Freeze Tag, Inc. - FORM 10-K

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EX-32.2 - CERTIFICATION - Freeze Tag, Inc.	frzt_ex322.htm
EX-32.1 - CERTIFICATION - Freeze Tag, Inc.	frzt_ex321.htm
EX-31.2 - CERTIFICATION - Freeze Tag, Inc.	frzt_ex312.htm
EX-31.1 - CERTIFICATION - Freeze Tag, Inc.	frzt_ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

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

For the transition period from_____________ to _____________.

Commission file number 000-54267

FREEZE TAG, INC.

(Exact name of registrant as specified in its charter)

Delaware		20-4532392
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

18062 Irvine Blvd., Suite 103 Tustin, California		92780
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (714) 210-3850

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

Title of each class		Name of each exchange on which registered
None		None

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

Common Stock, par value $0.00001

(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 ¨ No x

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

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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
		Emerging growth company	¨

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

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

Aggregate market value of the voting stock held by non-affiliates as of June 30, 2017: $2,841,071 based on the closing price of $0.30 on June 30, 2017 of our common stock (adjusted for reverse stock split). The voting stock held by non-affiliates on that date consisted of 9,470,238 shares of common stock (adjusted for reverse stock split).

Applicable Only to Registrants Involved in Bankruptcy Proceedings During the Preceding Five Years:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨

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 2, 2018, there were 72,306,123 shares of common stock, par value $0.00001, issued and outstanding.

Documents Incorporated by Reference

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None.

Freeze Tag, Inc.

TABLE OF CONTENTS

PART I

ITEM 1 –

BUSINESS

2

ITEM 1A –

RISK FACTORS.

16

ITEM 1B –

UNRESOLVED STAFF COMMENTS

27

ITEM 2 –

PROPERTIES

27

ITEM 3 –

LEGAL PROCEEDINGS

27

ITEM 4 –

MINE SAFETY DISCLOSURES

27

PART II

ITEM 5 –

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

28

ITEM 6 –

SELECTED FINANCIAL DATA

31

ITEM 7 –

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

31

ITEM 7A –

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

37

ITEM 8 –

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

F-1

ITEM 9 –

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

38

ITEM 9A –

CONTROLS AND PROCEDURES

38

ITEM 9B –

OTHER INFORMATION

39

PART III

ITEM 10 –

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

40

ITEM 11 –

EXECUTIVE COMPENSATION

42

ITEM 12 –

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

45

ITEM 13 –

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

46

ITEM 14 –

PRINCIPAL ACCOUNTING FEES AND SERVICES

48

PART IV

ITEM 15 –

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

49

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PART I

Explanatory Note

This Annual Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under the heading “Management’s Discussion and Analysis of Financial Condition or Plan of Operation.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. The Company’s future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

ITEM 1 – BUSINESS

Corporate History

We were incorporated as Freeze Tag, Inc. in February 2006 in the State of Delaware. In March 2006, Freeze Tag, LLC, our predecessor which was formed in October 2005, was merged with and into Freeze Tag, Inc. In October of 2017, we completed a merger transaction with Munzee Inc. in a transaction in which Freeze Tag, Inc. became the surviving entity and both companies merged their operations together. Under U.S. generally accepted accounting principles, the merger is treated as a “reverse merger” under the purchase method of accounting, with Munzee as the accounting acquirer. Accordingly, Munzee’s historical financial results of operations replace Freeze Tag’s historical financial results of operations for all periods prior to the Merger and, for all periods following the Merger, the financial results of operations of the combined company will be included in the Company’s financial statements. The new combined entity maintains offices in Tustin, California and McKinney, Texas. Other corporate actions that occurred as a result of the merger are that Robert Vardeman, Jr., former CEO of Munzee Inc. became President of Freeze Tag, Inc. and both Robert Vardeman, Jr. and Robert D. Vardeman were added to the Freeze Tag, Inc. Board of Directors. The new Board of Directors consists of Craig Holland, Mick Donahoo, Robert Vardeman, Jr., and Robert D. Vardeman.

Business Overview

Freeze Tag, Inc. is a creator of location-based, mobile social games that are fun and engaging for consumers and businesses. Based on a free-to-play business model that has propelled games built and marketed by some of our competitors to worldwide success, we employ state-of-the-art data analytics and proprietary technology to dynamically optimize the gaming experience for revenue generation. Players can download and enjoy our games for free, and, if they so choose, they can purchase virtual items and additional features within the game to increase the fun factor.

Founded by gaming industry veterans, Freeze Tag has launched several successful games over the course of its history. Our current portfolio includes hits such as Munzee®, a social platform with over 7 million locations worldwide and hundreds of thousands of players that blends gamification and geolocation into an experience that rewards players for going places in the physical world, Garfield Go, a Pokemon Go style augmented reality game based on the iconic cat Garfield, WallaBee®, an addictive collecting game with over 2,000 beautifully drawn digital cards, as well as many social mobile games that provide endless hours of family-friendly fun. We also offer our technology and services to third party businesses that want to leverage mobile gaming in their marketing and branding programs. For example, our Eventzee® solution allows businesses to create private scavenger hunts in physical places such as malls, tradeshows, company events or campuses to create immersive brand experiences.

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Our newest location based product, ZeeTours, was launched in December 2017 through a marketing contract with Groupon. ZeeTours is a location-based smartphone game that combines fitness, learning and fun into a zany walking tour.

Our mission is to design, develop and deliver innovative digital entertainment that surprises and delights. Our products bring families together by providing fun to kids of all ages. We also strive to create a workplace environment where creativity and fun can thrive in a demanding industry.

Business Strategy

In recent years, we have shifted our business strategy to focus our efforts on creating free-to-play social games for the mobile market. We’ve made this change because we believe that games that are social and mobile will provide the greatest revenue opportunities now and in the foreseeable future. This change in direction has not been an easy one as we’ve had to deploy resources differently, learn new techniques, and experiment with new game designs and marketing processes.

We have also announced our intention to grow through acquisition. The merger with Munzee Inc. is evidence that we are making progress on our intention to grow the business through merging and/or acquiring other companies in our field. We feel that the time is right to build an alliance of mobile game developers who can become stronger and more successful by working together to build a company that can leverage market intelligence, development expertise and cross-promotional opportunities to achieve great results for our customers and shareholders. In the event we do enter into any such transactions in the future, such transactions will likely be accomplished through the issuance of shares of our stock and/or in connection with a strategic financial investor, and not with cash directly from us unless and until our cash position improves.

Augmented Reality and Geo Location Games Market

In 2017, we launched Garfield Go, the company’s first augmented reality location based game (prior to the merger with Munzee Inc.). Garfield Go has become popular with our customers and has helped us to become more proficient in the development of augmented reality and location-based applications. We look forward to expanding our portfolio of games and applications that include augmented reality features because we believe that consumers are looking for new and exciting gaming experiences. We believe the future market potential for games and applications for consumers and businesses that include augmented reality is growing and will continue to expand.

According to Digi Capital’s AR/VR report (Digi Capital AR/VR report http://www.digi-capital.com/news/2017/01/after-mixed-year-mobile-ar-to-drive-108-billion-vrar-market-by-2021/#more-1617), Nintendo/The Pokémon Company/Niantic had a breakout success that even they didn’t anticipate with their augmented reality and geolocation games. Pokémon Go delivered $600 million mobile AR revenue in its first three months alone, making more money through the year than the entire virtual reality (VR) games software market in 2016. While this came from a very specific set of circumstances, many mobile game companies are developing strategies to build on the AR and geolocation games market that Pokemon Go has fostered among consumers.

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Free-to-play Business Model

The free-to-play business model for games was pioneered on the PC platform and has exploded globally on the mobile platform. The free-to-play model allows users to download and play an enjoyable, but limited, portion of a game for free. If the user wants to access premium features or special virtual items to increase the fun factor, then the user is required to pay, usually $0.99 per feature or item or $0.99 for a bundle of virtual items. For example, if a player has run out of “lives” or “moves” in a game, the player is given two options: 1) Wait for the lives to re-charge which involves waiting but no expense of money or virtual currency; 2) Spend money or virtual currency to buy additional “lives” and keep playing immediately. We use this business model in our Garfield Go game, where players can purchase additional food items to feed Garfield. In Munzee, players can purchase blast caps to capture virtual Munzees deployed near them.

In a just a few years, the free-to-play business model has proven to be a very successful model for mobile games. The revenue potential of a game largely depends on the fun-factor and popularity of the game and the game creator’s proprietary techniques for encouraging the player to make a purchase decision – without overly offending the player. The potential for rapidly spreading the game through social networks and small in-game purchases can add up to a very sizeable business opportunity. One of the top grossing games since it was launched in 2012, owned and marketed by King Digital, one of our competitors, is called Candy Crush Saga, a seemingly simple game where a user combines 3 or more color candies on a puzzle board to get points. Think Gaming, a service that analyzes and consults to mobile “freemium” game makers, publishers and investors, estimates that Candy Crush Saga grossed over $425,000 per day in 2015, or over $150 million per year, with a lifetime user revenue of merely $3.00 from in-game purchases.

Candy Crush Saga Estimated Revenue

(Source: ThinkGaming.com)

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While the success of Candy Crush Saga illustrates the potential market of so called “free-to-play” games, we have no relationship with King Digital or any of its games, and cannot expect and cannot predict that any of our launched games or games in development can have anywhere close to the success of games of our competitors. We have historically been unable to break even, much less ever enjoyed success of a game that generates multi-millions of dollars in revenues. Nevertheless, our business model is to attempt to develop and launch successful games. However, there is no assurance we will ever be able to do so.

Going forward, we plan on the majority of Freeze Tag’s mobile games to be based on the free-to-play model. In addition, we believe that games are more fun with friends, so we connect our players with major social networks such as Facebook and Twitter to enhance the games’ addictiveness, enjoyment and world-of-mouth referrals. In executing our business model, we have previously employed a proprietary game engine and real-time data analytics to dynamically optimize the gaming experience for revenue generation.

In the future, we plan to continue to employ our game engine, and where and when appropriate, we will develop specific games using the Unity Development platform. Unity (www.unity3d.com) has become the development platform of choice for many game studios, and allows us to quickly access additional talent in game development. We also plan to utilize other technologies in their native development environment (such as HTML5) as circumstances dictate. This shift will allow us to find the best development teams, engineering teams, and partners to help us quickly deploy our games.

Explosive Growth for Mobile Games

According to a 2016 report from Newzoo (a global market research firm with a primary focus on games), the global market for mobile games revenue will increase from $29.7 billion in 2015 to $58.1 billion in 2020, translating into a compound annual growth rate (CAGR) of 14.3%.

Source: Newzoo 2016 Mobile Games Report

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A Truly Global Market

The market for mobile applications grows as the number of smartphones and tablets increases. As of 2016, smartphone penetration reached 2.3 billion users or about 31% of the total global population. However, there is much room for growth. In 2016, almost half of the global users were found in the Asian Pacific region with other areas of the world such as Latin America and the Middle East/Africa set to record impressive growth, according to the Newzoo Mobile Games Report.

Source: Newzoo 2016 Mobile Games Report

Popular Smartphone Devices

One of the key elements of the growth of mobile game applications is the growth and introduction of new smartphone devices. As evidenced by the chart below, in the USA, Apple and Samsung products dominate the market. It is important for app developers to be aware of the most popular devices to ensure that their applications are optimized for use in order to reach the majority of the consumers who own those devices.

Source: Newzoo 2016 Mobile Games Report

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The Female Player

The explosive growth of the mobile games market can be partly attributed to a relative increase in the number of female players. Gaming is historically a male dominated market with action-based games. But the modern female with disposable income, a smartphone and time on her hands has changed everything. This market development has opened the door wide for a previously niche category of games referred to as “casual” games. Candy Crush Saga is an example of a casual game, and clearly, this is no longer a niche category.

The Freeze Tag Strategy

In targeting the global market for mobile games, we are highly focused on developing mobile social games that are casual, fun and engaging for all ages and gender. The free-to-play business model combined with the use of best-in-class development environments (be it the Freeze Tag Game Engine, Unity3D, HTML/CSS/Javascript engines or other technology) and Analytics and Deployment tools, allows us to systematically launch, optimize and monetize our games. We design our games to be never ending entertainment that our users will enjoy playing and be willing to pay us $0.99 or more from time-to-time for special features and virtual items to keep having fun. We believe that the free-to-play model should not be run as a sprint but rather as a marathon. Over the span of several months, or even years, each game is continuously subject to this optimization process to increase user enjoyment and financial return to the company.

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Distribution and Marketing

We market, sell and distribute our games primarily through direct-to-consumer digital storefronts, such as Apple’s App Store, the Google Play Store and Amazon’s App Store. We also sell to our players directly through our own web site http://www.freezetag.com and http://store.freezetag.com. We work with payment vendors like Shopify, Square and PayPal to process our online payments. In addition to publishing our smartphone games on direct-to-consumer digital storefronts, we also publish some of our titles on other platforms, such as the Facebook App Store, the Mac App Store and PC Download portals such as Big Fish Games and Gamehouse.

User Acquisition

In the free-to-play business model, a constant stream of new players is necessary to be successful. So, we have partnered with advertising networks and lead generation companies such as Facebook and Google to help us reach the appropriate audience for our products. We also employ data analytics to determine which creative messages and which lead referral sources are bringing in the most players who spend money in our games.

To help reduce the cost of acquiring downloads, we have embedded social networking mechanisms into our games to enable our best customers to do the marketing for us. Every time a satisfied player invites her friend to play one of our games, we have been introduced to a new potential customer without incurring a cost to entice that player to download the game. We will continue to design methods to encourage our players to invite their friends and spread the word about our games. Each time a user downloads one of our games from a friend referral without a direct expense from us, our user acquisition cost is lower, and therefore our profitability is potentially higher.

Technology and Tools

Free-to-play Revenue Model

The game industry, like many other forms of entertainment (music, TV, books, etc.) is undergoing a major shift. The free-to-play business model increased in appeal to game players of every genre and platform. Nowhere has this been felt more deeply than the mobile market. Free is a very powerful marketing approach that is irresistible to game players. The top grossing charts on popular mobile app stores like Apple, Google, and Amazon continually show that “free” games earn the most revenue for their developers. So with all this “free-ness,” how does a game creator make any money?

Optimizing Customer Lifetime Value

The key business metric of any free-to-play game is the Customer Lifetime Value (CLV). A free-to-play gamer starts out as a zero revenue customer, but he or she may become a paying customer throughout the customer’s life of playing the game. The game creator’s business is an ongoing engagement with the game players to get them to buy things in the game, without ruining the fun. Optimizing this delicate balance is where the most revenue can be extracted.

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The following graphic, developed by XEODesign identifies the approach to creating free-to-play games that are fun and engaging to consumers.

There are many techniques for generating free-to-play revenue. They range from a simple static “pay to access more levels” model to a more dynamic model where player behaviors are systematically analyzed to strategically introduce purchase options to help the user enjoy more of the game. Freeze Tag dynamically optimizes a game’s CLV by integrating two important elements: (1) Data Analytics and (2) a Dynamic Game Engine (whether it be the Freeze Tag Game Engine, Unity3D, or other native development environment).

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This combination allows us to optimize the features of our games to refresh and update the content so that players are happily engaged and invite their friends to play with them. When players invite their friends, they lower our user acquisition costs. The longer and more often players come back to play, the more likely they are to spend money on virtual goods (through in-game purchases). The net result is a customer with a greater lifetime value. The happier customers are, the more they share with their friends and the more often they come back to spend money. Everything we do is geared to our players having more fun because ultimately customer fun translates into revenue.

Data Analytics

By using commercial and proprietary data analytics tools, we analyze various aspects of the game across the entire pool of players to determine what modifications can be made to the game, which allows us to: (1) make it more fun, and (2) induce a purchase.

Some of the analysis we perform regularly are:

	·	Analyze the number of users that complete the tutorial process
	·	Identify the Day 1, Day 7, and Day 30 retention metrics of how many players are returning to play
	·	Quantify the ARPDAU (average revenue per daily active user) to determine the monetization effectiveness of each game
	·	Determine the percentage of overall users that are converting to spenders
	·	Quantify the ARPPDAU (average revenue per paying daily active user)
	·	Determine what parts of the game users are playing most
	·	Identify where in the game users are dropping out, and find out why
	·	Average play time per day and per session
	·	Importance of social networks, like Facebook and Twitter, to the game and how many players login to social networks
	·	Frequency of users playing against friends
	·	Identify what events most correlate with purchase events
	·	Identify how many invites a user is sending out, how long it takes them to send the first invite out, and how many of those players are coming in.

Dynamic Game Engine(s)

Over the years, we have developed a proprietary dynamic game engine (Freeze Tag Engine) that allows us to make changes to game play and game economies on-the-fly, in most cases, without requiring the download of another update. We also integrate several business analytics packages, and other key game management tools into our games that provide us with real time data to measure detailed player behavior, and respond directly to that behavior. Starting in 2014 and continuing forward, we began using the Unity3D Development Engine (www.unity3d.com). We have optimized and are continuing to optimize this engine in many of the same ways that our own engine was optimized. However, we continue to develop our own game engine which uses web-friendly technology that can be easily ported to the most popular mobile platforms, iOS and Android. As our games have become more sophisticated with the need for constant data connection and several points of data required to be associated with physical locations on a map, we have developed server-side tools to handle these requirements.

Platform Portability - Dynamic Game Engine(s)

Over the years, the Freeze Tag Game Engine has allowed us to the ability to port across multiple platforms using a single codebase. We continue to look to contract with outside teams and outside contractors, allowing us to maintain a smaller internal team.

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As we continue our development efforts in 2018, our approach is to review the technical requirements of the game we want to develop, then make a decision as to which Game Engine is the most appropriate to implement for that development effort, whether that be our own proprietary game engine based on web technologies or third party platforms such as Unity 3D.

As we make decisions about which Game Engine to employ, here are a few of the things that we look to have:

	·	A single codebase that can be easily ported to other platforms
	·	Ability to “bolt on” other technologies and codes to easily integrate with other SDK’s, platforms and special needs
	·	Interface easily with scalable backend databases and architecture
	·	Easily localized into new languages
	·	Updates can be pushed to the game allowing us to change things like:

	○	adding new characters
	○	changing the values in the economy
	○	updating text
	○	messaging users (in game) about new features
	○	instigating a social network based contest

Integrated Feedback Mechanisms

In addition, we aim to integrate feedback mechanisms into our games to provide incentive for our players to communicate their favorite features and any technical difficulties they may be experiencing. By combining dynamic gaming technology and data analytics into one integrated business process, we can optimize the “fun” factor for our players and maximize our revenue potential.

Product Development

We have learned that establishing and following a fairly rigid process is essential to producing commercially successful products, regardless of the platform. The process all begins with the creative development process. The chart below describes the approach we use to filter ideas and make final decisions on which games we will actually produce. After choosing the game that we will focus on, we write a detailed design document. A thorough design document ensures that all of those involved in the creation of the game have a common reference source throughout the production process. Also critical to producing high quality games, a test plan accompanies every design document. Not only do we test for bugs, but also we test the game for usability. Since most casual gamers do not want to read instructions, it is critical that the finished game be easy to play by just tapping at objects on the screen.

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As a developer of mobile social games, we have developed expertise in three core aspects of game production. These core competencies help to give us a competitive advantage in the industry. They are listed below, with the resulting benefit also identified.

1.	Create High Quality Products (including art and sound assets). Benefit: Provides high value to distribution partners and consumers, resulting in increased downloads and purchases.
2.	Maintain Flexible Engineering Tools and Processes. Benefit: Decreases time-to-market delivery of products.
3.	Minimize Risk by doing the following: 1) selecting proven genres, 2) keeping development costs low, and 3) modifying designs “on the fly” based on consumer feedback. Benefit: Increases the number of games released per year and decreases reliance on any one title’s success, ultimately improving return on investment for each game.

Augmented Reality and Geolocation Games Development

In 2016, Freeze Tag’s development team began working on a series of augmented reality/geolocation products designed to address this growing market. We signed a licensing agreement with the experienced geolocation application company Munzee (http://frzt.us/2mkXT95). We liked working with the Munzee team so much that we decided to combine forces and merge our operations in October 2017. We continue to work on augmented reality and location based games for the future.

Competition

The business of mobile games is very competitive. New products are introduced frequently and the platforms and devices change rapidly. To be successful in this crowded marketplace, we have to entice consumers to play our games based on the quality and “fun” of the experience. Players evaluate our games based on the game play, graphics quality, the music and sound effects and the efficiency and clarity of our software engineering and user interface design.

We compete with a continually increasing number of successful location based mobile game companies, including Niantic (makers of Pokemon Go), Geocaching, Seek, Snatch and many others.

In addition, given the open nature of the development and distribution for mobile devices, we also compete or will compete with a vast number of small companies and individuals who are able to create and launch games and other content for these devices using relatively limited resources and with relatively limited start-up time or expertise. As evidenced by the recent Flappy Bird phenomenon, it is possible for a one-man development team to build and launch a game that is able to achieve millions of downloads.

Some of our competitors and our potential competitors have one or more advantages over us, either globally or in particular geographic markets, which include:

	·	significantly greater financial resources;
	·	greater experience with the free-to-play games and games-as-a-service (GAAS) business models and more effective game monetization;
	·	stronger brand and consumer recognition regionally or worldwide;
	·	greater experience and effectiveness integrating community features into their games and increasing the revenues derived from their users;
	·	larger installed customer bases from their existing mobile games;
	·	the capacity to leverage their marketing expenditures across a broader portfolio of mobile and non-mobile products;
	·	larger installed customer bases from related platforms, such as console gaming or social networking websites, to which they can market and sell mobile games;
	·	more substantial intellectual property of their own from which they can develop games without having to pay royalties;
	·	better overall economies of scale;
	·	greater platform-specific focus, experience and expertise; and
	·	broader global distribution and presence.

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Intellectual Property

Our intellectual property is an essential element of our business. We use a combination of trademark, patent, copyright, trade secret and other intellectual property laws, confidentiality agreements and license agreements to protect our intellectual property. We have also registered a number of domain names, which we believe will be important to the branding and success of our games. Our employees and independent contractors are required to sign agreements acknowledging that all inventions, trade secrets, works of authorship, developments and other processes generated by them on our behalf are our property, and assigning to us any ownership that they may claim in those works. Despite our precautions, it may be possible for third parties to obtain and use without consent intellectual property that we own or license. Unauthorized use of our intellectual property by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business.

We intend to register ownership of software copyrights in the United States as well as seek registration of various trademarks associated with the Company’s name and mobile social games that we will develop.

Wherever possible, we own registered trademark protection for properties we develop. As the digital markets evolve, there are and will continue to be many competitors who will imitate successful game properties. We are investing in trademark protection to create game brands and protect them. For example, we have received approval from the United States Patent and Trademark Office to register Party Animals®, Unsolved Mystery®, Unsolved Mystery Club®, Ancient Astronauts®, Victorian Mysteries®, Grimm Reaper® and Rocket Weasel® for all gaming platforms. Munzee Inc. has previously received approval for the trademarks Munzee®, Eventzee®, and WallaBee®. These marks will assist us in defending against copycats who may try to incorporate these terms into their game titles.

From time to time, we may encounter disputes over rights and obligations concerning intellectual property. While we believe that our product and service offerings do not infringe the intellectual property rights of any third party, we cannot be assured that we will prevail in any intellectual property dispute. If we do not prevail in such disputes, we may lose some or all of our intellectual property protection, be enjoined from further sales of the applications determined to infringe the rights of others, and/or be forced to pay substantial royalties to a third party.

Garfield Licensing Relationship

In October of 2016, we entered into a licensing agreement with one of the most well-known comic character brands in the world, Garfield the cat. Paws Inc. is the licensing company that administers and represents the intellectual property rights of Garfield, Odie, Jon, and all of the characters in the Garfield comics universe. Our non-exclusive agreement (http://frzt.us/2nmY31o) gives us the ability to include the Garfield characters in our games in exchange for a share of the revenue we generate in those specific games. By the end of 2016, we had launched two games that featured Garfield, Kitty Pawp Featuring Garfield and Garfield Trivia. In June of 2017, we launched our first augmented reality game featuring Garfield called Garfield Go.

Business Acquisitions

In addition to our current operations, we propose to seek, investigate and, if warranted, acquire an interest in one or more businesses. The merger with Munzee Inc. is evidence of our pursuit of this strategy. We propose to investigate potential opportunities, particularly focusing upon existing privately held businesses whose owners are willing to consider merging their businesses into our company in order to establish a public trading market for their common stock, and whose managements are willing to operate the acquired businesses as divisions or subsidiaries of our company. The businesses we acquire may or may not need an injection of cash to facilitate their future operations. Presently, if we acquire any businesses we envision such acquisition being completed either with our shares of our stock or with the assistance of a strategic funding partner. We currently do not have substantial funds, or a revenue stream, to make acquisitions utilizing cash.

We are primarily interested in other technology opportunities, but we currently do not intend to restrict our search for investment opportunities to any particular industry or geographical location and may, therefore, engage in essentially any business. Our executive officers will review material furnished to them by the proposed merger or acquisition candidates and will ultimately decide if a merger or acquisition is in our best interests and the interests of our shareholders. We intend to source business opportunities through our officers and directors and their contacts. Those contacts include professional advisors such as attorneys and accountants, securities broker dealers, venture capitalists, members of the financial community, other businesses and others who may present solicited and unsolicited proposals. Management believes that business opportunities and ventures may become available to it due to a number of factors, including, among others: (1) management’s willingness to consider a wide variety of businesses; (2) management’s contacts and acquaintances; and (3) our flexibility with respect to the manner in which we may be able to structure, finance, merge with or acquire any business opportunity.

The analysis of new business opportunities will be undertaken by or under the supervision of our executive officers and directors. Inasmuch as we will have limited funds available to search for business opportunities and ventures, we will not be able to expend significant funds on a complete and exhaustive investigation of such business or opportunity. We will, however, investigate, to the extent believed reasonable by our management, such potential business opportunities or ventures by conducting a so-called “due diligence investigation”.

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In a so-called “due diligence investigation”, we intend to obtain and review materials regarding the business opportunity. Typically such materials will include information regarding a target business’ products, services, contracts, management, ownership, and financial information. In addition, we intend to cause our officers or agents to meet personally with management and key personnel of target businesses, ask questions regarding our prospects, tour facilities, and conduct other reasonable investigation of the target business to the extent of our limited financial resources and management and technical expertise.

Government Regulation

Because of our recent partnership with Paws Inc. (Garfield license), and our development of Augmented Reality / Geolocation games, and the types of data that we collect in those games, we must be more mindful of government regulations regarding the Children’s Online Privacy Protection Act or COPPA. To protect minors on the Internet (and now mobile devices), U.S. officials passed The Children’s Online Privacy Protection Act (COPPA). Essentially, COPPA governs online data collection of people aged 13 and younger. The COPPA rules define privacy policy requirements, data collection parameters, and the process of acquiring verifiable parental consent. In the past, we have disclosed the information that we collect in Privacy Policies, but now need to focus on getting parental approval for certain types of applications as they relate to children under the age of 13.

Our Employees

We have 16 employees and 7 contractors (23 total), that work in our offices in Tustin, California, McKinney, Texas, and other remote locations throughout the world. 5 of these are managers, 3 are administrative staff, and the remaining 15 are artists, engineers, production staff, etc. We also work with other artists, engineers, designers, and contractors on and as-needed basis.

Description of Property

Our executive offices are located in Tustin, California, at 18062 Irvine Blvd, Suite 103, Tustin, CA 92780 and are leased on a month-to-month basis at a cost of $977 per month. Our production office in Texas is located at 1720 Bray Central Drive, McKinney, TX 75069 and we are currently at the end of the first year of a 3 year lease. Current monthly lease payment for 15,000 sq feet of space is $15,000 per month plus utilities, and we anticipate that will soon be reduced significantly as we move into a smaller space within the same office complex.

Available Information

We are a fully reporting issuer, subject to the Securities Exchange Act of 1934. Our Quarterly Reports, Annual Reports, and other filings can be obtained from the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. You may also obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at http://www.sec.gov.

Our Internet website address is http://www.freezetag.com/.

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ITEM 1A – RISK FACTORS

As a smaller reporting company we are not required to provide a statement of risk factors. However, we believe this information may be valuable to our shareholders for this filing. We reserve the right to not provide risk factors in our future filings. We face risks in developing our games and products and eventually bringing them to market. The following risks are material risks that we face. If any of these risks occur, our business, our ability to achieve revenues, our operating results and our financial condition could be seriously harmed. Our primary risk factors and other considerations include:

Risk Factors Related to the Business of the Company

We have incurred losses from operations, and we may never generate substantial revenue or become profitable.

We incurred net losses of $9,592,287 for the year ended December 31, 2017 (including a non-cash impairment expense of $9,520,345). As of December 31, 2017, we had a working capital deficit of $519,684 and a total stockholders’ deficit of $459,692. The Company reported net cash provided by operating activities of $7,684 and $50,286 for the years ended December 31, 2017 and 2016, respectively. Management believes that by implementing cost reductions and realizing cost efficiencies from the Merger, operating cash flows will be sufficient to support our business plan. We will also continue to develop and launch new games to maximize revenues. There can be no assurance that we will be successful in these efforts.

Our ability to generate revenues from any of our games will depend on a number of factors, including our ability to satisfy consumer demand identify appropriate commercialization strategies, and successfully market and sell our games. Our ultimate success will depend on many factors, including factors outside of our control. We may never successfully commercialize or achieve and sustain market acceptance of any of our games, our game operations may not generate sufficient revenue to support our business, and we may never reach the level of sales and revenues necessary to achieve and sustain profitability.

If we are unable to meet our future capital needs, we may be required to reduce or curtail operations.

Historically, Munzee has relied on cash flow from operations to fund operations. We have limited cash liquidity and capital resources. Our cash on hand as of December 31, 2017, was $167,492, and our projected monthly expenditures rate is approximately $165,000. For the year ended December 31, 2017, our revenues were $2,217,975.

Our future capital requirements will depend on many factors, including our ability to market our products successfully, cash flow from operations, and competing market developments. Based on our current financial situation we may have difficulty continuing our operations at their current level, or at all, if we do not receive additional financing in the near future. Consequently, although we currently have no specific plans or arrangements for financing, we intend to raise funds through private placements, public offerings or other financings. Any equity financings would result in dilution to our then-existing stockholders. Sources of debt financing may result in higher interest expense. Any financing, if available, may be on unfavorable terms. If adequate funds are not obtained, we may be required to reduce or curtail operations. We anticipate that our existing capital resources will not be adequate to satisfy our operating expenses and capital requirements for any length of time. However, this estimate of expenses and capital requirements may prove to be inaccurate.

Debt financing is difficult to obtain.

Debt financing is difficult to obtain in the current credit markets. This difficulty may make future acquisitions either unlikely, or too difficult and expensive. This could materially adversely affect our company and the trading price of our common stock.

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Raising capital by borrowing could be risky.

If we were to raise capital by borrowing to fund our operations or acquisitions, it could be risky. Borrowing through non-convertible instruments typically results in less dilution than in connection with equity financings, but it also would increase our risk, in that cash is required to service the debt, ongoing covenants are typically employed which can restrict the way in which we operate our business, and if the debt comes due either upon maturity or an event of default, we may lack the resources at that time to either pay off or refinance the debt, or if we are able to refinance, the refinancing may be on terms that are less favorable than those originally in place, and may require additional equity or quasi equity accommodations. These risks could materially adversely affect our company and the trading price of our common stock.

Our financing decisions may be made without stockholder approval.

Our financing decisions and related decisions regarding levels of debt, capitalization, distributions, acquisitions and other key operating parameters, are determined by our board of directors in its discretion, in many cases without any notice to or vote by our stockholders. This could materially adversely affect our company and the trading price of our common stock.

Our independent registered public accounting firm has expressed doubts about our ability to continue as a going concern.

As a result of our financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the year ended December 31, 2017 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. In order to continue as a going concern we must effectively balance many factors and increase our revenues to a point where we can fund our operations from our sales and revenues. If we are not able to do this we may not be able to continue as an operating company.

Because we face intense competition, we may not be able to operate profitably in our markets.

The market for casual games is highly competitive and is becoming more so, which could hinder our ability to successfully market our products. We may not have the resources, expertise or other competitive factors to compete successfully in the future. We expect to face additional competition from existing competitors and new market entrants in the future. Many of our competitors have greater name recognition and more established relationships in the industry than we do. As a result, these competitors may be able to:

	·	develop and expand their product offerings more rapidly;
	·	adapt to new or emerging changes in customer requirements more quickly;
	·	take advantage of acquisition and other opportunities more readily; and
	·	devote greater resources to the marketing and sale of their products and adopt more aggressive pricing policies than we can.

If we are unable to maintain brand image or product quality, our business may suffer.

Our success depends on our ability to maintain and build brand image for our existing products, new products and brand extensions. We have no assurance that our advertising, marketing and promotional programs will have the desired impact on our products’ brand image and on consumer preferences.

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If we are unable to attract and retain key personnel, we may not be able to compete effectively in our market.

Our success will depend, in part, on our ability to attract and retain key management, including primarily Robert Vardeman, Jr., Craig Holland and Mick Donahoo, technical experts, and sales and marketing personnel. We attempt to enhance our management and technical expertise by recruiting qualified individuals who possess desired skills and experience in certain targeted areas. Our inability to retain employees and attract and retain sufficient additional employees, and information technology, engineering and technical support resources, could have a material adverse effect on our business, financial condition, results of operations and cash flows. The loss of key personnel could limit our ability to develop and market our products.

Because our officers and directors control our common stock vote, they have the ability to influence matters affecting our shareholders.

As of December 31, 2017, there were 69,786,123 outstanding shares of Common Stock, no outstanding shares of Series A Preferred Stock (“Series A Preferred”), 2,585,882 shares of Series B Preferred Stock (“Series B Preferred”), and 4,355,000 shares of Series C Preferred Stock (“Series C Preferred”). Our officers and directors own a significant portion of the common stock vote. As a result, they have the ability to influence matters affecting our shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because they control such shares, investors may find it difficult to replace our management if they disagree with the way our business is being operated. Because the influence by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.

Our business may be negatively impacted by a slowing economy or by unfavorable economic conditions or developments in the United States and/or in other countries in which we operate.

A general slowdown in the economy in the United States or unfavorable economic conditions or other developments may result in decreased consumer demand, business disruption, foreign currency devaluation, inflation or deflation. A slowdown in the economy or unstable economic conditions in the United States or in the countries in which we operate could have an adverse impact on our business results or financial condition.

We may not be able to effectively manage our growth and operations, which could materially and adversely affect our business.

We may experience rapid growth and development in a relatively short period of time by aggressively marketing our casual games. The management of this growth will require, among other things, continued development of our financial and management controls and management information systems, stringent control of costs, increased marketing activities, the ability to attract and retain qualified management personnel and the training of new personnel. We intend to hire additional personnel in order to manage our expected growth and expansion. Failure to successfully manage our possible growth and development could have a material adverse effect on our business and the value of our common stock.

Failure to renew our existing licenses or to obtain additional licenses could harm our business.

Some of our game products are or will be based on or incorporate intellectual properties that we license from third parties. Our current licenses to use these properties do not extend beyond terms of two to three years. We may be unable to renew these licenses on terms favorable to us, or at all, and we may be unable to secure alternatives in a timely manner. We expect that licenses we obtain in the future may impose development, distribution and marketing obligations on us. If we breach our obligations, our licensors may have the right to terminate the license or change an exclusive license to a non-exclusive license.

Competition for licenses may also increase the advances, guarantees and royalties that we must pay to the licensor, which could significantly increase our costs. Failure to maintain our existing licenses or obtain additional licenses with significant commercial value could impair our ability to introduce new applications or continue our current game products and applications, which could materially harm our business.

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If we fail to develop and introduce new casual games and other applications that achieve market acceptance, our sales could suffer.

Our business depends on providing casual games and applications that consumers initially want to download to their devices and then make subsequent in-game purchases. We must invest significant resources in research and development to enhance our offering of casual games and other applications and introduce new games and other applications. Our operating results would suffer if our games and other applications are not responsive to the preferences of our customers or are not effectively brought to market.

The planned timing or introduction of new casual games is subject to risks and uncertainties. Unexpected technical, operational, deployment, distribution or other problems could delay or prevent the introduction of new casual games, which could result in a loss of, or delay in, revenues or damage to our reputation and brand. If any of our applications is introduced with defects, errors or failures, we could experience decreased sales, loss of customers and damage to our reputation and brand. In addition, new applications may not achieve sufficient market acceptance to offset the costs of development. Our success depends, in part, on unpredictable and volatile factors beyond our control, including customer preferences, competing applications and the availability of other entertainment activities. A shift in Internet or mobile device usage or the entertainment preferences of our customers could cause a decline in our applications’ popularity that could materially reduce our revenues and harm our business.

We intend to continuously develop and introduce new games and other applications for use on next-generation Internet and mobile devices. We must make product development decisions and commit significant resources well in advance of the anticipated introduction of new mobile devices. New mobile devices for which we will develop applications may be delayed, may not be commercially successful, may have a shorter life cycle than anticipated or may not be adequately promoted by wireless carriers or the manufacturer. If the mobile devices for which we are developing games and other applications are not released when expected or do not achieve broad market penetration, our potential revenues will be limited and our business will suffer.

If our independent, third-party developers cease development of new applications for us and we are unable to find comparable replacements, our competitive position may be adversely impacted.

We rely on independent third-party developers to develop some of our game products which subjects us to the following risks:

	·	key developers who work for us may choose to work for or be acquired by our competitors;
	·	developers currently under contract may try to renegotiate our agreements with them on terms less favorable to us; and
	·	our developers may be unable or unwilling to allocate sufficient resources to complete our applications on a timely or satisfactory basis or at all.

If our developers terminate their relationships with us or negotiate agreements with terms less favorable to us, we may have to increase our internal development staff, which would be a time consuming and potentially costly process. If we are unable to increase our internal development staff in a cost-effective manner or if our current internal development staff fails to create successful applications, our earnings could be materially diminished.

In addition, although we require our third-party developers to sign agreements acknowledging that all inventions, trade secrets, works of authorship, development and other processes generated by them are our property and to assign to us any ownership they may have in those works, it may still be possible for third parties to obtain and use our intellectual properties without our consent.

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Our industry is experiencing consolidation that may cause us to lose key relationships and intensify competition.

The Internet and media distribution industries are undergoing substantial change, which has resulted in increasing consolidation and formation of strategic relationships. We expect this consolidation and strategic partnering to continue. Acquisitions or other consolidating transactions could harm us in a number of ways, including:

· we could lose strategic relationships if our strategic partners are acquired by or enter into relationships with a competitor (which could cause us to lose access to distribution, content, technology and other resources);

· we could lose customers if competitors or users of competing technologies consolidate with our current or potential customers; and

· our current competitors could become stronger, or new competitors could form, from consolidations.

Any of these events could put us at a competitive disadvantage, which could cause us to lose customers, revenue and market share. Consolidation could also force us to expend greater resources to meet new or additional competitive threats, which could also harm our operating results.

We rely on the continued reliable operation of third parties’ systems and networks and, if these systems and networks fail to operate or operate poorly, our business and operating results will be harmed.

Our operations are in part dependent upon the continued reliable operation of the information systems and networks of third parties. If these third parties do not provide reliable operation, our ability to service our customers will be impaired and our business, reputation and operating results could be harmed.

The Internet and our network are subject to security risks that could harm our business and reputation and expose us to litigation or liability.

Online commerce and communications depend on the ability to transmit confidential information and licensed intellectual property securely over private and public networks. Any compromise of our ability to transmit and store such information and data securely, and any costs associated with preventing or eliminating such problems, could damage our business, hurt our ability to distribute products and services and collect revenue, threaten the proprietary or confidential nature of our technology, harm our reputation, and expose us to litigation or liability. We also may be required to expend significant capital or other resources to protect against the threat of security breaches or hacker attacks or to alleviate problems caused by such breaches or attacks. Any successful attack or breach of our security could hurt consumer demand for our products and services, expose us to consumer class action lawsuits and harm our business.

We may be unable to adequately protect our proprietary rights.

Our ability to compete partly depends on the superiority, uniqueness and value of our intellectual property and technology, including both internally developed technology and technology licensed from third parties. To the extent we are able to do so, in order to protect our proprietary rights, we will rely on a combination of trademark, copyright and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions and licensing agreement. Despite these efforts, any of the following occurrences may reduce the value of our intellectual property:

· Our applications for trademarks and copyrights relating to our business may not be granted and, if granted, may be challenged or invalidated;

· Issued trademarks and registered copyrights may not provide us with any competitive advantages;

· Our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology;

· Our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those we develop;

· Another party may obtain a blocking patent and we would need to either obtain a license or design around the patent in order to continue to offer the contested feature or service in our products; or

· We may not be able to afford to pay the costs associated with protecting our intellectual property rights.

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We may be forced to litigate to defend our intellectual property rights, or to defend against claims by third parties against us relating to intellectual property rights.

We may be forced to litigate to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of other parties’ proprietary rights. Any such litigation could be very costly and could distract our management from focusing on operating our business. The existence and/or outcome of any such litigation could harm our business.

Interpretation of existing laws that did not originally contemplate the Internet could harm our business and operating results.

The application of existing laws governing issues such as property ownership, copyright and other intellectual property issues to the Internet is not clear. Many of these laws were adopted before the advent of the Internet and do not address the unique issues associated with the Internet and related technologies. In many cases, the relationship of these laws to the Internet has not yet been interpreted. New interpretations of existing laws may increase our costs, require us to change business practices or otherwise harm our business.

It is not yet clear how laws designed to protect children that use the Internet may be interpreted, and such laws may apply to our business in ways that may harm our business.

The Child Online Protection Act and the Child Online Privacy Protection Act impose civil and criminal penalties on persons distributing material harmful to minors (e.g., obscene material) over the Internet to persons under the age of 17, or collecting personal information from children under the age of 13. We do not knowingly distribute harmful materials to minors or collect personal information from children under the age of 13. The COPPA rules define privacy policy requirements, data collection parameters, and the process of acquiring verifiable parental consent. In the past, we have disclosed the information that we collect in Privacy Policies, but now need to focus on getting parental approval for certain types of applications as they relate to children under the age of 13. Although we have verification procedures in place to ensure we do not violate COPPA, in the event those safeguards fail, we could be subject to fines and/or lawsuits, and harm our business in other ways.

We may be subject to market risk and legal liability in connection with the data collection capabilities of our products and services.

Many of our products are interactive Internet applications that by their very nature require communication between a client and server to operate. To provide better consumer experiences and to operate effectively, our products send information to our servers. Many of the services we provide also require that a user provide certain information to us. We post an extensive privacy policy concerning the collection, use and disclosure of user data involved in interactions between our client and server products.

Our planned venture into augmented reality and geolocation games could subject us to greater liability risks from our users and third parties.

As noted herein, we are currently planning to develop a number of augmented reality and geolocation games. Such games place characters on a user’s mobile device in real world surroundings and have the user interacting with the game while on the move in real life. Augmented reality games developed by some of our competitors have led users into situations that may not be ideal for the user, such as near roads, bodies of water and/or possibly on private property. Although we will use our best efforts to develop our games to minimize locations that could be dangerous for our users, there is a chance that they could wander into a dangerous situation or onto a third parties’ private property, potentially harming themselves or others. Although we will have appropriate disclaimers and disclosures on our games, any such harmful events could expose us to potential lawsuits and/or liability.

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Risk Factors Relating to Future Acquisitions

We may not be able to identify, negotiate, finance or close future acquisitions.

A significant component of our growth strategy focuses on acquiring additional companies or assets. We may not, however, be able to identify, audit, or acquire companies or assets on acceptable terms, if at all. Additionally, we may need to finance all or a portion of the purchase price for an acquisition by incurring indebtedness. There can be no assurance that we will be able to obtain financing on terms that are favorable, if at all, which will limit our ability to acquire additional companies or assets in the future. Failure to acquire additional companies or assets on acceptable terms, if at all, would have a material adverse effect on our ability to increase assets, revenues and net income and on the trading price of our common Stock.

We may acquire businesses without any apparent synergies with our casual games related operations.

In an effort to diversify our sources of revenue and profits, we may decide to acquire businesses without any apparent synergies with our casual games related operations. For example, we believe that the acquisition of technologies unrelated to games and leisure may be an important way for us to enhance our stockholder value. Notwithstanding the critical importance of diversification, some members of the investment community and research analysts would prefer that micro-cap or small-cap companies restrict the scope of their activity to a single line of business, and may not be willing to make an investment in, or recommend an investment in, a micro-cap or small-cap company that undertakes multiple lines of business. This situation could materially adversely impact our company and the trading price of our stock.

We may not be able to properly manage multiple businesses.

We may not be able to properly manage multiple businesses. Managing multiple businesses would be more complicated than managing a single line of business, and would require that we hire and manage executives with experience and expertise in different fields. We can provide no assurance that we will be able to do so successfully. A failure to properly manage multiple businesses could materially adversely affect our company and the trading price of our stock.

We may not be able to successfully integrate new acquisitions.

Even if we are able to acquire additional companies or assets, we may not be able to successfully integrate those companies or assets. For example, we may need to integrate widely dispersed operations with different corporate cultures, operating margins, competitive environments, computer systems, compensation schemes, business plans and growth potential requiring significant management time and attention. In addition, the successful integration of any companies we acquire will depend in large part on the retention of personnel critical to our combined business operations due to, for example, unique technical skills or management expertise. We may be unable to retain existing management, finance, engineering, sales, customer support, and operations personnel that are critical to the success of the integrated company, resulting in disruption of operations, loss of key information, expertise or know-how, unanticipated additional recruitment and training costs, and otherwise diminishing anticipated benefits of these acquisitions, including loss of revenue and profitability. Failure to successfully integrate acquired businesses could have a material adverse effect on our company and the trading price of our stock.

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Our acquisitions of businesses may be extremely risky and we could lose all of our investments.

We may invest in software companies, other technology businesses, or other risky industries. An investment in these companies may be extremely risky because, among other things, the companies we are likely to focus on: (1) typically have limited operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns; (2) tend to be privately-owned and generally have little publicly available information and, as a result, we may not learn all of the material information we need to know regarding these businesses; (3) are more likely to depend on the management talents and efforts of a small group of people; and, as a result, the death, disability, resignation or termination of one or more of these people could have an adverse impact on the operations of any business that we may acquire; (4) may have less predicable operating results; (5) may from time to time be parties to litigation; (6) may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence; and (7) may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. Our failure to make acquisitions efficiently and profitably could have a material adverse effect on our business, results of operations, financial condition and the trading price of our stock.

Future acquisitions may fail to perform as expected.

Future acquisitions may fail to perform as expected. We may overestimate cash flow, underestimate costs, or fail to understand risks. This could materially adversely affect our company and the trading price of our Stock.

Competition may result in overpaying for acquisitions.

Other investors with significant capital may compete with us for attractive investment opportunities. These competitors may include publicly traded companies, private equity firms, privately held buyers, individual investors, and other types of investors. Such competition may increase the price of acquisitions, or otherwise adversely affect the terms and conditions of acquisitions. This could materially adversely affect our company and the trading price of our stock.

We may have insufficient resources to cover our operating expenses and the expenses of raising money and consummating acquisitions.

We have limited cash to cover our operating expenses and to cover the expenses incurred in connection with money raising and a business combination. It is possible that we could incur substantial costs in connection with money raising or a business combination. If we do not have sufficient proceeds available to cover our expenses, we may be forced to obtain additional financing, either from our management or third parties. We may not be able to obtain additional financing on acceptable terms, if at all, and neither our management nor any third party is obligated to provide any financing. This could have a negative impact on our company and our stock price.

The nature of our proposed future operations is speculative and will depend to a great extent on the businesses which we acquire.

While management typically intends to seek a merger or acquisition of privately held entities with established operating histories, there can be no assurance that we will be successful in locating an acquisition candidate meeting such criteria. In the event we complete a merger or acquisition transaction, of which there can be no assurance, our success if any will be dependent upon the operations, financial condition and management of the acquired company, and upon numerous other factors beyond our control. If the operations, financial condition or management of the acquired company were to be disrupted or otherwise negatively impacted following an acquisition, our company and our stock price would be negatively impacted.

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We may make actions that will not require our stockholders’ approval.

The terms and conditions of any acquisition could require us to take actions that would not require stockholder approval. In order to acquire certain companies or assets, we may issue additional shares of common or preferred stock, borrow money or issue debt instruments including debt convertible into capital stock. Not all of these actions would require our stockholders’ approval even if these actions dilute our shareholders’ economic or voting interest.

Our investigation of potential acquisitions will be limited.

Our analysis of new business opportunities will be undertaken by or under the supervision of our executive officers and directors. Inasmuch as we will have limited funds available to search for business opportunities and ventures, we will not be able to expend significant funds on a complete and exhaustive investigation of such business or opportunity. We will, however, investigate, to the extent believed reasonable by our management, such potential business opportunities or ventures by conducting a so-called “due diligence investigation”. In a so-called “due diligence investigation”, we intend to obtain and review materials regarding the business opportunity. Typically such materials will include information regarding a target business’ products, services, contracts, management, ownership, and financial information. In addition, we intend to cause our officers or agents to meet personally with management and key personnel of target businesses, ask questions regarding the company’s prospects, tour facilities, and conduct other reasonable investigation of the target business to the extent of our limited financial resources and management and technical expertise. Any failure of our typical “due diligence investigation” to uncover issues and problems relating to potential acquisition candidates could materially adversely affect our company and the trading price of our stock.

We will have only a limited ability to evaluate the directors and management of potential acquisitions.

We may make a determination that our current directors and officers should not remain, or should reduce their roles, following money raising or a business combination, based on an assessment of the experience and skill sets of new directors and officers and the management of target businesses. We cannot assure you that our assessment of these individuals will prove to be correct. This could have a negative impact on our company and our stock price.

We will be dependent on outside advisors to assist us.

In order to supplement the business experience of management, we may employ accountants, technical experts, appraisers, attorneys or other consultants or advisors. The selection of any such advisors will be made by management and without any control from shareholders. Additionally, it is anticipated that such persons may be engaged by us on an independent basis without a continuing fiduciary or other obligation to us.

We may be unable to protect or enforce the intellectual property rights of any target business that we acquire or the target business may become subject to claims of intellectual property infringement.

After completing a business combination, the procurement and protection of trademarks, copyrights, patents, domain names, and trade secrets may be critical to our success. We will likely rely on a combination of copyright, trademark, trade secret laws and contractual restrictions to protect any proprietary technology and rights that we may acquire. Despite our efforts to protect those proprietary technology and rights, we may not be able to prevent misappropriation of those proprietary rights or deter independent development of technologies that compete with the business we acquire. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. It is also possible that third parties may claim we have infringed their patent, trademark, copyright or other proprietary rights. Claims or litigation, with or without merit, could result in substantial costs and diversions of resources, either of which could have an adverse effect on our competitive position and business. Further, depending on the target business or businesses that we acquire, it is likely that we will have to protect trademarks, patents, and domain names in an increasing number of jurisdictions, a process that is expensive and may not be successful in every location. These factors could negatively impact our company and the trading price of our stock.

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Integrating acquired businesses may divert our management’s attention away from our day-to-day operations and harm our business.

Acquisitions generally involve significant risks, including the risk of overvaluation of potential acquisitions and risks in regard to the assimilation of personnel, operations, products, services, technologies, and corporate culture of acquired companies. Dealing with these risks may place a significant burden on our management and other internal resources. This could materially adversely affect our business and the trading price of our stock.

We may fail to manage our growth effectively.

Future growth through acquisitions and organic expansion would place a significant strain on our managerial, operational, technical, training, systems and financial resources. We can give you no assurance that we will be able to manage our expanding operations properly or cost effectively. A failure to properly and cost-effectively manage our expansion could materially adversely affect our company and the trading price of our stock.

The management of companies we acquire may lose their enthusiasm or entrepreneurship after the sale of their businesses.

We can give no assurance that the management of future companies we acquire will have the same level of enthusiasm for the operation of their businesses following their acquisition by us, or if they cease performing services for the acquired businesses that we will be able to install replacement management with the same skill sets and determination. There also is always a risk that management will attempt to reenter the market and possibly seek to recruit some of the former employees of the business, who may continue to be key employees of ours. This could materially adversely affect our business and the trading price of our Stock.

If we are deemed to be an investment company, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete a business combination.

We believe we will not be subject to regulation under the Investment Company Act insofar as we will not be engaged in the business of investing or trading in securities. However, in the event that we engage in business combinations which result in us holding passive investment interests in a number of entities, we may become subject to regulation under the Investment Company Act. In such event, we may be required to register as an investment company and may incur significant registration and compliance costs. We have obtained no formal determination from the government as to our status under the Investment Company Act, and consequently, any violation of such Act might subject us to material adverse consequences.

Risks Related To Our Common Stock

There is a limited public trading market for our common stock, which may impede our shareholders’ ability to sell our shares.

Currently, there is a limited trading market for our common stock, and there can be no assurance that a more robust market will be achieved in the future. There can be no assurance that an investor will be able to liquidate his or her investment without considerable delay, if at all. If the trading market for our common stock does increase, the price may be highly volatile. Factors discussed herein may have a significant impact on the market price of our shares. Moreover, due to the relatively low price of our securities, many brokerage firms may not effect transactions in our common stock if a market is established. Rules enacted by the SEC increase the likelihood that most brokerage firms will not participate in a potential future market for our common stock. Those rules require, as a condition to brokers effecting transactions in certain defined securities (unless such transaction is subject to one or more exemptions), that the broker obtain from its customer or client a written representation concerning the customer’s financial situation, investment experience and investment objectives. Compliance with these procedures tends to discourage most brokerage firms from participating in the market for certain low-priced securities.

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If we are unable to pay the costs associated with being a public, reporting company, we may not be able to continue trading on the OTC Markets and/or we may be forced to discontinue operations.

We have significant costs associated with being a public, reporting company, which adds to the substantial doubt about our ability to continue trading on the OTC Markets and/or continue as a going concern. These costs include compliance with the Sarbanes-Oxley Act of 2002, which will be difficult given the limited size of our management, and we will have to rely on outside consultants. Accounting controls, in particular, are difficult and can be expensive to comply with.

Our ability to continue trading on the OTC Markets and/or continue as a going concern will depend on positive cash flow, if any, from future operations and on our ability to raise additional funds through equity or debt financing. If we are unable to achieve the necessary product sales or raise or obtain needed funding to cover the costs of operating as a public, reporting company, our common stock may be deleted from the OTC Markets and/or we may be forced to discontinue operations.

We do not intend to pay dividends in the foreseeable future.

We do not intend to pay any dividends in the foreseeable future. We do not plan on making any cash distributions in the manner of a dividend or otherwise. Our Board presently intends to follow a policy of retaining earnings, if any.

We have the right to issue additional shares of common stock and preferred stock without consent of stockholders. This would have the effect of diluting investors’ ownership and could decrease the value of their investment.

We have additional authorized, but unissued shares of our common stock that may be issued by us for any purpose without the consent or vote of our stockholders that would dilute stockholders’ percentage ownership of our company.

In addition, our certificate of incorporation authorizes the issuance of shares of preferred stock, the rights, preferences, designations and limitations of which may be set by the Board of Directors. Our certificate of incorporation has authorized issuance of up to 10,000,000 shares of preferred stock in the discretion of our Board. The shares of authorized but undesignated preferred stock may be issued upon filing of an amended certificate of incorporation and the payment of required fees; no further stockholder action is required. In addition, other shares of preferred stock could be designated and, if issued, the rights, preferences, designations and limitations of such preferred stock would be set by our Board and could operate to the disadvantage of the outstanding common stock. Such terms could include, among others, preferences as to dividends, voting, and distributions on liquidation.

As of the end of the period covered by this report, we have 2,585,882 shares of our Series B Preferred Stock outstanding, which are convertible into an aggregate of 129,294,100 shares of our common stock. In the event the holder(s) convert such shares of preferred stock into common stock significant dilution could occur to the other holders of our common stock and could significantly decrease the value of our common stock

As of the end of the period covered by this report, we have 2,585,882 shares of our Series B Preferred Stock outstanding, which are convertible into an aggregate of 129,294,100 shares of our common stock. Although under the terms of the agreements with the holders of our Series B Preferred Stock, the number of shares of common stock issuable upon the conversion of their shares of preferred stock cannot exceed an amount that would cause the beneficial ownership of the holder and its affiliates to own more than 4.99% of our outstanding shares of Common Stock, the issuance of almost 5% of our outstanding common stock in a short period time, possibly happening multiple times, would cause substantial dilution to our shareholders. In the event the holder(s) of such preferred stock convert shares of their preferred stock into common stock significant dilution could occur to the other holders of our common stock and could significantly decrease the value of our common stock. We also have 4,355,000 shares of our Series C Preferred Stock outstanding which will eventually be convertible into 217,750,000 shares of our common stock, but they are locked-up until the date that is two years from the date we closed the merger with Munzee, Inc.

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Sales of our stock could cause the trading price of our stock to fall.

Sellers of our stock might include convertible debt securities as discussed above, our existing stockholders who have held our stock for years, persons and entities who acquire our stock as consideration for services they provide to our company, or our directors, officers or employees who might receive and then exercise stock options and simultaneously sell our stock. Since the trading volume of our stock is typically very low, any sales or attempts to sell our stock, or the perception that sales or attempts to sell our stock could occur, could adversely affect the trading price of our stock.

Our common stock is governed under The Securities Enforcement and Penny Stock Reform Act of 1990.

The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such exceptions include any equity security listed on NASDAQ and any equity security issued by an issuer that has (i) net tangible assets of at least $2,000,000, if such issuer has been in continuous operation for three years, (ii) net tangible assets of at least $5,000,000, if such issuer has been in continuous operation for less than three years, or (iii) average annual revenue of at least $6,000,000, if such issuer has been in continuous operation for less than three years. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.

ITEM 1B – UNRESOLVED STAFF COMMENTS

This Item is not applicable to us as we are not an accelerated filer, a large accelerated filer, or a well-seasoned issuer; however, we have not received written comments from the Commission staff regarding our periodic or current reports under the Securities Exchange Act of 1934 within the last 180 days before the end of our last fiscal year.

ITEM 2 – PROPERTIES

Our executive offices are located in Tustin, California, at 18062 Irvine Blvd, Suite 103, Tustin, CA 92780 and are leased on a month-to-month basis at a cost of $977 per month. Our production office in Texas is located at 1720 Bray Central Drive, McKinney, TX 75069 and we are currently at the end of the first year of a 3 year lease. Current monthly lease payment is $15,000 per month plus utilities for 15,000 square feet of space, and we anticipate that will soon be reduced significantly as we move into a smaller space within the same office complex.

ITEM 3 – LEGAL PROCEEDINGS

We are not a party to or otherwise involved in any legal proceedings.

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

ITEM 4 – MINE SAFETY DISCLOSURES

There is no information required to be disclosed by this Item.

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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 for trading on the OTC Markets / OTC Pink tier. Our current trading symbol is “FRZT.” Since our stock has been quoted, there has been limited volume.

The following table sets forth the high and low bid information for each quarter within the fiscal years ended December 31, 2017 and 2016, as as best we could estimate from publicly-available information. We underwent a 1-for-100 reverse stock split effective October 5, 2017. The stock prices set forth below are adjusted to reflect the reverse stock split.

		Bid Prices
Fiscal Year Ended December 31,	Period	High		Low

2016	First Quarter	$	0.19	$	0.081
	Second Quarter	$	0.18	$	0.10
	Third Quarter	$	0.08	$	0.01
	Fourth Quarter	$	0.05	$	0.01

2017	First Quarter	$	0.03	$	0.01
	Second Quarter	$	1.30	$	0.01
	Third Quarter	$	0.30	$	0.09
	Fourth Quarter	$	0.12	$	0.025

Holders

As of December 31, 2017, there were 69,786,123 shares of our common stock outstanding held by approximately 128 holders of record of our common stock. Aggregate market value of the voting stock held by non-affiliates as of June 30, 2017: $2,841,071 based on the closing price of $0.30 on June 30, 2017 of our common stock (adjusted for reverse stock split). The voting stock held by non-affiliates on that date consisted of 9,470,238 shares of common stock (adjusted for reverse stock split).

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Dividends

We have not declared or paid a cash dividend on our capital stock in our last two fiscal years and we do not expect to pay cash dividends on our common stock in the foreseeable future. We currently intend to retain our earnings, if any, for use in our business. Any dividends declared in the future will be at the discretion of our Board of Directors and subject to any restrictions that may be imposed by our lenders.

Securities Authorized for Issuance Under Equity Compensation Plans

There are currently 1,518,421 options outstanding, to purchase shares of our common stock.

Non-Qualified Stock Option Plan

On December 4, 2017, our Board of Directors approved the Freeze Tag, Inc. 2017 Non-Qualified Stock Option Plan (the “Plan”). Under the Plan, our Board of Directors may issue options to purchase up to an aggregate of 10,000,000 shares of common stock to individuals, including, but not limited to, our Board of Directors and/or our executive management. On December 5, 2017, our Board of Directors granted options to purchase a total of 1,512,821 shares of our common stock

On March 20, 2006, our Board of Directors and shareholders approved the Freeze Tag, Inc. 2006 Stock Plan (the “2006 Plan”). The 2006 Plan terminated during the year ended December 31, 2016. As of December 31, 2017, there were 5,600 options outstanding to purchase shares of common stock, and no shares of common stock had been issued pursuant to stock purchase rights under the 2006 Plan.

As of December 31, 2017, we had the following options outstanding:

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 plans (excluding securities reflected in column (a))
	(a)		(b)	(c)
Equity compensation plans approved by security holders (2006 plan)		5,600	$10.00	-
Equity compensation plans approved by security holders (2017 plan)		1,512,821	$0.039		8,487,179
Equity compensation plans not approved by security holders	-		-	-
Total		1,518,421	$0.076		8,487,179

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Recent Issuance of Unregistered Securities

During the quarter ended December 31, 2017, we issued a total of 3,865,000 common shares recorded at par value to an accredited investor in conversion of 77,300 shares of our Series B Preferred Stock. The shares of our common stock were issued without restrictive legend in accordance with Rule 144 due to the time the holder held the shares of our Series B Preferred Stock and the prior securities of the company.

On December 5, 2017, our Board of Directors granted the following options to purchase our common stock under the 2017 Freeze Tag, Inc. Non-Qualified Stock Option Plan:

Name	No. of Options		Exercise Price		Expiration

Mick Donahoo		1,025,641	$	0.039	Ten Years
Cecie Newman		256,410	$	0.039	Ten Years
Other Employees/Consultants		230,770	$	0.039	Ten Years

Total		1,512,821

All of the option grants were to members of our executive management team, employees, or independent consultants. The options issued to Mick Donahoo were issued in lieu of $40,000 of accrued vacation time. The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, since the recipients are our executive management team, employees, or independent consultants, and they are either accredited or sophisticated investors, and familiar with our operations.

As noted herein, on October 18, 2017, we closed the Merger with Munzee. As a result, on October 18, 2017, we issued the Munzee shareholders, the following shares of our Series C Convertible Preferred Stock: 2,659,128 shares to Rob Vardeman, 868,287 shares to Scott Foster, 339,174 shares to Don Vardeman, 325,607 shares to Chris Pick, and 162,804 shares to Aaron Benzick. Rob Vardeman is now our President and one of the members of our Board of Directors and Don Vardeman is now one of the members of our Board of Directors. These shares were issued with a standard Rule 144 restrictive legend. Based on the representations of the Merger Agreement, the issuance of the shares was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933. The investors were sophisticated, familiar with our operations, and there was no solicitation.

As disclosed in our Current Report on Form 8-K filed with the Commission on July 31, 2017, on July 25, 2017, we entered into Securities Exchange and Common Stock Agreements (the “CS Exchange Agreements”) with Craig Holland, Mick Donahoo, Robert Cowdell and the Holland Family Trust (together, the “CS Exchangers”), under which the CS Exchangers agreed to exchange certain promissory notes issued us to them into shares of our common stock automatically upon us completing a reverse stock split of our common stock with FINRA. On October 5, 2017, FINRA took our reverse stock split effective at the open of market. As a result, on October 5, 2017, we issued the CS Exchangers, the following shares of our post-split common stock: 37,849,200 shares to Craig Holland, 1,552,100 shares to Mick Donahoo, 3,072,100 shares to the assignee of Robert Cowdell, and 10,354,152 shares to the Holland Family Trust. These shares were all subject to a two-year lockup provision of the CS Exchange Agreements. These shares were issued with a standard Rule 144 restrictive legend. Based on the representations of the CS Exchangers in the CS Exchange Agreements, the issuance of the shares was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933. The investors were sophisticated, familiar with our operations, and there was no solicitation.

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As disclosed in our Current Report on Form 8-K filed with the Commission on July 31, 2017, on July 25, 2017, we entered into Securities Exchange and Preferred Stock Agreements (the “PS Exchange Agreements”) with three different accredited investors (together, the “PS Exchangers”), under which the PS Exchangers agreed to exchange certain promissory notes issued us to them into shares of our Series B Convertible Preferred Stock automatically upon us completing a reverse stock split of our common stock with FINRA. On October 5, 2017, FINRA took our reverse stock split effective at the open of market. As a result, on October 5, 2017, we issued the PS Exchangers, the following shares of our Series B Convertible Preferred stock: 214,966 shares to Accredited Investor #1, 1,942,322 shares to Accredited Investor #2, and 51,094 shares to Accredited Investor #3. Also, one of the promissory notes with PS Exchangers remained open until it was closed on October 10, 2017. On October 10, 2017, we issued the PS Exchangers, the following shares of our Series B Convertible Preferred stock: 454,800 preferred shares to Accredited Investor #2. These shares were issued with a standard Rule 144 restrictive legend. Based on the representations of the PS Exchangers in the PS Exchange Agreements, the issuance of the shares was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933. The investors were accredited and sophisticated, familiar with our operations, and there was no solicitation.

On October 6, 2017, we received a notice from a non-affiliate holder of one of the last remaining convertible promissory note to issue 567,500 shares of our common stock pursuant to the holder notifying us of their election to convert $11,350 of principal due under the promissory note into the shares. The shares were issued on October 10, 2017. Due to the length of time since the holder lent us the funds and that the holder has held the note, the shares were issued without a standard Rule 144 restrictive legend. Based on the representations of the investor in the Convertible Promissory Note and the Notice of Conversion, the issuance of the shares was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933. The investor was accredited and sophisticated, familiar with our operations, and there was no solicitation.

Unless otherwise noted, all of the issuances of securities described above were restricted share issuances and deemed to be exempt from registration in reliance on Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. Many investors represented that they were accredited investors, as defined in Rule 501 of Regulation D and, there was no general solicitation or general advertising used to market the securities. In most cases, we made available to each investor with disclosure of all aspects of our business, including providing the investor with press releases, access to our auditors, and other financial, business, and corporate information. All securities issued were restricted with an appropriate restrictive legend on certificates issued stating that the securities have not been registered under the Securities Act and cannot be sold or otherwise transferred without an effective registration or an exemption therefrom.

If our stock is listed on an exchange we will be subject to the Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to a few exceptions which we do not meet. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.

ITEM 6 – SELECTED FINANCIAL DATA

As a smaller reporting company we are not required to provide the information required by this Item.

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Annual Report on Form 10-K of Freeze Tag, Inc. (“Freeze Tag” or the “Company”) for the year ended December 31, 2017 contains forward-looking statements, principally in this Section and “Business.” Generally, you can identify these statements because they use words like “anticipates,” “believes,” “expects,” “future,” “intends,” “plans,” and similar terms. These statements reflect only our current expectations. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy and actual results may differ materially from those we anticipated due to a number of uncertainties, many of which are unforeseen, including, among others, the risks we face as described in this filing. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report. To the extent that such statements are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties. In any forward-looking statement where we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation of belief will be accomplished.

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We believe it is important to communicate our expectations to our investors. There may be events in the future; however, that we are unable to predict accurately or over which we have no control. The risk factors listed in this filing, as well as any cautionary language in this annual report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Factors that could cause actual results or events to differ materially from those anticipated, include, but are not limited to: distributors not accepting our games; price reductions; unforeseen delays in game production; changes in product strategies; general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in various tax laws; and the availability of key management and other personnel.

Merger Transaction

On October 18, 2017, we closed the merger transaction (the “Merger”) that was the subject of that certain Agreement and Plan of Merger (the “Merger Agreement”) with Munzee, Inc., a Delaware corporation (“Munzee”) dated July 26, 2017. At closing, in accordance with the Merger Agreement, Munzee merged with and into our corporation, Freeze Tag, Inc., a Delaware corporation (the “Merger”), with Freeze Tag, Inc. being the surviving corporation. At the closing, we issued the current owners of all of Munzee’s outstanding common stock 4,355,000 shares of our Series C Convertible Preferred Stock. Under U.S. generally accepted accounting principles, the merger is treated as a “reverse merger” under the purchase method of accounting, with Munzee as the accounting acquirer. Accordingly, Munzee’s historical financial results of operations replace Freeze Tag’s historical financial results of operations for all periods prior to the Merger and, for all periods following the Merger, the financial results of operations of the combined company will be included in the Company’s financial statements. Accordingly, the results of operations and cash flows for the year ended December 31, 2017 may not be comparable to the results of operations for the year ended December 31, 2016.

Summary Overview

Founded by gaming industry veterans, Freeze Tag has launched several successful games over the course of its history. Our current portfolio includes hits such as Munzee, a social platform with over 7 million locations worldwide and hundreds of thousands of players that blends gamification and geolocation into an experience that rewards players for going places in the physical world, Garfield Go, a Pokemon Go style augmented reality game based on the iconic cat Garfield, WallaBee, an addictive collecting game with over 2,000 beautifully drawn digital cards, as well as many social mobile games that provide endless hours of family-friendly fun. We also offer our technology and services to businesses that want to leverage mobile gaming in their marketing and branding programs. For example, our Eventzee solution allows businesses to create private scavenger hunts in physical places such as malls, tradeshows, company events or campuses to create immersive brand experiences.

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Central to Freeze Tag’s core strategy is capitalizing on two fast-growing trends in the mobile applications world: augmented reality gaming and location-based advertising. We plan to leverage the combined company’s proprietary technology and expertise to create more exciting augmented reality location-based games that can serve as a location-based advertising network.

Additionally, the combined company intends to offer services to help advertisers explore new possibilities in location-based advertising where captive users are roaming around in the real world. For example, AR games can help drive foot traffic to malls and movie theatres, or create memorable real world interactions that help connect users to brands with deeply emotional experiences. This kind of experience based location-specific advertising can have consumer impacts far beyond that of Google AdWords or Facebook news feed videos.

Going Concern Uncertainty

The accompanying financial statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. As shown in the accompanying financial statements, we incurred a net loss of $9,592,287 for the year ended December 31, 2017. As of December 31, 2017, we had a working capital deficit of $519,684 and a total stockholders’ deficit of $459,692. These factors, among others, raise substantial doubt about our ability to continue as a going concern.

Exclusive of the non-cash impairment expense of $9,520,345, the net loss for the year ended December 31, 2017 would have been $71,942. Additionally, we reported net cash provided by operating activities of $7,684 and $50,286 for the years ended December 31, 2017 and 2016, respectively. Management believes that by implementing cost reductions and realizing cost efficiencies from the Merger, operating cash flows will be sufficient to support our business plan. We will also continue to develop and launch new games to maximize revenues. However, management is currently evaluating alternative financing sources to fund our current business plan should cash provided by operations be insufficient.

Our ability to continue as a going concern is dependent upon successfully executing its plans to attain a successful level of operations. Our financial statements do not include any adjustments that might be necessary if it were unable to continue as a going concern.

Critical Accounting Policies

The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs, expenses and related disclosures. These estimates and assumptions are often based on historical experience and judgments that we believe to be reasonable under the circumstances at the time made. However, all such estimates and assumptions are inherently uncertain and unpredictable and actual results may differ. For further information on our significant accounting policies see Note 2 to our financial statements included in this filing.

The following is a summary of our critical accounting policies that involve estimates and management’s judgment.

Revenue Recognition

Our revenues are derived primarily by licensing software products in the form of mobile games for smartphone and tablet platforms. We recognize revenue from the sale of our products in accordance with current accounting standards upon the transfer of title and risk of loss to its customers, and once any performance obligations have been completed. Revenue from product sales is recorded net of processing costs.

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Allowances for Sales Returns and Doubtful Accounts

The allowance for sales returns is based on our estimates of potential future product returns and other allowances related to current period product revenue. We analyze historical returns, current economic trends and changes in customer demand and acceptance of our products. The allowance for doubtful accounts is based on our assessment of the collectability of customer accounts and the aging of the related invoices, and represents our best estimate of probable credit losses in its existing trade accounts receivable. We regularly review the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. We determined that no allowances for sales returns and doubtful accounts were required at December 31, 2017 and 2016.

Intangible Assets

Intangible assets consist primarily of intellectual property, customer base and non-compete agreements acquired in the Merger, which are amortized on a straight-line basis over their estimated useful lives of 5 years. Intangible assets are reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. At December 31, 2017, we reviewed the intangible assets and determined that an impairment expense of $37,800 was required.

The excess of the cost over the fair value of net assets of acquired in the Merger is recorded as goodwill. Goodwill is not subject to amortization, but is reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. An impairment charge would be recorded to the extent the carrying value of goodwill exceeds its estimated fair value. The testing of goodwill under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations. At December 31, 2017, we reviewed the goodwill recorded in the Merger and determined that an impairment expense of $9,482,545 was required.

Impairment of Long-Lived Assets

Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment charge is recognized equal to the amount by which the carrying amount exceeds fair value. The testing of these intangibles under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations.

Accounting for Stock-Based Compensation

We account for stock-based compensation in accordance with ASC Topic 718-10, Compensation-Stock Compensation and ASC Subtopic 505-50, Equity-Based Payments to Non-Employees (“ASC stock-based compensation guidance”). Stock-based compensation expense recognized during the requisite services period is based on the value of share-based payment awards after reduction for estimated forfeitures. Forfeitures are estimated at the time of grant and are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Fair Value of Financial Instruments

In accordance with current accounting standards, certain assets and liabilities must be measured at fair value. ASC 820 defines fair value 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 (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. ASC 820 requires that certain assets and liabilities must be measured at fair value, and the standard details the disclosures that are required for items measured at fair value. We had no assets and liabilities required to be measured on a recurring basis at December 31, 2017 and 2016.

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The current assets and current liabilities reported on our balance sheets are estimated by management to approximate fair market value due to their short-term nature.

Recent Accounting Pronouncements

In May 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-09, “Compensation-Stock Compensation: Scope of Modification Accounting.” The amendments of ASU No. 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The guidance of ASU No. 2017-09 is effective for years beginning after December 15, 2017, including interim periods within those years. We assessed the impact of this ASU and do not believe that its adoption will have a significant impact on our financial statements.

In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception.” Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, “Distinguishing Liabilities from Equity,” because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. We are currently unable to determine the impact on its financial statements of the adoption of this new accounting pronouncement.

Although there are several other new accounting pronouncements issued or proposed by the FASB, which we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had or will have a material impact on its financial position or results of operations.

Results of Operations for the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

Revenues

As discussed above, revenues for the year ended December 31, 2016 and the period January 1, 2017 through October 17, 2017 are Munzee revenues. Revenue from product sales is recorded net of processing costs. From October 18, 2017 through December 31, 2017, revenues are comprised of revenues of both Munzee and Freeze Tag. Revenues decreased $141,784 to $2,217,975 for the year ended December 31, 2017 from $2,359,759 for the year ended December 31, 2016. The primary reason for the decrease in revenues in the current year was due to the closing down of the Munzee Marketplace store, which was shut down prior to the merger and which also resulted in a decrease in Cost of Sales and other expenses, partially offset by the contribution of Freeze Tag revenues subsequent to the Merger.

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Cost of Sales

Cost of sales decreased $622,278 to $309,467 for the year ended December 31, 2017 from $931,745 for the year ended December 31, 2016. The decrease was a result of lower revenues and shutting down operations of the Munzee Marketplace store prior to the merger.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $502,797 to $1,904,035 for the year ended December 31, 2017 from $1,401,238 for the year ended December 31, 2016. Contributing to the increase were professional fees, travel and other costs relating to the merger and the inclusion of Freeze Tag expenses from the date of the merger to the end of the current fiscal year.

Impairment Expense

In the Merger, we recorded identifiable intangible assets totaling $495,200 and goodwill of $9,482,545 based on the valuation report of an independent consulting firm. Accounting rules require that intangible assets are reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of the assets may not be recoverable. At December 31, 2017, we reviewed the intangible assets and determined that a non-cash impairment expense of $9,520,345 was required, comprised of an impairment of identifiable intangible assets of $37,800 and an impairment of goodwill of $9,482,545. We recorded no impairment expense for the year ended December 31, 2016.

Other Income (Expense)

Our interest and other income is currently immaterial to our operations and totaled $4,571 and $0 for the years ended December 31, 2017 and 2016, respectively.

Interest expense primarily from automobile loans is also currently immaterial to our operations and totaled $4,891 and $2,394 for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, all interest-bearing debt had been retired.

We sold all automobiles and also abandoned certain leasehold improvements during the year ended December 31, 2017. Although we received total proceeds $47,251 from the sale of automobiles, we recognized a loss on disposition of $46,621. We had no gain or loss from disposition of property and equipment for the year ended December 31, 2016.

Provision for Income Taxes

The provision for income taxes was $29,474 and $7,314 for the years ended December 31, 2017 and 2016, respectively. The $29,474 provision for the year ended December 31, 2017 consists primarily of a provision for income taxes on the pre-merger income of Munzee.

Net Income (Loss)

As a result of the above, we reported a net loss of $9,592,287 for the year ended December 31, 2017 and net income of $17,068 for the year ended December 31, 2016. The primary reason for the net loss in the current year was the above-described impairment expense, which was a non-cash expense.

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Liquidity and Capital Resources

Introduction

As of December 31, 2017, we had current assets of $214,244, including cash of $167,492, and current liabilities of $733,928, resulting in a working capital deficit of $519,684. In addition, we had a total stockholders’ deficit of $459,692 at December 31, 2017.

During the years ended December 31, 2017 and 2016, we generated net cash from operating activities of $7,684 and $50,286, respectively. Management believes that by implementing cost reductions and realizing cost efficiencies from the Merger, operating cash flows will be sufficient to support our business plan. We will also continue to develop and launch new games to maximize revenues. As a result, we may have short-term cash needs. Therefore, management is currently evaluating alternative financing sources to fund our current business plan should cash provided by operations be insufficient. There can be no assurance that we will be successful in these efforts.

Sources and Uses of Cash

Net cash provided by operating activities was $7,684 for the year ended December 31, 2017 as a result of our net loss of $9,592,287, increases in accounts receivable of $1,481 and other assets of $15,000, and a decrease in accrued expenses of $24,848, offset by non-cash expenses totaling $9,625,484, a decrease in prepaid expenses and other current assets of $9,813 and an increase in accounts payable of $6,003.

By comparison, net cash provided by operating expenses was $50,286 for the year ended December 31, 2016 as a result of our net income of $17,068, non-cash expenses of $22,245 and an increase in accounts payable of $20,525, partially offset by an increase of prepaid expense and other current assets of $2,686 and a decrease in accrued expenses of $6,866.

Net cash provided by investing activities was $62,023 for the year ended December 31, 2017 comprised of proceeds from the disposition of property and equipment of $47,251, and cash acquired in the merger of $29,156, partially offset by the purchase of property and equipment of $14,384. Net cash used in investing activities was $26,930 for the year ended December 31, 2016, comprised of the purchase of property and equipment.

For the year ended December 31, 2017, we had net cash used by financing activities of $96,107, comprised of repayment of notes payable of $98,008, partially offset by proceeds from notes payable of $1,901. We had net cash provided by financing activities of $46,215 for the year ended December 31, 2016, comprised of proceeds from notes payable of $75,168, partially offset by repayment of notes payable of $28,953.

Notes Payable – Related Party

As of December 31, 2017, our debt was comprised of notes payable totaling $379,825 to Craig Holland, our Chief Executive Officer and Mick Donahoo, our Chief Financial Officer. These notes are non-interest bearing and mature on December 31, 2019. Of this related party indebtedness, there are two convertible notes payable of $186,450 to each of Messrs. Holland and Donahoo, who have the right, at any time, at their election, to convert all or part of the amount due into shares of fully paid and non-assessable shares of common stock of the Company. The Company has imputed interest on these notes payable using an annual rate of 10%. The fixed conversion price is $0.02 per share.

Debt Instruments, Guarantees, and Related Covenants

We have no disclosures required by this item.

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company we are not required to provide the information required by this Item.

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ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FREEZE TAG, INC.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm		F-2
Balance Sheets as of December 31, 2017 and 2016		F-3
Statements of Operations for the Years Ended December 31, 2017 and 2016		F-4
Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2017 and 2016		F-5
Statements of Cash Flows for the Years Ended December 31, 2017 and 2016		F-6-F-7
Notes to Financial Statements		F-8

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Shareholders of Freeze Tag, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Freeze Tag, Inc. (the Company) as of December 31, 2017 and 2016, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2017, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company suffered losses from operations which raise substantial doubt about its ability to continue as a going concern. Managements plans regarding those matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ M&K CPAS, PLLC

We have served as the Company’s auditor since 2010.

Houston, TX

April 2, 2018

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FREEZE TAG, INC.

BALANCE SHEETS

	December 31,
	2017			2016

ASSETS

Current assets:
Cash	$	167,492		$	193,892
Accounts receivable		7,395			-
Prepaid expenses and other current assets		39,357			44,767
Total current assets		214,244			238,659

Property and equipment, net		12,740			106,319
Intangible assets, net		432,640			-
Other assets		15,000			-

Total assets	$	674,624		$	344,978

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:
Accounts payable	$	155,494		$	30,843
Accrued expenses		451,247			17,805
Unearned royalties		127,187			-
Current portion of long-term debt		-			72,112
Total current liabilities		733,928			120,760

Long-term liabilities:
Accrued expenses		20,563			-
Notes payable – related party		379,825			-
Notes payable		-			23,995
Total long-term liabilities		400,388			23,995

Total liabilities		1,134,316			144,755

Commitments and contingencies

Stockholders’ equity (deficit):
Preferred stock; $0.00001 par value, 25,000,000 shares authorized:		-			-
Series B; 2,585,882 and 0 shares issued and outstanding at December 31, 2017 and 2016, respectively		26			-
Series C; 4,355,000 and 0 shares issued and outstanding at December 31, 2017 and 2016, respectively		44			-
Common stock; $0.00001 par value, 800,000,000 shares authorized, 69,786,123 and 6,720,000 shares issued and outstanding at December 31, 2017 and 2016, respectively		698			67
Additional paid-in capital		8,919,980			109
Common stock payable		16,800			-
Common stock subscription receivable		(5,000	)		-
Retained earnings (deficit)		(9,392,240	)		200,047
Total stockholders’ equity (deficit)		(459,692	)		200,223

Total liabilities and stockholders’ equity (deficit)	$	674,624		$	344,978

The accompanying notes are an integral part of the financial statements

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FREEZE TAG, INC.

STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2017			2016

Revenues	$	2,217,975		$	2,359,759

Operating costs and expenses:
Cost of sales		309,467			931,745
Selling, general and administrative expenses		1,904,035			1,401,238
Impairment expense		9,520,345			-

Total operating costs and expenses		11,733,847			2,332,983

Income (loss) from operations		(9,515,872	)		26,776

Other income (expense):
Interest and other income		4,571			-
Interest expense		(4,891	)		(2,394	)
Loss on disposition of property and equipment		(46,621	)		-

Total other income (expense)		(46,941	)		(2,394	)

Income (loss) before income taxes		(9,562,813	)		24,382
Provision for income taxes		(29,474	)		(7,314	)

Net income (loss)	$	(9,592,287	)	$	17,068

Weighted average number of common shares outstanding – basic and diluted		18,659,077			6,720,000

Income (loss) per common share – basic and diluted	$	(0.51	)	$	0.00

The accompanying notes are an integral part of the financial statements

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FREEZE TAG, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Years Ended December 31, 2017 and 2016

	Series A Preferred Stock					Series B Preferred Stock						Series C Preferred Stock				Common Stock						Additional Paid-in			Common Stock		Common Stock Subscription			Retained Earnings
	Shares			Amount		Shares			Amount			Shares		Amount		Shares			Amount			Capital			Payable		Receivable			(Deficit)			Total


Balance, December 31, 2015		-		$	-		-		$	-			-	$	-		6,720,000		$	67		$	109		$	-	$	-		$	182,979		$	183,155
Net income		-			-		-			-			-		-		-			-			-			-		-			17,068			17,068

Balance, December 31, 2016		-			-		-			-			-		-		6,720,000			67			109			-		-			200,047			200,223

Cancellation of common shares		-			-		-			-			-		-		(800,000	)		(8	)		8			-		-			-			-
Issuance of common stock for stock subscription receivable		-			-		-			-			-		-		500,000			5			4,995			-		(5,000	)		-			-
Issuance of Series C preferred stock and combination of equity accounts in reverse merger		1,000			-		2,663,182			27			4,355,000		44		59,500,962			595			8,855,239			16,800		-			-			8,872,705
Rounding of common shares		-			-		-			-			-		-		161			-			-			-		-			-			-
Surrender and cancellation of Series A preferred stock		(1,000	)		-		-			-			-		-		-			-			-			-		-			-			-
Issuance of common stock for conversion of Series B preferred stock		-			-		(77,300	)		(1	)		-		-		3,865,000			39			(38	)		-		-			-			-
Stock-based compensation and reduction of accrued expenses		-			-		-			-			-		-		-			-			59,667			-		-			-			59,667
Net loss		-			-		-			-			-		-		-			-			-			-		-			(9,592,287	)		(9,592,287	)

Balance, December 31, 2017		-		$	-		2,585,882		$	26			4,355,000	$	44		69,786,123		$	698		$	8,919,980		$	16,800	$	(5,000	)	$	(9,392,240	)	$	(459,692	)

The accompanying notes are an integral part of the financial statements

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FREEZE TAG, INC.

STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2017			2016
Cash flows from operating activities:
Net income (loss)	$	(9,592,287	)	$	17,068
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense		38,851			22,245
Impairment expense		9,520,345			-
Stock-based compensation		19,667			-
Loss on disposition of property and equipment		46,621			-
Changes in operating assets and liabilities:
Accounts receivable		(1,481	)		-
Prepaid expenses and other current assets		9,813			(2,686	)
Other assets		(15,000	)		-
Accounts payable		6,003			20,525
Accrued expenses		(24,848	)		(6,866	)

Net cash provided by operating activities		7,684			50,286

Cash flows from investing activities:
Purchase of property and equipment		(14,384	)		(26,930	)
Cash acquired in Merger		29,156			-
Proceeds from disposition of property and equipment		47,251			-

Net cash provided (used) by investing activities		62,023			(26,930	)

Cash flows from financing activities:
Proceeds from notes payable		1,901			75,168
Repayment of notes payable		(98,008	)		(28,953	)

Net cash provided (used) by financing activities		(96,107	)		46,215

Net increase (decrease) in cash		(26,400	)		69,571
Cash at the beginning of the year		193,892			124,321

Cash at the end of the year	$	167,492		$	193,892

Supplemental disclosure:
Cash paid for income taxes	$	17,476		$	10,000
Cash paid for interest		4,891			2,394

Continued

The accompanying notes are an integral part of the financial statements

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FREEZE TAG, INC.

STATEMENTS OF CASH FLOWS (continued)

	Years Ended December 31,
	2017			2016

Non-cash investing and financing transactions:
Cancellation of common shares	$	(8	)	$	-
Issuance of common stock for stock subscription receivable		5,000			-
Issuance of common stock for conversion of Series B preferred stock		39			-
Accrued expenses contributed to additional paid-in capital		40,000			-

The accompanying notes are an integral part of the financial statements

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FREEZE TAG, INC.

(A DELAWARE CORPORATION)

NOTES TO FINANCIAL STATEMENTS

Years Ended December 31, 2017 and 2016

NOTE 1 – THE COMPANY AND NATURE OF BUSINESS

Nature of Operations

Freeze Tag, Inc. (“Freeze Tag” or the “Company”) is a leading creator of mobile location-based games for consumers and businesses. We also offer our gaming technology and services to businesses that want to leverage mobile gaming in their marketing and branding programs.

Merger Transaction

On October 18, 2017, we closed the merger transaction (the “Merger”) that was the subject of that certain Agreement and Plan of Merger (the “Merger Agreement”) with Munzee, Inc., a Delaware corporation (“Munzee”) dated July 26, 2017. At closing, in accordance with the Merger Agreement, Munzee merged with and into our corporation, Freeze Tag, Inc., a Delaware corporation (the “Merger”), with Freeze Tag, Inc. being the surviving corporation. At the closing, we issued the current owners of all of Munzee’s outstanding common stock 4,355,000 shares of our Series C Convertible Preferred Stock. Under U.S. generally accepted accounting principles, the merger is treated as a “reverse merger” under the purchase method of accounting, with Munzee as the accounting acquirer. Accordingly, Munzee’s historical results of operations replace Freeze Tag’s historical results of operations for all periods prior to the Merger and, for all periods following the Merger, the results of operations of the combined company will be included in the Company’s financial statements. See Note 4.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company’s revenues are derived primarily by licensing software products in the form of mobile games for smartphone and tablet platforms. The Company recognizes revenue from the sale of its products in accordance with current accounting standards upon the transfer of title and risk of loss to its customers, and once any performance obligations have been completed. Revenue from product sales is recorded net of processing costs.

Cash and Cash Equivalents

For purposes of the Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents. The Company places its cash and cash equivalents with large commercial banks. The Federal Deposit Insurance Corporation (“FDIC”) insures these balances, up to $250,000. All of the Company’s cash balances at December 31, 2017 and December 31, 2016 were insured. At December 31, 2017 and December 31, 2016 there were no cash equivalents.

Allowances for Sales Returns and Doubtful Accounts

The allowance for sales returns is based on the Company’s estimates of potential future product returns and other allowances related to current period product revenue. The Company analyzes historical returns, current economic trends and changes in customer demand and acceptance of the Company’s products. The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts and the aging of the related invoices, and represents the Company’s best estimate of probable credit losses in its existing trade accounts receivable. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. We determined that no allowances for sales returns and doubtful accounts were required at December 31, 2017 and 2016.

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Property and Equipment

Property and equipment is stated at cost and is depreciated or amortized using the straight-line method over the estimated useful life of the related asset as follows:

Computer equipment		5 years
Office furniture and equipment		7 years
Automobiles		5 years
Leasehold improvements		15 years

Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments will be capitalized. At the time of retirement or other disposition of equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.

The Company will assess the recoverability of property and equipment by determining whether the depreciation and amortization of these assets over their remaining life can be recovered through projected undiscounted future cash flows. The amount of equipment impairment, if any, will be measured based on fair value and is charged to operations in the period in which such impairment is determined by management.

Intangible Assets

Intangible assets consist primarily of intellectual property, customer base and non-compete agreements acquired in the Merger, which are amortized on a straight-line basis over their estimated useful lives of 5 years. Intangible assets are reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. At December 31, 2017, the Company reviewed the intangible assets and determined that an impairment expense of $37,800 was required.

The excess of the cost over the fair value of net assets of acquired in the Merger is recorded as goodwill. Goodwill is not subject to amortization, but is reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. An impairment charge would be recorded to the extent the carrying value of goodwill exceeds its estimated fair value. The testing of goodwill under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations. At December 31, 2017, the Company reviewed the goodwill recorded in the Merger and determined that an impairment expense of $9,482,545 was required.

Impairment of Long-Lived Assets

Concentrations of Credit Risk, Major Customers and Major Vendors

The Company’s customers are the end-consumers that purchase its games from the websites where the Company has its games listed for sale. Therefore, the Company does not have any individual customers that represent any more than a fraction of its revenue.

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Income Taxes

We account for income taxes using ASC Topic 740, Income Taxes. Under ASC Topic 740, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

ASC Topic 740 includes accounting guidance which clarifies the accounting for the uncertainty in recognizing income taxes in an organization by providing detailed guidance for financial statement recognition, measurement and disclosure involving uncertain tax positions. This guidance requires an uncertain tax position to meet a more-likely-than-not recognition threshold at the effective date to be recognized both upon the adoption of the related guidance and in subsequent periods.

The Company has no uncertain tax positions at any of the dates presented.

Foreign Currency Translation

The Company derives a portion of its revenue from foreign countries, but customers pay in U.S. Dollars. Therefore, no adjustments are required in the accompanying financial statements for foreign currency transactions.

Accounting for Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718-10, Compensation-Stock Compensation and ASC Subtopic 505-50, Equity-Based Payments to Non-Employees (“ASC stock-based compensation guidance”). Stock-based compensation expense recognized during the requisite services period is based on the value of share-based payment awards after reduction for estimated forfeitures. Forfeitures are estimated at the time of grant and are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company had stock-based compensation expense recognized in its statements of operations of $19,667 and $0 for the years ended December 31, 2017 and 2016, respectively.

Earnings per Share

The computation of basic earnings per common share is based on the weighted average number of shares outstanding during the period. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the weighted average common stock equivalents which would arise from the exercise of stock options, warrants, convertible preferred stock and other rights during the period. All 2017 and 2016 share and per share disclosures have been adjusted to reflect the exchange of shares in the Merger.

For the year ended December 31, 2017, the diluted weighted average number of shares is the same as the basic weighted average number of shares as the inclusion of any common stock equivalents would be anti-dilutive. For the year ended December 31, 2016, the diluted weighted average number of shares is the same as the basic weighted average number of shares as the Company did not have any common stock equivalents.

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Fair Value of Financial Instruments

In accordance with current accounting standards, certain assets and liabilities must be measured at fair value. ASC 820 defines fair value 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 (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. ASC 820 requires that certain assets and liabilities must be measured at fair value, and the standard details the disclosures that are required for items measured at fair value. The Company had no assets and liabilities required to be measured on a recurring basis at December 31, 2017 and 2016.

The current assets and current liabilities reported on the Company’s balance sheets are estimated by management to approximate fair market value due to their short-term nature.

Use of Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions 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. Actual results may differ from these estimates and these differences may be material.

Research and Development Costs

The Company charges costs related to research and development of products to general and administrative expense as incurred. The types of costs included in research and development expenses include research materials, salaries, contractor fees, and support material.

Recent Accounting Pronouncements

In May 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-09, “Compensation-Stock Compensation: Scope of Modification Accounting.” The amendments of ASU No. 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The guidance of ASU No. 2017-09 is effective for years beginning after December 15, 2017, including interim periods within those years. The Company has assessed the impact of this ASU and does not believe that its adoption will have a significant impact on the Company’s financial statements.

In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception.” Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, “Distinguishing Liabilities from Equity,” because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently unable to determine the impact on its financial statements of the adoption of this new accounting pronouncement.

Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its financial position or results of operations.

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NOTE 3 – GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. As shown in the accompanying financial statements, the Company incurred a net loss of $9,592,287 for the year ended December 31, 2017. As of December 31, 2017, the Company had a working capital deficit of $519,684 and a total stockholders’ deficit of $459,692. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

Exclusive of the non-cash impairment expense of $9,520,345, the net loss for the year ended December 31, 2017 would have been $71,942. Additionally, the Company reported net cash provided by operating activities of $7,684 and $50,286 for the years ended December 31, 2017 and 2016, respectively. Management believes that by implementing cost reductions and realizing cost efficiencies from the Merger, operating cash flows will be sufficient to support the Company’s business plan. The Company will also continue to develop and launch new games to maximize revenues. However, management is currently evaluating alternative financing sources to fund the Company’s current business plan should cash provided by operations be insufficient.

The Company’s ability to continue as a going concern is dependent upon successfully executing its plans to attain a successful level of operations. The Company’s financial statements do not include any adjustments that might be necessary if it were unable to continue as a going concern.

NOTE 4 – MERGER TRANSACTION

Because the prior owners of Munzee’s outstanding common stock owned more than 50% of the combined voting interest in the Company, on a fully-diluted basis, immediately following the merger, the Merger is treated as a “reverse merger” under the purchase method of accounting, with Munzee as the accounting acquirer. Accordingly, Munzee’s historical results of operations replace Freeze Tag’s historical results of operations for all periods prior to the Merger and, for all periods following the Merger, the results of operations of the combined company will be included in the Company’s financial statements.

In the Merger, the 4,355,000 shares of our Series C Convertible Preferred Stock were valued by an independent valuation firm at $10,247,552, with the purchase price allocated as follows at October 18, 2017:

Current assets	$	278,366
Property and equipment		11,938
Other assets		15,000
Total liabilities		(35,497	)

Net identifiable assets		269,807
Intangible assets:
Intellectual property		307,100
Customer base		156,000
Non-compete agreements		32,100
Goodwill		9,482,545

Total purchase price	$	10,247,552

Pro forma summary results of operations for the years ended December 31, 2017 and 2016 as though the Merger had taken place at January 1, 2016 are as follows:

	2017			2016

Revenues	$	2,232,100		$	2,498,479
Net loss		(11,293,528	)		(11,724,422	)
Net loss per share		(0.17	)		(0.18	)

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NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31:

	2017			2016

Computer equipment	$	7,170		$	1,516
Office furniture and equipment		7,214			16,474
Automobiles		-			91,181
Leasehold improvements		-			60,127
Total		14,384			169,298
Less accumulated depreciation and amortization		(1,644	)		(62,979	)

Net	$	12,740		$	106,319

Depreciation and amortization expense was $14,091 and $22,245 for the years ended December 31, 2017 and 2016, respectively.

NOTE 6 – INTANGIBLE ASSETS

Intangible assets consisted of the following at December 31, 2017:

Intellectual property	$	307,100
Customer base		142,000
Non-compete agreements		8,300
Less accumulated amortization		(24,760	)

Net	$	432,640

Intangible assets were reduced by an impairment charge of $37,800 at December 31, 2017.

The intangible assets other than goodwill are amortized on a straight-line basis over an estimated useful life of 5 years. Estimated aggregate amortization expense for the intangible assets for each of the five fiscal years subsequent to 2017 is as follows:

2018	$	91,480
2019		91,480
2020		91,480
2021		91,480
2022		66,720

Total	$	432,640

Goodwill is not subject to amortization, but is reviewed for impairment annually. Goodwill recorded in the Merger of $9,482,454 has been fully reduced at December 31, 2017 by an impairment charge of $9,482,545.

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NOTE 7 – DEBT

Notes Payable

Notes payable to non-related parties consisted of the following at December 31, 2016:

Installment loan payable to finance company with monthly payments of $500, including interest at 6%, secured by vehicle, maturing October 2019	$	17,613
Installment loan payable to bank with monthly payments of $355, including interest at 5.54%, secured by vehicle, maturing December 2019		10,735
Installment loan payable to finance company with monthly payments of $303, including interest at 6%, secured by vehicle, maturing October 2019		9,543
Line of credit payable to bank, with interest at 7.4%, secured by personal guarantee of a stockholder, maturing October 2018		58,216
Total		96,107
Less current portion		72,112

Long-term portion	$	23,995

All non-related party debt was repaid during the year ended December 31, 2017.

Notes Payable – Related Party

Long-term notes payable - related party consisted of Freeze Tag notes payable that were assumed in the Merger and were as follows at December 31, 2017:

Note payable to Craig Holland, non-interest bearing, maturing on December 31, 2019	$	6,925
Convertible note payable to Craig Holland, non-interest bearing, maturing on December 31, 2019		186,450
Convertible note payable to Mick Donahoo, non-interest bearing, maturing on December 31, 2019		186,450

Total	$	379,825

The note payable to Craig Holland, our Chief Executive Officer, was amended on July 25, 2017 to eliminate the option to convert the note to common stock of the Company and to make the note non-interest bearing. The Company has imputed interest on this note payable using an annual rate of 10%.

The convertible notes payable to Craig Holland and Mick Donahoo, our Chief Financial Officer, consist of amounts relating to accrued salary. The notes were amended on July 25, 2017 to change the conversion terms of the notes and to make the notes non-interest bearing. The Company has imputed interest on these notes payable using an annual rate of 10%. Messrs. Holland and Donahoo have the right, at any time, at their election, to convert all or part of the amount due into shares of fully paid and non-assessable shares of common stock of the Company. The fixed conversion price is $0.02 per share.

Interest expense on all debt totaled $4,891 and $2,394 for the years ended December 31, 2017 and 2016, respectively.

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NOTE 8 – STOCKHOLDERS’ DEFICIT

Common Stock

The Company is authorized to issue up to 800,000,000 shares of its $0.00001 par value common stock and had 69,786,123 common shares issued and outstanding as of December 31, 2017.

On August 21, 2017, the Board of Directors of the Company adopted resolutions authorizing an amendment to the Company’s Articles of Incorporation to approve a reverse stock split of the Company’s outstanding common stock at a ratio of 1-for-100 and to decrease the number of the Company’s authorized common shares from 2,000,000,000 shares to 800,000,000 shares. The par value of the Company’s common stock of $0.00001 per share was not adjusted in connection with the reverse stock split. The reverse stock split was approved by FINRA and went effective on October 5, 2017. The Company has given retroactive effect to the reverse stock split in the accompanying financial statements for all periods presented.

Prior to the merger on October 18, 2017, Munzee issued 500,000 common shares for stock subscription receivable of $5,000 and cancelled 800,000 outstanding common shares at par value of $8.

During the year ended December 31, 2016, Munzee did not issue any common shares.

On the date of the merger, October 18, 2017, the Company had 65,920,962 shares of common stock issued and outstanding. This included 12,525,910 shares that were issued and outstanding at the time of the reverse split plus 567,500 shares that were reported on in prior filings and issued on October 10, 2017 to a holder of one of the last remaining convertible promissory notes pursuant to the holder notifying us of its election to convert $11,350 of principal due under the promissory note into the shares. In addition, shares were granted to the following parties as has been reported on in prior filings. On July 25, 2017, we entered into Securities Exchange and Common Stock Agreements “CS Exchange Agreements”) with Craig Holland, Mick Donahoo, Robert Cowdell and the Holland Family Trust (together, the “CS Exchangers”), under which the CS Exchangers agreed to exchange certain promissory notes issued us to them into shares of our common stock automatically upon us completing a reverse stock split of our common stock with FINRA. On October 5, 2017, FINRA took our reverse stock split effective at the open of market. As a result, on October 5, 2017, we issued the CS Exchangers, the following shares of our post-split common stock: 37,849,200 shares to Craig Holland, 1,552,100 shares to Mick Donahoo, 3,072,100 shares to the assignee of Robert Cowdell, and 10,354,152 shares to the Holland Family Trust.

Subsequent to the Merger, the Company issued a total of 3,865,161 shares of its common stock: an adjustment increasing outstanding common shares by 161 shares for post-split rounding and a total of 3,865,000 common shares recorded at par value to an accredited investor in conversion of 77,300 shares of our Series B preferred stock.

As of December 31, 2017, the Company had common stock payable of $16,800 resulting from a technology transfer agreement with an unrelated party that obligated the Company to issue a total of 960 shares of its common stock, payable in 8 quarterly installments of 120 shares.

Preferred Stock

The Company is authorized to issue up to 25,000,000 shares of its $0.00001 par value preferred stock. The shares of preferred stock may be issued from time to time in one or more series. As of December 31, 2017, there were 2,585,882 shares of Series B preferred stock and 4,355,000 shares of Series C preferred stock issued and outstanding.

Series A Preferred Stock

On August 18, 2017, we issued 1,000 shares of our Series A Preferred Stock to Craig Holland., our Chief Executive Officer. The shares of Series A Preferred Stock entitle the holder to voting rights of the Company equal to 51% of the then-outstanding voting rights on any matter properly brought before our shareholders for a vote. The issuance of the shares was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933. The investor was one of our executive officers, accredited and sophisticated, familiar with our operations, and there was no solicitation. The 1,000 shares were recorded at par value of $0.00001 per share for a total value of $0.01.

The Company’s Series A Preferred Stock has 1,000 shares authorized and the following rights: (i) no dividend rights; (ii) no liquidation preference over the Company’s common stock; (iii) no conversion rights; (iv) the shares are automatically redeemed by the Company in the event: (a) Mr. Holland is no longer an officer, director or consultant with the Company, or (b) the Company’s common stock is listed on a national exchange, if the listing rules require the shares to be eliminated; (v) no call rights by the Company; (vi) non-transferable; and (vii) the aggregate 1,000 shares have votes equal to 51% of the then-outstanding voting rights of the Company (including all common stock and any other series of preferred stock) on any matter properly brought before the Company’s stockholders for a vote.

Concurrent with the Merger, Mr. Holland surrendered the 1,000 shares of Series A preferred stock and the shares were cancelled.

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Series B Preferred Stock

The Company’s Series B preferred stock has 2,700,000 shares authorized and the following rights: (i) dividend rights equal to the Company’s common stock; (ii) no liquidation preference over the Company’s common stock; (iii) each share is convertible into 50 shares of the Company’s common stock; (iv) no redemption rights; (v) no call rights by the Company; and (vi) no voting rights. The holders of the Series B preferred stock cannot convert their shares of Series B preferred stock if such conversion would cause the holder to beneficially own more than 4.99% of our then-outstanding common stock.

On July 25, 2017, we entered into Securities Exchange and Preferred Stock Agreements (the “PS Exchange Agreements”) with certain accredited investors and lenders (together, the “PS Exchangers”). Under the PS Exchange Agreements, as amended, the PS Exchangers agreed to exchange certain promissory notes issued us to them into shares of our Series B preferred stock automatically upon us completing a reverse stock split of our common stock with FINRA. On October 5, 2017, FINRA took our reverse stock split effective at the open of market. As a result, on October 5, 2017, we issued the PS Exchangers a total of 2,663,182 shares of our Series B preferred stock.

In two transactions in November 2017, we issued a total of 3,865,000 common shares recorded at par value to an accredited investor in conversion of 77,300 shares of our Series B preferred stock.

Series C Preferred Stock

The Company’s Series C Preferred Stock has 4,500,000 shares authorized and the following rights: (i) dividend rights equal to the Company’s common stock; (ii) no liquidation preference over the Company’s common stock; (iii) each share is convertible into 50 shares of the Company’s common stock; (iv) no redemption rights; (v) no call rights by the Company; and (vi) each shares votes on an “as converted” basis, such that each share currently has 50 votes on all matters brought before the Company’s common stockholders for a vote.

As further discussed in Note 4, at the closing of the Merger, we issued the owners of all of Munzee’s outstanding common stock 4,355,000 shares of our Series C preferred stock.

Stock Options

2017 Non-Qualified Stock Option Plan

2006 Stock Option Plan

The Company’s 2006 Stock Option Plan adopted by our Board of Directors in March of 2006 terminated in the year ended December 31, 2016. As of December 31, 2017, there were 5,600 stock options outstanding under the 2006 Stock Option Plan.

We account for stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation. Under the fair value recognition provisions of this standard, stock-based compensation cost is measured at the grant date based on the estimated value of the award granted, using the Black-Scholes option pricing model, and recognized over the period in which the award vests in general and administrative expenses.

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The Company recorded stock-based compensation expense of $19,667 and $0 during the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, future compensation cost related to non-vested stock options not yet recognized in the statements of operations totaled $39,333.

A summary of the status of the stock options issued by the Company under both plans as of December 31, 2017, and changes during the years ended December 31, 2017 and 2016 is presented below:

			Weighted Average
	Shares		Exercise Price

Outstanding, December 31, 2015		5,600	$	10.00

Granted		-		-
Canceled / Expired		-		-
Exercised		-		-

Outstanding, December 31, 2016		5,600	$	10.00

Granted		1,512,821	$	0.039
Canceled / Expired		-		-
Exercised		-		-

Outstanding, December 31, 2017		1,518,421	$	0.076

The outstanding options expire on various dates beginning August 2020 through December 2027.

On December 5, 2017, our Board of Directors granted options to purchase a total of 1,512,821 shares of our common stock. This included 1,025,641 options issued to Mick Donahoo in lieu of $40,000 of accrued vacation time, 256,410 options issued to Cecie Newman, and 239,760 options issued to Other Employees / Consultants. All options were issued at an exercise price of $0.039 and have a ten year expiration.

In estimating the fair value of the stock options and warrants issued during 2017, we used the Black-Scholes pricing model with the following assumptions:

Risk-free interest rate	2.36	%
Expected life in years	10.0
Dividend yield	0	%
Expected volatility	341.22	%

NOTE 9 – RELATED PARTY TRANSACTIONS

The Company had a note payable to Craig Holland, its Chief Executive Officer, with a balance of $6,925 at December 31, 2017. The Company also had convertible notes payable to Mr. Holland and Mick Donahoo, its Chief Financial Officer, with a total balance of $372,900 as of December 31, 2017. See Note 7 for detailed disclosure of this related party debt, including interest rates, terms of conversion and other repayment terms.

Concurrent with the Merger, Mr. Holland surrendered 1,000 shares of Series A preferred stock and the shares were cancelled. See Note 10.

In connection with the grant of stock options in December 2017 (Note 10), options were granted to Mr. Donahoo in lieu of $40,000 of accrued vacation time, which was recorded as a contribution to capital.

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NOTE 10 – COMMITMENTS AND CONTINGENCIES

Leases

The Company leases its California office facilities on a month-to-month lease with either party having the option to terminate with 30 days’ notice.

The Company also leases its Texas office facilities pursuant to a long-term operating lease agreement with escalating monthly rent payments required through March 2020. Future minimum lease payments required under the lease as of December 31, 2017 are as follows:

2018	$	202,500
2019		219,000
2020		55,500

Total	$	477,000

The Company recognized rent expense under the Texas lease on a straight-line basis over the life of the lease, recording a deferred rent liability for the difference between the straight-line rent and rent expense incurred pursuant to the terms of the lease. As of December 31, 2017, the total deferred rent liability, included in accrued expenses was $20,813, of which $20,563 was recorded as a long-term liability.

Total rent expense under all operating leases was $156,182 and $144,577 for the years ended December 31, 2017 and 2016, respectively.

NOTE 11 – INCOME TAXES

The Company accounts for income taxes in accordance with standards of disclosure propounded by the FASB, and any related interpretations of those standards sanctioned by the FASB. Accordingly, deferred tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. Due to the uncertainty as to the utilization of net operating loss carry forwards, a valuation allowance has been made to the extent of any tax benefit that net operating losses may generate.

The provision for income taxes was $29,474 and $7,314 for the years ended December 31, 2017 and 2016, respectively. The provision for income taxes for the year ended December 31, 2017 includes a provision for income taxes on Munzee income prior to the Merger.

For Federal and California income tax purposes, the Company has net operating loss carry forwards that expire through 2031. The net operating loss as of December 31, 2017 and 2016 was $4,069,660 and $3,895,338, respectively. If substantial changes in the Company’s ownership should occur, there would be an annual limitation of the amount of the net operating loss carryforward that could be utilized.

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The deferred tax asset and the valuation allowance consist of the following at December 31:

	2017			2016

Deferred tax asset	$	1,383,685		$	1,324,918
Valuation allowance		(1,383,685	)		(1,324,918	)

Net	$	-		$	-

The ultimate realization of our deferred tax asset is dependent, in part, upon the tax laws in effect, our future earnings, and other events. As of December 31, 2017 and 2016, we recorded a 100% allowance against our deferred tax asset since we were unable to conclude that it is more likely than not that our deferred tax asset will be realized.

NOTE 12 – SUBSEQUENT EVENTS

Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported the following:

On March 1, 2018, a holder of the Company’s Series B preferred stock converted 50,400 shares of Series B preferred stock to 2,520,000 shares of the Company’s common stock.

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ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There are no items required to be reported under this Item.

ITEM 9A – CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined) in Exchange Act Rules 13a – 15(c) and 15d – 15(e)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer, who are our principal executive officer and principal financial officers, respectively, concluded that, as of the end of the period ended December 31, 2017, our disclosure controls and procedures were effective (1) to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to us, including our chief executive and chief financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or internal controls will prevent all error and all fraud. No matter how well conceived and operated, our disclosure controls and procedures can provide only a reasonable level of assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the company’s operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

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(b) Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States and includes those policies and procedures that:

	·	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and any disposition of our assets;
	·	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Under the supervision of our chief executive officer and our chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2017 using the criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our management concluded our internal control over financial reporting was not effective as at December 31, 2017.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by our registered, public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of our internal control over financial reporting as of December 31, 2017, we determined that there was a control deficiency that constituted a material weakness:

	(1)	Due to the Company not having formal Control procedures related to the approval of related party transactions;

	(2)	Management did not maintain effective internal controls relating to the quarter end closing and financial reporting process;

	(3)	The Company did not maintain effective internal controls to assure proper segregation of duties as the same employee was responsible for initiating and recording of transactions, thereby creating a segregation of duties weakness.

This control deficiency resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements could not have been prevented or detected on a timely basis. As a result of the material weakness described above, we concluded that we did not maintain effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control— 2013 Integrated Framework issued by COSO. Our management continues to evaluate remediation plans for the above deficiency. We plan to take steps to enhance and improve the design of our internal control over financial reporting.

(c) Changes in Internal Control over Financial Reporting

There are no changes to report during our fiscal quarter ended December 31, 2017.

ITEM 9B – OTHER INFORMATION

There are no events required to be disclosed by the Item.

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PART III

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The following table sets forth the names, ages, and biographical information of each of our current directors and executive officers, and the positions with the Company held by each person, and the date such person became a director or executive officer of the Company. Our executive officers are elected annually by the Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Family relationships among any of the directors and officers are described below.

Name	Age	Position

Craig Holland	57	Chief Executive Officer, Chief Creative Officer, and Director

Robert D. Vardeman, Jr.	42	President and Director

Mick Donahoo	48	Chief Operating Officer, Secretary, Chief Financial Officer, Treasurer, and Director

Cecie Newman	64	VP of Operations

Robert D. Vardeman	64	Director

Craig Holland co-founded Freeze Tag in October 2005. Prior to founding Freeze Tag, Craig founded Thumbworks, a publisher of mobile gaming applications, in January 2002 and served as the CEO of Thumbworks from its formation until its acquisition by In-Fusio, a mobile game publisher and mobile entertainment platform provider in January 2005. As CEO of Thumbworks, Mr. Holland drove the organization’s strategic direction, overseeing carrier relations, business development and licensing initiatives which led to partnerships with some of the world’s leading brands such as Etch A Sketch®, Nickelodeon, Suzuki, Paramount Pictures, and Honda. Prior to founding Thumbworks, Mr. Holland founded Nine Dots, an interactive marketing firm in North America whose clients included a number of high profile consumer brands such as Nestle, Quaker Oats, Qualcomm and General Motors, in 1992. Mr. Holland served as the CEO of Nine Dots from its formation until its sale to CyberSight, a Canadian-based interactive marketing company, in September 2000. Mr. Holland holds an MBA with an emphasis in Marketing from the University of Southern California (USC) and a Bachelor of Arts in English Literature from the University of California at Los Angeles (UCLA).

Robert Vardeman, Jr., age 42, is our President and a member of our Board of Directors, appointed to both positions on October 18, 2017 when Munzee merged with and into our corporation. From 2013-2017, Mr. Vardeman was the President of Munzee, Inc., providing the strategic direction of the company, ensuring that the general day-to-day operations were adequately executed. Mr. Vardeman was the visionary for Munzee’s suite of applications. He was also responsible for pushing the Munzee brand and spearheading its sales efforts. Before starting Munzee, Mr. Vardeman taught at Allen I.S.D. for 15 years, teaching mathematics for grades four through eight. Mr. Vardeman has a Bachelors in Elementary Education from Dallas Baptist University and a Masters in Administration and Supervision from the University of Phoenix.

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Mick Donahoo co-founded Freeze Tag in October 2005 and in his role as COO, Mr. Donahoo oversees product planning, design, and software development of all games and technology. With over 19 years of technology experience, Mr. Donahoo has produced over 25 mobile games distributed via 20 worldwide wireless carriers. Prior to founding Freeze Tag, Mr. Donahoo led North American development for Thumbworks and following its acquisition, by In-Fusio, oversaw overseas engineering teams located in Taiwan, Thailand, India, Russia, and Korea. Prior to In-Fusio, Mick was a consulting executive at Ernst & Young, LLP in the Financial Services and Aerospace and Defense industries architecting and developing large-scale, three-tiered client/server applications. Mick holds a Bachelor of Science degree in Business and Management Information Systems from Brigham Young University.

Cecie Newman, age 64, is our Vice President of Operations, appointed to the position on October 18, 2017 when Munzee merged with and into our corporation. From 2014-2017, Ms. Newman was with Munzee, Inc., and was most recently Executive Vice President of Operations, responsible for managing employees and their productivity, as well as being responsible for working with the shipping department, scheduling meetings, and holding team members accountable for their deadlines. Prior to joining Munzee, Mrs. Newman was a small business owner as a personal trainer. She also has 7 years of experience as a business consultant to the world’s largest convenience store chain.

Don Vardeman, age 64, is a member of our Board of Directors, appointed on October 18, 2017 when Munzee merged with and into our corporation. From 2013-2017, Mr. Vardeman was an advisor of Munzee, Inc., until Munzee merged with and into Freeze Tag, Inc. As a shareholder of Munzee, Mr. Vardeman provided guidance and insight to senior management. From 1999 - 2016, Mr. Vardeman worked for Anadarko Petroleum, eventually retiring as vice president of worldwide project management. In his positions with Anadarko Petroleum, Mr. Vardeman had execution responsibility for Anadarko’s major projects in Algeria, Ghana, Mozambique, and the Gulf of Mexico. Mr. Vardeman began his career with Amoco in operations, drilling and facilities. He later joined Sun Exploration and Production Company, predecessor of Oryx Energy Company, where he held positions in facilities and project management. Kerr-McGee merged with Oryx in 1999 and he later became vice president of marine facilities engineering. Vardeman and his group led the execution of the company’s deepwater developments including eight spar projects and other floating systems for the Gulf of Mexico and international locations. Mr. Vardeman graduated magna cum laude from Texas A&M University in 1975 with a degree in Electrical Engineering.

Family Relationships

Don Vardeman (Director) is the father of Rob Vardeman (President and Director). There are no family relationships among our officers or directors.

Historical Compensation of Directors

Other than as set forth herein no compensation has been given to any of the directors, although they may be reimbursed for any pre-approved out-of-pocket expenses.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers and persons who own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

During the most recent fiscal year, to the Company’s knowledge, there were six failures to timely file Section 16(a) forms

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Board Meetings and Committees

During the 2017 fiscal year, the Board of Directors met on a regular basis and took written action on numerous other occasions. All the members of the Board attended the meetings. The written actions were by unanimous consent.

Code of Ethics

We have not adopted a written code of ethics, because we believe and understand that our officers and directors adhere to and follow ethical standards without the necessity of a written policy.

Audit Committee

We do not currently have an audit committee.

Compensation Committee

We do not currently have a compensation committee.

ITEM 11 – EXECUTIVE COMPENSATION

Executive Officers and Directors

We do not currently have written employment agreements with our executives, Craig Holland, Robert D. Vardeman, Jr. (Rob), Mick Donahoo and Cecie Newman. All are at-will employees whose compensation is set forth in the Summary Compensation Table below.

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Summary Compensation Table

The following table sets forth information with respect to compensation earned by our Chief Executive Officer, President, Chief Financial Officer and VP of Operations for the fiscal years ended December 31, 2017, and 2016, and 2015.

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation ($)		All Other Compensation ($)		Total ($)

Craig Holland	2017		152,000		-		-		-		-		-		-		152,000
CEO	2016		159,600		-		-		-		-		-		-		159,600
	2015		159,600		-		-		-		-		-		-		159,600

Robert D. Vardeman, Jr.*	2017		103,362		-		-		-		-		-		-		103,362
President

Mick Donahoo	2017		152,000		-		-		40,000		-		-		-		192,000
CFO	2016		159,600		-		-		-		-		-		-		159,600
	2015		159,600		-		-		-		-		-		-		159,600

Cecie Newman*	2017		80,396		-		-		10,000		-		-		-		90,396
VP Operations

*Appointed as Executive officers in October 2017

Director Compensation

The following table sets forth director compensation for the fiscal year ended December 31, 2017:

Name

Fees

Earned

or Paid

in Cash

($)

Stock Awards

($)

Option Awards

($)

Non-Equity Incentive

Plan Compensation

($)

Nonqualified Deferred Compensation Earnings

($)

All Other Compensation

($)

Total

($)

Craig Holland

Mick Donahoo

Robert D. Vardeman, Jr.

Robert D. Vardeman

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Outstanding Equity Awards at Fiscal Year-End

On March 20, 2006, our Board of Directors and shareholders approved the Freeze Tag, Inc. 2006 Stock Plan. During the year ended December 31, 2016, the 2006 Stock Plan was terminated.

The following table sets forth certain information concerning outstanding stock awards held by the Named Executive Officers as of December 31, 2017:

	Option Awards									Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

Craig Holland		1,150		-		-		10.00	8/02/20		-		-		-		-

Mick Donahoo		341,880		683,761		-		0.039	12/05/27		-		-		-		-

Cecie Newman		85,470		170,940		-		0.039	12/05/27		-		-		-		-

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ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of March 29, 2018, certain information with respect to our equity securities owned of record or beneficially by (i) each of our Officers and Directors; (ii) each person who owns beneficially more than 5% of each class of our outstanding equity securities; and (iii) all Directors and Executive Officers as a group.

Common Stock⁽¹⁾

Name and Address of Beneficial Owner⁽²⁾	Nature of Beneficial Ownership	No. of Shares			Percent of Class			Percent of Total Voting Rights⁽⁷⁾

Craig Holland ⁽²⁾⁽³⁾	CEO, CCO and Director		50,877,842	⁽⁴⁾		62.1	%		14.33	%

Rob Vardeman ⁽²⁾⁽³⁾	President and Director		-0-			0	%		0	%

Mick Donahoo ⁽²⁾⁽³⁾	CFO, Secretary and Director		11,859,437	⁽⁵⁾		14.5	%		1	%

Cecie Newman ⁽²⁾⁽³⁾	VP of Operations		84,470	⁽⁶⁾		1	%		0	%

Don Vardeman ⁽²⁾⁽³⁾	Director		-0-			0	%		0	%

All Officers and Directors as a Group (5 persons)			62,821,749	^(4)-(6)		68.5	%		11.25	%

(1)	As of March 29, 2018, there were 72,306,123 shares of common stock outstanding (post reverse stock split). Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for the purposes of computing the percentage of any other person.

(2)	Indicates an officer and/or director of the Company.

(3)	Unless indicated otherwise, the address of the shareholder is Freeze Tag, Inc., 18062 Irvine Blvd., Suite 103, Tustin, California 92780.

(4)	Includes 770,204 shares of our common stock that are not locked up, 40,437,738 shares of common stock that is locked up for two years, 9,668,750 shares of common stock underlying convertible promissory notes, and 1,150 shares of common stock underlying vested stock options, which has an exercise price of $10 per share.

(5)	Includes 642,957 shares of our common stock that are not locked up, 1,552,100 shares of common stock that is locked up for two years, 9,332,500 shares of common stock underlying a convertible promissory note, and 341,880 shares of common stock underlying vested stock options, which as an exercise price of $0.039 per share.

(6)	Includes 84,470 shares of common stock underlying vested stock options, which as an exercise price of $0.039 per share.

(7)	Calculated based on the total votes currently outstanding (does not include votes from shares underlying promissory notes, options or warrants). There are currently 287,535,961 votes outstanding, consisting of 69,785,961 votes from common stockholders and 271,750,000 votes from Series C Preferred Stock holders.

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Series C Preferred Stock⁽¹⁾

Name and Address of Beneficial Owner	Nature of Beneficial Ownership	No. of Shares		Percent of Class			Percent of Total Voting Rights⁽⁴⁾

Craig Holland ⁽²⁾⁽³⁾	CEO, CCO and Director		-0-		0	%		0	%

Rob Vardeman ⁽²⁾⁽³⁾	President and Director		2,659,128		61.1	%		46.24	%

Mick Donahoo ⁽²⁾⁽³⁾	CFO, Secretary and Director		-0-		0	%		0	%

Cecie Newman ⁽²⁾⁽³⁾	VP of Operations		-0-		0	%		0	%

Don Vardeman ⁽²⁾⁽³⁾	Director		339,174		7.9	%		5.9	%

Scott Forster 1720 Bray Central Drive McKinney, TX 75069	5% Shareholder		868,287		20.0	%		15.1	%

Chris Pick 1720 Bray Central Drive McKinney, TX 75069	5% Shareholder		325,607		7.50	%		5.67	%

All Officers and Directors as a Group (5 persons)			2,998,272		68.8	%		52.14	%

(1)	As of March 29, 2018, there were 4,355,000 shares of our Series C Preferred Stock outstanding. Each share of our Series C Preferred Stock is convertible and votes at 50 to 1. Shares of Series C Preferred Stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for the purposes of computing the percentage of any other person.

(2)	Indicates an officer and/or director of the Company.

(3)	Unless indicated otherwise, the address of the shareholder is Freeze Tag, Inc., 18062 Irvine Blvd., Suite 103, Tustin, California 92780.

(4)	Calculated based on a total of 168,160,866 votes outstanding, consisting of 23,217,005 votes from common stockholders and 144,160,866 votes from Series C Preferred Stock holders.

We are not aware of any person who owns of record, or is known to own beneficially, five percent or more of the outstanding securities of any class of the issuer, other than as set forth above. We are not aware of any person who controls the issuer as specified in Section 2(a)(1) of the 1940 Act. There are no classes of stock other than common stock issued or outstanding. We do not have an investment advisor.

There are no current arrangements which will result in a change in control.

ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Notes Payable – Related Party

On July 25, 2017, we entered into an Amendment No. 1 to a Promissory Note with Craig Holland, our Chief Executive Officer, under which we agreed to amend the terms of that certain Convertible Promissory Note dated December 31, 2013, as extended by agreement dated December 31, 2016, and entered into by and between the parties (the “Holland Salary Note”) in order to (i) make the Holland Salary Note non-interest bearing, (ii) change the conversion price from a variable price to $0.02 per share, and (iii) waive all interest due and owing under the Holland Salary Note. The description of the Holland Salary Note set forth in this report is qualified in its entirety by reference to the full text of the “form of” document, which is incorporated herein by reference.

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On July 25, 2017, we entered into an Amendment No. 1 to a Promissory Note with Mick Donahoo, our Chief Financial Officer, under which we agreed to amend the terms of that certain Convertible Promissory Note dated December 31, 2013, as extended by agreement dated December 31, 2016, and entered into by and between the parties (the “Donahoo Salary Note”) in order to (i) make the Donahoo Salary Note non-interest bearing, (ii) change the conversion price from a variable price to $0.02 per share, and (iii) waive all interest due and owing under the Donahoo Salary Note. The description of the Donahoo Salary Note set forth in this report is qualified in its entirety by reference to the full text of the “form of” document, which is incorporated herein by reference.

On July 25, 2017, we entered into an Amendment No. 1 to a Promissory Note with Craig Holland, our Chief Executive Officer, under which we agreed to amend the terms of that certain Convertible Promissory Note dated December 31, 2013, as extended by agreement dated December 31, 2016, and entered into by and between the parties (the “Holland Note”) in order to make the Holland Note non-interest bearing, (ii) make the Holland Note non-convertible, and (iii) waive all interest due and owing under the Holland Note. The description of the Holland Note set forth in this report is qualified in its entirety by reference to the full text of the “form of” document, which is incorporated herein by reference.

As of December 31, 2017, we owed $379,825 to Craig Holland, our Chief Executive Officer and Mick Donahoo, our Chief Financial Officer under these note payables.

Securities Exchange Agreements

On July 25, 2017, we entered into a Securities Exchange and Common Stock Purchase Agreement with Craig Holland, our Chief Executive Officer (the “Holland Securities Exchange Agreement”). Under the Holland Securities Exchange Agreement, Mr. Holland agreed to exchange promissory notes issued by us dated December 31, 2013 and September 30, 2014 (the “Holland Notes”), and the $756,984 in principal owing under the Holland Notes, into 37,849,200 shares of our common stock (the “Holland Common Stock”), on a post-reverse basis (based on a prospective 1-for-100 reverse stock split we had planned for on or about September 1, 2017). At the time, the closing under the Holland Securities Exchange Agreement for the exchange of the Holland Notes for the Holland Common Stock was set to occur automatically upon the effectiveness of the referenced reverse stock split. The description of the Holland Securities Exchange Agreement set forth in this report is qualified in its entirety by reference to the full text of the “form of” document, which is incorporated herein by reference.

On July 25, 2017, we entered into a Securities Exchange and Common Stock Purchase Agreement with Mick Donahoo, our Chief Financial Officer (the “Donahoo Securities Exchange Agreement”). Under the Donahoo Securities Exchange Agreement, Mr. Donahoo agreed to exchange a promissory note issued by us dated December 31, 2013 (“Donahoo Note”), and the $31,042 in principal owing under the Donahoo Notes, into 1,552,100 shares of our common stock (the “Donahoo Common Stock”), on a post-reverse basis (based on a prospective 1-for-100 reverse stock split planned for on or about September 1, 2017). At the time, the closing under the Donahoo Securities Exchange Agreement for the exchange of the Donahoo Notes for the Donahoo Common Stock will occur automatically upon the effectiveness of the referenced reverse stock split. The description of the Donahoo Securities Exchange Agreement set forth in this report is qualified in its entirety by reference to the full text of the “form of” document, which is incorporated herein by reference.

On October 5, 2017, FINRA took our reverse stock split effective at the open of market. As a result, on October 5, 2017, we issued 37,849,200 shares of common stock to Craig Holland under the Holland Securities Exchange Agreement and 1,552,100 shares of common stock to Mick Donahoo under the Donahoo Securities Exchange Agreement. At the closing, the $ 285,764 in interest due under the Holland Notes was waived and the $9,841 in interest due under the Donahoo Note was waived.

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Stock Options

On August 2, 2010, we granted Craig Holland, our President, Chief Executive Officer, and a Director, options to purchase up to 115,000 shares of our common stock at an exercise price of $0.11 per share. The options were granted under the Freeze Tag, Inc. 2006 Stock Plan, which was terminated in 2016. The options expire in August 2020.

On December 5, 2017, we granted Mick Donahoo, our Chief Financial Officer, and a Director, options to purchase up to 1,025,641 shares of our common stock at an exercise price of $0.039 per share. The options were granted under the Freeze Tag, Inc. 2017 Non-Qualified Stock Option Plan and were issued in lieu of $40,000 of accrued vacation time. The options expire in December 2027.

On December 5, 2017, we granted Cecie Newman, our VP of Operations, options to purchase up to 256,410 shares of our common stock at an exercise price of $0.039 per share. The options were granted under the Freeze Tag, Inc. 2017 Non-Qualified Stock Option Plan. The options expire in December 2027.

ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit and Related Fees

During the years ended December 31, 2017 and 2016, M&K CPAS, PLLC charged us $38,200 and $27,700, respectively, in fees for professional services for the audit of our financial statements included in our annual report and for reviews of our quarterly reports.

Tax Fees

During the years ended December 31, 2017 and 2016, M&K CPAS, PLLC did not charge us for professional services for tax preparation.

All Other Fees

During the years ended December 31, 2017 and 2016, M&K CPAS, PLLC did not charge us for any other fees.

Of the fees described above for the years ended December 31, 2017 and 2016, 100% was approved by the entire Board of Directors.

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PART IV

ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements

The following financial statements are filed as part of this report:

Report of Independent Registered Public Accounting Firm		F-2

Balance Sheets as of December 31, 2017 and December 31, 2016		F-3

Statements of Operations for the Years Ended December 31, 2017 and 2016		F-4

Statement of Shareholders’ Deficit for the Years Ended December 31, 2017 and December 31, 2016		F-5

Statements of Cash Flows for the Years Ended December 31, 2017 and 2016		F-6-F-7

Notes to Financial Statements		F-8

(a)(2) Financial Statement Schedules

We do not have any financial statement schedules required to be supplied under this Item.

(a)(3) Exhibits

Refer to (b) below.

(b) Exhibits

3.1 (1)		Articles of Incorporation of Freeze Tag, Inc.

3.2 (1)		Articles of Amendment to Articles of Incorporation

3.3 (1)		Bylaws of Freeze Tag, Inc.

3.4 (10)		Articles of Amendment to Certificate of Incorporation February 4, 2014

3.5 (14)		Articles of Amendment to Certificate of Incorporation filed on February 18, 2016

4.1 (1)		Freeze Tag, Inc. 2006 Stock Plan

4.2 (19)		Freeze Tag, Inc. 2017 Non-Qualified Stock Option Plan

4.3 (19)		Form of Option Agreement under Freeze Tag, Inc. 2017 Non-Qualified Stock Option Plan

10.1 (1)		10% Convertible Promissory Note dated July 1, 2010 with The Holland Family Trust

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10.2 (1)		Support Services Agreement with Cardiff Partners, LLC dated October 12, 2009

10.3 (1)		Amendment No. 1 to Support Services Agreement with Cardiff Partners, LLC dated March 2, 2010

10.4 (1)		Amendment No. 2 to Support Services Agreement with Cardiff Partners, LLC dated March 3, 2010

10.5 (1)		Form of Conversion Agreement for October 2009 Conversions

10.6 (1)		Form of Option Conversion Agreement for October 2009 Conversions

10.7 (1)		Placement Agent and Advisory Services Agreement with Monarch Bay Associates, LLC dated October 12, 2009

10.8 (1)		Corporate Communications Consulting Agreement Michael Southworth dated September 25, 2009

10.9 (1)		Lock-Up Agreement dated November 10, 2009

10.10 (2)		Loan Agreement with Sunwest Bank dated October 20, 2006, as amended

10.11 (3)		Securities Purchase Agreement with Asher Enterprises, Inc. dated July 21, 2011

10.12 (3)		Convertible Promissory Note with Asher Enterprises, Inc. dated July 21, 2011

10.13 (4)		Technology Transfer Agreement dated June 22, 2011

10.14 (5)		Securities Purchase Agreement with Asher Enterprises, Inc. dated September 16, 2011

10.15 (5)		Convertible Promissory Note with Asher Enterprises, Inc. dated September 16, 2011

10.16 (6)		Securities Purchase Agreement with Asher Enterprises, Inc. dated December 6, 2011

10.16 (6)		Convertible Promissory Note with Asher Enterprises, Inc. dated December 6, 2011

10.17 (7)		Letter Agreement with Crucible Capital, Inc. dated February 29, 2012

10.18 (8)		Amendment No. 1 to Securities Purchase Agreement with Asher Enterprises, Inc. dated July 21, 2011

10.19 (8)		Amendment No. 1 to Securities Purchase Agreement with Asher Enterprises, Inc. dated September 16, 2011

10.20 (8)		Amendment No. 1 to Securities Purchase Agreement with Asher Enterprises, Inc. dated December 6, 2011

10.21 (8)		Amendment No. 1 to Promissory Note with The Lebrecht Group, APLC dated November 17, 2011

10.22 (9)		Convertible Promissory Note (10%) dated December 20, 2013 – Accredited Investor

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10.23 (9)		Convertible Promissory Note (10%) dated December 31, 2013 – Holland Family Trust

10.24 (9)		Convertible Promissory Note (10%) dated December 31, 2013 – Craig Holland Debt

10.25 (9)		Convertible Promissory Note (10%) dated December 31, 2013 – Craig Holland Salary

10.26 (9)		Convertible Promissory Note (10%) dated December 31, 2013 – Mick Donahoo Salary

10.27 (9)		Convertible Promissory Note (10%) dated December 31, 2013 – Mick Donahoo Debt

10.28 (9)		Convertible Promissory Note (10%) dated December 31, 2013 – Robert Cowdell

10.29 (15)		Convertible Promissory Note with an Accredited Investor dated June 25, 2014

10.30 (11)		Convertible Promissory Note (10%) dated September 30, 2014 – Holland Family Trust

10.31 (11)		Convertible Promissory Note (10%) dated September 30, 2014 – Craig Holland

10.32 (12)		Consulting and Co-Development Agreement with Gogii Games Corp. dated November 17, 2014 (Redacted Version)

10.33 (12)		Convertible Promissory Note with an accredited investor dated February 11, 2015

10.34 (12)		Master Development Agreement with TIC TOC STUDIOS, LLC dated February 18, 2015 (Redacted Version)

10.35 (13)		Convertible Promissory Note with an accredited investor dated July 28, 2015

10.36 (13)		Amendment to Convertible Promissory Note dated December 31, 2013 – Craig Holland

10.37 (13)		Amendment to Convertible Promissory Note dated December 31, 2013 – Mick Donahoo

10.38 (13)		Amendment to Convertible Promissory Note with an accredited investor dated December 30, 2013

10.39 (15)		Convertible Promissory Note with an accredited investor dated April 7, 2016

10.40 (16)		License Agreement with Munzee, Inc. dated October 19, 2016

10.41 (16)		License Agreement with Paws, Incorporation dated November 1, 2016 (Redacted Version)

10.42 (17)		Amendment #1 to Convertible Promissory Note with an accredited investor dated April 7, 2016

10.43 (17)		Convertible Promissory Note with an accredited investor dated February 8, 2017

10.44 (18)		Merger Agreement with Munzee, Inc. dated July 26, 2017

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10.45 (18)		Form of Securities Exchange and Common Stock Purchase Agreement with Related Parties dated July 25, 2017

10.46 (18)		Form of Securities Exchange and Series A Preferred Stock Purchase Agreement with Accredited Investor #1 and Accredited Investor #2 dated July 25, 2017

10.47 (18)		Form of Second Securities Exchange and Series A Preferred Stock Purchase Agreement with Accredited Investor #2 dated July 25, 2017

10.48 (18)		Form of Securities Exchange and Series A Preferred Stock Purchase Agreement with Accredited Investor #3 dated July 25, 2017

10.49 (18)		Form of Amendment No. 1 Promissory Note with Craig Holland and Mick Donahoo dated July 25, 2017

10.50 (18)		Amendment No. 2 to Promissory Note with Craig Holland dated July 25, 2017

31.1*		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2*		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.1*		Section 1350 Certification of Chief Executive Officer

32.2*		Section 1350 Certification of Chief Financial Officer.

101.INS**		XBRL Instance Document

101.SCH**		XBRL Taxonomy Extension Schema Document

101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB**		XBRL Taxonomy Extension Label Linkbase Document

101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document

_________

*	Filed herewith.

**	Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

(1) Incorporated by reference from our Registration Statement on Form S-1, filed with the Commission on August 16, 2010.

(2) Incorporated by reference from Amendment No. 2 to our Registration Statement on Form S-1/A2, filed with the Commission on October 25, 2010.

(3) Incorporated by reference from Current Report on Form 8-K filed with the Commission on August 3, 2011.

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(4) Incorporated by reference from Quarterly Report on Form 10-Q for the period ended June 30, 2011 filed with the Commission on August 15, 2011.

(5) Incorporated by reference from Current Report on Form 8-K filed with the Commission on September 21, 2011.

(6) Incorporated by reference from Current Report on Form 8-K filed with the Commission on December 23, 2011.

(7) Incorporated by reference from Current Report on Form 8-K filed with the Commission on March 8, 2012.

(8) Incorporated by reference from Annual Report on Form 10-K filed with the Commission on March 30, 2012.

(9) Incorporated by reference from Current Report on Form 8-K filed with the Commission on Februay 4, 2014.

(10) Incorporated by reference from Definitive Information Statement on Schedule 14-C filed with the Commission on December 31, 2013.

(11) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on November 14, 2014.

(12) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on May 15, 2015.

(13) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on November 16, 2015.

(14) Incorporated by reference from Annual Report on Form 10-K filed with the Commission on March 30, 2016.

(15) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on August 14, 2016.

(16) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on November 14, 2016.

(17) Incorporated by reference from our Annual Report on Form 10-K filed with the Commission on March 31, 2017.

(18) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on July 31, 2017.

(19) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on December 6, 2017.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Freeze Tag, Inc.

Dated: April 2, 2018	By:	/s/ Craig Holland
		Craig Holland
	Its:	Chief Executive Officer (Principal Executive Officer)


Dated: April 2, 2018	By:	/s/ Mick Donahoo
		Mick Donahoo
	Its:	Chief Financial Officer, Chief Accounting Officer (Principal Accounting Officer)

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Dated: April 2, 2018	By:	/s/ Craig Holland
		Craig Holland
	Its:	Director and Chief Executive Officer

Dated: April 2, 2018	By:	/s/ Mick Donahoo
		Mick Donahoo
	Its:	Director, Chief Financial Officer, Chief Accounting Officer

Dated: April 2, 2018	By:	/s/ Rob Vardeman
		Rob Vardeman
	Its:	Director and President

Dated: April 2, 2018	By:	/s/ Don Vardeman
		Don Vardeman
	Its:	Director

PART I

ITEM 1 –	BUSINESS	2
ITEM 1A –	RISK FACTORS.	16
ITEM 1B –	UNRESOLVED STAFF COMMENTS	27
ITEM 2 –	PROPERTIES	27
ITEM 3 –	LEGAL PROCEEDINGS	27
ITEM 4 –	MINE SAFETY DISCLOSURES	27

PART II

ITEM 5 –	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	28
ITEM 6 –	SELECTED FINANCIAL DATA	31
ITEM 7 –	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
ITEM 7A –	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37
ITEM 8 –	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	F-1
ITEM 9 –	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	38
ITEM 9A –	CONTROLS AND PROCEDURES	38
ITEM 9B –	OTHER INFORMATION	39

PART III

ITEM 10 –	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	40
ITEM 11 –	EXECUTIVE COMPENSATION	42
ITEM 12 –	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	45
ITEM 13 –	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	46
ITEM 14 –	PRINCIPAL ACCOUNTING FEES AND SERVICES	48

PART IV

ITEM 15 –	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	49

	·	we could lose strategic relationships if our strategic partners are acquired by or enter into relationships with a competitor (which could cause us to lose access to distribution, content, technology and other resources);
	·	we could lose customers if competitors or users of competing technologies consolidate with our current or potential customers; and
	·	our current competitors could become stronger, or new competitors could form, from consolidations.

	·	Our applications for trademarks and copyrights relating to our business may not be granted and, if granted, may be challenged or invalidated;
	·	Issued trademarks and registered copyrights may not provide us with any competitive advantages;
	·	Our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology;
	·	Our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those we develop;
	·	Another party may obtain a blocking patent and we would need to either obtain a license or design around the patent in order to continue to offer the contested feature or service in our products; or
	·	We may not be able to afford to pay the costs associated with protecting our intellectual property rights.

Freeze Tag, Inc. - FORM 10-K - April 2, 2018

Attached files

Freeze Tag, Inc. Reports