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May 24, 2021, 4:09 p.m. EDT

10-Q: FRIENDABLE, INC.

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(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included in Item 1 "Financial Statements" in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled "Risk Factors" included elsewhere in this Quarterly Report on Form 10-Q.

Overview

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

Friendable Inc. (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, is a traditional dating application with its focus on building revenue, as well as reintroducing the brand as a non-threatening, all-inclusive place where "Everything starts with Friendship"?meet, chat & date.

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

Launched July 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 3,000 music artists, of which more than 325 artists have been onboarded with their own "broadcast" music channel available on the Fab Pass app for live streaming and pre-recorded music content.

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

The Company maintains websites at www.Friendable.com and www.fanpasslive.com . The information on the app websites is not incorporated herein. Additionally, you can download the app from the Apple app Store or Google Play Stores.

What does precisely Fan Pass Live do?

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" Shares Revenues with Artists

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.

While it's free for the artists to join, Fan Pass monetizes its business model by using an "ALL ACCESS VIP" Offering priced at a $3.99 monthly subscription paid by fans through its website or $4.99 if processed by the Apple App Store or Google Play Stores, with a three-day free trial. How sweet does it get for the artists? These revenues are shared with all Channel artists. In exchange for its platform features, live streaming tools, bandwidth, processing, and handling, Fan Pass also earns platform fees on each separately ticketed event, as well as splits with each artist on subscriber fees and merchandise designed and sold on the platform.

Integration with Brightcove

Live Streaming integration for Fan Pass was completed through its relationship with Brightcove, a scalable, proven back-end infrastructure, on-demand scaling to meet high traffic demands and redundancy that is relied upon by some of the biggest brands, and significant events.

The Company aims to establish both Friendable and Fan Pass as premier brands and mobile platforms that are dedicated to connecting and engaging users from anywhere around the World.

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Presently, the Company is upgrading the Fan Pass app to include more on-demand and interactive capabilities for live streaming and fan/artist connection. This upgraded version is expected to be released during the second half of 2021.

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.

Executive Leadership

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







        Results of Operations
                                                              For the Three Months Ended
                                                                       March 31,
                                                                 2021              2020
        REVENUES
        Technology services                                 $            -     $    117,972
        Subscription and merchandising sales                         1,305              416
                                                                     1,305          118,388
        OPERATING EXPENSES:
        App hosting                                                  7,500            9,000
        Commissions                                                    159              125
        General and administrative                                 380,685          162,209
        Software development and support                            97,500          151,797
        Revenue shares                                                 861                -
        Investor relations                                          18,716          123,266
        Sales and marketing                                         55,633                -
                                                                   561,054          446,397
        LOSS FROM OPERATIONS                                      (559,749 )       (328,009 )
        OTHER INCOME (EXPENSE):
        Accretion and interest expense                            (266,372 )        (24,469 )
        Loss on initial derivative expense                      (1,796,835 )              -
        Loss on settlement of derivatives                                -         (898,138 )
        Gain(loss) on change in fair value of derivatives          138,000         (297,000 )
                                                                (1,925,207 )     (1,219,607 )
        NET LOSS                                            $   (2,484,956 )   $ (1,547,616 )
        


For the three months ended March 31, 2021 compared to March 31, 2020

Revenues

The Company had revenues of $1,305 and $118,388 for the three months ended March 31, 2021 and 2020 respectively. The decrease was due to the completion of the contract to develop a third-party app by December 31, 2020. The Company's only source of revenue for the three months ended March 31, 2021 was subscription and merchandising sales from its Fan Pass app and subscription revenue from its Friendable app.

Operating Expenses

The Company had operating expenses of $561,054 and $446,397 for the three months ended March 31, 2021 and 2020, respectively. The increase in operating expenses was due primarily to $66,332 incurred in legal fees in 2021 in connection with the Company's convertible debt and Regulation A capital raises, together with sales and marketing expense in 2021 of $55,633 to promote the Fan Pass app. The decline in revenue noted above together with higher operating expenses resulted in a greater loss from operations of $559,749 for the three months ended March 31, 2020 compared with a loss from operations of $328,009 for the three months ended March 31,2020.

Other Income and Expense

The Company had other expense of $1,925,207 and $1,219,607 for the three months ended March 31, 2021 and March 31, 2020 respectively. Other expense of $ 1,925,507 for the three months ended March 31,2021 included loss on initial derivative expense of $1,796,835 and accretion and interest expense of $266,372, offset by a gain on change in fair value of derivatives of $138,000. Other expense for the three months ended March 31,2020 included $898,138 loss on settlement of derivatives, $297,000 loss on change in fair value of derivatives and $ 24,469 accretion and interest expense.

Net Loss

The Company had net losses of $ 2,484,956 and $1,547,616 for the three months ended March 31, 2021 and 2020 respectively. The increase in net loss was due primarily to higher operating expenses of $114,657, as described above, and the loss on initial derivative expense of $1,796,835 for the three months ended March 31, 2021, compared with the loss on settlement of derivatives of $898,138 for the three months ended March 31, 2020.







        Liquidity and Capital Resources
        Working Capital
                                        March 31, 2021       December 31, 2020
                                         (unaudited)
        Current Assets                 $        255,379     $           148,601
        Current Liabilities            $      7,471,542     $         5,436,963
        Working Capital (Deficiency)   $     (7,216,163 )   $        (5,288,362 )
        


Current assets at March 31, 2021 increased compared to December 31, 2020 primarily due to higher cash from the Company's capital raise program, offset by a reduction in accounts receivable and prepaid expenses.

Current liabilities at March 31, 2021 increased compared to December 31, 2020 primarily due to the increase in the derivative liability resulting from new convertible notes and from an increase in capital raised from mandatorily redeemable Series C convertible preferred stock.







        Cash Flows
                                                     Three months        Three months
                                                         Ended               Ended
                                                    March 31, 2021      March 31, 2020
        Net Cash Used in Operating Activities       $      (486,299 )   $       (13,177 )
        Net Cash Provided by Financing Activities           627,850              32,500
        Net Increase in Cash                        $       141,551     $        19,333
        


Net Cash Used in Operating Activities

Our cash used in operating activities was $486,299 for the three month period ended March 31, 2021 compared to $13,177 for the three month period ended March 31, 2020. Net loss was $2,484,956 and $1,547,616 for the three month periods ending March 31, 2021 and 2020 respectively. In 2021, adjustments to reconcile the net loss to net cash used primarily included initial derivative expense of $1,796,835, and premium and accretion on stock settled debt $129,777 offset by a gain from the change in fair value of derivatives. In 2020, adjustments to reconcile the net loss to net cash used included adjustment for loss on extinguishment of debt $ 898,138, and loss on change in fair value of derivatives $ 297,000. In 2021, changes in operating assets and liabilities included a reduction in amount due to related party of $115,00 and an increase to accounts payable and accrued expenses of $138,055. In 2020 changes in operating assets and liabilities included an increase to accounts payable and accrued expenses of $120,647 and due from related party $51,412.

Net Cash Provided by Financing Activities

Our cash provided by financing activities of $627,850 for the three month period ended March 31, 2021 included the issuance of Series C preferred stock sold for cash of $269,350 and net proceeds from the issuance of convertible notes of $358,500 Our cash provided by financing activities of $32,500 for the three month period ended March 31, 2020 included the issuance of Series C preferred stock sold for cash of $ 33,000.

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.

Series C Preferred Stock Purchase Agreements

During the period November 22,2019 through March 24,2020 187,300 shares of Series C convertible preferred stock were issued to an investor under preferred stock purchase agreements at a price of approximately $0.90 per share for a total of $169,000. Due to the mandatory redemption feature, these shares are reflected as a current liability. Because these shares are convertible at 71% of the common shares market price around the time of the conversion date, they are treated as a stock settled debt under ASC 480 with the premium recorded and charged to interest expense. On May 29,2020 the Company defaulted on the shares by being late with the filing of its Form 10-K, thereby increasing the dividend rate to 22% and the stated value to $1.50 per share, which had the effect of increasing the stock redemption value to $ 280,950. At June 30,2020 therefore, the Company reflected a liability of $ 407,500 relating to the Series C stock, being the increased redemption value of $ 280,950, plus the premium of $ 114,755 on conversion, plus accrued dividend of $11,885.

Between July 17 and September 30, 2020 the investor converted 62,500 of the Series C stock to 3,822,958 common shares at an average price of approximately 0.025 per share to settle Series C stock with a redemption value of $ 93,750 and payment of $3,000 accrued dividend.

During the three months ended December 31, 2020 the holder of the Series C converted 101,300 Series C shares to 22,704,221 common shares for a redemption value of $218,655 including accrued dividends, plus premium, recorded into equity. In addition, during the three months ended December 31, 2020 a total of 149,600 shares of Series C convertible preferred stock were issued to two investors under preferred stock purchase agreements, at a price of approximately $0.91 per share, for a total of $136,000 cash and premiums totaling $60,302 were recorded during this period with respect to these issuances. At December 31, 2020 the remaining liability totals $285,605, represented by a remaining balance of $184,850 in redeemable Series C stock, together with the related premium of $74,701 and accrued dividends of $26,054.

During the three months ended March 31, 2021 a holder of the Series C converted 23,500 Series C shares to 5,500,894 common shares for a redemption value of $36,190 including accrued dividends, plus premium, recorded into equity. In addition, during the three months ended March 31, 2021 a total of 296,450 shares of Series C convertible preferred stock were issued to two investors under preferred stock purchase agreements, at a price of approximately $0.91 per share, for a total of $269,350 cash and premiums totaling $121,084 were recorded during this period with respect to these issuances. At March 31, 2021 the remaining liability totals $634,143, represented by a remaining balance of $446,050 in redeemable Series C stock, together with the related premium of $181,385 and accrued dividends of $6,708.

The Company records the cumulative dividend payable on the mandatorily redeemable Series C convertible preferred stock liability as interest expense since the Series C liability must be reflected at redemption value.

Going Concern

The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which implies that the Company would continue to realize its assets and discharge its liabilities in the normal course of business. As of March 31, 2021, the Company has a working capital deficiency of $7,216,163, has an accumulated deficit of $39,054,202 and has a stockholder's deficit of $7,216,163 and its operations continue to be funded primarily from sales of its stock, issuance of convertible debentures and short-term loans. During the three months ended March 31, 2021 the Company had a net loss and net cash used in operations of $2,484,956 and $ 486,299. 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.

Off-Balance Sheet Arrangements

As of March 31, 2021, the Company had no off-balance sheet arrangements.

May 24, 2021

COMTEX_387191063/2041/2021-05-24T16:08:30

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