Filed
Pursuant to Rule 253(g)(2)
File
No.: 024-11427
FRIENDABLE,
INC.
Maximum
Offering: $5,000,000
Up to a Maximum of 500,000 Series D Preferred Shares
Including
up to 750,000,000 shares of the Company’s Common Stock
Offering Price of $10.00 per Series D Preferred Share
We
are offering 500,000 shares of our Series D Preferred Stock, par value $0.0001 per share (the “Preferred Stock”), at an offering
price of $10.00 per share including up to 750,000,000 shares of the Company’s common stock into which it may be converted (the
“Offered Shares”). This Offering will terminate on twelve months from the day the Offering is qualified, subject to extension
for up to thirty (30) days as defined below or the date on which the maximum offering amount is sold (such earlier date, the “Termination
Date”). The minimum purchase requirement per investor is 5,000 Offered Shares ($50,000); however, we can waive the minimum purchase
requirement on a case-by-case basis in our sole discretion.
These
securities are speculative securities. Investment in the Company’s stock involves significant risk. You should purchase
these securities only if you can afford a complete loss of your investment. See the “Risk Factors” section
of this Offering Circular.
No
Escrow
The
proceeds of this offering will not be placed into an escrow account. We will offer our Common Stock on a best-efforts basis. Upon
the approval of any subscription to this Offering Circular, the Company shall immediately deposit said proceeds into the bank
account of the Company and may dispose of the proceeds in accordance with the Use of Proceeds.
Subscriptions
are irrevocable and the purchase price is non-refundable as expressly stated in this Offering Circular. The Company, by determination
of the Board of Directors, in its sole discretion, may issue the Securities under this Offering for cash, promissory notes, services,
and/or other consideration without notice to subscribers. All proceeds received by the Company from subscribers for this Offering
will be available for use by the Company upon acceptance of subscriptions for the Securities by the Company.
Sale
of these shares will commence within two calendar days of the qualification date and it will be a continuous Offering pursuant
to Rule 251(d)(3)(i)(F).
This
Offering will be conducted on a “best-efforts” basis, which means our Officers will use their commercially reasonable
best efforts in an attempt to offer and sell the Shares. Our Officers will not receive any commission or any other remuneration
for these sales. In offering the securities on our behalf, the Officers will rely on the safe harbor from broker-dealer registration
set out in Rule 3a4-1 under the Securities Exchange Act of 1934, as amended.
This
Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sales of
these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful, prior to registration
or qualification under the laws of any such state.
The
Company is using the Offering Circular format in its disclosure in this Offering Circular.
The
Preferred Stock offered hereby is convertible into common stock of the Company that is quoted on the OTC Pink marketplace under the symbol
“FDBL” and this offering includes up to 750,000,000 shares of the Company’s common stock into which the Preferred Stock
is convertible.
Investing
in our Preferred Stock involves a high degree of risk. See “Risk Factors” section of this Offering Circular
for a discussion of certain risks that you should consider in connection with an investment in our Preferred Stock.
Securities Offered by the
Company
|
|
Price Per
Share to
Public
|
|
|
Total
Number of
Shares
Being
Offered
|
|
|
Broker-
Dealer
discount
and
commissions (1)
|
|
|
Proceeds
to issuer (2)
|
|
|
Per
Share of Preferred Stock (3)
|
|
$
|
10.00
|
|
|
|
500,000
|
|
|
$
|
-
|
|
|
$
|
5,000,000
|
|
|
Total Maximum
|
|
$
|
5,000,000
|
|
|
|
500,000
|
|
|
$
|
-
|
|
|
$
|
5,000,000
|
|
|
|
(1)
|
We
may offer the shares of our preferred stock through registered broker-dealers or a selling agent and we may pay finders, although
we have no current arrangements to do so. We currently do not have any specific plans or arrangements to use a selling agent, broker-dealer
or finder; however, if we choose to do so in the future, information about any such broker dealer, selling agent, or finder shall be
disclosed in an amendment to this Offering Circular.
|
|
|
(2)
|
This
does not account for the payment of expenses of this offering, which is currently estimated to be approximately $150,000. See
“Plan of Distribution.”
|
|
|
(3)
|
Includes
up to 750,000,000 shares of the Company’s common stock in to which the Preferred Stock is convertible. See “Description
of Securities” and “Securities Offerred.”
|
Our
Board of Directors used its business judgment in setting a value of $10.00 per share to the Company as consideration for the stock
to be issued under the Offering. The sales price per share bears no relationship to our book value or any other measure of our
current value or worth.
Generally,
no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual
income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that
your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general
information on investing, we encourage you to refer to www.investor.gov.
THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED
OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION
MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION
HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.
TABLE
OF CONTENTS
In
this Offering Circular, unless the context indicates otherwise, references to “Friendable, Inc.”, “Freindable”,
“FDBL”, “we”, the “Company”, “our” and “us” refer to the activities
of and the assets and liabilities of the business and operations of Friendable, Inc.
IMPORTANT
INFORMATION ABOUT THIS OFFERING CIRCULAR
Please
carefully read the information in this offering circular and any accompanying offering circular supplements, which we refer to
collectively as the offering circular. You should rely only on the information contained in this Offering Circular. We have not
authorized anyone to provide you with different information. This offering circular may only be used where it is legal to sell
these securities. You should not assume that the information contained in this offering circular is accurate as of any date later
than the date hereof or such other dates as are stated herein or as of the respective dates of any documents or other information
incorporated herein by reference.
This
offering circular is part of an offering statement that we filed with the SEC, using a continuous offering process. Periodically,
as we have material developments, we will provide an offering circular supplement that may add, update or change information contained
in this offering circular. Any statement that we make in this offering circular will be modified or superseded by any inconsistent
statement made by us in a subsequent offering circular supplement. The offering statement we filed with the SEC includes exhibits
that provide more detailed descriptions of the matters discussed in this offering circular. You should read this offering circular
and the related exhibits filed with the SEC and any offering circular supplement, together with additional information contained
in our annual reports, semi-annual reports and other reports and information statements that we will file periodically with the
SEC. See the section entitled “Additional Information” below for more details.
We,
and if applicable, those selling Common Stock on our behalf in this offering, will be permitted to make a determination that the
purchasers of Common Stock in this offering are “qualified purchasers” in reliance on the information and representations
provided by the purchaser regarding the purchaser’s financial situation. Before making any representation that your investment
does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A (“Regulation A”)
under the Securities Act of 1933, as amended (the “Securities Act”). For general information on investing, we encourage
you to refer to www.investor.gov.
STATE
LAW EXEMPTION AND PURCHASE RESTRICTIONS
Our
Common Stock is being offered and sold only to “qualified purchaser” (as defined in Regulation A). As a Tier 2 offering
pursuant to Regulation A, this offering will be exempt from state law “Blue Sky” review, subject to meeting certain
state filing requirements and complying with certain anti-fraud provisions, to the extent that our Common Stock offered hereby
is offered and sold only to “qualified purchasers” or at a time when our Common Stock is listed on a national securities
exchange. “Qualified purchasers” include: (i) “accredited investors” under Rule 501(a) of Regulation D
under the Securities Act (“Regulation D”) and (ii) all other investors so long as their investment in our Common Stock
does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater
of annual revenue or net assets at fiscal year-end (for non-natural persons).
To
determine whether a potential investor is an “accredited investor” for purposes of satisfying one of the tests in
the “qualified purchaser” definition, the investor must be a natural person who has:
|
|
1.
|
an
individual net worth, or joint net worth with the person’s spouse, that exceeds $1,000,000 at the time of the purchase,
excluding the value of the primary residence of such person; or
|
|
|
2.
|
earned
income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years
and a reasonable expectation of the same income level in the current year.
|
If
the investor is not a natural person, different standards apply. See Rule 501 of Regulation D for more details.
For
purposes of determining whether a potential investor is a “qualified purchaser,” annual income and net worth should
be calculated as provided in the “accredited investor” definition under Rule 501 of Regulation D. In particular, net
worth in all cases should be calculated excluding the value of an investor’s home, home furnishings and automobiles.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some
of the statements under “Summary”, “Risk Factors”, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations”, “Our Business” and elsewhere in this Offering Circular constitute
forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies,
anticipated events or trends and similar matters that are not historical facts. In some cases, you can identify forward-looking
statements by terms such as “anticipate”, “believe”, “could”, “estimate”, “expect”,
“intend”, “may”, “plan”, “potential”, “should”, “will”
and “would” or the negatives of these terms or other comparable terminology.
You
should not place undue reliance on forward looking statements. The cautionary statements set forth in this Offering Circular,
including in “Risk Factors” and elsewhere, identify important factors which you should consider in evaluating our
forward-looking statements. These factors include, among other things:
The
speculative nature of the business;
Our
reliance on suppliers and vendors;
Our
dependence upon external sources for the financing of our operations, particularly given that there are concerns about our ability
to continue as a “going concern;”
Our
ability to effectively execute our business plan;
Our
ability to manage our expansion, growth and operating expenses;
Our
ability to finance our businesses;
Our
ability to promote our businesses;
Our
ability to compete and succeed in highly competitive and evolving businesses;
Our
ability to respond and adapt to changes in technology and customer behavior; and
Our
ability to protect our intellectual property and to develop, maintain and enhance our business strategy.
Although
the forward-looking statements in this Offering Circular are based on our beliefs, assumptions and expectations, taking into account
all information currently available to us, we cannot guarantee future transactions, results, performance, achievements or outcomes.
No assurance can be made to any investor by anyone that the expectations reflected in our forward-looking statements will be attained,
or that deviations from them will not be material and adverse. We undertake no obligation, other than as may be required by law,
to re-issue this Offering Circular or otherwise make public statements updating our forward-looking statements.
SUMMARY
This
summary highlights selected information contained elsewhere in this Offering Circular. This summary is not complete and does not
contain all the information that you should consider before deciding whether to invest in our Common Stock. You should carefully
read the entire Offering Circular, including the risks associated with an investment in the company discussed in the “Risk
Factors” section of this Offering Circular, before making an investment decision. Some of the statements in this Offering
Circular are forward-looking statements. See the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”
Company
Information
Friendable,
Inc. (“FDBL”) 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 moved the Friendable app closer to a traditional subscription based
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 subscription-based app/brand, released in July, 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 Fan Pass platform supports artists at all levels, providing exclusive artist content “channels,”
live event streaming, promotional support, fan subscriptions and custom merchandise designs, all of which are revenue streams
for each artist.
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 experience working together on
technology-related ventures. For more information about the Company, visit www.Friendable.com.
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.
|
Trading
Market
The
Preferred Stock offered hereby is convertible into common stock of the Company that is quoted on the OTC Pink marketplace under
the symbol “FDBL”.
THE
OFFERING
|
Issuer:
|
|
Friendable,
Inc.
|
|
|
|
|
|
Securities
offered:
|
|
500,000
shares of our Series D Preferred Stock, par value $0.0001 per share (the “Preferred Stock”) at an offering price of $10.00
per share including up to 750,000,000 shares of the Company’s common stock into which the Preferred Stock is convertible (the “Offered Shares”). (See “Distribution.”).
|
|
|
|
|
|
Number
of shares of Series D Preferred Stock outstanding before the offering:
|
|
0
issued and outstanding as of September 30, 2020.
|
|
|
|
|
|
Number
of shares of Series D Preferred Stock to be outstanding after the offering:
|
|
500,000
Series D Preferred Shares, assuming all the Offered Shares are sold in this offering.
|
|
|
|
|
|
Price
per share:
|
|
$10.00.
|
|
|
|
|
|
Conversion
of the Series D Preferred Stock:
|
|
Each
Offered Share of Series D Preferred Stock is convertible, at the option of the holder, at any time, and from time to time,
into that number of fully paid and nonassessable shares of Common Stock (whether whole or fractional) that have a Fair Market
Value, in the aggregate, equal to, and based on, the Series D Conversion Price. The “Series D Conversion Price”
shall initially be equal to a value of $10.00, per share. Such initial Series D Conversion Price, and the rate at which
shares of Series D Preferred Stock may be further converted into shares of Common Stock, shall be subject to adjustment for
Reclassification, Exchange, Substitution, Sales, Reorganizations, Mergers or Consolidations, as set forth in section 4.4 of
the Series D Preferred Stock Certificate of Designation, which is an Exhibit hereto. “Fair Market Value” shall
mean as of any date of determination, 80% of the average closing price of a share of Common Stock on the principal exchange
or market on which such shares are then trading for the 20 trading days immediately preceding such date.
As an example, suppose Investor X purchases 10,000 Series D Preferred
Shares under this Offering at $10.00 per share (for a total purchase price and value of $100,000) and the applicable average trading
price of the Company’s common shares on conversion is $0.00375 per share, Investor X would be entitled to receive 33,333,333
common shares on full conversion of the original Series D Preferred investment, calculated by applying 80% of $0.00375 (or $0.003)
against the original investment value of $100,000.
|
|
|
|
|
|
Trading
Market:
|
|
Our
Preferred Stock is convertible into common stock of the Company that is quoted on the OTC Pink marketplace under the symbol “FDBL”.
There is no trading market for the Preferred Stock.
|
|
|
|
|
|
Use
of Proceeds:
|
|
If
we sell all of the shares being offered, our net proceeds (after our estimated offering expenses) will be $4,850,000. We will
use these net proceeds for working capital and other general corporate purposes.
|
|
|
|
|
|
Risk
factors:
|
|
Investing
in our Series D Preferred Stock involves a high degree of risk. See “Risk Factors” below for additional
detail.
|
|
|
|
|
|
Termination
|
|
This
Offering will terminate on twelve months from the day the Offering is qualified, subject to extension for up to thirty (30)
days as defined below or the date on which the maximum offering amount is sold (such earlier date, the “Termination
Date”).
|
RISK
FACTORS
Investment
in our Series D Preferred Stock involves a high degree of risk. You should carefully consider, among other matters, the following
risk factors in addition to the other information in this offering, our Annual Report on Form 10K, our Quarterly Reports on Form
10Q and our other public filings when evaluating our business because these risk factors may have a significant impact on our
business, financial condition, operating results or cash flow. If any of the material risks described below or in subsequent reports
we file with the Securities and Exchange Commission (“SEC”) actually occur, they may materially harm our business,
financial condition, operating results or cash flow. Additional risks and uncertainties that we have not yet identified or that
we presently consider to be immaterial may also materially harm our business, financial condition, operating results or cash flow.
Risks
Related to Our Business and Industry
Our
success depends upon the continued growth and acceptance of paid subscription based access to our online/mobile applications,
together with acceptance by sponsors and advertisers to online/mobile platforms, particularly paid listings, as an effective
alternative to traditional, offline advertising and the continued commercial use of the internet.
Many
online/mobile applications are access free to audiences. In addition, many sponsors and 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 access free platforms (such as YouTube) and 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 paid subscription platforms and mobile advertising generally will depend, to a large extent, on its perceived
effectiveness and the acceptance of paid exclusive and/or live streaming digital content , as well as 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
had substantial client concentration with one technology services client, on a per contract basis, accounting for approximately 99% of
our revenues through 2020 and, although we may continue to work with this client in the future, we do not anticipate doing so and thus
face an inherent risk of not being able to sustain operations from our remaining Fan Pass business segment alone.
To
date, the Company’s revenue has been almost entirely dependent on technology services contracts with one client, Answering Legal,
to support operations until the Fan Pass subscription and merchandising segment of our business gained traction. At this time, our Fan
Pass subscription and merchandising segment of our business is growing, and we are reducing our dependance on Answering Legal. While
we anticipate being able to gain new technology services contracts from clients to offset our operating expenses, we may need to obtain
additional debt and/or equity financing in the interim and may continue to incur substantial operating losses, depending on the traction
our Fan Pass subscription and merchandising segment gains in 2021. There are inherent risks whenever a large percentage of total revenues
are concentrated with one primary client and when that client is no longer anticipated to be the primary source of revenue for a company.
Nonetheless, we are hopeful about the Fan Pass subscription and merchandising segment of our business in 2021. As a general matter, it
is not possible for us to predict the future level of demand for our services that will be generated by any clients, including Answering
Legal, or the future demand for the products and services of other similar clients. The loss of Answering Legal as a primary source of
revenue or the failure to retain similar clients generally could negatively affect our revenues and results of operations and/or the
trading price of our common stock.
We
depend, in part, upon arrangements with third parties to drive traffic to our various websites and distribute our products and
services.
We
engage in a variety of activities, such as search engine optimization and application search optimization, designed to attract
traffic to our application and convert visitors into repeat users and customers. How successful we are in these efforts depends,
in part, upon our continued ability to enter into arrangements with third parties to drive traffic to our application, as well
as the continued introduction of new and enhanced features, products and services that resonate with users and customers generally.
In
addition, we have entered into a number of arrangements with third parties to promote and deliver mobile advertising to various
social networks or mobile channels. Pursuant to these arrangements, third parties generally promote our application on various
mobile applications, their websites or through e-mail campaigns and we either pay on a cost per impression basis (i.e. cost per
view) or a fixed fee when visitors to these websites click through to or download our application. These arrangements are generally
not exclusive, are short-term in nature and are generally terminable by either party given notice. If existing arrangements with
third parties are terminated (or are not renewed upon their expiration) and we fail to replace this traffic and related revenues,
or if we are unable to enter into new arrangements with existing and/or new third parties in response to industry trends, our
business, financial condition and results of operations could be adversely affected.
Even
if we succeed in driving traffic to our application, we may not be able to convert this traffic or otherwise retain users unless
we continue to provide quality products and services. We may not be able to adapt quickly and/or in cost-effective manner to frequent
changes in user and customer preferences, which can be difficult to predict, or appropriately time the introduction of enhancements
and/or new products or services to the market. Our inability to provide quality products and services would adversely affect user
and customer experiences, which would result in decreases in users, customers and revenues, which would adversely affect our business,
financial condition and results of operations.
As
discussed below, our traffic building and conversion initiatives also involve the expenditure of considerable sums for marketing,
as well as for the development and introduction of new products, services and enhancements, infrastructure and other related efforts.
Marketing
efforts designed to drive traffic to our various websites may not be successful or cost-effective.
Traffic
building and conversion initiatives involve considerable expenditures for online, mobile and offline advertising and marketing.
We plan to make significant expenditures for online and mobile display advertising, event-based marketing and traditional offline
advertising in connection with these initiatives, which may not be successful or cost-effective. In the case of paid advertising
generally, the policies of sellers and publishers of advertising may limit our ability to purchase certain types of advertising
or advertise some of our products and services, which could affect our ability to compete effectively and, in turn, adversely
affect our business, financial condition and results of operations.
In
addition, search engines have increasingly expanded their offerings into other, non-search related categories, and have in certain
instances displayed their own integrated or related product and service offerings in a more prominent manner than those of third
parties within their search engine results. Continued expansion and competition from search engines could result in a substantial
decrease in traffic to our various websites, as well as increased costs if we were to replace free traffic with paid traffic,
which would adversely affect our business, financial condition and results of operations.
Lastly,
as discussed above, we also have and will enter into various arrangements with third parties in an effort to increase traffic,
which arrangements are generally more cost-effective than traditional marketing efforts. If we are unable to renew existing (and
enter into new) arrangements of this nature, sales and marketing costs as a percentage of revenue would increase over the long-term.
Any
failure to attract and acquire new, and retain existing, traffic, users and customers in a cost-effective manner could adversely
affect our business, financial condition and results of operations.
We
rely in part on application marketplaces and Internet search engines to drive traffic to our products and services, and if we
fail to appear high up in the search results or rankings, traffic to our platform could decline and our business and operating
results could be adversely affected.
We
rely on application marketplaces, such as Apple’s App Store, to drive downloads of our mobile applications. In the future,
Apple or other operators of application marketplaces may make changes to their marketplaces which may make access to our products
and services more difficult. Our rankings in Apple’s App Store may also drop based on the following factors:
|
|
●
|
the
size and diversity of our registered member and subscriber bases relative to those of our competitors;
|
|
|
●
|
the
functionality of our application and the attractiveness of their features and our services and offerings generally to consumers
relative to those of our competitors;
|
|
|
●
|
how
quickly we can enhance our existing technology and services and/or develop new features and localized opportunities and venue-based
monetization opportunities in response to:
|
|
|
●
|
new,
emerging and rapidly changing technologies;
|
|
|
●
|
the
introduction of product and service offerings by our competitors;
|
|
|
●
|
changes
in consumer requirements and trends in the single community relative to our competitors; and
|
|
|
●
|
our
ability to engage in cost-effective marketing efforts, including by way of maintaining relationships with third parties with which
we have entered into alliances, and the recognition and strength of our various brands relative to those of our competitors.
|
Our
estimated income taxes could be materially different from income taxes that we ultimately pay.
We
are subject to income taxes in the United States. Significant judgment and estimation is required in determining our provision
for income taxes and related matters. In the ordinary course of our business, there are many transactions and calculations where
the ultimate tax determinations are uncertain or otherwise subject to interpretation. Our determination of our income tax liability
is always subject to review by applicable tax authorities and we are currently subject to audits in a number of jurisdictions.
Although we believe our income tax estimates and related determinations are reasonable and appropriate, relevant taxing authorities
may disagree. The ultimate outcome of any such audits and reviews could be materially different from estimates and determinations
reflected in our historical income tax provisions and accruals. Any adverse outcome of any such audit or review could have an
adverse effect on our financial condition and results of operations.
A
variety of new laws, or new interpretations of existing laws, could subject us to claims or otherwise harm our business.
We
are subject to a variety of laws in the U.S. and abroad that are costly to comply with, can result in negative publicity and diversion
of management time and effort and can subject us to claims or other remedies. Some of these laws, such as income, sales, use,
value-added and other tax laws and consumer protection laws, are applicable to businesses generally and others are unique to the
various types of businesses in which we are engaged. Many of these laws were adopted prior to the advent of the internet and related
technologies and, as a result, do not contemplate or address the unique issues of the internet and related technologies.
Laws that do reference the internet are being interpreted by the courts, but their applicability and scope remain uncertain.
For
example, through our various businesses we post and link to third party content, including third party advertisements, links and
websites, as well as content submitted by users, such as comments, photographs and videos. We could be subject to liability for
posting or linking to third party content, and while we generally require third parties to indemnify us for related claims, we
may not be able to enforce our indemnification rights. Some laws, including the Communications Decency Act, or CDA, and the Digital
Millennium Copyright Act, or DMCA, limit our liability for posting or linking to third party content. For example, the DMCA generally
protects online service providers from claims of copyright infringement based on use of third party content, so long as certain
statutory requirements are satisfied. However, the scope and applicability of the DMCA are subject to judicial interpretation
and, as such, remain uncertain, and the U.S. Congress may enact legislation limiting the protections afforded by the DMCA to online
service providers. Moreover, similar protections may not exist in other jurisdictions in which our products are used. As a result,
claims could be threatened and filed under both U.S. and foreign laws based upon use of third party content asserting, among other
things, defamation, invasion of privacy or right or publicity, copyright infringement or trademark infringement.
Any
failure on our part to comply with applicable laws may subject us to additional liabilities, which could adversely affect our
business, financial condition and results of operations. In addition, if the laws to which we are currently subject are amended
or interpreted adversely to our interests, or if new adverse laws are adopted, our products and services might need to be modified
to comply with such laws, which would increase our costs and could result in decreased demand for our products and services to
the extent that we pass on such costs to our customers. Specifically, in the case of tax laws, positions that we have taken or
will take are subject to interpretation by the relevant taxing authorities. While we believe that the positions we have taken
to date comply with applicable law, there can be no assurances that the relevant taxing authorities will not take a contrary position,
and if so, that such positions will not adversely affect us. Any events of this nature could adversely affect our business, financial
condition and results of operations.
We
may fail to adequately protect our intellectual property rights or may be accused of infringing the intellectual property rights
of third parties.
We
regard our intellectual property rights, including trademarks, domain names, trade secrets, copyrights and other similar
intellectual property, as critical to our success. For example, we currently rely heavily on the trademark “Fan
Pass” and “Fan Pass Live” to market our products and seek to build and maintain brand loyalty and
recognition. We intend, in due course, subject to legal advice, to apply for trademark, copyright and/or patent
protection in the United States and other jurisdictions. We regard our intellectual property, including our software and
trademark, as valuable assets and intend to vigorously defend them against infringement. Effective trademark protection may
not be available or may not be sought in every country in which products and services are made available and contractual
disputes may affect the use of marks governed by private contract. We have reserved and registered certain domain names,
however not every variation of a domain name may be available or be registered, even if available.
While
there can be no assurance that registered trademarks and copyrights will protect our proprietary information, we intend to assert
our intellectual property rights against any infringer. Although any assertion of our rights can result in a substantial cost
to, and diversion of effort by, our Company, management believes that the protection of our intellectual property rights is a
key component of our operating strategy.
Our
application also relies upon trade secrets and certain copyrightable and patentable proprietary technologies relating to its software
and related features, products and services.
We
will rely on a combination of laws and contractual restrictions with employees, customers, suppliers, affiliates and others to
establish and protect our various intellectual property rights. For example, we plan to apply to register and renew, or secure
by contract where appropriate, trademarks and service marks as they are developed and used, and continue to reserve, register
and renew domain names as we deem appropriate.
We
also plan to apply for copyrights and patents or for other similar statutory protections as we deem appropriate, based on then
current facts and circumstances. No assurances can be given that any copyright or patent application we file will result in a
copyright or patent being issued, or that any future copyright or patent will afford adequate protection against competitors and
similar technologies. In addition, no assurances can be given that third parties will not create new products or methods that
achieve similar results without infringing upon copyrights or patents we may own in the future.
Despite
these measures, our intellectual property rights may still not be protected in a meaningful manner, challenges to contractual
rights could arise or third parties could copy or otherwise obtain and use our intellectual property without authorization. The
occurrence of any of these events could result in the erosion of our brands and limitations on our ability to control marketing
on or through the internet using our various domain names, as well as impede our ability to effectively compete against competitors
with similar technologies, any of which could adversely affect our business, financial conditions and results of operations.
From
time to time, we may be subject to legal proceedings and claims in the ordinary course of business, including claims of alleged
infringement of trademarks, copyrights, patents and other intellectual property rights held by third parties. In addition, litigation
may be necessary in the future to enforce our intellectual property rights, protect our trade secrets or to determine the validity
and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result
in substantial costs and diversion of management and technical resources, any of which could adversely affect our business, financial
condition and results of operations. Patent litigation tends to be particularly protracted and expensive.
If
we fail to grow our user base, or if user engagement or ad engagement on the platform declines, the revenue, business and operating
results may be harmed.
The
size of the user base and the users’ level of engagement are critical to our success. The financial performance has been
and will continue to be significantly determined by success in growing the number of users and increasing their overall level
of engagement on the platform as well as the number of ad engagements. We generate a substantial majority of our revenue based
upon the number of downloads, migration to subscription accounts and engagement by the users with the ads that we display. If
people do not perceive the services to be useful, reliable and trustworthy, we may not be able to attract users or increase the
frequency of their engagement with the platform and the ads that we display. There is no guarantee that we will be successful
in attracting more users or not suffer erosion of the user base or engagement levels. A number of factors could potentially negatively
affect user growth and engagement, including if:
|
|
●
|
users
engage with other products, services or activities as an alternative;
|
|
|
●
|
influential
users, such as celebrities, athletes, journalists and brands or certain age demographics conclude that an alternative product
or service is more relevant;
|
|
|
●
|
we
are unable to convince potential new users of the value and usefulness of its products and services;
|
|
|
●
|
there
is a decrease in the perceived quality of the content generated by our platform;
|
|
|
●
|
we
fail to introduce new and improved products or services or if we introduce new or improved products or services that are not favorably
received or that negatively affect user engagement;
|
|
|
●
|
technical
or other problems prevent us from delivering our products or services in a rapid and reliable manner or otherwise affect the user
experience;
|
|
|
●
|
we
are unable to present users with content that is interesting, useful and relevant to them;
|
|
|
●
|
users
believe that their experience is diminished as a result of the decisions we make with respect to the frequency, relevance and
prominence of ads that we display;
|
|
|
●
|
there
are user concerns related to privacy and communication, safety, security or other factors;
|
|
|
●
|
we
become subject to hostile or inappropriate usage on our platform;
|
|
|
●
|
there
are adverse changes in our products or services that are mandated by, or that we elect to make to address, legislation, regulatory
authorities or litigation, including settlements or consent decrees;
|
|
|
●
|
we
fail to provide adequate customer service to users; or
|
|
|
●
|
we
do not maintain our brand image or its reputation is damaged.
|
If
users do not continue to download and use our application and their engagement is not valuable to other users, we may experience
a decline in the number of users accessing the products and services and user engagement, which could result in the loss of advertisers
and revenue.
Our
success depends on our ability to provide users with valuable content, which in turn depends on the profile descriptions and use
of the app by others. We believe that one of our competitive advantages is the quality, quantity and real-time nature of the content
on iHookup, and that access to unique or real-time content is one of the main reasons users visit us. We seek to foster a broad
and engaged user community, and we encourage celebrities, athletes, and others to use our products and services to meet people
and form relationships. If users do not continue to contribute profiles and we are unable to provide users with valuable and timely
content or other people to engage with, our user base and user engagement may decline. Additionally, if we are not able to address
user concerns regarding the safety and security of our products and services or if we are unable to successfully prevent abusive
or other hostile behavior on the platform, the size of the user base and user engagement may decline.
If
we are unable to compete effectively for users and advertiser spend, the business and operating results could be harmed.
Competition
for users of its products and services is intense. Although we have developed a new platform for public self-expression and meeting
people in real time, we face strong competition in this business. We compete against many companies to attract and engage users,
including companies which have greater financial resources and substantially larger user bases, such as eHarmony, Match.com and
others which offer a variety of Internet and mobile device-based products, services and content. As a result, competitors may
acquire and engage users at the expense of the growth or engagement of our user base, which would negatively affect the business.
We
believe that our ability to compete effectively for users depends upon many factors both within and beyond our control, including:
|
|
●
|
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.
User
growth and engagement depend upon effective interoperation with operating systems, networks, and devices, that we do not control.
Currently,
our application is available only on Apple’s iOS. We are dependent on the interoperability of our products and services
with popular devices, and mobile operating systems that we do not control. Any changes in such systems or devices that degrade
the functionality of our products and services or give preferential treatment to competitive products or services could adversely
affect usage of our products and services. Further, if the number of platforms for which we develop our product expands, it will
result in an increase in our operating expenses. In order to deliver high quality products and services, it is important that
our products and services work with a range of operating systems and devices that we do not control. In addition, because our
users access our products and services through mobile devices, we are particularly dependent on the interoperability of our products
and services with mobile devices and operating systems. We may not be successful in developing or maintaining relationships with
key participants in the mobile industry or in developing products or services that operate effectively with these operating systems
and devices. In the event that it is difficult for our users to access and use our products and services on their mobile devices,
our user growth and engagement could be harmed, and our business and operating results could be adversely affected.
We
have a limited operating history in a new and unproven market for our platform, which makes it difficult to evaluate our future
prospects and may increase the risk that we will not be successful.
We
have developed a mobile app for public self-expression and meeting people in real time, and the market for our products and services
is relatively new and may not develop as expected, if at all. People who are not our users may not understand the value of our
products and services and new users may initially find our products confusing. Convincing potential new users of the value of
our products and services is critical to increasing our user base and to the success of our business
We
have a limited operating history which makes it difficult to effectively assess our future prospects or forecast future results.
We encounter or may encounter many risks in this developing and rapidly evolving market. These risks and challenges include its
ability to, among other things:
|
|
●
|
increase
its number of users and user engagement;
|
|
|
●
|
successfully
expand our business;
|
|
|
●
|
develop
a reliable, scalable, secure, high-performance technology infrastructure that can efficiently handle increased usage;
|
|
|
●
|
convince
advertisers of the benefits of our products compared to alternative forms of advertising;
|
|
|
●
|
develop
and deploy new features, products and services;
|
|
|
●
|
successfully
compete with other companies, some of which have substantially greater resources and market power than us, that are currently
in, or may in the future enter, its industry, or duplicate the features of our products and services;
|
|
|
●
|
attract,
retain and motivate talented employees, particularly engineers, designers and product managers;
|
|
|
●
|
process,
store, protect and use personal data in compliance with governmental regulations, contractual obligations and other obligations
related to privacy and security;
|
|
|
●
|
continue
to earn and preserve its users’ trust, including with respect to their private personal information; and
|
|
|
●
|
defending
ourselves against litigation, regulatory, intellectual property, privacy or other claims.
|
If
we fail to educate potential users and potential advertisers about the value of our products and services, if the market for our
platform does not develop as we expect or if we fail to address the needs of this market, our business will be harmed. We may
not be able to successfully address these risks and challenges or other unforeseen risks and challenges. Failure to adequately
address these risks and challenges could harm our business and cause our operating results to suffer.
Our
business depends on the continued and unimpeded access to our products and services on mobile devices by our users and advertisers.
If we or our users experience disruptions in service or if mobile service providers are able to block, degrade or charge for access
to our products and services, we could incur additional expenses and the loss of users and advertisers.
We
depend on the ability of our users and advertisers to access mobile devices. Currently, this access is provided by companies that
have significant market power in the broadband and telecommunications access marketplace, including incumbent telephone companies,
cable companies, mobile communications companies, government-owned service providers, device manufacturers and operating system
providers, any of whom could take actions that degrade, disrupt or increase the cost of user access to our products or services,
which would, in turn, negatively impact our business. We also rely on other companies to maintain reliable communications network
systems that provide adequate speed, data capacity and security to us and our users. As the number of mobile device users continues
to grow, frequency of use and amount of data transmitted, the communications infrastructure that we and our users rely on may
be unable to support the demands placed upon it. The failure of the mobile communications infrastructure that we and/or our users
rely on, even for a short period of time, could undermine our operations and harm our operating results.
Abusive
activities by certain users could diminish the user experience on our platform, which could damage our reputation and deter our
current and potential users from using our products and services.
There
are a range of abusive activities that are prohibited by the our terms of service and are generally defined as unsolicited, repeated
actions that negatively impact other users with the general goal of drawing user attention to a given person, account, site, product
or idea. This includes posting large numbers of unsolicited mentions of a user, duplicate outlets, misleading links (e.g., to
malware or click-jacking pages) or other false or misleading content, and aggressively following and un-following accounts, adding
users to lists, sending invitations to inappropriately attract attention. Our terms of service also prohibit the creation of serial
or bulk accounts, both manually or using automation, for disruptive or abusive purposes. Although we continue to invest resources
to reduce spam and other abusive behavior, we expect spammers and abusers will continue to seek ways to act inappropriately on
our platform. We will continuously combat spam and other abusive behaviors, including by suspending or terminating accounts we
believe to be spammers and launching algorithmic changes focused on curbing abusive activities. Combatting spam and other abusive
behaviors require the diversion of significant time and focus of our engineering team from improving our products and services.
If spam or abusive behavior increase, this could hurt our reputation for delivering relevant content or reduce user growth and
user engagement and result in continuing operational cost to us.
If
we fail to effectively manage our growth, our business and operating results could be harmed.
If
we experience rapid growth in our headcount and operations, it will place significant demands on our management, operational and
financial infrastructure. We intend to continue to make substantial investments to expand our operations, research and development,
sales and marketing and general and administrative organizations. We face significant competition for employees, particularly
engineers, designers and product managers, from other Internet and high-growth companies, which include both publicly-traded and
privately-held companies, and we may not be able to hire new employees quickly enough to meet our needs. To attract highly skilled
personnel, we will need to continue to offer, highly competitive compensation packages. As we continue to grow, we are subject
to the risks of over-hiring, over-compensating our employees and over-expanding our operating infrastructure, and to the challenges
of integrating, developing and motivating a rapidly growing employee base. If we fail to effectively manage our hiring needs and
successfully integrate new hires, our efficiency and ability to meet our forecasts and our employee morale, productivity and retention
could suffer, and our business and operating results could be adversely affected.
Our
business and operating results may be harmed by a disruption in our service, or by our failure to timely and effectively scale
and adapt our existing technology and infrastructure.
Some
of the reasons people use our platforms is for real-time information, personal contact and live streaming of music content. 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 platforms. 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 brands, our business and operating results may be harmed.
We
believe that maintaining and promoting our brands is critical to expanding our base of users and advertisers. Maintaining and promoting
our brands 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
brands if users do not have a positive experience using third-party applications. Our brands 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 brands may require iHookup to make substantial investments and these investments may not
achieve the desired goals. If we fail to successfully promote and maintain our brand or if we incur excessive expenses in this
effort, our business and operating results could be adversely affected.
Negative
publicity could adversely affect our business and operating results.
Negative
publicity about us, including about our product quality and reliability, changes to our products and services, privacy and security
practices, litigation, regulatory activity, the actions of our users or user experience with our products and services, even if
inaccurate, could adversely affect our reputation and the confidence in and the use of our products and services. For example,
service outages could result in widespread media reports. Such negative publicity could also have an adverse effect on the size,
engagement and loyalty of our user base and result in decreased revenue, which could adversely affect our business and operating
results.
We
focus on product innovation and user engagement rather than short-term operating results.
We
encourage employees to quickly develop and help us launch new and innovative features. We focus on improving the user experience
for our products and services and on developing new and improved products and services for the advertisers on our platform. We
prioritize innovation and the experience for users and advertisers on our platform over short-term operating results. We may make
product and service decisions that may reduce our short-term operating results if we believe that the decisions are consistent
with its goals to improve the user experience and performance for advertisers, which we believe will improve our operating results
over the long term. These decisions may not be consistent with the short-term expectations and may not produce the long-term benefits
that we expect, in which case our user growth and user engagement, our relationships with advertisers and our business and operating
results could be harmed. In addition, our focus on the user experience may negatively impact our relationships with existing or
prospective advertisers. This could result in a loss of advertisers, which could harm our revenue and operating results.
Our
products and services may contain undetected software errors, which could harm our business and operating results.
Our
products and services incorporate complex software and we encourage our employees to quickly develop and help us launch new and
innovative features. Our software may now or in the future contain, errors, bugs or vulnerabilities. Some errors in the software
code may only be discovered after the product or service has been released. Any errors, bugs or vulnerabilities discovered in
our code after release could result in damage to our reputation, loss of users, loss of platform partners, loss of advertisers
or advertising revenue or liability for damages, any of which could adversely affect our business and operating results.
Our
business is subject to complex and evolving U.S. laws and regulations. These laws and regulations are subject to change and uncertain
interpretation, and could result in claims, changes to its business practices, monetary penalties, increased cost of operations
or declines in user growth, user engagement or ad engagement, or otherwise harm our business.
We
are subject to a variety of laws and regulations in the United States that involve matters central to our business, including
privacy, rights of publicity, data protection, content regulation, intellectual property, competition, protection of minors, consumer
protection and taxation. Many of these laws and regulations are still evolving and being tested in courts and could be interpreted
or applied in ways that could harm our business, particularly in the new and rapidly evolving industry in which we operate. The
introduction of new products or services may subject us to additional laws and regulations. There have been a number of recent
legislative proposals in the United States, at both the federal and state levels, that would impose new obligations in areas such
as privacy. The U.S. government, including the Federal Trade Commission, or the FTC, and the Department of Commerce, has announced
that it is reviewing the need for greater regulation for the collection of information concerning user behavior on the Internet
and over mobile devices, including regulation aimed at restricting certain tracking and targeted advertising practices.
Additionally,
recent amendments to U.S. patent laws may affect the ability of companies to protect their innovations and defend against claims
of patent infringement. Having personal information may subject us to additional regulation. Further, it is difficult to predict
how existing laws and regulations will be applied to its business and the new laws and regulations to which we may become subject,
and it is possible that they may be interpreted and applied in a manner that is inconsistent with our practices. These existing
and proposed laws and regulations can be costly to comply with and can delay or impede the development of new products and services,
result in negative publicity, significantly increase our operating costs, require significant time and attention of management
and technical personnel and subject us to inquiries or investigations, claims or other remedies, including fines or demands that
we modify or cease existing business practices.
Even
though our platform is for public self-expression conversation and personal interaction, user trust regarding privacy is important
to the growth of users and the increase in user engagement on our platform, and privacy concerns relating to our products and
services could damage our reputation and deter current and potential users and advertisers from using our products and services.
From
time to time, concerns have been expressed by governments, regulators and others about whether mobile products, services or practices
compromise the privacy of users and others. Concerns about, governmental or regulatory actions involving practices with regard
to the collection, use, disclosure or security of personal information or other privacy-related matters, even if unfounded, could
damage our reputation, cause us to lose users and advertisers and adversely affect our operating results. While we will strive
to comply with applicable data protection laws and regulations, as we strive to comply with our own posted privacy policies and
other obligations we may have with respect to privacy and data protection, the failure or perceived failure to comply may result,
in inquiries and other proceedings or actions against us by governments, regulators or others. These inquiries could result in
negative publicity and damage to our reputation and brand, each of which could cause us to lose users and advertisers, which could
have an adverse effect on our business.
Any
systems failure or compromise of our security that results in the unauthorized access to or release of our users’ or advertisers’
data could significantly limit the adoption of our products and services and cause harm to our reputation and brand and, therefore,
our business. We expect to continue to expend significant resources to protect against security breaches. The risk that these
types of events could seriously harm our business is likely to increase as we expand the number of products and services we offer,
increase the size of our user base and operate in other countries.
If
our security measures are breached, or if our products and services are subject to attacks that degrade or deny the ability of
users to access our products and services, our products and services may be perceived as not being secure, users and advertisers
may curtail or stop using our products and services and our business and operating results could be harmed.
Our
products and services involve the storage and transmission of users’ and advertisers’ information, and security breaches
expose us to a risk of loss of this information, litigation and potential liability. We may experience cyber-attacks of varying
degrees, and as a result, unauthorized parties may obtain, and may in the future obtain, access to its data or its users’
or advertisers’ data. Our security measures may also be breached due to employee error, malfeasance or otherwise. Additionally,
outside parties may attempt to fraudulently induce employees, users or advertisers to disclose sensitive information in order
to gain access to our data or our users’ or advertisers’ data or accounts, or may otherwise obtain access to such
data or accounts. Since our users and advertisers may use their accounts to establish and maintain online identities, unauthorized
communications from our accounts that have been compromised may damage their reputations. Any such breach or unauthorized access
could result in significant legal and financial exposure, damage to our reputation and a loss of confidence in the security of
our products and services that could have an adverse effect on our business and operating results. Because the techniques used
to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until
launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If
an actual or perceived breach of security occurs, the market perception of the effectiveness of our security measures could be
harmed, we could lose users and advertisers and we may incur significant legal and financial exposure, including legal claims
and regulatory fines and penalties. Any of these actions could have a material and adverse effect on our business, reputation
and operating results.
We
depend on highly skilled personnel to grow and operate our business, and if we are unable to hire, retain and motivate its personnel,
we may not be able to grow effectively.
Our
future success will depend upon our continued ability to identify, hire, develop, motivate and retain highly skilled personnel,
including senior management, engineers, designers and product managers. Our ability to execute efficiently is dependent upon contributions
from our employees, in particular our senior management team. We do not maintain key person life insurance for any employee. In
addition, from time to time, there may be changes in our senior management team that may be disruptive to our business. If our
senior management team, including any new hires that we may make, fails to work together effectively and to execute our plans
and strategies on a timely basis, our business could be harmed. Our growth strategy also depends on our ability to expand our
organization with highly skilled personnel. Identifying, recruiting, training and integrating qualified individuals will require
significant time, expense and attention. Competition for highly skilled personnel is intense, particularly in the San Francisco
Bay Area, where our headquarters is located. We may need to invest significant amounts of cash and equity to attract and retain
new employees and we may never realize returns on these investments. If we are not able to effectively add and retain employees,
our ability to achieve our strategic objectives will be adversely impacted, and our business will be harmed.
Our
business is subject to the risks of earthquakes, fire, power outages, floods and other catastrophic events, and to interruption
by man-made problems such as terrorism.
A
significant natural disaster, such as an earthquake, fire, flood or significant power outage could have a material adverse impact
on our business, operating results, and financial condition. Our headquarters is located in the San Francisco Bay Area, a region
known for seismic activity. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems
at our data centers could result in lengthy interruptions in our services. In addition, acts of terrorism and other geo-political
unrest could cause disruptions in our business. All of the aforementioned risks may be further increased if our disaster recovery
plans prove to be inadequate. We have a disaster recovery program, which allows us to move production to a back-up data center
in the event of a catastrophe. Although this program is functional, we do not currently serve network traffic equally from each
data center, so if our primary data center shuts down, there will be a period of time that our products or services, or certain
of our products or services, will remain inaccessible to our users or our users may experience severe issues accessing our products
and services. We do not carry business interruption insurance sufficient to compensate us for the potentially significant losses,
including the potential harm to our business that may result from interruptions in our ability to provide our products and services.
Risks
Related to Our Company
Messrs.
Dean and Robert Rositano, Jr., as our directors and officers, own a significant percentage of the voting power of our stock and
will be able to exercise significant influence and control over the matters subject to stockholder approval and our operations.
Messrs.
Dean and Robert Rositano, Jr. may be deemed to own (directly and/or beneficially) 56.24% of our Series A
preferred stock. As of September 30, 2020, the following entities and individuals own the following shares of our Series A
preferred stock:
|
|
●
|
Messrs.
Dean and Robert Rositano, Jr. each directly own 1,882 and 1,881 shares, respectively.
|
|
|
●
|
Copper
Creek Holdings, LLC, a Nevada limited liability company owned and managed by Robert Rositano and his wife Stacy Rositano, owns
14,730 shares (74.45%), thus each may be deemed to beneficially own one half;
|
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 Jr.’s ownership interests and voting power described above, Messrs. Dean
and Robert Rositano Jr. 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 owed by the Company when obligations become due, the note holders may
take adverse proceedings under terms of default.
In
the event of default under terms in our 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 the following material weaknesses in our internal controls over financial reporting (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 and (iii) inadequate technical
skills of accounting personnel.
As
of the date of this Offering Circular, 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.
As
our Series D Preferred Stock, which is the subject of this Offering, is convertible into Common Stock of the Company that is quoted
on the OTC Markets Group marketplace under the symbol “FDBL,” the following risk factors related to our common stock
are relevant to this offering:
If
we issue additional shares in the future, it will result in the dilution of our existing shareholders.
As
of September 30, 2020, 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 and 50,000,000 shares of preferred 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 and/or choose to increase the Company’s authorized capital. The increase and issuance
of any such shares will reduce the book value per share and may contribute to a reduction in the market price of the outstanding
shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and
voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.
The
price of our common stock may be negatively impacted by factors which are unrelated to our operations.
The
market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our
ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes
in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition,
the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market
price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect
on our common stock.
We
do not intend to pay cash dividends on any investment in the shares of stock of our company.
We
have never paid any cash dividends and currently do not intend to pay any cash dividends for the foreseeable future. Because we
do not intend to declare cash dividends, any gain on an investment in our company will need to come through an increase in the
stock’s price. This may never happen and investors may lose all of their investment in our company.
Trading
of our stock is restricted by the Securities Exchange Commission’s penny stock regulations, which may limit a stockholder’s
ability to buy and sell our common stock.
The
Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security
that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our common stock 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
common stock price has been volatile and your investment could lose value.
The
trading price of our common stock has been volatile and could be subject to wide fluctuations due to various factors. The timing
of announcements in the public market regarding new products, product enhancements or technological advances by us or our competitors,
and any announcements by us or our competitors of acquisitions, major transactions or management changes could also affect our
stock price. Our stock price is subject to speculation in the press and the analyst community, changes in recommendations or earnings
estimates by financial analysts, changes in investors’ or analysts’ valuation measures for our stock and market trends
unrelated to our performance. A significant drop in our stock price could also expose us to the risk of securities class action
lawsuits, which could result in substantial costs and divert management’s attention and resources, which could adversely
affect our business. Moreover, if the per share trading price of our common stock declines significantly, you may be unable to
resell your shares at or above the public offering price. We cannot assure you that the per share trading price of our common
stock will not fluctuate or decline significantly in the future.
The
trading price of our common stock has been low, and the sale of a substantial number of shares in the public market could depress
the price of our common stock.
Our
common stock is traded on the OTC Markets Group 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 Markets Group 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 Markets Group 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.
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, our continued
operating losses and our net cash used in operations has raised substantial doubts about our ability to continue as a going
concern. We plan to attempt to raise additional equity capital by issuing shares and, if necessary through one or more
private placement or public offerings, and via the securities purchase agreement/equity line financing. However, the doubts
raised relating to our ability to continue as a going concern may make our shares an unattractive investment for potential
investors. These factors, among others, may make it difficult to raise any additional capital.
Failure
to effectively manage our growth could place additional strains on our managerial, operational and financial resources and could
adversely affect our business and prospective operating results.
Our
anticipated growth is expected to continue to place a strain on our managerial, operational and financial resources. Further,
as we expand our user and advertiser base, we will be required to manage multiple relationships. Any further growth by us, or
an increase in the number of our strategic relationships will increase this strain on our managerial, operational and financial
resources. This strain may inhibit our ability to achieve the rapid execution necessary to implement our business plan, and could
have a material adverse effect upon our financial condition, business prospects and prospective operations and the value of an
investment in our company.
We
may fail to raise sufficient capital.
To
the extent that we fail to obtain sufficient operating capital, we may be unable to deal with presently unforeseen contingencies
in the future or be able to fund our operations. In addition, we may have more difficulty or find it impossible, to raise third
party financing from investors or financial institutions.
Our
reserves may be insufficient.
We
intend to establish a reserve fund, as determined in the Board’s discretion, for normal working capital contingencies. However,
we have been unable to do so. If the reserves are not available to the Company, it may be necessary to attempt to raise additional
capital or financing. In the event that such capital or financing is not available on favorable terms, we may be forced to raise
additional capital on unfavorable terms. In fact, we have been forced to issue several convertible notes at substantial discounts
and interest rates in order to raise the requisite capital for operations.
Investors in this offering may not be
entitled to a jury trial with respect to claims arising under the subscription agreements, which could result in less favorable
outcomes to investors in any action under that agreement.
Investors in this offering will be bound by
the subscription agreement that includes a provision under which investors waive the right to a jury trial of any claim they may
have against the company arising out of or relating to the subscription agreement, including any claim under the federal securities
laws. If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable based
on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability
of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has
not been finally adjudicated by a federal court. However, we believe that a contractual pre-dispute jury trial waiver
provision is generally enforceable, including under the laws of the State of Nevada, which governs the subscription agreement,
in a court of competent jurisdiction in the State of Florida. In determining whether to enforce a contractual pre-dispute jury
trial waiver provision, courts will generally consider whether the visibility of the jury trial waiver provision within the agreement
is sufficiently prominent such that a party knowingly, intelligently, and voluntarily waived the right to a jury trial. We believe
that this is the case with respect to the subscription agreement. You should consult legal counsel regarding the jury waiver provision
before entering into the subscription agreement.
If you bring a claim against the Company in
connection with matters arising under the subscription agreement, including claims under federal securities laws, you may not be
entitled to a jury trial with respect to those claims, which may have the effect of limiting and discouraging lawsuits against
the company. If a lawsuit is brought against the company under the subscription agreement, it may be heard only by a judge or justice
of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes
than a trial by jury would have had, including results that could be less favorable to investors in such an action. Nevertheless,
if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the subscription
agreement with a jury trial. No condition, stipulation or provision of the subscription agreement serves as a waiver by any holder
of common shares or by us of compliance with any provision of the federal securities laws and the rules and regulations promulgated
under those laws.
The Company’s exclusive forum provision
in the Subscription Agreement attached as Exhibit 4.1 does not apply to claims arising under the federal securities laws and the
rules and regulations thereunder, including the Securities Act and the Exchange Act, and there are risks and other potential impacts
of this exclusive forum provision to investors in this Offering.
The
Subscription Agreement for this Offering provides that, unless we consent in writing to the selection of an alternative forum,
the state and federal courts located in Broward County, Florida will be the sole and exclusive forum for substantially all disputes
between us and subscribers to this Offering, which could limit your ability to obtain a favorable judicial forum for disputes with
us or our directors, officers, or employees. This choice of forum provision does not preclude or contract the scope of exclusive
federal or concurrent jurisdiction for any actions brought under the Securities Act or the Exchange Act and does not apply to claims
arising under the federal securities laws. Accordingly, our exclusive forum provision will not relieve us of our duties to comply
with the federal securities laws and the rules and regulations thereunder, and you cannot waive our compliance with these laws,
rules, and regulations.
Any
person or entity purchasing or otherwise acquiring any interest in any of our securities pursuant hereto shall be deemed to have
notice of and consented to this provision. This exclusive-forum provision may limit your ability to bring a claim in a judicial
forum of your choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against
us and our directors, officers and other employees. If a court were to find the choice of forum provision contained in the Subscription
Agreement, to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action
in other jurisdictions, which could harm our business, results of operations, and financial condition. Even if we are successful
in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees.
Statements
Regarding Forward-looking Statements
This
Offering Circular contains various “forward-looking statements.” You can identify forward-looking statements by the
use of forward-looking terminology such as “believes,” “expects,” “may,” “will,”
“would,” “could,” “should,” “seeks,” “approximately,” “intends,”
“plans,” “projects,” “estimates” or “anticipates” or the negative of these words
and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or
intentions. These statements may be impacted by a number of risks and uncertainties.
The
forward-looking statements are based on our beliefs, assumptions and expectations of our future performance taking into account
all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties
and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business,
financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements.
You should carefully consider these risks before you make an investment decision with respect to our Securities. For a further
discussion of these and other factors that could impact our future results, performance or transactions, see the section entitled
“Risk Factors.”
USE
OF PROCEEDS
We
estimate that, at a per share price of $10.00, the net proceeds from the sale of the shares in this offering will be approximately
$4,850,000, after deducting the estimated offering expenses of approximately $150,000.
The
following table sets forth the uses of proceeds assuming the sale of 100%, 75%, 50% and 25% of the securities offered for sale
by the Company at $10.00 per share. No assurance can be given that we will raise the full $5,000,000 as reflected in the following
table:
Shares Offered
(% Sold)
|
|
Shares
Sold (100%)
|
|
|
Shares
Sold (75%)
|
|
|
Shares
Sold (50%)
|
|
|
Shares
Sold (25%)
|
|
|
Total Offering Amount
|
|
$
|
5,000,000
|
|
|
$
|
3,750,000
|
|
|
$
|
2,500,000
|
|
|
$
|
1,250,000
|
|
|
Approximate Offering Expenses (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Misc. Expenses
|
|
|
105,000
|
|
|
|
105,000
|
|
|
|
105,000
|
|
|
|
105,000
|
|
|
Legal, Accounting and Audit
|
|
|
45,000
|
|
|
|
45,000
|
|
|
|
45,000
|
|
|
|
45,000
|
|
|
Total Offering Expenses
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
150,000
|
|
|
Total Net Offering Proceeds
|
|
|
4,850,000
|
|
|
|
3,600,000
|
|
|
|
2,350,000
|
|
|
|
1,100,000
|
|
|
Principal Uses of Net Proceeds (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and marketing
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
|
$
|
750,000
|
|
|
$
|
350,000
|
|
|
Compensation to officer employees, developers consultants, support staff (3)
|
|
$
|
1,200,000
|
|
|
$
|
1,000,000
|
|
|
$
|
650,000
|
|
|
$
|
300,000
|
|
|
Legal, investor relations, accounting, IT, servers, miscellaneous fees
|
|
$
|
1,300,000
|
|
|
$
|
1,000,000
|
|
|
$
|
550,000
|
|
|
$
|
250,000
|
|
|
Working Capital
|
|
$
|
1,350,000
|
|
|
$
|
600,000
|
|
|
$
|
400,000
|
|
|
$
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Principal Uses of Net Proceeds
|
|
$
|
4,850,000
|
|
|
$
|
3,600,000
|
|
|
$
|
2,350,000
|
|
|
$
|
1,100,000
|
|
|
|
(1)
|
These
amounts are estimates.
|
|
|
(2)
|
These
figures are estimates.
|
|
|
(3)
|
The
Company may use proceeds received and slates for this line item in order to pay all or a portion of any accrued and unpaid salaries
of executives as discussed elsewhere in this Offering Circular.
|
The
expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions,
which could change in the future as our plans and business conditions evolve. The amounts and timing of our actual expenditures
may vary significantly depending on numerous factors, including negotiations with the other parties in the merge and acquisitions
process of the target companies, the amount of cash available from other sources and any unforeseen cash needs. As a result, our
management will retain broad discretion over the allocation of the net proceeds from this offering.
DILUTION
If
you purchase shares in this offering, your ownership interest in our Preferred Stock or as converted common stock will be diluted
immediately, to the extent of the difference between the price to the public charged for each share in this offering and its converted
value into common shares and the net tangible book value per share of our common stock after this offering.
Our
historical net tangible book value as of September 30, 2020 was $(4,015,966) or $(0.1893) per then-outstanding shares of our
common stock, which does not include common stock “issuable” of 106,558,432 at September 30, 2020. Historical net
tangible book value per share equals the amount of our total tangible assets, less total liabilities, divided by the total
number of shares of our common stock outstanding, all as of the date specified.
The
following table illustrates the per share dilution to new investors discussed above, assuming the sale of, respectively,
100%, 75%, 50% and 25% of the Preferred Stock shares offered for sale at $10.00 per share in this offering, equating to its
80% common stock conversion value per Preferred Share (after deducting estimated offering expenses of $150,000):
|
Percentage of shares offered that are sold
|
|
100%
|
|
|
75%
|
|
|
50%
|
|
|
25%
|
|
|
Price to the public
charged for each common share conversion from this offering (1)
|
|
$
|
0.0290
|
|
|
$
|
0.0290
|
|
|
$
|
0.0290
|
|
|
$
|
0.0290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical net tangible book value per common
share as of September 30, 2020 (2)
|
|
$
|
(0.1893
|
)
|
|
$
|
(0.1893
|
)
|
|
$
|
(0.1893
|
)
|
|
$
|
(0.1893
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in net tangible book
value per common share attributable to new investors in this offering (3)
|
|
$
|
0.0250
|
|
|
$
|
0.0239
|
|
|
$
|
0.0219
|
|
|
$
|
0.0171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tangible book value per common share, after this offering
|
|
$
|
0.0043
|
|
|
$
|
(0.0028
|
)
|
|
$
|
(0.0155
|
)
|
|
$
|
(0.0453
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilution per common share to new investors
|
|
$
|
(0.0247
|
)
|
|
$
|
(0.0318
|
)
|
|
$
|
(0.0445
|
)
|
|
$
|
(0.0743
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase to pre-offering shareholders
|
|
$
|
0.1936
|
|
|
$
|
0.1865
|
|
|
$
|
0.1738
|
|
|
$
|
0.1440
|
|
|
|
(1)
|
Based
on a preferred to common conversion price of $0.0290 (being 80% of $0.036 closing price of FDBL common shares quoted on OTC Markets
Group on December 23, 2020).
|
|
|
(2)
|
Based
on net tangible book value of $(4,015,966) and 21,218,432 outstanding common shares as of September 30, 2020.
|
|
|
(3)
|
After
deducting estimated offering expenses of $150,000.
|
The Company’s issued and outstanding
common stock increased by 45,888,113 shares, from 21,218,432 shares to 67,106,545 shares, between October 1,2020 and January 20,2021,
while the Company’s issuable common stock decreased by 7,586,353 shares from 106,558,432 shares at September 30,2020 to
98,972,079 shares at January 20, 2021. A summary of these changes follows:
|
Increase in common shares issued and outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued on the conversion of 124,800 Preferred C stock
|
|
|
28,205,115
|
|
|
|
|
|
|
|
|
Common stock issued as requested drawdowns against the Company’s debt restructuring agreement
|
|
|
7,886,353
|
|
|
|
|
|
|
|
|
Common stock issued on conversion of outstanding principal and interest under certain Convertible Notes
|
|
|
9,796,645
|
|
|
|
|
|
|
|
|
Increase in issued and outstanding common shares
|
|
|
45,888,113
|
|
|
|
|
|
|
|
|
Decrease in the number of common shares issuable:
|
|
|
|
|
|
|
|
|
|
|
|
Common stock previously recorded as issuable, but now actually issued during the period (see above)
|
|
|
7,886,353
|
|
|
|
|
|
|
|
|
Less: additional stock issuable obligation under artist’s performance contract
|
|
|
300,000
|
|
|
|
|
|
|
|
|
Net reduction in issuable common shares
|
|
|
7,586,353
|
|
DISTRIBUTION
This
Offering Circular is part of an Offering Statement that we filed with the SEC, using a continuous offering process. Periodically,
as we have material developments, we will provide an Offering Circular supplement that may add, update or change information contained
in this Offering Circular. Any statement that we make in this Offering Circular will be modified or superseded by any inconsistent
statement made by us in a subsequent Offering Circular supplement. The Offering Statement we filed with the SEC includes exhibits
that provide more detailed descriptions of the matters discussed in this Offering Circular. You should read this Offering Circular
and the related exhibits filed with the SEC and any Offering Circular supplement, together with additional information contained
in our annual reports, semi-annual reports and other reports and information statements that we will file periodically with the
SEC. See the section entitled “Additional Information” below for more details.
We
intend to sell the shares in the primary offering through the efforts of our officers and employees, who will not receive any
compensation for offering or selling the shares in our primary offering. We believe that our officers and employees are exempt
from registration as a broker-dealer under the provisions of Rule 3a4-1 promulgated under the Securities Exchange Act of 1934
(the Exchange Act). In particular, Mr. Rositano Jr.:
|
|
●
|
is
not subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Securities Act; and
|
|
|
●
|
is
not to be compensated in connection with his participation by the payment of commissions or other remuneration based either directly
or indirectly on transactions in securities;
|
|
|
●
|
is
not an associated person of a broker or dealer; and
|
|
|
●
|
meets
the conditions of the following:
|
|
|
●
|
primarily
performs, and will perform at the end of this offering, substantial duties for us or on our behalf otherwise than in connection
with transactions in securities; and
|
|
|
●
|
was
not brokers or dealers, or an associated person of a broker or dealer, within the preceding 12 months; and
|
|
|
●
|
did
not participate in selling an offering of securities for any issuer more than once every 12 months other than in reliance on paragraphs
(a)(4)(i) or (iii) of Rule 3a4-1 under the Exchange Act.
|
Pricing
of the Offering
Prior
to the Offering, there has been a limited public market for the Offered Shares. The public offering price was determined by the
Company. The principal factors considered in determining the public offering price include:
|
|
●
|
the
information set forth in this Offering Circular and otherwise available;
|
|
|
●
|
our
history and prospects and the history of and prospects for the industry in which we compete;
|
|
|
●
|
our
past and present financial performance;
|
|
|
●
|
our
prospects for future earnings and the present state of our development;
|
|
|
●
|
the
general condition of the securities markets at the time of this Offering;
|
|
|
●
|
the
recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and
|
|
|
●
|
other
factors deemed relevant by us.
|
Offering
Period and Expiration Date
This
Offering will start on or after the Qualification Date and will terminate at the Company’s discretion or, on the Termination
Date.
Procedures
for Subscribing
When
you decide to subscribe for Offered Shares in this Offering, you should:
Contact
us via phone or email.
|
|
1.
|
Electronically
receive, review, execute and deliver to us a subscription agreement; and
|
|
|
2.
|
Deliver
funds directly by wire or electronic funds transfer via ACH to the specified account maintained by us.
|
Any
potential investor will have ample time to review the subscription agreement, along with their counsel, prior to making any final
investment decision. We shall only deliver such subscription agreement upon request after a potential investor has had ample opportunity
to review this Offering Circular.
Right
to Reject Subscriptions. After we receive your complete, executed subscription agreement and the funds required under the
subscription agreement have been deposited to the Company’s account, we have the right to review and accept or reject your
subscription in whole or in part, for any reason or for no reason. We will return all monies from rejected subscriptions immediately
to you, without interest or deduction.
Acceptance
of Subscriptions. Upon our acceptance of a subscription agreement, we will countersign the subscription agreement and issue
the shares subscribed at closing. Once you submit the subscription agreement and it is accepted, you may not revoke or change
your subscription or request your subscription funds. All accepted subscription agreements are irrevocable.
No
Escrow
The
proceeds of this offering will not be placed into an escrow account. We will offer our Common Stock on a best effort’s basis.
As there is no minimum offering, upon the approval of any subscription to this Offering Circular, the Company shall immediately
deposit said proceeds into the bank account of the Company and may dispose of the proceeds in accordance with the Use of Proceeds
at Management’s discretion.
Investment
Limitations
Generally,
no sale may be made to you in this Offering if the aggregate purchase price you pay is more than 10% of the greater of your annual
income or net worth (please see below on how to calculate your net worth). Different rules apply to accredited investors and non-natural
persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review
Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.
Because
this is a Tier 2, Regulation A Offering, most investors must comply with the 10% limitation on investment in the Offering. The
only investor in this Offering exempt from this limitation is an “accredited investor” as defined under Rule 501 of
Regulation D under the Securities Act (an “Accredited Investor”). If you meet one of the following tests you should
qualify as an Accredited Investor:
|
|
(i)
|
You
are a natural person who has had individual income in excess of $200,000 in each of the two most recent years, or joint income
with your spouse in excess of $300,000 in each of these years, and have a reasonable expectation of reaching the same income level
in the current year;
|
|
|
(ii)
|
You
are a natural person and your individual net worth, or joint net worth with your spouse, exceeds $1,000,000 at the time you purchase
Offered Shares (please see below on how to calculate your net worth);
|
|
|
(iii)
|
You
are an executive officer or general partner of the issuer or a manager or executive officer of the general partner of the issuer;
|
|
|
(iv)
|
You
are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or the Code, a corporation,
a Massachusetts or similar business trust or a partnership, not formed for the specific purpose of acquiring the Offered Shares,
with total assets in excess of $5,000,000;
|
|
|
(v)
|
You
are a bank or a savings and loan association or other institution as defined in the Securities Act, a broker or dealer registered
pursuant to Section 15 of the Exchange Act, an insurance company as defined by the Securities Act, an investment company registered
under the Investment Company Act of 1940 (the “Investment Company Act”), or a business development company as defined
in that act, any Small Business Investment Company licensed by the Small Business Investment Act of 1958 or a private business
development company as defined in the Investment Advisers Act of 1940;
|
|
|
(vi)
|
You
are an entity (including an Individual Retirement Account trust) in which each equity owner is an accredited investor;
|
|
|
(vii)
|
You
are a trust with total assets in excess of $5,000,000, your purchase of Offered Shares is directed by a person who either alone
or with his purchaser representative(s) (as defined in Regulation D promulgated under the Securities Act) has such knowledge and
experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment,
and you were not formed for the specific purpose of investing in the Offered Shares; or
|
|
|
(viii)
|
You
are a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has assets in excess of $5,000,000.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You
should read the following discussion and analysis of our financial condition and results of our operations together with our consolidated
financial statements and the notes thereto appearing elsewhere in this Offering Circular. This discussion contains forward-looking
statements reflecting our current expectations, whose actual outcomes involve risks and uncertainties. Actual results and the
timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of
factors, including those discussed in the sections entitled “Risk Factors”, “Cautionary Statement regarding
Forward-Looking Statements” and elsewhere in this Offering Circular. Please see the notes to our Financial Statements for
information about our Critical Accounting Policies and Recently Issued Accounting Pronouncements.
Results
of Operations
For
the three and nine months ended September 30, 2020 compared to September 30, 2019
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
REVENUES
|
|
$
|
111,392
|
|
|
$
|
118,801
|
|
|
$
|
322,671
|
|
|
$
|
120,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
App hosting
|
|
|
12,000
|
|
|
|
2,301
|
|
|
|
33,000
|
|
|
|
18,068
|
|
|
Commissions
|
|
|
191
|
|
|
|
61
|
|
|
|
625
|
|
|
|
619
|
|
|
General and administrative
|
|
|
224,401
|
|
|
|
187,352
|
|
|
|
605,458
|
|
|
|
577,605
|
|
|
Product development and launch
|
|
|
105,790
|
|
|
|
100,500
|
|
|
|
460,102
|
|
|
|
156,088
|
|
|
Artists’ performance fees
|
|
|
425,058
|
|
|
|
-
|
|
|
|
425,058
|
|
|
|
-
|
|
|
Artists’ revenue share
|
|
|
402
|
|
|
|
|
|
|
|
402
|
|
|
|
-
|
|
|
Investor relations
|
|
|
3,921
|
|
|
|
-
|
|
|
|
140,527
|
|
|
|
-
|
|
|
Sales and Marketing
|
|
|
30,081
|
|
|
|
28,788
|
|
|
|
82,335
|
|
|
|
52,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
801,844
|
|
|
|
319,002
|
|
|
|
1,747,507
|
|
|
|
805,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(690,452
|
)
|
|
|
(200,201
|
)
|
|
|
(1,424,836
|
)
|
|
|
(684,642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion and interest expense
|
|
|
(38,423
|
)
|
|
|
(189,117
|
)
|
|
|
(266,710
|
)
|
|
|
(453,674
|
)
|
|
Provision for settlement of lawsuit
|
|
|
-
|
|
|
|
(780,000
|
)
|
|
|
-
|
|
|
|
(780,000
|
)
|
|
Gain on foreign exchange
|
|
|
-
|
|
|
|
-
|
|
|
|
2,580
|
|
|
|
|
|
|
Initial derivative expense
|
|
|
-
|
|
|
|
-
|
|
|
|
(419,000
|
)
|
|
|
-
|
|
|
Gain (loss) on settlement of derivative
|
|
|
257,317
|
|
|
|
-
|
|
|
|
(640,821
|
)
|
|
|
-
|
|
|
Gain on change in fair value of derivative
|
|
|
263,000
|
|
|
|
-
|
|
|
|
259,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense, net
|
|
|
481,894
|
|
|
|
(969,117
|
)
|
|
|
(1,064,951
|
)
|
|
|
(1,233,674
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(208,558
|
)
|
|
$
|
(1,169,318
|
)
|
|
$
|
(2,489,787
|
)
|
|
$
|
(1,918,316
|
)
|
For
the three months ended September 30, 2020 compared to September 30, 2019
Revenues
The
Company had revenues of $111,392 and $118,801 for the three months ended September 30, 2020 and 2019 respectively. The decrease
was due to the timing of sales under a contract to develop a third-party app.
Operating
Expenses
The
Company had operating expenses of $801,844 and $319,002 for the three months ended September 30, 2020 and 2019, respectively.
The increase in operating expenses was due primarily to Artists’ performing fees of $ 425,058 together with other related
expenses associated with the live event produced for the launch the Fan Pass app on July 24,2020. This resulted in a higher loss
from operations of $690,466 for the three months ended September 30,2020 compared with a loss from operations of $200,201 for
the three months ended September 30,2019.
Other
Income and Expense
The
Company had other income of $481,894 for the three months ended June 30, 2020 compared with other expense of $969,117 for the
three months ended September 30, 2019. Other income of $481,894 included gain on settlement of derivative $ 257,317 and gain on
change in fair value of derivative $263,000, offset with lower accretion and interest expense of $38,423. Other expense for the
three months ended September 30,2019 included provision for settlement of lawsuit $780,000 and higher accretion and interest expense
of $ 189,117.
Net
Loss
The
Company had net losses of $208,552 and $1,169,318 for the three months ended September 30, 2020 and 2019 respectively. The decrease
in net loss was due primarily to the provision for settlement of lawsuit $780,000 for the three months ended September 30,2019,
and gain on settlement of derivative and gain in fair value in derivative of $257,317 and $263,000 in the current period. The
higher operating expenses for the three months ended September 30,2020 attributable to the July, 2020 launch of the Fan Pass app
were offset by lower accretion and interest expense and by the gain on settlement and change in fair value of derivative.
For
the nine months ended September 30, 2020 compared to September 30, 2019
Revenues
The
Company had revenues of $322,671 and $120,662 for the nine months ended September 30, 2020 and 2019, respectively. The
increase primarily was due to higher revenue derived from the Company’s contract to develop a third-party
app.
Operating
Expenses
The
Company had operating expenses of $1,747,507 and $805,304 for the nine months ended September 30, 2020 and 2019,
respectively. The increase in operating expenses was due primarily to additional product development, investor relations,
artists’ performance and sales and marketing expenses relating to the Company’s live event to launch the Fan Pass
app on July 24,2020.
Other
Income and Expense
The
Company had other expense of $1,064,951 and $1,233,674 for the nine months ended September 30, 2020 and 2019 respectively. The
decrease in other expense was due primarily due to the provision for settlement of lawsuit $780,000 for the nine months ended
September 30,2019, offset by initial derivative expense and loss on settlement of derivative, plus a gain for the change in fair
value of derivative, for the nine months ended September 30,2020.
Net
Loss
The
Company had net losses of $2,489,787 and $1,918,316 for the nine months ended September 30, 2020 and 2019 respectively. The reduction
in net loss was due primarily to the reduction of $780,000 in the provision for settlement of lawsuit, lower interest expense
and higher revenues, offset by increased operating expenses and increased losses related to the derivatives.
Results
of Operations
Years
Ended December 31, 2019 and 2018
Our
cash as of December 31, 2019 was $11,282. As a result of our minimal amount of revenues and ongoing expenditures in pursuit of
our business, we have incurred net losses since our inception. Our accumulated deficit at December 31, 2019 was $32,443,883. For
the year ended December 31, 2019, our net loss was $10,183,410.
Our
operating revenues and expenses for our fiscal years ended December 31, 2019 and 2018 and the changes between those periods for
the respective items are summarized as follows:
|
|
|
For the Years Ended
|
|
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
REVENUES
|
|
$
|
242,696
|
|
|
$
|
6,190
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
App hosting
|
|
|
24,068
|
|
|
|
210,000
|
|
|
Commissions
|
|
|
938
|
|
|
|
1,817
|
|
|
General and administrative
|
|
|
814,053
|
|
|
|
719,960
|
|
|
Product development
|
|
|
299,124
|
|
|
|
80,549
|
|
|
Investor relations
|
|
|
98,264
|
|
|
|
6,077
|
|
|
Sales and Marketing
|
|
|
48,375
|
|
|
|
22,575
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,284,822
|
|
|
|
1,040,978
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(1,042,126
|
)
|
|
|
(1,034,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
Accretion and interest expense
|
|
|
(621,149
|
)
|
|
|
(2,052,216
|
)
|
|
Impairment loss
|
|
|
-
|
|
|
|
(35,000
|
)
|
|
Provision for settlement of lawsuit
|
|
|
(1,035,000
|
)
|
|
|
-
|
|
|
Loss on debt extinguishments
|
|
|
(7,384,866
|
)
|
|
|
-
|
|
|
Exchange gain or (loss)
|
|
|
24,731
|
|
|
|
-
|
|
|
Loss on change in fair value of derivative
|
|
|
(125,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense, net
|
|
|
(9,141,284
|
)
|
|
|
(2,087,216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(10,183,410
|
)
|
|
$
|
(3,122,004
|
)
|
Revenues
Revenues
for the year ended December 31, 2019 increased to $242,696 as compared to $6,190 for the year ended December 31, 2018. The
increase in revenue was due to receiving a contract to develop an app for a third party.
Operating
Expenses
Operating
expenses for the year ended December 31, 2019 and the December 31, 2018 were $1,284,822 and $1,040,978 respectively, an increase
of 23%. The increase in operating expenses was due primarily to higher sales and marketing, product development, and investor
relations related to preparing to launch the Fan Pass app. App hosting expenses decreased with less support for the old Friendable
app.
Net
Loss
Our
operating results have recognized net loss in the amount of $10,183,410 for the year ended December 31, 2019 as compared to a
net loss of $3,122,004 for the year ended December 31, 2018. The increase was primarily related due to higher operating expenses,
a loss on extinguishments of debt, and by a provision for settlement of a lawsuit, offset by lower interest expense.
Liquidity
and Capital Resources
Working
Capital
Our
working capital deficit (being the excess of current liabilities over current assets) at September 30, 2020 totaled $(4,015,966)
compared with a working capital deficit at December 31, 2019 of $(15,970,305) and December 31, 2018 of $(10,237,897). The higher
deficit at December 31, 2019 related primarily to a derivative liability, which was largely extinguished in 2020. A summary follows:
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|
Current assets
|
|
$
|
115,165
|
|
|
$
|
71,500
|
|
|
$
|
25,646
|
|
|
Current liabilities
|
|
|
(4,131,131
|
)
|
|
|
(16,041,805
|
)
|
|
|
(10,263,543
|
)
|
|
Working capital deficit
|
|
$
|
(4,015,966
|
)
|
|
$
|
(15,970,305
|
)
|
|
$
|
(10,237,897
|
)
|
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
Our
cash flows for the 9 months ended September 30, 2020, 9 months ended September 30, 2019 and for the years ended December 31,
2019 and December 31, 2018 were as follows:
|
|
|
September 30, 2020
|
|
September 30, 2019
|
|
December 31, 2019
|
|
December 31, 2018
|
|
Net cash used in Operating Activities
|
|
$
|
(260,931
|
)
|
|
$
|
(350,935
|
)
|
|
$
|
(488,864
|
)
|
|
$
|
(385,319
|
)
|
|
Net cash provided by Financing Activities
|
|
|
258,500
|
|
|
|
325,368
|
|
|
|
474,500
|
|
|
|
410,965
|
|
|
Net increase (decrease) in Cash
|
|
$
|
(2,431
|
)
|
|
|
(25,567
|
)
|
|
$
|
(14,364
|
)
|
|
$
|
25,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
8,851
|
|
|
$
|
79
|
|
|
$
|
11,282
|
|
|
$
|
25,646
|
|
Operating
Activities
Cash
used in operating activities
The
Company used $260,931 and $350,935, respectively, in cash in operating activities for the 9 months ended September 30, 2020 and
September 30, 2019 and $488,864 and $385,319 for the years ended December 31, 2019 and December 31, 2018. The increase use in
2019 is due to higher product development and general and administrative expense.
Cash
provided by financing activities
Financing
activities for the 9 months ended September 30, 2020 and September 30, 2019 generated net cash of $258,500 and $325,368, respectively,
as compared to generating net cash of $474,500 and $410,965 for the years ended December 31, 2019 and December 31, 2018, respectively.
The higher cash provided from financing activities in 2019 is attributable to higher proceeds from the sale of convertible preferred
Series B, Series C stock. and common stock.
There
was no significant impact on the Company’s operations as a result of inflation in either the 9 months ended September
30, 2020 and 9 months ended September 30, 2019, or for the years ended December 31, 2019 and December 31, 2018.
Series
B and Series C Preferred Stock
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 $0.25 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 B Preferred Stock for a total purchase price of $284,000 of which $205,000 was received in cash and
$79,000 was settled against payables to a related party.
Series
C Preferred Stock Purchase Agreements
On
November 25, 2019 the Company filed a Designation of Series C convertible Preferred Stock with the state of Nevada, designating
1,000,000 shares of the Series C Preferred Stock with a stated value of $1.00 per share. The Series C Preferred Stock will, with
respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends
with the Company’s common stock, par value 0.0001 per share (“Common Stock”)(the Series C Preferred Stock will
convert into common stock immediately upon liquidation and be pari passu with the common stock in the event of litigation), and
(b) junior with respect to dividends and right of liquidation to all existing and future indebtedness of the Company. The Series
C Preferred Stock does not have any voting rights. Each share of Series C Preferred Stock will carry an annual dividend in the
amount of eight percent (8%) of the Stated Value of $1.00 (the “Divided Rate”), which shall be cumulative and compounded
daily, payable solely upon redemption, liquidation or conversion and increase to 22% upon an event of default as defined. In the
event of any default other than the Company’s failure to issue shares upon conversion, the stated price will be $1.50. In
a default event where the Company fails to issue shares upon conversion, the stated price will $2.00. The holder shall have the
right six months following the issuance date, to convert all or any part of the outstanding Series C Preferred Stock into shares
of common stock of the Company. The conversion price shall equal the Variable Conversion Price. The “Variable Conversion
Price” shall mean 71% multiplied by the market price, representing a discount rate of 29%. Market price means the average
of the two lowest trading prices for the Company’s common stock during the twenty trading day period ending on the latest
complete trading day prior to the conversion date. Upon any liquidation, dissolution or winding up of the Company, whether voluntary
or involuntary, or upon any deemed liquidation event, after payment or provision for payment of debts and other liabilities of
the Company, and after payment or provision for any liquidation preference payable to the holders of any Preferred Stock ranking
senior upon liquidation to the Series C Preferred Stock, if any, but prior to any distribution or payment made to the holders
of Common Stock or the holders of any Preferred Stock ranking junior upon liquidation to the Series C Preferred Stock by reason
of their ownership thereof, the Holders will be entitled to be paid out of the assets of the Company available for distribution
to its stockholders. The Company will have the right, at the Company’s option, to redeem all or any portion of the shares
of Series C Preferred Stock, exercisable on not more than three trading days prior written notice to the Holders, in full, in
accordance with Section 6 of the designations at a premium of up to 35% for up to six months. Company’s mandatory redemption:
On the earlier to occur of (i) the date which is twenty-four (24) months following the Issuance Date and (ii) the occurrence of
an Event of Default (the “Mandatory Redemption Date”), the Company shall redeem all of the shares of Series C Preferred
Stock of the Holders (which have not been previously redeemed or converted).
During
the year ended December 31, 2019, the Company entered into subscription agreements with Geneva Roth Remark Holdings, Inc.
whereby we sold 149,300 shares of Series C Preferred Stock for a total purchase price of $136,000. At September 30, 2020, due
to conversions exercised in 2020, the outstanding balance of Series C Preferred Stock was reduced to 124,800 shares, with a
cumulative liquidation value of $208,867.
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 was recorded as an increase
in additional paid-in capital in the 12 months ended 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 (former affiliate), 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. Subsequent
to March 26, 2019, Alpha sold all of its convertible debenture to Ellis International LP (“Ellis”).
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 were 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.
Reset
Dates. The “Reset Dates” as set forth in Section 1(h) of the Agreement are 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.
On
March 4, 2020 the Company became obligated issue an additional 36,193,098 shares of common stock and on July 2, 2020 it became
obligated to issue an additional 63,275,243 shares for a total amount of shares due of 105,370,930.
The
Company determined that the reset provision represented a standalone derivative liability. Accordingly, this debt restructure
transaction was accounted for in 2019 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 resulting in a loss on debt extinguishment of $6,954,920.
The
Company adjusted this 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
|
|
|
June
|
|
|
|
|
2019
|
|
|
31, 2019
|
|
|
30, 2020
|
|
|
Volatility
|
|
|
617
|
%
|
|
|
738.1
|
%
|
|
|
293.6
|
%
|
|
Risk Free Rate
|
|
|
1.59
|
%
|
|
|
1.6
|
%
|
|
|
.13
|
%
|
|
Expected Term
|
|
|
0.66
|
|
|
|
0.5
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Because
the second (and final) reset date of July 2, 2020 determined that the total common shares issuable to fully settle this debt
amounted to 105,370,930 a derivative liability no longer exists and the Company recognized a final gain on settlement on July
2, 2020 of $257,316.
On
September 21, 2020, Ellis International LP (as successor to Alpha Capital Anstalt) submitted a request to drawdown and, on September
29, 2020, was issued 687,355 common shares against its entitlement above and reclassified from issuable shares in the accompanying
balance sheet and statement of changes in stockholder equity.
CONVERTIBLE
PROMISSORY NOTES
The
following is a summary of Convertible Promissory Notes at September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
Issuance:
|
|
Principal
|
|
|
Accrued
|
|
|
Accrued
|
|
|
|
|
Date
|
|
Outstanding
|
|
|
Interest
|
|
|
Interest
|
|
|
J.P. Carey Inc.
|
|
March 30, 2017
|
|
|
-
|
|
|
$
|
48,228
|
|
|
$
|
48,228
|
|
|
J.P. Carey Inc
|
|
May 20, 2020
|
|
$
|
60,000
|
|
|
|
4,892
|
|
|
|
64,892
|
|
|
J.P. Carey Inc
|
|
June 11, 2020
|
|
|
10,000
|
|
|
|
-
|
|
|
|
10,000
|
|
|
Green Coast Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
April 6, 2020
|
|
|
10,755
|
|
|
|
631
|
|
|
|
11,386
|
|
|
Green Coast Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
April 8, 2020
|
|
|
35,000
|
|
|
|
2,853
|
|
|
|
37,853
|
|
|
Total
|
|
|
|
$
|
115,755
|
|
|
$
|
56,604
|
|
|
$
|
172,359
|
|
|
Less: Discount
|
|
|
|
|
(59,905
|
)
|
|
|
|
|
|
|
|
|
|
Net carrying value September 30, 2020
|
|
|
|
$
|
55,850
|
|
|
|
|
|
|
|
|
|
The
derivative fair value of the above at September 30, 2020 is $209,000.
Going
Concern
At
September 30, 2020, we had a working capital deficiency, an accumulated deficit, and a stockholder’s deficit of
$4,015,966, $34,933,670 and $4,015,966 respectively and incurred a net loss and cash used in operations of $2,489,787
and $260,931 respectively for the 9 months ended September 30, 2020 and $10,183,410 and $488,864 respectively for the
12 months ended December 31, 2019. We have generated a modest level of 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/social media industry. As of September 30, 2020, 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 both the 9
months ended September 30, 2020 and 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.
On
January 11, 2021, the Board of Directors adopted a new NonQualified Stock Option Award Plan for the Company’s full time
employees. Stock Options were granted totaling 15 million common shares, 10 million of which vest quarterly expiring January
11, 2024 and 5 million of which vest quarterly expiring January 11, 2023. Applying the Black-Scholes option pricing model, these
options were valued at $194,700 which will be amortized as an operating expense over their respective vesting periods.
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.
DEFAULTS
UPON SENIOR SECURITIES.
On
May 29, 2020, the Company defaulted on the outstanding Series C preferred stock previously issued by being late with the Form
10-K filing on the extended date. Under the default provision of the Series C preferred stock the dividend rate increases
from 8% to 22% and the stated price increases from $1.00 to $1.50. The Company also defaulted on four convertible notes, one
dated March 30,2017 having no principal balance outstanding and accrued interest of $ 48,228, one dated April 8, 2020 in the
amount of $35,000 one dated May 20, 2020 in the amount of $60,000, and another one dated June 11,2020 for $10,000 causing the
interest rate to increase to 24%.
BUSINESS
The
following description of our business contains forward-looking statements relating to future events or our future financial or
operating performance that involve risks and uncertainties, as set forth above under “Special Note Regarding Forward-Looking
Statements.” Our actual results could differ materially from those anticipated in these forward-looking statements as a
result of certain factors described in the Annual Report, including those set forth above in the Special Cautionary Note Regarding
Forward-Looking Statements or under the heading “Risk Factors” or elsewhere in this Offering Circular.
Business
Overview
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 and was launched on July 24, 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
|
|
●
|
The
Fan Pass launch event, which was held on July 24, 2020. The event exceeded the Company’s expectations.
The Fan Pass platform provided a virtual stage and hosted live stream performances that were headlined by some of
the music industry’s most talented artists ranging from Grammy award winning producers to international DJs and even rising
hip hop stars. The Fan Pass team successfully launched the showcasing of the platform’s high-quality streaming
capabilities, along with other unique aspects of the Company’s business model, including the turn-key service of providing
every artist an exclusive Fan Pass channel, custom merchandise, store front, Go Live Streaming and monetization
tools, Instagram & social ad creatives, and adding additional revenue opportunities for both the artists and the Company.
|
|
|
●
|
For
the launch event Fan Pass secured over 10 hours of exclusive content, on-boarded 16 prominent artists; produced
16+ live content channels, with custom merchandise and live merchandise stores; created social media ads and promotional materials
for the artists; solidified relationships with artists and artist management; increased social media followers, content and activity
and a radio interview with iHeart Radio. Live events were streamed from approximately 1:30 pm EST until roughly 11:00 pm EST on
Friday July 24, 2020 from four separate locations that included: an Atlanta, GA Stage; a New York, NY Penthouse; a Los Angeles,
CA Studio; and, a private venue located in Palm Beach, FL. The event attracted die-hard music fans and social followers
from across the globe, representing more than 72 countries.
|
|
|
●
|
On
August 27, 2020 the Company announced that since the Fan Pass launch event on July 24, 2020, Fan Pass has received an additional
34 Artist Sign-ups, validating the Company’s business model. The Company works with each new artist to move them through
the various onboarding stages required to build them their personalized Artist Channel on Fan Pass. Once completed, our agents
hand over the controls to each Artist so they can begin scheduling events through the Company’s live event calendar, promoting
their events with the custom marketing materials the Fan Pass team designs, and most importantly, so they can start streaming
and earning a revenue share on the Fan Pass platform.
|
|
|
●
|
On
September 3, 2020 the Company announced that its new artist sign-ups continued to increase, indicating
a strong demand for the Fan Pass platform and services. Fan Pass had received an additional 26 artist sign-ups with demand continuing
to grow. The Company’s next steps include focusing on the onboarding of each artist, bringing channels live, and delivering
promotional materials designed to convert artist fans and followers to monthly subscribers/content views, event ticket sales,
and general e-commerce that generates revenue through merchandise sales and special offerings.
|
|
|
●
|
On
September 15, 2020 the Company announced its new Fan Pass feature, allowing artists to perform a
live event or stream content right from their smart phone or mobile device, anywhere, any time.
|
History
Friendable,
Inc., a Nevada corporation (the “Company”), was incorporated in the State of Nevada on
June 5, 2007. On June 15, 2011, the Company changed its name to Titan Iron Ore Corp,
through a merger with a wholly owned subsidiary. On February 3, 2014, the Company merged with IHookup, created a new subsidiary
called iHookup Operations Corp, a Delaware corporation, and then merged the Company with and into IHookup, causing the subsidiary’s
separate existence to cease and IHookup to become a wholly-owned subsidiary of the Company. On October 27, 2015, the Company’s
trading symbol was changed from “HKUP” to “FDBL”. This change was made in conjunction with the Company’s
filing of a Certificate of Amendment on September 28, 2015 to its Articles of Incorporation changing the name of the Company from
“iHookup Social, Inc.” to “Friendable, Inc.” The Company had previously announced a re-branding our app
from “iHookup Social” to “Friendable”. As a result, the Company desired to change its name to match the rebranding
so as to be more recognizable and create less confusion.
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, completed and released in July 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 $0.25 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, and throughout this Form 1-A, 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).
Our
principal office is located at 1821 S Bascom Ave., Suite 353, Campbell, California 95008, and our telephone number is (855) 473-7473.
Business
Strategy
Fan
Pass is the “Virtual Stage” connecting artists with fans and fans with their favorite artists and entertainers. Whether
its fans seeking access to their favorite artist or an artist/entertainer, or ready to have their own Fan Pass Channel, Fan Pass
has it covered. Fan Pass has put everything together all in one place, making our venue a one-of-a-kind experience for both fans
and Artists/Entertainers.
At
Fan Pass, fans can go live with their favorite entertainers by tuning in to a channel to see their favorite singer, rapper, band,
or entertainers live stream, purchase tickets to a Live Virtual Event and shop exclusive artist merchandise available only on
Fan Pass. Through Fan Pass, fans are able to chat and meet other fellow fans. Fans can customize fan profiles and connect with
other fans, as well as share photos, videos, and other content of their favorite entertainer to their feed. Fan Pass also facilitates
fans and artists being able to discover and sign-up new talent. Fans can find or discover up-and-coming artists, view what’s
trending and sign up or recommend artists and entertainers who should have to their own channel
Fan
Pass provides direct benefits to Artists and Entertainers in some of the following ways. Artists & Entertainers simply need
to request a Fan Pass “Channel” Download and Register for Details. In doing so, they: (i) get paid on live or PPV
overed on call “PAY PER VIEW” events; (ii) keep up to 100% of Ticket Sales (less any fees for agency, agent, manager
or other, if applicable); (iii) share in monthly subscription revenue, based on “Content Views” generated by all Fan
Pass fans, across the entire platform; (iv) are able to upload content and keep fans engaged; (v) sell tickets to artist events
and perform live with the highest quality streams, right from their phone or computer, by simply notifying their fans on Go Live!;
and (vi) benefit from Fan Pass producing promotions, exclusive merchandise and preparing other related things needed.
Market
The
market in which Friendable, Inc. operates can be described as follows.
Market
Opportunity
Artists
rely heavily on revenue streams that are not often seen to those without intimate knowledge of a particular industry and with
the focus currently on virtual performances, there will be a re-entry for these same artists, back to the traditional stage while
maintaining the virtual streams. When it comes to traditional performances, the sale of a VIP/backstage or meet & greet pass
to boost revenue can often become the majority of the artist’s annual tour revenue. With data provided from one of the Friendable’s
original entertainment partners “The Kluger Agency” (“TKA”) suggesting that as much as 18%-23% of artists’
annual tour revenue has previously been derived from these VIP experiences. This is particularly true in the year 2020, with The
World Economic Forum reporting that the six-month-plus disappearance of live music concerts “is estimated to cost the industry
more than $10 billion in sponsorships,” and individual artists are feeling the loss the most.
Fan
Pass
Fan
Pass, one of Friendable’s applications, bridges the gap, providing more affordable virtual VIP experiences that can be offered
simultaneously to fans around the world. While Fan Pass is free for artists to join, Fan Pass leverages a monthly subscription
model paid by fans to generate revenues. These revenues are shared with all channel artists. In exchange for its platform features,
live streaming tools, bandwidth, processing and handling, Fan Pass earns platform fees on each separately ticketed event, as well
as splits with each artist on subscriber fees and merchandise designed and sold on the platform.
The
U.S. video streaming industry is expected to hit $7.08 billion in value in 2021, with an estimated 100 million internet users
watching online video content every day, according to data from Livestream.com. The same report suggests that 45% of live video
audiences would pay for exclusive, on-demand video from a favorite team, speaker or performer. Through Fan Pass, Friendable Inc.
is uniquely positioned to capitalize on this opportunity.
The
Friendable App
Our
Company’s second application, Friendable, is an all-inclusive platform where users can meet, chat and date. The app has
exceeded 1.5 million total downloads, with over 900,000 historical registered users and more than 580,000 historical user profiles.
Friendable
Inc.’s Next Phase of Growth
To
facilitate its next phase of growth, Friendable Inc. is seeking an additional equity investment of up to $5 million. The
company intends to utilize its relationships to secure the lowest cost of capital available as these funds will drive
technology advancements, increase head count, marketing initiatives and secure additional celebrity talent that will bring
larger fan audiences to each released event. These initiatives will assist in building recurring monthly (fan) subscribers
that generate recurring monthly revenue for each artist as well. The next phase of growth is expected to play a key role in
accelerating the company’s download and conversion of data for subscription revenue and merchandise sales.
Our
Company’s primary goal is to establish Fan Pass as a premier brand and mobile platform dedicated to connecting and engaging
users around the world. In support of this goal, it has entered into a partnership with Brightcove targeting OTT platform expansion,
including leaders such as iOS, Android, Apple TV, Android TV, Roku and WWW.
In
the highly competitive video streaming market, Friendable Inc. has tapped into an unmet demand from today’s ever-present
“omni-users” for constant contact with celebrities and influencers. Via Fan Pass, the company offers investors an
opportunity to gain a stake in an organization catering to this new breed of omni-users and their influencers. We believe that
this application’s potential is clearly illustrated by the interest it has generated. For example, from
September 4 to October 12, 2020 the Fan Pass platform added 246 new artists, accounting for a 410 percent increase in just six
weeks.
Competition
Product Differentiation
Based
on the Company’s internal analysis, market related and industry specific news/growth projections, management believes there
are approximately 10 companies currently in this streaming marketplace with similar goals of live streaming concerts or events.
The Company has identified what it believes is its closest competitors currently and listed them below with additional information
of how the offerings compare with one another and how Fan Pass has differentiated its offering to artists at all stages of their
careers. Nonetheless, we believe we have several competitive advantages along with discovering a service-related niche that is
being highly regarded by our artists. Fan Pass has no direct or service by service offering competitors. There are companies that
offer services similar to Fan Pass in different mediums and with different content, for example Only Fans, IG Live, Sessions,
Stage It and Twitch. Nonetheless, the Company believes it is differentiated in its offerings from these other companies and has
a competitive advantage. The Company believes it has a superior and differentiated offering to all Artists and Entertainers seeking
a “Virtual Stage” for performance and revenue. In addition to the streaming services offered by others, Fan Pass has
a focused approach to engage, support and grow each artists’ revenue and fan following. The table below describe more about
the Fan Pass offering vs. that of others, along with reference to a quote from a third-party article that articulates the Company’s
position vis a vis its competitors.
|
Fan
Pass
|
Similarities
|
Only
Fans (a Competitor)
|
|
● Artist-support
platform
● Mobile
app
● Exclusive
Merchandise
|
● Pay
per view content
● Ability
to subscribe to a creator
● Mobile
device streaming ability
|
● ’Sex
worker’ content creator platform
● Story
posts (like IG stories, FB, etc)
|
|
Fan
Pass
|
Similarities
|
IG
Live (a Competitor)
|
|
● Artist
platform
● OBS/Computer
streaming
● Archived
streams
|
● Mobile
device streaming ability
● Viewer
chatting
|
● Allows
facetime-like video chat
● Pinning
comments
● Streamer
chatting
|
|
Fan
Pass
|
Similarities
|
Sessions
(a Competitor)
|
|
● Mobile
app
● Archived
events
● Exclusive
Merchandise
|
● Music
(artist) platform
● Virtual
ticked events
● Chat
features
|
● In-chat
gifting features
● “meet
and greet” feature
● Only
ticketed events, no subscription
● Higher-tiered
artists
|
|
Fan
Pass
|
Similarities
|
Stage
It (a Competitor)
|
|
● Mobile
app
● Archived
events
● Free
subscriber streams (not only ticketed events)
● Exclusive
Merchandise
|
● Ticketed
events
● Chat
features
|
● Ticket
gifting
● Tipping
feature
● Shows
can sell out
|
|
Fan
Pass
|
Similarities
|
Twitch
(a Competitor)
|
|
● Artist
platform
● Photos,
Article content in channel
● Exclusive
Merchandise
● Artist-support
platform (creation of channel graphics, ads, etc)
|
● OBS
Streaming Abilities
● Archived
Streams
● Mobile
app & webpage
|
● Main
streamer demographic is gamer (with recent addition of music)
● Streamer
sets up their own channel
● Subscriptions
to individual channels
● Chat
Moderators (Nightbot, mods, etc)
● Custom
emotes
● Viewers
ability to tip the creator
● Viewers
ability to gift other fans in the chat
|
The
World Economic Forum released this past May staggering figures relating to how Covid-19 (the “pandemic”) has
affected the music industry. The report states with the disappearance of live music concerts and no end in-sight that the
“six-month shutdown is estimated to cost the industry more than $10 bn in sponsorships,” and individual artists are
feeling the loss the most. With the ban on large gatherings, small and large venues have shut their doors, and artists are
finding themselves deprived of their primary source of revenues, live gigs. Live shows account for 75% of artists’
income and are directly tied to the release of new music. Rolling Stones magazine reported that a growing list of
artists is delaying new releases to later in the year. Well-known artists from megastars Alicia Keys and Lady Gaga to
upcoming groups Haim and Hind, R&B singers such Toni Braxton, Kehlani to veterans rockers The Pretenders, and country
music legend Willie Nelson, have all decided to delay the release of their latest albums. Touring is the number one
promotional tool for a new album launch and is also an excellent marketplace for merchandising and connecting with fans. Many
artists are taking the position that without the ability to tour, it’s best to wait.
In
response to the growing pressure on the music industry to mitigate the damages done by the global pandemic, technology is coming
to the rescue and harnessing the power of live video streaming. Indeed our Company, Fan Pass, is a Live Streaming mobile app and
desktop platform is offering solutions to artists with dwindling sources of revenue at this time and giving them control over
their career. In particular response to the pandemic, we have released Fan Pass
Live, a live video streaming platform with an “artist first” approach to developing an eco-system where artists
now have their very own channel, in a particular genre or category and a central location where exclusive content lives. On this
platform, Fan Pass continues to provide many services to artists and entertainers, their work, creates custom merchandise for
each channel artist and gives them the controls to schedule a live event or event chat, at a moments’ notice, all providing
new revenue opportunities for all Fan Pass artists. The platform aims to give artists back a voice, while providing a one-of-a-kind
experience for their fans, along with opening up new ways of earning from the virtual stage. The brainchild of brothers and business
partners Robert A. Rositano, Jr. and Dean Rositano, Fan Pass Live, officially
launched its platform with a live concert on July 24, 2020.
To
demonstrate the strength of Fan Pass, for example, Fan Pass had live streaming events from approximately 1:30 pm EST until roughly
11:00 pm EST on Friday July 24, 2020 from four separate locations that included: an Atlanta, GA Stage; New York, NY Penthouse;
Los Angeles, CA Studio; and, a private venue located in Palm Beach, FL. The event attracted die-hard music fans and social followers
from across the globe in the following locations: the United States, Germany, Canada, India, United Republic of Tanzania, United
Arab Emirates, Ghana, Netherlands, New Zealand, Finland, Tunisia, United Kingdom, Brazil, Kenya, Japan, Guatemala, Nigeria,
Australia, South Africa, Dominican Republic, Ukraine, Turkey, Sweden, Italy, Poland, France, Rwanda, Haiti, Switzerland, Mexico,
Portugal, Spain, Belgium, Uganda, Iraq, Indonesia, Jamaica, Senegal, Norway, Malaysia, Virgin Islands, Bulgaria, Dominica, Greece,
Guadeloupe, Saudi Arabia, Honduras, Qatar, Ireland, Hong Kong, Denmark, Mongolia, Kuwait, Guyana, Lebanon, Chile, Jordan, Taiwan,
Zimbabwe, Cameroon, Estonia, Colombia, Egypt, Iceland, China, Vietnam, Austria, Peru, Israel, Philippines, Bahamas, Fiji, Puerto
Rico, and Costa Rica.
According
to the expectations set by management, this event outperformed the goals set for Fan Pass, achieving much more than it could have
anticipated. Fan Pass was able to secure over 10 hours of Exclusive Content, on-board 16 prominent artists; produce 16+ live content
channels, custom merchandise and live merchandise stores; create social media ads and promotional materials for 16+ artists; solidify
relationships with artists and artist management; increase social media followers, content and activity by 500%; gain recognition
from other Industry Labels; increase press coverage landing a radio interview with iHeart Radio; and, create more sponsorship
opportunities.
Robert
A. Rositano, Jr, CEO of the Company said to BitRebel, “When we initially developed Fan Pass Live, we were aiming to Live
Stream the “Backstage VIP Experience” or “meet and greet” of a concert event and make accessible this
once in a lifetime experience to all fans worldwide. With the global pandemic disrupting the industry and changing the industry’s
needs, we were determined to re-position our offering to also provide a solution to those who are used to earning a living on
the physical stages across the country.”
What
does precisely Fan Pass Live do? For starters, it breaks down the barrier between artists and fans, giving the artists control
over setting a date, setting a price (or offering viewings and access to Fan Pass monthly subscribers for free) and broadcasting
their events, concerts or chats, right from their phone or a complete computer, microphone and streaming set up. The Fan Pass
team also creates Instagram ads and promotion for each channel artist, allowing them to focus on what they enjoy and announcing
to fans with professionally designed ads to promote when ready. More importantly, it gives back to artists a way to remain relevant
to their fan base and earn revenue.
Fan
Pass Live Shares Revenues with Artists
Fan
Pass Live offers Artists at all levels and genres, the opportunity to engage fans from one location, removing the need for multiple
sharing platforms. It conveniently provides an Exclusive Artist “Channels” jam-packed with all their relevant content
from videos, photos, interviews, and past and upcoming events. While Fan Pass charges the fans a small transaction fee for ticket
sales, artists keep the money earned from ticket sales. The handling of the merchandise is also taken care of by the Company and
once it’s approved by the Artist, all merchandise is released within the Artist’s channel.
While
it is free for Artists to join, Fan Pass aims to monetize by offering fans an “ALL ACCESS VIP” offering priced at $3.99
as a monthly subscription model paid by fans through Fan Pass’ website or through a similar offering to fans at $4.99 per
month if processed by the Apple App Store or Google Play Stores, with a three-day free trial. Revenues are shared with all Channel
Artists. In exchange for its platform features, live streaming tools, bandwidth, processing, and handling, Fan Pass will also
earn platform fees on each separately ticketed event, as well as splits with each Artist on subscriber fees and merchandise designed
and sold on the platform.
Marketing
The
Company’s marketing efforts will consist of a combination of various public relations, social media and traditional media
outlets. Digital media (Facebook, Google, Instagram, Twitch and others), executive team pod casts and speaking engagements will
also round out online advertising designed to attract artists to the platform. In addition to the Company’s overarching
promotion of its Fan Pass brand and offering each artist is required to perform additional promotion to attract their fans specifically.
The Company believes it will convert a certain number of these fans to monthly subscribers, others will purchase tickets for PPV
events (performed by artists) and/or exclusive merchandise being offered and sold will also attract fan purchases. The platform
is not authorized to, and will not, make any commitments on behalf of an Artist for personal appearances or other promotional
activities related to any Live Performance or event planned on the Fan Pass platform, until such Artist has committed to platform
and Fan Pass has engaged in design and productions of fan-based offerings for such planned event. Notwithstanding the foregoing,
any such Artist will be offered creative options for at least one Instagram story and shall actively promote their artist “Channel”
on the Fan Pass platform, along with an upcoming or previous event. Artist deliverables include promotions to be delivered across
the Artist’s existing social media platforms to solicit downloads of the Fan Pass mobile application and therefor allow
fans to choose a subscription option or not. Artists will assist and use their best efforts to engage with fans, broadcast promotional
messages and announce live events scheduled, pre-recorded and available and upcoming.
Friendable,
Inc. is a publicly traded company on the OTC Marketplace with a set of product and service offerings that have, on occasion been
complimentary offerings to one another but most often stand alone as product and service offerings of the Friendable brand and/or
public company.
Friendable,
Inc. has a meet up/dating application that is available for download in the Apple app store and Google play stores and had been
the foundation of the Company’s first mobile app offering. Additionally, Friendable, Inc. has a “Technology Services”
division whereby our services can be hired for app consulting and related design, development and deployment services. Finally,
we have our Wholly owned subsidiary Fan Pass, Inc. which has been born out of various celebrity relationships achieved through
the strategic marketing efforts of the Friendable dating app and has become the focus of the Company’s future growth path
and ROI for investors. Currently, the Company has substantial client concentration, with one client accounting for a substantial
portion of our revenues.
In
the 9 months ended September 30, 2020 and in the 12 months ended December 31, 2019 we derived 99% 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.
Material
Agreements
As
mentioned above, in the 12 months ended December 31, 2019 and 9 months ended September 30, 2020, the Company derived the majority
of its revenue from its relationship with Answering Legal, a company with which Friendable is party to a “Technology Services
Agreement” that provides for statements of work or SOWs through various stages of development of 2 mobile and 1 desktop application.
These applications were to function on iOS and Android devices as well as website/browser, focused on providing an extension of
the “Answering Legal” call center/answering services provided to their “Legal/Attorney” based clients. The
fluid nature of app/tech development projects provided for various iterations of the interface, specifications and created various
changes and/or additions or changes that added to the Friendable development timelines, fees and overall scope, which ultimately
created an extended development cycle and supplemented the Company’s ability to focus on the development of its Friendable mobile
dating application and further its release of Fan Pass, it’s live streaming artist platform and core business focus. A copy
of the Technology Series Agreement is attached as an exhibit to this Offering Circular.
Regulatory
Requirements
None
that are extraordinary currently.
Patents
and Trade Secrets
Trademarks
and marks protected (Fan Pass, Inc., Fan Pass Live and Fan Pass) – Trade Secrets relate to the Company’s executive
teams experience with technology, the Internet and their various industry or industry related partners that have had or are having
success in the industries and markets the Company has embarked upon.
Seasonality
of Business
Our
results of operations have not been materially impacted by seasonality.
Property
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.
Employees
The
Company has seven full time employees and a variety of partners that serve in various consulting capacities based on the
Company’s specific needs.
Legal
Proceedings
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. Robert Rositano Jr., the
Company’s CEO, has also personally guaranteed the Company’s compliance with the terms of the Settlement Agreement.
The cash payment is to be made within 6 months of the date of the Settlement Agreement. As of the date of filing of this
report 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. The Company has determined that a total of 4,275,000 additional shares would be
issuable on the first “reset” date of March 4, 2020 based on a share price of $0.20 on that date and a total of
7,537,500 additional shares would be issuable on the second “reset” date of July 2, 2020 based on a shares price of
$0.08 on that date for a total of 12,562,500 shares. 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. It was determined by the Company that its liability was $1,005,000 ($750,000 plus a premium of $255,000) in
accordance with ASC 480.
On
August 28, 2020 Integrity requested and was issued 750,000 common shares, which Integrity advised the Company realized $16,625 when sold. Accordingly, at September 30, 2020 the Company reduced its liability payable in common stock from
$1,005,000 to $988,375 and retained $30,000 as an accrued liability for costs.
On
October 14, 2020, the Company filed a “Declaration” with the Santa Clara County Courts challenging Integrity’s
future ability to convert additional shares based on “Stock Market Manipulation” designed to harm the Company’s share
price, valuation and number of shares issuable to Integrity following its sales. Additionally, the Company contended that Integrity
disregarded the volume limitation set forth in its settlement for the Company’s thinly traded securities and caused a potential
third party capital investment of $150,000 to be rescinded. The court agreed with the Company’s declaration that Integrity
should have filed a motion so the Company would have the opportunity to present all arguments and evidence in opposition to deny
Integrity’s application to enter judgment.
MANAGEMENT
The
following table sets forth the names, ages and positions of our current board members and executive officers:
|
Name
|
|
Age
|
|
Position
with the Company
|
|
With
the
Company Since
|
|
Robert
A Rositano, Jr.
|
|
51
|
|
Chief
Executive Officer, Chief Financial Officer, Secretary & Director
|
|
January
31, 2014
|
|
Dean
Rositano
|
|
48
|
|
President,
Chief Technology Officer & Director
|
|
January
31, 2014
|
The
business address of our officers and directors is c/o Friendable, Inc., 1821 S Bascom Ave., Suite 353, Campbell, California 95008.
Board
Composition and Committees and Director Independence
Robert
Rositano, Jr. 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.
Biographies
Robert
A Rositano, Jr., Chief Executive Officer and Interim CFO
Prior
to founding iHookup, Robert Rositano, Jr. 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, Jr. 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, Jr. 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, Jr. 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, Jr. has continued in his role at CMI while serving as a director and officer of the Company.
Dean Rositano, President & Chief Technology Officer
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.
Overall
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.
Term
of Office
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.
Family
Relationships
Robert
Rositano, Jr., age 51, and Dean Rositano, age 48, are brothers.
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.
|
Committees
of the Board
Our
board of directors has the authority to appoint committees to perform certain management and administration functions. Currently,
we do not have an audit committee, compensation committee or nominating and corporate governance committee and do not have an
audit committee financial expert. Our board of directors currently intends to appoint various committees in the future.
Nominating
and Corporate Governance Committee
We
do not have a nominating and corporate governance committee. Our board of directors performed the functions associated with a
nominating committee. Generally, nominees for directors are identified and suggested by the members of our board of directors
or management using their business networks. Our board of directors has not retained any executive search firms or other third
parties to identify or evaluate director candidates in the past and does not intend to in the near future. We have elected not
to have a nominating committee because we are an exploration stage company with limited operations and resources.
Our
board of directors does not have a written policy or charter regarding how director candidates are evaluated or nominated for
our board of directors. Additionally, our board of directors has not created particular qualifications or minimum standards that
candidates for our board of directors must meet. Instead, our board of directors considers how a candidate could contribute to
our business and meet our needs and those of our board of directors. As we are an exploration stage company, our board of directors
will not consider candidates for director recommended by our stockholders, and we have received no such candidate recommendations
from our stockholders.
Compensation
Committee
We
currently do not have a compensation committee. However, our board of directors may establish a compensation committee once we
are no longer in the exploration stage, which would consist of inside directors and independent members. Until a formal committee
is established, our board of directors will continue to review all forms of compensation provided to our executive officers, directors,
consultants and employees including stock compensation.
Audit
Committee
We
currently do not have an audit committee. However, our board of directors may establish an audit committee once we are no longer
in the exploration stage, which would consist of inside directors and independent members.
Until
a formal committee is established, our board of directors will continue to perform the functions of an audit committee.
Audit
Committee Financial Expert
Our
board of directors has determined that it does not have a member that qualifies as an “audit committee financial expert”
as defined in Item 407(d)(5)(ii) of Regulation S-K issued by the United States Securities and Exchange Commission.
We
believe that our entire board of directors is capable of analyzing and evaluating financial statements that present a breadth
and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues reasonably
expected to be raised by our company. We believe that retaining an independent director who would qualify as an “audit committee
financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages
of our development and the fact that we have not generated revenues to date.
Code
of Ethics
We
have not yet adopted a Code of Ethics.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
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 $100,000 during the year ended December 31, 2020, 2019 and 2018:
|
Name and
|
|
Salary
Incurred
(1)(2)
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan
Compensation
|
Nonqualified
Deferred
Compensation
Earnings
|
All other
Compensation
|
Total
|
|
Principal
Position
|
Year
|
($)
|
($)
|
($)
(1)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
Robert Rositano, Jr.
|
2020
2019
|
150,000
150,000
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
150,000
150,000
|
|
CEO, CFO, Secretary, &
Director
|
2018
|
150,000
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean Rositano
|
2020
2019
|
150,000
150,000
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
150,000
150,000
|
|
President and CTO
|
2018
|
150,000
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank Garcia
|
2020
2019
|
73,333
100,000
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
73,333
100,000
|
|
CFO*
|
2018
|
100,000
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
100,000
|
(*resigned August 31, 2020)
Notes:
|
|
(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. At December
31,2020 and at September 30,2020 the aggregate accrued compensation to such officers totaled $1,156,749 and $1,081,749, respectively.
|
|
|
|
|
|
|
(2)
|
The officers’ salary incurred (and total compensation)
for the year ended December 31,2020 totaled $150,000 for Robert Rositano Jr., $150,000 for Dean Rositano and $73,333 for Frank
Garcia.
|
Compensation
for Executive Officers and Directors
Compensation
arrangements for our named executive officers and directors are described below.
Employment
Agreement – Robert Rositano, Jr.
Effective
January 19, 2014, the Company, entered into an employment agreement with Robert Rositano, Jr. to serve as Chief Executive Officer,
acting Chief Financial 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 Jr.’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, Jr. The employment agreement
provides, among other things, that Robert Rositano, Jr. 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, Jr. 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, Jr. 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, Jr. 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 Jr.’s sole discretion. The Company
may terminate Robert Rositano, Jr.’s employment prior to the end of his employment period by a majority vote of the board
of directors, excluding Robert Rositano Jr.’s vote. If we terminate Robert Rositano Jr.’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,
Jr. 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, Jr. 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, Jr. however, terminates his employment prior to the end of the employment period without cause, Robert
Rositano, Jr. shall not be entitled to any severance and the Company shall have no further liability to Robert Rositano, Jr. 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, Jr. 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, Jr. 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 Jr.’s performance. Rositano, Jr. 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,
Detocan Rositano will receive a bonus of $75,000 and his base salary will be increased to $250,000 annually. After the above goals
are achieved, his base salary will begin being increased semi-annually at a minimum rate of 10% or higher, as determined by the
board of directors or a committee established by the board of directors for compensation purposes. If Friendable, Inc. is unable
to pay executive salary or bonuses, the amounts owed will be accrued as a convertible note. The note can be converted into common
stock, at Dean Rositano’s sole discretion. The Company may terminate Dean Rositano’s employment prior to the end of
his employment period by a majority vote of the board of directors, excluding Dean Rositano’s vote. If we terminate Dean
Rositano’s employment prior to the end of his employment period without cause, which shall also include termination in the
event of a change in control, Dean Rositano shall be entitled to his base salary in effect on the date of his termination for
a period of twenty-four (24) months following the date of such termination, in one lump sum payment within fourteen (14) days
of termination or as otherwise agreed to in writing. Furthermore, any unvested options granted to Dean Rositano will immediately
vest. If we terminate his employment with cause, he will be entitled to his base salary and commission schedule in effect on the
date of termination for a period of twelve (12) months. If Dean Rositano, however, terminates his employment prior to the end
of the employment period without cause, Dean Rositano shall not be entitled to any severance and the Company shall have no further
liability to Dean Rositano. He is also permitted to pursue other business interests not in conflict with the Company, including
serving as officers and directors of other public companies.
On
April 3, 2019, the Company entered into a new employment agreement with Dean Rositano. Pursuant to that agreement, the Company
shall pay Rositano an aggregate annual salary at the rate of $150,000 (One Hundred Fifty Thousand Dollars) (the “Base Salary”).
Upon a successful launch of the company’s Fan Pass mobile app or website, and reaching its first 50,000 subscribers, Rositano
will receive a bonus of $50,000 and the Base Salary will be increased to $200,000 annually. In addition, when the Company reaches
a cumulative 100,000 subscribers or more, Rositano will receive a bonus of $75,000 and the Base Salary shall be increased to $250,000
annually. After the above goals are achieved, the Base Salary shall increase annually at a minimum rate of ten percent (10%) as
determined by the Board of Directors or a Committee established by the Board of Directors for compensation purposes (the “Compensation
Committee”), based on Rositano’s performance. Rositano shall be entitled to participate in the Company’s stock
option plan if and when it is put in place. Details will be determined by the board of directors or compensation committee at
such time.
Outstanding
Equity Awards
On
January 11, 2021, the following non-qualified stock option was awarded to each of Haley R. Rositano; Nikolas T. Rositano;
Ryan Madani: Taylor N. Rositano and Vincent J. Rositano pursuant to a new nonqualified stock option plan (see below) –
all full-time employees of the Company, as follows. Number of shares in each award: (a) 2 million common shares (total 10
million shares). Exercise price: $0.014 per common share. Vesting: 11.1% on January 11, 2021 and thereafter 11.1% at the end
of each quarter through January 11, 2024, and (b) 1 million common shares (total 5 million shares). Exercise price: $0.014
per common share vesting 12.5% on January 11, 2021 and thereafter 12.5% at the end of each quarter through January 11, 2023.
The total fair value of all of the options granted is approximately $194,700, to be recognized as compensation expense over
the respective vesting periods.
Long-Term
Incentive Plans
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 has 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 generally 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 which eliminated all the options which were previously
outstanding.
Under
the terms of the newly adopted nonqualified stock option of January 11,2021 the Company’s directors have the authority to
grant, from time to time, certain nonqualified stock options to its full-time employees, evidence by Notices of Grant denoting
the grant date and exercise price, the vesting entitlements and the grant expiration date. In the event that the employee grantee
becomes no longer employed by the Company, any portion of the award not exercisable immediately prior to employment termination
is also automatically terminated. In addition, any portion of the award that remains unexercised at the expiration of the applicable
exercisable period is likewise terminated. Any exercise of any portion of the aware requires the grantee to provide written notice
of such exercise accompanied by payment of the applicable exercise price.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
There
are several related party transactions reported within this report. All such transactions have been duly approved by the
required board and/or shareholder approvals. Please see below for further disclosure:
Dean
Rositano and Robert Rositano, Jr. 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, Jr. serves as Chief Executive
Officer and Chief Financial 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, Jr. are both directors and stockholders of Friendable, Inc. At Friendable, Inc., Dean Rositano also
serves as President and Chief Technology Officer, while Robert Rositano, Jr. 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, Jr. and his wife, Stacy Rositano.
As
described above, Dean Rositano and Robert Rositano, Jr. are both directors and officers of the Company.
Transactions
with related persons
Other
than as disclosed below, there has been no transaction, or currently proposed transaction, in which our company was or is to be
a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end
for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material
interest:
|
|
(i)
|
Any
director or executive officer of our Company;
|
|
|
(ii)
|
Any
beneficial owner of shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;
|
|
|
(iii)
|
Any
person who acquired control of our company when it was a shell company or any person that is part of a group, consisting of two
or more persons that agreed to act together for the purpose of acquiring, holding, voting or disposing of our common stock, that
acquired control of Titan Iron Ore Corp. when it was a shell company; and
|
|
|
(iv)
|
Any
immediate family member (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons.
|
During
the 9 months ended September 30, 2020 and during the years ended December 31, 2019 and December 31, 2018, the Company
incurred $369,558, $459,200 and $417,066 respectively in salaries and payroll taxes to officers and directors with such costs
being recorded as general and administrative expenses.
During
the 9 months ended September 30, 2020 the Company incurred $33,000, $332,834 and $45,000 (year ended December 31, 2019
$24,068, $299,124, and $58,883 and years ended December 31, 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 September 30, 2020, December 31, 2019 and December 31, 2018, the Company had a stock subscription receivable totaling $4,500
from an officer and director and from a company with an officer and director in common.
As
of September 30, 2020, due to related party includes $141,803 due to a company with two officers and directors in common, and
$1,081,749 payable in salaries to directors and officers of the Company. As of December 31, 2019, due from related party
includes $30,083 due from a company with two officers and directors in common, and $783,416 payable in salaries to directors
and officers. As of December 31, 2018, due to related party includes $721,099 due to a Company with two officers and
directors in common, and $798,500 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 were 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.
Dean
Rositano and Robert Rositano, Jr. are also both directors and 7.5% and 7.5% stockholders respectively of CMI. At CMI, Dean
Rositano also serves as President and Chief Technology Officer, while Robert Rositano, Jr. serves as Chief Executive Officer
and Chief Financial Officer. They will both continue their respective roles at CMI while serving as directors and officers of
Friendable, Inc.
Dean
Rositano and Robert Rositano, Jr. are both directors and stockholders of Friendable, Inc. At Friendable, Inc., Dean Rositano also
serves as President and Chief Technology Officer, while Robert Rositano, Jr. 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, Jr. 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, Jr. have both been appointed directors and officers of Friendable, Inc. Dean
Rositano also serves as President and Chief Technology Officer, while Robert Rositano, Jr. serves as Chief Executive Officer,
Secretary, and since September 1,2020 as Chief Financial Officer.
PRINCIPAL
STOCKHOLDERS
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 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 Series A
preferred stock are entitled to cast 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.
|
|
A.
|
Director
and Executive Officer Shareholders
|
The
following tabulation shows, as of September 30, 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)
|
Voting
Percentage of Company, as a whole and Amount of Common Shares held on an as converted basis (4)
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Holders Over 5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred
|
Robert A Rositano Jr.
|
9,246 (1)
|
Direct
|
46.73%
|
42.06%
537,391,285
|
|
|
3846 Moanna Way,
|
|
|
|
|
|
|
Santa Cruz, CA 95062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred
|
Dean Rositano
126 Sea Terrace Way,
Aptos, CA 95003
|
1,882
|
Direct
|
9.51%
|
8.56%
109,384,642
|
|
|
|
|
|
|
|
|
Series A preferred
|
Copper Creek Holdings, LLC
(2)
7960 B Soquel Dr., Suite #146
Aptos, CA 95003
|
14,730
|
Direct
|
74.45%
|
67.00%
856,129,529
|
|
|
-Robert Rositano, Jr.
|
7,365
|
|
37.22%
|
33.50%
428,064,764
|
|
|
-Stacy Rositano
|
7,365
|
|
37.22%
|
33.50%
428,064,765
|
|
|
|
|
|
|
|
|
|
(b)
|
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred
|
Robert A Rositano Jr.
|
9,246 (1)
|
Direct and
|
46.73%
|
42.06%
537,391,285
|
|
|
3846 Moanna Way,
|
|
Indirect
|
|
|
|
|
Santa Cruz, CA 95062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred
|
Dean Rositano
|
1,882
|
Direct
|
9.51%
|
8.56%
109,384,642
|
|
|
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
|
11,128 (1)
|
Direct and Indirect
|
56%
|
50.62%
646,795,927
|
|
(1)
|
Includes 7,365
shares beneficially owned by Robert Rositano, Jr. 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, Jr. 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 19,786 shares of Series A preferred
stock issued and outstanding as of September 30, 2020.
(Note: Issuable common shares totaling 106,558,432
as of September 30, 2020 have not been included in this percentage computation).
|
|
|
|
|
(4)
|
These percentages represent voting
power of common shares and Series A Preferred Shares of the Company on an as converted basis. Potential dilutive ownership
of common shares assumes that the stated proportionate holding of Series A Preferred Stock is converted to 9 times the
combined total issued and issuable common shares at September 30, 2020 of 127,776,864. These metrics are being provided
to show voting power in the Company as a whole. These numbers are based on 19,786 shares of Series A preferred stock issued
and outstanding as of September 30, 2020. As of the date of this Offering Circular, the current holders of Series A Preferred
Shares have agreed to waive any reserve requirements attached to their shares and to refrain from converting their shares
unless and until the Company increases its authorized shares to accommodate for their conversion amounts.
(Note: Issuable common shares totaling
106,558,432 as of September 30, 2020 have not been included in this percentage computation).
|
|
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
|
15,596
|
Direct
|
*
|
|
|
-Robert
Rositano, Jr.
|
7,798
|
Indirect
|
*
|
|
|
-Stacy
Rositano
|
7,798
|
Indirect
|
*
|
|
|
|
|
|
|
|
|
Common
stock
|
Robert
A Rositano Jr.
|
17,026
(1)
|
Direct
and
|
*
|
|
|
3846
Moanna Way,
|
|
Indirect
|
|
|
|
Santa
Cruz, CA 95062
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
Dean
Rositano
|
9,245
|
Direct
|
*
|
|
|
126
Sea Terrace Way,
|
|
|
|
|
|
Aptos,
CA 95003
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
Executive
Officers
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
Robert
Rositano, Jr. and Dean Rositano as named above
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
(c)
|
Officers
and Directors as a Group for common stock
|
26,271 (1)
|
Direct
and Indirect
|
0.124%
|
|
|
(1)
|
Includes
7,798 shares beneficially owned by Robert Rositano, Jr. 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, Jr. 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 21,218,432 of common stock issued and outstanding as of September 30,
2020 (and does not include 106,558,432 issuable common shares as of September 30, 2020).
|
|
|
B.
|
Other
Major Shareholders
|
The
following table lists the beneficial ownership of our securities as of September 30, 2020 by each person known by us to be the
beneficial owner of 5% or more of the outstanding shares of any class of our securities.
|
Series
C convertible preferred stock
|
Geneva
Roth Remark Holdings, Inc
|
124,800
|
100.0%
|
|
|
111
Great Neck Road, Suite 216
|
|
|
|
|
Great
Neck, NY 11021
|
|
|
|
|
|
|
|
|
Common
Shares
|
Robert
Bishop
|
2,190,000
|
10.32%
|
|
|
2744
W. Casas Dr.
|
|
|
|
|
Tucson,
AZ 95742
|
|
|
|
|
|
|
|
|
|
Juaquin
Malphur
|
1,800,000
|
8.48%
|
|
|
1894
Vermack Court
|
|
|
|
|
Dunwoody,
GA 30338
|
|
|
Based
on 21,218,432 of common stock issued and outstanding as of September 30, 2020 (and does not include 106,558,432
issuable common shares as of September 30, 2020).
Change
of 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.
Control
by Others
To
the best of the Company’s knowledge, the Company is not directly or indirectly owned or controlled by another corporation,
any foreign government, or any other natural or legal person, severally or jointly.
DESCRIPTION
OF SECURITIES
General
The
Preferred Shares subject to this offering are convertible into common shares of our Company. Our common shares are quoted on the
Pink Open Market under the symbol “FDBL.” Our common shares trade and have traded on a limited or sporadic basis and
should not be deemed to constitute an established public trading market. Broker-dealers often decline to trade in over-the-counter
stocks that are quoted on the Pink Open Market given the market for such securities are often limited, the stocks are more volatile,
and the risk to investors is greater. These factors may reduce the potential market for our common shares by reducing the number
of potential investors. This may make it more difficult for investors in our common shares to sell shares to third parties or
to otherwise dispose of their shares. This could cause our share price to decline, and there is no assurance that there will be
liquidity in our common shares.
In
addition, The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market
for penny stocks in connection with trades in any stock defined as a penny stock. The SEC has adopted regulations that generally
define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to a few exceptions
which we do not meet. Unless an exception is available, the regulations require the delivery, prior to any transaction involving
a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.
Articles
of Incorporation
We
are governed by our amended articles of incorporation (the “Articles”) under Nevada law (the “Act”) and
by our by-laws (the “By-laws”).
A description of the rights attached to
Series D Preferred Shares are explained below in the section titled “Securities Offered.” The discussion that immediately
follows provides an overview of the rights attached to shares of all classes of equity securities other than Series D Preferred
Shares. Series D Preferred Shares are convertible in common stock of the Company.
Shares
As
of the date of this Offering, the Company’s authorized capital stock consisted of 1,000,000,000 shares of common
stock, $0.0001 per share par value, 50,000,000 shares of Series A Preferred Stock, $0.0001 per share par value, 1,000,000 shares
of Series B Preferred Stock with a stated value of $1.00 per share and 1,000,000 shares of Series C Preferred Stock with a stated
value of $1.00 per share. As of September 30, 2020, there were 86 registered holders of record of our common stock. As of
such date, 21,218,432 shares of our common stock were issued and outstanding, and 106,558,432 were issuable.
As
of September 30, 2020, there were 28 registered holders of record of our Series B Preferred Stock and as of such date, 284,000
shares of our Series B Preferred Stock were issued and outstanding. As of September 30, 2020, there was 1 registered holder of
record of our Series C Preferred Stock and as of such date,124,800 shares of our Series C Preferred Stock were issued and outstanding.
Directors
The
number of authorized directors of the Company are between two (2) to five (5), and the term of directors is two (2) years. The
presence of a majority of the Board of Directors, at a meeting duly assembled, shall be necessary to constitute a quorum for the
transaction of business and the act of a majority of the directors present and voting at any meeting, at which a quorum is then
present, shall be the act of the Board of Directors, except as may be otherwise specifically provided by the statutes of Nevada
or by the Articles of Incorporation. Unless otherwise restricted by the Articles of Incorporation or by these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if a written consent
thereto is signed by all members of the Board.
The
Company’s Articles of Incorporation provide that a director or officer is protected from being personally liable for monetary
damages for breach of fiduciary duties to the fullest extent permitted by law and provide that the Company may purchase directors
and officers insurance. The Company’s Bylaws provide that the directors shall receive such compensation for their services
as directors, and such additional compensation for their services as members of any committees of the Board of Directors, as may
be authorized by the Board of Directors.
Voting
Each
share of common stock entitles its holder to one vote on each matter submitted to the stockholders.
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 (which is 9 shares of Common
Stock per 1 Series A Preferred Stock).
The
affirmative vote of a majority of Series A preferred stock have sufficient voting power to bind that class of shares and vote
together with common stockholders as one class. The holders of a majority of the stock issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by the statutes of Nevada or by the Articles of Incorporation. When a quorum
is present or represented at any meeting, the holders of a majority of the stock present in person or represented by proxy and
voting shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the
statutes of Nevada, the Articles of Incorporation or these Bylaws, a different vote is required, in which case such express provision
shall govern and control the decision of such question.
The
holders of Series B Preferred Stock and of Series C Preferred Stock generally have no right to vote on any matters requiring shareholder
approval or any matters on which the shareholders are permitted to vote except as required by law and for the limited matters
set forth in their certificates of designation. With respect to any voting rights of the Series B Preferred Stock or Series C
Preferred Stock may vote, Series B Preferred Stock or Series C Preferred Stock, as the case may be, shall vote each vote separately
as a class, each share of Series B Preferred Stock and Series C Preferred Stock shall have one vote on any such matter, and any
such approval may be given by holders holding a majority of the issued and outstanding shares of each of Series B Preferred Stock
and Series C Preferred Stock at such time shall be sufficient to bind that series of shares.
Conversion
The
total aggregate issued shares of Series A Preferred Stock at any given time regardless of their number shall be convertible, at
the option of the holder, 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” (meaning 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. The “Series A Original Issue Price” means $0.002 per share
for the Series A Preferred Stock subject to adjustment from time to time for any stock dividend, stock split, combination of shares,
reorganization, recapitalization, reclassification or similar event.
No
adjustment in the Series A Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares
of Common Stock if the Corporation receives written notice from the holders of at least fifty percent (50%) of the then outstanding
shares of Series A Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance or deemed
issuance of such Additional Shares of Common Stock.
In
addition, Series A Preferred Stock is subject to mandatory conversion upon either (a) the closing of the sale of shares of
Common Stock to the public, in a firm-commitment underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, at a minimum price of $5.00 per share resulting in at least $30 million of gross
proceeds to the Corporation or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the
holders of at least a majority of the then outstanding shares of Series A Preferred Stock (the time of such closing or the date
and time specified or the time of the event specified in such vote or written consent is referred to as the “Mandatory Conversion
Time”), at which point, (i) all outstanding shares of Series A Preferred Stock shall automatically be converted into shares
of Common Stock, at the then effective conversion rate and (ii) such shares may not be reissued by the Company.
A
holder of Series B Preferred Stock also has the right to convert their Series B Preferred Stock into fully paid and non-assessable
shares of Common Stock, at their option. Initially, the conversion price for the Series B Preferred Stock is $0.25 per share (equivalent
to 4 shares of Common Stock), subject to standard anti-dilution adjustments.
The
holders of Series C Preferred Stock shall also have the right from time to time, and at any time during the period beginning
on the date which is six (6) months following their date of issuance to convert all or any part of the outstanding Series C
Preferred Stock into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the date of their
issuance, or any shares of capital stock or other securities of the Company into which such Common Stock shall hereafter be
changed or reclassified at a variable conversion price of 71% multiplied by the market price based on the average of the two
lowest trading prices for the Company’s common stock during the 20 trading day period ending on the latest complete
trading day prior to the conversion date.
Dividends
The
holders of the shares of Series A Preferred Stock shall be entitled to receive non-cumulative dividends, when, and if declared,
at a rate of 6% per year on the Series A Original Issue Price. For the avoidance of doubt, the “Series A Original Issue
Price” means $0.002 per share for the Series A Preferred Stock subject to adjustment from time to time for any stock dividend,
stock split, combination of shares, reorganization, recapitalization, reclassification or similar event.
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 Company.
Share
of Series C Preferred Stock carry an annual dividend in the amount of eight percent (8%) of their stated value of $1.00 (the “Dividend
Rate”) which shall be cumulative and compounded daily, payable solely upon redemption, liquidation or conversion. Upon the
occurrence of an Event of Default (as defined in the articles of incorporation of the company), the Dividend Rate for Series C
Preferred Stock shall automatically increase to twenty two percent (22%).
Otherwise, the payment of dividends, if
any, to common stockholders generally and in the future, rests within the sole discretion of our board of directors. Holders of
common shares may receive dividends in the sole discretion of the Company’s 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.
|
Liquidation
Preference
In
the event of any Deemed Liquidation Event (as defined in the Articles of Incorporation of the Company), the holders of shares
of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution
to its stockholders prior to and in preference to payment to the holders of the shares of Common Stock by reason of their ownership
thereof, an amount per share equal to the greater of (i) the Series A Original Issue Price or (ii) such amount per share as would
have been payable had all shares of Series A Preferred Stock been converted into Common Stock immediately prior to such
liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this sentence is hereinafter
referred to as the “Series A Liquidation Amount”).
If
upon any such liquidation, dissolution or winding up of the Company or Deemed Liquidation Event, the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock
the full amount to which they shall be entitled under the Series A Liquidation Amount, the holders of shares of Series A Preferred
Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts
which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
Series
B Preferred Stock and Series C Preferred Stock shall be paid ahead of Common Stock of the Company in the event of a Deemed Liquidation
Event, but shall not be paid ahead of Series A Preferred Stock, which, for the avoidance of doubt, has not been converted into
Common Stock of the Company. For completeness, 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 and Series C Preferred Stock.
Redemption
The
Series C Preferred Stock may be redeemed at the Company’s option for up to 6 months at a 35% premium and also subject to
mandatory redemption by the Company on the earlier of (i) the date which is 24 months following the Issuance Date and (ii)
the occurrence of an Event of Default.
Action
Necessary to Change the Rights of Shareholders
Bylaws
may be adopted, amended or repealed by the affirmative vote of not less than seventy-five percent (75%) of the outstanding voting
shares of the Company.
Annual
and Special Meetings of Shareholders
An
annual meetings of the stockholders shall be held at such time
and date as the Board of Directors shall determine. Special meetings of the stockholders may only be called by stockholders of
record of not less than five (5) percent of the Company’s outstanding capital stock. In addition, action by written consent
of stockholders in lieu of meeting may only be taken by holders of at least 75% of the voting power.
Disclosure
of Director Share Ownership
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 and during
the 9 months ended September 30, 2020 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, Jr.
|
Nil
|
Nil
|
N/A
|
|
Dean
Rositano
|
Nil
|
Nil
|
N/A
|
SECURITIES
OFFERED
Current
Offering
The
Company is offering up to $5,000,000 total of Securities, consisting of Series D Preferred Stock, par value $0.0001 (the “Preferred
Stock”) including up to 750,000,000 shares of the Company’s common stock in to which the Preferred Stock is converted (collectively
the “Securities”).
Series D Preferred Stock (the “Preferred
Stock”)
General
The Company has designated 500,000 (five hundred
thousand) shares of its authorized and unissued Preferred Stock as “Series D Preferred Stock”. As of
the date of this Offering Circular, zero shares of Series D Preferred Stock are issued and outstanding.
Voting
Holders of Series D Preferred Stock of the
Company vote together as a single class, such that the affirmative vote of 50% of the then outstanding shares of Series D Preferred
stock is sufficient to bind all holders of Series D Preferred Stock.
Except as required by applicable law, the holders
of Series D Preferred Stock are only entitled to vote on any proposed amendment to the Company’s Articles of Incorporation
if such amendment would (1) Effect an exchange or reclassification of all or part of the Series D Preferred Stock into shares of
another class; (2) Effect an exchange or reclassification, or create the right of exchange, of all or part of the shares of another
class of the Company into shares of Series D Preferred Stock; (3) Adversely change the rights, preferences, or limitations of all
or part of the shares of Series D Preferred Stock; (4) Change the shares of all or part of the Series D Preferred Stock into a
different number of shares of Series D Preferred Stock; (5) Create a new class of shares having rights or preferences with respect
to dissolution that are prior or superior to the shares of Series D Preferred Stock; (6) Increase the rights, preferences, or number
of authorized shares of any class that, after giving effect to the amendment, have rights or preferences with respect to dissolution
that are prior or superior to the shares of Series D Preferred Stock; (7) Limit or deny any existing preemptive right of all or
part of the shares of the Series D Preferred Stock; or (8) Cancel or otherwise affect rights to distributions that have accumulated
but not yet been authorized on all or part of the shares of the Series D Preferred Stock.
Dividends
Holders of Series D Preferred Stock are currently
not entitled to receive dividends on Series D Preferred Stock.
Liquidation Preference
Upon the liquidation, dissolution and winding
up of our company, whether voluntary or involuntary, Series D Preferred Stock is senior to all common stockholders and are entitled
to receive an amount per share of Series D Preferred Stock equal to $10.00 per share, subject to appropriate adjustment in the
event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series D Preferred
Stock. If upon any such liquidation, dissolution or winding up of the Company or Deemed Liquidation Event (as defined in the Certificate
of Designation of Series D Preferred Stock of the Company), the assets of the Company available for distribution to its stockholders
shall be insufficient to pay the holders of shares of Series D Preferred Stock the full amount to which they shall be entitled
in accordance with the foregoing and shall share ratably in any distribution of the assets available for distribution in proportion
to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.
Conversion
Each share of Series D Preferred Stock is convertible,
at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by
the holder, into that number of fully paid and nonassessable shares of common stock of the Company (whether whole or fractional)
that have a Fair Market Value, in the aggregate, equal to the Series D Conversion Price. The “Series D Conversion Price”
is initially equal to $10.00. Such initial Series D Conversion Price, and the rate at which shares of Series D Preferred Stock
may be converted into shares of Common Stock is subject to adjustment for Reclassification, Exchange, Substitution, Sales, Reorganizations,
Mergers or Consolidations, as set forth in section 4.4 of the Series D Preferred Stock Certificate of Designation, which is an
Exhibit hereto. “Fair Market Value” shall mean as of any date of
determination, 80% of the average closing price of a share of Common Stock on the principal exchange or market on which such shares
are then trading for the 20 trading days immediately preceding such date.
Notwithstanding
the foregoing, Series D Preferred Stock is subject to adjustment for reclassification, exchange and substitutions as follows: If
the Common Stock issuable on the conversion of Series D Preferred Stock is changed into the same or a different number of shares
of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (except in the event of a sale,
reorganization or merger which results in a change in voting power of the Company that exceeds 50% of the combined voting power
of the Company) then and in each such event, the holder of each share of Series D Preferred Stock shall have the right thereafter
to convert such share into the kind and amount of shares of stock and other securities and property receivable on such reorganization,
reclassification or other change, by holders of the number of shares of Common Stock into which such shares of Series D Preferred
Stock might have been converted immediately before such reorganization, reclassification, or change.
Redemption
Series D Preferred Stock of the Company do not have redemption rights.
Listing
of Stock
The
Preferred Stock offered hereby is convertible into common stock of the Company and our common shares are quoted on the Pink Open
Market under the symbol “FDBL”.
Transfer
Agent and Registrar
Our
transfer agent is Nevada Agency and Transfer Company, 50 West Liberty Street Suite 880, Reno, Nevada 89501, phone (775) 322- 0626.
Dividend
Policy
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.
|
LEGAL
MATTERS
Certain
legal matters with respect to the shares of common stock offered hereby will be passed upon by Jonathan
D. Leinwand, Esq.
EXPERTS
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 and for the year ended December 31, 2018. These parties have audited our financial statements included in this offering
statement to the extent and for the periods set forth in their audit reports. Their reports are included in reliance upon
their authority as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
This
Offering Circular does not purport to restate all of the relevant provisions of the documents referred to or pertinent to the
matters discussed herein, all of which must be read for a complete description of the terms relating to an investment in us. Such
documents are available for inspection during regular business hours at our office by appointment, and upon written request, copies
of documents not annexed to this Offering Circular will be provided to prospective investors. Each prospective investor is invited
to ask questions of, and receive answers from, our representatives. Each prospective investor is invited to obtain such information
concerning us and this offering, to the extent we possess the same or can acquire it without unreasonable effort or expense, as
such prospective investor deems necessary to verify the accuracy of the information referred to into their Offering Circular.
Arrangements to ask such questions or obtain such information should be made by contacting Robert A. Rositano, Jr. - at our executive
offices. The telephone number is (855) 473-7473. We reserve the right, however, in our sole discretion, to condition access to
information that management deems proprietary in nature, on the execution by each prospective investor of appropriate confidentiality
agreements prior to having access to such information.
The
offering of the common stock is made solely by this Offering Circular and the exhibits hereto. The prospective investors have
a right to inquire about and request and receive any additional information they may deem appropriate or necessary to further
evaluate this offering and to make an investment decision. Our representatives may prepare written responses to such inquiries
or requests if the information requested is available. The use of any documents other than those prepared and expressly authorized
by us in connection with this offering is not permitted and should not be relied upon by any prospective investor.
ONLY
INFORMATION OR REPRESENTATIONS CONTAINED HEREIN MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US. NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS OFFERING CIRCULAR IN CONNECTION WITH
THE OFFER BEING MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY US. INVESTORS ARE CAUTIONED NOT TO RELY UPON ANY INFORMATION NOT EXPRESSLY SET FORTH IN THIS OFFERING CIRCULAR.
THE INFORMATION PRESENTED IS AS OF THE DATE ON THE COVER HEREOF UNLESS ANOTHER DATE IS SPECIFIED, AND NEITHER THE DELIVERY OF
THIS OFFERING CIRCULAR NOR ANY SALE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION PRESENTED
SUBSEQUENT TO SUCH DATES(S).
Financial
Statements - Table of Contents
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
FRIENDABLE,
INC.
SEPTEMBER
30, 2020
|
FRIENDABLE INC.
|
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
8,851
|
|
|
$
|
11,282
|
|
|
Accounts receivable
|
|
|
147
|
|
|
|
135
|
|
|
Prepaid expense
|
|
|
106,167
|
|
|
|
30,000
|
|
|
Due from a related party
|
|
|
-
|
|
|
|
30,083
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
115,165
|
|
|
|
71,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
115,165
|
|
|
$
|
71,500
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
2,389,774
|
|
|
$
|
1,997,326
|
|
|
Accounts payable - related party
|
|
|
141,803
|
|
|
|
-
|
|
|
Short term loans
|
|
|
61,000
|
|
|
|
-
|
|
|
Convertible debentures and convertible promissory notes, net of discounts
|
|
|
55,850
|
|
|
|
69,930
|
|
|
Mandatorily redeemable Series C convertible Preferred stock, 1,000,000 shares designated, 124,800 and 149,300 shares issued and outstanding at September 30, 2020 and December 31, 2019, including premium of $76,462 and $55,549 respectively (Liquidation value $208,867)
|
|
|
285,329
|
|
|
|
191,549
|
|
|
Derivative liabilities
|
|
|
209,000
|
|
|
|
12,778,000
|
|
|
Liability to be settled in common stock
|
|
|
988,375
|
|
|
|
1,005,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
4,131,131
|
|
|
|
16,041,805
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
4,131,131
|
|
|
|
16,041,805
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT:
|
|
|
|
|
|
|
|
|
|
Preferred stock, 50,000,000 authorized at par value $0.0001
|
|
|
|
|
|
|
|
|
|
Series A convertible Preferred stock, 25,000 shares designated at par value of $0.0001, 19,786 and 19,789 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively.
|
|
|
2
|
|
|
|
2
|
|
|
Series B convertible preferred stock, $0.0001 par value, 1,000,000 shares designated; 284,000 and 284,000 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively. (Liquidation value $284,000)
|
|
|
28
|
|
|
|
28
|
|
|
Common stock, $0.0001 par value, 1,000,000,000 shares authorized; 21,218,432 and 4,398,114 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
|
|
|
2,122
|
|
|
|
438
|
|
|
Common stock issuable, $0.0001 par value, 106,558,432 and 8,518,335 shares at September 30, 2020 and December 31, 2019, respectively
|
|
|
10,655
|
|
|
|
852
|
|
|
Additional paid-in capital
|
|
|
30,909,397
|
|
|
|
16,476,758
|
|
|
Common stock subscription receivable
|
|
|
(4,500
|
)
|
|
|
(4,500
|
)
|
|
Accumulated deficit
|
|
|
(34,933,670
|
)
|
|
|
(32,443,883
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Deficit
|
|
|
(4,015,966
|
)
|
|
|
(15,970,305
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
115,165
|
|
|
$
|
71,500
|
|
See
accompanying notes to consolidated financial statements
|
FRIENDABLE
INC.
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
(Unaudited)
|
|
|
|
For the
Three Months Ended
September 30,
|
|
|
For the Nine Months
Ended
September 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
111,392
|
|
|
$
|
118,801
|
|
|
$
|
322,671
|
|
|
$
|
120,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
App hosting
|
|
|
12,000
|
|
|
|
2,301
|
|
|
|
33,000
|
|
|
|
18,068
|
|
|
Commissions
|
|
|
191
|
|
|
|
61
|
|
|
|
625
|
|
|
|
619
|
|
|
General and administrative
|
|
|
224,401
|
|
|
|
187,352
|
|
|
|
605,458
|
|
|
|
577,605
|
|
|
Product development and launch
|
|
|
105,790
|
|
|
|
100,500
|
|
|
|
460,102
|
|
|
|
156,088
|
|
|
Artists’ performance fees
|
|
|
425,058
|
|
|
|
-
|
|
|
|
425,058
|
|
|
|
-
|
|
|
Artists’ revenue share
|
|
|
402
|
|
|
|
|
|
|
|
402
|
|
|
|
-
|
|
|
Investor relations
|
|
|
3,921
|
|
|
|
-
|
|
|
|
140,527
|
|
|
|
-
|
|
|
Sales and Marketing
|
|
|
30,081
|
|
|
|
28,788
|
|
|
|
82,335
|
|
|
|
52,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
801,844
|
|
|
|
319,002
|
|
|
|
1,747,507
|
|
|
|
805,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(690,452
|
)
|
|
|
(200,201
|
)
|
|
|
(1,424,836
|
)
|
|
|
(684,642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion and interest expense
|
|
|
(38,423
|
)
|
|
|
(189,117
|
)
|
|
|
(266,710
|
)
|
|
|
(453,674
|
)
|
|
Provision for settlement of lawsuit
|
|
|
-
|
|
|
|
(780,000
|
)
|
|
|
-
|
|
|
|
(780,000
|
)
|
|
Gain on foreign exchange
|
|
|
-
|
|
|
|
-
|
|
|
|
2,580
|
|
|
|
|
|
|
Initial derivative expense
|
|
|
-
|
|
|
|
-
|
|
|
|
(419,000
|
)
|
|
|
-
|
|
|
Gain (loss) on settlement of derivative
|
|
|
257,317
|
|
|
|
-
|
|
|
|
(640,821
|
)
|
|
|
-
|
|
|
Gain on change in fair value of derivative
|
|
|
263,000
|
|
|
|
-
|
|
|
|
259,000
|
|
|
|
|
|
|
Total other expense, net
|
|
|
481,894
|
|
|
|
(969,117
|
)
|
|
|
(1,064,951
|
)
|
|
|
(1,233,674
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(208,558
|
)
|
|
$
|
(1,169,318
|
)
|
|
$
|
(2,489,787
|
)
|
|
$
|
(1,918,316
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.002
|
)
|
|
$
|
(3.72
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(6.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
121,819,362
|
|
|
|
314,726
|
|
|
|
66,468,267
|
|
|
|
314,726
|
|
See
accompanying notes to consolidated financial statements
|
FRIENDABLE
INC.
|
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
|
|
For
the three and nine months ended September 30, 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
Series
A Preferred Stock
|
|
|
Series
B Preferred
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
Stock
|
|
|
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Paid In
|
|
|
Subscription
|
|
|
Accumulated
|
|
|
Shareholders’
|
|
|
|
|
Issued
|
|
|
Amount
|
|
|
Issuable
|
|
|
Amount
|
|
|
Issued
|
|
|
Amount
|
|
|
Issued
|
|
|
Amount
|
|
|
Issuable
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Equity
Deficit
|
|
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(500
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
362,595
|
|
|
|
36
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,914
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
600,000
|
|
|
|
60
|
|
|
|
-
|
|
|
|
-
|
|
|
|
89,940
|
|
|
|
-
|
|
|
|
-
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issuable under debt restructuring
agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,193,098
|
|
|
|
3,620
|
|
|
|
8,415,518
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,419,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock previously issuable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,575,746
|
|
|
|
258
|
|
|
|
(2,575,746
|
)
|
|
|
(258
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A preferred into common stock
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,076
|
|
|
|
5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,547,616
|
)
|
|
|
(1,547,616
|
)
|
|
Balance, March 31, 2020
|
|
|
19,786
|
|
|
$
|
2
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
284,000
|
|
|
$
|
28
|
|
|
|
7,988,531
|
|
|
$
|
797
|
|
|
|
42,135,687
|
|
|
$
|
4,214
|
|
|
$
|
25,001,625
|
|
|
$
|
(4,500
|
)
|
|
$
|
(33,991,499
|
)
|
|
$
|
(8,989,333
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,211,445
|
|
|
|
221
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,299
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
78,000
|
|
|
|
8
|
|
|
|
206,667
|
|
|
|
21
|
|
|
|
27,579
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred shares issuable to talent agents in exchange for services
|
|
|
-
|
|
|
|
-
|
|
|
|
118
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135,617
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of Series A preferred shares to treasury
|
|
|
(118
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock sold for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,750,000
|
|
|
|
175
|
|
|
|
34,825
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(733,613
|
)
|
|
|
(733,613
|
)
|
|
Balance, June 30, 2020
|
|
|
19,668
|
|
|
$
|
2
|
|
|
|
118
|
|
|
$
|
-
|
|
|
|
284,000
|
|
|
$
|
28
|
|
|
|
10,277,976
|
|
|
$
|
1,026
|
|
|
|
44,092,354
|
|
|
$
|
4,410
|
|
|
$
|
25,255,945
|
|
|
$
|
(4,500
|
)
|
|
$
|
(34,725,112
|
)
|
|
$
|
(9,468,201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issuable under debt restructuring agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,275,243
|
|
|
|
6,328
|
|
|
|
5,049,356
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,055,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issuable for stock issued for
cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
|
|
50
|
|
|
|
24,950
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,058,333
|
|
|
|
506
|
|
|
|
-
|
|
|
|
-
|
|
|
|
427,936
|
|
|
|
-
|
|
|
|
-
|
|
|
|
428,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued towards settlement of lawsuit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
750,000
|
|
|
|
75
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,550
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued on conversion of Series C preferred
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,822,958
|
|
|
|
383
|
|
|
|
-
|
|
|
|
-
|
|
|
|
134,660
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of common stock previously issuable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,309,165
|
|
|
|
132
|
|
|
|
(1,309,165
|
)
|
|
|
(132
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of Series A Preferred previously issuable
|
|
|
118
|
|
|
|
-
|
|
|
|
(118
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(208,558
|
)
|
|
|
(208,558
|
)
|
|
Balance, September 30,
2020
|
|
|
19,786
|
|
|
$
|
2
|
|
|
|
0
|
|
|
$
|
-
|
|
|
|
284,000
|
|
|
$
|
28
|
|
|
|
21,218,432
|
|
|
$
|
2,122
|
|
|
|
106,558,432
|
|
|
$
|
10,656
|
|
|
$
|
30,909,397
|
|
|
$
|
(4,500
|
)
|
|
$
|
(34,933,670
|
)
|
|
$
|
(4,015,965
|
)
|
See
accompanying notes to consolidated financial statements
|
FRIENDABLE
INC.
|
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
|
|
For
the three and nine months ended September 30, 2019
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
Series
A Preferred Stock
|
|
|
Series
B Preferred
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
Stock
|
|
|
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Paid In
|
|
|
Subscription
|
|
|
Accumulated
|
|
|
Shareholders’
|
|
|
|
|
Issued
|
|
|
Amount
|
|
|
Issuable
|
|
|
Amount
|
|
|
Issuable2
|
|
|
Amount
|
|
|
Issued
|
|
|
Amount
|
|
|
Issuable
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Equity
Deficit
|
|
|
Balance, December 31, 2018
|
|
|
21,267
|
|
|
$
|
2
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
21,267
|
|
|
$
|
2
|
|
|
|
314,726
|
|
|
$
|
31
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
12,027,043
|
|
|
$
|
(4,500
|
)
|
|
$
|
(22,260,473
|
)
|
|
$
|
(10,237,897
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt forgiveness - related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(380,289
|
)
|
|
|
(380,289
|
)
|
|
Balance, March 31, 2019
|
|
|
21,267
|
|
|
$
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,267
|
|
|
|
2
|
|
|
|
314,726
|
|
|
$
|
31
|
|
|
|
-
|
|
|
$
|
53
|
|
|
$
|
13,027,043
|
|
|
$
|
(4,500
|
)
|
|
$
|
(22,640,762
|
)
|
|
$
|
(9,618,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(368,709
|
)
|
|
|
(368,709
|
)
|
|
Balance, June 30, 2019
|
|
|
21,267
|
|
|
$
|
2
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
21,267
|
|
|
$
|
2
|
|
|
|
314,726
|
|
|
$
|
31
|
|
|
|
0
|
|
|
$
|
53
|
|
|
$
|
13,027,043
|
|
|
$
|
(4,500
|
)
|
|
$
|
(23,009,471
|
)
|
|
$
|
(9,986,895
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subscriptions received
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
325,368
|
|
|
|
-
|
|
|
|
325,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,169,318
|
)
|
|
|
(1,169,318
|
)
|
|
Balance, September 30, 2019
|
|
|
21,267
|
|
|
$
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,267
|
|
|
|
-
|
|
|
|
314,726
|
|
|
$
|
31
|
|
|
|
0
|
|
|
$
|
53
|
|
|
$
|
13,027,043
|
|
|
$
|
320,868
|
|
|
$
|
(24,178,789
|
)
|
|
$
|
(10,830,845
|
)
|
See
accompanying notes to consolidated financial statements
|
FRIENDABLE
INC.
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
|
|
For the Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(2,489,787
|
)
|
|
$
|
(1,918,316
|
)
|
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
575,500
|
|
|
|
-
|
|
|
Amortization of debt discount
|
|
|
45,095
|
|
|
|
-
|
|
|
Loss on settlement of derivative
|
|
|
640,822
|
|
|
|
-
|
|
|
Initial derivative expense
|
|
|
419,000
|
|
|
|
-
|
|
|
Gain on change in fair value of derivative
|
|
|
(259,000
|
)
|
|
|
-
|
|
|
Accrual of dividend on Preferred C Stock
|
|
|
24,666
|
|
|
|
-
|
|
|
Premium and penalties on stock settled debt
|
|
|
171,156
|
|
|
|
-
|
|
|
Interest on convertible debentures and promissory note
|
|
|
-
|
|
|
|
453,674
|
|
|
Provision for settlement of lawsuit
|
|
|
-
|
|
|
|
780,000
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(12
|
)
|
|
|
-
|
|
|
Due from related party
|
|
|
30,083
|
|
|
|
-
|
|
|
Prepaid expenses
|
|
|
30,000
|
|
|
|
-
|
|
|
Accounts payable - related party
|
|
|
141,803
|
|
|
|
-
|
|
|
Accounts payable and accrued expenses
|
|
|
409,743
|
|
|
|
333,707
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(260,931
|
)
|
|
|
(350,935
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of convertible preferred Series C stock
|
|
|
33,000
|
|
|
|
-
|
|
|
Refund on canceled common stock subscription
|
|
|
(500
|
)
|
|
|
-
|
|
|
Proceeds from issuance of convertible notes
|
|
|
105,000
|
|
|
|
-
|
|
|
Proceeds from short-term loans
|
|
|
61,000
|
|
|
|
-
|
|
|
Proceeds from sale of common stock
|
|
|
60,000
|
|
|
|
325,368
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
258,500
|
|
|
|
325,368
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(2,431
|
)
|
|
|
(25,567
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - beginning of period
|
|
|
11,282
|
|
|
|
25,646
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - end of period
|
|
$
|
8,851
|
|
|
$
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Conversion of accrued interest to common stock
|
|
$
|
17,295
|
|
|
$
|
-
|
|
|
Conversion of convertible notes to common stock
|
|
$
|
59,175
|
|
|
$
|
-
|
|
|
Premiums on Series C redeemable preferred shares
|
|
$
|
135,042
|
|
|
$
|
-
|
|
|
Series A shares granted for fees and recorded as prepaid asset
|
|
$
|
135,617
|
|
|
$
|
-
|
|
|
Reduction of liability to be settled with common stock
|
|
$
|
16,625
|
|
|
$
|
-
|
|
|
Recording of debt discount from derivatives on convertible debt
|
|
$
|
105,000
|
|
|
$
|
-
|
|
|
Reduction of derivative liability based on reset common shares issuable
|
|
$
|
13,474,521
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash consists of:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
8,851
|
|
|
$
|
79
|
|
See
accompanying notes to consolidated financial statements
FRIENDABLE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020 and 2019
(Unaudited)
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 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, released in July, 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.
Presently,
until our apps gain greater adoption from paying subscribers through increased awareness, coupled with additional compelling and
exclusive digital content to produce higher revenue levels, the Company has largely supported its operations through the sale
of its software services, and specifically its app development services, under a contractual relationship since inception with
a third party. The Company’s plan, in due course, is to replace revenue from third party app development services with revenue
from its own Friendable and Fan Pass apps, which have various revenue streams currently being tested for long term and/or recurring
monthly viability.
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 unaudited consolidated financial statements and footnotes has been retroactively adjusted for the effects
of the reverse split for all periods presented.
Going
Concern
The
accompanying unaudited 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 September 30, 2020, the Company has a working capital deficiency of $4,015,966, an accumulated deficit of $34,933,670 and
has a stockholder’s deficit of $4,015,966 and its operations continue to be funded primarily from sales of its stock, the
issuance of convertible debentures and short-term loans. During the nine months ended September 30, 2020 the Company had a net
loss and net cash used in operations of $2,489,787 and $260,931. 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 unaudited 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
Basis
of Presentation and Principles of Consolidation
The
unaudited consolidated financial statements include all the accounts of the Company and all of its wholly owned subsidiaries as
of September 30, 2020 and 2019. All material intercompany accounts and transactions have been eliminated in consolidation. The
Company’s fiscal year end is December 31.
The
accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in the United States of America (the “U.S. GAAP”) for interim financial information. Operating results
for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. These unaudited
consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes
to the consolidated financial statements for the year ended December 31, 2019 of the Company which were included in the Company’s
annual report on Form 10-K as filed with the Securities and Exchange Commission June 29, 2020.
FRIENDABLE,
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020 and 2019
(Unaudited)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reclassifications
Certain
balances in 2019 have been reclassified to conform with the 2020 presentation. Specifically, accrued interest on convertible notes
has been reclassified into accounts payable and accrued expenses and accretion and interest expense has been reclassified to other
expenses.
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 nine months ended September 30,
2020, the Company derived revenues primarily from the development of apps for a third party of $319,331, and such revenues were
recognized upon completion of services, and secondarily revenue from the Friendable and Fan Pass apps totaling $3,340.
Sales
and Marketing Costs
The
Company’s policy regarding sales and marketing costs is to expense such costs when incurred. During the nine months ended
September 30, 2020, the Company incurred $82,335 (September 30, 2019: $52,924) in sales and marketing 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.
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 and conversion options embedded in convertible
debt. 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.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020 and 2019
(Unaudited)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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 September 30, 2020 and December
31, 2019, 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 nine months ended September 30, 2020 and 2019 we derived 99% 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.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020 and 2019
(Unaudited)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
As
of September 30, 2020, there were approximately 1,180,528,592 potentially dilutive shares outstanding, as follows.
Potential
dilutive shares
|
|
60,908
|
|
|
Warrants outstanding
|
|
|
14,313,505
|
|
|
Common shares issuable upon conversion of convertible debt
|
|
|
1,149,991,726
|
|
|
Total shares issuable upon conversion of Preferred Series A shares
|
|
|
1,136,000
|
|
|
Total shares issuable upon conversion of Preferred Series B shares
|
|
|
15,026,403
|
|
|
Total shares issuable upon conversion of Preferred Series C shares
|
|
|
1,180,528,592
|
|
|
|
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 of September 30, 2020 the Company has no lease obligations.
3.
RELATED PARTY TRANSACTIONS AND BALANCES
During
the nine months ended September 30, 2020, the Company incurred $369,558 (2019: $344.434) in salaries and payroll taxes to officers,
directors, and other related employees with such costs being recorded as general and administrative expenses.
During
the nine months ended September 30, 2020, the Company incurred $33,000, $332,834, and $45,000 (2019: $18,068, $156,088, and $43,883)
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.
As
of September 30, 2020, the Company had a stock subscription receivable totaling $4,500 (December 31, 2019: $4,500) from an officer
and director and from a company with an officer and director in common.
As
of September 30, 2020, accounts payable, related party includes $141,803 (December 31, 2019: due from related party of $30,083)
due to a company with two officers and directors in common, and $1,081,749 (December 31, 2019: $783,416) payable in salaries to
directors and officers of the Company, which is included in accounts payable and accrued expenses. The amounts are unsecured,
non-interest bearing and are due on demand.
4.
CONVERTIBLE DEBENTURES
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 at that date. Subsequent to March 26, 2019
Alpha sold all of its convertible debenture to Ellis International LP (“Ellis”).
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020 and 2019
(Unaudited)
4.
CONVERTIBLE DEBENTURES (CONTINUED)
The
debt holders agreed to convert their debt of approximately $6.3 million and accrued interest of approximately $1.8 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. Accordingly, the 5,902,589 common shares due were recorded as issuable in equity.
On
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.
On
March 4, 2020 the Company became obligated issue an additional 36,193,098 shares of common stock and on July 2, 2020 it became
obligated to issue an additional 63,275,243 shares for a total amount of shares due of 105,370,930.
The
Company determined that the reset provision represented a standalone derivative liability. Accordingly, this debt restructure
transaction was accounted for in 2019 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 resulting in a loss on debt extinguishment of $6,954,920.
The
Company adjusted this 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
|
|
|
June
|
|
|
|
|
2019
|
|
|
31, 2019
|
|
|
30, 2020
|
|
|
Volatility
|
|
|
617
|
%
|
|
|
738.1
|
%
|
|
|
293.6
|
%
|
|
Risk Free Rate
|
|
|
1.59
|
%
|
|
|
1.6
|
%
|
|
|
.13
|
%
|
|
Expected Term
|
|
|
0.66
|
|
|
|
0.5
|
|
|
|
0.01
|
|
Because
the second (and final) reset date of July 2, 2020 determined that the total common shares issuable to fully settle this debt amounted
to 105,370,930 a derivative liability no longer exists and the Company recognized a final gain on settlement on July 2, 2020 of
$257,316.
On
September 21, 2020, Ellis International LP (as successor to Alpha Capital Anstalt) submitted a request to drawdown and, on September
29, 2020, was issued 687,355 common shares against its entitlement above and reclassified from issuable shares in the accompanying
balance sheet and statement of changes in stockholder equity.
Subsequent
to September 30, 2020, on November 9, 2020, Coventry Enterprises requested and was issued 915,000 common shares and on November
23, 2020 Barbara Mittman requested and was issued 1,262,783 against their respective entitlement under the debt settlement agreement,
which was reclassified from issuable shares.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020 and 2019
(Unaudited)
4.
CONVERTIBLE DEBENTURES (CONTINUED)
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 consolidated
balance sheet, with changes in fair value reported in the consolidated 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.
The
following is a summary of activity related to the reset provision derivative liability for the nine months ended September 30,
2020:
|
Balance, Derivative Liability at December 31, 2019
|
|
$
|
12,778,000
|
|
|
Record obligation to issue additional shares
|
|
|
(13,474,821
|
)
|
|
Loss on settlement of derivative
|
|
|
640,821
|
|
|
Loss on change in fair value of derivative
|
|
|
56,000
|
|
|
Balance, Reset provision derivative liability at September 30, 2020
|
|
$
|
-
|
|
5.
CONVERTIBLE PROMISSORY NOTES
The
following is a summary of Convertible Promissory Notes at September 30, 2020:
|
|
|
Issuance:
|
|
Principal
|
|
|
Accrued
|
|
|
Principal and
|
|
|
|
|
Date
|
|
Outstanding
|
|
|
Interest
|
|
|
Accrued Interest
|
|
|
J.P. Carey Inc.
|
|
March 30, 2017
|
|
|
-
|
|
|
$
|
48,228
|
|
|
$
|
48,228
|
|
|
J.P. Carey Inc
|
|
May 20, 2020
|
|
$
|
60,000
|
|
|
|
4,892
|
|
|
|
64,892
|
|
|
J.P. Carey Inc
|
|
June 11, 2020
|
|
|
10,000
|
|
|
|
-
|
|
|
|
10,000
|
|
|
Green Coast Capital International
|
|
April 6, 2020
|
|
|
10,755
|
|
|
|
631
|
|
|
|
11,386
|
|
|
Green Coast Capital International
|
|
April 8, 2020
|
|
|
35,000
|
|
|
|
2,853
|
|
|
|
37,853
|
|
|
Total
|
|
|
|
$
|
115,755
|
|
|
$
|
56,604
|
|
|
$
|
172,359
|
|
|
Less: Discount
|
|
|
|
|
(59,905
|
)
|
|
|
|
|
|
|
|
|
|
Net carrying value September 30, 2020
|
|
|
|
$
|
55,850
|
|
|
|
|
|
|
|
|
|
The
derivative fair value of the above at September 30, 2020 is $209,000.
Further
information concerning the above Notes is as follows:
JP
Carey Convertible Note dated March 30, 2017 and assignments
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 LLC an entity controlled by Mr. Canouse.
Although the Note is dated March 30, 2017, it was issued on April 7, 2017. The note maturity date was September 30, 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.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020 and 2019
(Unaudited)
5.
PROMISSORY NOTE AND CONVERTIBLE PROMISSORY NOTE (CONTINUED)
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 trading day immediately preceding the closing date, which was $20.00 per share, 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 4.99% of our outstanding common stock. The note defines several events that constitute
default including failure to pay principal and interest by the maturity date of September 30, 2017 and failure to comply with
the exchange act. 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. The Company defaulted by not paying the principal and
interest on September 30, 2017 and has been recording interest at the 24% default rate. The Company also defaulted by being late
with filing the Form 10-K on May 29, 2020.
During
the year ended 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 and 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.
At
December 31, 2019, the J.P. Carey note balance including accrued interest of $51,980 was $121,910, including the portion assigned
to World Market Ventures of $4,000.
During
the nine months ended September 30, 2020:
J.P.
Carey converted $30,929 of principal and $18,021 of interest into 1,642,162 shares of the Company’s common stock at a price
of $0.029.
World
Market Ventures converted the remaining balance of $4,000 of principal into 72,595 shares of the Company’s common stock
at a price of $0.0551.
On
April 6, 2020 JP Carey assigned $35,000 of the note to Green Coast Capital International. The assignment carries the same conversion
rights as the original note. During the nine months ended September 30, 2020 Green Coast converted $24,245 of principal into 859,283
shares of common stock of the Company at an average price of $0.029 and the Company incurred $414 of interest on the assigned
note. As of September 30, 2020 the assigned note had a principal balance of $10,755 and an interest balance of $631.
At
September 30, 2020, the J.P. Carey note principal balance was $0 and accrued interest was $48,228.
The
accrued interest has been accounted for as a derivative liability due to the variable conversion price.
Green
Coast Capital International Securities Purchase Agreement and Convertible Note dated April 8, 2020
On
April 8, 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) whereby the Company agreed to
sell to the holder convertible notes in amounts up to $150,000. The note holder shall be entitled to a pro rata share of 20% of
the net revenues (excluding Brightcove) derived from subscriptions and other sales of Fan Pass, Inc., a wholly owned subsidiary
of the Company. The 20% pays out two times the initial investment and continues at 5% for a period of five years.
On
April 8, 2020 the Company issued a 0% note to Green Coast under this SPA with a maturity date of October 8, 2020 and received
$35,000 in cash. The Note is convertible into common stock, subject to Rule 144, at any time after the issue date at $0.02 per
share. The holder does not have the right to convert the note, to the extent that the holder would beneficially own in excess
of 4.9% of our outstanding common stock. The note defines several events that constitute default including failure to pay principal
and interest by the maturity date and failure to comply with the exchange act. 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.
Under certain default events the Company may incur a penalty of 20% to 50% of the note principal. Further, if the Company fails
to comply with the exchange act the conversion price is the lowest price quoted on the trade exchange during the delinquency period.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020 and 2019
(Unaudited)
5.
PROMISSORY NOTE AND CONVERTIBLE PROMISSORY NOTE (CONTINUED)
Upon
certain default events the conversion price may change. Therefore, the embedded conversion option is bifurcated and treated as
a derivative liability. On the date of issuance, the Company recorded a derivative liability of $228,000, resulting in derivative
expense of $193,000 and a discount against the note of $35,000 to be amortized into interest expense through the maturity date
of October 8, 2020.
The
Company defaulted by being late with filing the Form 10-K on May 29, 2020. The Company accrued interest at the default rate of
24% for the period from May 29, 2020 to September 30, 2020. At September 30, 2020, the Green Coast note principal balance was
$35,000 and accrued interest was $2,853.
JP
Carey Securities Purchase Agreement and Convertible Note dated May 20, 2020
On
May 20, 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) whereby the Company agreed to sell
to the holder convertible notes in amounts up to $60,000. The note holder shall be entitled to a pro rata share of 20% of the
net revenues (excluding Brightcove) derived from subscriptions and other sales of Fan Pass, Inc., a wholly owned subsidiary of
the Company. The 20% pays out two times the initial investment and continues at 5% for a period of five years. At September 30, 2020
no accrual for the net revenue share was material.
On
May 20, 2020 the Company issued a 0% interest rate note to JP Carey under this SPA with a maturity date of January 1, 2021 and
received $60,000 in cash in three closings; $30,000 on April 9, 2020, $15,000 on May 13, 2020, and $15,000 on May 20, 2020. The
Note is convertible into common stock, subject to Rule 144, at any time after the issue date at $0.02 per share. The holder does
not have the right to convert the note, to the extent that the holder would beneficially own in excess of 4.9% of our outstanding
common stock. The note defines several events that constitute default including failure to pay principal and interest by the maturity
date and failure to comply with the exchange act. 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. Under certain default
events the Company may incur a penalty of 20% to 50% of the note principal. Further, if the Company fails to comply with the exchange
act the conversion price is the lowest price quoted on the trade exchange during the delinquency period.
Upon
certain default events the conversion price may change. Therefore, the embedded conversion option is bifurcated and treated as
a derivative liability. On the date of issuance, the Company recorded a derivative liability of $233,000, resulting in derivative
expense of $173,000 and a discount against the note of $60,000 to be amortized into interest expense through the maturity date.
The
Company defaulted by being late with filing the Form 10-K on May 29, 2020. The Company accrued $4,892 of interest at the default
rate of 24% for the period from May 29, 2020 to September 30, 2020.
JP
Carey Convertible Note dated June 11, 2020
On
June 11, 2020, the issued a 0% note to JP Carey with a maturity date of January 15, 2021 and received $10,000 in cash. The Note
is convertible into common stock, subject to Rule 144, at any time after the issue date at $0.01 per share. The holder does not
have the right to convert the note, to the extent that the holder would beneficially own in excess of 9.9% of our outstanding
common stock. The note defines several events that constitute default including failure to pay principal and interest by the maturity
date and failure to comply with the exchange act. 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. Under certain default
events the Company may incur a penalty of 20% to 50% of the note principal. Further, if the Company fails to comply with the exchange
act the conversion price is the lowest price quoted on the trade exchange during the delinquency period.
Upon
certain default events the conversion price may change. Therefore, the embedded conversion option is bifurcated and treated as
a derivative liability. On the date of issuance, the Company recorded a derivative liability of $63,000, resulting in derivative
expense of $53,000 and a discount against the note of $10,000 to be amortized into interest expense through the maturity date.
At
September 30, 2020, the JP Carey note principal balance was $10,000 and accrued interest was $0.
As
discussed above, the Company determined that the conversion options embedded in certain convertible debt meet the definition of
a derivative liability. The Company estimated the fair value of the conversion options at the date of issuance, and at September
30, 2020, using Monte Carlo simulations and the following range of assumptions:
|
Volatility
|
|
246.09%
– 259.77%
|
|
Risk
Free Rate
|
|
0.10%
|
|
Expected
Term
|
|
0.25
– 0.31
|
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020 and 2019
(Unaudited)
5.
PROMISSORY NOTE AND CONVERTIBLE PROMISSORY NOTE (CONTINUED)
The
following is a summary of activity related to the embedded conversion options derivative liabilities for the nine months ended
September 30, 2020.
|
Balance, December 31, 2019
|
|
$
|
-
|
|
|
Initial derivative liabilities charged to operations
|
|
|
419,000
|
|
|
Initial derivative liabilities recorded as debt discount
|
|
|
105,000
|
|
|
Change in fair value loss (gain)
|
|
|
(315,000
|
)
|
|
Balance, September 30, 2020
|
|
$
|
209,000
|
|
6.
SHORT TERM LOANS
During
the 3 months ended September 30, 2020 the Company received short term, interest free, loans of $10,000, $16,000, $15,000 and $20,000
(total $61,000) on July 9, 2020, August 13, 2020, September 2, 2020 and September 28, 2020 respectively, from Joseph Canouse,
the provider of the J.P. Carey Inc. convertible promissory notes.
7.
COMMITMENTS AND CONTINGENCIES
The
following table summarizes the Company’s significant contractual obligations as of September 30, 2020:
|
Employment Agreements (1)
|
|
$
|
300,000
|
|
|
Lawsuit Contingency (2)
|
|
$
|
988,375
|
|
|
|
(i)
|
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 of subscribers, the officers are eligible to receive additional bonuses and
salary increases. With mutual agreement with the Company, effective August 31, 2020 one of the officers chose early termination
of his employment, which reduced the annual commitment for the remaining officers to $300,000.
|
|
(ii)
|
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. While the court did not
strike those responses, 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, as Amended, 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 to be issued in tranches every
30 days or according to the instructions of Integrity, in exchange for 275 of the Company’s preferred shares held by Integrity
and the cash payment of $30,000 for costs. Robert Rositano, the Company’s CEO, has also personally guaranteed the Company’s
compliance with the terms of the Settlement Agreement. The cash payment is to be made within 6 months of the date of the Settlement
Agreement. As of the date of filing of this report 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. The Company determined that a total of 4,275,000 additional
shares would be issuable on the first “reset” date of March 4, 2020 based on a share price of $0.20 on that date and
a total of 7,537,500 additional shares would be issuable on the second “reset” date of July 2, 2020 based on a share
price of $0.08 on that date, for a total of 12,562,500 shares. Integrity will also be entitled to a “true-up” by the
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 $1.00. It was determined by the Company that its liability was $1,005,000 ($750,000 plus a premium of $255,000),
in accordance with ASC 480.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020 and 2019
(Unaudited)
7.
COMMITMENTS AND CONTINGENCIES (CONTINUED)
On
August 28, 2020 Integrity requested and was issued 750,000 common shares, which Integrity advised the Company realized $16,625
when sold. Accordingly, at September 30, 2020 the Company reduced its liability payable in common stock from $1,005,000 to $988,375
and retained $30,000 as an accrued liability for costs.
On
October 14, 2020 the Company filed a “Declaration” with the Santa Clara County Courts challenging Integrity’s
future ability to convert additional shares based on “Stock Market Manipulation” designed to harm the Company’s share
price, valuation and number of shares issuable to Integrity following its sales. Additionally, the Company contended that
Integrity disregarded the volume limitation set forth in its settlement for the Company’s thinly traded securities and caused
a potential third party capital investment of $150,000 to be rescinded. The court agreed with the Company’s declaration
that Integrity should have filed a motion so the Company would have the opportunity to present all arguments and evidence in opposition
to deny Integrity’s application to enter judgment.
COVID-19
Disclosure
The
coronavirus pandemic has at times adversely affected the Company’s
business and is expected to continue to adversely affect certain aspects of our merchandise
offerings and custom artist collections of merchandise specifically. This
impact on our operations, supply chains and distribution systems may also impair our ability to raise capital. There is uncertainty
around the duration and breadth of the COVID-19 pandemic and, as a result, uncertainty on the ultimate impact on our business.
Such impact on the Company’s financial condition and operating results cannot be reasonably estimated at
this time, since the extent of such impact is dependent
on future developments, which are highly uncertain and cannot be predicted.
8.
COMMON AND PREFERRED STOCK
Common
Stock:
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 remained issuable as of December 31, 2019.
Issued
534,000 shares of common stock to various subscribers of common stock under security purchase agreements at $0.25 per share for
a total of $133,500. Certain of these agreements contained a provision whereby the founders of the Company were to issue to the
subscribers (a) an aggregate of 47,000 shares of common stock from their personal holdings and (b) another amount of common shares
(43,811) by converting their held Series A preferred shares as measured on the date one year from the closing of the offering.
There is no accounting effect for these transfers. In addition, other agreements contained a provision whereby the Company would
set aside 10% of future net revenue from a specific product and share ratably with the investors. The Company has reviewed ASC
470-10-25, “Sales of Future Revenues or Various other Measures of Income.” and determined that no debt provision is
needed. The investors who received this benefit did not pay additional consideration compared to those who did not receive it.
Therefore, the additional feature is a detachable unit with $0 value. 477,000 shares remained issuable as of December 31, 2019.
In March 2020, the Founder converted 3 Series A Preferred Shares to meet their personal commitment to transfer their common shares
to the investors.
Issued
600,000 shares of common stock to a consultant in exchange for future services valued at $90,000 of which $30,000 remained in
prepaid expense at 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 debt extinguishment
of $435,000 based on the $537,500 value based on recent sales.
Issued
1,002,970 and had 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 4).
During
the six months ended June 30, 2020, the Company:
Issued
2,574,040 shares of common stock to two convertible note holders for partial conversion of an aggregate of $76,470 of the notes
and accrued interest at an average price of $0.03.
Cancelled
2,000 shares of common stock valued at $500 previously issued to an investor under a securities purchase agreement and returned
the $500 to the investor.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020 and 2019
(Unaudited)
8.
COMMON AND PREFERRED STOCK (CONTINUED)
Granted
884,667 shares of common stock to consultants in exchange for services valued at $117,608 based on the quoted trading price of
the Company’s common stock on the grant dates.
Recorded
the obligation to issue 36,193,098 additional shares of common stock based on the first reset date of March 4, 2020 in accordance
with the debt restructuring agreement (See note 4).
The
two directors converted 3 shares of Series A Preferred Stock into 54,076 shares of common stock to transfer 43,811 of these shares
to investors who were owed shares of common stock under a “founders match” provision in security purchase agreements
(See above).
Sold
1,750,000 shares of common stock in exchange for $35,000.
During
the three months ended September 30, 2020, the Company:
Recorded
the obligation to issue 63,275,243 additional shares of common stock based on the second reset date of July 2, 2020 in accordance
with the debt restructuring agreement (See note 4).
Recorded
the obligation to issue 500,000 common shares under a third party SPA at the sale price of $0.05 per share in exchange for cash
of $25,000.
Issued
a total of 4,983,333 common shares for services from music artists and mangers at a value of $425,058 at date of agreements, based
on the quoted trading prices on those dates, to secure live performances for the July 24, 2020 Fan Pass app launch.
Issued
750,000 common shares to Integrity Media pursuant to the Company’s settlement agreement, which Integrity Media advised had
a realized value of $16,625.
Granted
a total of 75,000 common shares for services valued at $3,384 at date of the agreement.
Issued
a total of 3,822,958 common shares on conversion of 62,500 Preferred Series C shares having a redemption value of $96,750 including
accrued dividend, plus a premium of $38,293.
Issued
a total of 1,309,165 common shares against commitments for previously issuable common shares.
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 two related parties
who 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 two directors. The 2,018,746 common shares were issuable as of December 31, 2019 and were subsequently issued during
the six months ended June 30, 2020.
During
the six months ended June 30, 2020 two directors converted 3 shares of Series A Preferred Stock into 54,076 shares of common stock.
|
FRIENDABLE,
INC.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
September
30, 2020 and 2019
|
|
(Unaudited)
|
|
|
8.
COMMON AND PREFERRED STOCK (CONTINUED)
On
June 3, 2020 the Company and Eclectic Artists LLC (“E Artists”) entered into a Partner Agreement and Stock Subscription
Agreement, pursuant to which E Artists will engage musical artists and other talent to engage on the Company’s FanPass platform,
providing live streaming events available through the FanPass mobile application for a term of 18 months. As compensation for
bringing the artists to the FanPass platform, E Artists will receive 5% of net revenue attributable to the Fan Pass platform,
initially for a period of 18 months. In addition, E Artists will receive Series A preferred stock such that when converted would
be equal to 5% of the outstanding common stock. The number of Series A preferred shares was calculated at 118 shares valued at
$135,617 based on the quoted trading price of the Company’s common stock of $0.0605 on the agreement date and 2,241,596
equivalent common shares. The Company recorded a prepaid expense of $135,617 and amortized $29,450 as sales and marketing expense
as of September 30, 2020. Concurrent with the issuance of the Series A Shares to E Artists, Robert Rositano, Jr., the Company’s
CEO and Dean Rositano, the Company’s president, will return an aggregate of 118 Series A Preferred shares to the Company’s
treasury.
Series
B:
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 other than noted above. 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 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:
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.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
September
30, 2020 and 2019
|
|
(Unaudited)
|
|
|
8.
COMMON AND PREFERRED STOCK (CONTINUED)
During
the year ended December 31, 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.
As
of June 30, 2020, the Company has revalued the shares and premiums at the stated value of $1.50 per share in accordance with the
events discussed below. On May 29, 2020 the Company defaulted on the shares by being late with the filing of the Form 10-K, thereby
increasing the dividend rate to 22% and the stated value to $1.50 per share. During the three months ended March 31, 2020, 38,000
shares of Series C convertible preferred stock were issued to an investor under preferred stock purchase agreements at a price
of approximately $0.87 per share for a total of $33,000. Due to the mandatory redemption feature, these shares were reflected
as a current liability at June 30, 2020 and September 30, 2020.
Because
Series C preferred 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 total premium of $114,755 recorded as of June 30, 2020. In
addition, the Company recorded a cumulative dividend payable of $11,885 as of June 30, 2020 to the mandatorily redeemable
Series C convertible preferred stock liability with this amount being recorded as interest expense since the Series C
liability must be reflected at redemption value. Together with the 2019 issuances and adjustments, the total amount was
reflected at $407,590 at June 30, 2020.
During
the three months ended September 30, 2020 the holder of the Series C converted 62,500 Series C shares to 3,822,958 common
shares for a redemption value of $96,750 including accrued dividends plus premium of $38,292, which totaled $135,042 recorded
into equity. At September 30, 2020 the remaining liability totals $285,329, represented by a remaining balance of $187,200 in
redeemable Series C stock, together with the related premium of $76,463 and accrued dividends of $21,667.
9.
SHARE PURCHASE WARRANTS
Activity
in 2020 and 2019 is as follows:
|
|
|
Number of
Warrants
|
|
|
Weighted Average
Exercise Price $
|
|
|
Weighted Average
Remaining Life (Years)
|
|
|
Balance, December 31, 2018
|
|
|
60,908
|
|
|
|
72.00
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
60,908
|
|
|
|
72.00
|
|
|
|
|
|
|
Balance, September 30, 2020
|
|
|
60,908
|
|
|
|
72.00
|
|
|
|
1.0
|
|
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.
|
FRIENDABLE,
INC.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
September
30, 2020 and 2019
|
|
(Unaudited)
|
|
|
10.
STOCK-BASED COMPENSATION (CONTINUED)
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 September 30, 2020, 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.
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 September 30, 2020, there was a derivative measured at fair value on a recurring basis (see note 4) presented on the Company’s
balance sheet, as follows:
|
|
|
Liabilities at Fair Value
|
|
|
|
|
September 30, 2020
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Embedded conversion of options derivative liabilities
|
|
|
-
|
|
|
|
-
|
|
|
$
|
209,000
|
|
|
$
|
209,000
|
|
|
FRIENDABLE,
INC.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
September
30, 2020 and 2019
|
|
(Unaudited)
|
|
|
12.
SUBSEQUENT EVENTS
Between
October 23 and November 13, 2020, the Company issued a total of 4,412,118 shares of common stock to the holder of the Preferred
C stock on conversion of 25,900 shares of Preferred C stock at a price per common share of between $0.0083 and $0.0095. The conversion
price was determined based on the default stated value of $1.50 plus accrued dividends and a discount to market price of 29%.
The
Company recorded the obligation to issue 915,000 common shares to Coventry Enterprises and 1,262,783 common shares to Barbara
Mittman in November 2020 as requested drawdowns against the Company’s debt restructuring agreement (see Note 4).
On
October 9, 2020 the Company recorded the obligation to issue 300,000 common shares to music artist Remy Boy Monty in consideration
for the artist’s agreement to post his exclusive music content on the Company’s Fan Pass platform on a revenue share
basis. The shares will be valued at the quoted trade price on the October 9, 2020 grant date.
On
November 19, 2020 the Company issued 175,000 common shares to Green Coast Capital International at $0.02 per share in settlement
of its $35,000 convertible note maturing October 8, 2020.
FRIENDABLE,
INC.
CONSOLIDATED
FINANCIAL STATEMENTS
December
31, 2019
Report
of Independent Registered Public Accounting Firm
To
the Stockholders and the Board of Directors of:
Friendable,
Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheet of Friendable, Inc. and Subsidiary (the “Company”) as of
December 31, 2019, the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash
flows, for the year then ended and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position
of the Company as of December 31, 2019, and the consolidated results of its operations and its cash flows for the year then ended,
in conformity with accounting principles generally accepted in the United States of America.
We
also audited the adjustments described in Note 1 to retrospectively apply the effects of the 1 for 18,000 reverse stock-split
to all periods presented including the 2018 period. In our opinion, such adjustments are appropriate and have been properly applied.
We were not engaged to audit, review or apply any procedures to the 2018 consolidated financial statements other than with respect
to the reverse stock-split adjustments and accordingly, we do not express an opinion or any other form of assurance on the 2018
consolidated financial statements taken as a whole.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 1 to the consolidated financial statements, the Company has a net loss and cash used in operations of $10,183,410
and $488,864, respectively, in 2019 and has a working capital deficit, stockholders’ deficit and accumulated deficit of
$15,970,305, $32,443,883 and $15,970,305, respectively, at December 31, 2019. These matters raise substantial doubt
about the Company’s ability to continue as a going concern. Management’s Plan in regards to these matters is also
described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
2295
NW Corporate Blvd., Suite 240 ● Boca Raton, FL 33431-7328
Phone:
(561) 995-8270 ● Toll Free: (866) CPA-8500 ● Fax: (561) 995-1920
www.salbergco.com
● info@salbergco.com
Member
National Association of Certified Valuation Analysts ● Registered with the PCAOB
Member
CPAConnect with Affiliated Offices Worldwide ● Member AICPA Center for Audit Quality
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over
financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
Salberg & Company, P.A.
SALBERG
& COMPANY, P.A.
We
have served as the Company’s auditor since 2020.
Boca
Raton, Florida
June
29, 2020
|
17th
floor, 1030 West Georgia St., Vancouver, BC, Canada V6E 2Y3
Tel: 604. 714. 3600 Fax: 604. 714. 3669 Web: manningelliott.com
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
To
the Stockholders and the Board of Directors of Friendable, Inc.
Opinion
on the Consolidated Financial Statements
We
have audited, before the effects of the adjustment to retrospectively apply the adjustments described in Note 1 to apply the effects
of the 1 for 18,000 reverse stock-split to all periods presented including the 2018 period the accompanying consolidated financial
statements of Friendable, Inc. and its subsidiaries (the “Company”), which comprised the consolidated statements of
financial position as at December 31, 2018 and 2017, and the consolidated statements of comprehensive loss, consolidated statement
of stockholders’ deficit and consolidated statements of cash flows for the years ended December 31, 2018 and 2017, and the
related notes, including a summary of significant accounting policies and other explanatory information (collectively referred
to as the “consolidated financial statements”).
In
our opinion, the consolidated financial statements, before the effects of the adjustments to retrospectively apply the effects
of the 1 for 18,000 reverse stock-split as described in Note 1, present fairly, in all material respects, the financial position
of the Company as at December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in
accordance with accounting principles generally accepted in the United States as issued by the Financial Accounting Standards
Board.
We
were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the effects of the 1 for
18,000 reverse stock-split as described in Note 1 and, accordingly, we do not express an option or any other form of assurance
about whether such adjustments are appropriate and have been properly applied. These adjustments were audited by Salberg &
Company, P.A.
Explanatory
Paragraph – Going Concern
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements, the Company has a working capital deficit and has accumulated losses since
inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s
plans in regard to these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (PCAOB) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether
due to fraud or error. Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error, and performing procedures that respond to those risks. Such procedures include
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
We
believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a reasonable basis for
our audit opinion.
/s/
MANNING ELLIOTT LLP
CHARTERED
PROFESSIONAL ACCOUNTANTS
Vancouver,
British Columbia
June
29, 2020
We
have served as the Company’s auditor since 2010.
|
FRIENDABLE
INC.
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
11,282
|
|
|
$
|
25,646
|
|
|
Accounts receivable
|
|
|
135
|
|
|
|
-
|
|
|
Prepaid expenses
|
|
|
30,000
|
|
|
|
-
|
|
|
Due from a related party
|
|
|
30,083
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
71,500
|
|
|
|
25,646
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
71,500
|
|
|
$
|
25,646
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
1,945,346
|
|
|
$
|
3,777,301
|
|
|
Convertible debentures and convertible promissory notes
|
|
|
121,910
|
|
|
|
6,385,683
|
|
|
Mandatorily redeemable Series C convertible Preferred stock,
1,000,000 shares designated, 149,300 and 0 issued and outstanding at December 31, 2019 and 2018, including premium of $55,549 (Liquidation
value $136,000)
|
|
|
191,549
|
|
|
|
-
|
|
|
Derivative liability
|
|
|
12,778,000
|
|
|
|
-
|
|
|
Promissory note
|
|
|
-
|
|
|
|
100,559
|
|
|
Liability to be settled in common stock
|
|
|
1,005,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
16,041,805
|
|
|
|
10,263,543
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
16,041,805
|
|
|
|
10,263,543
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT:
|
|
|
|
|
|
|
|
|
|
Preferred stock, 50,000,000 authorized at par value $0.0001
|
|
|
|
|
|
|
|
|
|
Series A convertible Preferred stock, 50,000,000 shares designated at par value of $0.0001, 19,789 and 21,267 shares issued and outstanding at December 31, 2019 and 2018 (Liquidation value $68,366)
|
|
|
2
|
|
|
|
2
|
|
|
Series B convertible preferred stock, $0.0001 par value, 1,000,000 shares designated; 284,000 and 0 shares issued and outstanding at outstanding December 31, 2019 and 2018, respectively. (Liquidation value $284,000)
|
|
|
28
|
|
|
|
-
|
|
|
Common stock, $0.0001 par value, 1,000,000,000 shares authorized; 4,398,114 and 308,518 shares issued and outstanding at outstanding December 31, 2019 and 2018, respectively
|
|
|
438
|
|
|
|
31
|
|
|
Common stock issuable, $0.0001 par value, 8,518,335 and 0 shares at December 31, 2019 and 2018, respectively
|
|
|
852
|
|
|
|
-
|
|
|
Additional paid-in capital
|
|
|
16,476,758
|
|
|
|
12,027,043
|
|
|
Common stock subscription receivable
|
|
|
(4,500
|
)
|
|
|
(4,500
|
)
|
|
Accumulated deficit
|
|
|
(32,443,883
|
)
|
|
|
(22,260,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Deficit
|
|
|
(15,970,305
|
)
|
|
|
(10,237,897
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
71,500
|
|
|
$
|
25,646
|
|
See
accompanying notes to consolidated financial statements.
|
FRIENDABLE
INC.
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
For the Years Ended
|
|
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
242,696
|
|
|
$
|
6,190
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
App hosting
|
|
|
24,068
|
|
|
|
210,000
|
|
|
Commissions
|
|
|
938
|
|
|
|
1,817
|
|
|
General and administrative
|
|
|
814,053
|
|
|
|
719,960
|
|
|
Product development
|
|
|
299,124
|
|
|
|
80,549
|
|
|
Investor relations
|
|
|
98,264
|
|
|
|
6,077
|
|
|
Sales and Marketing
|
|
|
48,375
|
|
|
|
22,575
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,284,822
|
|
|
|
1,040,978
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(1,042,126
|
)
|
|
|
(1,034,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
Accretion and interest expense
|
|
|
(621,149
|
)
|
|
|
(2,052,216
|
)
|
|
Impairment loss
|
|
|
-
|
|
|
|
(35,000
|
)
|
|
Provision for settlement of lawsuit
|
|
|
(1,035,000
|
)
|
|
|
-
|
|
|
Loss on debt extinguishments
|
|
|
(7,384,866
|
)
|
|
|
-
|
|
|
Exchange gain or (loss)
|
|
|
24,731
|
|
|
|
-
|
|
|
Loss on change in fair value of derivative
|
|
|
(125,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense, net
|
|
|
(9,141,284
|
)
|
|
|
(2,087,216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(10,183,410
|
)
|
|
$
|
(3,122,004
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(2.56
|
)
|
|
$
|
(10.23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
3,981,702
|
|
|
|
305,283
|
|
See
accompanying notes to consolidated financial statements.
|
FRIENDABLE
INC.
|
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
For
the Years Ended December 31, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Common Stock
|
|
|
|
|
|
Total
|
|
|
|
|
Series
A Preferred Stock
|
|
|
Series
B Preferred Stock
|
|
|
Common
Stock
|
|
|
Paid
In
|
|
|
Subscription
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
|
Shares
Issued
|
|
|
Amount
|
|
|
Shares
Issuable
|
|
|
Amount
|
|
|
Shares
Issued
|
|
|
Amount
|
|
|
Shares
Issuable
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Equity
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017
|
|
|
21,267
|
|
|
$
|
2
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
278,351
|
|
|
$
|
28
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
11,658,781
|
|
|
$
|
(4,500
|
)
|
|
$
|
(19,138,469
|
)
|
|
$
|
(7,484,158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,167
|
|
|
|
3
|
|
|
|
|
|
|
|
-
|
|
|
|
60,297
|
|
|
|
|
|
|
|
|
|
|
|
60,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
307,965
|
|
|
|
|
|
|
|
|
|
|
|
307,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,122,004
|
)
|
|
|
(3,122,004
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
21,267
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
308,518
|
|
|
|
31
|
|
|
|
|
|
|
|
-
|
|
|
|
12,027,043
|
|
|
$
|
(4,500
|
)
|
|
$
|
(22,260,473
|
)
|
|
|
(10,237,897
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt forgiveness - related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock sold for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
57,000
|
|
|
|
5
|
|
|
|
477,000
|
|
|
|
48
|
|
|
|
133,447
|
|
|
|
|
|
|
|
|
|
|
|
133,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issuable under debt restructuring
agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,902,589
|
|
|
|
590
|
|
|
|
2,384,056
|
|
|
|
|
|
|
|
|
|
|
|
2,384,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock Series B Sold for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
205,000
|
|
|
|
20
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
204,980
|
|
|
|
|
|
|
|
|
|
|
|
205,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock Series B issued to settle
AP - Related Party
|
|
|
-
|
|
|
|
-
|
|
|
|
79,000
|
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
78,992
|
|
|
|
|
|
|
|
|
|
|
|
79,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
273,418
|
|
|
|
27
|
|
|
|
120,000
|
|
|
|
12
|
|
|
|
21,317
|
|
|
|
|
|
|
|
|
|
|
|
21,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
600,000
|
|
|
|
60
|
|
|
|
-
|
|
|
|
-
|
|
|
|
89,940
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for settlement of promissory
note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,150,000
|
|
|
|
215
|
|
|
|
-
|
|
|
|
-
|
|
|
|
537,285
|
|
|
|
|
|
|
|
|
|
|
|
537,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A preferred shares
|
|
|
(1,478
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,002,970
|
|
|
|
100
|
|
|
|
2,018,746
|
|
|
|
202
|
|
|
|
(302
|
)
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fractional share issuance
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,208
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
(10,183,410
|
)
|
|
|
(10,183,410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2019
|
|
|
19,789
|
|
|
$
|
2
|
|
|
|
284,000
|
|
|
$
|
28
|
|
|
|
4,398,114
|
|
|
$
|
438
|
|
|
|
8,518,335
|
|
|
$
|
852
|
|
|
$
|
16,476,758
|
|
|
$
|
(4,500
|
)
|
|
$
|
(32,443,883
|
)
|
|
$
|
(15,970,305
|
)
|
See
accompanying notes to consolidated financial statements.
|
FRIENDABLE
INC.
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
For the Years Ended
|
|
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(10,183,410
|
)
|
|
$
|
(3,122,004
|
)
|
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
|
|
|
|
|
|
|
|
|
|
Loss on debt extinguishment, net
|
|
|
7,384,867
|
|
|
|
-
|
|
|
Notes issued for services
|
|
|
20,000
|
|
|
|
-
|
|
|
Amortization of prepaid stock fees
|
|
|
60,000
|
|
|
|
-
|
|
|
Loss on change in fair value of derivative
|
|
|
125,000
|
|
|
|
-
|
|
|
Premium on stock settled debt
|
|
|
55,549
|
|
|
|
|
|
|
Interest on convertible debentures and promissory note
|
|
|
-
|
|
|
|
48,229
|
|
|
Accretion expense
|
|
|
-
|
|
|
|
1,501,848
|
|
|
Impairment loss
|
|
|
-
|
|
|
|
35,000
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(135
|
)
|
|
|
-
|
|
|
Due from related party
|
|
|
(30,083
|
)
|
|
|
|
|
|
Prepaid expenses
|
|
|
-
|
|
|
|
6,863
|
|
|
Accounts payable and accrued expenses
|
|
|
1,074,348
|
|
|
|
1,144,745
|
|
|
Liability to be settled in common stock
|
|
|
1,005,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(488,864
|
)
|
|
|
(385,319
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible debentures
|
|
|
-
|
|
|
|
310,965
|
|
|
Proceeds from promissory note
|
|
|
-
|
|
|
|
100,000
|
|
|
Proceeds from sale of convertible preferred Series B stock
|
|
|
205,000
|
|
|
|
-
|
|
|
Proceeds from sale of convertible preferred Series C stock
|
|
|
136,000
|
|
|
|
-
|
|
|
Proceeds from sale of common stock
|
|
|
133,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
474,500
|
|
|
|
410,965
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS:
|
|
|
(14,364
|
)
|
|
|
25,646
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - beginning of year
|
|
|
25,646
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - end of year
|
|
$
|
11,282
|
|
|
$
|
25,646
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Common shares issued for prepaid expenses
|
|
$
|
90,000
|
|
|
$
|
-
|
|
|
Series B convertible preferred stock issued in exchange for accounts payable, related party
|
|
$
|
79,000
|
|
|
$
|
-
|
|
|
Payables forgiven by related parties treated as contributed capital
|
|
$
|
1,000,000
|
|
|
$
|
-
|
|
|
Debt and accrued interest settled with common stock
|
|
$
|
8,178,634
|
|
|
$
|
-
|
|
|
Convertible notes converted to common stock
|
|
$
|
13,002
|
|
|
$
|
54,300
|
|
|
Derivative liability
|
|
$
|
5,698,080
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Consists of:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
11,282
|
|
|
$
|
25,646
|
|
See
accompanying notes to consolidated financial statements.
FRIENDABLE,
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2019 and 2018
1.
NATURE OF BUSINESS AND GOING CONCERN
Nature
of Business
Friendable,
Inc., a Nevada corporation (the “Company”), was incorporated in the State of Nevada.
Friendable,
Inc. is a mobile-focused technology and marketing company, connecting and engaging users through two distinctly branded applications.
The Company initially released its flagship product Friendable, as a social application where users can create one-on-one or group-style
meetups. In 2019 the Company has moved the Friendable app closer to a traditional dating application with its focus on building
revenue, as well as reintroducing the brand as a non-threatening, all-inclusive place where “Everything starts with Friendship”…meet,
chat & date.
On
June 28, 2017, the Company formed a wholly owned Nevada subsidiary called Fan Pass Inc.
Fan
Pass is the Company’s most recent or second app/brand, scheduled for release in 2020. Fan Pass believes in connecting Fans of
their favorite celebrity or artist, to an exclusive VIP or Backstage experience, right from their smartphone or other connected
devices. Fan Pass allows an artist’s fanbase to experience something they would otherwise never have the opportunity to afford
or geographically attend. The Company aims to establish both Friendable and Fan Pass as premier brands and mobile platforms that
are dedicated to connecting and engaging users from anywhere around the World.
On
August 8, 2019 the Company filed a Designation of Series B convertible Preferred Stock with the state of Nevada, designating 1,000,000 shares
of the Series B Preferred Stock with a stated value of $1.00 per share. A
holder of Series B Preferred Stock has the right to convert their Series B Preferred Stock into fully paid and non-assessable
shares of Common Stock. Initially, the conversion price for the Series B Preferred Stock is $.25 per share, subject to standard
anti-dilution adjustments. Additionally, each share of Series B Preferred Stock shall be entitled to, as a dividend, a pro rata
portion of an amount equal to 10% (Ten Percent) of the Net Revenues (“Net Revenues” being Gross Sales minus Cost of
Goods Sold) derived from the subscriptions and other sales, but excluding and net of Vimeo fees, processing fees and up sells,
generated by Fan Pass Inc., the wholly-owned subsidiary of the Corporation. The Series B Dividend shall be calculated and paid
on a monthly basis in arrears starting on the day 30 days following the first day of the month following the initial issuance
of the Series B Preferred and continuing for a period of 60 (Sixty) months. The holders of Series B Preferred stock shall have
no voting rights. The holders of Series B Preferred stock shall not be entitled to receive any dividends. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company or deemed liquidation event, the holders of shares
of Series B Preferred Stock shall be entitled to be paid the liquidation amount, as defined out of the assets of the Company available
for distribution to its shareholders, after distributions to holders of the Series A Preferred Stock and before distributions
to holders of Common Stock.
On
August 27, 2019, a 1 for 18,000 reverse stock split of our common stock became effective. All share and per share information
in the accompanying consolidated financial statements and footnotes has been retroactively adjusted for the effects of the reverse
split for all periods presented.
On
November 25, 2019 the Company filed a Designation of Series C convertible Preferred Stock with the state of Nevada, designating 1,000,000
shares of the Series C Preferred Stock with a stated value of $1.00 per share. The Series C Preferred Stock will, with respect
to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends with the
Company’s common stock, par value 0.0001 per share (“Common Stock”)(the Series C Preferred Stock will convert into common
stock immediately upon liquidation and be pari passu with the common stock in the event of litigation), and (b) junior with respect
to dividends and right of liquidation to all existing and future indebtedness of the Company. The Series C Preferred Stock does
not have any voting rights. Each share of Series C Preferred Stock will carry an annual dividend in the amount of eight percent
(8%) of the Stated Value of $1.00 (the “Divided Rate”), which shall be cumulative and compounded daily, payable solely
upon redemption, liquidation or conversion and increase to 22% upon an event of default as defined. In the event of any default
other than the Company’s failure to issue shares upon conversion, the stated price will be $1.50. In a default event where
the Company fails to issue shares upon conversion, the stated price will $2.00. The holder shall have the right six months following
the issuance date, to convert all or any part of the outstanding Series C Preferred Stock into shares of common stock of the Company.
The conversion price shall equal the Variable Conversion Price. The “Variable Conversion Price” shall mean 71% multiplied
by the market price, representing a discount rate of 29%. Market price means the average of the two lowest trading prices for
the Company’s common stock during the twenty trading day period ending on the latest complete trading day prior to the conversion
date. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or upon any deemed liquidation
event, after payment or provision for payment of debts and other liabilities of the Company, and after payment or provision for
any liquidation preference payable to the holders of any Preferred Stock ranking senior upon liquidation to the Series C Preferred
Stock, if any, but prior to any distribution or payment made to the holders of Common Stock or the holders of any Preferred Stock
ranking junior upon liquidation to the Series C Preferred Stock by reason of their ownership thereof, the Holders will be entitled
to be paid out of the assets of the Company available for distribution to its stockholders. The Company will have the right, at
the Company’s option, to redeem all or any portion of the shares of Series C Preferred Stock, exercisable on not more than
three trading days prior written notice to the Holders, in full, in accordance with Section 6 of the designations at a premium
of up to 35% for up to six months. Company’s mandatory redemption: On the earlier to occur of (i) the date which is twenty-four
(24) months following the Issuance Date and (ii) the occurrence of an Event of Default (the “Mandatory Redemption Date”),
the Company shall redeem all of the shares of Series C Preferred Stock of the Holders (which have not been previously redeemed
or converted).
1.
NATURE OF BUSINESS AND GOING CONCERN (CONTINUED)
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which
implies that the Company would continue to realize its assets and discharge its liabilities in the normal course of business.
As of December 31, 2019, the Company has a working capital deficiency of $15,970,305 and has an accumulated deficit of $32,443,883
and a stockholder’s deficit of $15,970,305 since inception and its operations continue to be funded primarily from sales
of its stock and issuance of convertible debentures. During 2019 the Company had a net loss and net cash used in operations of
$10,183,410 and $488,864. As of December 31, 2019 the Company had $1,360 of cumulative dividends related to the Series C convertible preferred
stock. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of
twelve months from the issuance of this report. The ability of the Company to continue as a going concern is dependent on the
Company’s ability to obtain the necessary financing through the issuance of convertible notes and equity instruments. The
consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts
and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Management
plans to raise financing through the issuance of convertible notes and equity sales. No assurance can be given that any such additional
financing will be available, or that it can be obtained on terms acceptable to the Company and its stockholders.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation
The consolidated financial statements include all the accounts
of the Company and all of its wholly owned subsidiaries as of December 31, 2019 and 2018. All material intercompany accounts and
transactions have been eliminated in the accompanying consolidated financial statements. The Company’s fiscal year end is
December 31.
Reclassifications
Certain
balances in 2018 have been reclassified to conform with the 2019 presentation.
Use
of Estimates
The
preparation of these statements in accordance with United States generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions
related to valuation of convertible debenture conversion options, derivative instruments, deferred income tax asset valuations,
financial instrument valuations, share-based payments, other equity-based payments, and loss contingencies. The Company bases
its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the
Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between
the estimates and the actual results, future results of operations will be affected.
Revenue
Recognition
In
accordance with ASC 606, revenue is recognized when the following criteria have been met; valid contracts are identified with
specific customers, performance obligations have been identified, price is determinable, price is allocated to performance obligations,
and the Company has satisfied the performance obligations. Revenue generally is recognized net of allowances for returns and any
taxes collected from customers and subsequently remitted to governmental authorities. During the year ended December 31, 2019,
the Company derived revenues primarily from the development of apps for a third party, and such revenues were recognized upon
completion of services.
Advertising
Costs
The
Company’s policy regarding advertising is to expense advertising when incurred. During the twelve months ended December
31, 2019, the Company incurred $48,375 (December 31, 2018: $1,783) in advertising costs.
Cash
and Cash Equivalents
The
Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.
Intangible
Assets
The
Company accounts for intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other. The Company assesses
potential impairments to intangible assets when there is evidence that events or changes in circumstances indicate that the carrying
amount of an asset may not be recovered.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangible
assets with finite lives are reviewed for impairment when events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of intangible assets with finite lives is measured by comparing the carrying
amount of the asset to its fair value. If the future value of the asset is lower than its carrying value, the Company recognizes
an impairment loss for the amount by which the carrying value of the asset exceeds the related estimated fair value.
Intangible
assets with indefinite lives are tested for impairment annually or more frequently are tested for impairment annually or more
frequently if events or changes in circumstances indicate that it is more likely than not that the intangible asset is impaired.
Impairment
of Long-Lived Assets
The
Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may
not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived
assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows.
If
the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss
based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or the fair value less costs to sell.
Derivative
liabilities
The
Company has a financial instrument associated with a debt restructuring agreement. The Company evaluates all its financial instruments
to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately
accounted for in accordance with ASC 815-10 – Derivative and Hedging – Contract in Entity’s Own Equity.
This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market
at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the
change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment,
the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related
fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment.
In
July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives
and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify
the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round
feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification.
The guidance was adopted as of January 1, 2019. The Company adopted ASU No. 2017-11 in the first quarter of 2019, and the adoption
did not have any impact on its consolidated financial statement and there was no cumulative effect adjustment.
Stock-based
Compensation
During
2018 the Company recorded stock-based compensation in accordance with ASC 718, Compensation – Stock Based Compensation and
ASC 505, Equity Based Payments to Non-Employees, which requires the measurement and recognition of compensation expense based
on estimated fair values for all share-based awards made to employees and directors, including stock options. In 2019 the Company
adopted ASU 2018-07 which expands the measurement requirements to non employees.
ASC
718 requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. The
Company uses the Black-Scholes option pricing model as its method in determining fair value. This model is affected by the Company’s
stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not
limited to the Company’s expected stock price volatility over the terms of the awards, and actual and projected employee
stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an
expense in the statement of operations over the requisite service period.
All
transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably
measurable.
Accounts
Receivable and Allowance for Doubtful Accounts
The
Company monitors its outstanding receivables for timely payments and potential collection issues. At December 31, 2019 and 2018,
the Company did not have any allowance for doubtful accounts.
Financial
Instruments
Financial
assets and financial liabilities are recognized in the balance sheet when the Company has become party to the contractual provisions
of the instruments.
The
Company’s financial instruments consist of accounts receivable, accounts payable, convertible debentures, stock settled
debt, derivatives, mandatorily redeemable Series C Preferred stock and promissory notes. The fair values of these financial instruments
approximate their carrying value, due to their short term nature, and current market rates for similar financial instruments.
Fair value of a financial instrument is defined as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. The Company’s financial instruments recorded
at fair value in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure
their fair value.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
As
of December 31, 2019, there were approximately 122,051,838 potentially dilutive shares outstanding. Potential dilutive shares:
|
|
60,908
|
|
|
Warrants outstanding
|
|
|
2,212,523
|
|
|
Common shares issuable upon conversion of convertible debt
|
|
|
116,248,041
|
|
|
Total shares issuable upon conversion of Preferred Series A shares
|
|
|
1,136,000
|
|
|
Total shares issuable upon conversion of Preferred Series B shares
|
|
|
2,394,366
|
|
|
Total shares issuable upon conversion of Preferred Series C shares
|
|
|
122,051,838
|
|
|
|
Income
Taxes
The
Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes. The asset and
liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of
temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit
carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in
effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to
the amount that is believed more likely than not to be realized.
Recent
Accounting Pronouncements
In
February 2016, the FASB issued ASU No. 2016-02, Leases (ASC Topic 842) (“ASU 2016-02”), which requires lessees to
recognize at the commencement date for all leases, with the exception of short-term leases, (i) a lease liability, which is a
lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use
asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease
term. ASU 2016-02 will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2018. The ASU requires adoption using a modified retrospective transition approach with either (a) periods
prior to the adoption date being recast or (b) a cumulative-effect adjustment recognized to the opening balance of retained earnings
on the adoption date with prior periods not recast. As at December 31, 2019 the Company has no lease obligations.
Reclassifications
Certain
amounts in the 2018 financial statements have been reclassified to conform to the 2019 presentation.
3.
INTANGIBLE ASSETS
As
at December 31, 2019 and 2018, the Company owns the Friendable Properties which includes domain names, logos, icons, and registered
trademarks for which it paid cash consideration of $35,000. During 2018 an impairment provision for $35,000 was recorded through
the statement of operations to impair the intangible assets to $nil.
4.
RELATED PARTY TRANSACTIONS AND BALANCES
During
the year ended December 31, 2019, the Company incurred $459,200 (2018: $417,066) in salaries and payroll taxes to officers and
directors with such costs being recorded as general and administrative expenses.
During
the year ended December 31, 2019, the Company incurred $24,068, $299,124, and $58,883 (2018: $210,000, $80,000, and $60,000) in
app hosting, app development and rent to a company with two officers and directors in common with such costs being recorded as
app hosting, product development and general and administrative expenses.
During
the year ended December 31, 2019, the Company issue a Securities Purchase agreement to a vendor company with two officers and
directors in common for the purchase of 79,000 Series B preferred stock with the purchase price of $79,000 being applied to accounts
payable due to the vendor. The price was based on recent sales of Series B shares for $1.00 per share.
As
of December 31, 2019, the Company had a stock subscription receivable totaling $4,500 (December 31, 2018: $4,500) from an officer
and director and from a company with an officer and director in common.
As
of December 31, 2019, Due from related party includes $30,083 (December 31, 2018: payable of $721,099) due from a company with
two officers and directors in common, and $783,416 (December 31, 2018: $798,580) payable in salaries to directors and officers
of the Company. The amounts are unsecured, non-interest bearing and are due on demand.
4.
RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
During
the year ended December 31, 2019, two directors converted 588 shares of Series A preferred stock at the contractual conversion
rate into 1,002,970 shares of common stock and donated them to the Diocese of Monterey and other parties related to the directors
converted 890 Series A preferred shares into 2,018,746 common shares that are issuable at December 31, 2019.
During
the year ended December 31, 2019, three officers forgave debt totaling $400,000 and a company controlled by two officers of the
Company forgave debt totaling $600,000. The total amount is reflected as contributed capital.
5.
CONVERTIBLE DEBENTURES
During
the year ended December 31, 2019, $8,355 (2018: $60,300) of convertible debentures were converted at the contractual rate by issuing
33,418 (2018: 30,167) shares of common stock of the Company.
On
March 26, 2019 the Company entered into a Debt Restructuring Agreement (the “Agreement”) with Robert A. Rositano Jr.
(“Robert Rositano”), Dean Rositano (“Dean Rositano”), Frank Garcia (“Garcia”), Checkmate Mobile,
Inc. (“Checkmate”), Alpha Capital Anstalt (“Alpha”), Coventry Enterprises, LLC (“Coventry”),
Palladium Capital Advisors, LLC (“Palladium”), EMA Financial, LLC (“EMA”), Michael Finkelstein (“Finkelstein”),
and Barbara R. Mittman (“Mittman”), each being a debt holder of the Company.
The
debt holders agreed to convert their debt of approximately $6.3 million into an initial 5,902,589 shares of common stock as set
forth in the Agreement upon the Company meeting certain milestones including but not limited to: the Company effecting a reverse
stock split and maintaining a stock price of $1.00 per share; being current with its periodic report filings pursuant to the Securities
Exchange Act; certain vendors and Company employees forgiving an aggregate of $1,000,000 in amounts owed to them; the Company
raising not less than $400,000 in common stock at a post-split price of not less than $.20 per share; and certain other things
as further set forth in the Agreement. The debt holders will be subject to certain lock up and leak out provisions as contained
in the Agreement. As part of the Agreement the parties signed a Rights to Shares Agreement. Whereas the Agreement called for all
the shares to be delivered at closing, the holders are generally restricted to beneficial ownership of up to 4.99% of the company’s
common shares outstanding. The Rights to Shares Agreement allows for the Company to issue shares to each holder up the 4.99% limitation
while preserving the holders’ rights to the total shares in schedule A of the Agreement.
During
the year ended December 31, 2019, the Company incurred $558,792 (2018: $2,052,216) in accretion and interest expense in connection
with the convertible debentures.
December
26, 2019, all parties signed an amendment to the Agreement which set forth, among other things, the following:
Company
Principals have given Holders notice that it has satisfied all conditions of closing.
The
Agreement is considered Closed as of November 5, 2019 (“Settlement Date”) and any conditions of closing not satisfied
are waived.
Reset
Dates. The “Reset Dates” as set forth in Section 1(h) of the Agreement shall be as follows: March 4, 2020 and July
2, 2020. As of the reset dates the holders can convert all or part of the settled note amounts at the lower of (i) 75% of the
closing bid price for the Common Stock on such respective Reset Date, or (ii) the VWAP for the Company’s Common Stock for
the 7 trading days immediately preceding and including such respective Reset Dates. This reset provision provides for the issuance
of additional shares above the initial 5,902,589 shares for no additional consideration as measured at each of the two reset dates.
The
Company determined that the reset provision represents a standalone derivative liability. Accordingly, this debt restructure transaction
was accounted for as an extinguishment of debt for consideration equal to the $2,384,646 fair value of the 5,902,589 common shares
issuable, based on the $0.404 quoted trading price of the Company’s common stock price on the settlement date, and the initial
fair value of the derivative liability of $12,653,000.
5.
CONVERTIBLE DEBENTURES (CONTINUED)
The
Company adjusts its derivative liability to fair value at each reporting and settlement date, with changes in fair value reported
in the statement of operations. The Company estimated the fair value of the obligations to issue common stock pursuant to the
Debt Restructuring Agreement, as amended, using Monte Carlo simulations and the following assumptions:
|
|
|
November 5,
|
|
|
December
|
|
|
|
|
2019
|
|
|
31, 2019
|
|
|
Volatility
|
|
|
617.0
|
%
|
|
|
738.1
|
%
|
|
Risk Free Rate
|
|
|
1.59
|
%
|
|
|
1.60
|
%
|
|
Expected Term
|
|
|
0.66
|
|
|
|
0.50
|
|
Derivative
Liabilities
The Company accounts for its obligation
to issue common stock (“Reset Provision”) as derivative instruments in accordance with ASC Topic 815, “Derivatives
and Hedging” which are reflected as liabilities at fair value on the balance sheet, with changes in fair value reported in
the statement of operations. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction
between willing and able market participants. The number of shares of common stock the Company could be obligated to issue, is
based on future trading prices of the Company’s common stock. To reflect this uncertainty in estimating the fair value of
the potential obligation to issue common stock, the Company uses a Monte Carlo model that considers the reporting date trading
price, historical volatility of the Company’s common stock, and risk free rate in estimating the fair value of the potential
obligation to issue common stock. The results of the Monte Carlo simulation model are most sensitive to inputs for expected volatility.
Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair
value estimates. The estimated fair values may not represent future fair values and may not be realizable. We categorize our fair
value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency
utilized in measuring financial instruments at fair value as discussed above. As of December 31, 2019, the fair value of the Company’s
potential obligation to issue common stock was $12,778,000.
The
following is a summary of activity related to the derivative liability for the year ended December 31, 2019:
|
Balance, December 31, 2018
|
|
$
|
-
|
|
|
Reset provision
|
|
|
12,653,000
|
|
|
Change in fair value
|
|
|
125,000
|
|
|
Balance, December 31, 2019
|
|
$
|
12,778,000
|
|
6.
PROMISSORY NOTE AND CONVERTIBLE PROMISSORY NOTE
On
December 14, 2018, the Company issued a promissory note for proceeds of $100,000 at 12% interest per annum. The maturity date
of the note is December 14, 2019. The note includes a conversion feature that entitles the Holder to receive 1.63% equity ownership
of Friendable, Inc. and 18.2% equity ownership of Fan Pass, Inc. upon conversion. During the year ended December 31, 2019, the
Company incurred $1,901 (2018: $599) in interest expense in connection with the promissory note.
On
December 20, 2019 the note above settled by the issuance of 2,150,000 shares of common stock. The shares were valued at $537,500
based on contemporaneous sales $0.25 of per share resulting in a loss on debt extinguishment of $435,000.
On
April 7, 2017, the Company entered into a Settlement Agreement with Joseph Canouse (the “Agreement”). The Company
and Mr. Canouse had been in a dispute regarding what amount, if any, was owed pursuant to a consulting agreement between the parties
signed in April 2014. In December 2016, Mr. Canouse obtained a judgment in state court in Georgia and the right to garnish the
Company’s bank accounts. Pursuant to the Settlement Agreement, the Company agreed to issue an 8% Convertible Note in the
principal amount of $82,931 (the “Note”). The Note was issued to J.P. Carey Inc., an entity controlled by Mr. Canouse.
Although the Note is dated March 30, 2017, it was issued on April 7, 2017. In return for the issuance of the Note, Mr. Canouse
filed a Consent Motion to Withdraw Judgment, dismiss all garnishments, and cease all collection activities.
The
Note is convertible into common stock, subject to Rule 144, at any time after the issue date at the lower of (i) the closing sale
price of the common stock on the on the trading day immediately preceding the closing date, and (ii) 50% of the lowest sale price
for the common stock during the twenty-five (25) consecutive trading days immediately preceding the conversion date or the closing
bid price, whichever is lower. Mr. Canouse does not have the right to convert the Note, to the extent that he would beneficially
own in excess of 4.9% of our outstanding common stock. In the event of default, the amount of principal and interest not paid
when due bear default interest at the rate of 24% per annum and the Note becomes immediately due and payable.
During
the year ended December 31, 2019:
The
Company incurred $51,980 in interest related to the note through December 31, 2019.
J.P.
Carey converted $1,002 of principal into 120,000 shares of the Company’s common stock at a price of $0.0084.
J.P.
Carey assigned $10,000 of the note to World Market Ventures, LLC and assigned $6,000 of the note to Anvil Financial Management
LTD LLC. The assignments carry the same conversion rights as the original note. World Market Ventures converted $6,000 of principal
into 120,000 shares of the Company’s common stock at a price of $0.05. Anvil converted $6,000 of principal into 120,000
shares of the Company’s common stock at a price of $0.05.
7.
COMMITMENTS AND CONTINGENCIES
The
following table summarizes the Company’s significant contractual obligations as of December 31, 2019:
|
|
|
$
|
|
|
Employment Agreements (1)
|
|
|
400,000
|
|
|
Lawsuit Contingency (2)
|
|
|
1,005,000
|
|
|
|
(1)
|
Employment
agreements with related parties.
|
On
April 3, 2019, the Company entered into employment agreements with three officers. Pursuant to the agreements, the Company shall
pay officers an aggregate annual salary amount of $400,000. Upon a successful launch of the company’s Fan Pass mobile app or website,
and the Company achieving various levels if subscribers, the officers will receive additional bonuses and salary increases.
Integrity
Media, Inc. (“Integrity”) had previously filed a lawsuit against the Company and the CEO of the Company for $500,000
alleging breach of contract alleging the Company failed to deliver marketable securities in exchange for services. The Company
answered the allegations in court and Integrity filed a motion attacking the Company’s answers. The court did not strike
the answers but the clerk of the court entered a default judgment against the Company in the amount of $1,192,875 plus 10% interest.
On May 8, 2019, the Company received a tentative ruling on the Company’s motion to vacate the default judgement whereby
the previously entered default judgement was voided and a trial date of August 26, 2019 was set.
On
September 19, 2019, the Company entered into a Settlement Agreement with Integrity Media settling the civil action known as Integrity
Media, Inc. vs. Friendable, Inc. et al., Orange County Case No. 30-2016-00867956-CU-CO-CJC. Pursuant to the Settlement Agreement,
the Company agreed to issue to Integrity 750,000 shares of its common stock in exchange for 275 of the Company’s preferred
shares held by Integrity and the cash payment of $30,000 for costs. The cash payment is to be made within 6 months of the date
of the Settlement Agreement. As of June 24, 2019 the cash amount has not been paid and the preferred shares have not been returned.
Additionally, Integrity will be entitled to additional shares if (i) the price of the Company’s common stock is below $1.34
at either the 120 day or 240 day reset dates set forth in the Company’s Debt Restructure Agreement as amended entered into
with various debt holders on March 26, 2019 effective November 5, 2019. Integrity will also be entitled to a “true-up”
by issuance of additional common shares on the issuance date should the share price of the Company’s common stock on the
issuance date be below $1. The true-up shares will adjust the value of the aggregate shares issued to be $750,000 on the date
of issuance. As of December 31, 2019, no shares have been issued nor cash paid. As of December 31, 2019, the Company has recorded
a provision for settlement of lawsuit of $1,035,000 with $1,005,000 ($750,000 plus a premium of $255,000) recorded as a liability
payable in common stock in accordance with ASC 480 and $30,000 as an accrued liability.
Robert
Rositano, the Company’s CEO, has also personally guaranteed the Company’s compliance with the terms of the Settlement
Agreement.
COVID-19
Disclosure
The
coronavirus pandemic could adversely impact our operations, supply chains and distribution systems and demand for our products
and services. The coronavirus pandemic could adversely impact our ability to raise capital.
8.
COMMON AND PREFERRED STOCK
Common
Stock:
During
the year ended December 31, 2018, the Company issued 30,167 shares of common stock to various convertible note holders for full
and partial conversion of the notes During the year ended December 31, 2019, the Company:
Issued
393,418 shares of common stock to two convertible note holders for partial conversion of an aggregate of $21,356 of the notes
at the contractual conversion rates. 120,000 of the shares remain issuable as of December 31, 2019.
Issued
534,000 shares of common stock to various subscribers of common stock at $0.25 per share for a total of $133,500. 477,000 shares
remain issuable as of December 31, 2019.
8.
COMMON AND PREFERRED STOCK (CONTINUED)
Issued
600,000 shares of common stock to a consultant in exchange for future services valued at $90,000 of which $30,000 remains in prepaid
expenses as of December 31, 2019.
Issued
2,150,000 shares of common stock to settle a promissory note and accrued interest of $102,500 and recognized a loss on settlement
of $435,000 based on the $537,500 value based on recent sales.
Issued
1,002,970 and has 2,018,746 issuable shares of common stock to related parties on conversion of 1,478 shares of Series A preferred
stock.
Agreed
to issue 5,902,589 shares as a preliminary settlement of approximately $6.3 million of convertible debt (See note 5)
Preferred
Stock:
Series
A:
The
Series A Preferred Stock was authorized in 2014 and is convertible into nine (9) times the number of common stock outstanding
at time of conversion until the closing of a Qualified Financing (i.e. the sale and issuance of the Company’s equity securities
that results in gross proceeds in excess of $2,500,000). The number of shares of common stock issued on conversion of Series A
preferred stock is based on the ratio of the number of shares of Series A preferred stock converted to the total number of shares
of preferred stock outstanding at the date of conversion multiplied by nine (9) times the number of common stock outstanding at
the date of conversion. After the qualified financing the conversion shares issuable shall be the original issue price of the
Series A preferred stock divided by $0.002. The holders of Series A Preferred stock are entitled to receive non-cumulative dividends
when and if declared at a rate of 6% per year. On all matters presented to the stockholders for action the holders of Series A
Preferred stock shall be entitled to cast votes equal to the number of shares the holder would be entitled to if the Series A
Preferred stock were converted at the date of record.
During
the year ended December 31, 2019, 588 shares of Series A preferred stock were converted to common stock by 2 related parties and
donated them to the Diocese of Monterey. In addition, 890 Series A shares were converted into 2,018,746 common shares by parties
related to the 2 directors. The 2,018,746 common shares remain issuable as of December 31, 2019.
Series
B:
During
the year ended December 31, 2019, the Company entered into Security Purchase Agreements with various investors for the purchase
of 205,000 shares Series B convertible Preferred stock and received $205,000 in cash. Each Series B Preferred share is convertible into 4
shares of common stock valued at $0.25.
During
the year ended December 31, 2019, The Company entered into a Security Purchase Agreements with a related party for the purchase
of 79,000 shares Series B Preferred stock. The $79,000 was settled against accounts payable owed to the related party. Each Series
B Preferred share is convertible into 4 shares of common stock valued at $0.25.
Series
C:
In
November and December 2019, 149,300 shares of Series C convertible preferred stock were issued to an investor under preferred stock purchase agreements
at a price of approximately $0.91 per share for a total of $136,000. Due to the mandatory redemption feature, these shares are
reflected as a current liability at December 31, 2019. Furthermore, because these shares are convertible at 71% of the common
shares market price around the time of the conversion date, they are treated as a stock settled debt under ASC 480 with a premium
of $55,549 recorded and charged to interest expense. The total amount is reflected at $191,549 at December 31, 2019.
9.
SHARE PURCHASE WARRANTS
Activity
in 2019 and 2018 is as follows:
|
|
|
Number of
Warrants
|
|
|
Weighted Average
Exercise
Price
$
|
|
|
Weighted Average
Remaining
Life
|
|
|
Balance, December 31, 2017
|
|
|
60,908
|
|
|
|
72.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
60,908
|
|
|
|
72.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 30, 2019
|
|
|
60,908
|
|
|
|
72.00
|
|
|
|
1.6
|
|
10.
STOCK-BASED COMPENSATION
On
November 22, 2011, the Board of Directors of the Company approved a stock option plan (“2011 Stock Option Plan”),
the purpose of which is to enhance the Company’s stockholder value and financial performance by attracting, retaining and
motivating the Company’s officers, directors, key employees, consultants and its affiliates and to encourage stock ownership
by such individuals by providing them with a means to acquire a proprietary interest in the Company’s success through stock
ownership. Under the 2011 Stock Option Plan, officers, directors, employees and consultants who provide services to the Company
may be granted options to acquire common shares of the Company. The aggregate number of
options authorized by the plan shall not exceed 4,974 shares of common stock of the Company.
The
Board of Directors and the stockholders holding a majority of the voting power approved a 2014 Equity Incentive Plan (the “2014
Plan”) on February 28, 2014, with a to be determined effective date. The date never became effective. The purpose of the
2014 Plan is to assist the Company and its affiliates in attracting, retaining and providing incentives to employees, directors,
consultants and independent contractors who serve the Company and its affiliates by offering them the opportunity to acquire or
increase their proprietary interest in the Company and to promote the identification of their interests with those of the stockholders
of the Company. The 2014 Plan will also be used to make grants to further reward and incentivize current employees and others.
There
are 7 shares of common stock reserved for issuance under the 2014 Plan. The Board shall have the power and authority to make grants
of stock options to employees, directors, consultants and independent contractors who serve the Company and its affiliates. Any
stock options granted under the 2014 Plan shall have an exercise price equal to or greater than the fair market value of the Company’s
shares of common stock. Unless otherwise determined by the Board of Directors, stock options shall vest over a four-year period
with 25% being vested after the end of one (1) year of service and the remainder vesting equally over a 36-month period. The Board
may award options that may vest based upon the achievement of certain performance milestones. As of December 31, 2019, no options
have been awarded under the 2014 Plan. Effective August 27, 2019, the Company effected a reverse split of the common stock of
1 for 18,000 (Note 1) which eliminated all the options which were previously outstanding.
11.
FAIR VALUE MEASUREMENTS
ASC
820, Fair Value Measurements and Disclosures, require an entity to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the
fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes
the inputs into three levels that may be used to measure fair value:
Level
1
Level
1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Valuations
are based on quoted prices that are readily and regularly available in an active market and do not entail a significant degree
of judgment.
11.
FAIR VALUE MEASUREMENTS (CONTINUED)
Level
2
Level
2 applies to assets or liabilities for which there are other than Level 1 observable inputs such as quoted prices for similar
assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data.
Level
2 instruments require more management judgment and subjectivity as compared to Level 1 instruments. For instance: determining
which instruments are most similar to the instrument being priced requires management to identify a sample of similar securities
based on the coupon rates, maturity, issuer, credit rating and instrument type, and subjectively select an individual security
or multiple securities that are deemed most similar to the security being priced; and determining whether a market is considered
active requires management judgment.
Level
3
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to
the measurement of the fair value of the assets or liabilities. The determination of fair value for Level 3 instruments requires
the most management judgment and subjectivity.
Pursuant
to ASC 825, cash is based on Level 1 inputs. The Company believes that the recorded values of accounts receivable and accounts
payable approximate their current fair values because of their nature or respective relatively short durations. The fair value
of the Company’s convertible debentures and promissory note approximates their carrying values as the underlying imputed
interest rates approximates the estimated current market rate for similar instruments.
As of December 31, 2019 there was a derivative measured at fair
value on a recurring basis (see note 5) presented on the Company’s balance sheet, as follows:
Liabilities at Fair Value
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Derivative Liability
|
|
|
|
|
|
|
|
|
|
|
12,778,000
|
|
|
|
12,778,000
|
|
12.
INCOME TAXES
Due to the net losses incurred there was no income tax provision in 2019 or 2018.
A
reconciliation of the difference between the income tax benefit computed at the federal statutory rate of 21% and 35% respectively,
and the provision for income taxes for the years ended December 31, 2019 and 2018 are as follows:
|
|
|
2019
|
|
|
2018
|
|
|
Computed tax benefit
|
|
$
|
(2,138,516
|
)
|
|
$
|
(1,092,701
|
)
|
|
State taxes
|
|
|
(394,200
|
)
|
|
|
-
|
|
|
Permanent differences
|
|
|
1,887,855
|
|
|
|
662,304
|
|
|
Change in tax rate and other
|
|
|
1,143,792
|
|
|
|
-
|
|
|
Change in valuation allowance
|
|
|
(498,931
|
)
|
|
|
430,497
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company’s deferred tax assets and liabilities as of December 31, 2019 and 2018 were as follows:
|
|
|
2019
|
|
|
2018
|
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
|
Net operating losses
|
|
$
|
3,187,626
|
|
|
$
|
4,214,782
|
|
|
Accrued payroll
|
|
|
194,843
|
|
|
|
-
|
|
|
Reserve contingency
|
|
|
257,415
|
|
|
|
-
|
|
|
|
|
|
3,639,884
|
|
|
|
4,214,782
|
|
|
Deferred Tax Liability:
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(186,533
|
)
|
|
|
(262,500
|
)
|
|
Valuation Allowance
|
|
|
(3,453,351
|
)
|
|
|
(3,952,282
|
)
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company has net operating losses of approximately $12,817,000, of which $10,457,080 expires through 2037 and $2,359,560 may be
carried forward indefinitely subject to annual usage limitations. The Company has established a 100% valuation allowance against
its net deferred tax assets as it is more likely than not they will not be able to utilize such deferred assets in the future.
The change in the valuation allowance for the year ended December 31, 2019 was a decrease of $498,931.
13.
SUBSEQUENT EVENTS
Subsequent
to December 31, 2019, the Company issued 78,000 shares of common stock to a consultant at $0.13 per share for services valued
at $10,000.
Subsequent
to December 31, 2019, the Company issued 1,178,650 shares of common stock on conversion of principal of $39,280 on convertible
notes at an average contractual price of $0.03.
Subsequent
to December 31, 2019, the Company raised $95,000 in financing by issuing new convertible notes. Interest accrues at 12% per annum
and the notes are convertible, subject to rule 144, at a 50% discount to the lowest trading price in the preceding 25 days prior
to conversion.
Subsequent
to December 31, 2019, the Company raised $33,000 by issuing 38,000 shares of Series C preferred stock.
Subsequent
to December 31, 2019, the Company issued 600,000 shares of common stock for past and future services valued at $0.15 per share
or $90,000 to be recognized through the service term ending March 31, 2020.
Friendable (CE) (USOTC:FDBL)
Historical Stock Chart
From Mar 2024 to Apr 2024
Friendable (CE) (USOTC:FDBL)
Historical Stock Chart
From Apr 2023 to Apr 2024
