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

 

FRIENDABLE, INC.
(Exact name of registrant as specified in its charter)

 

Nevada   98-0546715
State or other jurisdiction of   (I.R.S. Employer
incorporation or organization   Identification No.)

 

1821 S Bascom Ave., Suite 353, Campbell, California 95008
(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

 

Title of each class   Name of each exchange on which registered
None   N/A
     

Securities registered pursuant to Section 12(g) of the Act

 

Common Stock, par value $0.0001 per share
(Title of Class)
 

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.

 

Large accelerated filer o   Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company x
         

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.

1

 

TABLE OF CONTENTS

 

PART I 3
   ITEM 1. BUSINESS   3
   ITEM 1A. RISK FACTORS   9
   ITEM 1B. UNRESOLVED STAFF COMMENTS   21
   ITEM 2. PROPERTIES   21
   ITEM 3. LEGAL PROCEEDINGS   21
   ITEM 4. MINE SAFETY DISCLOSURES   21
         
PART II 21
   ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES   21
   ITEM 6 SELECTED FINANCIAL DATA   23
   ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   23
   ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   28
   ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   29
   ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE   30
   ITEM 9A. CONTROLS AND PROCEDURES    30
   ITEM 9B. OTHER INFORMATION   31
         
PART III 31
   ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE   31
   ITEM 11. EXECUTIVE COMPENSATION   34
   ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS   36
   ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE   38
   ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES   40
         
PART IV 41
   ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES   41
         
   SIGNATURES   44

2

 

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.

3

 

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

4

 

Fan Pass Market Opportunity

 

(GRAPHICS)

5

 

(GRAPHICS)

6

 

(GRAPHICS)

7

 

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.

 

(ROBERT A ROSITANO JR.) Robert A Rositano Jr.

Chief Executive Officer
   

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.

 

(DEAN ROSITANO) Dean Rositano

President & Chief Technology Officer
   

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.

 

(DEAN ROSITANO) Frank Garcia

Chief Financial Officer
   

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.

 

           
  Investor Communications Contacts: Robert A. Rositano, Jr.,   Web
  Friendable, Inc. (855) 473-7473   CEO Friendable, Inc.   www.friendable.com
  Xt701   1821 S. Bascom    

8

 

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.

9

 

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:

 

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.

10

 

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.

11

 

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;

 

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.

12

 

We believe that our ability to compete effectively for users depends upon many factors both within and beyond our control, including:

 

the popularity, usefulness, ease of use, performance and reliability of our products and services compared to those of our competitors;

 

the amount, quality and timeliness of content generated by our users;

 

the timing and market acceptance of our products and services;

 

the adoption of our products and services internationally;

 

its ability, and the ability of our competitors, to develop new products and services and enhancements to existing products and services;

 

the frequency and relative prominence of the ads displayed by us or our competitors;

 

our ability to establish and maintain relationships with platform partners that integrate with our platform;

 

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;

 

government action regulating competition;

 

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:

 

the size and composition of our user base relative to those of our competitors;

 

our ad targeting capabilities, and those of our competitors;

 

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.

13

 

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.

14

 

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.

15

 

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.

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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.

17

 

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.

18

 

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.

19

 

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.

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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

 

(a) Market Information

 

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  

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(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.

 

(c) Dividends

 

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.

22

 

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 )

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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 )

24

 

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).

25

 

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.

26

 

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.

27

 

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

28

 

ITEM 8 FINANCIAL STATEMENTS AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

FRIENDABLE, INC.

 

CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2019

 

Reports of Independent Registered Public Accounting Firms   F-1
     
Consolidated Balance Sheets as of December 31, 2019 and 2018   F-4
     
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019 and 2018   F-5
     
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2019 and 2018   F-6
     
Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018   F-7
     
Notes to the Consolidated Financial Statements   F-8 - F-18

29

 

(SALBERG & COMPANY LOGO)

 

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

F-1

 

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

 

F-2

 

 

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.

F-3

 

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.

F-4

 

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.

F-5

 

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.

F-6

 

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.

F-7

 

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).

F-8

 

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.

F-9

 

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.

F-10

 

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.

F-11

 

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.

F-12

 

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.

F-13

 

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.

 

(2) Lawsuit Contingency.

 

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.

F-14

 

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.

F-15

 

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.

F-16

 

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  

F-17

 

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.

F-18

 

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.

30

 

(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.

31

 

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.

32

 

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.

33

 

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.

34

 

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.

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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.

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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.

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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%

 

* Less than 1%.

 

(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;

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  (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.

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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.

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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)

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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)

42

 

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

** Filed herewith.

*** Furnished herewith.

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. 

 

 

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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  

44