FRIENDABLE, INC. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included in Item 1 "Financial Statements" in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled "Risk Factors" included elsewhere in this Quarterly Report on Form 10-Q. Overview
Friendable Inc. (FDBL) is a mobile technology and marketing company focused on connecting and engaging users through its proprietary mobile and desktop applications. The Company's first app, the "Friendable" subscription app, was a traditional dating application with its focus on building revenue, as well as reintroducing the brand as a non-threatening, all-inclusive place where "Everything starts with Friendship"…meet, chat & date.
On
LaunchedJuly 24, 2020 , the Company's "Fan Pass" flagship subscription app is designed to help artists engage with their fans around the world and earn revenue while doing so. The Live Streaming platform supports artists at all levels, providing exclusive artist content "channels," live event streaming, promotional support, fan subscriptions and custom merchandise designs, all of which are revenue streams for each artist. With Fan Pass, artists can offer exclusive content channels to their fans, who can simply use their smartphones to gain access to their favorite artists as well as an all-access pass, giving them access to all artists on the platform. Additionally, the Fan Pass team will deploy social broadcasters to capture exclusive VIP experiences, interviews and behind-the-scenes content featuring their favorite artists - all available to fan subscribers for free on a trial basis. Thereafter, subscriptions are billed monthly, providing VIP access at a fraction of the cost of traditional face-to-face meetups. Presently, Fan Pass has signed more than 5,000 music artists, of which more than 750 artists have been onboarded with their own "broadcast" music Channel available on the Fan Pass app for live streaming
and pre-recorded music content.Friendable Inc. was founded byRobert A. Rositano Jr . andDean Rositano , two brothers with over 25 years of experience working together on technology-related ventures. The Company maintains websites at www.Friendable.com and www.fanpasslive.com. The information on these app websites is not incorporated herein. Additionally, you can download the Fan Pass app from the Apple app Store or
What precisely does
For starters, Fan Pass breaks down the barrier between artists and fans, with artists broadcasting their events, concerts, and announcements to supporters directly from the Fan Pass mobile application or desktop. More importantly, it gives back to artists a way to remain relevant to their fan base and earn revenue.Fan Pass Live offers artists at all levels and genres, the opportunity to engage fans from one location, removing the need for multiple sharing platforms. It conveniently provides Exclusive Artist "Channels" jam-packed with all their relevant content from videos, photos, interviews, and past and upcoming events. While Fan Pass charges the fans a small transaction fee for ticket sales, artists keep the money earned from ticket sales. The handling of merchandise is also taken care of by the company and once it's approved by the artist, all merchandising is released within the artist's Channel. For artists there are tools available to help them "up their game" such as the creation of custom logos and merchandising, live chat options, promotional aids that provide the ability to live stream, post photos, audio and video with ease. For subscribers, fans can browse for upcoming events, shop merchandising, search by music genre and create dashboards. They can also view notifications, discussions and their favorite music artists in one app. While it's free for the artists to join, Fan Pass monetizes its business model by using an "ALL ACCESS VIP" Offering. Commencing with the release of Fan Pass v2.0 onJuly 24, 2021 , this offering is priced at a$2.99 monthly subscription, paid by fans through its website,Apple App Store or Google Play Stores, with a three-day free trial. OnAugust 5, 2021 the Company announced the approval of the Fan Pass v2.0 livestream artist platform by both the Apple App and
The Company aims to establish Fan Pass as its premier brand and mobile platform that is dedicated to connecting and engaging users from anywhere around the World.
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Fan Pass Live provides fans exclusive access into the lives of their favorite
artists, and provides artists a 'virtual stage' to perform, earn revenues, and
engage with fans from around the world.
On April 7, 2021 the Company entered into a letter of understanding with Santo
Mining Corp. ("SMC") to form a joint venture to pursue the development and sale
of NFT's ( non-fungible tokens of verifiable, tradable assets of digital art,
music") or other content or collectibles originating through the Company's
exploitation of the content associated with and from the Fan Pass app. Santo
would be responsible to provide, establish and maintain the blockchain
technology for the NFT's and related data base, together with establishing the
marketplace so the sale and trading of the NFT's, and the Company would be
responsible to provide and/or obtain the digital assets from its Fan Pass
artists. Net profit from the joint venture, as defined under the agreement, is
the be shared 50/50. To become effective, the terms of the joint venture are to
be evidenced by the execution of a definitive agreement between the Company and
Santos. At the date of this filing, both the Company and SMC continue to work
together on the details of the definitive agreement, with the intention to
finalize and execute by the end of 2021.
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Executive Leadership
Our two founders are a team of Entrepreneurs who have over 25 years of tech related startup experience, recruiting talent, building teams and turning ideas into big business opportunities, as well as exits for investors. Together raising over$40M in capital, spanning various companies, with a history dating back to the first ever Internet IPO (Netcom Online Communications - 1993), as well as the development of the first ever World Wide Web Directory (sold toMcMillan Publishing 1995) and even deploying a first mover social network by the name of nettaxi.com - 1998 - 2002, which was prior to Facebook and resulted in a top 10 most trafficked web site in the World, with a market cap of approximately$700M upon exiting the public company. Relationships developed over the years include such companies as Apple, eBay and AT&T, as well as joint ventures with Music Industry Giants, includingNocturne Productions ,Herbie Herbert (Manager of the Band Journey) and Music.com; an early adopter offering digital music
downloads.
Results of Operations For the Three Months Ended For the Six Months Ended
June 30, June 30,
2021 2020 2021 2020
REVENUES:
Technology services $ - $ 91,860 $ - $ 209,831 Subscription and merchandising sales 1,609 1,031
2,914 1,448
1,609 92,891 2,914 211,279
OPERATING EXPENSE:
App hosting 7,500 12,000 15,000 21,000
Commissions 199 309 358 434General and administrative 265,924 218,848 646,609 381,057 Software development and support 225,000 202,515
322,500 354,312
Revenue shares 343 - 1,204 -
Investor relations 28,134 13,340 46,850 136,606
Sales and marketing 210,419 52,254 266,052 52,254
737,519 499,266 1,298,573 945,663
OTHER INCOME (EXPENSE):
Accretion and interest expense (243,541 ) (203,818 ) (509,913 ) (228,287 )
Gain on foreign exchange - 2,580 - 2,580
Loss on initial derivative expense - (419,000 ) (1,796,835 ) (419,000 )
Loss on settlement of derivatives - - - (898,138 )
Gain(loss) on change in fair value of
derivatives 1,813,000 293,000 1,951,000 (4,000 )
1,569,459 (327,238 ) (355,748 ) (1,546,845 )
NET INCOME (LOSS) $ 833,549 $ (733,613 ) $ (1,651,407 ) $ (2,281,229 ) For the three months ended
Revenues The Company had revenues of$1,609 and$92,891 for the three months endedJune 30, 2021 and 2020 respectively. Revenues in 2021 related entirely to subscriber and merchandising revenue from theCompany's Fan Pass andFriendable apps. (2020$1,031 ). Revenues for the three months endedJune 30, 2020 includes$91,860 from technology services provided under a contract with a third party, which expired at the end of 2020 (2021$0 ). No new third-party technology services contract has been obtained to date in 2021. Operating Expenses The Company had operating expenses of$737,519 and$499,266 for the three months endedJune 30, 2021 and 2020 respectively. The increase in operating expenses was due primarily to higher sales and marketing expenses in 2021 to support the Fan Pass app. and higher salary costs to its full time employees. Other Income and Expense
The Company had other income of$1,569,459 for the three months endedJune 30, 2021 , compared to other expense of$327,238 for the three months endedJune 30, 2020 . The increase in other income was due primarily to a gain on change in fair value of derivatives in 2021, compared primarily to a loss on initial derivative expense in 2020. Net Income (Loss)
The Company had net income of$833,549 for the three months endedJune 30, 2021 , compared to a net loss of$733,613 for the three months endedJune 30, 2020 . The increase in net income was due primarily to a gain on change in fair value of derivatives in 2021 of$ 1,813,000 , offset by higher operating expenses. 31
For the six months ended
Revenues The Company had revenues of$2,914 and$211,279 for the six months endedJune 30, 2021 and 2020 respectively. The decrease was due to the end of a contract to develop a third-party app at the end of 2020, which was not replaced by a new third-party app. development contract in 2021. Revenue in 2021 related entirely to subscriber and merchandising revenue from the Company's own Fan Pass and
Friendable apps. Operating Expenses The Company had operating expenses of$1,298,573 and$945,663 for the six months endedJune 30, 2021 and 2020 respectively. The increase in operating expenses of$352,910 was due primarily to an increase of$265,552 in general and administrative expenses arising primarily from higher legal fees and increased salaries, and an increase in sales and marketing expenses of$213,799 in 2021 to support the Fan Pass app. launch, partially offset by lower investor relations expense. Other Income and Expense
The Company had other expense of$355,748 and$1,546,845 for the six months endedJune 30, 2021 and 2020 respectively. The net decrease in other expense of$1,191,098 was due primarily to a gain on change in fair value of derivative of$1,951,000 in 2021, offset by higher interest expense and a higher loss on initial derivative expense in 2021. Net Loss
The Company had net losses of$1,651,407 and$2,281,229 for the six months endedJune 30, 2021 and 2020 respectively. The decrease in net loss was due primarily to the gain on change in fair value of derivatives in 2021, offset by increased operating expenses and decrease in revenues.
Liquidity and Capital Resources
Working Capital
June 30, 2021 December 31, 2020
(unaudited)
Current Assets $ 421,871 $ 148,601
Current Liabilities $ 5,826,223 $ 5,436,963
Working Capital (Deficiency) $ (5,404,352 ) $ (5,288,362 ) Current assets at
Current liabilities atJune 30, 2021 increased compared toDecember 31, 2020 primarily due to the increase in accounts payable and accrued expenses and from an increase in capital raised from the issuance of mandatorily redeemable Series C convertible preferred stock and from new convertible notes payable. Cash Flows Six months Six months Ended EndedJune 30, 2021 June 30, 2020
172,500
Net Increase (Decrease) in Cash$ 319,423 $ (4,054 )
Our cash used in operating activities was$1,168,303 for the six month period endedJune 30, 2021 compared to$176,554 for the six month period endedJune 30, 2020 . Net loss was$1,651,407 and$2,281,229 for the six month periods endingJune 30, 2021 and 2020 respectively. In 2021, adjustments to reconcile the net loss to net cash used primarily included a loss on initial derivative expense of$1,796,835 , offset by a gain from the change in fair value of derivatives of$1,951,000 . In 2020, adjustments to reconcile the net loss to net cash used included adjustment for loss on settlement of derivatives of$898,138 , and loss on initial derivative expense of$419,000 . In 2021, changes in operating assets and liabilities included a reduction in amount due to related party of$108,999 and an increase to accounts payable and accrued expenses of$208,298 . In 2020 changes in operating assets and liabilities included an increase to accounts payable and accrued expenses of$257,351 and an increase due to related party$30,083 . 32
Net Cash Provided by Financing Activities
Our cash provided by financing activities of$1,487,726 for the six month period endedJune 30, 2021 included the issuance of Series C preferred stock sold for cash of$361,475 offset by a redemption payment of Series C preferred stock of$50,939 , issuance of Series D preferred stock under Regulation A of$850,000 less offering costs of$31,310 , and net proceeds from the issuance of convertible notes of$358,500 . Our cash provided by financing activities of$172,500 for the six month period endedJune 30, 2020 included the issuance of Series C preferred stock sold for cash of$33,000 , net proceeds from the issuance of convertible notes of$105,000 and proceeds of$35,000 from the
sale of common stock. The Company derives the majority of its financing by issuing convertible notes or stock to investors. The investors have the right to convert the notes and certain preferred stock into common shares of the Company after the requisite Rule 144 waiting period. The notes generally call for the shares to be issued at a deep discount to the market price at the time of conversion. In addition, investors purchasing Series D preferred stock have the right to convert that stock to common shares. Going Concern The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which implies that the Company would continue to realize its assets and discharge its liabilities in the normal course of business. As ofJune 30, 2021 , the Company has a working capital deficiency of$5,404,352 , has an accumulated deficit of$38,220,653 and has a stockholder's deficit of$5,404,352 and its operations continue to be funded primarily from sales of its stock, issuance of convertible debentures and short-term loans. During the six months endedJune 30, 2021 the Company had a net loss and net cash used in operations of$1,651,407 and$1,168,303 . These factors raise substantial doubt about the Company's ability to continue as a going concern for a period of twelve months from the issuance of this report. The ability of the Company to continue as a going concern is dependent on the Company's ability to obtain the necessary financing through short term loans and the issuance of convertible notes and equity instruments. The unaudited consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management plans to raise financing through the issuance of convertible notes and equity sales. No assurance can be given that any such additional financing will be available, or that it can be obtained on terms acceptable to the Company and its stockholders. 33
Off-Balance Sheet Arrangements
As of
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