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


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2014
 
or
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                 to                
 
Commission File Number:   000-52917
 
IHOOKUP SOCIAL, INC.

(Exact name of registrant as specified in its charter)
 
Nevada
 
98-0546715
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
125 East Campbell Ave, Campbell, CA 95008
(Address of principal executive offices)   (zip code)
 
(855)473-8473
(Registrant’s telephone number, including area code)
 
f/k/a Titan Iron Ore Corp.
(Former name, former address and former fiscal year, if changed since last report)
 
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.
 
x Yes   o No
     
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
x Yes   o No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
 
Accelerated filer
o
Non-accelerated filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
o Yes   x No
 
APPLICABLE ONLY TO CORPORATE ISSUERS:
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 389,739,563 shares of common stock and 2,280,683 shares of preferred stock outstanding as of November 11, 2014.
 
 
 
i

 
 
 
 
TABLE OF CONTENTS
 
 
 
PART I - FINANCIAL INFORMATION
2
   
ITEM 1.  FINANCIAL STATEMENTS
2
   
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS
22
   
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
32
   
ITEM 4.  CONTROLS AND PROCEDURES
32
   
PART II - OTHER INFORMATION
33
   
ITEM 1.  LEGAL PROCEEDINGS
33
   
ITEM 1A.  RISK FACTORS
34
   
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
47
   
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
47
   
ITEM 4.  MINE SAFETY DISCLOSURES
47
   
ITEM 5.  OTHER INFORMATION
47
   
ITEM 6.  EXHIBITS
48
   
SIGNATURES
49
   
 
 


 
ii

 

As used in this report, the term “the Company” means iHookup Social, Inc., formerly known as Titan Iron Ore Corp., and its subsidiary, unless the context clearly indicates otherwise.
 
Special Note Regarding Forward-Looking Information
 
This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements. These forward-looking statements include, among others, statements relating to: the Company’s future financial performance, the Company’s business prospects and strategy, anticipated trends and prospects in the industries in which the Company’s businesses operate and other similar matters. These forward-looking statements are based on the Company’s management's expectations and assumptions about future events as of the date of this quarterly report, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
 
Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, among others, the risk factors set forth below. Other unknown or unpredictable factors that could also adversely affect the Company’s business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward-looking statements discussed in this quarterly report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of the Company’s management as of the date of this quarterly report. The Company does not undertake to update these forward-looking statements
 
In this quarterly report on Form 10-Q, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in the Company’s capital stock.
 
An investment in the Company’s common stock involves a number of very significant risks.  You should carefully consider the following risks and uncertainties in addition to other information in this quarterly report on Form 10-Q in evaluating the Company and its business before purchasing shares of the Company’s common stock.  The Company’s business, operating results and financial condition could be seriously harmed as a result of the occurrence of any of the following risks.  You could lose all or part of your investment due to any of these risks. You should invest in the Company’s common stock only if you can afford to lose your entire investment.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 

 
1

 


PART I - FINANCIAL INFORMATION
 
 
ITEM 1.  FINANCIAL STATEMENTS.
 

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
FORMERLY TITAN IRON ORE CORP.
 
CONSOLIDATED FINANCIAL STATEMENTS

 
September 30, 2014

 
Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013
 
3
     
Consolidated Statement of Comprehensive Loss for the three and nine month periods ended September 30, 2014 and for the period from December 2, 2013 (inception) to September 30, 2014
 
4
     
Consolidated Statements of Stockholders’ Deficit for the nine month period ended September 30, 2014, and for the period from December 2, 2013 (inception) to December 31, 2013
 
5
     
Consolidated Statement of Cash Flows for the nine month period ended September 30, 2014 and for the period from December 2, 2013 (inception) to September 30, 2014
 
6
     
Notes to the Consolidated Financial Statements
 
7 - 21
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
2

 
 
 IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(Expressed in US dollars)
         
ASSETS
 
September 30, 
2014 
(unaudited)
 
December 31, 
2013
                 
Current assets
               
Cash
 
$
24,476
   
$
—  
 
Accounts receivable
   
5,673
     
          — 
 
Prepaid expenses
   
180,008
     
—  
 
Debt issue costs (Note 12)
   
61,477
     
—  
 
Total current assets
   
271,634
     
—  
 
                 
                 
 TOTAL ASSETS
 
$
271,634
   
$
—  
 
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
LIABILITIES
               
Current liabilities
               
Accounts payable
 
$
594,405
   
$
16,109
 
Current portion of convertible debentures (Note 12)
   
155,890
     
—  
 
Promissory notes (Note 6)
   
253,863
     
—  
 
                 
Total liabilities
   
1,004,158
     
16,109
 
                 
Going concern (Note 1)
               
Commitments (Note 8)
               
Subsequent events (Note 15)
               
                 
STOCKHOLDERS' DEFICIT
               
Preferred stock, 50,000,000 shares authorized at par value of $0.0001, 2,299,042,000  shares issued and outstanding (Note 4)
   
230
     
—  
 
Common stock, 10,000,000,000 shares authorized at par value of $0.0001, 151,352,744 (December 31, 2013 – 541,250) shares issued and outstanding (Note 4)
   
15,135
     
54
 
Additional paid-in capital
   
2,647,664
     
4,946
 
Stock subscriptions receivable (Note 9)
   
(4,500
)
   
(5,000
)
Deficit
   
(3,391,053
)
   
(16,109
)
Total Stockholders' Deficit
   
(732,524
)
   
(16,109
)
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 
$
271,634
   
$
—  
 
  
 
The accompanying notes are an integral part of these consolidated financial statements.
  
 


 
3

 
 
 IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (UNAUDITED)
(Expressed in US dollars)
 
 
   
Three months Ended
September 30, 2014
   
Nine months Ended
September 30, 2014
   
Period from December 2, 2013 (inception) to September 30, 2014
 
                   
REVENUES
 
$
61,480
   
$
154,697
   
$
154,697
 
                         
OPERATING EXPENSES
                       
    Accretion and interest expense
  $
297,753
    $
771,893
    $
771,893
 
    Cost of revenue
   
18,444
     
46,409
     
46,409
 
    General and administrative (Note 9)
   
313,164
     
1,010,962
     
1,027,071
 
    Financing costs
   
22,722
     
55,366
     
55,366
 
    Product development
   
154,845
     
329,054
     
329,054
 
    Sales and marketing
   
228,271
     
486,310
     
486,310
 
                         
TOTAL OPERATING EXPENSES
   
1,035,203
     
2,699,994
     
2,716,103
 
                         
LOSS FROM OPERATIONS
   
(973,723
)
   
(2,545,297
)
   
(2,561,406
)
                         
OTHER EXPENSES
                       
    Impairment loss (Note 13)
   
     
(293,750
)
   
(293,750
)
    Gain on extinguishment of debt  (Note 3)
   
     
76,359
     
76,359
 
                         
NET LOSS AND COMPREHENSIVE LOSS
  $
(986,920
)
  $
(2,762,688
)
  $
(2,778,797
)
                         
BASIC AND DILUTED LOSS PER SHARE
   
(0.01
)
   
(0.05
)
       
                         
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
   
99,051,173
     
57,194,492
         
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
 
 

 
 
 
 
 
 
 
 

 
4

 
 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION ON DECEMBER 2, 2013 TO SEPTEMBER 30, 2014 (UNAUDITED)
(Expressed in US dollars)
 
 
   
Common # Stock
(Note 4)
   
Common Stock Amount
   
Preferred #
Stock
   
Preferred Stock Amount
   
Additional Paid-in Capital
   
Common Stock
Receivable
   
Deficit
   
Total
 
Balance, December 2, 2013
   
   
$
     
   
$
   
$
   
$
   
$
   
$
 
                                                                 
Shares issued for cash
   
541,250
     
54
     
     
     
4,946
     
(5,000
)
   
     
 
                                                                 
Net loss
   
     
     
     
     
     
     
(16,109
)
   
(16,109
)
                                                                 
Balance, December 31, 2013
   
541,250
   
$
54
     
   
$
   
$
4,946
   
$
(5,000
)
 
$
(16,109
)
 
$
(16,109
)
                                                                 
Issuance of preferred shares (Note 13)
   
     
     
58,750
     
1
     
293,749
     
     
     
293,750
 
                                                                 
Conversion of preferred shares (Note 13)
   
50,992,3700
     
5,099
     
(259,708
)
   
(21
)
   
(5,078
)
   
     
     
 
                                                                 
Reverse acquisition transaction (Note 14)
   
11,041,292
     
1,103
     
2,500,000
     
250
     
478,206
     
     
(612,256
)
   
(132,697
)
                                                                 
Share subscriptions received
   
     
     
     
     
     
500
     
     
500
 
                                                                 
Shares issued for services
   
7,026,389
     
703
     
     
     
429,281
     
     
     
429,984
 
                                                                 
Convertible notes (net) (Note 12)
   
81,751,443
     
8,176
     
     
     
1,446,560
     
     
     
1,454,736
 
                                                                 
Net loss for period
   
     
     
     
     
     
     
(2,762,688
)
   
(2,762,688
)
                                                                 
Balance, September 30, 2014
   
151,352,744
   
$
15,135
     
2,299,042
   
$
230
   
$
2,647,664
   
$
(4,500
)
 
$
(3,391,053
)
 
$
(732,524
)
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
 
 
 
 


 
5

 
 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Expressed in US dollars)

 
   
Nine month period ended 
September 30, 2014
 
Period from December 2, 2013
(inception) to 
September 30, 2014
Cash Flows from Operating Activities:
               
Net loss
 
$
(2,762,688
)
 
$
(2,778,797
)
                 
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
               
Impairment loss
   
293,750
     
293,750
 
Debt issue costs
   
13,146
     
13,146
 
Interest on promissory note
   
3,863
     
3,863
 
Accretion expense
   
751,339
     
751,339
 
Gain on extinguishment of debt
   
(76,359
)
   
(76,359
)
Shares issued for services
   
228,066
     
228,066
 
Changes in Operating Assets and Liabilities
               
Decrease (increase) in accounts receivable
   
(5,673
)
   
(5,673
)
Decrease (increase) in advances to related parties
   
-
     
-
 
Decrease (increase) in prepaid expenses
   
21,910
     
21,910
 
Increase (decrease) in accounts payable
   
419,745
     
435,853
 
Net Cash Used in Operating Activities
   
(1,112,900
)
   
(1,112,900
)
                 
Cash Flows provided by Investing Activities:
               
Cash acquired in the Merger
   
966
     
966
 
Net Cash Provided by  Investing Activities
   
966
     
966
 
                 
Cash Flows from Financing Activities:
               
Proceeds from convertible debentures (net)
   
885,910
     
885,910
 
Proceeds from promissory notes
   
250,000
     
250,000
 
Share subscriptions received
   
500
     
500
 
Net Cash Provided by Financing Activities
   
1,136,410
     
1,136,410
 
                 
Net Increase (Decrease) in Cash
   
24,476
     
24,476
 
                 
Cash– Beginning
   
—  
     
—  
 
                 
Cash– Ending
 
$
24,476
     
24,476
 
                 
Supplemental Cash Flow Information:
               
Cash paid for interest
 
$
—  
   
$
—  
 
Cash paid for income taxes
 
$
—  
   
$
—  
 
                 
Non-cash Investing and Financing Items:
               
Shares issued for conversion of debt (net)
 
$
939,250
   
$
939,250
 
  
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
 
 

 
6

 
 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
1.  NATURE OF BUSINESS AND GOING CONCERN
 
iHookup Social, Inc. (a development stage company), a Nevada corporation (the “Company”), was incorporated in the State of Nevada with a plan to produce user-friendly software that creates interactive digital yearbook software for schools, resulting in nominal revenue of $4,855.
 
Effective June 15, 2011, the Company completed a merger with its subsidiary, Titan Iron Ore Corp., a Nevada corporation, which was incorporated solely to effect a change in the Company’s name from “Digital Yearbook Inc.” to “Titan Iron Ore Corp.” The Company then began to pursue business in the area of mining exploration.

As previously reported in the Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on February 6, 2014, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) on February 3, 2014 with iHookup Operations Corp., a wholly-owned Delaware subsidiary of the Company (“Acquisition Sub”) and iHookup-DE, whereby iHookup-DE was the surviving entity and became the wholly-owned subsidiary of the Company. iHookup-DE’s former stockholders exchanged all of their 600,000 (12,000,000 pre-split) shares of outstanding common stock for 2,500,000 (50,000,000 pre-split) shares of the Company’s designated Series A Preferred Stock.
 
The transaction was regarded as a reverse merger (the “Merger”) whereby iHookup-DE was considered to be the accounting acquirer as its management retained control of the Company after the Merger. During the period ended March 31, 2014, the Merger was completed (see Note 14) and as a result, iHookup-DE acquired the net liabilities of the Company. The Company has discontinued its prior operations in mineral exploration and subsequent to period-end has conveyed all rights to its mineral properties to settle the outstanding promissory note payable.
 
As a result of the Merger, the Company ceased its prior operations and its business became the development and dissemination of a “proximity based” mobile-social media application that facilitates connections between people, utilizing the intelligence of global positioning system (“GPS”) and localized recommendations.
 
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which implies that the Company would continue to realize its assets and discharge its liabilities in the normal course of business. The Company has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. As of September 30, 2014 the Company has a working capital deficiency of $732,524 and has accumulated deficit of $3,391,053 since inception and its operations continue to be funded primarily from sales of its stock and issuance of convertible debentures. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to obtain the necessary financing from sales of its stock financings. The financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
These consolidated financial statements include the accounts of iHookup Social, Inc. and its wholly owned subsidiary, iHookup-DE (see Note 14).
 
These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The Company’s fiscal year end is December 31.
 
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. Interim results are not necessarily indicative of the results that may be expected for a full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto.
 
 
 

 
7

 
 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
On April 29, 2014, the Company completed a 20 for 1 common stock and preferred stock reverse stock split at a ratio of 20 to 1; the reverse stock split has been retroactively applied to all common stock, preferred stock, weighted average common stock, and loss per common stock disclosures.
 
Use of Estimates
The preparation of these statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to revenue recognition, useful life and recoverability of long-lived assets, valuation of mineral properties, deferred income tax asset valuations, financial instrument valuations, share based payments, other equity-based payments, and loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. 
 
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
 
Advertising Costs
The Company’s policy regarding advertising is to expense advertising when incurred.

Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.
 
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows.

If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Based Compensation and ASC 505, Equity Based Payments to Non-Employees, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards made to employees and directors, including stock options.

ASC 718 requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option pricing model as its method in determining fair value. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the terms of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.
 
 
 

 
8

 
 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
 
Mineral Property Costs
Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are capitalized.  The Company assesses the carrying costs for impairment, whenever events or changes in circumstances indicate that the carrying cost may not be recoverable under ASC 360, Property, Plant, and Equipment at each reporting date. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, will be capitalized. Such costs will be amortized using the units-of-production method over the estimated recoverable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. During the period ended September 30, 2014 the Company did not pursue any mineral property exploration activity.
 
Asset Retirement Obligations
The Company records asset retirement obligations in accordance with ASC 410-20, Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and normal use of the asset. ASC 410-20 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, the Company will recognize a gain or loss on settlement. As at September 30, 2014, the Company has not incurred any asset retirement obligation related to the exploration of its mineral property exploration activity.
 
Comprehensive Loss
ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. During the periods ended September 30, 2014 and December 31, 2013, the Company had no items that represent other comprehensive income.

Financial Instruments
FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value, as required by ASC 820, must maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. The carrying values of cash, accounts payable, and due to related parties approximate fair values because of the short-term maturity of these instruments. The fair value of the Company’s promissory note approximates carrying value as the underlying imputed interest rate approximates the estimated market rate. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
 
 
 

 
9

 
 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basic and Diluted Loss Per Share
The Company computes net loss per share in accordance with ASC 260, Earnings per Share.  ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
 
Recent Accounting Pronouncements
 
In March 2013, ASC guidance was issued related to Foreign Currency Matters to clarify the treatment of cumulative translation adjustments when a parent sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. The updated guidance also resolves the diversity in practice for the treatment of business combinations achieved in stages in a foreign entity. The update is effective prospectively for the Company’s fiscal year beginning January 1, 2014. There has been no significant impact on the Company’s consolidated financial statements as a result of adoption of this new accounting pronouncement.
 
In April 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which changes the criteria for determining which disposals can be presented as discontinued operations and modifies the related disclosure requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that represents a strategic shift that has, or will have, a major effect on an entity's operations and financial results. The revised guidance is effective for annual fiscal periods beginning after December 15, 2014. Early adoption is permitted. The Company is evaluating the impact the revised guidance will have on its consolidated financial statements.
 
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40). Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosure. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued.
 
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition” and some cost guidance included in ASC Subtopic 605-35, Revenue Recognition -Construction-Type and Production-Type Contracts”.  2014-09 requires the disclosure of sufficient information to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The Company will also be required to disclose information regarding significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. Early adoption is not allowed. ASU 2014-09 provides two methods of retrospective application. The first method would require the Company to apply ASU 2014-09 to each prior reporting period presented. The second method would require the Company to retrospectively apply with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. The Company is currently evaluating the impact that the adoption of ASU 2014-09 may have on its consolidated financial statements.
 
 
 
10

 
 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
3.  MINERAL PROPERTIES
 
Wyoming Iron Complex Properties
The Company was formerly involved in mineral exploration activities for (i) the property located at Southwest Quarter of Section 22, Township 19 North, Range 71 West, 6th Principal Meridian, Albany County, Wyoming (“Leased Real Property”); and (ii) certain unpatented lode mining claims situated in an unorganized mining district, Albany County, Wyoming, in Sections 14 and 24, Township 19 North, Range 72 West, 6th Principal Meridian, the names of which and the place of record of the location notices thereof in the official records of the county recorder and the authorized office of the Bureau of Land Management (“Unpatented Mining Claims,” and together with the Leased Real Property, the “Wyoming Iron Complex”). The Company was assigned the rights to Wyoming Iron Complex in exchange for a promissory note. At the time of the Merger described in Note 14, the Company did not expect to go forward with any mining or mineral exploration activities at these sites. An impairment analysis was conducted at the time of the Merger and no impairment was recorded as the fair value of Wyoming Iron Complex (considered to be the carrying value of the promissory note) exceeded the carrying value. During the period ending September 30, 2014, the mineral property was surrendered to settle the outstanding promissory note as per Note 6, resulting in a gain of $76,359 on the extinguishment of debt.
 
4.  COMMON AND PREFERRED STOCK
 
Issued during 2014:
 
During the nine month period ended September 30, 2014, the Company issued 81,751,443 shares of common stock to various convertible note holders for full and partial conversion of the notes (Note 12).

During the nine month period ended September 30, 2014, the Company issued 7,026,389 shares of common stock to various consultants in exchange for investor relations and advertising services.
 
During the nine month period ended September 30, 2014, the Company issued 50,992,370 shares of common stock to various holders of preferred stock upon conversion or such preferred stock.
 
On January 18, 2014, the Company designated 4,000,000 shares of its authorized 50,000,000 shares of Preferred Stock as “Series A Preferred Stock”.  Each share of Series A Preferred Stock is convertible into such number of shares of common stock as is determined by dividing the Series A Original Issue Price by $5.00 ($0.25 pre-split). Each holder of Series A Preferred Stock is entitled to cast votes equal to nine times the total number of shares of common stock which are issued and outstanding, voting together with the holders of common stock as a single class.
 
5.  SHARE PURCHASE WARRANTS
 
     
Weighted Average
 
 
Number
 
Exercise
 
 
of
 
Price
 
   
Warrants
   
$
 
Warrants of the Company outstanding and exercisable as at the Merger
   
85,850
     
17.00
 
Warrants expired during the period
   
(52,500
)
   
15.00
 
Balance, September 30, 2014
   
33,350
     
20.00
 
 
Details of share purchase warrants outstanding as of September 30, 2014 are:
 
Number of Warrants Outstanding and Exercisable
Number
   
Exercise Price per Share
 
Expiry Date
           
 
33,350
   
$
20.00
 
January 10, 2015
 
33,350
   
$
20.00
   
 
6.  PROMISSORY NOTES
 
As part of the Merger described in Note 14, the Company acquired a Promissory Note due to Wyomex Limited Liability Company (“Wyomex”). On May 7, 2014, the carrying value of the Promissory Note was $1,282,370. On May 7, 2014, the Company entered into an arrangement to settle the Promissory Note by conveying the Strong Creek and Iron Mountain Properties described in Note 3 to Wyomex. The carrying value of the mineral properties on that date was $1,206,011 and the Company recorded a gain of $76,359.
    
 
 
11

 
 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)

6.  PROMISSORY NOTES (CONTINUED)
 
As of June 25, 2014, the Company” entered into a Letter Agreement (the “Letter Agreement”) with Beaufort Capital Partners LLC (“Beaufort”), pursuant to which Beaufort agrees to loan (the “Loan”) up to $400,000 to the Company upon the Company’s written request. From June 25, 2014 to October 1, 2014 (the “Term”), the Loan may be made in monthly installments of One Hundred Thousand Dollars ($100,000) each and must be made within three (3) days of the receipt of the written request from the Company and evidenced by a Secured Promissory Note (the “Note”).  Each Note shall be secured by a pledge of 8,000,000 shares of common stock of the Company provided by Copper Creek Holdings, LLC (“Copper Creek”), pledged under the terms and conditions of a Stock Pledge Agreement (the “Pledge”).
 
During the nine months ended September 30, 2014 and pursuant to the Letter Agreement, Company delivered written requests for installments in the aggregate of $250,000 and executed three Notes totaling $250,000. The Notes bear 1% interest per month, compounded monthly, and mature in six (6) months (“Maturity Date”). In the event that payment is not received within ten (10) days of the Maturity Date, then the Company shall be charged a late fee in an amount equal to 5% of the amount of such overdue payment, payable within five (5) days of the Maturity Date. An “Event of Default” is defined as (i) the failure of the Company to make the payments owed under the Notes in a timely manner, or (i) the initiation of bankruptcy proceedings by the Company. Upon an Event of Default, the unpaid principal balance of the Note shall be due and payable immediately, at Beaufort’s option. Additionally, if there is an Event of Default after the Maturity Date, interest shall accrue on the outstanding principal balance of the Notes at 10% per annum on the basis of a 360-day year (“Default Interest”), or if such Default Interest is not permitted by law, then the maximum rate of interest as permitted by applicable law. As of September 30, 2014 the Company recorded interest expense of $3,863 on these Notes. 

7.  STOCK-BASED COMPENSATION
 
On November 22, 2011, the Board of Directors approved a stock option plan (“2011 Stock Option Plan”), the purpose of which is to enhance the Company’s stockholder value and financial performance by attracting, retaining and motivating the Company’s officers, directors, key employees, consultants and its affiliates and to encourage stock ownership by such individuals by providing them with a means to acquire a proprietary interest in the Company’s success through stock ownership. Under the 2011 Stock Option Plan, officers, directors, employees and consultants who provide services to the Company may be granted options to acquire common shares of the Company.   The aggregate number of options authorized by the plan shall not exceed 497,370 common shares of the Company. 
 
The following table summarizes the options outstanding under the 2011 Stock Option Plan as of September 30, 2014:
 
   
Option Price
   
Expiry Date
 
Per Share
 
Number
December 21, 2021
 
$
16.80
     
123,500
 
December 21, 2014
   
16.80
     
25,000
 
June 21, 2022
   
4.00
     
50,000
 
June 25, 2023
   
1.34
     
85,000
 
   
$
9.90
     
283,500
 
 
The Board of Directors and the stockholders holding a majority of the voting power approved a 2014 Equity Incentive Plan (the “2014 Plan”) on February 28, 2014, with a to be determined effective date. The purpose of the 2014 Plan is to assist the Company and its affiliates in attracting, retaining and providing incentives to employees, directors, consultants and independent contractors who serve the Company and its affiliates by offering them the opportunity to acquire or increase their proprietary interest in the Company and to promote the identification of their interests with those of the stockholders of the Company. The 2014 Plan will also be used to make grants to further reward and incentivize current employees and others.
 
There are 12,067,859 shares of common stock (post-split) reserved for issuance under the 2014 Plan. The Board shall have the power and authority to make grants of stock options to employees, directors, consultants and independent contractors who serve the Company and its affiliates. Any stock options granted under the 2014 Plan shall have an exercise price equal to or greater than the fair market value of the Company’s shares of common stock. Unless otherwise determined by the Board of Directors, stock options shall vest over a four year period with 25% being vested after the end of one (1) year of service and the remainder vesting equally over a 36 month period.  The Board may award options that may vest based upon the achievement of certain performance milestones. As of September 30, 2014, no options have been awarded under the 2014 Plan.
 
 
12

 
 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
7.  STOCK-BASED COMPENSATION (CONTINUED)
 
The following table summarizes the Company’s stock options outstanding and exercisable:
 
   
Number of Options
   
Weighted Average Exercise Price
   
Weighted- Average Remaining Contractual Term (years)
 
Aggregate Intrinsic Value
         
$
         
$
Outstanding, December 31, 2013
   
-
     
-
     
-
 
-
Exercisable, December 31, 2013
   
-
     
-
     
-
 
-
Stock options of the Company outstanding and exercisable at the Merger
   
283,500
     
9.90
     
7.16
   
Outstanding, September 30, 2014
   
283,500
     
9.90
     
7.16
 
-
Exercisable, September 30, 2014
   
283,500
     
9.90
     
7.16
 
-
  
8.  COMMITMENTS
 
The following table summarizes our significant contractual obligations as of September 30, 2014:
 
   
2014
 
2015
Convertible Notes (1)
   
88,922
   
930,354
Operating Leases (2)
   
3,338
   
5,564
Service Contracts (3)
   
41,997
   
16,997
Employment Agreements (4)
   
75,000
   
300,000
Prommisory Notes (5)
   
-
   
250,000
     
209,257
   
1,502,914
 
(1) Principal and interest for various convertible notes due at the maturity date.
(2) Rents payable for office space.
(3) Service contracts for app and website hosting and investor relations services.
(4) Employment agreements with related parties.
(5) Principal and interest for various promissory notes due at the maturity date.
 
9.  RELATED PARTY TRANSACTIONS AND BALANCES
 
During the nine months ended September 30, 2014, the Company incurred $318,656 (2013: $nil) in salaries and management fees to current and former officers and directors with such costs being recorded as general and administrative expenses.
 
During the nine months ended September 30, 2014, the Company incurred $258,300 in app hosting, app development, office expenses, and rent to a company with two officers and directors in common with such costs being recorded as general and administrative and product development expenses.
 
During the nine months ended September 30, 2014, the Company incurred $2,800 in management fees, rent and office expenses to a company with an officer in common with such costs being recorded as general and administrative expenses.
 
During the nine months ended September 30, 2014, the Company paid $3,500 to the spouse of an officer and director with such costs being recorded as sales and marketing expenses.
 
As of September 30, 2014, the Company had a stock subscription receivable totaling $4,500 from an officer and director and from a company with an officer and director in common.
 
The above transactions were recorded at their exchange amounts, being the amounts agreed by the related parties.
 
10.  FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements and Disclosures require an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
 
 

 
13

 
 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
10.  FAIR VALUE MEASUREMENTS (CONTINUED)
 
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Valuations are based on quoted prices that are readily and regularly available in an active market and do not entail a significant degree of judgment.
 
Level 2
Level 2 applies to assets or liabilities for which there are other than Level 1 observable inputs such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
 
Level 2 instruments require more management judgment and subjectivity as compared to Level 1 instruments. For instance: determining which instruments are most similar to the instrument being priced requires management to identify a sample of similar securities based on the coupon rates, maturity, issuer, credit rating and instrument type, and subjectively select an individual security or multiple securities that are deemed most similar to the security being priced; and determining whether a market is considered active requires management judgment.

Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The determination of fair value for Level 3 instruments requires the most management judgment and subjectivity.

Pursuant to ASC 825, cash is based on "Level 1" inputs. The Company believes that the recorded values of accounts payable approximate their current fair values because of their nature or respective relatively short durations. The fair value of the Company’s promissory note and convertible debentures approximates carrying value as the underlying imputed interest rate approximates the estimated current market rate for similar instruments.

Assets measured at fair value on a recurring basis were presented on the Company’s balance sheet as of September 30, 2014, as follows:
 
 
   
Fair Value Measurements Using
       
                         
   
Quoted Prices in
   
 
Significant
             
   
Active Markets
   
Other
   
Significant
       
   
For Identical
   
Observable
   
Unobservable
   
Balance as of
 
   
Instruments
   
Inputs
   
Inputs
   
September 30, 2014
 
   
(Level 1)
   
(Level 2)
   
(Level 3)
       
   
$
     
$
     
$
     
$
   
                                 
Assets:
                               
Cash (recurring basis)
   
24,476
     
     
     
24,476
 
                                 
 
As of September 30, 2014, there were no liabilities measured at fair value on a recurring basis presented on the Company’s balance sheet. 
 
 

 
14

 
 
 IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
12.  CONVERTIBLE DEBENTURES
 
   
Issuance
Principal
Discount
Carrying Value
Interest Rate
Maturity Date
a )
24-Feb-14
- - - 8 %
26-Nov-14
b )
17-Feb-14
7,000 4,115 2,885 8 %
17-Feb-15
c )
2-Apr-13
5,054 - 5,054 0 %
2-Jan-13
d )
16-Apr-14
44,444 4,619 2,825 12 %
16-Apr-15
d )
3-Sep-14
44,444 27,089 17,355 12 %
3-Sep-15
e )
6-Feb-14
25,000 18,933 6,067 8 %
6-Feb-15
e )
6-Feb-14
7,267 5,029 2,238 8 %
6-Feb-15
e )
17-Feb-14
21,000 12,549 8,451 8 %
17-Feb-15
e )
18-Mar-14
50,000 44,000 6,000 8 %
18-Mar-15
e )
21-May-14
75,000 71,788 3,212 8 %
21-May-15
f )
5-Mar-14
24,000 - 24,000 8 %
7-Sep-14
g )
18-Mar-14
25,000 21,693 3,307 8 %
18-Mar-15
h )
4-Apr-14
53,000 43,713 9,287 8 %
8-Jan-15
h )
11-Apr-14
37,500 30,910 6,590 8 %
16-Jan-15
h )
22-May-14
53,000 24,718 28,282 8 %
27-Feb-15
h )
16-Jun-14
63,000 50,099 12,901 8 %
18-Mar-15
i )
9-May-14
35,000 30,495 4,505 8 %
9-Feb-15
j )
16-Jun-14
55,000 46,057 8,943 12 %
11-Dec-14
k )
9-May-14
29,500 27,082 2,418 8 %
14-May-15
L )
11-Jul-14
80,000 78,430 1,570 12 %
10-Jul-15
      734,209 578,319 155,890      
 
a)  
The Company entered into several convertible promissory notes (“Asher Notes”) with Asher Enterprises Inc. (“Asher”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 60% of the average price of the lowest 5 day trading days during the 10 trading days preceding the conversion. The Asher Notes cannot be converted, to the extent that Asher Enterprises Inc. and its affiliates would beneficially own in excess of 4.99% of the Company’s outstanding common stock.
 
The convertible debenture may be repaid by the Company as follows:
 
 
·
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period of 60 days beginning on the issuance date;
     
 
·
Outstanding principal multiplied by 135% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 61 days following the issuance date and ending on the date that is 90 days following the issuance date;
     
 
·
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 91 days following the issuance date and ending on the date that is 120 days following the issuance date;
     
 
·
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 121 days following the issuance date and ending on the date that is 180 days following the issuance date;
     
 
·
Outstanding principal multiplied by 175% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 181 days following the issuance date through the maturity date.
     
 
·
In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the Asher Notes becomes immediately due and payable. Should that occur the Company is liable to pay the holder 150% of the then outstanding principal and interest. 
As of September 30, 2014, this note has been fully repaid.
 
b)
The Company entered into four convertible promissory notes (“GEL Notes”) with GEL Properties, LLC (“GEL”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 60% of the lowest closing bid price during the 5 trading days preceding the conversion. The GEL Notes cannot be converted, to the extent that GEL would beneficially own in excess of 4.99% of the Company’s outstanding common stock.
 
 
15

 
 
 IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
12.  CONVERTIBLE DEBENTURES (CONTINUED)
 
The convertible debenture may be repaid by the Company as follows:
 
 
·
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period of 90 days beginning on the issuance date;
     
 
·
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 91 days following the issuance date and ending on the date that is 180 days following the issuance date;
     
 
·
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 181 days following the issuance date through the maturity date.
     
 
·
In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the GEL Notes becomes immediately due and payable.
 
c)
On April 2, 2013, the Company entered into a convertible bridge note with GCA Strategic Investment Fund Limited (“GCA”). On December 31, 2013 the Company entered in a letter agreement with GCA, in which the original maturity date of September 20, 2013 was extended to January 2, 2014.
 
The unpaid principal portion and accrued interest on the convertible bridge note is convertible in whole or in part as follows:
 
 
·
Conversion price per share equal to the lower of :
 
 
(i)
100% of the average price of the Company’s common stock for the 5 trading days preceding the conversion days
 
(ii)
70% of the daily average price of the Company’s common stock for the 10 trading days preceding the conversion date.
 
 
·
The holders must not convert more than 33 1/3%  of the initial principal sum into shares of the Company’s common stock at a price below $0.08 per share during any calendar month.
 
GCA does not have the right to convert the convertible bridge note, to the extent that GCA and its affiliates would beneficially own in excess of 9.99% of the Company’s outstanding common stock.
 
In the event the Company elects to prepay the convertible bridge note in full or in part, the Company is required to pay principal, interest and any other amounts owing multiplied by 130%. The convertible bridge note also contains a mandatory partial prepayment requirement should the Company obtain certain future net financings in excess of $300,000, and under other conditions.
 
d)
During the period ended December 31, 2013 the Company entered into a one year promissory note with JMJ Financial. The total amount that may be borrowed is $275,000, which includes an upfront fee of 10%. No interest will be applied to the principal balance for the first 90 days after cash advance. After the first 90 days, an interest charge of 12% will be immediately applied to the principal and the 10% upfront fee.
 
On delivery of consideration, the lender may convert all or part of the unpaid principal and upfront fee into common stock at its sole discretion. All balances outstanding have a variable conversion price equal to the lesser of $0.07 or 60% of the market price. The market price is defined as the lowest trade price in the 25 days prior to the conversion date. The lender is limited to holding no more than 4.99% of the issued and outstanding common stock at the time of conversion.
 
After the expiration of 90 days following the delivery date of any consideration, the Company will have no right of prepayment.
 
e)
The Company entered into a convertible promissory note (“LG Note”) with LG Properties, LLC (“LG”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 50% of the average of the two lowest closing bid prices during the 5 trading days preceding the conversion. The LG Note cannot be converted, to the extent that LG would beneficially own in excess of 4.99% of the Company’s outstanding common stock.
 
 
 
16

 
 
 IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
12.  CONVERTIBLE DEBENTURES (CONTINUED)
 
The convertible debenture may be repaid by the Company as follows:
 
 
·
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period of 90 days beginning on the issuance date;
     
 
·
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 91 days following the issuance date and ending on the date that is 180 days following the issuance date;
     
 
·
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 181 days following the issuance date through the maturity date.
     
 
·
In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the LG Notes becomes immediately due and payable.
 
f)
The Company entered into two convertible debentures agreements with Beaufort Ventures, PLC (“Beaufort”).  Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 58% of the lowest intra-day trading price during the 10 trading days preceding the conversion date.  Interest on any unpaid principal balance of this Note shall be repaid at the rate of 8% per annum.
 
The convertible debenture may be repaid by the Company as follows:
 
 
·
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period of 90 days beginning on the issuance date;
     
 
·
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 91 days following the issuance date and ending on the date that is 180 days following the issuance date;
 
g) 
The Company entered into a convertible debenture agreement with Coventry Enterprises, LLC (“Coventry”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 50% of the lowest fifteen closing bid prices preceding the conversion.
 
 
The convertible debenture may be repaid by the Company as follows:
 
 
·
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid within a period of 181 days beginning on the issuance date;
 
h)  
The Company entered into several convertible promissory notes (“KBM Notes”) with KBM Worldwide Inc. (“KBM”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 65% of the average price of the lowest 3 day trading days during the 10 trading days preceding the conversion. The KBM Notes cannot be converted, to the extent that KBM Worldwide Inc. and its affiliates would beneficially own in excess of 4.99% of the Company’s outstanding common stock.
 
The convertible debenture may be repaid by the Company as follows:
 
 
·
Outstanding principal multiplied by 110% together with accrued interest and unpaid interest thereon if prepaid within a period of 30 days beginning on the issuance date;
     
 
·
Outstanding principal multiplied by 115% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 31 days following the issuance date and ending on the date that is 60 days following the issuance date;
     
 
·
Outstanding principal multiplied by 120% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 61 days following the issuance date and ending on the date that is 90 days following the issuance date;
     
 
·
Outstanding principal multiplied by 125% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 91 days following the issuance date and ending on the date that is 120 days following the issuance date;
     
 
·
Outstanding principal multiplied by 135% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 121 days following the issuance date and ending on the date that is 180 days following the issuance date. The Company may not prepay the KBM Note after the 180th day following the issue date.
     
 
·
In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the KBM Notes becomes immediately due and payable. Should that occur the Company is liable to pay the holder 150% of the then outstanding principal and interest. 
 
 
17

 
 
 IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
12.  CONVERTIBLE DEBENTURES (CONTINUED)
 
i)  
The  Company entered into a securities purchase agreement (the “Auctus SPA”) with Auctus Private Equity Fund, LLC (“Auctus”), pursuant to which the Company sold to Auctus a $35,000 face value 8% Convertible Note (the “Auctus Note”) with a term of nine months (the “Auctus Maturity Date”). Interest accrues daily on the outstanding principal amount of the AUCTUS Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount of the note and interest is payable on the Auctus Maturity Date. The note is convertible into common stock beginning six months after the issue date  (the “Issue date”), at the holder’s option, at a 45% discount to the average of the two lowest closing bid prices of the common stock during the 25 trading day period prior to conversion. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 125% if prepaid during the period commencing on the Issue Date through 30 days thereafter, (ii) 130% if prepaid 31 days following the closing through 60 days following the Issue Date, (iii) 135% if prepaid 61 days following the closing through 90 days following the Issue Date, (iv) 140% if prepaid 91 days following the Issue Date through 120 days following the Issue Date, (v) 145% if prepaid 121 days following the Issue Date through 150 days following the Issue Date, and (vi) 150% if prepaid 151 days following the Issue Date through the 180 days following the Issue Date. The Company may not prepay the note after the 180th day following the Issue Date. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the note becomes immediately due and payable. Should that occur the Company is liable to pay the holder 150% of the then outstanding principal and interest. Auctus does not have the right to convert the Note, to the extent that Auctus and its affiliates would beneficially own in excess of 4.99% of our outstanding common stock.
 
j)  
The  Company entered into a Convertible Note Purchase Agreement  with JSJ Investments Inc. (“JSJ”), pursuant to which the Company sold to JSJ a $55,000 face value 12% Convertible Note (the “JSJ Note”) with a term of six months (the “JSJ Maturity Date”). Interest accrues daily on the outstanding principal amount of the JSJ Note at a rate per annual equal to 12% on the basis of a 365-day year. The principal amount of the JSJ Note and interest is payable on the JSJ Maturity Date. The JSJ Note is convertible into common stock, subject to Rule 144, at any time after the issue date, at JSJ’s option, at a 50% discount to the average of the three lowest trades on the previous 20 days before the date of the conversion notice or to the average of the three lowest trades on the previous 20 days before the date of execution of the JSJ Note. If the shares are not delivered to JSJ within three business days of the Company’s receipt of the conversion notice, a penalty of an additional 25% in the number of shares to be converted will incur on the fourth business day, and each day thereafter until the shares are delivered.  . Upon the Maturity Date and JSJ’s consent to exercise such provision, there is a 150% cash redemption premium on the principal amount only. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 12% per annum and the JSJ Note becomes immediately due and payable.
 
k)  
The Company issued a one-year, 8% Convertible Redeemable Note (the “Union Note”) to Union Capital LLC (“Union”) pursuant to which Union funded $29,500 at closing on May 15, 2014. The Company also issued a separate 8% Convertible Redeemable Notes dated May 14,2014, in the amount of $29,500 to Union (the “Union Back-End Note”), in exchange for which Union issued to the Company an 8% secured promissory note in the amount of $29,500 (the “Union Payment Note”), to secure funding under the Union Back End Note. Payment to the Company under the Union Payment Note will be no later than January 14, 2015. The term of the Union Note and the Union Back End Note is one year, upon which the outstanding principal amount is payable. The amount funded plus accrued interest under the Union Note and Union Back End Note is convertible into common stock at any time after the requisite rule 144 holding period, at the holder’s option, at a conversion price equal to 55% of the lowest closing bid price in the 15 trading days previous to the conversion. In the event the Company redeems the Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150% if prepaid during the period commencing on the Issue Date through 180 days thereafter. There shall be no redemption after the 180th day the Note has been issued. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the note becomes immediately due and payable.

l)  
On July 11, 2014, and with a  closing date of July 16, 2014, the Company entered into a Convertible Note Purchase Agreement  with Eastmore Capital LLC (“Eastmore”), pursuant to which the Company sold to Eastmore an $80,000 face value 12% Convertible Note (the “Eastmore Note”) with a maturity date of July 10, 2015 (the “Eastmore Maturity Date”). Interest accrues daily on the outstanding principal amount of the Eastmore Note at a rate per annum equal to 12% on the basis of a 365-day year. The principal amount of the Eastmore Note and interest is payable on the Eastmore Maturity Date. The Eastmore Note is convertible into common stock, subject to Rule 144, at any time after the issue date, at the lower of (i) the closing sale price of the common stock on the on the trading day immediately preceding the closing date, and (ii) 50% of the lowest sale price for the common stock during the ten (10) consecutive trading days immediately preceding the conversion date. If the shares are not delivered to Eastmore within three business days of the Company’s receipt of the conversion notice, the Company will pay Eastmore a penalty of $1,000 per day for each day that the the Company fails to deliver such common stock through willful acts designed to hinder the delivery of common stock to Eastmore. Eastmore does not have the right to convert the note, to the extent that it would beneficially own in excess of 4.9% of our outstanding common stock. The Company shall have the right, exercisable on not less than five (5) trading days prior written notice to Eastmore, to prepay the outstanding balance on this note for $120,000 plus any and all accrued and unpaid interest on the unpaid principal amount. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the Eastmore Note becomes immediately due and payable. In connection with the Eastmore Note, the Company paid Eastmore $2,500 for its legal fees and expenses and paid third party brokers a $10,000 fee.
 
 
 
 
18

 
 
 IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
12.  CONVERTIBLE DEBENTURES (CONTINUED)
 
The Company has evaluated whether separate financial instruments with the same terms as the conversion features above would meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25. The terms of the contracts do not permit net settlement, as the shares delivered upon conversion are not readily convertible to cash. The Company’s trading history indicated that the shares are thinly traded and the market would not absorb the sale of the shares issued upon conversion without significantly affecting the price. As the conversion features would not meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25, the conversion features are not required to be separated from the host instrument and accounted for separately. As a result, at September 30, 2014 the conversion features would not meet derivative classification.
 
At September 30, 2014, the convertible debentures are unsecured. During the nine months ended September 30, 2014, $939,260 of convertible debentures were settled by issuing 81,751,443 shares of common stock of the Company.
 
During the nine months ended September 30, 2014, $190,000 of convertible debentures were settled through payment of cash and issuance of new convertible debentures.
 
During the nine months ended September 30, 2014, the Company incurred $103,720 in transaction costs in connection with the issuance of the convertible debentures.
 
13.  ASSET PURCHASE AGREEMENT
 
Pursuant to an asset purchase agreement dated January 18, 2014, the Company purchased the iHookup mobile application, its name, intellectual property, user database, certain domain names, and Apple developer from CheckMate Mobile, Inc., a Delaware corporation (“CheckMate”) for a purchase price of $293,750. The Company paid the purchase price by issuing 58,750 (1,175,000 pre-split) shares of its Series A Preferred Stock. Subsequent to the purchase, the assets were considered impaired, resulting in an impairment loss. On February 3, 2014, as part of the Merger described in Note 14, all outstanding Series A Preferred Stock of iHookup-DE held by CheckMate was converted into common stock of iHookup-DE at ratio of 1 to 1. 
 
14.  MERGER
 
As previously reported in the Current Report on Form 8-K filed with the SEC on February 6, 2014, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) on February 3, 2014 with iHookup Operations Corp., a wholly-owned Delaware subsidiary of the Company (“Acquisition Sub”) and iHookup-DE, whereby iHookup-DE was the surviving entity and became the wholly-owned subsidiary of the Company. iHookup-DE’s former stockholders exchanged all of their 600,000 (12,000,000 pre-split) shares of outstanding common stock for 2,500,000 (50,000,000 pre-split) shares of the Company’s designated Series A Preferred Stock. Each share of the Company’s common stock entitles its holder to one (1) vote on each matter submitted to its stockholders. The holders of the Series A Preferred Stock are entitled to cast votes equal to nine (9) times the total number of shares of common stock which are issued and outstanding, voting together with the holders of common stock as a single class. The Series A Preferred Stock is convertible into nine (9) times the number of common stock outstanding until the closing of a Qualified Financing (i.e. the sale and issuance of our equity securities that results in gross proceeds in excess of $2,500,000). As a result of the transaction, the former stockholders of iHookup-DE received a controlling interest in the Company.
 
For accounting purposes, the Merger has been treated as a reverse recapitalization, rather than a business combination. Accordingly, for accounting purposes iHookup-DE is considered the acquirer and surviving entity in the reverse recapitalization. The accompanying historical financial statements prior to the Merger are those of iHookup-DE.
 
The consolidated financial statements present the previously issued shares of the Company pre-Merger (“Titan”) common stock as having been issued pursuant to the Merger on February 3, 2014, with the consideration for such issuance being the estimated fair value of the Titan shares issued, based on the number of equity interest iHookup-DE would have had to give to Titan to retain the same percentage equity interest in the combined entity that results from the Merger. The excess of the consideration issued over the net assets of Titan is recognized as an adjustment to deficit. As of the date of the Merger, Titan was in a net liability position.
 
 

 
19

 
 
 IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)
 
14.  MERGER (CONTINUED)
 
   
$
 
         
Preferred shares issued
   
68,366
 
Net liabilities acquired
   
(543,891
         
Adjustment to deficit
   
475,525
 
 
15.  SUBSEQUENT EVENTS
 
a)  
Subsequent to September 30, 2014 the Company issued 230,463,742 shares in connection with conversion of convertible notes in the amount of $311,354.

b)  
Subsequent to September 30, 2014 the Company issued 26,213,933 shares of common stock in connection with conversion of preferred shares.
 
c)  
Subsequent to September 30, 2014 the Company issued 7,923,077 shares of common stock for services in connection with financial services agreements.
 
d)  
Subsequent to September 30, 2014 the Company entered into a Securities Purchase Agreement (the “Coventry SPA”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued two Convertible Notes (together, the “Notes”)  in the amount of $75,000 each, at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The first of the two Convertible Notes (the “Coventry Note”) was paid by the Buyer on October 8, 2014.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $75,000 promissory note issued to the Company by the Buyer (“Buyer Note”), provided that prior to the conversion of the Coventry Back-End Note, the Buyer must have paid off the Buyer Note in cash.  Payment to the Company under the Buyer Note must be no later than October 7, 2015. The Buyer Note will be initially secured by the pledge of the Coventry Back-End Note.
 
The term of the Coventry Note and the Coventry Back-End Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the Coventry Note and Coventry Back-End Note is convertible into Common Stock at any time after the requisite Rule 144 holding period (subject to the condition above for the Coventry Back-End Note), at a conversion price equal to 50% of the lowest closing bid price in the 15 trading days previous to the conversion. In the event the Company redeems the Coventry Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150% if prepaid prior to the 180th day after its issuance. There shall be no redemption after the 180th day. The Coventry Back-End Note may not be prepaid, except that if the Coventry Back-End Note is redeemed by the Company within six months of its issuance, all obligations of the Company and Coventry under the Coventry Back-End Note and the Buyer Note will be deemed satisfied and such notes shall automatically be deemed cancelled and of no further force or effect. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 16% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the Coventry Note, the Company paid $3,750 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $3,750 in legal fees and expenses for the Coventry Back-End Note.
 
e)  
Subsequent to September 30, 2014 the Company entered into a securities purchase agreement  with KBM Worldwide Inc. (“KBM”), pursuant to which the Company sold to KBM a $43,000 face value 8% Convertible Note (the “KBM Note”) with a term of nine months (the “KBM Maturity Date”). Interest accrues daily on the outstanding principal amount of the KBM Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount of the note and interest is payable on the KBM Maturity Date. The note is convertible into common stock beginning six months after the issue date  (the “Issue date”), at the holder’s option, at a 45% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 110% if prepaid during the period commencing on the Issue Date through 30 days thereafter, (ii) 115% if prepaid 31 days following the closing through 60 days following the Issue Date, (iii) 120% if prepaid 61 days following the closing through 90 days following the Issue Date, (iv) 125% if prepaid 91 days following the Issue Date through 120 days following the Issue Date, and (v) 135% if prepaid 121 days following the Issue Date through the 180 days following the Issue Date. The Company may not prepay the note after the 180th day following the Issue Date. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the note becomes immediately due and payable. Should that occur the Company is liable to pay the holder 150% of the then outstanding principal and interest. KBM does not have the right to convert the Note, to the extent that KBM and its affiliates would beneficially own in excess of 4.99% of our outstanding common stock. KBM has a right of first refusal to participate in future financings below $45,000 for a period of 12 months. The Company paid KBM $3,000 for its legal fees and expenses.
 
 
 
 
20

 
 
 IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2014 
(Expressed in US dollars)

15.  SUBSEQUENT EVENTS (CONTINUED)

f)  
Subsequent to September 30, 2014 the Company entered a convertible note purchase agreement  with an effective date of July 1, 2014 with Bingham McCutchen LLP (“Bingham”), pursuant to which the Company sold to Bingham an 8% Convertible Notes (the “Notes”) with a value of $40,465. Interest on this Note shall be computed on the basis of a 365-day year and actual days elapsed.
 
Unless previously converted as provided for below, the Note will automatically mature and the entire outstanding principal amount, together with accrued interest, shall become due and payable upon date that is the earlier of: (i) a sale of equity securities of the Company in an amount equal to or in excess of $1,000,000 (“ Qualified Financing”); (ii)  nine (9) months  from the date of issuance;  or (iii) an event of default that is followed by written notice by the Company (such first date to occur being the “Maturity Date”).
 
The Note may not be prepaid in whole or in part by the Company.
 
Bingham shall have the following conversion rights. If the Company issues and sells shares of capital stock in a Qualified Financing, then all then-outstanding principal and all accrued and unpaid interest on the Note (the “Conversion Amount”) shall automatically be converted into fully paid and non-assessable shares of the kind of Equity Securities issued and sold in such Qualified Financing, at a conversion rate equal to 85% of the price at which the Equity Securities were issued and sold in the Qualified Financing (the “Conversion Price”).  The number of Equity Securities to be issued to the Holder upon a Qualified Financing shall be equal to the quotient obtained by dividing the Conversion Amount by the Conversion Price.  The Equity Securities issued to the Holder upon conversion of this Note in accordance with a Qualified Financing shall have the same rights, preferences and privileges as the Equity Securities issued to investors in the Qualified Financing.

In connection with the Note, the Company has approved  the acquisition of such note from Bingham by Carebourn Capital LP (“Carebourn”).


  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
21

 

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.
 
Corporate Overview
 
On June 5, 2007, iHookup Social, Inc., a Nevada corporation (the "Company"), was incorporated in the State of Nevada with a plan to produce user-friendly software that creates interactive digital yearbook software for schools. The Company produced nominal revenues of $4,855 under this business.
 
Effective June 15, 2011, the Company completed a merger with its subsidiary, Titan Iron Ore Corp., a Nevada corporation, which was incorporated solely to effect a change in the Company’s name from “Digital Yearbook Inc.” to “Titan Iron Ore Corp.” Subsequently, the Company changed its business to become a mineral exploration company.

Also effective June 15, 2011, the Company effected a 37-to-1 forward stock split of its issued and outstanding common stock.  As a result, the Company’s authorized capital increased from 100,000,000 shares of common stock with a par value of $0.0001 to 3,700,000,000 shares of common stock with a par value of $0.0001 of which 5,151,000 shares of common stock outstanding increased to 190,587,000 shares of common stock. Subsequently, on June 20, 2011, the Company issued 2,100,000 shares of common stock pursuant to a private placement unit offering, increasing the number of shares of common stock outstanding to 192,687,000.
 
Pursuant to an asset purchase agreement dated January 18, 2014, iHookup Social, Inc., a Delaware corporation (“iHookup-DE”), purchased the iHookup mobile application, its name, intellectual property, user database, certain domain names, and Apple developer account (iTunes) from CheckMate Mobile, Inc., a Delaware corporation (“CheckMate”) for a purchase price of $293,750. iHookup-DE paid the purchase price by issuing 58,750 (1,175,000 pre-split) shares of its Series A Preferred Stock to CheckMate. Subsequent to the purchase, the assets were considered impaired, resulting in an impairment loss. On February 3, 2014, as part of the reverse acquisition transaction described below all outstanding Series A Preferred Stock of iHookup-DE held by CheckMate were converted into common stock of iHookup-DE at a ratio of 1-to-1.
 
Due to the Company’s inability to raise capital to further develop mining claims and pursue mineral exploration, the Company decided to exit the mining business and look for other opportunities. As previously reported in the Current Report on Form 8-K filed with the SEC on February 6, 2014, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) on February 3, 2014 with iHookup Operations Corp., a wholly-owned Delaware subsidiary of the Company (“Acquisition Sub”) and iHookup-DE, whereby iHookup-DE was the surviving entity and became the wholly-owned subsidiary of the Company. iHookup-DE’s former stockholders exchanged all of their 600,000 (12,000,000 pre-split) shares of outstanding common stock for 2,500,000 (50,000,000 pre-split) shares of the Company’s designated Series A Preferred Stock. Each share of the Company’s common stock entitles its holder to one (1) vote on each matter submitted to its stockholders. The holders of the Series A Preferred Stock are entitled to cast votes equal to nine (9) times the total number of shares of common stock which are issued and outstanding, voting together with the holders of common stock as a single class. The Series A Preferred Stock is convertible into nine (9) times the number of common stock outstanding until the closing of a Qualified Financing (i.e. the sale and issuance of our equity securities that results in gross proceeds in excess of $2,500,000). As a result of the transaction, the former stockholders of iHookup-DE received a controlling interest in the Company.
 
On April 11, 2014, the Company filed an Amended and Restated Articles of Incorporation with the Nevada Secretary of State and changed its name to “iHookup Social, Inc.” On April 29, 2014, FINRA approved the name change and assigned the Company a temporary trading symbol under “TFERD”. On May 26, 2014, the Company will begin trading under the symbol “HKUP”.
 
On April 29, 2014, FINRA also approved a 20 for 1 reverse stock split whereby 937,459,274 shares of the Company’s common stock then issued and outstanding, were exchanged for 46,872,964 shares of the Company’s common stock.
 
As used in this report from here on, the terms “we”, “us”, “our”, “our company” and “iHookup” mean iHookup Social, Inc., formerly known as Titan Iron Ore Corp., and its Delaware subsidiary, unless the context clearly indicates otherwise.
 
 
 
22

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Our Current Business: GPS and Location Based Mobile Dating – Social Networking
 
iHookup’s business is the development and dissemination of a mobile-social application named “iHookup.” The application is designed to facilitate connections between people, recommend local destinations that facilitate “Hookups” and generally promote social interaction and engagement. The application utilizes the intelligence of global positioning system (“GPS”) and localized/proximity based technology to facilitate such interactions. It is a mobile application that intersects dating, social media and location based connections.
 
Making connections through online or mobile devices has become a dominant part of today’s mobile-social lifestyle, across various social circles, age groups, race, gender and demographics.  In the near future, we may integrate locally relevant content and special offers/discounts from brand advertisers and merchants to drive those seeking a “real life” connection or a “Hookup” to a physical location, event or venue (e.g. to plan a networking event, Hookup for a date, or Hookup for lunch, coffee or drinks, etc.).
 
Products/Services: iHookup Mobile Application
 
The iHookup application is a proximity-based or location-based social platform and discovery application that facilitates communication between two or more users (“iHookup application” or “application”). It utilizes the intelligence of GPS and localized recommendations for dating, friends, groups and organizations to expand existing social circles. It is available on the iOS platform and in iTunes / App Stores worldwide. We offer a free version, a paid version and a subscription version. The free version allows users to browse through the application’s features and user profiles. The paid version, which is currently priced at $0.99 to download, provides a trial of all subscription-based services for a specified period of time, as determined by our marketing strategy. The subscription version allow users to send messages to each other and take advantage of any localized recommendations or offers with certain brands and merchants. The application also offers a “virtual currency” component, allowing users to purchase “in application” coin packs that activate virtual gifts and various service-based options (see subscription offers and pricing below – prices are subject to change and often do during this user acquisition phase our company is currently in):
 
Recurring Monthly Subscription
  $ 8.99  
1-Month
  $ 14.99  
3-Month
  $ 24.99  
6-Month
  $ 44.99  
Annual
  $ 69.99  
Coin Pack1
  $ 4.99  
Coin Pack2
  $ 7.99  
Coin Pack 3
  $ 19.99  
 
We are pursuing our growth in our current "dating vertical" market, as well as expanding our reach into the general audience category of "social networking."
 
In the near future, we may provide our users with "local" options of many kinds, enabling “social commerce” (i.e. using social media to promote the buying and selling of products and services) with mobile distribution of locally relevant content and special offers. We hope to bring together a dynamic opportunity for brands, advertisers and merchants to interact in new and innovative ways with the iHookup Social Network, while building customer loyalty, engagement and revenues.
 
We intend to build population density in our user base by engaging users with new features that are locally relevant and retain our user base through other enhanced engagement features. Through the potential introduction of “social commerce” revenue opportunities, we may add another layer of monetization to our revenue model (as discussed below in Revenues).
 
Marketing
 
We market our application utilizing a variety of online and offline marketing activities. Our offline marketing activities generally consist of traditional marketing and event-based branding in various local markets. Our marketing plan also includes leveraging several key domain names registered by our company, utilizing these domains for search engine optimization designations and linking strategies that drive ranking and visibility on search engines like Google, as well as efforts that may eventually bring local and event style marketing to college campuses and other areas. For example, our domain names include but are not limited to: www.hookupUCLA.comwww.hookupHARVARD.comwww.hookupASU.com and www.hookupHOLLYWOOD.com.
 
 
 
23

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Our online marketing activities generally consist of the purchase of mobile-banners; video and other display advertising and search engine marketing. We run various mobile ad campaigns targeting male, female and Apple / iOS users on Facebook and other regional, US and international sites. In addition, our company produces video ads that may be run on mobile “video” ad networks or be placed based on a variety of alliances with third parties who advertise and promote our services, from time to time. So far, such video advertising have been utilized on YouTube and Facebook. Such video advertising may also be utilized in commercials, and various other editorial and public relations efforts.
 
iHookup is available in iTunes / the Apple App Store, where our visibility in ranking on the free, paid and social networking categories also drives traffic to both versions of the application.  The highest ranking achieved by our application in March 2014 on the Apple App Store is as follows:
 
·
Top Grossing Social Networking FREE iPhone / iPod App USA: #30
·
Top Grossing Social Networking PAID iPhone / iPod App USA: #64
·
Top Grossing Social Networking FREE iPad App USA: #44
·
Top Rank in Social Networking FREE App USA: #49
·
Top Rank Social Networking Paid:  #11
·
Top Rank Social Networking Paid Canada:  #10
 
Revenue
 
Our revenue is derived primarily from download and subscription fees for our paid and subscription versions, as well as from users purchasing virtual “coins” to activate short term features, or deliver virtual gifts or “Ice Breakers” to a specified recipient. Additional revenue opportunities include the potential of “Localized Offers or Recommendations” that may provide a way for brands, advertisers and merchants to promote their venue to their local base of iHookup Social users. If successful, special discounts and incentives by merchants, brands and advertisers may be integrated into our location based technology and the company would anticipate being paid a fee or percentage upon the action or redemption of each offer by users.
 
The following table summarizes our revenue and related statistics for the quarter ended September 30, 2014
 
   
Total Q1
   
Total Q2
   
Total Q3
   
Total YTD
 
    $     $     $     $  
REVENUE
    27,208       66,009       61,480       154,697  
APPLE COST
    8,162       19,803       18,444       46,409  
NET REVENUE
    19,046       46,206       43,036       108,288  
                                 
STATISTICS
                               
    Downloads 
(Free and Paid)
    7,406       6,547       16,599       42,242  
    Registered  Users
    137,743       257,316       386,694       386,694  
    # of In App Purchases
    2,105       4,951       6,878       13,934  
 
Registered Users consist of users (includes free, paid and subscribed) who have filled out a profile and created a username and password for the application. In-App Purchases consist of any purchases from within the application, which includes any virtual “coins” or subscriptions.
 
Competition 
 
The Mobile Dating – Social Networking business is highly competitive and barriers to entry are minimal. We compete primarily with other e-dating websites and mobile applications (e.g. Tinder, Match.com, Zoosk, Ok Cupid, etc.), dating and matchmaking services, other social media platforms and applications, and other conventional media companies that provide personal services and traditional venues where people meet for dating or social gatherings (both online and offline). We hope to use the dating category as an entry point to a much broader “Social Networking” marketplace, where competitors will include websites and applications offering coupons by merchants and brands (e.g. Living Social, and Groupon).
 
 
 
24

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
We believe that our ability to compete successfully will depend primarily upon the following factors:
 
the size, diversity and activity (engagement) level of our registered member and subscriber bases relative to those of our competitors;
 
the functionality of our application and the attractiveness of our features, services and offerings generally to consumers relative to those of our competitors;
 
how quickly we can enhance our existing technology (e.g. develop an Android version) and services and/or develop new features and localized opportunities and venue based monetization opportunities in response to:
   
new, emerging and rapidly changing technologies;
   
the introduction of product and service offerings by our competitors;
   
changes in consumer requirements and trends in the single community relative to our competitors; and
 
our ability to engage in cost-effective marketing efforts, including by way of maintaining relationships with third parties with which we have entered into alliances, and the recognition and strength of our various brands relative to those of our competitors.
 
Employees and Key Consultants
 
Our company has five full time employees and one part time employee. 
 
Key consultants include (i) Integrity Media, Inc., a Nevada corporation, who provides us with certain investor-relation services, (ii) Mega Cast Networks, who provides us with additional investor outreach and assistance with the iHookup website, (iii) GummiCube, who provides us with App Store Optimization and certain search engine optimization efforts related to search; and (iv) Integrative Business Alliance, LLC, who provide us with certain investor-relation services.
 
Intellectual Property
 
We intend, in due course, subject to legal advice, to apply for trademark, copyright and/or patent protection in the United States and other jurisdictions. We regard our intellectual property, including our software and trademark, as valuable assets and intend to vigorously defend them against infringement.  
 
While there can be no assurance that registered patents, trademarks and copyrights will protect our proprietary information, we intend to file for protection and assert our intellectual property rights against any infringer. Although any assertion of our rights can result in a substantial cost to, and diversion of effort by, our company, management believes that the protection of our intellectual property rights is an important part of our operating strategy.
 
Market Opportunity
 
As a whole, mobile applications create a socially connected experience for a wide range of users, across various demographics worldwide. They allow users a localized way to search for and connect with others nearby with similar interests. Mobile dating and social networking are two of the fastest growing market segments in mobile communications. A common problem faced across all demographic profiles is the lack of time in each day. Easy, accessible and user driven technologies are replacing traditional avenues of meeting people by providing yet another way to embrace our “Do it all” and “Have it all” mobile - social generation.
 
Results of Operations
 
For the nine months ended September 30, 2014
 
Our net loss and comprehensive loss for our interim period ended September 30, 2014 are summarized as follows:
  
   
Nine months ended
 
   
September 30, 2014
 
       
Revenue
 
$
154,697
 
Total Operating Expenses
   
2,699,994
 
Loss From Operations
   
(2,545,297
)
Other Income (Expenses)
   
(217,391
)
Net Loss
   
(2,762,688
)
 
 
25

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Total revenue for the nine months ended September 30, 2014 consisted of revenues from the downloading and follow-up subscriptions of the application.
 
Total operating expenses of $2,699,994 for the nine months ended September 30, 2014 consisted primarily of general and administrative expenses of $1,010,961, accretion and interest on promissory notes of $771,893, product development of $329,054, and sales and marketing costs of $486,310.
 
Other income and expenses of $217,391 for the nine months ended September 30, 2014 consisted of an impairment charge of $293,750 against an intangible asset acquired in connection with the application, offset by a gain on extinguishment of debt of $76,359.
  
Liquidity and Capital Resources
 
Working Capital
 
   
September 30, 2014
 
December 31, 2013
   
(unaudited)
 
(audited)
Current Assets
 
$
271,634
   
$
—  
 
Current Liabilities
   
1,004,158
     
16,109
 
Working Capital(Deficiency)
 
$
(732,524
)
 
$
(16,109
)
 
As of September 30, 2014, we had $24,476 in cash, accounts receivable of $5,673, and $180,008 in prepaid expenses, as compared to $Nil as of December 31, 2013.
 
As of September 30, 2014, we had accounts payable of $594,404, as compared to $16,109 as of December 31, 2013. Our accounts payable increased due to the Merger with iHookup-DE.
 
As of September 30, 2014, we had current portion of convertible debentures of $155,890, as compared to $Nil as of December 31, 2013. Our convertible debentures increased due to the Merger with iHookup-DE.

As of September 30, 2014, we had promissory notes of $253,863, as compared to $Nil as of December 31, 2013. Our convertible debentures increased due to the Merger with iHookup-DE.
 
Cash Flows
 
   
Nine months
   
Ended
   
September 30, 2014
Net Cash Provided by (Used in) Operating Activities
 
$
(1,112,900
)
Net Cash Provided by (Used in) Investing Activities
   
966
 
Net Cash Provided by (Used in) Financing Activities
   
1,136,410
 
Net Increase (Decrease) in Cash
 
$
24,476
 
 
Net Cash Provided by (Used in) Operating Activities
 
Our cash used in operating activities of $1,112,900 for the nine month period ended September 30, 2014 consisted primarily of a net loss of $2,762,788 offset by non-cash adjustments for increase in accounts payable of $419,745, impairment of $293,750 and accretion expense of $751,339.
 
Net Cash Provided by Investing Activities
 
Our cash provided by investing activities for the nine month period ended September 30, 2014 was $966 and resulted from cash acquired in the merger.
 
 
 
26

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Net Cash Provided by Financing Activities
 
Our cash provided by financing activities of $1,136,410 for the nine month period ended September 30, 2014 consisted primarily of net proceeds from convertible and promissory notes.
 
Convertible Redeemable Promissory Note with GEL Properties LLC
 
On May 29, 2014, the Company issued an 8% Convertible Redeemable Promissory Note to GEL Properties LLC, in the amount of $22,500, with a term to November 4, 2015.The debenture holders have the right to convert any unpaid principal portion, at a conversion price per share equal to 60% of the lowest closing bid price for the 5 trading days preceding the conversion date any time after six months from the date the note was originally issued (Originally issued November 4, 2014, therefore convertible from April 4, 2014 – Proceeds not received until May 29, 2014).
 
Promissory note with JMJ Financial
 
On June 26, 2013, the Company entered into a one year promissory note with JMJ Financial. The total amount that may be borrowed is $275,000, which includes an upfront fee of 10%. No interest will be applied to the principal balance for the first 90 days after cash advance. After the first 90 days, an interest charge of 12% will be immediately applied to the principal and the 10% upfront fee.
 
On delivery of consideration, the lender may convert all or part of the unpaid principal and upfront fee into common stock at its sole discretion. All balances outstanding have a variable conversion price equal to the lesser of $0.07 or 60% of the market price. The market price is defined as the lowest trade price in the 25 days prior to the conversion date. The lender is limited to holding no more than 4.99% of the issued and outstanding common stock at the time of conversion. After the expiration of 90 days following the delivery date of any consideration, the Company will have no right of prepayment.
 
On September 3, 2014, the Company received a fourth tranche of $44,000 on this debenture.
 
Securities Purchase Agreements and Convertible Notes with KBM Worldwide, Inc.
 
On April 4, 2014, the Company entered into a Securities Purchase Agreement with KBM Worldwide Inc. (“KBM”), pursuant to which the Company sold to KBM a $53,000 face value 8% Convertible Note (the “KBM Note”) with a term of nine months (the “KBM Maturity Date”). Interest accrues daily on the outstanding principal amount of the KBM Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount of the KBM Note and interest is payable on the KBM Maturity Date. The KBM Note is convertible into common stock six months after the issue date, at KBM’s option, at a 45% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the KBM Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 110% if prepaid during the period commencing on the Issue Date through 30 days thereafter, (ii) 115% if prepaid between 31 days following the Issue Date through 60 days following the Issue Date, (iii) 120% if prepaid between 61 days following the Issue Date through 90 days following the Issue Date, (iv) 125% if prepaid between 91 days following the Issue Date through 120 days following the Issue Date, and (v) 135% if prepaid between 121 days following the Issue Date through 180 days following the Issue Date. The Company may not prepay the KBM Note after the 180th day following the Issue Date. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the KBM Note becomes immediately due and payable. Should that occur the Company is liable to pay KBM 150% of the then outstanding principal and interest. KBM does not have the right to convert the KBM Note, to the extent that KBM and its affiliates would beneficially own in excess of 4.99% of the Company’s outstanding common stock. KBM has a right of first refusal to participate in future financings below $45,000 for a period of 12 months. The Company paid KBM $3,000 for its legal fees and expenses.
 
On April 11, 2014, the Company entered into a Securities Purchase Agreement with KBM Worldwide Inc. (“KBM”), pursuant to which the Company sold to KBM a $37,500 face value 8% Convertible Note (the “KBM Note”) with a term of nine months (the “KBM Maturity Date”). Interest accrues daily on the outstanding principal amount of the KBM Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount of the KBM Note and interest is payable on the KBM Maturity Date. The KBM Note is convertible into common stock six months after the issue date, at KBM’s option, at a 45% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the KBM Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 110% if prepaid during the period commencing on the Issue Date through 30 days thereafter, (ii) 115% if prepaid between 31 days following the Issue Date through 60 days following the Issue Date, (iii) 120% if prepaid between 61 days following the Issue Date through 90 days following the Issue Date, (iv) 125% if prepaid between 91 days following the Issue Date through 120 days following the Issue Date, and (v) 135% if prepaid between 121 days following the Issue Date through 180 days following the Issue Date. The Company may not prepay the KBM Note after the 180th day following the Issue Date. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the KBM Note becomes immediately due and payable. Should that occur the Company is liable to pay KBM 150% of the then outstanding principal and interest. KBM does not have the right to convert the KBM Note, to the extent that KBM and its affiliates would beneficially own in excess of 4.99% of the Company’s outstanding common stock. KBM has a right of first refusal to participate in future financings below $45,000 for a period of 12 months. The Company paid KBM $2,500 for its legal fees and expenses.
 
 
 
27

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
On May 22, 2014, the Company entered into a Securities Purchase Agreement with KBM Worldwide Inc. (“KBM”), pursuant to which the Company sold to KBM a $53,000 face value 8% Convertible Note (the “KBM Note”) with a term of nine months (the “KBM Maturity Date”). Interest accrues daily on the outstanding principal amount of the KBM Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount of the KBM Note and interest is payable on the KBM Maturity Date. The KBM Note is convertible into common stock six months after the issue date, at KBM’s option, at a 45% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the KBM Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 110% if prepaid during the period commencing on the Issue Date through 30 days thereafter, (ii) 115% if prepaid between 31 days following the Issue Date through 60 days following the Issue Date, (iii) 120% if prepaid between 61 days following the Issue Date through 90 days following the Issue Date, (iv) 125% if prepaid between 91 days following the Issue Date through 120 days following the Issue Date, and (v) 135% if prepaid between 121 days following the Issue Date through 180 days following the Issue Date. The Company may not prepay the KBM Note after the 180th day following the Issue Date. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the KBM Note becomes immediately due and payable. Should that occur the Company is liable to pay KBM 150% of the then outstanding principal and interest. KBM does not have the right to convert the KBM Note, to the extent that KBM and its affiliates would beneficially own in excess of 4.99% of the Company’s outstanding common stock. KBM has a right of first refusal to participate in future financings below $45,000 for a period of 12 months. The Company paid KBM $3,000 for its legal fees and expenses.
 
On June 16, 2014, the Company entered into a Securities Purchase Agreement with KBM Worldwide Inc. (“KBM”), pursuant to which the Company sold to KBM a $63,000 face value 8% Convertible Note (the “KBM Note”) with a term of nine months (the “KBM Maturity Date”). Interest accrues daily on the outstanding principal amount of the KBM Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount of the KBM Note and interest is payable on the KBM Maturity Date. The KBM Note is convertible into common stock six months after the issue date, at KBM’s option, at a 45% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the KBM Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 110% if prepaid during the period commencing on the Issue Date through 30 days thereafter, (ii) 115% if prepaid between 31 days following the Issue Date through 60 days following the Issue Date, (iii) 120% if prepaid between 61 days following the Issue Date through 90 days following the Issue Date, (iv) 125% if prepaid between 91 days following the Issue Date through 120 days following the Issue Date, and (v) 135% if prepaid between 121 days following the Issue Date through 180 days following the Issue Date. The Company may not prepay the KBM Note after the 180th day following the Issue Date. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the KBM Note becomes immediately due and payable. Should that occur the Company is liable to pay KBM 150% of the then outstanding principal and interest. KBM does not have the right to convert the KBM Note, to the extent that KBM and its affiliates would beneficially own in excess of 4.99% of the Company’s outstanding common stock. KBM has a right of first refusal to participate in future financings below $45,000 for a period of 12 months. The Company paid KBM $3,000 for its legal fees and expenses.
 
Securities Purchase Agreements and Convertible Notes with Auctus Private Equity Fund, LLC
 
On May 9, 2014 the Company entered into a securities purchase agreement (the “Auctus SPA”) with Auctus Private Equity Fund, LLC (“Auctus”), pursuant to which the Company sold to Auctus a $35,000 face value 8% Convertible Note (the “Auctus Note”) with a term of nine months (the “Auctus Maturity Date”). Interest accrues daily on the outstanding principal amount of the AUCTUS Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount of the note and interest is payable on the Auctus Maturity Date. The note is convertible into common stock beginning six months after the issue date (the “Issue date”), at the holder’s option, at a 45% discount to the average of the two lowest closing bid prices of the common stock during the 25 trading day period prior to conversion. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 125% if prepaid during the period commencing on the Issue Date through 30 days thereafter, (ii) 130% if prepaid 31 days following the closing through 60 days following the Issue Date, (iii) 135% if prepaid 61 days following the closing through 90 days following the Issue Date, (iv) 140% if prepaid 91 days following the Issue Date through 120 days following the Issue Date, (v) 145% if prepaid 121 days following the Issue Date through 150 days following the Issue Date, and (vi) 150% if prepaid 151 days following the Issue Date through the 180 days following the Issue Date. The Company may not prepay the note after the 180th day following the Issue Date. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the note becomes immediately due and payable. Should that occur the Company is liable to pay the holder 150% of the then outstanding principal and interest. Auctus does not have the right to convert the Note, to the extent that Auctus and its affiliates would beneficially own in excess of 4.99% of our outstanding common stock. The Company paid Auctus $2,750 for its legal fees and expenses and paid Auctus Private Equity Management, Inc. (“Auctus Management”) $2,500 for services rendered in connection with the Auctus Note. The Company also paid $3,500 in fees to a third party broker.
 
Securities Purchase Agreements and Convertible Notes with Union Capital, LLC
 
As of May14, 2014 and with a closing date of May 15, 2014, iHookup Social, Inc. (the “Company”) entered into a securities purchase agreement (the “Union SPA”) with Union Capital, LLC (“Union”), pursuant to which the Company will sell two 8% convertible notes of the Company in the aggregate principal amount of $59,000.00 (with the first note being in the amount of $29,500 and the second note being in the amount of $29,500 convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The first of the two notes (the “First Note”) shall be paid for by the Buyer as set forth herein. The second note (the “Second Note”) shall initially be paid for by the issuance of an offsetting $29,500.00 secured note issued to the Company by the Buyer (“Buyer Note”), provided that prior to conversion of the Second Note, the Buyer must have paid off the Buyer Note in cash such that the Second Note may not be converted until it has been paid for in cash.
 
 
 
28

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
In connection with the Union SPA, on May 14, 2014 and with a closing date of May 15, 2014, the Company issued a one-year, 8% Convertible Redeemable Note (the “Union Note”) to Union Capital LLC (“Union”) pursuant to which Union funded $29,500 at closing on May 15, 2014. The Company also issued a separate 8% Convertible Redeemable Notes dated May 14,2014, in the amount of $29,500 to Union (the “Union Back-End Note”), in exchange for which Union issued to the Company an 8% secured promissory note in the amount of $29,500 (the “Union Payment Note”), to secure funding under the Union Back End Note. Payment to the Company under the Union Payment Note will be no later than January 14, 2015. The term of the Union Note and the Union Back End Note is one year, upon which the outstanding principal amount is payable. The amount funded plus accrued interest under the Union Note and Union Back End Note is convertible into common stock at any time after the requisite rule 144 holding period, at the holder’s option, at a conversion price equal to 55% of the lowest closing bid price in the 15 trading days previous to the conversion. In the event the Company redeems the Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150% if prepaid during the period commencing on the Issue Date through 180 days thereafter. There shall be no redemption after the 180th day the Note has been issued. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the note becomes immediately due and payable. In connection with the Union Note, the Company paid $2,000 in legal fees and expenses, and paid a 3rd party broker a $2,500 commission.
 
Securities Purchase Agreement and Convertible Notes with LG Capital Funding, LLC
 
On May 21, 2014 the Company entered into a Securities Purchase Agreement (the “LG SPA”) with LG Capital Funding, LLC (“LG”), pursuant to which the Company issued two Convertible Notes (together, the “Notes”) in the amount of $75,000 each, at a rate of 8% per annum. Amounts funded are convertible into shares of the common stock of the Company, $0.0001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes. The first of the two Convertible Notes (the “LG Note”) was paid by the Buyer on May 22, 2014. The second Convertible Note (the “LG Back-End Note”) shall initially be paid for by an offsetting $75,000 promissory note issued to the Company by the Buyer (“Buyer Note”), provided that prior to the conversion of the LG Back-End Note, the Buyer must have paid off the Buyer Note in cash. Payment to the Company under the Buyer Note must be no later than January 21, 2015. The Buyer Note will be initially secured by the pledge of the LG Back-End Note.
 
The term of the LG Note and the LG Back-End Note is one year, upon which the outstanding principal and interest is payable. The amount funded plus accrued interest under the LG Note and LG Back-End Note is convertible into Common Stock at any time after the requisite Rule 144 holding period (subject to the condition above for the LG Back-End Note), at a conversion price equal to 50% of the lowest closing bid price in the 15 trading days previous to the conversion. In the event the Company redeems the LG Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150% if prepaid prior to the 180th day after its issuance. There shall be no redemption after the 180th day. The LG Back-End Note may not be prepaid, except that if the LG Back-End Note is redeemed by the Company within six months of its issuance, all obligations of the Company and LG under the LG Back-End Note and the Buyer Note will be deemed satisfied and such notes shall automatically be deemed cancelled and of no further force or effect. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 16% per annum, or the highest rate of interest permitted by law, and the Notes shall become immediately due and payable. In connection with the LG Note, the Company paid $3,750 in legal fees and expenses, and $7,500 in commission to a third party broker. Upon the cash payment of the Buyer Note, the Company will pay an additional $3,750 in legal fees and expenses and $7,500 in commission to a third party broker for the LG Back-End Note Securities Purchase Agreements.
 
Securities Purchase Agreements and Convertible Notes with JSJ Investments, Inc.
 
On June 11, 2014, the Company entered into a Convertible Note Purchase Agreement with JSJ Investments Inc. (“JSJ”), pursuant to which the Company sold to JSJ a $55,000 face value 12% Convertible Note (the “JSJ Note”) with a term of six months (the “JSJ Maturity Date”). Interest accrues daily on the outstanding principal amount of the JSJ Note at a rate per annual equal to 12% on the basis of a 365-day year. The principal amount of the JSJ Note and interest is payable on the JSJ Maturity Date. The JSJ Note is convertible into common stock, subject to Rule 144, at any time after the issue date, at JSJ’s option, at a 50% discount to the average of the three lowest trades on the previous 20 days before the date of the conversion notice or to the average of the three lowest trades on the previous 20 days before the date of execution of the JSJ Note. If the shares are not delivered to JSJ within three business days of the Company’s receipt of the conversion notice, a penalty of an additional 25% in the number of shares to be converted will incur on the fourth business day, and each day thereafter until the shares are delivered. Upon the Maturity Date and JSJ’s consent to exercise such provision, there is a 150% cash redemption premium on the principal amount only. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 12% per annum and the JSJ Note becomes immediately due and payable.
 
 
 
 
29

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Convertible Note Purchase Agreement and Convertible Note with Eastmore Capital LLC
 
On July 11, 2014, the Company entered into a Convertible Note Purchase Agreement with Eastmore Capital LLC (“Eastmore”), pursuant to which the Company sold to Eastmore an $80,000 face value 12% Convertible Note (the “Eastmore Note”) with a maturity date of July 10, 2015 (the “Eastmore Maturity Date”). Interest accrues daily on the outstanding principal amount of the Eastmore Note at a rate per annum equal to 12% on the basis of a 365-day year. The principal amount of the Eastmore Note and interest is payable on the Eastmore Maturity Date. The Eastmore Note is convertible into common stock, subject to Rule 144, at any time after the issue date, at the lower of (i) the closing sale price of the common stock on the on the trading day immediately preceding the closing date, and (ii) 50% of the lowest sale price for the common stock during the ten (10) consecutive trading days immediately preceding the conversion date. If the shares are not delivered to Eastmore within three business days of the Company’s receipt of the conversion notice, the Company will pay Eastmore a penalty of $1,000 per day for each day that the the Company fails to deliver such common stock through willful acts designed to hinder the delivery of common stock to Eastmore. Eastmore does not have the right to convert the note, to the extent that it would beneficially own in excess of 4.9% of our outstanding common stock. The Company shall have the right, exercisable on not less than five (5) trading days prior written notice to Eastmore, to prepay the outstanding balance on this note for $120,000 plus any and all accrued and unpaid interest on the unpaid principal amount. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the Eastmore Note becomes immediately due and payable. In connection with the Eastmore Note, the Company paid Eastmore $2,500 for its legal fees and expenses and paid third party brokers a $10,000 fee.
 
Investment Agreement and Amended and Restated Investment Agreement with Beaufort Capital Partners LLC

Subsequent to September 30, 2014 the Company entered into an Investment Agreement (the “Investment Agreement”) with Beaufort Capital Partners LLC (“Beaufort”), pursuant to which the Company may issue and sell to Beaufort $2,500,000 of the Company’s fully registered, freely tradable common stock (the “Shares”). The parties also entered into a Registration Rights Agreement, whereby the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended (the “Securities Act”), and applicable state laws (the “Registration Agreement”, and together with the Investment Agreement, the “Agreements”). Pursuant to the Agreements, the Company shall register the Shares pursuant to a registration statement on Form S-1 (or on such other form as is available to the Company within 21 days of the execution of the Agreements) (the “Registration Statement”).
 
Subsequently, the Company entered into an Amended and Restated Investment Agreement (the “Amended and Restated Investment Agreement”) with Beaufort Capital Partners LLC (“Beaufort”), whereby we amended and restated the Investment Agreement (the “Original Investment Agreement”). The Amended and Restated Investment Agreement increased the maximum aggregate dollar amount of Common Stock that the Company may sell and issue to Beaufort to $5,000,000. The S-1 registration statement was not filed with the SEC.
 
Letter Agreement, Promissory Note, Pledge Agreement, and Indemnification Agreement with Beaufort Capital Partners LLC

Subsequent to September 30, 2014 the Company entered into a Letter Agreement (the “Letter Agreement”) with Beaufort Capital Partners LLC (“Beaufort”), pursuant to which Beaufort agrees to loan (the “Loan”) up to $400,000 to the Company upon the Company’s written request. During the term, the Loan may be made in monthly installments of $100,000 each and must be made within three (3) days of the receipt of the written request from the Company and evidenced by a Secured Promissory Note (the “Note”). Each Note shall be secured by a pledge of 8,000,000 shares of common stock of the Company provided by Copper Creek Holdings, LLC (“Copper Creek”), pledged under the terms and conditions of a Stock Pledge Agreement (the “Pledge”). Notwithstanding the foregoing, upon the occurrence of an Event of Default (defined below), Beaufort may terminate its obligations under the Letter Agreement without notice.

During the nine months ended September 30, 2014 and pursuant to the Letter Agreement, Company delivered written requests for installments in the aggregate of $250,000 and executed three Notes totaling $250,000. The Notes bear 1% interest per month, compounded monthly, and mature in six (6) months (“Maturity Date”). In the event that payment is not received within ten (10) days of the Maturity Date, then the Company shall be charged a late fee in an amount equal to 5% of the amount of such overdue payment, payable within five (5) days of the Maturity Date. An “Event of Default” is defined as (i) the failure of the Company to make the payments owed under the Notes in a timely manner, or (i) the initiation of bankruptcy proceedings by the Company. Upon an Event of Default, the unpaid principal balance of the Note shall be due and payable immediately, at Beaufort’s option. Additionally, if there is an Event of Default after the Maturity Date, interest shall accrue on the outstanding principal balance of the Notes at 10% per annum on the basis of a 360-day year (“Default Interest”), or if such Default Interest is not permitted by law, then the maximum rate of interest as permitted by applicable law. As of September 30, 2014 the Company recorded interest expense of $3,863 on these Notes.
 
 
 
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Convertible Note Purchase Agreement and Convertible Note with Bingham McCutchen

Subsequent to September 30, 2014 the Company entered a convertible note purchase agreement  with an effective date of July 1, 2014 with Bingham McCutchen LLP (“Bingham”), pursuant to which the Company sold to Bingham an 8% Convertible Notes (the “Notes”) with a value of $40,465. Interest on this Note shall be computed on the basis of a 365-day year and actual days elapsed.
 
Unless previously converted as provided for below, the Note will automatically mature and the entire outstanding principal amount, together with accrued interest, shall become due and payable upon date that is the earlier of: (i) a sale of equity securities of the Company in an amount equal to or in excess of $1,000,000 (“ Qualified Financing”); (ii)  nine (9) months  from the date of issuance;  or (iii) an event of default that is followed by written notice by the Company (such first date to occur being the “Maturity Date”).
 
The Note may not be prepaid in whole or in part by the Company.
 
Bingham shall have the following conversion rights. If the Company issues and sells shares of capital stock in a Qualified Financing, then all then-outstanding principal and all accrued and unpaid interest on the Note (the “Conversion Amount”) shall automatically be converted into fully paid and non-assessable shares of the kind of Equity Securities issued and sold in such Qualified Financing, at a conversion rate equal to 85% of the price at which the Equity Securities were issued and sold in the Qualified Financing (the “Conversion Price”).  The number of Equity Securities to be issued to the Holder upon a Qualified Financing shall be equal to the quotient obtained by dividing the Conversion Amount by the Conversion Price.  The Equity Securities issued to the Holder upon conversion of this Note in accordance with a Qualified Financing shall have the same rights, preferences and privileges as the Equity Securities issued to investors in the Qualified Financing.

In connection with the Note, the Company has approved  the acquisition of such note from Bingham by Carebourn Capital LP (“Carebourn”).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Pursuant to the Letter Agreement, Company, Beaufort and Copper Creek executed the Pledge, whereby Copper Creek pledged 8,000,000 of its shares of common stock of the Company (“Pledged Shares”) as collateral for the Note. In the event, through no fault of Beaufort, the closing price of the Company’s common stock reported on the Company’s principal trading exchange decreases by fifty percent (50%) or more during the term, the Pledged Shares shall be increased as follows: (i) a 50% to 60% decrease in closing price shall increase the Pledged Shares by 10%; (ii) a 60% to 70% decrease in closing price shall increase the Pledged Shares by 20%; (iii) a 70% to 80% decrease in closing price shall increase the Pledged Shares by 30%; or (iv) a 80% to 90% decrease in closing price shall increase the Pledged Shares by 40%; or (v) a 90% to 100% decrease in closing price shall increase the Pledged Shares by 50%. Beaufort agrees that unless an Event of Default (as defined in the Note) shall have occurred and be continuing, Copper Creek shall retain all of its rights as a holder of the Pledged Shares, including its right to vote, give consents, ratify, waivers, except to the extent that, in Beaufort’s reasonably judgment, any such vote, consent ratification or waiver would detract from the Pledged Share’s value as collateral, or which would be inconsistent with or result in any violation of the Note or Pledge. Upon the repayment of the Note, Beaufort will, at the request of Copper Creek, duly assign, transfer and deliver to Copper Creek such of the collateral as may then remain in Beaufort’s possession, together with any monies at the time held by Beaufort hereunder, and execute and deliver to Copper creek a proper instrument(s) acknowledging the satisfaction and termination of the Pledge.
 
In order to induce Copper Creek to execute and deliver the Pledge, the Company executed an Indemnification Agreement in Copper Creek’s favor, the (“Indemnification Agreement”). The Indemnification Agreement provides that the Company shall reimburse the Pledged Shares, in identical quantity and class of stock, to Copper Creek, in the event that Copper Creek is required to assign its Pledged Shares to Beaufort upon an Event of Default of the Note, and any expenses incurred by Copper Creek relating to such assignment. The Company also agrees to indemnify Copper Creek (including its affiliates, and each of their respective directors, officers, employees, agents, representatives, attorneys, stockholders and controlling persons) from and against any and all losses, claims, damages and liabilities, that it may become subject to in connection with or arising out of or relating to the Pledged Shares, the Note, the Pledge or the Letter Agreement. The Indemnification Agreement shall terminate when the Note is paid back in full to Beaufort and Copper Creek is released from the Pledge.
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements.
 
Going Concern
 
At September 30, 2014, we had an accumulated deficit of $3,391,053 and incurred a net loss of $2,762,688, for the period ended September 30, 2014.  We expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due.
 
We have generated minimal revenues and have incurred losses since inception. Accordingly, we will be dependent on future additional financing in order to finance operations and growth. We are considered an early stage company and has only focused on our current business in the iHookup application since December 3, 2013. Since we are an early stage company, there is no assurance that we will generate sufficient revenue to sustain our operations.
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
Not Applicable.
 
ITEM 4.  CONTROLS AND PROCEDURES.
 
Disclosure Controls and Procedures
 
We maintain “disclosure controls and procedures”, as that term is defined in Rule 13a-15(e), promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.  Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
 
 
 
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ITEM 4.  CONTROLS AND PROCEDURES. - continued
 
As required by paragraph (b) of Rules 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and our principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our management concluded that as of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures were not effective.
 
Management’s Report on Internal Control over Financial Reporting
 
Our management, including our principal executive officer, principal financial officer and our Board of Directors, is responsible for establishing and maintaining a process 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.
 
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of September 30, 2014.  Our management’s evaluation of our internal control over financial reporting was based on the framework in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of September 30, 2014 due to the following material weaknesses which are indicative of many small companies with small staff: (i) inadequate segregation of duties and ineffective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines. To remediate such weaknesses, we believe we would need to implement the following changes: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may not be undertaken. Until we have the required funds, we do not anticipate implementing these remediation steps.
 
A material weakness is a deficiency or a combination of control 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.
 
Our principal executive officer and our principal financial officer do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. 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 our 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. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
 
Changes in Internal Control over Financial Reporting
 
There were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
 
 
PART II - OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS
 
There are no significant legal proceedings as of the date of this report.
 
 
 
 
33

 
 
ITEM 1A.  RISK FACTORS.
 
RISK FACTORS
 
The risks and uncertainties below may not be the only ones our company faces. If any of these risks actually occur, or others not specified below, the business, financial condition, operating results and prospects of our company could be materially and adversely affected. In that case, the trading price of our common stock could decline.
 
General Risks
 
We may fail to raise sufficient capital.
 
To the extent that we fail to obtain sufficient operating capital, we may be unable to deal with presently unforeseen contingencies in the future or be able to fund our operations. In addition, much of the available capital is invested in the form of convertible notes which are subject to large discounts upon conversion into our common stock. These discounts may have a negative impact on our stock price. In the future, we may have more difficulty or find it impossible, to raise third party financing from investors or financial institutions.
 
Our reserves may be insufficient.
 
We intend to establish a reserve fund, as determined in the Board’s discretion, for normal working capital contingencies.  There is no guarantee that our reserves will be adequate.  If the reserves are not available to our company, it may be necessary to attempt to raise additional capital or financing.  In the event that such capital or financing is not available on favorable terms, we may be forced to raise additional capital on unfavorable terms.
 
Risks Related to Our Business and Industry
 
Our success depends upon the continued growth and acceptance of mobile advertising, particularly paid listings, as an effective alternative to traditional, offline advertising and the continued commercial use of mobile devices.
 
Many advertisers still have limited experience with mobile advertising and may continue to devote significant portions of their advertising budgets to traditional offline advertising media. Accordingly, we continue to compete with traditional advertising media, including television, radio and print, in addition to a multitude of websites with high levels of traffic and online advertising networks, for a share of available advertising expenditures and expect to face continued competition as more emerging media and traditional offline media companies enter the mobile advertising market. We believe that the continued growth and continued acceptance of mobile advertising generally will depend, to a large extent, on its perceived effectiveness and the acceptance of related advertising models (particularly in the case of models that incorporate user targeting and/or utilize mobile devices), the continued growth in commercial use of the internet (particularly abroad), the extent to which web browsers, software programs and/or other applications that limit or prevent advertising from being displayed become commonplace and the extent to which the industry is able to effectively manage click fraud. Any lack of growth in the market for mobile advertising, particularly for paid listings, or any decrease in the effectiveness and value of mobile advertising (whether due to the passage of laws requiring additional disclosure and/or opt-in policies for advertising that incorporates user targeting or other developments) would have an adverse effect on our business, financial condition and results of operations.
 
We depend, in part, upon arrangements with third parties to drive traffic to our application and distribute our products and services.
 
We engage in a variety of activities designed to attract traffic to our application and convert visitors into repeat users and customers. How successful we are in these efforts depends, in part, upon our continued ability to enter into arrangements with third parties to drive traffic to our application, as well as the continued introduction of new and enhanced products and services that resonate with users and customers generally.
 
In addition, we have entered into a number of arrangements with third parties to promote and deliver mobile advertising to various social networks or mobile channels. Pursuant to these arrangements, third parties generally promote our services on various mobile applications, their websites or through e-mail campaigns and we either pay on a cost per impression basis (i.e. cost per view) or a fixed fee when visitors to these websites click through to or download our application.. These arrangements are generally not exclusive, are short-term in nature and are generally terminable by either party given notice. If existing arrangements with third parties are terminated (or are not renewed upon their expiration) and we fail to replace this traffic and related revenues, or if we are unable to enter into new arrangements with existing and/or new third parties in response to industry trends, our business, financial condition and results of operations could be adversely affected.
 
 
34

 
 
ITEM 1A.  RISK FACTORS. - continued
 
Even if we succeed in driving traffic to our application, we may not be able to convert this traffic or otherwise retain users unless we continue to provide quality products and services. We may not be able to adapt quickly and/or in cost-effective manner to frequent changes in user and customer preferences, which can be difficult to predict, or appropriately time the introduction of enhancements and/or new products or services to the market. Our inability to provide quality products and services would adversely affect user and customer experiences, which would result in decreases in users, customers and revenues, which would adversely affect our business, financial condition and results of operations.
 
As discussed below, our traffic building and conversion initiatives also involve the expenditure of considerable sums for marketing, as well as for the development and introduction of new products, services and enhancements, infrastructure and other related efforts.
 
Marketing efforts designed to drive traffic to our applicationmay not be successful or cost-effective.
 
Traffic building and conversion initiatives involve considerable expenditures for mobile, online and offline advertising and marketing. We plan to make significant expenditures for online display advertising, event-based marketing and traditional offline advertising in connection with these initiatives, which may not be successful or cost-effective.  In the case of paid advertising generally, the policies of sellers and publishers of advertising may limit our ability to purchase certain types of advertising or advertise some of our products and services, which could affect our ability to compete effectively and, in turn, adversely affect our business, financial condition and results of operations.
 
In addition, search engines have increasingly expanded their offerings into other, non-search related categories, and have in certain instances displayed their own integrated or related product and service offerings in a more prominent manner than those of third parties within their search engine results. Continued expansion and competition from search engines could result in a substantial decrease in traffic to our application, as well as increased costs if we were to replace free traffic with paid traffic, which would adversely affect our business, financial condition and results of operations.
 
Lastly, as discussed above, we also have and will enter into various arrangements with third parties in an effort to increase traffic to our application, which arrangements are generally more cost-effective than traditional marketing efforts. If we are unable to renew existing (and enter into new) arrangements of this nature, sales and marketing costs as a percentage of revenue would increase over the long-term.
 
Any failure to attract and acquire new, and retain existing, traffic, users and customers in a cost-effective manner could adversely affect our business, financial condition and results of operations. We rely in part on application marketplaces and Internet search engines to drive traffic to our products and services, and if we fail to appear high up in the search results or rankings, traffic to our platform could decline and our business and operating results could be adversely affected.
 
We rely on application marketplaces, such as Apple’s App Store, to drive downloads of our mobile applications. In the future, Apple or other operators of application marketplaces may make changes to their marketplaces which make access to our products and services more difficult. Our rankings in Apple’s App Store may also drop based on the following factors:
 
the size and diversity of our registered member and subscriber bases relative to those of our competitors;
 
the functionality of our application and the attractiveness of their features and our services and offerings generally to consumers relative to those of our competitors;
 
how quickly we can enhance our existing technology and services and/or develop new features and localized opportunities and venue based monetization opportunities in response to:
   
new, emerging and rapidly changing technologies;
   
the introduction of product and service offerings by our competitors;
   
changes in consumer requirements and trends in the single community relative to our competitors; and
 
our ability to engage in cost-effective marketing efforts, including by way of maintaining relationships with third parties with which we have entered into alliances, and the recognition and strength of our various brands relative to those of our competitors.   
 
 
 
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ITEM 1A.  RISK FACTORS. - continued
 
Our estimated income taxes could be materially different from income taxes that we ultimately pay.
 
We are subject to income taxes in both the United States and numerous jurisdictions abroad. Significant judgment and estimation is required in determining our provision for income taxes and related matters. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determinations are uncertain or otherwise subject to interpretation. Our determination of our income tax liability is always subject to review by applicable tax authorities and we are currently subject to audits in a number of jurisdictions. Although we believe our income tax estimates and related determinations are reasonable and appropriate, relevant taxing authorities may disagree. The ultimate outcome of any such audits and reviews could be materially different from estimates and determinations reflected in our historical income tax provisions and accruals. Any adverse outcome of any such audit or review could have an adverse effect on our financial condition and results of operations.
 
A variety of new laws, or new interpretations of existing laws, could subject us to claims or otherwise harm our business.
 
We are subject to a variety of laws in the U.S. and abroad that are costly to comply with, can result in negative publicity and diversion of management time and effort and can subject us to claims or other remedies.  Some of these laws, such as wide ranging privacy laws, income, sales, use, value-added and other tax laws and consumer protection laws, are applicable to businesses generally and others are unique to the various types of businesses in which we are engaged.  Many of these laws were adopted prior to the advent of the internet and related technologies and, as a result, do not contemplate or address the unique issues of the internet and related technologies.  Laws that do reference the internet are being interpreted by the courts, but their applicability and scope remain uncertain. 
 
For example, through our various businesses we post and link to third party content, including third party advertisements, links and websites, as well as content submitted by users, such as comments, photographs and videos. We could be subject to liability for posting or linking to third party content, and while we generally require third parties to indemnify us for related claims, we may not be able to enforce our indemnification rights. Some laws, including the Communications Decency Act, or CDA, and the Digital Millennium Copyright Act, or DMCA, limit our liability for posting or linking to third party content. For example, the DMCA generally protects online service providers from claims of copyright infringement based on use of third party content, so long as certain statutory requirements are satisfied. However, the scope and applicability of the DMCA are subject to judicial interpretation and, as such, remain uncertain, and the U.S. Congress may enact legislation limiting the protections afforded by the DMCA to online service providers. Moreover, similar protections may not exist in other jurisdictions in which our various businesses operate. As a result, claims could be threatened and filed under both U.S. and foreign laws based upon use of third party content asserting, among other things, defamation, invasion of privacy or right or publicity, copyright infringement or trademark infringement.
 
Any failure on our part to comply with applicable laws may subject us to additional liabilities, which could adversely affect our business, financial condition and results of operations.  In addition, if the laws to which we are currently subject are amended or interpreted adversely to our interests, or if new adverse laws are adopted, our products and services might need to be modified to comply with such laws, which would increase our costs and could result in decreased demand for our products and services to the extent that we pass on such costs to our customers.  Specifically, in the case of tax laws, positions that we have taken or will take are subject to interpretation by the relevant taxing authorities. While we believe that the positions we have taken to date comply with applicable law, there can be no assurances that the relevant taxing authorities will not take a contrary position, and if so, that such positions will not adversely affect us. Any events of this nature could adversely affect our business, financial condition and results of operations.
 
We may fail to adequately protect our intellectual property rights or may be accused of infringing the intellectual property rights of third parties.
 
We regard our intellectual property rights, including trademarks, domain names, trade secrets, patents, copyrights and other similar intellectual property, as critical to our success.  For example, we rely heavily on the trademark “iHookup” to market our product and seek to build and maintain brand loyalty and recognition. . We intend, in due course, subject to legal advice, to apply for trademark, copyright and/or patent protection in the United States and other jurisdictions. We regard our intellectual property, including our software and trademark, as valuable assets and intend to vigorously defend them against infringement.  Effective trademark protection may not be available or may not be sought in every country in which products and services are made available and contractual disputes may affect the use of marks governed by private contract.  We have reserved and registered certain domain names, however not every variation of a domain name may be available or be registered, even if available.
 
While there can be no assurance that registered trademarks and copyrights will protect our proprietary information, we intend to assert our intellectual property rights against any infringer. Although any assertion of our rights can result in a substantial cost to, and diversion of effort by, our Company, management believes that the protection of our intellectual property rights is a key component of our operating strategy.
 
 
 
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ITEM 1A.  RISK FACTORS. - continued
 
Our application also relies upon trade secrets and certain copyrightable and patentable proprietary technologies relating to its software and related features, products and services.
 
We will rely on a combination of laws and contractual restrictions with employees, customers, suppliers, affiliates and others to establish and protect our various intellectual property rights.  For example, we plan to apply to register and renew, or secure by contract where appropriate, trademarks and service marks as they are developed and used, and continue to reserve, register and renew domain names as we deem appropriate. 
 
We also plan to apply for copyrights and patents or for other similar statutory protections as we deem appropriate, based on then current facts and circumstances.  No assurances can be given that any copyright or patent application we file will result in a copyright or patent being issued, or that any future copyright or patent will afford adequate protection against competitors and similar technologies.  In addition, no assurances can be given that third parties will not create new products or methods that achieve similar results without infringing upon copyrights or patents we may own in the future.
 
Despite these measures, our intellectual property rights may still not be protected in a meaningful manner, challenges to contractual rights could arise or third parties could copy or otherwise obtain and use our intellectual property without authorization.  The occurrence of any of these events could result in the erosion of our brands and limitations on our ability to control marketing on or through the internet using our various domain names, as well as impede our ability to effectively compete against competitors with similar technologies, any of which could adversely affect our business, financial conditions and results of operations.
 
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, copyrights, patents and other intellectual property rights held by third parties.  In addition, litigation may be necessary in the future to enforce our intellectual property rights, protect our trade secrets or to determine the validity and scope of proprietary rights claimed by others.  Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect our business, financial condition and results of operations.  Patent litigation tends to be particularly protracted and expensive.
  
If we fail to grow our user base, or if user engagement or ad engagement on the platform declines, the revenue, business and operating results may be harmed.
 
The size of the user base and the users’ level of engagement are critical to our success. The financial performance has been and will continue to be significantly determined by success in growing the number of users and increasing their overall level of engagement on the platform as well as the number of ad engagements. We generate a substantial majority of our revenue based upon the number of downloads, migration to subscription accounts and engagement by the users with the ads that we display. If people do not perceive the services to be useful, reliable and trustworthy, we may not be able to attract users or increase the frequency of their engagement with the platform and the ads that we display. There is no guarantee that we will be successful in attracting more users or not suffer erosion of the user base or engagement levels. A number of factors could potentially negatively affect user growth and engagement, including if:
 
·
users engage with other products, services or activities as an alternative;
 
·
influential users, such as celebrities, athletes, journalists and brands or certain age demographics conclude that an alternative product or service is more relevant;
 
·
we are unable to convince potential new users of the value and usefulness of its products and services;
 
·
there is a decrease in the perceived quality of the content generated by our platform;
 
·
we fail to introduce new and improved products or services or if we introduce new or improved products or services that are not favorably received or that negatively affect user engagement;
 
·
technical or other problems prevent us  from delivering our products or services in a rapid and reliable manner or otherwise affect the user experience;
 
·
we are unable to present users with content that is interesting, useful and relevant to them;
 
·
users believe that their experience is diminished as a result of the decisions we make with respect to the frequency, relevance and prominence of ads that we display;
 
·
there are user concerns related to privacy and communication, safety, security or other factors;
 
·
we become subject to hostile or inappropriate usage on our platform;
 
 
 
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ITEM 1A.  RISK FACTORS. - continued
 
·
there are adverse changes in our products or services that are mandated by, or that we  elect to make to address, legislation, regulatory authorities or litigation, including settlements or consent decrees;
 
·
we fail to provide adequate customer service to users; or
 
·
we do not maintain our brand image or its reputation is damaged.
 
If users do not continue to download and use our application and their engagement is not valuable to other users, we may experience a decline in the number of users accessing the products and services and user engagement, which could result in the loss of advertisers and revenue.
 
Our success depends on our ability to provide users with valuable content, which in turn depends on the profile descriptions and use of the application by others. We believe that one of our competitive advantages is the quality, quantity and real-time nature of the content on iHookup, and that access to unique or real-time content is one of the main reasons users visit us. We seek to foster a broad and engaged user community, and we encourage celebrities, athletes, and others to use our products and services to meet people and form relationships. If users do not continue to contribute profiles and we are unable to provide users with valuable and timely content or other people to engage with, our user base and user engagement may decline. Additionally, if we are not able to address user concerns regarding the safety and security of our products and services or if we are unable to successfully prevent abusive or other hostile behavior on the platform, the size of the user base and user engagement may decline.
 
If we are unable to compete effectively for users and advertiser spend, the business and operating results could be harmed.
 
Competition for users of its products and services is intense. Although we have developed a new platform for public self-expression and meeting people in real time, we face strong competition in this business. We compete against many companies to attract and engage users, including companies which have greater financial resources and substantially larger user bases, such as eHarmony, Match.com and others which offer a variety of Internet and mobile device-based products, services and content. As a result, competitors may acquire and engage users at the expense of the growth or engagement of our user base, which would negatively affect the business.
 
We believe that our ability to compete effectively for users depends upon many factors both within and beyond our control, including:
 
·
the popularity, usefulness, ease of use, performance and reliability of our products and services compared to those of our competitors;
 
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the amount, quality and timeliness of content generated by our users;
 
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the timing and market acceptance of our products and services;
 
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the adoption of our products and services internationally;