FDBL Friendable Inc (CE)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.		☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).		☒ Yes ☐ No

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☒
			Emerging growth company	☐

PART I - FINANCIAL INFORMATION

 

 

ITEM 1.  FINANCIAL STATEMENTS.

 

 

 

FRIENDABLE, INC.

 

CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

September 30, 2019

 

(Unaudited)

 

 

Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018		2
Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018		3
Consolidated Statements of Stockholders’ Deficiency for the period from December 31, 2017 to September 30, 2019		4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018		5
Notes to the Consolidated Financial Statements		6-15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

FRIENDABLE, INC.

CONSOLIDATED BALANCE SHEETS

(Expressed in US dollars)

  

ASSETS	September 30, 2019 (Unaudited)	December 31,  2018
Current assets
Cash	$79	$25,646
Accounts receivable	-	-
Total current assets	79	25,646
TOTAL ASSETS	$79	$25,646
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Current liabilities
Accounts payable	$4,421,982	$3,863,577
Convertible debentures short-term (Note 9)	6,299,407	6,299,407
Promissory note (Note 10)	109,535	100,559
Total current liabilities	10,830,924	10,263,543
TOTAL LIABILITIES	10,830,924	10,263,543
Going concern (Note 1)
Commitments (Note 6)
Contingency (Note 12)
Subsequent events (Note 13)
STOCKHOLDERS' DEFICIT
Preferred stock, 50,000,000 shares authorized at par value of $0.0001, 21,267 (December 31, 2018 – 21,267 ) shares issued and outstanding (Note 3)	2	2
Common stock, 1,000,000,000 shares authorized at par value of $0.0001, 314,726 (December 31, 2018 – 314,726) shares issued and outstanding (Note 3)	31	31
Additional paid-in capital	13,027,043	12,027,043
Common stock subscriptions receivable (Note 7)	320,868	(4,500)
Deficit	(24,178,789)	(22,260,473)
Total Stockholders' Deficit	(10,830,845)	(10,237,897)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$79	$25,646

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

2

 

 

 FRIENDABLE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Expressed in US dollars)

(Unaudited)

 

	Three Months Ended September 30, 2019 $	Three Months Ended September 30, 2018 $	Nine months Ended September 30, 2019 $	Nine months Ended September 30, 2018 $
REVENUES	118,801	1,227	120,662	5,709
OPERATING EXPENSES
Accretion and interest expense (Note 9, 10)	189,117	478,102	453,674	1,874,931
App hosting (Note 7)	2,301	141,000	18,068	420,425
Commissions	61	368	619	1,673
General and administrative (Note 7)	187,352	186,090	577,605	597,275
Product development (Note 7)	100,500	549	156,088	549
Sales and marketing	28,788	598	52,924	2,185
TOTAL OPERATING EXPENSES	508,119	806,707	1,258,978	2,897,038
LOSS FROM OPERATIONS	(389,318)	(805,480)	(1,918,316)	(2,891,329)
OTHER EXPENSES
Provision for settlement of lawsuit (Note 12)	(780,000)	-	(780,000)	-
NET LOSS AND COMPREHENSIVE LOSS	(1,169,318)	(805,480)	(1,918,316)	(2,891,329)
BASIC LOSS PER SHARE	(3.72)	(6.44)	(6.10)	(9.50)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING	314,726	125,074	314,726	304,194

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

3

 

 

FRIENDABLE, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FROM DECEMBER 31, 2017 TO SEPTEMBER 30, 2019

(Expressed in US dollars)

    

	Common # Stock	Common Stock Amount	Preferred #	Preferred Stock Amount	Additional Paid-in Capital	Common Stock Subscriptions	Deficit	Total
Balance December 31, 2017	284,559	$28	21,267	$2	$11,658,781	$(4,500)	$(19,138,469)	$(7,484,158)

 

Conversion of convertible notes (Note 9)	30,167	3	—	—	60,297	—	—	60,300
Issuance of convertible notes (net) (Note 9)	—	—	—	—	307,965	—	—	307,965
Net loss for the year	—	—	—	—	—	—	(3,122,004)	(3,122,004)
Balance December 31, 2018	314,726	$31	21,267	$2	$12,027,043	$(4,500)	$(22,260,473)	$(10,237,897)

 

Common stock subscriptions received (Note 3)	—	—	—	—	—	325,368	—	325,368
Debt forgiveness (Note 7, 11)	—	—	—	—	1,000,000	—	—	1,000,000
Net loss for the period	—	—	—	—	—	—	(1,918,316)	(1,918,316)
Balance September 30, 2019	314,726	$31	21,267	$2	$13,027,043	$320,868	$(24,178,789)	$(10,830,845)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

 

 

 

 

4

 

 

 FRIENDABLE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Expressed in US dollars)

 

  

	Nine months ended September 30, 2019	Nine months ended September 30, 2018
Cash Flows from Operating Activities:
Net loss	$(1,918,316)	$(2,891,329)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Interest on convertible debentures and promissory note	453,674	400,189
Accretion expense	-	1,474,742
Provision for settlement of lawsuit	780,000
Changes in Operating Assets and Liabilities
Increase in accounts receivable	-	(512)
Increase in accounts payable	333,707	709,368
Net Cash Used in Operating Activities	(350,935)	(307,542)
Cash Flows from Financing Activities:
Proceeds from convertible debentures (net)	-	310,965
Proceeds from common stock subscription received	325,368	-
Net Cash Provided by Financing Activities	325,368	310,965
Net Increase (Decrease) in Cash	(25,567)	3,423
Cash – Beginning	25,646	-
Cash – Ending	$79	$3,423
Supplemental Cash Flow Information:
Cash paid for interest	$—	$—
Cash paid for income taxes	$—	$—
Non-cash Investing and Financing Items:
Shares issued for conversion of debt (net)	$-	$-
Convertible debentures issued to extinguish promissory notes	$-	$-
Cash consists of:
Cash	$79	$3,423

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

5

 

 

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 June 28, 2017, the Company formed a wholly owned Nevada subsidiary called Fan Pass, Inc.

 

On August 27, 2019, FINRA approved a 18,000 for 1 reverse stock split whereby 5,553,310,369, shares of the Company’s common stock then issued and outstanding, were exchanged for 314,726 shares of the Company’s common stock.

 

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, 2019, the Company has a working capital deficiency of $10,830,845 and has an accumulated deficit of $24,178,789 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.

 

 

 

 

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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.

 

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 consolidated 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.

 

Advertising Costs

The Company’s policy regarding advertising is to expense advertising when incurred. During the nine months ended September 30, 2019, the Company incurred $48,409 (September 30, 2018: $1,474) 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.

 

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.

 

 

 

 

7

 

 

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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, 2019 and 2018, the Company did not have any allowance for doubtful accounts.

  

Financial Instruments

Financial assets and financial liabilities are recognized in the consolidated balance sheet when the Company has become party to the contractual provisions of the instruments.

 

The Company’s financial instruments consist of accounts payable, convertible debentures and promissory note. 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 consolidated 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, 2019, there were approximately 3,383,314 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.

 

 

 

 

 

 

 

 

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2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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. The the adoption of ASU No. 2016-02 did not have an effect on its consolidated financial statements.

 

3.  COMMON AND PREFERRED STOCK

 

Common Stock:

 

Issued during 2019

 

None.

 

Issued during 2018

 

During the 12 months ended December 31, 2018, the Company issued 543,000,000 shares of common stock to various convertible note holders for full and partial conversion of the notes.

 

Reverse Split

 

On August 27, 2019, the Company completed a common stock reverse stock split at a ratio of 18,000 to 1. The reverse stock split has been retrospectively applied to all common stock, weighted average common stock, and loss per common stock disclosures.

 

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.

 

Stock Subscriptions Received:

 

During the nine months ended September 30, 2019, the Company sold a number of its common shares to be issued upon the completion of the reverse split of the Company’s stock as set forth in the Company’s filing on Form 14C as filed with the Commission on May 7, 2018. The total number of post-split shares to be issued is 994,000. As of September 30, 2019, the Company has not issued these shares. The share numbers set forth below represent the post-split number of shares to be issued by the Company.

 

During the nine months ended September 30, 2019, the Company received $325,368 in proceeds related to Security Purchase Agreements (SPA’s) for the purchase of common stock in the Company. The SPA’s are of two separate types. In the first type of SPA, the holders are entitled to shares of the Company’s stock and Company founders pledge to match the shares on a 1:1 basis from their personal shares. In the second type of SPA, investors will be issued common stock and revenue sharing rights, plus, depending on investments levels holders will be awarded app subscriptions, merchandise, backstage passes to celebrity events, and travel expenses. As of September 30, 2019, no shares or awards have been issued in relation to these SPA’s.

 

 

 

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4.  SHARE PURCHASE WARRANTS

 

Balance of share purchase warrants as of September 30, 2019 and year ended December 31, 2018 are: 

 

		Weighted Average
		Exercise
	Number of Warrants	Price $
Balance, December 31, 2018	60,908	79.16
Balance, September 30, 2019	60,908	79.16

 

5.  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 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, 2019, no options have been awarded under the 2014 Plan. Effective August 27, 2019, the Company effected a reverse split of 18,000 to 1 (Note 3) which eliminated all the options which were previously outstanding.

 

6.  COMMITMENTS

 

The following table summarizes the Company’s significant contractual obligations as of September 30, 2019:

 

		$
Employment Agreements (1)		100,000

 

 (1) Employment agreements with related parties.

 

 

 

 

10

 

 

 7.  RELATED PARTY TRANSACTIONS AND BALANCES

 

During the nine months ended September 30, 2019, the Company incurred $344,400 (2018: $344,400) in salaries to officers and directors with such costs being recorded as general and administrative expenses.

 

During the nine months ended September 30, 2019, the Company incurred $18,068, $155,500, and $45,000 (2018: $420,425, $0, and $45,000) 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.

  

As of September 30, 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 September 30, 2019, accounts payable includes $65,717 (December 31, 2018: $721,099) payable to a company with two officers and directors in common, and $683,831 (December 31, 2018: $798,580) payable in salaries to directors and officers of the Company. The amounts are unsecured, non-interest bearing and are due on demand.

 

During the nine months ended September 30, 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 was considered a capital transaction and therefore $1,000,000 was recorded as an increase in additional paid-in capital as of September 30, 2019.

 

The above transactions were recorded at their exchange amounts, being the amounts agreed by the related parties.

 

8.  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, 2019, there were no assets or liabilities measured at fair value on a recurring basis presented on the Company’s consolidated balance sheet, other than cash. 

 

 

 

11

 

 

9.  CONVERTIBLE DEBENTURES

 

Current Convertible Debentures:

 

Conversion Feature		Issuance	Net Principal ($)	Discount ($)	Carrying Value ($)	Interest Rate		Maturity Date
a	)	2-Apr-13	5,054	-	5,054	0	%	2-Jan-14
d	)	5-Aug-15	474,900	-	474,900	7	%	5-Feb-17
d	)	5-Aug-15	18,750	-	18,750	7	%	5-Feb-17
c	)	17-Feb-15	102,135	-	102,135	8	%	17-Feb-16
b	)	17-Feb-15	5,000	-	5,000	8	%	17-Feb-16
b	)	27-Feb-15	37,500	-	37,500	8	%	27-Feb-16
b	)	19-Mar-15	53,551	-	53,551	8	%	19-Mar-16
b	)	19-Mar-15	8,000	-	8,000	8	%	19-Mar-16
b	)	11-May-15	50,000	-	50,000	8	%	11-May-16
b	)	2-Jun-15	29,500	-	29,500	8	%	2-Jun-16
b	)	2-Jun-15	45,966	-	45,966	8	%	2-Jun-16
b	)	2-Jun-15	10,000	-	10,000	8	%	2-Jun-16
b	)	2-Jun-15	58,540	-	58,540	8	%	2-Jun-16
b	)	2-Jun-15	35,408	-	35,408	8	%	2-Jun-16
b	)	2-Jun-15	20,758	-	20,758	8	%	2-Jun-16
c	)	11-Jun-15	50,000	-	50,000	8	%	27-Mar-16
b	)	19-Jun-15	30,464	-	30,464	8	%	19-Jun-16
b	)	19-Jun-15	30,000	-	30,000	8	%	19-Jun-16
b	)	19-Jun-15	35,408	-	35,408	8	%	19-Jun-16
b	)	24-Jun-15	37,500	-	37,500	8	%	27-Feb-16
b	)	24-Jun-15	35,000	-	35,000	8	%	12-Feb-16
b	)	24-Jun-15	37,500	-	37,500	8	%	12-Mar-16
b	)	7-Jul-15	75,000	-	75,000	8	%	7-Oct-15
b	)	1-Aug-15	17,408	-	17,408	8	%	4-Aug-16
b	)	1-Aug-15	30,000	-	30,000	8	%	1-Aug-16
b	)	1-Aug-15	35,408	-	35,408	8	%	1-Aug-16
b	)	21-Sep-15	64,744	-	64,744	8	%	21-Sep-16
b	)	3-May-16	50,000	-	50,000	8	%	3-May-17
b	)	3-May-16	50,000	-	50,000	8	%	11-May-16
b	)	3-May-16	29,500	-	29,500	8	%	2-Jun-16
b	)	3-May-16	45,965	-	45,965	8	%	2-Jun-16
b	)	24-May-16	61,571	-	61,571	8	%	24-May-17
b	)	24-May-16	30,464	-	30,464	8	%	19-Jun-16
b	)	26-May-16	157,500	-	157,500	8	%	26-May-17
b	)	15-Jun-16	5,000	-	5,000	8	%	15-Jun-17
d	)	3-Jun-16	160,000	-	160,000	7	%	8-Sep-17
d	)	3-Jun-16	4,000	-	4,000	7	%	8-Sep-17
d	)	15-Jun-16	50,000	-	50,000	7	%	8-Sep-17
d	)	15-Jun-16	1,250	-	1,250	7	%	8-Sep-17
d	)	17-May-16	100,000	-	100,000	7	%	8-Sep-17
d	)	17-May-16	2,500	-	2,500	7	%	8-Sep-17
d	)	20-May-16	110,000	-	110,000	7	%	8-Sep-17
d	)	20-May-16	2,750	-	2,750	7	%	8-Sep-17
d	)	27-Jan-16	250,000	-	250,000	7	%	27-Jul-17
d	)	8-Mar-16	110,000	-	110,000	7	%	8-Sep-17
d	)	27-Jan-16	18,750	-	18,750	7	%	27-Jul-17
d	)	8-Mar-16	5,000	-	5,000	7	%	8-Sep-17

 

 

 

12

 

9.  CONVERTIBLE DEBENTURES (CONTINUED)

 

d	)	8-Mar-16	90,000	-	90,000	8	%	8-Sep-17
b	)	8-Jul-16	50,000	-	50,000	7	%	8-Sep-17
b	)	4-Aug-16	110,000	-	110,000	7	%	8-Sep-17
d	)	15-Aug-16	157,000	-	157,000	7	%	8-Sep-17
d	)	12-Sep-16	83,000	-	83,000	7	%	8-Sep-17
d	)	8-Jul-16	1,250	-	1,250	7	%	8-Sep-17
d	)	4-Aug-16	2,750	-	2,750	7	%	8-Sep-17
d	)	15-Aug-16	3,925	-	3,925	7	%	8-Sep-17
d	)	12-Sep-16	2,075	-	2,075	7	%	8-Sep-17
d	)	4-Aug-16	110,000	-	110,000	8	%	4-Aug-17
b	)	15-Aug-16	157,500	-	157,500	8	%	15-Aug-17
b	)	8-Sep-16	80,000	-	80,000	8	%	8-Sep-17
b	)	11-Nov-16	80,000	-	80,000	8	%	11-Nov-17
b	)	5-Dec-16	88,000	-	88,000	8	%	5-Dec-17
b	)	9-Jan-17	84,000	-	84,000	8	%	6-Jan-18
b	)	13-Mar-17	32,000	-	32,000	8	%	13-Mar-18
c	)	2-Feb-17	90,198	-	90,198	8	%	2-Feb-18
c	)	15-Mar-17	96,000	-	96,000	8	%	15-Mar-18
d	)	7-Oct-16	465,000	-	465,000	7	%	7-Apr-18
d	)	7-Nov-16	295,000	-	295,000	7	%	7-May-18
d	)	12-Dec-16	295,000	-	295,000	7	%	12-Jun-18
d	)	18-Jan-17	295,000	-	295,000	7	%	7-Apr-18
b	)	7-Apr-17	25,000	-	25,000	8	%	7-Apr-18
b	)	3-May-17	27,000	-	27,000	8	%	3-May-18
c	)	5-May-17	30,000	-	30,000	8	%	5-May-18
b	)	2-Jun-17	27,000	-	27,000	8	%	2-Jun-18
s) d	)	21-Jul-17	790,965	-	790,965	10	%	21-Jul-18
s) d	)	14-Aug-18	30,000	-	30,000	10	%	31-Dec-18
s) d	)	21-Jul-17	24,000	-	24,000	10	%	21-Jul-18
			6,299,407	-	6,299,407

 

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 equal to 50% of the lowest closing bid price of the Company’s common stock for the 15-20 trading days preceding the conversion date subject to a maximum conversion price ranging from $0.0005-$0.05.

 

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 is fixed ranging from $0.0003 - $0.0078.

 

s)

Convertible debenture is secured.

 

 

 

 

13

 

 

9.  CONVERTIBLE DEBENTURES (CONTINUED)

 

At September 30, 2019, convertible debentures with the principal amount of $6,299,407 are subject to a General Security Agreement covering substantially all of the Company’s assets.

 

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, 2019 the conversion features and non-standard anti-dilution provisions would not meet derivative classification.

 

Convertible debentures with maturity dates prior to September 30, 2019 are now due on demand.

 

10. 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 nine months ended September 30, 2019, the Company incurred $9,535 in interest expense in connection with the promissory note.

 

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, 2019 the conversion features and non-standard anti-dilution provisions would not meet derivative classification.

 

11.  DEBT RESTRUCTURE AGREEMENT

 

On March 26, 2019, the Company entered into a Debt Restructuring Agreement with related parties Robert A. Rositano Jr., Dean Rositano, Frank Garcia, and Checkmate Mobile, Inc. and Alpha Capital Anstalt, Coventry Enterprises, LLC, Palladium Capital Advisors, LLC, EMA Financial, LLC, Michael Finkelstein, and Barbara R. Mittman, each being a debt holder of the Company.

 

The debt holders have agreed to convert their debt into certain amounts of common stock as set forth in the Agreement upon the Company meeting certain milestones including but not limited to: the Company effecting a reverse stock split and maintaining a stock price of $1.00 per share; being current with its periodic report filings pursuant to the Securities Exchange Act; Checkmate Mobile, Inc. and Company officers forgiving an aggregate of $1,000,000 in amounts owed to them; the Company raising not less than $400,000 in common stock at a post-split price of not less than $0.20 per share; and certain other things as further set forth in the Agreement. The debt holders will be subject to certain lock up and leak out provisions as contained in the Agreement.

 

12. CONTINGENCY

 

Integrity Media, Inc. (“Integrity”) had previously filed a lawsuit against the Company and the CEO of the Company for $500,000 alleging breach of contract alleging the Company failed to deliver marketable securities in exchange for services. The Company answered the allegations in court and Integrity filed a motion attacking the Company’s answers. The court did not strike the answers but the clerk of the court entered a default judgment against the Company in the amount of $1,192,875 plus 10% interest. On May 8, 2019, the Company received a tentative ruling on the Company’s motion to vacate the default judgement whereby the previously entered default judgement has now been voided and a trial date of August 26, 2019 was set.

 

 

 

14

 

 

12. CONTINGENCY (CONTINUED)

 

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. 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 entered into with various debt holders on March 26, 2019 and filed on Form 8-K on April 15, 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 at November 19, 2019, no shares have been issued nor cash paid.

 

Robert Rositano, the Company’s CEO, has also personally guaranteed the Company’s compliance with the terms of the Settlement Agreement.

 

13. SUBSEQUENT EVENTS

 

Subsequent to September 30, 2019, the Company issued 2,000,000 shares of common stock to a consultant in exchange for investor relations services.

 

Subsequent to September 30, 2019, the Company issued 33,418 shares of common stock in connection with conversion of convertible notes in the amount of $8,355.

 

Subsequent to September 30, 2019, the Company issued 120,000 shares of common stock in connection with conversion of convertible notes in the amount of $1,920.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included in Item 1 “Financial Statements” in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.

 

Overview

 

We were incorporated in the State of Nevada on June 5, 2007. Effective June 15, 2011, we completed a merger with our subsidiary, Titan Iron Ore Corp., a Nevada corporation, which was incorporated solely to effect a change in our name to “Titan Iron Ore Corp.”

 

As of December 31, 2013, Titan Iron Ore Corp. was a mineral exploration company. Due to our inability to raise capital to further develop mining claims and pursue mineral exploration, we decided to exit the mining business and look for other opportunities.

 

On February 3, 2014, we completed a merger with iHookup Social, Inc., a Delaware corporation (“iHookup”) pursuant to an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) dated January 31, 2014. Pursuant to the Merger Agreement, we incorporated a new subsidiary called iHookup Operations Corp, a Delaware corporation, which merged with and into iHookup, causing the subsidiary’s separate existence to cease and iHookup to become a wholly-owned subsidiary of the Company. iHookup’s stockholders exchanged all of their twelve million (12,000,000) shares of outstanding common stock for fifty million (50,000,000) shares of the Company’s newly designated Series A Preferred Stock. Each share of common stock entitles its holder to one vote on each matter submitted to the stockholders.  The holders of preferred stock are entitled to cast votes equal to the number of votes equal to the number of whole shares of common stock into which the shares of Series A Preferred Stock held by such holder are convertible. The total aggregate issued shares of Series A Preferred Stock at any given time regardless of their number shall be convertible into the number of shares of common stock which equals nine (9) times the total number of shares of common stock which are issued and outstanding at the time of any conversion, at the option of the preferred holders or until the closing of a Qualified Financing (i.e. the sale and issuance of our equity securities that results in gross proceeds in excess of $2,500,000) at one time or in the same round. As a result of the transaction, the former Friendable stockholders received a controlling interest in the Company due to the voting rights of the Series A Preferred Stock being connected to their super-majority conversion rights.

 

On April 29, 2014, FINRA approved a 20 for 1 reverse stock split whereby 937,459,274 shares of the Company’s common stock then issued and outstanding, were exchanged for 46,872,964 shares of the Company’s common stock.

 

On March 19, 2015, FINRA approved a 100 for 1 reverse stock split whereby 2,355,489,991, shares of the Company’s common stock then issued and outstanding, were exchanged for 23,554,923 shares of the Company’s common stock.

 

On October 26, 2015, the Company issued a press release announcing that FINRA had approved a change to our trading symbol for our common stock which is quoted on the OTC Pink marketplace. Effective October 27, 2015 our trading symbol was changed from “HKUP” to “FDBL”. This change was made in conjunction with the Company’s filing of a Certificate of Amendment on September 28, 2015 to its Articles of Incorporation changing the name of the Company from “iHookup Social, Inc.” to “Friendable, Inc.” The company had previously announced a re-branding our app from "iHookup Social" to "Friendable". As a result, the Company desired to change its name to match the rebranding so as to be more specific to the Company’s core values and its products/services, creating a more recognizable brand that creates less confusion.

 

On May 31, 2017, the Company filed an Amendment to its Articles of Incorporation increasing the authorized common stock from 10,000,000,000 to 15,000,000,000 shares. On June 28, 2017, the Company incorporated a subsidiary, Fan Pass, Inc., a Nevada corporation, which was incorporated to undertake the development of the mobile application “The Fan Pass App”.

 

On August 27, 2019, FINRA approved a 18,000 for 1 reverse stock split whereby 5,553,310,369, shares of the Company’s common stock then issued and outstanding, were exchanged for 314,726 shares of the Company’s common stock.

 

 

 

 

16

 

 

Who We Are

 

About Friendable, Inc.

 

Friendable, Inc. is a mobile focused technology and marketing company, connecting and engaging users through two distinctly branded applications:

 

The Friendable and Fan Pass Mobile Applications.

 

The Company initially released its flagship product Friendable, as a social application where users can create one-on-one or group-style meetups. In 2019 the Company released its new version of Friendable with a focus on dating and building subscription based revenue, starting with its existing and historical database of approximately 900,000 registered users.

 

Fan Pass is the Company’s newest app/brand and wholly owned subsidiary, scheduled for release in 2019. Fan Pass believes in connecting Fans of their favorite celebrity or artist, to an exclusive VIP or Backstage experience, right from their smart phone or other connected devices. Fan Pass allows an artist fan base 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.

 

Mobile Applications

 

Introduction

 

The Friendable Mobile Application:

 

 

Friendable’s platform is a location-based social platform which creates a “Subscription” based opportunity and location-based advertising for Brands and Businesses. Friendable is marketed as a friendly non-threatening environment for everyone with a "friends-first" approach to making new connections and where everything starts with friendship. The company plans to continue upgrading its application & acquire new registered users and subscribers to increase revenue, engagement and overall # of monthly active users (MAU).

 

 

17

 

 

In January 2019, the Company released a brand new ground up version of the friendable application which is to focus on generating subscription based revenue. Based on several factors which included the reliance on outdated software and ongoing neggiations to reduce the company’s debt, the Company purged all legacy users. In doing so, the Company will rely upon aqcuiring new users and marketing to the prior legacy database in an attempt to convert them into active, paying subscribers.

 

The Friendable application has undergone several versions over the past 5 years and has historically accomplished the following:

 

-

Exceeded 1,500,000 total downloads 

-

Exceeded 900,000 historical registered users

-

Worldwide App store rankings & Celebrity Marketing Integration

-

Ranked in the top 400 social networking apps in over 80 countries around the world

-

Ranked in the top 1000 social networking apps in 147 countries around the world.

-

Reached #4 Social Networking apps in France 

-

Reached 34 in top grossing apps in US

-

Achieved #1 position for all Social Networking apps in Australia, Aug 2016

-

Partnered with “TKA” The KlugerAgency (responsible for “Plenty of Fish” roll out with “LADY GA GA” & “Tinder” user acquisition with “HILLARY DUFF”

-

Integrated in notable artists videos like Jennifer Lopez, Fifth Harmony, Fetty Wap, Meghan Trainor, Red Foo and Austin Mahone

-

January 2019 – Release of our completely re-done new version of the Friendable mobile application aimed at subscription based  revenue. 

 

 

Historically, Friendable’s apps have been downloaded total over 1.5 million times across iOS and Android.

 

Management believes that its Friendable application is in need of additional feature set upgrades, expansion and intelligent technology integration to stay competitive in the Social Networking / Dating category and will continue on this path while developing and launching Fan Pass. Management believes that the cross promotion of Fan Pass users to the Friendable application will allow us to acquire Friendable subscribers at much lower cost than if acquiring users through its own marketing directives.

 

 

 

 

 

 

 

 

 

 

 

 

18

 

  

 

The Fan Pass Live Application (Development Stage)

 

 

In 2019, the Company partnered with Vimeo, Inc to develop and release its Fan Pass mobile application for commercial release on its Vimeo OTT / Livestream platform for iPhone, Android, Apple TV, Android TV, and Roku.

 

●

Backstage access before, during or after an event

●

Sound Check – Recording studio sessions

●

Behind-the-scenes looks on music video, film, or photo-shoot sets – Green Room

●

FREE Content – Social Influencer video (shot front facing)

●

On-set makeup or wardrobe trailers

●

Special interviews & one-on-one videos 

●

Looks into the behind-the-scenes lives of the celebrity’s

     And more exclusive VIP content!

 

In addition, fans will be able to subscribe and view all livestream and on-demand archived videos; or subscribe to an individual broadcast instead. We believe that, especially for a large event like a music festival or concert, the option for fans to briefly purchase a broadcast or view an older broadcast increases the likelihood of added subscriptions.

 

For artists, Fan Pass will offer several levels of revenue-sharing with them and their agencies. Each artist will be asked to market their Fan Pass channel to their social followers and fans, ultimately generating subscription revenue for the Company. The revenue-sharing ecosystem is designed to help celebrities monetize their fans and followers at fairer rates compared to other video streaming applications; Fan Pass will be able to be used in conjunction with other video applications to bolster their income. Lastly, Fan Pass will offer video production and recording services for artists if they do not want to record their own streams.

 

Fan Pass believe's in connecting fans globally..to an exclusive backstage experience, right from their smartphone!

 

Marketing

 

Marketing initiatives will combine celebrity driven outreach to social media followers and fans, specialized content, digital marketing, and live event marketing to optimize market reach:

 

Celebrity Marketing

 

Celebrity partners will utilize the following channels to market Fan Pass:

 

●

Their own Social media

●

Label and/or Management Social Media 

●

Live events 

●

Existing fan marketing 

 

 

 

19

 

 

Event Marketing

 

The Fan Pass marketing / business development team will market the application at:

 

●

Live events – Concerts, Festivals, Private Events, Promotional Events

 

In addition, Fan Pass video and photography crews will take pictures and videos at events for public relations and social media.

 

Digital Marketing

 

Fan Pass will utilize digital marketing avenues such as: 

 

●

Celebrity direct-to-fan

●

Digital ad campaigns on social media, search, and email

 

Digital marketing initiatives will utilize celebrity content and user generated content for maximum market reach.

 

The creation of a business development team that will curate the Company’s internal and external growth goals, and traditional forms of advertising such as television and radio are also key avenues. The goal of using these channels is to create a platform for the long-term success and brand awareness, a matrix of the Company’s planned marketing channels is listed below:

 

Revenue

 

The Friendable application revenue is derived from premium subscriptions within the application. Additional revenue may come from advertising and virtual currency.

 

The Company believes the Fan Pass application will generate revenue utilizing various avenues of pursuit:

 

■

Fan Pass Subscriptions - Initial pricing model example:

o

 $2.99 per month – all access VIP

o

$12.99 single PPV event.

■

Brand sponsorship and/or monthly branded campaigns

■

Social media influencers and promotion

■

Content creation and development

■

Pre-Roll Video Advertising revenue from both live and archived videos

■

E-Commerce Merchandise Sales - including t-shirts, hats, and more

 

Market Opportunity

 

Market Overview: Fan Pass

 

As our digital age continues to evolve, today we see the creation of a new type of end-user: the ever-present “Omni-user” with an overwhelming appetite for content.  These people are an emerging class of knowledgeable users that demand constant access to content, people and celebrities they follow, from work to play or from home, anywhere in the world. Fan Pass was created to satisfy the needs of these omni-users. It is only in the last five years that technology and social media have evolved to a point that allows Fan Pass to become a disruptive opportunity.

 

Consider these facts; Less than a dozen years ago the first mobile phone was invented. Only five years ago, mobile devices started to become less annoying and more useful. It has taken these last five years for processors to become fast, displays to become large and clear, storage to become easily available, and cellular and Wi-Fi networks to be “Omni-present” making mobile devices a useful and always present, necessity in life. At the same time, social media networks have had time to grow strong, reliable and also “Omni-present” thus allowing celebrities and influencers to build vast armies of Fans or “Social Followers”.

 

 

 

 

 

20

 

Results of Operations

 

	Three Months Ended September 30, 2019 $	Three Months Ended September 30, 2018 $	Nine months Ended September 30, 2019 $	Nine months Ended September 30, 2018 $
REVENUES	118,801	1,227	120,662	5,709
OPERATING EXPENSES
Accretion and interest expense (Note 9, 10)	189,117	478,102	453,674	1,874,931
App hosting (Note 7)	2,301	141,000	18,068	420,425
Commissions	61	368	619	1,673
General and administrative (Note 7)	187,352	186,090	577,605	597,275
Product development (Note 7)	100,500	549	156,088	549
Sales and marketing	28,788	598	52,924	2,185
TOTAL OPERATING EXPENSES	508,119	806,707	1,258,978	2,897,038
LOSS FROM OPERATIONS	(389,318)	(805,480)	(1,138,316)	(2,891,329)

 

For the three months ended September 30, 2019 compared to September 30, 2018

 

Revenue

 

The Company had revenue of $118,801 and $1,227 during the three months ended September 30, 2019 and 2018, respectively, an increase of $117,574. The increase in revenue was due to receiving a contract to develop an app for a third party.

 

Operating Expenses

 

The Company had operating expenses of $508,119 and $806,707 during the three months ended September 30, 2019 and 2018, respectively, a decrease of 37%. The decrease in operating expenses was due primarily to lower accretion and interest expense on convertible notes and lower app hosting expenses, offset by higher Fan Pass development and marketing costs.

 

For the nine months ended September 30, 2019 compared to September 30, 2018

 

Revenue

 

The Company had revenue of $120,662 and $5,709 during the nine months ended September 30, 2019 and 2018, respectively, an increase of $114,953. The increase in revenue was due to receiving a contract to develop an app for a third party.

 

Operating Expenses

 

The Company had operating expenses of $1,258,978 and $2,897,038 during the nine months ended September 30, 2019 and 2018, respectively, a decrease of 57%. The decrease in operating expenses was due primarily to lower accretion and interest expense on convertible notes and lower app hosting expenses, offset by higher Fan Pass development and marketing costs.

 

 

21

 

 

Liquidity and Capital Resources

 

Working Capital

	September 30, 2019	December 31, 2018
	(unaudited)	(audited)
Current Assets	$79	$25,646
Current Liabilities	10,830,924	10,263,543
Working Capital (Deficiency)	$(10,830,845)	$(10,237,897)

 

Current assets for the nine months ended September 30, 2019 decreased compared to December 31, 2018 primarily due to less cash on hand.

 

Current liabilities for the nine months ended September 30, 2019 increased compared to December 31, 2018 primarily due to accruing for a settlement offset by forgiveness of debt by related parties.

  

Cash Flows

 

	Nine months	Nine months
	Ended	Ended
	September 30, 2019	September 30, 2018
Net Cash Used in Operating Activities	$(350,935)	$(307,542)
Net Cash Used in Investing Activities	-	-
Net Cash Provided by Financing Activities	325,368	310,965
Net Increase (Decrease) in Cash	$(25,567)	3,423

  

Net Cash Used in Operating Activities

 

Our cash used in operating activities was $350,935 for the nine month period ended September 30, 2019 compared to $307,542 for the nine month period ended September 30, 2018. The increase in cash used is due to higher cash paid to vendors.

 

Net Cash Provided by Financing Activities

 

Our cash provided by financing activities of $325,368 for the nine month period ended September 30, 2019 consisted of stock subscriptions received. Our cash provided by financing activities of $310,965 for the nine month period ended September 30, 2018 consisted of the issuance of convertible debentures.

 

The Company derives the majority of its financing by issuing convertible notes to investors. The investors have the right to convert the notes into common shares of the Company after the requisite Rule 144 waiting period. The notes generally call for the shares to be issued at a deep discount to the market price at the time of conversion.

 

 

 

22

 

 

Securities Purchase Agreements

 

During the nine months ended September 30, 2019, the Company received $325,368 in proceeds related to Security Purchase Agreements (SPA’s) for the purchase of common stock in the Company. In one type of SPA, the holders are entitled to shares of the Company’s stock and Company founders pledge to match the shares on a 1:1 basis from their personal shares. In a second type of SPA, investors will be issued common stock and revenue sharing rights, plus, depending on investments levels holders will be awarded app subscriptions, merchandise, backstage passes to celebrity events, and travel expenses. As of September 30, 2019, no shares or awards have been issued in relation to these SPA’s.

 

Debt Restructure Agreement

 

 On March 26, 2019 three officers forgave debt totaling $400,000 and a company controlled by two officers of the Company forgave debt totaling $600,000. The debt forgiveness is considered a capital transaction and therefore $1,000,000 will be recorded as an increase in additional paid-in capital for December 31, 2019.

 

On March 26, 2019, the Company entered into a Debt Restructuring Agreement with related parties Robert A. Rositano Jr., Dean Rositano , Frank Garcia , and Checkmate Mobile, Inc. and Alpha Capital Anstalt , Coventry Enterprises, LLC , Palladium Capital Advisors, LLC , EMA Financial, LLC, Michael Finkelstein, and Barbara R. Mittman , each being a debt holder of the Company.

 

The debt holders have agreed to convert their debt into certain amounts of common stock as set forth in the Agreement upon the Company meeting certain milestones including but not limited to: the Company effecting a reverse stock split and maintaining a stock price of $1.00 per share; being current with its periodic report filings pursuant to the Securities Exchange Act; Checkmate Mobile Inc and Company officers forgiving an aggregate of $1,000,000 in amounts owed to them; the Company raising not less than $400,000 in common stock at a post-split price of not less than $0.20 per share; and certain other things as further set forth in the Agreement. The debt holders will be subject to certain lock up and leak out provisions as contained in the Agreement. 

 

Going Concern

 

As of September 30, 2019, the Company has a working capital deficiency of $10,830,845 and has an accumulated deficit of $24,178,789 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 financings. 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.

 

We have generated minimal revenues and have incurred losses since inception. Accordingly, we will be dependent on future additional financing in order to finance operations and growth. There is no assurance that we will generate sufficient revenue to sustain our operations.

 

Off-Balance Sheet Arrangements

 

As of September 30, 2019, the Company had no off-balance sheet arrangements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

This Item 3 is not applicable to us as a smaller reporting company and has been omitted.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Disclosure Controls and Procedures

 

We maintain “disclosure controls and procedures”, as that term is defined in Rule 13a-15(e), promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

 

 

 

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As required by paragraph (b) of Rules 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and our principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our management concluded that as of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures were not effective.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management, including our principal executive officer, principal financial officer and our Board of Directors, is responsible for establishing and maintaining a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of September 30, 2019. Our management’s evaluation of our internal control over financial reporting was based on the framework in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of September 30, 2019 due to the following material weaknesses which are indicative of many small companies with small staff: (i) inadequate segregation of duties and ineffective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines. To remediate such weaknesses, we believe we would need to implement the following changes: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may not be undertaken. Until we have the required funds, we do not anticipate implementing these remediation steps.

 

A material weakness is a deficiency or a combination of control deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

 

Our principal executive officer and our principal financial officer do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

 

 

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ITEM 1A. RISK FACTORS. – GENERALLY THE COMPANY IS AT RISK IF THE PROPER FUNDING IS NOT COMMITED AND/OR SECURED TO FUND THE CONTINUED NEEDS OF THE COMPANY FOR OPERATIONS, DEVELOPMENT, PARTNER RELATIONSHIPS, SERVICE PROVIDERS and PUBLIC COMPANY RELATED EXPENSES.

 

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the SEC on April 17, 2019.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

There is no other information required to be disclosed under this item which was not previously disclosed.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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ITEM 6. EXHIBITS

 

The exhibits listed on the Exhibit Index immediately preceding such exhibits, which is incorporated herein by reference, are filed or furnished as part of this Quarterly Report on Form 10-Q.

 

Exhibit Number

Description

 

(4)	Instruments defining the rights of security holders, including indentures
4.1	Convertible Note by and between the Company and Alpha Capital Anstalt dated July 21, 2017 (Incorporated by reference to the Current Report on form 8K, previously filed with the SEC on August 2, 2017)
(10)	Material Contracts
10.1	Securities Purchase Agreement by and between the Company and Alpha Capital Anstalt dated July 21, 2017 (Incorporated by reference to the Current Report on form 8K, previously filed with the SEC on August 2, 2017)
10.2	Fan Pass Security Agreement by and between the Company and Alpha Capital Anstalt dated July 21, 2017 (Incorporated by reference to the Current Report on form 8K, previously filed with the SEC on August 2, 2017)
10.3	Pledge Agreement by and between the Company and Alpha Capital Anstalt dated July 21, 2017 (Incorporated by reference to the Current Report on form 8K, previously filed with the SEC on August 2, 2017)
(31)	Rule 13a-14(a)/15d-14(a) Certification
31.1*	Certification of the Principal Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Principal Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32)	Section 1350 Certification
32.1+	Certification of the Principal Executive Officer and Principal Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(101)	XBRL
101.INS*	XBRL INSTANCE DOCUMENT
101.SCH*	XBRL TAXONOMY EXTENSION SCHEMA
101.CAL*	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF*	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB*	XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE*	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

 

* Filed herewith.

+ In accordance with SEC Release 33-8238, Exhibits 32.1 is being furnished and not filed.

 

 

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SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	FRIENDABLE, INC.
Date: November 19, 2019	By:	/s/ Robert Rositano, Jr.
		Name:  Robert Rositano, Jr.
		Title: CEO, Secretary, and Director (Principal Executive Officer)
Date: November 19, 2019	By:	/s/ Frank Garcia
		Name: Frank Garcia
		Title: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

 

 

 

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