þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-3191847
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting company
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þ
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(Do not check if a smaller reporting company)
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Class
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Outstanding at December 6, 2012
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|
Common Stock, par value $0.001 per share
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43,805,261
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Page Number
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||
PART I. FINANCIAL INFORMATION
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||
ITEM 1.
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Financial Statements
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Condensed Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011
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1
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Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited)
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2
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Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2012 (Unaudited)
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3
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Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011 (Unaudited)
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4
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Notes to Condensed Consolidated Financial Statements (Unaudited)
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5
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ITEM 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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14
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ITEM 3.
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Quantitative and Qualitative Disclosures About Market Risk
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26
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ITEM 4.
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Controls and Procedures
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26
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PART II. OTHER INFORMATION
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||
ITEM 1.
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Legal Proceedings
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27
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ITEM 1A.
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Risk Factors
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27
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ITEM 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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27
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ITEM 3.
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Defaults Upon Senior Securities
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27
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ITEM 4.
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Mine Safety Disclosures
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27
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ITEM 5.
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Other Information
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27
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ITEM 6.
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Exhibits
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28
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SIGNATURES
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29
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●
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our heavy reliance on Facebook platform to run our application and Facebook’s ability to discontinue, limit or restrict access to its platform by us or our application, change its terms and conditions or other policies or features, including restricting methods of collecting payments and establish more favorable relationships with one or more of our competitors;
|
●
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our ability to develop and enhance our product to remain commercially acceptable to the social discovery and online dating market;
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●
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our ability to derive revenue from our mobile platforms;
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●
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our reliance on a small number of our total users for nearly all of our revenue;
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●
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our ability to establish and maintain brand recognition;
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●
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the intense competition in the social discovery and online dating marketplace;
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●
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our reliance on email campaigns to convert installs to subscribers;
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●
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our ability to effectively advertise our products through a variety of advertising media;
|
|
●
|
our ability to generate subscribers through advertising and marketing agreements with third party advertising and marketing providers;
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●
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our ability to effectively manage our growth, including attracting and hiring key personnel;
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●
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our ability to develop and market new technologies to respond to rapid technological changes;
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●
|
our ability to anticipate and respond to changing consumer trends and preferences;
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●
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our ability to support our application for mobile platforms;
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●
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our ability to obtain additional financing to execute our business plan;
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●
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our reliance on our chief executive officer and sole director;
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●
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our dependence on a single vendor to host the majority of our application traffic;
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●
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our reliance upon credit card processors and related merchant account approvals;
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●
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the increased governmental regulation of the online dating, social discovery or Internet industries;
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●
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our ability to protect our intellectual property;
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●
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the potential impact of a finding that we have infringed on intellectual property rights of others;
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●
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the effect of programming errors or flaws in our products;
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●
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the effect of security breaches, computer viruses and computer hacking attacks;
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●
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our limited insurance coverage and the risk of uninsured claims;
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●
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the possibility that our users and subscribers may be harmed following interaction with other users and subscribers;
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●
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the risk that we would be deemed a “dating service” or an “Internet dating service” under various state regulations; and
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●
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other circumstances that could disrupt the functioning of our application and website.
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September 30,
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December 31,
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|||||||
2012
|
2011
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
6,528,271
|
$
|
2,397,828
|
||||
Restricted cash
|
105,000
|
-
|
||||||
Credit card holdback receivable
|
415,571
|
441,840
|
||||||
Accounts receivable, net of allowances and reserves of $42,292 and $184,964, respectively
|
410,846
|
480,190
|
||||||
Accrued interest receivable
|
5,907
|
5,907
|
||||||
Investments
|
-
|
6,481,205
|
||||||
Prepaid expense and other current assets
|
184,652
|
96,815
|
||||||
Total current assets
|
7,650,247
|
9,903,785
|
||||||
Fixed assets and intangible assets, net
|
573,548
|
578,463
|
||||||
Notes receivable
|
130,463
|
138,803
|
||||||
Security deposits
|
-
|
19,520
|
||||||
Total assets
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$
|
8,354,258
|
$
|
10,640,571
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
1,158,898
|
$
|
1,027,841
|
||||
Accrued expenses and other current liabilities
|
542,326
|
864,983
|
||||||
Deferred revenue
|
3,317,790
|
3,138,406
|
||||||
Total current liabilities
|
5,019,014
|
5,031,230
|
||||||
Long term deferred rent
|
44,938
|
61,640
|
||||||
Warrant liability
|
1,546,050
|
937,000
|
||||||
Commitments
|
||||||||
Total liabilities
|
6,610,002
|
6,029,870
|
||||||
Stockholders' equity:
|
||||||||
Preferred Stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding
|
-
|
-
|
||||||
Common Stock, $0.001 par value, 100,000,000 shares authorized, 43,805,261 and 38,580,261 shares issued, respectively, and 38,655,261 and 38,580,261 shares outstanding, respectively
|
38,655
|
38,580
|
||||||
Additional paid-in capital
|
9,117,897
|
8,256,864
|
||||||
Accumulated deficit
|
(7,412,296
|
)
|
(3,684,743
|
)
|
||||
Total stockholders' equity
|
1,744,256
|
4,610,701
|
||||||
Total liabilities and stockholders' equity
|
$
|
8,354,258
|
$
|
10,640,571
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Revenues | (As Restated) | (As Restated) | ||||||||||||||
Subscription revenue
|
$
|
4,304,763
|
$
|
4,953,561
|
$
|
15,001,709
|
$
|
13,501,480
|
||||||||
Advertising revenue
|
26,938
|
137,465
|
288,082
|
153,234
|
||||||||||||
Total revenues
|
4,331,701
|
5,091,026
|
15,289,791
|
13,654,714
|
||||||||||||
Costs and expenses:
|
||||||||||||||||
Programming, hosting and technology
|
1,393,933
|
784,457
|
3,821,511
|
1,845,403
|
||||||||||||
Compensation
|
593,153
|
568,816
|
2,033,312
|
988,843
|
||||||||||||
Professional fees
|
156,354
|
110,863
|
488,580
|
399,280
|
||||||||||||
Advertising and marketing
|
1,509,760
|
3,389,934
|
9,053,658
|
10,598,544
|
||||||||||||
General and administrative
|
943,984
|
755,409
|
3,018,538
|
1,911,527
|
||||||||||||
Total costs and expenses
|
4,597,184
|
5,609,479
|
18,415,599
|
15,743,597
|
||||||||||||
Loss from operations
|
(265,483
|
)
|
(518,453
|
)
|
(3,125,808
|
)
|
(2,088,883
|
)
|
||||||||
Interest income, net
|
5,589
|
7,163
|
24,190
|
20,071
|
||||||||||||
Mark-to-market adjustment on warrant liability
|
562,200
|
632,475
|
(609,050
|
)
|
2,014,575
|
|||||||||||
Other income (expense)
|
-
|
-
|
(16,885
|
)
|
3,909
|
|||||||||||
Net income (loss) before income tax
|
302,306
|
121,185
|
(3,727,553
|
)
|
(50,328
|
)
|
||||||||||
Provision for income taxes
|
-
|
-
|
-
|
-
|
||||||||||||
Net income (loss)
|
$
|
302,306
|
$
|
121,185
|
$
|
(3,727,553
|
)
|
$
|
(50,328
|
)
|
||||||
Net income (loss) per common share:
|
||||||||||||||||
Basic
|
$
|
0.01
|
$
|
0.00
|
$
|
(0.10
|
)
|
$
|
(0.00
|
)
|
||||||
Diluted
|
$
|
0.01
|
$
|
0.00
|
$
|
(0.10
|
)
|
$
|
(0.00
|
)
|
||||||
Weighted average number of common shares used in calculating net income (loss) per common share:
|
||||||||||||||||
Basic
|
38,593,304
|
37,718,256
|
38,584,641
|
37,484,089
|
||||||||||||
Diluted
|
39,685,134
|
42,323,970
|
38,584,641
|
37,484,089
|
Common Stock
|
Additional
Paid-
|
Accumulated
|
Stockholders’
|
|||||||||||||||||
Shares
|
Amount
|
in Capital
|
Deficit
|
Equity
|
||||||||||||||||
Balance at December 31, 2011
|
38,580,261
|
$
|
38,580
|
$
|
8,256,864
|
$
|
(3,684,743
|
)
|
$
|
4,610,701
|
||||||||||
Exercise of stock options for common stock
|
75,000
|
75
|
24,925
|
-
|
25,000
|
|||||||||||||||
Stock-based compensation expense for stock options
|
-
|
-
|
600,613
|
-
|
600,613
|
|||||||||||||||
Stock-based compensation expense for restricted stock awards
|
-
|
-
|
235,495
|
-
|
235,495
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
(3,727,553
|
)
|
(3,727,553
|
)
|
|||||||||||||
Balance at September 30, 2012
|
38,655,261
|
$
|
38,655
|
$
|
9,117,897
|
$
|
(7,412,296
|
)
|
$
|
1,744,256
|
Nine Months Ended
|
||||||||
September 30,
|
||||||||
2012
|
2011
|
|||||||
(As Restated) | ||||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(3,727,553
|
)
|
$
|
(50,328
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
112,509
|
22,977
|
||||||
Amortization of investment premium
|
6,205
|
4,795
|
||||||
Stock-based compensation expense
|
836,108
|
115,268
|
||||||
Mark-to-market adjustment on warrant liability
|
609,050
|
(2,014,575
|
)
|
|||||
Deferred rent
|
(16,702
|
)
|
40,475
|
|||||
Loss on disposal of fixed assets
|
16,885
|
453
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Restricted cash
|
(105,000
|
)
|
-
|
|||||
Credit card holdback receivable
|
26,269
|
(205,953
|
)
|
|||||
Accounts receivable
|
69,344
|
(281,221
|
)
|
|||||
Accrued interest paid
|
-
|
(5,907
|
)
|
|||||
Prepaid expense and other current assets
|
(87,837
|
)
|
(19,732
|
)
|
||||
Security deposit
|
19,520
|
(1,335
|
)
|
|||||
Accounts payable and accrued expenses and other current liabilities
|
(191,600
|
)
|
573,474
|
|||||
Deferred revenue
|
179,384
|
887,929
|
||||||
Accrued interest payable - related party
|
-
|
2,019
|
||||||
Net cash used in operating activities
|
(2,253,418
|
)
|
(931,661
|
)
|
||||
Cash flows from investing activities:
|
||||||||
Purchase of fixed assets
|
(124,479
|
)
|
(366,591
|
)
|
||||
Redemption (purchase) of short-term investments
|
6,475,000
|
(6,989,938
|
)
|
|||||
Repayment (issuance) of note receivable issued to employees
|
8,340
|
(41,843
|
)
|
|||||
Net cash provided by (used in) investing activities
|
6,358,861
|
(7,398,372
|
)
|
|||||
Cash flows from financing activities:
|
||||||||
Proceeds from issuance of common stock and warrants
|
-
|
7,915,700
|
||||||
Proceeds from exercise of common stock warrants
|
-
|
88,125
|
||||||
Proceeds from exercise of stock options
|
25,000
|
-
|
||||||
Net cash provided by financing activities
|
25,000
|
8,003,825
|
||||||
Net increase (decrease) in cash and cash equivalents
|
4,130,443
|
(326,208
|
)
|
|||||
Cash and cash equivalents at beginning of year
|
2,397,828
|
3,018,876
|
||||||
Cash and cash equivalents at end of period
|
$
|
6,528,271
|
$
|
2,692,668
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for taxes
|
$
|
25,794
|
$
|
4,500
|
As Originally Reported
|
Effect of Restatement
|
As Restated
|
||||||||||
Mark-to-market adjustment on warrant liability
|
$
|
-
|
$
|
632,475
|
$
|
632,475
|
||||||
Net loss before income tax
|
(511,290)
|
632,475
|
121,185
|
|||||||||
Net loss
|
(511,290)
|
632,475
|
121,185
|
|||||||||
Net loss per share - Basic and diluted
|
(0.01)
|
0.01
|
0.00
|
As Originally Reported
|
Effect of Restatement
|
As Restated
|
||||||||||
Mark-to-market adjustment on warrant liability
|
$
|
-
|
$
|
2,014,575
|
$
|
2,014,575
|
||||||
Net loss before income tax
|
(2,064,903)
|
2,014,575
|
(50,328)
|
|||||||||
Net loss
|
(2,064,903)
|
2,014,575
|
(50,328)
|
|||||||||
Net loss per share - Basic and diluted
|
(0.06)
|
0.06
|
(0.00)
|
As Originally Reported
|
Effect of Restatement
|
As Restated
|
||||||||||
Net loss
|
$
|
(2,064,903)
|
$
|
2,014,575
|
$
|
(50,328)
|
||||||
Mark-to-market adjustment on warrant liability
|
-
|
(2,014,575)
|
(2,014,575)
|
September 30,
|
December 31,
|
|||||
2012
|
2011
|
|||||
(Unaudited)
|
||||||
Accounts receivable
|
$
|
453,138
|
$
|
665,154
|
||
Less: Allowance for doubtful accounts
|
-
|
(123,392
|
)
|
|||
Less: Reserve for future chargebacks
|
(42,292
|
)
|
(61,572
|
)
|
||
Total accounts receivable, net
|
$
|
410,846
|
$
|
480,190
|
●
|
Level 1: Fair value measurement of the asset or liability using observable inputs such as quoted prices in active markets for identical assets or liabilities;
|
|
●
|
Level 2: Fair value measurement of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and
|
●
|
Level 3: Fair value measurement of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability.
|
September 30, 2012
|
||||||||||||||||||||||||||||||||
(Unaudited)
|
December 31, 2011
|
|||||||||||||||||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||||||||||||||
ASSETS:
|
||||||||||||||||||||||||||||||||
Cash equivalents:
|
||||||||||||||||||||||||||||||||
U.S. government securities (1)
|
$
|
500,071
|
$
|
—
|
$
|
—
|
$
|
500,071
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||||||
Certificates of deposit
|
500,000
|
—
|
—
|
500,000
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||
Total cash equivalents
|
$
|
1,000,071
|
$
|
—
|
$
|
—
|
$
|
1,000,071
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||||||
Short-term investments:
|
||||||||||||||||||||||||||||||||
U.S. government securities (2)
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
3,506,205
|
$
|
—
|
$
|
—
|
$
|
3,506,205
|
||||||||||||||||
Certificates of deposit
|
—
|
—
|
—
|
—
|
2,975,000
|
—
|
—
|
2,975,000
|
||||||||||||||||||||||||
Total short-term investments
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
6,481,205
|
$
|
—
|
$
|
—
|
$
|
6,481,205
|
||||||||||||||||
LIABILITIES:
|
||||||||||||||||||||||||||||||||
Common Stock Warrants:
|
||||||||||||||||||||||||||||||||
Common stock warrants
|
$
|
—
|
$
|
—
|
$
|
1,546,050
|
$
|
1,546,050
|
$
|
—
|
$
|
—
|
$
|
937,000
|
$
|
937,000
|
||||||||||||||||
Total common stock warrants
|
$
|
—
|
$
|
—
|
$
|
1,546,050
|
$
|
1,546,050
|
$
|
—
|
$
|
—
|
$
|
937,000
|
$
|
937,000
|
Security Type
|
Remaining
Maturity
|
Consolidated Balance Sheet
Classification
|
Amortized
Cost
|
Fair
Value
|
Yield
|
|||||||||||
Government securities
|
31 Days
|
Cash and cash equivalents
|
$
|
500,071
|
$
|
500,095
|
0.37%
|
|
||||||||
Certificates of deposit
|
89 Days
|
Cash and cash equivalents
|
500,000
|
500,088
|
0.52%
|
|
||||||||||
Total
|
$
|
1,000,071
|
$
|
1,000,183
|
September 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
(Unaudited)
|
||||||||
Stock price
|
$
|
1.11
|
$
|
0.65
|
||||
Strike price
|
$
|
2.50
|
$
|
2.50
|
||||
Remaining contractual term (years)
|
3.3
|
4.1
|
||||||
Volatility
|
192.2%
|
215.5%
|
||||||
Adjusted volatility
|
125.8%
|
125.5%
|
||||||
Risk-free rate
|
0.4%
|
0.6%
|
||||||
Dividend yield
|
0.0%
|
0.0%
|
September 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
(Unaudited)
|
||||||||
Computer equipment
|
$ | 196,538 | $ | 143,461 | ||||
Furniture and fixtures
|
142,856 | 159,051 | ||||||
Leasehold improvements
|
377,727 | 329,156 | ||||||
Software
|
9,905 | 7,342 | ||||||
Website domain name
|
24,938 | 24,938 | ||||||
Website costs
|
40,500 | 40,500 | ||||||
Total fixed assets
|
792,464 | 704,448 | ||||||
Less: Accumulated depreciation and amortization
|
(218,916 | ) | (125,985 | ) | ||||
Total fixed assets and intangible assets, net
|
$ | 573,548 | $ | 578,463 |
September 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
(Unaudited)
|
||||||||
Compensation and benefits
|
$
|
375,000
|
$
|
817,656
|
||||
Deferred rent
|
40,475
|
40,475
|
||||||
Professional fees
|
120,000
|
-
|
||||||
Other accrued expenses
|
6,851
|
6,852
|
||||||
Total accrued expenses and other current liabilities
|
$
|
542,326
|
$
|
864,983
|
Nine Months
Ended
September 30, 2012
|
||||
Expected volatility
|
301.48%
|
|||
Expected life of option
|
6.05 Years
|
|||
Risk free interest rate
|
1.00%
|
|||
Expected dividend yield
|
0%
|
Number of
Options
|
Weighted
Average
Exercise Price
|
|||||||
Stock Options:
|
||||||||
Outstanding at December 31, 2011
|
8,118,955
|
$
|
0.41
|
|||||
Granted
|
1,237,500
|
|
1.48
|
|||||
Exercised
|
(75,000
|
)
|
0.33
|
|||||
Expired or canceled, during the period
|
(4,500,000
|
)
|
0.13
|
|||||
Forfeited, during the period
|
(110,750
|
)
|
0.97
|
|||||
Outstanding at September 30, 2012
|
4,670,705
|
0.94
|
||||||
Exercisable at September 30, 2012
|
2,054,114
|
$
|
0.73
|
Number of
Options
|
Weighted
Average
Exercise Price
|
|||||||
Non-employee Stock Options:
|
||||||||
Outstanding at December 31, 2011
|
530,000
|
$
|
0.94
|
|||||
Granted
|
400,000
|
1.21
|
||||||
Exercised
|
-
|
|||||||
Expired or canceled, during the period
|
-
|
|||||||
Forfeited, during the period
|
-
|
|||||||
Outstanding at September 30, 2012
|
930,000
|
1.06
|
||||||
Exercisable at September 30, 2012
|
542,500
|
$
|
0.95
|
Number of
Options
|
Weighted
Average
Grant Date Fair Value
|
|||||||
Unvested Stock Options:
|
||||||||
Unvested stock options outstanding at December 31, 2011
|
1,885,955
|
$
|
0.54
|
|||||
Granted
|
1,237,500
|
1.29
|
||||||
Vested
|
(396,114
|
)
|
0.39
|
|||||
Forfeited, during the period
|
(110,750
|
)
|
0.68
|
|||||
Unvested stock options outstanding at September 30, 2012
|
2,616,591
|
$
|
0.91
|
Number of
RSAs
|
Weighted
Average
Grant Date
Fair Value |
|||||||
Restricted Stock Awards:
|
||||||||
Outstanding at December 31, 2011
|
300,000
|
$
|
0.45
|
|||||
Granted
|
4,850,000
|
0.65
|
||||||
Vested
|
-
|
|||||||
Forfeited, during the period
|
-
|
|||||||
Outstanding at September 30, 2012
|
5,150,000
|
$
|
0.55
|
Number of
Warrants
|
Weighted
Average
Exercise Price
|
|||||||
Stock Warrants:
|
||||||||
Outstanding at December 31, 2011
|
2,342,500
|
$
|
2.50
|
|||||
Granted
|
-
|
|||||||
Exercised
|
-
|
|||||||
Forfeited
|
-
|
|||||||
Outstanding at September 30, 2012
|
2,342,500
|
|
2.50
|
|||||
Warrants exercisable at September 30, 2012
|
2,342,500
|
$
|
2.50
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
(As Restated)
|
(As Restated)
|
|||||||||||||||
Net income (loss) attributable to Snap Interactive, Inc. shareholders
|
$
|
302,306
|
$
|
121,185
|
$
|
(3,727,553
|
)
|
$
|
(50,328
|
)
|
||||||
Net income (loss) allocated to participating securities
|
|
35,591
|
|
1,739
|
|
-
|
|
-
|
||||||||
Net income (loss) attributable to Snap Interactive, Inc. common shareholders – basic
|
$
|
266,715
|
$
|
119,446
|
$
|
(3,727,553
|
)
|
$
|
(50,328
|
)
|
||||||
Average number of common shares outstanding – basic
|
38,593,304
|
37,718,256
|
38,584,641
|
37,484,089
|
||||||||||||
Dilutive effect of equity awards
|
1,091,830
|
4,605,714
|
-
|
-
|
||||||||||||
Average number of common shares outstanding – diluted
|
39,685,134
|
42,323,970
|
38,584,641
|
37,484,089
|
||||||||||||
Net income (loss) per common share attributable to Snap Interactive, Inc. common shareholders:
|
||||||||||||||||
Basic
|
$
|
0.01
|
$
|
0.00
|
$
|
(0.10
|
)
|
$
|
(0.00
|
)
|
||||||
Diluted
|
$
|
0.01
|
$
|
0.00
|
$
|
(0.10
|
)
|
$
|
(0.00
|
)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Options to purchase common stock
|
1,889,839
|
229,565
|
-
|
-
|
||||||||||||
Unvested restricted stock awards
|
2,545,773
|
410,604
|
-
|
-
|
||||||||||||
Common stock warrants
|
2,342,500
|
2,342,500
|
-
|
-
|
●
|
the official re-launch of the redesigned AreYouInterested.com product that was completed in early August 2012;
|
●
|
the testing and development of designs, features, pricing and payment methods to increase user engagement and total revenues; and
|
●
|
the installation of a new performance analytics structure that will allow us to analyze and react to our product’s performance in closer to real-time.
|
●
|
a decrease in both revenues and bookings during the third quarter of 2012, as compared to the third quarter of 2011;
|
●
|
a decrease in the number of active subscribers during the third quarter of 2012, as compared to the third quarter of 2011; and
|
●
|
a reduction in net loss during the third quarter of 2012, as compared to the third quarter of 2011, as the decrease in advertising and marketing expenses more than offset the effects of lower revenues and bookings.
|
●
|
Optimizing the redesigned AreYouInterested.com product by continuing to deploy new and engaging features for the product;
|
●
|
Continuing to integrate and expand the overall product offering between the AreYouInterested.com Facebook application, AreYouInterested.com website and AreYouInterested.com iPhone and Android applications for an enhanced user experience across all platforms;
|
●
|
Increasing the amount of resources devoted to mobile initiatives and increasing user engagement on our mobile products;
|
●
|
Increasing our rate of advertising and marketing expenditures to increase traffic to the AreYouInterested.com brand; and
|
●
|
Identifying and exploring new opportunities in our rapidly evolving industry.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||
September 30,
|
September 30,
|
|||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||
Consolidated Statements of Operations Data:
|
||||||||||||
Total revenues
|
$ | 4,331,701 | $ | 5,091,026 | $ | 15,289,791 | $ | 13,654,714 | ||||
Consolidated Balance Sheets Data:
|
||||||||||||
Deferred revenue at period end
|
$ | 3,317,790 | $ | 2,825,844 | $ | 3,317,790 | $ | 2,825,844 | ||||
Consolidated Statements of Cash Flows Data:
|
||||||||||||
Net cash provided by (used in) operating activities
|
$ | (555,460 | ) | $ | 212,426 | $ | (2,253,418 | ) | $ | (931,661 | ) |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Reconciliation of Subscription Revenue to Bookings
|
||||||||||||||||
Subscription revenue
|
$
|
4,304,763
|
$
|
4,953,561
|
$
|
15,001,709
|
$
|
13,501,480
|
||||||||
Change in deferred revenue
|
(337,153
|
) |
2,130
|
179,384
|
887,929
|
|||||||||||
Bookings
|
$
|
3,967,610
|
$
|
4,955,691
|
$
|
15,181,093
|
$
|
14,389,409
|
●
|
Bookings does not reflect that we defer and recognize revenue from subscription fees and premium sales over the length of the subscription term; and
|
●
|
Other companies, including companies in our industry, may calculate bookings differently or choose not to calculate bookings at all, which reduces its usefulness as a comparative measure.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Revenues
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
||||||||||||
Costs and expenses:
|
||||||||||||||||
Programming, hosting and technology
|
32.2%
|
15.4%
|
25.0%
|
13.5%
|
||||||||||||
Compensation
|
13.7%
|
11.2%
|
13.3%
|
7.2%
|
||||||||||||
Professional fees
|
3.6%
|
2.2%
|
3.2%
|
2.9%
|
||||||||||||
Advertising and marketing
|
34.9%
|
66.6%
|
59.2%
|
77.6%
|
||||||||||||
General and administrative
|
21.8%
|
14.8%
|
19.7%
|
14.0%
|
||||||||||||
Total costs and expenses
|
106.1%
|
110.2%
|
120.4%
|
115.3%
|
||||||||||||
Loss from operations
|
(6.1)%
|
(10.2)%
|
(20.4)%
|
(15.3)%
|
||||||||||||
Interest income, net
|
0.1%
|
0.1%
|
0.2%
|
0.1%
|
||||||||||||
Mark-to-market adjustment on warrant liability
|
13.0%
|
12.4%
|
(4.0)%
|
14.8%
|
||||||||||||
Other income (expense)
|
0.0%
|
0.0%
|
(0.1)%
|
0.0%
|
||||||||||||
Net income (loss) before income tax
|
7.0%
|
2.4%
|
(24.4)%
|
(0.4)%
|
||||||||||||
Provision for income taxes
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
||||||||||||
Net income (loss)
|
7.0%
|
2.4%
|
(24.4)%
|
(0.4)%
|
% Revenue | ||||||||||||||||||||||||
Three Months Ended
|
Three Months Ended
|
|||||||||||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||||||||||
2012
|
2011
|
Decrease
|
% Decrease
|
2012
|
2011
|
|||||||||||||||||||
Subscription revenue
|
$
|
4,304,763
|
$
|
4,953,561
|
$
|
(648,798
|
) |
(13.1)%
|
99.4%
|
97.3%
|
||||||||||||||
Advertising revenue
|
26,938
|
137,465
|
(110,527
|
) |
(80.4)%
|
0.6%
|
2.7%
|
|||||||||||||||||
Total revenue
|
$
|
4,331,701
|
$
|
5,091,026
|
$
|
(759,325
|
) |
(14.9)%
|
100.0%
|
100.0%
|
Three Months Ended
|
||||||||||||||||
September 30,
|
Increase
|
% Increase
|
||||||||||||||
2012
|
2011
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Programming, hosting and technology
|
$
|
1,393,933
|
$
|
784,457
|
$
|
609,476
|
77.7%
|
|||||||||
Compensation
|
593,153
|
568,816
|
24,337
|
4.3%
|
||||||||||||
Professional fees
|
156,354
|
110,863
|
45,491
|
41.0%
|
||||||||||||
Advertising and marketing
|
1,509,760
|
3,389,934
|
(1,880,174
|
)
|
(55.5)%
|
|||||||||||
General and administrative
|
943,984
|
755,409
|
188,575
|
25.0%
|
||||||||||||
Total costs and expenses
|
$
|
4,597,184
|
$
|
5,609,479
|
$
|
(1,012,295
|
)
|
(18.0)%
|
Three Months Ended
|
|||||||||||||||
September 30,
|
|||||||||||||||
2012
|
2011
|
Decrease
|
% Decrease
|
||||||||||||
Interest income, net
|
$
|
5,589
|
$
|
7,163
|
$
|
(1,574
|
)
|
%
|
(22.0%
|
)
|
|||||
Mark-to-market adjustment on warrant liability
|
562,200
|
632,475
|
(70,275
|
)
|
%
|
(11.1%
|
)
|
||||||||
Other income (expense)
|
-
|
-
|
-
|
-
|
|||||||||||
Total non-operating income (expense)
|
$
|
567,789
|
$
|
639,638
|
$
|
(71,849
|
)
|
%
|
(11.2%
|
)
|
% Revenue
|
||||||||||||||||||||||||
Nine Months Ended
|
Nine Months Ended
|
|||||||||||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||||||||||
2012
|
2011
|
Increase
|
% Increase
|
2012
|
2011
|
|||||||||||||||||||
Subscription revenue
|
$
|
15,001,709
|
$
|
13,501,480
|
$
|
1,500,229
|
11.1%
|
98.1%
|
98.9%
|
|||||||||||||||
Advertising revenue
|
288,082
|
153,234
|
134,848
|
88.0%
|
1.9%
|
1.1%
|
||||||||||||||||||
Total revenue
|
$
|
15,289,791
|
$
|
13,654,714
|
$
|
1,635,077
|
12.0%
|
100.0%
|
100.0%
|
Nine Months Ended
September 30,
|
Increase
|
% Increase
|
||||||||||||||
2012
|
2011
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Programming, hosting and technology
|
$
|
3,821,511
|
$
|
1,845,403
|
$
|
1,976,108
|
107.1%
|
|||||||||
Compensation
|
2,033,312
|
988,843
|
1,044,469
|
105.6%
|
||||||||||||
Professional fees
|
488,580
|
399,280
|
89,300
|
22.4%
|
||||||||||||
Advertising and marketing
|
9,053,658
|
10,598,544
|
(1,544,886)
|
(14.6%)
|
||||||||||||
General and administrative
|
3,018,538
|
1,911,527
|
1,107,011
|
57.9%
|
||||||||||||
Total costs and expenses
|
$
|
18,415,599
|
$
|
15,743,597
|
$
|
2,672,002
|
17.0%
|
Nine Months Ended
|
||||||||||||||||
September 30,
|
Increase
|
% Increase
|
||||||||||||||
2012
|
2011
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Interest income, net
|
$
|
24,190
|
$
|
20,071
|
$
|
4,119
|
20.5%
|
|||||||||
Mark-to-market adjustment on warrant liability
|
(609,050
|
)
|
2,014,575
|
(2,623,625
|
)
|
(130.2%)
|
||||||||||
Other income (expense)
|
(16,885
|
)
|
3,909
|
(20,794
|
)
|
(532.0%)
|
||||||||||
Total non-operating income (expense)
|
$
|
(601,745
|
)
|
$
|
2,038,555
|
$
|
(2,640,300
|
)
|
(129.5%)
|
Nine Months Ended
|
||||||||
September 30,
|
||||||||
2012
|
2011
|
|||||||
Consolidated Statements of Cash Flows Data:
|
||||||||
Net cash used in operating activities
|
$
|
(2,253,418
|
)
|
$
|
(931,661
|
)
|
||
Net cash provided by (used in) investing activities
|
6,358,861
|
(7,398,372
|
)
|
|||||
Net cash provided by financing activities
|
25,000
|
8,003,825
|
||||||
Net increase in cash and cash equivalents
|
$
|
4,130,443
|
$
|
(326,208
|
)
|
●
|
The Company does not have an independent audit committee in place, which would provide oversight of the Company’s officers, operations and financial reporting function.
|
●
|
The Company does not have effective controls, policies or procedures in place to support the accurate and timely reporting of our financial results. This includes identification of various warrant features and the proper accounting for a warrant liability. As a result, we were required to restate our Annual Report on Form 10-K for the year ended December 31, 2011 as well as our Quarterly Reports on Form 10-Q for the periods ended March 31, 2012 and June 30, 2012.
|
●
|
Management did not disclose warrants issued in connection with an equity financing in a timely manner.
|
Exhibit
Number
|
Description
|
|
3.1
|
Certificate of Incorporation, dated July 19, 2005 (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 of the Company filed on February 11, 2011 by the Company with the SEC).
|
|
3.2
|
Amendment to Certificate of Incorporation, dated November 20, 2007 (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 of the Company filed on February 11, 2011 by the Company with the SEC).
|
|
3.3
|
Amended and Restated By-Laws of Snap Interactive, Inc., as amended April 19, 2012 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Company filed April 25, 2012, by the Company with the SEC).
|
|
31.1 *
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2 *
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1 *
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Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101†
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The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (eXtensible Business Reporting Language), (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements.
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SNAP INTERACTIVE, INC.
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Date: December 10, 2012
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By:
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/s/ Clifford Lerner
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Clifford Lerner
President and Chief Executive Officer
(Principal Executive Officer)
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Date: December 10, 2012
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By:
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/s/ Jon D. Pedersen, Sr.
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Jon D. Pedersen, Sr.
Chief Financial Officer
(Principal Financial and Accounting Officer)
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1.
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I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2012 of Snap Interactive, Inc. (the “Registrant”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
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4.
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The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
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5.
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The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
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/s/ CLIFFORD LERNER
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1.
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I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2012 of Snap Interactive, Inc. (the “Registrant”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
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4.
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The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
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5.
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The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
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/s/ JON D. PEDERSEN, SR.
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Jon D. Pedersen, Sr.
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Chief Financial Officer
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(Principal Financial and Accounting Officer)
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/s/ CLIFFORD LERNER
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Clifford Lerner
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President and Chief Executive Officer
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(Principal Executive Officer)
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/s/ JON D. PEDERSEN, SR.
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Jon D. Pedersen, Sr.
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Chief Financial Officer
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(Principal Financial and Accounting Officer)
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Investments and Fair Value Measurements (Details 2) (USD $)
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9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2012
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Dec. 31, 2011
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Summary of estimated fair value of the warrant liability | ||
Stock price | $ 1.11 | $ 0.65 |
Strike price | $ 2.50 | $ 2.50 |
Remaining contractual term (years) | 3 years 3 months 18 days | 4 years 1 month 6 days |
Volatility | 192.20% | 215.50% |
Adjusted volatility | 125.80% | 125.50% |
Risk-free rate | 0.40% | 0.60% |
Dividend yield | 0.00% | 0.00% |
Related Party Transactions (Details) (Restricted Stock [Member])
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9 Months Ended | 3 Months Ended |
---|---|---|
Sep. 30, 2012
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Mar. 31, 2012
Chief Executive Officer and Co-Founder [Member]
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Related Party Transactions (Textual) | ||
Granted | 4,850,000 | 5,150,000 |
Commitments (Details) (USD $)
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1 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
May 31, 2011
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Feb. 28, 2009
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Sep. 30, 2012
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Sep. 30, 2011
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Commitments (Textual) | ||||
Term of non-cancelable operating lease | 46 months | 3 years | ||
Start date of lease | Jun. 01, 2011 | Apr. 01, 2009 | ||
Expiration date of lease | Mar. 30, 2015 | Mar. 31, 2012 | ||
Operating lease, base rent | $ 973,595 | $ 313,680 | ||
Lease termination, portion of Lease | Final five months | |||
Minimum notice period to terminate lease | 8 months | |||
Rent expense | $ 219,584 | $ 148,556 |
Stock-Based Compensation (Details)
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9 Months Ended |
---|---|
Sep. 30, 2012
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|
Weighted average assumptions used to estimate fair value of options granted | |
Expected volatility | 301.48% |
Expected life of option | 6 years 18 days |
Risk free interest rate | 1.00% |
Expected dividend yield | 0.00% |
Summary of Significant Accounting Policies (Details) (USD $)
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Sep. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Summary of Significant Accounting Policies (Textual) | ||
Uninsured amount of cash and cash equivalents and credit card holdback receivables by FDIC | $ 4,356,873 | $ 1,561,947 |
Credit card holdback receivable | 415,571 | 441,840 |
Uninsured amount of credit card holdback receivables by FDIC | $ 213,073 | $ 248,534 |
Accounts Receivable, Net (Tables)
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9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
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Notes Receivable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable, net |
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Common Stock Purchase Warrants (Details) (Warrant [Member], USD $)
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9 Months Ended |
---|---|
Sep. 30, 2012
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Warrant [Member]
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Summary of stock options/warrants | |
Beginning Balance, Number of Options/Warrants | 2,342,500 |
Granted, Number of Options/Warrants | |
Exercised, Number of Options/Warrants | |
Forfeited, Number of Options/Warrants | |
Ending Balance, Number of Options/Warrants | 2,342,500 |
Options/Warrants exercisable | 2,342,500 |
Beginning Balance, Weighted Average Exercise Price | $ 2.50 |
Granted, Weighted Average Exercise Price | |
Exercised, Weighted Average Exercise Price | |
Forfeited, Weighted Average Exercise Price | |
Ending Balance, Weighted Average Exercise Price | $ 2.50 |
Exercisable, Weighted Average Exercise Price | $ 2.50 |
Fixed Assets and Intangible Assets, Net (Details Textual) (USD $)
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9 Months Ended | |
---|---|---|
Sep. 30, 2012
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Sep. 30, 2011
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Fixed Assets and Intangible Assets, Net (Textual) | ||
Depreciation and amortization expense | $ 112,509 | $ 22,977 |
Net Income (Loss) Per Common Share (Details) (USD $)
|
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2012
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Sep. 30, 2011
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Sep. 30, 2012
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Sep. 30, 2011
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|
Reconciliation of the numerator and denominator used in computing basic and diluted net loss per common share | ||||
Net income (loss) attributable to Snap Interactive Inc. shareholders | $ 302,306 | $ 121,185 | $ (3,727,553) | $ (50,328) |
Net income (loss) allocated to participating securities | 35,591 | 1,739 | ||
Net income (loss) attributable to Snap Interactive Inc. common shareholders – basic | $ 266,715 | $ 119,446 | $ (3,727,553) | $ (50,328) |
Average number of common shares outstanding – basic | 38,593,304 | 37,718,256 | 38,584,641 | 37,484,089 |
Dilutive effect of equity awards | 1,091,830 | 4,605,714 | ||
Average number of common shares outstanding – diluted | 39,685,134 | 42,323,970 | 38,584,641 | 37,484,089 |
Net income (loss) per common share attributable to Snap Interactive, Inc. common shareholders: | ||||
Basic | $ 0.01 | $ 0.00 | $ (0.10) | $ 0.00 |
Diluted | $ 0.01 | $ 0.00 | $ (0.10) | $ 0.00 |
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