Friendable, Inc. - Quarter Report: 2020 March (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2020

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 000-52917

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

5,553,310,369 shares of common stock outstanding as of July 10, 2020

TABLE OF CONTENTS

As used in this report, the term “the Company” means Friendable, Inc., formerly known as iHookup Social, Inc., and its subsidiary, unless the context clearly indicates otherwise.

Special Note Regarding Forward-Looking Information

This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements. These forward-looking statements include, among others, statements relating to: the Company’s future financial performance, the Company’s business prospects and strategy, anticipated trends and prospects in the industries in which the Company’s businesses operate and other similar matters. These forward-looking statements are based on the Company’s management’s expectations and assumptions about future events as of the date of this quarterly report, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.

Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, among others, the risk factors set forth below. Other unknown or unpredictable factors that could also adversely affect the Company’s business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward-looking statements discussed in this quarterly report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of the Company’s management as of the date of this quarterly report. The Company does not undertake to update these forward-looking statements

In this quarterly report on Form 10-Q, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in the Company’s capital stock.

An investment in the Company’s common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this quarterly report on Form 10-Q in evaluating the Company and its business before purchasing shares of the Company’s common stock. The Company’s business, operating results and financial condition could be seriously harmed as a result of the occurrence of any of the following risks. You could lose all or part of your investment due to any of these risks. You should invest in the Company’s common stock only if you can afford to lose your entire investment.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

FRIENDABLE, INC.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(Unaudited)

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

FRIENDABLE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

March 31, 2020 and 2019

(Unaudited)

1. NATURE OF BUSINESS AND GOING CONCERN

Nature of Business

Friendable, Inc., a Nevada corporation (the “Company”), was incorporated in the State of Nevada.

Friendable, Inc. is a mobile-focused technology and marketing company, connecting and engaging users through two distinctly branded applications. The Company initially released its flagship product Friendable, as a social application where users can create one-on-one or group-style meetups. In 2019 the Company has moved the Friendable app closer to a traditional dating application with its focus on building revenue, as well as reintroducing the brand as a non-threatening, all-inclusive place where “Everything starts with Friendship”…meet, chat & date.

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

Fan Pass is the Company’s most recent or second app/brand, scheduled for release in 2020. Fan Pass believes in connecting Fans of their favorite celebrity or artist, to an exclusive VIP or Backstage experience, right from their smartphone or other connected devices. Fan Pass allows an artist’s fanbase to experience something they would otherwise never have the opportunity to afford or geographically attend. The Company aims to establish both Friendable and Fan Pass as premier brands and mobile platforms that are dedicated to connecting and engaging users from anywhere around the World.

On August 27, 2019, a 1 for 18,000 reverse stock split of our common stock became effective. All share and per share information in the accompanying unaudited consolidated financial statements and footnotes has been retroactively adjusted for the effects of the reverse split for all periods presented. 

Going Concern

The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which implies that the Company would continue to realize its assets and discharge its liabilities in the normal course of business. As of March 31, 2020, the Company has a working capital deficiency of $8,989,333, an accumulated deficit of $33,991,499 and has a stockholder’s deficit of $33,991,499 and its operations continue to be funded primarily from sales of its stock and issuance of convertible debentures. During the three months ended March 31, 2020 the Company had a net loss and net cash used in operations of $1,547,616 and $13,177. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance of this report. The ability of the Company to continue as a going concern is dependent on the Company’s ability to obtain the necessary financing through the issuance of convertible notes and equity instruments. The unaudited consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management plans to raise financing through the issuance of convertible notes and equity sales. No assurance can be given that any such additional financing will be available, or that it can be obtained on terms acceptable to the Company and its stockholders.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The unaudited consolidated financial statements include all the accounts of the Company and all of its wholly owned subsidiaries as of March 31, 2020 and 2019. All material intercompany accounts and transactions have been eliminated in consolidation. The Company’s fiscal year end is December 31.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) for interim financial information. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. These unaudited consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to the consolidated financial statements for the year ended December 31, 2019 of the Company which were included in the Company’s annual report on Form 10-K as filed with the Securities and Exchange Commission on June 30, 2020

FRIENDABLE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

March 31, 2020 and 2019

(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reclassifications

Certain balances in 2019 have been reclassified to conform with the 2020 presentation. Specifically, accrued interest on convertible notes has been reclassified into Accounts payable and accrued expenses and accretion and interest expense has been reclassified to other expenses.

Use of Estimates

The preparation of these statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to valuation of convertible debenture conversion options, derivative instruments, deferred income tax asset valuations, financial instrument valuations, share-based payments, other equity-based payments, and loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. 

Revenue Recognition

In accordance with ASC 606, revenue is recognized when the following criteria have been met; valid contracts are identified with specific customers, performance obligations have been identified, price is determinable, price is allocated to performance obligations, and the Company has satisfied the performance obligations. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities. During the three months ended March 31, 2020, the Company derived revenues primarily from the development of apps for a third party, and such revenues were recognized upon completion of services.

Advertising Costs

The Company’s policy regarding advertising is to expense advertising when incurred. During the three months ended March 31, 2020, the Company incurred $0 (March 31, 2019: $4,426) 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.

Impairment of Long-Lived Assets

The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows.

If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

Derivative liabilities

The Company has a financial instrument associated with a debt restructuring agreement. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10 – Derivative and Hedging – Contract in Entity’s Own Equity. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment.

FRIENDABLE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

March 31, 2020 and 2019

(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The guidance was adopted as of January 1, 2019 and the adoption did not have any impact on its consolidated financial statement and there was no cumulative effect adjustment.

Stock-based Compensation

During 2018 the Company recorded stock-based compensation in accordance with ASC 718, Compensation – Stock Based Compensation and ASC 505, Equity Based Payments to Non-Employees, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards made to employees and directors, including stock options. In 2019 the Company adopted ASU 2018-07 which expands the measurement requirements to non employees.

ASC 718 requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option pricing model as its method in determining fair value. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the terms of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

Accounts Receivable and Allowance for Doubtful Accounts

The Company monitors its outstanding receivables for timely payments and potential collection issues. At March 31, 2020 and December 31, 2019, the Company did not have any allowance for doubtful accounts.

Financial Instruments

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

The Company’s financial instruments consist of accounts receivable, accounts payable, convertible debentures, stock settled debt, derivatives, mandatorily redeemable Series C Preferred stock and promissory notes. The fair values of these financial instruments approximate their carrying value, due to their short term nature, and current market rates for similar financial instruments. Fair value of a financial instrument is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company’s financial instruments recorded at fair value in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

Concentrations

We have substantial client concentration, with one client accounting for a substantial portion of our revenues.

In the three months ended March 31, 2020 we derived 99.6% (2019: 0%) of our revenue from one client. There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of clients. It is not possible for us to predict the future level of demand for our services that will be generated by this client or the future demand for the products and services of other similar clients. A loss of this client or the failure to retain similar clients could negatively affect our revenues and results of operations and/or trading price of our common stock.

Basic and Diluted Loss Per Share

The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

FRIENDABLE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

March 31, 2020 and 2019

(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

As of March 31, 2020, there were approximately 510,586,539 potentially dilutive shares outstanding. Potential dilutive shares:

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (ASC Topic 842) (“ASU 2016-02”), which requires lessees to recognize at the commencement date for all leases, with the exception of short-term leases, (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The ASU requires adoption using a modified retrospective transition approach with either (a) periods prior to the adoption date being recast or (b) a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods not recast. As at March 31, 2020 the Company has no lease obligations.

3. RELATED PARTY TRANSACTIONS AND BALANCES

During the three months ended March 31, 2020, the Company incurred $114,800 (2019: $114,800) in salaries and payroll taxes to officers and directors with such costs being recorded as general and administrative expenses.

During the three months ended March 31, 2020, the Company incurred $9,000, $150,000, and $15,000 (2019: $15,000, $30,588, and $15,000) 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 March 31, 2020, the Company had a stock subscription receivable totaling $4,500 (December 31, 2019: $4,500) from an officer and director and from a company with an officer and director in common.

As of March 31, 2020, accounts payable includes $51,412 (December 31, 2019: receivable of $30,083) due to a company with two officers and directors in common, and $885,916 (December 31, 2019: $783,416) payable in salaries to directors and officers of the Company. The amounts are unsecured, non-interest bearing and are due on demand.

4. CONVERTIBLE DEBENTURES

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

FRIENDABLE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

March 31, 2020 and 2019

(Unaudited)

4. CONVERTIBLE DEBENTURES (CONTINUED)

The debt holders agreed to convert their debt of approximately $6.3 million and accrued interest of approximately $1.8 million into an initial 5,902,589 shares of common stock as set forth in the Agreement upon the Company meeting certain milestones including but not limited to: the Company effecting a reverse stock split and maintaining a stock price of $1.00 per share; being current with its periodic report filings pursuant to the Securities Exchange Act; certain vendors and Company employees forgiving an aggregate of $1,000,000 in amounts owed to them; the Company raising not less than $400,000 in common stock at a post-split price of not less than $.20 per share; and certain other things as further set forth in the Agreement. The debt holders will be subject to certain lock up and leak out provisions as contained in the Agreement. As part of the Agreement the parties signed a Rights to Shares Agreement. Whereas the Agreement called for all the shares to be delivered at closing, the holders are generally restricted to beneficial ownership of up to 4.99% of the company’s common shares outstanding. The Rights to Shares Agreement allows for the Company to issue shares to each holder up the 4.99% limitation while preserving the holders’ rights to the total shares in schedule A of the Agreement.

On December 26, 2019, all parties signed an amendment to the Agreement which set forth, among other things, the following:

Company Principals have given Holders notice that it has satisfied all conditions of closing.

The Agreement is considered Closed as of November 5, 2019 (“Settlement Date”) and any conditions of closing not satisfied are waived.

Reset Dates. The “Reset Dates” as set forth in Section 1(h) of the Agreement shall be as follows: March 4, 2020 and July 2, 2020. As of the reset dates the holders can convert all or part of the settled note amounts at the lower of (i) 75% of the closing bid price for the Common Stock on such respective Reset Date, or (ii) the VWAP for the Company’s Common Stock for the 7 trading days immediately preceding and including such respective Reset Dates. This reset provision provides for the issuance of additional shares above the initial 5,902,589 shares for no additional consideration as measured at each of the two reset dates.

On March 4, 2020 the Company became obligated issue an additional 36,193,098 shares of common stock and on July 2, 2020 it became obligated to issue an additional 63,275,243 shares for a total amount of shares due of 105,370,930.

The Company determined that the reset provision represents a standalone derivative liability. Accordingly, this debt restructure transaction was accounted for as an extinguishment of debt for consideration equal to the $2,384,646 fair value of the 5,902,589 common shares issuable, based on the $0.404 quoted trading price of the Company’s common stock price on the settlement date, and the initial fair value of the derivative liability of $12,653,000 resulting in a loss on debt extinguishment of $6,954,920. 

The Company adjusts its derivative liability to fair value at each reporting and settlement date, with changes in fair value reported in the statement of operations. The Company estimated the fair value of the obligations to issue common stock pursuant to the Debt Restructuring Agreement, as amended, using Monte Carlo simulations and the following assumptions:

FRIENDABLE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

March 31, 2020 and 2019

(Unaudited)

4. CONVERTIBLE DEBENTURES (CONTINUED)

Derivative Liabilities

The Company accounts for its obligation to issue common stock (“Reset Provision”) as derivative instruments in accordance with ASC Topic 815, “Derivatives and Hedging” which are reflected as liabilities at fair value on the consolidated balance sheet, with changes in fair value reported in the consolidated statement of operations. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. The number of shares of common stock the Company could be obligated to issue, is based on future trading prices of the Company’s common stock. To reflect this uncertainty in estimating the fair value of the potential obligation to issue common stock, the Company uses a Monte Carlo model that considers the reporting date trading price, historical volatility of the Company’s common stock, and risk free rate in estimating the fair value of the potential obligation to issue common stock. The results of the Monte Carlo simulation model are most sensitive to inputs for expected volatility. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The estimated fair values may not represent future fair values and may not be realizable. We categorize our fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments at fair value as discussed above. As of March 31, 2020, the fair value of the Company’s potential obligation to issue common stock was $5,554,000.

The following is a summary of activity related to the derivative liability for the three months ended March 31, 2020:

5. PROMISSORY NOTE AND CONVERTIBLE PROMISSORY NOTE

On April 7, 2017, the Company entered into a Settlement Agreement with Joseph Canouse (the “Agreement”). The Company and Mr. Canouse had been in a dispute regarding what amount, if any, was owed pursuant to a consulting agreement between the parties signed in April 2014. In December 2016, Mr. Canouse obtained a judgment in state court in Georgia and the right to garnish the Company’s bank accounts. Pursuant to the Settlement Agreement, the Company agreed to issue an 8% Convertible Note in the principal amount of $82,931 (the “Note”). The Note was issued to J.P. Carey Inc., an entity controlled by Mr. Canouse. Although the Note is dated March 30, 2017, it was issued on April 7, 2017. The note maturity date was September 30, 2017. In return for the issuance of the Note, Mr. Canouse filed a Consent Motion to Withdraw Judgment, dismiss all garnishments, and cease all collection activities.

The Note is convertible into common stock, subject to Rule 144, at any time after the issue date at the lower of (i) the closing sale price of the common stock on the trading day immediately preceding the closing date, and (ii) 50% of the lowest sale price for the common stock during the twenty-five (25) consecutive trading days immediately preceding the conversion date or the closing bid price, whichever is lower. Mr. Canouse does not have the right to convert the Note, to the extent that he would beneficially own in excess of 4.99% of our outstanding common stock. The note defines several events that constitute default including failure to pay principal and interest by the maturity date of September 30, 2017 and failure to comply with the exchange act. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the Note becomes immediately due and payable. The Company defaulted by not paying the principal and interest on September 30, 2017 and has been recording interest at the 24% default rate. The Company also defaulted by being late with filing the Form 10-K on May 29, 2020.

During the year ended December 31, 2019:

The Company incurred $51,980 in interest related to the note.

J.P. Carey converted $1,002 of principal into 120,000 shares of the Company’s common stock at a price of $0.0084.

J.P. Carey assigned $10,000 of the note to World Market Ventures, LLC and assigned $6,000 of the note to Anvil Financial Management LTD LLC. The assignments carry the same conversion rights as the original note. World Market Ventures converted $6,000 of principal into 120,000 shares of the Company’s common stock at a price of $0.05. Anvil converted $6,000 of principal into 120,000 shares of the Company’s common stock at a price of $0.05.

At December 31, 2019, the J.P. Carey note balance including accrued interest of $51,980 was $121,910 including the portion assigned to World Market Ventures of $4,000.

FRIENDABLE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

March 31, 2020 and 2019

(Unaudited)

5. PROMISSORY NOTE AND CONVERTIBLE PROMISSORY NOTE (CONTINUED)

During the three months ended March 31, 2020:

The Company incurred $7,308 in interest related to the note through March 31, 2020.

J.P. Carey converted $15,950 of principal into 290,000 shares of the Company’s common stock at a price of $0.055.

World Market Ventures converted the remaining balance of $4,000 of principal into 72,595 shares of the Company’s common stock at a price of $0.0551.

At March 31, 2020, the J.P. Carey note principal balance was $49,979 and accrued interest was $59,289.

6. COMMITMENTS AND CONTINGENCIES

The following table summarizes the Company’s significant contractual obligations as of March 31, 2020:

On April 3, 2019, the Company entered into employment agreements with three officers. Pursuant to the agreements, the Company shall pay officers an aggregate annual salary amount of $400,000. Upon a successful launch of the company’s Fan Pass mobile app or website, and the Company achieving various levels if subscribers, the officers will receive additional bonuses and salary increases.

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

On September 19, 2019, the Company entered into a Settlement Agreement with Integrity Media settling the civil action known as Integrity Media, Inc. vs. Friendable, Inc. et al., Orange County Case No. 30-2016-00867956-CU-CO-CJC. Pursuant to the Settlement Agreement, the Company agreed to issue to Integrity 750,000 shares of its common stock in exchange for 275 of the Company’s preferred shares held by Integrity and the cash payment of $30,000 for costs. Robert Rositano, the Company’s CEO, has also personally guaranteed the Company’s compliance with the terms of the Settlement Agreement. The cash payment is to be made within 6 months of the date of the Settlement Agreement. As of the date of filing of this report the cash amount has not been paid and the preferred shares have not been returned. Additionally, Integrity will be entitled to additional shares if (i) the price of the Company’s common stock is below $1.34 at either the 120 day or 240 day reset dates set forth in the Company’s Debt Restructure Agreement as amended entered into with various debt holders on March 26, 2019 effective November 5, 2019. The Company has determined that a total of 4,275,000 additional shares would be issuable on the first “reset” date of March 4, 2020 based on a share price of $0.20 on that date and a total of 7,537,500 additional shares would be issuable on the second “reset” date of July 2, 2020 based on a shares price of $0.08 on that date for a total of 12,562,500 shares. Integrity will also be entitled to a “true-up” by issuance of additional common shares on the issuance date should the share price of the Company’s common stock on the issuance date be below $1. The true-up shares will adjust the value of the aggregate shares issued to be $750,000 on the date of issuance. As of March 31, 2020, no shares have been issued nor cash paid as the shares due are reflected as the $1,005,000 liability until the final July 2, 2020 reset date. As of March 31, 2020, the Company has a provision for settlement of lawsuit balance of $1,035,000 with $1,005,000 ($750,000 plus a premium of $255,000) recorded as a liability payable in common stock in accordance with ASC 480 and $30,000 as an accrued liability.

COVID-19 Disclosure

The coronavirus pandemic could adversely impact our operations, supply chains and distribution systems and demand for our products and services. The coronavirus pandemic could adversely impact our ability to raise capital.

FRIENDABLE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

March 31, 2020 and 2019

(Unaudited)

7. COMMON AND PREFERRED STOCK

Common Stock:

During the year ended December 31, 2019, the Company:

Issued 393,418 shares of common stock to two convertible note holders for partial conversion of an aggregate of $21,356 of the notes at the contractual conversion rates. 120,000 of the shares remained issuable as of December 31, 2019.

Issued 534,000 shares of common stock to various subscribers of common stock under security purchase agreements at $0.25 per share for a total of $133,500. Certain of these agreements contained a provision whereby the founders of the Company were to issue to the subscribers (a) an aggregate of 47,000 shares of common stock from their personal holdings and (b) another amount of common shares (43,811) by converting their held Series A preferred shares as measured on the date one year from the closing of the offering. There is no accounting effect for these transfers. In addition, other agreements contained a provision whereby the Company would set aside 10% of future net revenue from a specific product and share ratably with the investors. The Company has reviewed ASC 470-10-25, “Sales of Future Revenues or Various other Measures of Income.” and determined that no debt provision is needed. The investors who received this benefit did not pay additional consideration compared to those who did not receive it. Therefore the additional feature is a detachable unit with $0 value. 477,000 shares remained issuable as of December 31, 2019. In March 2020, the Founder converted 3 Series A Preferred Shares to meet their personal commitment to transfer their common shares to the investors.

Issued 600,000 shares of common stock to a consultant in exchange for future services valued at $90,000 of which $30,000 remained in prepaid expense at December 31, 2019.

Issued 2,150,000 shares of common stock to settle a promissory note and accrued interest of $102,500 and recognized a loss on debt extinguishment of $435,000 based on the $537,500 value based on recent sales.

Issued 1,002,970 and had 2,018,746 issuable shares of common stock to related parties on conversion of 1,478 shares of Series A preferred stock.

Agreed to issue 5,902,589 shares as a preliminary settlement of approximately $6.3 million of convertible debt (See note 4)

During the three months ended March 31, 2020, the Company:

Issued 362,595 shares of common stock to two convertible note holders for partial conversion of an aggregate of $19,950 of the notes at an average price of $0.055.

Cancelled 2,000 shares of common stock valued at $500 previously issued to an investor under a securities purchase agreement and returned the $500 to the investor.

Issued 600,000 shares of common stock to a consultant in exchange for services valued at $90,000.

Recorded the obligation to issue 36,193,098 additional shares of common stock based on the first reset date of March 4, 2020 in accordance with the debt restructuring agreement. (See note 4)

The two directors converted 3 shares of Series A Preferred Stock into 54,076 shares of common stock to transfer 43,811 of these shares to investors who were owed shares of common stock under a “founders match” provision in security purchase agreements. (see above)

Preferred Stock:

Series A:

The Series A Preferred Stock was authorized in 2014 and is convertible into nine (9) times the number of common stock outstanding at time of conversion until the closing of a Qualified Financing (i.e. the sale and issuance of the Company’s equity securities that results in gross proceeds in excess of $2,500,000). The number of shares of common stock issued on conversion of Series A preferred stock is based on the ratio of the number of shares of Series A preferred stock converted to the total number of shares of preferred stock outstanding at the date of conversion multiplied by nine (9) times the number of common stock outstanding at the date of conversion. After the qualified financing the conversion shares issuable shall be the original issue price of the Series A preferred stock divided by $0.002. The holders of Series A Preferred stock are entitled to receive non-cumulative dividends when and if declared at a rate of 6% per year. On all matters presented to the stockholders for action the holders of Series A Preferred stock shall be entitled to cast votes equal to the number of shares the holder would be entitled to if the Series A Preferred stock were converted at the date of record.

FRIENDABLE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

March 31, 2020 and 2019

(Unaudited)

7. COMMON AND PREFERRED STOCK (CONTINUED)

During the year ended December 31, 2019, 588 shares of Series A preferred stock were converted to common stock by two related parties who donated them to the Diocese of Monterey. In addition, 890 Series A shares were converted into 2,018,746 common shares by parties related to the two directors. The 2,018,746 common shares were issuable as of December 31, 2019 and were subsequently issued during the three months ended March 31, 2020.

During the three months ended March 31, 2020 two directors converted 3 shares of Series A Preferred Stock into 54,076 shares of common stock.

Series B:

On August 8, 2019 the Company filed a Designation of Series B convertible Preferred Stock with the state of Nevada, designating 1,000,000 shares of the Series B Preferred Stock with a stated value of $1.00 per share. A holder of Series B Preferred Stock has the right to convert their Series B Preferred Stock into fully paid and non-assessable shares of Common Stock. Initially, the conversion price for the Series B Preferred Stock is $.25 per share, subject to standard anti-dilution adjustments. Additionally, each share of Series B Preferred Stock shall be entitled to, as a dividend, a pro rata portion of an amount equal to 10% (Ten Percent) of the Net Revenues (“Net Revenues” being Gross Sales minus Cost of Goods Sold) derived from the subscriptions and other sales, but excluding and net of Vimeo fees, processing fees and up sells, generated by Fan Pass Inc., the wholly-owned subsidiary of the Corporation. The Series B Dividend shall be calculated and paid on a monthly basis in arrears starting on the day 30 days following the first day of the month following the initial issuance of the Series B Preferred and continuing for a period of 60 (Sixty) months. The holders of Series B Preferred stock shall have no voting rights. The holders of Series B Preferred stock shall not be entitled to receive any dividends other than noted above. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or deemed liquidation event, the holders of shares of Series B Preferred Stock shall be entitled to be paid the liquidation amount, as defined out of the assets of the Company available for distribution to its shareholders, after distributions to holders of the Series A Preferred Stock and before distributions to holders of Common Stock.

During the year ended December 31, 2019, the Company entered into Security Purchase Agreements with various investors for the purchase of 205,000 shares Series B convertible Preferred stock and received $205,000 in cash. Each Series B Preferred share is convertible into 4 shares of common stock valued at $0.25.

During the year ended December 31, 2019, The Company entered into a Security Purchase Agreements with a related party for the purchase of 79,000 shares Series B Preferred stock. The $79,000 was settled against accounts payable owed to the related party. Each Series B Preferred share is convertible into 4 shares of common stock valued at $0.25.

Series C:

On November 25, 2019 the Company filed a Designation of Series C convertible Preferred Stock with the state of Nevada, designating 1,000,000 shares of the Series C Preferred Stock with a stated value of $1.00 per share. The Series C Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends with the Company’s common stock, par value 0.0001 per share (“Common Stock”) (the Series C Preferred Stock will convert into common stock immediately upon liquidation and be pari passu with the common stock in the event of litigation), and (b) junior with respect to dividends and right of liquidation to all existing and future indebtedness of the Company. The Series C Preferred Stock does not have any voting rights. Each share of Series C Preferred Stock will carry an annual dividend in the amount of eight percent (8%) of the Stated Value of $1.00 (the “Divided Rate”), which shall be cumulative and compounded daily, payable solely upon redemption, liquidation or conversion and increase to 22% upon an event of default as defined. In the event of any default other than the Company’s failure to issue shares upon conversion, the stated price will be $1.50. In a default event where the Company fails to issue shares upon conversion, the stated price will $2.00. The holder shall have the right six months following the issuance date, to convert all or any part of the outstanding Series C Preferred Stock into shares of common stock of the Company. The conversion price shall equal the Variable Conversion Price. The “Variable Conversion Price” shall mean 71% multiplied by the market price, representing a discount rate of 29%. Market price means the average of the two lowest trading prices for the Company’s common stock during the twenty trading day period ending on the latest complete trading day prior to the conversion date. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or upon any deemed liquidation event, after payment or provision for payment of debts and other liabilities of the Company, and after payment or provision for any liquidation preference payable to the holders of any Preferred Stock ranking senior upon liquidation to the Series C Preferred Stock, if any, but prior to any distribution or payment made to the holders of Common Stock or the holders of any Preferred Stock ranking junior upon liquidation to the Series C Preferred Stock by reason of their ownership thereof, the Holders will be entitled to be paid out of the assets of the Company available for distribution to its stockholders. The Company will have the right, at the Company’s option, to redeem all or any portion of the shares of Series C Preferred Stock, exercisable on not more than three trading days prior written notice to the Holders, in full, in accordance with Section 6 of the designations at a premium of up to 35% for up to six months. Company’s mandatory redemption: On the earlier to occur of (i) the date which is twenty-four (24) months following the Issuance Date and (ii) the occurrence of an Event of Default (the “Mandatory Redemption Date”), the Company shall redeem all of the shares of Series C Preferred Stock of the Holders (which have not been previously redeemed or converted).

FRIENDABLE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

March 31, 2020 and 2019

(Unaudited)

7. COMMON AND PREFERRED STOCK (CONTINUED)

During the year ended December 31, 2019, 149,300 shares of Series C convertible preferred stock were issued to an investor under preferred stock purchase agreements at a price of approximately $0.91 per share for a total of $136,000. Due to the mandatory redemption feature, these shares are reflected as a current liability at December 31, 2019. Furthermore, because these shares are convertible at 71% of the common shares market price around the time of the conversion date, they are treated as a stock settled debt under ASC 480 with a premium of $55,549 recorded and charged to interest expense. The total amount is reflected at $191,549 at December 31, 2019.

During the three months ended March 31, 2020, 38,000 shares of Series C convertible preferred stock were issued to an investor under preferred stock purchase agreements at a price of approximately $0.87 per share for a total of $33,000. Due to the mandatory redemption feature, these shares are reflected as a current liability at March 31, 2020. Because these shares are convertible at 71% of the common shares market price around the time of the conversion date, they are treated as a stock settled debt under ASC 480 with a premium of $13,479 recorded and charged to interest expense. In addition, the Company recorded a cumulative dividend payable of $3,682 to the mandatorily redeemable Series C convertible preferred stock liability with this amount being recorded as interest expense since the Series C liability must be reflected at redemption value. Together with the 2019 issuances the total amount is reflected at $241,710 at March 31, 2020.

8. SHARE PURCHASE WARRANTS

Activity in 2020 and 2019 is as follows:

9. STOCK-BASED COMPENSATION

On November 22, 2011, the Board of Directors of the Company approved a stock option plan (“2011 Stock Option Plan”), the purpose of which is to enhance the Company’s stockholder value and financial performance by attracting, retaining and motivating the Company’s officers, directors, key employees, consultants and its affiliates and to encourage stock ownership by such individuals by providing them with a means to acquire a proprietary interest in the Company’s success through stock ownership. Under the 2011 Stock Option Plan, officers, directors, employees and consultants who provide services to the Company may be granted options to acquire common shares of the Company. The aggregate number of options authorized by the plan shall not exceed 4,974 shares of common stock of the Company. 

The Board of Directors and the stockholders holding a majority of the voting power approved a 2014 Equity Incentive Plan (the “2014 Plan”) on February 28, 2014, with a to be determined effective date. The date never became effective. The purpose of the 2014 Plan is to assist the Company and its affiliates in attracting, retaining and providing incentives to employees, directors, consultants and independent contractors who serve the Company and its affiliates by offering them the opportunity to acquire or increase their proprietary interest in the Company and to promote the identification of their interests with those of the stockholders of the Company. The 2014 Plan will also be used to make grants to further reward and incentivize current employees and others.

There are 7 shares of common stock reserved for issuance under the 2014 Plan. The Board shall have the power and authority to make grants of stock options to employees, directors, consultants and independent contractors who serve the Company and its affiliates. Any stock options granted under the 2014 Plan shall have an exercise price equal to or greater than the fair market value of the Company’s shares of common stock. Unless otherwise determined by the Board of Directors, stock options shall vest over a four-year period with 25% being vested after the end of one (1) year of service and the remainder vesting equally over a 36-month period. The Board may award options that may vest based upon the achievement of certain performance milestones. As of March 31, 2020, no options have been awarded under the 2014 Plan. Effective August 27, 2019, the Company effected a reverse split of the common stock of 1 for 18,000 (Note 1) which eliminated all the options which were previously outstanding.

FRIENDABLE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

March 31, 2020 and 2019

(Unaudited)

10. 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 March 31, 2020 there was a derivative measured at fair value on a recurring basis (see note 4) presented on the Company’s balance sheet, as follows:

FRIENDABLE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

March 31, 2020 and 2019

(Unaudited)

11. SUBSEQUENT EVENTS

Subsequent to March 31, 2020, the Company issued 78,000 shares of common stock to a consultant valued at $0.13 based on the quoted trading price per share for services valued at $10,608.

Subsequent to March 31, 2020, the Company issued 2,211,495 shares of common stock on conversion of principal of $56,520 on convertible notes at an average contractual price of $0.0256.

Subsequent to March 31, 2020, the Company raised $95,000 in financing by issuing new convertible notes. Interest accrues at 12% per annum and the notes are convertible, subject to rule 144, at a 50% discount to the lowest trading price in the preceding 25 days prior to conversion.

Subsequent to March 31, 2020, the Company recorded the obligation to issue 63,275,243 additional shares of common stock based on the second reset date of July 2, 2020 in accordance with the debt restructuring agreement. (See note 4)

Subsequent to March 31, 2020, with respect to the Settlement Agreement with Integrity Media, the Company has determined that a total of 4,275,000 additional shares would be issuable on the first “reset” date of March 4, 2020 based on a shares price of $0.20 on that date and a total of 7,537,500 additional shares would be issuable on the second “reset” date of July 2, 2020 based on a shares price of $0.08 on that date for a total common shares due to Integrity including the initial 750,000 common shares of 12,562,500 shares. (See note 6)

On May 29, 2020 the Company defaulted on the outstanding Series C preferred stock previously issued by being late with the Form 10-K filing on the extended date. Under the default provision of the Series A preferred stock the interest rate increases from 8% to 22% and the stated price increases from $1.00 to $1.50. The Company has recorded a penalty of $84,500 to increase the liability to its increased redemption value.

On June 3, 2020 the Company and Eclectic Artists LLC (“E Artists”) entered into a Partner Agreement and Stock Subscription Agreement, pursuant to which E Artists will engage musical artists and other talent to engage on the Company’s FanPass platform, providing live streaming events available through the FanPass mobile application. As compensation for bringing the artists to the FanPass platform, E Artists will receive 5% of net revenue attributable to the Fan Pass platform, initially for a period of 18 months. In addition, E Artists will receive Series A preferred stock such that when converted would be equal to 5% of the outstanding common stock. The number of Series A preferred shares was initially calculated at 118 shares valued at $131,119. Concurrent with the issuance of the Series A Shares to E Artists, Robert Rositano, Jr., the Company’s CEO and Dean Rositano, the Company’s president, will return an aggregate of 118 Series A Preferred shares to the Company’s treasury.

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

Friendable, Inc., a Nevada corporation (the “Company”), was incorporated in the State of Nevada.

Friendable, Inc. is a mobile-focused technology and marketing company, connecting and engaging users through two distinctly branded applications. The Company initially released its flagship product Friendable, as a social application where users can create one-on-one or group-style meetups. In 2019 the Company has moved the Friendable app closer to a traditional dating application with its focus on building revenue, as well as reintroducing the brand as a non-threatening, all-inclusive place where “Everything starts with Friendship”…meet, chat & date.

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

Fan Pass is the Company’s most recent or second app/brand, scheduled for release in 2020. Fan Pass believes in connecting Fans of their favorite celebrity or artist, to an exclusive VIP or Backstage experience, right from their smartphone or other connected devices. Fan Pass allows an artist’s fanbase to experience something they would otherwise never have the opportunity to afford or geographically attend. The Company aims to establish both Friendable and Fan Pass as premier brands and mobile platforms that are dedicated to connecting and engaging users from anywhere around the World.

On August 27, 2019, a 1 for 18,000 reverse stock split of our common stock became effective. All share and per share information in the accompanying unaudited consolidated financial statements and footnotes has been retroactively adjusted for the effects of the reverse split for all periods presented.

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 has moved the Friendable app closer to a traditional dating application with its focus on building revenue, as well as reintroducing the brand as a non-threatening, all-inclusive place where “Everything starts with Friendship”…meet, chat & date.

Fan Pass is the Company’s most recent or second app/brand, scheduled for release in 2020. Fan Pass believes in connecting Fans of their favorite celebrity or artist, to an exclusive VIP or Backstage experience, right from their smartphone or other connected devices. Fan Pass allows an artist’s fanbase to experience something they would otherwise never have the opportunity to afford or geographically attend. The Company aims to establish both Friendable and Fan Pass as premier brands and mobile platforms that are dedicated to connecting and engaging users from anywhere around the World.

Friendable, Inc. was founded by Robert A. Rositano Jr. and Dean Rositano, two brothers with over 27 years of working together on technology-related ventures.

Highlights

Friendable has partnered with notable artists like Jennifer Lopez, Fifth Harmony, Fetty Wap, Meghan Trainor, Red Foo and Austin Mahone and has generated over 1.5 Million historical downloads, approximately 900k registered users and most recently released a new upgraded “Friendable” mobile app in January 2019.

Celebrity Relationships have led the Company in the direction of “Live Streaming Video” and a soon to be released Mobile Application by the name of “Fan Pass”, designed to connect fans to the “Backstage or VIP Experience” of their favorite artists.

Fan Pass Market Opportunity

Executive Leadership

Our two founders are a team of Entrepreneurs who have over 25 years of tech related startup experience, recruiting talent, building teams and turning ideas into big business opportunities, as well as exits for investors. Together raising over $40M in capital, spanning various companies, with a history dating back to the first ever Internet IPO (Netcom Online Communications - 1993), as well as the development of the first ever World Wide Web Directory (sold to McMillan Publishing 1995) and even deploying a first mover social network by the name of nettaxi.com – 1998 - 2002, which was prior to Facebook and resulted in a top 10 most trafficked web site in the World, with a market cap of approximately $700M upon exiting the public company. Relationships developed over the years include such companies as Apple, eBay and AT&T, as well as joint ventures with Music Industry Giants, including Nocturne Productions, Herbie Herbert (Manager of the Band Journey) and Music.com; an early adopter offering digital music downloads.

Robert A Rositano Jr. Chief Executive Officer

Mr. Rositano, Jr. is a serial entrepreneur with 25+ years of experience in technology and bringing more than $60M in liquidity events for the companies he has hatched or managed. Prior to starting the Company, Mr. Rositano began as the 3rd employee and member of the Internet’s first IPO in 1993, Netcom Online Communications, Inc., which was sold to ICG Communications and later sold to EarthLink in 1997. Mr. Rositano has co-founded a number of successful ventures following his experience with new technologies, trends and markets. Some of which included Simply Internet, Inc., Nettaxi.com, America’s Biggest, Inc., Zippi Networks, Inc (an eBay partner), CheckMate Mobile, Inc. and AppBuilder 360, a mobile app developer. He was also an author the first Web Directory to ever be published, later selling the rights to Macmillan Publishing. His most recent venture, Friendable, Inc. has resulted in a growing business opportunity in the ever-popular mobile technology space.

Dean Rositano President & Chief Technology Officer

Dean is the President and Chief Technology Officer of Friendable, Inc. and is responsible for the day to day operations and guiding of the technical direction of the company. With over 20 years of experience in executive management, Internet architecture and high technology operations, Mr. Rositano has successfully assisted in raising funds in both private and public transactions. Prior to Friendable, Inc., Mr. Rositano co- founded Checkmate Mobile, Inc, Latitude Venture Partners, LLC, Zippi Networks, Inc, America’s Biggest, Inc, and most notably, was the co-founder and president and CTO of Silicon Valley based Nettaxi.com, which went public in 1998 when it quickly reached a valuation of over $600M. With over 3M unique visitors daily and a top 5 worldwide, website rank. As President and CTO, Mr. Rositano was responsible for designing, architecting, and scaling the Nettaxi server infrastructure from 0 to over 10 million visitors per day.

Frank Garcia Chief Financial Officer

Mr. Garcia has an extensive background in public accounting and finance, with his most recent role serving as Chief Financial Officer Titan Iron Corp. (OTCQB: TFER). From 1997 to 2006, he was employed in senior management positions by UK based Misys PLC, a global software and solutions company serving customers in international banking and securities, international healthcare, and retail financial services. Prior to 1997 Mr. Garcia held executive positions with CEMEX, a world leader in the construction materials industry. Mr. Garcia received his Bachelor of Science–Business Administration—Major in Accounting from the University of Arizona in 1981.

Employees and Key Consultants

The Company has three full time employees and a variety of partners that serve in various consulting capacities based on the Company’s specific needs.

Available information

Our website address is www.friendable.com. We do not intend our website address to be an active link or to otherwise incorporate by reference the contents of the website into this Report. The public may read and copy any materials the Company files with the U.S. Securities and Exchange Commission (the “SEC”) at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0030. The SEC maintains an Internet website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Results of Operations

For the three months ended March 31, 2020 compared to March 31, 2019

Revenues

The Company had revenues of $118,388 and $1,005 the three months ended March 31, 2020 and 2019 respectively. The increase was due to receiving a contract to develop a third party app.

Operating Expenses

The Company had operating expenses of $446,397 and $248,642 during the three months ended March 31, 2020 and 2019 respectively. The increase in operating expenses was due primarily to additional product development and investor relations as the Company prepares to launch the Fan Pass app.

Net Loss

The Company had net losses of $1,547,616 and $380,289 during the three months ended March 31, 2020 and 2019 respectively. The increase in net loss was due primarily to the increased operating expenses and increased losses related to the derivative, offset by higher revenues and lower accretion and interest expense.

Liquidity and Capital Resources

Working Capital

Current assets for the quarter ended March 31, 2020 decreased compared to December 31, 2019 primarily due to payment of a related party reveivable and amortization of prepaid expense in 2020.

Current liabilities for the quarter ended March 31, 2020 decreased compared to December 31, 2019 primarily due to the decrease in the derivative liability resulting from the reset provision shares that became issuable on March 4, 2020.

Cash Flows

Net Cash Used in Operating Activities

Our cash used in operating activities was $13,177 for the three month period ended March 31, 2020 compared to $159,620 for the three month period ended March 31, 2019. Net loss was $1,547,616 and $380,289 for the three month periods ending March 31, 2020 and 2019 respectively. In 2020, adjustments to reconcile the net loss to net cash used included common stock issued for services of $90,000, loss on settlement of derivative of $898,137, and loss on change in fair value of derivative of $297,000. In 2019, adjustments to reconcile the net loss to net cash used included interest on convertible debentures and promissory note of $135,677. In 2020, changes in operating assets and liabilities included due from related party of $30,083, prepaid expenses of $30,000, accounts payable – related party of $51,412, and accounts payable and accrued expenses of $120,648. In 2019, changes in operating assets and liabilities included accounts payable and accrued expenses of $85,384.

Net Cash Provided by Financing Activities

Our cash provided by financing activities of $32,500 for the three month period ended March 31, 2020 is primarily from the issuance of Series C preferred stock sold for cash. Our cash provided by financing activities of $135,368 for the three month period ended March 31, 2019 consisted of the issuance of common stock sold for cash.

The Company derives the majority of its financing by issuing convertible notes or stock to investors. The investors have the right to convert the notes and certain preferred stock 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.

Securities Purchase Agreements

During the three months ended March 31, 2020, 38,000 shares of Series C convertible preferred stock were issued to an investor under preferred stock purchase agreements at a price of approximately $0.87 per share for a total of $33,000. Due to the mandatory redemption feature, these shares are reflected as a current liability at March 31, 2020. Because these shares are convertible at 71% of the common shares market price around the time of the conversion date, they are treated as a stock settled debt under ASC 480 with a premium of $13,479 recorded and charged to interest expense. In addition, the Company recorded a cumulative dividend payable of $3,682 to the mandatorily redeemable Series C convertible preferred stock liability with this amount being recorded as interest expense since the Series C liability must be reflected at redemption value.

Going Concern

The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which implies that the Company would continue to realize its assets and discharge its liabilities in the normal course of business. As of March 31, 2020, the Company has a working capital deficiency of $8,989,333, has an accumulated deficit of $33,991,499 and has a stockholder’s deficit of $8,989,333 and its operations continue to be funded primarily from sales of its stock and issuance of convertible debentures. During the three months ended March 31, 2020 the Company had a net loss and net cash used in operations of $1,547,616 and $13,177. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance of this report. The ability of the Company to continue as a going concern is dependent on the Company’s ability to obtain the necessary financing through the issuance of convertible notes and equity instruments. The unaudited consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management plans to raise financing through the issuance of convertible notes and equity sales. No assurance can be given that any such additional financing will be available, or that it can be obtained on terms acceptable to the Company and its stockholders.

Off-Balance Sheet Arrangements

As of March 31, 2020, 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.

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 based on the material weaknesses discussed in the Company’s Form 10-K for the year ended December 31, 2019.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2020 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.

ITEM 1A. RISK FACTORS. – GENERALLY THE COMPANY IS AT RISK IF THE PROPER FUNDING IS NOT COMMITTED 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 June 30, 2020.

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

During the three months ended March 31, 2020, the Company:

Issued 362,595 shares of common stock to two convertible note holders for partial conversion of an aggregate of $19,950 of the notes at an average price of $0.055.

Cancelled 2,000 shares of common stock valued at $500 previously issued to an investor under a securities purchase agreement and returned the $500 to the investor.

Issued 600,000 shares of common stock to a consultant in exchange for services valued at $90,000.

Recorded the obligation to issue 36,193,098 additional shares of common stock based on the first reset date of March 4, 2020 in accordance with the debt restructuring agreement.

The two directors converted 3 shares of Series A Preferred Stock into 54,076 shares of common stock.

The shares above were issued pursuant to an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “Act”).

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

On May 29, 2020 the Company defaulted on the outstanding Series C preferred stock previously issued by being late with the Form 10-K filing on the extended date. Under the default provision of the Series A preferred stock the interest rate increases from 8% to 22% and the stated price increases from $1.00 to $1.50. The Company has recorded a penalty of $84,500 to increase the liability to its increased redemption value.

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.

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.

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.