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.
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Overview
AboutFriendable Inc.
Friendable published its first mobile application in theApple App Store andGoogle Play Store in 2014 in the social networking and dating category. TheFriendable app achieved over 1.5 million downloads, top 10 worldwide rankings, and has led to celebrity-related marketing opportunities and various relationships with well-known music artists as well as up-and-coming independent artists.
On
Friendable has since pivoted its business focus to its Music Artist Offering, a one of a kind 360 artist platform. The offering now includes music production/collaboration, music distribution (Spotify, Sound Cloud), Play Listing, Livestream/live events, promotions, ticket sales, behind the scenes, merchandising designs/store/ship, tips, fan interaction, subscription offerings and more, which all equal revenue sharing and earning for all music artists. It is the Company's goal to become the new launch point for Indie Artists, as well as Artists at all levels, as they build engagement, revenue, and fans/followers.The Fan Pass livestream artist platform was launchedJuly 24, 2020 . The platform has proven invaluable for artists and fans alike as performances shifted from the stage to the "digital screen". The Company has grown its product and services offerings to include a 360 suite of music artist services, completing this full spectrum solution with its acquisition of Artist Republik and FeaturedX inJanuary 2022 .Friendable was founded by brothersRobert A. Rositano Jr . andDean Rositano , who have more than 27 years of experience working together on technology-related ventures. 32
For more information, visit www.Friendable.com www.FanPassLive.com www.artistrepublik.com/ and www.featuredx.com/
Additionally, Download the Fan Pass app on the
Audiences can visit the website at www.fanpasslive.com or download the mobile app from the Apple App or Google Play stores. Fan Pass offers a seven-day free trial, which provides a VIP all-access pass. After seven days, this free trial converts to a fee-based subscription of$2.99 per month, of which artists also receive up to 40% as revenue sharing on a recurring monthly basis.
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, launch their careers without the debt and ownership created by cumbersome record labels and ultimately provides all the products, services, and support to develop revenues, brand, fan base, music distribution and production/collaboration for artists at any level of their career as well.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 ($25.99 annual subscription), paid by fans through its website,Apple App Store or Google Play Stores, with a three-day free trial. Fan Pass also offers an "Artist Pro" monthly subscription of$8.99 which offers the "ALL ACCESS VIP", plus advanced dashboard analytics, merchandising store access and promotion of scheduled music events, 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.
OnJanuary 4, 2022 , the Company completed its acquisition of substantially all the assets ofArtist Republik, Inc. ("Artist Republik"). Artist Republik is a subscription service specifically created for music artists to obtain music distribution on certain digital platforms (such as Spotify and Apple Music) and receipt of royalties from those platforms, together with providing a marketplace to purchase beats, obtain enhanced audio production and purchase access to playlists. Its decentralized platform allows independent music artists from around the world to take control of their own careers through networking, centralized resources, and AI-based management tools. Artist Republik has attracted approximately 100,000 artists to its offerings and has operating revenues from the sales of services. The Company acquired all of Artist Republik's customer lists, customers, back-end processes, name, trademarks, internet domains and other things necessary to carry on the business of Artist Republik. 33 In January, 2022 we also launched and released FeaturedX.com, a web property acquired as part of the Company's acquisition of Artist Republik, FeaturedX has thousands of artists currently available and is a place where artists can book a guest feature, co-write, MIDI composition or live instrumental tracking for artists releasing their next single or looking to extend reach and exposure by tapping into these available resources for music production and collaboration. While continuing to deliver a variety of expanded services to our artists, platforms, and offerings, FeaturedX has now taken center stage as our next service offering ready for growth. Working closely withMr. O'Leary andMr. Menig , the 2 original co-founders of Featured X, it was immediately clear that having them both on board as partners for our journey forward would be one of our keys to success. This said, we have been able to reach agreement with both O'Leary and Menig to join our team as partners as we focus on revenue, artists, and additional services growth on a platform that already has great momentum.Ryan "Tuck" O'Leary is a co-founder of FeaturedX and best known for slinging his bass around with "Texas Metal" powerhouse Fit For A King, and has added another ace to his ever-growing deck. InAugust 2020 alongside his longtime friendJeff Menig , O'Leary launched a new connective platform for creatives. FeaturedX is the first premier platform for connecting and working with your favorite artists from a multitude of genres. This is a dream team of the greatest artists in alternative music. Combining years of friendships and touring experience we built this as a community. Now teaming up withFan Pass Live , FeaturedX is looking to continue expanding and growing an already stellar roster of creatives.Jeff Menig is a co-founder of FeaturedX and an entertainment industry professional with over 21 years of experience in band management, live events, merchandise, consulting, artist development, and marketing. His unrelentingly passionate and persistent entrepreneur makes precision focused usage of the diverse set of skills he's developed. Menig builds brands and bands for the social media age, optimizing the multiple opportunities for engagement, communication, and personal interaction for his clients. His keen attention to detail, from visual elements to messaging, makes him invaluable as he teams withFan Pass Live to grow the FeaturedX brand and services. For a complete and up to date presentation of the entire 360 platform, brands, products and services offered by the Company please use the following link to view the Company's 360 Capabilities Deck & Presentation or visit the investors tab on the Company's website, which will lead to theFriendable, Inc. Investor Relations or friendable.com/ir where the presentation can also be located. LINK "360 Capabilities Deck & 2022 Presentation" [[Image Removed: (GRAPHIC)]] 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. 34 Results of Operations For the Three Months Ended For the Six Months Ended June 30, June 30, 2022 2021 2022 2021
REVENUES:
Subscription and merchandising sales
$ 2,581 $ 2,914 Music royalties and services 46,173 -
110,213 -
47,538 1,609 112,794 2,914
OPERATING EXPENSES
Commissions 2,618 199 6,160 358
General and administrative 338,348 269,924 722,869 646,609
Software development, hoisting and
support - related party 180.,000 232,500 360,000 337,500
Other software support fees 16,028 -
29,842 -
Revenue shares 46,781 343 95,823 1,204
Investor relations 3,453 28,134 7,040 46,850Advertising, promotion and marketing 37,647 210,419 172,501 266,052 Amortization of intangible assets 14,596 -
29,192 -
639,471 737,519 1,423,427 1,298,573
LOSS FOR OPERATIONS (591,933 ) (735,910 ) (1,310,633 ) (1,295,659 )
OTHER INCOME(EXPENSE)
Accretion and interest expense (34,415 ) (243,541 ) (104,619 ) (509,913 )
Gain on extinguishment of convertible
note - - 81,706 -
Loss in initial derivative expense (59,000 ) - (59,000 ) (1,796,835 )
Loss on settlement of convertible debt (85,913 ) - (85,913 ) -
Gain on change to fair value of
derivatives 8,300 1,813,000 7,300 1,951,000
(171,028 ) 1,569,459 (160,526 ) (355,748 )
NET INCOME (LOSS) $ (762,961 ) $ 833,549 $ (1,471,159 ) $ (1,651,407 ) For the three months ended
Revenues: The Company had revenues of$47,538 and$1,609 for the three months endedJune 30, 2022 and 2021 respectively. Revenues in 2022 included$46,173 in music royalties and services and$725 in subscriptions relating to the Artist Republik music business acquiredJanuary 5, 2022 (2021$0 ). The remainder of 2022 revenue related to Fan Pass subscriptions and merchandising sales of$615 for the three months endedJune 30, 2022 (2021:$ 1,609 ). Operating Expenses The Company had operating expenses of$639,471 and$737,519 for the three months endedJune 30, 2021 and 2020 respectively. The decrease in operating expenses was due primarily to lower advertising, promotion and marketing expenses in 2022, partially offset with higher general and administrative expenses. Other Income and Expense The Company had other expense of$171,028 for the three months endedJune 30, 2022 , compared with other income of$1,569,459 for the three months endedJune 30, 2021 , The decrease in other income was due primarily to a gain on change in fair value of derivatives in 2021 of$1,813,000 , compared primarily to a loss on initial derivative expense of$59,000 and loss on settlement of convertible
debt of$85,913 in 2022. 35 Net Income (Loss) The Company had net loss of$762,961 for the three months endedJune 30, 2022 , compared to a net income of$833,549 for the three months endedJune 30, 2021 . The net income in 2021 was due primarily to a gain on change in fair value of derivatives in 2021 of$ 1,813,000 , offset by higher operating expenses.
For the six months ended
Revenues The Company had revenues of$112,794 and$2,914 for the six months endedJune 30, 2022 and 2021 respectively. The increase was due to the Artist Republik music business acquiredJanuary 5, 2022 . Revenue in 2021 related entirely to subscriber and merchandising revenue from theCompany's Fan Pass app. Operating Expenses
The Company had operating expenses of
Other Income and Expense The Company had other expense of$160,526 and$355,748 for the six months endedJune 30, 2022 and 2021 respectively. The reduction in 2022 related primarily to a decrease in accretion and interest expense$ 405,294 , offset by a loss on settlement of convertible debt$ 85,913 . Net Loss
The Company had net losses of$1,471,159 and$1,651,407 for the six months endedJune 30, 2022 and 2021 respectively. The decrease in net loss was due primarily to increased operating expenses, partially offset by a reduction in other expense and an increase in revenues.
Liquidity and Capital Resources
Working Capital
June 31, 2022 December 31, 2021
(unaudited)
Current Assets $ 24,264 $ 253,523
Current Liabilities $ 5,373,235 $ 5,007,005
Working Capital (Deficiency) $ (5,348,971 ) $ (4,753,482 ) Current assets at
Current liabilities atJune 30, 2022 increased compared toDecember 31, 2021 primarily due to a contingent purchase consideration of$410,000 relating to the acquisition of the Artist Republik business in 2022 and an increases in accounts payable and accrued expenses of$285,877 , partially offset by a reduction of$ 329,607 in 2022 in the Company's mandatorily redeemable Series C convertible preferred stock liability. Cash Flows Six months Six months Ended EndedJune 30, 2022 June 30, 2021
9,500 -
Net Cash Provided by Financing Activities 813,450
1,487,226
Net Increase (Decrease) in Cash$ (229,259 ) $ 319,423 36 FRIENDABLE, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS June 30, 2022 and 2021 (Unaudited)
Our cash used in operating activities was$1,052,209 for the six month period endedJune 30, 2022 compared to$1,168,303 for the six month period endedJune 30, 2021 . Net loss was$1,471,159 and$1,651,407 for the six month periods endingJune 30, 2022 and 2021 respectively. In 2022, adjustments to reconcile the net loss to net cash used primarily included stock option expense$53,705 , amortization of debt discount$26,254 , amortization of intangible assets of$29,192 , initial derivative expense of$59,000 . In 2021, adjustments to reconcile the net loss to net cash used included primarily an adjustment for initial derivative expense$1,796,835 and change in fair value of derivatives of$(1,951,000) . In 2022, changes in operating assets and liabilities included an decrease in amount due to related party of$500 and an increase to accounts payable and accrued expenses of$293,033 . In 2021 changes in operating assets and liabilities included an increase to accounts payable and accrued expenses of$208,298 offset by a reduction in amount due to related party$108,999 .
Net Cash Provided by Investing Activities
For the six months ending
Net Cash Provided by Financing Activities
Our cash provided by financing activities of$813,450 for the six month period endedJune 30, 2022 included the issuance of Series D preferred stock under Regulation A of 782,200 less finder's fees of$22,500 , and net proceeds from the issuance of Series C preferred stock of$ 53,750 . 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 , proceeds from the issuance of Series D preferred stock under Regulation A of$850,000 , less offering costs of$31,309 , and net proceeds from the issuance of convertible notes of$358,500 . The Company derives the majority of its financing by issuing Series C and Series D preferred stock to investors. The investors have the right to convert Series C preferred stock into common shares of the Company after the requisite Rule 144 waiting period. Series D preferred stock however can be immediately converted to common shares pursuant to the terms of the Company' Regulation A offering. Conversion generally calls for the common shares to be issued at a deep discount ranging from 37% to 50% to the market price at the time of conversion. 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, 2022 , the Company has a working capital deficiency of$5,348,971 , has an accumulated deficit of$41,269,584 and has a stockholder's deficit of$4,340,513 and its operations continue to be funded primarily from sales of its stock. During the six months endedJune 30, 2022 the Company had a net loss and net cash used in operations of$1,471,159 and$1,052,209 . 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 continue raising financing through equity sales of Series C and Series D Preferred stock, while intending to reduce and/or eliminate its convertible debt. No assurance can be given that any such additional financing will be available, or that it can be obtained on terms acceptable to the Company and its stockholders.
Off-Balance Sheet Arrangements
As of
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