As filed with the Securities and Exchange Commission on July
28, 2014;
Registration No. _________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
Registration Statement under the Securities
Act of 1933
IHOOKUP SOCIAL, INC.
(Name of issuer in its charter)
Nevada
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7372
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98-0546715
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code)
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(I.R.S. Employer
Identification No.)
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iHookup Social, Inc.
125 East Campbell Ave
Campbell,
CA 95008
(855) 473-8473
(Address and telephone number of principal
executive offices)
Robert Rositano, Jr., CEO, Secretary and
Director
125 East Campbell Ave., Campbell, CA 95008,
(855) 473-8473
(Name, address
and phone number of agent for service)
Copies of communications to:
Matthew C. McMurdo, Esq.,
28 West 44
th
Street,
16
th
Floor
New York, NY 10036
(917) 318-2865
Approximate date of commencement of proposed
sale to the public: As soon as practicable after the registration statement becomes effective.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box.
x
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement number of the earlier effective registration statement for
the same offering.
o
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
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 definitions of
"large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.
Large Accelerated Filer
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Accelerated Filer
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Non-accelerated Filer
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Smaller reporting company
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S
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(Do not check if a smaller reporting company)
Calculation of registration fee
Title of Each
Class Of
Securities To Be
Registered
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Amount To Be
Registered (1)
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Proposed Maximum
Offering
Price Per Share (2)
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Proposed Maximum
Aggregate
Offering Price (2)
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Amount of
Registration Fee (2)
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Common stock, $.0001 par value per share
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166,666,668
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$
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.03
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$
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5,000,000
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$
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644.00
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(1) The shares of common stock of iHookup
Social, Inc. (“HKUP,” “Company,” “we,” or “our”) to be registered are 166,666,668
shares of our common stock (the “Put Shares”) that we may put to Beaufort Capital Partners LLC (“Beaufort”),
pursuant to an amended and restated investment agreement by and between Beaufort and the Company, dated July 22, 2014 (the “Drawdown
Agreement”).
In the event of stock splits, stock dividends, or similar transactions
involving the common stock, the number of common shares registered shall, unless otherwise expressly provided, automatically be
deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of
1933, as amended (the “Securities Act”). In the event that adjustment provisions of the Drawdown Agreement require
the registrant to issue more shares than are being registered in this registration statement, for reasons other than those stated
in Rule 416 of the Securities Act of 1933, as amended, the registrant will file a new registration statement to register those
additional shares.
(2) The proposed maximum offering price per share and the proposed
maximum aggregate offering price have been estimated solely for the purpose of calculating the amount of the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended, on the basis of the average of the high and low prices
of the common stock on the OTCQB on July 23, 2014, a date within five (5) trading days prior to the date of the filing of this
registration statement.
The registrant hereby amends this Registration
Statement on the date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become effective on the date as the Commission, acting pursuant
to said Section 8(a), may determine.
Our financial statements have been examined
by our auditors, Manning Elliott LLP, and have been prepared in accordance with generally accepted accounting principles and pursuant
to Regulation S-X as promulgated by the SEC and are included herein.
The information in this prospectus is not
complete and may be changed. The Registrant may not sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell securities and we are not soliciting an offer to
buy these securities in any state where the offer or sale is not permitted.
Selling Stockholder Preliminary Prospectus
Subject to completion July 28, 2014
IHOOKUP SOCIAL, INC.
166,666,668 Shares of Common Stock
This prospectus relates to the resale of up
to 166,666,668 shares of common stock, $.0001 par value, of iHookup Social, Inc., a Nevada corporation, by Beaufort. The total
amount of shares of common stock, which may be sold pursuant to this prospectus, would constitute approximately 68.9% of our issued
and outstanding common stock as of June 11, 2014 if all of the shares had been sold by that date.
Pursuant to the Drawdown Agreement, which has
a total drawdown amount of five million dollars ($5,000,000) (the “Commitment Amount”), HKUP has the right to sell
to Beaufort, at HKUP’s sole discretion, and Beaufort has the obligation to purchase through advances to the Company, the
Company's common stock through draw-down notice requests (each, a “Notice”) issued by the Company. The number of shares
of common stock that Beaufort shall purchase shall be determined by dividing the dollar amount raised, which may or may not equal
the entire amount of the advance request, by the purchase price as quoted on the OTCQB. No fractional shares will be issued. Fractional
shares will be rounded up to the next full share.
Beaufort is selling all of the shares of common
stock offered by this prospectus. It is anticipated that Beaufort will sell these shares of common stock from time to time in one
or more transactions, in negotiated transactions or otherwise, at prevailing market prices or at prices otherwise negotiated. We
will not receive any proceeds from the sale of shares by Beaufort. However, we will receive the sale price of any common stock
that we sell to Beaufort under the Drawdown Agreement.
Beaufort is an “underwriter” within
the meaning of the Securities Act of 1933, as amended (the “Securities Act”) in connection with the resale of our common
stock under the equity line of credit. Beaufort will pay us 80% of the three (3) lowest trading price of our common stock, as quoted
on the OTCQB, during the five (5) trading days immediately before our delivery of our Notice to Beaufort of our election to exercise
our "put" right. The offering will terminate upon the earlier of (i) the first day of the month next following the 36-month
anniversary of the date the registration statement, to which this prospectus is made a part, is declared effective by the SEC and
(ii) the date on which Beaufort shall have made payment of advances in the aggregate amount of the Commitment Amount. There are
no underwriting agreements. Beaufort has agreed to pay all the costs and expenses of this registration other than costs incurred
in HKUP’s review of this registration.
Our common stock is quoted on the OTCQB under
the symbol "HKUP." The shares of our common stock registered hereunder are being offering for sale by Beaufort at prices
established on the OTCQB during the term of this offering. On July 23, 2014, the closing price of our common stock was $.03 per
share on the OTCQB. These prices will fluctuate based on the demand for our common stock.
Based on the closing lowest traded price of
our common stock on July 23, 2014, Beaufort would be able to sell approximately 166,666,668 shares of our common stock. Such amount
of shares ignores the 4.99% cap on the number of shares that can be held by Beaufort pursuant to the Drawdown Agreement.
We have no ongoing revenues to satisfy our
ongoing liabilities. Our auditors have issued a going concern opinion. Unless we secure equity, debt financing or joint venture
partners, of which there can be no assurance, or identify a profitable acquisition candidate, we will not be able to continue operations
for more than ten months.
We may amend or supplement this prospectus
from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or
supplements carefully before you make your investment decision. The Company is not a blank check company because it has a specific
business purpose and has no plans or intention to merge with an operating company. To our knowledge, none of the Company’s
shareholders have plans to enter a change of control or change of management. None of our current management has previously been
involved with a development stage company that did not implement its business plan, that generated no or minimal revenues or was
engaged in a change of control.
The shares being offered are highly speculative
and they involve a high degree of risk and should be considered only by persons who can afford the loss of their entire investment.
See "Risk Factors" beginning on page 11.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of
this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is subject
to completion July 28, 2014
TABLE OF CONTENTS
PROSPECTUS SUMMARY
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6
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RISK FACTORS
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13
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
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27
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USE OF PROCEEDS
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27
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DETERMINATION OF OFFERING PRICE
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28
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DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES
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28
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SELLING STOCKHOLDER
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29
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PLAN OF DISTRIBUTION
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30
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BUSINESS
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31
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MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
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36
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DESCRIPTION OF PROPERTY
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50
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LEGAL PROCEEDINGS
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50
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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
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50
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EXECUTIVE COMPENSATION
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54
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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57
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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59
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DESCRIPTION OF SECURITIES
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60
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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61
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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63
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DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
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63
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EXPERTS
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63
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WHERE YOU CAN FIND MORE INFORMATION
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63
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FINANCIAL STATEMENTS
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F-1
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Until September 3, 2014, all dealers that effect transactions
in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or
subscriptions.
You may only rely on the information contained
in this prospectus or that we have referred you to. We have not authorized anyone to provide you with different information. This
prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the common stock
offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common
stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this prospectus nor any sale
made in connection with this prospectus shall, under any circumstances, create any implication that there has been no change in
our affairs since the date of this prospectus or that the information contained by reference to this prospectus is correct as of
any time after its date.
PROSPECTUS SUMMARY
The information presented is a brief overview
of the key aspects of the offering. The prospectus summary contains a summary of information contained elsewhere in this prospectus.
You should carefully read all information in the prospectus, including the financial statements and the notes to the financial
statements under the Financial Statements section beginning on page F-1 prior to making an investment decision.
Our Corporate History and Background
We were incorporated in the State of Nevada
on June 5, 2007. Our plan after our inception on June 5, 2007 was to produce user-friendly software that creates interactive digital
yearbook software for schools and allows them to create and burn their own interactive digital yearbooks on CD/DVD. We produced
nominal revenues of $4,855 in our early stages as a result of sales efforts undertaken.
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 from
“Digital Yearbook Inc.” to “Titan Iron Ore Corp.”
Also effective June 15, 2011, we effected a
37 to one forward stock split of our authorized and 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.
Effective June 30, 2011, and 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.
On February 3, 2014, the Company completed
a merger with iHookup Social, Inc., a Delaware corporation (“iHookup”) pursuant to an Agreement and Plan of Merger
and Reorganization (the “Merger Agreement”) dated January 31, 2014. Pursuant to the Merger Agreement, the Company 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 their twelve million (12,000,000) shares of outstanding common stock for fifty million (50,000,000) shares of the Company’s
newly designated Series A Preferred Stock.
As a result of the transaction, the former iHookup
stockholders received a controlling interest in the Company.
iHookup Social’s business is development
and dissemination of a "proximity based" mobile social media application that facilitates connections between people,
utilizing the intelligence of GPS and localized recommendations. Going forward, the Company expects to focus on this aspect of
the business.
Our Business
Introduction – Mobile Dating App
iHookup is seeking to redefine the way people
meet, date, discover and socially convey interest in a potential partner. The laws of meeting and dating have shifted, with traditional
dating and wooing of that prospective mate now taking a back seat to meeting online or through the use of technology. Among various
social circles, age groups, race, sex – gender and demographic, making connections through online or mobile devices has become
a dominant part of today’s mobile – social lifestyle.
Market Opportunity
As a whole mobile apps have become an
extension of the proliferation of technology, and now our interests and desires can be transformed into pocket sized mobile applications.
Apps create a socially connected experience while continuing 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, continuing
to support 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.
Market Size
The current
market for mobile dating in the US is over $2 billion (Source: IBIS WORLD). The larger market of mobile applications is projected
to continue its growth. In 2013, the business of mobile applications doubled in revenue from the previous year.
(Source:
Portio Research).
Email,
web browsers, and social networks lead in usage frequency
.
By far, the largest contributor
to this number will be app-enabled commerce, supplemented by forecasted revenue from downloads, in-advertising and virtual goods.
Mobile dating apps now
command more time compared to online dating sites: 8.4 minutes vs. 8.3 minutes. A year ago, people spent more than twice as much
time on the Internet for dating as they now do on mobile apps. However, mobile app usage has increased dramatically over the last
year, from 3.7 minutes in June 2010 to 8.4 minutes in June 2011, overtaking online dating time spent on websites [SOURCE THE ABOVE].
These findings parallel Flurry Analytics’ recent report that showed, in total, mobile app usage has overtaken desktop (“Internet”)
usage.
In terms of engagement, frequency
of use is driving growth in time spent per day in mobile dating apps. Last year, the average user opened his or her dating app
twice per day, a little under two minutes each time. Now the average user opens his or her app over five times a day, but for shorter
periods of time, about 1.5 minutes per session.
Similarly, the number of people
using mobile apps vs. the Internet for eDating is growing rapidly.
Based upon the proportion of
unique users, dating apps are more popular on smartphones than online dating sites are on the Internet. For the Internet, we compared
unique visitors of online dating sites versus the total number of people using the Internet, which totaled 12% in June 2010 and
13% in June 2011. For mobile apps, the Company compared unique users of mobile dating apps versus all apps, which yielded 15% in
June 2010 and 17% in June 2011.
We have also found that the
number of people using dating apps is growing faster than the number using all apps in every category. In short, dating is a growth
category and Social Networking even larger. Overall, the number of unique users of all applications continues to increase while
the number of unique users using mobile / Social apps continues to validate the trend that users are moving away from their computers
to a more rewarding “mobile” experience.
We believe that dating itself
is inherently local and better served by mobile, and it seems that mobile apps facilitate better engagement throughout the day.
Today’s eDater need not be in front of his or her computer to view potential matches, or to receive or send messages.
The user’s phone is always by his or her side. Our engagement numbers regarding the frequency and session length, described
above, support this trend.
iOS and Android devices are
versatile multi-purpose machines that have already significantly impacted the business models of music, games and other Media &
Entertainment industry categories. And now, within the nexus of mobile-social-local, mobile dating apps appear to be another high
growth sector. Mobile dating apps are heavily used by both genders.
Similarly, as demonstrated
above, mobile dating apps are used by multiple generations with the highest use by those aged 25-34 years followed closely by those
35-54 years of age.
Growth
In less than two decades, online dating
soared and is "in the growth phase of its economic life cycle," says an IBISWorld report (April 2014) Though 18- to 29-year-olds
make up the biggest chunk of users, with 30- to 49-year-olds next in line, demand is expected to increase with users over 50 years
of age too. More than one-third of Baby Boomers are unmarried, and as more and more migrate to the digital world, the industry
is beginning to target this unattached and largely underserved market. Nielsen reports that the number of Americans using apps
or a mobile version of a dating website was 13.7 million in November 2012, more than double the previous year's 5.8 million.
iHookup app – Offering
iHookup allows the user to choose the best
match for the user at any particular moment. If the user is seeking someone in close proximity, the user can simply choose a search
of his or her current location, or choose to broaden the search to miles away for that special connection. Should the user choose
to hang back and flirt, view photo or video galleries, send a virtual gift, search the specifics of that special male or female,
or just go for it by sending one of iHookups special broadcasts anytime, iHookup has a broad feature set for the user. iHookup
seeks to solve real human issues by taking into consideration existing habits, individual identity and ultimately user expectations
(based on search criteria).
OVERVIEW
iHookup Social’s business is development
and dissemination of a "proximity based" mobile social media application that facilitates connections between people,
utilizing the intelligence of GPS and localized recommendations. Going forward, the Company expects to focus on this aspect of
the business.
The Company’s auditors, Manning Elliott
LLP, have issued the Company a ‘Going Concern’ statement. The ability of the Company to continue as a going concern
is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is
unable to obtain adequate capital, it could be forced to cease development of operations.
The Company plans to continue using a combination
of this offering and additional fund raising to develop our business plan. The further implementation of our business plan will
require significant capital. We do not have this capital and as a result, we will require additional financing to develop our operations.
We may use debt or equity to fund our ongoing operations. There can be no assurance that any financing will be available, and if
available, will be on terms and conditions acceptable to the Company. If we rely on equity financing, our shareholders will experience
significant dilution. If we rely on debt financing, we may not be able to satisfy our debt obligations.
The Terms of the Offering
Securities Being Offered
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166,666,668 shares of common stock being registered on behalf of Beaufort (maximum offering).
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Offering Period:
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Until all shares are sold by Beaufort or until 36 months from the date that the registration statement becomes effective, whichever comes first.
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Risk of Factors:
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The Securities offered hereby involve a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors.”
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Common Stock Issued And
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Outstanding Before Offering:
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104,616,793
1
shares of our common stock are issued and outstanding as of the date of this Prospectus.
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Common Stock Issued And
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Outstanding After Offering:
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271,283,461 shares of common stock.
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Use of Proceeds:
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We will not receive any proceeds from the sale of the common stock by Beaufort. However, we will receive proceeds from the sale of our common stock under the Drawdown Agreement. The proceeds will be used for working capital, asset acquisition, and general corporate purposes. See “Use of Proceeds.”
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This offering relates to the resale of up to 166,666,668
shares of our common stock by Beaufort.
There are substantial risks to investors as
a result of the issuance of shares of our common stock under the Drawdown Agreement. These risks include dilution of stockholders,
significant decline in our stock price and our inability to draw sufficient funds when needed.
In order to fund a notice for funding pursuant
to the Drawdown Agreement (a “Drawdown Notice”), Beaufort will periodically purchase our common stock under the Drawdown
Agreement and will, in turn, sell such shares to investors in the market at the market price on a best efforts basis, subject to
certain conditions. This may cause our stock price to decline, which will require us to issue increasing numbers of common shares
to Beaufort to raise the same amount of funds, as our stock price declines.
Disclosure showing shares issuable if
market stock price drops 25%, 50% and 75%
Drawdown Amount Required
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100% of
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25% Decrease
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50% Decrease
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75% Decrease
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Current Stock
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in Stock Price
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in Stock Price
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in Stock Price
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Price
(1)
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(1)
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(1)
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(1)
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Total No. of Shares Required to Raise $5,000,000 Based on Current market price
(1)
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166,666,668
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222,222,222
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333,333,333
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666,666,667
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(1) Based on the lowest traded price during the five days ending on July 23, 2014 of $.03 per share, as quoted on the OTCQB.
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Based on the above chart, the sale of stock
under the first drawdown is limited to 5,220,378 shares of common stock. This results in significantly less capital than the $5,000,000
capital commitment, per the Drawdown Agreement. There are no assurances that the price of common stock will appreciate, depreciate,
or remain at the same price as a result of stock sales
1
Based on the number of common stock outstanding after the planned conversion of certain Series A Preferred Stock, as further discussed
below.
under this Agreement, however, if there
is a 25% to 75% decline in stock value pricing, HKUP may see between 8% to 11% of the overall drawdown amount of $5,000,000
with overall subsequent drawdowns over the thirty six (36) month period of the Agreement’s term.
The Company understands and acknowledges that
the number of shares issuable upon purchases pursuant to this Agreement will increase in certain circumstances including, but not
necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the Pricing Period. The
Company's executive officers and directors have studied and fully understand the nature of the transactions contemplated by this
Agreement and recognize that they have a potential dilutive effect on the shareholders of the Company. The Board of Directors of
the Company has concluded, in its good faith business judgment, and with full understanding of the implications, that such issuance
is in the best interests of the Company. The Company specifically acknowledges that, subject to such limitations as are expressly
set forth in the Agreement, its obligation to issue Advance Shares upon purchases pursuant to this Agreement is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
Financial Summary
This financial summary does not contain all the financial information
that may be important to you. Therefore, you should carefully read all the information in this prospectus, including the financial
statements and their explanatory notes before making an investment decision.
We derived the summary financial information from our financial
statements appearing in the section in this prospectus entitled "Financial Statements." You should read this summary
financial information in conjunction with our financial statements and related notes to the financial statements. We have included
financial summaries for iHookup Social, Inc. and Titan Iron Corp.
Condensed Statement of Operations Information:
iHookup Social, Inc.
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For The period From December 2, 2013 (Inception) to December 31, 2013
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Total Revenues
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$
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-
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Professional Fees
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16,109
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Loss from operations
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(16,109
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Other Income (Expenses)
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Net Loss and Comprehensive Loss
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(16,109
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Other Income/Expenses
|
|
|
|
|
Total Other Income (Expenses)
|
|
|
|
|
|
|
|
|
|
Net Loss applicable to common shareholders
|
|
|
$(16,109
|
)
|
|
|
|
|
|
Condensed Balance Sheet Information:
|
|
As of December 31, 2013
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Total Assets
|
|
|
-
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
Total Current Liabilities
|
|
|
16,109
|
|
|
|
|
|
|
Long-term Liabilities:
|
|
|
|
|
Total Long-term liabilities
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
Common Stock
|
|
|
1,083
|
|
Additional paid-in capital
|
|
|
3,917
|
|
Stock subscriptions receivable
|
|
|
(5,000
|
)
|
Accumulated Deficit During the Development Stage
|
|
|
(16,109
|
)
|
Total Stockholders' Equity
|
|
|
(16,109
|
)
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
|
-
|
|
Condensed Statement of Operations Information:
Titan Iron Ore Corp.
|
|
For The Year Ended December 31, 2013
|
|
|
|
|
|
|
|
|
$
|
|
|
General and Administrative
|
|
|
625,737
|
|
Impairment of Mineral Acquisition Costs
|
|
|
25,000
|
|
Accretion Expense
|
|
|
888,512
|
|
Financing Costs
|
|
|
574,380
|
|
Interest Expense
|
|
|
40,531
|
|
Investor Relations
|
|
|
31,588
|
|
Professional Fees
|
|
|
141,649
|
|
Mineral Property Exploration Costs
|
|
|
34,567
|
|
Stock Based Compensation
|
|
|
352,338
|
|
Travel
|
|
|
4,616
|
|
Loss from operations
|
|
|
(2,718,918
|
)
|
|
|
|
|
|
Loss on Modification of Promissory Note
|
|
|
(150,704
|
)
|
|
|
|
|
|
Net Loss and Comprehensive Loss
|
|
|
(2,869,622
|
)
|
|
|
|
|
|
Net Loss applicable to common shareholders
|
|
$
|
(2,869,622
|
)
|
|
|
|
|
|
|
|
Condensed Balance Sheet Information:
|
|
Titan Iron Ore Corp.
As of December 31, 2013
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Current Assets:
|
|
|
|
|
Cash
|
|
|
18,006
|
|
Total Current Assets
|
|
|
18,006
|
|
Debt Issue Costs
|
|
|
13,123
|
|
Mineral Properties
|
|
|
1,206,011
|
|
|
|
|
|
|
Total Assets
|
|
|
1,237,140
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
Accounts Payable
|
|
|
296,539
|
|
Accrued Expenses – related party
|
|
|
129,193
|
|
Convertible Debentures
|
|
|
397,288
|
|
Current Portion of Promissory Note
|
|
|
257,911
|
|
Total Current Liabilities
|
|
|
1,080,931
|
|
|
|
|
|
|
Promissory Note
|
|
|
971,818
|
|
Total Liabilities
|
|
|
2,052,749
|
|
|
|
|
|
|
Stockholders' Equity (Deficit)
|
|
|
|
|
Common Stock
|
|
|
21,342
|
|
Additional paid-in capital
|
|
|
6,470,624
|
|
Accumulated Deficit During the Exploration Stage
|
|
|
(7,307,575
|
)
|
Total Stockholders' Equity
|
|
|
(815,609
|
)
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
|
1,237,140
|
|
RISK FACTORS
An investment in our securities is highly speculative
and subject to numerous and substantial risks. These risks are set forth below. You should not invest in the Company unless you
can afford to lose your entire investment. Readers are encouraged to review these risks carefully before making any investment
decision.
Risks of Purchasing Shares:
Shares eligible for future sale under
Rule 144 may adversely affect the market for our securities.
From time to time, certain of our stockholders
who hold restricted securities may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage
transactions in the open market pursuant to Rule 144, promulgated under the Securities Act of 1933, subject to certain limitations.
Although current stockholders may have no current intention or ability to sell their shares, any substantial sales by holders of
our common stock in the future pursuant to Rule 144 may have a material adverse effect on the market price of our securities. There
are not enough unregistered shares held by non-affiliates to have a material effect on the price of our common stock.
The price of our common stock is subjected
to volatility.
The market for HKUP’s common stock is
highly volatile. The trading price of HKUP’s common stock is subject to wide fluctuations in response to, among other things,
quarterly variations in operating and financial results, and general economic and market conditions. In addition, statements or
changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to their markets or relating
to HKUP could result in an immediate and adverse effect on the market price of our common stock. The highly volatile nature of
HKUP’s stock prices may cause investment losses for their shareholders. If securities class action litigation is brought
against HKUP, such litigation could result in substantial costs while diverting management's attention and resources.
Disruptions in global financial markets
and deteriorating global economic conditions could cause lower returns to investors.
Disruptions in global financial markets and
deteriorating global economic conditions could adversely affect the value of HKUP’s common stock. The current state of the
economy and the implications of future potential weakening may negatively impact market fundamentals, resulting in lower revenues
and values for HKUP’s business opportunities and investments.
If securities or industry analysts do
not publish research or reports about HKUP’s business or if they issue an adverse or misleading opinion regarding HKUP stock,
its price and trading volume could decline.
The trading market for HKUP’s common
stock will be influenced by the research and reports that industry or securities analysts publish about HKUP or its business, if
any.
Our shares will be deemed to be "penny
stocks" as defined in the Securities Exchange Act of 1934, as amended, and, as a result, will be subject to various eligibility
and disclosure requirements on broker-dealers engaged in the resale of these shares.
The shares offered in this prospectus will
be "penny stocks" as that term is defined in the Securities Exchange Act of 1934, as amended, (the ‘Exchange Act”)
to mean, among other definitions, equity securities with a price of less than $5.00 per share. Under the penny stock regulations,
a broker-dealer selling a penny stock to anyone other than an established customer or an
accredited investor must make a special
suitability determination regarding the purchaser and provide special disclosure documents to the purchaser. The imposition of
these suitability standards and special disclosures could reduce an investor's
ability to resale the shares at a time or price desired. See the section "Market for Common Equity and Related Stockholder
Matters."
If we fail to remain current on our reporting
requirements, we could be removed from quotation by the OTCQB, which would limit the ability of broker-dealers to sell our securities
and the ability of shareholders to sell their securities in the secondary market.
Companies quoted on the OTCQB must be reporting
issuers under Section 12 of the Exchange Act, and must be current in their reports under Section 13 of the Exchange Act, in order
to maintain price quotation privileges on the OTCQB. If we fail to remain current on our reporting requirements, we could be removed
from the OTCQB. As a result, the market liquidity for our securities could be adversely affected by limiting the ability of broker-dealers
to sell our securities and the ability of shareholders to sell their securities in the secondary market.
Risks Related to the equity line of
credit:
Beaufort will pay less than the then-prevailing
market price of our common stock, which could cause the price of our common stock to decline.
Our common stock to be issued under the Drawdown
Agreement will be purchased at a twenty percent (20%) discount or 80% of the lowest traded prices during the five (5) trading days
immediately before our delivery of our Notice to Beaufort of our election to exercise our "put" right.
Beaufort has a financial incentive to sell
our shares immediately upon receiving the shares to realize the profit between the discounted price and the market price. If Beaufort
sells our shares, the price of our common stock may decrease. If our stock price decreases, Beaufort may have a further incentive
to sell such shares. Accordingly, the discounted sales price in the Drawdown Agreement may cause the price of our common stock
to decline.
We are registering an aggregate of 166,666,668 shares
of common stock to be issued under the equity line of credit. The sale of such shares could depress the market price of our common
stock.
We are registering an aggregate of 166,666,668
shares of common stock under the registration statement of which this prospectus forms a part for issuance pursuant to the equity
line of credit. The sale of these shares into the public market by Beaufort could depress the market price of our common stock.
We may not have access to the full amount
under the equity line of credit.
For the five consecutive trading days prior
to July 23, 2014 the lowest traded price of our common stock was $0.03. There is no assurance that the market price of our common
stock will increase or remain the same substantially in the near future. The entire commitment under the equity line of credit
is $ 5,000,000. The aggregate number of shares of common stock necessary to raise the entire $5,000,000 at $.03 per share is
166,666,668. We may not have access to the remaining commitment under the equity line of credit unless the market price of our
common stock increases or remains stable. Quantitatively, the Company may expect to receive approximately 80% of the full line
of credit, resulting in a total drawdown of $4,000,000. The Company's executive officers and directors fully recognize that the
Company may not provide them access to the full line of credit.
9,728,716,539 shares of our common stock (excluding
47,676,521 shares of preferred stock) remain available for issuance.
Our common stock price may decline by
our draw on our equity line of credit.
Effective July 22, 2014, we entered into the
Drawdown Agreement with Beaufort. Pursuant to the Drawdown Agreement, when we deem it necessary, we may raise capital through the
private sale of our common stock to Beaufort at a price equal to 80% of lowest traded price during the applicable pricing period.
Because this price is lower than the prevailing market price of our common stock, to the extent that the put right is exercised,
your ownership interest will be diluted in direct proportion.
There may not be a sufficient price of
our common stock to permit us to acquire adequate funds, which may adversely affect our liquidity.
The Drawdown Agreement provides that the number
of shares sold pursuant to each Notice
plus
the shares held by Beaufort at that time shall not exceed 4.99% of
the issued and outstanding shares of common stock of the Company. If the price our common stock is too low, it is possible that
we may not be permitted to draw the full amount of proceeds of the drawdown request, which may not provide adequate funding for
our planned operations and may materially decrease our liquidity. Analysis shows that an initial drawdown at current market prices
will result in a drawdown of 2,307,738 shares of stock resulting in $53,063 of actual available funds. While the Company cannot
predict a quantitative risk factor in specific numbers, it can quantify its initial drawdown expectation.
We may draw on our equity line of credit
to the extent that a change of control occurs.
The Company may continue to make drawdown requests
while the Selling Shareholder holds shares of common stock or sells shares to a specific party, thereby causing such purchasing
party to gain control of the Company. This could jeopardize the execution of the Company’s business plan and may disrupt
operations. The Company does not anticipate making drawdown requests under this scenario.
Risks Related to Our Business:
If we fail to grow and maintain 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 premium 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.
If users do not continue to download
and use our app 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.
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.
We make our products and services available
across a variety of operating systems. We are dependent on the interoperability of our products and services with popular devices,
and mobile operating systems that we do not control, such as Android and Apple iOS. 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 2013 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;
-
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.
We continue to experience rapid growth in our
headcount and operations, which will continue to 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.
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.
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.
We are subject to a variety of laws and regulations
in the United States that involve matters central to our business, including privacy, rights of publicity, data protection, content
regulation, intellectual property, competition, protection of minors, consumer protection and taxation. Many of these laws and
regulations are still evolving and being tested in courts and could be interpreted or applied in ways that could harm our business,
particularly in the new and rapidly evolving industry in which we operate. The introduction of new products or services may subject
us to additional laws and regulations. There have been a number of recent legislative proposals in the United States, at both the
federal and state level, that would impose new obligations in areas such as privacy. The U.S. government, including the Federal
Trade Commission, or the FTC, and the Department of Commerce, has announced that it is reviewing the need for greater regulation
for the collection of information concerning user behavior on the Internet and over mobile devices, including regulation aimed
at restricting certain tracking and targeted advertising practices.
Additionally, recent amendments to U.S. patent
laws may affect the ability of companies to protect their innovations and defend against claims of patent infringement. Having
personal information may subject us to additional regulation. Further, it is difficult to predict how existing laws and regulations
will be applied to its business and the new laws and regulations to which we may become subject, and it is possible that they may
be interpreted and applied in a manner that is inconsistent with our practices. These existing and proposed laws and regulations
can be costly to comply with and can delay or impede the development of new products and services, result in negative publicity,
significantly increase our operating costs, require significant time and attention of management and technical personnel and subject
us to inquiries or investigations, claims or other remedies, including fines or demands that we modify or cease existing business
practices.
Even though our platform is for public
self-expression conversation and personal interaction, user trust regarding privacy is important to the growth of users and the
increase in user engagement on our platform, and privacy concerns relating to our products and services could damage our reputation
and deter current and potential users and advertisers from using our products and services.
From time to time, concerns have been expressed
by governments, regulators and others about whether mobile products, services or practices compromise the privacy of users and
others. Concerns about, governmental or regulatory actions involving practices with regard to the collection, use, disclosure or
security of personal information or other privacy-related matters, even if unfounded, could damage our reputation, cause us to
lose users and advertisers and adversely affect our operating results. While we will strive to comply with applicable data protection
laws and regulations, as we strive to comply with our own posted privacy policies and other obligations we may have with respect
to privacy and data protection, the failure or perceived failure to comply may result, in inquiries and other proceedings or actions
against us by governments, regulators or others. These inquiries could result in negative publicity and damage to our reputation
and brand, each of which could cause us to lose users and advertisers, which could have an adverse effect on our business.
Any systems failure or compromise of our security
that results in the unauthorized access to or release of our users’ or advertisers’ data could significantly limit
the adoption of our products and services and cause harm to our reputation and brand and, therefore, our business. We expect to
continue to expend significant resources to protect against security breaches. The risk that these types of events could seriously
harm our business is likely to increase as we expand the number of products and services we offer, increase the size of our user
base and operate in other countries.
If our security measures are breached,
or if our products and services are subject to attacks that degrade or deny the ability of users to access our products and services,
our products and services may be perceived as not being secure, users and advertisers may curtail or stop using our products and
services and our business and operating results could be harmed.
Our products and services involve the storage
and transmission of users’ and advertisers’ information, and security breaches expose us to a risk of loss of this
information, litigation and potential liability. We may experience cyber-attacks of varying degrees, and as a result, unauthorized
parties may obtain, and may in the future obtain, access to its data or its users’ or advertisers’ data. Our security
measures may also be breached due to employee error, malfeasance or otherwise. Additionally, outside parties may attempt to fraudulently
induce employees, users or advertisers to disclose sensitive information in order to gain access to our data or our users’
or advertisers’ data or accounts, or may otherwise obtain access to such data or accounts. Since our users and advertisers
may use their accounts to establish and maintain online identities, unauthorized communications from our accounts that have been
compromised may damage their reputations. Any such breach or unauthorized access could result in significant legal and financial
exposure, damage to our reputation and a loss of confidence in the security of our products and services that could have an adverse
effect on our business and operating results. Because the techniques used to obtain unauthorized access, disable or degrade service
or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate
these techniques or to implement adequate preventative measures. If an actual or perceived breach of security occurs, the market
perception of the effectiveness of our security measures could be harmed, we could lose users and advertisers and we may incur
significant legal and financial exposure, including legal claims and regulatory fines and penalties. Any of these actions could
have a material and adverse effect on our business, reputation and operating results.
Our intellectual property rights are
valuable, and any inability to protect them could reduce the value of our products, services and brand.
Our trade secrets, trademarks, copyrights,
patent right and other intellectual property rights are important assets. We rely on, and expects to continue to rely on, a combination
of confidentiality and license agreements with our employees, consultants and third parties with whom we have relationships, as
well as our trademark, trade dress, domain name, copyright, trade secret and potential patents, to protect our brand and other
intellectual property rights. Various events outside of our control may pose a threat to our intellectual property rights. For
example, we may fail to obtain effective intellectual property protection, or effective intellectual property protection may not
be available for our products and services are available. Also, the efforts we have taken to protect our intellectual property
rights may not be sufficient or effective, and any of our intellectual property rights may be challenged, which could result in
them being narrowed in scope or declared invalid or unenforceable. There can be no assurance our intellectual property rights will
be sufficient to protect against others offering products or services that are substantially similar to ours and compete with our
business.
We may be in the future, be party to
intellectual property rights claims that are expensive and time consuming to defend, and, if resolved adversely, could have a significant
impact on our business, financial condition or operating results.
Companies in the mobile technology and media
industries own large numbers of patents, copyrights, trademarks and trade secrets, and frequently enter into litigation based on
allegations of infringement, misappropriation or other violations of intellectual property or other rights. Many companies in these
industries, including many of our competitors, have substantially larger patent and intellectual property portfolios than we, which
could make us a target for litigation as we may not be able to assert counterclaims against parties that sue us for patent, or
other intellectual property infringement. In addition, various “non-practicing entities” that own patents and other
intellectual property rights often attempt to aggressively assert claims in order to extract value from technology companies. Further,
from time to time we may introduce new products and services, including in areas where we currently do not have an offering, which
could increase our exposure to patent and other intellectual property claims from competitors and non-practicing entities, which
could result in loss of revenue and adversely impact our business.
We may require additional capital to
support our operations or the growth of our business, and we cannot be certain that this capital will be available on reasonable
terms when required, or at all.
From time to time, we may need additional financing
to operate or grow its business. Our ability to obtain additional financing, if and when required, will depend on investor and
lender demand, our operating performance, the condition of the capital markets and other factors, and we cannot be assured that
additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through
the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to
the rights of our common stock, and our existing stockholders may experience dilution. If we are unable to obtain adequate financing
or financing on terms satisfactory to us when we require it, our ability to continue to support the operation or growth of our
business could be significantly impaired and our operating results may be harmed.
We depend on highly skilled personnel
to grow and operate our business, and if we are unable to hire, retain and motivate its personnel, we may not be able to grow effectively.
Our future success will depend upon our continued
ability to identify, hire, develop, motivate and retain highly skilled personnel, including senior management, engineers, designers
and product managers. Our ability to execute efficiently is dependent upon contributions from our employees, in particular our
senior management team. We do not maintain key person life insurance for any employee. In addition, from time to time, there may
be changes in our senior management team that may be disruptive to our business. If our senior management team, including any new
hires that we may make, fails to work together effectively and to execute our plans and strategies on a timely basis, our business
could be harmed. Our growth strategy also depends on our ability to expand our organization with highly skilled personnel. Identifying,
recruiting, training and integrating qualified individuals will require significant time, expense and attention. Competition for
highly skilled personnel is intense, particularly in the San Francisco Bay Area, where our headquarters is located. We may
need to invest significant amounts of cash and equity to attract and retain new employees and we may never realize returns on these
investments. If we are not able to effectively add and retain employees, our ability to achieve our strategic objectives will be
adversely impacted, and our business will be harmed.
Our business is subject to the risks
of earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by man-made problems such as terrorism.
A significant natural disaster, such as an
earthquake, fire, flood or significant power outage could have a material adverse impact on our business, operating results, and
financial condition. Our headquarters is located in the San Francisco Bay Area, a region known for seismic activity. Despite any
precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our data centers could result
in lengthy interruptions in our services. In addition, acts of terrorism and other geo-political unrest could cause disruptions
in our business. All of the aforementioned risks may be further increased if our disaster recovery plans prove to be inadequate.
We have a disaster recovery program, which allows us to move production to a back-up data center in the event of a catastrophe.
Although this program is functional, we do not currently serve network traffic equally from each data center, so if our primary
data center shuts down, there will be a period of time that our products or services, or certain of our products or services, will
remain inaccessible to our users or our users may experience severe issues accessing our products and services. We do not carry
business interruption insurance sufficient to compensate us for the
potentially significant losses, including the potential harm to our business that may result from interruptions in our
ability to provide our products and services.
Risks Related to Our Stockholders
and Shares of Common Stock
We have a large number of authorized
but unissued shares of our common stock.
We have a large number of authorized but unissued
shares of common stock, which our management may issue without further stockholder approval, thereby causing dilution of your holdings
of our common stock. Our management will continue to have broad discretion to issue shares of our common stock in a range of transactions,
including capital-raising transactions, mergers, acquisitions and other transactions, without obtaining stockholder approval, unless
stockholder approval is required. If our management determines to issue shares of our common stock from the large pool of
authorized but unissued shares for any purpose in the future, your ownership position would be diluted without your further ability
to vote on that transaction.
Shares of our common stock may continue
to be subject to illiquidity because our shares may continue to be thinly traded and may never become eligible for trading on a
national securities exchange.
While we may at some point be able to meet
the requirements necessary for our common stock to be listed on a national securities exchange, we cannot assure you that we will
ever achieve a listing of our common stock on a national securities exchange. Our shares are currently only eligible for quotation
on the OTCQB, which is not an exchange. Initial listing on a national securities exchange is subject to a variety of requirements,
including minimum trading price and minimum public “float” requirements, and could also be affected by the general
skepticism of such markets concerning companies that are the result of mergers with inactive publicly-held companies. There are
also continuing eligibility requirements for companies listed on public trading markets. If we are unable to satisfy the initial
or continuing eligibility requirements of any such market, then our stock may not be listed or could be delisted. This could result
in a lower trading price for our common stock and may limit your ability to sell your shares, any of which could result in you
losing some or all of your investments.
If the price of the shares of our common
stock falls, we may lose eligibility for quotation on the OTCQB.
Our shares are currently only eligible for
quotation on the OTCQB, which is not an exchange. Since May 1, 2014, there was a continuing eligibility requirements for OTCQB,
whereby the price of our common stock can’t fall below $0.01 for thirty consecutive days. If we are unable to satisfy this
continuing eligibility requirement of the OTCQB, the quotation of our common stock could be moved to the OTC Pink Sheets. This
could result in a lower trading price for our common stock and may limit your ability to sell your shares, any of which could result
in you losing some or all of your investments.
The market valuation of our business
may fluctuate due to factors beyond our control and the value of your investment may fluctuate correspondingly.
The market valuation of emerging growth companies,
such as us, frequently fluctuate due to factors unrelated to the past or present operating performance of such companies. Our market
valuation may fluctuate significantly in response to a number of factors, many of which are beyond our control, including:
|
i.
|
changes in securities analysts’ estimates of our financial performance, although there are
currently no analysts covering our stock;
|
|
ii.
|
fluctuations in stock market prices and volumes, particularly among securities of emerging growth
companies;
|
|
iii.
|
changes in market valuations of similar companies;
|
|
iv.
|
announcements by us or our competitors of significant contracts, new technologies, acquisitions,
commercial relationships, joint ventures or capital commitments;
|
|
v.
|
variations in our quarterly operating results;
|
|
vi.
|
fluctuations in related commodities prices; and
|
|
vii.
|
additions or departures of key personnel.
|
As a result, the value of your investment in
us may fluctuate.
Investors should not look to dividends as a
source of income.
In the interest of reinvesting initial profits
back into our business, we do not intend to pay cash dividends in the foreseeable future. Consequently, any economic return will
initially be derived, if at all, from appreciation in the fair market value of our stock, and not as a result of dividend payments.
Our common stock may be subject to penny
stock regulations, which may make it difficult for investors to sell their stock.
The Securities and Exchange Commission has
adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks”. Penny stocks
generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such
securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules; deliver a standardized risk disclosure document prepared by the Commission, which
specifies information about penny stocks and the nature and significance of risks of the penny stock market. The broker-dealer
also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer and salesperson
in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules;
the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and
receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the
trading activity in the secondary market for a stock that becomes subject to the penny stock rules. If our common stock becomes
subject to the penny stock rules, holders of our shares may have difficulty selling those shares.
We have never paid dividends on our common
stock.
We have never paid cash dividends on our common
stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment
of cash dividends will be re-invested into the Company to further our business strategy.
We expect to issue more shares in an
equity financing, which will result in substantial dilution.
Our Articles of Incorporation authorize the
Company to issue 10,000,000,000 shares of common stock and 50,000,000 shares of “blank check” preferred stock. Any
equity financing effected by the Company may result in the issuance of additional securities without stockholder approval and may
result in substantial dilution in the percentage of our common stock held by our then existing stockholders. Moreover, our stock
issued in any equity financing transaction may be valued on an arbitrary or non-arm’s-length basis by our management, resulting
in an additional reduction in the percentage of common stock held by our then existing stockholders. Our board of directors has
the power to issue any or all of such authorized but unissued shares without stockholder approval. To the extent that additional
shares of common stock or preferred stock are issued in connection with a business combination or otherwise, dilution to the interests
of our stockholders will occur and the rights of the holders of common stock might be materially adversely affected.
Messrs. Dean and Robert Rositano, as
our directors and officers, own a significant percentage of the voting power of our stock and will be able to exercise significant
influence and control over the matters subject to stockholder approval and our operations.
After the merger with iHookup Social, Inc., Messrs. Dean and
Robert Rositano
may be deemed to own (directly and/or beneficially) 100% of our Series A preferred stock. As of February
5, 2014, the following entities and individuals own the following shares of our Series A preferred stock:
•
|
|
Messrs. Dean and Robert Rositano each own 4,510,400 shares;
|
•
|
|
Copper Creek Holdings, LLC, a Nevada limited liability company owned and managed by
Robert Rositano and his wife Stacy Rositano, owns 36,083,350 shares;
|
•
|
|
Checkmate Mobile, Inc., a Delaware corporation, owns 4,895,850 shares - Dean Rositano
is a 14.1% stockholder and Robert Rositano is a 13.6% stockholder stockholder of Checkmate Mobile, Inc and both serve as officers
and directors of CheckMate Mobile, Inc.
|
The holders of our 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 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 $5,000,000).
Therefore,
Dean
and Robert Rositano’s
voting power, as holders of our Series A Preferred Stock, put them in a position to influence
and control, subject to our organizational documents and Nevada law, the composition of our Board of Directors and the outcome
of corporate actions requiring stockholder approval, such as mergers, business combinations and dispositions of assets, among other
corporate transactions. In addition, this concentration of voting power could discourage others from initiating a potential merger,
takeover or other change of control transaction that may otherwise be beneficial to the Company, which could adversely affect the
market price of our securities.
We expect the holders of our Series A
Preferred Stock to convert all or certain portions of our Series A Preferred Stock, which will result in substantial dilution because,
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 $5,000,000), the Series A Preferred Stock is convertible into nine (9) times the total number of shares of outstanding
common stock at the time of conversion
.
The Series A Preferred Stock is 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.
Therefore, any conversion
of the Series A Preferred Stock will be dilutive to the holders of the outstanding shares of common stock. The holders of Series
A Preferred Stock plan to convert 7.06086% of the Series A Preferred Stock on or around July 28, 2014. Based on the current outstanding
common stock of 64,414,048 shares, such percentage of Series A Preferred Stock would convert into 40,933,672 shares of common stock.
If we are unable to pay the convertible
promissory notes when obligations become due, the note holders may take proceedings under terms of default.
In the event of default under terms in the
convertible promissory notes, the note holder may enforce remedies including acceleration of payment in full plus interest and
other charges, and an increase in interest rates of up to 24% when allowable by law.
Our disclosure controls and procedures
and internal control over financial reporting are not effective, which may cause our financial reporting to be unreliable and lead
to misinformation being disseminated to the public.
Our management evaluated our disclosure controls
and procedures as of December 31, 2013 and concluded that as of those dates, our disclosure controls and procedures were not effective.
The ineffectiveness of our disclosure controls and procedures was due to (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.
We believe that
these material weaknesses continue to exist and our disclosure controls and procedures and internal control over financial reporting
are not effective. If such material weakness and ineffective controls are not promptly corrected in the future, our ability to
report quarterly and annual financial results or other information required to be disclosed on a timely and accurate basis may
be adversely affected. Also such material weakness and ineffective controls could cause our financial reporting to be unreliable
and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed
investment decision.
We have a limited operating history on
which to base an evaluation of our business and prospects.
We have a short operating history, which limits
our ability to forecast our future operating results and subjects us to a number of uncertainties, including our ability to plan
for and model future growth. We have encountered and will continue to encounter risks and uncertainties frequently experienced
by growing companies in developing industries. If our assumptions regarding these uncertainties, which we use to plan our business,
are incorrect or change in reaction to changes in our markets, or if we do not address these risks successfully, our operating
and financial results could differ materially from our expectations and our business could suffer.
Risks Relating to the Early Stage
of our Company and Ability to Raise Capital
We are at a very early stage and our
success is subject to the substantial risks inherent in the establishment of a new business venture.
The implementation of our business strategy
is in a very early stage and subject to all of the risks inherent in the establishment of a new business venture. Accordingly,
our intended business and prospective operations may not prove to be successful in the near future, if at all. Any future success
that we might enjoy will depend upon many factors, many of which are beyond our control, or which cannot be predicted at this time,
and which could have a material adverse effect upon our financial condition, business prospects and operations and the value of
an investment in our company.
We expect to suffer continued operating
losses and we may not be able to achieve profitability.
We expect to continue to incur significant
development and marketing expenses in the foreseeable future related to the launch and commercialization of our products and services.
As a result, we will be sustaining substantial operating and net losses, and it is possible that we will never be able to achieve
profitability.
We may have difficulty raising additional
capital, which could deprive us of necessary resources.
In order to support the initiatives envisioned
in our business plan, we will need to raise additional funds through public or private debt or equity financing, collaborative
relationships or other arrangements. Our ability to raise additional financing depends on many factors beyond our control, including
the state of the capital markets, the market price of our common stock, and the development of competitive projects by others.
Because our common stock is not listed on a major stock market, many investors may not be willing or allowed to purchase our common
shares or may demand steep discounts. Sufficient additional financing may not be available to us or may be available only on terms
that would result in further dilution to the current owners of our common stock.
During the year ended December 31, 2013, we
received $709,437 in convertible note financing and repaid $194,159 of convertible note debt. During the quarter ended March 31,
2014, we received $526,966 in convertible note financing and repaid $216,966 of convertible note debt. However, we do not have
any firm commitments for funding beyond this recent financing. If we are unsuccessful in raising additional capital, or the terms
of raising such capital are unacceptable, we may have to modify our business plan and/or significantly curtail our planned activities.
If we are successful raising additional capital through the issuance of additional equity, our investor’s interests will
be diluted.
There are substantial doubts about our
ability to continue as a going concern and if we are unable to continue our business, our shares may have little or no value.
Our ability to become a profitable operating
company is dependent upon our ability to generate revenues and/or obtain financing adequate to implement our business plan. Achieving
a level of revenues adequate to support our cost structure has raised doubts about our ability to continue as a going concern.
We plan to attempt to raise additional equity capital by issuing shares and, if necessary through one or more private placement
or public offerings, and via the securities purchase agreement/equity line financing. However, the doubts raised relating to our
ability to continue as a going concern may make our shares an unattractive investment for potential investors. These factors, among
others, may make it difficult to raise any additional capital.
Failure to effectively manage our growth
could place additional strains on our managerial, operational and financial resources and could adversely affect our business and
prospective operating results.
Our anticipated growth is expected to continue
to place a strain on our managerial, operational and financial resources. Further, as we expand our user and advertiser base, we
will be required to manage multiple relationships. Any further growth by us, or an increase in the number of our strategic relationships
will increase this strain on our managerial, operational and financial resources. This strain may inhibit our ability to achieve
the rapid execution necessary to implement our business plan, and could have a material adverse effect upon our financial condition,
business prospects and prospective operations and the value of an investment in our company.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements.
All statements other than statements of historical facts contained in this prospectus, including statements regarding our future
financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements.
The words "believe," "may," "estimate," "continue," "anticipate," "intend,"
"should," "plan," "expect" and similar expressions, as they relate to us, are intended to identify
forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections
about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy
and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions described
in "Risk Factors" and elsewhere in this prospectus.
Other sections of this prospectus may include
additional factors which could adversely affect our business and financial performance. Moreover, we operate in a highly regulated,
very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management
to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
We undertake no obligation to update publicly
or revise any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events or
performance. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved
or will occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot
guarantee future results, levels of activity, performance or achievements. We have an ongoing obligation to continually disclose
material future changes in the Company and its operations.
USE OF PROCEEDS
We will not receive any of the proceeds from
the sale of the common stock by Beaufort. However, the Company anticipates receiving up to $5,000,000 gross proceeds pursuant to
the Drawdown Agreement with Beaufort. The maximum amount we can receive is dependent on the price of our common stock, and could
be less than $5,000,000. We chose an equity line of $5,000,000 as we require large sums of financing for our staged growth,
which will be obtained either through debt financing, or equity financing. For illustrative purposes, we’ve set forth
below how we plan to use such proceeds in the event we receive $5,000,000, $2,500,000 or $1,250,000 from this offering::
Offering Proceeds:
|
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$
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5,000,000
|
|
|
$
|
2,500,000
|
|
|
$
|
1,250,00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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App hosting, monitoring, support
|
|
$
|
1,038,000
|
|
|
$
|
519,500
|
|
|
$
|
223,000
|
|
|
|
|
|
|
|
|
|
|
|
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Marketing
|
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$
|
1,924,000
|
|
|
$
|
961,400
|
|
|
$
|
461,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Corporate Purposes:
|
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$
|
2,038,000
|
|
|
$
|
1,019,100
|
|
|
$
|
566,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
5,000,000
|
|
|
$
|
2,500,000
|
|
|
$
|
1,250,000
|
|
If the Company receives less than $5,000,000,
the priority of funds will be as follows: first priority will be to cover general and corporate expenses, which we anticipate to
be a minimum of $900,000 for the next twelve month period. Funds raised over $900,000 will be used between marketing and App hosting,
monitoring, support in the ordinary course of the Company’s business.
The aggregate amounts of $5,000,000, $2,500,000
and $1,250,000 listed above assume that Beaufort is able to sell the shares of common stock it receives in each drawdown and therefore,
the maximum advance amount of 4.99% of the issued and outstanding shares is never met or exceeded.
Based on the current number of issued and
outstanding shares, which was 34,479,597 as of March 31, 2014, the maximum advance amount of shares would be 230,747,382. This
number does factor in the aggregate common shares post advance. With the average of the high and low prices of the common stock
on the OTCQB, on July 23, 2014, being $.03, such maximum advance amount would result in the Company receiving $52,063.
DETERMINATION OF OFFERING PRICE
Beaufort may sell their shares in the over-the-counter
market or otherwise, at market prices prevailing at the time of sale, at prices related to the prevailing market price, or at negotiated
prices. We will not receive any proceeds from the sale of shares by Beaufort.
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES
"Dilution" represents the difference
between the offering price of the shares of common stock and the net book value per share of common stock immediately after completion
of the offering. "Net Book Value" is the amount that results from subtracting total liabilities from total assets. In
this offering, the level of dilution is increased as a result of the relatively low book value of HKUP’s issued and outstanding
stock.
As of March 31, 2014, we had 34,479,597 shares
of common stock issued and outstanding. Our net tangible book value as of March 31, 2014 was ($451,545). Based upon those figures,
our net tangible book value per share was $0.0131 and after giving effect to the purchase by Beaufort of all 166,666,668 shares
being offered, and in effect HKUP receives the maximum estimated proceeds, our net book value per share would be $0.0022 which
represents an immediate dilution to an investor of $0.0109 per share.
The following table illustrates the dilution
of the net book value of common stock purchased by Beaufort in this offering of 166,666,668 shares compared with those existing
shareholders who purchased shares of HKUP previously.
Percent of Offering Sold
|
|
|
100%
|
|
|
75%
|
|
|
|
50%
|
|
|
|
25%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Tangible Book Value Per Share Prior to Sale
|
|
$
|
(.0131
|
)
|
|
$
|
(.0131
|
)
|
|
$
|
(.0131
|
)
|
|
$
|
(.0131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Net Tangible Book Value Per Share After Sale
|
|
$
|
(.0022)
|
|
|
$
|
(.0028)
|
|
|
$
|
(.0038)
|
|
|
$
|
(.0059)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in Net Book Value Per Share Due to Sale
|
|
$
|
(0.0109)
|
|
|
$
|
(0.0103)
|
|
|
$
|
(0.0093)
|
|
|
$
|
(0.00072)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Dilution (Purchase Price of $0.135 Less Pro Forma Net Tangible Book Value Per Share)
|
|
$
|
(.0026)
|
|
|
$
|
(.0032)
|
|
|
$
|
(.0042)
|
|
|
$
|
(.0063)
|
|
SELLING STOCKHOLDER
Investment Agreement.
On July 22, 2014, we entered into the Drawdown
Agreement with Beaufort and on June 25, 2014, we entered into a registration rights agreement with Beaufort (collectively, the
“Agreements”). In accordance with the Agreements, Beaufort has committed, subject to certain conditions, to purchase
up to $5,000,000 of the Company's common stock over a term of up to three years. Beaufort and any participating broker-dealers
are “underwriters” within the meaning of the Securities Act. Although the Company is not mandated to sell shares under
the Agreements, the Agreements give the Company the option to sell to Beaufort shares of common stock at a per share purchase price
equal to 80% of the lowest traded price during the five consecutive trading days immediately prior to the Company's delivery of
a Notice.
Beaufort is not required to purchase the shares,
unless the shares, which are subject to the Notice, have been registered for resale and are freely tradable in accordance with
the federal securities laws, including the Securities Act. The Company is obligated to file with the SEC a registration statement
on Form S-1, of which this prospectus forms a part, and to use all commercially reasonable efforts to have such registration statement
declared effective by the SEC.
During the five consecutive trading days before
a Notice, we will calculate the amount of shares (making sure that it remains under 4.99% of the issued and outstanding shares
of common stock of the Company) we will sell to Beaufort and the purchase price per share. The purchase price per share of common
stock will be based on the average of the three lowest closing prices of our common stock during the five consecutive trading
days immediately prior to the drawdown date, less a discount of 20%. Beaufort's obligations under the Drawdown Agreement are not
transferrable.
The maximum amount we can request at any one
time is 4.99% of the issued and outstanding shares of common stock of the Company and no Notice can have the effect of causing
Beaufort to own more than 4.99% of our issued and outstanding shares.
Previously, around March 11, 2014, Beaufort
Ventures PLC (“Beaufort Ventures”), a previous but not current affiliate of Beaufort, entered into a $55,000 six month,
8% Convertible Redeemable Note with the Company (the “Beaufort Ventures Note”). 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 42% of the lowest closing price in the ten (10) trading days previous to the conversion.
In connection with the Beaufort Ventures Note,
on March 7, 2014, 2014, the Company entered into a debt purchase agreement (the “Beaufort Debt Purchase Agreement”)
with Beaufort Ventures and GCA Strategic Investment Fund, Limited (“GCA”), whereby Beaufort Ventures agreed to assume
$90,000 of the face value of a Convertible Promissory Note dated April 24, 2013, granted by the Company in favor of GCA on terms
modified to be consistent with the Beaufort Ventures Note.
Please note that the parties have agreed to
$5,000,000 as the amount of the Drawdown Agreement. The parties understand that it is not guaranteed that the full amount of the
proceeds available under the Drawdown Agreement will be accessible at the current stock price.
All expenses incurred with respect to the registration
of the common stock will be borne by Beaufort other than our independent legal review of the related documents, and we will not
be obligated to pay any underwriting fees, discounts, commission or other expenses incurred by Beaufort in connection with the
sale of such shares.
Except as indicated below, neither Beaufort
nor any of its associates or affiliates has held any position, office, or other material relationship with us in the past three
years.
The following table sets forth the name of Beaufort, the number
of shares of common stock beneficially owned by Beaufort as of the date hereof and the number of shares of common stock being offered
by Beaufort. The offer and sale of the shares are being registered herein. The transaction being registered is an indirect primary
distribution through Beaufort. However, Beaufort is under no obligation to sell all or any portion of such shares. All information
with respect to share ownership has been furnished by Beaufort. The “Number of Shares Beneficially Owned After the Offering”
column assumes the sale of all shares offered herein.
Name
|
|
Shares Beneficially
Owned Prior To Offering
|
|
|
Shares to
be Offered(1)
|
|
|
Amount Beneficially
Owned After Offering(2)
|
|
|
Percent
Beneficially Owned
After Offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beaufort Capital Partners LLC (3)
|
|
|
0
|
|
|
|
166,666,668
|
(3)
|
|
|
0
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The number assumes that
Beaufort purchases the maximum amount of registrable Put Shares in this registration statement.
(2) The number assumes Beaufort
sells all of the common shares being offering pursuant to this prospectus.
(3) Beaufort Capital Partners
LLC is a NY investment fund. Robert Marino is a Managing Member of Beaufort Capital Partners LLC and, acting alone, has voting
and dispositive power over the shares beneficially owned by Beaufort Capital Partners LLC. Robert Marino has had no other material
relationship with the Company and has personally owned no securities of the Company prior to the offering in his individual capacity.
PLAN OF DISTRIBUTION
This prospectus relates to the resale of up
to 166,666,668 shares of our common stock by Beaufort.
Beaufort and any of its pledgees, donees, assignees
and other successors-in-interest may, from time to time sell any or all of their shares of common stock on any stock exchange,
market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated
prices. Beaufort may use any one or more of the following methods when selling shares:
|
·
|
ordinary brokerage transactions and transactions in which the broker-dealer
solicits the purchaser;
|
|
·
|
block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal;
|
|
·
|
facilitate the transaction;
|
|
·
|
purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
|
|
·
|
an exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately negotiated transactions;
|
|
·
|
broker-dealers may agree with Beaufort to sell a specified number
of such shares at a stipulated price per share;
|
|
·
|
through the writing of options on the shares
|
|
·
|
a combination of any such methods of sale; and
|
|
·
|
any other method permitted pursuant to applicable law.
|
Beaufort shall have the sole and absolute discretion
not to accept any purchase offer or make any sale of shares if it deems the purchase price to be unsatisfactory at any particular
time.
Beaufort may also sell the shares directly
to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers
may receive compensation in the form of discounts, concessions or commissions from Beaufort and/or the purchasers of shares for
whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer
might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own
account and at their own risk. It is possible that Beaufort will attempt to sell shares of common stock in block transactions to
market makers or other purchasers at a price per share which may be below the then existing market price. We cannot assure that
all or any of the shares offered in this prospectus will be issued to, or sold by, Beaufort. Beaufort and any broker-dealers or
agents, upon completing the sale of any of the shares offered in this prospectus, may be deemed to be "underwriters"
as that term is defined under the Securities Act, the Exchange Act and the rules and regulations of such acts. In such event, any
commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act.
Beaufort, alternatively, may sell all or any
part of the shares offered in this prospectus through an underwriter. Beaufort has not entered into any agreement with a prospective
underwriter and there is no assurance that any such agreement will be entered into.
Beaufort may pledge its shares to its brokers
under the margin provisions of customer agreements. If Beaufort defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares. Beaufort and any other persons participating in the sale or distribution of the shares will be subject
to applicable provisions of the Exchange Act, and the rules and regulations under such act, including, without limitation, Regulation
M. These provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the shares by, Beaufort
or any other such person. Beaufort is not permitted to engage in short sales of common stock. Furthermore, under Regulation M,
persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject
to specified exceptions or exemptions. All of these limitations may affect the marketability of the shares.
Beaufort, the underwriter herein, may offer
for sale up to 166,666,668 shares of our common stock which it will originally acquire pursuant to the terms of the Drawdown Agreement.
Beaufort will be offering such shares for its own account. We do not know for certain how or when Beaufort will choose to sell
its shares of common stock. However, it can sell such shares at any time or through any manner set forth in this plan of distribution,
at such time as we have "put" the shares to them. We may request Beaufort to purchase shares by delivering a Notice to
Beaufort. A Notice may not be sent until the drawdown on the prior Notice is completed.
To permit Beaufort to resell the shares
of common stock issued to it, we agreed to file a registration statement, of which this prospectus is a part, and all
necessary amendments and supplements with the SEC for the purpose of registering and maintaining the registration of the
shares. Beaufort will bear all costs relating to the registration of the common stock offered by this prospectus, other than
the costs of our independent legal review. We will keep the registration statement effective until the earlier of (i) the
date after which all of the shares of common stock held by Beaufort that are covered by the registration statement have been
sold by Beaufort pursuant to such registration statement and (ii) the first day of the month next following the 36-month
anniversary of the date the registration statement, to which this prospectus is made a part, is declared effective by the
SEC.
BUSINESS
Overview of Business
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.
History and Corporate Structure
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 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 5,000,000 (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 $5,000,000). 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.
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
|
$19.99
|
|
|
We are pursuing our growth in our current "dating
vertical" market, as well as expanding our reach into the general audience category of "social networking."
In the near future, we may provide our
users with "local" options of many kinds, enabling “social commerce” (i.e. using social media to
promote the buying and selling of products and services) with mobile distribution of locally relevant content and special
offers. We hope to bring together a dynamic opportunity for brands, advertisers and merchants to interact in new and
innovative ways with the iHookup Social Network, while building customer loyalty, engagement and revenues.
We intend to build population density in our
user base by engaging users with new features that are locally relevant and retain our user base through other enhanced engagement
features. Through the potential introduction of “social commerce” revenue opportunities, we may add another layer of
monetization to our revenue model (as discussed below in Revenues).
Marketing
We market our application utilizing a variety
of online and offline marketing activities. Our offline marketing activities generally consist of traditional marketing and event-based
branding in various local markets. Our marketing plan also includes leveraging several key domain names registered by our company
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 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 in March 2014 on the Apple App Store is
as follows:
|
Top Grossing Social Networking FREE iPhone / iPod App USA: #28 (July 19, 2014)
|
|
Top Grossing Social Networking PAID iPhone / iPod App USA: #39 (August 12, 2013)
|
|
Top Rank in Social Networking FREE App USA: #149 (June 22, 2104
|
|
Top Rank Social Networking Paid App USA: #6 (August 11, 2013)
|
|
Top Rank Overall Apps FREE App USA: #510 (June
17, 2014)
Top Rank Overall Apps Paid App USA: #292 (August
12, 2013)
|
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).
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., who provides us with investor-relation services communication, press writing and interview preparation, (ii) Courtland Brooks,
a consultant related to the business of internet and Mobile dating, (iii) Boardwalk Group, LLC for video production marketing and
creative services, and (iv) Deep Forest Media, Inc. for direct iOS and Mobile advertising targeting, measurement and data mining
services.
Intellectual Property
We intend, in due course, subject to legal
advice, to apply for trademark, copyright and/or patent protection in the United States and other jurisdictions. We regard
our intellectual property, including our software and trademark, as valuable assets and intend to vigorously defend them against
infringement.
While there can be no assurance that registered
patents, trademarks and copyrights will protect our proprietary information, we intend to file for protection and assert our intellectual
property rights against any infringer. Although any assertion of our rights can result in a substantial cost to, and diversion
of effort by, our company, management believes that the protection of our intellectual property rights is an important part of
our operating strategy.
Market Opportunity
As a whole, mobile applications create a
socially connected experience 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.
Governmental Approval and Regulation
There are multiple governmental regulations
related to how the Company will process, store, protect and use personal data in compliance with governmental regulations, contractual
obligations and other obligations related to privacy and security.
Environmental Compliance
We are not subject to material federal, state
or local laws or regulations governing the protection of the environment.
Insurance
We maintain a general business owner policy
which includes general liability and business interruption insurance. However, we do not currently have any D&O or key person
life insurance..
MANAGEMENT'S DISCUSSION AND ANALYSIS AND
RESULTS OF OPERATIONS
You should read the following discussion together with our consolidated
financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements,
which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result
of many factors, including the factors we describe under "Risk Factors," and elsewhere in this prospectus.
Forward-Looking Statements
Certain statements, other than purely historical
information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results,
and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act.
These forward-looking statements generally are identified by the words “believes,” “project,” “expects,”
“anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,”
“will,” “would,” “will be,” “will continue,” “will likely result,”
and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of
complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that
are subject to risks and uncertainties, which may cause actual results to differ materially from the forward-looking statements.
Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could
have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to:
changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally
accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including
additional factors that could materially affect our financial results, is included herein.
Subsequent Events:
|
|
Subsequent to March 31, 2014 the Company obtained proceeds of $566,000 for various convertible debenture agreements (“
Debentures
”) entered into with face value totaling $566,000, 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 the Company at various conversion rates as outlined in each agreement. The Company paid $61,500 in legal and other expenses in connection with these debentures.
|
|
Subsequent to the March 31, 2014, the Company settled the outstanding promissory note by transferring the Strong Creek and Iron Mountain Properties (see Note 3) to the promissory note holder.
|
|
Subsequent to March 31, 2014 the Company issued 20,487,515 shares in connection with conversion of convertible notes in the amount of $399,364.
|
|
Subsequent to March 31, 2014 the Company effected a 20:1 reverse stock split.
|
Subsequent to March 31, 2014, the Company entered
into a Letter Agreement with Beaufort Capital Partners LLC, pursuant to which Beaufort agreed to loan up to $400,000 to the Company
upon the Company’s written request. From June 25, 2014 to October 1, 2014, 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. Each Note shall be secured by a pledge of 8,000,000 shares of common stock
of the Company provided by Copper Creek Holdings, LLC, pledged under the terms and conditions of a Stock Pledge Agreement.
Subsequent to March 31, 2014, the Company entered into an Investment
Agreement with Beaufort Capital Partners LLC, pursuant to which the Company may issue and sell to Beaufort $2,500,000 of the Company’s
fully registered, freely tradable common stock. The parties also entered into a Registration Rights Agreement dated June 25, 2014,
whereby the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended. Pursuant to
the agreements, the Company shall register the shares pursuant to a registration statement on Form S-1 (or on such other form as
is available to the Company within 21 days of the execution of the agreements) The Investment Agreement was subsequently restated
and amended to $5,000,000. In connection with the Investment Agreement, the Company issued 3,000,000 shares of common stock to
an escrow agent. These shares are cancellable upon issuing the S-1 registration statement
Subsequent to March 31, 2014 the Company issued
6,446,429 shares of common stock for payment of services to various consultants and service providers.
Subsequent to March 31, 2014 the Company issued
40,202,745 shares of common stock on conversion of preferred stock.
Subsequent
to March 31, 2014, the holders of Series A Preferred Stock plan to convert 7.06086% of the Series A Preferred Stock on or around
July 28, 2014. Based on the current outstanding common stock of 64,414,048 shares, such percentage of Series A Preferred Stock
would convert into 40,933,672 shares of common stock.
Corporate Overview
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-DE”, purchased the iHookup mobile application, its name, intellectual property, user database,
certain domain names, and Apple developer from 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 the Merger Agreement on February 3, 2014 with the 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 5,000,000 (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 $5,000,000). 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.
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
|
$19.99
|
|
|
We are pursuing our growth in our current "dating
vertical" market, as well as expanding our reach into the general audience category of "social networking."
In the near future, we may provide our users
with "local" options of many kinds, enabling “social commerce” (i.e. using social media to promote the buying
and selling of products and services) with mobile distribution of locally relevant content and special offers. We hope to bring
together a dynamic opportunity for brands, advertisers and merchants to interact in new and innovative ways with the iHookup Social
Network, while building customer loyalty, engagement and revenues.
We intend to build population density in our
user base by engaging users with new features that are locally relevant and retain our user base through other enhanced engagement
features. Through the potential introduction of “social commerce” revenue opportunities, we may add another layer of
monetization to our revenue model (as discussed below in Revenues).
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.
Results of Operations
For the three months ended March 31,
2014-iHookup Social, Inc.
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.
For the Years Ended December 31, 2013
and 2012 – Titan Iron Ore
Our cash as of December 31, 2013 was $18,005.
As a result of our minimal amount of revenues and ongoing expenditures in pursuit of our business, we incurred net losses since
our inception. For the period from inception (June 5, 2007) to December 31, 2013 we had operating revenues of $4,855 and incurred
a net loss of $7,307,575. For the year ended December 31, 2013, our net loss was $2,869,622.
Our operating expenses for our fiscal years
ended December 31, 2013 and 2012 and the changes between those periods for the respective items are summarized as follows:
Titan Iron Ore, Corp.
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31, 2013
|
|
|
Year
Ended December 31, 2012
|
|
|
|
$
|
|
|
$
|
|
REVENUES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
-
|
|
|
|
2,653
|
|
General and administrative
|
|
|
625,737
|
|
|
|
586,421
|
|
Impairment of mineral acquisition costs
|
|
|
25,000
|
|
|
|
-
|
|
Accretion on promissory note
|
|
|
888,512
|
|
|
|
113,394
|
|
Financing costs
|
|
|
574,380
|
|
|
|
8,391
|
|
Interest expense
|
|
|
40,531
|
|
|
|
2,385
|
|
Investor relations
|
|
|
31,588
|
|
|
|
227,687
|
|
Professional fees
|
|
|
141,649
|
|
|
|
154,767
|
|
Mineral property exploration costs
|
|
|
34,567
|
|
|
|
164,564
|
|
Stock-based compensation
|
|
|
352,338
|
|
|
|
2,133,251
|
|
Travel
|
|
|
4,616
|
|
|
|
14,244
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
2,718,918
|
|
|
|
3,407,757
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses increased by 11% for
the year ended December 31, 2013 compared to the same period ended December 31, 2012. The increase in expenses over
the prior year was due primarily to a charge for mineral acquisition costs and higher accretion on promissory notes, financing
costs, and interest due to convertible debt financing. Offsetting these increases were lower mineral exploration costs, investor
relations expense, and stock based compensation.
Liquidity and Capital Resources
Working Capital
For the three months ended March 31,
2014-iHookup Social, Inc.
|
|
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.
For the Years Ended December 31, 2013
and 2012-Titan Iron Ore Corp.
Working Capital
|
|
|
December 31, 2013
|
|
|
|
December 31, 2012
|
|
|
|
|
(audited)
|
|
|
|
(audited)
|
|
Current Assets
|
|
$
|
18,005
|
|
|
$
|
145,433
|
|
Current Liabilities
|
|
$
|
1,080,931
|
|
|
$
|
196,525
|
|
Working Capital Deficiency
|
|
$
|
(1,062,926
|
)
|
|
$
|
(51,092
|
)
|
As of December 31, 2013, we had $18,005 in
cash, as compared to $145,433 as of December 31, 2012. Our cash decreased due to operating expenses incurred during the period.
As of December 31, 2013, we had accounts payable
of $296,539, as compared to $60,862 as of December 31, 2012. Our accounts payable increased due to a shortfall in financing to
pay liabilities.
As of December 31, 2013, we had a current portion
of promissory note of $257,911, as compared to 127,353 as of December 31, 2012. Our current portion of promissory note increased
due to payments due under the Wyomex property acquisition.
As of December 31, 2013, we had accrued expenses
to related parties of $129,193, as compared to $6,479 as of December 31, 2012. Our accrued expenses to related parties increased
due to amounts due to officers.
We currently do
not have sufficient capital to funds our needs for the next 12 months. We believe that we need
a minimum of $900,000 in
capital for the next twelve month period in order to fund our operations.
.
Cash Flows
For the three months ended March 31,
2014-iHookup Social, Inc.
|
|
Three months
|
|
|
|
|
Ended
|
|
|
|
|
March 31, 2014
|
|
|
Net 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.
For the Years Ended December 31,
2013 and 2012-Titan Iron Ore Corp.
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
December 31, 2013
|
|
|
|
December 31, 2012
|
|
Net Cash Provided by (Used in) Operating Activities
|
$
|
(606,949
|
)
|
|
$
|
(983,734
|
)
|
Net Cash Provided by (Used in) Investing Activities
|
|
(25,000
|
)
|
|
|
(85,000
|
)
|
Net Cash Provided by (Used in) Financing Activities
|
|
529,522
|
|
|
|
1,071,101
|
|
Net Increase (Decrease) in Cash
|
$
|
(102,427
|
)
|
|
$
|
2,367
|
|
Operating Activities
Net cash used in operating activities decreased
by 43% for our 12-month period ended December 31, 2013 compared to the same period in 2012. The reason for the decrease
is decreased cash operating expenses.
Investing Activities
Net cash used in investing activities decreased
by 71% for our 12-month period ended December 31, 2013 compared to the same period in 2012. The reason for the decrease
is fewer payments on mineral properties.
Financing Activities
Net cash provided by financing activities decreased
by 55% for our 12-month period ended December 31, 2013 compared to the same period in 2012. The reason for the decrease
is the reduction in private placement funding, partially offset by higher convertible notes.
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.
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.
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 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,
pursuant to which our company will sold a six month, 8% Convertible Redeemable Note to Beaufort Ventures (the “Beaufort Ventures
Note”). On March 11, 2014, Beaufort Ventures funded $55,000 at closing. The maturity date of the Beaufort Ventures
Note is September 7, 2014 (the “Beaufort Maturity Date”), upon which the outstanding principal amount for the Beaufort
Ventures Note is payable. Amounts funded plus interest under the Beaufort Venture Note 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 price 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 Ventures transaction,
on March 7, 2014, 2014, our company entered into the Beaufort Debt Purchase Agreement with Beaufort Ventures and GCA, whereby Beaufort
Ventures agreed to assume $90,000 of the face value of the GCA Note on terms modified to be consistent with the Beaufort Ventures
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.
Securities Purchase Agreement with Ascendiant
Capital Partners, LLC (Equity Line of Credit)
On October 18, 2012, the Company entered into
a securities purchase agreement (the “Equity Line of Credit Agreement”) with Ascendiant Capital Partners, LLC (“Ascendiant”),
as amended on January 9, 2013, February 19, 2013 and April 2, 2013, pursuant to which the Company may sell and issue to Ascendiant,
and Ascendiant is obligated to purchase, up to $10,000,000 in value of its shares of common stock from time to time over a 36 month
period.
The Company will determine, at its own discretion,
the timing and amount of its sales of stock, subject to certain conditions and limitations. Shares will be
priced to be the lesser of (i) 75% of the volume weighted average price on the date of delivery of the draw down notice and (ii)
75% of the closing price of the last transaction on the date of delivery of the draw down notice as long as such price is within
the bid and offer at the close (if such transaction is not within the bid and offer at the close, then the next most recent transaction
will be selected until one is located that is within the bid and offer at close). The maximum dollar amount as to each draw down
is to be equal to (i) 20% of the average daily trading volume during the 7 trading days immediately prior to the date of the draw
down notice, eliminating the 2 days with the greatest trading volume and the 2 days with the least trading volume, multiplied by
(ii) the volume weighted average price on the trading day immediately prior to the date of the draw down notice; provided, however,
no draw down can exceed $25,000. Only one draw down will be allowed on each trading day. The Company can terminate the equity line
at any time.
Pursuant to the terms of the Equity Line of
Credit Agreement, the Company agreed to issue the following shares of common stock (the “Commitment Shares”):
|
·
|
150,015 shares of common stock no later than 30 days following the agreement date (issued on October 22, 2012) and an additional
857,142 shares (issued on April 15, 2013);
|
|
·
|
On the trading day (the “Second Payment Date”) which is 30 calendar days following the agreement date, 173,913
shares of common stock, (issued on November 19, 2012);
|
|
·
|
On the trading day (the “Third Payment Date”) which is 30 calendar days following the agreement date, 818,930 shares
of common stock (issued on January 10, 2013);
|
|
·
|
On the trading day (the “Fourth Payment Date”) in which the Company has received at least $1,000,000 in aggregate
up on drawdowns, a number of shares of common stock equal to 0.5% of $10,000,000 divided by 95% of the average VWAP during the
10 trading days prior to the Fourth Payment Date; and
|
|
·
|
On the trading day (the “Fifth Payment Date”) in which the Company has received at least $2,000,000 in aggregate
up on drawdowns, a number of shares of common stock equal to 0.5% of $10,000,000 divided by 95% of the average VWAP during the
10 trading days prior to the Fifth Payment Date.
|
At December 31, 2013, the fair value of the
commitment shares issued of $165,916 for the First and Second Payment Dates, $163,980 for the value of the commitment shares for
the Third Payment Date, and $62,440 for the value of the commitment shares for the Fourth Payment Date plus the direct expenses
of $59,377 have been included in deferred financing costs and will be amortized over the Equity Line of Credit Agreement.
At December 31, 2013, direct expenses of $7,624
have been included in deferred financing costs and will be amortized over the Share Purchase Agreement. On June 26,
2013, the registration statement was declared effective by the SEC. On September 12, 2013 the Company issued 86,764
shares of common stock under the equity line at an average price of $0.0423 for proceeds of $3,671.
Securities Purchase Agreements (Debentures)
- Marie Baier Foundation and Motivated Minds
On October 18, 2012, we entered into securities
purchase agreements with two investors, pursuant to which we sold an aggregate of $235,300 face value in principal amount of 5%
convertible debentures due October 18, 2013. In addition to the debentures, we issued an aggregate of 705,901 common stock purchase
warrants with each warrant entitling the holder to acquire one share of our common stock at a price of $0.25 per share for three
years. The investors paid us the aggregate subscription amount of $200,000 for the debentures and the warrants, which subscription
amount was at a 15% discount from the principal amount of the debentures. For further information regarding the debentures, see
the section titled “The Offering” in our Registration Statement on Form S-1 dated February 22, 2013. As of December
31, 2013 these notes have been fully paid and/or have been converted to commons stock.
Convertible Debentures
During the year ended December 31, 2013, the
Company has entered into various convertible debenture agreements summarized as follows:
|
|
Issuance
|
|
Principal
|
|
|
Discount
|
|
|
Carrying Value
|
|
|
Interest Rate
|
|
Maturity Date
|
|
a
|
)
|
15-Aug-13
|
|
|
15,500
|
|
|
|
1,928
|
|
|
|
13,572
|
|
|
|
8
|
%
|
19-May-14
|
|
a
|
)
|
23-Aug-13
|
|
|
27,500
|
|
|
|
18,845
|
|
|
|
8,655
|
|
|
|
8
|
%
|
27-May-14
|
|
a
|
)
|
1-Jul-13
|
|
|
42,500
|
|
|
|
13,929
|
|
|
|
28,571
|
|
|
|
8
|
%
|
28-Mar-14
|
|
a
|
)
|
17-Oct-13
|
|
|
27,500
|
|
|
|
11,741
|
|
|
|
15,759
|
|
|
|
8
|
%
|
16-Jul-14
|
|
b
|
)
|
4-Nov-13
|
|
|
15,000
|
|
|
|
9,542
|
|
|
|
5,458
|
|
|
|
6
|
%
|
4-Nov-15
|
|
b
|
)
|
9-Dec-13
|
|
|
20,000
|
|
|
|
13,054
|
|
|
|
6,946
|
|
|
|
6
|
%
|
5-Dec-15
|
|
c
|
)
|
9-Dec-13
|
|
|
33,159
|
|
|
|
21,644
|
|
|
|
11,515
|
|
|
|
8
|
%
|
5-Dec-15
|
|
d
|
)
|
2-Apr-13
|
|
|
208,250
|
|
|
|
11,814
|
|
|
|
196,436
|
|
|
|
0
|
%
|
2-Jan-13
|
|
e
|
)
|
2-Oct-13
|
|
|
76,500
|
|
|
|
28,501
|
|
|
|
47,999
|
|
|
|
12
|
%
|
18-Sep-14
|
|
f
|
)
|
26-Jun-13
|
|
|
83,333
|
|
|
|
55,037
|
|
|
|
28,296
|
|
|
|
12
|
%
|
26-Jun-14
|
|
f
|
)
|
26-Sep-13
|
|
|
27,778
|
|
|
|
25,682
|
|
|
|
2,096
|
|
|
|
12
|
%
|
26-Sep-14
|
|
f
|
)
|
9-Dec-13
|
|
|
27,778
|
|
|
|
23,506
|
|
|
|
4,272
|
|
|
|
12
|
%
|
9-Dec-14
|
|
g
|
)
|
4-Nov-13
|
|
|
15,000
|
|
|
|
7,077
|
|
|
|
7,923
|
|
|
|
8
|
%
|
4-Nov-15
|
|
h
|
)
|
18-Sep-13
|
|
|
30,000
|
|
|
|
10,210
|
|
|
|
19,790
|
|
|
|
12
|
%
|
18-Sep-14
|
|
|
|
|
|
|
649,798
|
|
|
|
252,510
|
|
|
|
397,288
|
|
|
|
|
|
|
|
a)
|
The Company entered into several convertible promissory notes (“Asher Notes”) with Asher Enterprises Inc. (“Asher”).
Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time
after 6 months from the issuance date at a conversion price per share equal to 60% of the average price of the lowest 5 day trading
days during the 10 trading days preceding the conversion. The Asher Notes cannot be converted, to the extent that Asher Enterprises
Inc. and its affiliates would beneficially own in excess of 4.99% of the Company’s outstanding common stock.
|
The convertible debenture may be
repaid by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period
of 60 days beginning on the issuance date;
|
|
·
|
Outstanding principal multiplied by 135% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 61 days following the issuance date and ending on the date that is 90 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 91 days following the issuance date and ending on the date that is 120 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 121 days following the issuance date and ending on the date that is 180 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 175% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 181 days following the issuance date through the maturity date.
|
|
·
|
In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per
annum and the Asher Notes becomes immediately due and payable. Should that occur the Company is liable to pay the holder 150% of
the then outstanding principal and interest.
|
|
b)
|
The Company entered into two convertible promissory notes (“GEL Notes”) with GEL Properties, LLC (“GEL”).
Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time
after 6 months from the issuance date at a conversion price per share equal to 60% of the lowest closing bid price during the 5
trading days preceding the conversion. The GEL Notes cannot be converted, to the extent that GEL would beneficially own in excess
of 4.99% of the Company’s outstanding common stock.
|
The convertible debenture may be
repaid by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period
of 90 days beginning on the issuance date;
|
|
·
|
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 91 days following the issuance date and ending on the date that is 180 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 181 days following the issuance date through the maturity date.
|
|
·
|
In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per
annum and the GEL Notes becomes immediately due and payable.
|
|
c)
|
On October 18, 2012, The Company entered into a convertible bridge note (the “Baier Note”) with The Marie Baier
Foundation (“The Foundation”) for $147,062. On December 9, 2013, the Company assigned $34,159 of principal and interest
of the Baier Note to GEL Properties, LLC (“GEL”) and entered into a $34,159 convertible promissory note (the “GEL
Note”) with GEL. Any outstanding principal amount can be converted, in whole or in part, into common stock at the option
of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 60% of the lowest closing
bid price during the 5 trading days preceding the conversion. The GEL Notes cannot be converted, to the extent that GEL would beneficially
own in excess of 4.99% of the Company’s outstanding common stock.
|
The convertible note cannot be prepaid.
|
d)
|
On April 2, 2013, the Company entered into a convertible bridge note with GCA Strategic Investment Fund Limited. On December
31, 2013 the Company entered in a letter agreement with GCA Strategic Investment Fund Limited, in which the original maturity date
of September 20, 2013 was extended to January 2, 2014. The remaining principal balance was agreed to be $218,000. During the year
ended December 31, 2013, GCA converted $9,750 of the note leaving a principal balance of $208,250
|
The unpaid principal portion and
accrued interest on the convertible bridge note is convertible in whole or in part as follows:
|
·
|
Conversion price per share equal to the lower of:
|
|
(i)
|
100% of the average price of the Company’s common stock for the 5 trading days preceding the conversion days
|
|
(ii)
|
70% of the daily average price of the Company’s common stock for the 10 trading days preceding the conversion date.
|
|
·
|
The holders must not convert more than 33 1/3% of the initial principal sum into shares of the Company’s common
stock at a price below $0.08 per share during any calendar month.
|
Global does not have the right to
convert the convertible bridge note, to the extent that Global 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.
|
e)
|
The Company entered into a convertible promissory note (“Hanover Note”) with Hanover Holdings I, LLC (“Hanover”).
Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time
after 6 months from the issuance date at a conversion price per share equal to 60% of the lowest VWAP (“Variable Weighted
Average Price”) price during the 5 trading days preceding the conversion. The Hanover Note cannot be converted, to the extent
that Hanover would beneficially own in excess of 4.99% of the Company’s
outstanding common stock.
|
The convertible debenture may be repaid
by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period
of 180 days beginning on the issuance 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 GEL Notes becomes immediately due and payable.
|
|
f)
|
During the period ended December 31, 2013 the Company entered into a one year promissory note with JMJ Financial. The total
amount that may be borrowed is $275,000, which includes an upfront fee of 10%. No interest will be applied to the principal balance
for the first 90 days after cash advance. After the first 90 days, an interest charge of 12% will be immediately applied to the
principal and the 10% upfront fee.
|
On delivery of consideration, the
lender may convert all or part of the unpaid principal and upfront fee into common stock at its sole discretion. All balances outstanding
have a variable conversion price equal to the lesser of $0.07 or 60% of the market price. The market price is defined as the lowest
trade price in the 25 days prior to the conversion date. The lender is limited to holding no more than 4.99% of the issued and
outstanding common stock at the time of conversion.
After the expiration of 90 days
following the delivery date of any consideration, the Company will have no right of prepayment.
|
g)
|
The Company entered into a convertible promissory note (“LG Note”) with LG Properties, LLC (“LG”).
Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time
after 6 months from the issuance date at a conversion price per share equal to 50% of the average of the two lowest closing bid
prices during the 5 trading days preceding the conversion. The LG Note cannot be converted, to the extent that LG would beneficially
own in excess of 4.99% of the Company’s outstanding common stock.
|
The convertible debenture may be
repaid by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period
of 90 days beginning on the issuance date;
|
|
·
|
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 91 days following the issuance date and ending on the date that is 180 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 181 days following the issuance date through the maturity date.
|
|
·
|
In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per
annum and the LG Notes becomes immediately due and payable.
|
|
h)
|
During the period ended December 31, 2013 the Company entered into a convertible debenture agreement with Magna LLC in the
amount of $195,000.
|
The unpaid principal portion on
the convertible debenture is convertible in whole or in part as follows at a conversion price equal to 80% of the average price
of the Company’s common stock for the 5 trading days preceding the conversion day. The holders must not convert more than
300% of the average daily dollar volume in the 10 day trading period ending on the day that the holder elects conversion.
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.
DESCRIPTION OF PROPERTY
Principal Office
Our executive offices are located at 125 East
Campbell Ave, Campbell, California 95008, and we also lease an office at 1735 East Fort Lowell Road, Suite 9, Tucson, Arizona 85719.
We believe that our office space and facilities are sufficient to meet our present needs and do not anticipate any difficulty securing
alternative or additional space, as needed, on terms acceptable to us.
Our registered agent
is located at
Nevada Agency and Transfer Company, 50 West Liberty Street Suite 880, Reno, Nevada 89501
.
LEGAL PROCEEDINGS
On December 7, 2012, we filed suit in state
court in Albany County, Wyoming against DSS Holdings LLC and Douglas Samuelson (“Samuelson”) to regain preliminary
access to our Iron Mountain holdings. This road crosses Samuelson’s property. Samuelson has locked the gate across the road
providing access to the Iron Mountain holdings and denied our repeated requests for access. The suit was filed in the District
Court of the Second Judicial District in Wyoming, after negotiations between the parties were unsuccessful. Under Wyoming Statute§
1-26-507, we hoped to gain access to our property in order to conduct studies and collect samples of iron ore from the existing
Iron Mountain pit and stockpile in order to evaluate the suitability of these materials to meet the specifications of potential
customers.
On February 11, 2013, our petition to use the
road was denied. We pursued condemnation efforts and sought a second preliminary access hearing. We sent a letter to Samuelson
as a requirement to condemn an easement over the road under Wyoming Statute§1-26-505 through 1-26-508 and have sent another
letter as a precursor to a second preliminary access hearing. As of December 31, 2013, no further action is planned by the Company.
Other than the suit against DSS Holdings LLC
and Samuelson, we know of no material pending legal proceedings to which our company or any of our subsidiaries is a party or of
which any of our properties, or the properties of any of our subsidiaries, is the subject. In addition, we do not know of any such
proceedings contemplated by any governmental authorities.
We know of no material proceedings in which
any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to our company or
any of our subsidiaries or has a material interest adverse to our company or any of our subsidiaries.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
Directors and Executive Officers
Our directors hold office until the next annual
meeting or until their successors have been elected and qualified, or until they resign or are removed. Our board of directors
appoints our officers, and our officers hold office for such term as may be prescribed by our board of directors and until their
successors are chosen and qualify, or until their death or resignation, or until their removal.
Our directors and executive officers, their
ages, positions held, and duration of such are as follows:
Name
|
Position Held with Our Company
|
Age
|
Date First Elected or Appointed
|
Robert Rositano
|
CEO, Secretary and Director
|
45
|
January 31, 2014
|
Dean Rositano
|
President, CTO and Director
|
42
|
January 31, 2014
|
Frank Garcia
|
CFO
|
56
|
June 30, 2011
|
Business Experience
The following is a brief account of the education
and business experience during at least the past five years of each director and executive officer of our company, indicating the
person’s principal occupation during that period, and the name and principal business of the organization in which such occupation
and employment were carried out.
Robert Rositano, CEO, Secretary and Director:
Robert Rositano is a serial entrepreneur with
more than twenty years of experience in technology and bringing in more than $60 million in liquidity events for the companies
he has founded and/or managed. Prior to founding iHookup, Robert Rositano was the third employee at Netcom Online Communications,
Inc., an internet service provider which quickly reached 500,000 subscribers. He was involved in taking Netcom Online Communications,
Inc. public in 1993, and the company eventually merged into Earthlink and AT&T Canada. Robert Rositano has co-founded a number
of successful ventures, including Simply Internet, Inc., Nettaxi.com, America’s Biggest, Inc., Zippi Networks, Inc. (an eBay
partner) and Checkmate Mobile, Inc. (“CMI”). He has also authored one of the first Web Directory’s for Macmillan
Publishers.
From 2006-2010, Robert Rositano worked as Chief
Executive Officer of Zippi Networks, Inc. Zippi Networks, Inc. created a home-based business system that allowed users to become
certified eBay sellers and earn commission by selling items on eBay for others. Zippi Networks, Inc. supplied its users with everything
one would need to begin a home-based business as an eBay seller, including but not limited to, certain training, materials, uniforms,
processes and software. Robert Rositano was responsible for its day-to-day operations and overseeing the development of eBay seller
applications for the web, as well as mobile applications for windows and iPhone devices. He was also in charge of fundraising,
and raised over $2 million for Zippi Networks, Inc. In 2010, Robert Rositano became Chief Executive Officer of CMI, which developed
mobile applications on a work-for-hire basis as well as incubated creative concepts conceived among a core group of product managers,
graphic designers and mobile developers. CMI has successfully developed apps for the education market (e.g. released Cloud9 Learning
to Brigham Young University with a pilot of over 7,000 students), cause-related or donation style apps, apps used by restaurants
and bars, etc. Robert Rositano will continue his role at CMI while serving as a director and officer of Titan and iHookup.
Robert Rositano is well qualified as a director,
and the Chief Executive Officer and Secretary of Titan and iHookup due to his twenty years of experience working with high technology
companies, many of which have been in the social media or internet community space and directly relate to the iHookup mobile app.
He has extensive experience in successfully raising capital, managing and growing teams of people in the areas of product development,
internet / mobile marketing, and IT, as well as architecting, building, scaling and launching high volume consumer products, from
internet websites to mobile applications.
Dean Rositano, President, CTO and Director:
With over fifteen years of experience in executive
management, Internet architecture, mobile technologies, high volume server architectures, and general high technology operations,
Dean Rositano has successfully assisted in the raising of over $40 million in both private and public transactions. Prior to iHookup
Social, Inc., Dean Rositano co-founded CMI, Latitude Venture Partners, LLC, Zippi Networks, Inc., America’s Biggest, Inc.,
and most notably, was the co-founder and president and CTO of Silicon Valley-based Nettaxi.com, which went public in 1998 when
it quickly reached a valuation of over $600 million. With over three million unique visitors daily and a top five worldwide, website
rank, Dean Rositano was responsible for designing, architecting, and scaling the Nettaxi server infrastructure from zero to over
10 million visitors per day.
From 2006-2010, Dean Rositano worked as
President and Chief Technology Officer of Zippi Networks, Inc. Zippi Networks, Inc. created a home-based business system that
allowed users to become certified eBay sellers and earn commission by selling items on eBay for others. Zippi Networks, Inc.
supplied its users with everything one would need to build a home-based business as an eBay seller, including but not limited
to, certain training, materials, uniforms, processes and software. Dean Rositano was responsible for its day-to-day
operations and overseeing the development of eBay seller applications for the web, as well as mobile applications for windows
and iPhone devices. In 2010, Dean Rositano became President and Chief Technology Officer of CMI, which developed mobile
applications on a work-for-hire basis as well as incubated creative concepts conceived among a core group of product
managers, graphic designers and mobile developers. CMI has successfully developed apps for the education market (e.g.
released Cloud9 Learning to Brigham Young University with a pilot of over 7,000 students), cause-related or donation style
apps, apps used by restaurants and bars, etc. Dean Rositano will continue his role at CMI while serving as a director and officer
of Titan and iHookup.
Dean Rositano is well qualified as a
director and the President and Chief Technology Officer of Titan and iHookup due to his twenty years of experience working with
high technology companies, many of which have been in the social media or internet community space and directly relates to the
iHookup mobile app. He has extensive experience in successfully raising capital, managing and growing teams of people in the areas
of product development, internet / mobile marketing, and IT, as well as architecting, building, scaling and launching high volume
consumer products, from internet websites to mobile applications.
Frank Garcia, CFO:
Frank Garcia from 2007 to the present has worked
as Accounting Manager for Kriyah Consultants LLC providing accounting services for mining exploration companies. From 1997 to 2006,
Mr. Garcia was employed in senior management positions by Misys PLC, a global software and solutions company serving customers
in international banking and securities, international healthcare, and UK retail financial services. Prior to 1997 Mr. Garcia held
executive positions with CEMEX, a world leader in the construction materials industry. Mr. Garcia is currently the CFO of a publicly-traded
mining exploration company-- Zoro Mining Corp. (OTCBB: ZORM). Mr. Garcia received his Bachelor of Science –Business Administration—Major
in Accounting from the University of Arizona in 1981.
We believe Mr. Garcia is qualified to serve
as an officer because he brings significant company knowledge as well as business and public company experience to our company.
Family Relationships
Robert
Rositano, age 45, and Dean Rositano, age 42, are brothers.
Involvement in Certain Legal Proceedings
During the past ten years, our directors and executive officers
above have not been involved in any of the following events:
|
|
|
|
•
|
a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
|
|
|
|
|
•
|
conviction in a criminal proceeding or being subject to a pending criminal proceeding, excluding traffic violations and other minor offenses;
|
|
|
|
|
•
|
being subject to any order, judgment or decree, not substantially reversed, suspended or vacated, of any court of competent jurisdiction, permanently enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking business;
|
|
|
|
|
•
|
being found by a court of competent jurisdiction, in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated;
|
|
|
|
|
•
|
being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
|
|
|
|
•
|
being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
Conflict of Interest
There are several related party transactions
reported within this annual report. All conflicts of interests between such related parties have been duly approved by the required
board and/or shareholder approvals. Please see below for further disclosure:
Dean Rositano and Robert Rositano are both
directors and the 19.3% stockholders of CMI. At CMI, Dean Rositano also serves as President and Chief Technology Officer, while
Robert Rositano serves as Chief Executive Officer. They will both continue their respective roles at CMI while serving as directors
and officers of Titan and iHookup.
CMI sold the iHookup mobile app to iHookup
Social, Inc. for a purchase price of $293,750. iHookup Social, Inc. paid the purchase price by issuing 1,175,000 shares of its
Series A Preferred Stock, priced at $0.25/share, to CMI.
Dean Rositano and Robert Rositano are both
directors and stockholders of iHookup. At iHookup, Dean Rositano also serves as President and Chief Technology Officer, while Robert
Rositano serves as Chief Executive Officer and Secretary. The majority stockholder of iHookup is Copper Creek Holdings, LLC, a
Nevada limited liability company owned and managed by Robert Rositano and his wife, Stacy Rositano.
Pursuant to the Merger Agreement dated January
31, 2014 by and between iHookup Social, Inc. and Titan, Titan’s Series A Preferred Stock consists of the following: 4,510,400
shares owned by Dean Rositano, 4,510,400 shares owned by Robert Rositano, 36,083,350 shares owned by Copper Creek Holdings, LLC,
and 4,895,850 shares owned by CMI. Such Series A Preferred Stock shall be convertible into the number of shares of common stock
which equals nine 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. sale and issuance of equity securities of Titan that results in gross proceeds to Titan
in excess of five million dollars ($5,000,000)).
As described above, Dean Rositano and Robert Rositano have
both been appointed directors and officers of Titan. Dean Rositano will also serve as President and Chief Technology Officer, while
Robert Rositano will serve as Chief Executive Officer and Secretary.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the
Securities Exchange
Act of 1934
requires our executive officers and directors, and persons who own more than 10% of our common stock, to file initial
statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common
stock and other equity securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based
solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we
believe that during year ended December 31, 2013 all filing requirements applicable to our executive officers and directors, and
persons who own more than 10% of our common stock were complied with, with the exception of the following:
Name
|
Number
of
Late Reports
|
Number
of
Transactions Not
Reported on a
Timely Basis
|
Failure to File
Requested Forms
|
Andrew Brodkey
|
Nil
|
Nil
|
N/A
|
Frank Garcia
|
Nil
|
Nil
|
N/A
|
Dr. David Hackman
|
Nil
|
Nil
|
N/A
|
Dr. Ronald Richman
|
Nil
|
Nil
|
N/A
|
Code of Ethics
We have not yet adopted a
Code of Ethics. We believe that due to our size of our management, we do not currently require a code of ethics.
Committees of the Board
Our board of directors has the authority to
appoint committees to perform certain management and administration functions. Currently, we do not have an audit committee, compensation
committee or nominating and corporate governance committee and do not have an audit committee financial expert. Our board of directors
currently intends to appoint various committees in the future.
Nominating and Corporate Governance Committee
We do not have a nominating and corporate governance
committee. Our board of directors performed the functions associated with a nominating committee. Generally, nominees for directors
are identified and suggested by the members of our board of directors or management using their business networks. Our board of
directors has not retained any executive search firms or other third parties to identify or evaluate director candidates in the
past and does not intend to in the near future. We have elected not to have a nominating committee because we are an exploration
stage company with limited operations and resources.
Our board of directors does not have a written
policy or charter regarding how director candidates are evaluated or nominated for our board of directors. Additionally, our board
of directors has not created particular qualifications or minimum standards that candidates for our board of directors must meet.
Instead, our board of directors considers how a candidate could contribute to our business and meet our needs and those of our
board of directors. As we are an exploration stage company, our board of directors will not consider candidates for director recommended
by our stockholders, and we have received no such candidate recommendations from our stockholders.
Compensation Committee
We currently do not have a compensation committee.
However, our board of directors may establish a compensation committee once we are no longer in the exploration stage, which would
consist of inside directors and independent members. Until a formal committee is established, our board of directors will continue
to review all forms of compensation provided to our executive officers, directors, consultants and employees including stock compensation.
Audit Committee
We currently do not have an audit committee.
However, our board of directors may establish an audit committee once we are no longer in the exploration stage, which would consist
of inside directors and independent members.
Until a formal committee is established, our
board of directors will continue to perform the functions of an audit committee.
Audit Committee Financial Expert
Our board of directors has determined that
it does not have a member that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii)
of Regulation S-K issued by the United States Securities and Exchange Commission.
We believe that our entire board of directors
is capable of analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of the issues reasonably expected to be raised by our company. We believe
that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly
and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not
generated revenues to date.
EXECUTIVE COMPENSATION
Summary Compensation
The particulars of compensation paid to the following persons:
|
(a)
|
all individuals serving as our principal executive officer during the year ended December 31, 2013;
|
|
|
|
|
(b)
|
each of our two most highly compensated executive officers other than our principal executive officer who were serving as executive officers at December 31, 2012 who had total compensation exceeding $100,000; and
|
|
|
|
who we will collectively refer to as the named
executive officers, for the years ended December 31, 2013 and 2012, are set out in the following summary compensation table:
Name and
Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards
($)
1
|
Option Awards
($)
|
Non-Equity Incentive Plan Compensation
($)
|
Nonqualified Deferred Compensation Earnings
($)
|
All other Compensation
($)
|
Total
($)
|
Andrew Brodkey
Former President, Secretary, Treasurer
& Director
2
|
2013
2012
|
206,498
185,686
|
Nil
Nil
|
Nil
Nil
|
65,846
844,895
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
273,344
1,030,581
|
Frank Garcia
Chief Financial Officer
2
|
2013
2012
|
93,659
50,446
|
Nil
Nil
|
Nil
Nil
|
19,754
279,316
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
113,413
329,762
|
Dr. David Hackman
Former VP of Explorations
2
|
2013
2012
|
72,000
72,000
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
72,000
72,000
|
|
1
|
The amounts reported for option awards and any other equity-based awards represent the
grant date fair value, computed in accordance with ASC Topic 718.
|
|
2
|
Messrs. Brodkey, Garcia and Hackman were appointed as officers on June
30, 2011.
Messrs. Brodkey and Hackman resigned on January 31, 2014.
|
Compensation for Executive Officers and Directors
Compensation arrangements for our named executive officers and directors
are described below.
Employment Agreement – Andrew A. Brodkey
Effective June 30, 2011, we entered into an
employment agreement with Andrew A. Brodkey to serve as President and Chief Executive Officer of our company for a term of two
years with automatic renewals for similar two year periods pursuant to the terms of the agreement. Mr. Brodkey resigned
effective January 31, 2014. Mr. Brodkey’s duties included the duties and responsibilities for our company’s corporate
and administration offices and positions as set forth in our company’s and such other duties and responsibilities as the
board of directors may from time to time reasonably assign to Mr. Brodkey. Under the agreement, Mr. Brodkey received monthly remuneration
at a gross rate of $15,000 with such increases as our board of directors may approve. Mr. Brodkey was also entitled to receive
and did receive 2.4 million options to purchase shares of our common stock pursuant to our Stock Option Plan which has been approved
by our directors.
Consulting and Payroll Agreements – Kriyah Consultants
LLC
Effective June 30, 2011, we entered into consulting
agreements with Kriyah Consultants LLC, a company managed by Andrew Brodkey, whereby Kriyah was paid a consulting fee of $2,500
per month to:
|
(a)
|
provide office space, office equipment, utilities, phones and furniture;
|
|
|
|
|
(b)
|
employ secretarial, bookkeeping, accounting, recordkeeping, legal compliance and related personnel;
|
|
|
|
|
(c)
|
advise our company regarding financial planning, corporate development, and corporate governance;
|
|
|
|
|
(d)
|
provide instructions and directions to our company’s legal counsel, accountants and auditors; and
|
|
|
|
|
(e)
|
ensure that all accounting records are maintained to meet generally accept accounting principals and quarterly and annual reports are prepared and filed to meet regulatory requirements.
|
The Kriyah agreement also provided that our
company would reimburse Kriyah for its proportionate share of all expenses incurred with respect to the operation of the administration
of our company, including but not limited to, our company’s allocable share of Kriyah’s office rent, office equipment,
employee and contractor wages and benefits, phones and other office operational
costs (such allocable share to be determined according to the number of like clients being serviced by Kriyah at its Tucson location).
Also under this agreement, Kriyah provided the services of Frank Garcia as CFO.
In addition to the consulting agreement, our
company entered into a payroll services agreement with Kriyah, whereby Kriyah agreed to administer the payroll health insurance
benefits to be provided by our company to Mr. Brodkey as contemplated in the employment agreement with Mr. Brodkey. Such payroll
services include administering payroll deductions, unemployment compensation, social security taxes and workers compensation and
any other withholdings or payroll related payments required under applicable law.
Kriyah Consultants LLC went out of business
on December 31, 2013 effectively ending the contract.
Consulting Agreement – David
Hackman
Effective June 30, 2011, we entered into a
consulting agreement with Sage Associates, Inc. whereby Sage through its owner, Dr. David Hackman, served as our company’s
Vice President, Exploration, provided and performed for the benefit of our company certain geological advisory services as requested
by our company. Under the agreement, Sage received monthly compensation at a gross rate of $6,000. In addition to any
fees payable to Sage under the agreement, we agreed to promptly reimburse Sage within thirty (30) days of receipt of detailed invoice,
for all reasonable travel and other out-of-pocket expenses incurred in performing the services under the agreement, which are approved
by our company. Dr. Hackman resigned effective January 31, 2014.
Outstanding Equity Awards at Fiscal Year-End
of Named Executive Officers
The following table sets forth for each named executive officer
and former officer and certain information concerning the outstanding equity awards as of December 31, 2013:
|
OPTION AWARDS
|
STOCK AWARDS
|
Name
|
Number of Securities Underlying Unexercised
Options
(#)
Exercisable
|
Number of Securities Underlying Unexercised
Options
(#)
Unexercisable
|
Equity Incentive Plan Awards: Number of Securities
Underlying Unexercised Unearned Options
(#)
|
Option Exercise Price
($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have
Not Vested
(#)
|
Market Value of Shares or Units of Stock
That Have Not Vested
($)
|
Equity Incentive Plan Awards: Number of Unearned
Shares, Units or Other Rights That Have Not Vested
(#)
|
Equity Incentive Plan Awards: Market or Payout
Value of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
|
Andrew Brodkey
|
1,000,000
|
Nil
|
Nil
|
$0.84
|
12/21/2021
|
Nil
|
Nil
|
Nil
|
Nil
|
Andrew Brodkey
|
800,000
|
Nil
|
Nil
|
$0.20
|
06/22/2022
|
Nil
|
Nil
|
Nil
|
Nil
|
Andrew Brodkey
|
1,000,000
|
Nil
|
Nil
|
$0.067
|
06/25/2023
|
Nil
|
Nil
|
Nil
|
Nil
|
Frank Garcia
|
300,000
|
Nil
|
Nil
|
$0.067
|
06/25/2023
|
Nil
|
Nil
|
Nil
|
Nil
|
Frank Garcia
|
400,000
|
Nil
|
Nil
|
$0.84
|
12/21/2021
|
Nil
|
Nil
|
Nil
|
Nil
|
Dr. David Hackman
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Director Compensation
The following table sets forth for a former director certain information
concerning his compensation for the year ended December 31, 2013.
Name
|
Fees
Earned
or Paid
in Cash
($)
|
Stock
Awards
1
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
All Other
Compensation
($)
|
Total
($)
|
Ronald Richman
|
24,000
|
Nil
|
19,754
|
Nil
|
Nil
|
Nil
|
43,754
|
Outstanding Equity Awards at Fiscal Year-End for former director
|
OPTION AWARDS
|
STOCK AWARDS
|
Name
|
Number of Securities Underlying Unexercised
Options
(#)
Exercisable
|
Number of Securities Underlying Unexercised
Options
(#)
Unexercisable
|
Equity Incentive Plan Awards: Number of Securities
Underlying Unexercised Unearned Options
(#)
|
Option Exercise Price
($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have
Not Vested
(#)
|
Market Value of Shares or Units of Stock
That Have Not Vested
($)
|
Equity Incentive Plan Awards: Number of Unearned
Shares, Units or Other Rights That Have Not Vested
(#)
|
Equity Incentive Plan Awards: Market or Payout
Value of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
|
Ronald Richman
|
750,000
|
Nil
|
Nil
|
$0.84
|
12/21/2021
|
Nil
|
Nil
|
Nil
|
Nil
|
Ronald Richman
|
200,000
|
Nil
|
Nil
|
$0.20
|
06/22/2022
|
Nil
|
Nil
|
Nil
|
Nil
|
Ronald Richman
|
300,000
|
Nil
|
Nil
|
$0.067
|
06/25/2023
|
Nil
|
Nil
|
Nil
|
Nil
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The number of shares beneficially owned is
determined under the rules promulgated by the SEC, and the information is not necessarily indicative of beneficial ownership for
any other purpose. Under those rules, beneficial ownership includes any shares as to which a person or entity has sole
or shared voting power or investment power
plus
any shares which such person or entity has the right to acquire within sixty
(60) days of March 27, 2014 through the exercise or conversion of any stock option, convertible security, warrant or other right. Unless
otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares such power
with that person’s spouse) with respect to all shares of capital stock listed as owned by that person or entity.
The following tabulation shows, as of the Record Date, the number
of shares of capital stock owned beneficially by: (a) all persons known to be the holders of more than five percent (5%) of voting
securities, (b) Directors, (c) Executive Officers and (d) all other Officers and Directors as a group:
|
|
|
|
|
|
|
|
|
|
Title of Class
|
Name and Address of Beneficial Owner
|
Amount and Nature of Beneficial Ownership
|
Percent of Class
|
|
|
|
|
|
|
(a)
|
Holders Over 5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred
|
Robert A Rositano Jr.
|
22,552,075
(1)
|
Direct
|
45.10%
|
|
3846 Moanna Way,
|
|
|
|
|
Santa Cruz, CA 95062
|
|
|
|
|
|
|
|
|
|
Series A preferred
|
Dean Rositano
126 Sea Terrace Way,
Aptos, CA 95003
|
4,510,400
|
Direct
|
9.02%
|
|
|
|
|
|
Series A preferred
|
Checkmate Mobile, Inc.
125 E. Campbell Ave.,
Campbell,- California 95008
|
4,895,850
|
Direct
|
9.79%
|
|
|
|
|
|
Series A preferred
|
Copper Creek Holdings, LLC
(2)
7960 B Soquel Dr., Suite #146
Aptos, CA 95003
|
36,083,350
|
Direct
|
72.17%
|
|
-
Robert Rositano
|
18,041,675
|
|
36.085%
|
|
-
Stacy Rositano
|
18,041,675
|
|
36.085%
|
|
|
|
|
|
|
(b)
|
Directors
|
|
|
|
|
|
|
|
|
|
Series A preferred
|
Robert A Rositano Jr.
|
22,552,075
(1)
|
Direct and
|
45.10%
|
|
3846 Moanna Way,
|
|
Indirect
|
|
|
Santa Cruz, CA 95062
|
|
|
|
|
|
|
|
|
|
Series A preferred
|
Dean Rositano
|
4,510,400
|
Direct
|
9.02%
|
|
126 Sea Terrace Way,
|
|
|
|
|
Aptos, CA 95003
|
|
|
|
|
|
|
|
|
|
|
(c)
|
Executive Officers
|
|
|
|
|
|
|
|
|
|
Series A preferred
|
Robert Rositano, Jr. and Dean Rositano as named above
|
|
|
|
|
|
|
|
|
Series A preferred
|
(d)
|
Officers and Directors as a Group for preferred stock
|
27,062,475
(1)
|
Direct and Indirect
|
54.12%
|
|
|
|
|
|
|
|
(1)
|
Includes the shares beneficially owned by Robert Rositano through Copper Creek Holdings, LLC.
|
|
(2)
|
Copper Creek Holdings, LLC is owned and managed by Robert Rositano and his wife Stacy Rositano, thus each may be deemed to
beneficially own half of the interest of Copper Creek Holdings, LLC.
|
Title of Class
|
Name and Address of
Beneficial Owner
|
Amount and Nature of
Beneficial Ownership
|
Percent of Class
(1)
|
|
|
|
|
|
(a)
|
Executive Officers
|
|
|
|
|
|
|
|
|
common stock
|
Frank Garcia
Tucson, AZ
|
1,540,000
|
Direct
(2)
|
0.2%
|
|
|
|
|
|
(b)
|
Officers and Directors as a Group for common stock
|
1,540,000
|
Direct
(2)
|
0.2%
|
|
(1)
|
Based on 34,479,597 of common stock issued and outstanding as of March 31, 2014.
|
(2)
Includes
700,000 vested stock options.
Changes in Control
On February 3, 2014, the Company completed a merger with iHookup
Social, Inc., a Delaware corporation (“iHookup”) pursuant to an Agreement and Plan of Merger and Reorganization (the
“Merger Agreement”) dated January 31, 2014. Pursuant to the Merger Agreement, the Company 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 their twelve million (12,000,000) shares of outstanding common stock for fifty million (50,000,000) shares of the Company’s
newly designated Series A Preferred Stock.
As a result of the transaction, the former iHookup
stockholders received a controlling interest in the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with related persons
Other than as disclosed below, there has been
no transaction, or currently proposed transaction, in which our company was or is to be a participant and the amount involved exceeds
the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and
in which any of the following persons had or will have a direct or indirect material interest:
|
(i)
|
Any director or executive officer of our company;
|
|
|
|
|
(ii)
|
Any beneficial owner of shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;
|
|
|
|
|
(iii)
|
Any person who acquired control of our company or any person that is part of a group, consisting of two or more persons that agreed to act together for the purpose of acquiring, holding, voting or disposing of our common stock, that acquired control of Titan Iron Ore Corp.; and
|
|
|
|
|
(iv)
|
Any immediate family member (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons.
|
During the
year
ended December 31, 2011
the Company advanced $25,000 to a management firm managed by the Company’s former CEO. During
the
twelve months ended December 31, 2013
the Company advanced $10,000 to this management
firm and the management firm provided expense detail which was recorded as general and administrative expense.
During the
twelve
months ended December 31, 2013
the Company incurred $30,000 in management fees (2012: $30,000) to the management firm managed
by the Company’s CEO with such costs being recorded as general and administrative costs.
During the
twelve
months ended December 31, 2013
the Company incurred $420,965 in management fees to officers and directors of the Company
(2012: $366,161) with such costs being recorded as general and administrative costs. As at December 31, 2013, the Company owed
$129,193 to officers for unreimbursed expenses and accrued management fees (December 31, 2012: $6,479).
The above transactions were recorded
at their exchange amounts, being the amounts agreed by the related parties.
There are several related party transactions reported within this
annual report. All conflicts of interests between such related parties have been duly approved by the required board and/or shareholder
approvals. Please see below for further disclosure:
Dean Rositano and Robert Rositano are both directors and the 19.3%
stockholders of CMI. At CMI, Dean Rositano also serves as President and Chief Technology Officer, while Robert Rositano serves
as Chief Executive Officer. They will both continue their respective roles at CMI while serving as directors and officers of Titan
and iHookup.
CMI sold the iHookup mobile app to iHookup Social, Inc. for a purchase
price of $293,750. iHookup Social, Inc. paid the purchase price by issuing 1,175,000 shares of its Series A Preferred Stock, priced
at $0.25/share, to CMI.
Dean Rositano and Robert Rositano are both directors and stockholders
of iHookup. At iHookup, Dean Rositano also serves as President and Chief Technology Officer, while Robert Rositano serves as Chief
Executive Officer and Secretary. The majority stockholder of iHookup is Copper Creek Holdings, LLC, a Nevada limited liability
company owned and managed by Robert Rositano and his wife, Stacy Rositano.
Pursuant to the Merger Agreement dated January
31, 2014 by and between iHookup Social, Inc. and Titan, Titan’s Series A Preferred Stock consists of the following: 4,510,400
shares owned by Dean Rositano, 4,510,400 shares owned by Robert Rositano, 36,083,350 shares owned by Copper Creek Holdings, LLC,
and 4,895,850 shares owned by CMI. Such Series A Preferred Stock shall be convertible into the number of shares of common stock
which equals nine 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. sale and issuance of equity securities of Titan that results in gross proceeds to Titan
in excess of five million dollars ($5,000,000)).
As
described
above,
Dean Rositano and Robert Rositano have both been
appointed directors and officers of Titan. Dean Rositano will also serve as President and Chief Technology Officer, while Robert
Rositano will serve as Chief Executive Officer and Secretary.
Director Independence
Our common
stock is quoted on the OTCQB Bulletin Board operated by the Financial Industry Regulatory Authority and on the over-the-counter
market operated by Pink OTC Markets Inc., which do not impose any director independence requirements. Under NASDAQ rule 5605(a)(2),
a director is not independent if he or she is also an executive officer or employee of the corporation. Under that definition of
independent director, we only have one independent director as of December 31, 2013, Ronald Richman.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 10,000,000,000
shares of $0.0001 par value common stock and 50,000,000 of preferred stock. All common stock shares have equal voting rights, are
non-assessable, and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the
common stock could, if they choose to do so, elect all of the directors of the Company. Holders of our common stock are entitled
to receive such dividends as our Board may declare from time to time from any surplus that we may have. We have not paid dividends
on our common stock since the date of our incorporation and we do not anticipate paying any common stock dividends in the foreseeable
future. We anticipate that any earnings will be retained for development and expansion of our businesses and we do not anticipate
paying any cash dividends in the foreseeable future. Future dividend policy will depend upon our earnings, financial condition,
contractual restrictions and other factors considered relevant by our Board and will be subject to limitations imposed under Nevada
law.
Preferred Stock
The Company is authorized to issue 50,000,000
shares of preferred stock. 5,000,000 are issued and outstanding.
MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
Our common stock is quoted on the OTCQB Bulletin Board of Financial
Industry Regulatory Authority under the symbol “TFER”. In light of our new business focus, we are changing our trading
symbol to “HKUP.”
Set forth below are the range of high and low
bid quotations for the periods indicated as reported by the OTCQB Bulletin Board. The market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.
Quarter Ended
|
|
High Bid
|
|
|
Low Bid
|
|
December 31, 2013
|
|
$
|
0.03
|
|
|
$
|
0.0008
|
|
September 30, 2013
|
|
$
|
0.09
|
|
|
$
|
0.02
|
|
June 30, 2013
|
|
$
|
0.18
|
|
|
$
|
0.06
|
|
March 31, 2013
|
|
$
|
0.29
|
|
|
$
|
0.14
|
|
December 31, 2012
|
|
$
|
1.13
|
|
|
$
|
0.18
|
|
September 30, 2012
|
|
$
|
0.53
|
|
|
$
|
0.20
|
|
On March 31, 2014, the closing price of our common stock as reported
by the OTC Bulletin Board was $0.0017 per share.
Transfer Agent
Our shares of common
stock are issued in registered form. Our transfer agent is
Nevada Agency and Transfer Company, 50 West Liberty
Street Suite 880, Reno, Nevada 89501
, phone (775) 322-0626.
Holders of Our Common Stock
As of July 24 2014, there were 26 registered
holders of record of our common stock. As of such date, 104,616,793 shares of our common stock were issued and outstanding.
Dividends
The payment of dividends, if any, in the future,
rests within the sole discretion of our board of directors. The payment of dividends will depend upon our earnings, our capital
requirements and our financial condition, as well as other relevant factors. We have not declared any cash dividends
since our inception and have no present intention of paying any cash dividends on our common stock in the foreseeable future.
There are no restrictions in our articles of
incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring
dividends where, after giving effect to the distribution of the dividend:
1.
|
We would not be able to pay our debts as they become due in the usual course of business; or
|
2.
|
Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
|
Securities Authorized for Issuance under Equity Compensation
Plans
Effective November 22, 2011 our board of directors
adopted and approved our stock option plan. The purpose of the stock option plan is to enhance the long-term stockholder value
of our company by offering opportunities to directors, key employees, officers, independent contractors and consultants of our
company to acquire and maintain stock ownership in our company in order to give these persons the opportunity to participate in
our company’s growth and success, and to
encourage them to remain in the service of our company. A total of 9,947,400 shares of our common stock are available for issuance
under the stock option plan.
Plan Category
|
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
|
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
|
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plan
|
Equity compensation plans approved by security holders
|
Nil
|
Nil
|
Nil
|
Equity compensation plans not approved by security holders
|
6,650,000
|
$0.55
|
3,297,400
|
Total
|
6,650,000
|
$0.55
|
3,297,400
|
Recent Sales of Unregistered Securities
Since the beginning of our fiscal year ended
December 31, 2012, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not
previously reported in an annual report on Form 10-K, in a quarterly report on Form 10-Q or in a current report on Form 8-K.
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
None.
Penny Stock Considerations
Our common stock will be deemed to be "penny
stock" as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of
less than $5.00. Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker-dealers
who engage in certain transactions involving a penny stock.
Under the penny stock regulations, a broker-dealer
selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination
regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer
is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually
or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations
the broker-dealer is required to:
Deliver, prior to any transaction involving
a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction
is otherwise exempt;
Disclose commissions payable to the broker-dealer
and our registered representatives and current bid and offer quotations for the securities;
Send monthly statements disclosing recent price
information pertaining to the penny stock held in a customer's account, the account's value and information regarding the limited
market in penny stocks; and
Make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior
to conducting any penny stock transaction in the customer's account.
Because of these regulations, broker-dealers
may encounter difficulties in their attempt to buy or sell shares of our common stock, which may affect the ability of selling
stockholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading
activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common
stock even if our common stock becomes publicly traded. In addition, the liquidity for our common stock may be decreased, with
a corresponding decrease in the price of our common stock. Our shares are likely to be subject to such penny stock rules for the
foreseeable future.
Reports to Stockholders
We have filed all necessary periodic reports,
and other information with the SEC. We have provided annual reports to our stockholders containing audited financial statements.
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our Bylaws, subject to the provisions of the
Nevada Revised Statutes, contain provisions which allow the Company to indemnify any person against liabilities and other expenses
incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if
it is determined that person acted in good faith and in a manner which he reasonably believed was in or not opposed to the best
interest of the Company. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to
our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
EXPERTS
Financial Auditors
Our most current audited consolidated financial
statements for the period from inception to December 31, 2013 from inception are included in this prospectus have been so included
in reliance on the reports of Manning Elliott LLP, 11
th
Floor, 1050 West Pender Street, Vancouver, BC, Canada V6E
3S7.
Legal Counsel Providing Legal Opinion
The validity of the issuance of the shares
of common stock will be passed upon for the company by Matthew McMurdo, Esq. Counsel has additionally consented to his opinion
being included as an exhibit to this filing. Additionally, counsel has consented to being named in the prospectus.
The legal counsel that passed their opinion
on the legality of these securities is:
Matthew McMurdo, Esq.
28 West 44
th
Street,
16
th
Floor
New York, NY 10036
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement
on Form S-1 (File Number ___________) under the Securities Act of 1933 regarding the shares of common stock offered hereby.
This prospectus does not contain all of the information found in the registration statement, portions of which are omitted as permitted
under the rules and regulations of the SEC. For further information regarding us and the securities offered by this prospectus,
please refer to the registration statement, including its exhibits and schedules. Statements made in this prospectus concerning
the contents of any contract, agreement or other document filed as an exhibit to the registration statement are summaries of the
terms of those documents. The registration statement of which this prospectus forms a part, including its exhibits and schedules,
may be inspected and copied at the public reference room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You
may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330.
The SEC maintains a web site on the Internet
at www.sec.gov. Our registration statement and other information that we file with the SEC are available at the SEC's website.
We make available to our stockholders annual
reports (on Form 10-K) containing our audited consolidated financial statements and make available quarterly reports (on Form 10-Q)
containing our unaudited interim consolidated financial information for the first three fiscal quarters of each of our fiscal years.
If you are a stockholder,
you may request a copy of these filings at no cost by contacting us at:
iHookup Social, Inc.
125 East Campbell Ave
Campbell, CA 95008
,
Telephone:
(855) 473-8473
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
December 31, 2013
Report of Independent Registered Public Accounting Firm
|
F-2
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Balance Sheet as of December 31, 2013
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F-3
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Statement of Comprehensive Loss for the period from inception on December 2, 2013 to December 31, 2013
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F-4
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Statement of Stockholders’ Equity (Deficit) for the period from inception on December 2, 2013 to December 31, 2013
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F-5
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Statement of Cash Flows for the period from inception on December 2, 2013 to December 31, 2013
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F-6
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Notes to the Financial Statements
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F-7
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Report
of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
iHookup Social Inc.
(A Development Stage Company)
We have audited the accompanying balance
sheet of iHookup Social Inc. (a Development Stage Company) as of December 31, 2013 and the related statements of operations, cash
flows and stockholders' equity for the period from inception on December 2, 2013 to December 31, 2013. These financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of iHookup Social Inc. (a Development Stage
Company) as of December 31, 2013, and the results of its operations, cash flows and stockholders' equity for the period from inception
on December 2, 2013 to December 31, 2013 in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have
been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company
has a working capital deficit and has accumulated losses since inception. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/
Manning Elliott LLP
CHARTERED ACCOUNTANTS
Vancouver, Canada
May 14, 2014
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(Expressed in US dollars)
|
|
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ASSETS
|
|
December 31,
2013
|
|
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TOTAL ASSETS
|
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$
|
-
|
|
|
|
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LIABILITIES AND STOCKHOLDERS' EQUITY
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|
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|
|
|
|
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LIABILITIES
|
|
|
|
Current Liabilities
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|
|
|
Accounts payable
|
|
$
|
16,109
|
|
|
|
|
Total Current Liabilities
|
|
|
16,109
|
|
|
|
|
Total Liabilities
|
|
|
16,109
|
|
|
|
|
Nature of business and going concern (Note 1)
|
|
|
|
Subsequent events (Notes 1 and 5)
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|
|
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|
|
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STOCKHOLDERS' EQUITY
|
|
|
|
40,000,000 (Note 3)
Common stock, 30,000,000 shares
authorized at par value of $0.0001, 10,825,000 shares issued and outstanding (Note 3)
|
|
|
1,083
|
Preferred stock, 10,000,000 shares authorized
|
|
|
-
|
Additional paid in capital
|
|
|
3,917
|
Stock subscriptions receivable (Note 3)
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|
|
(5,000)
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Deficit
|
|
|
(16,109
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Total Stockholders' Equity
|
|
|
(11,109)
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|
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|
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
-
|
The accompanying notes are an integral part
of the financial statements.
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF COMPREHENSIVE
LOSS
(Expressed in US dollars)
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|
|
|
Period from inception on December 2, 2013 to December 31, 2013
|
|
|
|
|
$
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REVENUES
|
|
|
|
|
-
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|
|
|
|
|
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OPERATING EXPENSES
|
|
|
|
|
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Professional Fees
|
|
|
|
|
16,109
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|
|
|
|
|
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TOTAL OPERATING EXPENSES
|
|
|
|
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16,109
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|
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LOSS FROM OPERATIONS
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|
|
|
|
(16,109)
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|
|
|
|
|
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OTHER INCOME (EXPENSES)
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|
|
|
|
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Other income (expenses)
|
|
|
|
|
-
|
|
|
|
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|
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NET LOSS AND COMPREHENSIVE LOSS
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|
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|
|
(16,109)
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|
|
|
|
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BASIC AND DILUTED LOSS PER SHARE
|
|
|
|
|
(0.00)
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|
|
|
|
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
|
|
|
10,825,000
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|
|
|
|
|
|
The accompanying notes are an integral part
of the financial statements.
IHOOKUP SOCIAL,
INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD FROM DECEMBER 2, 2013 (INCEPTION)
TO DECEMBER 31, 2013
(Expressed in US dollars)
|
|
Common # Stock
(Note 4)
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Common Stock Amount
|
|
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Additional Paid-in Capital
|
|
|
Stock Subscriptions
Receivable
|
|
|
Accumulated Deficit
|
|
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Total
|
|
Balance, December 2, 2013 (Inception)
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Common Stock issued for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at $0.00046189 per share
|
|
|
10,825,000
|
|
|
|
1,083
|
|
|
|
3,917
|
|
|
|
(5,000)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net loss for the period ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,109
|
)
|
|
|
(16,109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
|
|
10,825,000
|
|
|
|
1,083
|
|
|
|
3,917
|
|
|
|
(5,000)
|
|
|
|
(16,109
|
)
|
|
|
(16,109
|
)
|
The accompanying notes are an integral part
of the financial statements.
IHOOKUP SOCIAL,
INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH
FLOWS
(Expressed in US dollars)
|
|
Period from inception on December 2, 2013 to December 31, 2013
|
|
Cash Flows from Operating Activities:
|
|
|
|
Net loss
|
|
$
|
(16,109
|
)
|
|
|
|
|
|
Changes in Operating Assets and Liabilities
|
|
|
|
|
Increase (decrease) in accounts payable
|
|
|
16,109
|
|
Net Cash Provided by (Used in) Operating Activities
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
|
-
|
|
|
|
|
|
|
Cash– Beginning
|
|
|
-
|
|
|
|
|
|
|
Cash– Ending
|
|
$
|
-
|
|
|
|
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
|
|
|
The accompanying notes are an integral part
of the financial statements.
Notes
to the Financial Statements
1. NATURE OF BUSINESS AND GOING CONCERN
iHookup Social, Inc. (a development stage company)
(the Company) was incorporated in the State of Delaware on December 2, 2013 with authorized share capital consisting of 30,000,000
shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share. On
December 3, 2013, the Company issued 10,825,000 shares of common stock to three shareholders for gross proceeds of $5,000 which
had not been received by the Company on December 31, 2013.
Subsequent to the period end on January 18,
2014, the Company designated 4,000,000 shares of its authorized 10,000,000 shares of Preferred Stock as “Series A Preferred
Stock”. Each share of Series A Preferred Stock is convertible into such number of shares of common stock as is determined
by dividing the Series A Original Issue Price by $0.25.
Pursuant to an Asset Purchase Agreement dated
January 18, 2014, the Company purchased a mobile app from a related party. The Company paid the purchase price by issuing 1,175,000
shares of its Series A Preferred Stock. Immediately prior to the completion of the Merger Agreement, the 1,175,000 shares of Series
A Preferred Stock were converted into 1,175,000 shares of common stock on a 1:1 basis.
The Company’s business plans are for the development and dissemination
of a "proximity based" mobile social media application that facilitates connections between people, utilizing the intelligence
of GPS and localized recommendations. Going forward, the Company plans to focus on this aspect of the business.
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. As at December 31, 2013 the Company has a working capital
deficiency of $16,109 and has accumulated losses of $16,109.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
raise necessary financing from operations and from sales of its stock financings. The financial statements do not include any adjustments
to the recoverability and classification of the recorded asset amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
These 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.
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 deferred income tax asset valuations.
The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results
experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material
differences between the estimates and the actual results, future results of operations will be affected.
Revenue Recognition
The Company recognizes revenue when products
are fully delivered or services have been provided and collection is reasonably assured.
Advertising Costs
The Company’s policy regarding advertising
is to expense advertising when incurred.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
The Company considers all highly liquid instruments
purchased with a maturity of three months or less to be cash equivalents.
Comprehensive Loss
ASC 220, Comprehensive Income establishes standards
for the reporting and display of comprehensive loss and its components in the financial statements. During the period ended December
31, 2013 the Company had no items that represent other comprehensive income.
Financial Instruments
FASB ASC 820, Fair Value Measurements and Disclosures,
defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances
disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to
measure fair value, as required by ASC 820, must maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company’s assessment of the significance
of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities
being measured and their placement within the fair value hierarchy. At December 31, 2013 the Company does not have any financial
instruments and is not exposed to significant interest, currency or credit risks.
Basic and Diluted Loss
Per Share
The Company computes net loss per share in
accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share
(EPS) on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock
using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number
of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares
if their effect is anti-dilutive.
Income Taxes
The Company accounts for income taxes using
the asset and liability method in accordance with ASC 740, Income Taxes. The asset and liability method provides that deferred
tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial
reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected
to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely
than not to be realized.
Recent Accounting Pronouncements
Foreign Currency Matters
In March 2013, ASC guidance was issued related
to Foreign Currency Matters to clarify the treatment of cumulative translation adjustments when a parent sells a part or all of
its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that
is a business within a foreign entity. The updated guidance also resolves the diversity in practice for the treatment of business
combinations achieved in stages in a foreign entity. The update is effective prospectively for the Company’s fiscal year
beginning January 1, 2014. The Company does not expect the updated guidance to have an impact on the financial position, results
of operations or cash flows.
The Company has implemented all other new accounting
pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new
accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3. COMMON STOCK AND STOCK SUBSCRIPTIONS RECEIVABLE
FROM RELATED PARTIES
The Company is authorized to issue 30,000,000 shares with par value
of $0.0001.
During the
period
ended December 31, 2013
2,165,000 shares of common stock were issued to two directors and officers of the Company for an
aggregate amount of $1,000. The amount owing to the Company from these officers and directors as of December 31, 2013 was $1,000.
During the
period
ended December 31, 2013
the Company sold and issued 8,660,000 shares of common stock to a company controlled by an officer
and director for an aggregate amount of $4,000 and $4,000 was owing and payable to the Company as of December 31, 2013.
The above transactions were recorded at their
exchange amounts, being the amounts agreed by the related parties.
4. INCOME TAXES
The Company has adopted the provisions of ASC
740, Income Taxes. Pursuant to ASC 740 the Company is required to compute tax asset benefits for net operating losses carried forward.
The potential benefit of net operating losses have not been recognized in the financial statements because the Company cannot be
assured that it is more likely than not that it will utilize the net operating losses carried forward in future years. The Company
has approximately $16,109 of net operating losses to carry forward which are available to offset taxable income in future years
which expire through fiscal 2033.
The components of the net deferred tax asset
at December 31, 2013, and 2012, the statutory tax rate, the effective tax rate, and the amounts of the valuation allowance are
indicated below:
|
|
December 31, 2013
$
|
|
|
|
|
|
Net loss before taxes
|
|
(16,109
|
)
|
Statutory rate
|
|
35.00
|
%
|
|
|
|
|
Computed expected tax (recovery)
|
|
(5,638
|
)
|
Increase in valuation allowance:
|
|
5,638
|
|
|
|
|
|
Reported income taxes
|
|
–
|
|
|
|
December 31, 2013
$
|
|
|
|
|
|
Potential deferred tax asset
|
|
|
|
- Net operating losses
|
|
5,638
|
|
|
|
|
|
Total deferred tax assets
|
|
5,638
|
|
Valuation allowance
|
|
(5,638
|
)
|
Net deferred tax assets
|
|
–
|
|
5. SUBSEQUENT EVENT
On February 3, 2014, the Company completed
a merger with Titan Iron Ore Corp., a Nevada corporation (“Titan”) pursuant to an Agreement and Plan of Merger
and Reorganization (the “Merger Agreement”) dated January 31, 2014. Pursuant to the Merger Agreement, Titan incorporated
a new subsidiary called iHookup Operations Corp, a Delaware corporation, which merged with and into the Company causing the subsidiary’s
separate existence to cease and the Company to become a wholly-owned subsidiary of Titan. The Company’s stockholders
exchanged all of their twelve million (12,000,000) shares of outstanding common stock for fifty million (50,000,000) shares of
the Titan’s newly designated Series A Preferred Stock (see also Note 1).
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
FORMERLY TITAN IRON ORE CORP.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014
|
|
|
|
|
|
Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013
|
|
F-11
|
|
|
|
Consolidated Statement of Comprehensive Loss for the three month period ended March 31, 2014
|
|
F-12
|
|
|
|
Consolidated Statements of Stockholders’ Deficit for the three month period ended March 31, 2014, and for the period from December 2, 2013 (inception) to December 31, 2013
|
|
F-13
|
|
|
|
Consolidated Statement of Cash Flows for the three month period ended March 31, 2014
|
|
F-14
|
|
|
|
Notes to the Consolidated Financial Statements
|
|
F-15 - F
|
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(Expressed in US dollars)
|
|
|
|
|
|
|
ASSETS
|
|
March 31,
2014
(unaudited)
|
|
|
December 31,
2013
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
85,979
|
|
|
$
|
-
|
|
Prepaid expenses (Note 9)
|
|
|
12,500
|
|
|
|
-
|
|
Total current assets
|
|
|
98,479
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Debt issue costs (Note 12)
|
|
|
33,478
|
|
|
|
-
|
|
Mineral properties (Note 3)
|
|
|
1,206,011
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
1,337,968
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
327,520
|
|
|
$
|
16,109
|
|
Current portion of convertible debentures (Note 12)
|
|
|
168,505
|
|
|
|
-
|
|
Current portion of promissory note (Note 6)
|
|
|
324,416
|
|
|
|
-
|
|
Total Current Liabilities
|
|
|
820,441
|
|
|
|
16,109
|
|
Convertible debentures (Note 12)
|
|
|
26,474
|
|
|
|
-
|
|
Promissory note (Note 6)
|
|
|
942,598
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,789,513
|
|
|
|
16,109
|
|
|
|
|
|
|
|
|
|
|
Going concern (Note 1)
|
|
|
|
|
|
|
|
|
Commitments (Note 8)
|
|
|
|
|
|
|
|
|
Subsequent events (Note 15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Preferred stock, 50,000,000 shares authorized at par value of $0.0001, 2,500,000 shares issued and outstanding (Note 4)
|
|
|
250
|
|
|
|
-
|
|
Common stock, 10,000,000,000 shares authorized at par value of $0.0001, 34,479,597 (December 31, 2013 – 541,250) shares issued and outstanding (Note 4)
|
|
|
3,447
|
|
|
|
54
|
|
Additional paid-in capital
|
|
|
1,088,795
|
|
|
|
4,946
|
|
Stock subscriptions receivable (Note 9)
|
|
|
(4,500)
|
|
|
|
(5,000)
|
|
Deficit
|
|
|
(1,539,537)
|
|
|
|
(16,109)
|
|
Total Stockholders' Deficit
|
|
|
(451,545)
|
|
|
|
(16,109)
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
1,337,968
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
(UNAUDITED)
(Expressed in US dollars)
|
|
|
Three Months Ended
March 31, 2014
|
|
|
|
Period from December 2, 2013 (inception) to March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
27,208
|
|
|
$
|
27,208
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
Accretion and interest expense
|
|
|
240,718
|
|
|
|
240,718
|
|
Cost of revenue
|
|
|
8,162
|
|
|
|
8,162
|
|
General and administrative (Note 9)
|
|
|
296,758
|
|
|
|
312,867
|
|
Financing costs
|
|
|
6,645
|
|
|
|
6,645
|
|
Product development
|
|
|
63,273
|
|
|
|
63,273
|
|
Sales and marketing
|
|
|
29,074
|
|
|
|
29,074
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
644,630
|
|
|
|
660,739
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(617,422
|
)
|
|
|
(660,739
|
)
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES
|
|
|
|
|
|
|
|
|
Impairment loss (Note 13)
|
|
|
(293,750
|
)
|
|
|
(293,750
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS AND COMPREHENSIVE LOSS
|
|
|
(911,172
|
)
|
|
|
(927,281
|
)
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE
|
|
|
(0.05
|
)
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
|
18,861,990
|
|
|
|
18,861,990
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION ON DECEMBER 2 2013 TO MARCH 31, 2014
(UNAUDITED)
(Expressed in US dollars)
|
|
|
|
Common # Stock
(Note 4)
|
|
|
|
Common Stock Amount
|
|
|
|
Preferred #
Stock
|
|
|
|
Preferred Stock Amount
|
|
|
|
Additional Paid-in Capital
|
|
|
|
Common Stock
Receivable
|
|
|
|
Deficit
|
|
|
|
Total
|
|
Balance, December 2, 2013
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for cash
|
|
|
541,250
|
|
|
|
54
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,946
|
|
|
|
(5,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(16,109
|
)
|
|
|
(16,109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
|
|
541,250
|
|
|
$
|
54
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
4,946
|
|
|
$
|
(5,000
|
)
|
|
$
|
(16,109
|
)
|
|
$
|
(16,109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred shares (Note 13)
|
|
|
—
|
|
|
|
—
|
|
|
|
58,750
|
|
|
|
1
|
|
|
|
293,749
|
|
|
|
—
|
|
|
|
—
|
|
|
|
293,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of preferred shares (Note 13)
|
|
|
58,750
|
|
|
|
6
|
|
|
|
(58,750
|
)
|
|
|
(1
|
)
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse acquisition transaction (Note 14)
|
|
|
11,041,292
|
|
|
|
1,103
|
|
|
|
2,500,000
|
|
|
|
250
|
|
|
|
478,206
|
|
|
|
—
|
|
|
|
(612,256
|
)
|
|
|
(132,697
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share subscriptions received
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
500
|
|
|
|
—
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
250,000
|
|
|
|
25
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,975
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes (net) (Note 12)
|
|
|
22,588,305
|
|
|
|
2,259
|
|
|
|
—
|
|
|
|
—
|
|
|
|
300,924
|
|
|
|
—
|
|
|
|
—
|
|
|
|
303,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(911,172
|
)
|
|
|
(911,172
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2014
|
|
|
34,479,597
|
|
|
$
|
3,447
|
|
|
|
2,500,000
|
|
|
$
|
250
|
|
|
$
|
1,088,795
|
|
|
$
|
(4,500
|
)
|
|
$
|
(1,539,537
|
)
|
|
$
|
(451,545
|
)
|
The accompanying notes are an integral part of these consolidated
financial statements.
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(Expressed in US dollars)
|
|
Three month period ended
March 31, 2014
|
|
|
Period from December 2, 2013 (inception) to March 31, 2014
|
|
Cash Flows from Operating Activities:
|
|
|
|
$
|
|
|
Net loss
|
|
$
|
(911,172
|
)
|
|
(927,281
|
)
|
|
|
|
|
|
|
|
|
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
|
|
|
|
|
|
|
|
Impairment loss
|
|
|
293,750
|
|
|
293,750
|
|
Debt issue costs
|
|
|
(20,355
|
)
|
|
(20,355
|
)
|
Accretion expense
|
|
|
233,961
|
|
|
233,961
|
|
Shares issued for services
|
|
|
11,000
|
|
|
11,000
|
|
Changes in Operating Assets and Liabilities
|
|
|
|
|
|
|
|
Decrease (increase) in prepaid expenses
|
|
|
(12,500
|
)
|
|
(12,500
|
)
|
Increase (decrease) in accounts payable
|
|
|
152,863
|
|
|
168,972
|
|
Net Cash Used in Operating Activities
|
|
|
(252,453
|
)
|
|
(252,453
|
)
|
|
|
|
|
|
|
|
|
Cash Flows provided by Investing Activities:
|
|
|
|
|
|
|
|
Cash acquired in the Merger
|
|
|
966
|
|
|
966
|
|
Net Cash Provided by Investing Activities
|
|
|
966
|
|
|
966
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
Proceeds from convertible debentures (net)
|
|
|
336,966
|
|
|
336,966
|
|
Share subscriptions received
|
|
|
500
|
|
|
500
|
|
Net Cash Provided by Financing Activities
|
|
|
337,466
|
|
|
337,466
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
|
85,979
|
|
|
85,979
|
|
|
|
|
|
|
|
|
|
Cash– Beginning
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Cash– Ending
|
|
$
|
85,979
|
|
|
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)
|
|
$
|
303,183
|
|
$
|
303,183
|
|
The accompanying notes are an integral
part of these consolidated financial statements.
IHOOKUP SOCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD ENDED MARCH 31, 2014
(Expressed in US dollars)
1. NATURE OF BUSINESS AND GOING CONCERN
iHookup Social, Inc. (a development stage company), 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.” The Company then began to pursue business in
the area of mining exploration.
As previously reported in the Current Report on Form 8-K filed with the Securities and Exchange Commission (“
SEC
”)
on February 6, 2014, the Company entered into an Agreement and Plan of Merger and Reorganization (the “
Merger Agreement
”)
on February 3, 2014 with iHookup Operations Corp., a wholly-owned Delaware subsidiary of the Company (“
Acquisition Sub
”)
and iHookup-DE, whereby iHookup-DE was the surviving entity and became the wholly-owned subsidiary of the Company. iHookup-DE’s
former stockholders exchanged all of their 600,000 (12,000,000 pre-split) shares of outstanding common stock for 5,000,000 (50,000,000
pre-split) shares of the Company’s designated Series A Preferred Stock.
The transaction was regarded as a reverse merger (the
“
Merger
”) whereby iHookup-DE was considered to be the accounting acquirer as its management retained
control of the Company after the Merger. During the period ended March 31, 2014, the Merger was completed (see Note 14) and
as a result, iHookup-DE acquired the net liabilities of the Company. The Company has discontinued its prior operations in
mineral exploration and subsequent to period-end has conveyed all rights to its mineral properties to settle the outstanding
promissory note payable.
As a result of the Merger, the Company ceased its prior operations
and its business became the development and dissemination of a “proximity based” mobile-social media application that
facilitates connections between people, utilizing the intelligence of global positioning system (“
GPS
”) and
localized recommendations.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern, which implies that the Company would continue to realize its assets and discharge
its liabilities in the normal course of business. The Company has never paid any dividends and is unlikely to pay dividends or
generate earnings in the immediate or foreseeable future. As of March 31, 2014 the Company has a working capital deficiency of
$721,962 and has accumulated losses of $1,539,537 since inception and its operations continue to be funded primarily from sales
of its stock and issuance of convertible debentures. These factors raise substantial doubt about the Company’s ability to
continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability
to obtain the necessary financing from sales of its stock financings. The financial statements do not include any adjustments to
the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These consolidated financial statements include the accounts of
iHookup Social, Inc. and its wholly owned subsidiary, iHookup-DE (see Note 14).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
These consolidated financial statements and related notes are presented
in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The Company’s
fiscal year end is December 31.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with U.S. generally accepted accounting principles ("
U.S. GAAP
") for interim financial
information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all
of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying
unaudited consolidated financial statements include all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation. Interim results are not necessarily indicative of the results that may be expected for a full year. The
accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements
and notes thereto.
On April 29, 2014, the Company completed a 20 for 1 common stock
and preferred stock reverse stock split at a ratio of 20 to 1; the reverse stock split has been retroactively applied to all common
stock, preferred stock, weighted average common stock, and loss per common stock disclosures.
Use of Estimates
The preparation of these statements in accordance with United States
generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting
period. The Company regularly evaluates estimates and assumptions related to revenue recognition, useful life and recoverability
of long-lived assets, valuation of mineral properties, deferred income tax asset valuations, financial instrument valuations, share
based payments, other equity-based payments, and loss contingencies. The Company bases its estimates and assumptions on current
facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses
that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely
from the Company’s estimates. To the extent there are material differences between the estimates and the actual results,
future results of operations will be affected.
Revenue Recognition
The Company recognizes revenue when products are fully delivered
or services have been provided and collection is reasonably assured.
Advertising Costs
The Company’s policy regarding advertising is to expense advertising
when incurred.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with
a maturity of three months or less to be cash equivalents.
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances
that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances
are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets
will be recovered through undiscounted expected future cash flows.
If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss
based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or the fair value less costs to sell.
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 operations over the requisite service period.
All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted
for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more
reliably measurable.
Mineral Property Costs
Mineral property exploration costs are expensed as incurred. Mineral
property acquisition costs are capitalized. The Company assesses the carrying costs for impairment, whenever events
or changes in circumstances indicate that the carrying cost may not be recoverable under ASC 360,
Property, Plant, and Equipment
at each reporting date. When it has been determined that a mineral property can be economically developed as a result of establishing
proven and probable reserves, the costs then incurred to develop such property, will be capitalized. Such costs will be amortized
using the units-of-production method over the estimated recoverable reserves. If mineral properties are subsequently abandoned
or impaired, any capitalized costs will be charged to operations. During the period ended March 31, 2014 the Company did not
pursue any mineral property exploration activity.
Asset Retirement Obligations
The Company records asset retirement obligations in accordance with
ASC 410-20, Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated retirement costs. The standard applies to legal obligations associated
with the retirement of long-lived assets that result from the acquisition, construction, development and normal use of the asset.
ASC 410-20 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which
it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount
of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted
at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount
of the liability, the Company will recognize a gain or loss on settlement. As at March 31, 2014, the Company has not incurred any
asset retirement obligation related to the exploration of its mineral property exploration activity.
Comprehensive Loss
ASC 220, Comprehensive Income establishes standards for the reporting
and display of comprehensive loss and its components in the financial statements. During the periods ended March 31, 2014 and December
31, 2013, the Company had no items that represent other comprehensive income.
Financial Instruments
FASB ASC 820, Fair Value Measurements and Disclosures, defines fair
value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures
about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair
value, as required by ASC 820, must maximize the use of observable inputs and minimize the use of unobservable inputs.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment, and
may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. The
carrying values of cash, accounts payable, and due to related parties approximate fair values because of the short-term maturity
of these instruments. The fair value of the Company’s promissory note approximates carrying value as the underlying imputed
interest rate approximates the estimated market rate. Unless otherwise noted, it is management’s opinion that the Company
is not exposed to significant interest, currency or credit risks arising from these financial instruments.
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. Shares underlying these securities totaled approximately 418,350
as of March 31, 2014.
Income Taxes
The Company accounts for income taxes using the asset and liability
method in accordance with ASC 740, Income Taxes. The asset and liability method provides that deferred tax assets and liabilities
are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases
of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured
using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company
records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Recent Accounting Pronouncements
Foreign Currency Matters
In March 2013, ASC guidance was issued related to Foreign Currency
Matters to clarify the treatment of cumulative translation adjustments when a parent sells a part or all of its investment in a
foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business within
a foreign entity. The updated guidance also resolves the diversity in practice for the treatment of business combinations achieved
in stages in a foreign entity. The update is effective prospectively for the Company’s fiscal year beginning January 1, 2014.
There has been no significant impact on the Company’s consolidated financial statements as a result of adoption of this new
accounting pronouncement.
In April 2014, the Financial Accounting Standards Board issued Accounting
Standards Update No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which
changes the criteria for determining which disposals can be presented as discontinued operations and modifies the related disclosure
requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that
represents a strategic shift that has, or will have, a major effect on an entity's operations and financial results. The revised
guidance is effective for annual fiscal periods beginning after December 15, 2014. Early adoption is permitted. The Company is
evaluating the impact the revised guidance will have on its consolidated financial statements.
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
3. MINERAL PROPERTIES (CONTINUED)
district, Albany County, Wyoming, in Sections 14 and 24, Township
19 North, Range 72 West, 6th Principal Meridian, the names of which and the place of record of the location notices thereof in
the official records of the county recorder and the authorized office of the Bureau of Land Management (“
Unpatented Mining
Claims,
” and together with the Leased Real Property, the “
Wyoming Iron Complex
”). The Company was
assigned the rights to Wyoming Iron Complex in exchange for a promissory note. At the time of the Merger described in Note 14,
the Company did not expect to go forward with any mining or mineral exploration activities at these sites. An impairment analysis
was conducted at the time of the Merger and no impairment was recorded as the fair value of Wyoming Iron Complex (considered to
be the carrying value of the promissory note against which Wyoming Iron Complex was settled against after period-end as per Note
15) exceeded the carrying value at March 31, 2014.
4. COMMON STOCK
Issued during 2014:
During the three month period ended March 31, 2014, the Company
issued 22,588,305 shares of common stock to various convertible note holders for full and partial conversion of the notes (Note
12).
During the three month period ended March 31, 2014, the Company issued 250,000 shares of common stock to a consultant in exchange
for investor relations services.
On January 18, 2014, the Company designated 4,000,000 shares of
its authorized 50,000,000 shares of Preferred Stock as “Series A Preferred Stock”. Each share of Series
A Preferred Stock is convertible into such number of shares of common stock as is determined by dividing the Series A Original
Issue Price by $5.00 ($0.25 pre-split). Each holder of Series A Preferred Stock is entitled to cast votes equal to nine times the
total number of shares of common stock which are issued and outstanding, voting together with the holders of common stock as a
single class.
5. SHARE PURCHASE WARRANTS
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
Warrants
|
|
|
Exercise
Price
|
|
|
|
|
|
|
$
|
|
Balance, December 31, 2013
|
|
|
-
|
|
|
|
-
|
|
Warrants of the Company outstanding and exercisable as at the Merger
|
|
|
85,850
|
|
|
|
17.00
|
|
Balance, March 31, 2014
|
|
|
85,850
|
|
|
|
17.00
|
|
Details of share purchase warrants outstanding as of March 31, 2014
are:
Number of Warrants Outstanding and Exercisable
|
|
|
Number
|
|
Exercise Price per Share
|
|
Expiry Date
|
|
|
|
|
|
|
|
|
52,500
|
|
$
|
15.00
|
|
June 20, 2014
|
|
|
33,350
|
|
$
|
20.00
|
|
January 10, 2015
|
|
|
85,850
|
|
$
|
17.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. PROMISSORY NOTE
As part of the Merger described in Note 14, the Company acquired
a Promissory Note due to Wyomex Limited Liability Company (“
Wyomex
”). As of March 31, 2014, the carrying value
of the Promissory Note is $1,191,253.
At March 31, 2014, estimated contractual principal payments due
on Promissory Note for the next five years as per the agreement are as follows:
September 30, 2014
|
|
|
257,911
|
September 30, 2015
|
|
|
133,842
|
September 30, 2016
|
|
|
137,209
|
September 30, 2017
|
|
|
140,660
|
September 30, 2018
|
|
|
144,199
|
Total
|
|
$
|
813,821
|
During the period ending March 31, 2014, the Company entered into
an arrangement to settle the Promissory Note by conveying certain properties described in Note 3 to Wyomex. Subsequent to period-end
this transaction was completed. (See Note 15.)
7. STOCK-BASED COMPENSATION
On November 22, 2011, the Board of Directors approved a stock option
plan (“
2011 Stock Option Plan
”), the purpose of which is to enhance the Company’s stockholder value and
financial performance by attracting, retaining and motivating the Company’s officers, directors, key employees, consultants
and its affiliates and to encourage stock ownership by such individuals by providing them with a means to acquire a proprietary
interest in the Company’s success through stock ownership. Under the 2011 Stock Option Plan, officers, directors, employees
and consultants who provide services to the Company may be granted options to acquire common shares of the Company.
The
aggregate number of options authorized by the plan shall not exceed 497,370,common shares of the Company.
The following table summarizes the options outstanding under the 2011 Stock Option Plan as of March 31, 2014:
|
|
Option Price
|
|
|
|
Expiry Date
|
|
Per Share
|
|
|
Number
|
December 21, 2021
|
|
$
|
16.80
|
|
|
|
123,500
|
December 21, 2014
|
|
|
16.80
|
|
|
|
25,000
|
June 21, 2022
|
|
|
4.00
|
|
|
|
50,000
|
June 25, 2023
|
|
|
1.34
|
|
|
|
85,000
|
|
|
$
|
11.00
|
|
|
|
332,500
|
The Board of Directors and the stockholders holding a majority of
the voting power approved a 2014 Equity Incentive Plan (the “
2014 Plan
”) on February 28, 2014, with a to be
determined effective date. The purpose of the 2014 Plan is to assist the Company and its affiliates in attracting, retaining and
providing incentives to employees, directors, consultants and independent contractors who serve the Company and its affiliates
by offering them the opportunity to acquire or increase their proprietary interest in the Company and to promote the identification
of their interests with those of the stockholders of the Company. The 2014 Plan will also be used to make grants to further reward
and incentivize current employees and others.
There are 12,067,859 shares of common stock (post-split) reserved
for issuance under the 2014 Plan. The Board shall have the power and authority to make grants of stock options to employees, directors,
consultants and independent contractors who serve the Company and its affiliates. Any stock options granted under the 2014 Plan
shall have an exercise price equal to or greater than the fair market value of the Company’s shares of common stock. Unless
otherwise determined by the Board of Directors, stock options shall vest over a four year period with 25% being vested after the
end of one (1) year of service and the remainder vesting equally over a 36 month period. The Board may award options
that may vest based upon the achievement of certain performance milestones. As of March 31, 2014, no options have been awarded
under the 2014 Plan.
7. STOCK-BASED COMPENSATION (CONTINUED)
The following table summarizes the continuity of the Company’s stock options:
|
|
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
|
|
|
332,500
|
|
|
|
11.00
|
|
|
|
7.77
|
|
|
|
|
Outstanding, March 31, 2014
|
|
|
332,500
|
|
|
|
11.00
|
|
|
|
7.66
|
|
|
|
-
|
Exercisable, March 31, 2014
|
|
|
332,500
|
|
|
|
11.00
|
|
|
|
7.66
|
|
|
|
-
|
8. COMMITMENTS
The following table summarizes our significant contractual obligations
as of March 31, 2014:
|
|
|
|
|
|
|
|
2014
|
|
|
2015
|
Convertible Notes 1
|
|
|
377,893
|
|
|
|
382,407
|
Operating Leases 2
|
|
|
9,969
|
|
|
|
5,564
|
Service Contracts 3
|
|
|
26,991
|
|
|
|
6,497
|
Employment Agreements 4
|
|
|
225,000
|
|
|
|
300,000
|
|
|
|
639,853
|
|
|
|
694,467
|
1 Principal and interest for various convertible notes due at the
maturity date.
2 Rents payable for office space.
3 Service contracts for app and website hosting.
4 Employment agreements with related parties.
9. RELATED PARTY TRANSACTIONS
AND BALANCES
During the three months ended March 31, 2014, the Company incurred
$68,159 (2013: $nil) in salaries and management fees to current and former officers and directors with such costs being recorded
as general and administrative expenses. As of March 31, 2014 owed $Nil to officers and directors (December 31, 2013: $nil) for
unpaid fees and unreimbursed expenses.
During the three months ended March 31, 2014, the Company incurred
$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. As of March 31, 2014 the Company advanced
$12,500 (December 31, 2014: $Nil) to this Company for these services.
During the three months ended March 31, 2014, the Company incurred
$2,800 in management fees, rent and office expenses to a company with an officer in common with such costs being recorded as general
and administrative expenses.
As of March 31, 2014, the Company had a stock subscription receivable
totalling $4,500 from an officer and director and from a company with an officer and director in common.
The above transactions were recorded at their exchange amounts,
being the amounts agreed by the related parties.
10. FAIR VALUE MEASUREMENTS
ASC 820, Fair Value Measurements and Disclosures require an entity to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the
fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes
the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted
prices in active markets for identical assets or liabilities. Valuations are based on quoted prices that are readily and regularly
available in an active market and do not entail a significant degree of judgment.
Level 2
Level 2 applies to assets or liabilities for which there are other
than Level 1 observable inputs such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical
assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations
in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 2 instruments require more management judgment and
subjectivity as compared to Level 1 instruments. For instance: determining which instruments are most similar to the
instrument being priced requires management to identify a sample of similar securities based on the coupon rates, maturity,
issuer, credit rating and instrument type, and subjectively select an individual security or multiple securities that are
deemed most similar to the security being priced; and determining whether a market is considered active requires management
judgment.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable
inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The
determination of fair value for Level 3 instruments requires the most management judgment and subjectivity.
Pursuant to ASC 825, cash is based on "Level 1" inputs. The Company believes that the recorded values of accounts payable
approximate their current fair values because of their nature or respective relatively short durations. The fair value of the Company’s
promissory note and convertible debentures approximates carrying value as the underlying imputed interest rate approximates the
estimated current market rate for similar instruments.
Assets measured at fair value on a recurring and nonrecurring basis were presented on the Company’s balance sheet as of March
31, 2014, as follows:
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
|
|
|
|
|
|
Active Markets
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
For Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
Balance as of
|
|
|
Instruments
|
|
|
Inputs
|
|
|
Inputs
|
|
|
December 31,
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
2013
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (recurring basis)
|
|
|
85,979
|
|
|
|
–
|
|
|
|
–
|
|
|
|
85,979
|
Mineral properties (nonrecurring basis) (Note 3)
|
|
|
–
|
|
|
|
–
|
|
|
|
1,206,011
|
|
|
|
1,206,011
|
As of March 31, 2014, there were no liabilities measured at fair
value on a recurring basis presented on the Company’s balance sheet.
12. CONVERTIBLE DEBENTURES
|
|
Issuance
|
Principal
|
Discount
|
Carrying Value
|
Interest Rate
|
|
Maturity Date
|
|
a
|
)
|
17-Oct-13
|
|
27,500
|
|
7,219
|
|
20,281
|
|
8
|
%
|
16-Jul-14
|
|
a
|
)
|
24-Feb-14
|
|
63,000
|
|
61,872
|
|
1,128
|
|
8
|
%
|
26-Nov-14
|
|
b
|
)
|
4-Nov-13
|
|
15,000
|
|
8,753
|
|
6,247
|
|
6
|
%
|
4-Nov-15
|
|
b
|
)
|
9-Dec-13
|
|
20,000
|
|
12,050
|
|
7,950
|
|
6
|
%
|
5-Dec-15
|
|
b
|
)
|
6-Feb-14
|
|
25,000
|
|
24,056
|
|
944
|
|
8
|
%
|
6-Feb-15
|
|
b
|
)
|
17-Feb-14
|
|
21,000
|
|
18,295
|
|
2,705
|
|
8
|
%
|
17-Feb-15
|
|
c
|
)
|
2-Apr-13
|
|
235,000
|
|
216,750
|
|
18,250
|
|
0
|
%
|
2-Jan-13
|
|
d
|
)
|
2-Oct-13
|
|
76,500
|
|
20,152
|
|
56,348
|
|
12
|
%
|
18-Sep-14
|
|
e
|
)
|
26-Jun-13
|
|
83,333
|
|
64,390
|
|
18,943
|
|
12
|
%
|
26-Jun-14
|
|
e
|
)
|
26-Sep-13
|
|
27,778
|
|
20,052
|
|
7,726
|
|
12
|
%
|
26-Sep-14
|
|
e
|
)
|
9-Dec-13
|
|
27,778
|
|
20,824
|
|
6,954
|
|
12
|
%
|
9-Dec-14
|
|
f
|
)
|
4-Nov-13
|
|
15,000
|
|
6,372
|
|
8,628
|
|
6
|
%
|
4-Nov-15
|
|
f
|
)
|
6-Feb-14
|
|
25,000
|
|
24,056
|
|
944
|
|
8
|
%
|
6-Feb-15
|
|
f
|
)
|
6-Feb-14
|
|
7,267
|
|
6,799
|
|
468
|
|
8
|
%
|
6-Feb-15
|
|
f
|
)
|
17-Feb-14
|
|
21,000
|
|
18,295
|
|
2,705
|
|
8
|
%
|
17-Feb-15
|
|
f
|
)
|
17-Feb-14
|
|
50,000
|
|
43,560
|
|
6,440
|
|
8
|
%
|
17-Feb-15
|
|
f
|
)
|
18-Mar-14
|
|
50,000
|
|
49,354
|
|
646
|
|
8
|
%
|
18-Mar-15
|
|
g
|
)
|
5-Mar-14
|
|
55,000
|
|
53,668
|
|
1,332
|
|
8
|
%
|
7-Sep-14
|
|
g
|
)
|
5-Mar-14
|
|
90,000
|
|
64,305
|
|
25,695
|
|
8
|
%
|
7-Sep-14
|
|
h
|
)
|
18-Mar-14
|
|
50,000
|
|
49,354
|
|
646
|
|
8
|
%
|
18-Mar-15
|
|
|
|
|
|
985,156
|
|
790,176
|
|
194,979
|
|
|
|
|
a)
|
The Company entered into several convertible promissory notes (“
Asher Notes
”) with Asher Enterprises Inc. (“
Asher
”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 60% of the average price of the lowest 5 day trading days during the 10 trading days preceding the conversion. The Asher Notes cannot be converted, to the extent that Asher Enterprises Inc. and its affiliates would beneficially own in excess of 4.99% of the Company’s outstanding common stock.
|
The convertible debenture may be repaid by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period of 60 days beginning on the issuance date;
|
|
·
|
Outstanding principal multiplied by 135% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 61 days following the issuance date and ending on the date that is 90 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 91 days following the issuance date and ending on the date that is 120 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 121 days following the issuance date and ending on the date that is 180 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 175% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 181 days following the issuance date through the maturity date.
|
|
·
|
In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per annum and the Asher Notes becomes immediately due and payable. Should that occur the Company is liable to pay the holder 150% of the then outstanding principal and interest.
|
12. CONVERTIBLE DEBENTURES (CONTINUED)
b)
|
The Company entered into four convertible promissory notes (“
GEL Notes
”) with GEL Properties, LLC (“
GEL
”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 60% of the lowest closing bid price during the 5 trading days preceding the conversion. The GEL Notes cannot be converted, to the extent that GEL would beneficially own in excess of 4.99% of the Company’s outstanding common stock.
|
The convertible debenture may be repaid by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period of 90 days beginning on the issuance date;
|
|
·
|
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 91 days following the issuance date and ending on the date that is 180 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 181 days following the issuance date through the maturity date.
|
|
·
|
In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the GEL Notes becomes immediately due and payable.
|
c)
|
On April 2, 2013, the Company entered into a convertible bridge note with GCA Strategic Investment Fund Limited (“
GCA
”). On December 31, 2013 the Company entered in a letter agreement with GCA, in which the original maturity date of September 20, 2013 was extended to January 2, 2014.
|
The unpaid principal portion and accrued interest on the convertible
bridge note is convertible in whole or in part as follows:
|
·
|
Conversion price per share equal to the lower of :
|
|
(i)
|
100% of the average price of the Company’s common stock for the 5 trading days preceding the conversion days
|
|
(ii)
|
70% of the daily average price of the Company’s common stock for the 10 trading days preceding the conversion date.
|
|
·
|
The holders must not convert more than 33 1/3% of the initial principal sum into shares of the Company’s common stock at a price below $0.08 per share during any calendar month.
|
GCA does not have the right to convert the convertible bridge note,
to the extent that GCA and its affiliates would beneficially own in excess of 9.99% of the Company’s outstanding common stock.
In the event the Company elects to prepay the convertible bridge
note in full or in part, the Company is required to pay principal, interest and any other amounts owing multiplied by 130%. The
convertible bridge note also contains a mandatory partial prepayment requirement should the Company obtain certain future net financings
in excess of $300,000, and under other conditions.
d)
|
The Company entered into a convertible promissory note (“
Hanover Note
”) with Hanover Holdings I, LLC (“
Hanover
”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 60% of the lowest VWAP (“
Variable Weighted Average Price
”) price during the 5 trading days preceding the conversion. The Hanover Note cannot be converted, to the extent that Hanover would beneficially own in excess of 4.99% of the Company’s outstanding common stock.
|
12. CONVERTIBLE DEBENTURES (continued)
The convertible debenture may be repaid by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period of 180 days beginning on the issuance 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 GEL Notes becomes immediately due and payable.
|
e)
|
During the period ended December 31, 2013 the Company entered into a one year promissory note with JMJ Financial. The total amount that may be borrowed is $275,000, which includes an upfront fee of 10%. No interest will be applied to the principal balance for the first 90 days after cash advance. After the first 90 days, an interest charge of 12% will be immediately applied to the principal and the 10% upfront fee.
|
On delivery of consideration, the lender may convert all or part
of the unpaid principal and upfront fee into common stock at its sole discretion. All balances outstanding have a variable conversion
price equal to the lesser of $0.07 or 60% of the market price. The market price is defined as the lowest trade price in the 25
days prior to the conversion date. The lender is limited to holding no more than 4.99% of the issued and outstanding common stock
at the time of conversion.
After the expiration of 90 days following the delivery date of any
consideration, the Company will have no right of prepayment.
f)
|
The Company entered into a convertible promissory note (“
LG Note
”) with LG Properties, LLC (“
LG
”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 50% of the average of the two lowest closing bid prices during the 5 trading days preceding the conversion. The LG Note cannot be converted, to the extent that LG would beneficially own in excess of 4.99% of the Company’s outstanding common stock.
|
The convertible debenture may be repaid by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period of 90 days beginning on the issuance date;
|
|
·
|
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 91 days following the issuance date and ending on the date that is 180 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 181 days following the issuance date through the maturity date.
|
|
·
|
In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per annum and the LG Notes becomes immediately due and payable.
|
g)
|
During the 3-months ended March 31, 2014 the Company entered into 2 convertible debentures agreements with Beaufort Ventures, PLC. Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 58% of the lowest intra-day trading price during the 10 trading days preceding the conversion date. Interest on any unpaid principal balance of this Note shall be repaid at the rate of 8% per annum.
|
12. CONVERTIBLE DEBENTURES (continued)
The convertible debenture may be repaid by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period of 90 days beginning on the issuance date;
|
|
·
|
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period beginning 91 days following the issuance date and ending on the date that is 180 days following the issuance date;
|
h)
|
During the 3-months ended March 31, 2014 the Company entered into a convertible debenture agreement with Coventry Enterprises, LLC (“
Coventry
”). Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 50% of the lowest fifteen closing bid prices preceding the conversion.
|
|
The convertible debenture may be repaid by the Company as follows:
|
|
·
|
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid within a period of 181 days beginning on the issuance date;
|
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 December 31, 2013 the conversion
features would not meet derivative classification.
At March 31, 2014, the convertible debentures are unsecured. During
the three months ended March 31, 2014, $303,183 of convertible debentures were settled by issuing 22,588,305 shares of common stock
of the Company.
During the three months ended March 31, 2014, $190,000 of convertible
debentures were settled through payment of cash and issuance of new convertible debentures.
During the three months ended March 31, 2014, the Company incurred
$nil in transaction costs in connection with the issuance of the convertible debentures, which has been recorded as a reduction
to the carrying values of convertible debentures.
13. ASSET PURCHASE AGREEMENT
Pursuant to an asset purchase agreement dated January 18, 2014,
the Company purchased the iHookup mobile application, its name, intellectual property, user database, certain domain names, and
Apple developer from CheckMate Mobile, Inc., a Delaware corporation (“
CheckMate
”) for a purchase price of $293,750.
The Company paid the purchase price by issuing 58,750 (1,175,000 pre-split) shares of its Series A Preferred Stock. Subsequent
to the purchase, the assets were considered impaired, resulting in an impairment loss. On February 3, 2014, as part of the Merger
described in Note 14, all outstanding Series A Preferred Stock of iHookup-DE held by CheckMate was converted into common stock
of iHookup-DE at ratio of 1 to 1.
14. MERGER
As previously reported in the Current Report on Form 8-K filed with
the SEC on February 6, 2014, the Company entered into an Agreement and Plan of Merger and Reorganization (the “
Merger
Agreement
”) on February 3, 2014 with iHookup Operations Corp., a wholly-owned Delaware subsidiary of the Company (“
Acquisition
Sub
”) and iHookup-DE, whereby iHookup-DE was the surviving entity and became the wholly-owned subsidiary of the Company.
iHookup-DE’s former stockholders exchanged all of their 600,000 (12,000,000 pre-split) shares of outstanding common stock
for 5,000,000 (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 $5,000,000). As a result of the transaction, the former stockholders of iHookup-DE
received a controlling interest in the Company.
For accounting purposes, the Merger has been treated as a reverse
recapitalization, rather than a business combination. Accordingly, for accounting purposes iHookup-DE is considered the acquirer
and surviving entity in the reverse recapitalization. The accompanying historical financial statements prior to the Merger are
those of iHookup-DE.
The consolidated financial statements present the previously issued
shares of the Company pre-Merger (“
Titan
”) common stock as having been issued pursuant to the Merger on February
3, 2014, with the consideration for such issuance being the estimated fair value of the Titan shares issued, based on the number
of equity interest iHookup-DE would have had to give to Titan to retain the same percentage equity interest in the combined entity
that results from the Merger. The excess of the consideration issued over the net assets of Titan is recognized as an adjustment
to deficit. As of the date of the Merger, Titan was in a net liability position.
|
|
$
|
|
|
|
|
|
|
|
|
Preferred shares issued
|
|
|
68,366
|
|
|
Net liabilities acquired
|
|
|
(543,891
|
)
|
|
|
|
|
|
|
|
Adjustment to deficit
|
|
|
475,525
|
|
|
15. SUBSEQUENT EVENTS
a)
|
Subsequent to March 31, 2014 the 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 the Company at various conversion rates as outlined in each agreement. The Company paid $18,750 in legal and other expenses in connection with these debentures.
|
b)
|
Subsequent to the March 31, 2014, the Company settled the outstanding promissory note (see Note 6) by transferring the Strong Creek and Iron Mountain Properties (see Note 3) to the promissory note holder.
|
c)
|
Subsequent to March 31, 2014 the Company issued 13,585,021 shares in connection with conversion of convertible notes in the amount of $247,645.
|
d)
|
Subsequent to March 31, 2014 the Company effected a 20:1 reverse stock split. (See Note 2).
|
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TITAN IRON ORE CORP.
FINANCIAL STATEMENTS
December 31, 2013
|
|
|
Balance Sheets as of December 31, 2013 and December 31, 2012
|
|
F-1
|
|
|
|
Statements of Comprehensive Loss for the year ended December 31, 2013 and 2012, and for the period from June 5, 2007 (inception) to December 31, 2013
|
|
F-2
|
|
|
|
Statement of Stockholders’ Equity (Deficit) for the year ended December 31, 2013 and 2012, and for the period from June 5, 2007 (inception) to December 31, 2013
|
|
F-3 - F-4
|
|
|
|
Statements of Cash Flows for the year ended December 31, 2013 and 2012, and for the period from June 5, 2007 (inception) to December 31, 2013
|
|
F-5
|
|
|
|
Notes to the Financial Statements
|
|
F-6
|
Report of Independent Registered Public Accounting
Firm
To the Board of Directors and Stockholders of
Titan Iron Ore Corp.
(An exploration stage company)
We have audited the accompanying balance sheets of Titan Iron Ore
Corp. (an exploration stage company) as of December 31, 2013 and 2012 and the related statements of comprehensive loss, stockholders’
equity (deficit) and cash flows for the years then ended and for the period from June 5, 2007 (date of inception) to December 31,
2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Titan Iron Ore Corp. (an exploration stage company) as of December
31, 2013 and 2012, and the results of its operations, stockholders’ deficit and cash flows for the years then ended and for
the period from June 5, 2007 (date of inception) to December 31, 2013 in conformity with accounting principles generally accepted
in the United States.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a working capital
deficit and has accumulated losses since inception. These factors raise substantial doubt about the Company’s ability to
continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
/s/ “Manning Elliott LLP”
CHARTERED ACCOUNTANTS
Vancouver, Canada
April 15, 2014
TITAN IRON ORE CORP.
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
(Expressed in US dollars)
|
|
|
|
|
|
|
ASSETS
|
|
December 31,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
18,006
|
|
|
$
|
120,433
|
|
Prepaid expenses (Note 9)
|
|
|
-
|
|
|
|
25,000
|
|
Total current assets
|
|
|
18,006
|
|
|
|
145,433
|
|
|
|
|
|
|
|
|
|
|
Deferred financing costs (Note 13)
|
|
|
-
|
|
|
|
366,684
|
|
Debt issue costs (Note 12)
|
|
|
13,123
|
|
|
|
32,998
|
|
Mineral properties (Note 3)
|
|
|
1,206,011
|
|
|
|
1,206,011
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
1,237,140
|
|
|
$
|
1,751,126
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
296,539
|
|
|
$
|
60,862
|
|
Accrued expenses - related party (Note 9)
|
|
|
129,193
|
|
|
|
6,479
|
|
Convertible debentures (Note 12)
|
|
|
397,288
|
|
|
|
1,831
|
|
Current portion of promissory note (Note 6)
|
|
|
257,911
|
|
|
|
127,353
|
|
Total Current Liabilities
|
|
|
1,080,931
|
|
|
|
196,525
|
|
|
|
|
|
|
|
|
|
|
Promissory note (Note 6)
|
|
|
971,818
|
|
|
|
982,159
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
2,052,749
|
|
|
|
1,178,684
|
|
|
|
|
|
|
|
|
|
|
Going concern (Note 1)
|
|
|
|
|
|
|
|
|
Commitments (Note 8)
|
|
|
|
|
|
|
|
|
Subsequent events (Note 15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Preferred stock, 50,000,000 shares authorized at par value of $0.0001, no shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, 3,700,000,000 shares authorized at par value of $0.0001, 213,423,577 (December 31, 2012 – 52,501,110) shares issued and outstanding (Note 4)
|
|
|
21,342
|
|
|
|
5,250
|
|
Additional paid-in capital
|
|
|
6,470,624
|
|
|
|
4,833,170
|
|
Common stock issuable
|
|
|
-
|
|
|
|
171,975
|
|
Deficit accumulated during the exploration stage
|
|
|
(7,307,575
|
)
|
|
|
(4,437,953
|
)
|
Total Stockholders' Equity (Deficit)
|
|
|
(815,609)
|
|
|
|
572,442
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
1,237,140
|
|
|
$
|
1,751,126
|
|
The accompanying notes are an integral part
of the financial statements.
TITAN IRON ORE CORP.
(AN EXPLORATION
STAGE COMPANY)
STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in US dollars)
|
|
|
|
Year
Ended December 31, 2013
|
|
|
Year
Ended December 31, 2012
|
|
|
Period from June 5, 2007 (Inception) to December 31, 2013
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
REVENUES
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
|
|
-
|
|
|
|
2,653
|
|
|
|
25,385
|
|
General and administrative (Note 9)
|
|
|
|
|
625,737
|
|
|
|
586,421
|
|
|
|
1,604,221
|
|
Impairment of mineral acquisition costs (Note 3)
|
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
75,124
|
|
Accretion expense
|
|
|
|
|
888,512
|
|
|
|
113,394
|
|
|
|
1,001,906
|
|
Financing costs
|
|
|
|
|
574,380
|
|
|
|
8,391
|
|
|
|
582,771
|
|
Interest expense
|
|
|
|
|
40,531
|
|
|
|
2,385
|
|
|
|
42,916
|
|
Investor relations
|
|
|
|
|
31,588
|
|
|
|
227,687
|
|
|
|
281,321
|
|
Professional fees
|
|
|
|
|
141,649
|
|
|
|
154,767
|
|
|
|
422,544
|
|
Mineral property exploration costs (Note 11)
|
|
|
|
|
34,567
|
|
|
|
164,564
|
|
|
|
528,238
|
|
Stock-based compensation (Note 7)
|
|
|
|
|
352,338
|
|
|
|
2,133,251
|
|
|
|
2,593,361
|
|
Travel
|
|
|
|
|
4,616
|
|
|
|
14,244
|
|
|
|
20,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
|
|
2,718,918
|
|
|
|
3,407,757
|
|
|
|
7,178,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
|
|
(2,718,918
|
)
|
|
|
(3,407,757
|
)
|
|
|
(7,173,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on debt settlement
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,631
|
|
Loss on modification of promissory note
|
|
|
|
|
(150,704)
|
|
|
|
-
|
|
|
|
(150,704
|
)
|
Other income (expenses)
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,167)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS AND COMPREHENSIVE LOSS
|
|
|
|
|
(2,869,622
|
)
|
|
|
(3,407,757
|
)
|
|
|
(7,307,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE
|
|
|
|
|
(0.04
|
)
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
|
|
|
66,994,509
|
|
|
|
51,331,037
|
|
|
|
|
|
The accompanying notes are an integral part
of the financial statements.
TITAN IRON ORE CORP.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD FROM JUNE 5, 2007 (INCEPTION)
TO DECEMBER 31, 2013
(Expressed in US dollars)
|
|
Common # Stock
(Note 4)
|
|
|
Common Stock Amount
|
|
|
Additional Paid-in Capital
|
|
|
Common stock issuable
|
|
|
Deficit Accumulated During the Development Stage
|
|
|
Total
|
|
Balance, June 5, 2007 (Inception)
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock issued for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at $0.0001 per share
|
|
|
148,000,000
|
|
|
|
14,800
|
|
|
|
(14,400
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock issued for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at $0.05 per share
|
|
|
29,637,000
|
|
|
|
2,964
|
|
|
|
37,086
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(21,874
|
)
|
|
|
(21,874
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
177,637,000
|
|
|
|
17,764
|
|
|
|
22,686
|
|
|
|
-
|
|
|
|
(21,874
|
)
|
|
|
18,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock issued for creditors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at $0.05 per share
|
|
|
12,950,000
|
|
|
|
1,295
|
|
|
|
16,205
|
|
|
|
|
|
|
|
-
|
|
|
|
17,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss 2008
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(34,675
|
)
|
|
|
(34,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
190,587,000
|
|
|
|
19,059
|
|
|
|
38,891
|
|
|
|
-
|
|
|
|
(56,549
|
)
|
|
|
1,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss 2009
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,485
|
)
|
|
|
(9,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
190,587,000
|
|
|
|
19,059
|
|
|
|
38,891
|
|
|
|
-
|
|
|
|
(66,034
|
)
|
|
|
(8,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss 2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,485
|
)
|
|
|
(9,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
|
190,587,000
|
|
|
|
19,059
|
|
|
|
38,891
|
|
|
|
-
|
|
|
|
(75,519
|
)
|
|
|
(17,569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock issued for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at $0.50 per share
|
|
|
2,100,000
|
|
|
|
210
|
|
|
|
1,049,790
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,050,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issuance costs
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,564
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,564
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares cancelled
|
|
|
(142,950,000
|
)
|
|
|
(14,295
|
)
|
|
|
14,295
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
107,772
|
|
|
|
-
|
|
|
|
-
|
|
|
|
107,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss 2011
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(954,677
|
)
|
|
|
(954,677
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2011
|
|
|
49,737,000
|
|
|
$
|
4,974
|
|
|
$
|
1,206,184
|
|
|
|
-
|
|
|
$
|
(1,030,196
|
)
|
|
$
|
180,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part
of the financial statements.
TITAN IRON ORE CORP.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD FROM JUNE 5, 2007 (INCEPTION)
TO DECEMBER 31, 2013 (CONTINUED)
(Expressed in US dollars)
|
|
Common # Stock
(Note 4)
|
|
|
Common Stock Amount
|
|
|
Additional Paid-in Capital
|
|
|
Common stock issuable
|
|
|
Deficit Accumulated During the Development Stage
|
|
|
Total
|
|
Common Stock issued for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at $0.75 per share (net of issuance costs)
|
|
|
1,334,000
|
|
|
|
133
|
|
|
|
993,405
|
|
|
|
-
|
|
|
|
-
|
|
|
|
993,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
550,000
|
|
|
|
55
|
|
|
|
126,445
|
|
|
|
-
|
|
|
|
-
|
|
|
|
126,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
2,133,251
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,133,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued under equity line
(Note 13)
|
|
|
323,928
|
|
|
|
32
|
|
|
|
182,177
|
|
|
|
171,975
|
|
|
|
-
|
|
|
|
354,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants
|
|
|
556,182
|
|
|
|
56
|
|
|
|
(56
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes (net proceeds)
|
|
|
-
|
|
|
|
-
|
|
|
|
191,764
|
|
|
|
-
|
|
|
|
-
|
|
|
|
191,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss 2012
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,407,757
|
)
|
|
|
(3,407,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012
|
|
|
52,501,110
|
|
|
$
|
5,250
|
|
|
$
|
4,833,170
|
|
|
$
|
171,975
|
|
|
$
|
(4,437,953
|
)
|
|
$
|
572,442
|
|
Balance, December 31, 2012
|
|
|
52,501,110
|
|
|
$
|
5,250
|
|
|
$
|
4,833,170
|
|
|
$
|
171,975
|
|
|
$
|
(4,437,953
|
)
|
|
$
|
572,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
352,338
|
|
|
|
-
|
|
|
|
-
|
|
|
|
352,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued under equity line (Note 13)
|
|
|
1,762,836
|
|
|
|
177
|
|
|
|
252,038
|
|
|
|
(171,975
|
)
|
|
|
-
|
|
|
|
80,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
203,333
|
|
|
|
20
|
|
|
|
17,746
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes (net)
|
|
|
158,956,298
|
|
|
|
15,895
|
|
|
|
1,015,332
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,031,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss 2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,869,622
|
)
|
|
|
(2,869,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
|
|
213,423,577
|
|
|
$
|
21,342
|
|
|
$
|
6,470,624
|
|
|
$
|
-
|
|
|
$
|
(7,307,575
|
)
|
|
$
|
(815,609)
|
|
The accompanying notes are an integral part
of the financial statements.
TITAN IRON ORE
CORP.
(AN EXPLORATION
STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Expressed in US dollars)
|
|
Year Ended
December 31, 2013
|
|
|
Year Ended
December 31, 2012
|
|
|
Period from June 5, 2007 (Inception) to December 31, 2013
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,869,622
|
)
|
|
$
|
(3,407,757
|
)
|
|
$
|
(7,307,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
5,833
|
|
Stock-based compensation
|
|
|
352,338
|
|
|
|
2,133,251
|
|
|
|
2,593,361
|
|
Loss on disposal of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
1,167
|
|
Impairment of mineral property
|
|
|
25,000
|
|
|
|
-
|
|
|
|
75,124
|
|
Financing costs
|
|
|
432,748
|
|
|
|
8,391
|
|
|
|
441,139
|
|
Accretion expense
|
|
|
888,512
|
|
|
|
113,394
|
|
|
|
1,001,906
|
|
Shares issued for services
|
|
|
17,766
|
|
|
|
126,500
|
|
|
|
161,766
|
|
Gain (loss) on debt extinguishment
|
|
|
168,000
|
|
|
|
-
|
|
|
|
150,369
|
|
Changes in Operating Assets and Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in prepaid expenses
|
|
|
25,000
|
|
|
|
|
|
|
|
-
|
|
Increase (decrease) in accounts payable
|
|
|
230,595
|
|
|
|
36,655
|
|
|
|
259,037
|
|
Increase (decrease) in accrued expenses – related party
|
|
|
122,714
|
|
|
|
5,832
|
|
|
|
138,407
|
|
Net Cash Provided by (Used in) Operating Activities
|
|
|
(606,949
|
)
|
|
|
(983,734
|
)
|
|
|
(2,479,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows used in Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,000
|
)
|
Payment on mineral property options
|
|
|
(25,000
|
)
|
|
|
(85,000
|
)
|
|
|
(220,124
|
)
|
Net Cash Used in Investing Activities
|
|
|
(25,000
|
)
|
|
|
(85,000
|
)
|
|
|
(227,124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash (net of issuance costs)
|
|
|
-
|
|
|
|
993,538
|
|
|
|
2,086,386
|
|
Proceeds from convertible debentures (net)
|
|
|
652,500
|
|
|
|
168,875
|
|
|
|
852,500
|
|
Repayment of promissory note
|
|
|
-
|
|
|
|
(63,562
|
)
|
|
|
(63,562
|
)
|
Repayment of convertible debt
|
|
|
(122,978
|
)
|
|
|
-
|
|
|
|
(122,978)
|
|
Deferred financing costs
|
|
|
-
|
|
|
|
(27,750
|
)
|
|
|
(27,750
|
)
|
Net Cash Provided by Financing Activities
|
|
|
529,522
|
|
|
|
1,071,101
|
|
|
|
2,724,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
|
(102,427
|
)
|
|
|
2,367
|
|
|
|
18,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash– Beginning
|
|
|
120,433
|
|
|
|
118,066
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash– Ending
|
|
$
|
18,006
|
|
|
$
|
120,433
|
|
|
$
|
18,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash Investing and Financing Items:
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
$
|
17,766
|
|
|
$
|
126,500
|
|
|
$
|
161,766
|
|
Promissory note issued for mineral property
|
|
|
-
|
|
|
|
1,061,011
|
|
|
|
1,061,011
|
|
The accompanying notes are an integral part
of the financial statements.
Notes
to the Financial Statements
1. NATURE OF BUSINESS AND GOING CONCERN
Titan Iron Ore Corp. (the Company) (formerly
Digital Yearbook, Inc.) was incorporated in the State of Nevada on June 5, 2007. 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 our
name from “Digital Yearbook Inc.” to “Titan Iron Ore Corp.” effectively becoming an exploration stage company
whose principal business became the acquisition, and exploration of mineral properties.
Subsequent to the 2013 year-end on February 3, 2014, the Company
completed a merger with iHookup Social, Inc., a Delaware corporation (“iHookup”) pursuant to an Agreement and
Plan of Merger and Reorganization (the “Merger Agreement”) dated January 31, 2014. Pursuant to the Merger Agreement,
the Company 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 their twelve million (12,000,000) shares of outstanding common stock for fifty
million (50,000,000) shares of the Company’s newly designated Series A Preferred Stock.
iHookup Social’s business is development and dissemination
of a "proximity based" mobile social media application that facilitates connections between people, utilizing the intelligence
of GPS and localized recommendations. Going forward, the Company expects to focus on this aspect of the business.
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 at December 31, 2013 the Company has a working
capital deficiency of $1,062,925 and has accumulated losses of $7,282,575 since inception and its operations continue to be funded
primarily from sales of its stock and issuance of convertible debentures. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s
ability to obtain the necessary financing from sales of its stock financings. The financial statements do not include any adjustments
to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
These 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.
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 useful life and recoverability of
long-lived assets, valuation of mineral properties, deferred income tax asset valuations, asset retirement obligations, financial
instrument valuations, share based payments, other equity-based payments, and loss contingencies. The Company bases its estimates
and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of
costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially
and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual
results, future results of operations will be affected.
Revenue Recognition
The Company recognizes revenue when products
are fully delivered or services have been provided and collection is reasonably assured.
Advertising Costs
The Company’s policy regarding advertising
is to expense advertising when incurred.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
The Company considers all highly liquid instruments
purchased with a maturity of three months or less to be cash equivalents.
Impairment of Long-Lived Assets
The Company continually monitors events and
changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or
changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying
value of such assets will be recovered through undiscounted expected future cash flows.
If the total of the future cash flows is less
than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount
over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value
less costs to sell.
Stock-based Compensation
The Company records stock-based compensation
in accordance with ASC 718,
Compensation – Stock Based Compensation
and ASC 505,
Equity Based Payments to Non-Employees
,
which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards
made to employees and directors, including stock options.
ASC 718 requires companies to estimate the
fair value of share-based awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option
pricing model as its method in determining fair value. This model is affected by the Company’s stock price as well as assumptions
regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected
stock price volatility over the terms of the awards, and actual and projected employee stock option exercise behaviors. The value
of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over
the requisite service period.
All transactions in which goods or services
are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration
received or the fair value of the equity instrument issued, whichever is more reliably measurable.
Mineral Property Costs
The Company has been in the exploration stage
and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of
mineral properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are capitalized. The
Company assesses the carrying costs for impairment, whenever events or changes in circumstances indicate that the carrying cost
may not be recoverable under ASC 360,
Property, Plant, and Equipment
at each reporting date. When it has been determined
that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then
incurred to develop such property, will be capitalized. Such costs will be amortized using the units-of-production method over
the estimated recoverable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be
charged to operations.
Asset Retirement Obligations
The Company records asset retirement obligations
in accordance with ASC 410-20, Asset Retirement Obligations, which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated retirement costs. The standard applies to legal
obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and
normal use of the asset. ASC 410-20 requires that the fair value of a liability for an asset retirement obligation be recognized
in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added
to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The
liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than
the carrying amount of the liability, the Company will recognize a gain or loss on settlement. As at December 31, 2013, the Company
has not incurred any asset retirement obligation related to the exploration of its mineral property option.
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Comprehensive Loss
ASC 220, Comprehensive Income establishes standards
for the reporting and display of comprehensive loss and its components in the financial statements. During the periods ended December
31, 2013 and December 31, 2012, the Company had no items that represent other comprehensive income.
Financial Instruments
FASB ASC 820, Fair Value Measurements and Disclosures,
defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances
disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to
measure fair value, as required by ASC 820, must maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company’s assessment of the significance
of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities
being measured and their placement within the fair value hierarchy. The carrying values of cash, accounts payable, and due to related
parties approximate fair values because of the short-term maturity of these instruments. The fair value of the Company’s
promissory note approximates carrying value as the underlying imputed interest rate approximates the estimated market rate. Unless
otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks
arising from these financial instruments.
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. Shares underlying these securities totaled approximately 8,367,000 as of December 31, 2013.
Income Taxes
The Company accounts for income taxes using
the asset and liability method in accordance with ASC 740, Income Taxes. The asset and liability method provides that deferred
tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial
reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected
to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely
than not to be realized.
Recent Accounting Pronouncements
Foreign Currency Matters
In March 2013, ASC guidance was issued related
to Foreign Currency Matters to clarify the treatment of cumulative translation adjustments when a parent sells a part or all of
its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that
is a business within a foreign entity. The updated guidance also resolves the diversity in practice for the treatment of business
combinations achieved in stages in a foreign entity. The update is effective prospectively for the Company’s fiscal year
beginning January 1, 2014. The Company does not expect the updated guidance to have an impact on the financial position, results
of operations or cash flows.
The Company has implemented all other new accounting
pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new
accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3. MINERAL PROPERTIES
Strong Creek and Iron Mountain Properties
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, the Company completed the acquisition of a 100% right, title and interest in and to a properties (Strong Creek
and Iron Mountain) option agreement (the “Option Agreement”) from J2 Mining with respect to an iron ore mineral property
located in Albany County, Wyoming by entering into an assignment of mineral property option agreement with J2 Mining and Wyomex
LLC (the “Assignment Agreement”), whereby the Company was assigned the 100% right, title and interest in and the Option
Agreement from J2 Mining.
The Option Agreement assigned to the Company
from J2 Mining on June 30, 2011, was originally entered into on May 26, 2011 between J2 Mining and Wyomex LLC, pursuant to which
Wyomex LLC (“Optionor”), granted to J2 Mining, as optionee, an exclusive right and option to acquire 100% undivided
legal and beneficial interests in and to certain unpatented lode mining claims, fee lands, leased lands, and other interests in
real property situated in Albany County, Wyoming (the “Wyoming Iron Complex”). Pursuant to the Assignment Agreement,
J2 Mining agreed to assign all its rights and interests in the property and the Option Agreement, and transfer all of its obligations
under the Option Agreement, to the Company.
The term of the option commenced on May 26,
2011 and could be extended for a maximum of six successive one-month periods, at the sole election of the Company, through notice
to Wyomex LLC and tender of $5,000 from the Company to Wyomex LLC for each of the first three additional months and $15,000 for
each additional month for months four through six. As at December 31, 2013, total payments of $145,000 had been made.
Prior to December 31, 2011, the Company provided
written notice to the Optionor of its intent to exercise its option. On April 10, 2012, the Company executed an asset purchase
agreement to exercise its option for consideration of $7,000,000, consisting of the following:
|
a)
|
A cash payment at closing of $85,000 as an initial payment (paid on March 30, 2012);
|
|
b)
|
$60,000 of consideration previously paid and received by the Optionor (see above);
|
|
c)
|
A $6,855,000 promissory note with an estimated fair value of $1,061,011 on the date of issuance. See Note 6 for details.
|
On December 7, 2012, we filed suit in state
court in Albany County, Wyoming against DSS Holdings LLC and Douglas Samuelson (“Samuelson”) to regain preliminary
access to our Iron Mountain holdings. This road crosses Samuelson’s property. Samuelson has locked the gate across the road
providing access to the Iron Mountain holdings and denied our repeated requests for access. The suit was filed in the District
Court of the Second Judicial District in Wyoming, after negotiations between the parties were unsuccessful. Under Wyoming Statute§
1-26-507, we hoped to gain access to our property in order to conduct studies and collect samples of iron ore from the existing
Iron Mountain pit and stockpile in order to evaluate the suitability of these materials to meet the specifications of potential
customers.
On February 11, 2013, the Company’s petition
to use the road was denied. The Company is now pursuing the condemnation efforts and are seeking a second preliminary access hearing.
As of December 31, 2013, the Company does not expect to go forward with any exploration at these sites. An impairment analysis
was conducted at December 31, 2013 and no impairment was recorded as the fair value of the property (considered to be the carrying
value of the promissory note against which the property was settled after year-end as per Note 15) exceeded the carrying value
at December 31, 2013.
Sunrise Iron
On April 16, 2013 the Company announced that
through a binding letter of intent (“LOI”) the Company has agreed to purchase the Sunrise Iron Mining Complex from
New Sunrise, LLC, for a price of $12 million. Sunrise is an iron project located in Platte County, Wyoming, consisting of fee land
and patented mining claims aggregating approximately 1400 acres.
In connection with the LOI, Titan paid New
Sunrise a non-refundable deposit of $25,000, and Titan had 180 days to conduct due diligence investigations of the property. On
October 15, 2013, the parties agreed to extend the agreement to January 15, 2014 on a non-exclusive basis. The Company does not
expect to go forward with this transaction and took an impairment charge for the $25,000 deposit as of December 31, 2013.
4. COMMON STOCK
Issued during 2013:
During the year ended December 31, 2013, the
Company issued 1,762,836 shares of common stock pursuant to the Equity Line of Credit Agreement (Note 13).
During the year ended December 31, 2013 the
Company issued 53,333 shares of common stock as finder’s fees for a convertible note.
During the year ended December 31, 2013, the
Company issued 158,956,298 shares of common stock to various convertible note holders for full and partial conversion of the notes
(Note 12).
During the year ended December 31, 2013, the
Company issued 150,000 shares of common stock to a consultant in exchange for investor relations services.
5. SHARE PURCHASE WARRANTS
|
|
|
|
|
Weighted Average
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
Warrants
|
|
|
Price
|
|
|
|
|
|
|
$
|
|
Balance, December 31, 2011
|
|
|
1,050,000
|
|
|
|
0.75
|
|
Warrants granted with private placement
|
|
|
667,000
|
|
|
|
1.00
|
|
Warrants issued with convertible debentures
|
|
|
758,844
|
|
|
|
0.25
|
|
Warrants exercised
|
|
|
(758,844
|
)
|
|
|
0.25
|
|
Balance, December 31, 2012
|
|
|
1,717,000
|
|
|
|
0.85
|
|
Balance, December 31, 2013
|
|
|
1,717,000
|
|
|
|
0.85
|
|
Details of share purchase warrants outstanding as of December 31,
2013 are:
Number of Warrants Outstanding and Exercisable
|
|
|
Number
|
|
|
Exercise Price per Share
|
|
Expiry Date
|
|
|
|
|
|
|
|
1,050,000
|
|
|
$
|
0.75
|
|
June 20, 2014
|
|
667,000
|
|
|
$
|
1.00
|
|
January 10, 2015
|
|
1,717,000
|
|
|
$
|
0.85
|
|
|
6. PROMISSORY NOTE
On April 10, 2012 the Company entered into
a non-interest bearing promissory note in the amount of $6,855,000 with Wyomex Limited Liability Company (“Wyomex”)
secured by the Strong Creek and Iron Mountain properties. The note is repayable through advance minimum royalty payments of $62,500
(adjusted for the consumer price index in successive period) commencing six months from the date of closing and after receipt of
the initial payment, and every six months thereafter, until the commencement of commercial production from the property. At the
commencement of commercial production from the properties, the semi-annual advance minimum royalty shall convert to a 4.5% gross
metal value royalty on iron ore and/or other mineral materials produced and sold from the property and, except for events of force
majeure, in no event shall the production royalty paid to Wyomex be less than $150,000 in any given calendar year. Repayment of
the promissory note may be demanded by Wyomex upon an event of default as defined in the agreement. Upon full settlement of the
promissory note, the production royalty shall be reduced, and the Company shall pay Wyomex a gross metal value royalty of 1.5%
for all iron product and/or other mineral materials mined and sold from the property. The estimated fair value of the note (assuming
an imputed 14.03% interest rate) was calculated to be $1,061,011 on April 10, 2012. As of December 31, 2013, the carrying value
of the promissory note is $1,191,253. During the year ending December 31, 2013, the Company entered into concurrent
agreements with Wyomex and a third party to assign and convert $200,000 of principal into a convertible note (see Note 12). The
modification of the note resulted in a loss on extinguishment of promissory note of $168,000.
6. PROMISSORY NOTE (continued)
At December 31, 2013, estimated contractual
principal payments due on the promissory note for the next five years are as follows:
September 30, 2014
|
|
|
257,911
|
|
September 30, 2015
|
|
|
133,842
|
|
September 30, 2016
|
|
|
137,209
|
|
September 30, 2017
|
|
|
140,660
|
|
September 30, 2018
|
|
|
144,199
|
|
Total
|
|
$
|
813,821
|
|
Subsequent to the year-end, the Company settled the promissory note.
See Note 15.
7. STOCK-BASED COMPENSATION
On November 22, 2011, the Board of Directors
approved a stock option plan (“2011 Stock Option Plan”), the purpose of which is to enhance the Company’s stockholder
value and financial performance by attracting, retaining and motivating the Company’s officers, directors, key employees,
consultants and its affiliates and to encourage stock ownership by such individuals by providing them with a means to acquire a
proprietary interest in the Company’s success through stock ownership. Under the 2011 Stock Option Plan, officers, directors,
employees and consultants who provide services to the Company may be granted options to acquire common shares of the Company.
The
aggregate number of options authorized by the plan shall not exceed 9,947,400 common shares of the Company.
During the year ended December 31, 2013, the
Company granted 1,700,000 stock options at an exercise price of $0.067 per share for 10 years. During the year ended December 31,
2013 the Company recorded stock based compensation $352,338 (2012: $2,133,251) related to the vesting period for these options.
The following table summarizes the options
outstanding as at December 31, 2013:
|
|
Option Price
|
|
|
|
|
Expiry Date
|
|
Per Share
|
|
|
Number
|
|
December 21, 2021
|
|
|
0.84
|
|
|
|
3,450,000
|
|
December 21, 2014
|
|
|
0.84
|
|
|
|
500,000
|
|
June 21, 2022
|
|
|
0.20
|
|
|
|
1,000,000
|
|
June 25, 2023
|
|
|
0.067
|
|
|
|
1,700,000
|
|
|
|
|
0.55
|
|
|
|
6,650,000
|
|
The following table summarizes the continuity of the Company’s
stock options:
|
|
Number of Options
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted-Average Remaining Contractual Term (years)
|
|
|
Aggregate Intrinsic Value
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2011
|
|
|
3,950,000
|
|
|
|
0.84
|
|
|
|
8.08
|
|
|
|
869,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
1,000,000
|
|
|
|
0.20
|
|
|
|
9.48
|
|
|
|
-
|
|
Outstanding, December 31, 2012
|
|
|
4,950,000
|
|
|
|
0.71
|
|
|
|
8.37
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
1,700,000
|
|
|
|
0.067
|
|
|
|
9.49
|
|
|
|
-
|
|
Outstanding, December 31, 2013
|
|
|
6,650,000
|
|
|
|
0.55
|
|
|
|
7.90
|
|
|
|
-
|
|
Exercisable, December 31, 2013
|
|
|
6,650,000
|
|
|
|
0.55
|
|
|
|
7.90
|
|
|
|
-
|
|
As at December 31, 2013, the unrecognized compensation
cost related to non-vested stock options is $Nil.
8. COMMITMENTS
On June 30, 2011, the Company entered into
an employment agreement with an officer to serve as President and Chief Executive Officer of our company for a term of two years
with automatic renewals for similar two year periods pursuant to the terms of the agreement. Under the agreement, the officer
received monthly remuneration at a gross rate of $15,000. The Company can terminate the agreement within 60 days of notice. If
the executive is terminated without cause, the executive shall be entitled to one month’s severance pay for each one month
of service up to a maximum of two years. Subsequent to December 31, 2013, this officer resigned.
On June 30, 2011, the Company entered into
consulting agreements with a management company managed by the CEO, for consulting fee of $2,500 per month to provide office space
and administrative services. The Company can terminate the agreement within 15 days written notice. The management company ceased
operations on December 31, 2013.
On June 30, 2011, the Company entered into
a consulting agreement with a firm to provide the services of the company’s Vice President, Exploration, who will provide
and perform for the benefit of our company certain geological advisory services as may be requested by our company. Under the agreement,
the firm receives monthly compensation at a gross rate of $6,000. The Company can terminate the consulting agreement at any
time. Subsequent to December 31, 2013, the Vice President, Exploration resigned.
On June 30, 2011, the Company entered into
a consulting agreement with a consulting firm who will provide and perform for the benefit of our company certain geological, engineering,
marketing and project management services as may be requested by the Company at monthly rate of $8,000. The Company can terminate
the consulting agreement at any time. Subsequent to December 31, 2013, this consultant resigned.
9. RELATED PARTY TRANSACTIONS AND BALANCES
During the
year
ended December 31, 2011
the Company advanced $25,000 to a management firm managed by the Company’s former CEO. During
the
year ended December 31, 2013
the Company advanced an additional $10,000 to this
management firm for expenditures to be incurred on behalf of the Company. These expenditures have been recorded as general and
administrative expense.
During the
year
ended December 31, 2013
the Company incurred $30,000 in management fees (2012: $30,000) to the management firm managed by
the Company’s former CEO with such costs being recorded as general and administrative costs.
During the
year
ended December 31, 2013
the Company incurred $420,965 in management fees to officers and directors of the Company (2012:
$366,161) with such costs being recorded as general and administrative costs. As at December 31, 2013, the Company owed $129,193
to officers for unreimbursed expenses and accrued management fees (December 31, 2012: $6,479).
The above transactions
were recorded at their exchange amounts, being the amounts agreed by the related parties.
10. FAIR VALUE MEASUREMENT
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.
10. FAIR VALUE MEASUREMENT (continued)
Level 2 instruments require more management
judgment and subjectivity as compared to Level 1 instruments. For instance: determining which instruments are most similar to the
instrument being priced requires management to identify a sample of similar securities based on the coupon rates, maturity, issuer,
credit rating and instrument type, and subjectively select an individual security or multiple securities that are deemed most similar
to the security being priced; and determining whether a market is considered active requires management judgment.
Level 3
Level 3 applies to assets or liabilities for
which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the
assets or liabilities. The determination of fair value for Level 3 instruments requires the most management judgment and subjectivity.
Pursuant to ASC 825, cash is based on "Level
1" inputs. The Company believes that the recorded values of accounts payable approximate their current fair values because
of their nature or respective relatively short durations. The fair value of the Company’s promissory note and convertible
debentures approximates carrying value as the underlying imputed interest rate approximates the estimated current market rate for
similar instruments.
Assets measured at fair value on a recurring
basis were presented on the Company’s balance sheet as of December 31, 2013, as follows:
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets
|
|
|
Significant
Other
|
|
|
Significant
|
|
|
Balance
|
|
|
|
For Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
as of
|
|
|
|
Instruments
|
|
|
Inputs
|
|
|
Inputs
|
|
|
December 31,
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
2013
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
18,005
|
|
|
|
–
|
|
|
|
–
|
|
|
|
18,005
|
|
As at December 31, 2013, there were no liabilities
measured at fair value on a recurring basis presented on the Company’s balance sheet.
11. MINERAL PROPERTY EXPLORATION COSTS
During the year ended December 31, 2013 and 2012 the following project
costs were incurred:
|
|
Year Ended December 31, 2013
|
|
|
Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
Strong Creek and Iron Mountain:
|
|
|
|
|
|
|
Technical Report
|
|
$
|
16,271
|
|
|
$
|
94,141
|
|
Mapping
|
|
|
180
|
|
|
|
-
|
|
Claims
|
|
|
3,774
|
|
|
|
3,642
|
|
Drilling
|
|
|
1,342
|
|
|
|
14,795
|
|
Travel
|
|
|
1,000
|
|
|
|
23,986
|
|
Aeromagnetic Survey
|
|
|
-
|
|
|
|
20,000
|
|
Lease payments
|
|
|
12,000
|
|
|
|
8,000
|
|
TOTAL
|
|
|
34,567
|
|
|
|
164,564
|
|
12. CONVERTIBLE DEBENTURES
|
|
Issuance
|
|
Principal
|
|
|
Discount
|
|
|
Carrying Value
|
|
|
Interest Rate
|
|
Maturity Date
|
|
a
|
)
|
15-Aug-13
|
|
|
15,500
|
|
|
|
1,928
|
|
|
|
13,572
|
|
|
|
8
|
%
|
19-May-14
|
|
a
|
)
|
23-Aug-13
|
|
|
27,500
|
|
|
|
18,845
|
|
|
|
8,655
|
|
|
|
8
|
%
|
27-May-14
|
|
a
|
)
|
1-Jul-13
|
|
|
42,500
|
|
|
|
13,929
|
|
|
|
28,571
|
|
|
|
8
|
%
|
28-Mar-14
|
|
a
|
)
|
17-Oct-13
|
|
|
27,500
|
|
|
|
11,741
|
|
|
|
15,759
|
|
|
|
8
|
%
|
16-Jul-14
|
|
b
|
)
|
4-Nov-13
|
|
|
15,000
|
|
|
|
9,542
|
|
|
|
5,458
|
|
|
|
6
|
%
|
4-Nov-15
|
|
b
|
)
|
9-Dec-13
|
|
|
20,000
|
|
|
|
13,054
|
|
|
|
6,946
|
|
|
|
6
|
%
|
5-Dec-15
|
|
c
|
)
|
9-Dec-13
|
|
|
33,159
|
|
|
|
21,644
|
|
|
|
11,515
|
|
|
|
8
|
%
|
5-Dec-15
|
|
d
|
)
|
2-Apr-13
|
|
|
208,250
|
|
|
|
11,814
|
|
|
|
196,436
|
|
|
|
0
|
%
|
2-Jan-13
|
|
e
|
)
|
2-Oct-13
|
|
|
76,500
|
|
|
|
28,501
|
|
|
|
47,999
|
|
|
|
12
|
%
|
18-Sep-14
|
|
f
|
)
|
26-Jun-13
|
|
|
83,333
|
|
|
|
55,037
|
|
|
|
28,296
|
|
|
|
12
|
%
|
26-Jun-14
|
|
f
|
)
|
26-Sep-13
|
|
|
27,778
|
|
|
|
25,682
|
|
|
|
2,096
|
|
|
|
12
|
%
|
26-Sep-14
|
|
f
|
)
|
9-Dec-13
|
|
|
27,778
|
|
|
|
23,506
|
|
|
|
4,272
|
|
|
|
12
|
%
|
9-Dec-14
|
|
g
|
)
|
4-Nov-13
|
|
|
15,000
|
|
|
|
7,077
|
|
|
|
7,923
|
|
|
|
8
|
%
|
4-Nov-15
|
|
h
|
)
|
18-Sep-13
|
|
|
30,000
|
|
|
|
10,210
|
|
|
|
19,790
|
|
|
|
12
|
%
|
18-Sep-14
|
|
|
|
|
|
|
649,798
|
|
|
|
252,510
|
|
|
|
397,288
|
|
|
|
|
|
|
|
a)
|
The Company entered into several convertible promissory notes (“Asher Notes”) with Asher Enterprises Inc. (“Asher”).
Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time
after 6 months from the issuance date at a conversion price per share equal to 60% of the average price of the lowest 5 day trading
days during the 10 trading days preceding the conversion. The Asher Notes cannot be converted, to the extent that Asher Enterprises
Inc. and its affiliates would beneficially own in excess of 4.99% of the Company’s outstanding common stock.
|
The convertible debenture may be
repaid by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period
of 60 days beginning on the issuance date;
|
|
·
|
Outstanding principal multiplied by 135% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 61 days following the issuance date and ending on the date that is 90 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 91 days following the issuance date and ending on the date that is 120 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 121 days following the issuance date and ending on the date that is 180 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 175% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 181 days following the issuance date through the maturity date.
|
|
·
|
In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 22% per
annum and the Asher Notes becomes immediately due and payable. Should that occur the Company is liable to pay the holder 150% of
the then outstanding principal and interest.
|
|
b)
|
The Company entered into two convertible promissory notes (“GEL Notes”) with GEL Properties, LLC (“GEL”).
Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time
after 6 months from the issuance date at a conversion price per share equal to 60% of the lowest closing bid price during the 5
trading days preceding the conversion. The GEL Notes cannot be converted, to the extent that GEL would beneficially own in excess
of 4.99% of the Company’s outstanding common stock.
|
12. CONVERTIBLE DEBENTURES (continued)
The convertible debenture may be
repaid by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period
of 90 days beginning on the issuance date;
|
|
·
|
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 91 days following the issuance date and ending on the date that is 180 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 181 days following the issuance date through the maturity date.
|
|
·
|
In the event of default, the amount of principal and interest not paid when due bear default interest at the rate of 24% per
annum and the GEL Notes becomes immediately due and payable.
|
|
c)
|
On October 18, 2012, The Company entered into a convertible bridge note (the “Baier Note”) with The Marie Baier
Foundation (“The Foundation”) for $147,062. On December 9, 2013, the Company assigned $34,159 of principal and interest
of the Baier Note to GEL Properties, LLC (“GEL”) and entered into a $34,159 convertible promissory note (the “GEL
Note”) with GEL. Any outstanding principal amount can be converted, in whole or in part, into common stock at the option
of the holder at any time after 6 months from the issuance date at a conversion price per share equal to 60% of the lowest closing
bid price during the 5 trading days preceding the conversion. The GEL Notes cannot be converted, to the extent that GEL would beneficially
own in excess of 4.99% of the Company’s outstanding common stock.
|
The convertible note cannot be prepaid.
|
d)
|
On April 2, 2013, the Company entered into a convertible bridge note with GCA Strategic Investment Fund Limited. On December
31, 2013 the Company entered in a letter agreement with GCA Strategic Investment Fund Limited, in which the original maturity date
of September 20, 2013 was extended to January 2, 2014.
|
The unpaid principal portion and
accrued interest on the convertible bridge note is convertible in whole or in part as follows:
|
·
|
Conversion price per share equal to the lower of :
|
|
(i)
|
100% of the average price of the Company’s common stock for the 5 trading days preceding the conversion days
|
|
(ii)
|
70% of the daily average price of the Company’s common stock for the 10 trading days preceding the conversion date.
|
|
·
|
The holders must not convert more than 33 1/3% of the initial principal sum into shares of the Company’s common
stock at a price below $0.08 per share during any calendar month.
|
Global does not have the right to
convert the convertible bridge note, to the extent that Global 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.
|
e)
|
The Company entered into a convertible promissory note (“Hanover Note”) with Hanover Holdings I, LLC (“Hanover”).
Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time
after 6 months from the issuance date at a conversion price per share equal to 60% of the lowest VWAP (“Variable Weighted
Average Price”) price during the 5 trading days preceding the conversion. The Hanover Note cannot be converted, to the extent
that Hanover would beneficially own in excess of 4.99% of the Company’s outstanding common stock.
|
12. CONVERTIBLE DEBENTURES
(continued)
The convertible debenture may be
repaid by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period
of 180 days beginning on the issuance 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 GEL Notes becomes immediately due and payable.
|
|
f)
|
During the period ended December 31, 2013 the Company entered into a one year promissory note with JMJ Financial. The total
amount that may be borrowed is $275,000, which includes an upfront fee of 10%. No interest will be applied to the principal balance
for the first 90 days after cash advance. After the first 90 days, an interest charge of 12% will be immediately applied to the
principal and the 10% upfront fee.
|
On delivery of consideration, the
lender may convert all or part of the unpaid principal and upfront fee into common stock at its sole discretion. All balances outstanding
have a variable conversion price equal to the lesser of $0.07 or 60% of the market price. The market price is defined as the lowest
trade price in the 25 days prior to the conversion date. The lender is limited to holding no more than 4.99% of the issued and
outstanding common stock at the time of conversion.
After the expiration of 90 days
following the delivery date of any consideration, the Company will have no right of prepayment.
|
g)
|
The Company entered into a convertible promissory note (“LG Note”) with LG Properties, LLC (“LG”).
Any outstanding principal amount can be converted, in whole or in part, into common stock at the option of the holder at any time
after 6 months from the issuance date at a conversion price per share equal to 50% of the average of the two lowest closing bid
prices during the 5 trading days preceding the conversion. The LG Note cannot be converted, to the extent that LG would beneficially
own in excess of 4.99% of the Company’s outstanding common stock.
|
The convertible debenture may be
repaid by the Company as follows:
|
·
|
Outstanding principal multiplied by 130% together with accrued interest and unpaid interest thereon if prepaid within a period
of 90 days beginning on the issuance date;
|
|
·
|
Outstanding principal multiplied by 140% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 91 days following the issuance date and ending on the date that is 180 days following the issuance date;
|
|
·
|
Outstanding principal multiplied by 150% together with accrued interest and unpaid interest thereon if prepaid during the period
beginning 181 days following the issuance date through the maturity date.
|
· In the event of default, the amount
of principal and interest not paid when due bear default interest at the rate of 24% per annum and the LG Notes becomes immediately
due and payable. h) During the period ended December 31, 2013 the Company entered into a convertible debenture agreement with
Magna LLC.
The unpaid principal portion on
the convertible debenture is convertible in whole or in part as follows at a conversion price equal to 80% of the average price
of the Company’s common stock for the 5 trading days preceding the conversion day. The holders must not convert more than
300% of the average daily dollar volume in the 10 day
trading period ending on the day that the holder elects conversion.
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 December
31, 2013 the conversion features would not meet derivative classification.
12. CONVERTIBLE DEBENTURES (continued)
At December 31, 2013, the convertible debentures
are unsecured. During the period ended December 31, 2013, $357,176 (2012 - $nil) of convertible debentures were settled by issuing
158,956,298 (2012 - nil) shares of common stock of the Company.
During the period ended December 31, 2013,
$194,159 (2012 - $nil) of convertible debentures were settled through payment of cash.
During the period ended December 31, 2013,
the Company incurred $nil (2012 - $31,126) in transaction costs in connection with the issuance of the convertible debentures,
which has been recorded as a reduction to the carrying values of convertible debentures.
13. EQUITY LINE OF CREDIT
On October 18, 2012, the Company entered into
a securities purchase agreement with Ascendiant Capital Partners, LLC (“Ascendiant”), as amended on January 9, 2013,
February 19, 2013 and April 2, 2013 (the “Equity Line of Credit Agreement”), pursuant to which the Company may sell
and issue to Ascendiant, and Ascendiant is obligated to purchase, up to $10,000,000 in value of its shares of common stock from
time to time over a 36 month period.
The Company will determine, at its own discretion,
the timing and amount of its sales of stock, subject to certain conditions and limitations. Shares will be priced to be the lesser
of (i) 75% of the volume weighted average price on the date of delivery of the draw down notice and (ii) 75% of the closing price
of the last transaction on the date of delivery of the draw down notice as long as such price is within the bid and offer at the
close (if such transaction is not within the bid and offer at the close, then the next most recent transaction will be selected
until one is located that is within the bid and offer at close). The maximum dollar amount as to each draw down is to be equal
to (i) 20% of the average daily trading volume during the 7 trading days immediately prior to the date of the draw down notice,
eliminating the 2 days with the greatest trading volume and the 2 days with the least trading volume, multiplied by (ii) the volume
weighted average price on the trading day immediately prior to the date of the draw down notice; provided, however, no draw down
can exceed $25,000. Only one draw down will be allowed on each trading day. The Company can terminate the equity line at any time.
Pursuant to the terms of the Equity Line of
Credit Agreement, the Company agreed to issue the following shares of common stock (the “Commitment Shares”):
|
·
|
150,015 shares of common stock no later than 30 days following the agreement date (issued on October 22, 2012) and an additional
857,142 shares (issued on April 15, 2013);
|
|
·
|
On the trading day (the “Second Payment Date”) which is 30 calendar days following the agreement date, 173,913
shares of common stock, (issued on November 19, 2012);
|
|
·
|
On the trading day (the “Third Payment Date”) which is 30 calendar days following the agreement date, 818,930 shares
of common stock (issued on January 10, 2013);
|
|
·
|
On the trading day (the “Fourth Payment Date”) in which the Company has received at least $1,000,000 in aggregate
up on drawdowns, a number of shares of common stock equal to 0.5% of $10,000,000 divided by 95% of the average VWAP during the
10 trading days prior to the Fourth Payment Date; and
|
|
·
|
On the trading day (the “Fifth Payment Date”) in which the Company has received at least $2,000,000 in aggregate
up on drawdowns, a number of shares of common stock equal to 0.5% of $10,000,000 divided by 95% of the average VWAP during the
10 trading days prior to the Fifth Payment Date.
|
For the year ended December 31, 2013, the fair
value of the commitment shares issued is $165,916 for the First and Second Payment Dates and $180,083 for the value of the commitment
shares for the Third Payment Date. On April 15, 2014, the Company issued an additional 857,142 shares valued at $68,571 under the
amended agreements.
On August 12, 2013, the Company issued 86,764
shares valued at $3,561 under the Equity Line of Credit.
For the year ended December 31, 2013, the Company
has fully expensed all costs related to the Equity Line of Credit as the Company does not expect to utilize it in the future. This
amounted to $350,359, which is included in financing charges.
14. INCOME TAXES
The Company has adopted the provisions of ASC
740, Income Taxes. Pursuant to ASC 740 the Company is required to compute tax asset benefits for net operating losses carried forward.
The potential benefit of net operating losses have not been recognized in the financial statements because the Company cannot be
assured that it is more likely than not that it will utilize the net operating losses carried forward in future years. The Company
has approximately $1,432,746 of net operating losses to carry forward which are available to offset taxable income in future years
which expire through fiscal 2032. For the years ended December 31, 2013 and 2012, the valuation allowance established against the
deferred tax assets increased by $499,382, and $386,971 respectively.
The components of the net deferred tax asset at December 31,
2013, and 2012, the statutory tax rate, the effective tax rate, and the amounts of the valuation allowance are indicated
below:
|
|
December 31,
2013
$
|
|
December 31,
2012
$
|
|
|
|
|
|
|
|
Net loss before taxes
|
|
(2,869,622
|
)
|
(3,407,757)
|
|
Statutory rate
|
|
35
|
%
|
35%
|
|
|
|
|
|
|
|
Computed expected tax (recovery)
|
|
(1,004,367
|
)
|
(1,192,715)
|
|
Stock-based compensation
|
|
123,318
|
|
746,638
|
|
Accretion on convertible debt
|
|
85,407
|
|
-
|
|
Amortization of beneficial conversion feature
|
|
296,260
|
|
59,106
|
|
Increase in valuation allowance:
|
|
499,382
|
|
386,971
|
|
|
|
|
|
|
|
Reported income taxes
|
|
–
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential deferred tax asset
|
|
|
|
|
|
- Net operating losses
|
|
1,432,750
|
|
619,955
|
|
- Mineral properties
|
|
131,822
|
|
148,970
|
|
- Less valuation allowance
|
|
(1,209,202
|
)
|
(709,820
|
)
|
|
|
|
|
|
|
Total deferred tax assets
|
|
335,370
|
|
59,106
|
|
Beneficial conversion feature and other
|
|
(335,370
|
)
|
(59,106
|
)
|
Net deferred tax assets
|
|
–
|
|
–
|
|
15. SUBSEQUENT EVENTS
|
a)
|
Subsequent to year-end the Company obtained proceeds of $526,966 for various convertible debenture agreements (“Debentures”)
entered into with face value totaling $526,966, bearing interest at 8% 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.
|
|
b)
|
Subsequent to the year-end, the Company settled the outstanding promissory note (see note 6) by transferring the Strong
Creek and Iron Mountain Properties (see note 3) to the promissory note holder.
|
|
c)
|
Subsequent to year-end the Company issued 451,766,093 shares in connection with conversion of convertible notes in the amount
of $316,514.
|
|
d)
|
Subsequent to year-end the Company issued 19,402,265 shares to settle current liabilities of $291,034.
|
|
e)
|
Subsequent to year-end the Company issued 5,000,000 shares in connection with an investor relations consulting agreement
valued at $11,000 based on a closing price of $0.0022 on the date of issuance.
|
PART II - INFORMATION NOT REQUIRED IN
PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE
AND DISTRIBUTION
The following are our expenses related to our
offering:
Securities and Exchange Commission Registration Fee
|
|
$
|
644.00
|
|
Legal Fees
|
|
$
|
24,000.00
|
|
Accounting Fees*
|
|
$
|
2,500.00
|
|
Printing and Engraving*
|
|
$
|
-
|
|
Blue Sky Qualification Fees and Expenses*
|
|
$
|
-
|
|
Transfer Agent Fee*
|
|
$
|
-
|
|
Miscellaneous*
|
|
$
|
1,500.00
|
|
TOTAL
|
|
$
|
28,644.00
|
|
* Estimated costs
ITEM 14. INDEMNIFICATION OF DIRECTORS
AND OFFICERS
The Registrant is a Nevada corporation and
the provisions of the Nevada Revised Statutes will be applicable to the indemnification the Registrant offers to its officers,
directors and agents. In its By-laws the Registrant generally agrees to indemnify each person who is a director or officer of the
Registrant, or serves at the request of a director or officer as a director, officer, employee or agent of another company, in
accordance with the Registrant's By-laws, to the fullest extent permissible by the Nevada Revised Statutes or other applicable
laws. In its By-laws the Registrant indicates that, in connection with any such indemnification, it is within the discretion of
the Board of Directors whether to advance any funds in advance of disposition of any action, suit or proceeding.
Under the Articles of Incorporation, the By-laws,
and the Nevada Revised Statutes, no director of the Registrant will be personally liable to the Registrant or its stockholders
for monetary damages, or expenses in defense of an action, for breach of fiduciary duty as a director or by reason of the fact
that he is or was a director, officer, employee or agent of the Registrant, or serving in such capacity for another entity at the
request of the Registrant, except for liability (i) for any breach of the director's duty of loyalty to the Registrant or its stockholders,
(ii) for acts or omissions not in good faith or there is reasonable cause to believe it was unlawful, or (iii) for any transaction
from which the director derived an improper personal benefit. The Registrant has the power to purchase and maintain insurance on
behalf of any persons potentially eligible for indemnification. The rights to indemnification are also applicable to those persons
entitled to such rights by virtue of the Registrant's consummation of a business combination, including such consummations wherein
the Registrant is merged into or reorganized as a new entity.
The foregoing description of available indemnification
is a summary only, and is qualified in its entirety by the complete terms and provisions of the Nevada Revised Statutes and also
the Registrant's Articles of Incorporation and By-laws, filed herewith as exhibits.
ITEM 15
.
RECENT SALES
OF UNREGISTERED SECURITIES
Below is a chart of all the shareholders who
purchased shares since December 31, 2013. The chart provides detail on the sales price of the common stock of the Company, person
purchasing the security, the date and amount of the security.
Cert No
|
|
Name
|
|
Shares
|
|
|
$
Per Share
|
|
|
Total Paid
|
|
Date of
Payment
|
|
Exemption from
Registration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DESCRIBE UNREGISTERED STOCK ISSUES SINCE
DECEMBER 31, 2013:
Since the beginning of our fiscal quarter ended
March 31, 2014, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not
previously reported in an annual report on Form 10-K, in a quarterly report on Form 10-Q or in a current report on Form 8-K.
ITEM 16. EXHIBITS
Exhibit
|
|
Number
|
Description
|
(2)
|
Plan of Acquisition, re-organization, arrangement, liquidation or succession
|
2.1
|
Agreement and Plan of Merger and Reorganization, dated as of January 31, 2014, by and among Titan Iron Ore Corp., iHookup Operations Corp and iHookup Social, Inc. (Incorporated by reference to Amendment No. 1 to the Current Report on Form 8-K, previously filed with the SEC on February 18, 2014)
|
(3)
|
Articles of Incorporation and Bylaws
|
3.1
|
Articles of Incorporation (Incorporated by reference to the Registration Statement on Form SB-2, previously filed with the SEC on October 3, 2007).
|
3.2
|
Bylaws (Incorporated by reference to the Registration Statement on Form SB-2, previously filed with the SEC on October 3, 2007).
|
3.3
|
Articles of Merger dated effective June 15, 2011 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on June 17, 2011)
|
3.4
|
Certificate of Change dated effective June 15, 2011 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on June 17, 2011)
|
3.5
|
Certificate of Designation of Rights, Preferences and Privileges of Series A Preferred Stock 2011 (Incorporated by reference to Amendment No. 1 to the Current Report on Form 8-K, previously filed with the SEC on February 18, 2014)
|
3.6
|
Amended and Restated Articles of Incorporation (Incorporated by reference to the Preliminary Information Statement on Schedule 14C, previously filed with the SEC on March 21, 2014)
|
3.7
|
Amended and Restated Bylaws (Incorporated by reference to the Preliminary Information Statement on Schedule 14C, previously filed with the SEC on March 21, 2014)
|
5.1
|
Opinion of Matthew
McMurdo, Esq., legal counsel
|
(10)
|
Material Contracts
|
10.1
|
Mineral Property Option Acquisition Agreement dated June 13, 2011 with J2 Mining Ventures Ltd. (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on June 16, 2011)
|
10.2
|
Form of subscription agreement (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on June 24, 2011)
|
10.3
|
Form of warrant certificate (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on June 24, 2011)
|
10.4
|
Assignment of Mineral Property Option Agreement With J2 Mining and Wyomex LLC dated June 30, 2011 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on July 8, 2011)
|
10.5
|
Employment Agreement with Andrew Brodkey dated June 30 30, 2011 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on July 8, 2011)
|
10.6
|
Consulting Agreement with Kriyah Consultants, LLC dated June 30, 2011 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on July 8, 2011)
|
10.7
|
Consulting Agreement with Sage Associates, Inc. dated June 30, 2011 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on July 8, 2011)
|
10.8
|
Consulting Agreement with J2 Mining dated June 30, 2011 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on July 8, 2011)
|
10.9
|
Stock Purchase Agreement dated June 28, 2011 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on July 8, 2011)
|
10.10
|
Option Agreement dated effective July 12, 2011 between Titan Iron Ore Corp. and Globex Mining Enterprises Inc. (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on July 28, 2011)
|
10.11
|
Retainer Agreement dated effective November 1, 2011 between Titan Iron Ore Corp. and Wolfe Axelrod Weinberger Associates LLC. (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on November 7, 2011)
|
10.12
|
Form of subscription agreement (Incorporated by reference to the Current Report on Form 8-K previously filed with the SEC on January 12, 2012)
|
10.13
|
Form of warrant certificate (Incorporated by reference to the Current Report on Form 8-K previously filed with the SEC on January 12, 2012)
|
10.14
|
Asset Purchase Agreement between the Company and Wyomex (Incorporated by reference to the Current Report on Form 8-K previously filed with the SEC on April 11, 2012)
|
10.15
|
Note between the Company and Wyomex (Incorporated by reference to the Current Report on Form 8-K previously filed with the SEC on April 11, 2012)
|
10.16
|
Mortgage between the Company and Wyomex (Incorporated by reference to the Current Report on Form 8-K previously filed with the SEC on April 11, 2012)
|
10.17
|
2011 Stock Option Plan (incorporated by reference to the current report on Form 8-K, previously filed with the SEC on June 22, 2012)
|
10.18
|
Form of Stock Option Agreement (incorporated by reference to the current report on Form 8-K, previously filed with the SEC on June 22, 2012)
|
10.19
|
Consulting and Professional Service Agreement dated effective September 5, 2012 between Titan Iron Ore Corp. and NuWa Group, LLC. (incorporated by reference to the current report on Form 8-K, previously filed with the SEC on September 14, 2012)
|
10.20
|
Form of Securities Purchase Agreement (Equity Line of Credit) (incorporated by reference to the current report on Form 8-K, previously filed with the SEC on October 19, 2012)
|
10.21
|
Form of Registration Rights Agreement (Equity Line of Credit) (incorporated by reference to the current report on Form 8-K, previously filed with the SEC on October 19, 2012)
|
10.22
|
Form of Securities Purchase Agreement (Debenture) (incorporated by reference to the current report on Form 8-K, previously filed with the SEC on October 19, 2012)
|
10.23
|
Form of Debenture (incorporated by reference to the current report on Form 8-K, previously filed with the SEC on October 19, 2012)
|
10.24
|
Form of Warrant (incorporated by reference to the current report on Form 8-K, previously filed with the SEC on October 19, 2012)
|
10.25
|
Form of Piggyback Registration Rights Agreement (Debenture) (incorporated by reference to the current report on Form 8-K, previously filed with the SEC on October 19, 2012)
|
10.26
|
First Amendment to Securities Purchase Agreement dated January 9, 2013 (Equity Line of Credit) (incorporated by reference to the current report on Form 8-K, previously filed with the SEC on February 21, 2013)
|
10.27
|
First Amended and Restated Securities Purchase Agreement dated February 19, 2013 (Equity Line of Credit) (incorporated by reference to the current report on Form 8-K, previously filed with the SEC on February 21, 2013)
|
10.28
|
First Amended and Restated Registration Rights Agreement dated February 19, 2013 (Equity Line of Credit) (incorporated by reference to the current report on Form 8-K, previously filed with the SEC on February 21, 2013)
|
10.30
|
Payroll Services Agreement with Kriyah Consultants, LLC dated June 30, 2011 (incorporated by reference to the registration statement on Form S1, previously filed with the SEC on February 25, 2013)
|
10.31
|
Securities Purchase Agreement dated March 26, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on April 5, 2013)
|
10.32
|
Convertible Promissory Note dated March 26, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on April 5, 2013)
|
10.33
|
Securities Purchase Agreement dated April 2, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on April 5, 2013)
|
10.34
|
Convertible Bridge Note dated April 2, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on April 5, 2013)
|
10.35
|
First Amendment to First Amended Securities Purchase Agreement dated April 2, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on April 5, 2013)
|
10.36
|
Empire Relations Group Consulting Agreement dated May 21, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on May 21, 2013)
|
10.37
|
Securities Purchase Agreement dated June 25, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on June 27, 2013)
|
10.38
|
Convertible Promissory Note dated June 25, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on June 27, 2013)
|
10.39
|
Promissory Note dated June 25, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on June 27, 2013)
|
10.40
|
Securities Purchase Agreement dated August 15, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on September 6, 2013)
|
10.41
|
Convertible Promissory Note dated August 15, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on September 6, 2013)
|
10.42
|
Securities Purchase Agreement dated August 23, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on September 6, 2013)
|
10.43
|
Convertible Promissory Note dated August 23, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on September 6, 2013)
|
10.44
|
Convertible Note dated September 18, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on September 26, 2013)
|
10.45
|
Assignment Agreement dated September 18, 2013 with Wyomex, LLC and Magna Group LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on September 26, 2013)
|
10.46
|
Securities Purchase Agreement dated September 18, 2013 with Hanover Holdings I, LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on October 7, 2013)
|
10.47
|
Convertible Promissory Note dated September 18, 2013 with Hanover Holdings I, LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on October 7, 2013)
|
10.48
|
Letter dated September 30, 2013 with GCA Strategic Investment Fund Ltd. re: Extension of Convertible Bridge Note dated April 2, 2013 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on October 7, 2013)
|
10.49
|
First Amendment dated October 15, 2013 to that certain Letter of Intent dated April 15, 2013 with New Sunrise LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on October 18, 2013)
|
10.50
|
Securities Purchase Agreement dated October 14, 2013 with Asher Enterprises Inc. (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on October 18, 2013)
|
10.51
|
Convertible Promissory Note dated October 14, 2013 with Asher Enterprises Inc. (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on October 18, 2013)
|
10.52
|
Letter dated October 18, 2013 re: Securities Purchase Agreement and Convertible Note with the Marie Baier Foundation dated October 18, 2012 (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on October 18, 2013)
|
10.53
|
Securities Purchase Agreement dated October 31, 2013 with LG Capital Funding LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on November 15, 2013)
|
10.54
|
Convertible Redeemable Note dated November 5, 2013 with LG Capital Funding LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on November 15, 2013)
|
10.55
|
Amended and Restated Convertible Redeemable Note dated November 5, 2013 with LG Capital Funding LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on November 15, 2013)
|
10.56
|
Convertible Redeemable Note dated November 5, 2013 with GEL Properties LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on November 15, 2013)
|
10.57
|
Secured Promissory Note GEL Back End Security Note 1 of 2 dated November 4, 2013 with GEL Properties LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on November 15, 2013)
|
10.58
|
Secured Promissory Note GEL Back End Security Note 2 of 2 dated November 4, 2013 with GEL Properties LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on November 15, 2013)
|
10.59
|
Amended and Restated Convertible Redeemable Note dated November 5, 2013 with LG Capital Funding LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on November 15, 2013)
|
10.60
|
Debt Purchase Agreement dated November 4, 2013 with LG Capital Funding LLC and The Marie Baier Foundation (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on November 15, 2013)
|
10.61
|
Debt Purchase Agreement dated November 4, 2013 with GEL Properties LLC and The Marie Baier Foundation (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on November 15, 2013)
|
10.62
|
Convertible Redeemable Note dated December 5, 2013 with GEL Properties LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on December 13, 2013)
|
10.63
|
Amended and Restated Convertible Redeemable Note dated December 5, 2013 with GEL Properties LLC (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on December 13, 2013)
|
10.64
|
Debt Purchase Agreement dated December 5, 2013 with GEL Properties LLC and The Marie Baier Foundation (Incorporated by reference to the Current Report on Form 8-K, previously filed with the SEC on December 13, 2013)
|
10.65
|
Asset Purchase Agreement dated January 18, 2014 by and between Checkmate Mobile Inc. and iHookup Social Inc. (Incorporated by reference to Amendment No. 1 to the Current Report on Form 8-K, previously filed with the SEC on February 18, 2014)
|
10.66
|
General Contract for Services dated January 18, 2014 by and between Checkmate Mobile Inc. and iHookup Social Inc. (Incorporated by reference to Amendment No. 1 to the Current Report on Form 8-K, previously filed with the SEC on February 18, 2014)
|
10.67
|
Employment Agreement dated January 19, 2014 by and between iHookup Social Inc. and Dean Rositano (Incorporated by reference to Amendment No. 1 to the Current Report on Form 8-K, previously filed with the SEC on February 18, 2014)
|
10.68
|
Employment Agreement dated January 19, 2014 by and between iHookup Social Inc. and Robert Rositano (Incorporated by reference to Amendment No. 1 to the Current Report on Form 8-K, previously filed with the SEC on February 18, 2014)
|
10.69
|
Amended and Restated Investment Agreement, by and between iHookup Social Inc. and Beaufort Capital Partners LLC, dated July 22, 2014.
|
10.70
|
Registration Rights Agreement, by and between iHookup Social Inc. and Beaufort Capital Partners LLC, dated June 25, 2014.
|
21.1
|
Subsidiaries – iHookup Social, Inc., a Delaware corporation
|
23.1
|
Consent of Manning
Elliott
|
|
|
23.2
|
Consent of Matthew McMurdo, Esq. (included in Exhibit 5.1)
|
|
|
|
|
|
|
|
|
ITEM 17. UNDERTAKINGS
UNDERTAKINGS
The Registrant undertakes:
1. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Registrant is registering
securities under Rule 415 of the Securities Act and hereby undertakes:
1. To file, during any period in which
it offers or sells securities, a post-effective amendment to this registration statement to:
|
(i)
|
Include any prospectus required by Section 10(a)(3) of the Securities Act;
|
|
(ii)
|
Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and notwithstanding the forgoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospects filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.
|
|
(iii)
|
Include any additional or changed material information on the plan of distribution.
|
2. That, for the purposes of determining
any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be new registration statement
relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means
of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
4. The undersigned Registrant hereby
undertakes that:
A. For determining
liability of the undersigned issuer under the Securities Act to any purchaser in the initial distribution of the securities, the
undersigned issuer undertakes that in a primary offering of securities of the undersigned issuer pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or
sold to such purchaser by means of any of the following communications, the undersigned issuer will be a seller to the purchaser
and will be considered to offer or sell such securities to such purchaser:
|
i.
|
Any preliminary prospectus or prospectus of the undersigned issuer relating to the offering required to be filed pursuant to Rule 424;
|
|
ii.
|
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned issuer or used or referred to by the undersigned issuer;
|
|
|
|
|
iii.
|
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned issuer or its securities provided by or on behalf of the undersigned issuer; and
|
|
iv.
|
Any other communication that is an offer in the offering made by the undersigned issuer to the purchaser.
|
B. That for the purpose
of determining liability under the Securities Act to any purchaser:
Each prospectus filed pursuant to Rule 424(b)
as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the
date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of
the registration statement or made in any such document immediately prior to such date of first use.
"Insofar as indemnification for liabilities
arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons
of the issuer pursuant to the foregoing provisions, or otherwise, the issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable."
In the event that a claim for indemnification
against such liabilities (other than the payment by the issuer of expenses incurred or paid by a director, officer or controlling
person of the issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the issuer will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned,
on July 28, 2014.
|
iHookup Social, Inc.
|
|
|
|
|
By:
|
/s/ Robert Rositano
|
|
|
|
Robert Rositano
|
|
|
|
CEO
|
|
In accordance with the requirements of the
Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.
/s/ Robert Rositano
|
|
Dated: July 28, 2014
|
Robert Rositano
CEO, Secretary and Director
(Principal Executive Officer)
|
|
|
|
|
|
/s/ Frank Garcia
|
|
Dated: July 28, 2014
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Frank Garcia
CFO and Principal Accounting Officer
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/s/ Dean Rositano
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Dated: July 28, 2014
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Dean Rositano
President, Chief Technology Officer and Director
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1
Based on the number of common stock outstanding after the planned conversion
of certain Series A Preferred Stock, as further discussed below.