NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2017
(Expressed in US dollars)
1. NATURE OF BUSINESS AND GOING CONCERN
Friendable, Inc., a Nevada corporation (the “Company”),
was incorporated in the State of Nevada as Digital Yearbook Inc.
Effective June 15, 2011, the Company completed a merger with its
subsidiary, Titan Iron Ore Corp., a Nevada corporation, which was
incorporated solely to effect a change in the Company’s name
from “Digital Yearbook Inc.” to “Titan Iron Ore
Corp.” The Company then began to pursue business in the area
of mining exploration.
On February 3, 2014, the Company entered into an Agreement and Plan
of Merger and Reorganization (the
“Merger”)
with iHookup Operations Corp., a wholly-owned
Delaware subsidiary of the Company (“Acquisition Sub”)
and iHookup-DE, whereby iHookup-DE was the surviving entity and
became the wholly-owned subsidiary of the Company.
iHookup-DE’s former stockholders exchanged all of their 6,000
shares of outstanding common stock for 25,000 shares of the
Company’s designated Series A Preferred
Stock.
The Merger was regarded as a reverse recapitalization whereby
iHookup-DE was considered to be the accounting acquirer as its
stockholders retained control of the Company after the Merger. On
February 3, 2014, the Merger was completed and as a result,
iHookup-DE acquired the net liabilities of the Company. As a result
of the Merger, the Company ceased its prior operations and its
business became the development and dissemination of a
“proximity based” mobile-social media application that
facilitates connections between people, utilizing the intelligence
of global positioning system and localized
recommendations.
On
September 28, 2015, the Company filed a Certificate of Amendment to
its Articles of Incorporation changing the name of the Company from
“iHookup Social, Inc.” to “Friendable,
Inc.”
. On October 27, 2015, the
Company’s trading symbol on the OTC Pink marketplace was
changed from “HKUP” to “FDBL”.
This
change was made in conjunction with the re-branding of the
Company’s app from "iHookup Social" to "Friendable". On May
31, 2017, the Company filed an Amendment to its Articles of
Incorporation increasing the authorized common stock from
10,000,000,000 to 15,000,000,000 shares.
On June 28, 2017,
the Company incorporated a subsidiary, Fan Pass Inc., a Nevada
corporation, which was incorporated to undertake the development of
the mobile application “The Fan Pass
App”.
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern,
which implies that the Company would continue to realize its assets
and discharge its liabilities in the normal course of business. The
Company has never paid any dividends and is unlikely to pay
dividends or generate earnings in the immediate or foreseeable
future. As of September 30, 2017, the Company has a working capital
deficiency of $6,847,029 and has an accumulated deficit of
$17,928,809 since inception and its operations continue to be
funded primarily from sales of its stock and issuance of
convertible debentures. These factors raise substantial doubt about
the Company’s ability to continue as a going concern. The
ability of the Company to continue as a going concern is dependent
on the Company’s ability to obtain the necessary financing
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. No assurance can be given that any such
additional financing will be available, or that it can be obtained
on terms acceptable to the Company and its
stockholders.
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
These consolidated financial statements and related notes are
presented in accordance with accounting principles generally
accepted in the United States, and are expressed in US dollars. The
Company’s fiscal year end is December 31.
Interim financial statements
The unaudited interim consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting
principles for interim consolidated financial information and with
the instructions for Securities and Exchange Commission
(“SEC”) Form 10-Q and they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete consolidated financial statements.
Therefore, these consolidated financial statements should be read
in conjunction with the Company’s audited annual consolidated
financial statements and notes thereto for the year ended December
31, 2016, included in the Company’s Annual Report on Form
10-K filed on April 17, 2017, with the SEC.
In the opinion of management, all adjustments (consisting of normal
and recurring accruals) considered necessary for fair presentation
of the Company’s financial position, results of operations
and cash flows have been included. Operating results for the nine
months ended September 30, 2017, are not necessarily indicative of
the results that may be expected for future quarters or the year
ending December 31, 2017.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2017
(Expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Use of Estimates
The preparation of these statements in accordance with United
States generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses in the reporting
period. The Company regularly evaluates estimates and assumptions
related to the useful life and recoverability of long-lived assets,
valuation of convertible debenture conversion options, deferred
income tax asset valuations, financial instrument valuations,
share-based payments, other equity-based payments, and loss
contingencies. The Company bases its estimates and assumptions on
current facts, historical experience and various other factors that
it believes to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities and the accrual of costs and
expenses that are not readily apparent from other sources. The
actual results experienced by the Company may differ materially and
adversely from the Company’s estimates. To the extent there
are material differences between the estimates and the actual
results, future results of operations will be
affected.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement
exists, delivery has occurred, the fee is fixed or determinable,
and collectability is probable. Revenue generally is recognized net
of allowances for returns and any taxes collected from customers
and subsequently remitted to governmental authorities. The Company
derives revenues from the sale of application software, unlimited
messaging subscriptions for periods varying from one to twelve
months, and arrangements for virtual gifts and access to special
features referred to as coin packs. Revenue from the sale of
application software is recognized upon download. Revenue from
messaging subscriptions is recognized as revenue ratably over the
subscription period beginning on the date the service is made
available to customers. Revenue from coin packs is recognized on a
consumption basis commensurate with the customer utilization of
such resources.
Advertising Costs
The Company’s policy regarding advertising is to expense
advertising when incurred. During the nine months ended September
30, 2017, the Company incurred $26,179 (September 30, 2016:
$1,379,116) in advertising costs.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with
a maturity of three months or less to be cash
equivalents.
Intangible Assets
The Company accounts for intangible assets in accordance with ASC
350, Intangibles – Goodwill and Other. The Company assesses
potential impairments to intangible assets when there is evidence
that events or changes in circumstances indicate that the carrying
amount of an asset may not be recovered.
Intangible assets with 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.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2017
(Expressed in US dollars)
2. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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.
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC
718, Compensation – Stock Based Compensation and
ASC 505, Equity Based Payments to Non-Employees, which
requires the measurement and recognition of compensation expense
based on estimated fair values for all share-based awards made to
employees and directors, including stock options.
ASC 718 requires companies to estimate the fair value of
share-based awards on the date of grant using an option-pricing
model. The Company uses the Black-Scholes option pricing model as
its method in determining fair value. This model is affected by the
Company’s stock price as well as assumptions regarding a
number of subjective variables. These subjective variables include,
but are not limited to the Company’s expected stock price
volatility over the terms of the awards, and actual and projected
employee stock option exercise behaviors. The value of the portion
of the award that is ultimately expected to vest is recognized as
an expense in the statement of comprehensive loss over the
requisite service period.
All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably
measurable.
Allowance for Doubtful Accounts
The Company monitors its outstanding receivables for timely
payments and potential collection issues. During the nine months
ended September 30, 2017 and 2016, the Company did not have any
allowance for doubtful accounts.
Financial Instruments
Financial assets and financial liabilities are recognized in the
balance sheet when the Company has become party to the contractual
provisions of the instruments.
The Company’s financial instruments consist of cash, accounts
receivable, accounts payable, and convertible debentures. The fair
values of these financial instruments approximate their carrying
value, due to their short term nature, and current market rates for
similar financial instruments. Fair value of a financial instrument
is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The Company’s
financial instruments recorded at fair value in the balance sheets
are categorized based upon the level of judgment associated with
the inputs used to measure their fair value.
Basic and Diluted Loss Per Share
The Company computes net loss per share in accordance with ASC 260,
Earnings per Share. ASC 260 requires presentation of
both basic and diluted earnings per share (EPS) on the face of the
statement of comprehensive loss. Basic EPS is computed by dividing
net income (loss) available to common stockholders (numerator) by
the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the
if-converted method. In computing diluted EPS, the average stock
price for the period is used in determining the number of shares
assumed to be purchased from the exercise of stock options or
warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti-dilutive.
As of September 30, 2017, there were approximately 38,807,536,857
potentially dilutive shares outstanding.
Income Taxes
The Company accounts for income taxes using the asset and liability
method in accordance with ASC 740, Income Taxes. The asset and
liability method provides that deferred tax assets and liabilities
are recognized for the expected future tax consequences of
temporary differences between the financial reporting and tax bases
of assets and liabilities and for operating loss and tax credit
carry forwards. Deferred tax assets and liabilities are measured
using the currently enacted tax rates and laws that will be in
effect when the differences are expected to reverse. The Company
records a valuation allowance to reduce deferred tax assets to the
amount that is believed more likely than not to be
realized.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2017
(Expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent Accounting Pronouncements
In
May 2014, the FASB issued ASU No. 2014-09, “Revenue from
Contracts with Customers (Topic 606)” (“ASU
2014-09”). ASU 2014-09 supersedes the revenue recognition
requirements in ASC Topic 605, “Revenue Recognition”
and some cost guidance included in ASC Subtopic 605-35, Revenue
Recognition -Construction-Type and Production-Type
Contracts”. ASU 2014-09 requires the disclosure of sufficient
information to enable users of the financial statements to
understand the nature, amount, timing and uncertainty of revenue
and cash flows arising from customer contracts. The Company will
also be required to disclose information regarding significant
judgments and changes in judgments, and assets recognized from
costs incurred to obtain or fulfill a contract. Early adoption is
not allowed. ASU 2014-09 provides two methods of retrospective
application. The first method would require the Company to apply
ASU 2014-09 to each prior reporting period presented. The second
method would require the Company to retrospectively apply with the
cumulative effect of initially applying ASU 2014-09 recognized at
the date of initial application. ASU 2015-14 deferred the effective
date of ASU 2014-09 for all entities by one year. ASU 2014-09 is
now effective for annual reporting periods beginning after December
15, 2017, including interim reporting periods within that reporting
period. Early application is permitted only as of annual reporting
periods beginning after December 15, 2016, including interim
reporting periods within that reporting period. The Company is
currently evaluating the impact that the adoption of ASU 2014-09
may have on its consolidated financial
statements.
3. INTANGIBLE ASSETS
As at September 30, 2017, the Company owns the Friendable
Properties which includes domain names, logos, icons, and
registered trademarks for which it paid cash consideration of
$35,000.
4. COMMON AND PREFERRED STOCK
Common Stock:
Issued during 2017
During the nine months ended September 30, 2017, the Company issued
1,899,157,030 shares of common stock to various convertible note
holders for full and partial conversion of the notes (Note
10).
During the nine months ended September 30, 2017, the Company issued
123,220,000 shares of common stock as payment for
services.
During the nine months ended September 30, 2017, the Company issued
297,726,173 shares of common stock to various Series A preferred
stockholders on conversion of 388 preferred shares.
Preferred Stock:
The Series A Preferred Stock is convertible into nine (9) times the
number of common stock outstanding until the closing of a Qualified
Financing (i.e. the sale and issuance of the Company’s equity
securities that results in gross proceeds in excess of
$2,500,000). The number of shares of common stock issued
on conversion of preferred stock is based on the ratio of the
number of shares of preferred stock converted to the total number
of shares of preferred stock outstanding at the date of conversion
multiplied by nine (9) times the number of common stock outstanding
at the date of conversion.
5. SHARE PURCHASE WARRANTS
Details of share purchase warrants during the nine months ended
September 30, 2017 are:
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2016
|
978,335,757
|
0.005
|
Warrants
issued
|
118,000,000
|
0.003
|
Balance,
September 30, 2017
|
1,096,335,757
|
0.004
|
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2017
(Expressed in US dollars)
6. STOCK-BASED COMPENSATION
On November 22, 2011, the Board of Directors of the Company. (see
Note 1) approved a stock option plan (“2011 Stock Option
Plan”), the purpose of which is to enhance the
Company’s stockholder value and financial performance by
attracting, retaining and motivating the Company’s officers,
directors, key employees, consultants and its affiliates and to
encourage stock ownership by such individuals by providing them
with a means to acquire a proprietary interest in the
Company’s success through stock ownership. Under the 2011
Stock Option Plan, officers, directors, employees and consultants
who provide services to the Company may be granted options to
acquire common shares of the
Company.
The aggregate number of
options authorized by the plan shall not exceed 4,974 shares of
common stock of the Company.
The following table summarizes the options outstanding and
exercisable under the 2011 Stock Option Plan as of September
30, 2017:
|
|
|
|
|
|
December
21, 2021
|
1,680
|
1,725
|
June
21, 2022
|
400
|
500
|
June
25, 2023
|
134
|
850
|
|
$
1,044
|
3,075
|
The Board of Directors and the stockholders holding a majority of
the voting power approved a 2014 Equity Incentive Plan (the
“2014 Plan”) on February 28, 2014, with a to be
determined effective date. The purpose of the 2014 Plan is to
assist the Company and its affiliates in attracting, retaining and
providing incentives to employees, directors, consultants and
independent contractors who serve the Company and its affiliates by
offering them the opportunity to acquire or increase their
proprietary interest in the Company and to promote the
identification of their interests with those of the stockholders of
the Company. The 2014 Plan will also be used to make grants to
further reward and incentivize current employees and
others.
There are 120,679 shares of common stock reserved for issuance
under the 2014 Plan. The Board shall have the power and authority
to make grants of stock options to employees, directors,
consultants and independent contractors who serve the Company and
its affiliates. Any stock options granted under the 2014 Plan shall
have an exercise price equal to or greater than the fair market
value of the Company’s shares of common stock. Unless
otherwise determined by the Board of Directors, stock options shall
vest over a four-year period with 25% being vested after the end of
one (1) year of service and the remainder vesting equally over a
36-month period. The Board may award options that may
vest based upon the achievement of certain performance milestones.
As of September 30, 2017, no options have been awarded under the
2014 Plan.
The following table summarizes the Company’s stock options
outstanding and exercisable:
|
|
Weighted Average Exercise Price
|
Weighted- Average Remaining Contractual Term (years)
|
Aggregate Intrinsic Value
|
|
$
|
$
|
Outstanding
and exercisable, December 31, 2016
|
3,075
|
1,044
|
6.57
|
-
|
Outstanding
and exercisable, September 30, 2017
|
3,075
|
1,044
|
5.82
|
-
|
7. COMMITMENTS
The following table summarizes the Company’s significant
contractual obligations as of September 30, 2017:
|
$
|
|
|
Employment Agreements (1)
|
75,000
|
(1) Employment agreements with related parties.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2017
(Expressed in US dollars)
8. RELATED PARTY
TRANSACTIONS AND BALANCES
During the nine months ended September 30, 2017, the Company
incurred $364,000 (2016: 332,667) in salaries to officers and
directors with such costs being recorded as general and
administrative expenses.
During the nine months ended September 30, 2017, the Company
incurred $688,837 (2016: $588,204) 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, respectively.
As of September 30, 2017, the Company had a stock subscription
receivable totaling $4,500 (December 31, 2016: $4,500) from an
officer and director and from a company with an officer and
director in common.
As of September 30, 2017, accounts payable includes $429,437
(December 31, 2016: $234,058) payable to a company with two
officers and directors in common, and $376,667 (December 31, 2015:
$215,000) 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, 2016, two officers forgave debt
totaling $200,000 and a company controlled by three officers
(December 31, 2016: two officers) of the Company forgave debt
totaling $300,000. The debt forgiveness was considered a capital
transaction and therefore $500,000 was recorded as an increase in
additional paid-in capital as of December 31,
2016
.
The above transactions were recorded at their exchange amounts,
being the amounts agreed by the related parties.
9. FAIR VALUE MEASUREMENTS
ASC 820, Fair Value Measurements and Disclosures, require an entity
to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. ASC 820 establishes
a fair value hierarchy based on the level of independent, objective
evidence surrounding the inputs used to measure fair value. A
financial instrument’s categorization within the fair value
hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. ASC 820 prioritizes the
inputs into three levels that may be used to measure fair
value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted
prices in active markets for identical assets or liabilities.
Valuations are based on quoted prices that are readily and
regularly available in an active market and do not entail a
significant degree of judgment.
Level 2
Level 2 applies to assets or liabilities for which there are other
than Level 1 observable inputs such as quoted prices for similar
assets or liabilities in active markets; quoted prices for
identical assets or liabilities in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived
valuations in which significant inputs are observable or can be
derived principally from, or corroborated by, observable market
data.
Level 2 instruments require more management judgment and
subjectivity as compared to Level 1 instruments. For instance:
determining which instruments are most similar to the instrument
being priced requires management to identify a sample of similar
securities based on the coupon rates, maturity, issuer, credit
rating and instrument type, and subjectively select an individual
security or multiple securities that are deemed most similar to the
security being priced; and determining whether a market is
considered active requires management judgment.
Level 3
Level 3 applies to assets or liabilities for which there are
unobservable inputs to the valuation methodology that are
significant to the measurement of the fair value of the assets or
liabilities. The determination of fair value for Level 3
instruments requires the most management judgment and
subjectivity.
Pursuant to ASC 825, cash is based on Level 1 inputs. The Company
believes that the recorded values of accounts receivable and
accounts payable approximate their current fair values because of
their nature or respective relatively short durations. The fair
value of the Company’s convertible debentures approximates
their carrying values as the underlying imputed interest rates
approximates the estimated current market rate for similar
instruments.
As of September 30, 2017, there were no assets or liabilities
measured at fair value on a recurring basis presented on
the Company’s balance sheet, other than
cash.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2017
(Expressed in US dollars)
10. CONVERTIBLE
DEBENTURES
Current
Convertible Debentures:
|
|
|
|
|
|
Maturity Date
|
a
)
|
2-Apr-13
|
5,054
|
-
|
5,054
|
0
%
|
2-Jan-14
|
b
)
|
5-Aug-15
|
631,800
|
-
|
631,800
|
7
%
|
5-Feb-17
|
b
)
|
5-Aug-15
|
18,750
|
-
|
18,750
|
7
%
|
5-Feb-17
|
d
)
|
17-Feb-15
|
102,135
|
-
|
102,135
|
8
%
|
17-Feb-16
|
d
)
|
17-Feb-15
|
5,000
|
-
|
5,000
|
8
%
|
17-Feb-16
|
c
)
|
27-Feb-15
|
37,500
|
-
|
37,500
|
8
%
|
27-Feb-16
|
d
)
|
19-Mar-15
|
53,551
|
-
|
53,551
|
8
%
|
19-Mar-16
|
d
)
|
19-Mar-15
|
8,000
|
-
|
8,000
|
8
%
|
19-Mar-16
|
c
)
|
11-May-15
|
50,000
|
-
|
50,000
|
8
%
|
10-May-16
|
d
)
|
2-Jun-15
|
29,500
|
-
|
29,500
|
8
%
|
1-Jun-16
|
d
)
|
2-Jun-15
|
45,966
|
-
|
45,966
|
8
%
|
1-Jun-16
|
d
)
|
2-Jun-15
|
10,000
|
-
|
10,000
|
8
%
|
1-Jun-16
|
d
)
|
2-Jun-15
|
58,540
|
-
|
58,540
|
8
%
|
1-Jun-16
|
d
)
|
2-Jun-15
|
35,408
|
-
|
35,408
|
8
%
|
1-Jun-16
|
d
)
|
2-Jun-15
|
20,758
|
-
|
20,758
|
8
%
|
1-Jun-16
|
c
)
|
11-Jun-15
|
50,000
|
-
|
50,000
|
8
%
|
10-Jun-16
|
d
)
|
16-Jun-15
|
30,464
|
-
|
30,464
|
8
%
|
15-Jun-16
|
d
)
|
19-Jun-15
|
30,000
|
-
|
30,000
|
8
%
|
18-Jun-16
|
d
)
|
19-Jun-15
|
35,408
|
-
|
35,408
|
8
%
|
18-Jun-16
|
c
)
|
24-Jun-15
|
37,500
|
-
|
37,500
|
8
%
|
23-Jun-16
|
d
)
|
24-Jun-15
|
35,000
|
-
|
35,000
|
8
%
|
23-Jun-16
|
c
)
|
24-Jun-15
|
37,500
|
-
|
37,500
|
8
%
|
23-Jun-16
|
d
)
|
7-Jul-15
|
75,000
|
-
|
75,000
|
8
%
|
7-Oct-15
|
d
)
|
1-Aug-15
|
17,408
|
-
|
17,408
|
8
%
|
4-Aug-16
|
d
)
|
1-Aug-15
|
30,000
|
-
|
30,000
|
8
%
|
1-Aug-16
|
d
)
|
1-Aug-15
|
35,408
|
-
|
35,408
|
8
%
|
1-Aug-16
|
d
)
|
21-Sep-15
|
64,744
|
-
|
64,744
|
8
%
|
21-Sep-16
|
b
)
|
3-May-16
|
50,000
|
-
|
50,000
|
8
%
|
3-May-17
|
c
)
|
3-May-16
|
50,000
|
-
|
50,000
|
8
%
|
3-May-17
|
d
)
|
3-May-16
|
29,500
|
-
|
29,500
|
8
%
|
3-May-17
|
d
)
|
3-May-15
|
45,965
|
-
|
45,965
|
8
%
|
3-May-17
|
b
)
|
24-May-16
|
61,571
|
-
|
61,571
|
8
%
|
24-May-17
|
d
)
|
24-May-16
|
30,464
|
-
|
30,464
|
8
%
|
24-May-17
|
b
)
|
26-May-16
|
157,500
|
-
|
157,500
|
8
%
|
26-May-17
|
d
)
|
15-Jun-16
|
5,000
|
-
|
5,000
|
8
%
|
15-Jun-17
|
b
)
|
2-Jun-16
|
160,000
|
-
|
160,000
|
7
%
|
2-Jun-17
|
b
)
|
2-Jun-16
|
4,000
|
-
|
4,000
|
7
%
|
2-Jun-17
|
b
)
|
15-Jun-16
|
50,000
|
-
|
50,000
|
7
%
|
15-Jun-17
|
b
)
|
15-Jun-16
|
1,250
|
-
|
1,250
|
7
%
|
15-Jun-17
|
b
)
|
17-May-16
|
100,000
|
-
|
100,000
|
7
%
|
8-Sep-17
|
b
)
|
17-May-16
|
2,500
|
-
|
2,500
|
7
%
|
8-Sep-17
|
b
)
|
19-May-16
|
110,000
|
-
|
110,000
|
7
%
|
8-Sep-17
|
b
)
|
19-May-16
|
2,750
|
-
|
2,750
|
7
%
|
8-Sep-17
|
b
)
|
27-Jan-16
|
250,000
|
-
|
250,000
|
7
%
|
27-Jul-17
|
b
)
|
8-Mar-16
|
110,000
|
-
|
110,000
|
7
%
|
8-Sep-17
|
b
)
|
27-Jan-16
|
18,750
|
-
|
18,750
|
7
%
|
27-Jul-17
|
b
)
|
8-Mar-16
|
5,000
|
-
|
5,000
|
7
%
|
8-Sep-17
|
b
)
|
8-Mar-16
|
90,000
|
-
|
90,000
|
7
%
|
8-Sep-17
|
b
)
|
7-Jul-16
|
50,000
|
-
|
50,000
|
7
%
|
8-Sep-17
|
b
)
|
4-Aug-16
|
110,000
|
-
|
110,000
|
7
%
|
8-Sep-17
|
b
)
|
15-Aug-16
|
157,000
|
-
|
157,000
|
7
%
|
8-Sep-17
|
b
)
|
12-Sep-16
|
83,000
|
-
|
83,000
|
7
%
|
8-Sep-17
|
b
)
|
7-Jul-16
|
1,250
|
-
|
1,250
|
7
%
|
8-Sep-17
|
b
)
|
4-Aug-16
|
2,750
|
-
|
2,750
|
7
%
|
8-Sep-17
|
b
)
|
15-Aug-16
|
3,925
|
-
|
3,925
|
7
%
|
8-Sep-17
|
b
)
|
12-Sep-16
|
2,075
|
-
|
2,075
|
7
%
|
8-Sep-17
|
b
)
|
4-Aug-16
|
110,000
|
-
|
110,000
|
7
%
|
4-Aug-17
|
b
)
|
15-Aug-16
|
157,500
|
-
|
157,500
|
7
%
|
15-Aug-17
|
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2017
(Expressed in US dollars)
10. CONVERTIBLE
DEBENTURES
(CONTINUED)
b
)
|
8-Sep-16
|
80,000
|
-
|
80,000
|
7
%
|
8-Sep-17
|
b
)
|
11-Nov-16
|
80,000
|
40,896
|
39,104
|
7
%
|
11-Nov-17
|
b
)
|
6-Dec-16
|
88,000
|
55,689
|
32,311
|
7
%
|
6-Dec-17
|
b
)
|
9-Jan-17
|
84,000
|
63,565
|
20,435
|
7
%
|
9-Jan-18
|
b
)
|
3-Mar-17
|
32,000
|
27,032
|
4,968
|
7
%
|
3-Mar-18
|
c
)
|
2-Feb-17
|
109,305
|
89,610
|
19,695
|
8
%
|
2-Feb-17
|
c
)
|
15-Mar-17
|
96,000
|
87,066
|
8,934
|
8
%
|
15-Mar-18
|
b
)
|
7-Oct-16
|
465,000
|
422,483
|
42,517
|
7
%
|
7-Apr-18
|
b
)
|
7-Nov-16
|
286,376
|
172,389
|
113,987
|
7
%
|
7-May-18
|
b
)
|
12-Dec-16
|
289,142
|
51,824
|
237,318
|
7
%
|
12-Jun-18
|
b
)
|
18-Jan-17
|
286,208
|
79,133
|
207,075
|
7
%
|
7-Apr-18
|
b
)
|
7-Apr-17
|
25,000
|
21,734
|
3,266
|
8
%
|
7-Apr-18
|
b
)
|
3-May-17
|
27,000
|
24,404
|
2,596
|
8
%
|
3-May-18
|
c
)
|
5-May-17
|
30,000
|
27,342
|
2,658
|
8
%
|
5-May-18
|
b
)
|
2-Jun-17
|
27,000
|
25,068
|
1,932
|
8
%
|
2-Jun-18
|
b
)
|
21-Jul-17
|
231,761
|
200,164
|
31,597
|
7
%
|
21-Jul-18
|
b
)
|
21-Jul-17
|
24,000
|
14,059
|
9,941
|
7
%
|
21-Jul-18
|
|
|
|
|
|
|
|
5,862,936
|
1,402,458
|
4,460,478
|
|
|
a)
The
conversion price per share equal to the lower of:
i.
100%
of the average price of the Company’s common stock for the 5
trading days preceding the conversion date;
ii.
70%
of the daily average price of the Company’s common stock for
the 10 trading days preceding the conversion date.
b)
The
conversion price is a range of $0.0025-$0.0078.
c)
The
conversion price equal to 50% of the lowest closing bid price of
the Company’s common stock in the 20-25 trading days prior to
the conversion.
d)
The
conversion price of $0.0005.
During the nine months ended September 30, 2017, the Company
received net proceeds from convertible debentures of
$979,770.
During the nine months ended September 30, 2017, $620,336 of
convertible debentures were settled by issuing 1,899,157,030 shares
of common stock of the Company.
During the nine months ended September 30, 2017, the Company
incurred $90,250 in transaction costs in connection with the
issuance of the convertible debentures that have been offset
against the carrying values of the related debentures on the
issuance date.
During the nine months ended September 30, 2017, the Company
incurred $2,714,869 in accretion and interest expense in connection
with the convertible debentures.
At September 30, 2017, convertible debentures with the principal
amount of $5,862,936 are subject to a General Security Agreement
covering substantially all of the Company’s
assets.
FRIENDABLE,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2017
(Expressed in US dollars)
10.
CONVERTIBLE DEBENTURES
(CONTINUED)
The Company has evaluated whether separate financial instruments
with the same terms as the conversion features above would meet the
characteristics of a derivative instrument as described in
paragraphs ASC 815-15-25. The terms of the contracts do not permit
net settlement, as the shares delivered upon conversion are not
readily convertible to cash. The Company’s trading history
indicated that the shares are thinly traded and the market would
not absorb the sale of the shares issued upon conversion without
significantly affecting the price. As the conversion features would
not meet the characteristics of a derivative instrument as
described in ASC 815-15-25, the conversion features are not
required to be separated from the host instrument and accounted for
separately. As a result, at September 30, 2017 the conversion
features and non-standard anti-dilutions provisions would not meet
derivative classification.
Convertible debentures with maturity dates prior to September 30,
2017 are now due on demand.
11. LOSS ON INVESTMENT AND INTANGIBLE ASSET
On October 7, 2016, t
he Company entered into a Securities
Purchase Agreement (the “Alpha SPA”) with Alpha Capital
Anstalt (“Alpha Capital”), to issue and sell up to, in
principal amount, $1,615,000 of convertible notes, payable in four
tranches (the “Alpha Notes”). The first tranche of
$465,000 was funded on October 7, 2016 (the “Initial Closing
Date”) and the second, third, and fourth tranches of $375,000
were funded, respectively, during the first week of each of
November 2016, December 2016, and January 2017 (the subsequent
closing dates and, with the Initial Closing Date, each a
“Closing”).
The
Company used a portion of the proceeds of each Closing to purchase
Series A Convertible Participating Preferred Stock of a private
entity named Hang With, Inc. (“Hang With”). Alpha
Capital is currently Hang With’s majority shareholder. On
October 7, 2016, the Company entered into a Securities Purchase
Agreement with Hang With (the “Hang With SPA”) to buy
up to 330,397 shares of Hang With’s Series A Convertible
Participating Preferred Stock (the “Preferred Stock”)
for $750,000. On the Initial Closing Date, the Company paid
$225,000 and was to receive 99,118 shares of Preferred Stock. The
Company paid Hang With $175,000 on each of the subsequent three
Closings. In connection with entering into the Hang With SPA, the
Company and Hang With entered into a Software License Agreement
(the “License Agreement”) in which Hang With is
licensing the intellectual property of the Hang With apps to the
Company. As part of the Hang With SPA and as compensation for the
Company entering into the License Agreement and the future
development agreement, Hang With was to issue 154,185 shares of
Preferred Stock on the Initial Closing Date, and was to issue
100,000 shares of its common stock to the Company.
The
Company attributed much of the value of Hang With to Hang With
management’s representation that, in the history of its own
apps, it had a certain amount of total users and a range of monthly
active users. Hang With believed, prior to the Hang With SPA being
signed, that, with the Company’s investment, the monthly
active users would be at the higher end of the range within a short
period of time. Based on these representations by management the
Company believed that it could specifically market its own apps to
the minimum monthly active users of the Hang With app that Hang
With management’s represented existed.
The
Company believes that, after the November 2016 Closing, the Hang
With app was removed for a period of time from the app stores on
which it appeared and that the app was shut down for a period of
time. At this point, Hang With effectively had zero monthly active
users. In addition, the Company was not able to utilize Hang
With’s technology in the Friendable app as was contemplated
by the License Agreement due to Hang With’s technology being,
in the Company’s view, out of date. The Company is currently
seeking to negotiate a settlement with Hang With regarding the
Company’s claims against Hang With.
As of
December 31, 2016 Hang With had not delivered any of the preferred
or common shares to the Company. During the year ended December 31,
2016, the Company had paid Hang With $575,000 which has been
written off as a loss on investment. During the nine months ended
September 30, 2017, the Company had paid Hang With $175,000 in
connection to the fourth Closing which has been written off as a
loss on investment.
12. LOSS ON SETTLEMENT AGREEMENT
The
Company and Joseph Canouse had been in a dispute regarding what
amount, if any, was owed pursuant to a consulting agreement between
the parties signed on April 1, 2014. On December 7, 2016, Mr.
Canouse obtained a judgment in state court in Georgia in the amount
of $82,931 and the right to garnish the Company’s bank
accounts. On April 7, 2017, the Company entered into a Settlement
Agreement with Mr. Canouse (the “Agreement”). Pursuant
to the Agreement, the Company agreed to issue an 8% Convertible
Note (the “Note”) in the principal amount of $82,931 to
an entity controlled by Mr. Canouse. Under the terms of the
Agreement, in return for the issuance of the Note, Mr. Canouse will
file a Consent Motion to Withdraw Judgment, dismiss all
garnishments, and cease all collection activities. As of December
31, 2016, the Company recorded a loss on settlement agreement of
$82,931 and accrued a corresponding liability. As of September 30,
2017, the Note has not been issued.
13. SUBSEQUENT EVENT
a)
|
Subsequent
to September 30, 2017, the Company issued 1,384,175,343 shares of
common stock on conversion of $237,017 of convertible
debt.
|