Delaware
|
20-3191847
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
þ
|
(Do not check if a smaller reporting company)
|
Class
|
Outstanding at August 11, 2014
|
|
Common Stock, par value $0.001 per share
|
39,182,826
|
Page
Number
|
||
1
|
||
2
|
||
3
|
||
4
|
||
5
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15
|
||
27
|
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27
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||
PART II. OTHER INFORMATION
|
||
28
|
||
28
|
||
28
|
||
28
|
||
28
|
||
28
|
||
29
|
●
|
our ability to generate and sustain increased revenue levels and achieve profitability in the future;
|
|
●
|
our heavy reliance on the Facebook platform to run our application and Facebook Inc.’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 or placing advertisements), establish more favorable relationships with one or more of our competitors or develop an application or feature that competes with our application;
|
|
●
|
our ability to maintain good relationships with Apple Inc. and Google Inc.;
|
|
●
|
our reliance on our president and chief executive officer and chief operating officer and chief financial officer;
|
|
●
|
the intense competition in the online dating industry;
|
|
●
|
our reliance on a small percentage of our total users for substantially all of our revenue;
|
|
●
|
our ability to develop, establish and maintain a strong brand;
|
|
●
|
our ability to develop and market new technologies to respond to rapid technological changes;
|
|
●
|
our ability to effectively manage our growth, including attracting and retaining qualified employees;
|
|
●
|
our ability to generate subscribers through advertising and marketing agreements with third party advertising and marketing providers;
|
|
●
|
our reliance on email campaigns to convert users to subscribers and to retain subscribers;
|
|
●
|
the effect of an interruption or failure of our data center;
|
|
●
|
the effect of an interruption or failure of our programming code, servers or technological infrastructure;
|
|
●
|
the effect of security breaches, computer viruses and computer hacking attacks;
|
|
●
|
our ability to comply with laws and regulations regarding privacy and protection of user data;
|
|
●
|
our reliance upon credit card processors and related merchant account approvals;
|
|
●
|
governmental regulation or taxation of the online dating, social dating or Internet industries;
|
|
●
|
the impact of any claim that we have infringed on intellectual property rights of others;
|
|
●
|
our ability to protect our intellectual property rights;
|
|
●
|
the risk that we might be deemed a “dating service” or an “Internet dating service” under various state regulations;
|
|
●
|
the possibility that our users or third parties may be physically or emotionally harmed following interaction with other users;
|
|
●
|
our ability to obtain additional capital or financing to execute our business plan;
|
|
●
|
our ability to repay indebtedness; and
|
|
●
|
our ability to maintain effective internal control over financial reporting.
|
June 30,
2014
|
December 31,
2013
|
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
555,745
|
$
|
927,352
|
||||
Restricted cash
|
385,422
|
490,315
|
||||||
Credit card holdback receivable
|
686,016
|
232,264
|
||||||
Accounts receivable, net of allowances and reserves of $33,653 and $37,850, respectively
|
276,881
|
385,370
|
||||||
Prepaid expense and other current assets
|
132,916
|
114,863
|
||||||
Total current assets
|
2,036,980
|
2,150,164
|
||||||
Fixed assets and intangible assets, net
|
439,320
|
522,462
|
||||||
Notes receivable
|
122,749
|
170,566
|
||||||
Investments
|
150,000
|
100,000
|
||||||
Total assets
|
$
|
2,749,049
|
$
|
2,943,192
|
||||
Liabilities and stockholders’ equity (deficit)
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
949,854
|
861,730
|
||||||
Accrued expenses and other current liabilities
|
485,858
|
671,142
|
||||||
Promissory notes
|
400,000
|
-
|
||||||
Deferred subscription revenue
|
1,958,767
|
1,826,771
|
||||||
Deferred advertising revenue
|
446,667
|
300,000
|
||||||
Total current liabilities
|
4,241,146
|
3,659,643
|
||||||
Long term deferred rent
|
-
|
12,058
|
||||||
Warrant liability
|
70,275
|
140,550
|
||||||
Total liabilities
|
4,311,421
|
3,812,251
|
||||||
Stockholders' equity (deficit):
|
||||||||
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, 49,507,826 and 49,987,826 shares issued, respectively, and 39,182,826 and 39,132,826 shares outstanding, respectively
|
39,183
|
39,133
|
||||||
Additional paid-in capital
|
11,312,617
|
10,813,205
|
||||||
Accumulated deficit
|
(12,914,172
|
)
|
(11,721,397
|
)
|
||||
Total stockholders' equity (deficit)
|
(1,562,372
|
)
|
(869,059
|
)
|
||||
Total liabilities and stockholders' equity (deficit)
|
$
|
2,749,049
|
$
|
2,943,192
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Revenues:
|
||||||||||||||||
Subscription revenue
|
$
|
3,151,002
|
$
|
3,150,319
|
$
|
6,290,022
|
$
|
6,578,210
|
||||||||
Advertising revenue
|
299,008
|
1,670
|
452,341
|
43,339
|
||||||||||||
Total revenues
|
3,450,010
|
3,151,989
|
6,742,363
|
6,621,549
|
||||||||||||
Costs and expenses:
|
||||||||||||||||
Programming, hosting and technology expense
|
669,795
|
1,339,930
|
1,612,206
|
2,701,321
|
||||||||||||
Compensation expense
|
864,859
|
1,078,536
|
1,634,262
|
1,899,606
|
||||||||||||
Professional fees
|
262,876
|
206,703
|
513,031
|
473,807
|
||||||||||||
Advertising and marketing expense
|
1,110,726
|
952,248
|
2,582,937
|
2,083,929
|
||||||||||||
General and administrative expense
|
795,854
|
1,118,700
|
1,659,272
|
2,264,725
|
||||||||||||
Total costs and expenses
|
3,704,110
|
4,696,117
|
8,001,708
|
9,423,388
|
||||||||||||
Loss from operations
|
(254,100
|
)
|
(1,544,128
|
)
|
(1,259,345
|
)
|
(2,801,839
|
)
|
||||||||
Interest income (expense), net
|
(5,578
|
)
|
1,440
|
(3,705
|
)
|
3,106
|
||||||||||
Gain on change in fair value of warrants
|
-
|
70,275
|
70,275
|
1,171,250
|
||||||||||||
Loss before provision for income taxes
|
(259,678
|
)
|
(1,472,413
|
)
|
(1,192,775
|
)
|
(1,627,483
|
)
|
||||||||
Provision for income taxes
|
-
|
-
|
-
|
-
|
||||||||||||
Net loss
|
$
|
(259,678
|
)
|
$
|
(1,472,413
|
)
|
$
|
(1,192,775
|
)
|
$
|
(1,627,483
|
)
|
||||
Net loss per common share:
|
||||||||||||||||
Basic and diluted
|
$
|
(0.01
|
)
|
$
|
(0.04
|
)
|
$
|
(0.03
|
)
|
$
|
(0.04
|
)
|
||||
Weighted average number of common shares used in calculating net loss per common share:
|
||||||||||||||||
Basic and diluted
|
39,152,713
|
38,932,826
|
39,155,340
|
38,920,671
|
Additional
|
Stockholders’
|
|||||||||||||||||||
Common Stock
|
Paid-
|
Accumulated
|
Equity
|
|||||||||||||||||
Shares
|
Amount
|
in Capital
|
Deficit
|
(Deficit)
|
||||||||||||||||
Balance at December 31, 2013
|
39,132,826
|
$
|
39,133
|
$
|
10,813,205
|
$
|
(11,721,397
|
)
|
$
|
(869,059
|
)
|
|||||||||
Shares issued for consulting services
|
50,000
|
50
|
(50
|
)
|
-
|
-
|
||||||||||||||
Stock-based compensation expense for restricted stock awards
|
-
|
-
|
418,679
|
-
|
418,679
|
|||||||||||||||
Stock-based compensation expense for stock options
|
-
|
-
|
76,033
|
-
|
76,033
|
|||||||||||||||
Warrants issued for debt issuance cost
|
-
|
-
|
4,750
|
-
|
4,750
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
(1,192,775
|
)
|
(1,192,775
|
)
|
|||||||||||||
Balance at June 30, 2014
|
39,182,826
|
$
|
39,183
|
$
|
11,312,617
|
$
|
(12,914,172
|
)
|
$
|
(1,562,372
|
)
|
Six Months Ended
June 30,
|
||||||||
2014
|
2013
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(1,192,775
|
)
|
$
|
(1,627,483
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
86,873
|
85,563
|
||||||
Stock-based compensation expense
|
494,712
|
445,069
|
||||||
Gain on change in fair value of warrants
|
(70,275
|
)
|
(1,171,250
|
)
|
||||
Changes in operating assets and liabilities:
|
||||||||
Decrease (increase) in restricted cash
|
104,893
|
(270,211
|
)
|
|||||
Decrease (increase) in credit card holdback receivable
|
(453,752
|
)
|
30,369
|
|||||
Decrease (increase) in accounts receivable
|
108,489
|
(13,163
|
)
|
|||||
Decrease (increase) in prepaid expenses and other current assets
|
(13,303
|
)
|
34,688
|
|||||
Increase (decrease) in accounts payable, accrued expenses and other current liabilities
|
(89,913
|
)
|
341,601
|
|||||
Decrease in deferred rent
|
(19,306
|
)
|
(14,587
|
)
|
||||
Increase (decrease) in deferred subscription revenue
|
131,996
|
(492,527
|
)
|
|||||
Increase in deferred advertising revenue
|
146,667
|
-
|
||||||
Net cash used in operating activities
|
(765,694
|
)
|
(2,651,931
|
)
|
||||
Cash flows from investing activities:
|
||||||||
Purchase of fixed assets
|
(3,731
|
)
|
(35,550
|
)
|
||||
Purchase of non-marketable equity securities
|
(50,000
|
)
|
(50,000
|
)
|
||||
Repayment of notes receivable issued to employees and accrued interest
|
47,818
|
(2,382
|
)
|
|||||
Net cash used in investing activities
|
(5,913
|
)
|
(87,932
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Proceeds from issuance of promissory notes
|
400,000
|
-
|
||||||
Net cash provided by financing activities
|
400,000
|
-
|
||||||
Decrease in cash and cash equivalents
|
(371,607
|
)
|
(2,739,863
|
)
|
||||
Balance of cash and cash equivalents at beginning of period
|
927,352
|
5,357,596
|
||||||
Balance of cash and cash equivalents at end of period
|
$
|
555,745
|
$
|
2,617,733
|
||||
Supplemental disclosure of cash flow information
|
||||||||
AYI.com domain name purchase in exchange for 100,000 shares of common stock
|
$
|
-
|
$
|
100,000
|
||||
Warrants issued for debt issuance costs
|
$
|
4,750
|
|
-
|
June 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
(Unaudited)
|
||||||||
Accounts receivable
|
$
|
310,534
|
$
|
423,220
|
||||
Less: Reserve for future chargebacks
|
(33,653
|
)
|
(37,850
|
)
|
||||
Total accounts receivable, net
|
$
|
276,881
|
$
|
385,370
|
●
|
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.
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
LIABILITIES:
|
||||||||||||||||
Warrant liability
|
$
|
—
|
$
|
—
|
$
|
70,275
|
$
|
70,275
|
||||||||
Total warrant liability
|
$
|
—
|
$
|
—
|
$
|
70,275
|
$
|
70,275
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
LIABILITIES:
|
||||||||||||||||
Warrant liability
|
$
|
—
|
$
|
—
|
$
|
140,550
|
$
|
140,550
|
||||||||
Total warrant liability
|
$
|
—
|
$
|
—
|
$
|
140,550
|
$
|
140,550
|
June 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
(Unaudited)
|
||||||||
Stock price
|
$
|
0.30
|
$
|
0.42
|
||||
Strike price
|
$
|
2.50
|
$
|
2.50
|
||||
Remaining contractual term (years)
|
1.6
|
2.1
|
||||||
Volatility
|
117.2
|
%
|
109.6
|
%
|
||||
Adjusted volatility
|
112.8
|
%
|
102.5
|
%
|
||||
Risk-free rate
|
0.3
|
%
|
0.4
|
%
|
||||
Dividend yield
|
0.0
|
%
|
0.0
|
%
|
June 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
(Unaudited)
|
||||||||
Computer equipment
|
$
|
256,610
|
$
|
252,879
|
||||
Furniture and fixtures
|
142,856
|
142,856
|
||||||
Leasehold improvements
|
382,376
|
382,376
|
||||||
Software
|
10,968
|
10,968
|
||||||
Website domain name
|
124,938
|
124,938
|
||||||
Website costs
|
40,500
|
40,500
|
||||||
Total fixed assets
|
958,248
|
954,517
|
||||||
Less: Accumulated depreciation and amortization
|
(518,928
|
)
|
(432,055
|
)
|
||||
Total fixed assets and intangible assets, net
|
$
|
439,320
|
$
|
522,462
|
June 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
(Unaudited)
|
||||||||
Compensation and benefits
|
$
|
228,250
|
$
|
499,500
|
||||
Deferred rent
|
30,214
|
37,463
|
||||||
Professional fees
|
215,973
|
134,179
|
||||||
Other accrued expenses
|
11,421
|
-
|
||||||
Total accrued expenses and other current liabilities
|
$
|
485,858
|
$
|
671,142
|
Six Months Ended
June 30,
2014
|
||||
Expected volatility
|
199.74
|
%
|
||
Expected life of option
|
6.18 Years
|
|||
Risk free interest rate
|
1.96
|
%
|
||
Expected dividend yield
|
0
|
%
|
Number of
Options
|
Weighted
Average
Exercise Price
|
|||||||
Stock Options:
|
||||||||
Outstanding at December 31, 2013
|
4,129,790
|
$
|
0.74
|
|||||
Granted
|
2,134,000
|
0.31
|
||||||
Expired or canceled, during the period
|
(507,500
|
)
|
0.70
|
|||||
Forfeited, during the period
|
(1,631,510
|
)
|
0.64
|
|||||
Outstanding at June 30, 2014
|
4,124,780
|
0.56
|
||||||
Exercisable at June 30, 2014
|
1,987,082
|
$
|
0.75
|
Number of
Options
|
Weighted
Average
Exercise Price
|
|||||||
Non-Employee Stock Options:
|
||||||||
Outstanding at December 31, 2013
|
200,000
|
$
|
0.93
|
|||||
Granted
|
25,000
|
0.34
|
||||||
Outstanding at June 30, 2014
|
225,000
|
0.87
|
||||||
Exercisable at June 30, 2014
|
200,000
|
$
|
0.93
|
|
Number of
Options
|
Weighted
Average
Grant Date
Fair Value
|
||||||
Unvested Stock Options:
|
||||||||
Unvested stock options outstanding at December 31, 2013
|
1,888,437
|
$
|
0.57
|
|||||
Granted
|
2,134,000
|
0.31
|
||||||
Vested
|
(253,229
|
) |
0.49
|
|||||
Forfeited, during the period
|
(1,631,512
|
)
|
0.63
|
|||||
Unvested stock options outstanding at June 30, 2014
|
2,137,696
|
$
|
0.37
|
Number of
RSAs
|
Weighted
Average
Grant Date
Fair Value
|
|||||||
Restricted Stock Awards:
|
||||||||
Outstanding at December 31, 2013
|
10,855,000
|
$
|
0.56
|
|||||
Vested
|
(50,000
|
)
|
0.42
|
|||||
Forfeited, during the period
|
(480,000
|
)
|
0.52
|
|||||
Outstanding at June 30, 2014
|
10,325,000
|
$
|
0.56
|
Number of
RSAs
|
Weighted
Average
Grant Date
Fair Value
|
|||||||
Non-Employee Restricted Stock Awards:
|
||||||||
Outstanding at December 31, 2013
|
1,125,000
|
$
|
0.42
|
|||||
Vested
|
(50,000
|
)
|
0.42
|
|||||
Outstanding at June 30, 2014
|
1,075,000
|
$
|
0.42
|
Number of
Warrants
|
Weighted
Average
Exercise Price
|
|||||||
Stock Warrants:
|
||||||||
Outstanding at December 31, 2013
|
2,342,500
|
$
|
2.50
|
|||||
Granted
|
25,000
|
0.32
|
||||||
Exercised
|
-
|
- | ||||||
Forfeited
|
-
|
- | ||||||
Outstanding at June 30, 2014
|
2,367,500
|
2.48
|
||||||
Warrants exercisable at June 30, 2014
|
2,367,500
|
$
|
2.48
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net loss
|
$
|
(259,678
|
)
|
$
|
(1,472,413
|
)
|
$
|
(1,192,775
|
)
|
$
|
(1,627,483
|
)
|
||||
Denominator:
|
||||||||||||||||
Basic shares:
|
||||||||||||||||
Weighted-average common shares outstanding
|
39,152,713
|
38,932,826
|
39,155,340
|
38,920,671
|
||||||||||||
Diluted shares:
|
||||||||||||||||
Weighted-average shares used to compute basic net loss per share
|
39,152,713
|
38,932,826
|
39,155,340
|
38,920,671
|
||||||||||||
Weighted-average shares used to compute diluted net loss per share
|
39,152,713
|
38,932,826
|
39,155,340
|
38,920,671
|
||||||||||||
Net loss per common share:
|
||||||||||||||||
Basic
|
$
|
(0.01
|
)
|
$
|
(0.04
|
)
|
$
|
(0.03
|
)
|
$
|
(0.04
|
)
|
||||
Diluted
|
$
|
(0.01
|
)
|
$
|
(0.04
|
)
|
$
|
(0.03
|
)
|
$
|
(0.04
|
)
|
●
|
increased our messaging activity, user engagement and user conversion rates;
|
|
●
|
increased the number of new subscriptions primarily due to advertising and marketing efficiency;
|
|
●
|
reduced total costs and expenses, including programming, hosting and technology expense by approximately 40%, general and administrative expense by approximately 27% and compensation expense by approximately 14% for the six months ended June 30, 2014 as compared to the six months ended June 30, 2013;
|
|
● | diversified our user acquisition sources, increasing the percentage of new users acquired through advertisements placed on sources other than Facebook media from 49% in December 2013 to 72% in June 2014; and | |
●
|
increased advertising revenues due to the renewal of the advertising agreement with Match.com L.L.C. (“Match.com”) and secured future advertising revenues by entering into a new advertising agreement with Zoosk, Inc. (“Zoosk”).
|
●
|
increasing revenue generated from subscribers by reducing subscriber attrition and presenting additional purchases opportunities;
|
|
●
|
continuing to seek reductions in general and administrative expense, programming, hosting and technology expense, and in other expense areas in order to generate positive cash flow from operations;
|
|
●
|
increasing the prominence of our mobile applications on iOS and Android platforms; and
|
|
● | appointing independent directors to the Company's Board of Directors. |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Active subscribers (at period end)
|
98,000
|
79,200
|
98,000
|
79,200
|
||||||||||||
Bookings
|
$
|
3,021,860
|
$
|
3,114,169
|
$
|
6,422,018
|
$
|
6,085,683
|
||||||||
Net cash used in operating activities
|
$
|
(301,174
|
)
|
$
|
(1,480,086
|
)
|
$
|
(765,694
|
)
|
$
|
(2,651,931
|
)
|
||||
Net loss
|
$
|
(259,678
|
) | $ |
(1,472,413
|
) | $ |
(1,192,775
|
) | $ |
(1,627,483
|
) | ||||
Adjusted EBITDA
|
$
|
61,746
|
$
|
(1,130,476
|
)
|
$
|
(677,760
|
)
|
$
|
(2,271,207
|
)
|
|||||
Adjusted EBITDA as percentage of total revenues
|
1.8
|
%
|
(35.9
|
)%
|
(10.1
|
)%
|
(34.3
|
)%
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Reconciliation of Subscription Revenue to Bookings
|
||||||||||||||||
Subscription revenue
|
$
|
3,151,002
|
$
|
3,150,319
|
$
|
6,290,022
|
$
|
6,578,210
|
||||||||
Change in deferred subscription revenue
|
(129,142
|
)
|
(36,150
|
)
|
131,996
|
(492,527
|
)
|
|||||||||
Bookings
|
$
|
3,021,860
|
$
|
3,114,169
|
$
|
6,422,018
|
$
|
6,085,683
|
●
|
Bookings does not reflect that we recognize subscription 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.
|
|
●
|
Adjusted EBITDA does not reflect cash capital expenditure requirements for assets underlying depreciation and amortization expense that may need to be replaced or for new capital expenditures;
|
|
●
|
Adjusted EBITDA does not reflect our working capital requirements;
|
|
●
|
Adjusted EBITDA does not consider the potentially dilutive impact of stock-based compensation;
|
|
●
|
Adjusted EBITDA does not reflect interest expense or interest payments on our outstanding indebtedness;
|
|
●
|
Adjusted EBITDA does not reflect the change in fair value of warrants; and
|
|
●
|
Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Reconciliation of Net loss to Adjusted EBITDA:
|
||||||||||||||||
Net loss
|
$
|
(259,678
|
)
|
$
|
(1,472,413
|
)
|
$
|
(1,192,775
|
)
|
$
|
(1,627,483
|
)
|
||||
Interest expense (income), net
|
5,578
|
(1,440
|
)
|
3,705
|
(3,106
|
)
|
||||||||||
Depreciation and amortization expense
|
43,610
|
43,530
|
86,873
|
85,563
|
||||||||||||
Gain on change in fair value of warrants
|
-
|
(70,275
|
)
|
(70,275
|
)
|
(1,171,250
|
)
|
|||||||||
Stock-based compensation expense
|
272,236
|
370,122
|
494,712
|
445,069
|
||||||||||||
Adjusted EBITDA
|
$
|
61,746
|
$
|
(1,130,476
|
)
|
$
|
(677,760
|
)
|
$
|
(2,271,207
|
)
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Revenues
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||||
Costs and expenses:
|
||||||||||||||||
Programming, hosting and technology expense
|
19.4
|
%
|
42.5
|
%
|
23.9
|
%
|
40.8
|
%
|
||||||||
Compensation expense
|
25.1
|
%
|
34.2
|
%
|
24.2
|
%
|
28.7
|
%
|
||||||||
Professional fees
|
7.6
|
%
|
6.6
|
%
|
7.6
|
%
|
7.2
|
%
|
||||||||
Advertising and marketing expense
|
32.2
|
%
|
30.2
|
%
|
38.3
|
%
|
31.5
|
%
|
||||||||
General and administrative expense
|
23.1
|
%
|
35.5
|
%
|
24.6
|
%
|
34.2
|
%
|
||||||||
Total costs and expenses
|
107.4
|
%
|
149.0
|
%
|
118.7
|
%
|
142.3
|
%
|
||||||||
Loss from operations
|
(7.4
|
)%
|
(49.0
|
)%
|
(18.7
|
)%
|
(42.3
|
)%
|
||||||||
Interest income (expense), net
|
(0.2
|
)%
|
0.0
|
%
|
(0.1
|
)%
|
0.0
|
%
|
||||||||
Gain on change in fair value of warrants
|
0.0
|
%
|
2.2
|
%
|
1.0
|
%
|
17.7
|
%
|
||||||||
Loss before provision for income taxes
|
(7.5
|
)%
|
(46.7
|
)%
|
(17.7
|
)%
|
(24.6
|
)%
|
||||||||
Provision for income taxes
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
||||||||
Net loss
|
(7.5
|
)%
|
(46.7
|
)%
|
(17.7
|
)%
|
(24.6
|
)%
|
% Revenue
|
||||||||||||||||||||||||
Three Months Ended
|
Three Months Ended
|
|||||||||||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||||||||||
2014
|
2013
|
Increase
|
% Increase
|
2014
|
2013
|
|||||||||||||||||||
Subscription revenue
|
3,151,002
|
3,150,319
|
683
|
0.0
|
%
|
91.3
|
%
|
99.9
|
%
|
|||||||||||||||
Advertising revenue
|
299,008
|
1,670
|
297,338
|
17,804.7
|
%
|
8.7
|
%
|
0.1
|
%
|
|||||||||||||||
Total revenues
|
3,450,010
|
3,151,989
|
298,021
|
9.5
|
%
|
100.0
|
%
|
100.0
|
%
|
Three Months Ended
|
%
|
|||||||||||||||
June 30,
|
Increase
|
Increase
|
||||||||||||||
2014
|
2013
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Programming, hosting and technology expense
|
$
|
669,795
|
$
|
1,339,930
|
$
|
(670,135
|
)
|
(50.0
|
)%
|
|||||||
Compensation expense
|
864,859
|
1,078,536
|
(213,677
|
)
|
(19.8
|
)%
|
||||||||||
Professional fees
|
262,876
|
206,703
|
56,173
|
27.2
|
%
|
|||||||||||
Advertising and marketing expense
|
1,110,726
|
952,248
|
158,478
|
16.6
|
%
|
|||||||||||
General and administrative expense
|
795,854
|
1,118,700
|
(322,846
|
)
|
(28.9
|
)%
|
||||||||||
Total costs and expenses
|
$
|
3,704,110
|
$
|
4,696,117
|
$
|
(992,007
|
)
|
(21.1
|
)%
|
Three Months Ended
|
||||||||||||||||
June 30,
|
||||||||||||||||
2014
|
2013
|
(Decrease)
|
% (Decrease)
|
|||||||||||||
Interest income (expense), net
|
$
|
(5,578
|
)
|
1,440
|
(7,018
|
)
|
(487.4)
|
%
|
||||||||
Gain on change in fair value of warrants
|
-
|
70,275
|
(70,275
|
)
|
(100.0)
|
%
|
||||||||||
Total non-operating income
|
$
|
(5,578
|
)
|
71,715
|
(77,293
|
)
|
(107.8)
|
%
|
% Revenue
|
||||||||||||||||||||||||
Six Months Ended
|
%
|
Six Months Ended
|
||||||||||||||||||||||
June 30,
|
Increase
|
Increase
|
June 30,
|
|||||||||||||||||||||
2014
|
2013
|
(Decrease)
|
(Decrease)
|
2014
|
2013
|
|||||||||||||||||||
Subscription revenue
|
6,290,022
|
6,578,210
|
(288,188
|
)
|
(4.4
|
)%
|
93.3
|
%
|
99.3
|
%
|
||||||||||||||
Advertising revenue
|
452,341
|
43,339
|
409,002
|
943.7
|
%
|
6.7
|
%
|
0.7
|
%
|
|||||||||||||||
Total revenues
|
6,742,363
|
6,621,549
|
120,814
|
1.8
|
%
|
100.0
|
%
|
100.0
|
%
|
Six Months Ended
|
%
|
|||||||||||||||
June 30,
|
Increase
|
Increase
|
||||||||||||||
2014
|
2013
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Programming, hosting and technology expense
|
$
|
1,612,206
|
$
|
2,701,321
|
$
|
(1,089,115
|
)
|
(40.3
|
)%
|
|||||||
Compensation expense
|
1,634,262
|
1,899,606
|
(265,344
|
)
|
(14.0
|
)%
|
||||||||||
Professional fees
|
513,031
|
473,807
|
39,224
|
8.3
|
%
|
|||||||||||
Advertising and marketing expense
|
2,582,937
|
2,083,929
|
499,008
|
23.9
|
%
|
|||||||||||
General and administrative expense
|
1,659,272
|
2,264,725
|
(605,453
|
)
|
(26.7
|
)%
|
||||||||||
Total costs and expenses
|
$
|
8,001,708
|
$
|
9,423,388
|
$
|
(1,421,680
|
)
|
(15.1
|
)%
|
Six Months Ended
|
||||||||||||||||
June 30,
|
%
|
|||||||||||||||
2014
|
2013
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Interest income (expense), net
|
$
|
(3,705
|
)
|
3,106
|
(6,811
|
)
|
(219.3
|
)%
|
||||||||
Gain on change in fair value of warrants
|
70,275
|
1,171,250
|
(1,100,975
|
)
|
(94.0
|
)%
|
||||||||||
Total non-operating income
|
$
|
66,570
|
1,174,356
|
(1,107,786
|
)
|
(94.3
|
)%
|
Six Months Ended
|
||||||||
June 30,
|
||||||||
2014
|
2013
|
|||||||
Consolidated Statements of Cash Flows Data:
|
||||||||
Net cash used in operating activities
|
$
|
(765,694
|
)
|
$
|
(2,651,931
|
)
|
||
Net cash used in investing activities
|
(5,913
|
)
|
(87,932
|
)
|
||||
Net cash provided by financing activities
|
400,000
|
-
|
||||||
Net decrease in cash and cash equivalents
|
$
|
(371,607
|
)
|
$
|
(2,739,863
|
)
|
●
|
The Company did not have an independent audit committee in place, which would provide oversight of the Company’s officers, operations and financial reporting function; and
|
|
●
|
The Company did not have effective internal controls in place over its financial statement close process, which could result in the Company's failure to detect material misstatements in the Company's financial statements.
|
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
|
Certificate of Amendment of 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*†
|
Business Development Agreement, dated November 27, 2013, by and between Snap Interactive, Inc. and Match.com, L.L.C.
|
|
10.2*†
|
Amendment No. 1 to Business Development Agreement, dated April 16, 2014, by and between Snap Interactive, Inc. and Match.com, L.L.C.
|
|
10.3*
|
Promissory Note, dated April 24, 2014, issued by Snap Interactive, Inc.
|
|
10.4*
|
Promissory Note, dated May 20, 2014, issued by Snap Interactive, Inc.
|
|
10.5*†
|
Membership Acquisition Agreement, dated as of June 25, 2014, by and between Snap Interactive, Inc. and Zoosk, Inc.
|
|
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 June 30, 2014, 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: August 11, 2014
|
By:
|
/s/ Clifford Lerner
|
|
Clifford Lerner
President and Chief Executive Officer
(Principal Executive Officer)
|
|||
Date: August 11, 2014
|
By:
|
/s/ Alexander Harrington
|
|
Alexander Harrington
Chief Operating Officer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
1.
|
Background. Snap Interactive, Inc. (“SNAP”) is an Internet company providing services in the social dating market. SNAP owns and operates a social dating software application under its AYI brand that can be accessed on Facebook, mobile devices such as iPhone and Android, and a stand-alone website. Match.com, L.L.C. (“Match”) is an online personals service provider that provides online personals services to registered members and subscribers.
|
|
2.
|
Purpose of Agreement. This Agreement provides the framework for SNAP to promote Match on its AYI social dating website and software application during the Term of this Agreement.
|
|
3.
|
Term. The term of this Agreement is from the date of this Agreement until the 91st date following the Launch Date (the “Term”). The term “Launch Date” means the later of (i) January 1, 2014, or (ii) the day that Match and its affiliates collectively reach ***** who reach websites from the Integration Features.
|
|
4.
|
Compensation for SNAP. Within four (4) business days of the execution of this Agreement, Match will pay to SNAP a non-refundable aggregate amount in cash equal to three hundred thousand ($300,000), payable by wire transfer in immediately available funds, to the bank account designated in writing by SNAP.
|
|
5.
|
Integration Features. Subject to Section 6 of this Agreement, SNAP agrees to continuously provide the following integration features (the “Integration Features”) during the Term to *****:
|
|
(a)
|
Feature Match on *****;
|
|
(b)
|
Feature Match through *****;
|
|
(c)
|
Feature Match on *****; and
|
|
(d)
|
*****.
|
|
6.
|
Match API Provisions.
|
|
(a)
|
Match grants SNAP a non-exclusive, non-sub-licensable, non-assignable, non-transferable revocable license to use the Match.com, or any of its affiliates, Application Programming Interface (the “Match API”) solely to *****. SNAP agrees that as between SNAP and Match, Match owns all right, title and interest in and to the Match API and the Member Content. Match may throttle or terminate use of the Match API at any time. SNAP is not required to provide any Integration Features during any period when Match throttles or terminates the use of the Match API or fails to provide access to or display any Member Content.
|
|
(b)
|
Match will provide SNAP a unique identification number by which SNAP will access the Match API (the “Application ID”). SNAP will only access the Match API from its server code using the Application ID. SNAP will not allow the Application ID to appear within the Javascript, browser code or html or otherwise disclose or make it available to any third party. If SNAP suspects or knows that there has been an unauthorized disclosure of the Application ID, it will give prompt written notice to Match regardless of the day or the time of the discovery or suspicion, which notice will be by email to PageOpsManager@match.com and in all cases within eight (8) business hours of the SNAP’s discovery or suspicion of unauthorized disclosure.
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(c)
|
SNAP will refresh the Member Content through the Match API no less frequently than every six (6) hours. SNAP will include meta robot no cache tags in the code on the AYI website and AYI’s Facebook application, and will not cache Member Content for more than six (6) hours or otherwise retain a copy of the Member Content for any reason.
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(d)
|
If SNAP or Match receives a request ***** from the AYI.com website or AYI’s Facebook application, the parties will provide each other with prompt notice of any such requests and shall *****.
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7.
|
Consultation Rights. During the Term, Match shall have the right to ***** of the Integration Features. SNAP approves all Integration Features that are substantially similar to those attached hereto as exhibits. SNAP shall have the opportunity to review and approve any material changes to such Integration Features (with such approval not to be unreasonably withheld or delayed).
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8.
|
Press Release. A mutually-agreed upon press release, substantially in the form as attached to this Agreement as Exhibit D, that contains a favorable quote about this Agreement from the Chief Executive Officer of Match, will be issued by the parties within four (4) business days following the execution of this Agreement.
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9.
|
Severability. In case any provision of this Agreement shall be invalid, illegal or incapable of being enforced by any law or public policy, such provision shall be reformed to the extent necessary to permit enforcement thereof, and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. If such provision is not capable of reformation or if the applicable governmental entity refuses to reform such provision, it shall be severed from this Agreement and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
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10.
|
Confidentiality. Match and SNAP agree that, except to the extent (i) otherwise required by applicable laws or regulations, (ii) disclosed pursuant to Section 8 of this Agreement or (iii) this provision is waived in writing by the other party to this Agreement, each of them will treat and maintain as confidential the financial and other details of this Agreement and the transactions contemplated hereby.
|
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11.
|
Integrated Agreement. This Agreement and the Exhibits attached hereto constitute the entire agreement between the parties hereto, and there are no other agreements, understandings, restrictions, warranties or representations between the parties.
|
|
12.
|
Counterparts. This Agreement may be executed in one or more counterparts (and by facsimile or portable document format (.pdf)), each of which shall be deemed to constitute an original, but all of which together shall constitute one and the same document.
|
|
13.
|
Governing Law. This Agreement shall be governed by, construed, interpreted and applied in accordance with the laws of the State of New York, without giving effect to any conflict of laws rules that would refer the matter to the laws of another jurisdiction.
|
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14.
|
Successors and Assigns. This Agreement, and all the terms and provisions hereof, shall inure to the benefit of, and be binding upon, the parties hereto and their respective assigns, successors, heirs, executors and administrators.
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15.
|
Amendments. This Agreement may not be amended or modified except by an instrument in writing signed by, or on behalf of, both SNAP and Match.
|
|
1.
|
Amendment of Section 3. Section 3 of the Business Development Agreement is hereby deleted in its entirety and replaced with the following language:
|
|
2.
|
Amendment of Section 4. Section 4 of the Business Development Agreement is hereby deleted in its entirety and replaced with the following language:
|
|
3.
|
Amendment of Section 5. Section 5(e) of the Business Development Agreement is hereby revised ***** by adding with the following language:
|
|
4.
|
Business Development Agreement. All other terms of the Business Development Agreement shall remain in full force and effect and are hereby expressly ratified and confirmed.
|
|
5.
|
Titles. The titles of articles and sections of this Amendment are for convenience of reference only and shall not be considered a part of or affect the construction or interpretation of any provisions of this Amendment.
|
*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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|
(1)
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*****
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(2)
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*****
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(3)
|
*****
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(4)
|
*****
|
SNAP INTERACTIVE, INC.
|
|||
|
By:
|
/s/ Clifford Lerner | |
Name:
|
Clifford Lerner | ||
Title: | CEO |
ZOOSK, INC.
|
|||
|
By:
|
/s/ Romain Galoisy | |
Name:
|
Romain Galoisy | ||
Title: | VP of Marketing |
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:
|
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.
|
Date: August 11, 2014
|
By:
|
/s/ Clifford Lerner
|
|
Clifford Lerner
|
|||
President and Chief Executive Officer
|
|||
(Principal 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.
|
Date: August 11, 2014
|
By:
|
/s/ Alexander Harrington
|
|
Alexander Harrington
|
|||
Chief Operating Officer and
Chief Financial Officer
|
|||
(Principal Financial Officer and
Principal Accounting Officer)
|
Date: August 11, 2014
|
By:
|
/s/ Clifford Lerner
|
|
Clifford Lerner
|
|||
President and Chief Executive Officer
|
|||
(Principal Executive Officer)
|
Date: August 11, 2014
|
By:
|
/s/ Alexander Harrington
|
|
Alexander Harrington
|
|||
Chief Operating Officer and
Chief Financial Officer
|
|||
(Principal Financial Officer and
Principal Accounting Officer)
|
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Cost-Method Investment (Details) (USD $)
|
6 Months Ended | 1 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2014
|
Apr. 30, 2014
DCL Ventures Inc. [Member]
|
Jan. 31, 2014
DCL Ventures Inc. [Member]
|
Oct. 31, 2013
DCL Ventures Inc. [Member]
|
Jul. 31, 2013
DCL Ventures Inc. [Member]
|
Apr. 30, 2013
DCL Ventures Inc. [Member]
|
|
Cost-Method Investment (Textual) | ||||||
Share purchase under initial investment | 25,000 | 25,000 | 25,000 | 25,000 | 50,000 | |
Impairment loss | ||||||
Investment in DCL Ventures, Inc. | $ 150,000 | $ 25,000 | $ 25,000 | $ 25,000 | $ 25,000 | $ 50,000 |
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