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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: March 31, 2015
 
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: 91,415,087 shares of common stock and 22,286 shares of preferred stock outstanding as of May 15, 2015.

 
i

 
  
TABLE OF CONTENTS
 
 
 
PART I - FINANCIAL INFORMATION
1
   
ITEM 1.  FINANCIAL STATEMENTS
1
   
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS
20
   
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
28
   
ITEM 4.  CONTROLS AND PROCEDURES
28
   
PART II - OTHER INFORMATION
29
   
ITEM 1.  LEGAL PROCEEDINGS
29
   
ITEM 1A.  RISK FACTORS
30
   
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
43
   
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
43
   
ITEM 4.  MINE SAFETY DISCLOSURES
43
   
ITEM 5.  OTHER INFORMATION
43
   
ITEM 6.  EXHIBITS
44
   
SIGNATURES
45
   
 
 



 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 


 
iii

 
 
PART I - FINANCIAL INFORMATION
 
 
ITEM 1.  FINANCIAL STATEMENTS.
 
 
 
IHOOKUP SOCIAL, INC.
(FORMERLY TITAN IRON ORE CORP.)
 
CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
March 31, 2015
 
 
 
     
Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014
 
2
     
Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2015 and 2014
 
3
     
Consolidated Statements of Stockholders’ Deficit for the period from December 2, 2013 (inception) to March 31, 2015
 
4
     
Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014
 
5
     
Notes to the Consolidated Financial Statements
 
6-19
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 

 
1

 
 
 IHOOKUP SOCIAL, INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in US dollars)

         
ASSETS
 
 
March 31, 
2015
(unaudited)
 
December 31, 
2014
                 
Current assets
               
Cash
 
$
1,333
   
$
-
 
Accounts receivable
   
18,929
     
14,137
 
Prepaid expenses
   
14,908
     
49,741
 
Debt issue costs (Note 11)
   
65,927
     
47,122
 
Total current assets
   
101,097
     
111,000
 
Non-current assets
               
 Other
   
10,000
     
-
 
                 
                 
 TOTAL ASSETS
 
$
111,097
   
$
111,000
 
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
LIABILITIES
               
Current liabilities
               
Cheques issued in excess of cash on hand
 
$
-
   
$
945
 
Accounts payable
   
724,845
     
683,516
 
Convertible debentures (Note 11)
   
160,525
     
120,432
 
Deferred revenue
   
17,836
     
17,836
 
Promissory notes and accrued interest (Note 6)
   
-
     
261,425
 
                 
Total liabilities
   
903,206
     
1,084,154
 
                 
Going concern (Note 1)
               
Commitments (Note 8)
               
Subsequent events (Note 14)
               
                 
STOCKHOLDERS' DEFICIT
               
Preferred stock, 50,000,000 shares authorized at par value of $0.0001, 22,807 shares issued and outstanding (Note 4)
   
2
     
2
 
Common stock, 10,000,000,000 shares authorized at par value of $0.0001, 25,824,923 (December 31, 2014 – 8,802,940) shares issued and outstanding (Note 4)
   
2,584
     
881
 
Additional paid-in capital
   
4,177,011
     
3,340,495
 
Common stock subscriptions receivable (Note 9)
   
(4,500
)
   
(4,500
)
Deficit
   
(4,967,206
)
   
(4,310,032
)
Total Stockholders' Deficit
   
(792,109
)
   
(973,154
)
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 
$
111,097
   
$
111,000
 
  
 
The accompanying notes are an integral part of these consolidated financial statements.
  
 
 

 
 

 
2

 
 
 IHOOKUP SOCIAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in US dollars)
(Unaudited)
 
 
   
Three months ended
March 31, 2015
   
Three months ended
March 31, 2014
 
             
REVENUES
 
$
37,685
   
$
27,208
 
                 
OPERATING EXPENSES
               
    Accretion and interest expense
 
$
272,311
   
$
240,718
 
    App hosting (Note 9)
   
81,650
     
26,624
 
    Commissions
   
11,306
     
8,162
 
    Financing costs
   
16,589
     
6,645
 
    General and administrative (Note 9)
   
236,454
     
296,758
 
    Product development
   
20,548
     
36,649
 
    Sales and marketing
   
61,097
     
29,074
 
                 
TOTAL OPERATING EXPENSES
   
699,955
     
644,630
 
                 
LOSS FROM OPERATIONS
   
(662,270
)
   
(617,422
)
                 
OTHER ITEMS
               
    Impairment loss (Note 12)
   
-
     
(293,750
)
    Gain on extinguishment of debt  (Note 6)
   
5,096
     
-
 
                 
NET LOSS AND COMPREHENSIVE LOSS
 
$
(657,174
)
 
$
(911,172
)
                 
BASIC AND DILUTED LOSS PER SHARE
 
$
(0.03
)
 
$
(4.83
)
                 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
   
19,991,409
     
188,620
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
 
 
 

 


 
3

 
 
IHOOKUP SOCIAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION ON DECEMBER 2, 2013 TO MARCH 31, 2015
(Expressed in US dollars)
(Unaudited)
 
 
   
Common # Stock
(Note 4)
   
Common Stock Amount
   
Preferred #
Stock
   
Preferred Stock Amount
   
Additional Paid-in Capital
   
Common Stock Subscriptions
Receivable
   
Deficit
   
Total
 
Balance, December 2, 2013
   
   
$
     
   
$
   
$
   
$
   
$
   
$
 
                                                                 
Shares issued for cash
   
5,413
     
1
     
     
     
4,999
     
(5,000
)
   
     
 
                                                                 
Net loss for the period
   
     
     
     
     
     
     
(16,109
)
   
(16,109
)
                                                                 
Balance, December 31, 2013
   
5,413
   
$
1
     
   
$
   
$
4,999
   
$
(5,000
)
 
$
(16,109
)
 
$
(16,109
)
                                                                 
Issuance of preferred shares (Note 12)
   
     
     
588
     
1
     
293,749
     
     
     
293,750
 
                                                                 
Conversion of preferred shares (Note 4)
   
771,426
     
77
     
(2,193
)
   
(1
)
   
(76
)
   
     
     
 
                                                                 
Reverse acquisition transaction (Note 13)
   
111,000
     
11
     
24,413
     
2
     
479,546
     
     
(612,256
)
   
(132,697
)
                                                                 
Share subscriptions received
   
     
     
     
     
     
500
     
     
500
 
                                                                 
Shares issued for services
   
197,495
     
20
     
     
     
269,696
     
     
     
269,716
 
                                                                 
Convertible notes (net) (Note 11)
   
7,717,606
     
772
     
     
     
2,292,581
     
     
     
2,293,353
 
                                                                 
Net loss for the year
   
     
     
     
     
     
     
(3,681,667
)
   
(3,681,667
)
                                                                 
Balance, December 31, 2014
   
8,802,940
   
$
881
     
22,807
   
$
2
   
$
3,340,495
   
$
(4,500
)
 
$
(4,310,032
)
 
$
(973,154
)
                                                                 
Shares issued for services
   
1,150,000
     
115
     
     
     
6,325
     
     
     
6,440
 
                                                                 
Conversion of convertible notes (Note 11)
   
15,871,983
     
1,588
     
     
     
116,639
     
     
     
118,227
 
                                                                 
Issuance of Convertible notes (net) (Note 11)
   
     
     
     
     
713,552
     
     
     
713,552
 
                                                                 
Net loss for the period
   
     
     
     
     
     
     
(657,174
)
   
(657,174
)
                                                                 
Balance, March 31, 2015
   
25,824,923
   
$
2,584
     
22,807
   
$
2
   
$
4,177,011
   
$
(4,500
)
 
$
(4,967,206
)
 
$
(792,109
)
 
 
 
The accompanying notes are an integral part of these consolidated financial statements. 
 
 
 

 
4

 
 
IHOOKUP SOCIAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS 
(Expressed in US dollars)
(Unaudited)
 

 
 
   
Three months ended 
March 31, 2015
   
Three months ended 
March 31, 2014
 
Cash Flows from Operating Activities:
           
Net loss
 
$
(657,174
)
 
$
(911,172
)
                 
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
               
Impairment loss
   
-
     
293,750
 
Interest on promissory note
   
22,965
     
 
Accretion expense
   
240,374
     
233,961
 
Gain on extinguishment of debt
   
(5,096
)
   
 
Shares issued for services
   
41,452
     
11,000
 
Changes in Operating Assets and Liabilities
           
 
Decrease (increase) in accounts receivable
   
(4,792
)
   
 
Decrease (increase) in prepaid expenses
   
(180
)
   
(12,500
)
Increase (decrease) in accounts payable
   
150,883
     
152,863
 
Net Cash Used in Operating Activities
   
(211,568
)
   
(232,098
)
                 
Cash Flows provided by (used in) Investing Activities:
               
Acquisition of other assets
   
(10,000
)
   
 
Cash acquired in the Merger
   
-
     
966
 
Net Cash Provided by (used in) Investing Activities
   
(10,000
)
   
966
 
                 
Cash Flows from Financing Activities:
               
Proceeds from convertible debentures (net)
   
223,846
     
316,611
 
Share subscriptions received
   
-
     
500
 
Net Cash Provided by Financing Activities
   
223,846
     
317,111
 
                 
Net Increase in Cash
   
2,278
     
85,979
 
                 
Cash (cheques issues in excess of cash on hand) – Beginning
   
(945
)
   
 
                 
Cash – Ending
 
$
1,333
   
$
85,979
 
                 
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)
 
$
118,227
   
$
303,183
 
Convertible debentures issued to extinguish promissory notes
 
$
261,425
   
$
 
                 
  
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
 
 
 

 
5

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)
 
1.  NATURE OF BUSINESS AND GOING CONCERN
 
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.
 
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.

On February 3, 2014, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger”) 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 6,000 shares of outstanding common stock for 25,000 shares of the Company’s designated Series A Preferred Stock.
 
The Merger was regarded as a reverse recapitalization whereby iHookup-DE was considered to be the accounting acquirer as its shareholders retained control of the Company after the Merger. During the year ended December 31, 2014, the Merger was completed (see Note 13) and as a result, iHookup-DE acquired the net liabilities of the Company.

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 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 March 31, 2015 the Company has a working capital deficiency of $802,109 and has an accumulated deficit of $4,967,206 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.

Management plans to raise financing through the issuance of convertible notes (see Note 14).
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
These consolidated financial statements include the accounts of iHookup Social, Inc., from the date of acquisition, and its wholly owned subsidiary, iHookup-DE from inception (see Note 13).
 
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.

Interim financial statements
The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim consolidated financial information and with the instructions for Securities and Exchange Commission (“SEC”) Form 10-Q and they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. Therefore, these consolidated financial statements should be read in conjunction with the Company’s audited annual consolidated financial statements and notes thereto for the year ended December 31, 2014, included in the Company’s Annual Report on Form 10-K filed on April 16, 2015, with the SEC.

In the opinion of management, all adjustments (consisting of normal and recurring accruals) considered necessary for fair presentation of the Company’s financial position, results of operations and cash flows have been included. Operating results for the three months ended March 31, 2015, are not necessarily indicative of the results that may be expected for future quarters or the year ending December 31, 2015.

 
 
 

 
 

 
6

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

On April 29, 2014, the Company completed a common stock and preferred stock reverse stock split at a ratio of 20 to 1. Furthermore, on March 19, 2015, the Company completed a common stock and preferred stock reverse stock split at a ratio of 100 to 1. The reverse stock splits have 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 valuation of assets and liabilities acquired in asset acquisition and reverse recapitalization transactions, useful life and recoverability of long-lived assets, valuation of convertible debenture conversion options, 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
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities. The Company derives revenues from the sale of application software, unlimited messaging subscriptions for periods varying from one to twelve months, and arrangements for virtual gifts and access to special features referred to as coin packs. Revenue from the sale of application software is recognized upon download. Revenue from messaging subscriptions is recognized as revenue ratably over the subscription period beginning on the date the service is made available to customers. Revenue from coin packs is recognized on a consumption basis commensurate with the customer utilization of such resources.
 
Advertising Costs
The Company’s policy regarding advertising is to expense advertising when incurred. During the three months ended March 31, 2015, the Company incurred $61,097 in advertising costs.

Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.
 
Intangible Assets
The Company accounts for intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other. The Company assesses potential impairments to other intangible assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered.

Intangible assets with estimated lives and other long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of intangible assets with estimated lives and other long-lived assets is measured by comparing the carrying amount of the asset to its fair value. If the future value of the asset is lower than its carrying value, the Company recognizes an impairment loss for the amount by which the carrying value of the asset exceeds the related estimated fair value.

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.


 


 

 
7

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
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 comprehensive loss over the requisite service period.
 
Allowance for Doubtful Accounts
The Company receives revenues from sales of its software application. The Company monitors its outstanding receivables for timely payments and potential collection issues. During the three months ended March 31, 2015, the Company did not have any allowance for doubtful accounts.

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.
  
Financial Instruments
Financial assets and financial liabilities are recognized in the balance sheet when the Company has become party to the contractual provisions of the instruments.

The Company’s financial instruments consist of accounts receivable, accounts payable, promissory notes, and convertible debentures. The fair values of these financial instruments approximate their carrying value, due to their short term nature, and current market rates for similar financial instruments. Fair value of a financial instrument 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. The Company’s financial instruments recorded at fair value in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

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.
 
As of March 31, 2015, there were approximately 6,303,576,363 potentially dilutive shares outstanding.
 
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.




 

 
8

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements

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. The Company is evaluating the impact the revised guidance will have on its consolidated financial statements.
 
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.
 
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 13, 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 year ending December 31, 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 2015:
 
On March 19, 2015, the Company completed a common stock and preferred stock reverse stock split at a ratio of 100 to 1. The reverse stock splits have been retroactively applied to all common stock, preferred stock, weighted average common stock, and loss per common stock disclosures. 

During the three months ended March 31, 2015, the Company issued 15,871,983 shares of common stock to various convertible note holders for full and partial conversion of the notes (Note 11).

During the three months ended March 31, 2015, the Company issued 1,150,000 shares of common stock to a consultant in exchange for investor relations and advertising services.
 
Preferred Stock:
 
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 the Company’s equity securities that results in gross proceeds in excess of $2,500,000).

 

 
9

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)

5.  SHARE PURCHASE WARRANTS
 
     
Weighted Average
 
 
Number
 
Exercise
 
 
of
 
Price
 
   
Warrants
   
$
 
Balance, December 31, 2014
   
334
     
2,000
 
Warrants expired
   
(334
)
   
(2,000)
 
Warrants issued
   
15,000,000
     
0.05
 
Balance, March 31, 2015
   
15,000,000
     
0.05
 
 
6.  PROMISSORY NOTES
 
As of June 25, 2014, the Company entered into a Letter Agreement (the “Letter Agreement”) with Beaufort Capital Partners LLC 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 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 year ended December 31, 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. During the three months ended March 31, 2015 the Company extinguished these notes in their entirety by issuing replacement convertible notes (Note 12). The Company also recorded interest expense of $6,074 and a gain on debt extinguishment of $5,096 on these notes. 

7.  STOCK-BASED COMPENSATION
 
On November 22, 2011, the Board of Directors of Titan Iron Ore Corp. (see Note 1) 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 4,974 common shares of the Company. 
 
The following table summarizes the options outstanding and exercisable under the 2011 Stock Option Plan as of March 31, 2015:
 
   
Option Price
       
Expiry Date
 
Per Share
   
Number
 
December 21, 2021
    1,680       1,725  
June 21, 2022
    400       500  
June 25, 2023
    134       850  
    $ 1,044       3,075  
 
 

 
10

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)
 
7.  STOCK-BASED COMPENSATION (CONTINUED)
 
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 120,679 shares of common stock 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 March 31, 2015, no options have been awarded under the 2014 Plan.

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
    3,075       1,044       7.57          
Outstanding and exercisable, December 31, 2014
    3,075       1,044       7.57       -  
Outstanding and exercisable, March 31, 2015
    3,075       1,044       7.32       -  
 
8.  COMMITMENTS
 
The following table summarizes our significant contractual obligations as of March 31, 2015:
 
   
2015
 
Convertible Notes (1)
   
1,109,439
 
Operating Leases (2)
   
2,225
 
Employment Agreements (3)
   
225,000
 
Purchase Contracts (4)
   
25,000
 
     
1,361,664
 
 
(1) Principal and interest for various convertible notes due at the maturity date.
(2) Rents payable for office space.
(3) Employment agreements with related parties.
(4) Properties Lease and Purchase Agreement
 
9.  RELATED PARTY TRANSACTIONS AND BALANCES
 
During the three months ended March 31, 2015, the Company incurred $111,054 (2014: 68,159) in salaries to officers and directors with such costs being recorded as general and administrative expenses.
 
During the three months ended March 31, 2015, the Company incurred $111,650 (2014: $58,897) 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.
 
 

 
11

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)
 
9.  RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
 
As of March 31, 2015, 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.

As of March 31, 2015, included in prepaid expenses is $3,118 (December 31, 2014: $2,938) advanced to the Chief Executive Officer of the Company.
 
As of March 31, 2015, accounts payable include $63,802 (December 31, 2014: $42,352) payable to a company with two officers and directors in common, and $54,167 (December 31, 2014: $16,667) payable in salaries to directors and officers of the Company. The amounts are unsecured, non-interest bearing and are due on demand.

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:
 
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 and cheques issued in excess of cash on hand 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 notes and convertible debentures approximates their carrying values as the underlying imputed interest rates approximates the estimated current market rate for similar instruments.

As of March 31, 2015, there were no assets or liabilities measured at fair value on a recurring basis presented on the  Company’s balance sheet, other than cash. 
 
During the three months ended March 31, 2014, the Company impaired intangible assets and wrote the carrying amount down to $nil, its estimated fair value determined using a level 3 measurement (see Note 12).
 

 
12

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)
 
11.  CONVERTIBLE DEBENTURES
 
   
Issuance
Principal
Discount
Carrying Value
Interest Rate
Maturity Date
a
)
2-Apr-13
5,054
-
5,054
0
%
2-Jan-14
b
)
3-Sep-14
44,444
15,745
28,700
12
%
3-Sep-15
c
)
23-Oct-14
75,000
57,188
17,812
8
%
21-May-15
c
)
21-May-14
44,125
21,884
22,241
8
%
21-May-15
c
)
9-Jan-15
37,500
36,115
1,385
8
%
9-Jan-16
d
)
7-Oct-14
75,000
69,547
5,453
8
%
7-Oct-15
d
)
15-Jan-15
40,000
38,728
1,272
8
%
15-Jan-16
d
)
15-Jan-15
26,285
25,372
913
8
%
15-Jan-16
d
)
12-Feb-15
35,000
34,055
945
8
%
12-Feb-16
d
)
12-Feb-15
63,125
62,082
1,043
8
%
12-Feb-16
d
)
17-Feb-15
102,135
101,069
1,066
8
%
17-Feb-16
d
)
17-Feb-15
5,000
4,328
672
8
%
17-Feb-16
d
)
27-Feb-15
37,500
36,688
812
8
%
27-Feb-16
d
)
12-Mar-15
37,500
36,811
689
8
%
12-Mar-16
d
)
19-Mar-15
106,707
106,034
673
8
%
19-Mar-16
d
)
19-Mar-15
53,551
52,913
638
8
%
19-Mar-16
d
)
19-Mar-15
8,000
7,436
564
8
%
19-Mar-16
d
)
27-Mar-15
50,000
49,454
546
8
%
27-Mar-16
e
)
14-Oct-14
43,000
35,943
7,057
8
%
16-Jul-15
e
)
13-Nov-14
43,000
31,270
11,730
8
%
7-Aug-15
f
)
11-Jul-14
80,000
61,796
18,204
12
%
10-Jul-15
g
)
21-Nov-14
62,500
29,444
33,056
12
%
21-Aug-15
                 
     
1,074,426
913,901
160,525
     
 
a)
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.
 
 


 
13

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)
 
11.  CONVERTIBLE DEBENTURES (CONTINUED)

 
·
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.
 
b)
During the year 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 is applied to the principal balance for the first 90 days after cash advance. After the first 90 days, an interest charge of 12% is to be immediately applied to the principal and the 10% upfront fee. The note is secured by a General Security Agreement.
 
After 180 days from the issuance date 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 two closing bid prices in the 20 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.

c)
The Company entered into 3 convertible promissory notes (“LG Notes”) with LG Capital Funding, 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 lowest closing bid prices during the 15 trading days preceding the conversion. The LG Notes cannot be converted, to the extent that LG would beneficially own in excess of 4.99% of the Company’s outstanding common stock. The notes are secured by General Security Agreement. The convertible debentures may be repaid by the Company as follows:
 
 
·
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 16% per annum and the LG Notes become immediately due and payable.
 
d) 
On January 15, 2015, the Company entered into a securities purchase agreement (the “Coventry SPA”) with Coventry Enterprises LLC.,  (“Coventry”), pursuant to which the Company sold to Coventry a $40,000 face value 8% Convertible Note (the “Coventry Note”) with a term of twelve months (the “Coventry Maturity Date”). Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock beginning six months after the Issue Date, at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. In the event the Company prepays the Coventry Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150%. 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 Coventry Note becomes immediately due and payable. The Company paid Coventry $2,000 for its legal fees and expenses.
 
On January 15, 2015, the Company entered into a Convertible Redeemable Note with Coventry whereby the Company issued a $44,535 face value 8% Convertible Note (the “Coventry Note”) with a term of twelve months (the “Coventry Maturity Date”) to replace a $42,152 debt to Bingham McCutchen LLP originally incurred on May 1, 2014. Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock , at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. 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 Coventry Note becomes immediately due and payable.



 
14

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)
 
11.  CONVERTIBLE DEBENTURES (CONTINUED)
 
 
On February 12, 2015, 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 $35,000 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 February 15, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $35,000 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 12, 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 $1,750 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $1,750 in legal fees and expenses for the Coventry Back-End Note.
 
On February 12, 2015, the Company entered into a Convertible Redeemable Note with Coventry whereby the Company issued a $63,125 face value 8% Convertible Note (the “Coventry Note”) with a term of twelve months (the “Coventry Maturity Date”) to replace a $58,675 debt to Bingham McCutchen LLP originally incurred on March 1, 2014. Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock , at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. 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 Coventry Note becomes immediately due and payable.
 
On February 17, 2015, the Company entered into a Convertible Redeemable Note with Coventry whereby the Company issued a $102,135 face value 8% Convertible Note (the “Coventry Note”) with a term of twelve months (the “Coventry Maturity Date”) to replace a $100,000 note to Beaufort Capital Partners LLP originally issued on January 29, 2015. Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock , at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. 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 Coventry Note becomes immediately due and payable. In connection with the note, the Company issued a separate $5,000 8% convertible Rule 144 note to Coventry, with the same conversion terms, to pay for legal expenses.
 
On February 27, 2015, 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 $37,500 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 February 27, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $37,500 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 February 27, 2016. 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 20 trading days previous to the conversion. In no event shall Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. 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%. 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 24% 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 $2,500 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $2,500 in legal fees and expenses for the Coventry Back-End Note.


 
15

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)
 
11.  CONVERTIBLE DEBENTURES (CONTINUED)
 
 
In connection with the Notes, the Company entered into a Common Stock Purchase Warrant (the “Warrant”) which entitles Coventry to subscribe for and purchase from the Company, up to 7,000,000 shares of common stock of the Company at an exercise price of $0.05 for a period of five years. The exercise price is subject to adjustments as provided in the Warrant. Under certain circumstances, the Holder is also permitted a cashless exercise.
 
On March 12, 2015, 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 $37,500 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 March 13, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $37,500 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 November 12, 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 20 trading days previous to the conversion. In no event shall Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. 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%. 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 24% 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 $2,500 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $2,500 in legal fees and expenses for the Coventry Back-End Note.
 
In connection with the Notes, the Company entered into a Common Stock Purchase Warrant (the “Warrant”) which entitles Coventry to subscribe for and purchase from the Company, up to 7,000,000 shares of common stock of the Company at an exercise price of $0.05 for a period of five years. The exercise price is subject to adjustments as provided in the Warrant. Under certain circumstances, the Holder is also permitted a cashless exercise.
 
On March 19, 2015, the Company entered into two Convertible Redeemable Notes with Coventry whereby the Company issued two  8% Convertible Notes (the “Coventry Notes”)with an aggregate value of $160,268 with a term of twelve months (the “Coventry Maturity Date”) to replace a $156,329 in debt to Bingham McCutchen LP originally incurred in fiscal year 2014. Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock , at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. 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 Coventry Note becomes immediately due and payable. In connection with the note, the Company issued a separate $8,000 8% convertible Rule 144 note to Coventry, with the same conversion terms, to pay for legal expenses.
 
On March 27, 2015, 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 $50,000 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 March 27, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $50,000 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 November 27, 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 20 trading days previous to the conversion. In no event shall Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. 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%. 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 24% 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 $2,500 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $2,500 in legal fees and expenses for the Coventry Back-End Note.
 
In connection with the Notes, the Company entered into a Common Stock Purchase Warrant (the “Warrant”) which entitles Coventry to subscribe for and purchase from the Company, up to 1,000,000 shares of common stock of the Company at an exercise price of $0.05 for a period of five years. The exercise price is subject to adjustments as provided in the Warrant. Under certain circumstances, the Holder is also permitted a cashless exercise.

 
16

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)
 
11.  CONVERTIBLE DEBENTURES (CONTINUED)

e)  
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 58% 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 notes are secured by a General Security Agreement. 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. 
 
f)  
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 with a maturity date of July 10, 2015. 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 Eastmore Note is convertible into common stock, at any time after the issue date, at the lower of (i) the closing sale price of the common stock 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.
 
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. The note is secured by a General Security Agreement.
 
g)  
On November 21 and November 24, 2014, the Company entered into two securities purchase agreements  with Carebourn Capital L.P. (“Carebourn”), pursuant to which the Company sold to Carebourn a $62,500 face value 12% Convertible Note and a $40,465 face value 12% Convertible Note with a term of nine months. Interest accrues daily on the outstanding principal amount of the Carebourn Notes at a rate per annum equal to 12% on the basis of a 365-day year. The note is convertible into common stock beginning six months after 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 notes in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by:
 
The Company may not prepay the notes 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. Carebourn does not have the right to convert the Notes, to the extent that Carebourn and its affiliates would beneficially own in excess of 4.99% of our outstanding common stock. The notes are secured by a General Security Agreement.
 
 
17

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)
 
11.  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 March 31, 2015 the conversion features would not meet derivative classification.
 
[At March 31, 2015, unless otherwise noted, the convertible debentures are unsecured.] During the three months ended March 31, 2015, $118,227 of convertible debentures were settled by issuing 15,871,960 shares of common stock of the Company.
 
During the three months ended March 31, 2015, the Company incurred $29,500 in transaction costs in connection with the issuance of the convertible debentures.

12.  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 588 shares of its Series A Preferred Stock. Subsequent to the purchase, the assets were considered impaired, resulting in an impairment loss of a corresponding amount. On February 3, 2014, as part of the Merger described in Note 13, 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. 
 
13.  MERGER
 
On February 3, 2014, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) 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 6,000 shares of outstanding common stock for 25,000 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 the Company’s 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.
 
 
 
 
 
 
 
 
 
18

 
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD MARCH 31, 2015 
(Expressed in US dollars)
 
13.  MERGER (CONTINUED)
 
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.
 
    $  
         
Preferred shares issued
    68,366  
Net liabilities acquired
    543,891  
         
Adjustment to deficit
    612,257  
         
Details of net liabilities acquired:
       
Cash
    966  
Debt issue costs
    13,123  
Mineral properties
    1,206,011  
Accounts payable and accrued liabilities
    (165,420 )
Other
    (23,404 )
Promissory note
    (1,229,728 )
Convertible debt
    (345,439 )
         
Net liabilities acquired
    543,891  
 
14.  SUBSEQUENT EVENTS
 
a)  
Subsequent to March 31, 2015 the Company issued 60,070,516 shares of common stock in connection with conversion of convertible notes in the amount of $103,363
 
b)  
Subsequent to March 31, 2015 the Company issued 5,516,680 shares of common stock for conversion of preferred shares.
 
c)  
Subsequent to March 31, 2015 the Company obtained proceeds of $122,500 for three convertible debenture agreements (“Debentures”) entered into with face value totaling $122,500, with interest rates between 8% and 12% per annum and maturing between six months and one year from the dates of issuance. The principal and interest of the Debentures are convertible into common shares of the Company at various conversion rates as outlined in each agreement. The Company paid $11,000 in legal fees and other expenses in connection with these debentures.
  
 


 
 

 
19

 

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
 
We were incorporated in the State of Nevada on June 5, 2007. Effective June 15, 2011, we completed a merger with our subsidiary, Titan Iron Ore Corp., a Nevada corporation, which was incorporated solely to effect a change in our name to “Titan Iron Ore Corp.”
 
Also effective June 15, 2011, we effected a 37 to one forward stock split of our issued and outstanding common and preferred stock.  As a result, our 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, we issued 2,100,000 common shares pursuant to a private placement unit offering, increasing the number of shares of common stock outstanding to 192,687,000.

Effective June 30, 2011 and in connection with the entry into an agreement (the “Acquisition Agreement”) with J2 Mining Ventures Ltd. (“J2 Mining”) dated June 13, 2011 and attached as Exhibit 10.1 to our Current Report on Form 8-K filed June 16, 2011, we completed the acquisition of a 100% right, title and interest in and to a properties option agreement (the “Option Agreement”) from J2 Mining with respect to iron ore mineral properties located in Albany County, Wyoming, by way of entering an assignment of mineral property option agreement with J2 Mining and Wyomex LLC (the “Assignment Agreement”), whereby our company was assigned 100% of the right, title and interest in and to the Option Agreement from J2 Mining.

In connection with the closing of the Acquisition Agreement, Ohad David, Ruth Navon and Service Merchant Corp. (the “Vendors”), entered into an affiliate stock purchase agreement, whereby, among other things, the Vendors surrendered 142,950,000 common shares for cancellation.

As described above, on February 3, 2014 we completed a merger with iHookup pursuant to the Merger Agreement dated January 31, 2014. Pursuant to the Merger Agreement, we incorporated a new subsidiary called iHookup Operations Corp, a Delaware corporation, which merged with and into iHookup, causing the subsidiary’s separate existence to cease and iHookup to become a wholly-owned subsidiary of the Company. iHookup’s stockholders exchanged all of six thousand (6,000) shares of outstanding common stock for twenty five thousand (25,000) shares of the Company’s newly designated Series A Preferred Stock. Each share of common stock entitles its holder to one vote on each matter submitted to the 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. Such Series A Preferred Stock shall also be convertible into the number of shares of common stock which equals nine (9) times the total number of shares of common stock which are issued and outstanding at the time of conversion 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 iHookup stockholders received a controlling interest in the Company.

On April 29, 2014, FINRA 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.

On March 19, 2015, FINRA approved a 100 for 1 reverse stock split whereby 2,355,489,991, shares of the Company’s common stock then issued and outstanding, were exchanged for 23,554,923 shares of the Company’s common stock.
 
Mobile Application
 
Introduction
 
iHookup Social is seeking to redefine the way people connect with a potential friend or partner. The laws of meeting, socializing and dating have shifted as meeting online or through the use of mobile technology has become a dominant part of today’s mobile-social lifestyle, across various social circles, age groups, races, genders and demographics. iHookup Social’s goal is to facilitate such virtual connections and move them toward real-life interactions, like a matchmaker and concierge in one. As such, the company has begun providing users with locally relevant content, such as popular venues and special merchant discounts, within the user’s vicinity. As this feature continues to be built up, the company believes it will help drive meet ups or “Hookups” to physical locations or events. Ultimately, the company plans to bring together a dynamic opportunity for brands, advertisers and merchants to interact with a network of socially active mobile users on a locally relevant basis, while building customer loyalty, engagement and revenues.
 
 
20

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued
 
Products/Services: iHookup application
 
iHookup is a proximity-based or location-based social platform and discovery application that facilitates communication between two or more users (“iHookup” or “application”). It utilizes the intelligence of GPS and localized recommendations to provide opportunities for making new connections, socializing, dating and expanding existing social circles for individuals, groups and organizations. It is available on the iOS platform and in iTunes stores world-wide, where we offer a free version and a paid version. The free version allows users to browse through the application’s features and user profiles. The paid version which costs $0.99 to download, provides a trial of all subscription based services (which allows users to send message and take advantage of any localized recommendations or offers) for a specified period of time, as determined by the company’s marketing strategy. 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 the company is currently in):
 
Recurring Subscriptions
$7.99
1-Month
$17.99
3-Month
$27.99
6-Month
$44.99
Annual
$59.99
Coin Pack1
$2.99
Coin Pack2
$4.99
Coin Pack 3
$9.99

In addition, the company has begun providing localized recommendations and merchant discounts to its users and allowing users to share such recommendations and offers with each other. This feature is also linked with each user’s mobile mapping service, allowing for easy routing to the venue or event. As this feature continues to be built up, the company hopes it will help drive encounters or “Hookups” to physical locations or events, become an additional method of retaining its user base and increase the company’s revenue streams in several vertically attractive markets in brands and advertising.
 
Marketing
 
We market our application utilizing a variety of online and offline marketing activities. Our offline marketing activities has consisted of traditional marketing and event-based branding in various local markets, such as distributing coasters and flyers at test locations.
 
Our online marketing activities generally consist of the purchase of mobile-banners 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, the 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. Such video advertising may be expanded and utilized in commercials, on Facebook, YouTube, and various other editorial and public relations efforts.
 
iHookup is available on in the Apple App Store / iTunes, where our visibility in rank on the free, paid and social networking categories also drives traffic to both versions of the application.  The highest ranking achieved by our application as of March 2015 on the Apple App Store is as follows:

 iHookup Free:
 
·
Top Rank Overall Apps USA - #532
 
·
Top Rank in Social Networking App USA: #49
 
·
Top Grossing Overall Apps USA - #510
 
·
Top Grossing Social Networking iPhone / iPod App USA: #28
 
·
Top Grossing Social Networking iPad App USA: #24

iHookup Paid:
 
·
Top Rank Overall Apps USA - #292
 
·
Top Rank Social Networking USA:  #6
 
·
Top Grossing Overall Paid Apps - #651
 
·
Top Grossing Social Networking
 
 
iPhone / iPod App USA: #39
 
·
Top Grossing Social Networking iPad App USA: #58
 
 
21

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

The company plans to announce specific name changes and feature additions to its current application, believed by management to enable the brand to expand its services beyond what currently exists in the marketplace today.
 
Revenue

Our revenue is derived primarily from subscription fees for our paid versions and from users purchasing “coins” for added features. Additional revenue opportunities include merchants, brands and advertisers that we are beginning to vertically integrate into our location based offers and discounts.

Competition

The mobile-social business is highly competitive and barriers to entry are minimal. We compete primarily with other social networking, messaging and dating mobile applications (e.g. Tinder), but also category specific websites (e.g. Facebook, Match.com and eHarmony), social apps, dating and matchmaking services, other social media platforms and applications, and other conventional media companies that provide personal services and traditional venues where singles meet (both online and offline). The company hopes 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, Groupon, What About We).

We believe that our ability to compete successfully will depend primarily upon the following factors:
• 
establishing a “Friendly” brand that will be socially shared, acceptable and viral in nature;
• 
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.
• 
raising sufficient working capital to fund our operations and growth strategy.
 
Employees and Key Consultants
 
Our company has three full time employees and one part time employee.
 
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 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 while allowing users to stay active or on the move, and push forward with personal and professional goals. Mobile dating is one of the fastest growing market segments in mobile communications, continuing to attract new users. A common problem faced across all age and 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.
 

 
22

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

Results of Operations
 
For the three months ended March 31, 2015 compared to 2014
 
Our net loss and comprehensive loss for our interim period ended March 31, 2015 and 2014 and the changes between those periods for the respective items are summarized as follows:
 
   
Three Months
   
Three Months
 
   
Ended
   
Ended
 
   
March 31
   
March 31
 
   
2015
   
2014
 
Revenues
  $ 37,685     $ 27,208  
Total Operating Expenses
    699,955       644,630  
Loss From Operations
    (662,270 )     (617,422 )
Other Income (Expenses)
    5,096       (293,750 )
Net Loss
    (657,174 )     (911,172 )
 
Total revenue for the three months ended March 31, 2015 increased compared to the same period last year due to an increased number of registered users.
 
Total operating expenses of $699,955 for the three months ended March 31, 2015 increased by 55,325 due primarily due to increased app hosting costs on a higher number of registered users.
 
Other income and expenses of $5,096 for the three months ended March 31, 2015 consisted of a gain on debt settlement while other income and expenses of ($293,750) for the three months ended March 31, 2014 consisted of an impairment charge of $293,750 against an intangible asset acquired in connection with the application.
  
Liquidity and Capital Resources
 
Working Capital
 
   
March 31, 2015
   
December 31, 2014
 
   
(unaudited)
   
(audited)
 
Current Assets
  $ 101,097     $ 111,000  
Current Liabilities
    903,206       1,084,154  
Working Capital(Deficiency)
  $ (802,109 )   $ (973,154 )
 
Current assets for the quarter ended March 31, 2015 decreased by $9,903 compared to December 31, 2014 primarily due to lower prepaid expenses offset by higher debt issue costs.
 
Current liabilities for the quarter ended March 31, 2015 decreased by $180,948 compared to December 31, 2014 primarily due to the extinguishment of promissory notes offset by higher accounts payable and convertible notes.




 
23

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

Cash Flows
   
Three months
   
Three months
 
   
Ended
   
Ended
 
   
March 31, 2015
   
March 31, 2014
 
Net Cash Provided by (Used in) Operating Activities
  $ (211,568 )   $ (232,098 )
Net Cash Provided by (Used in) Investing Activities
    (10,000 )     966  
Net Cash Provided by (Used in) Financing Activities
    223,846       317,111  
Net Increase (Decrease) in Cash
  $ 2,278     $ 85,979  
Net Cash Provided by (Used in) Operating Activities
 
Our cash used in operating activities of $211,568 for the three month period ended March 31, 2015 consisted primarily of a loss of 657,175 adjusted by accretion expense of 240,374 and a change in accounts payable of $150,883. Our cash used in operating activities of $232,098 for the three month period ended March 31, 2014 consisted primarily of a net loss of $911,172 offset by non-cash adjustments for impairment of $293,750 and accretion expense of $233,961.
 
Net Cash Provided by (Used in) Investing Activities
 
Our cash used in investing activities for the three month period ended March 31, 2015 was $10,000 and resulted from the initial payment toward a trademark. Our cash provided by investing activities for the three month period ended March 31, 2014 was $966 and consisted of cash acquired in the merger.
 
 Net Cash Provided by Financing Activities
 
Our cash provided by financing activities of $223,845 for the three month period ended March 31, 2015 consisted primarily of net proceeds from convertible notes. Our cash provided by financing activities of $317,111 for the three month period ended March 31, 2014 consisted primarily of net proceeds from convertible notes.
 
 
 
 
 
 
 

 
 
24

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Securities Purchase Agreement and Convertible Note with LG Capital Funding, LLC
 
On January 9, 2015 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 $37,500 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 January 9, 2015. The second Convertible Note (the “LG Back-End Note”) shall initially be paid for by an offsetting $37,500 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 September 9, 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 $1,750 in legal fees and expenses, and $3,500 in commission to a third party broker. Upon the cash payment of the Buyer Note, the Company will pay an additional $1,750 in legal fees and expenses and $3,500 in commission to a third party broker for the LG Back-End Note Securities Purchase Agreements.
 
Securities Exchange and Settlement Agreement with Beaufort Capital Partners, LLC
 
On January 29, 2015 the Company entered into a Securities Exchange and Settlement Agreement with Beaufort Capital Partners, LLC whereby the parties agreed to amend a promissory note originally issued by the Company on July 29, 2014 in the face amount of $100,000. Whereas the original note had no conversion rights or provisions, the settlement agreement allows Beaufort from time to time to convert all or part of the note into shares of commons stock of the Company based on the terms in the settlement agreement. Beaufort has the right to convert all or part of the note based on 50% of the average of the three (3) lowest volume weighted average prices of the Company’s common stock during the ten (10) trading days immediately preceding the conversion date. On February 17, 2015 the Company extinguished the note in full in connection with another convertible note issued to Coventry Enterprises, LLC.

Securities Purchase Agreements and Convertible Notes with Coventry Enterprises, LLC
 
On January 15, 2015, the Company entered into a securities purchase agreement (the “Coventry SPA”) with Coventry Enterprises LLC.,  (“Coventry”), pursuant to which the Company sold to Coventry a $40,000 face value 8% Convertible Note (the “Coventry Note”) with a term of twelve months (the “Coventry Maturity Date”). Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock beginning six months after the Issue Date, at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. In the event the Company prepays the Coventry Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 150%. 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 Coventry Note becomes immediately due and payable. The Company paid Coventry $2,000 for its legal fees and expenses.

On January 15, 2015, the Company entered into a Convertible Redeemable Note with Coventry whereby the Company issued a $44,535 face value 8% Convertible Note (the “Coventry Note”) with a term of twelve months (the “Coventry Maturity Date”) to replace a $42,152 debt to Bingham McCutchen LLP originally incurred on May 1, 2014. Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock , at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. 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 Coventry Note becomes immediately due and payable.
 
 
25

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
On February 12, 2015, 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 $35,000 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 February 15, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $35,000 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 12, 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 $1,750 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $1,750 in legal fees and expenses for the Coventry Back-End Note.

On February 12, 2015, the Company entered into a Convertible Redeemable Note with Coventry whereby the Company issued a $63,125 face value 8% Convertible Note (the “Coventry Note”) with a term of twelve months (the “Coventry Maturity Date”) to replace a $58,675 debt to Bingham McCutchen LLP originally incurred on March 1, 2014. Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock , at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. 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 Coventry Note becomes immediately due and payable.

On February 17, 2015, the Company entered into a Convertible Redeemable Note with Coventry whereby the Company issued a $102,135 face value 8% Convertible Note (the “Coventry Note”) with a term of twelve months (the “Coventry Maturity Date”) to replace a $100,000 note to Beaufort Capital Partners LLP originally issued on January 29, 2015. Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock , at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. 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 Coventry Note becomes immediately due and payable. In connection with the note, the Company issued a separate $5,000 8% convertible Rule 144 note to Coventry, with the same conversion terms, to pay for legal expenses.

On February 27, 2015, 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 $37,500 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 February 27, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $37,500 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 February 27, 2016. The Buyer Note will be initially secured by the pledge of the Coventry Back-End Note.
 
 
 
 
26

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
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 20 trading days previous to the conversion. In no event shall the Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. 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%. 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 24% 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 $2,500 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $2,500 in legal fees and expenses for the Coventry Back-End Note.

In connection with the Notes, the Company entered into a Common Stock Purchase Warrant (the “Warrant”) which entitles Coventry to subscribe for and purchase from the Company, up to 7,000,000 shares of common stock of the Company at an exercise price of $0.05 for a period of five years. The exercise price is subject to adjustments as provided in the Warrant. Under certain circumstances, the Holder is also permitted a cashless exercise.

On March 12, 2015, 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 $37,500 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 March 13, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $37,500 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 November 12, 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 20 trading days previous to the conversion. In no event shall Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. 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%. 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 24% 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 $2,500 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $2,500 in legal fees and expenses for the Coventry Back-End Note.

In connection with the Notes, the Company entered into a Common Stock Purchase Warrant (the “Warrant”) which entitles Coventry to subscribe for and purchase from the Company, up to 7,000,000 shares of common stock of the Company at an exercise price of $0.05 for a period of five years. The exercise price is subject to adjustments as provided in the Warrant. Under certain circumstances, the Holder is also permitted a cashless exercise.

On March 19, 2015, the Company entered into two Convertible Redeemable Notes with Coventry whereby the Company issued two  8% Convertible Notes (the “Coventry Notes”)with an aggregate value of $160,268 with a term of twelve months (the “Coventry Maturity Date”) to replace a $156,329 in debt to Bingham McCutchen LP originally incurred in fiscal year 2014. Interest accrues daily on the outstanding principal amount of the Coventry Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the Coventry Note is payable on the Coventry Maturity Date. The Coventry Note is convertible into common stock, at the holder’s option, at a 50% discount to the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. Coventry does not have the right to convert the Note, to the extent that Coventry and its affiliates would beneficially own in excess of 9.99% of our outstanding common stock. 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 Coventry Note becomes immediately due and payable. In connection with the note, the Company issued a separate $8,000 8% convertible Rule 144 note to Coventry, with the same conversion terms, to pay for legal expenses.
 
 
 
 
27

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
On March 27, 2015, 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 $50,000 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 March 27, 2015.  The second Convertible Note (the “Coventry Back-End Note”) shall initially be paid for by an offsetting $50,000 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 November 27, 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 20 trading days previous to the conversion. In no event shall Coventry be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Coventry and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. 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%. 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 24% 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 $2,500 in legal fees and expenses. Upon the cash payment of the Buyer Note, the Company will pay an additional $2,500 in legal fees and expenses for the Coventry Back-End Note.

In connection with the Notes, the Company entered into a Common Stock Purchase Warrant (the “Warrant”) which entitles Coventry to subscribe for and purchase from the Company, up to 1,000,000 shares of common stock of the Company at an exercise price of $0.05 for a period of five years. The exercise price is subject to adjustments as provided in the Warrant. Under certain circumstances, the Holder is also permitted a cashless exercise.
 
Friendable Properties Lease and Purchase Agreement
 
On February 26, 2015 the Company entered into a Properties Lease and Purchase Agreement with Kimberly Snover (the “Seller”) whereby the Company agreed to acquire from the Seller certain properties, including the Friendable domains, logos, and trademark. The payment terms are an initial payment of $5,000 and subsequent payments totaling $30,000 over the course of 90 days. After the initial payment until the final payments, the properties will be leased by the Company from the Seller.
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements.
 
Going Concern
 
At March 31, 2015, we had an accumulated deficit of $4,967,206 and incurred a net loss of $657,174, for the period ended March 31, 2015.  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.
 
 
 

 
28

 

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 March 31, 2015.  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 March 31, 2015 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 March 31, 2015 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.
 
 
 
 

 
29

 
 
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, we may have more difficulty or find it impossible, to raise third party financing from investors or financial institutions. In addition, any operating capital raised may be obtained on harsh terms and be dilutive to current shareholders.

Our reserves may be insufficient.

We intend to establish a reserve fund, as determined in the Board’s discretion, for normal working capital contingencies. However, we have been unable to do so. If the reserves are not available to the 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. In fact, we have been forced to issue several convertible notes at substantial discounts and interest rates in order to raise the requisite capital for operations.


Risks Related to Our Business and Industry

Our success depends upon the continued growth and acceptance of online/mobile advertising, particularly paid listings, as an effective alternative to traditional, offline advertising and the continued commercial use of the internet.
 
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 mobile 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 online and mobile advertising markets. 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) and smart devices, the extent to which web/mobile browsers, software programs and/or mobile 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 various websites and distribute our products and services.
 
We engage in a variety of activities, such as search engine optimization and application search optimization, 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 features, 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 application 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.
 
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 a 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.
 

 
30

 

ITEM 1A. RISK FACTORS - continued
 
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 various websites may not be successful or cost-effective.
 
Traffic building and conversion initiatives involve considerable expenditures for online, mobile and offline advertising and marketing. To the extent that we have the working capital available, we plan to make significant expenditures for online and mobile 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 various websites, 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, 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 may 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
 
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 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 products are used. 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, copyrights and other similar intellectual property, as critical to our success.  For example, we have relied heavily on the trademark “iHookup” to market our product and seek to build and maintain brand loyalty and recognition. We intend to change the name of the Company and roll out a new brand. To the extent that we have protectable intellectual property rights, 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.
 
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.
 

 
32

 

ITEM 1A. RISK FACTORS - continued
 
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;

 
·
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.
 
 

 
33

 

ITEM 1A. RISK FACTORS - continued
 
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 app 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;

 
·
the amount, quality and timeliness of content generated by our users;

 
·
the timing and market acceptance of our products and services;

 
·
the adoption of our products and services internationally;

 
·
its ability, and the ability of our competitors, to develop new products and services and enhancements to existing products and services;

 
·
the frequency and relative prominence of the ads displayed by us or our competitors;

 
·
our ability to establish and maintain relationships with platform partners that integrate with our platform;

 
·
changes mandated by, or that we elect to make to address, legislation, regulatory authorities or litigation, including settlements and consent decrees, some of which may have a disproportionate effect on us;

 
·
government action regulating competition;

 
·
our ability to attract, retain and motivate talented employees, particularly engineers, designers and product managers;

 
·
acquisitions or consolidation within our industry, which may result in more formidable competitors; and

 
·
our reputation and the brand strength relative to our competitors.

We also face significant competition for advertiser spend. We compete against online and mobile businesses, including those referenced above, and traditional media outlets, such as television, radio and print, for advertising budgets. In order to grow our revenue and improve our operating results, we must increase our share of spending on advertising relative to our competitors, many of which are larger companies that offer more traditional and widely accepted advertising products. In addition, some of our larger competitors have substantially broader product or service offerings and leverage their relationships based on other products or services to gain additional share of advertising budgets.
 

 
 
34

 

ITEM 1A. RISK FACTORS - continued
 
We believe that our ability to compete effectively for advertiser spend depends upon many factors both within and beyond our control, including:

 
·
the size and composition of our user base relative to those of our competitors;

 
·
our ad targeting capabilities, and those of our competitors;

 
·
the timing and market acceptance of our advertising services, and those of our competitors;
 
 
·
our marketing and selling efforts, and those of our competitors;

 
·
the pricing for our products relative to the advertising products and services of our competitors;

 
·
the return our advertisers receive from their advertising services, compared to those of our competitors; and

 
·
our reputation and the strength of our brand relative to our competitors.
 
If we are not able to compete effectively for users and advertiser spend our business and operating results would be materially and adversely affected.

User growth and engagement depend upon effective interoperation with operating systems, networks, and devices, that we do not control.

Currently, our application is available only on Apple’s iOS. We are dependent on the interoperability of our products and services with popular devices, and mobile operating systems that we do not control. Any changes in such systems or devices that degrade the functionality of our products and services or give preferential treatment to competitive products or services could adversely affect usage of our products and services. Further, if the number of platforms for which we develop our product expands, it will result in an increase in our operating expenses. In order to deliver high quality products and services, it is important that our products and services work with a range of operating systems and devices that we do not control. In addition, because our users access our products and services through mobile devices, we are particularly dependent on the interoperability of our products and services with mobile devices and operating systems. We may not be successful in developing or maintaining relationships with key participants in the mobile industry or in developing products or services that operate effectively with these operating systems and devices. In the event that it is difficult for our users to access and use our products and services on their mobile devices, our user growth and engagement could be harmed, and our business and operating results could be adversely affected.

We have a limited operating history in a new and unproven market for our platform, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

We have developed a mobile app for public self-expression and meeting people in real time, and the market for our products and services is relatively new and may not develop as expected, if at all. People who are not our users may not understand the value of our products and services and new users may initially find our products confusing.  Convincing potential new users of the value of our products and services is critical to increasing our user base and to the success of our business.

We have a limited operating history, and only began to generate revenue in 2014 which makes it difficult to effectively assess our future prospects or forecast future results. We encounter or may encounter many risks in this developing and rapidly evolving market. These risks and challenges include its ability to, among other things:

 
·
increase its number of users and user engagement;

 
·
successfully expand our business;

 
·
develop a reliable, scalable, secure, high-performance technology infrastructure that can efficiently handle increased usage;

 
·
convince advertisers of the benefits of our products compared to alternative forms of advertising;

 
·
develop and deploy new features, products and services;
 
 
 
35

 
 
ITEM 1A. RISK FACTORS - continued
 
 
·
successfully compete with other companies, some of which have substantially greater resources and market power than us, that are currently in, or may in the future enter, its industry, or duplicate the features of our products and services;

 
·
attract, retain and motivate talented employees, particularly engineers, designers and product managers;

 
·
process, store, protect and use personal data in compliance with governmental regulations, contractual obligations and other obligations related to privacy and security;

 
·
continue to earn and preserve its users’ trust, including with respect to their private personal information; and

 
·
defend ourselves against litigation, regulatory, intellectual property, privacy or other claims.
 
If we fail to educate potential users and potential advertisers about the value of our products and services, if the market for our platform does not develop as we expect or if we fail to address the needs of this market, our business will be harmed. We may not be able to successfully address these risks and challenges or other unforeseen risks and challenges. Failure to adequately address these risks and challenges could harm our business and cause our operating results to suffer.

Our business depends on the continued and unimpeded access to our products and services on mobile devices by our users and advertisers. If we or our users experience disruptions in service or if mobile service providers are able to block, degrade or charge for access to our products and services, we could incur additional expenses and the loss of users and advertisers.

We depend on the ability of our users and advertisers to access mobile devices. Currently, this access is provided by companies that have significant market power in the broadband and telecommunications access marketplace, including incumbent telephone companies, cable companies, mobile communications companies, government-owned service providers, device manufacturers and operating system providers, any of whom could take actions that degrade, disrupt or increase the cost of user access to our products or services, which would, in turn, negatively impact our business.  We also rely on other companies to maintain reliable communications network systems that provide adequate speed, data capacity and security to us and our users. As the number of mobile device users continues to grow, frequency of use and amount of data transmitted, the communications infrastructure that we and our users rely on may be unable to support the demands placed upon it. The failure of the mobile communications infrastructure that we and/or our users rely on, even for a short period of time, could undermine our operations and harm our operating results.

Abusive activities by certain users could diminish the user experience on our platform, which could damage our reputation and deter our current and potential users from using our products and services.

There are a range of abusive activities that are prohibited by the our terms of service and are generally defined as unsolicited, repeated actions that negatively impact other users with the general goal of drawing user attention to a given person, account, site, product or idea. This includes posting large numbers of unsolicited mentions of a user, duplicate outlets, misleading links (e.g., to malware or click-jacking pages) or other false or misleading content, and aggressively following and un-following accounts, adding users to lists, sending invitations to inappropriately attract attention. Our terms of service also prohibit the creation of serial or bulk accounts, both manually or using automation, for disruptive or abusive purposes.  Although we continue to invest resources to reduce spam and other abusive behavior, we expect spammers and abusers will continue to seek ways to act inappropriately on our platform.  We will continuously combat spam and other abusive behaviors, including by suspending or terminating accounts we believe to be spammers and launching algorithmic changes focused on curbing abusive activities. Combatting spam and other abusive behaviors require the diversion of significant time and focus of our engineering team from improving our products and services. If spam or abusive behavior increase, this could hurt our reputation for delivering relevant content or reduce user growth and user engagement and result in continuing operational cost to us.

If we fail to effectively manage our growth, our business and operating results could be harmed.

If we experience rapid growth in our headcount and operations, it will place significant demands on our management, operational and financial infrastructure. We intend to continue to make substantial investments to expand our operations, research and development, sales and marketing and general and administrative organizations. We face significant competition for employees, particularly engineers, designers and product managers, from other Internet and high-growth companies, which include both publicly-traded and privately-held companies, and we may not be able to hire new employees quickly enough to meet our needs. To attract highly skilled personnel, we will need to continue to offer, highly competitive compensation packages. As we continue to grow, we are subject to the risks of over-hiring, over-compensating our employees and over-expanding our operating infrastructure, and to the challenges of integrating, developing and motivating a rapidly growing employee base.  If we fail to effectively manage our hiring needs and successfully integrate new hires, our efficiency and ability to meet our forecasts and our employee morale, productivity and retention could suffer, and our business and operating results could be adversely affected.
 
 
 
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ITEM 1A. RISK FACTORS - continued
 
Our business and operating results may be harmed by a disruption in our service, or by our failure to timely and effectively scale and adapt our existing technology and infrastructure.

One of the reasons people use our platform is for real-time information and personal contact. We may, in the future, experience service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, hardware failure, capacity constraints due to an overwhelming number of people accessing our products and services simultaneously, computer viruses and denial of service or fraud or security attacks. Although we are investing significantly to improve the capacity, capability and reliability of our infrastructure, we are not currently serving traffic equally through the data centers that support our platform. Accordingly, in the event of a significant issue at the data center supporting most of our network traffic, some of our products and services may become inaccessible to the public or the public may experience difficulties accessing our products and services.  Any disruption or failure in our infrastructure could hinder our ability to handle existing or increased traffic on our platform, which could significantly harm our business.
 
As the number of our users increases and our users generate more content, including photos and videos hosted by us, we may be required to expand and adapt our technology and infrastructure to continue to reliably store, serve and analyze this content. It may become increasingly difficult to maintain and improve the performance of our products and services, especially during peak usage times, as our products and services become more complex and our user traffic increases. This would negatively impact our ability to attract users and advertisers and increase engagement of our users. We expect to continue to make significant investments to maintain and improve the capacity, capability and reliability of our infrastructure. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and infrastructure to accommodate actual and anticipated changes in technology, our business and operating results may be harmed.

If we are unable to maintain and promote our brand, our business and operating results may be harmed.

We believe that maintaining and promoting our brand is critical to expanding our base of users and advertisers. Maintaining and promoting our brand will depend largely on our ability to continue to provide useful, reliable and innovative products and services, which we may not do successfully. We may introduce new features, products, services or terms of service that users, platform partners or advertisers do not like, which may negatively affect our brand. Additionally, the actions of platform partners may affect our brand if users do not have a positive experience using third-party applications. Our brand may also be negatively affected by the actions of users that are hostile or inappropriate to other people, by users impersonating other people, by users identified as spam, by users introducing excessive amounts of spam on its platform or by third parties obtaining control over users’ accounts. Maintaining and enhancing our brand may require iHookup to make substantial investments and these investments may not achieve the desired goals. If we fail to successfully promote and maintain our brand or if we incur excessive expenses in this effort, our business and operating results could be adversely affected.

Negative publicity could adversely affect our business and operating results.

Negative publicity about us, including about our product quality and reliability, changes to our products and services, privacy and security practices, litigation, regulatory activity, the actions of our users or user experience with our products and services, even if inaccurate, could adversely affect our reputation and the confidence in and the use of our products and services. For example, service outages could result in widespread media reports. Such negative publicity could also have an adverse effect on the size, engagement and loyalty of our user base and result in decreased revenue, which could adversely affect our business and operating results.

We focus on product innovation and user engagement rather than short-term operating results.

We encourage employees to quickly develop and help us launch new and innovative features. We focus on improving the user experience for our products and services and on developing new and improved products and services for the advertisers on our platform. We prioritize innovation and the experience for users and advertisers on our platform over short-term operating results. We may make product and service decisions that may reduce our short-term operating results if we believe that the decisions are consistent with its goals to improve the user experience and performance for advertisers, which we believe will improve our operating results over the long term. These decisions may not be consistent with the short-term expectations and may not produce the long-term benefits that we expect, in which case our user growth and user engagement, our relationships with advertisers and our business and operating results could be harmed. In addition, our focus on the user experience may negatively impact our relationships with existing or prospective advertisers. This could result in a loss of advertisers, which could harm our revenue and operating results.

Our products and services may contain undetected software errors, which could harm our business and operating results.

Our products and services incorporate complex software and we encourage our employees to quickly develop and help us launch new and innovative features. Our software may now or in the future contain, errors, bugs or vulnerabilities. Some errors in the software code may only be discovered after the product or service has been released. Any errors, bugs or vulnerabilities discovered in our code after release could result in damage to our reputation, loss of users, loss of platform partners, loss of advertisers or advertising revenue or liability for damages, any of which could adversely affect our business and operating results.
 
 
 
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ITEM 1A. RISK FACTORS - continued
 
Our business is subject to complex and evolving U.S. laws and regulations. These laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to its business practices, monetary penalties, increased cost of operations or declines in user growth, user engagement or ad engagement, or otherwise harm our business.