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IHOOKUP SOCIAL, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) 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 iHookup Social, Inc., a Nevada corporation, formerly known as Titan Iron Ore Corp., a Nevada corporation (the "Company"), was incorporated in the State of Nevada on June 5, 2007. The Company's plan after its incorporation on June 5, 2007 was to produce user-friendly software that creates interactive digital yearbook software for schools. The Company produced nominal revenues of $4,855. Effective June 15, 2011, the Company completed a merger with its subsidiary, Titan Iron Ore Corp., a Nevada corporation, which was incorporated solely to effect a change in the Company's name from "Digital Yearbook Inc." to "Titan Iron Ore Corp." Also effective June 15, 2011, the Company effected a 37-to-1 forward stock split of its issued and outstanding common stock. As a result, the Company's authorized capital increased from 100,000,000 shares of common stock with a par value of $0.0001 to 3,700,000,000 shares of common stock with a par value of $0.0001 of which 5,151,000 shares of common stock outstanding increased to 190,587,000 shares of common stock. Subsequently, on June 20, 2011, the Company issued 2,100,000 shares of common stock pursuant to a private placement unit offering, increasing the number of shares of common stock outstanding to 192,687,000. Pursuant to an asset purchase agreement dated January 18, 2014, iHookup Social, Inc., a Delaware corporation ("iHookup-DE"), purchased the iHookup mobile application, its name, intellectual property, user database, certain domain names, and Apple developer from CheckMate Mobile, Inc., a Delaware corporation ("CheckMate") for a purchase price of $293,750. iHookup-DE paid the purchase price by issuing 58,750 (1,175,000 pre-split) shares of its Series A Preferred Stock to CheckMate. Subsequent to the purchase, the assets were considered impaired, resulting in an impairment loss. On February 3, 2014, as part of the reverse acquisition transaction described below all outstanding Series A Preferred Stock of iHookup-DE held by CheckMate were converted into common stock of iHookup-DE at a ratio of 1-to-1. Due to the Company's inability to raise capital to further develop mining claims and pursue mineral exploration, the Company decided to exit the mining business and look for other opportunities. As previously reported in the Current Report on Form 8-K filed with the SEC on February 6, 2014, the Company entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement") on February 3, 2014 with iHookup Operations Corp., a wholly-owned Delaware subsidiary of the Company ("Acquisition Sub") and iHookup-DE, whereby iHookup-DE was the surviving entity and became the wholly-owned subsidiary of the Company. iHookup-DE's former stockholders exchanged all of their 600,000 (12,000,000 pre-split) shares of outstanding common stock for 2,500,000 (50,000,000 pre-split) shares of the Company's designated Series A Preferred Stock. Each share of the Company's common stock entitles its holder to one (1) vote on each matter submitted to its stockholders. The holders of the Series A Preferred Stock are entitled to cast votes equal to nine (9) times the total number of shares of common stock which are issued and outstanding, voting together with the holders of common stock as a single class. The Series A Preferred Stock is convertible into nine (9) times the number of common stock outstanding until the closing of a Qualified Financing (i.e. the sale and issuance of our equity securities that results in gross proceeds in excess of $2,500,000). As a result of the transaction, the former stockholders of iHookup-DE received a controlling interest in the Company. On April 11, 2014, the Company filed an Amended and Restated Articles of Incorporation with the Nevada Secretary of State and changed its name to "iHookup Social, Inc." On April 29, 2014, FINRA approved the name change and assigned the Company a temporary trading symbol under "TFERD". On May 26, 2014, the Company will begin trading under the symbol "HKUP". On April 29, 2014, FINRA also approved a 20 for 1 reverse stock split whereby 937,459,274 shares of the Company's common stock then issued and outstanding, were exchanged for 46,872,964 shares of the Company's common stock. As used in this report from here on, the terms "we", "us", "our", "our company" and "iHookup" mean iHookup Social, Inc., formerly known as Titan Iron Ore Corp., and its Delaware subsidiary, unless the context clearly indicates otherwise. 20-------------------------------------------------------------------------------- Our Current Business: GPS and Location Based Mobile Dating - Social Networking iHookup's business is the development and dissemination of a mobile-social application named "iHookup." The application is designed to facilitate connections between people, recommend local destinations that facilitate "Hookups" and generally promote social interaction and engagement. The application utilizes the intelligence of global positioning system ("GPS") and localized/proximity based technology to facilitate such interactions. It is a mobile application that intersects dating, social media and location based connections. Going forward, we expect to focus on this aspect of the business. Making connections through online or mobile devices has become a dominant part of today's mobile-social lifestyle, across various social circles, age groups, race, gender and demographics. In the near future, we may integrate locally relevant content and special offers/discounts from brand advertisers and merchants to drive those seeking a "real life" connection or a "Hookup" to a physical location, event or venue (e.g. to plan a networking event, Hookup for a date, or Hookup for lunch, coffee or drinks, etc.). Products/Services: iHookup Mobile Application The iHookup application is a proximity-based or location-based social platform and discovery application that facilitates communication between two or more users ("iHookup application" or "application"). It utilizes the intelligence of GPS and localized recommendations for dating, friends, groups and organizations to expand existing social circles. It is available on the iOS platform and in iTunes stores world-wide. We offer a free version, a paid version and a subscription version. The free version allows users to browse through the application's features and user profiles. The paid version which costs $0.99 to download, provides a trial of all subscription based services for a specified period of time, as determined by our marketing strategy. The subscription version allow users to send messages to each other and take advantage of any localized recommendations or offers with certain brands and merchants. The application also offers a "virtual currency" component, allowing users to purchase "in application" coin packs that activate virtual gifts and various service-based options (see subscription offers and pricing below - prices are subject to change and often do during this user acquisition phase our company is currently in): Recurring Subscriptions $8.99 1-Month $14.99 3-Month $24.99 6-Month $44.99 Annual $69.99 Coin Pack1 $4.99 Coin Pack2 $7.99 Coin Pack 3 $19.99We are pursuing our growth in our current "dating vertical" market, as well as expanding our reach into the general audience category of "social networking." In the near future, we may provide our users with "local" options of many kinds, enabling "social commerce" (i.e. using social media to promote the buying and selling of products and services) with mobile distribution of locally relevant content and special offers. We hope to bring together a dynamic opportunity for brands, advertisers and merchants to interact in new and innovative ways with the iHookup Social Network, while building customer loyalty, engagement and revenues. We intend to build population density in our user base by engaging users with new features that are locally relevant and retain our user base through other enhanced engagement features. Through the potential introduction of "social commerce" revenue opportunities, we may add another layer of monetization to our revenue model (as discussed below in Revenues). -------------------------------------------------------------------------------- 21-------------------------------------------------------------------------------- Marketing We market our application utilizing a variety of online and offline marketing activities. Our offline marketing activities generally consist of traditional marketing and event-based branding in various local markets. Our marketing plan also includes leveraging several key domain names registered by our company to bring local and event style marketing to college campuses and other areas. For example, our domain names include but are not limited to: www.hookupUCLA.com, www.hookupHARVARD.com, www.hookupASU.com and www.hookupHOLLYWOOD.com. 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, our company produces video ads that may be run on mobile "video" ad networks or be placed based on a variety of alliances with third parties who advertise and promote our services, from time to time. 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 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 in March 2014 on the Apple App Store is as follows: · Top Grossing Social Networking FREE iPhone / iPod App USA: #54 · Top Grossing Social Networking PAID iPhone / iPod App USA: #70 · Top Grossing Social Networking FREE iPad App USA: #83 · Top Rank in Social Networking FREE App USA: #149 · Top Rank Social Networking Paid in March: #20 · Top Rank Social Networking Paid Canada: #13 Revenue Our revenue is derived primarily from download and subscription fees for our paid and subscription versions, as well as from users purchasing virtual "coins" to activate short term features, or deliver virtual gifts or "Ice Breakers" to a specified recipient. Additional revenue opportunities include the potential introduction of "social commerce" to our application, in which special discounts and incentives by merchants, brands and advertisers may be integrated into our location based technology (of which we would be paid upon the action or redemption of each offer). The following table summarizes our revenue and related statistics for the quarter ended March 31, 2014 January February March Total Q1 $ $ $ $ REVENUE 8,694 7,605 10,909 27,208 APPLE COST 2,608 2,282 3,272 8,162 NET REVENUE 6,086 5,323 7,637 19,046 STATISTICS Downloads (Free and Paid) 7,406 6,547 16,599 Registered Users 120,148 124,588 137,743 # of In App Purchases 590 560 955 Registered Users consist of users (includes free, paid and subscribed) who have filled out a profile and created a username and password for our application. In-App Purchases consist of any purchases from within our application, which includes any virtual "coins" or subscriptions. Competition The Mobile Dating - Social Networking business is highly competitive and barriers to entry are minimal. We compete primarily with other e-dating websites and mobile applications (e.g. Tinder, Match.com, Zoosk, Ok Cupid, etc.), dating and matchmaking services, other social media platforms and applications, and other conventional media companies that provide personal services and traditional venues where people meet for dating or social gatherings (both online and offline). We hope to use the dating category as an entry point to a much broader "Social Networking" marketplace, where competitors will include websites and applications offering coupons by merchants and brands (e.g. Living Social, and Groupon). 22-------------------------------------------------------------------------------- We believe that our ability to compete successfully will depend primarily upon 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 our features, services and offerings generally to consumers relative to those of our competitors; • how quickly we can enhance our existing technology (e.g. develop an Android version) and services and/or develop new features and localized opportunities and venue based monetization opportunities in response to: • new, emerging and rapidly changing technologies; • the introduction of product and service offerings by our competitors; • changes in consumer requirements and trends in the single community relative to our competitors; and • our ability to engage in cost-effective marketing efforts, including by way of maintaining relationships with third parties with which we have entered into alliances, and the recognition and strength of our various brands relative to those of our competitors. Employees and Key Consultants Our company has five full time employees and one part time employee. Key consultants include (i) Integrity Media, Inc., a Nevada corporation, who provides us with certain investor-relation services, and (ii) Courtland Brooks, a consultant on the business of internet dating. Intellectual Property We intend, in due course, subject to legal advice, to apply for trademark, copyright and/or patent protection in the United States and other jurisdictions. We regard our intellectual property, including our software and trademark, as valuable assets and intend to vigorously defend them against infringement. While there can be no assurance that registered patents, trademarks and copyrights will protect our proprietary information, we intend to file for protection and assert our intellectual property rights against any infringer. Although any assertion of our rights can result in a substantial cost to, and diversion of effort by, our company, management believes that the protection of our intellectual property rights is an important part of our operating strategy. Market Opportunity As a whole, mobile applications create a socially connected experience while allowing users to push forward with personal goals to achieve, stay active or on the move and ultimately accessible at all times. 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. Results of Operations For the three months ended March 31, 2014 Our net loss and comprehensive loss for our interim period ended March 31, 2014 are summarized as follows: Three Months ended Ended March 31, 2014 Revenue $ 27,208 Total Operating Expenses 644,630 Loss From Operations (617,422 ) Other Income (Expenses) (293,750 ) Net Loss (911,172 ) Total revenue for the three months ended March 31, 2014 consisted of revenues from the downloading and follow-up subscriptions of the application. Total operating expenses of $644,630 for the three months ended March 31, 2014 consisted primarily of general and administrative expenses of $296,758, accretion and interest on promissory notes of $240,718, product development of $63,273, and sales and marketing of $29,074. Other income and expenses of $293,750 for the three months ended March 31, 2014 consisted of an impairment charge against an intangible asset acquired in connection with the application. 23-------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued Liquidity and Capital Resources Working Capital March 31, 2014 December 31, 2013 (unaudited) (audited) Current Assets $ 98,479 $ -- Current Liabilities 820,441 16,109 Working Capital(Deficiency) $ (721,962 ) $ (16,109 ) As of March 31, 2014, we had $85,979 in cash and $12,500 in prepaid expenses, as compared to $Nil as of December 31, 2013. As of March 31, 2014, we had accounts payable of $327,520, as compared to $16,109 as of December 31, 2013. Our accounts payable increased due to the Merger with iHookup-DE. As of March 31, 2014, we had current portion of convertible debentures of $168,505, as compared to $Nil as of December 31, 2013. Our convertible debentures increased due to the Merger with iHookup-DE. As of March 31, 2014, we had current portion of promissory note of $324,416, as compared to $Nil as of December 31, 2013. Our current portion of promissory note increased due to the Merger with iHookup-DE. Cash Flows Three months Ended March 31, 2014Net Cash Provided by (Used in) Operating Activities $ (252,453 ) Net Cash Provided by (Used in) Investing Activities 966 Net Cash Provided by (Used in) Financing Activities 337,466 Net Increase (Decrease) in Cash $ 85,979 Net Cash Provided by (Used in) Operating Activities Our cash used in operating activities of $252,453 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 Investing Activities Our cash provided by investing activities for the three month period ended March 31, 2014 was $966. Net Cash Provided by Financing Activities Our cash provided by financing activities of $337,966 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 Agreements and Convertible Notes with Asher Enterprises, Inc. As of February 24, 2014, our company entered into a securities purchase agreement (the "Asher SPA") with Asher Enterprises Inc. ("Asher"), pursuant to which our company sold to Asher a $63,000 face value 8% Convertible Note (the "Asher Note") with a term to November 26, 2014 (the "Asher Maturity Date"). Interest accrues daily on the outstanding principal amount of the Asher Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount of the Asher Note and interest is payable on the Asher Maturity Date. The Asher Note is convertible, in whole or in part, into common stock beginning six months after the issue date (February 24, 2014) (the "Issue date"), at the holder's option, at a 42% 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 our company prepays the note in full, our company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 130% if prepaid during the period commencing on the Issue Date through 60 days thereafter, (ii) 135% if prepaid 61 days following the closing through 90 days following the Issue Date, (iii) 140% if prepaid 91 days following the closing through 120 days following the Issue Date, (iv) 150% if prepaid 121 days following the Issue Date through 180 days following the Issue Date, and (v) 175% if prepaid 181 days following the Issue Date through the Asher Maturity Date. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the note becomes immediately due and payable. Should that occur our company is liable to pay the holder 150% of the then outstanding principal and interest. Asher does not have the right to convert the Note, to the extent that Asher and its affiliates would beneficially own in excess of 4.99% of our outstanding common stock. Asher has a right of first refusal to participate in future financings below $45,000 for a period of 12 months. The Company paid Asher $3,000 for its legal fees and expenses. Securities Purchase Agreements and Convertible Redeemable Promissory Notes with LG Capital Funding LLC On February 10, 2014, our company entered into a securities purchase agreement (the "LG SPA") with LG Capital Funding LLC ("LG"), pursuant to which our company will sell a one-year, 8% Convertible Redeemable Note to LG ( the "LG Note"). LG has funded $25,000 at closing on February 10, 2014. The term of the LG Note is one year (the "LG Maturity Date"), upon which the outstanding principal amount for each funding is payable. Amounts funded plus interest under the LG Notes are convertible into common stock at any time after the requisite rule 144 holding period, at the holder's option, at a conversion price equal to 50% of the average of the two (2) lowest closing prices in the ten (10) trading days previous to the conversion. In the event our company prepays the note in full, our company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 130% if prepaid during the period commencing on the Issue Date through 90 days thereafter, and (ii) 140% if prepaid 91 days following the closing through 180 days following the Issue Date. There is no redemption after the 180th day following the date of this note. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the note becomes immediately due and payable. The Company paid LG $1,500 for its legal fees and expenses, and paid a 3rd party broker a $2,500 commission. In connection with the LG transaction, on February 10, 2014, 2014, our company issued an 8% Convertible Redeemable Promissory Note (the "LG Replacement Note") to LG, in the face amount of $13,483, with a term to February 6, 215 (the "LG Replacement Note Maturity Date"). Interest accrues daily on the outstanding principal amount of the Note at a rate per annual equal to 8% on the basis of a 365-day year. The LG Replacement Note was issued in exchange for the surrender by LG to our company of $12,500 of the face value of a 10% Convertible Promissory Note dated April 24, 2013, granted by our company in favor of the Morley Company Family Investment, LLLP (the "Morley Note"). By virtue of a Debt Purchase Agreement dated February 10, 2014, LG purchased $13,483 of the Morley Note, and the parties agreed to exchange this amount of the Morley Note for the LG Replacement Note. Provided certain conditions are met, the LG Replacement Note and accrued interest is convertible into common stock at any time after the issuance date, at LG's option, at a conversion price equal to a 50% discount to the average of the two lowest closing bid prices for the ten trading days prior to conversion. The Company has no right to prepay the LG Replacement Note in full or in part. On the occurrence of certain events, at the request of the holder, the Note is payable at 150% of face amount plus accrued and unpaid interest. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 24% per annum and the Note becomes immediately due and payable. On February 17, 2014, The Company entered into a securities purchase agreement (the "LG SPA") with LG Capital Funding LLC ("LG"), pursuant to which our company will sell a one-year, 8% Convertible Redeemable Note to LG ( the "LG Note") with an effective date of February 17, 2014. LG has funded $21,000 at closing on February 20, 2014. The parties have agreed in writing to change the effective date of the LG SPA and LG Note to February 20, 2014. The term of the LG Note is one year (the "LG Maturity Date"), upon which the outstanding principal amount for each funding is payable. Amounts funded plus interest under the LG Notes are convertible into common stock at any time after the requisite rule 144 holding period, at the holder's option, at a conversion price equal to 50% of the average of the two (2) lowest closing prices in the ten (10) trading days previous to the conversion. In the event our company prepays the note in full, our company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 130% if prepaid during the period commencing on the Issue Date through 90 days thereafter, and (ii) 140% if prepaid 91 days following the closing through 180 days following the Issue Date. There is no redemption after the 180th day following the date of this note. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the note becomes immediately due and payable. The Company paid LG $1,000 for its legal fees and expenses, and paid a 3rd party broker a $2,000 commission. 25-------------------------------------------------------------------------------- In connection with the LG transaction, on February 20, 2014, 2014, our company issued an 8% Convertible Redeemable Promissory Note dated February 17, 2014 (the "LG Replacement Note") to LG, in the face amount of $50,000, with a term of one year (the "LG Replacement Note Maturity Date"). Interest accrues daily on the outstanding principal amount of the Note at a rate per annual equal to 8% on the basis of a 365-day year. The LG Replacement Note was issued in exchange for the surrender by LG to our company of $50,000 of the face value of a Convertible Promissory Note dated April 2, 2013, granted by our company in favor of the GCA Strategic Investment Fund, Limited (the "GCA Note"). By virtue of a Debt Purchase Agreement dated February 17, 2014, LG purchased $50,000 of the GCA Note on February 20, 2014, and the parties agreed to exchange this amount of the GCA Note for the LG Replacement Note. Provided certain conditions are met, the LG Replacement Note and accrued interest is convertible into common stock at any time after the issuance date, at LG's option, at a conversion price equal to a 50% discount to the average of the two lowest closing bid prices for the ten trading days prior to conversion. The Company has no right to prepay the LG Replacement Note in full or in part. On the occurrence of certain events, at the request of the holder, the Note is payable at 150% of face amount plus accrued and unpaid interest. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 24% per annum and the Note becomes immediately due and payable. As of March 18, 2014 ("Issue Date"), and with a closing date of March 21, 2014, our company entered into a securities purchase agreement (the "LG SPA") with LG Capital Funding, LLC ("LG"), pursuant to which our company sold to LG a $50,000 face value 8% Convertible Note (the "LG Note") with a term of twelve months (the "LG Maturity Date"). Interest accrues daily on the outstanding principal amount of the LG Note at a rate per annual equal to 8% on the basis of a 365-day year. The principal amount and interest of the LG Note is payable on the LG Maturity Date. The LG 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 15 trading day period prior to conversion. In the event our company prepays the LG Note in full, our company is required to pay off all principal, interest and any other amounts owing multiplied by 150% if prepaid during the period commencing on the Issue Date through 180 days thereafter. The Company may not prepay the LG 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 24% per annum and the LG Note becomes immediately due and payable. The Company paid LG $2,500 for its legal fees and expenses and paid a third party a $5,000 placement fee. Securities Purchase Agreements and Convertible Redeemable Promissory Notes with GEL Properties LLC On February 10, 2014, our company entered into a securities purchase agreement (the "GEL SPA") with GEL Properties LLC ("GEL"), pursuant to which our company will sell a one-year, 8% Convertible Redeemable Note to GEL ( the "GEL Note"). GEL has funded $25,000 at closing on February 10, 2014. The term of the GEL Note is one year (the "GEL Maturity Date"), upon which the outstanding principal amount for each funding is payable. Amounts funded plus interest under the GEL Notes are convertible into common stock at any time after the requisite rule 144 holding period, at the holder's option, at a conversion price equal to 50% of the average of the two (2) lowest closing prices in the ten (10) trading days previous to the conversion. In the event our company prepays the note in full, our company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 130% if prepaid during the period commencing on the Issue Date through 90 days thereafter, and (ii) 140% if prepaid 91 days following the closing through 180 days following the Issue Date. There is no redemption after the 180th day following the date of this note. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the note becomes immediately due and payable. The Company paid GEL $1,500 for its legal fees and expenses, and paid a 3rd party broker a $2,500 commission. In connection with the GEL transaction, on February 10, 2014, 2014, our company issued an 8% Convertible Redeemable Promissory Note (the "GEL Replacement Note") to GEL, in the face amount of $13,483, with a term to February 6, 2015 (the "GEL Replacement Note Maturity Date"). Interest accrues daily on the outstanding principal amount of the Note at a rate per annual equal to 8% on the basis of a 365-day year. The GEL Replacement Note was issued in exchange for the surrender by GEL to our company of $12,500 of the face value of a 10% Convertible Promissory Note dated April 24, 2013, granted by our company in favor of the Morley Company Family Investment, LLLP (the "Morley Note"). By virtue of a Debt Purchase Agreement dated February 10, 2014, GEL purchased $13,483 of the Morley Note, and the parties agreed to exchange this amount of the Morley Note for the GEL Replacement Note. Provided certain conditions are met, the GEL Replacement Note and accrued interest is convertible into common stock at any time after the issuance date, at GEL's option, at a conversion price equal to a 50% discount to the average of the two lowest closing bid prices for the ten trading days prior to conversion. The Company has no right to prepay the GEL Replacement Note in full or in part. On the occurrence of certain events, at the request of the holder, the Note is payable at 150% of face amount plus accrued and unpaid interest. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 24% per annum and the Note becomes immediately due and payable On February 17, 2014, The Company entered into a securities purchase agreement (the "GEL SPA") with GEL Properties LLC ("GEL"), pursuant to which our company will sell a one-year, 8% Convertible Redeemable Note to GEL ( the "GEL Note") with an effective date of February 17, 2014. GEL has funded $21,000 at closing on February 20, 2014. The parties have agreed in writing to change the effective date of the LG SPA and LG Note to February 20, 2014. The term of the GEL Note is one year (the "GEL Maturity Date"), upon which the outstanding principal amount for each funding is payable. Amounts funded plus interest under the GEL Notes are convertible into common stock at any time after the requisite rule 144 holding period, at the holder's option, at a conversion price equal to 50% of the average of the two (2) lowest closing prices in the ten (10) trading days previous to the conversion. In the event our company prepays the note in full, our company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 130% if prepaid during the period commencing on the Issue Date through 90 days thereafter, and (ii) 140% if prepaid 91 days following the closing through 180 days following the Issue Date. There is no redemption after the 180th day following the date of this note. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the note becomes immediately due and payable. The Company paid GEL $1,000 for its legal fees and expenses, and paid a 3rd party broker a $2,000 commission. 26-------------------------------------------------------------------------------- In connection with the GEL transaction, on February 20, 2014, 2014, our company issued an 8% Convertible Redeemable Promissory Note dated February 17, 2014 (the "GEL Replacement Note") to GEL, in the face amount of $50,000, with a term of one year (the "GEL Replacement Note Maturity Date"). Interest accrues daily on the outstanding principal amount of the Note at a rate per annual equal to 8% on the basis of a 365-day year. The GEL Replacement Note was issued in exchange for the surrender by GEL to our company of $50,000 of the face value of a Convertible Promissory Note dated April 2, 2013, granted by our company in favor of the GCA Strategic Investment Fund, Limited (the "GCA Note"). By virtue of a Debt Purchase Agreement dated February 17, 2014, GEL purchased $50,000 of the GCA Note on February 20, 2014, and the parties agreed to exchange this amount of the GCA Note for the GEL Replacement Note. Provided certain conditions are met, the GEL Replacement Note and accrued interest is convertible into common stock at any time after the issuance date, at GEL's option, at a conversion price equal to a 50% discount to the average of the two lowest closing bid prices for the ten trading days prior to conversion. The Company has no right to prepay the GEL Replacement Note in full or in part. On the occurrence of certain events, at the request of the holder, the Note is payable at 150% of face amount plus accrued and unpaid interest. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 24% per annum and the Note becomes immediately due and payable Securities Purchase Agreement and Convertible Redeemable Promissory Note with Coventry Enterprises LLC As of March 18, 2014 ("Issue Date"), and with a closing date of March 20, 2014, our company entered into a securities purchase agreement (the "Coventry SPA") with Coventry Enterprises LLC., ("Coventry"), pursuant to which our company sold to Coventry a $50,000 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 15 trading day period prior to conversion. In the event our company prepays the Coventry Note in full, our company is required to pay off all principal, interest and any other amounts owing multiplied by 150% if prepaid during the period commencing on the Issue Date through 180 days thereafter. The Company may not prepay the Coventry 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 24% per annum and the Coventry Note becomes immediately due and payable. The Company paid Coventry $2,500 for its legal fees and expenses. Securities Purchase Agreement and Convertible Redeemable Promissory Notes with Beaufort Ventures PLC On March 7, 2014 and with a closing date of March 11, 2014, The Company entered into a securities purchase agreement (the "Beaufort SPA") with Beaufort Ventures PLC ("Beaufort"), pursuant to which our company will sell a six month, 8% Convertible Redeemable Note to Beaufort ( the "Beaufort Note"). On March 11, 2014, Beaufort funded $55,000 at closing. The maturity date of the Beaufort Note is September 7, 2014 (the "Beaufort Maturity Date"), upon which the outstanding principal amount for the Beaufort Note is payable. Amounts funded plus interest under the Beaufort Notes are convertible into common stock at any time after the requisite rule 144 holding period, at the holder's option, at a conversion price equal to 58% of the lowest closing price in the ten (10) trading days previous to the conversion. However, if our company's share price loses the bid at any time before September 7, 2014 (ex: .0001 on the ask with zero market makers on the bid on level 2), loses DTC eligibility, or gets "chilled for deposit", then the fixed conversion price resets to $.00001. In the event our company prepays the note in full, our company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 130% if prepaid during the period commencing on the Issue Date through 90 days thereafter, and (ii) 140% if prepaid 91 days following the closing through 180 days following the Issue Date. There is no redemption after the 180th day following the date of this note. In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the note becomes immediately due and payable. In connection with the Beaufort transaction, on March 7, 2014, 2014, our company entered into a debt purchase agreement (the "Beaufort Debt Purchase Agreement") with Beaufort and GCA Strategic Investment Fund, Limited ("GCA"), whereby Beaufort agreed to assume $90,000 of the face value of a Convertible Promissory Note dated April 24, 2013, granted by our company in favor of GCA (the "GCA Note") on terms modified to be consistent with the Beaufort Note. Subsequent to March 31, 2014 our company obtained proceeds of $195,000 for various convertible debenture agreements ("Debentures") entered into with face value totaling $195,000, 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 our company at various conversion rates as outlined in each agreement. The Company paid $18,750 in legal fees and other expenses in connection with the Debentures. 27 -------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Going Concern At March 31, 2014, we had an accumulated deficit of $1,539,537 and incurred a net loss of $911,172, for the period ended March 31, 2014. We expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. We have generated minimal revenues and have incurred losses since inception. Accordingly, we will be dependent on future additional financing in order to finance operations and growth. We are considered an early stage company and has only focused on our current business in the iHookup application since December 3, 2013. Since we are an early stage company, there is no assurance that we will generate sufficient revenue to sustain our operations. |