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EX-32.1 - SECTION 906 CERTIFICATIONS UNDER SARBANES-OXLEY ACT OF 2002 - Friendable, Inc.exhibit_32-1.htm
EX-31.1 - SECTION 302 CERTIFICATION UNDER SARBANES-OXLEY ACT OF 2002 OF THE CHIEF EXECUTIVE OFFICER - Friendable, Inc.exhibit_31-1.htm
EX-31.2 - SECTION 302 CERTIFICATION UNDER SARBANES-OXLEY ACT OF 2002 OF THE CHIEF FINANCIAL OFFICER - Friendable, Inc.exhibit_31-2.htm

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

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended:   December 31, 2015
or

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

For the transition period from __________________ to __________________

Commission file number: 000-52917

FRIENDABLE, INC.

(Exact name of registrant as specified in its charter)

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

125 E Campbell Ave, Campbell CA 95008

(Address of principal executive offices and Zip Code)

Registrant’s telephone number, including area code
(855) 473-7473

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

Title of each class
 
Name of each exchange on which registered
Common Stock
par value $.0001
 
OTC Pink Sheet

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

Common Stock, par value $0.0001 per share

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes o No x

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of  the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 
Yes x   No o


 
1

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information  statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

As of June 30, 2015, the last business day of the registrant’s most recently completed second fiscal quarter the aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant was approximately $1,293,665, based on the closing price (last sale of the day) for the registrant’s common stock on the OTC Bulletin Board on June 30, 2015 of $0.01  per share.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of April 11, 2016, there were 293,358,162 shares of the registrant’s common stock issued and outstanding.


DOCUMENTS INCORPORATED BY REFERENCE

Not Applicable




 
2

 
 
TABLE OF CONTENTS
 
 
PART I  
 
 ITEM 1.
BUSINESS
  4
 
 ITEM 1A.
RISK FACTORS
  13
 
 ITEM 1B.
UNRESOLVED STAFF COMMENTS
  26
 
 ITEM 2.
PROPERTIES
  26
 
 ITEM 3.
LEGAL PROCEEDINGS
  26
 
 ITEM 4.
MINE SAFETY DISCLOSURES
  26
       
PART II 
 
 
 ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  27
 
 ITEM 6
SELECTED FINANCIAL DATA
  29
 
 ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  29
 
 ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  43
 
 ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  44
 
 ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  45
 
 ITEM 9A.
CONTROLS AND PROCEDURES
 45
 
 ITEM 9B.
OTHER INFORMATION
  46
       
PART III 
 
 
 ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  46
 
 ITEM 11.
EXECUTIVE COMPENSATION
  49
 
 ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  51
 
 ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  54
 
 ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
 55
       
PART IV 
 
 
 ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
  56
       
 
 SIGNATURES
59
 
 
 


 
3

 

PART I
 
As used in this report, the terms “we”, “us”, “our”, “our company,” “Friendable” and “the Company” mean Friendable Inc. unless the context clearly indicates otherwise.

Cautionary Statement Regarding Forward-looking Information

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

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

In this annual report on Form 10-K, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
 
An investment in our common stock involves a number of very significant risks.  You should carefully consider the following risks and uncertainties in addition to other information in this annual report on Form 10-K in evaluating our company and our business before purchasing shares of our common stock.  Our business, operating results and financial condition could be seriously harmed as a result of the occurrence of any of the following risks.  You could lose all or part of your investment due to any of these risks. You should invest in our common stock only if you can afford to lose your entire investment.
 
ITEM 1. BUSINESS
 
Who We Are

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 nine (9) times the total number of shares of common stock which are issued and outstanding, voting together with the holders of common stock as a single class. Such Series A Preferred Stock shall also 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 conversion 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). As a result of the transaction, the former Friendable stockholders received a controlling interest in the Company.

Friendable’s business is development and dissemination of a "proximity based" mobile social media application that facilitates connections between people, utilizing the intelligence of GPS and localized recommendations. Management believes that its Friendable app brand, feature set and over all appeal to a broad base of social user demographics will assist in the company's goal of building millions of registered users across the US and worldwide. The company's number one focus and growth metric is registered users, with users equating to valuation drivers in the current market sector of Friendable. As critical mass continues to build in terms of registered users, management believes millions of users may attract other social media giants to Friendable for potential M&A discussions, it should be noted that users have been the basis for M&A activity by such companies that have deep monetization engines that can benefit from the acquisition of users in a specific demographic.


 
4

 

ITEM 1. BUSINESS - continued
 
Corporate 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.”
 
Also effective June 15, 2011, we effected a 37 to one forward stock split of our issued and outstanding common and preferred stock.  As a result, our authorized capital increased from 100,000,000 shares of common stock with a par value of $0.0001 to 3,700,000,000 shares of common stock with a par value of $0.0001 of which 5,151,000 shares of common stock outstanding increased to 190,587,000 shares of common stock. Subsequently, on June 20, 2011, we issued 2,100,000 common shares pursuant to a private placement unit offering, increasing the number of shares of common stock outstanding to 192,687,000.

Effective June 30, 2011 and in connection with the entry into an agreement (the “Acquisition Agreement”) with J2 Mining Ventures Ltd. (“J2 Mining”) dated June 13, 2011 and attached as Exhibit 10.1 to our Current Report on Form 8-K filed June 16, 2011, we completed the acquisition of a 100% right, title and interest in and to a properties option agreement (the “Option Agreement”) from J2 Mining with respect to iron ore mineral properties located in Albany County, Wyoming, by way of entering an assignment of mineral property option agreement with J2 Mining and Wyomex LLC (the “Assignment Agreement”), whereby our company was assigned 100% of the right, title and interest in and to the Option Agreement from J2 Mining.

In connection with the closing of the Acquisition Agreement, Ohad David, Ruth Navon and Service Merchant Corp. (the “Vendors”), entered into an affiliate stock purchase agreement, whereby, among other things, the Vendors surrendered 142,950,000 common shares for cancellation.

As described above, on February 3, 2014 we completed a merger with IHookup pursuant to 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 the Series A Preferred Stock are entitled to cast votes equal to nine (9) times the total number of shares of common stock which are issued and outstanding, voting together with the holders of common stock as a single class. Such Series A Preferred Stock shall also 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 conversion 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). As a result of the transaction, the former IHookup stockholders received a controlling interest in the Company.

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 recognizable and create less confusion.

 
5

 

ITEM 1. BUSINESS - continued
 
Mobile Application
 
Introduction
 
About Friendable:
 
Management believes that its Friendable app brand, feature set and over all appeal to a broad base of social user demographics will assist in the company's goal of building millions of registered users across the US and worldwide. The company's number one focus and growth metric is registered users, with users equating to valuation drivers in the current market sector of Friendable. As critical mass continues to build in terms of registered users, management believes millions of users may attract other social media giants to Friendable for potential M&A discussions, it should be noted that users have been the basis for M&A activity by such companies that have deep monetization engines that can benefit from the acquisition of users in a specific demographic.
 
Friendable recognizes that “Everything starts with Friendship” and the way to make connections and meet new people continues to evolve through new technologies and devices that make it all possible. Today just about everyone is on the move and interacting online with their mobile devices, creating dynamic opportunities to find and explore new experiences with location specific accuracy. 
 
Friendable provides its vast mobile community of users with the freedom to meet new people, hang out with current friends, explore exciting venues and interact in social activities based around shared interests and location, transforming mobile interactions into a real-life social experiences. Friendable bridges our mobile community of users with the meeting of new friends, building relationships and connecting them with local venues or events tied to their interests, which presents newfound ways for them to interact and hang out.
 
Meeting new people and making connections has grown, where the modern meaning of “being social” or “meeting up,” now includes opportunities to meet through mobile apps. The result of these interactions produces hyper-local advertising opportunities, allowing Friendable to act as both a friend finder and concierge using nearby locations to identify activities, events and businesses that may provide the entertainment they are seeking.
 
Making friends through a mobile app allows people of various backgrounds to connect through common interests and engage in fresh experiences while cultivating deep relationships. Meet people where you want, when you want, and show the world that you’re Friendable – Everything starts with friendship!
 
Join Friendable today and let someone know what you’re “Friendable” for!
 

For Additional Investor Information and to Receive Company Updates:
 
http://www.friendable.com/presentation
 
http://www.friendable.com/fdbloptin
 

Visit our social media properties at:
 
Facebook: http://facebook.com/friendable
 
Twitter: twitter.com/friendableapp
 
Instagram: instagram.com/friendableapp
 
 
 
6

 

ITEM 1. BUSINESS - continued
 
Products/Services: Friendable application
 
Friendable is a “location specific” Social platform, as well as a discovery application that facilitates communication between two or more users on a one to one meeting or “group style” event based meet ups for concerts, sporting events, coffee, movies, night out etc. The Friendable app utilizes the intelligence of GPS and location specific recommendations to provide opportunities to make new connections for the purpose of socializing, networking, dating or simply expanding existing social circles.
   Everything Starts With Friendship
 
     
    Chat with New People
    Share Common Interests
    Go on Local Adventures
     
  From the App to the Real World
     
    Find Local Events
    Set up Group Activities
     
  Brand Positioning & Demographic
     
    Young
    Energetic
    Adventurous
    Casual & Friendly
 
The app is currently available on the Apple iOS platform and in iTunes stores world-wide where Friendable offers a free version and a paid version of the app. The app is also available on the Android platform and in the Google Play Store for a FREE download. The applications also offer a “virtual currency” component, allowing users to purchase “in application” coin packs that activate virtual gifts and various additional service-based options. Friendable has recently announced a completely FREE model to assist with its user acquisition strategy as well as to test engagement/usage metrics as the company scales its user base; the FREE option is subject to change based on the company’s marketing strategies going forward, (see subscription offers and pricing below for additional information  – prices are subject to change and often do during this user acquisition phase the company is currently in):
 
7

 
 
ITEM 1. BUSINESS - continued
 
NOTE – THE BELOW MAY OR MAY NOT BE OFFERED BASED ON MARKETING STRATEGIES:
 
Recurring Subscriptions
  $ 7.99  
1-Month
  $ 17.99  
3-Month
  $ 27.99  
6-Month
  $ 44.99  
Annual
  $ 59.99  
Coin Pack1
  $ 2.99  
Coin Pack2
  $ 4.99  
Coin Pack 3
  $ 9.99  

Marketing
 
We market our application utilizing a variety of online and offline marketing activities.
 
Our online marketing activities generally consist of the purchase of mobile-banners and other display advertising and search engine marketing. We run various mobile ad campaigns targeting male, female and Apple / iOS and Android users on Facebook and other regional, US and international sites. In addition, the company produces video ads that may be run on mobile “video” ad networks or be placed based on a variety of alliances with third parties who advertise and promote our services, from time to time. Such video advertising may be expanded and utilized in commercials, on Facebook, YouTube, and various other editorial and public relations efforts.
 
The company plans to announce specific name changes and feature additions to its current application, believed by management to enable the brand to expand its services beyond what currently exists in the marketplace today.

Revenue

The company's revenue model is to incorporate and derive revenue from subscription fees, in-app purchases (upgrades/coins purchased by users, using the app) as well as advertising/sponsorship as population density and overall users growth expands to support active page views.

Competition

The mobile-social business is highly competitive and barriers to entry are minimal. We compete primarily with other social networking, messaging and dating applications (e.g. Facebook, Lovoo, Banjo), but also category specific websites (e.g. Match.com, Tinder and eHarmony), social apps, dating and matchmaking services, other social media platforms and apps, and other conventional media companies that provide socially active lifestyle services.
We believe that our ability to compete successfully will depend primarily upon the following factors:
 
establishing a “Friendly” brand that will be socially shared, acceptable and viral in nature;
 
the size and diversity of our registered member and subscriber bases relative to those of our competitors;
 
the functionality of our application and the attractiveness of their features and our services and offerings generally to consumers relative to those of our competitors;
 
how quickly we can enhance our existing technology and services and/or develop new features and localized opportunities and venue based monetization opportunities in response to:
 
new, emerging and rapidly changing technologies;
 
the introduction of product and service offerings by our competitors;
 
changes in consumer requirements and trends in the single community relative to our competitors; and
 
our ability to engage in cost-effective marketing efforts, including by way of maintaining relationships with third parties with which we have entered into alliances, and the recognition and strength of our various brands relative to those of our competitors

 
8

 
 
ITEM 1. BUSINESS - continued
 
Employees and Key Consultants
 
Our company has three full time employees and one part time employee.
 
Intellectual Property

We intend, in due course, subject to legal advice, to apply for trademark, copyright and/or patent protection in the United States and other jurisdictions. We regard our intellectual property, including our software and trademark, as valuable assets and intend to vigorously defend them against infringement.  

While there can be no assurance that registered trademarks and copyrights will protect our proprietary information, we intend to file for protection and assert our intellectual property rights against any infringer. Although any assertion of our rights can result in a substantial cost to, and diversion of effort by, our Company, management believes that the protection of our intellectual property rights is an important part of our operating strategy.

Market Opportunity
 
As a whole, mobile applications create a socially connected experience while allowing users to stay active or do as they choose while on the move, pushing forward with both personal and professional goals. Social Networking is one of the fastest growing market segments in mobile communications, continuing to attract new users. A common problem faced across all age and demographic profiles, is the lack of time in each day. Easy, accessible and user driven technologies are replacing traditional avenues of meeting people by providing yet another way to embrace our “Do it all” and “Have it all” mobile - social generation.
 
“Mobile Devices and The Media Time They Command Is Now Greater Than Desktop and All Other Media Combined” US Statistics Significantly Higher at 51% Mobile vs. 42% Desktop (Source: SmartInsights)
 
Current Market Size
 
Mobile – Social “apps” and social media are growing at outstanding rates $76 Billion Market Projected by 2017 (source: Pew Research Center) Over 2 Billion Smart Phones (Mobile Devices) currently shipped annually and the number of Mobile app downloads Worldwide at 102,062m. The projected number of app downloads 2017 to reach 268,692m with $1.5 Trillion in revenue generating transactions from these 2 Billion Devices
 

 
 
9

 
 
ITEM 1. BUSINESS - continued
 
 

 

 
Friendable believes that Social Networking and socializing in general is inherently local, being better served by mobile applications that provide accessibility wherever users go. Today’s mobile society prefers to not be in front of a computer to view potential connections, or to receive or send messages. Instead, the user’s phone is always by his or her side.
 
 
10

 
 
ITEM 1. BUSINESS - continued
 
iOS devices are versatile multi-purpose machines that have already significantly impacted the business models of music, games and other Media & Entertainment industry categories. And now, within the nexus of mobile-social-local, mobile connection applications with “hyper-local” features, provide opportunities in a high growth sector.
 
Growth
 
According to the chart below, mobile applications generated a total of $59.8 billion in revenues through in-app advertising, sales of physical goods and services, virtual goods, paid application downloads and digital downloads. As of 2017, this market is projected to grow to over $140 billion.
 
 
 
 
 
11

 
 
ITEM 1. BUSINESS - continued
 
Development Update
 
We had several releases approved by Apple in 2015 for each of the companies IOS applications.  The applications are heavily connected to a cloud based server application, which was updated as well.  Here is a summary of the development features that were accomplished in 2015:
 
 
1.
Re-branding and positioning of the iHookup Social Application, to Friendable
 
2.
Phase 1 - name change, bug fixes, and optimizations
 
3.
Phase 2 – complete re-brand and addition of new features / user flow
 
4.
New UI/UX change from dating (iHookup social) to social (Friendable) -  New User Interface Design and User Experience workflows
 
a.
Design of paper storyboards of all new features
 
b.
WireFrame mockups of all screens
 
c.
Final pixel perfect designs of all final screen designs for developer guide
 
d.
User focus groups on new design and user experience
 
e.
Cut up of final graphics into multiple resolutions for use in actual application development
 
f.
Addition of a 4 tab bar at the bottom of the main screen, and 3 new corresponding areas (Multiple screens)
 
i.
Area 1 – Create Friendable Request:  Allows users to create an event “Friendable Request” by choosing from nearby locations, selecting a title and description and optional photo.
 
1.
Invitations: After creating a Friendable request, users can invite facebook friends or friends in the app to attend the event.  The Facebook invitations get posted to the users facebook page and/or directly to a user as a direct message.
 
ii.
Area 2 - Nearby:  This area displays nearby events (Friendable Requests)
 
1.
Event Detail:  When tapping on an event, the event detail screen displays the information that the user entered, including a Google map with directions, ability for anyone to join (Or make private), and a comment sections for attendees to communicate.
 
iii.
Area 3 – Trending – This area functions similarly to Area2, but sorts the data by its popularity (# of attendees, # of comments, etc.)
 
iv.
Misc architecture/design updates to accommodate new features – i.e. moving map/list view toggle from the bottom to the top header bar, removal of 3 notification inboxes, new combined notification inbox in the right side menu, etc.)
 
 
5.
Push notifications
 
a.
Re-integrated to Amazons SNS push notification service
 
b.
Re-branded to Friendable from iHookup Social
 
c.
Updated and created new push notifications based on the new features (i.e. “someone has joined your event”, “you were just invited to an event”, etc.)
 
d.
Updated Cron schedule and messages – automated messages
 
 
6.
Updated SDK’s
 
a.
Major switch from a legacy Facebook api’s to the newest native Facebook api’s – all new structure and calls
 
b.
Extensive QA
 
 
7.
Re-branded all emails, server code, and User Interface / all consumer facing info from iHookup Social to Friendable Phase 1, then completely replaced the branding Phase 2.
 
a.
Implementation of all new designs, including all new login and registration page layouts
 
 
8.
Refactoring:  Refactoring old code to optimize based on the newer features. Making compatible with IOS 8 and all current versions of the OS.
 
 
9.
Server infrastructure:  Completely rebuilt all of the servers from scratch with the latest servers available (Amazon AWS), databases, load balancers, etc.
 
 
10.
Setup a mirror of the production environment for development but on a smaller scale for cost optimizations
 
 
11.
Addition of 15 – 20 new API’s to handle all of the new features
 
a.
Update and optimizations on old api’s
 
b.
Removing embedded emails and push notifications to their own separated file
 
c.
Testing and Q/A
 
 
12.
Setup new Friendable domains
 
 
13.
Purchased, generated, and installed secure SSL certificates on all api servers and load balancer for secure communication between the app and the servers.
 
 
14.
Upgraded the app source architecture from 32 bit to the latest 64 bit technology for best performance on the newer iPhone models, per a new requirement by apple.
 
 
 
12

 
 
ITEM 1. BUSINESS - continued
 
 
15.
24/ 7 server monitoring and scaling
 
 
16.
Updated newsletter software with the new domains and language
 
 
17.
Update the server api’s to handle Android devices and user types
 
 
18.
Created Android Development Spec
 
a.
New Android Specific storyboards and designs
 
b.
Screen by screen descriptions, api mappings, and flow diagrams
 
 
19.
Made design improvements on Android application
 
 
20.
Created and cut up all android graphics
 
 
21.
Began Android mobile app development via Android Studio
 
ITEM 1A. RISK FACTORS

RISK FACTORS

The risks and uncertainties below may not be the only ones the Company faces. If any of these risks actually occur, or others not specified below, the business, financial condition, operating results and prospects of the Company could be materially and adversely affected. In that case, the trading price of our common stock could decline.

General Risks

We may fail to raise sufficient capital.

To the extent that we fail to obtain sufficient operating capital, we may be unable to deal with presently unforeseen contingencies in the future or be able to fund our operations. In addition, we may have more difficulty or find it impossible, to raise third party financing from investors or financial institutions.

Our reserves may be insufficient.

We intend to establish a reserve fund, as determined in the Board’s discretion, for normal working capital contingencies. However, we have been unable to do so. If the reserves are not available to the Company, it may be necessary to attempt to raise additional capital or financing.  In the event that such capital or financing is not available on favorable terms, we may be forced to raise additional capital on unfavorable terms. In fact, we have been forced to issue several convertible notes at substantial discounts and interest rates in order to raise the requisite capital for operations.

Risks Related to Our Business and Industry

Our success depends upon the continued growth and acceptance of online/mobile advertising, particularly paid listings, as an effective alternative to traditional, offline advertising and the continued commercial use of the internet.
 
Many advertisers still have limited experience with mobile advertising and may continue to devote significant portions of their advertising budgets to traditional offline advertising media. Accordingly, we continue to compete with traditional advertising media, including television, radio and print, in addition to a multitude of websites with high levels of traffic and mobile advertising networks, for a share of available advertising expenditures and expect to face continued competition as more emerging media and traditional offline media companies enter the online and mobile advertising markets. We believe that the continued growth and continued acceptance of mobile advertising generally will depend, to a large extent, on its perceived effectiveness and the acceptance of related advertising models (particularly in the case of models that incorporate user targeting and/or utilize mobile devices), the continued growth in commercial use of the internet (particularly abroad) and smart devices, the extent to which web/mobile browsers, software programs and/or mobile applications that limit or prevent advertising from being displayed become commonplace and the extent to which the industry is able to effectively manage click fraud. Any lack of growth in the market for mobile advertising, particularly for paid listings, or any decrease in the effectiveness and value of mobile advertising (whether due to the passage of laws requiring additional disclosure and/or opt-in policies for advertising that incorporates user targeting or other developments) would have an adverse effect on our business, financial condition and results of operations.
 
 
 
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ITEM 1A. RISK FACTORS - continued
 
We depend, in part, upon arrangements with third parties to drive traffic to our various websites and distribute our products and services.
 
We engage in a variety of activities, such as search engine optimization and application search optimization, designed to attract traffic to our application and convert visitors into repeat users and customers. How successful we are in these efforts depends, in part, upon our continued ability to enter into arrangements with third parties to drive traffic to our application, as well as the continued introduction of new and enhanced features, products and services that resonate with users and customers generally.
 
In addition, we have entered into a number of arrangements with third parties to promote and deliver mobile advertising to various social networks or mobile channels. Pursuant to these arrangements, third parties generally promote our application on various mobile applications, their websites or through e-mail campaigns and we either pay on a cost per impression basis (i.e. cost per view) or a fixed fee when visitors to these websites click through to or download our application. These arrangements are generally not exclusive, are short-term in nature and are generally terminable by either party given notice. If existing arrangements with third parties are terminated (or are not renewed upon their expiration) and we fail to replace this traffic and related revenues, or if we are unable to enter into new arrangements with existing and/or new third parties in response to industry trends, our business, financial condition and results of operations could be adversely affected.
 
Even if we succeed in driving traffic to our application, we may not be able to convert this traffic or otherwise retain users unless we continue to provide quality products and services. We may not be able to adapt quickly and/or in cost-effective manner to frequent changes in user and customer preferences, which can be difficult to predict, or appropriately time the introduction of enhancements and/or new products or services to the market. Our inability to provide quality products and services would adversely affect user and customer experiences, which would result in decreases in users, customers and revenues, which would adversely affect our business, financial condition and results of operations.
 
As discussed below, our traffic building and conversion initiatives also involve the expenditure of considerable sums for marketing, as well as for the development and introduction of new products, services and enhancements, infrastructure and other related efforts.
 
Marketing efforts designed to drive traffic to our various websites may not be successful or cost-effective.
 
Traffic building and conversion initiatives involve considerable expenditures for online, mobile and offline advertising and marketing. We plan to make significant expenditures for online and mobile display advertising, event-based marketing and traditional offline advertising in connection with these initiatives, which may not be successful or cost-effective.  In the case of paid advertising generally, the policies of sellers and publishers of advertising may limit our ability to purchase certain types of advertising or advertise some of our products and services, which could affect our ability to compete effectively and, in turn, adversely affect our business, financial condition and results of operations.
 
In addition, search engines have increasingly expanded their offerings into other, non-search related categories, and have in certain instances displayed their own integrated or related product and service offerings in a more prominent manner than those of third parties within their search engine results. Continued expansion and competition from search engines could result in a substantial decrease in traffic to our various websites, as well as increased costs if we were to replace free traffic with paid traffic, which would adversely affect our business, financial condition and results of operations.
 
Lastly, as discussed above, we also have and will enter into various arrangements with third parties in an effort to increase traffic, which arrangements are generally more cost-effective than traditional marketing efforts. If we are unable to renew existing (and enter into new) arrangements of this nature, sales and marketing costs as a percentage of revenue would increase over the long-term.
 
Any failure to attract and acquire new, and retain existing, traffic, users and customers in a cost-effective manner could adversely affect our business, financial condition and results of operations.
 
We rely in part on application marketplaces and Internet search engines to drive traffic to our products and services, and if we fail to appear high up in the search results or rankings, traffic to our platform could decline and our business and operating results could be adversely affected.
 
We rely on application marketplaces, such as Apple’s App Store, to drive downloads of our mobile applications. In the future, Apple or other operators of application marketplaces may make changes to their marketplaces which may make access to our products and services more difficult. Our rankings in Apple’s App Store may also drop based on the following factors:
 
 
the size and diversity of our registered member and subscriber bases relative to those of our competitors;
 
the functionality of our application and the attractiveness of their features and our services and offerings generally to consumers relative to those of our competitors;
 
 
 
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ITEM 1A. RISK FACTORS - continued
 
 
how quickly we can enhance our existing technology and services and/or develop new features and localized opportunities and venue based monetization opportunities in response to:
 
new, emerging and rapidly changing technologies;
 
 the introduction of product and service offerings by our competitors;
 
 changes in consumer requirements and trends in the single community relative to our competitors; and
 
 our ability to engage in cost-effective marketing efforts, including by way of maintaining  relationships with third parties with which we have entered into alliances, and the recognition and strength of our various brands relative to those of our competitors.
 
Our estimated income taxes could be materially different from income taxes that we ultimately pay.
 
We are subject to income taxes in the United States. Significant judgment and estimation is required in determining our provision for income taxes and related matters. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determinations are uncertain or otherwise subject to interpretation. Our determination of our income tax liability is always subject to review by applicable tax authorities and we are currently subject to audits in a number of jurisdictions. Although we believe our income tax estimates and related determinations are reasonable and appropriate, relevant taxing authorities may disagree. The ultimate outcome of any such audits and reviews could be materially different from estimates and determinations reflected in our historical income tax provisions and accruals. Any adverse outcome of any such audit or review could have an adverse effect on our financial condition and results of operations.
 
A variety of new laws, or new interpretations of existing laws, could subject us to claims or otherwise harm our business.
 
We are subject to a variety of laws in the U.S. and abroad that are costly to comply with, can result in negative publicity and diversion of management time and effort and can subject us to claims or other remedies.  Some of these laws, such as income, sales, use, value-added and other tax laws and consumer protection laws, are applicable to businesses generally and others are unique to the various types of businesses in which we are engaged.  Many of these laws were adopted prior to the advent of the internet and related technologies and, as a result, do not contemplate or address the unique issues of the internet and related technologies.  Laws that do reference the internet are being interpreted by the courts, but their applicability and scope remain uncertain. 
 
For example, through our various businesses we post and link to third party content, including third party advertisements, links and websites, as well as content submitted by users, such as comments, photographs and videos. We could be subject to liability for posting or linking to third party content, and while we generally require third parties to indemnify us for related claims, we may not be able to enforce our indemnification rights. Some laws, including the Communications Decency Act, or CDA, and the Digital Millennium Copyright Act, or DMCA, limit our liability for posting or linking to third party content. For example, the DMCA generally protects online service providers from claims of copyright infringement based on use of third party content, so long as certain statutory requirements are satisfied. However, the scope and applicability of the DMCA are subject to judicial interpretation and, as such, remain uncertain, and the U.S. Congress may enact legislation limiting the protections afforded by the DMCA to online service providers. Moreover, similar protections may not exist in other jurisdictions in which our products are used. As a result, claims could be threatened and filed under both U.S. and foreign laws based upon use of third party content asserting, among other things, defamation, invasion of privacy or right or publicity, copyright infringement or trademark infringement.
 
Any failure on our part to comply with applicable laws may subject us to additional liabilities, which could adversely affect our business, financial condition and results of operations.  In addition, if the laws to which we are currently subject are amended or interpreted adversely to our interests, or if new adverse laws are adopted, our products and services might need to be modified to comply with such laws, which would increase our costs and could result in decreased demand for our products and services to the extent that we pass on such costs to our customers.  Specifically, in the case of tax laws, positions that we have taken or will take are subject to interpretation by the relevant taxing authorities. While we believe that the positions we have taken to date comply with applicable law, there can be no assurances that the relevant taxing authorities will not take a contrary position, and if so, that such positions will not adversely affect us. Any events of this nature could adversely affect our business, financial condition and results of operations.
 
We may fail to adequately protect our intellectual property rights or may be accused of infringing the intellectual property rights of third parties.
 
 
 
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ITEM 1A. RISK FACTORS - continued
 
We regard our intellectual property rights, including trademarks, domain names, trade secrets, copyrights and other similar intellectual property, as critical to our success.  For example, we currently rely heavily on the trademark “iHookup” to market our product and seek to build and maintain brand loyalty and recognition. We intend, in due course, subject to legal advice, to apply for trademark, copyright and/or patent protection in the United States and other jurisdictions. We regard our intellectual property, including our software and trademark, as valuable assets and intend to vigorously defend them against infringement.  Effective trademark protection may not be available or may not be sought in every country in which products and services are made available and contractual disputes may affect the use of marks governed by private contract.  We have reserved and registered certain domain names, however not every variation of a domain name may be available or be registered, even if available.
 
While there can be no assurance that registered trademarks and copyrights will protect our proprietary information, we intend to assert our intellectual property rights against any infringer. Although any assertion of our rights can result in a substantial cost to, and diversion of effort by, our Company, management believes that the protection of our intellectual property rights is a key component of our operating strategy.
 
Our application also relies upon trade secrets and certain copyrightable and patentable proprietary technologies relating to its software and related features, products and services.
 
We will rely on a combination of laws and contractual restrictions with employees, customers, suppliers, affiliates and others to establish and protect our various intellectual property rights.  For example, we plan to apply to register and renew, or secure by contract where appropriate, trademarks and service marks as they are developed and used, and continue to reserve, register and renew domain names as we deem appropriate. 
 
We also plan to apply for copyrights and patents or for other similar statutory protections as we deem appropriate, based on then current facts and circumstances.  No assurances can be given that any copyright or patent application we file will result in a copyright or patent being issued, or that any future copyright or patent will afford adequate protection against competitors and similar technologies.  In addition, no assurances can be given that third parties will not create new products or methods that achieve similar results without infringing upon copyrights or patents we may own in the future.
 
Despite these measures, our intellectual property rights may still not be protected in a meaningful manner, challenges to contractual rights could arise or third parties could copy or otherwise obtain and use our intellectual property without authorization.  The occurrence of any of these events could result in the erosion of our brands and limitations on our ability to control marketing on or through the internet using our various domain names, as well as impede our ability to effectively compete against competitors with similar technologies, any of which could adversely affect our business, financial conditions and results of operations.
 
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, copyrights, patents and other intellectual property rights held by third parties.  In addition, litigation may be necessary in the future to enforce our intellectual property rights, protect our trade secrets or to determine the validity and scope of proprietary rights claimed by others.  Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect our business, financial condition and results of operations.  Patent litigation tends to be particularly protracted and expensive.
 
If we fail to grow our user base, or if user engagement or ad engagement on the platform declines, the revenue, business and operating results may be harmed.

The size of the user base and the users’ level of engagement are critical to our success. The financial performance has been and will continue to be significantly determined by success in growing the number of users and increasing their overall level of engagement on the platform as well as the number of ad engagements. We generate a substantial majority of our revenue based upon the number of downloads, migration to subscription accounts and engagement by the users with the ads that we display. If people do not perceive the services to be useful, reliable and trustworthy, we may not be able to attract users or increase the frequency of their engagement with the platform and the ads that we display. There is no guarantee that we will be successful in attracting more users or not suffer erosion of the user base or engagement levels. A number of factors could potentially negatively affect user growth and engagement, including if:

 
·
users engage with other products, services or activities as an alternative;

 
·
influential users, such as celebrities, athletes, journalists and brands or certain age demographics conclude that an alternative product or service is more relevant;

 
·
we are unable to convince potential new users of the value and usefulness of its products and services;

 
·
there is a decrease in the perceived quality of the content generated by our platform;

 
·
we fail to introduce new and improved products or services or if we introduce new or improved products or services that are not favorably received or that negatively affect user engagement;
 
 

 
 
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ITEM 1A. RISK FACTORS - continued
 
 
·
technical or other problems prevent us  from delivering our products or services in a rapid and reliable manner or otherwise affect the user experience;

 
·
we are unable to present users with content that is interesting, useful and relevant to them;

 
·
users believe that their experience is diminished as a result of the decisions we make with respect to the frequency, relevance and prominence of ads that we display;

 
·
there are user concerns related to privacy and communication, safety, security or other factors;

 
·
we become subject to hostile or inappropriate usage on our platform;

 
·
there are adverse changes in our products or services that are mandated by, or that we elect to make to address, legislation, regulatory authorities or litigation, including settlements or consent decrees;

 
·
we fail to provide adequate customer service to users; or

 
·
we do not maintain our brand image or its reputation is damaged.
 
If users do not continue to download and use our application and their engagement is not valuable to other users, we may experience a decline in the number of users accessing the products and services and user engagement, which could result in the loss of advertisers and revenue.

Our success depends on our ability to provide users with valuable content, which in turn depends on the profile descriptions and use of the app by others. We believe that one of our competitive advantages is the quality, quantity and real-time nature of the content on iHookup, and that access to unique or real-time content is one of the main reasons users visit us. We seek to foster a broad and engaged user community, and we encourage celebrities, athletes, and others to use our products and services to meet people and form relationships. If users do not continue to contribute profiles and we are unable to provide users with valuable and timely content or other people to engage with, our user base and user engagement may decline. Additionally, if we are not able to address user concerns regarding the safety and security of our products and services or if we are unable to successfully prevent abusive or other hostile behavior on the platform, the size of the user base and user engagement may decline.

If we are unable to compete effectively for users and advertiser spend, the business and operating results could be harmed.

Competition for users of its products and services is intense. Although we have developed a new platform for public self-expression and meeting people in real time, we face strong competition in this business. We compete against many companies to attract and engage users, including companies which have greater financial resources and substantially larger user bases, such as eHarmony, Match.com and others which offer a variety of Internet and mobile device-based products, services and content. As a result, competitors may acquire and engage users at the expense of the growth or engagement of our user base, which would negatively affect the business.

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

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

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

 
·
the timing and market acceptance of our products and services;

 
·
the adoption of our products and services internationally;

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

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

 
·
our ability to establish and maintain relationships with platform partners that integrate with our platform;
 
 
 
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ITEM 1A. RISK FACTORS - continued
 
 
·
changes mandated by, or that we elect to make to address, legislation, regulatory authorities or litigation, including settlements and consent decrees, some of which may have a disproportionate effect on us;

 
·
government action regulating competition;

 
·
our ability to attract, retain and motivate talented employees, particularly engineers, designers and product managers;

 
·
acquisitions or consolidation within our industry, which may result in more formidable competitors; and

 
·
our reputation and the brand strength relative to our competitors.

We also face significant competition for advertiser spend. We compete against online and mobile businesses, including those referenced above, and traditional media outlets, such as television, radio and print, for advertising budgets. In order to grow our revenue and improve our operating results, we must increase our share of spending on advertising relative to our competitors, many of which are larger companies that offer more traditional and widely accepted advertising products. In addition, some of our larger competitors have substantially broader product or service offerings and leverage their relationships based on other products or services to gain additional share of advertising budgets.

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

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

 
·
our ad targeting capabilities, and those of our competitors;

 
·
the timing and market acceptance of our advertising services, and those of our competitors;

 
·
our marketing and selling efforts, and those of our competitors;

 
·
the pricing for our products relative to the advertising products and services of our competitors;

 
·
the return our advertisers receive from their advertising services, compared to those of our competitors; and

 
·
our reputation and the strength of our brand relative to our competitors.
 
If we are not able to compete effectively for users and advertiser spend our business and operating results would be materially and adversely affected.

User growth and engagement depend upon effective interoperation with operating systems, networks, and devices, that we do not control.

Currently, our application is available only on Apple’s iOS. We are dependent on the interoperability of our products and services with popular devices, and mobile operating systems that we do not control. Any changes in such systems or devices that degrade the functionality of our products and services or give preferential treatment to competitive products or services could adversely affect usage of our products and services. Further, if the number of platforms for which we develop our product expands, it will result in an increase in our operating expenses. In order to deliver high quality products and services, it is important that our products and services work with a range of operating systems and devices that we do not control. In addition, because our users access our products and services through mobile devices, we are particularly dependent on the interoperability of our products and services with mobile devices and operating systems. We may not be successful in developing or maintaining relationships with key participants in the mobile industry or in developing products or services that operate effectively with these operating systems and devices. In the event that it is difficult for our users to access and use our products and services on their mobile devices, our user growth and engagement could be harmed, and our business and operating results could be adversely affected.

We have a limited operating history in a new and unproven market for our platform, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

We have developed a mobile app for public self-expression and meeting people in real time, and the market for our products and services is relatively new and may not develop as expected, if at all. People who are not our users may not understand the value of our products and services and new users may initially find our products confusing.  Convincing potential new users of the value of our products and services is critical to increasing our user base and to the success of our business.
 
 
 
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ITEM 1A. RISK FACTORS - continued
 
We have a limited operating history, and only began to generate revenue in 2013 which makes it difficult to effectively assess our future prospects or forecast future results. We encounter or may encounter many risks in this developing and rapidly evolving market. These risks and challenges include its ability to, among other things:

 
·
increase its number of users and user engagement;

 
·
successfully expand our business;

 
·
develop a reliable, scalable, secure, high-performance technology infrastructure that can efficiently handle increased usage;

 
·
convince advertisers of the benefits of our products compared to alternative forms of advertising;

 
·
develop and deploy new features, products and services;

 
·
successfully compete with other companies, some of which have substantially greater resources and market power than us, that are currently in, or may in the future enter, its industry, or duplicate the features of our products and services;

 
·
attract, retain and motivate talented employees, particularly engineers, designers and product managers;

 
·
process, store, protect and use personal data in compliance with governmental regulations, contractual obligations and other obligations related to privacy and security;

 
·
continue to earn and preserve its users’ trust, including with respect to their private personal information; and

 
·
defending ourselves against litigation, regulatory, intellectual property, privacy or other claims.
 
If we fail to educate potential users and potential advertisers about the value of our products and services, if the market for our platform does not develop as we expect or if we fail to address the needs of this market, our business will be harmed. We may not be able to successfully address these risks and challenges or other unforeseen risks and challenges. Failure to adequately address these risks and challenges could harm our business and cause our operating results to suffer.

Our business depends on the continued and unimpeded access to our products and services on mobile devices by our users and advertisers. If we or our users experience disruptions in service or if mobile service providers are able to block, degrade or charge for access to our products and services, we could incur additional expenses and the loss of users and advertisers.

We depend on the ability of our users and advertisers to access mobile devices. Currently, this access is provided by companies that have significant market power in the broadband and telecommunications access marketplace, including incumbent telephone companies, cable companies, mobile communications companies, government-owned service providers, device manufacturers and operating system providers, any of whom could take actions that degrade, disrupt or increase the cost of user access to our products or services, which would, in turn, negatively impact our business.  We also rely on other companies to maintain reliable communications network systems that provide adequate speed, data capacity and security to us and our users. As the number of mobile device users continues to grow, frequency of use and amount of data transmitted, the communications infrastructure that we and our users rely on may be unable to support the demands placed upon it. The failure of the mobile communications infrastructure that we and/or our users rely on, even for a short period of time, could undermine our operations and harm our operating results.

Abusive activities by certain users could diminish the user experience on our platform, which could damage our reputation and deter our current and potential users from using our products and services.

There are a range of abusive activities that are prohibited by the our terms of service and are generally defined as unsolicited, repeated actions that negatively impact other users with the general goal of drawing user attention to a given person, account, site, product or idea. This includes posting large numbers of unsolicited mentions of a user, duplicate outlets, misleading links (e.g., to malware or click-jacking pages) or other false or misleading content, and aggressively following and un-following accounts, adding users to lists, sending invitations to inappropriately attract attention. Our terms of service also prohibit the creation of serial or bulk accounts, both manually or using automation, for disruptive or abusive purposes.  Although we continue to invest resources to reduce spam and other abusive behavior, we expect spammers and abusers will continue to seek ways to act inappropriately on our platform.  We will continuously combat spam and other abusive behaviors, including by suspending or terminating accounts we believe to be spammers and launching algorithmic changes focused on curbing abusive activities. Combatting spam and other abusive behaviors require the diversion of significant time and focus of our engineering team from improving our products and services. If spam or abusive behavior increase, this could hurt our reputation for delivering relevant content or reduce user growth and user engagement and result in continuing operational cost to us.

If we fail to effectively manage our growth, our business and operating results could be harmed.
 

 
 
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ITEM 1A. RISK FACTORS - continued
 
If we experience rapid growth in our headcount and operations, it will place significant demands on our management, operational and financial infrastructure. We intend to continue to make substantial investments to expand our operations, research and development, sales and marketing and general and administrative organizations. We face significant competition for employees, particularly engineers, designers and product managers, from other Internet and high-growth companies, which include both publicly-traded and privately-held companies, and we may not be able to hire new employees quickly enough to meet our needs. To attract highly skilled personnel, we will need to continue to offer, highly competitive compensation packages. As we continue to grow, we are subject to the risks of over-hiring, over-compensating our employees and over-expanding our operating infrastructure, and to the challenges of integrating, developing and motivating a rapidly growing employee base.  If we fail to effectively manage our hiring needs and successfully integrate new hires, our efficiency and ability to meet our forecasts and our employee morale, productivity and retention could suffer, and our business and operating results could be adversely affected.

Our business and operating results may be harmed by a disruption in our service, or by our failure to timely and effectively scale and adapt our existing technology and infrastructure.

One of the reasons people use our platform is for real-time information and personal contact. We may, in the future, experience service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, hardware failure, capacity constraints due to an overwhelming number of people accessing our products and services simultaneously, computer viruses and denial of service or fraud or security attacks. Although we are investing significantly to improve the capacity, capability and reliability of our infrastructure, we are not currently serving traffic equally through the data centers that support our platform. Accordingly, in the event of a significant issue at the data center supporting most of our network traffic, some of our products and services may become inaccessible to the public or the public may experience difficulties accessing our products and services.  Any disruption or failure in our infrastructure could hinder our ability to handle existing or increased traffic on our platform, which could significantly harm our business.

As the number of our users increases and our users generate more content, including photos and videos hosted by us, we may be required to expand and adapt our technology and infrastructure to continue to reliably store, serve and analyze this content. It may become increasingly difficult to maintain and improve the performance of our products and services, especially during peak usage times, as our products and services become more complex and our user traffic increases. This would negatively impact our ability to attract users and advertisers and increase engagement of our users. We expect to continue to make significant investments to maintain and improve the capacity, capability and reliability of our infrastructure. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and infrastructure to accommodate actual and anticipated changes in technology, our business and operating results may be harmed.

If we are unable to maintain and promote our brand, our business and operating results may be harmed.

We believe that maintaining and promoting our brand is critical to expanding our base of users and advertisers. Maintaining and promoting our brand will depend largely on our ability to continue to provide useful, reliable and innovative products and services, which we may not do successfully. We may introduce new features, products, services or terms of service that users, platform partners or advertisers do not like, which may negatively affect our brand. Additionally, the actions of platform partners may affect our brand if users do not have a positive experience using third-party applications. Our brand may also be negatively affected by the actions of users that are hostile or inappropriate to other people, by users impersonating other people, by users identified as spam, by users introducing excessive amounts of spam on its platform or by third parties obtaining control over users’ accounts. Maintaining and enhancing our brand may require iHookup to make substantial investments and these investments may not achieve the desired goals. If we fail to successfully promote and maintain our brand or if we incur excessive expenses in this effort, our business and operating results could be adversely affected.

Negative publicity could adversely affect our business and operating results.

Negative publicity about us, including about our product quality and reliability, changes to our products and services, privacy and security practices, litigation, regulatory activity, the actions of our users or user experience with our products and services, even if inaccurate, could adversely affect our reputation and the confidence in and the use of our products and services. For example, service outages could result in widespread media reports. Such negative publicity could also have an adverse effect on the size, engagement and loyalty of our user base and result in decreased revenue, which could adversely affect our business and operating results.

We focus on product innovation and user engagement rather than short-term operating results.

We encourage employees to quickly develop and help us launch new and innovative features. We focus on improving the user experience for our products and services and on developing new and improved products and services for the advertisers on our platform. We prioritize innovation and the experience for users and advertisers on our platform over short-term operating results. We may make product and service decisions that may reduce our short-term operating results if we believe that the decisions are consistent with its goals to improve the user experience and performance for advertisers, which we believe will improve our operating results over the long term. These decisions may not be consistent with the short-term expectations and may not produce the long-term benefits that we expect, in which case our user growth and user engagement, our relationships with advertisers and our business and operating results could be harmed. In addition, our focus on the user experience may negatively impact our relationships with existing or prospective advertisers. This could result in a loss of advertisers, which could harm our revenue and operating results.
 
 
 
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ITEM 1A. RISK FACTORS - continued

Our products and services may contain undetected software errors, which could harm our business and operating results.

Our products and services incorporate complex software and we encourage our employees to quickly develop and help us launch new and innovative features. Our software may now or in the future contain, errors, bugs or vulnerabilities. Some errors in the software code may only be discovered after the product or service has been released. Any errors, bugs or vulnerabilities discovered in our code after release could result in damage to our reputation, loss of users, loss of platform partners, loss of advertisers or advertising revenue or liability for damages, any of which could adversely affect our business and operating results.

Our business is subject to complex and evolving U.S. laws and regulations. These laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to its business practices, monetary penalties, increased cost of operations or declines in user growth, user engagement or ad engagement, or otherwise harm our business.

We are subject to a variety of laws and regulations in the United States that involve matters central to our business, including privacy, rights of publicity, data protection, content regulation, intellectual property, competition, protection of minors, consumer protection and taxation. Many of these laws and regulations are still evolving and being tested in courts and could be interpreted or applied in ways that could harm our business, particularly in the new and rapidly evolving industry in which we operate. The introduction of new products or services may subject us to additional laws and regulations. There have been a number of recent legislative proposals in the United States, at both the federal and state level, that would impose new obligations in areas such as privacy. The U.S. government, including the Federal Trade Commission, or the FTC, and the Department of Commerce, has announced that it is reviewing the need for greater regulation for the collection of information concerning user behavior on the Internet and over mobile devices, including regulation aimed at restricting certain tracking and targeted advertising practices.

Additionally, recent amendments to U.S. patent laws may affect the ability of companies to protect their innovations and defend against claims of patent infringement. Having personal information may subject us to additional regulation. Further, it is difficult to predict how existing laws and regulations will be applied to its business and the new laws and regulations to which we may become subject, and it is possible that they may be interpreted and applied in a manner that is inconsistent with our practices. These existing and proposed laws and regulations can be costly to comply with and can delay or impede the development of new products and services, result in negative publicity, significantly increase our operating costs, require significant time and attention of management and technical personnel and subject us to inquiries or investigations, claims or other remedies, including fines or demands that we modify or cease existing business practices.

Even though our platform is for public self-expression conversation and personal interaction, user trust regarding privacy is important to the growth of users and the increase in user engagement on our platform, and privacy concerns relating to our products and services could damage our reputation and deter current and potential users and advertisers from using our products and services.

From time to time, concerns have been expressed by governments, regulators and others about whether mobile products, services or practices compromise the privacy of users and others. Concerns about, governmental or regulatory actions involving practices with regard to the collection, use, disclosure or security of personal information or other privacy-related matters, even if unfounded, could damage our reputation, cause us to lose users and advertisers and adversely affect our operating results. While we will strive to comply with applicable data protection laws and regulations, as we strive to comply with our own posted privacy policies and other obligations we may have with respect to privacy and data protection, the failure or perceived failure to comply may result, in inquiries and other proceedings or actions against us  by governments, regulators or others. These inquiries could result in negative publicity and damage to our reputation and brand, each of which could cause us to lose users and advertisers, which could have an adverse effect on our business.

Any systems failure or compromise of our security that results in the unauthorized access to or release of our users’ or advertisers’ data could significantly limit the adoption of our products and services and cause harm to our reputation and brand and, therefore, our business. We expect to continue to expend significant resources to protect against security breaches. The risk that these types of events could seriously harm our business is likely to increase as we expand the number of products and services we offer, increase the size of our user base and operate in other countries.

If our security measures are breached, or if our products and services are subject to attacks that degrade or deny the ability of users to access our products and services, our products and services may be perceived as not being secure, users and advertisers may curtail or stop using our products and services and our business and operating results could be harmed.
 
 

 
 
21

 
 
ITEM 1A. RISK FACTORS - continued
 
Our products and services involve the storage and transmission of users’ and advertisers’ information, and security breaches expose us to a risk of loss of this information, litigation and potential liability. We may experience cyber-attacks of varying degrees, and as a result, unauthorized parties may obtain, and may in the future obtain, access to its data or its users’ or advertisers’ data.  Our security measures may also be breached due to employee error, malfeasance or otherwise. Additionally, outside parties may attempt to fraudulently induce employees, users or advertisers to disclose sensitive information in order to gain access to our data or our users’ or advertisers’ data or accounts, or may otherwise obtain access to such data or accounts. Since our users and advertisers may use their accounts to establish and maintain online identities, unauthorized communications from our accounts that have been compromised may damage their reputations. Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation and a loss of confidence in the security of our products and services that could have an adverse effect on our business and operating results. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of security occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose users and advertisers and we may incur significant legal and financial exposure, including legal claims and regulatory fines and penalties. Any of these actions could have a material and adverse effect on our business, reputation and operating results.

We depend on highly skilled personnel to grow and operate our business, and if we are unable to hire, retain and motivate its personnel, we may not be able to grow effectively.

Our future success will depend upon our continued ability to identify, hire, develop, motivate and retain highly skilled personnel, including senior management, engineers, designers and product managers. Our ability to execute efficiently is dependent upon contributions from our employees, in particular our senior management team.  We do not maintain key person life insurance for any employee. In addition, from time to time, there may be changes in our senior management team that may be disruptive to our business. If our senior management team, including any new hires that we may make, fails to work together effectively and to execute our plans and strategies on a timely basis, our business could be harmed. Our growth strategy also depends on our ability to expand our organization with highly skilled personnel. Identifying, recruiting, training and integrating qualified individuals will require significant time, expense and attention.  Competition for highly skilled personnel is intense, particularly in the San Francisco Bay Area, where our headquarters is located. We may need to invest significant amounts of cash and equity to attract and retain new employees and we may never realize returns on these investments. If we are not able to effectively add and retain employees, our ability to achieve our strategic objectives will be adversely impacted, and our business will be harmed.

Our business is subject to the risks of earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by man-made problems such as terrorism.

A significant natural disaster, such as an earthquake, fire, flood or significant power outage could have a material adverse impact on our business, operating results, and financial condition. Our headquarters is located in the San Francisco Bay Area, a region known for seismic activity. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our data centers could result in lengthy interruptions in our services. In addition, acts of terrorism and other geo-political unrest could cause disruptions in our business. All of the aforementioned risks may be further increased if our disaster recovery plans prove to be inadequate. We have a disaster recovery program, which allows us to move production to a back-up data center in the event of a catastrophe. Although this program is functional, we do not currently serve network traffic equally from each data center, so if our primary data center shuts down, there will be a period of time that our products or services, or certain of our products or services, will remain inaccessible to our users or our users may experience severe issues accessing our products and services. We do not carry business interruption insurance sufficient to compensate us for the potentially significant losses, including the potential harm to our business that may result from interruptions in our ability to provide our products and services.

Risks Related to Our Company
 
Messrs. Dean and Robert Rositano, as our directors and officers, own a significant percentage of the voting power of our stock and will be able to exercise significant influence and control over the matters subject to stockholder approval and our operations.

After the merger with Friendable, Inc., Messrs. Dean and Robert Rositano may be deemed to own (directly and/or beneficially) 98.3% of our Series A preferred stock. As of April 6, 2016, the following entities and individuals own the following shares of our Series A preferred stock:
 
Messrs. Dean and Robert Rositano each own 2,255 shares;
 
Copper Creek Holdings, LLC, a Nevada limited liability company owned and managed by Robert Rositano and his wife Stacy Rositano, owns 16,381 shares;
 
Checkmate Mobile, Inc., a Delaware corporation, owns 898 shares - Messrs. Dean and Robert Rositano are 8.8% and 8.8%  stockholders respectively and serve as officers and directors of CheckMate Mobile, Inc. 
 
 
 
22

 
 
ITEM 1A. RISK FACTORS - continued
 
The holders of preferred stock are entitled to cast votes equal to nine (9) times the total number of shares of common stock which are issued and outstanding, voting together with the holders of common stock as a single class. Such Series A Preferred Stock shall also 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 conversion 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). As a result of the transaction, the former iHookup stockholders received a controlling interest in the Company. As a result of Messrs. Dean and Robert Rositano’s ownership interests and voting power described above, Messrs. Dean and Robert Rositano currently are in a position to influence and control, subject to our organizational documents and Nevada law, the composition of our Board of Directors and the outcome of corporate actions requiring stockholder approval, such as mergers, business combinations and dispositions of assets, among other corporate transactions. In addition, this concentration of voting power could discourage others from initiating a potential merger, takeover or other change of control transaction that may otherwise be beneficial to the Company, which could adversely affect the market price of our securities.

If we are unable to pay the convertible promissory notes when obligations become due, the note holders may take adverse proceedings under terms of default.
 
In the event of default under terms in the convertible promissory notes, the note holder may enforce remedies including acceleration of payment in full plus interest and other charges, and an increase in interest rates of up to 24% when allowable by law.
 
Our disclosure controls and procedures and internal control over financial reporting are not effective, which may cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.
 
Our management evaluated our disclosure controls and procedures as of December 31, 2015 and concluded that as of those dates, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to (i) inadequate segregation of duties and ineffective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
 
As of the date of this annual report on Form 10-K, we believe that these material weaknesses continue to exist and our disclosure controls and procedures and internal control over financial reporting are not effective. If such material weakness and ineffective controls are not promptly corrected in the future, our ability to report quarterly and annual financial results or other information required to be disclosed on a timely and accurate basis may be adversely affected. Also such material weakness and ineffective controls could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.
 
We have a limited operating history on which to base an evaluation of our business and prospects.

We have a short operating history, which limits our ability to forecast our future operating results and subjects us to a number of uncertainties, including our ability to plan for and model future growth. We have encountered and will continue to encounter risks and uncertainties frequently experienced by growing companies in developing industries. If our assumptions regarding these uncertainties, which we use to plan our business, are incorrect or change in reaction to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.
 
Risks Associated with Our Common Stock
 
Messrs. Dean and Robert Rositano, as our directors and officers, own a significant percentage of the voting power of our stock and will be able to exercise significant influence and control over the matters subject to stockholder approval and our operations.

After the merger with Friendable, Inc., Messrs. Dean and Robert Rositano may be deemed to own (directly and/or beneficially) 98.3% of our Series A preferred stock. As of April 6, 2016, the following entities and individuals own the following shares of our Series A preferred stock:
 
Messrs. Dean and Robert Rositano each own 2,255 shares;
 
Copper Creek Holdings, LLC, a Nevada limited liability company owned and managed by Robert Rositano and his wife Stacy Rositano, owns 16,381 shares;
 
Checkmate Mobile, Inc., a Delaware corporation, owns 898 shares - Messrs. Dean and Robert Rositano are 8.8% and 8.8%  stockholders respectively and serve as officers and directors of CheckMate Mobile, Inc. 
 
 
 
23

 
 
ITEM 1A. RISK FACTORS - continued
 
The holders of preferred stock are entitled to cast votes equal to nine (9) times the total number of shares of common stock which are issued and outstanding, voting together with the holders of common stock as a single class. Such Series A Preferred Stock shall also 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 conversion 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). As a result of the transaction, the former iHookup stockholders received a controlling interest in the Company. As a result of Messrs. Dean and Robert Rositano’s ownership interests and voting power described above, Messrs. Dean and Robert Rositano currently are in a position to influence and control, subject to our organizational documents and Nevada law, the composition of our Board of Directors and the outcome of corporate actions requiring stockholder approval, such as mergers, business combinations and dispositions of assets, among other corporate transactions. In addition, this concentration of voting power could discourage others from initiating a potential merger, takeover or other change of control transaction that may otherwise be beneficial to the Company, which could adversely affect the market price of our securities.

If we issue additional shares in the future, it will result in the dilution of our existing shareholders.
 
As of December 31, 2015, our articles of incorporation authorize the issuance of up to 10,000,000,000 shares of common stock with a par value of $0.0001 per share. Our board of directors may choose to issue some or all of such shares to acquire one or more companies or properties and to fund our overhead and general operating requirements. The issuance of any such shares will reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.

The price of our common stock may be negatively impacted by factors which are unrelated to our operations.
 
The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.
 
We do not intend to pay cash dividends on any investment in the shares of stock of our company.
 
We have never paid any cash dividends and currently do not intend to pay any cash dividends for the foreseeable future. Because we do not intend to declare cash dividends, any gain on an investment in our company will need to come through an increase in the stock’s price. This may never happen and investors may lose all of their investment in our company.
 
Trading of our stock is restricted by the Securities Exchange Commission’s penny stock regulations, which may limit a stockholder’s ability to buy and sell our common stock.
 
The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
 
FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
 
In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (known as “FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
 

 
 
24

 
 
ITEM 1A. RISK FACTORS - continued
 
Our stock price has been volatile and your investment could lose value.

The trading price of our common stock has been volatile and could be subject to wide fluctuations due to various factors. The timing of announcements in the public market regarding new products, product enhancements or technological advances by us or our competitors, and any announcements by us or our competitors of acquisitions, major transactions or management changes could also affect our stock price. Our stock price is subject to speculation in the press and the analyst community, changes in recommendations or earnings estimates by financial analysts, changes in investors’ or analysts’ valuation measures for our stock and market trends unrelated to our performance. A significant drop in our stock price could also expose us to the risk of securities class action lawsuits, which could result in substantial costs and divert management’s attention and resources, which could adversely affect our business. Moreover, if the per share trading price of our common stock declines significantly, you may be unable to resell your shares at or above the public offering price. We cannot assure you that the per share trading price of our common stock will not fluctuate or decline significantly in the future.

The trading price of our common stock has been low, and the sale of a substantial number of shares in the public market could depress the price of our common stock.

Our common stock is traded on the OTC Pink Sheets and historically has had a low average daily trading price relative to many other stocks. Thinly traded stocks can have more price volatility than stocks trading in an active public market, which can lead to significant price swings even when a relatively small number of shares are being traded, and can limit an investor’s ability to quickly sell blocks of stock. If there continues to be low average daily trading volume or price in our common stock investors may be unable to quickly liquidate their investments or at prices investors consider to be adequate.

Because our common stock is quoted and traded on the OTC Pink Sheets, short selling could increase the volatility of our stock price.
 
Short selling occurs when a person sells shares of stock which the person does not yet own and promises to buy stock in the future to cover the sale. The general objective of the person selling the shares short is to make a profit by buying the shares later, at a lower price, to cover the sale. Significant amounts of short selling, or the perception that a significant amount of short sales could occur, could depress the market price of our common stock. In contrast, purchases to cover a short position may have the effect of preventing or retarding a decline in the market price of our common stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the OTC Pink Sheets or any other available markets or exchanges. Such short selling if it were to occur could impact the value of our stock in an extreme and volatile manner to the detriment of our shareholders.


Risks Relating to the Early Stage of our Company and Ability to Raise Capital
 
We are at a very early stage and our success is subject to the substantial risks inherent in the establishment of a new business venture.
 
The implementation of our business strategy is in a very early stage and subject to all of the risks inherent in the establishment of a new business venture. Accordingly, our intended business and prospective operations may not prove to be successful in the near future, if at all. Any future success that we might enjoy will depend upon many factors, many of which are beyond our control, or which cannot be predicted at this time, and which could have a material adverse effect upon our financial condition, business prospects and operations and the value of an investment in our company.
 
We expect to suffer continued operating losses and we may not be able to achieve profitability.
 
We expect to continue to incur significant development and marketing expenses in the foreseeable future related to the launch and commercialization of our products and services. As a result, we will be sustaining substantial operating and net losses, and it is possible that we will never be able to achieve profitability.
 

 
25

 

ITEM 1A. RISK FACTORS - continued
 
We may have difficulty raising additional capital, which could deprive us of necessary resources.
 
In order to support the initiatives envisioned in our business plan, we will need to raise additional funds through public or private debt or equity financing, collaborative relationships or other arrangements. Our ability to raise additional financing depends on many factors beyond our control, including the state of the capital markets, the market price of our common stock, and the development of competitive projects by others. Because our common stock is not listed on a major stock market, many investors may not be willing or allowed to purchase our common shares or may demand steep discounts. Sufficient additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.
 
During the year ended December 31, 2015, we received $1,331,170 in convertible note financing. During the quarter ended March 31, 2016, we received $450,000 in convertible note financing. However, we do not have any firm commitments for funding beyond this recent financing. If we are unsuccessful in raising additional capital, or the terms of raising such capital are unacceptable, we may have to modify our business plan and/or significantly curtail our planned activities. If we are successful raising additional capital through the issuance of additional equity, our investor’s interests will be diluted.
 
There are substantial doubts about our ability to continue as a going concern and if we are unable to continue our business, our shares may have little or no value.
 
Our ability to become a profitable operating company is dependent upon our ability to generate revenues and/or obtain financing adequate to implement our business plan. Achieving a level of revenues adequate to support our cost structure has raised doubts about our ability to continue as a going concern. We plan to attempt to raise additional equity capital by issuing shares and, if necessary through one or more private placement or public offerings, and via the securities purchase agreement/equity line financing. However, the doubts raised relating to our ability to continue as a going concern may make our shares an unattractive investment for potential investors. These factors, among others, may make it difficult to raise any additional capital.
 
Failure to effectively manage our growth could place additional strains on our managerial, operational and financial resources and could adversely affect our business and prospective operating results.
 
Our anticipated growth is expected to continue to place a strain on our managerial, operational and financial resources. Further, as we expand our user and advertiser base, we will be required to manage multiple relationships. Any further growth by us, or an increase in the number of our strategic relationships will increase this strain on our managerial, operational and financial resources. This strain may inhibit our ability to achieve the rapid execution necessary to implement our business plan, and could have a material adverse effect upon our financial condition, business prospects and prospective operations and the value of an investment in our company.
 
ITEM 1B. UNRESOLVED STAFF COMMENTS
 
Not Applicable.
 
ITEM 2. PROPERTIES
 
Principal Office
 
Our executive offices are located at 1821 S. Bascom Ave Ste 353, Campbell, California 95008, and at 1735 East Fort Lowell Road, Suite 9, Tucson, Arizona 85719. We believe that our office space and facilities are sufficient to meet our present needs and do not anticipate any difficulty securing alternative or additional space, as needed, on terms acceptable to us.
 
Our registered agent is located at Nevada Agency and Transfer Company, 50 West Liberty Street Suite 880, Reno, Nevada 89501.
 
ITEM 3. LEGAL PROCEEDINGS
 
Not applicable.
 
ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.
 
 
 
26

 
 
PART II
  
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market Information
 
Our common stock is quoted on the OTC Pink Sheets under the symbol “FDBL”. There is no established trading market for the Company’s Series A Preferred Stock.
 
Set forth below are the range of high and low bid quotations for the periods indicated as reported by the OTCQB Bulletin Board. The market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.

 
Quarter Ended
 
High Bid
   
Low Bid
 
December 31, 2015
 
$
0.0094
   
$
0.0023
 
September 30, 2015
 
$
0.0109
   
$
0.0059
 
June 30, 2015
 
$
0.0131
   
$
0.0008
 
March 31, 2015
 
$
0.0400
   
$
0.0051
 
December 31, 2014
 
$
0.0500
   
$
0.0400
 
September 30, 2014
 
$
0.3000
   
$
0.2300
 
 
On October 13, 2014, we received notice from OTC Markets Group that the company will be delisted from OTCQB and moved to OTC Pink Sheets on October 14, 2014. On May 1, 2014, OTCQB implemented new eligibility standards for OTCQB which requires companies to maintain a closing bid price of $0.01 per share on at least one of the prior 30 consecutive calendar days. The closing bid price of the company’s common stock had fallen below $0.01 for 30 consecutive calendar days from September 11, 2014. We believe that, among other reasons, the conversion of previously issued convertible notes into the company’s common stock at substantial discounts and the subsequent sale of such common stock by the note holders, caused the decrease in price.

The company filed a Schedule 14C on January 22, 2015 to effect a reverse split of 100 to 1. FINRA approved of the reverse split effective as of March 19, 2015. In order to regain OTCQB eligibility, the company will need to have a closing bid price of at least $0.01 for 30 consecutive calendar days. Upon stabilizing its stock price, the company plans to apply to be re-listed on the OTCQB as soon as reasonably practicable.

On March 31, 2016, the closing price of our common stock as reported by the OTC Bulletin Board was $0.00422 per share.
 
 
 
 
 
 
 

 
27

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES - continued
 
Transfer Agent
 
Our shares of common stock are issued in registered form.  Our transfer agent is Nevada Agency and Transfer Company, 50 West Liberty Street Suite 880, Reno, Nevada 89501, phone (775) 322-0626.
 
Holders of Our Common Stock
 
As of April 11, 2016 there were 46 registered holders of record of our common stock. As of such date, 293,358,162 shares of our common stock were issued and outstanding.
 
Dividends
 
The payment of dividends, if any, in the future, rests within the sole discretion of our board of directors. The payment of dividends will depend upon our earnings, our capital requirements and our financial condition, as well as other relevant factors.  We have not declared any cash dividends since our inception and have no present intention of paying any cash dividends on our common stock in the foreseeable future.
 
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:
1.
We would not be able to pay our debts as they become due in the usual course of business; or
2.
Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
 
Securities Authorized for Issuance under Equity Compensation Plans
 
Effective November 22, 2011 our board of directors adopted and approved our stock option plan. The purpose of the stock option plan is to enhance the long-term stockholder value of our company by offering opportunities to directors, key employees, officers, independent contractors and consultants of our company to acquire and maintain stock ownership in our company in order to give these persons the opportunity to participate in our company’s growth and success, and to encourage them to remain in the service of our company. A total of 4,494 shares of our common stock are available for issuance under the stock option plan.

Plan Category
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plan
Equity compensation plans approved by security holders
Nil
Nil
Nil
Equity compensation plans not approved by security holders
3,325
$1,045
1,649
Total
3,325
$1,045
1,649
 



 
28

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES - continued
 
Recent Sales of Unregistered Securities
 
Since the beginning of our fiscal year ended December 31, 2012, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in an annual report on Form 10-K, in a quarterly report on Form 10-Q or in a current report on Form 8-K.
 
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
None.
 
ITEM 6 SELECTED FINANCIAL DATA
 
Not applicable.
 
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Our management’s discussion and analysis provides a narrative about our financial performance and condition that should be read in conjunction with the audited and unaudited consolidated financial statements and related notes thereto included in this annual report on Form 10-K. This discussion contains forward looking statements reflecting our current expectations and estimates and assumptions about events and trends that may affect our future operating results or financial position. Our actual results and the timing of certain events could differ materially from those discussed in these forward-looking statements due to a number of factors, including, but not limited to, those set forth in the sections of this annual report on Form 10-K titled “Risk Factors” beginning at page 13 above and “Forward-Looking Statements” beginning at page 4 above.
 
Overview
 
We were a mineral exploration company until January 31, 2014 when we effected the Merger with Friendable. We have minimal revenues from our mobile app, have achieved losses since inception, have been issued a going concern opinion by our auditors and rely upon the sale of our securities to fund operations.  Accordingly, we will be dependent on future additional financing in order to fund our anticipated cash needs, and to seek other business opportunities in new business opportunities. There are no assurances that we will be able to complete such future additional financing for other business opportunities.


 
29

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Results of Operations
 
Years Ended December 31, 2015 and 2014
 
Our cash as of December 31, 2015 was 15,880. As a result of our minimal amount of revenues and ongoing expenditures in pursuit of our business, we incurred net losses since our inception. For the period from inception (December 4, 2013) to December 31, 2015 we incurred a net loss of $7,465,001. For the year ended December 31, 2015, our net loss was $3,154,969.
 
Our operating expenses for our fiscal years ended December 31, 2015 and 2014 and the changes between those periods for the respective items are summarized as follows:
 
   
Year Ended
December 31, 2015
   
Year Ended
December 31, 2014
 
             
REVENUES
 
$
151,191
   
$
167,079
 
                 
OPERATING EXPENSES
               
    Accretion and interest expense
 
$
1,406,852
   
$
1,240,935
 
    App hosting
   
382,330
     
103,927
 
    Commissions
   
45,357
     
50,124
 
    General and administrative (Note 9)
   
881,539
     
1,372,772
 
    Financing costs
   
117,077
     
90,716
 
    Product development
   
249,221
     
259,984
 
    Sales and marketing
   
228,880
     
512,897
 
                 
TOTAL OPERATING EXPENSES
   
3,311,256
     
3,631,355
 
                 

 
30

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Liquidity and Capital Resources
 
Working Capital
   
December 31, 2015
   
December 31, 2014
 
   
(audited)
   
(audited)
 
Current Assets
 
$
222,480
   
$
111,000
 
Current Liabilities
 
$
1,683,234
   
$
1,084,154
 
Working Capital Deficiency
 
$
(1,460,754
)
 
$
(973,154
)
 
As of December 31, 2015, current assets consisted primarily of cash $15,880 and debt issue costs of 200,855. As of December 31, 2014, current assets consisted primarily of prepaid expenses $49,741 and debt issue costs of 47,122.

As of December 31, 2015, current liabilities consisted primarily of accounts payable and accrued liabilities of $1,183,169 and convertible notes of $493,742. As of December 31, 2014, current liabilities consisted primarily of accounts payable and accrued liabilities of $683,516, promissory notes of $261,425 and convertible notes of $120,432.
 
We currently do not have sufficient capital to fund our needs for the next 12 months. We rely on financing from convertible and promissory notes to fund our operations.
 
Cash Flows
   
Year Ended
   
Year Ended
 
   
December 31, 2015
   
December 31, 2014
 
Net Cash Provided by (Used in) Operating Activities
  $ (1,279,345 )   $ (1,439,261 )
Net Cash Provided by (Used in) Investing Activities
    (35,000     966  
Net Cash Provided by (Used in) Financing Activities
    1,331,170       1,475,350  
Net Increase (Decrease) in Cash
  $ 16,825     $ (945 )
 
Operating Activities
 
Net cash used in operating activities for the 12-month period ended December 31, 2015 consisted of net loss from operations of $3,154,969 offset by adjustments for non cash items including accretion expense of $1,201,118, shares issued for services of $50,830, and interest on promissory notes of $64,129. Net cash used in operating activities for the 12-month period ended December 31, 2014 was further adjusted for changes in accounts payable of $562,414.
 
Net cash used in operating activities for the 12-month period ended December 31, 2014 consisted of net loss from operations of $3,681,667 offset by adjustments for non cash items including accretion expense of $1,168,982, shares issued for services of $225,325, and impairment loss of $293,750. Net cash used in operating activities for the 12-month period ended December 31, 2014 was further adjusted for changes in accounts payable of $620,934.
 
Investing Activities
 
Net cash used in investing activities for the 12-month period ended December 31, 2015 consisted of the acquisition of the Friendable assets.

Net cash provided by investing activities for the 12-month period ended December 31, 2014 consisted of cash acquired in the merger.

Financing Activities
 
Net cash provided by financing activities for the 12-month period ended December 31, 2015 consisted of proceeds from convertible notes.
 
Net cash provided by financing activities for the 12-month period ended December 31, 2014 consisted primarily of proceeds from convertible notes of $1,186,850 and proceeds from promissory notes of $250,000.
 
 
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Securities Purchase Agreements and Convertible Notes with Coventry Enterprises, LLC
 
On January 15, 2015, the Company entered into a securities purchase agreement (the “Coventry SPA”) with Coventry Enterprises LLC.,  (“Coventry”), pursuant to which the Company sold to Coventry a $40,000 face value 8% Convertible Note (the “Coventry Note”) with a term of twelve months (the “Coventry Maturity Date”). Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock beginning six months after the Issue Date, at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. In the event the Company prepays the Coventry Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150%. 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 Coventry Note becomes immediately due and payable. The Company paid Coventry $2,000 for its legal fees and expenses.
 
On January 15, 2015, the Company entered into a Convertible Redeemable Note with Coventry whereby the Company issued a $44,535 face value 8% Convertible Note (the “Coventry Note”) with a term of twelve months (the “Coventry Maturity Date”) to replace a $42,152 debt to Bingham McCutchen LLP originally incurred on May 1, 2014. Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock , at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the Coventry Note becomes immediately due and payable.
 
On February 12, 2015, the Company entered into a Securities Purchase Agreement (the “Coventry SPA”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued two Convertible Notes (together, the “Notes”)  in the amount of $35,000 each, at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The first of the two Convertible Notes (the “Coventry Note”) was paid by the Buyer on February 15, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $35,000 promissory note issued to the Company by the Buyer (“Buyer Note”), provided that prior to the conversion of the Coventry Back-End Note, the Buyer must have paid off the Buyer Note in cash.  Payment to the Company under the Buyer Note must be no later than October 12, 2015. The Buyer Note will be initially secured by the pledge of the Coventry Back-End Note. The Back-End Note was funded on June 24, 2015.

The term of the Coventry Note and the Coventry Back-End Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Coventry Note and Coventry Back-End Note is convertible into Common Stock at any time after the requisite Rule 144 holding period (subject to the condition above for the Coventry Back-End Note), at a conversion price equal to 50% of the lowest closing bid price in the 15 trading days previous to the conversion. In the event the Company redeems the Coventry Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150% if prepaid prior to the 180th day after its issuance. There shall be no redemption after the 180th day. The Coventry Back-End Note may not be prepaid, except that if the Coventry Back-End Note is redeemed by the Company within six months of its issuance, all obligations of the Company and Coventry under the Coventry Back-End Note and the Buyer Note will be deemed satisfied and such notes shall automatically be deemed cancelled and of no further force or effect. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 16% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Coventry Note, the Company paid $1,750 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company paid an additional $1,750 in legal fees and expenses for the Coventry Back-End Note.

On February 12, 2015, the Company entered into a Convertible Redeemable Note with Coventry whereby the Company issued a $63,125 face value 8% Convertible Note (the “Coventry Note”) with a term of twelve months (the “Coventry Maturity Date”) to replace a $58,675 debt to Bingham McCutchen LLP originally incurred on March 1, 2014. Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock , at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the Coventry Note becomes immediately due and payable.

On February 17, 2015, the Company entered into a Convertible Redeemable Note with Coventry whereby the Company issued a $102,135 face value 8% Convertible Note (the “Coventry Note”) with a term of twelve months (the “Coventry Maturity Date”) to replace a $100,000 note to Beaufort Capital Partners LLP originally issued on January 29, 2015. Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock , at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the Coventry Note becomes immediately due and payable. In connection with the note, the Company issued a separate $5,000 8% convertible Rule 144 note to Coventry, with the same conversion terms, to pay for legal expenses.
 
 
32

 
 
 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
On February 27, 2015, the Company entered into a Securities Purchase Agreement (the “Coventry SPA”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued two Convertible Notes (together, the “Notes”) in the amount of $37,500 each, at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The first of the two Convertible Notes (the “Coventry Note”) was paid by the Buyer on February 27, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $37,500 promissory note issued to the Company by the Buyer (“Buyer Note”), provided that prior to the conversion of the Coventry Back-End Note, the Buyer must have paid off the Buyer Note in cash.  Payment to the Company under the Buyer Note must be no later than February 27, 2016. The Buyer Note will be initially secured by the pledge of the Coventry Back-End Note. The Back-End Note was funded on June 24, 2015.
 
The term of the Coventry Note and the Coventry Back-End Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Coventry Note and Coventry Back-End Note is convertible into Common Stock at any time after the requisite Rule 144 holding period (subject to the condition above for the Coventry Back-End Note), at a conversion price equal to 50% of the lowest closing bid price in the 20 trading days previous to the conversion. In no event shall the Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. In the event the Company redeems the Coventry Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150%. The Coventry Back-End Note may not be prepaid, except that if the Coventry Back-End Note is redeemed by the Company within six months of its issuance, all obligations of the Company and Coventry under the Coventry Back-End Note and the Buyer Note will be deemed satisfied and such notes shall automatically be deemed cancelled and of no further force or effect. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Coventry Note, the Company paid $2,500 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company paid an additional $2,500 in legal fees and expenses for the Coventry Back-End Note.

In connection with the Notes, the Company entered into a Common Stock Purchase Warrant (the “Warrant”) which entitles Coventry to subscribe for and purchase from the Company, up to 7,000,000 shares of common stock of the Company at an exercise price of $0.05 for a period of five years. The exercise price is subject to adjustments as provided in the Warrant. Under certain circumstances, the Holder is also permitted a cashless exercise.

On March 12, 2015, the Company entered into a Securities Purchase Agreement (the “Coventry SPA”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued two Convertible Notes (together, the “Notes”) in the amount of $37,500 each, at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The first of the two Convertible Notes (the “Coventry Note”) was paid by the Buyer on March 13, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $37,500 promissory note issued to the Company by the Buyer (“Buyer Note”), provided that prior to the conversion of the Coventry Back-End Note, the Buyer must have paid off the Buyer Note in cash.  Payment to the Company under the Buyer Note must be no later than November 12, 2015. The Buyer Note will be initially secured by the pledge of the Coventry Back-End Note. The Back-End Note was funded on June 24, 2015.

 The term of the Coventry Note and the Coventry Back-End Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Coventry Note and Coventry Back-End Note is convertible into Common Stock at any time after the requisite Rule 144 holding period (subject to the condition above for the Coventry Back-End Note), at a conversion price equal to 50% of the lowest closing bid price in the 20 trading days previous to the conversion. In no event shall Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. In the event the Company redeems the Coventry Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150%. The Coventry Back-End Note may not be prepaid, except that if the Coventry Back-End Note is redeemed by the Company within six months of its issuance, all obligations of the Company and Coventry under the Coventry Back-End Note and the Buyer Note will be deemed satisfied and such notes shall automatically be deemed cancelled and of no further force or effect. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Coventry Note, the Company paid $2,500 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company paid an additional $2,500 in legal fees and expenses for the Coventry Back-End Note.

In connection with the Notes, the Company entered into a Common Stock Purchase Warrant (the “Warrant”) which entitles Coventry to subscribe for and purchase from the Company, up to 7,000,000 shares of common stock of the Company at an exercise price of $0.05 for a period of five years. The exercise price is subject to adjustments as provided in the Warrant. Under certain circumstances, the Holder is also permitted a cashless exercise.









 
33

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
On March 19, 2015, the Company entered into two Convertible Redeemable Notes with Coventry whereby the Company issued two  8% Convertible Notes (the “Coventry Notes”)with an aggregate value of $160,268 with a term of twelve months (the “Coventry Maturity Date”) to replace a $156,329 in debt to Bingham McCutchen LP originally incurred in fiscal year 2014. Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock, at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the Coventry Note becomes immediately due and payable. In connection with the note, the Company issued a separate $8,000 8% convertible Rule 144 note to Coventry, with the same conversion terms, to pay for legal expenses.
 
 On March 27, 2015, the Company entered into a Securities Purchase Agreement (the “Coventry SPA”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued two Convertible Notes (together, the “Notes”) in the amount of $50,000 each, at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The first of the two Convertible Notes (the “Coventry Note”) was paid by the Buyer on March 27, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $50,000 promissory note issued to the Company by the Buyer (“Buyer Note”), provided that prior to the conversion of the Coventry Back-End Note, the Buyer must have paid off the Buyer Note in cash.  Payment to the Company under the Buyer Note must be no later than November 27, 2015. The Buyer Note will be initially secured by the pledge of the Coventry Back-End Note. The Back-End Note was funded on June 11, 2015.

The term of the Coventry Note and the Coventry Back-End Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Coventry Note and Coventry Back-End Note is convertible into Common Stock at any time after the requisite Rule 144 holding period (subject to the condition above for the Coventry Back-End Note), at a conversion price equal to 50% of the lowest closing bid price in the 20 trading days previous to the conversion. In no event shall Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. In the event the Company redeems the Coventry Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150%. The Coventry Back-End Note may not be prepaid, except that if the Coventry Back-End Note is redeemed by the Company within six months of its issuance, all obligations of the Company and Coventry under the Coventry Back-End Note and the Buyer Note will be deemed satisfied and such notes shall automatically be deemed cancelled and of no further force or effect. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Coventry Note, the Company paid $2,500 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company paid an additional $2,500 in legal fees and expenses for the Coventry Back-End Note.

In connection with the Notes, the Company entered into a Common Stock Purchase Warrant (the “Warrant”) which entitles Coventry to subscribe for and purchase from the Company, up to 1,000,000 shares of common stock of the Company at an exercise price of $0.05 for a period of five years. The exercise price is subject to adjustments as provided in the Warrant. Under certain circumstances, the Holder is also permitted a cashless exercise.
 
In connection with the Notes, the Company entered into a Common Stock Purchase Warrant (the “Warrant”) which entitles Coventry to subscribe for and purchase from the Company, up to 7,000,000 shares of common stock of the Company at an exercise price of $0.05 for a period of five years. The exercise price is subject to adjustments as provided in the Warrant. Under certain circumstances, the Holder is also permitted a cashless exercise.
 
On May 11, 2015, the Company entered into a Securities Purchase Agreement (the “Coventry SPA”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued two Convertible Notes (together, the “Notes”) in the amount of $50,000 each, at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The first of the two Convertible Notes (the “Coventry Note”) was paid by the Buyer on May11, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $50,000 promissory note issued to the Company by the Buyer (“Buyer Note”), provided that prior to the conversion of the Coventry Back-End Note, the Buyer must have paid off the Buyer Note in cash.  Payment to the Company under the Buyer Note must be no later than January 11, 2016. The Buyer Note will be initially secured by the pledge of the Coventry Back-End Note.
 
 
 
34

 
 
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
The term of the Coventry Note and the Coventry Back-End Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Coventry Note and Coventry Back-End Note is convertible into Common Stock at any time after the requisite Rule 144 holding period (subject to the condition above for the Coventry Back-End Note), at a conversion price equal to 50% of the lowest closing bid price (with a ceiling price of $0.05)  in the 20 trading days previous to the conversion. In no event shall Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. In the event the Company redeems the Coventry Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150%. The Coventry Back-End Note may not be prepaid, except that if the Coventry Back-End Note is redeemed by the Company within six months of its issuance, all obligations of the Company and Coventry under the Coventry Back-End Note and the Buyer Note will be deemed satisfied and such notes shall automatically be deemed cancelled and of no further force or effect. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Coventry Note, the Company paid $2,500 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $2,500 in legal fees and expenses for the Coventry Back-End Note.
 
As of June 2, 2015 and with a closing date of June 5, 2015, Friendable, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Coventry SPA”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued two Convertible Notes (together, the “Notes”) in the amount of $45,966 each, at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The first of the two Convertible Notes (the “Coventry Note”) was paid by the Buyer on June 5, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $45,966 promissory note issued to the Company by the Buyer (“Buyer Note”), provided that prior to the conversion of the Coventry Back-End Note, the Buyer must have paid off the Buyer Note in cash.  Payment to the Company under the Buyer Note must be no later than February 2, 2016. The Buyer Note will be initially secured by the pledge of the Coventry Back-End Note.
 
The term of the Coventry Note and the Coventry Back-End Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Coventry Note and Coventry Back-End Note is convertible into Common Stock at any time after the requisite Rule 144 holding period (subject to the condition above for the Coventry Back-End Note), at a conversion price equal to 50% of the lowest closing bid price (with a ceiling price of $0.05) in the 20 trading days previous to the conversion. In no event shall the Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. In the event the Company redeems the Coventry Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150%. The Coventry Back-End Note may not be prepaid, except that if the Coventry Back-End Note is redeemed by the Company within six months of its issuance, all obligations of the Company and Coventry under the Coventry Back-End Note and the Buyer Note will be deemed satisfied and such notes shall automatically be deemed cancelled and of no further force or effect. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Coventry Note and other transactions on this date, the Company incurred $10,000 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $2,500 in legal fees and expenses for the Coventry Back-End Note. In connection with the Coventry Note, the Company retired $13,464 of existing convertible note debt.
 
As of June 2, 2015 and with a closing date of June 5, 2015, Friendable, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Coventry SPA”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued two Convertible Notes (together, the “Notes”) in the amount of $65,000 each, at a rate of 8% per annum. The date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be as follows: (i) the first closing (“First Closing”) June 2, 2015 shall be the purchase and sale of two  $29,500 Notes (ii) the second closing (“Second Closing”) for the purchase and sale of two $17,750 Notes shall occur within 30 days following the First Closing, (iii) the third closing for the purchase and sale of two $17,750 Notes shall occur within 30 days following the Second Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The first closing of the first of the two Convertible Notes (the “Coventry Note”) was paid by the Buyer on June 5, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $29,500 promissory note issued to the Company by the Buyer (“Buyer Note”), provided that prior to the conversion of the Coventry Back-End Note, the Buyer must have paid off the Buyer Note in cash.  Payment to the Company under the Buyer Note must be no later than February 2, 2016. The Buyer Note will be initially secured by the pledge of the Coventry Back-End Note.
 
 
 
35

 
 
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
The term of the Coventry Note and the Coventry Back-End Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Coventry Note and Coventry Back-End Note is convertible into Common Stock at any time after the requisite Rule 144 holding period (subject to the condition above for the Coventry Back-End Note), at a conversion price equal to 50% of the lowest closing bid price (with a ceiling price of $0.05) in the 20 trading days previous to the conversion. In no event shall the Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. In the event the Company redeems the Coventry Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150%. The Coventry Back-End Note may not be prepaid, except that if the Coventry Back-End Note is redeemed by the Company within six months of its issuance, all obligations of the Company and Coventry under the Coventry Back-End Note and the Buyer Note will be deemed satisfied and such notes shall automatically be deemed cancelled and of no further force or effect. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Coventry Note, the Company retired $25,456 of existing convertible note debt. In connection with the Coventry Note, the Company incurred $1,500 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $1,500 in legal fees and expenses for the Coventry Back-End Note. On July 17, 2015 the parties entered in an amendment which established a ceiling price of $0.0005 on conversion of the notes.
 
As of June 2, 2015 and with a closing date of June 4, 2015, Friendable, Inc. (the “Company”) entered into a series of Convertible Redeemable Notes (together, the “Replacement Notes”) in the aggregate amount of $124,706 with Coventry Enterprises, LLC (“Coventry”), at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The term of the Replacement Notes is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Replacement Notes is convertible into Common Stock at any time after the requisite Rule 144 holding period at a conversion price equal to 50% of the lowest closing bid price (with a ceiling price of $0.05) in the 20 trading days previous to the conversion. In no event shall the Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. The Replacement Notes may not be prepaid. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Replacement Notes the Company retired $124,706 of principal and interest on existing convertible notes.
 
On June 19, 2015, Friendable, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Coventry SPA”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued two Convertible Notes (together, the “Notes”) in the amount of $30,464 each, at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The first of the two Convertible Notes (the “Coventry Note”) was paid by the Buyer on June 5, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $30,464 promissory note issued to the Company by the Buyer (“Buyer Note”), provided that prior to the conversion of the Coventry Back-End Note, the Buyer must have paid off the Buyer Note in cash.  Payment to the Company under the Buyer Note must be no later than February 19, 2016. The Buyer Note will be initially secured by the pledge of the Coventry Back-End Note.
 
The term of the Coventry Note and the Coventry Back-End Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Coventry Note and Coventry Back-End Note is convertible into Common Stock at any time after the requisite Rule 144 holding period (subject to the condition above for the Coventry Back-End Note), at a conversion price equal to 50% of the lowest closing bid price (with a ceiling price of $0.05) in the 20 trading days previous to the conversion. In no event shall the Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. In the event the Company redeems the Coventry Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150%. The Coventry Back-End Note may not be prepaid, except that if the Coventry Back-End Note is redeemed by the Company within six months of its issuance, all obligations of the Company and Coventry under the Coventry Back-End Note and the Buyer Note will be deemed satisfied and such notes shall automatically be deemed cancelled and of no further force or effect. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Coventry Note, the Company incurred $1,946 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $1,946 in legal fees and expenses for the Coventry Back-End Note. In connection with the Coventry Note, the Company retired $30,464 of existing convertible note debt.
 
 
 
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
On June 19, 2015, Friendable, Inc. (the “Company”) entered into two Convertible Redeemable Notes (together, the “Replacement Notes”) in the aggregate amount of $65,408 with Coventry Enterprises, LLC (“Coventry”), at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The term of the Replacement Notes is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Replacement Notes is convertible into Common Stock at any time after the requisite Rule 144 holding period at a conversion price equal to 50% of the lowest closing bid price (with a ceiling price of $0.05) in the 20 trading days previous to the conversion. In no event shall the Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. The Replacement Notes may not be prepaid. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Replacement Notes the Company retired $65,408 of principal and interest on existing convertible notes. In connection with the Coventry Note, the Company incurred $3,270 in legal fees and expenses.
 
On July 17, 2015, the Company entered into a Securities Purchase Agreement (the “Coventry SPA”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued a Convertible Note (the “Note”) in the amount of $27,000, at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.
 
The term of the Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Note is convertible into Common Stock at any time after the requisite Rule 144 holding period, at a conversion price equal to 50% of the lowest closing bid price (with a ceiling price of $0.0005) in the 20 trading days previous to the conversion. In no event shall the Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. The Note may not be redeemed or prepaid. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Note, the Company incurred $1,544 in legal fees and expenses. In connection with the Note, the Company retired $25,456 of existing convertible note debt.
 
On August 1, 2015, the “Company entered into a Securities Purchase Agreement (the “Coventry SPA”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued a Convertible Note (the “Note”) in the amount of $17,408, at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.
 
The term of the Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Note is convertible into Common Stock at any time after the requisite Rule 144 holding period, at a conversion price equal to 50% of the lowest closing bid price (with a ceiling price of $0.0005) in the 20 trading days previous to the conversion. In no event shall the Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. The Note may not be redeemed or prepaid. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Note, the Company incurred $3,944 in legal fees and expenses. In connection with the Note, the Company retired $13,464 of existing convertible note debt.
 
On August 1, 2015, the Company entered into two Convertible Redeemable Notes (together, the “Replacement Notes”) in the aggregate amount of $65,408 with Coventry Enterprises, LLC (“Coventry”), at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The term of the Replacement Notes is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Replacement Notes is convertible into Common Stock at any time after the requisite Rule 144 holding period at a conversion price equal to 50% of the lowest closing bid price (with a ceiling price of $0.0005) in the 20 trading days previous to the conversion. In no event shall the Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. The Replacement Notes may not be prepaid. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Replacement Notes the Company retired $65,408 of principal and interest on existing convertible notes.
 
 
 
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
On September 18, 2015 VIS VIRES Group Inc. agreed to the Company prepaying a $43,000 note issued on April 1, 2015 for a sum of $61,660 including principal, interest, and prepayment fees. In order to pay off the note, the Company issued a replacement note to Coventry Enterprises, LLC (“Coventry”). On September 21, 2015, the “Company entered into a Securities Purchase Agreement (the “Coventry SPA”) with Coventry, pursuant to which the Company issued a Convertible Note (the “Note”) in the amount of $64,744 at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.
 
The term of the Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Note is convertible into Common Stock at any time after the requisite Rule 144 holding period, at a conversion price equal to 50% of the lowest closing bid price (with a ceiling price of $0.0005) in the 20 trading days previous to the conversion. In no event shall the Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. The Note may not be redeemed or prepaid. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Note, the Company incurred $3,083 in legal fees and expenses.
 
Consolidation of debt with Coventry Enterprises, LLC

As previously disclosed on the Form 8-K, filed with the Securities and Exchange Commission on June 9, 2015, Friendable, Inc. (the “Company”) effected a major consolidation of its convertible debt on June 5, 2015, with Coventry Enterprises, LLC (“Coventry”) becoming the major note holder of the Company. Coventry entered into Debt Purchase Agreements totaling $240,818 with the Company’s other convertible note promissory holders, which included LG Capital Funding LLC, Union Capital LLC, Jabro Funding Corp., and Carebourn Capital L.P. (the “Sellers”) whereby Coventry purchased all rights to the principal and interest of such outstanding convertible notes. Previously, conversions and simultaneous sales by multiple note holders put downward pressure of the stock price of the Company’s shares. In no event shall Coventry be allowed to effect a conversion of its notes if such conversion, along with all other shares of Company common stock beneficially owned by Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company.  Due to the limit on conversion, the Company believes such consolidation will help decrease the likelihood of the Company from being exposed to high, unpredictable conversion rates from multiple note holders.
 
Amendments to Convertible Notes with Coventry Enterprises, LLC
 
As part of the consolidation efforts, the Company entered into a certain Amendment #1 to Convertible Promissory Notes, dated June 23, 2015 (the “Amendment”), with Coventry, pursuant to which the Company agreed to change the conversion terms of three Convertible Notes originally issued by the Company on October 7, 2014 in the amount of $75,000, a second $75,000 note issued on October 7, 2014, and a third note in the amount of $102,135 issued on February 17, 2015. Per the Amendment, a ceiling price of $0.0005 is established for the conversion price on these notes.
 
As part of the consolidation efforts, the Company entered into a certain Amendment #1 to Convertible Promissory Notes, dated July 7, 2015 (the “Amendment”), with Coventry, pursuant to which the Company agreed to change the conversion terms of various Convertible Notes originally issued to Coventry on February 15, 2015 in the amount of $35,000, a $63,125 note issued on February 15, 2014, a note in the amount of $37,500 issued on February 27, 2015 , a note in the amount of $37,500 issued on March 12, 2015 , a note in the amount of $53,561 issued on March 19, 2015, and a note in the amount of $29,500 issued on June 2, 2015. Per the Amendment, a ceiling price of $0.0005 is established for the conversion price on these notes.
 
Side Letter Agreement with Coventry Enterprises, LLC
 
As part of the consolidation efforts, the Company entered into a certain Side Letter Agreement, dated July 9, 2015 (the “Agreement”) with Coventry, pursuant to which the Company agreed to change the terms of various Convertible Notes originally issued by the Company to Coventry. Per the Agreement, all redemption features of all notes issued by the Company to Coventry are null and void.
 
 
 
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Securities Purchase Agreements and Convertible Notes with Alpha Capital, Palladium Capital Advisors, and Coventry Enterprises
 
Friendable, Inc. (the “Company”) entered into a Securities Purchase Agreement, dated August 5, 2015 (the “SPA”) with Alpha Capital Anstalt (“Alpha Capital”), to issue and sell up to, in principal amount, $1,500,000 of convertible notes, payable in two tranches (the “Alpha Notes”). The first tranche of $750,000 was funded on August 5, 2015 (“Initial Closing Date”) and the second tranche of $750,000 will be funded upon the Company reaching a “trading value” of at least $2,000,000 during each thirty (30) calendar day period commencing one (1) calendar day after the Initial Closing Date and ending on the one hundred and fiftieth (150th) day after the Initial Closing Date (“Second Closing Date”, and with the Initial Closing Date, each a “Closing”). “Trading value” means the number of shares traded on the Company’s principal trading market during a specified period multiplied by the volume weighted average price (“VWAP”) for such trading period as determined by Bloomberg L.P. for the Company’s principal trading market.
 
Pursuant to the SPA, the Company also issued warrants to Alpha Capital to purchase up to a number of shares of the Company’s common stock (“Common Stock”) equal to the purchase price of the Alpha Notes divided by the conversion price in effect as of the date of Closing (the “Alpha Warrant”). The conversion price as of the Initial Closing Date was $0.0078, and therefore warrants to purchase 96,153,846 shares of Common Stock were issued to Alpha Capital. The Alpha Warrants’ per share exercise price of $0.00936 is equivalent to 120% of the conversion price.
 
For its services as a placement agent for this transaction and pursuant to the SPA, Palladium Capital Advisors, LLC (“Palladium”) shall receive the following compensation: (i) 5% of the aggregate purchase price paid in each Closing, payable in cash by wire transfer at the time of such Closing, or $37,500 in cash as of the Initial Closing Date; (ii) 2.5% of the aggregate purchase price paid in each Closing, payable in the securities purchased in the Closing, which means as of the Initial Closing Date, by (1) a convertible note in the principal amount of $18,750 (“Palladium Note”), and (2) a warrant to purchase up to a number of shares of Common Stock equal to the purchase price of the Palladium Note divided by the conversion price in effect as of the date of the Closing, or warrants to purchase 2,403,846 shares of Common Stock (the “Palladium Note Warrant”); and (iii) warrants to purchase 6% of the number of shares of Common Stock issuable upon the assumed conversion of all the convertible notes sold at each Closing divided by the conversion price in effect on the date of such Closing, or warrants to purchase 5,913,462 shares of Common Stock as of the Initial Closing Date (the “Palladium Warrant”).  The Palladium Note Warrant and Palladium Warrant will be identical to the Alpha Warrant in all other respects.
 
On August 5, 2015 the Company entered into a Securities Purchase Agreement (the “SPA”) with Alpha Capital Anstalt (“Alpha Capital”), to issue and sell up to, in principal amount, $1,500,000 of convertible notes, payable in two tranches (the “Alpha Notes”). The first tranche of $750,000 was funded on August 5, 2015 (“Initial Closing Date”) and the second tranche of $750,000 was to be funded upon the Company meeting certain stock trading milestones. On January 21, 2016, the parties agreed to waive the non-occurrence of the trading milestones in a Subsequent Closing Agreement (the “SCA”) and agreed to conduct a second closing of $250,000. On January 27, 2016 the Company issued a $250,000 7% interest note to Alpha Capital with a maturity date of July 27, 2017. After the requisite Rule 144 holding period, the note is convertible into common shares of the Company at an initial price of $0.0078 (subject to certain adjustments).
 
In connection with the January 27, 2016 closing, the Company also issued warrants to Alpha Capital to purchase up to a number of shares of the Company’s common stock (“Common Stock”) equal to the purchase price of the Alpha Notes divided by the conversion price in effect as of the date of Closing (the “Alpha Warrant”). Warrants to purchase 32,051,282 shares of Common Stock with an exercise price of $0.00936 were issued to Alpha Capital.
 
For its services as a placement agent for this transaction and pursuant to the SPA, Palladium Capital Advisors, LLC (“Palladium”) received the following compensation: (i) a convertible note in the principal amount of $18,750 (“Palladium Note”) and (ii) warrants to purchase 1,923,077 shares of Common Stock at an exercise price of $0.00936.  The Palladium Note and Palladium Warrant will be identical to the Alpha Warrant in all other respects.
 
On August 5, 2015 the Company entered into a Securities Purchase Agreement (the “SPA”) with Alpha Capital Anstalt (“Alpha Capital”), to issue and sell up to, in principal amount, $1,500,000 of convertible notes, payable in two tranches (the “Alpha Notes”). The first tranche of $750,000 was funded on August 5, 2015 (“Initial Closing Date”) and the second tranche of $750,000 was to be funded upon the Company meeting certain stock trading milestones. On January 21, 2016, the parties agreed to waive the non-occurrence of the trading milestones in a Subsequent Closing Agreement (the “SCA”). and agreed to conduct a second closing of $250,000. On March 8, 2016, the parties agreed to conduct a third closing of $200,000. On March 8, 2016 the Company entered into a Securities Purchase Agreement with two purchasers, Alpha Capital and Coventry Enterprises. On March 8, 2016 the Company issued a $110,000 7% interest note to Alpha Capital with a maturity date of September 8, 2017. After the requisite Rule 144 holding period, the note is convertible into common shares of the Company at an initial price of $0.0025 (subject to certain adjustments). On the same date, the Company also issued a $90,000 note to Coventry Enterprises with identical terms.
 
 
 
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
In connection with the March 8, 2016 closing, the Company also issued warrants to the purchasers to purchase up to a number of shares of the Company’s common stock (“Common Stock”) equal to the purchase price of the Alpha Notes divided by the conversion price in effect as of the date of Closing (the “Alpha Warrant”). Warrants to purchase 44,000,000 shares of Common Stock with an exercise price of $0.0030 were issued to Alpha Capital warrants to purchase 36,000,000 shares of Common Stock with an exercise price of $0.0030 were issued to Coventry Enterprises.
 
For its services as a placement agent for this transaction and pursuant to the SPA, Palladium Capital Advisors, LLC (“Palladium”) received the following compensation: (i) a convertible note in the principal amount of $5,000 (“Palladium Note”) and (ii) warrants to purchase 2,000,000 shares of Common Stock at an exercise price of $0.0030.  The Palladium Note and Palladium Warrant will be identical to the Alpha Warrant in all other respects.

Consulting and Marketing Agreements with EJ Media Group and TKA
 
On February 4, 2016, Friendable, Inc. (the “Company”) entered into a consulting agreement with EJ Media Group (“EJ Media”), to be effective on February 15, 2016, whereby EJ Media will create a strategic publicity campaign for Friendable and designed to:
 
 
1.
Develop a strategic publicity campaign to launch Friendable as the only app that uses the combination of geotagging and shared interests to create friendships;
 
2.
Distinguish Friendable from other dating or other social networking apps by emphasizing its focus on friendships over matchmaking;
 
3.
Leverage category expertise to secure entrepreneurial features and expert commentary in relevant publications;
 
4.
Utilize endorsements and integration to position Friendable as the new “hot” app;
 
5.
Increase awareness and downloads through consistent media placements during the course of the campaign.
 
For its services, the Company will pay EJ Media $8,000 per month for a term of four months.
 
In connection with the EJ Media agreement, the Company entered into a marketing agreement with a major advertising agency (TKA) with a focus on strategic celebrity partnerships to seek out such partnerships and related opportunities on behalf of the Company and the Friendable brand.
 
The terms of the agreement call for a series of strategic celebrity partnerships, including the integration of the Company’s brand into music videos, over a six-month period, defined to be between February 1, 2016 and July 31, 2016. For its services, TKA will receive the sum of Four Hundred Thousand U.S. Dollars ($400,000) payable in cash. In addition, TKA will receive eight million (8,000,000) shares in common stock of the Company and a warrant to purchase an additional seventeen million (17,000,000) shares in the common stock of the Company.
 
The agency (TKA) is a U.S. person and we expect to rely on Rule 506 of Regulation D and/or Section 4(2) of the Securities Act of 1933 to issue the shares of our common stock.
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements.


 
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Going Concern
 
At December 31, 2015, we had an accumulated deficit of $7,465,001 since our inception and incurred a net loss of $3,154,969 for the year ended December 31, 2015.  We expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our independent auditors included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern in their report on our annual financial statements for the year ended December 31, 2015.
 
We have generated minimal revenues and have incurred losses since inception. Accordingly, we will be dependent on future additional financing in order to seek other business opportunities in the dating app industry or new business opportunities. We are considered a development stage company in the dating app industry. As of December 31, 2015, there is no assurance that we will be able raise sufficient capital to sustain our operations.
 
Application of Critical Accounting Policies
 
Basis of Presentation
 
Our financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. Our fiscal year-end is December 31, 2015.
 
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. We regularly evaluates estimates and assumptions related to useful life and recoverability of long-lived assets, deferred income tax asset valuations, asset retirement obligations, financial instrument valuations, and loss contingencies. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe 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 us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
 
Revenue Recognition
 
We recognize revenue when products are fully delivered or services have been provided and collection is reasonably assured.
 
Advertising Costs
 
Our policy regarding advertising is to expense advertising when incurred.


 
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Cash and Cash Equivalents
 
We consider all highly liquid instruments purchased with a maturity of six months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
 
Impairment of Long-Lived Assets
 
We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows.
 
If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
 
Stock-based compensation
 
We record stock-based compensation in accordance with ASC 718, Compensation – Stock Based Compensation, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards made to employees and directors, including stock options.
 
ASC 718 requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. We use the Black-Scholes option pricing model as its method in determining fair value. This model is affected by our stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to our expected stock price volatility over the terms of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.
 
Mineral Property Costs
 
Prior to the Merger, we were an exploration stage company and did not realize any revenues from our operations.  We were primarily engaged in the acquisition and exploration of mineral properties. Mineral property exploration costs were expensed as incurred. Mineral property acquisition costs were initially capitalized.  We assess the carrying costs for impairment, whenever events or changes in circumstances indicate that the carrying cost may not be recoverable under ASC 360, Property, Plant, and Equipment at each reporting date. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, will be capitalized. Such costs will be amortized using the units-of-production method over the estimated recoverable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
 
Asset Retirement Obligations
 
We record asset retirement obligations in accordance with ASC 410-20, Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and normal use of the asset. ASC 410-20 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, we will recognize a gain or loss on settlement. As at December 31, 2013, we have not incurred any asset retirement obligation related to the exploration and development of its resource properties.


 
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Comprehensive Loss
 
ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the consolidated financial statements. As at December 31, 2013 and December 31, 2012, we have no items that represent other comprehensive loss and, therefore, have not included a schedule of other comprehensive loss in the financial statements.
 
Financial Instruments
 
FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value, as required by ASC 820, must maximize the use of observable inputs and minimize the use of unobservable inputs.
 
Our assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. The carrying values of cash, accounts payable, and due to related parties approximate fair values because of the short-term maturity of these instruments. Unless otherwise noted, it is management’s opinion that we are not exposed to significant interest, currency or credit risks arising from these financial instruments.
 
Basic and Diluted Net Loss Per Share
 
We compute net loss per share in accordance with ASC 260, Earnings per Share.  ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. Shares underlying these securities totaled approximately 3,075 as of December 31, 2014.
 
Income Taxes
 
We account 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. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
 
Recent Accounting Pronouncements
 
We have implemented all other new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
 
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not Applicable


 
43

 

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 
PART I - FINANCIAL INFORMATION
 
FRIENDABLE, INC.
(FORMERLY IHOOKUP SOCIAL, INC.)
 
CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
December 31, 2015
 
 
 
Report of Independent Registered Public Accounting Firm
 
F-1
     
Consolidated Balance Sheets as of December 31, 2015 and 2014
 
F-2
     
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2015 and 2014
 
F-3
     
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2015 and 2014
 
F-4
     
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014
 
F-5
     
Notes to the Consolidated Financial Statements
 
F-6 - F-26
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 

 
44

 
 

 
Report of Independent Registered Public Accounting Firm

 

 
To the Board of Directors and Stockholders of
 Friendable, Inc.
 
We have audited the accompanying consolidated balance sheets of Friendable, Inc. (formerly iHookup Social, Inc.) as of December 31, 2015 and 2014 and the related consolidated statements of comprehensive loss, stockholders’ deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Friendable, Inc. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
 
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a working capital deficit and has accumulated losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
 
/s/ “Manning Elliott LLP”
 
CHARTERED PROFESSIONAL ACCOUNTANTS
 
Vancouver, Canada
 
 
April 14, 2016
 
 
 
 
 
 
 
 
 

 
F-1

 
 
 
FRIENDABLE, INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in US dollars)
  
         
ASSETS
 
 
December 31, 
2015
 
December 31, 
2014
                 
Current assets
               
Cash
 
$
15,880
   
$
-
 
Accounts receivable
   
3,848
     
14,137
 
Prepaid expenses
   
1,897
     
49,741
 
Debt issue costs (Note 12)
   
200,855
     
47,122
 
Total current assets
   
222,480
     
111,000
 
                 
Intangible assets (Note 4)
   
35,000
     
-
 
                 
 TOTAL ASSETS
 
$
257,480
   
$
111,000
 
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
LIABILITIES
               
Current liabilities
               
Checks issued in excess of cash on hand
 
$
-
   
$
945
 
Accounts payable
   
1,183,169
     
683,516
 
Convertible debentures short-term (Note 12)
   
493,742
     
120,432
 
Deferred revenue
   
6,323
     
17,836
 
Promissory notes and accrued interest (Note 7)
   
-
     
261,425
 
Total current liabilities
   
1,683,234
     
1,084,154
 
                 
Convertible debentures long-term (Note 12)
   
74,263
     
-
 
                 
Total liabilities
   
1,757,497
     
1,084,154
 
 
Going concern (Note 1)
               
Commitments (Note 9)
               
Subsequent events (Note 16)
               
                 
STOCKHOLDERS' DEFICIT
               
Preferred stock, 50,000,000 shares authorized at par value of $0.0001, 22,165 (December 31, 2014 – 22,807) shares issued and outstanding (Note 5)
   
2
     
2
 
Common stock, 10,000,000,000 shares authorized at par value of $0.0001, 218,977,542 (December 31, 2014 – 8,802,940) shares issued and outstanding (Note 5)
   
21,898
     
881
 
Additional paid-in capital
   
5,947,584
     
3,340,495
 
Common stock subscriptions receivable (Note 10)
   
(4,500
)
   
(4,500
)
Deficit
   
(7,465,001
)
   
(4,310,032
)
Total Stockholders' Deficit
   
(1,500,017
)
   
(973,154
)
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 
$
257,480
   
$
111,000
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 

 
F-2

 
 
 FRIENDABLE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in US dollars)
 
 
   
Year Ended
December 31, 2015
   
Year Ended
December 31, 2014
 
             
REVENUES
 
$
151,191
   
$
167,079
 
                 
OPERATING EXPENSES
               
    Accretion and interest expense
 
$
1,406,852
   
$
1,240,935
 
    App hosting (Note 10)
   
382,330
     
103,927
 
    Commissions
   
45,357
     
50,124
 
    General and administrative (Note 10)
   
881,539
     
1,372,772
 
    Financing costs
   
117,077
     
90,716
 
    Product development (Note 10)
   
249,221
     
259,984
 
    Sales and marketing
   
228,880
     
512,897
 
                 
TOTAL OPERATING EXPENSES
   
3,311,256
     
3,631,355
 
                 
LOSS FROM OPERATIONS
   
(3,160,065
)
   
(3,464,276
)
                 
OTHER EXPENSES
               
    Impairment loss (Note 13)
   
-
     
(293,750)
 
    Gain on extinguishment of debt  (Notes 3 and 7)
   
5,096
     
76,359
 
                 
NET LOSS AND COMPREHENSIVE LOSS
 
$
(3,154,969
)
 
$
(3,681,667
 
                 
BASIC AND DILUTED LOSS PER SHARE
   
(0.03
)
   
(2.84
)
                 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
   
96,575,512
     
1,295,364
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
 
F-3

 
 
FRIENDABLE, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2015
(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, 2013
   
5,413
   
$
1
     
   
$
   
$
4,999
   
$
(5,000
)
 
$
(16,109
)
 
$
(16,109
)
                                                                 
Issuance of preferred shares (Note 13)
   
     
     
588
     
1
     
293,749
     
     
     
293,750
 
                                                                 
Conversion of preferred shares (Note 5)
   
771,426
     
77
     
(2,193
)
   
(1
)
   
(76
)
   
     
     
 
                                                                 
Reverse acquisition transaction (Note 14)
   
111,000
     
11
     
24,413
     
2
     
479,546
     
     
(612,256
)
   
(132,697
)
                                                                 
Share subscriptions received
   
     
     
     
     
     
500
     
     
500
 
                                                                 
Shares issued for services
   
197,495
     
20
     
     
     
269,696
     
     
     
269,716
 
                                                                 
Issuance of convertible notes (net) (Note 12)
   
7,717,606
     
772
     
     
     
2,292,581
     
     
     
2,293,353
 
                                                                 
Net loss for the year
   
     
     
     
     
     
     
(3,681,667
)
   
(3,681,667
)
                                                                 
Balance December 31, 2014
   
8,802,940
   
$
881
     
22,807
   
$
2
   
$
3,340,495
   
$
(4,500
)
 
$
(4,310,032
)
 
$
(973,154
)
                                                                 
Shares issued for services
   
1,150,000
     
115
     
     
     
6,325
     
     
     
6,440
 
                                                                 
Conversion of convertible notes (Note 12)
   
190,385,736
     
19,038
     
     
     
269,629
     
     
     
288,667
 
                                                                 
Conversion of preferred shares (Note 5)
   
18,638,866
     
1,864
     
(642)
     
     
(1,864
)
   
     
     
 
                                                                 
Issuance of convertible notes (net) (Note 12)
   
     
     
     
     
2,332,999
     
     
     
2,332,999
 
                                                                 
Net loss for the year
   
     
     
     
     
     
     
(3,154,969
)
   
(3,154,969
)
                                                                 
Balance December 31, 2015
   
218,977,542
   
$
21,898
     
22,165
   
$
2
   
$
5,947,584
   
$
(4,500
)
 
$
(7,465,001
)
 
$
(1,500,017
)
 
  
The accompanying notes are an integral part of these consolidated financial statements.

 
F-4

 
 

 FRIENDABLE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS 
(Expressed in US dollars)
 
   
Year Ended 
December 31, 2015
   
Year Ended 
December 31, 2014
 
Cash Flows from Operating Activities:
           
Net loss
  $ (3,154,969 )   $ (3,681,667 )
                 
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
               
Impairment loss
    -       293,750  
Interest on promissory note
    64,129       11,425  
Accretion expense
    1,201,118       1,168,982  
Gain on extinguishment of debt
    (5,096 )     (76,359 )
Shares issued for services
    50,830       225,325  
Changes in Operating Assets and Liabilities
               
Decrease (increase) in accounts receivable
    10,289       (14,137 )
Increase in deferred revenue
    (11,513 )     17,836  
Decrease (increase) in prepaid expenses
    3,453       (5,350 )
Increase in accounts payable
    562,414       620,934  
Net Cash Used in Operating Activities
    (1,279,345 )     (1,439,261 )
                 
Cash Flows provided by Investing Activities:
               
Acquisition of Intangible Assets
    (35,000 )     -  
Cash acquired in the Merger
    -       966  
Net Cash Provided by (Used in) Investing Activities
    (35,000 )     966  
                 
Cash Flows from Financing Activities:
               
Proceeds from convertible debentures (net)
    1,331,170       1,186,850  
Proceeds from promissory notes
    -       250,000  
Share subscriptions received
    -       500  
Net Cash Provided by Financing Activities
    1,331,170       1,437,350  
                 
Net Increase (Decrease) in Cash
    16,825       (945 )
                 
Checks Issued in Excess of Cash on Hand – Beginning
    (945 )      
                 
Cash (Checks Issued in Excess of Cash on Hand)  – Ending
  $ 15,880     $ (945 )
                 
Supplemental Cash Flow Information:
               
Cash paid for interest
  $     $  
Cash paid for income taxes
  $     $  
                 
Non-cash Investing and Financing Items:
               
Convertible debentures issued to extinguish promissory notes
    261,425        
Shares issued for conversion of debt (net)
  $ 288,688     $ 1,437,436  
Shares issued in reverse acquisition transaction
  $       68,366  
  
Cash consists of:
           
Cash
  $ 15,880     $  
Checks issued in excess of cash on hand
  $       (945 )
 

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

 
F-5

 
FRIENDABLE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(Expressed in US dollars)

1.  NATURE OF BUSINESS AND GOING CONCERN
 
Friendable, Inc., a Nevada corporation (the “Company”), was incorporated in the State of Nevada as Digital Yearbook Inc.
 
Effective June 15, 2011, the Company completed a merger with its subsidiary, Titan Iron Ore Corp., a Nevada corporation, which was incorporated solely to effect a change in the Company’s name from “Digital Yearbook Inc.” to “Titan Iron Ore Corp.” The Company then began to pursue business in the area of mining exploration.

On February 3, 2014, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger”) with iHookup Operations Corp., a wholly-owned Delaware subsidiary of the Company (“Acquisition Sub”) and iHookup-DE, whereby iHookup-DE was the surviving entity and became the wholly-owned subsidiary of the Company. iHookup-DE’s former stockholders exchanged all of their 6,000 shares of outstanding common stock for 25,000 shares of the Company’s designated Series A Preferred Stock.
 
The Merger was regarded as a reverse recapitalization whereby iHookup-DE was considered to be the accounting acquirer as its shareholders retained control of the Company after the Merger. On February 3, 2014, the Merger was completed (see Note 14) 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".

The accompanying 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 December 31, 2015 the Company has a working capital deficiency of $1,460,754 and has an accumulated deficit of $7,465,001 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 from sales of its stock and the issuance of convertible debentures. The 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 (see Note 16).
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
These consolidated financial statements include the accounts of Friendable, Inc., from the date of acquisition, and its wholly owned subsidiary, iHookup-DE from inception (see Note 14).
 
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.

 
 
 
 

 


 
F-6

 
FRIENDABLE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(Expressed in US dollars)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

On April 29, 2014, the Company completed a common stock and preferred stock reverse stock split at a ratio of 20 to 1. Furthermore, on March 19, 2015, the Company completed a common stock and preferred stock reverse stock split at a ratio of 100 to 1. The reverse stock splits have been retroactively applied to all common stock, preferred stock, weighted average common stock, and loss per common stock disclosures. 

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 assets and liabilities acquired in asset acquisition and reverse recapitalization transactions, useful life and recoverability of long-lived assets, valuation of convertible debenture conversion options, deferred income tax asset valuations, financial instrument valuations, share-based payments, other equity-based payments, and loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. 
 
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities. The Company derives revenues from the sale of application software, unlimited messaging subscriptions for periods varying from one to twelve months, and arrangements for virtual gifts and access to special features referred to as coin packs. Revenue from the sale of application software is recognized upon download. Revenue from messaging subscriptions is recognized as revenue ratably over the subscription period beginning on the date the service is made available to customers. Revenue from coin packs is recognized on a consumption basis commensurate with the customer utilization of such resources.
 
Advertising Costs
The Company’s policy regarding advertising is to expense advertising when incurred. During the year ended December 31, 2015, the Company incurred $16,302 (December 31, 2014: $254,848) 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 estimated lives and other long-lived assets 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 estimated lives and other long-lived assets 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.

 
F-7

 
FRIENDABLE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(Expressed in US dollars)

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.