected 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, 2019, we received $474,500 from the
sale of common and preferred stock. 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.
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.
ITEM 1B. UNRESOLVED STAFF
COMMENTS
Not
Applicable.
ITEM 2. PROPERTIES
Principal Office
Our
executive offices are located at 1821 S. Bascom Ave Ste 353,
Campbell, California 95008. We believe that our office space and
facilities are sufficient to meet our present needs and do not
anticipate any difficulty securing alternative or additional space,
as needed, on terms acceptable to us.
ITEM 3. LEGAL
PROCEEDINGS
We
are currently not involved in any litigation that we believe could
have a materially adverse effect on our financial condition or
results of operations. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or,
to the knowledge of the executive officers of our Company or any of
our subsidiaries, threatened against or affecting our Company, our
common stock, any of our subsidiaries or of our Company’s or our
Company’s subsidiaries’ officers or directors in their capacities
as such, in which an adverse decision could have a material adverse
effect.
ITEM 4. MINE SAFETY
DISCLOSURES
Not
applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Our
common stock is quoted on the OTC Pink marketplace under the symbol
“FDBL”.
Set
forth below are the range of high and low bid quotations for the
periods indicated as reported by the OTC Pink marketplace. The
market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not necessarily represent
actual transactions.
|
Quarter Ended |
|
High Bid |
|
|
Low Bid |
|
| December 31, 2019 |
|
$ |
0.6930 |
|
|
$ |
0.1000 |
|
| September 30, 2019 |
|
$ |
0.3000 |
|
|
$ |
0.0260 |
|
| June 30, 2019 |
|
|
none |
|
|
|
none |
|
| March 31, 2019 |
|
$ |
0.0001 |
|
|
$ |
0.0001 |
|
| December 31, 2018 |
|
|
none |
|
|
|
none |
|
| September 30, 2018 |
|
$ |
0.0001 |
|
|
$ |
0.0001 |
|
| June 30, 2018 |
|
|
none |
|
|
|
none |
|
| March 31, 2018 |
|
$ |
0.0001 |
|
|
$ |
0.0001 |
|
|
(b) |
Holders of Our Common Stock |
As of
June 23, 2020, there were 78 registered holders of record of our
common stock. As of such date, 9,263,653 shares of our common stock
were issued and outstanding.
The
payment of dividends, if any, in the future, rests within the sole
discretion of our board of directors. The payment of dividends will
depend upon our earnings, our capital requirements and our
financial condition, as well as other relevant factors. We have not
declared any cash dividends since our inception and have no present
intention of paying any cash dividends on our common stock in the
foreseeable future.
There
are no restrictions in our articles of incorporation or bylaws that
prevent us from declaring dividends. The Nevada Revised Statutes,
however, do prohibit us from declaring dividends where, after
giving effect to the distribution of the dividend:
|
1. |
We
would not be able to pay our debts as they become due in the usual
course of business; or |
|
2. |
Our
total assets would be less than the sum of our total liabilities
plus the amount that would be needed to satisfy the rights of
shareholders who have preferential rights superior to those
receiving the distribution. |
|
(d) |
Securities Authorized for Issuance under Equity Compensation
Plans |
Effective
November 22, 2011 our board of directors adopted and approved our
stock option plan. The purpose of the stock option plan is to
enhance the long-term stockholder value of our company by offering
opportunities to directors, key employees, officers, independent
contractors and consultants of our company to acquire and maintain
stock ownership in our company in order to give these persons the
opportunity to participate in our company’s growth and success, and
to encourage them to remain in the service of our company.
Effective August 27, 2019, the Company effected a reverse split of
1 for 18,000 which eliminated all the options which were previously
outstanding.
Transfer Agent
Our
transfer agent is Nevada Agency and Transfer Company, 50 West
Liberty Street Suite 880, Reno, Nevada 89501, phone (775)
322-0626.
Recent Sales of Unregistered Securities
During
the year ended December 31, 2019, $21,356 of convertible debentures
were converted by agreeing to issue 393,418 shares of common stock
of the Company. The notes were converted at an average price per
share of $0.06. The shares were to be issued as follows: 16,709 on
September 26, 2019, 120,000 on October 2, 2019, 16,709 on October
5, 2019, and 120,000 on November 14, 2019. 120,000 shares remain
issuable as of December 31, 2019.
During
the year ended December 31, 2019, the Company issued 534,000 shares
of common stock to various subscribers of common stock at $0.25 per
share for a total of $133,500. The shares were sold at various
times during the year and became issuable on August 27, 2019 when
the reverse split became effective. 477,000 shares remain issuable
as of December 31, 2019.
During
the year ended December 31, 2019, the Company issued 600,000 shares
of common stock to a consultant in exchange for future services
valued at $90,000 of which $30,000 remain in prepaid expenses as of
December 31, 2019. The agreement was dated September 1, 2019. The
shares were issued on October 1, 2019.
During
the year ended December 31, 2019, the Company issued 2,150,000
shares of common stock to settle a promissory note and accrued
interest of $102,500 and recognized a loss on settlement of
$435,000 based on the $537,500 value based on recent sales. The
note was converted at a price per share of $0.05. The settlement
date was March 11, 2019. The shares were issued on December 20,
2019.
During
the year ended December 31, 2019, the Company agreed to issue
3,021,716 shares of common stock to related parties on conversion
of 1,478 shares of Series A preferred stock. The shares were issued
as follows: 1,002,970 converted and issued on December 18, 2019.
2,018,746 converted on October 2, 2019 and remain issuable at
December 31, 2019.
During
the year ended December 31, 2019, the Company agreed to issue
5,902,589 shares as a preliminary settlement of approximately $6.3
million of convertible debt. The settlement became effective on
November 5, 2019 and the shares remain issuable as of December 31,
2019.
We
made the foregoing stock issuances in reliance upon the exemption
from registration under Section 4(a)(2) of the Securities Act of
1933, as amended.
Rule
10B-18 Transactions
During
the years ended December 31, 2019 and 2018, there were no
repurchases of the Company’s common stock by the
Company.
ITEM 6 SELECTED FINANCIAL
DATA
Not
applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Our management’s discussion and analysis provides a narrative about
our financial performance and condition that should be read in
conjunction with the audited and unaudited consolidated financial
statements and related notes thereto included in this annual report
on Form 10-K. This discussion contains forward looking statements
reflecting our current expectations and estimates and assumptions
about events and trends that may affect our future operating
results or financial position. Our actual results and the timing of
certain events could differ materially from those discussed in
these forward-looking statements due to a number of factors,
including, but not limited to, those set forth in the sections of
this annual report on Form 10-K titled “Risk Factors” beginning at
page 13 above and “Forward-Looking Statements” beginning
at page 4 above.
Results of Operations
Years
Ended December 31, 2019 and 2018
Our
cash as of December 31, 2019 was $11,282. As a result of our
minimal amount of revenues and ongoing expenditures in pursuit of
our business, we have incurred net losses since our inception. Our
accumulated deficit at December 31, 2019 was $32,443,883. For the
year ended December 31, 2019, our net loss was
$10,183,410.
Our
operating revenues and expenses for our fiscal years ended December
31, 2019 and 2018 and the changes between those periods for the
respective items are summarized as follows:
| |
|
For
the Years Ended |
|
| |
|
December 31, |
|
| |
|
2019 |
|
|
2018 |
|
|
REVENUES |
|
$ |
242,696 |
|
|
$ |
6,190 |
|
| |
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
| App
hosting |
|
|
24,068 |
|
|
|
210,000 |
|
|
Commissions |
|
|
938 |
|
|
|
1,817 |
|
|
General and administrative |
|
|
814,053 |
|
|
|
719,960 |
|
|
Product development |
|
|
299,124 |
|
|
|
80,549 |
|
|
Investor relations |
|
|
98,264 |
|
|
|
6,077 |
|
|
Sales and Marketing |
|
|
48,375 |
|
|
|
22,575 |
|
| |
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,284,822 |
|
|
|
1,040,978 |
|
| |
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(1,042,126 |
) |
|
|
(1,034,788 |
) |
| |
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
Accretion and interest expense |
|
|
(621,149 |
) |
|
|
(2,052,216 |
) |
|
Impairment loss |
|
|
- |
|
|
|
(35,000 |
) |
|
Provision for settlement of lawsuit |
|
|
(1,035,000 |
) |
|
|
- |
|
|
Loss on debt extinguishments |
|
|
(7,384,866 |
) |
|
|
- |
|
|
Exchange gain or (loss) |
|
|
24,731 |
|
|
|
- |
|
|
Loss on change in fair value of derivative |
|
|
(125,000 |
) |
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Total other expense, net |
|
|
(9,141,284 |
) |
|
|
(2,087,216 |
) |
| |
|
|
|
|
|
|
|
|
|
NET LOSS |
|
$ |
(10,183,410 |
) |
|
$ |
(3,122,004 |
) |
Revenues
Revenues
for the year ended December 31, 2019 increased to $242,696 as
compared to $6,190 for the year ended December 31, 2018. The
increase in revenue was due to receiving a contract to develop an
app for a third party.
Operating
Expenses
Operating
expenses for the year ended December 31, 2019 and the December 31,
2018 were $1,284,822 and $1,040,978 respectively, an increase of
23%. The increase in operating expenses was due primarily to higher
sales and marketing, product development, and investor relations
related to preparing to launch the Fan Pass app. App hosting
expenses decreased with less support for the old Friendable
app.
Net
Loss
Our
operating results have recognized net loss in the amount of
$10,183,410 for the year ended December 31, 2019 as compared to a
net loss of $3,122,004 for the year ended December 31, 2018. The
increase was primarily related due to higher operating expenses, a
loss on extinguishments of debt, and by a provision for settlement
of a lawsuit, offset by lower interest expense.
Liquidity and Capital Resources
Working
Capital
| |
|
December 31, 2019 |
|
|
December 31, 2018 |
|
| Current Assets |
|
$ |
71,500 |
|
|
$ |
25,646 |
|
| Current
Liabilities |
|
$ |
16,041,805 |
|
|
$ |
10,263,543 |
|
| Working Capital
Deficiency |
|
$ |
(15,970,305 |
) |
|
$ |
(10,237,897 |
) |
Current
liabilities as of December 31, 2019 and 2018 were $16,041,805 and
$10,263,543 respectively, an increase of $5,778,262. The primary
reason for the increase was settling approximately $8.0 million in
convertible debt and accrued interest and replacing it with a $12.8
million derivative liability resulting from the Company’s
determination that the resulting reset provision was a derivative.
In addition, the Company recorded a $1.0 million provision for
settlement of a lawsuit.
We
currently do not have sufficient capital to fund our needs for the
next 12 months. We rely on financing from convertible debt,
promissory notes, and sale of stock to fund our
operations.
Cash
Flows
| |
|
Year
Ended |
|
|
Year
Ended |
|
| |
|
December 31, 2019 |
|
|
December 31, 2018 |
|
| Net Cash Used in Operating
Activities |
|
$ |
(488,864 |
) |
|
$ |
(385,319 |
) |
| Net Cash Provided
by Financing Activities |
|
|
474,500 |
|
|
|
410,965 |
|
| Net Increase
(Decrease) in Cash |
|
$ |
(14,364 |
) |
|
$ |
25,646 |
|
Operating Activities
Cash provided by operating activities
The
Company used $488,864 in cash from operating activities for the
year ended December 31, 2019 as compared to a use of $385,319 for
the year ended December 31, 2018. The increase is due to
expenditures related to developing and preparing to launch Fan
Pass.
Cash provided by financing activities
Financing
activities for the year ended December 31, 2019 generated cash of
$474,500 as compared to generating $410,965 of cash for the year
ended December 31, 2018. The higher cash provided from financing
activities in the current year is attributable to higher proceeds
from the sale of stock.
There
was no significant impact on the Company’s operations as a result
of inflation for the year ended December 31, 2019.
Series B Preferred Stock Purchase Agreements
On
August 8, 2019 the Company filed a Designation of Series B
convertible Preferred Stock with the state of Nevada, designating
1,000,000 shares of the Series B Preferred Stock with a stated
value of $1.00 per share. A holder of Series B Preferred Stock has
the right to convert their Series B Preferred Stock into fully paid
and non-assessable shares of Common Stock. Initially, the
conversion price for the Series B Preferred Stock is $.25 per
share, subject to standard anti-dilution adjustments. Additionally,
each share of Series B Preferred Stock shall be entitled to, as a
dividend, a pro rata portion of an amount equal to 10% (Ten
Percent) of the Net Revenues (“Net Revenues” being Gross Sales
minus Cost of Goods Sold) derived from the subscriptions and other
sales, but excluding and net of Vimeo fees, processing fees and up
sells, generated by Fan Pass Inc., the wholly-owned subsidiary of
the Corporation. The Series B Dividend shall be calculated and paid
on a monthly basis in arrears starting on the day 30 days following
the first day of the month following the initial issuance of the
Series B Preferred and continuing for a period of 60 (Sixty)
months. The holders of Series B Preferred stock shall have no
voting rights. The holders of Series B Preferred stock shall not be
entitled to receive any dividends. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company
or deemed liquidation event, the holders of shares of Series B
Preferred Stock shall be entitled to be paid the liquidation
amount, as defined out of the assets of the Company available for
distribution to its shareholders, after distributions to holders of
the Series A Preferred Stock and before distributions to holders of
Common Stock.
During
the year ended December 31, 2019, the Company entered into
subscription agreements with various investors whereby we sold
rights to 284,000 shares of Series C Preferred Stock for a total
purchase price of $284,000 of which $205,000 was received in cash
and $79,000 was settled against payables to a related
party.
Series C Preferred Stock Purchase Agreements
On
November 25, 2019 the Company filed a Designation of Series C
convertible Preferred Stock with the state of Nevada, designating
1,000,000 shares of the Series C Preferred Stock with a stated
value of $1.00 per share. The Series C Preferred Stock will, with
respect to dividend rights and rights upon liquidation, winding-up
or dissolution, rank: (a) senior with respect to dividends with the
Company’s common stock, par value 0.0001 per share (“Common
Stock”)(the Series C Preferred Stock will convert into common stock
immediately upon liquidation and be pari passu with the common
stock in the event of litigation), and (b) junior with respect to
dividends and right of liquidation to all existing and future
indebtedness of the Company. The Series C Preferred Stock does not
have any voting rights. Each share of Series C Preferred Stock will
carry an annual dividend in the amount of eight percent (8%) of the
Stated Value of $1.00 (the “Divided Rate”), which shall be
cumulative and compounded daily, payable solely upon redemption,
liquidation or conversion and increase to 22% upon an event of
default as defined. In the event of any default other than the
Company’s failure to issue shares upon conversion, the stated price
will be $1.50. In a default event where the Company fails to issue
shares upon conversion, the stated price will $2.00. The holder
shall have the right six months following the issuance date, to
convert all or any part of the outstanding Series C Preferred Stock
into shares of common stock of the Company. The conversion price
shall equal the Variable Conversion Price. The “Variable Conversion
Price” shall mean 71% multiplied by the market price, representing
a discount rate of 29%. Market price means the average of the two
lowest trading prices for the Company’s common stock during the
twenty trading day period ending on the latest complete trading day
prior to the conversion date. Upon any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, or
upon any deemed liquidation event, after payment or provision for
payment of debts and other liabilities of the Company, and after
payment or provision for any liquidation preference payable to the
holders of any Preferred Stock ranking senior upon liquidation to
the Series C Preferred Stock, if any, but prior to any distribution
or payment made to the holders of Common Stock or the holders of
any Preferred Stock ranking junior upon liquidation to the Series C
Preferred Stock by reason of their ownership thereof, the Holders
will be entitled to be paid out of the assets of the Company
available for distribution to its stockholders. The Company will
have the right, at the Company’s option, to redeem all or any
portion of the shares of Series C Preferred Stock, exercisable on
not more than three trading days prior written notice to the
Holders, in full, in accordance with Section 6 of the designations
at a premium of up to 35% for up to six months. Company’s mandatory
redemption: On the earlier to occur of (i) the date which is
twenty-four (24) months following the Issuance Date and (ii) the
occurrence of an Event of Default (the “Mandatory Redemption
Date”), the Company shall redeem all of the shares of Series C
Preferred Stock of the Holders (which have not been previously
redeemed or converted).
During
the year ended December 31, 2019, the Company entered into
subscription agreements with Geneva Roth Remark Holdings, Inc.
whereby we sold 149,300 shares of Series C Preferred Stock for a
total purchase price of $136,000.
Debt Restructure Agreement
On
March 26, 2019 three officers forgave debt totaling $400,000 and a
company controlled by two officers of the Company forgave debt
totaling $600,000. The debt forgiveness is considered a capital
transaction and therefore $1,000,000 will be recorded as an
increase in additional paid-in capital for December 31,
2019.
On
March 26, 2019, the Company entered into a Debt Restructuring
Agreement with related parties Robert A. Rositano Jr., Dean
Rositano , Frank Garcia , and Checkmate Mobile, Inc. and Alpha
Capital Anstalt , Coventry Enterprises, LLC , Palladium Capital
Advisors, LLC, EMA Financial, LLC, Michael Finkelstein, and Barbara
R. Mittman , each being a debt holder of the Company.
The
debt holders have agreed to convert their debt into certain amounts
of common stock as set forth in the Agreement upon the Company
meeting certain milestones including but not limited to: the
Company effecting a reverse stock split and maintaining a stock
price of $1.00 per share; being current with its periodic report
filings pursuant to the Securities Exchange Act; Checkmate Mobile
Inc and Company officers forgiving an aggregate of $1,000,000 in
amounts owed to them; the Company raising not less than $400,000 in
common stock at a post-split price of not less than $0.20 per
share; and certain other things as further set forth in the
Agreement. The debt holders will be subject to certain lock up and
leak out provisions as contained in the Agreement.
December
26, 2019, all parties signed an amendment to the Agreement which
set forth, among other things, the following:
Company
Principals have given Holders notice that it has satisfied all
conditions of closing.
The
Agreement is considered Closed as of November 5, 2019 (“Settlement
Date”) and any conditions of closing not satisfied are
waived.
Going Concern
At
December 31, 2019, we had a working capital deficiency, an
accumulated deficit, and a stockholders deficit of $15,970,735,
$32,443,883 and $15,970,735 respectively and incurred a net loss
and cash used in operations of $10,183,410 and $488,864
respectively in 2019. We have generated minimal revenues and have
incurred losses since inception. Accordingly, we will be dependent
on future additional financing in order to seek other business
opportunities in the online entertainment industry or new business
opportunities. We are considered a development stage company in the
online entertainment industry. As of December 31, 2019, there is no
assurance that we will be able raise sufficient capital to sustain
our operations. We expect to incur further losses in the
development of our business, all of which casts substantial doubt
about our ability to continue as a going concern. Our ability to
continue as a going concern is dependent upon our ability to
generate future profitable operations and/or to obtain the
necessary financing to meet our obligations and repay our
liabilities arising from normal business operations when they come
due.
Application of Critical Accounting Policies
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 valuation of convertible debenture conversion options,
derivative instruments, 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
In
accordance with ASC 606, revenue is recognized when the following
criteria have been met; valid contracts are identified with
specific customers, performance obligations have been identified,
price is determinable, price is allocated to performance
obligations, and the Company has satisfied the performance
obligations. Revenue generally is recognized net of allowances for
returns and any taxes collected from customers and subsequently
remitted to governmental authorities. During the year ended
December 31, 2019, the Company derived revenues primarily from the
development of apps for a third party, and such revenues were
recognized upon completion of services.
Impairment
of Long-Lived Assets
We
continually monitor 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, we assess 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, we recognize 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.
Stock-based
compensation
We
record stock-based compensation in accordance with ASC 718,
Compensation – Stock Based Compensation, 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. In 2019 the Company adapted
ASU 2018-17 which expands the measurement requirements to non
employees.
ASC
718 requires companies to estimate the fair value of share-based
awards on the date of grant using an option-pricing model. We use
the Black-Scholes option pricing model as its method in determining
fair value. This model is affected by our stock price as well as
assumptions regarding a number of subjective variables. These
subjective variables include, but are not limited to our 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 operations over the
requisite service period.
Financial
Instruments
FASB
ASC 820, Fair Value Measurements and Disclosures, defines fair
value, establishes a framework for measuring fair value under
generally accepted accounting principles and enhances disclosures
about fair value measurements. Fair value 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. Valuation techniques used to measure fair
value, as required by ASC 820, must maximize the use of observable
inputs and minimize the use of unobservable inputs.
Our
assessment of the significance of a particular input to the fair
value measurements requires judgment, and may affect the valuation
of the assets and liabilities being measured and their placement
within the fair value hierarchy. The carrying values of accounts
payable, convertible debentures and promissory note approximate
fair values because of the short-term maturity of these
instruments. Unless otherwise noted, it is management’s opinion
that we are not exposed to significant interest, currency or credit
risks arising from these financial instruments.
Basic
and Diluted Net Loss Per Share
We
compute 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
operations. Basic EPS is computed by dividing net income (loss)
available to common shareholders (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.
Recent Accounting Pronouncements
We
have implemented all other new accounting pronouncements that are
in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that
have been issued that might have a material impact on its financial
position or results of operations.
Off-Balance
Sheet Arrangements
We do
not have any off -balance sheet arrangements
ITEM 7A QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Not
Applicable
ITEM 8 FINANCIAL STATEMENTS AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FRIENDABLE,
INC.
CONSOLIDATED
FINANCIAL STATEMENTS
December
31, 2019
Report of Independent Registered
Public Accounting Firm
To
the Stockholders and the Board of Directors of:
Friendable,
Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheet of
Friendable, Inc. and Subsidiary (the “Company”) as of December 31,
2019, the related consolidated statements of operations, changes in
stockholders’ equity (deficit), and cash flows, for the year then
ended and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Company as of
December 31, 2019, and the consolidated results of its operations
and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
We
also audited the adjustments described in Note 1 to retrospectively
apply the effects of the 1 for 18,000 reverse stock-split to all
periods presented including the 2018 period. In our opinion, such
adjustments are appropriate and have been properly applied. We were
not engaged to audit, review or apply any procedures to the 2018
consolidated financial statements other than with respect to the
reverse stock-split adjustments and accordingly, we do not express
an opinion or any other form of assurance on the 2018 consolidated
financial statements taken as a whole.
Going
Concern
The
accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 1 to the consolidated financial statements, the
Company has a net loss and cash used in operations of $10,183,410
and $488,864, respectively, in 2019 and has a working capital
deficit, stockholders’ deficit and accumulated deficit of
$15,970,305, $32,443,883 and $15,970,305, respectively, at
December 31, 2019. These matters raise substantial doubt
about the Company’s ability to continue as a going concern.
Management’s Plan in regards to these matters is also described in
Note 1. The consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our
audit. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (“PCAOB”) and
are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
2295
NW Corporate Blvd., Suite 240 ● Boca Raton, FL
33431-7328
Phone:
(561) 995-8270 ● Toll Free: (866) CPA-8500 ● Fax: (561)
995-1920
www.salbergco.com
● info@salbergco.com
Member
National Association of Certified Valuation Analysts ● Registered
with the PCAOB
Member
CPAConnect with Affiliated Offices Worldwide ● Member AICPA Center
for Audit Quality
We
conducted our audit in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of internal control over financial
reporting. As part of our audit we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of
material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audit also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our audit
provides a reasonable basis for our opinion.
/s/
Salberg & Company, P.A.
SALBERG
& COMPANY, P.A.
We
have served as the Company’s auditor since 2020.
Boca
Raton, Florida
June
29, 2020
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Stockholders and the Board of Directors of Friendable,
Inc.
Opinion on the Consolidated Financial Statements
We have audited, before the effects of the adjustment to
retrospectively apply the adjustments described in Note 1 to apply
the effects of the 1 for 18,000 reverse stock-split to all periods
presented including the 2018 period the accompanying consolidated
financial statements of Friendable, Inc. and its subsidiaries (the
“Company”), which comprised the consolidated statements of
financial position as at December 31, 2018 and 2017, and the
consolidated statements of comprehensive loss, consolidated
statement of stockholders’ deficit and consolidated statements of
cash flows for the years ended December 31, 2018 and 2017, and the
related notes, including a summary of significant accounting
policies and other explanatory information (collectively referred
to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements, before the
effects of the adjustments to retrospectively apply the effects of
the 1 for 18,000 reverse stock-split as described in Note 1,
present fairly, in all material respects, the financial position of
the Company as at December 31, 2018 and 2017, and its financial
performance and its cash flows for the years then ended in
accordance with accounting principles generally accepted in the
United States as issued by the Financial Accounting Standards
Board.
We were not engaged to audit, review, or apply any procedures to
the adjustments to retrospectively apply the effects of the 1 for
18,000 reverse stock-split as described in Note 1 and, accordingly,
we do not express an option or any other form of assurance about
whether such adjustments are appropriate and have been properly
applied. These adjustments were audited by Salberg & Company,
P.A.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As
discussed in Note 1 to the consolidated financial statements, the
Company has a working capital deficit and has accumulated losses
since inception. These factors raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s
plans in regard to these matters are also discussed in Note 1. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement, whether
due to fraud or error. Our audits included performing procedures to
assess the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error, and performing
procedures that respond to those risks. Such procedures include
examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits
is sufficient and appropriate to provide a reasonable basis for our
audit opinion.
/s/ MANNING ELLIOTT LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, British Columbia
June 29, 2020
We have served as the Company’s auditor since 2010.
|
FRIENDABLE
INC. |
|
CONSOLIDATED BALANCE
SHEETS |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
11,282 |
|
|
$ |
25,646 |
|
|
Accounts receivable |
|
|
135 |
|
|
|
- |
|
|
Prepaid expenses |
|
|
30,000 |
|
|
|
- |
|
|
Due from a related party |
|
|
30,083 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
71,500 |
|
|
|
25,646 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
71,500 |
|
|
$ |
25,646 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
1,945,346 |
|
|
$ |
3,777,301 |
|
|
Convertible debentures and convertible promissory notes |
|
|
121,910 |
|
|
|
6,385,683 |
|
|
Mandatorily redeemable Series C convertible Preferred stock,
1,000,000 shares designated, 149,300 and 0 issued and outstanding
at December 31, 2019 and 2018, including premium of $55,549
(Liquidation value $136,000) |
|
|
191,549 |
|
|
|
- |
|
|
Derivative liability |
|
|
12,778,000 |
|
|
|
- |
|
|
Promissory note |
|
|
- |
|
|
|
100,559 |
|
|
Liability to be settled in common stock |
|
|
1,005,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
16,041,805 |
|
|
|
10,263,543 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
16,041,805 |
|
|
|
10,263,543 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT: |
|
|
|
|
|
|
|
|
|
Preferred stock, 50,000,000 authorized at par value
$0.0001 |
|
|
|
|
|
|
|
|
|
Series A convertible Preferred stock, 50,000,000 shares designated
at par value of $0.0001, 19,789 and 21,267 shares issued and
outstanding at December 31, 2019 and 2018 (Liquidation value
$68,366) |
|
|
2 |
|
|
|
2 |
|
|
Series B convertible preferred stock, $0.0001 par value, 1,000,000
shares designated; 284,000 and 0 shares issued and outstanding at
outstanding December 31, 2019 and 2018, respectively. (Liquidation
value $284,000) |
|
|
28 |
|
|
|
- |
|
|
Common stock, $0.0001 par value, 1,000,000,000 shares authorized;
4,398,114 and 308,518 shares issued and outstanding at outstanding
December 31, 2019 and 2018, respectively |
|
|
438 |
|
|
|
31 |
|
|
Common stock issuable, $0.0001 par value, 8,518,335 and 0 shares at
December 31, 2019 and 2018, respectively |
|
|
852 |
|
|
|
- |
|
|
Additional paid-in capital |
|
|
16,476,758 |
|
|
|
12,027,043 |
|
|
Common stock subscription receivable |
|
|
(4,500 |
) |
|
|
(4,500 |
) |
|
Accumulated deficit |
|
|
(32,443,883 |
) |
|
|
(22,260,473 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Deficit |
|
|
(15,970,305 |
) |
|
|
(10,237,897 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit |
|
$ |
71,500 |
|
|
$ |
25,646 |
|
See
accompanying notes to consolidated financial statements.
|
FRIENDABLE
INC. |
|
CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
|
|
For
the Years Ended |
|
|
|
|
December 31, |
|
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
REVENUES |
|
$ |
242,696 |
|
|
$ |
6,190 |
|
| |
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
| App
hosting |
|
|
24,068 |
|
|
|
210,000 |
|
|
Commissions |
|
|
938 |
|
|
|
1,817 |
|
|
General and administrative |
|
|
814,053 |
|
|
|
719,960 |
|
|
Product development |
|
|
299,124 |
|
|
|
80,549 |
|
|
Investor relations |
|
|
98,264 |
|
|
|
6,077 |
|
|
Sales and Marketing |
|
|
48,375 |
|
|
|
22,575 |
|
| |
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,284,822 |
|
|
|
1,040,978 |
|
| |
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(1,042,126 |
) |
|
|
(1,034,788 |
) |
| |
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
Accretion and interest expense |
|
|
(621,149 |
) |
|
|
(2,052,216 |
) |
|
Impairment loss |
|
|
- |
|
|
|
(35,000 |
) |
|
Provision for settlement of lawsuit |
|
|
(1,035,000 |
) |
|
|
- |
|
|
Loss on debt extinguishments |
|
|
(7,384,866 |
) |
|
|
- |
|
|
Exchange gain or (loss) |
|
|
24,731 |
|
|
|
- |
|
|
Loss on change in fair value of derivative |
|
|
(125,000 |
) |
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Total other expense, net |
|
|
(9,141,284 |
) |
|
|
(2,087,216 |
) |
| |
|
|
|
|
|
|
|
|
|
NET LOSS |
|
$ |
(10,183,410 |
) |
|
$ |
(3,122,004 |
) |
| |
|
|
|
|
|
|
|
|
| NET LOSS PER
COMMON SHARE: |
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(2.56 |
) |
|
$ |
(10.23 |
) |
| |
|
|
|
|
|
|
|
|
| WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
3,981,702 |
|
|
|
305,283 |
|
See
accompanying notes to consolidated financial statements.
|
FRIENDABLE
INC. |
|
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY (DEFICIT) |
|
For
the Years Ended December 31, 2019 and 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Common Stock |
|
|
|
|
|
Total |
|
|
|
|
Series A Preferred Stock |
|
|
Series B Preferred Stock |
|
|
Common Stock |
|
|
Paid In |
|
|
Subscription |
|
|
Accumulated |
|
|
Stockholders’ |
|
|
|
|
Shares Issued |
|
|
Amount |
|
|
Shares Issuable |
|
|
Amount |
|
|
Shares Issued |
|
|
Amount |
|
|
Shares Issuable |
|
|
Amount |
|
|
Capital |
|
|
Receivable |
|
|
Deficit |
|
|
Equity (Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017 |
|
|
21,267 |
|
|
$ |
2 |
|
|
|
- |
|
|
$ |
- |
|
|
|
278,351 |
|
|
$ |
28 |
|
|
|
|
|
|
$ |
- |
|
|
$ |
11,658,781 |
|
|
$ |
(4,500 |
) |
|
$ |
(19,138,469 |
) |
|
$ |
(7,484,158 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible
notes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
30,167 |
|
|
|
3 |
|
|
|
|
|
|
|
- |
|
|
|
60,297 |
|
|
|
|
|
|
|
|
|
|
|
60,300 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of convertible
notes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
307,965 |
|
|
|
|
|
|
|
|
|
|
|
307,965 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,122,004 |
) |
|
|
(3,122,004 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018 |
|
|
21,267 |
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
308,518 |
|
|
|
31 |
|
|
|
|
|
|
|
- |
|
|
|
12,027,043 |
|
|
$ |
(4,500 |
) |
|
$ |
(22,260,473 |
) |
|
|
(10,237,897 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt forgiveness - related
parties |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
1,000,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock sold for cash |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
57,000 |
|
|
|
5 |
|
|
|
477,000 |
|
|
|
48 |
|
|
|
133,447 |
|
|
|
|
|
|
|
|
|
|
|
133,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issuable under debt
restructuring agreement |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,902,589 |
|
|
|
590 |
|
|
|
2,384,056 |
|
|
|
|
|
|
|
|
|
|
|
2,384,646 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock Series B Sold for
cash |
|
|
- |
|
|
|
- |
|
|
|
205,000 |
|
|
|
20 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
204,980 |
|
|
|
|
|
|
|
|
|
|
|
205,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock Series B issued to
settle AP - Related Party |
|
|
- |
|
|
|
- |
|
|
|
79,000 |
|
|
|
8 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
78,992 |
|
|
|
|
|
|
|
|
|
|
|
79,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Convertible
notes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
273,418 |
|
|
|
27 |
|
|
|
120,000 |
|
|
|
12 |
|
|
|
21,317 |
|
|
|
|
|
|
|
|
|
|
|
21,356 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for
services |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
600,000 |
|
|
|
60 |
|
|
|
- |
|
|
|
- |
|
|
|
89,940 |
|
|
|
|
|
|
|
|
|
|
|
90,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for settlement of
promissory note |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,150,000 |
|
|
|
215 |
|
|
|
- |
|
|
|
- |
|
|
|
537,285 |
|
|
|
|
|
|
|
|
|
|
|
537,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A preferred
shares |
|
|
(1,478 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,002,970 |
|
|
|
100 |
|
|
|
2,018,746 |
|
|
|
202 |
|
|
|
(302 |
) |
|
|
|
|
|
|
|
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fractional share issuance |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,208 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
(10,183,410 |
) |
|
|
(10,183,410 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019 |
|
|
19,789 |
|
|
$ |
2 |
|
|
|
284,000 |
|
|
$ |
28 |
|
|
|
4,398,114 |
|
|
$ |
438 |
|
|
|
8,518,335 |
|
|
$ |
852 |
|
|
$ |
16,476,758 |
|
|
$ |
(4,500 |
) |
|
$ |
(32,443,883 |
) |
|
$ |
(15,970,305 |
) |
See
accompanying notes to consolidated financial statements.
|
FRIENDABLE
INC. |
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
|
|
For
the Years Ended |
|
|
|
|
December 31, |
|
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(10,183,410 |
) |
|
$ |
(3,122,004 |
) |
|
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities |
|
|
|
|
|
|
|
|
|
Loss on debt extinguishment, net |
|
|
7,384,867 |
|
|
|
- |
|
|
Notes issued for services |
|
|
20,000 |
|
|
|
- |
|
|
Amortization of prepaid stock fees |
|
|
60,000 |
|
|
|
- |
|
|
Loss on change in fair value of derivative |
|
|
125,000 |
|
|
|
- |
|
|
Premium on stock settled debt |
|
|
55,549 |
|
|
|
|
|
|
Interest on convertible debentures and promissory note |
|
|
- |
|
|
|
48,229 |
|
|
Accretion expense |
|
|
- |
|
|
|
1,501,848 |
|
|
Impairment loss |
|
|
- |
|
|
|
35,000 |
|
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(135 |
) |
|
|
- |
|
| Due
from related party |
|
|
(30,083 |
) |
|
|
|
|
|
Prepaid expenses |
|
|
- |
|
|
|
6,863 |
|
|
Accounts payable and accrued expenses |
|
|
1,074,348 |
|
|
|
1,144,745 |
|
|
Liability to be settled in common stock |
|
|
1,005,000 |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES |
|
|
(488,864 |
) |
|
|
(385,319 |
) |
| |
|
|
|
|
|
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Proceeds from convertible debentures |
|
|
- |
|
|
|
310,965 |
|
|
Proceeds from promissory note |
|
|
- |
|
|
|
100,000 |
|
|
Proceeds from sale of convertible preferred Series B stock |
|
|
205,000 |
|
|
|
- |
|
|
Proceeds from sale of convertible preferred Series C stock |
|
|
136,000 |
|
|
|
- |
|
|
Proceeds from sale of common stock |
|
|
133,500 |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
|
474,500 |
|
|
|
410,965 |
|
| |
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS: |
|
|
(14,364 |
) |
|
|
25,646 |
|
| |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - beginning of year |
|
|
25,646 |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - end of year |
|
$ |
11,282 |
|
|
$ |
25,646 |
|
| |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
- |
|
|
$ |
- |
|
|
Income taxes |
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Common shares issued for prepaid expenses |
|
$ |
90,000 |
|
|
$ |
- |
|
|
Series B convertible preferred stock issued in exchange for
accounts payable, related party |
|
$ |
79,000 |
|
|
$ |
- |
|
|
Payables forgiven by related parties treated as contributed
capital |
|
$ |
1,000,000 |
|
|
$ |
- |
|
|
Debt and accrued interest settled with common stock |
|
$ |
8,178,634 |
|
|
$ |
- |
|
|
Convertible notes converted to common stock |
|
$ |
13,002 |
|
|
$ |
54,300 |
|
|
Derivative liability |
|
$ |
5,698,080 |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
| Cash
Consists of: |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
11,282 |
|
|
$ |
25,646 |
|
See
accompanying notes to consolidated financial statements.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
December
31, 2019 and 2018
1.
NATURE OF BUSINESS AND GOING CONCERN
Nature
of Business
Friendable,
Inc., a Nevada corporation (the “Company”), was incorporated in the
State of Nevada.
Friendable,
Inc. is a mobile-focused technology and marketing company,
connecting and engaging users through two distinctly branded
applications. The Company initially released its flagship product
Friendable, as a social application where users can create
one-on-one or group-style meetups. In 2019 the Company has moved
the Friendable app closer to a traditional dating application with
its focus on building revenue, as well as reintroducing the brand
as a non-threatening, all-inclusive place where “Everything starts
with Friendship”…meet, chat & date.
On
June 28, 2017, the Company formed a wholly owned Nevada subsidiary
called Fan Pass Inc.
Fan
Pass is the Company’s most recent or second app/brand, scheduled
for release in 2020. Fan Pass believes in connecting Fans of their
favorite celebrity or artist, to an exclusive VIP or Backstage
experience, right from their smartphone or other connected devices.
Fan Pass allows an artist’s fanbase to experience something they
would otherwise never have the opportunity to afford or
geographically attend. The Company aims to establish both
Friendable and Fan Pass as premier brands and mobile platforms that
are dedicated to connecting and engaging users from anywhere around
the World.
On August 8, 2019 the Company filed a Designation of Series B
convertible Preferred Stock with the state of Nevada, designating
1,000,000 shares of the Series B Preferred Stock with a stated
value of $1.00 per share. A
holder of Series B Preferred Stock has the right to convert their
Series B Preferred Stock into fully paid and non-assessable shares
of Common Stock. Initially, the conversion price for the Series B
Preferred Stock is $.25 per share, subject to standard
anti-dilution adjustments. Additionally, each share of Series B
Preferred Stock shall be entitled to, as a dividend, a pro rata
portion of an amount equal to 10% (Ten Percent) of the Net Revenues
(“Net Revenues” being Gross Sales minus Cost of Goods Sold) derived
from the subscriptions and other sales, but excluding and net of
Vimeo fees, processing fees and up sells, generated by Fan Pass
Inc., the wholly-owned subsidiary of the Corporation. The Series B
Dividend shall be calculated and paid on a monthly basis in arrears
starting on the day 30 days following the first day of the month
following the initial issuance of the Series B Preferred and
continuing for a period of 60 (Sixty) months. The holders of Series
B Preferred stock shall have no voting rights. The holders of
Series B Preferred stock shall not be entitled to receive any
dividends. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company or deemed
liquidation event, the holders of shares of Series B Preferred
Stock shall be entitled to be paid the liquidation amount, as
defined out of the assets of the Company available for distribution
to its shareholders, after distributions to holders of the Series A
Preferred Stock and before distributions to holders of Common
Stock.
On
August 27, 2019, a 1 for 18,000 reverse stock split of our common
stock became effective. All share and per share information in the
accompanying consolidated financial statements and footnotes has
been retroactively adjusted for the effects of the reverse split
for all periods presented.
On
November 25, 2019 the Company filed a Designation of Series C
convertible Preferred Stock with the state of Nevada, designating
1,000,000 shares of the Series C Preferred Stock with a stated
value of $1.00 per share. The Series C Preferred Stock will, with
respect to dividend rights and rights upon liquidation, winding-up
or dissolution, rank: (a) senior with respect to dividends with the
Company’s common stock, par value 0.0001 per share (“Common
Stock”)(the Series C Preferred Stock will convert into common stock
immediately upon liquidation and be pari passu with the common
stock in the event of litigation), and (b) junior with respect to
dividends and right of liquidation to all existing and future
indebtedness of the Company. The Series C Preferred Stock does not
have any voting rights. Each share of Series C Preferred Stock will
carry an annual dividend in the amount of eight percent (8%) of the
Stated Value of $1.00 (the “Divided Rate”), which shall be
cumulative and compounded daily, payable solely upon redemption,
liquidation or conversion and increase to 22% upon an event of
default as defined. In the event of any default other than the
Company’s failure to issue shares upon conversion, the stated price
will be $1.50. In a default event where the Company fails to issue
shares upon conversion, the stated price will $2.00. The holder
shall have the right six months following the issuance date, to
convert all or any part of the outstanding Series C Preferred Stock
into shares of common stock of the Company. The conversion price
shall equal the Variable Conversion Price. The “Variable Conversion
Price” shall mean 71% multiplied by the market price, representing
a discount rate of 29%. Market price means the average of the two
lowest trading prices for the Company’s common stock during the
twenty trading day period ending on the latest complete trading day
prior to the conversion date. Upon any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, or
upon any deemed liquidation event, after payment or provision for
payment of debts and other liabilities of the Company, and after
payment or provision for any liquidation preference payable to the
holders of any Preferred Stock ranking senior upon liquidation to
the Series C Preferred Stock, if any, but prior to any distribution
or payment made to the holders of Common Stock or the holders of
any Preferred Stock ranking junior upon liquidation to the Series C
Preferred Stock by reason of their ownership thereof, the Holders
will be entitled to be paid out of the assets of the Company
available for distribution to its stockholders. The Company will
have the right, at the Company’s option, to redeem all or any
portion of the shares of Series C Preferred Stock, exercisable on
not more than three trading days prior written notice to the
Holders, in full, in accordance with Section 6 of the designations
at a premium of up to 35% for up to six months. Company’s mandatory
redemption: On the earlier to occur of (i) the date which is
twenty-four (24) months following the Issuance Date and (ii) the
occurrence of an Event of Default (the “Mandatory Redemption
Date”), the Company shall redeem all of the shares of Series C
Preferred Stock of the Holders (which have not been previously
redeemed or converted).
1.
NATURE OF BUSINESS AND GOING CONCERN
(CONTINUED)
Going
Concern
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. As of
December 31, 2019, the Company has a working capital deficiency of
$15,970,305 and has an accumulated deficit of $32,443,883 and a
stockholder’s deficit of $15,970,305 since inception and its
operations continue to be funded primarily from sales of its stock
and issuance of convertible debentures. During 2019 the Company had
a net loss and net cash used in operations of $10,183,410 and
$488,864. As of December 31, 2019 the Company had $1,360 of
cumulative dividends related to the Series C convertible preferred
stock. These factors raise substantial doubt about the Company’s
ability to continue as a going concern for a period of twelve
months from the issuance of this report. The ability of the Company
to continue as a going concern is dependent on the Company’s
ability to obtain the necessary financing through the issuance of
convertible notes and equity instruments. 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
and equity sales. 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
Principles
of Consolidation
The
consolidated financial statements include all the accounts of the
Company and all of its wholly owned subsidiaries as of December 31,
2019 and 2018. All material intercompany accounts and transactions
have been eliminated in the accompanying consolidated financial
statements. The Company’s fiscal year end is December
31.
Reclassifications
Certain
balances in 2018 have been reclassified to conform with the 2019
presentation.
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 valuation of convertible debenture conversion options,
derivative instruments, 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
In
accordance with ASC 606, revenue is recognized when the following
criteria have been met; valid contracts are identified with
specific customers, performance obligations have been identified,
price is determinable, price is allocated to performance
obligations, and the Company has satisfied the performance
obligations. Revenue generally is recognized net of allowances for
returns and any taxes collected from customers and subsequently
remitted to governmental authorities. During the year ended
December 31, 2019, the Company derived revenues primarily from the
development of apps for a third party, and such revenues were
recognized upon completion of services.
Advertising
Costs
The
Company’s policy regarding advertising is to expense advertising
when incurred. During the twelve months ended December 31, 2019,
the Company incurred $48,375 (December 31, 2018: $1,783) 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.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Intangible
assets with finite lives 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 finite lives 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.
Derivative
liabilities
The Company
has a financial instrument associated with a debt restructuring
agreement. The Company evaluates all its financial instruments to
determine if those contracts or any potential embedded components
of those contracts qualify as derivatives to be separately
accounted for in accordance with ASC 815-10 – Derivative and
Hedging – Contract in Entity’s Own Equity. This accounting
treatment requires that the carrying amount of any derivatives be
recorded at fair value at issuance and marked-to-market at each
balance sheet date. In the event that the fair value is recorded as
a liability, as is the case with the Company, the change in the
fair value during the period is recorded as either other income or
expense. Upon conversion, exercise or repayment, the respective
derivative liability is marked to fair value at the conversion,
repayment or exercise date and then the related fair value amount
is reclassified to other income or expense as part of gain or loss
on debt extinguishment.
In July
2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260);
Distinguishing Liabilities from Equity (Topic 480); Derivatives and
Hedging (Topic 815): (Part I) Accounting for Certain Financial
Instruments with Down Round Features. These amendments simplify the
accounting for certain financial instruments with down-round
features. The amendments require companies to disregard the
down-round feature when assessing whether the instrument is indexed
to its own stock, for purposes of determining liability or equity
classification. The guidance was adopted as of January 1, 2019. The
Company adopted ASU No. 2017-11 in the first quarter of 2019, and
the adoption did not have any impact on its consolidated financial
statement and there was no cumulative effect adjustment.
Stock-based
Compensation
During
2018 the Company recorded 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. In 2019 the
Company adopted ASU 2018-07 which expands the measurement
requirements to non employees.
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
operations 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.
Accounts
Receivable and Allowance for Doubtful Accounts
The
Company monitors its outstanding receivables for timely payments
and potential collection issues. At December 31, 2019 and 2018, 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, convertible debentures, stock settled debt,
derivatives, mandatorily redeemable Series C Preferred stock and
promissory notes. 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.
Concentrations
We
Have Substantial Client Concentration, with one Client Accounting
for a Substantial Portion of our Revenues.
In the year
ended December 31, 2019 we derived 99% (2018: 0%) of our revenue
from one client. There are inherent risks whenever a large
percentage of total revenues are concentrated with a limited number
of clients. It is not possible for us to predict the future level
of demand for our services that will be generated by this client or
the future demand for the products and services of other similar
clients. A loss of this client or the failure to retain similar
clients could negatively affect our revenues and results of
operations and/or trading price of our common stock.
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
operations. 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.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
As of
December 31, 2019, there were approximately 122,051,838 potentially
dilutive shares outstanding. Potential dilutive shares:
| |
60,908 |
|
|
Warrants outstanding |
| |
2,212,523 |
|
|
Common shares issuable upon conversion
of convertible debt |
| |
116,248,041 |
|
|
Total shares issuable upon conversion
of Preferred Series A shares |
| |
1,136,000 |
|
|
Total shares issuable upon conversion
of Preferred Series B shares |
|
|
2,394,366 |
|
|
Total shares
issuable upon conversion of Preferred Series C shares |
|
|
122,051,838 |
|
|
|
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.
Recent
Accounting Pronouncements
In
February 2016, the FASB issued ASU No. 2016-02, Leases (ASC Topic
842) (“ASU 2016-02”), which requires lessees to recognize at the
commencement date for all leases, with the exception of short-term
leases, (i) a lease liability, which is a lessee’s obligation to
make lease payments arising from a lease, measured on a discounted
basis, and (ii) a right-of-use asset, which is an asset that
represents the lessee’s right to use, or control the use of, a
specified asset for the lease term. ASU 2016-02 will take effect
for public companies for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2018. The ASU
requires adoption using a modified retrospective transition
approach with either (a) periods prior to the adoption date being
recast or (b) a cumulative-effect adjustment recognized to the
opening balance of retained earnings on the adoption date with
prior periods not recast. As at December 31, 2019 the Company has
no lease obligations.
Reclassifications
Certain
amounts in the 2018 financial statements have been reclassified to
conform to the 2019 presentation.
3.
INTANGIBLE ASSETS
As at
December 31, 2019 and 2018, the Company owns the Friendable
Properties which includes domain names, logos, icons, and
registered trademarks for which it paid cash consideration of
$35,000. During 2018 an impairment provision for $35,000 was
recorded through the statement of operations to impair the
intangible assets to $nil.
4.
RELATED PARTY TRANSACTIONS AND BALANCES
During
the year ended December 31, 2019, the Company incurred $459,200
(2018: $417,066) in salaries and payroll taxes to officers and
directors with such costs being recorded as general and
administrative expenses.
During
the year ended December 31, 2019, the Company incurred $24,068,
$299,124, and $58,883 (2018: $210,000, $80,000, and $60,000) in app
hosting, app development and rent to a company with two officers
and directors in common with such costs being recorded as app
hosting, product development and general and administrative
expenses.
During
the year ended December 31, 2019, the Company issue a Securities
Purchase agreement to a vendor company with two officers and
directors in common for the purchase of 79,000 Series B preferred
stock with the purchase price of $79,000 being applied to accounts
payable due to the vendor. The price was based on recent sales of
Series B shares for $1.00 per share.
As of
December 31, 2019, the Company had a stock subscription receivable
totaling $4,500 (December 31, 2018: $4,500) from an officer and
director and from a company with an officer and director in
common.
As of
December 31, 2019, Due from related party includes $30,083
(December 31, 2018: payable of $721,099) due from a company with
two officers and directors in common, and $783,416 (December 31,
2018: $798,580) payable in salaries to directors and officers of
the Company. The amounts are unsecured, non-interest bearing and
are due on demand.
4.
RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
During
the year ended December 31, 2019, two directors converted 588
shares of Series A preferred stock at the contractual conversion
rate into 1,002,970 shares of common stock and donated them to the
Diocese of Monterey and other parties related to the directors
converted 890 Series A preferred shares into 2,018,746 common
shares that are issuable at December 31, 2019
During
the year ended December 31, 2019, three officers forgave debt
totaling $400,000 and a company controlled by two officers of the
Company forgave debt totaling $600,000. The total amount is
reflected as contributed capital.
5.
CONVERTIBLE DEBENTURES
During
the year ended December 31, 2019, $8,355 (2018: $60,300) of
convertible debentures were converted at the contractual rate by
issuing 33,418 (2018: 30,167) shares of common stock of the
Company.
On
March 26, 2019 the Company entered into a Debt Restructuring
Agreement (the “Agreement”) with Robert A. Rositano Jr. (“Robert
Rositano”), Dean Rositano (“Dean Rositano”), Frank Garcia
(“Garcia”), Checkmate Mobile, Inc. (“Checkmate”), Alpha Capital
Anstalt (“Alpha”), Coventry Enterprises, LLC (“Coventry”),
Palladium Capital Advisors, LLC (“Palladium”), EMA Financial, LLC
(“EMA”), Michael Finkelstein (“Finkelstein”), and Barbara R.
Mittman (“Mittman”), each being a debt holder of the
Company.
The
debt holders agreed to convert their debt of approximately $6.3
million into an initial 5,902,589 shares of common stock as set
forth in the Agreement upon the Company meeting certain milestones
including but not limited to: the Company effecting a reverse stock
split and maintaining a stock price of $1.00 per share; being
current with its periodic report filings pursuant to the Securities
Exchange Act; certain vendors and Company employees forgiving an
aggregate of $1,000,000 in amounts owed to them; the Company
raising not less than $400,000 in common stock at a post-split
price of not less than $.20 per share; and certain other things as
further set forth in the Agreement. The debt holders will be
subject to certain lock up and leak out provisions as contained in
the Agreement. As part of the Agreement the parties signed a Rights
to Shares Agreement. Whereas the Agreement called for all the
shares to be delivered at closing, the holders are generally
restricted to beneficial ownership of up to 4.99% of the company’s
common shares outstanding. The Rights to Shares Agreement allows
for the Company to issue shares to each holder up the 4.99%
limitation while preserving the holders’ rights to the total shares
in schedule A of the Agreement.
During
the year ended December 31, 2019, the Company incurred $558,792
(2018: $2,052,216) in accretion and interest expense in connection
with the convertible debentures.
December
26, 2019, all parties signed an amendment to the Agreement which
set forth, among other things, the following:
Company
Principals have given Holders notice that it has satisfied all
conditions of closing.
The
Agreement is considered Closed as of November 5, 2019 (“Settlement
Date”) and any conditions of closing not satisfied are
waived.
Reset
Dates. The “Reset Dates” as set forth in Section 1(h) of the
Agreement shall be as follows: March 4, 2020 and July 2, 2020. As
of the reset dates the holders can convert all or part of the
settled note amounts at the lower of (i) 75% of the closing bid
price for the Common Stock on such respective Reset Date, or (ii)
the VWAP for the Company’s Common Stock for the 7 trading days
immediately preceding and including such respective Reset Dates.
This reset provision provides for the issuance of additional shares
above the initial 5,902,589 shares for no additional consideration
as measured at each of the two reset dates.
The
Company determined that the reset provision represents a standalone
derivative liability. Accordingly, this debt restructure
transaction was accounted for as an extinguishment of debt for
consideration equal to the $2,384,646 fair value of the 5,902,589
common shares issuable, based on the $0.404 quoted trading price of
the Company’s common stock price on the settlement date, and the
initial fair value of the derivative liability of
$12,653,000.
5.
CONVERTIBLE DEBENTURES (CONTINUED)
The
Company adjusts its derivative liability to fair value at each
reporting and settlement date, with changes in fair value reported
in the statement of operations. The Company estimated the fair
value of the obligations to issue common stock pursuant to the Debt
Restructuring Agreement, as amended, using Monte Carlo simulations
and the following assumptions:
| |
|
November 5, |
|
|
December |
|
|
|
|
2019 |
|
|
31, 2019 |
|
| Volatility |
|
|
617.0 |
% |
|
|
738.1 |
% |
| Risk Free Rate |
|
|
1.59 |
% |
|
|
1.60 |
% |
| Expected Term |
|
|
0.66 |
|
|
|
0.50 |
|
Derivative
Liabilities
The
Company accounts for its obligation to issue common stock (“Reset
Provision”) as derivative instruments in accordance with ASC Topic
815, “Derivatives and Hedging” which are reflected as liabilities
at fair value on the balance sheet, with changes in fair value
reported in the statement of operations. Fair value is defined as
the price to sell an asset or transfer a liability in an orderly
transaction between willing and able market participants. The
number of shares of common stock the Company could be obligated to
issue, is based on future trading prices of the Company’s common
stock. To reflect this uncertainty in estimating the fair value of
the potential obligation to issue common stock, the Company uses a
Monte Carlo model that considers the reporting date trading price,
historical volatility of the Company’s common stock, and risk free
rate in estimating the fair value of the potential obligation to
issue common stock. The results of the Monte Carlo simulation model
are most sensitive to inputs for expected volatility. Depending on
the availability of observable inputs and prices, different
valuation models could produce materially different fair value
estimates. The estimated fair values may not represent future fair
values and may not be realizable. We categorize our fair value
estimates in accordance with ASC 820 based on the hierarchical
framework associated with the three levels of price transparency
utilized in measuring financial instruments at fair value as
discussed above. As of December 31, 2019, the fair value of the
Company’s potential obligation to issue common stock was
$12,778,000.
The
following is a summary of activity related to the derivative
liability for the year ended December 31, 2019:
| Balance, December 31, 2018 |
|
$ |
- |
|
| Reset provision |
|
|
12,653,000 |
|
| Change in fair
value |
|
|
125,000 |
|
| Balance, December 31, 2019 |
|
$ |
12,778,000 |
|
6.
PROMISSORY NOTE AND CONVERTIBLE PROMISSORY NOTE
On
December 14, 2018, the Company issued a promissory note for
proceeds of $100,000 at 12% interest per annum. The maturity date
of the note is December 14, 2019. The note includes a conversion
feature that entitles the Holder to receive 1.63% equity ownership
of Friendable, Inc. and 18.2% equity ownership of Fan Pass, Inc.
upon conversion. During the year ended December 31, 2019, the
Company incurred $1,901 (2018: $599) in interest expense in
connection with the promissory note.
On
December 20, 2019 the note above settled by the issuance of
2,150,000 shares of common stock. The shares were valued at
$537,500 based on contemporaneous sales $0.25 of per share
resulting in a loss on debt extinguishment of $435,000.
On
April 7, 2017, the Company entered into a Settlement Agreement with
Joseph Canouse (the “Agreement”). The Company and Mr. Canouse had
been in a dispute regarding what amount, if any, was owed pursuant
to a consulting agreement between the parties signed in April 2014.
In December 2016, Mr. Canouse obtained a judgment in state court in
Georgia and the right to garnish the Company’s bank accounts.
Pursuant to the Settlement Agreement, the Company agreed to issue
an 8% Convertible Note in the principal amount of $82,931 (the
“Note”). The Note was issued to J.P. Carey Inc., an entity
controlled by Mr. Canouse. Although the Note is dated March 30,
2017, it was issued on April 7, 2017. In return for the issuance of
the Note, Mr. Canouse filed a Consent Motion to Withdraw Judgment,
dismiss all garnishments, and cease all collection
activities.
The
Note is convertible into common stock, subject to Rule 144, at any
time after the issue date at the lower of (i) the closing sale
price of the common stock on the on the trading day immediately
preceding the closing date, and (ii) 50% of the lowest sale price
for the common stock during the twenty-five (25) consecutive
trading days immediately preceding the conversion date or the
closing bid price, whichever is lower. Mr. Canouse does not have
the right to convert the Note, to the extent that he would
beneficially own in excess of 4.9% of our outstanding common stock.
In the event of default, the amount of principal and interest not
paid when due bear default interest at the rate of 24% per annum
and the Note becomes immediately due and payable.
During
the year ended December 31, 2019:
The
Company incurred $51,980 in interest related to the note through
December 31, 2019.
J.P.
Carey converted $1,002 of principal into 120,000 shares of the
Company’s common stock at a price of $0.0084.
J.P.
Carey assigned $10,000 of the note to World Market Ventures, LLC
and assigned $6,000 of the note to Anvil Financial Management LTD
LLC. The assignments carry the same conversion rights as the
original note. World Market Ventures converted $6,000 of principal
into 120,000 shares of the Company’s common stock at a price of
$0.05. Anvil converted $6,000 of principal into 120,000 shares of
the Company’s common stock at a price of $0.05.
7.
COMMITMENTS AND CONTINGENCIES
The
following table summarizes the Company’s significant contractual
obligations as of December 31, 2019:
| |
|
$ |
|
|
Employment Agreements (1) |
|
|
400,000 |
|
| Lawsuit
Contingency (2) |
|
|
1,005,000 |
|
|
(1) |
Employment
agreements with related parties. |
On
April 3, 2019, the Company entered into employment agreements with
three officers. Pursuant to the agreements, the Company shall pay
officers an aggregate annual salary amount of $400,000. Upon a
successful launch of the company’s Fan Pass mobile app or website,
and the Company achieving various levels if subscribers, the
officers will receive additional bonuses and salary
increases.
Integrity
Media, Inc. (“Integrity”) had previously filed a lawsuit against
the Company and the CEO of the Company for $500,000 alleging breach
of contract alleging the Company failed to deliver marketable
securities in exchange for services. The Company answered the
allegations in court and Integrity filed a motion attacking the
Company’s answers. The court did not strike the answers but the
clerk of the court entered a default judgment against the Company
in the amount of $1,192,875 plus 10% interest. On May 8, 2019, the
Company received a tentative ruling on the Company’s motion to
vacate the default judgement whereby the previously entered default
judgement was voided and a trial date of August 26, 2019 was
set.
On
September 19, 2019, the Company entered into a Settlement Agreement
with Integrity Media settling the civil action known as Integrity
Media, Inc. vs. Friendable, Inc. et al., Orange County Case No.
30-2016-00867956-CU-CO-CJC. Pursuant to the Settlement Agreement,
the Company agreed to issue to Integrity 750,000 shares of its
common stock in exchange for 275 of the Company’s preferred shares
held by Integrity and the cash payment of $30,000 for costs. The
cash payment is to be made within 6 months of the date of the
Settlement Agreement. As of June 24, 2019 the cash amount has not
been paid and the preferred shares have not been returned.
Additionally, Integrity will be entitled to additional shares if
(i) the price of the Company’s common stock is below $1.34 at
either the 120 day or 240 day reset dates set forth in the
Company’s Debt Restructure Agreement as amended entered into with
various debt holders on March 26, 2019 effective November 5, 2019.
Integrity will also be entitled to a “true-up” by issuance of
additional common shares on the issuance date should the share
price of the Company’s common stock on the issuance date be below
$1. The true-up shares will adjust the value of the aggregate
shares issued to be $750,000 on the date of issuance. As of
December 31, 2019, no shares have been issued nor cash paid. As of
December 31, 2019, the Company has recorded a provision for
settlement of lawsuit of $1,035,000 with $1,005,000 ($750,000 plus
a premium of $255,000) recorded as a liability payable in common
stock in accordance with ASC 480 and $30,000 as an accrued
liability.
Robert
Rositano, the Company’s CEO, has also personally guaranteed the
Company’s compliance with the terms of the Settlement
Agreement.
COVID-19 Disclosure
The
coronavirus pandemic could adversely impact our operations, supply
chains and distribution systems and demand for our products and
services. The coronavirus pandemic could adversely impact our
ability to raise capital.
8.
COMMON AND PREFERRED STOCK
Common Stock:
During
the year ended December 31, 2018, the Company issued 30,167 shares
of common stock to various convertible note holders for full and
partial conversion of the notes
During
the year ended December 31, 2019, the Company:
Issued
393,418 shares of common stock to two convertible note holders for
partial conversion of an aggregate of $21,356 of the notes at the
contractual conversion rates. 120,000 of the shares remain issuable
as of December 31, 2019.
Issued
534,000 shares of common stock to various subscribers of common
stock at $0.25 per share for a total of $133,500. 477,000 shares
remain issuable as of December 31, 2019.
8.
COMMON AND PREFERRED STOCK (CONTINUED)
Issued
600,000 shares of common stock to a consultant in exchange for
future services valued at $90,000 of which $30,000 remains in
prepaid expenses as of December 31, 2019.
Issued
2,150,000 shares of common stock to settle a promissory note and
accrued interest of $102,500 and recognized a loss on settlement of
$435,000 based on the $537,500 value based on recent
sales.
Issued
1,002,970 and has 2,018,746 issuable shares of common stock to
related parties on conversion of 1,478 shares of Series A preferred
stock.
Agreed
to issue 5,902,589 shares as a preliminary settlement of
approximately $6.3 million of convertible debt (See note
5)
Preferred Stock:
Series
A:
The
Series A Preferred Stock was authorized in 2014 and is convertible
into nine (9) times the number of common stock outstanding at time
of conversion 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 Series A preferred stock is
based on the ratio of the number of shares of Series A 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.
After the qualified financing the conversion shares issuable shall
be the original issue price of the Series A preferred stock divided
by $0.002. The holders of Series A Preferred stock are entitled to
receive non-cumulative dividends when and if declared at a rate of
6% per year. On all matters presented to the stockholders for
action the holders of Series A Preferred stock shall be entitled to
cast votes equal to the number of shares the holder would be
entitled to if the Series A Preferred stock were converted at the
date of record.
During
the year ended December 31, 2019, 588 shares of Series A preferred
stock were converted to common stock by 2 related parties and
donated them to the Diocese of Monterey. In addition, 890 Series A
shares were converted into 2,018,746 common shares by parties
related to the 2 directors. The 2,018,746 common shares remain
issuable as of December 31, 2019.
Series
B:
During
the year ended December 31, 2019, the Company entered into Security
Purchase Agreements with various investors for the purchase of
205,000 shares Series B convertible Preferred stock and received
$205,000 in cash. Each Series B Preferred share is convertible into
4 shares of common stock valued at $0.25.
During
the year ended December 31, 2019, The Company entered into a
Security Purchase Agreements with a related party for the purchase
of 79,000 shares Series B Preferred stock. The $79,000 was settled
against accounts payable owed to the related party. Each Series B
Preferred share is convertible into 4 shares of common stock valued
at $0.25.
Series
C:
In
November and December 2019, 149,300 shares of Series C convertible
preferred stock were issued to an investor under preferred stock
purchase agreements at a price of approximately $0.91 per share for
a total of $136,000. Due to the mandatory redemption feature, these
shares are reflected as a current liability at December 31, 2019.
Furthermore, because these shares are convertible at 71% of the
common shares market price around the time of the conversion date,
they are treated as a stock settled debt under ASC 480 with a
premium of $55,549 recorded and charged to interest expense. The
total amount is reflected at $191,549 at December 31,
2019.
9.
SHARE PURCHASE WARRANTS
Activity
in 2019 and 2018 is as follows:
|
|
|
Number of
Warrants |
|
|
Weighted Average
Exercise
Price
$ |
|
|
Weighted Average
Remaining
Life |
|
|
Balance, December 31, 2017 |
|
|
60,908 |
|
|
|
72.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018 |
|
|
60,908 |
|
|
|
72.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 30, 2019 |
|
|
60,908 |
|
|
|
72.00 |
|
|
|
1.6 |
|
10.
STOCK-BASED COMPENSATION
On
November 22, 2011, the Board of Directors of the Company 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
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 date never became effective. 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 7 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 December 31,
2019, no options have been awarded under the 2014 Plan. Effective
August 27, 2019, the Company effected a reverse split of the common
stock of 1 for 18,000 (Note 1) which eliminated all the options
which were previously outstanding.
11.
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.
11.
FAIR VALUE MEASUREMENTS (CONTINUED)
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 convertible debentures and promissory note
approximates their carrying values as the underlying imputed
interest rates approximates the estimated current market rate for
similar instruments.
As of
December 31, 2019 there was a derivative measured at fair value on
a recurring basis (see note 5) presented on the Company’s
balance sheet, as follows:
Liabilities at Fair Value
December 31, 2019 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Derivative Liability |
|
|
|
|
|
|
|
|
|
|
12,778,000 |
|
|
|
12,778,000 |
|
12.
INCOME TAXES
Due
to the net losses incurred there was no income tax provision in
2019 or 2018.
A
reconciliation of the difference between the income tax benefit
computed at the federal statutory rate of 21% and 35% respectively,
and the provision for income taxes for the years ended December 31,
2019 and 2018 are as follows:
| |
|
2019 |
|
|
2018 |
|
|
Computed tax benefit |
|
$ |
(2,138,516 |
) |
|
$ |
(1,092,701 |
) |
|
State taxes |
|
|
(394,200 |
) |
|
|
- |
|
|
Permanent differences |
|
|
1,887,855 |
|
|
|
662,304 |
|
|
Change in tax rate and other |
|
|
1,143,792 |
|
|
|
- |
|
|
Change in valuation allowance |
|
|
(498,931 |
) |
|
|
430,497 |
|
|
|
|
$ |
- |
|
|
$ |
- |
|
The
Company’s deferred tax assets and liabilities as of December 31,
2019 and 2018 were as follows:
| |
|
2019 |
|
|
2018 |
|
|
Deferred Tax Assets: |
|
|
|
|
|
|
|
|
|
Net operating losses |
|
$ |
3,187,626 |
|
|
$ |
4,214,782 |
|
|
Accrued payroll |
|
|
194,843 |
|
|
|
- |
|
|
Reserve contingency |
|
|
257,415 |
|
|
|
- |
|
|
|
|
|
3,639,884 |
|
|
|
4,214,782 |
|
|
Deferred Tax Liability: |
|
|
|
|
|
|
|
|
|
Other |
|
|
(186,533 |
) |
|
|
(262,500 |
) |
|
Valuation Allowance |
|
|
(3,453,351 |
) |
|
|
(3,952,282 |
) |
|
|
|
$ |
- |
|
|
$ |
- |
|
The
Company has net operating losses of approximately $12,817,000, of
which $10,457,080 expires through 2037 and $2,359,560 may be
carried forward indefinitely subject to annual usage limitations.
The Company has established a 100% valuation allowance against its
net deferred tax assets as it is more likely than not they will not
be able to utilize such deferred assets in the future. The change
in the valuation allowance for the year ended December 31, 2019 was
a decrease of $498,931.
13.
SUBSEQUENT EVENTS
Subsequent
to December 31, 2019, the Company issued 78,000 shares of common
stock to a consultant at $0.13 per share for services valued at
$10,000.
Subsequent
to December 31, 2019, the Company issued 1,178,650 shares of common
stock on conversion of principal of $39,280 on convertible notes at
an average contractual price of $0.03.
Subsequent
to December 31, 2019, the Company raised $95,000 in financing by
issuing new convertible notes. Interest accrues at 12% per annum
and the notes are convertible, subject to rule 144, at a 50%
discount to the lowest trading price in the preceding 25 days prior
to conversion.
Subsequent
to December 31, 2019, the Company raised $33,000 by issuing 38,000
shares of Series C preferred stock.
Subsequent
to December 31, 2019, the Company issued 600,000 shares of common
stock for past and future services valued at $0.15 per share or
$90,000 to be recognized through the service term ending March 31,
2020.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There
have been no changes in or disagreements with accountants on
accounting and financial disclosure.
ITEM 9A. CONTROLS AND
PROCEDURES
|
(a) |
Disclosure Controls and Procedures |
We
maintain “disclosure controls and procedures”, as that term is
defined in Rule 13a-15(e), promulgated by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended. Disclosure controls and procedures include
controls and procedures designed to ensure that information
required to be disclosed in our company’s reports filed under the
Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms, and that such
information is accumulated and communicated to our management,
including our principal executive officer and our principal
financial officer, as appropriate, to allow timely decisions
regarding required disclosure.
As
required by paragraph (b) of Rules 13a-15 under the Securities
Exchange Act of 1934, our management, with the participation of
our principal executive officer and our principal financial
officer, evaluated our company’s disclosure controls and procedures
as of the end of the period covered by this annual report on Form
10-K. Based on this evaluation, our management concluded that as of
the end of the period covered by this annual report on
Form 10-K, our disclosure controls and procedures were not
effective.
|
(b) |
Management’s Report on Internal Control over Financial
Reporting |
Our
management, including our principal executive officer, principal
financial officer and our Board of Directors, is responsible for
establishing and maintaining a process to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting
principles.
Our
management, with the participation of our principal executive
officer and our principal financial officer, evaluated the
effectiveness of our internal control over financial reporting as
of December 31, 2019. Our management’s evaluation of our internal
control over financial reporting was based on the framework in
Internal Control—Integrated Framework, issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, our management concluded that our internal control over
financial reporting was not effective as of December 31, 2019 due
to the following material weaknesses which are indicative of many
small companies with small staff: (i) inadequate segregation of
duties and ineffective risk assessment; (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; (iii) and inadequate technical skills
of accounting personnel. To remediate such weaknesses, we believe
we would need to implement the following changes: (i) appoint
additional qualified personnel to address inadequate segregation of
duties and ineffective risk management; and (ii) adopt sufficient
written policies and procedures for accounting and financial
reporting. The remediation efforts set out in (i) and (ii) are
largely dependent upon our securing additional financing to cover
the costs of implementing the changes required. If we are
unsuccessful in securing such funds, remediation efforts may be
adversely affected in a material manner. Until we have the required
funds, we do not anticipate implementing these remediation
steps.
A
material weakness is a deficiency or a combination of control
deficiencies in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of
our annual or interim financial statements will not be prevented or
detected on a timely basis.
Our
principal executive officer and our principal financial officer do
not expect that our disclosure controls or our internal control
over financial reporting will prevent all errors and all fraud. A
control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any,
within our company have been detected. These inherent limitations
include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of a simple error or
mistake. Additional controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by
management override of the controls. The design of any system of
controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become
inadequate because of changes in conditions, or the degree of
compliance with the policies or procedures may deteriorate. Because
of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be
detected.
|
(c) |
Changes in Internal Control over Financial
Reporting |
There
were no changes in our internal control over financial reporting
during the fiscal quarter ended December 31, 2019 that have
materially affected, or are reasonably likely to materially affect
our internal control over financial reporting.
ITEM 9B. OTHER
INFORMATION
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Our
directors hold office until the next annual meeting or until their
successors have been elected and qualified, or until they resign or
are removed. Our board of directors appoints our officers, and our
officers hold office for such term as may be prescribed by our
board of directors and until their successors are chosen and
qualify, or until their death or resignation, or until their
removal.
Our
directors and executive officers, their ages, positions held, and
duration of such are as follows:
|
Name |
|
Position Held with Our Company |
|
Age |
|
Date First Elected or Appointed |
|
Robert Rositano |
|
CEO,
Secretary and Director |
|
51 |
|
January 31, 2014 |
| Dean
Rositano |
|
President, CTO and Director |
|
48 |
|
January 31, 2014 |
| Frank
Garcia |
|
CFO |
|
62 |
|
June
30, 2011 |
Business
Experience
The
following is a brief account of the education and business
experience during at least the past five years of each director and
executive officer of our company, indicating the person’s principal
occupation during that period, and the name and principal business
of the organization in which such occupation and employment were
carried out.
Robert
Rositano, CEO, Secretary and Director:
Prior
to founding iHookup, Robert Rositano was the third employee at
Netcom Online Communications, Inc., an internet service provider
which went public in 1993 and eventually merged into Earthlink and
AT&T Canada. From 2006-2010, Robert Rositano worked as Chief
Executive Officer of Zippi Networks, Inc. Zippi Networks, Inc.
created a home-based business system that allowed users to become
certified eBay sellers and earn commission by selling items on eBay
for others. Zippi Networks, Inc. supplied its users with everything
one would need to begin a home-based business as an eBay seller,
including but not limited to, certain training, materials,
uniforms, processes and software. Robert Rositano was responsible
for its day-to-day operations and overseeing the development of
eBay seller applications for the web, as well as mobile
applications for windows and iPhone devices. He was also in charge
of fundraising, and raised over $2 million for Zippi Networks, Inc.
In 2010, Robert Rositano became Chief Executive Officer of
Checkmate Mobile, Inc. (“CMI”), which developed mobile applications
on a work-for-hire basis as well as incubated creative concepts
conceived among a core group of product managers, graphic designers
and mobile developers. CMI has successfully developed applications
for the education market (e.g. released Cloud9 Learning to Brigham
Young University with a pilot of over 7,000 students),
cause-related or donation style applications, and applications used
by restaurants and bars. Robert Rositano has continued in his role
at CMI while serving as a director and officer of the
Company.
Dean
Rositano, President, CTO and Director:
Prior
to Friendable, Inc., Dean Rositano co-founded CMI, Latitude Venture
Partners, LLC, Zippi Networks, Inc., America’s Biggest, Inc., and
most notably, was the co-founder and president and CTO of Silicon
Valley-based Nettaxi.com, which went public in 1998.
From
2006-2010, Dean Rositano worked as President and Chief Technology
Officer of Zippi Networks, Inc. In 2010, Dean Rositano became
President and Chief Technology Officer of CMI. Dean Rositano has
continued in his role at CMI while serving as a director and
officer of the Company.
The
Company believes Messrs. Robert and Dean Rositano are well
qualified to serve as director and officers of the Company due to
each of them having twenty years of experience working with high
technology companies, many of which have been in the social media
or internet community space and directly relate to the Friendable
apps. They have each had experience in successfully raising
capital, managing and growing teams of people in the areas of
product development, internet / mobile marketing, and IT, as well
as architecting, building, scaling and launching high volume
consumer products, from internet websites to mobile
applications.
Frank
Garcia, CFO:
From
1997 to 2006, Mr. Garcia was employed in senior management
positions by Misys PLC, a global software and solutions company
serving customers in international banking and securities,
international healthcare, and UK retail financial services. Prior
to 1997 Mr. Garcia held executive positions with CEMEX, a world
leader in the construction materials industry. Mr. Garcia was
formerly the CFO of a publicly-traded mining exploration company--
Zoro Mining Corp. (OTCBB: ZORM). Mr. Garcia received his Bachelor
of Science –Business Administration—Major in Accounting from the
University of Arizona in 1981. We believe Mr. Garcia is
qualified to serve as an officer because he brings significant
company knowledge as well as business and public company experience
to our company.
Family Relationships
Robert
Rositano, age 51, and Dean Rositano, age 48, are
brothers.
Board
Composition and Committees and Director Independence
Robert
Rositano and Dean Rositano currently serve on our board of
directors. We are not required to have any independent members of
the Board of Directors. As we do not have any board committees, the
board carries out the functions of nominating and compensation
committees, and such “independent director” determination has been
made pursuant to the committee independence standards.
Committees of the Board
Our
board of directors has the authority to appoint committees to
perform certain management and administration functions. Currently,
we do not have an audit committee, compensation committee or
nominating and corporate governance committee and do not have an
audit committee financial expert. Our board of directors currently
intends to appoint various committees in the future.
Nominating
and Corporate Governance Committee
We do
not have a nominating and corporate governance committee. Our board
of directors performed the functions associated with a nominating
committee. Generally, nominees for directors are identified and
suggested by the members of our board of directors or management
using their business networks. Our board of directors has not
retained any executive search firms or other third parties to
identify or evaluate director candidates in the past and does not
intend to in the near future. We have elected not to have a
nominating committee because we are an exploration stage company
with limited operations and resources.
Our
board of directors does not have a written policy or charter
regarding how director candidates are evaluated or nominated for
our board of directors. Additionally, our board of directors has
not created particular qualifications or minimum standards that
candidates for our board of directors must meet. Instead, our board
of directors considers how a candidate could contribute to our
business and meet our needs and those of our board of directors. As
we are an exploration stage company, our board of directors will
not consider candidates for director recommended by our
stockholders, and we have received no such candidate
recommendations from our stockholders.
Compensation
Committee
We
currently do not have a compensation committee. However, our board
of directors may establish a compensation committee once we are no
longer in the exploration stage, which would consist of inside
directors and independent members. Until a formal committee is
established, our board of directors will continue to review all
forms of compensation provided to our executive officers,
directors, consultants and employees including stock
compensation.
Audit
Committee
We
currently do not have an audit committee. However, our board of
directors may establish an audit committee once we are no longer in
the exploration stage, which would consist of inside directors and
independent members.
Until
a formal committee is established, our board of directors will
continue to perform the functions of an audit committee.
Audit
Committee Financial Expert
Our
board of directors has determined that it does not have a member
that qualifies as an “audit committee financial expert” as defined
in Item 407(d)(5)(ii) of Regulation S-K issued by the United States
Securities and Exchange Commission.
We
believe that our entire board of directors is capable of analyzing
and evaluating financial statements that present a breadth and
level of complexity of accounting issues that are generally
comparable to the breadth and complexity of the issues reasonably
expected to be raised by our company. We believe that retaining an
independent director who would qualify as an “audit committee
financial expert” would be overly costly and burdensome and is not
warranted in our circumstances given the early stages of our
development and the fact that we have not generated revenues to
date.
Involvement in Certain Legal Proceedings
During
the past ten years, our directors and executive officers above have
not been involved in any of the following events:
|
● |
a
bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that
time; |
|
● |
conviction
in a criminal proceeding or being subject to a pending criminal
proceeding, excluding traffic violations and other minor
offenses; |
|
● |
being
subject to any order, judgment or decree, not substantially
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently enjoining, barring, suspending or
otherwise limiting his involvement in any type of business,
securities or banking business; |
|
● |
being
found by a court of competent jurisdiction, in a civil action, the
SEC or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated; |
|
● |
being
the subject of, or a party to, any federal or state judicial or
administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of: (i) any federal or state securities or commodities
law or regulation; or (ii) any law or regulation respecting
financial institutions or insurance companies including, but not
limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order;
or (iii) any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity; or |
|
● |
being
the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Securities
Exchange Act of 1934), any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act), or any equivalent
exchange, association, entity or organization that has disciplinary
authority over its members or persons associated with a
member. |
Conflict of Interest
There
are several related party transactions reported within this annual
report. All conflicts of interests between such related parties
have been duly approved by the required board and/or shareholder
approvals. Please see below for further disclosure:
Dean
Rositano and Robert Rositano are both directors and 7.5% and 7.5%
stockholders respectively of Checkmate Mobile, Inc. (“CMI”). At
CMI, Dean Rositano also serves as President and Chief Technology
Officer, while Robert Rositano serves as Chief Executive Officer.
They will both continue their respective roles at CMI while serving
as directors and officers of Friendable, Inc.
During
the year ended December 31, 2019, the Company incurred $24,068,
$294,124, and $58,883 (2018: $210,000, $80,000, and $60,000) in app
hosting, app development and rent to a CMI. As of December 31,
2019, Due from related party includes $30,083 (December 31, 2018:
payable of $721,099) due from CMI.
During
the year ended December 31, 2019, two directors converted 588
shares of Series A preferred stock at the contractual conversion
rate into 1,002,970 shares of common stock and donated them to the
Diocese of Monterey and other parties related to the directors
converted 890 Series A preferred shares into 2,018,746 common
shares that are issuable at December 31, 2019.
Dean
Rositano and Robert Rositano are both directors and stockholders of
Friendable, Inc.. At Friendable, Inc., Dean Rositano also serves as
President and Chief Technology Officer, while Robert Rositano
serves as Chief Executive Officer and Secretary. The majority
stockholder of Friendable, Inc. is Copper Creek Holdings, LLC, a
Nevada limited liability company owned and managed by Robert
Rositano and his wife, Stacy Rositano.
As
described above, Dean Rositano and Robert Rositano are both
directors and officers of the Company.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our
executive officers and directors, and persons who own more than 10%
of our common stock, to file initial statements of beneficial
ownership, reports of changes in ownership and annual reports
concerning their ownership of our common stock and other equity
securities with the Securities and Exchange Commission and to
provide us with copies of those filings. Based solely on our review
of the copies of such forms received by us, or written
representations from certain reporting persons, we believe that
during year ended December 31, 2019 all filing requirements
applicable to our executive officers and directors, and persons who
own more than 10% of our common stock were complied with, with the
exception of the following:
|
Name |
Number
of Late
Reports |
Number
of Transactions Not Reported on a
Timely Basis |
Failure
to File
Requested Forms |
|
Robert
Rositano |
Nil |
Nil |
N/A |
|
Dean
Rositano |
Nil |
Nil |
N/A |
|
Frank
Garcia |
Nil |
Nil |
N/A |
Code of Ethics
We have not yet adopted a Code of Ethics.
ITEM 11. EXECUTIVE
COMPENSATION
Summary Compensation
The
following table summarizes information regarding the compensation
awarded to, earned by or paid to, our Chief Executive Officer, and
our other most highly compensated executive officers who earned in
excess of $100,000 during the year ended December 31, 2019 and
2018, who we will collectively refer to as the named executive
officers, for the years ended December 31, 2019 and 2018, are set
out in the following summary compensation table:
Name and
Principal Position |
|
Year |
|
Salary
Incurred
(1)
($) |
|
Bonus
($) |
|
Stock
Awards
($) 1 |
|
Option
Awards
($) |
|
Non-Equity
Incentive Plan
Compensation
($) |
|
Nonqualified
Deferred
Compensation
Earnings
($) |
|
All other
Compensation
($) |
|
Total
($) |
Robert
Rositano
CEO, Secretary, & Director |
|
2019
2018 |
|
150,000
150,000 |
|
Nil
Nil |
|
Nil
Nil |
|
Nil
Nil |
|
Nil
Nil |
|
Nil
Nil |
|
Nil
Nil |
|
150,000
150,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean
Rositano
President and CTO |
|
2019
2018 |
|
150,000
150,000 |
|
Nil
Nil |
|
Nil
Nil |
|
Nil
Nil |
|
Nil
Nil |
|
Nil
Nil |
|
Nil
Nil |
|
150,000
150,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
Garcia
Chief Financial Officer |
|
2019
2018 |
|
100,000
100,000 |
|
Nil
Nil |
|
Nil
Nil |
|
Nil
Nil |
|
Nil
Nil |
|
Nil
Nil |
|
Nil
Nil |
|
100,000
100,000 |
|
(1) |
The
above listed officers had accrued salaries of $783,416 at December
31, 2019 and $798,580
at December 31, 2018. During the year ended December 31, 2019,
three officers forgave $400,000 in accrued salaries as part of the
debt restructuring agreement. |
Compensation for Executive Officers and
Directors
Compensation
arrangements for our named executive officers and directors are
described below.
Employment
Agreement – Robert Rositano
Effective
January 19, 2014, the Company, entered into an employment agreement
with Robert Rositano to serve as Chief Executive Officer and
Secretary of Friendable, Inc. for a term of two years with
automatic renewals for similar two year periods pursuant to the
terms of the agreement. Robert Rositano’s duties shall include the
duties and responsibilities for the Company’s corporate and
administration offices and positions as set forth by the Company
and such other duties and responsibilities as the board of
directors may from time to time reasonably assign to Robert
Rositano. The employment agreement provides, among other things,
that Robert Rositano will be eligible for participation in any
employee benefit plan, retirement plan, and option plan maintained
by Friendable, Inc.; receive a base salary of $150,000 per year;
and receive reimbursement for ordinary and necessary business
expenses incurred by Robert Rositano in connection with the
performance of his duties as Chief Executive Officer and Secretary.
During the year, only a portion of the salary was paid and the
balance was accrued. Upon a successful launch of Friendable, Inc.’s
products and services and reaching the first 1,000,000 registered
users, Robert Rositano will receive a bonus of $50,000 and his base
salary will be increased to $200,000 annually. When Friendable,
Inc. reaches a cumulative 5,000,000 registered users or more,
Robert Rositano will receive a bonus of $75,000 and his base salary
will be increased to $250,000 annually. After the above goals are
achieved, his base salary will begin being increased semi-annually
at a minimum rate of 10% or higher, as determined by the board of
directors or a committee established by the board of directors for
compensation purposes. If Friendable, Inc. is unable to pay
executive salary or bonuses, the amounts owed will be accrued as a
convertible note. The note can be converted into common stock, at
Robert Rositano’s sole discretion. The Company may terminate Robert
Rositano’s employment prior to the end of his employment period by
a majority vote of the board of directors, excluding Robert
Rositano’s vote. If we terminate Robert Rositano’s employment prior
to the end of his employment period without cause, which shall also
include termination in the event of a change in control, Robert
Rositano shall be entitled to his base salary in effect on the
date of his termination for a period of twenty-four (24) months
following the date of such termination, in one lump sum payment
within fourteen (14) days of termination or as otherwise agreed to
in writing. Furthermore, any unvested options granted to Robert
Rositano will immediately vest. If we terminate his employment with
cause, he will be entitled to his base salary and commission
schedule in effect on the date of termination for a period of
twelve (12) months. If Robert Rositano, however, terminates his
employment prior to the end of the employment period without cause,
Robert Rositano shall not be entitled to any severance and the
Company shall have no further liability to Robert Rositano. He is
also permitted to pursue other business interests not in conflict
with the Company, including serving as officers and directors of
other public companies.
On
April 3, 2019, the Company entered into a new employment agreement
with Robert Rositano. Pursuant to that agreement, the Company shall
pay Rositano an aggregate annual salary at the rate of $150,000
(One Hundred Fifty Thousand Dollars) (the “Base Salary”). Upon a
successful launch of the company’s Fan Pass mobile app or website,
and reaching its first 50,000 subscribers, Rositano will receive a
bonus of $50,000 and the Base Salary will be increased to $200,000
annually. In addition, when the Company reaches a cumulative
100,000 subscribers or more, Rositano will receive a bonus of
$75,000 and the Base Salary shall be increased to $250,000
annually. After the above goals are achieved, the Base Salary shall
increase annually at a minimum rate of ten percent (10%) as
determined by the Board of Directors or a Committee established by
the Board of Directors for compensation purposes (the “Compensation
Committee”), based on Rositano’s performance. Rositano shall be
entitled to participate in the Company’s stock option plan if and
when it is put in place. Details will be determined by the board of
directors or compensation committee at such time.
Employment
Agreement – Dean Rositano
Effective
January 19, 2014, the Company, entered into an employment agreement
with Dean Rositano to serve as President and Chief Technology
Officer of Friendable, Inc. for a term of two years with automatic
renewals for similar two year periods pursuant to the terms of the
agreement. Dean Rositano’s duties shall include the duties and
responsibilities for the Company’s corporate and administration
offices and positions as set forth by the Company and such other
duties and responsibilities as the board of directors may from time
to time reasonably assign to Dean Rositano. The employment
agreement provides, among other things, that Dean Rositano will be
eligible for participation in any employee benefit plan, retirement
plan, and option plan maintained by Friendable, Inc.; receive a
base salary of $150,000 per year; and receive reimbursement for
ordinary and necessary business expenses incurred by Dean Rositano
in connection with the performance of his duties as President and
Chief Technology Officer. During the year, only a portion of the
salary was paid and the balance was accrued. Upon a successful
launch of Friendable, Inc.’s products and services and reaching the
first 1,000,000 registered users, Dean Rositano will receive a
bonus of $50,000 and his base salary will be increased to $200,000
annually. When Friendable, Inc. reaches a cumulative 5,000,000
registered users or more, Dean Rositano will receive a bonus of
$75,000 and his base salary will be increased to $250,000 annually.
After the above goals are achieved, his base salary will begin
being increased semi-annually at a minimum rate of 10% or higher,
as determined by the board of directors or a committee established
by the board of directors for compensation purposes. If Friendable,
Inc. is unable to pay executive salary or bonuses, the amounts owed
will be accrued as a convertible note. The note can be converted
into common stock, at Dean Rositano’s sole discretion. The Company
may terminate Dean Rositano’s employment prior to the end of his
employment period by a majority vote of the board of directors,
excluding Dean Rositano’s vote. If we terminate Dean Rositano’s
employment prior to the end of his employment period without cause,
which shall also include termination in the event of a change in
control, Dean Rositano shall be entitled to his base salary in
effect on the date of his termination for a period of twenty-four
(24) months following the date of such termination, in one lump sum
payment within fourteen (14) days of termination or as otherwise
agreed to in writing. Furthermore, any unvested options granted to
Dean Rositano will immediately vest. If we terminate his employment
with cause, he will be entitled to his base salary and commission
schedule in effect on the date of termination for a period of
twelve (12) months. If Dean Rositano, however, terminates his
employment prior to the end of the employment period without cause,
Dean Rositano shall not be entitled to any severance and the
Company shall have no further liability to Dean Rositano. He is
also permitted to pursue other business interests not in conflict
with the Company, including serving as officers and directors of
other public companies.
On
April 3, 2019, the Company entered into a new employment agreement
with Dean Rositano. Pursuant to that agreement, the Company shall
pay Rositano an aggregate annual salary at the rate of $150,000
(One Hundred Fifty Thousand Dollars) (the “Base Salary”). Upon a
successful launch of the company’s Fan Pass mobile app or website,
and reaching its first 50,000 subscribers, Rositano will receive a
bonus of $50,000 and the Base Salary will be increased to $200,000
annually. In addition, when the Company reaches a cumulative
100,000 subscribers or more, Rositano will receive a bonus of
$75,000 and the Base Salary shall be increased to $250,000
annually. After the above goals are achieved, the Base Salary shall
increase annually at a minimum rate of ten percent (10%) as
determined by the Board of Directors or a Committee established by
the Board of Directors for compensation purposes (the “Compensation
Committee”), based on Rositano’s performance. Rositano shall be
entitled to participate in the Company’s stock option plan if and
when it is put in place. Details will be determined by the board of
directors or compensation committee at such time.
Employment
Agreement – Frank Garcia
Effective
February 3, 2014, iHookup, a wholly-owned subsidiary of the
Company, entered into an employment agreement with Frank Garcia to
serve as Chief Financial Officer of iHookup. Frank Garcia’s duties
shall include the duties and responsibilities for the Company’s
corporate and administration offices and positions as set forth by
the Company and such other duties and responsibilities as the board
of directors may from time to time reasonably assign to Frank
Garcia. Frank Garcia received a base salary of $80,000 per year,
which was automatically adjusted to $100,000 a year beginning April
1, 2014; and receive reimbursement for ordinary and necessary
business expenses incurred by Frank Garcia in connection with the
performance of his duties as Chief Financial Officer. During the
2016 fiscal year, this amount was increased to $110,000. Frank
Garcia will be granted 20,000,000 stock options of the Company
which shall become effective upon the effective date of a new
Company stock option plan. The employment agreement provides, among
other things, that Frank Garcia will be eligible for an annual
bonus based on his performance and determined in the sole
discretion of the Board of Directors. He is also eligible to
participate in any employee benefit plan, retirement plan, and
option plan maintained by Friendable, Inc.. Frank Garcia’s
employment is at will, and either party may terminate his
employment at any time with or without cause; provided that Frank
Garcia gives at least 30 days’ advance notice. He is also permitted
to pursue other business interests not in conflict with the
Company, including serving as officers and directors of other
public companies.
On
April 3, 2019 the Company entered into a new employment agreement
with Frank Garcia. The Company shall pay Garcia an aggregate annual
salary at the rate of $100,000 (One Hundred Thousand Dollar) (the
“Base Salary). Upon a successful launch of the company’s Fan Pass
mobile app or website. and reaching its first 50,000 subscribers,
Executive will receive a bonus of $20,000 and the Base Salary will
be increased to $110,000 annually. In addition. when the Company
reaches a cumulative 100,000 subscribers or more, Garcia will
receive a bonus of $25,000 and the Base Salary shall be increased
to $125,000 annually. After the above goals are achieved, the Base
Salary shall increase annually at a minimum rate of ten percent
(10%) as determined by the Board of Directors or a Committee
established by the Board of Directors for compensation purposes
(the “Compensation Committee”) based on Garcia’s performance.
Garcia shall be entitled to participate in the Company’s stock
option plan if and when it is put in place. Details will be
determined by the board of directors or compensation committee at
such time.
ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The
number of shares beneficially owned is determined under the rules
promulgated by the SEC, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under
those rules, beneficial ownership includes any shares as to which a
person or entity has sole or shared voting power or investment
power plus any shares which such person or entity has the
right to acquire within sixty (60) days of April 16, 2019 through
the exercise or conversion of any stock option, convertible
security, warrant or other right. Unless otherwise indicated, each
person or entity named in the table has sole voting power and
investment power (or shares such power with that person’s spouse)
with respect to all shares of capital stock listed as owned by that
person or entity.
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 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.
The
following tabulation shows, as of May 9, 2020, the number of shares
of capital stock owned beneficially by: (a) all persons known to be
the holders of more than five percent (5%) of voting securities,
(b) Directors, (c) Executive Officers and (d) all other Officers
and Directors as a group.
|
Title
of Class |
Name
and Address of Beneficial Owner |
Amount
and Nature of Beneficial
Ownership |
Percent
of
Class (3) |
|
|
|
|
|
|
|
| |
(a) |
Holders
Over 5% |
|
|
|
| |
|
|
|
|
|
| Series
A preferred |
Robert
A Rositano Jr. |
9,307
(1) |
Direct |
47.03% |
| |
3846
Moanna Way, |
|
|
|
| |
Santa
Cruz, CA 95062 |
|
|
|
| |
|
|
|
|
|
| Series
A preferred |
Dean
Rositano
126 Sea Terrace Way,
Aptos, CA 95003 |
1,942 |
Direct |
9.81% |
| |
|
|
|
|
| Series
A preferred |
Frank
Garcia
1735 E Ft Lowell Rd Ste9,
Tucson, AZ 85719 |
750 |
Direct |
3.79% |
| |
|
|
|
|
| Series
A preferred |
Copper
Creek Holdings, LLC (2)
7960 B Soquel Dr., Suite
#146
Aptos, CA 95003 |
14,730 |
Direct |
74.44% |
| |
-Robert
Rositano |
7,365 |
|
37.22% |
| |
-Stacy
Rositano |
7,365 |
|
37.22% |
| |
|
|
|
|
| |
(b) |
Directors |
|
|
|
| |
|
|
|
|
|
| Series
A preferred |
Robert
A Rositano Jr. |
9,307
(1) |
Direct
and |
47.03% |
| |
3846
Moanna Way, |
|
Indirect |
|
| |
Santa
Cruz, CA 95062 |
|
|
|
| |
|
|
|
|
|
| Series
A preferred |
Dean
Rositano |
1,942 |
Direct |
9.81% |
| |
126
Sea Terrace Way, |
|
|
|
| |
Aptos,
CA 95003 |
|
|
|
| |
|
|
|
|
|
| |
(c) |
Executive
Officers |
|
|
|
| |
|
|
|
|
|
| Series
A preferred |
Robert
Rositano, Jr. and Dean Rositano as named above |
|
|
| |
|
|
|
|
|
| Series
A preferred |
(d) |
Officers
and Directors as a Group for preferred stock |
11,999
(1) |
Direct
and Indirect |
60.63% |
|
(1) |
Includes
the shares beneficially owned by Robert Rositano through Copper
Creek Holdings, LLC. Does not include the shares beneficially owned
by Stacy Rositano through Copper Creek Holdings, LLC. |
|
(2) |
Copper
Creek Holdings, LLC is owned and managed by Robert Rositano and his
wife Stacy Rositano, thus each may be deemed to beneficially own
half of the interest of Copper Creek Holdings, LLC. |
|
(3) |
Based
on 19,789 shares of Series A preferred stock issued and
outstanding as of June 23, 2020. |
|
Title
of Class |
Name
and Address of Beneficial Owner |
Amount
and Nature of Beneficial
Ownership |
Percent
of
Class (3) |
|
|
|
|
|
|
|
| |
(a) |
Directors |
|
|
|
| |
|
|
|
|
|
| Common
stock |
Copper
Creek Holdings, LLC (2)
7960 B Soquel Dr., Suite
#146
Aptos, CA 95003 |
15 |
Direct |
* |
| |
-Robert
Rositano |
8 |
|
* |
| |
-Stacy
Rositano |
8 |
|
* |
| |
|
|
|
|
|
| Common
stock |
Robert
A Rositano Jr. |
1,840
(1) |
Direct
and |
* |
| |
3846
Moanna Way, |
|
Indirect |
|
| |
Santa
Cruz, CA 95062 |
|
|
|
| |
|
|
|
|
| Common
stock |
Dean
Rositano |
1,857 |
Direct |
* |
| |
126
Sea Terrace Way, |
|
|
|
| |
Aptos,
CA 95003 |
|
|
|
| |
|
|
|
|
| |
(b) |
Executive
Officers |
|
|
|
| |
|
|
|
|
| Common
stock |
Frank
Garcia |
1 |
Direct |
* |
| |
1735
E Ft Lowell Rd, |
|
|
|
| |
Tucson,
AZ 85719 |
|
|
|
| |
|
|
|
|
| Common
stock |
Robert
Rositano, Jr. and Dean Rositano as named above |
|
|
| |
|
|
|
|
|
| Common
stock |
(c) |
Officers
and Directors as a Group for common stock |
3,698
(1) |
Direct
and Indirect |
0.02% |
|
(1) |
Includes
the shares beneficially owned by Robert Rositano through Copper
Creek Holdings, LLC. Does not include the shares beneficially owned
by Stacy Rositano through Copper Creek Holdings, LLC. |
|
(2) |
Copper
Creek Holdings, LLC is owned and managed by Robert Rositano and his
wife Stacy Rositano, thus each may be deemed to beneficially own
half of the interest of Copper Creek Holdings, LLC. |
|
(3) |
Based
on 14,793,099 of common stock issued and outstanding as
of June 23, 2020. |
Changes in Control
We
are not aware of any arrangements that may result in “changes in
control” as that term is defined by the provisions of Item 403(c)
of Regulation S-K.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with related persons
Other
than as disclosed below, there has been no transaction, or
currently proposed transaction, in which our company was or is to
be a participant and the amount involved exceeds the lesser of
$120,000 or one percent of the average of our total assets at year
end for the last two completed fiscal years, and in which any of
the following persons had or will have a direct or indirect
material interest:
|
|
(i) |
Any
director or executive officer of our company; |
|
|
|
|
|
|
(ii) |
Any
beneficial owner of shares carrying more than 5% of the voting
rights attached to our outstanding shares of common
stock; |
|
|
(iii) |
Any
person who acquired control of our company when it was a shell
company or any person that is part of a group, consisting of two or
more persons that agreed to act together for the purpose of
acquiring, holding, voting or disposing of our common stock, that
acquired control of Titan Iron Ore Corp. when it was a shell
company; and |
|
|
|
|
|
|
(iv) |
Any
immediate family member (including spouse, parents, children,
siblings and in-laws) of any of the foregoing persons. |
During
the year ended December 31, 2019, the Company incurred $459,200
(2018: $417,066) in salaries and payroll taxes to officers and
directors with such costs being recorded as general and
administrative expenses.
During
the year ended December 31, 2019, the Company incurred $24,068,
$299,124, and $58,883 (2018: $210,000, $80,000, and $60,000) in app
hosting, app development and rent to a company with two officers
and directors in common with such costs being recorded as app
hosting, product development and general and administrative
expenses.
During
the year ended December 31, 2019, the Company issue a Securities
Purchase agreement to a vendor company with two officers and
directors in common for the purchase of 79,000 Series B preferred
stock with the purchase price of $79,000 being applied to accounts
payable due to the vendor. The price was based on recent sales of
Series B shares for $1.00 per share.
As of
December 31, 2019, the Company had a stock subscription receivable
totaling $4,500 (December 31, 2018: $4,500) from an officer and
director and from a company with an officer and director in
common.
As of
December 31, 2019, Due from related party includes $30,083
(December 31, 2018: payable of $721,099) due from a company with
two officers and directors in common, and $783,416 (December 31,
2018: $798,580) payable in salaries to directors and officers of
the Company. The amounts are unsecured, non-interest bearing and
are due on demand.
During
the year ended December 31, 2019, two directors converted 588
shares of Series A preferred stock at the contractual conversion
rate into 1,002,970 shares of common stock and donated them to the
Diocese of Monterey and other parties related to the directors
converted 890 Series A preferred shares into 2,018,746 common
shares that are issuable at December 31, 2019.
During
the year ended December 31, 2019, three officers forgave debt
totaling $400,000 and a company controlled by two officers of the
Company forgave debt totaling $600,000. The total amount is
reflected as contributed capital.
There
are several related party transactions reported within this annual
report. All conflicts of interests between such related parties
have been duly approved by the required board and/or shareholder
approvals. Please see below for further disclosure:
Dean
Rositano and Robert Rositano are both directors and 14% and
14% stockholders respectively of CMI. At CMI, Dean Rositano
also serves as President and Chief Technology Officer, while Robert
Rositano serves as Chief Executive Officer. They will both continue
their respective roles at CMI while serving as directors and
officers of Friendable, Inc.
Dean
Rositano and Robert Rositano are both directors and stockholders of
Friendable, Inc. At Friendable, Inc., Dean Rositano also serves as
President and Chief Technology Officer, while Robert Rositano
serves as Chief Executive Officer and Secretary. The majority
stockholder of Friendable, Inc. is Copper Creek Holdings, LLC, a
Nevada limited liability company owned and managed by Robert
Rositano and his wife, Stacy Rositano.
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 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
described above, Dean Rositano and Robert Rositano have both been
appointed directors and officers of Friendable, Inc. Dean Rositano
also serves as President and Chief Technology Officer, while Robert
Rositano serves as Chief Executive Officer and
Secretary.
Director Independence
Because
our common stock is not currently listed on a national securities
exchange, we have used the definition of “independence” of The
NASDAQ Stock Market to make this determination. NASDAQ Listing Rule
5605(a)(2) provides that an “independent director” is a person
other than an officer or employee of the Company or any other
individual having a relationship which, in the opinion of the
Company’s board of directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director. The NASDAQ listing rules provide that a director cannot
be considered independent if:
|
|
● |
the
director is, or at any time during the past three years was, an
employee of the company; |
|
|
● |
the
director or a family member of the director accepted any
compensation from the company in excess of $120,000 during any
period of 12 consecutive months within the three years preceding
the independence determination (subject to certain exclusions,
including, among other things, compensation for board or board
committee service); |
|
|
● |
a
family member of the director is, or at any time during the past
three years was, an executive officer of the company; |
|
|
● |
the
director or a family member of the director is a partner in,
controlling stockholder of, or an executive officer of an entity to
which the company made, or from which the company received,
payments in the current or any of the past three fiscal years that
exceed 5% of the recipient’s consolidated gross revenue for that
year or $200,000, whichever is greater (subject to certain
exclusions); or |
|
|
● |
the
director or a family member of the director is employed as an
executive officer of an entity where, at any time during the past
three years, any of the executive officers of the company served on
the compensation committee of such other entity; or the director or
a family member of the director is a current partner of the
company’s outside auditor, or at any time during the past three
years was a partner or employee of the company’s outside auditor,
and who worked on the company’s audit. |
Based
upon the above, we currently do not have any independent board
members.
ITEM 14. PRINCIPAL ACCOUNTING FEES
AND SERVICES
Audit Fees
The
Company has engaged a new audit firm, Salberg & Company, P.A.
(“Salberg”) to perform the audit for the year ended December 31,
2019. Manning Elliott LLP (“Manning Elliott”) performed the reviews
for the first 3 quarters of 2019. The aggregate fees billed by our
auditors for the most recently completed fiscal year ended December
31, 2019 and for fiscal year ended December 31, 2018 for
professional services rendered by the principal accountant for the
audit of our annual consolidated financial statements and review of
the consolidated financial statements included in our quarterly
reports on Form 10-Q and services that are normally provided by the
accountant in connection with statutory and regulatory filings or
engagements for these fiscal periods were as follows:
| |
|
Salberg |
|
|
Manning Elliott |
|
| |
|
Fiscal
Year
Ended |
|
|
Fiscal
Year
Ended |
|
|
Fiscal
Year
Ended |
|
|
Fee Category |
|
31-Dec-19 |
|
|
31-Dec-19 |
|
|
31-Dec-18 |
|
| Audit Fees (1) |
|
$ |
28,000 |
|
|
$ |
19,058 |
|
|
$ |
52,950 |
|
| Audit Related Fees (2) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Tax Fees (3) |
|
|
- |
|
|
|
15,400 |
|
|
|
5,400 |
|
| All Other Fees
(4) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Total |
|
$ |
28,000 |
|
|
$ |
34,458 |
|
|
$ |
58,350 |
|
|
|
1 |
Audit
fees consist of fees incurred for professional services rendered
for the audit of our financial statements, for reviews of our
interim consolidated financial statements included in our quarterly
reports on Form 10-Q and for services that are normally provided in
connection with statutory or regulatory filings or
engagements. |
|
|
2 |
Audit-related
fees consist of fees billed for professional services that are
reasonably related to the performance of the audit or review of our
consolidated financial statements, but are not reported under
“Audit fees.” |
|
|
3 |
Tax
fees consist of fees billed for professional services relating to
tax compliance, tax planning, and tax advice. |
|
|
4 |
All
other fees consist of fees billed for all other
services. |
Pre-Approval Policies and Procedures with respect to Services
Performed by Independent Registered Public Accounting
Firms
Before
Manning Elliott and Salberg were engaged by us to render any
auditing or permitted non-audit related service, our board of
directors approved the engagements.
Our board of
directors has considered the nature and amount of fees billed by
Manning Elliott and Salberg and believe that the provision of
services for activities unrelated to the audit was compatible with
maintaining Manning Elliott and Salberg’s independence.
PART IV
ITEM 15. EXHIBITS, FINANCIAL
STATEMENT SCHEDULES
(b)
|
Exhibit |
|
|
Number |
Description |
|
(2) |
Plan
of Acquisition, re-organization, arrangement, liquidation or
succession |
|
2.1 |
Agreement
and Plan of Merger and Reorganization, dated as of January 31,
2014, by and among Titan Iron Ore Corp., iHookup Operations Corp
and iHookup Social, Inc. (Incorporated by reference to Amendment
No. 1 to the Current Report on Form 8-K, previously filed with the
SEC on February 18, 2014) |
|
(3) |
Articles
of Incorporation and Bylaws |
|
3.1 |
Amended
and Restated Articles of Incorporation (Incorporated by reference
to the Definitive Information Statement on Schedule 14C, previously
filed with the SEC on April 30, 2014) |
|
3.2 |
Amended
and Restated Bylaws (Incorporated by reference to the Definitive
Information Statement on Schedule 14C, previously filed with the
SEC on April 30, 2014) |
|
3.3 |
Amended
and Restated Articles of Incorporation (Incorporated by reference
to the Definitive Information Statement on Schedule 14C, previously
filed with the SEC on April 29, 2014) |
|
3.4 |
Certificate
of Amendment to the Amended and Restated Articles of Incorporation
(Incorporated by reference to the Definitive Information Statement
on Schedule 14C, previously filed with the SEC on January 22,
2015) |
|
(10) |
Material
Contracts |
|
10.1 |
2014
Stock Option Plan (Incorporated by reference to the Definitive
Information Statement on Schedule 14C, previously filed with the
SEC on April 30, 2014) |
|
10.2 |
Form
of Stock Option Agreement (Incorporated by reference to the
Definitive Information Statement on Schedule 14C, previously filed
with the SEC on April 30, 2014) |
| 10.3 |
General
Contract for Services dated January 18, 2014 by and between
Checkmate Mobile Inc. and iHookup Social Inc. (Incorporated by
reference to Amendment No. 1 to the Current Report on Form 8-K,
previously filed with the SEC on February 18, 2014) |
| 10.4* |
Employment
Agreement dated January 19, 2014 by and between iHookup Social Inc.
and Dean Rositano (Incorporated by reference to Amendment No. 1 to
the Current Report on Form 8-K, previously filed with the SEC on
February 18, 2014) |
|
10.5* |
Employment
Agreement dated January 19, 2014 by and between iHookup Social Inc.
and Robert Rositano (Incorporated by reference to Amendment No. 1
to the Current Report on Form 8-K, previously filed with the SEC on
February 18, 2014) |
|
10.6 |
Convertible
Promissory Note dated August 1, 2015 (Incorporated by reference to
the Current Report on Form 8-K, previously filed with the SEC on
August 11, 2015) |
|
10.7 |
Convertible
Promissory Notes dated August 5, 2015 (Incorporated by reference to
the Current Report on Form 8-K, previously filed with the SEC on
August 11, 2015) |
|
10.8 |
Securities
Purchase Agreement dated June 15, 2016 with Coventry Enterprises,
LLC (Incorporated by reference to the Current Report on Form 8-K,
previously filed with the SEC on June 23, 2016) |
|
10.9 |
Convertible
Promissory Notes dated June 15, 2016 (Incorporated by reference to
the Current Report on Form 8-K, previously filed with the SEC on
June 23, 2016) |
|
10.10 |
Securities
Purchase Agreement dated July 7, 2016 with Coventry Enterprises,
LLC (Incorporated by reference to the Current Report on Form 8-K,
previously filed with the SEC on July 13, 2016) |
|
10.11 |
Convertible
Promissory Notes dated August 4, 2016 (Incorporated by reference to
the Current Report on Form 8-K, previously filed with the SEC on
August 10, 2016) |
|
10.12 |
Securities
Purchase Agreement dated August 4, 2016 with Coventry Enterprises,
LLC (Incorporated by reference to the Current Report on Form 8-K,
previously filed with the SEC on August 10, 2016) |
|
10.13 |
Sixth
Amendment and Closing Agreement with Alpha Capital Anstalt and
Palladium Capital Advisors, LLC (Incorporated by reference to the
Current Report on Form 8-K, previously filed with the SEC on August
10, 2016) |
|
10.14 |
Common
Stock Warrant Agreement dated August 1, 2016 with Alpha Capital
Anstalt (Incorporated by reference to the Current Report on Form
8-K, previously filed with the SEC on August 10,
2016) |
|
10.15 |
Marketing
Agreement with The Kluger Agency dated August 3, 2016 (Incorporated
by reference to the Current Report on Form 8-K, previously filed
with the SEC on August 10, 2016) |
|
10.16 |
Securities
Purchase Agreement dated August 15, 2016 with Coventry Enterprises,
LLC (Incorporated by reference to the Current Report on Form 8-K,
previously filed with the SEC on August 25, 2016) |
|
10.17 |
Convertible
Promissory Note dated August 15, 2016 (Incorporated by reference to
the Current Report on Form 8-K, previously filed with the SEC on
August 25, 2016) |
|
10.18 |
Seventh
Amendment and Closing Agreement with Alpha Capital Anstalt and
Palladium Capital Advisors, LLC (Incorporated by reference to the
Current Report on Form 8-K, previously filed with the SEC on August
25, 2016) |
|
10.19 |
Common
Stock Warrant Agreement dated August 1, 2016 with Alpha Capital
Anstalt (Incorporated by reference to the Current Report on Form
8-K, previously filed with the SEC on August 25,
2016) |
|
10.20 |
Securities
Purchase Agreement dated September 8, 2016 with Coventry
Enterprises, LLC (Incorporated by reference to the Current Report
on Form 8-K, previously filed with the SEC on September 16,
2016) |
|
10.21 |
Convertible
Promissory Note dated September 8, 2016 (Incorporated by reference
to the Current Report on Form 8-K, previously filed with the SEC on
September 16, 2016) |
|
10.22 |
Eighth
Amendment and Closing Agreement with Alpha Capital Anstalt and
Palladium Capital Advisors, LLC (Incorporated by reference to the
Current Report on Form 8-K, previously filed with the SEC on
September 16, 2016) |
|
10.23 |
Common
Stock Warrant Agreement dated September 12, 2016 with Alpha Capital
Anstalt (Incorporated by reference to the Current Report on Form
8-K, previously filed with the SEC on September 16,
2016) |
|
10.24 |
Securities
Purchase Agreement dated October 7, 2016 with Coventry Enterprises,
LLC (Incorporated by reference to the Current Report on Form 8-K,
previously filed with the SEC on October 14, 2016) |
|
10.25 |
Convertible
Promissory Notes dated October 7, 2016 (Incorporated by reference
to the Current Report on Form 8-K, previously filed with the SEC on
October 14, 2016) |
|
10.26 |
Common
Stock Warrant Agreement dated October 7, 2016 with Alpha Capital
Anstalt (Incorporated by reference to the Current Report on Form
8-K, previously filed with the SEC on August 25,
2016) |
|
10.27 |
Securities
Purchase Agreement dated October 7, 2016 with Coventry Enterprises,
LLC (Incorporated by reference to the Current Report on Form 8-K,
previously filed with the SEC on October 14, 2016) |
|
10.28 |
Software
License Agreement Dated October 7, 2016 with Hang With, Inc.
(Incorporated by reference to the Current Report on Form 8-K,
previously filed with the SEC on October 14, 2016) |
|
10.29 |
Agreement
dated December 2, 2016 with Alpha Capital Anstalt (Incorporated by
reference to the Current Report on Form 8-K, previously filed with
the SEC on December 5, 2016) |
|
10.30 |
Funding
Commitment Letter dated December 2, 2016 with Coventry Enterprises,
LLC |
|
10.31 |
Securities
Purchase Agreement by and between the Company and EMA Financial,
LLC dated February 2, 2017 (Incorporated by reference to the
Current Report on form 8K, previously filed with the SEC on March
6, 2017) |
|
10.32 |
Convertible
Note by and between the Company and EMA Financial, LLC dated
February 2, 2017 (Incorporated by reference to the Current Report
on form 8K, previously filed with the SEC on March 6,
2017) |
|
10.33 |
Securities
Purchase Agreement by and between the Company and Coventry
Enterprises, LLC dated March 13, 2017 (Incorporated by reference to
the Current Report on form 8K, previously filed with the SEC on
March 23, 2017) |
|
10.34 |
Convertible
Note by and between the Company and Coventry Enterprises, LLC dated
March 15, 2017 (Incorporated by reference to the Current Report on
form 8K, previously filed with the SEC on March 23,
2017) |
|
10.35 |
Securities
Purchase Agreement by and between the Company and EMA Financial,
LLC dated March 15, 2017 (Incorporated by reference to the Current
Report on form 8K, previously filed with the SEC on March 23,
2017) |
|
10.36 |
Convertible
Note by and between the Company and EMA Financial, LLC dated March
15, 2017 (Incorporated by reference to the Current Report on form
8K, previously filed with the SEC on March 23,
2017) |
|
10.37 |
Convertible
Note by and between the Company and JP Carey Enterprises, Inc.
dated March 30, 2017 (Incorporated by reference to the Current
Report on form 8K, previously filed with the SEC on April 14,
2017) |
|
10.38 |
Settlement
Agreement by and between the Company and Joseph C. Canouse dated
April 7, 2017 (Incorporated by reference to the Current Report on
form 8K, previously filed with the SEC on April 14,
2017) |
|
10.39 |
Securities
Purchase Agreement by and between the Company and Alpha Capital
Anstalt dated July 21, 2017 (Incorporated by reference to the
Current Report on form 8K, previously filed with the SEC on August
2, 2017) |
|
10.40 |
Convertible
Note by and between the Company and Alpha Capital Anstalt dated
July 21, 2017 (Incorporated by reference to the Current Report on
form 8K, previously filed with the SEC on August 2,
2017) |
|
10.41 |
Fan
Pass Security Agreement by and between the Company and Alpha
Capital Anstalt dated July 21, 2017 (Incorporated by reference to
the Current Report on form 8K, previously filed with the SEC on
August 2, 2017) |
|
10.42 |
Pledge
Agreement by and between the Company and Alpha Capital Anstalt
dated July 21, 2017 (Incorporated by reference to the Current
Report on form 8K, previously filed with the SEC on August 2,
2017) |
|
10.43 |
Share
Exchange Agreement dated June 27, 2018 (Incorporated by reference
to the Current Report on form 8K, previously filed with the SEC on
July 2, 2018) |
|
10.44 |
Spinoff
Agreement dated June 27, 2018 (Incorporated by reference to the
Current Report on form 8K, previously filed with the SEC on July 2,
2018) |
|
10.45 |
Letter
from Sharps Technology Inc., dated September 10, 2018 (Incorporated
by reference to the Current Report on form 8K, previously filed
with the SEC on October 18, 2018) |
|
10.46 |
12%
Convertible Loan Or Promissory Note Dated December 14, 2018
(Incorporated by reference to the Current Report on form 8K,
previously filed with the SEC on December 21, 2018) |
|
10.47 |
Debt
Restructure Agreement dated December 14, 2018 (Incorporated by
reference to the Current Report on form 8K, previously filed with
the SEC on March 15, 2019) |
|
10.48*** |
Robert
Rositano Employment Agreement dated April 3, 2019 |
|
10.49*** |
Dean
Rositano Employment Agreement dated April 3, 2019
|
|
10.50*** |
Frank
Garcia Employment Agreement dated April 3, 2019 |
|
10.51 |
Schedule
14 C Reverse Split and Change in Authorized Common Stock effective
May 27, 2019 (Incorporated by reference to the Current Report on
form 8K, previously filed with the SEC on May 7,
2019) |
|
10.52 |
Designation
of Series B Preferred stock dated April 11, 2019 (Incorporated by
reference to the Current Report on form 8K, previously filed with
the SEC on June 14, 2019) |
|
10.53 |
Settlement
Agreement with Integrity Media dated September 26, 2019
(Incorporated by reference to the Current Report on form 8K,
previously filed with the SEC on September 30,
2019) |
|
10.54 |
Designation
of Series C Preferred stock dated November 25, 2019 (Incorporated
by reference to the Current Report on form 8K, previously filed
with the SEC on December 31, 2019) |
|
10.55*** |
Security Purchase Agreement for Preferred C Stock dated November
19, 2019 |
|
10.56 |
Amendment
to the Restructuring Agreement dated December 26, 2019
(Incorporated by reference to the Current Report on form 8K,
previously filed with the SEC on December 31, 2019) |
|
10.57 |
Security
Purchase Agreement for Preferred C Stock dated December 11, 2019
(Incorporated by reference to the Current Report on form 8K,
previously filed with the SEC on December 31, 2019) |
|
(21) |
Subsidiaries |
|
21.1 |
Subsidiaries
of the Registrant |
|
(31) |
Rule
13a-14(a)/15d-14(a) Certification |
|
31.1** |
Section
302 Certification under Sarbanes-Oxley Act of 2002 of the Chief
Executive Officer |
|
31.2** |
Section
302 Certification under Sarbanes-Oxley Act of 2002 of the Chief
Financial Officer |
|
(32) |
Section
1350 Certification |
|
32.1*** |
Section
906 Certifications under Sarbanes-Oxley Act of 2002 |
|
(101) |
XBRL |
| 101.INS+ |
XBRL
INSTANCE DOCUMENT |
| 101.SCH+ |
XBRL
TAXONOMY EXTENSION SCHEMA |
| 101.CAL+ |
XBRL
TAXONOMY EXTENSION CALCULATION LINKBASE |
| 101.DEF+ |
XBRL
TAXONOMY EXTENSION DEFINITION LINKBASE |
| 101.LAB+ |
XBRL
TAXONOMY EXTENSION LABEL LINKBASE |
| 101.PRE+ |
XBRL
TAXONOMY EXTENSION PRESENTATION LINKBASE |
|
* |
Indicates
management contract or compensatory plan or agreement |
+ IN
ACCORDANCE WITH THE TEMPORARY HARDSHIP EXEMPTION PROVIDED BY RULE
201 OF REGULATION S-T, THE DATE BY WHICH THE INTERACTIVE DATA FILE
IS REQUIRED TO BE SUBMITTED HAS BEEN EXTENDED BY SIX BUSINESS
DAYS.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
| |
FRIENDABLE
INC. |
|
|
|
|
|
|
|
Date:
June 29, 2020 |
By: |
/s/ Robert
Rositano |
|
| |
|
Robert
Rositano |
|
| |
|
Chief
Executive Officer, Secretary, and Director
(Principal Executive Officer) |
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
|
Date:
June 29, 2020 |
By: |
/s/ Robert
Rositano |
|
| |
|
Robert
Rositano |
|
| |
|
Chief
Executive Officer, Secretary, and Director
(Principal Executive Officer) |
|
|
Date:
June 29, 2020 |
By: |
/s/ Frank
Garcia |
|
|
|
|
Frank
Garcia |
|
| |
|
Chief
Financial Officer
(Principal Financial Officer and Principal Accounting
Officer) |
|
|
Date:
June 29, 2020 |
By: |
/s/ Dean
Rositano |
|
|
|
|
Dean
Rositano |
|
| |
|
President
and Chief Technology Officer and Director |
|