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 May 8, 2013
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|
Common Stock, par value $0.001 per share
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38,932,826
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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 March 31, 2013 (Unaudited) and December 31, 2012
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1
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Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2013 and 2012 (Unaudited)
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2
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Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2013 (Unaudited)
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3
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012 (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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13
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ITEM 3.
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Quantitative and Qualitative Disclosures About Market Risk
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21
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ITEM 4.
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Controls and Procedures
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21
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PART II. OTHER INFORMATION
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||
ITEM 1.
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Legal Proceedings
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22
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ITEM 1A.
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Risk Factors
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22
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ITEM 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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22
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ITEM 3.
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Defaults Upon Senior Securities
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22
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ITEM 4.
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Mine Safety Disclosures
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22
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ITEM 5.
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Other Information
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22
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ITEM 6.
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Exhibits
|
23
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SIGNATURES
|
24
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Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements” made under the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 that are based on current expectations, estimates, forecasts and assumptions and are subject to risks and uncertainties. Words such as “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “began,” “target,” “would” and variations of such words and similar expressions are intended to identify such forward-looking statements. All forward-looking statements speak only as of the date on which they are made. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to certain factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following:
|
●
|
our heavy reliance on the 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;
|
●
|
our ability to generate revenue and achieve profitability in the future;
|
●
|
our ability to derive revenue from our mobile platforms;
|
●
|
our reliance on a small number of our total users for nearly all of our revenue;
|
●
|
our ability to establish and maintain brand recognition;
|
●
|
the intense competition in the social dating marketplace;
|
●
|
our reliance on email campaigns to convert users to subscribers;
|
●
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our ability to effectively advertise our applications through a variety of advertising media;
|
●
|
our ability to generate subscribers through advertising and marketing agreements with third party advertising and marketing providers;
|
●
|
our ability to effectively manage our growth, including attracting and hiring key personnel;
|
●
|
our ability to develop and market new technologies to respond to rapid technological changes;
|
●
|
our ability to anticipate and respond to changing consumer trends and preferences;
|
●
|
our ability to develop and support our application for mobile platforms;
|
●
|
the success of the redesigned AYI brand and application;
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●
|
the success of new AYI features;
|
●
|
the effect of new AYI features and branding on user engagement and conversion;
|
●
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our ability to obtain additional financing to execute our business plan;
|
●
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our reliance on our chief executive officer and sole director;
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●
|
our dependence on a single vendor to host the majority of our application traffic;
|
●
|
our reliance upon credit card processors and related merchant account approvals;
|
●
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the increased governmental regulation of the online dating, social dating or Internet industries;
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●
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our ability to comply with laws and regulations regarding privacy and protection of user data;
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●
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our ability to protect our intellectual property;
|
●
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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 application;
|
●
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the effect of security breaches, computer viruses and computer hacking attacks;
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●
|
our limited insurance coverage and the risk of uninsured claims;
|
●
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the possibility that our users and subscribers may be harmed following interaction with other users and subscribers;
|
●
|
the risk that we would be deemed a “dating service” or an “Internet dating service” under various state regulations;
|
●
|
our ability to maintain effective internal controls over financial reporting; and
|
●
|
other circumstances that could disrupt the functioning of our application and website.
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March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
ASSETS
|
(Unaudited)
|
|||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
4,164,286
|
$
|
5,357,596
|
||||
Restricted cash
|
305,211
|
105,000
|
||||||
Credit card holdback receivable
|
243,926
|
287,293
|
||||||
Accounts receivable, net of allowances and reserves of $36,895 and $36,129, respectively
|
307,310
|
320,019
|
||||||
Prepaid expense and other current assets
|
162,614
|
204,824
|
||||||
Total current assets
|
5,183,347
|
6,274,732
|
||||||
Fixed assets and intangible assets, net
|
626,812
|
548,549
|
||||||
Notes receivable
|
166,885
|
165,716
|
||||||
Total assets
|
$
|
5,977,044
|
$
|
6,988,997
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
1,178,394
|
$
|
799,183
|
||||
Accrued expenses and other current liabilities
|
395,423
|
240,049
|
||||||
Deferred revenue
|
2,067,853
|
2,524,229
|
||||||
Total current liabilities
|
3,641,670
|
3,563,461
|
||||||
Deferred rent
|
39,277
|
48,340
|
||||||
Warrant liability
|
515,350
|
1,616,325
|
||||||
Total liabilities
|
4,196,297
|
5,228,126
|
||||||
Commitments
|
||||||||
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, 44,257,826 and 44,007,826 shares issued, respectively, and 38,932,826 and 38,832,826 shares outstanding, respectively
|
38,933
|
38,833
|
||||||
Additional paid-in capital
|
9,612,269
|
9,437,422
|
||||||
Accumulated deficit
|
(7,870,455
|
)
|
(7,715,384
|
)
|
||||
Total stockholders' equity
|
1,780,747
|
1,760,871
|
||||||
Total liabilities and stockholders' equity
|
$
|
5,977,044
|
$
|
6,988,997
|
For the Three Months Ended
|
||||||||
March 31,
|
||||||||
2013
|
2012
|
|||||||
Revenues:
|
||||||||
Subscription revenue
|
$
|
3,427,891
|
$
|
5,586,038
|
||||
Advertising revenue
|
41,669
|
159,414
|
||||||
Total revenues
|
3,469,560
|
5,745,452
|
||||||
Costs and expenses:
|
||||||||
Programming, hosting and technology
|
1,385,391
|
902,120
|
||||||
Compensation
|
797,070
|
906,348
|
||||||
Professional fees
|
267,104
|
148,317
|
||||||
Advertising and marketing
|
1,131,680
|
4,520,241
|
||||||
General and administrative
|
1,146,026
|
984,220
|
||||||
Total costs and expenses
|
4,727,271
|
7,461,246
|
||||||
Loss from operations
|
(1,257,711
|
)
|
(1,715,794
|
)
|
||||
Interest income, net
|
1,665
|
8,533
|
||||||
Mark-to-market adjustment on warrant liability
|
1,100,975
|
(1,288,375
|
)
|
|||||
Net loss before income taxes:
|
(155,071
|
)
|
(2,995,636
|
)
|
||||
Provision for income taxes
|
-
|
-
|
||||||
Net loss
|
$
|
(155,071
|
)
|
$
|
(2,995,636
|
)
|
||
Net loss per common share:
|
||||||||
Basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.08
|
)
|
||
Weighted average number of common shares used in calculating net loss per common share:
|
||||||||
Basic and diluted
|
38,908,382
|
38,580,261
|
Common Stock
|
Additional
Paid-
|
Accumulated
|
Stockholders’
|
|||||||||||||||||
Shares
|
Amount
|
in Capital
|
Deficit
|
Equity
|
||||||||||||||||
Balance at December 31, 2012
|
38,832,826
|
$
|
38,833
|
$
|
9,437,422
|
$
|
(7,715,384
|
)
|
$
|
1,760,871
|
||||||||||
Stock issued in exchange for domain name
|
100,000
|
100
|
99,900
|
-
|
100,000
|
|||||||||||||||
Stock-based compensation expense for stock options
|
-
|
-
|
(13,418
|
) |
-
|
(13,418
|
) | |||||||||||||
Stock-based compensation expense for restricted stock awards
|
- | - |
88,365
|
- |
88,365
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
(155,071
|
)
|
(155,071
|
)
|
|||||||||||||
Balance at March 31, 2013
|
38,932,826
|
$
|
38,933
|
$
|
9,612,269
|
$
|
(7,870,455
|
)
|
$
|
1,780,747
|
Three Months Ended
|
||||||||
March 31,
|
||||||||
2013
|
2012
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(155,071
|
)
|
$
|
(2,995,636
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
42,033
|
32,740
|
||||||
Amortization of investment premium
|
-
|
3,212
|
||||||
Stock-based compensation expense
|
74,947
|
285,283
|
||||||
Mark-to-market adjustment on warrant liability
|
(1,100,975
|
)
|
1,288,375
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Restricted cash
|
(200,211
|
)
|
(105,000
|
)
|
||||
Credit card holdback receivable
|
43,367
|
(14,642
|
)
|
|||||
Accounts receivable, net
|
12,709
|
(607,861
|
)
|
|||||
Prepaid expense and other current assets
|
42,210
|
|
(83,716
|
)
|
||||
Security deposit
|
-
|
19,520
|
||||||
Accounts payable and accrued expenses and other current liabilities
|
532,815
|
331,713
|
||||||
Deferred rent
|
(7,293
|
)
|
(5,567)
|
|||||
Deferred revenue
|
(456,376
|
)
|
291,672
|
|||||
Net cash used in operating activities
|
(1,171,845
|
)
|
(1,559,907
|
)
|
||||
Cash flows from investing activities:
|
||||||||
Purchase of fixed assets
|
(20,296
|
)
|
(2,677
|
)
|
||||
Redemption (purchase) of short-term investments
|
-
|
3,003,850
|
||||||
Repayment (issuance) of notes receivable and accrued interest
|
(1,169
|
)
|
8,664
|
|||||
Net cash (used in) provided by investing activities
|
(21,465
|
)
|
3,009,837
|
|||||
Cash flows from financing activities:
|
||||||||
Net cash provided by financing activities
|
-
|
-
|
||||||
Net (decrease) increase in cash and cash equivalents
|
(1,193,310
|
)
|
1,449,930
|
|||||
Cash and cash equivalents at beginning of year
|
5,357,596
|
2,397,828
|
||||||
Cash and cash equivalents at end of period
|
$
|
4,164,286
|
$
|
3,847,758
|
||||
Supplemental disclosure of noncash activity:
|
||||||||
AYI.com domain purchase in exchange for 100,000 shares of common stock
|
$
|
100,000
|
-
|
March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
||||||||
Accounts receivable
|
$
|
344,205
|
$
|
356,148
|
||||
Less: Reserve for future chargebacks
|
(36,895
|
)
|
(36,129
|
)
|
||||
Total accounts receivable, net
|
$
|
307,310
|
$
|
320,019
|
●
|
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.
|
March 31, 2013
(Unaudited)
|
December 31, 2012
|
|||||||||||||||||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||||||||||||||
LIABILITIES:
|
||||||||||||||||||||||||||||||||
Warrant liability:
|
||||||||||||||||||||||||||||||||
Warrant liability
|
$
|
—
|
$
|
—
|
$
|
515,350
|
$
|
515,350
|
$
|
—
|
$
|
—
|
$
|
1,616,325
|
$
|
1,616,325
|
||||||||||||||||
Total warrant liability
|
$
|
—
|
$
|
—
|
$
|
515,350
|
$
|
515,350
|
$
|
—
|
$
|
—
|
$
|
1,616,325
|
$
|
1,616,325
|
March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
||||||||
Stock price
|
$
|
0.55
|
$
|
1.25
|
||||
Strike price
|
$
|
2.50
|
$
|
2.50
|
||||
Remaining contractual term (years)
|
2.8
|
3.1
|
||||||
Volatility
|
169.2%
|
171.9%
|
||||||
Adjusted volatility
|
122.3%
|
121.1%
|
||||||
Risk-free rate
|
0.3%
|
0.4%
|
||||||
Dividend yield
|
0.0%
|
0.0%
|
March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
||||||||
Computer equipment
|
$
|
229,271
|
$
|
211,896
|
||||
Furniture and fixtures
|
142,856
|
142,856
|
||||||
Leasehold improvements
|
377,727
|
377,727
|
||||||
Software
|
10,968
|
8,047
|
||||||
Website domain name
|
124,938
|
24,938
|
||||||
Website costs
|
40,500
|
40,500
|
||||||
Total fixed assets
|
926,260
|
805,964
|
||||||
Less: Accumulated depreciation and amortization
|
(299,448
|
)
|
(257,415
|
)
|
||||
Total fixed assets and intangible assets, net
|
$
|
626,812
|
$
|
548,549
|
March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
||||||||
Compensation and benefits
|
$
|
175,000
|
$
|
39,344
|
||||
Deferred rent
|
32,124
|
30,354
|
||||||
Professional fees
|
104,448
|
163,500
|
||||||
Other accrued expenses
|
83,851
|
6,851
|
||||||
Total accrued expenses and other current liabilities
|
$
|
395,423
|
$
|
240,049
|
Three Months Ended
March 31, 2013
|
||||
Expected volatility
|
263.55%
|
|||
Expected life of option
|
6.25 Years
|
|||
Risk free interest rate
|
1.10%
|
|||
Expected dividend yield
|
0%
|
Number of
Options
|
Weighted
Average
Exercise Price
|
|||||||
Stock Options:
|
||||||||
Outstanding at December 31, 2012
|
4,525,205
|
$
|
0.97
|
|||||
Granted
|
254,250
|
0.66
|
||||||
Exercised
|
-
|
|||||||
Expired or canceled, during the period
|
(450,000
|
)
|
1.00
|
|||||
Forfeited, during the period
|
(232,000
|
)
|
1.08
|
|||||
Outstanding at March 31, 2013
|
4,097,455
|
0.95
|
||||||
Exercisable at March 31, 2013
|
1,924,978
|
$
|
0.75
|
Number of
Options
|
Weighted
Average
Exercise Price
|
|||||||
Non-employee Stock Options:
|
||||||||
Outstanding at December 31, 2012
|
900,000
|
$
|
1.08
|
|||||
Granted
|
-
|
|||||||
Exercised
|
-
|
|||||||
Expired or canceled, during the period
|
(450,000
|
)
|
1.00
|
|||||
Forfeited, during the period
|
-
|
|||||||
Outstanding at March 31, 2013
|
450,000
|
1.16
|
||||||
Exercisable at March 31, 2013
|
137,500
|
$
|
1.05
|
Number of
Options
|
Weighted
Average
Grant Date Fair Value
|
|||||||
Unvested Stock Options:
|
||||||||
Unvested stock options outstanding at December 31, 2012
|
2,353,591
|
$
|
0.99
|
|||||
Granted
|
254,250
|
0.65
|
||||||
Vested
|
(203,364
|
)
|
0.93
|
|||||
Forfeited, during the period
|
(232,000
|
)
|
0.60
|
|||||
Unvested stock options outstanding at March 31, 2013
|
2,172,477
|
$
|
0.88
|
Number of
RSAs
|
Weighted
Average
Grant Date
Fair Value
|
|||||||
Restricted Stock Awards:
|
||||||||
Outstanding at December 31, 2012
|
5,175,000
|
$
|
0.68
|
|||||
Granted
|
150,000
|
0.83
|
||||||
Vested
|
-
|
|||||||
Forfeited, during the period
|
-
|
|||||||
Outstanding at March 31, 2013
|
5,325,000
|
$
|
0.68
|
Number of
Warrants
|
Weighted
Average
Exercise Price
|
|||||||
Stock Warrants:
|
||||||||
Outstanding at December 31, 2012
|
2,342,500
|
$
|
2.50
|
|||||
Granted
|
-
|
|||||||
Exercised
|
-
|
|||||||
Forfeited
|
-
|
|||||||
Outstanding at March 31, 2013
|
2,342,500
|
2.50
|
||||||
Warrants exercisable at March 31, 2013
|
2,342,500
|
$
|
2.50
|
Three Months Ended
|
||||||||
March 31,
|
||||||||
2013
|
2012
|
|||||||
Numerator:
|
||||||||
Net loss
|
$
|
(155,071
|
)
|
$
|
(2,995,636
|
)
|
||
Denominator:
|
||||||||
Basic shares:
|
||||||||
Weighted-average common shares outstanding
|
38,908,382
|
38,580,261
|
||||||
Diluted shares:
|
||||||||
Weighted-average common shares used to compute basic net loss per common share
|
38,908,382
|
38,580,261
|
||||||
Add: Weighted average shares assumed to be issued upon conversion of convertible notes as of the date of issuance
|
-
|
-
|
||||||
Warrants and options as of beginning of period
|
-
|
-
|
||||||
Weighted-average common shares used to compute diluted net loss per common share
|
38,908,382
|
38,580,261
|
||||||
Net loss per common share:
|
||||||||
Basic
|
$
|
(0.00
|
)
|
$
|
(0.08
|
)
|
||
Diluted
|
$
|
(0.00
|
)
|
$
|
(0.08
|
)
|
●
|
We acquired and transitioned to the “AYI.com” domain from AreYouInterested.com;
|
●
|
We rebranded to “AYI”, a shorter name that is easier for our users to remember; and
|
●
|
We launched new “social” features for AYI that are designed to integrate a user’s interest and social graphs into the online dating experience.
|
●
|
Building a recognizable brand for AYI by expanding our advertising and marketing efforts beyond pure user acquisition;
|
●
|
Increasing the amount of resources devoted to mobile initiatives and increasing user engagement on our mobile application, particularly with regard to Android and mobile web;
|
●
|
Increasing our rate of advertising and marketing expenditures to increase traffic to the AYI brand; and
|
●
|
Growing our base of paid subscribers.
|
Three Months Ended
|
||||||||
March 31,
|
||||||||
2013
|
2012
|
|||||||
Consolidated Statements of Operations Data:
|
||||||||
Total revenues
|
$
|
3,469,560
|
$
|
5,745,452
|
||||
Consolidated Balance Sheets Data:
|
||||||||
Deferred revenue (at period end)
|
$
|
2,067,853
|
$
|
3,430,078
|
||||
Consolidated Statements of Cash Flows Data:
|
||||||||
Net cash used in operating activities
|
$
|
(1,171,845
|
)
|
$
|
(1,559,907
|
)
|
Three Months Ended
|
||||||||
March 31,
|
||||||||
2013
|
2012
|
|||||||
Reconciliation of Subscription Revenue to Bookings
|
||||||||
Subscription revenue
|
$
|
3,427,891
|
$
|
5,586,038
|
||||
Change in deferred revenue
|
(456,376)
|
291,672
|
||||||
Bookings
|
$
|
2,971,515
|
$
|
5,877,710
|
●
|
Bookings does not reflect that we recognize revenue from subscription fees and micro-transactions 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
|
||||||||
March 31,
|
||||||||
2013
|
2012
|
|||||||
Total revenues
|
100.0%
|
100.0%
|
||||||
Costs and expenses:
|
||||||||
Programming, hosting and technology
|
39.9%
|
15.7%
|
||||||
Compensation
|
23.0%
|
15.8%
|
||||||
Professional fees
|
7.7%
|
2.6%
|
||||||
Advertising and marketing
|
32.6%
|
78.7%
|
||||||
General and administrative
|
33.0%
|
17.1%
|
||||||
Total costs and expenses
|
136.2%
|
129.9%
|
||||||
Loss from operations
|
(36.2)%
|
(29.9)%
|
||||||
Interest income, net
|
0.0%
|
0.1%
|
||||||
Mark-to-market adjustment on warrant liability
|
31.7%
|
(22.4)%
|
||||||
Net loss before income taxes
|
(4.5)%
|
(52.1)%
|
||||||
Provision for income taxes
|
0.0%
|
0.0%
|
||||||
Net loss
|
(4.5)%
|
(52.1)%
|
% Revenue
|
||||||||||||||||||||||||
Three Months Ended
|
Three Months Ended
|
|||||||||||||||||||||||
March 31,
|
March 31,
|
|||||||||||||||||||||||
2013
|
2012
|
Decrease
|
% Decrease
|
2013
|
2012
|
|||||||||||||||||||
Subscription revenue
|
$
|
3,427,891
|
$
|
5,586,038
|
$
|
(2,158,147
|
)
|
(38.6)%
|
98.8%
|
97.2%
|
||||||||||||||
Advertising revenue
|
41,669
|
159,414
|
(117,745
|
)
|
(73.9)%
|
1.2%
|
2.8%
|
|||||||||||||||||
Total revenues
|
$
|
3,469,560
|
$
|
5,745,452
|
$
|
(2,275,892
|
)
|
(39.6)%
|
100.0%
|
100.0%
|
Three Months Ended
|
||||||||||||||||
March 31,
|
Increase
|
% Increase
|
||||||||||||||
2013
|
2012
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Programming, hosting and technology
|
$
|
1,385,391
|
$
|
902,120
|
$
|
483,271
|
53.6%
|
|||||||||
Compensation
|
797,070
|
906,348
|
(109,278
|
)
|
(12.1)%
|
|||||||||||
Professional fees
|
267,104
|
148,317
|
118,787
|
80.1%
|
||||||||||||
Advertising and marketing
|
1,131,680
|
4,520,241
|
(3,388,561
|
)
|
(75.0)%
|
|||||||||||
General and administrative
|
1,146,026
|
984,220
|
161,806
|
16.4%
|
||||||||||||
Total costs and expenses
|
$
|
4,727,271
|
$
|
7,461,246
|
$
|
(2,733,975
|
)
|
(36.6)%
|
Three Months Ended
|
|||||||||||||||
March 31,
|
Increase |
% Increase
|
|||||||||||||
2013
|
2012
|
(Decrease)
|
(Decrease)
|
||||||||||||
Interest income, net
|
$
|
1,665
|
$
|
8,533
|
$
|
(6,868
|
) |
|
(80.5)%
|
||||||
Mark-to-market adjustment on warrant liability
|
1,100,975
|
(1,288,375
|
)
|
2,389,350
|
(185.5)%
|
||||||||||
Other income (expense)
|
-
|
-
|
-
|
-
|
|||||||||||
Total non-operating income (expense)
|
$
|
1,102,640
|
$
|
(1,279,842
|
)
|
$
|
2,382,482
|
(186.2)%
|
Three Months Ended
|
||||||||
March 31,
|
||||||||
2013
|
2012
|
|||||||
Consolidated Statements of Cash Flows Data:
|
||||||||
Net cash used in operating activities
|
$
|
(1,171,845
|
)
|
$
|
(1,559,907
|
)
|
||
Net cash provided by (used in) investing activities
|
(21,465
|
)
|
3,009,837
|
|||||
Net cash provided by financing activities
|
-
|
-
|
||||||
Net increase in cash and cash equivalents
|
$
|
(1,193,310
|
)
|
$
|
1,449,930
|
●
|
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.
|
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 on April 25, 2012 by the Company with the SEC).
|
|
10.1
|
Severance and General Release Agreement, dated as of January 31, 2013, by and between Darrell Lerner and Snap Interactive, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company filed on February 5, 2013 by the Company with the SEC).
|
|
10.2
|
Restricted Stock Award Agreement, dated as of January 31, 2013, by and between Darrell Lerner and Snap Interactive, Inc. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of the Company filed on February 5, 2013 by the Company with the SEC).
|
|
10.3
|
Consulting Agreement, dated as of January 31, 2013, by and between Darrell Lerner and Snap Interactive, Inc. (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of the Company filed on February 5, 2013 by the Company with the SEC).
|
|
10.4
|
Subscription Agreement, dated as of January 31, 2013, by and among Darrell Lerner, DCL Ventures, Inc., and Snap Interactive, Inc. (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of the Company filed on February 5, 2013 by the Company with the SEC).
|
|
10.5†
|
Executive Employment Agreement, dated April 9, 2013, by and between Snap Interactive, Inc. and Clifford Lerner (incorporated by reference to Exhibit 10.4 to the Post-Effective Amendment No. 3 to the Registration Statement on Form S-1 filed on April 11, 2013, by the Company with the SEC).
|
|
10.6†
|
Amended and Restated Executive Employment Agreement, dated April 9, 2013, by and between Snap Interactive, Inc. and Jon D. Pedersen, Sr. (incorporated by reference to Exhibit 10.4 to the Post-Effective Amendment No. 3 to the Registration Statement on Form S-1 filed on April 11, 2013, 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.
|
|
32.1 *
|
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101**
|
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, 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.
|
SNAP INTERACTIVE, INC.
|
|||
Date: May 9, 2013
|
By:
|
/s/ Clifford Lerner
|
|
Clifford Lerner
President and Chief Executive Officer
(Principal Executive Officer)
|
|||
Date: May 9, 2013
|
By:
|
/s/ Jon D. Pedersen, Sr.
|
|
Jon D. Pedersen, Sr.
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Snap Interactive, Inc.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
(a)
|
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;
|
(b)
|
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 financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
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
|
(d)
|
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
|
5.
|
The registrant’s other certifying officer(s) 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):
|
(a)
|
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
|
(b)
|
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.
|
Dated: May 9, 2013
|
By:
|
/s/ Clifford Lerner
|
Clifford Lerner
|
||
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Snap Interactive, Inc.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
(a)
|
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;
|
(b)
|
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 financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
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
|
(d)
|
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
|
5.
|
The registrant’s other certifying officer(s) 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):
|
(a)
|
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
|
(b)
|
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.
|
Dated: May 9, 2013
|
By:
|
/s/ Jon D. Pedersen, Sr.
|
Jon D. Pedersen, Sr.
|
||
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
|
Date: May 9, 2013
|
By:
|
/s/ Clifford Lerner
|
|
Name: Clifford Lerner
|
|||
Title: Chief Executive Officer
|
Date: May 9, 2013
|
By:
|
/s/ Jon D. Pedersen, Sr.
|
|
Name: Jon D. Pedersen, Sr.
|
|||
Title: Chief Financial Officer
|
Notes Receivable (Details) (USD $)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Dec. 31, 2012
|
|
Notes Receivable (Textual) | ||
Notes receivable due from current and former employees | $ 166,885 | $ 165,716 |
Maturity period of due note | At various times during 2021-2023 | |
Notes receivable, interest rate, minimum | 2.31% | |
Notes receivable, interest rate, maximum | 3.57% | |
Current Employee [Member]
|
||
Notes Receivable (Textual) | ||
Notes receivable due from current and former employees | 92,727 | |
Former Employees [Member]
|
||
Notes Receivable (Textual) | ||
Notes receivable due from current and former employees | $ 74,158 |
Common Stock Issued for Domain Name (Details) (USD $)
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Common Stock Issued For Domain Name (Textual) | |
Common stock issued for domain name, value | $ 100,000 |
Common stock issued for domain name, shares | 100,000 |
Amount recorded to fixed and intangible assets | 100,000 |
Amount recorded to common stock | 100 |
Amount recorded to additional paid-in capital | $ 99,900 |
Common Stock Purchase Warrants (Details) (Stock Warrant [Member], USD $)
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Stock Warrant [Member]
|
|
Schedule of warrant activity | |
Beginning Balance | 2,342,500 |
Granted | |
Exercised | |
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 |
Accounts Receivable, Net (Details Textual) (USD $)
|
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Accounts Receivable, Net (Textual) | ||
Unsettled transactions from credit card payment processors | $ 169,162 | $ 112,885 |
Accounts receivable due from Apple Inc. | 161,355 | 201,859 |
Receivable from advertising network | $ 626 | $ 27,469 |
Investments and Fair Value Measurements (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments and Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets and liabilities measured at fair value |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of estimated fair value of the warrant liability |
|
Net Loss Per Common Share (Details Textual) (Stock Option and Warrants [Member])
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Stock Option and Warrants [Member]
|
||
Net Loss Per Common Share (Textual) | ||
Shares issuable excluded from computation of diluted net loss per share | 6,439,955 | 6,441,455 |
Stock-Based Compensation (Details) (Stock options [Member])
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Stock options [Member]
|
|
Weighted average assumptions used to estimate fair value of options granted | |
Expected volatility | 263.55% |
Expected life of option | 6 years 3 months |
Risk free interest rate | 1.10% |
Expected dividend yield | 0.00% |
Fixed Assets and Intangible Assets, Net (Details) (USD $)
|
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Schedule of fixed assets and intangible assets | ||
Total fixed assets | $ 926,260 | $ 805,964 |
Less: Accumulated depreciation and amortization | (299,448) | (257,415) |
Total fixed assets and intangible assets, net | 626,812 | 548,549 |
Computer equipment [Member]
|
||
Schedule of fixed assets and intangible assets | ||
Total fixed assets | 229,271 | 211,896 |
Furniture and fixtures [Member]
|
||
Schedule of fixed assets and intangible assets | ||
Total fixed assets | 142,856 | 142,856 |
Leasehold improvements [Member]
|
||
Schedule of fixed assets and intangible assets | ||
Total fixed assets | 377,727 | 377,727 |
Software [Member]
|
||
Schedule of fixed assets and intangible assets | ||
Total fixed assets | 10,968 | 8,047 |
Website domain name [Member]
|
||
Schedule of fixed assets and intangible assets | ||
Total fixed assets | 124,938 | 24,938 |
Website costs [Member]
|
||
Schedule of fixed assets and intangible assets | ||
Total fixed assets | $ 40,500 | $ 40,500 |
Related Party Transactions (Details) (USD $)
|
0 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2013
|
Dec. 31, 2012
|
Apr. 10, 2013
Clifford Lerner, the Company's President and Chief Executive Officer [Member]
|
Apr. 10, 2013
Jon Pedersen, the Company's Chief Financial Officer [Member]
|
|
Related Party Transactions (Textual) | ||||
Issuance of restricted shares of common stock | 5,000,000 | 480,000 | ||
Stock option, Granted | 700,000 | |||
Exercise price of stock option | $ 0.52 | |||
Notes receivable due from current and former employees | $ 166,885 | $ 165,716 |
Common Stock Purchase Warrants (Details Textual) (USD $)
|
1 Months Ended | 3 Months Ended | 1 Months Ended | |||
---|---|---|---|---|---|---|
Jan. 31, 2011
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Mar. 31, 2013
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Mar. 31, 2012
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Dec. 31, 2012
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Apr. 30, 2011
Investor [Member]
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Jan. 31, 2011
Placement Agent [Member]
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Common Stock Purchase Warrants (Textual) | ||||||
Warrant issued to purchase common stock | 255,000 | |||||
Common stock shares issued for warrant exercised | 2,125,000 | 37,500 | ||||
Gross proceeds from equity financing | $ 8,500,000 | $ 88,125 | ||||
Warrants exercise price | $ 2.50 | $ 2.50 | ||||
Stock and warrants issued for cash ($2/sh, less stock offering costs), (shares) | 4,250,000 | |||||
Common stock price per share | $ 2.00 | |||||
Warrants expiration date | Jan. 19, 2016 | |||||
Net proceeds from issuance of warrants | 7,915,700 | |||||
Offering cost of warrants | 584,300 | |||||
Fair value of warrants | 515,350 | 1,616,325 | ||||
Mark-to-market adjustment on warrant liability | $ 1,100,975 | $ (1,288,375) |
Summary of Significant Accounting Policies
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3 Months Ended |
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Mar. 31, 2013
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Summary Of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies
During the three months ended March 31, 2013, there were no material changes to the Company’s significant accounting policies from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
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