Snap Interactive Reports Results for the Quarter Ended September 30, 2016

NEW YORK, NY / ACCESSWIRE / November 10, 2016 / Snap Interactive, Inc. ("SNAP," the "Company," "we," "our" or "us") (OTCQB: STVI), a leading online dating provider, today announced financial and operational results for the quarter ended September 30, 2016.

On October 7, 2016, we completed our previously announced merger with A.V.M. Software, Inc. (d/b/a Paltalk) ("Paltalk"). Except as otherwise specifically noted herein, the financial statements, other financial information and the business information set forth herein generally speak only as to Snap Interactive, Inc. on a pre-merger basis. Supplemental information concerning the business and properties of the post-combination Company (representing the combined operations of the Company and Paltalk and their respective subsidiaries) will be included in the Company's Form 8-K/A to be filed on or before December 23, 2016.

Highlights:

  • SNAP revenues decreased 16.1% for the nine months ended September 30, 2016 relative to the comparable period in 2015, primarily driven by a 15.2% decrease in advertising expense in 2016;
  • SNAP net cash used in operating activities for the nine months ended September 30, 2016 decreased by approximately $383 thousand, or 32.3%, compared to the same period in 2015, based on continued cost reductions and the ongoing realization of operating efficiencies;
  • SNAP announced and subsequently closed a merger with Paltalk, a leader in online and mobile video chat, creating a significantly larger, well capitalized public entity with combined annual revenues estimated at approximately $30 million;
  • Subsequent to the quarter end, post-merger SNAP announced that it had repaid all of its outstanding indebtedness, lifting restrictive debt covenants and eliminating burdensome interest and advisory fee payments; and
  • Post-merger SNAP will benefit from ample capital resources to fund growth, with the combined entity having approximately $7.9 million of collective cash and cash equivalents at June 30, 2016, prior to giving effect to the repayment of SNAP's senior secured note.

Financial Highlights

Current quarter versus last year same period
Three Months Ended
September 30,
%
Statement of Operations and Cash Flow Results (unaudited)
2016
2015
Change
Subscription revenue
$
2,373,273
$
2,791,722
(15.0)
%
Advertising revenue
$
142,268
$
134,971
5.4
%
Total revenue
$
2,515,541
$
2,926,693
(14.0)
%
Sales and marketing expense
$
1,170,469
$
1,043,905
12.1
%
Total expenses
$
3,031,937
$
2,823,988
7.4
%
Net income
$
52,335
$
539,354
(90.3)
%
Net cash provided by (used in) operating activities
$
(282,720
)
$
260,306
(208.6)
%
Financial Metrics (unaudited)
Bookings
$
2,310,703
$
2,624,196
(11.9)
%
Adjusted EBITDA (a non-GAAP measure)
$
(348,619
)
$
381,556
(191.4)
%

Year-to-date versus last year same period
Nine Months Ended
September 30,
%
Statement of Operations and Cash Flow Results (unaudited)
2016
2015
Change
Subscription revenue
$
7,340,054
$
8,996,899
(18.4)
%
Advertising revenue
$
466,715
$
304,415
53.3
%
Total revenue
$
7,806,769
$
9,301,314
(16.1)
%
Sales and marketing expense
$
3,676,309
$
4,224,528
(13.0)
%
Total expenses
$
8,959,320
$
10,419,760
(14.0)
%
Net loss
$
(2,293,371
)
$
(938,812
)
144.3
%
Net cash used in operating activities
$
(803,155
)
$
(1,186,337
)
(32.3)
%
Financial Metrics (unaudited)
Bookings
$
7,180,048
$
8,700,170
(17.5)
%
Adjusted EBITDA (a non-GAAP measure)
$
(621,958
)
$
(157,505
)
294.9
%

September 30,
December 31,
2016
2015
Balance Sheet Results (unaudited)
Cash and cash equivalents
$
1,460,494
$
2,131,262
Deferred subscription revenue
$
1,345,856
$
1,505,862
Financial Metrics (unaudited)
Active subscribers (at period end)
71,900
98,000

Management Commentary

Growth and New Initiatives

In the third quarter of 2016 we achieved important milestones in growth and new initiatives, including:

  • New Product Development - Continued development of a new product targeting users over 50 years of age; and
  • Reengaged Users - Reactivated approximately 1.4 million users from our large user database via targeted email campaigns in the nine months ended September 30, 2016.

In addition, shortly after the end of the third quarter of 2016, we closed our merger with Paltalk. Following the merger, SNAP and Paltalk set up collaborative working groups to initiate plans for best practice sharing and optimizing revenue synergy opportunities for the combined company.

SNAP's Chief Executive Officer and interim Chief Financial Officer, Alex Harrington, said, "In the third quarter of 2016, we were excited to move ahead on SNAP's pre-merger initiatives, such as the development of a new dating service for users 50 and older, while successfully working towards the consummation of the merger with Paltalk. Looking forward, the combination of assets of SNAP and Paltalk present many opportunities to serve our unified database of more than 250 million users, and to broaden the combined company's reach ever further. As we commence the integration of the two businesses, we see numerous lucrative growth avenues for new and existing products."

Post-Merger Business Opportunities

Post-merger SNAP's combined executive team, led by Mr. Harrington and Jason Katz, who serves as Chairman of the Board, President and Chief Operating Officer, expect to execute on the following business initiatives in the near term:

  • integrating the operations of Snap and Paltalk and sharing best practices;
  • cross-selling our combined database of over 250 million users across the post-merger portfolio of eight products;
  • combining elements of live video communication and dating into new and existing products; and
  • intellectual property licensing opportunities.

Mr. Katz commented, "Paltalk has been a leader in providing social networking services since 1999, now hosting one of the world's largest video-based interactive communities. Many of our users are eager to meet new people through our services, including for romantic connections. We believe integrating dating features into our products would serve our users better, and integrating video chat into SNAP's dating products could be a breakthrough in the industry."

Mr. Katz continued, "The underlying technology supporting our live multi-user video communication on web and mobile is very hard to replicate, and is a distinct competitive advantage. We expect this advantage will help us integrate video into interactive dating to create a superior user experience. Furthermore, our intellectual property has historically brought tens of millions of dollars of value to Paltalk through the licensing of its portfolio of patents, which primarily relate to video conferencing and online gaming. We expect the combined company to realize more intellectual property licensing opportunities in the future."

Liquidity and Cash Flow

  • Cash Balance: We ended the third quarter of 2016 with approximately $1.5 million of cash and cash equivalents on our balance sheet, and after giving effect to the merger, the combined company would have had approximately $7.9 million of collective cash and cash equivalents at June 30, 2016, prior to repayment of SNAP's senior secured note;
  • Expense Reductions: We had total costs and expenses of approximately $9.0 million in the nine months ended September 30, 2016, representing a decrease of approximately $1.5 million as compared to the same period in 2015, and, excluding non-recurring merger related expenses, which the Company believes is useful for comparing the Company's total expenses for the nine months ended September 30, 2016 to total expenses for other periods, we would have had $8.5 million of total expenses, or a further reduction of $0.4 million as compared to the same period in 2015; and
  • Cash Used in Operating Activities: Net cash used in operating activities was reduced by $383 thousand for the nine months ended September 30, 2016 as compared to the same period in 2015.

Mr. Harrington continued, "Before the merger, SNAP had been highly capital constrained, with onerous debt service obligations and restrictive debt covenants that limited our ability to invest in new user acquisition and fund other growth initiatives. These constraints were the primary driver of the 15.2% reduction is advertising expense in the nine months ended September 30, 2016, as compared to the comparable period in 2015. By paying off all of our outstanding debt subsequent to the merger, our improved balance sheet now gives us the flexibility and the wherewithal to invest in the business. We expect this new capability, together with the cost discipline we have developed, will lead to efficient revenue growth and long-term profitability."

Mr. Harrington concluded, "Furthermore, on the financial front, we have begun a search for a full time Chief Financial Officer. This and other initiatives are steps toward the goal of listing our common stock on a national securities exchange. And on the longer term strategic front, we believe the dating industry will continue to consolidate, and we will actively explore these opportunities to build greater scale."

IR Contact:
[email protected]

About Snap Interactive, Inc.

Snap Interactive, Inc. is a leading provider of real-time, rich media, interactive social networking and dating applications with more than 250 million users around the world. The SNAP product portfolio includes Paltalk and Camfrog, which together host one of the world's largest collections of video-based communities, and FirstMet, a prominent interactive dating brand serving users 35 and older. The Company has a long history of technology innovation and holds 25 patents related to video conferencing and online gaming.

For more information, please visit http://www.snap-interactive.com.

The contents of our website is not part of this press release, and you should not consider the contents of this website in making an investment decision with respect to our common stock.

Facebook is a registered trademark of Facebook Inc. Apple, iTunes and iPhone are registered trademarks of Apple Inc. and App Store is a registered service mark of Apple Inc. Android and Google Play are registered trademarks of Google Inc. Paltalk, Camfrog, FirstMet and The Grade are trademarks of Snap Interactive, Inc.

Forward-Looking Statements

This press release contains "forward-looking statements." Such statements may be preceded by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential" or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company's control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with general economic, industry and market sector conditions; the ability to effectively integrate the operations of the Company and Paltalk; the Company's ability to institute corporate governance standards or achieve compliance with national securities exchange listing requirements; the Company's future growth and the ability to obtain additional financing to implement the Company's growth strategy; the ability to increase or recognize revenue, decrease expenses and increase the number of active subscribers, new subscription transactions or monthly active users; the ability to enter into new advertising agreements; the ability to diversify new user acquisition channels or improve the conversion of users to paid subscribers; the ability to anticipate and respond to changing user and industry trends and preferences; the intense competition in the online dating marketplace; the ability to release new applications or derive revenue from new applications; and circumstances that could disrupt the functioning of the Company's applications. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission ("SEC"), including the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC's web site at http://www.sec.gov.

All forward-looking statements speak only as of the date on which they are made. The Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement was made, except to the extent required by applicable securities laws.

SNAP INTERACTIVE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,
2016
December 31,
2015
Assets
(Unaudited)
Current assets:
Cash and cash equivalents
$
1,460,494
$
2,131,262
Credit card holdback receivable
161,140
165,853
Accounts receivable, net of allowances and reserves of $62,793 and $55,468, respectively
192,490
206,547
Other receivable
190,000
-
Prepaid expense and other current assets
61,248
108,871
Total current assets
2,065,372
2,612,533
Fixed assets and intangible assets, net
293,175
387,617
Notes receivable
82,452
81,123
Long term security deposits
279,410
279,410
Investments
-
200,000
Total assets
$
2,720,409
$
3,560,683
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable
$
1,380,328
$
1,065,662
Accrued expenses and other current liabilities
320,719
367,018
Deferred subscription revenue
1,345,856
1,505,862
Term Note payable
200,000
-
Senior Note payable, net of discount
2,546,926
-
Total current liabilities
5,793,829
2,938,542
Deferred rent, net of current portion
116,240
99,595
Senior Note payable, net of discount
-
1,636,585
Derivative liabilities
20,000
473,425
Capital lease obligations, net of current portion
12,786
75,560
Total liabilities
5,942,855
5,223,707
Commitments and Contingencies
Stockholders' deficit:
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding
-
-
Common stock, $0.001 par value, 500,000,000 shares authorized, 52,017,826 and 50,017,826 shares issued, respectively, and 41,692,826 and 39,692,826 shares outstanding, respectively
41,693
39,693
Additional paid-in capital
13,706,358
12,974,409
Accumulated deficit
(16,970,497
)
(14,677,126
)
Total stockholders' deficit
(3,222,446
)
(1,663,024
)
Total liabilities and stockholders' deficit
$
2,720,409
$
3,560,683

SNAP INTERACTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2016
2015
2016
2015
Revenues:
Subscription revenue
$
2,373,273
$
2,791,722
$
7,340,054
$
8,996,899
Advertising revenue
142,268
134,971
466,715
304,415
Total revenues
2,515,541
2,926,693
7,806,769
9,301,314
Costs and expenses:
Cost of revenue
397,963
424,889
1,239,586
1,306,148
Sales and marketing expense
1,170,469
1,043,905
3,676,309
4,224,528
Product development expense
422,582
464,632
1,308,580
1,635,433
General and administrative expense
1,040,923
890,562
2,734,845
3,253,651
Total costs and expenses
3,031,937
2,823,988
8,959,320
10,419,760
Income (loss) from operations
(516,396
)
102,705
(1,152,551
)
(1,118,446
)
Interest expense, net
(431,269
)
(433,351
)
(1,284,245
)
(1,100,366
)
Gain on extinguishment of warrant liability, net
650,000
-
650,000
-
Change in fair value of derivative liabilities
360,000
870,000
(496,575
)
1,280,000
Other expense
(10,000
)
-
(10,000
)
-
Income (loss) before provision for income taxes
52,335
539,354
(2,293,371
)
(938,812
)
Provision for income taxes
-
-
-
-
Net income (loss)
$
52,335
$
539,354
$
(2,293,371
)
$
(938,812
)
Net loss per share of common stock:
Basic and diluted
$
0.00
$
0.01
$
(0.06
)
$
(0.03
)
Weighted average number of shares of common stock used in calculating net loss per share of common stock:
Basic and diluted
41,431,956
39,686,087
40,276,
768
39,591,540

SNAP INTERACTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended
September 30,
2016
2015
Cash flows from operating activities:
Net loss
$
(2,293,371
)
$
(938,812
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
106,646
131,583
Stock-based compensation expense
433,949
749,730
Loss on disposal of fixed assets
-
79,628
Amortization of debt issuance cost
117,519
99,801
Amortization of debt discount
792,822
665,041
Gain on extinguishment of warrant liability, net
(650,000
)
-
Change in fair value of derivative liabilities
496,575
(1,280,000
)
Write down of investment to net realizable value
10,000
-
Changes in operating assets and liabilities:
Credit card holdback receivable
4,713
445,519
Accounts receivable
14,057
(4,298
)
Security deposits
-
(85,555
)
Prepaid expenses and other current assets
47,623
(50,017
)
Accounts payable, accrued expenses and other current liabilities
259,673
(770,215
)
Deferred rent
16,645
81,414
Deferred subscription revenue
(160,006
)
(296,729
)
Deferred advertising revenue
-
(13,427
)
Net cash used in operating activities
(803,155
)
(1,186,337
)
Cash flows from investing activities:
Purchase of property and equipment
(12,204
)
(44,210
)
Proceeds from sale of fixed assets
-
6,000
Issuance to employees of note receivable and accrued interest
(1,329
)
(1,939
)
Net cash used in investing activities
(13,533
)
(40,149
)
Cash flows from financing activities:
Payments of capital lease obligations
(54,080
)
(46,592
)
Repayment of promissory notes
-
(400,000
)
Payment of financing costs
-
(314,249
)
Proceeds from issuance of promissory notes
200,000
3,000,000
Net cash provided by financing activities
145,920
2,239,159
Net (decrease) increase in cash and cash equivalents
(670,768
)
1,012,673
Balance of cash and cash equivalents at beginning of period
2,131,262
1,138,385
Balance of cash and cash equivalents at end of period
$
1,460,494
$
2,151,058
Supplemental disclosure of cash flow information:
Cash paid in interest and taxes
$
270,000
$
226,000
Non-cash investing and financing activities:
Compound embedded derivative under the Senior Note and Securities Purchase Agreement recorded as derivative liabilities (See Note 5)
$
-
$
1,748,000
Warrants issued under the Advisory Services Agreement as additional consideration for the Senior Note and recorded as derivative liabilities (See Note 5)
$
-
$
342,000
Common stock issued under the Advisory Services Agreement as additional consideration for the Senior Note
$
-
$
30,000
Reclassification of investment to other receivable
$
190,000
-

SNAP INTERACTIVE, INC.
RECONCILIATION OF ADJUSTED EBITDA
(Unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2016
2015
2016
2015
Reconciliation of Net loss to Adjusted EBITDA:
Net income (loss)
$
52,335
$
539,354
$
(2,293,371
)
$
(938,812
)
Interest expense, net
431,269
433,351
1,284,245
1,100,366
Depreciation and amortization expense
34,860
35,576
106,644
131,583
Change in fair value of derivative liabilities and gain on extinguishment of warrant liability, net
(1,010,000
)
(870,000
)
(153,425
)
(1,280,000
)
Loss on disposal of fixed assets
-
-
-
79,628
Stock-based compensation expense
142,917
243,275
433,949
749,730
Adjusted EBITDA
$
(348,619
)
$
381,556
$
(621,958
)
$
(157,505
)

Non-GAAP Financial Measures and Key Metrics

The Company has provided in this release certain non-GAAP financial measures, including Adjusted EBITDA, and other key metrics, including bookings, to supplement the condensed consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). The Company defines Adjusted EBITDA as net loss adjusted to exclude interest income (expense), net, depreciation and amortization expense, gain (loss) on extinguishment and change in fair value of derivative liabilities, loss on disposal of fixed assets and stock-based compensation expense. The Company calculates bookings as subscription revenue recognized during the period plus the change in deferred subscription revenue recognized during the period.

Management uses these financial metrics internally in analyzing the Company's financial results to assess operational performance and to determine the Company's future capital requirements. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. The Company believes that both management and investors benefit from referring to these financial metrics in assessing our performance and when planning, forecasting and analyzing future periods. The Company believes these financial metrics are useful to investors and others to understand and evaluate the Company's operating results and it allows for a more meaningful comparison between the Company's performance and that of competitors.

Some limitations of bookings and Adjusted EBITDA as financial measures include that:

  • Bookings does not reflect that we recognize subscription revenue from subscription fees over the length of the subscription term and subscription revenue from micro-transactions over a two-month period;
  • Adjusted EBITDA does not (i) reflect cash capital expenditure requirements for assets underlying depreciation and amortization expense that may need to be replaced or for new capital expenditures; (ii) the Company's working capital requirements; (iii) consider the potentially dilutive impact of stock-based compensation; (iv) reflect interest expense or interest payments on our outstanding indebtedness; or (v) reflect the change in fair value of warrants; and
  • Other companies, including companies in our industry, may calculate bookings or Adjusted EBITDA differently or choose not to calculate bookings or Adjusted EBITDA at all, which reduces their usefulness as comparative measures.

Because of these limitations, you should consider these financial metrics along with other financial performance measures, including total revenues, subscription revenue, deferred revenue, net income (loss), cash and cash equivalents, restricted cash, net cash used in operating activities and our financial results presented in accordance with GAAP.