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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | |
SECURITIES EXCHANGE ACT OF 1934 | ||
For the quarterly period ended | ||
OR | ||
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | |
SECURITIES EXCHANGE ACT OF 1934 | ||
MeetMe,
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| Delaware | 86-0879433 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
100 Union Square Drive | ||
New Hope, Pennsylvania | 18938 | |
(Address of principal executive offices) | (Zip Code) | |
| Large accelerated filer ☐ | Accelerated filer ☒ | |
Non-accelerated filer ☐ (Do not check if a smaller reporting company) | Smaller reporting company ☐ | |
| Emerging growth company ☐ | ||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for comply with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | |
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| Class | Outstanding as of | |||
Common Stock, $0.001 par value per share |
| shares | ||
MEETME,THE MEET GROUP, INC. AND SUBSIDIARIES
CERTIFICATIONS INDEX TO EXHIBITS (Unaudited) September 30, 2016 December 31, 2015 ASSETS CURRENT ASSETS: Cash and cash equivalents Accounts receivable, net of allowance of $190,000 and $133,000 at September 30,2016 and December 31, 2015, respectively Prepaid expenses and other current assets Total current assets Goodwill Property and equipment, net Intangible assets, net Deferred tax asset Other assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable Accrued liabilities Current portion of capital lease obligations Deferred revenue Total current liabilities Long-term capital lease obligations, less current portion, net Other liabilities TOTAL LIABILITIES STOCKHOLDERS' EQUITY: Preferred stock, $.001 par value, authorized - 5,000,000 Shares; ConvertiblePreferred Stock Series A-1, $.001 par value; authorized - 1,000,000 shares;0 shares issued and outstanding at September 30, 2016 and December 31, 2015 Common stock, $.001 par value; authorized - 100,000,000 Shares; 54,221,918 and 47,179,486 shares issued and outstanding at September 30, 2016 and December 31, 2015 Additional paid-in capital Accumulated deficit ) ) Total stockholders' equity Total liabilities and stockholders' equity For the Three Months Ended September 30, For the Nine Months Ended September 30, 2016 2015 2016 2015 Revenues Operating Costs and Expenses: Sales and marketing Product development and content General and administrative Depreciation and amortization Acquisition and restructuring costs Total Operating Costs and Expenses Income (Loss) from Operations ) Other Income (Expense): Interest income Interest expense ) ) ) ) Change in warrant liability ) ) Gain (loss) on cumulative foreign currency translation adjustment ) ) ) Gain on sale of asset Total Other Expense ) ) ) ) Income (Loss) before Benefit (Provision) for Income Taxes ) Benefit (provision) for income taxes ) Net Income (Loss) ) ) Basic and diluted net income (loss) per common stockholders: Basic net income (loss) per common stockholders ) ) Diluted net income (loss) per common stockholders ) ) Weighted average shares outstanding: Basic Diluted Other comprehensive income (loss): Net income (loss) ) ) Foreign currency translation adjustment Comprehensive income (loss) ) ) Preferred Stock Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Total Stockholders' Shares Amount Shares Amount Capital Deficit Income (Loss) Equity Balance—December 31, 2014 ) ) Vesting of stock options forcompensation Stock compensation expense forwarrant modification Issuance of common stockfor vested RSAs ) Exercise of stock options Conversion of preferredstock to common stock ) ) ) Foreign currency translationadjustment ) ) Loss on cumulativecurrency translationadjustment Net income Balance—December 31, 2015 ) Vesting of stock options forcompensation Issuance of common stockfor vested RSAs ) Exercise of stock options Exercise of warrants Repurchase and retirement of treasurystock ) ) ) ) Foreign currency translationadjustment Gain on cumulative currencytranslation adjustment ) ) Net income Balance—September 30, 2016 (Unaudited) ) For the Nine Months Ended September 30, 2016 2015 Cash flows from operating activities: Net income (loss) ) Adjustments to reconcile net income (loss) to net cash provided by operatingactivities: Depreciation and amortization Gain on sale of asset ) Vesting of stock options for compensation Deferred income tax benefit ) (Gain) Loss on cumulative foreign currency ) Bad debt expense (recovery) ) Change in warrant liability ) Amortization of discounts on notes payable and debt issuance costs Changes in operating assets and liabilities: Accounts receivable ) Prepaid expenses, other current assets and other assets ) Accounts payable and accrued liabilities ) ) Deferred revenue ) Net cash provided by operating activities Cash flows from investing activities: Purchase of property and equipment ) ) Purchase of trademarks and domain names ) Proceeds from sale of asset Net cash used in investing activities ) ) Cash flows from financing activities: Proceeds from exercise of stock options Proceeds from exercise of warrants Purchases of treasury stock ) Payments of capital leases ) ) Payments on long-term debt ) Net cash provided by (used in) financing activities ) Change in cash and cash equivalents prior to effects of foreign currencyexchange rate on cash ) Effect of foreign currency exchange rate on cash ) Net increase (decrease) in cash and cash equivalents ) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental Disclosure of Cash Flow Information: Cash paid for interest Supplemental Disclosure of Non-Cash Investing and Financing Activities: Warrant exercise settlement placement. We use advanced technology to engineer serendipitous connections among people who otherwise might never have met - a sort of digital coffeehouse where everyone belongs. Over the years, The Meet Group’s apps have originated untold numbers of chats, shares, good friends, dates, romantic relationships - even marriages. 9, 2017. Fair Value Measurements For the Three Months Ended September 30, For the Nine Months Ended September 30, 2016 2015 2016 2015 Numerator: Net income (loss) ) ) Denominator: Weighted-average shares outstanding Effect of dilutive securities Weighted-average diluted shares Basic income (loss) per share ) ) Diluted income (loss) per share ) ) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2016 2015 2016 2015 Stock options Unvested restricted stock awards Warrants Convertible preferred stock Totals Quoted Prices in Active Markets for Identical Items Significant Other Observable Inputs Significant Unobservable Inputs (Level 1) (Level 2) (Level 3) Total September 30, 2016 Assets Money market Total assets Liabilities Warrants to purchase common stock Total Liabilities December 31, 2015 Assets Money market Total assets Liabilities Warrants to purchase common stock Total Liabilities Convertible Common Stock Warrant Liability Balance as of December 31, 2015 Changes in estimated fair value Amounts acquired or issued ) Balance as of September 30, 2016 2016. September 30, 2016 December 31, 2015 Trademarks and domain names Advertising customer relationships Mobile applications Less accumulated amortization ) ) Intangible assets - net 2017. Year ending December 31, Remaining in 2016 Total September 30, 2016 December 31, 2015 Servers, computer equipment and software Office furniture and equipment Leasehold improvements Less accumulated depreciation/amortization ) ) Property and equipment—net Capital Leases Operating Leases Remaining in 2016 2017 2018 2019 2020 Thereafter Total minimum lease payments Less: Amount representing interest ) Total present value of minimum payments Less: Current portion of such obligations Long-term capital lease obligations authorized or issued and outstanding. 2017. Unless extended by the Board of Directors, the 2016 Repurchase Program will terminate on August 29, 2017. The Company did not repurchase any shares during the six months ended June 30, 2017. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2016 2015 2016 2015 Sales and marketing Product development and content General and administrative Total stock-based compensation expense Options Number of Stock Options Weighted- Average Exercise Price Weighted Average Remaining ContractualLife Aggregate Intrinsic Value Outstanding at December 31, 2015 Granted Exercised ) Forfeited or expired ) Outstanding at September 30, 2016 Exercisable at September 30, 2016 For the Nine Months Ended September 30, 2016 2015 Risk-free interest rate % % Expected term (in years) Expected dividend yield Expected volatility % % Under 2012 Omnibus Incentive Plan RSAs Number of RSAs Weighted-Average Stock Price Outstanding at December 31, 2015 Granted Exercised ) Forfeited or expired ) Outstanding at September 30, 2016 Unvested at September 30, 2016 Options Number of Stock Options Weighted- Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding at December 31, 2015 Granted Exercised ) Forfeited or expired ) Outstanding at September 30, 2016 Exercisable at September 30, 2016 Options Number of Stock Options Weighted- Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding at December 31, 2015 Granted Exercised ) Forfeited or expired Outstanding at September 30, 2016 Exercisable at September 30, 2016 Weighted- average Balance Sheet Classification as of September 30, 2016 December 31, 2015 exercise price September 30, 2016 December 31, 2015 Venture Lending &Leasing VI, Inc. 2/28/2024 Liability Liability Venture Lending &Leasing VII, Inc. 2/28/2024 Liability Liability Allen, F. Stephen Series 2 6/21/2017 Equity Equity Allen, F. Stephen Series 3 6/21/2017 Equity Equity Warberg WF IVLP 6/21/2017 Equity Equity OTA LLC 6/21/2017 Equity Equity Stearns, Robert 3/21/2016 Equity Equity MATT Series #1 9/19/2016 Equity Equity MATT Series #2 9/19/2016 Equity Equity All warrants Warrants Number of warrants Weighted-average exercise price Outstanding at December 31, 2015 Granted Exercised ) Forfeited or expired ) Outstanding at September 30, 2016 Exercisable at September 30, 2016 On October 3, 2016, in connection with the closing of the Skout acquisition, the Company’s Board of Directors adopted the 2016 Inducement Omnibus Incentive Plan in accordance with NASDAQ Listing Rule 5635(c)(4). At the closing of the Skout acquisition, the Company granted stock options to purchase an aggregate of up to 355,000 shares of its common stock to 25 former Skout employees as an inducement material to becoming non-executive employees of the Company. At October 3, 2016 Cash Fair value of MeetMe stock issued Total consideration OPERATIONS. placement. We use advanced technology to engineer serendipitous connections among people who otherwise might never have met - a sort of digital coffeehouse where everyone belongs. Over the years, The Meet Group’s apps have originated untold numbers of chats, shares, good friends, dates, romantic relationships - even marriages. For the Three Months Ended September 30, 2016 2015 MAU- MeetMe For the Three Months Ended September 30, 2016 2015 DAU- MeetMe 2017. Growth trends in web and mobile MAUs and DAUs affect our revenue and financial results by influencing the number of advertisements we are able to show, the value of those advertisements, the volume of payments transactions, as well as our expenses and capital expenditures. The following table sets forth our For the Three Months Ended September 30, 2016 2015 2015 to 2016 Changes ($) 2015 to 2016 Changes (%) Revenues % Operating Costs and Expenses: Sales and marketing % Product development and content ) % General and administrative ) % Depreciation and amortization ) % Acquisition and restructuring costs % Total Operating Costs and Expenses ) % Income (Loss) from Operations ) % Other Income (Expense): Interest income % Interest expense ) ) % Change in warrant liability ) ) % Loss on cumulative foreign currency translation adjustment ) ) % Total Other Expense ) ) ) % Income (Loss) before benefit for income taxes ) % Benefit for income taxes ) % Net Income (Loss) ) % if(we) acquisition. and if(we) acquisitions. 2016. For the Three Months Ended September 30, 2016 2015 Changes ($) Sales and marketing Product development and content General and administrative Total stock-based compensation expense For the Nine Months Ended September 30, 2016 2015 2015 to 2016 Changes ($) 2015 to 2016 Changes (%) Revenues % Operating Costs and Expenses: Sales and marketing % Product development and content ) % General and administrative ) % Depreciation and amortization ) % Restructuring costs % Total Operating Costs and Expenses % Income from Operations % Other Income (Expense): Interest income % Interest expense ) ) % Change in warrant liability ) ) % Gain (loss) on cumulative foreign currency translation adjustment ) % Gain on sale of asset ) % Total Other Expense ) ) % Income before benefit (provision) for income taxes % Benefit (provision) for income taxes ) % Net Income ) % operations: if(we) acquisition. For the Nine Months Ended September 30, 2016 2015 Changes ($) Sales and marketing Product development and content General and administrative Total stock-based compensation expense an increase in permanent differences, mainly transaction costs, related to the recent acquisition of if(we). The ETR is also higher due to the release of the entire valuation allowance in 2016. For the Nine Months Ended September 30, 2016 2015 Net cash provided by operating activities Net cash used in investing activities ) ) Net cash provided by (used in) financing activities ) ) six months ended June 30, 2016. assets. September 30, December 31, 2016 2015 Cash and cash equivalents Total assets Percentage of total assets % % months from the date of this filing. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2016 2015 2016 2015 Net Income (Loss) ) ) Interest expense Change in warrant liability ) ) (Benefit) provision for income taxes ) ) Depreciation and amortization Acquisition and restructuring costs Stock-based compensation expense Bad debt expense outside normal range Gain (loss) on cumulative effect of foreign currency translation adjustment ) Gain on sale of asset ) Adjusted EBITDA Procedures. Limitations on the Effectiveness of Controls Period (a) Total number of shares purchased (b) Average pricepaid per share (c) Total number of shares purchased as part of publicly announced plans or programs (1) (d) Maximum number of shares (or approximate dollar value) of shares that may yet be purchased under the plans or programs (in millions) (1) July 1, 2016 - July 31, 2016 August 1, 2016 - August 31, 2016 September 1, 2016 - September 30, 2016 Filed or Incorporated by Reference Furnished Exhibit No. Exhibit Description Form Date Number Herewith 10.1 Agreement and Plan of Merger 8-K 6/28/16 2.1 10.2 Form of Amended and Restated Employment Agreement Filed 31.1 Certification of Principal Executive Officer (Section 302) Filed 31.2 Certification of Principal Financial Officer (Section 302) Filed 32.1 Certification of Principal Executive Officer (Section 906) Furnished* 32.2 Certification of Principal Financial Officer (Section 906) Furnished* 101.INS XBRL Instance Document ** 101.SCH XBRL Taxonomy Extension Schema Document ** 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document ** 101.DEF XBRL Taxonomy Extension Definition Linkbase Document ** 101.LAB XBRL Taxonomy Extension Label Linkbase Document ** 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document ** By: /s/Geoffrey Cook Geoffrey Cook Chief Executive Officer (Principal Executive Officer) By: /s/ David Clark David Clark Chief Financial Officer (Principal Financial Officer) 2638 3939393939MEETME, $ 45,971,169 $ 19,298,038 13,526,976 16,509,291 809,824 970,239 60,307,969 36,777,568 70,646,036 70,646,036 2,112,352 2,610,307 145,415 1,278,498 27,269,800 — 122,441 178,264 $ 160,604,013 $ 111,490,673 $ 1,756,662 $ 2,776,710 3,518,135 4,127,634 271,389 366,114 296,080 293,414 5,842,266 7,563,872 18,901 221,302 — 1,035,137 $ 5,861,167 $ 8,820,311 $ — $ — 54,225 47,183 318,465,808 300,725,791 (163,777,187 (198,102,612 154,742,846 102,670,362 $ 160,604,013 $ 111,490,673 (Unaudited) June 30,
2017 December 31,
2016ASSETS CURRENT ASSETS: Cash and cash equivalents $ 32,252,734 $ 21,852,531 Accounts receivable, net of allowance of $309,000 and $283,000 at June 30, 2017 and December 31, 2016, respectively 20,810,796 23,737,254 Prepaid expenses and other current assets 5,353,355 1,489,267 Total current assets 58,416,885 47,079,052 Restricted cash 894,057 393,484 Goodwill 150,088,783 114,175,554 Property and equipment, net 3,491,539 2,466,110 Intangible assets, net 37,236,258 17,010,565 Deferred taxes 27,562,319 28,253,827 Other assets 584,292 110,892 Total assets $ 278,274,133 $ 209,489,484 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 3,552,147 $ 5,350,336 Accrued liabilities 12,770,565 8,395,060 Current portion of long-term debt 7,500,000 — Current portion of capital lease obligations 81,761 221,302 Deferred revenue 1,188,881 434,197 Total current liabilities 25,093,354 14,400,895 Long-term debt 5,625,000 — Total liabilities 30,718,354 14,400,895 STOCKHOLDERS’ EQUITY: Preferred stock, $.001 par value; authorized - 5,000,000 shares; 0 shares issued and outstanding at June 30, 2017 and December 31, 2016 — — Common stock, $.001 par value; authorized - 100,000,000 shares; 71,794,766 and 58,945,607 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively 71,798 58,949 Additional paid-in capital 403,025,701 351,873,801 Accumulated deficit (155,541,720 ) (156,844,161 ) Total stockholders’ equity 247,555,779 195,088,589 Total liabilities and stockholders’ equity $ 278,274,133 $ 209,489,484 MEETME, (LOSS)UNAUDITED NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20162017 AND 2015 2016 $ 17,191,261 $ 14,308,080 $ 46,901,923 $ 37,023,933 3,228,262 1,483,252 8,776,029 3,792,639 5,808,449 6,175,566 17,730,610 18,578,826 2,215,727 7,802,367 6,431,486 11,197,263 761,460 762,830 2,266,642 2,380,004 467,777 — 1,628,126 — 12,481,675 16,224,015 36,832,893 35,948,732 4,709,586 (1,915,935 10,069,030 1,075,201 7,135 5,303 18,697 15,733 (4,123 (93,383 (16,228 (375,239 (318,983 45,532 (864,596 6,212 (1,206 (78,987 33,347 (862,078 — — — 163,333 (317,177 (121,535 (828,780 (1,052,039 4,392,409 (2,037,470 9,240,250 23,162 — 1,849 27,125,446 (126,801 $ 4,392,409 $ (2,035,621 $ 36,365,696 $ (103,639 $ 0.08 $ (0.04 $ 0.73 $ (0.00 $ 0.07 $ (0.04 $ 0.65 $ (0.00 53,231,369 45,470,686 49,649,221 45,192,785 59,048,821 45,470,686 55,604,866 45,192,785 $ 4,392,409 $ (2,035,621 $ 36,365,696 $ (103,639 — — — — $ 4,392,409 $ (2,035,621 $ 36,365,696 $ (103,639 Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Revenues $ 31,329,468 $ 16,388,991 $ 51,388,265 $ 29,710,662 Operating costs and expenses: Sales and marketing 4,599,842 3,226,344 9,705,350 5,547,767 Product development and content 16,526,905 6,214,062 24,984,399 11,922,162 General and administrative 5,160,799 1,867,590 8,023,226 4,215,758 Depreciation and amortization 2,965,175 753,918 4,650,014 1,505,182 Acquisition and restructuring 3,769,425 1,160,349 5,269,854 1,160,349 Total operating costs and expenses 33,022,146 13,222,263 52,632,843 24,351,218 (Loss) income from operations (1,692,678 ) 3,166,728 (1,244,578 ) 5,359,444 Other income (expense): Interest income 1,400 6,447 3,970 11,562 Interest expense (175,254 ) (5,360 ) (177,586 ) (12,105 ) Change in warrant liability — (787,391 ) — (545,614 ) (Loss) gain on foreign currency adjustment (9,229 ) 18,201 (11,429 ) 34,553 Total other expense (183,083 ) (768,103 ) (185,045 ) (511,604 ) (Loss) income before income taxes (1,875,761 ) 2,398,625 (1,429,623 ) 4,847,840 Benefit from income taxes 2,732,356 27,219,764 2,732,064 27,125,446 Net income $ 856,595 $ 29,618,389 $ 1,302,441 $ 31,973,286 Basic and diluted net income per common stockholders: Basic net income per common stockholders $ 0.01 $ 0.61 $ 0.02 $ 0.67 Diluted net income per common stockholders $ 0.01 $ 0.55 $ 0.02 $ 0.59 Weighted average shares outstanding: Basic 70,122,234 48,218,184 65,632,962 47,838,466 Diluted 74,885,903 54,061,306 70,569,243 53,863,966 Comprehensive income $ 856,595 $ 29,618,389 $ 1,302,441 $ 31,973,286 MEETME,STOCKHOLDERS'STOCKHOLDERS’ EQUITYFOR THE NINESEPTEMBERJUNE 30, 20162017 (UNAUDITED) AND20152016 1,000,000 $ 1,000 44,910,034 $ 44,914 $ 297,001,168 $ (204,072,240 $ (717,875 $ 92,256,967 — — — — 2,916,427 — — 2,916,427 — — — — 425,538 — — 425,538 — — 557,603 557 (557 — — — — — 231,900 232 383,695 — — 383,927 (1,000,000 (1,000 1,479,949 1,480 (480 — — — — — — — — — (138,563 (138,563 — — — — — — 856,438 856,438 — — — — — 5,969,628 — 5,969,628 — $ — 47,179,486 $ 47,183 $ 300,725,791 $ (198,102,612 $ — $ 102,670,362 — — — — 2,554,842 — — 2,554,842 — — 934,991 935 (935 — — — — — 4,687,335 4,687 8,817,805 — — 8,822,492 — — 1,763,340 1,763 6,368,305 — — 6,370,068 — — (343,234 (343 — (2,040,271 — (2,040,614 — — — — — — 33,347 33,347 — — — — — — (33,347 (33,347 — — — — — 36,365,696 — 36,365,696 — $ — 54,221,918 $ 54,225 $ 318,465,808 $ (163,777,187 $ — $ 154,742,846 Common Stock Shares Amount Balance-December 31, 2015 47,179,486 $ 47,183 $ 300,725,791 $ (198,102,612 ) $ 102,670,362 Vesting of stock options for compensation — — 3,567,987 — 3,567,987 Exercise of stock options 4,693,918 4,694 8,841,370 — 8,846,064 Exercise of warrants 1,763,340 1,763 6,368,305 — 6,370,068 Issuance of common stock for Skout
acquisition5,222,017 5,222 32,371,283 — 32,376,505 Issuance of common stock for vested RSAs 934,991 935 (935 ) — — Repurchase and retirement of common stock (848,145 ) (848 ) — (5,010,167 ) (5,011,015 ) Net income — — — 46,268,618 46,268,618 Balance-December 31, 2016 58,945,607 $ 58,949 $ 351,873,801 $ (156,844,161 ) $ 195,088,589 Vesting of stock options for compensation — — 3,502,350 — 3,502,350 Exercise of stock options 2,060,964 2,061 2,776,115 — 2,778,176 Exercise of warrants 675,000 675 2,395,575 — 2,396,250 Issuance of common stock 9,200,000 9,200 42,986,171 — 42,995,371 Issuance of common stock for vested RSAs 913,195 913 (913 ) — — RSAs withheld to cover taxes — — (507,398 ) — (507,398 ) Net income — — — 1,302,441 1,302,441 Balance-June 30, 2017 71,794,766 $ 71,798 $ 403,025,701 $ (155,541,720 ) $ 247,555,779 MEETME,(UNAUDITED) FOR THE NINESEPTEMBERJUNE 30, 2017 AND 2016 AND 2015 $ 36,365,696 $ (103,639 2,266,642 2,380,004 — (163,333 2,554,842 2,009,742 (27,269,800 — (33,347 862,078 57,000 (248,000 864,596 (6,212 — 151,631 2,925,315 (1,676,482 216,238 (21,089 (1,629,546 (1,248,554 2,667 (10,731 16,320,303 1,925,415 (626,105 (1,297,237 (9,500 — — 255,000 (635,605 (1,042,237 8,822,492 10,747 4,470,334 — (2,040,614 — (297,126 (732,729 — (1,529,760 10,955,086 (2,251,742 26,639,784 (1,368,564 33,347 (144,203 26,673,131 (1,512,767 19,298,038 17,041,050 $ 45,971,169 $ 15,528,283 $ 16,228 $ 223,609 $ 1,899,516 $ — Six Months Ended June 30, 2017 2016 Cash flows from operating activities: Net income $ 1,302,441 $ 31,973,286 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,650,014 1,505,182 Vesting of stock options for compensation 3,502,350 1,643,352 Deferred taxes (444,230 ) (27,269,800 ) Loss (gain) on cumulative foreign currency 11,429 (34,553 ) Bad debt expense (recovery) 26,000 (4,000 ) Amortization of loan origination costs 34,342 — Revaluation of warrant liability — 545,614 Changes in operating assets and liabilities: Accounts receivable 5,862,051 3,098,088 Prepaid expenses, other current assets and other assets 1,610,514 (2,300,347 ) Accounts payable and accrued liabilities 161,914 1,136,350 Deferred revenue (54,560 ) 17,997 Net cash provided by operating activities 16,662,265 10,311,169 Cash flows from investing activities: Purchase of property and equipment (595,126 ) (494,744 ) Acquisition of if(we), Inc., net of cash and restricted cash acquired (65,802,792 ) — Net cash used in investing activities (66,397,918 ) (494,744 ) Cash flows from financing activities: Proceeds from exercise of stock options 2,778,176 3,134,604 Proceeds from issuance of common stock 42,995,371 — Proceeds from exercise of warrants 2,396,250 — Payments of capital leases (139,541 ) (214,585 ) Proceeds from long-term debt 15,000,000 — Payments for restricted stock awards withheld for taxes (507,398 ) — Payments on long-term debt (1,875,000 ) — Net cash provided by financing activities 60,647,858 2,920,019 Change in cash, cash equivalents, and restricted cash prior to effects of foreign currency exchange rate 10,912,205 12,736,444 Effect of foreign currency exchange rate (11,429 ) 34,553 Net increase in cash, cash equivalents, and restricted cash 10,900,776 12,770,997 Cash, cash equivalents, and restricted cash at beginning of period 22,246,015 19,298,038 Cash, cash equivalents, and restricted cash at end of period $ 33,146,791 $ 32,069,035 Supplemental disclosure of cash flow information: Cash paid for interest $ 140,911 $ 12,105 Notes to the Condensed Consolidated Financial Statements1—1-Description of Business, Basis of Presentation and Summary of Significant Accounting PoliciesMeetMe,“Company”“Company,” “The Meet Group,” “us” or “MeetMe”“we”) is a fast-growing portfolio of mobile apps that brings together people around the world for new connections. Our mission is to meet the universal need for human connection. We operate location-based social networknetworks for meeting new people on mobile platforms, including on iPhone, Android, iPad and other tablets, and on the web that facilitatesfacilitate interactions among users and encouragesencourage users to connect and chat with each other. Given consumer preferences to use more than a single mobile application, we are adopting a brand portfolio strategy, through which we offer products that collectively appeal to the broadest spectrum of consumers. We are consolidating the fragmented mobile meeting sector through strategic acquisitions, leveraging economies and innovation to drive growth. On October 3, 2016, we completed our acquisition of Skout, Inc. (“Skout”), and on April 3, 2017, we completed our acquisition of Ifwe Inc. (“if(we)”), both of which owned leading global mobile networks for meeting new people.Company monetizesMeet Group’s platforms monetize through advertising, in-app purchases, and paid subscriptions. The Company provides users with access to an expansive, multilingual menu of resources that promote social interaction, information sharing and other topics of interest. The Company offers online marketing capabilities, which enable marketers to display their advertisements in different formats and in different locations. We offer significant scale to our advertising partners, with hundreds of millions of daily impressions across our active and growing global user base, and sophisticated data science for highly effective hyper-targeting. The Company works with its advertisers to maximize the effectiveness of their campaigns by optimizing advertisement formats and placements.MeetMeThe Meet Group is creating the social network not of the people you know but of the people you want to know. The Company believesNimble and fast-moving, already in more than 100 countries, we are challenging the dominant player in our space, Match Group. Our vision extends beyond dating. We focus on building quality products to satisfy the universal need for human connection among all people, everywhere-not just paying subscribers. We believe meeting new people is a basic human need, especially for users aged 18-30,18-34, when so many long-lasting relationships are made.the Company believeswe believe it is critical to establish a high density of users within the geographic regions it serves.we serve. As the Company’s network growsThe Meet Group’s networks grow and the number of users in a location increases, the Company believeswe believe that users who are seeking to meet new people will incrementally benefit from the quantity of relevant connections.MeetMeThe Meet Group (formerly known as MeetMe) and its wholly-owned subsidiaries, Quepasa.com de Mexico, Quepasa Serviços em Solucoes de Publicidade E Tecnologia Ltda (inactive) and, MeetMe Online S/S Ltda.Ltda, which was dissolved during the fourth quarter of 2016, Skout and if(we). All intercompany accounts and transactions have been eliminated in consolidation.2016.2017. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted under the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015,2016, filed with the SEC on March 8, 2016.ASCAccounting Standards Codification (“ASC”) 605, “RevenueRecognition,” and ASC 605-45 “PrincipalAgent Considerations”(together, (together, the “ASC Guidance”). Revenue from advertising on the Company’s website and mobile apps is generally recognized on a net basis, since the majority of its advertising revenues come from advertising agencies. The guidance provides indicators for determining whether “gross” or “net” presentation is appropriate. While all indicators should be considered, the Company believes that whether it acted as a primary obligor in its agreements with advertising agencies is the strongest indicator of whether gross or net revenue reporting is appropriate.ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, the Company had transactions with several partners that qualify for principal-agentprincipal agent considerations. The Company recognizes revenue, net of amounts retained by third party entities, pursuant to revenue sharing agreements with advertising networks for advertising and with other partners for royalties on product sales. The Company considered two key factors when making its revenue recognition determinations: (1) whether the Company performed a service for a fee, similar to an agent or a brokerbroker; and (2) whether the Company was involved in the determination of product or service specifications. The Company focused on the substance of the agreements and determined that net presentation was representationally faithful to the substance, as well as the form, of the agreements. The form of the agreements was such that the Company provided services in exchange for a fee. In addition, the Company has no latitude in establishing price, and the advertising agencies were solely responsible for determining pricing with third party advertisers. The Company determined only the fee for providing its services to advertising agencies.ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, the Company’s revenue was generated from two principal sources: revenue earned from the sales of advertising on the Company’s mobile applications and website and revenue earned from in-app products.websitemobile applications and mobile applications.website. Revenue from advertising is generally recognized as advertisements are delivered. The Company recognizes advertising revenue from customers that are advertising networks on a net basis, while advertising revenues earned directly from advertisers are recognized on a gross basis. Approximately 87%76% and 83%86% of the Company’s revenue came from advertising during the ninesix months ended SeptemberJune 30, 2017 and 2016, and 2015, respectively.Credits.Credits, Points and Gold. Users buy Credits, Points or Gold to purchase the Company’s virtual products. These products put users in the spotlight, helping users to get more attention from the community in order to meet more people faster. Revenue from these virtual products is recognized over time. Credits, Points or Gold can be purchased using PayPal on the website and iTunes and Google checkout on mobile applications. Platform users do not own the Credits, Points or Gold but have a limited right to use the creditsthem on virtual products offered for sale on the Company’s platform.platforms. Credits, Points and Gold are non-refundable, the Company may change the purchase price of Creditsthem at any time, and the Company reserves the right to stop issuing Credits, Points or Gold in the future. The Company’s in-app products are not transferable, cannot be sold or exchanged outside our platform, are not redeemable for any sum of money, and can only be used on the Company’s platform.platforms. In-app products are recorded in deferred revenue when purchased and recognized as revenue when: (i) the creditsCredits, Points or Gold are used by the customer; or (ii) the Company determines the likelihood of the creditsCredits, Points or Gold being redeemed by the customer is remote (breakage) and there is not a legal obligation to remit the unredeemed creditsCredits, Points or Gold to the relevant jurisdiction. The determination of the breakage rate is based upon Company-specific historical redemption patterns. Breakage is recognized in revenue as the Credits and Gold are used on a pro rata basis over a three-monththree month period (life of the user) beginning at the date of the Credits sale and isare included in revenue in the Condensed Consolidated Statementsconsolidated statements of Operationsoperations and Comprehensive Income (Loss).comprehensive income. Breakage recognized during the ninesix months ended SeptemberJune 30, 2017 and 2016 was $664,665 and 2015 was approximately $988,000 and $640,000,$651,000, respectively. For “MeetMe+” and other subscription based products, the Company recognizes revenue over the term of the subscription. The Social Theater prices are both fixed and determinable based on the contract with the advertiser. The user completes an action and the electronic record of the transaction triggers the revenue recognition. The collection of the Social Theater revenue is reasonably assured by contractual obligation and historical payment performance. The delivery of virtual currency from the hosting platform to a user evidences the completion of the action required by the customer that the service has been rendered for Social Theater revenue recognition.Beanstock Media Inc.Web AgreementOn September 25, 2013, the Company entered into a Media Publisher Agreement (the “Web Agreement”) with Beanstock Media, Inc. (“Beanstock”). The Web Agreement was effective from September 23, 2013 until June 2, 2015 when the Company terminated the Web Agreement as a result of non-payment by Beanstock of amounts owed.Pursuant to the Web Agreement, Beanstock had the exclusive right and obligation to fill all of the Company’s remnant desktop in-page display advertising inventory on www.meetme.com (the “Site”), excluding, (i) any inventory sold to a third party under an insertion order that was campaign or advertiser specific, (ii) any inventory the Company reserved in existing and future agreements with third parties for barter transactions and as additional consideration as part of larger business development transactions, and (iii) any inventory reserved for premium advertising for the Site. The Company could have continued to place inventory outside of the Web Agreement in direct sales.Beanstock was obligated to pay for all advertising requests that the Company delivered, whether or not Beanstock filled them. For the United States, Beanstock was obligated to pay the Company specified CPM rates plus a percentage of revenue in excess of those rates; for the rest of the world, Beanstock was obligated to pay the Company 90% of its net ad revenue for the Site.The Company could terminate the Web Agreement at any time without charge or penalty by providing written notice to Beanstock. Either party could terminate the Web Agreement if the other party was in material breach of its obligations and did not cure such breach, or if the other party filed a petition for bankruptcy, became insolvent, made an assignment for the benefit of its creditors, or a receiver was appointed for such party or its business.For the three months ended September 30, 2016 and 2015, the Company recognized $0 under the terms of the Web Agreement. For the nine months ended September 30, 2016 and 2015, the Company recognized $0 and approximately $2,160,000 under the terms of the Web Agreement, respectively. On June 2, 2015, the Company terminated the Web Agreement as a result of non-payment by Beanstock of amounts owed, and resumed managing its web advertising inventory in-house. In the third quarter of 2015, the Company determined that the approximately $1,300,000 receivable in connection with the Web Agreement was deemed uncollectible and as a result the Company incurred a bad debt expense of the entire amount.Mobile AgreementOn December 23, 2014, the Company entered into an Advertising Agreement with Beanstock (the “Mobile Agreement”). On June 2, 2015, the Company terminated the Mobile Agreement with Beanstock as a result of non-payment by Beanstock of amounts owed.Pursuant to the Mobile Agreement, Beanstock had the right and obligation to fill substantially all of the Company’s advertising inventory on its MeetMe mobile app for iOS and Android, as well as the Site when accessed using a mobile device and as optimized for mobile devices (collectively, the “App”). The Mobile Agreement did not apply to interstitially-placed advertisements, advertisements on versions of the App specific to the iPad and other Apple tablet devices, other mobile apps or in-app products or features on the App, including, without limitation, offer wall features and the Company’s Social Theater business.Under the Mobile Agreement, the Company began placing ad calls (not including prior test calls) with Beanstock on March 1, 2015 (the “Effective Date”).The Company could, on a basis substantially consistent with its advertising display logic (as set forth in the Mobile Agreement) (“Ad Logic”), (i) add additional sections or features to the App and provide them with ads, and (ii) change the locations and sizes of particular ad placements within the App; in any such case, all resulting ad placements would be subject to the Mobile Agreement. In addition, if the Company wished to increase the number, type, frequency or scope of placements in the Ad Logic, it would be required to first notify Beanstock and upon Beanstock’s written consent, such additional inventory would be added to the Ad Logic. If Beanstock withheld or denied said consent, then the additional inventory would remain outside of the scope of the Mobile Agreement and the Company could fill it otherwise.Beanstock was required to pay for all ad requests that the Company delivered whether or not Beanstock filled them. Beanstock was required to pay specified CPM rates depending on the type of ad; provided, however, that if more than a stated percentage of impressions originated outside of the United States and Canada, then Beanstock was required to pay the Company a percentage of Beanstock’s gross revenue relating to such international ad impressions in excess of that percentage.Beanstock was required to remit payments due to the Company within thirty days following the last day of each calendar month for that month regardless of advertiser campaign duration; provided, however, that if the balance owing under the Mobile Agreement exceeded a stated amount, then the Company could request Beanstock to accelerate payments so that the balance does not at any point exceed that amount, and Beanstock would be required do so within ten days and for so long as necessary to keep said balance under that amount. Beanstock assumed all risk with regards to collection of all applicable advertiser fees with respect to all of the advertising inventory and was not permitted to delay payment to the Company as a result of non-collection or delay of payment of fees by advertisers. Beanstock was not permitted to withhold or offset amounts owing the Mobile Agreement for any reason.The Company determined the number of ad calls that it would place under the Mobile Agreement. If Beanstock determined that number to be less than 90% of the Company’s number for any particular month and the parties could not resolve the discrepancy, then the ad call number for that month would be 90% of the number that the Company originally determined.Beanstock agreed to comply with the Company’s advertising editorial guidelines as in effect from time to time.The Company could terminate the Mobile Agreement upon written notice (i) from the date thereof to the sixtieth day after the Effective Date, or (ii) if, in the Company’s sole discretion, the placement or running of ads on the App caused a diminution in user experience, including without limitation with respect to the crash rate.In addition, the Mobile Agreement could be terminated upon written notice by (A) either party if the other party (i) was in material breach of its obligations and that party failed to cure said breach within ten days after receipt of written notice thereof from the non-breaching party, or (ii) filed a petition for bankruptcy, became insolvent, made an assignment for the benefit of its creditors, or a receiver was appointed for such other party or its business, or (B) the Company if Beanstock failed to pay any amount thereunder when due (any of the events in this sentence, “Cause”). If the Company terminated the Mobile Agreement for Cause or Beanstock terminated it wrongfully, then Beanstock would be required to pay the Company a stated amount as liquidated damages.Effective March 26, 2015, the Company amended the Mobile Agreement with Beanstock (the “Amendment”). Pursuant to the Amendment, the Company provided certain price reductions on its invoices to Beanstock for the months of March, 2015 and April, 2015, contingent upon certain events to which Beanstock was required to certify. The Amendment provided that the Company would implement certain changes to the Ad Logic for the App by May 1, 2015 as well as make certain product changes with respect to the App by June 1, 2015. The Amendment increased the amount of liquidated damages payable by Beanstock under certain circumstances and provided the Company with a right to terminate the Mobile Agreement for convenience until September 1, 2015, and after such date with either sufficient advance notice or by paying a stated termination fee.On May 6, 2015, the Company entered into a second amendment and joinder to the Mobile Agreement (the “Second Amendment”). Pursuant to the Second Amendment, Beanstock would pay in full (i) the invoice dated March 31, 2015, under the Mobile Agreement (a portion of which remained overdue) on or before June 30, 2015 and (ii) all other amounts under the Mobile Agreement and the Web Agreement as they became due. In addition, Adaptive Medias, Inc. (“Adaptive”) joined as a party to the Mobile Agreement to guarantee Beanstock’s payment obligations under both the Mobile Agreement and the Web Agreement. If Beanstock failed to pay any amounts due under either the Mobile Agreement or the Web Agreement, Adaptive would immediately, upon demand, pay all such owed amounts in full.For the three months ended September 30, 2016 and 2015 the Company recognized $0 under the terms of the Mobile Agreement. For the nine months ended September 30, 2016 and 2015, the Company recognized approximately $0 and approximately $5,200,000, respectively, under the terms of the Mobile Agreement. On June 2, 2015, the Company terminated the Mobile Agreement as a result of non-payment by Beanstock of amounts owed, and resumed managing its mobile advertising inventory in-house. In the third quarter of 2015, the Company determined that the approximately $4,400,000 receivable in connection with the Mobile Agreement was deemed uncollectible and as a result the Company incurred a bad debt expense of the entire amount. In 2015, the total accounts receivable balance written off under the Web Agreement and the Mobile Agreement was approximately $5,700,000. In addition, Beanstock owes the Company $4,000,000 of liquated damages under the Mobile Agreement that have not been recorded in the financial statements and are not included in the approximately $5,700,000 bad debt write-off.Pinsight MediaOn October 31, 2013, the Company entered into an Advertising Agreement with Pinsight Media+, Inc. (“Pinsight”) (as amended, the “Pinsight Agreement”). The Pinsight Agreement was effective from October 31, 2013 through December 31, 2014, with a post-termination transition period that ended on March 1, 2015.Pursuant to the Pinsight Agreement, Pinsight had the right and obligation to fill all of the Company’s advertising inventory on the App. The Pinsight Agreement did not apply to other mobile apps or virtual currency features on the App, including without limitation offer wall features and the Company’s Social Theater business.Pinsight was obligated to pay for all ad requests that the Company delivered, whether or not Pinsight filled them. Pinsight paid specified CPM rates depending on the type of ad. The stated CPM rates for certain ads were subject to renegotiation under certain conditions; in such case, if the parties did not agree on a modified rate, then such ads would be excluded from the Pinsight Agreement.Pinsight assumed all risk with regards to collection of all applicable advertiser fees with respect to all advertising inventory and was not permitted to delay payment to the Company as a result of non-collection or delay of payment by the advertisers.Pinsight was obligated to comply with the Company’s advertising editorial guidelines as in effect from time to time.For the three months ended September 30, 2016 and 2015, the Company recognized no revenue under the terms of the Pinsight Agreement. For the nine months ended September 30, 2016 and 2015, the Company recognized $0 and approximately $5,100,000 in revenue under the terms of the Pinsight Agreement, respectively.wereare carried at fair value until their exercise as disclosed in Note 2. 3-Fair Value Measurements. The Company has evaluated the estimated fair value of financial instruments using available market information and management'smanagement’s estimates. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Net gains and losses resulting from foreign exchange transactions are included in other income (expense). The Company’s foreign operations were substantially liquidated in the first quarter of 2015. Due to our current reporting metrics, providing revenues from users attributed to the U.S. and revenues from users attributed to all other countries is impracticable.(Loss) per Share (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares and common stock equivalents outstanding, calculated onunder the treasury stock method for options and warrants using the average market prices during the period. $ 4,392,409 $ (2,035,621 $ 36,365,696 $ (103,639 53,231,369 45,470,686 49,649,221 45,192,785 5,817,452 — 5,955,645 — 59,048,821 45,470,686 55,604,866 45,192,785 $ 0.08 $ (0.04 $ 0.73 $ (0.00 $ 0.07 $ (0.04 $ 0.65 $ (0.00 Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Numerator: Net income $ 856,595 $ 29,618,389 $ 1,302,441 $ 31,973,286 Denominator: Weighted-average shares outstanding 70,122,234 48,218,184 65,632,962 47,838,466 Effect of dilutive securities 4,763,669 5,843,122 4,936,281 6,025,500 Weighted-average diluted shares 74,885,903 54,061,306 70,569,243 53,863,966 Basic income per share $ 0.01 $ 0.61 $ 0.02 $ 0.67 Diluted income per share $ 0.01 $ 0.55 $ 0.02 $ 0.59 incomeloss per share: 2,480,228 10,382,119 2,427,662 10,382,119 — 1,967,107 — 1,967,107 391,015 2,812,414 305,388 2,812,414 — 1,479,949 — 1,479,949 2,871,243 16,641,589 2,733,050 16,641,589 Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Stock options 4,013,425 5,320,564 3,840,813 5,020,092 Warrants — 2,031,425 — 2,149,519 Total 4,013,425 7,351,989 3,840,813 7,169,611 Except with respect to the Beanstock write-offs described above, theThe Company has no recent history of significant losses from uncollectible accounts. During the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, three customers, all of which were advertising aggregators, which represent thousands of advertisers, comprised approximately 54%46% and 46%53% of total revenues, respectively. Three customers, all of which were advertising aggregators, which represent thousandscomprised of advertisers, comprised approximately 63%46% and 52%49% of accounts receivable as of SeptemberJune 30, 20162017 and December 31, 2015,2016, respectively.operations. However,operations, however, there can be no assurance that the Company’s business will not experience any adverse impact from credit risk in the future.(“ASU”) 2014-09,Revenue from Contracts with Customers.ASU 2014-09 supersedes the revenue recognition requirements of FASB ASC Topic 605,Revenue Recognitionand most industry-specific guidance throughout the ASC, resulting in the creation of FASB ASC Topic 606,No. 2014-09: Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 requiresThis update outlines a single comprehensive model for entities to recognizeuse in accounting for revenue in a wayarising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that depicts“an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.” This ASU provides alternative methods of adoption. In August 2015, the FASB issued ASU 2015-14,Revenue from Contracts with Customers, Deferral of the Effective Date. ASU 2015-14 defers the effective date of ASU 2014-09update also requires significantly expanded disclosures related to annual reporting periods beginning after December 15, 2017 and interim periods within those reporting periods beginning after that date, and permits early adoption of the standard, but not before the original effective date for fiscal years beginning after December 15, 2016.revenue recognition. In March 2016, the FASB issued ASU 2016-08,Revenue from Contracts with Customers,Accounting Standards Update No. 2016-08: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) clarifying (“ASU 2016-08”), amending the principal-versus-agent implementation guidance on principal versus agent considerations. Specifically,set forth in ASU 2014-09. Among other things, ASU 2016-08 clarifies that an entity should evaluate whether it is required to determine whether the nature of a promise is to provideprincipal or the agent for each specified good or service itself (that is, the entity ispromised in a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The determination influences the timing and amount of revenue recognition.contract with a customer. In April 2016, the FASB issued ASU 2016-10,Revenue from Contracts with Customers,Accounting Standards Update No. 2016-10: Identifying Performance Obligations and Licensing clarifying (“ASU 2016-10”), which amends certain aspects of the implementation guidance onset forth in the FASB’s new revenue standard related to identifying performance obligations and licensing. Specifically, the amendments reduce the cost and complexity of identifying promised goods or services and improves the guidance for determining whether promises are separately identifiable. The amendments also provide implementation guidance on determining whether an entity's promise to grant a license provides a customer with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). The effective date and transition requirements for ASU 2016-08 and ASU 2016-10 are the same as the effective date and transition requirements for ASU 2014-09.licensing implementation. In May 2016, the FASB issued Accounting Standards Update No. 2016-12: Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), amending certain aspects of ASU 2014-09 to address implementation issues identified by the FASB’s transition resource group and clarify the new revenue standard’s core revenue recognition principles. In December 2016, the FASB issued Accounting Standards Update No. 2016-122016-20: Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients(“ASU 2016-20”), which clarifies guidance in certain narrow areas and adds a practical expedient forclarified or corrected unintended application of certain aspects of the new revenue guidance. The amendments do not changeASU 2014-09 will be effective for the core principleCompany in fiscal year 2018 following the issuance of Accounting Standards Update No. 2015-14: Deferral of the guidanceEffective Date in August 2015, which deferred the effective date of ASU 2014-09. 2014-09 by one year.currentlyin the process of evaluating the qualitative and quantitative disclosure requirements of ASU 2014-09 to identify possible enhancements to the Company’s financial statements that will enable users to better understand the nature, amount, timing and uncertainty of revenues and cashflows arising from contracts with customers, including significant judgments, changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The Company expects the adoption of ASU 2014-09, as amended, to have an impact to its business processes, financial reporting disclosures, and internal controls over financial reporting (“ICFR”). As part of the assessment performed through the date of this filing, the Company has created an implementation working group, which includes internal and third-party resources.potentialappropriate changes to its business processes and controls to support revenue recognition and disclosures under the new standard. The Company plans to adopt the new standard using the modified retrospective method.2016-08,2014-09 states that the transaction price for contracts with more than one performance obligation should be allocated to each performance obligation. This guidance may impact certain contracts the Company has with its customers, which include multiple performance obligations.2016-102014-09 modified some of the existing principal and ASU 2016-12 on its financial statementsagent considerations. This update may result in changes to gross vs net treatment of revenue and related disclosures.In July 2015, the FASB issued ASU 2015-14, which delayed the effective date of ASU 2014-09. As a result,expenses; however, this guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. update would not affect net income.currently evaluating the new guidance and has not determinedcontinuing to assess the impact this standard may haveof ASU 2014-09 on the costs to acquire and fulfill its consolidated financial statements nor decided uponcustomer contracts, including whether the methodCompany can apply the practical expedient of adoption.In June 2014,expensing contract costs when incurred if the FASB issued ASU No. 2014-12,Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite serviceamortization period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifiesasset that compensation cost should bewould have been recognized inis one year or less. Currently, the period in which it becomes probableCompany’s accounting policy is to expense contract costs as they are incurred.performanceCompany enters. The Company is on target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The adoptioncomplete its assessment of ASU 2014-12 had no material2014-09 and its impact on the Company’s consolidated financial statements.In August 2014, the FASB issued ASU 2014-15,Presentationstatements and related disclosures as of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 explicitly requires management to evaluate, at each annual or interim reporting period, whether there are conditions or events that exist which raise substantial doubt about an entity’s ability to continue as a going concern and to provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and annual and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of adopting this new standard on its consolidated financial statement disclosures.In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The new standard requires debt issuance costs, related to a recognized debt liability, be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. The update requires the guidance to be applied retrospectively. The update is effective for fiscal years beginning after December 15, 2015. The adoption of ASU 2015-03 had no material impact on the Company’s consolidated financial statements.In November 2015, the FASB issued ASU 2015-17,Balance Sheet Classification of Deferred Taxes, which will require entities to present all deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) as non-current on the balance sheet. This guidance is effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. Early adoption is permitted, and entities may choose whether to adopt this update prospectively or retrospectively. On December 31, 2015, we elected to adopt ASU 2015-17 and changed our method of classifying DTAs and DTLs as either current or non-current to classifying all DTAs and DTLs as non-current, using a prospective method. Prior balance sheets were not retrospectively adjusted. The adoption did not have a material effect on the Company’s financial position.In January 2016, the FASB issued ASU 2016-01,Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under ASC 820,Fair Value Measurements, and as such these investments may be measured at cost. ASU 2016-01 will be effective for annual periods and interim periods within those annual periods beginning after December 15, 2017 and early adoption is not permitted. The adoption of ASU 2016-01 is not expected to have a material effect on the Company’s consolidated financial statements.2016-02,2016-2, Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-022016-2 is effective for annual periods beginning after December 15, 2018, and annual and interim periods thereafter, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact that the adoption of this new standard will have on theits consolidated financial statements.In March 2016, the FASB issued ASU No. 2016-09,Compensation - Stock Compensation (Topic 718). The amendments of ASU No. 2016-09 were issued as part of the FASB's Simplification Initiative focused on improving areas of GAAP for which cost and complexity may be reduced while maintaining or improving the usefulness of information disclosed within the financial statements. The amendments focused on simplification specifically with regard to share-based payment transactions, including income tax consequences, classification of awards as equity or liabilities and classification on the statement of cash flows. The guidance in ASU No. 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on the consolidated financial statements.In June 2016, the FASB issued ASU No. 2016-13,Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard provides for a new impairment model which requires measurement and recognition of expected credit losses for most financial assets held. ASU No. 2016-13 is effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. The Company is currently evaluating the impact that the adoption of this new standard will have on the consolidated financial statements.theits consolidated financial statements.2—Fair2-Acquisitions At April 3, 2017 $ 60,000,000 Net working capital adjustment 14,467,379 Total estimated consideration $ 74,467,379 At April 3, 2017 Cash and cash equivalents $ 8,164,587 Accounts receivable 2,961,593 Prepaid expenses and other current assets 5,588,308 Restricted cash 500,000 Property and equipment 1,476,010 Other assets 394,037 Intangible assets 23,830,000 Accounts payable (1,632,306 ) Accrued expenses and other current liabilities (783,096 ) Deferred revenue (809,244 ) Deferred tax liability (1,135,739 ) Net assets acquired $ 38,554,150 Goodwill 35,913,229 Total consideration $ 74,467,379 Fair Value Trademarks $ 9,895,000 Software 13,205,000 Customer relationships 730,000 Total identifiable intangible assets $ 23,830,000 Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Revenues $ 31,478,167 $ 33,892,589 $ 62,169,230 $ 64,135,130 Net income $ 989,468 $ 28,673,169 $ 621,700 $ 30,204,527 Basic earnings per share $ 0.01 $ 0.59 $ 0.01 $ 0.63 Diluted earnings per share $ 0.01 $ 0.53 $ 0.01 $ 0.56 $ 33,155,532 Equity consideration 32,376,505 Contingent consideration 3,000,000 Total estimated consideration $ 68,532,037 Cash and cash equivalents $ 2,851,338 Accounts receivable 4,146,927 Prepaid expenses and other current assets 280,379 Restricted cash 393,261 Property and equipment 396,998 Deferred tax asset 157,111 Intangible assets 18,230,000 Accounts payable (1,055,802 ) Accrued expenses and other current liabilities (208,628 ) Deferred revenue (189,066 ) Net assets acquired $ 25,002,518 Goodwill 43,529,519 Total consideration $ 68,532,037 Fair Value Trademark $ 7,155,000 Software 2,500,000 Customer relationships 8,575,000 Total identifiable intangible assets $ 18,230,000 (“ (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company'sCompany’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company'sCompany’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances.1—Valuations1-Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.2—Valuations2-Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.3—Valuations3-Valuations based on inputs that are unobservable and significant to the overall fair value measurement.instrument'sinstrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.andrestricted cash, warrants to purchase common stock.stock, and contingent consideration. During the periods presented, the Company has not changed the manner in which it values assets and liabilities that are measured at fair value using Level 3 inputs. The following fair value hierarchy table presents information about each major category of the Company'sCompany’s financial assets and liabilities measured at fair value on a recurring basis: $ 7,047,964 $ — $ — $ 7,047,964 $ 7,047,964 $ — $ — $ 7,047,964 $ — $ — $ — $ — $ — $ — $ — $ — $ 10,029,275 $ — $ — $ 10,029,275 $ 10,029,275 $ — $ — $ 10,029,275 $ — $ — $ 1,035,137 $ 1,035,137 $ — $ — $ 1,035,137 $ 1,035,137 Total June 30, 2017 Assets Money market $ 3,855,336 $ — $ — $ 3,855,336 Restricted cash 894,057 — — 894,057 Total assets $ 4,749,393 $ — $ — $ 4,749,393 Liabilities Contingent consideration — — 3,000,000 3,000,000 Total liabilities $ — $ — $ 3,000,000 $ 3,000,000 December 31, 2016 Assets Money market $ 7,586,810 $ — $ — $ 7,586,810 Restricted cash 393,484 — — 393,484 Total assets $ 7,980,294 $ — $ — $ 7,980,294 Liabilities Contingent consideration $ — — 3,000,000 3,000,000 Total liabilities $ — $ — $ 3,000,000 $ 3,000,000 Company'sCompany’s Common Stock warrant liability, which represents a recurring measurement that is classified within Level 3 of the fair value hierarchy, wherein fair value is estimated using significant unobservable inputs: $ 1,035,137 864,596 (1,899,733 $ — Contingent
ConsiderationBalance as of December 31, 2016 $ 3,000,000 Changes in estimated fair value — Balance as of June 30, 2017 $ 3,000,000 ninesix months ended SeptemberJune 30, 20162017 and the year ended December 31, 2015.fair valuefollowing table sets forth a summary of the warrants on the date of issuance and on each re-measurement date classified as liabilities was estimated using the Black-Scholes option pricing model. The changechanges in the fair value of the Company’s Common Stock warrant liability, which represents a recurring measurement that was classified within Level 3 of each reporting period was recorded on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).fair value hierarchy, wherein fair value is estimated using significant unobservable inputs. On June 30, 2016, Venture Lending & Leasing VI and VII provided notification of the surrender of their outstanding 341,838 liability classified warrants, which were net settled into common shares in the third quarter of 2016. As a result of the warrant exercise, no remeasurement of the warrant liability occurred subsequent to the exercise and the balance in the warrant liability account is $0no warrants were outstanding as of September 30, 2016. Balance as of December 31, 2015 $ 1,035,137 Changes in estimated fair value 545,614 Balance as of June 30, 2016 $ 1,580,751 3—4 - Intangible Assets $ 5,859,494 $ 5,849,994 1,165,000 1,165,000 1,725,000 1,725,000 8,749,494 8,739,994 (8,604,079 (7,461,496 $ 145,415 $ 1,278,498 June 30,
2017 December 31,
2016Trademarks and domain names $ 22,909,494 $ 13,014,494 Customer relationships 10,470,000 9,740,000 Software 17,430,000 4,225,000 50,809,494 26,979,494 Less accumulated amortization (13,573,236 ) (9,968,929 ) Intangible assets - net $ 37,236,258 $ 17,010,565 $382,000$2.4 million and $379,000$0.4 million for the three months ended SeptemberJune 30, 2017 and 2016 and 2015,$3.6 million and $0.8 million for the six months ended June 30, 2017 and 2016, respectively. Amortization expenseThe weighted average amortizable life of the intangible assets was approximately $1,143,000 and $1,145,000 for the nine months ended September6.8 years as of June 30, 2016 and 2015, respectively. $ 145,415 $ 145,415 Year ending December 31, Remaining in 2017 $ 4,623,214 2018 8,391,414 2019 6,946,377 2020 5,797,947 2021 4,964,280 Thereafter 6,513,026 Total $ 37,236,258 4—5 - Property and Equipment $ 9,594,974 $ 9,105,086 176,516 57,359 386,198 369,137 10,157,688 9,531,582 (8,045,336 (6,921,275 $ 2,112,352 $ 2,610,307 June 30,
2017 December 31,
2016Servers, computer equipment and software $ 12,159,742 $ 10,273,823 Office furniture and equipment 294,704 232,217 Leasehold improvements 565,853 443,123 13,020,299 10,949,163 Less accumulated depreciation (9,528,760 ) (8,483,053 ) Property and equipment - net $ 3,491,539 $ 2,466,110 and amortization expense was approximately $379,000$0.6 million and $384,000$0.4 million for the three months ended SeptemberJune 30, 2017 and 2016 and 2015, respectively. For$1.0 million and $0.7 million for the ninesix months ended SeptemberJune 30, 2017 and 2016, and 2015, property and equipment depreciation and amortization expense was approximately $1,124,000 and $1,235,000, respectively.5—6-Long-Term DebtSenior Loans PayableTerm LoanApril 29, 2013,March 3, 2017, in connection with the if(we) merger discussed in Note 2-Acquisitions (the “Merger”), the Company entered into an $8.0 million loana credit agreement (the “Credit Agreement”) with the several banks and security agreement with Venture Lending & Leasing VI, Inc. & Venture Lending & Leasing VII, Inc.other financial institutions party thereto (the “Lenders”) and JPMorgan Chase Bank, N.A., at an 11% fixed interest rate, maturing in 36 months, and which was able to be drawn in three tranchesas administrative agent (the “Loan”“Agent”). The Credit Agreement provides for a $15.0 million revolving credit facility (the “Revolving Credit Facility”) and a $15.0 million term loan facility (the “Term Loan Facility,” and together with the “Revolving Credit Facility,” the “Credit Facilities”).29, 2013,3, 2017, the Company drew $5.0down $15.0 million on the facility. Interest was payable monthly for the first six months of the loan term, and monthly principal and interest payments were due thereafter through the maturity date. The Company issued warrants to each of the lendersfrom its Term Loan Facility in conjunctionconnection with the loan facility with an initial aggregate exercise price of $800,000, which increased by $200,000 with the first tranche and would have increased by $300,000 with the second and third tranche draw down of the Loan had the Company drawn on either tranche. The Loan is net of the initial value of the warrants. The initial value of the warrants has been capitalized within the other assets section of the consolidated balance sheets and is being amortized utilizing the effective interest method over the term of the Loan. Amortization expense was $0 and $37,344 for the three months ended September 30, 2016 and 2015, respectively, and is included on the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) in Interest Expense. Amortization expense for the nine months ended September 30, 2016 and 2015 was $0 and $151,631, respectively, and is included on the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) in Interest Expense.Merger. As of SeptemberJune 30, 2016 and December 31, 2015,2017, the Company had repaid allan outstanding indebtedness underbalance of $13.1 million on its Term Loan Facility. The weighted average interest rate at June 30, 2017 was 3.69%. Remaining unamortized fees and direct costs incurred for the Loan.Company’s Credit Facilities were $0.1 million. As of June 30, 2017, the Company did not have an outstanding balance on its Revolving Credit Facility.6—7- Commitments and Contingencies$0.4$1.7 million and $0.5$0.4 million for the three months ended SeptemberJune 30, 2017 and 2016 and 2015, respectively. Rent expense under these leases was approximately $1.2$2.4 million and $1.5$0.8 million for the ninesix months ended SeptemberJune 30, 2017 and 2016, and 2015, respectively.throughin 2017. In 2012, the Company executed two noncancelable master lease agreements, one with Dell Financial Services and one with HP Financial Services. Both are for the purchase or lease of equipment for the Company’s data centers. Principal and interest are payable monthly at interest rates ranging from 4.5% to 8.0% per annum, rates varying based on the type of equipment purchased. The capital leases are secured by the leased equipment, and outstanding principal and interest are due monthly through October 2017. During the ninesix months ended SeptemberJune 30, 2016,2017, the Company did not enter into any new capital lease agreements.SeptemberJune 30, 20162017 are as follows: $ 72,149 $ 431,529 225,879 1,543,407 — 450,156 — 420,154 — 432,758 — 557,993 $ 298,028 $ 3,835,997 (7,738 290,290 271,389 $ 18,901 Remaining in 2017 $ 82,512 $ 2,639,060 2018 — 3,959,618 2019 — 1,827,943 2020 — 432,758 2021 — 445,741 2022 — 112,253 Total minimum lease payments $ 82,512 $ 9,417,373 Less: Amount representing interest 751 Total present value of minimum payments 81,761 Less: Current portion of such obligations 81,761 Long-term capital lease obligations $ — 2017.2017, prior to which all Series 2 and Series 3 warrants were exercised. On December 23, 2015, the Court dismissed the litigation with prejudice.On August 7, 2015, the Company entered into a Settlement and Mutual Release (the “Settlement and Release”) with the People of the State of California (the “People”) resolving all claims relating toPeople of the State of California, ex rel. Dennis Herrera, San Francisco City Attorney v. MeetMe, Inc., et al.(Case No. CGC 14-537126), filed in the Superior Court of California, City of San Francisco, on February 3, 2014 (the “Litigation”). Pursuant to the Settlement and Release, (A) the Company agreed,inter alia, to (i) implement a number of privacy-related product changes, (ii) restate its Terms of Service and Privacy Policy, and (iii) pay $200,000 to the People. On August 19, 2015, the Court dismissed the litigation with prejudice.Mobile Agreement. Company’s Social Theater business.7—8- Stockholder’s EquityPreferred Stockpreferred stock and fix the rights and preferences of those shares, including the dividend rights, dividend rates, conversion rights, exchange rights, voting rights, terms of redemption, redemption price or prices, liquidation preferences, the number of shares constituting any series and the designation of such series.In November 2011,soldfiled with the Secretary of State of the State of Delaware a Certificate of Elimination of the 1,000,000 shares of Series A-1 Preferred Stock (“Series A-1”) to Mexicans & Americans Trading Together, Inc. (“MATT Inc.”) for $5,000,000. MATT Inc. was an existing stockholder ofthat effectuated the Company. The Series A-1 shares were convertible, at MATT Inc.’s option, into 1,479,949 shares of the Company’s common stock, at a conversion price per share of approximately $3.38, and had voting rights on an as-converted basis. The holderselimination of the Series A-1 did not havePreferred Stock, which then resumed the status of authorized but unissued shares of preferred stock. As of June 30, 2017, there were no longer any change of control or liquidation preferences. In December 2015, MATT Inc. converted all of its outstanding Series A-1 shares into 1,479,949 shares of the Company’s common stock. 4,687,335 shares and 231,900 shares of common stock in connection with theof 2,060,964 and 4,693,918 related to exercises of stock options, 913,195 and 934,991 related to restricted stock awards and 675,000 and 1,763,340 related to the exercise of warrants during the ninesix months ended SeptemberJune 30, 20162017 and the year ended December 31, 2015,2016, respectively. The Company issued 934,991 shares and 557,603 shares of common stock in connection with restricted stock awards during the nine months ended September 30, 2016 andDuring the year ended December 31, 2015, respectively. The Company issued 1,763,340 shares2016, 200,000 warrants expired. No warrants expired during the ninesix months ended SeptemberJune 30, 2016 in connection with the exercise of warrants. No warrants were exercised during the year ended December 31, 2015. During the nine months ended September 30, 2016 and 2015, 200,000 and -0- warrants expired, respectively.Company’s Board of Directors approvedauthorized a $15 million share repurchase program (the “Repurchase“2016 Repurchase Program”). Repurchases under the 2016 Repurchase Program will be made in the open market or through privately negotiated transactions intended to comply with SEC Rule 10b-18, subject to market conditions, applicable legal requirements, and other relevant factors. The 2016 Repurchase Program does not obligate the Company to acquire any particular amount of common stock, and it may be suspended at any time at the Company’s discretion. During the quarteryear ended September 30,December 31, 2016, the Company repurchased 343,234848,145 shares for an aggregate purchase price of $2.0$5.0 million. These shares were immediately retired.20162017 and 2015,2016, the Company continued to use the simplified method to determine the expected option term since the Company’s stock option exercise experience does not provide a reasonable basis upon which to estimate the expected option term.Condensed Consolidated Statementconsolidated statement of Operationsoperations and Comprehensive Income (Loss)comprehensive income as follows: $ 94,997 $ 83,264 $ 250,729 $ 229,508 368,150 253,436 1,075,803 909,714 448,343 324,726 1,228,310 870,520 $ 911,490 $ 661,426 $ 2,554,842 $ 2,009,742 Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Sales and marketing $ 101,035 $ 95,295 $ 202,304 $ 155,732 Product development and content 1,428,743 403,956 1,930,043 707,653 General and administrative 838,414 416,321 1,370,003 779,967 Total stock-based compensation expense $ 2,368,192 $ 915,572 $ 3,502,350 $ 1,643,352 SeptemberJune 30, 2016,2017, there was approximately $2.6$7.6 million of total unrecognized compensation cost relating to stock options, which is expected to be recognized over a period of approximately two years. As of SeptemberJune 30, 2016,2017, the Company had approximately $3.6$12.2 million of unrecognized stock-based compensation expense related to RSAs, which will be recognized over the remaining weighted-average vesting period of approximately two years.August 11, 2014,December 16, 2016, the Company’s stockholders approved the Amended and Restated 2012 Omnibus Incentive Plan (the “2012 Plan”), providing for the issuance of up to 8,700,00010.5 million shares of the Company’s common stock, including approximately 2,100,0002.1 million shares previously approved by the Company’s stockholders under the Company’s Amended and Restated 2006 Stock Incentive Plan (the “2006 Stock Plan”), less one share of common stock for every one share of common stock that was subject to an option or other award granted after December 31, 2011 under the 2006 Stock Plan, plus an additional number of shares of common stock equal to the number of shares previously granted under the 2006 Stock Plan that either terminate, expire, or are forfeited after December 31, 2011. As of SeptemberJune 30, 2016,2017, there were approximately 2.32.0 million shares of common stock available for grant.ninesix months ended SeptemberJune 30, 20162017 is as follows: 2,972,378 $ 2.06 768,200 3.35 (795,722 2.04 (101,668 1.99 2,843,188 $ 2.41 8.4 $ 10,762,251 1,183,664 $ 2.22 7.6 $ 4,713,328 Options Outstanding at December 31, 2016 2,822,855 $ 2.42 Granted 1,110,351 4.97 Exercised (80,331 ) 2.13 Forfeited or expired (44,966 ) 3.45 Outstanding at June 30, 2017 3,807,909 $ 3.16 8.3 $ 7,308,114 Exercisable at June 30, 2017 1,972,801 $ 2.32 7.4 $ 5,380,295 ninesix months ended SeptemberJune 30, 20162017 and 2015: 1.39 1.35 6.0 6.0 — — 84 88 Six Months Ended June 30, 2017 2016 Risk-free interest rate 1.89% 1.39% Expected term (in years) 6.0 6.0 Expected dividend yield — — Expected volatility 83% 84% 826,8501,304,271 RSAs during the ninesix months ended SeptemberJune 30, 2016. RSAs vest in three equal annual increments and2017. Shares are forfeited if not vested within three years from the date of grant.grant and vest in three equal annual increments. The Company recorded stock-based compensation expense related to RSAs of approximately $544,000$1.0 million and $1.6$0.6 million for the three and nine months ended SeptemberJune 30, 2017 and 2016, respectively, and $1.6 million and $1.0 million for the six months ended June 30, 2017 and 2016, respectively. A summary of RSA activity under the 2012 Plan during the ninesix months ended SeptemberJune 30, 20162017 is as follows: 2,072,957 $ 1.84 826,850 3.28 (934,991 1.87 (158,701 2.05 1,806,115 $ 2.46 1,806,115 $ 2.46 RSAs Outstanding at December 31, 2016 1,794,115 $ 2.46 Granted 1,304,271 4.95 Vested (999,832 ) 2.34 Forfeited or expired (93,450 ) 3.79 Outstanding and unvested at June 30, 2017 2,005,104 $ 4.07 In 2008, the Company’s Board of Directors and stockholders approved an amendment to the 2006 Stock Plan to authorize the issuance of an additional 2,000,000 shares of common stock. In November 2009, the Company’s Board of Directors approved an amendment to the 2006 Stock Plan to authorize the issuance of an additional 2,000,000 shares of common stock. On June 4, 2010, the Company’s stockholders ratified this amendment to the 2006 Stock Plan. In June 2011 and November 2011, the Company’s Board of Directors and stockholders approved amendments to the 2006 Stock Plan to authorize the issuances of 4,000,000 additional shares of common stock. Pursuant to the terms of the 2006 Stock Plan, eligible individuals could be granted incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, or stock grant awards. ninesix months ended SeptemberJune 30, 20162017 is as follows: 6,844,301 $ 2.22 — — (3,765,031 1.87 (31,334 4.92 3,047,936 $ 2.62 3.2 $ 10,985,224 3,003,757 $ 2.60 3.2 $ 10,874,776 Non-Plan OptionsOptions Outstanding at December 31, 2016 3,041,686 $ 2.62 Granted — — Exercised (1,664,177 ) 1.31 Forfeited or expired (183,428 ) 4.94 Outstanding at June 30, 2017 1,194,081 $ 4.08 4.3 $ 1,260,386 Exercisable at June 30, 2017 1,149,902 $ 4.09 4.4 $ 1,200,744 Boardtotal intrinsic values of Directors has approvedoptions exercised were $6.3 million and our stockholders have ratified the issuance of stock options outside of our stock incentive plans. A summary of Non-Plan option activity$6.1 million during the ninesix months ended SeptemberJune 30, 2017 and 2016, is as follows: 443,038 $ 1.34 — — (126,582 1.34 — — 316,456 $ 1.34 3.1 $ 1,537,976 316,456 $ 1.34 3.1 $ 1,537,976 Note 8—Warrant TransactionsBelow is a summary of the number of shares issuable upon exercise of outstanding warrants and the terms and accounting treatment for the outstanding warrants: Warrants as of Expiration — 170,919 $ 1.96 — 170,919 $ 1.96 — 450,000 $ 3.55 425,000 500,000 $ 3.55 70,000 — $ 3.55 180,000 — $ 3.55 — 200,000 $ 3.55 — 270,576 $ 2.75 — 1,000,000 $ 2.75 675,000 2,762,414 Venture Lending & Leasing VI and VII Inc.In connection with the Loan that took place in April 2013, the Company issued warrants to the lender with an initial aggregate exercise value of $800,000, which increased by $200,000 with the first tranche and which would have increased by $300,000 with each of the second and third tranche draw downs of the Loan had the Company drawn down on them (see Note 6). Each warrant was immediately exercisable and with an expiration date ten years from the original date of issuance. The warrants to purchase shares of the Company's common stock have an exercise price equal to the estimated fair value of the underlying instrument as of the initial date such warrants were issued. Each warrant is exercisable on either a physical settlement or net share settlement basis from the date of issuance.The warrant agreement contains a provision requiring an adjustment to the number of shares in the event the Company issues common stock, or securities convertible into or exercisable for common stock, at a price per share lower than the warrant exercise price. The Company concluded that the anti-dilution feature required the warrants to be classified as liabilities under ASC Topic 815,Derivatives and Hedging—Contracts in Entity's Own Equity. The warrants are measured at fair value, with changes in fair value recognized as a gain or loss to other income (expense) in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for each reporting period thereafter. The fair value of the common stock warrants was recorded as a discount to the Loan.On March 10, 2014, Venture Lending & Leasing VIVII exercised 168,366 warrants with an exercise price of $1.96 per share. The warrants were net settled resulting in the Company issuing 89,230 shares of common stock.On June 30,Restated 2016 Venture Lending & Leasing VI and VII provided notification of the surrender of all their outstanding 341,838 warrants, with an exercise price of $1.96 per share, for the net issuance of 217,764 common shares.As of September 30, 2016, all 217,764 shares have been issued upon net settlement of the warrants. The fair value of the liability classified warrants on the date of issuance and on each re-measurement date was estimated using the Black-Scholes option pricing model. This method of valuation involves using inputs such as the fair value of the Company's common stock, stock price volatility, contractual term of the warrants, risk-free interest rates, and dividend yields. Due to the nature of these inputs and the valuation techniques utilized, the valuation of the warrants are considered a Level 3 measurement (Note 2). These liability classified warrants were remeasured for the final time before their exercise.Allen, F. Stephen Series 2 and 3, Warberg WF IV LP and OTA LLCIn March 2006, the Company issued two series of warrants to purchase 1,000,000 shares of common stock each at exercise prices of $4.00 and $7.00 as compensation for certain strategic initiatives to F. Stephen Allen. On February 19, 2010, the Company reduced the exercise price of the remaining 1,000,000 outstanding warrants to $3.55 per share. On December 22, 2015, in conjunction with a litigation settlement, the Company repurchased 50,000 Series 2 warrants and extended the warrant expiration date to June 21, 2017. See Note 6 for additional information on the settlement. The fair value of the warrant modification was determined by comparing the fair value of the modified warrant with the fair value of the unmodified warrant on the modification date. As a result of this modification, an additional expense of approximately $426,000 was recorded in General and Administrative expense.During the third quarter of 2016, F. Stephen Allen exercised 275,000 warrants with an exercise price of $3.55 per share, with the Company issuing 275,000 shares of common stock. He sold 250,000 warrants to Warberg WF IV LP (“Warberg”), and as of September 30, 2016, has 425,000 warrants remaining outstanding. Warberg sold 180,000 warrants to OTA LLC.Stearns, RobertIn March 2006, the Company issued warrants to purchase 200,000 shares of common stock at an exercise price of $3.55 per share as compensation to the Company’s then Chief Executive Officer, Robert Stearns. The awards of warrants to purchase shares of common stock are accounted for as equity instruments. The fair value at issuance was calculated using the Black-Scholes option-pricing model, and was charged to compensation expense. These warrants expired unexercised in March 2016.MATT Series 1 and 2In October 2006, the Company issued two series of warrants to purchase 1,000,000 shares of common stock each at exercise prices of $12.50 and $15.00 per share to MATT in connection with the issuance of common stock. On January 25, 2008, the Company entered into a Note Purchase Agreement (the “MATT Agreement”) with MATT. Pursuant to the terms of the MATT Agreement the exercise price of MATT’s outstanding warrants was reduced to $2.75 per share. The warrant re-pricing resulted in a discount on the MATT Note of $1,341,692, to be amortized over the life of the MATT Note. The fair value of the warrant re-pricing was determined by comparing the fair value of the modified warrant with the fair value of the unmodified warrant on the modification date and recording any excess as a discount on the note. No such discount was recorded as the repriced warrants value decreased.On March 5, 2013, MATT exercised warrants to purchase 2,147 shares of common stock using the amount by which the outstanding principal and accrued interest under the MATT Note exceeded $6,254,178 in principal and accrued interest which was outstanding under the MATT Note. MATT agreed to exercise or forfeit the MATT warrants with an aggregate exercise price of $2,000,000 over an eleven-month period beginning in March 2013.During the third quarter of 2016, MATT exercised the remaining outstanding 1,270,576 warrants with an exercise price of $2.75 resulting in the Company issuing 1,270,576 shares of common stock.A summary of warrant activity for the nine months ended September 30, 2016 is as follows: 2,762,414 $ 2.99 — — (1,887,414 2.72 (200,000 3.55 675,000 $ 3.55 675,000 $ 3.55 Note 9—Income TaxesAs of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets (primarily federal and state net operating losses (NOLs). In the second quarter of 2016, in part because in the current year we achieved three years of cumulative pretax income in the U.S. federal tax jurisdiction, management determined that there is sufficient positive evidence to conclude that it is more likely than not that net deferred tax assets of $33.6 million are realizable. It therefore reversed the valuation allowance accordingly.During the nine months ended September 30, 2016, the Company recorded a net income tax benefit of $27.3 million. This net income tax benefit, which was recorded during the second quarter of 2016, is primarily related to a release of the entire valuation allowance. Included in this net benefit is current income tax expense of approximately $30,000 for certain state income tax liabilities in jurisdictions where no or limited net operating loss carryovers are available. AtDecember 31, 2015, the Company had net deferred tax assets that were fully offset by a valuation allowance, as management believed that it was not more likely than not that the Company will realize the benefits of the deductible differences. The deferred tax assets at both September 30, 2016 and December 31, 2015 are principally the result of federal and state net operating loss carryforwards of approximately $61 million and $61 million, respectively. The Company has completed an Internal Revenue Code Section 382 study to determine annual limitations on the usability of its net operating loss carryforwards due to historical changes in ownership. That study concluded that $61 million of such accumulated net operating loss carryforwards at September 30, 2016, subject to annual limitation, should be available to offset future taxable income during the carryover period which extends through 2033. If unused, these net operating loss carryforwards will expire at various dates through 2033.During the nine months ended September 30, 2016 and 2015, the Company had no material changes in uncertain tax positions.Note 10—Acquisition of Skout, Inc.On June 27, 2016, MeetMe, Inc., and its wholly-owned subsidiaries, MeetMe Sub I, Inc., a Delaware corporation, and MeetMe Sub II, LLC, a Delaware limited Liability Corporation, (together, “MeetMe”) entered into a Merger agreement with Skout, Inc (“Skout”), a California corporation, pursuant to which MeetMe agreed to acquire 100% of the issued and outstanding shares of common stock of Skout for total consideration of $30.98 million in cash and 5,222,017 shares of MeetMe common stock. The transaction closed October 3, 2016.The acquisition-date fair value On February 27, 2017, the Company amended and restated the 2016 Inducement Omnibus Incentive Plan (as so amended and restated, the “2016 Stock Plan”) authorized an additional 2,000,000 shares of common stock under the 2016 Stock Plan. At the closing of the consideration transferred is as follows: $ 30,975,002 32,276,505 $ 63,351,507 The Company has not provided an allocation of the preliminary purchase price as the initial accounting for the business combination is incomplete.Note 11—Subsequent EventsSubsequent to September 30, 2016 and pursuant to the Repurchase Program,if(we) acquisition, the Company repurchasedgranted options to purchase an additional 504,911aggregate of up to 75,000 shares of its common stock forand restricted stock awards representing an aggregate of 717,500 shares of common stock to 83 former if(we) employees as an inducement material to becoming non-executive employees of the Company.Options Outstanding at December 31, 2016 310,000 $ 6.02 Granted 575,000 4.95 Exercised — — Forfeited or expired (67,500 ) 5.92 Outstanding at June 30, 2017 817,500 $ 5.27 9.6 $ 110,900 Exercisable at June 30, 2017 — — — — Six Months Ended June 30, 2017 Risk-free interest rate 1.89% Expected term (in years) 6.0 Expected dividend yield — Expected volatility 84% RSAs Outstanding at December 31, 2016 — $ — Granted 1,007,750 5.47 Vested — — Forfeited or expired (55,250 ) 5.74 Outstanding and unvested at June 30, 2017 952,500 $ 5.45 Options Outstanding at December 31, 2016 316,456 $ 1.34 Granted — — Exercised (316,456 ) 1.34 Forfeited or expired — — Outstanding at June 30, 2017 — — — $ — Warrants as of Weighted-Average Exercise Price Balance Sheet Classification as of June 30, 2017 December 31, 2016 Expiration June 30, 2017 December 31, 2016 Allen, F. Stephen Series 3 — 425,000 $ 3.55 6/21/2017 Equity Equity OTA LLC Series 2 — 250,000 $ 3.55 6/21/2017 Equity Equity All warrants — 675,000 $2,970,400.the remaining 1,000,000 outstanding warrants to $3.55 per share. On December 22, 2015, in conjunction with a litigation settlement, the Company repurchased 50,000 Series 2 warrants and extended the warrant expiration date to June 21, 2017. The fair value of the warrant modification was determined by comparing the fair value of the modified warrant with the fair value of the unmodified warrant on the modification date.Warrants Number of warrants Weighted-Average
Exercise PriceOutstanding at December 31, 2016 675,000 $ 3.55 Granted — — Exercised (675,000 ) $ 3.55 Forfeited or expired — — Outstanding and exercisable at June 30, 2017 — — OPERATIONS●our expectations regarding user engagement patterns;●our expectations regarding mobile usage by our users;●the impact of increased mobile usage and Social Theater competition on revenues and financial results;●the impact of seasonality on our operating results;●our expectations relating to advertising and the effects of advertising and mobile monetization on our revenues;●our expectations regarding our ability to manage and fill our advertising inventory internally;●our plans regarding product development, international growth and personnel;●our liquidity and expectations regarding uses of cash;●our expectations regarding payments relating to cost reduction initiatives;●our ability to successfully pursue collection actions;●our expectations regarding the cost and outcome of our current and future litigation;●the impact of new accounting policies;●our plans for capital expenditures for the remainder of the year ending December 31, 2016, and●our acquisition of Skout, Inc.Credits.Credits, Points or Gold. Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.2015.2016. Additional risks that we do not presently know or that we currently believe are immaterial could materially and adversely affect any of our business, financial position, future results or prospects.20152016 (“Annual Report”), as well as our condensed consolidated financial statements and the accompanying notes included in this report.MeetMenetworknetworks for meeting new people on mobile platforms, including on iPhone, Android, iPad and other tablets, and on the web that facilitatesfacilitate interactions among users and encouragesencourage users to connect and chat with each other. MeetMe monetizesGiven consumer preferences to use more than a single mobile application, we are adopting a brand portfolio strategy, through which we offer products that collectively appeal to the broadest spectrum of consumers. We are consolidating the fragmented mobile meeting sector through strategic acquisitions, leveraging economies and innovation to drive growth. On October 3, 2016 we completed our acquisition of Skout, Inc. (“Skout”), and on April 3, 2017 we completed our acquisition of Ifwe Inc. (“if(we)”), both of which owned leading global mobile networks for meeting new people. MeetMe provides users with access to an expansive, multilingual menu of resources that promote social interaction, information sharing, and other topics of interest. The Company offers online marketing capabilities, which enable marketers to display their advertisements in different formats and in different locations. We offer significant scale to our advertising partners, with hundreds of millions of daily impressions across our active and growing global user base, and sophisticated data science for highly effective hyper-targeting. The Company works with its advertisers to maximize the effectiveness of their campaigns by optimizing advertisement formats and placements.MeetMeThe Meet Group is creating the social network not of the people you know but of the people you want to know. Nimble and fast-moving, already in more than 100 countries, we are challenging the dominant player in our space, Match Group. Our vision extends beyond dating. We focus on building quality products to satisfy the universal need for human connection among all people, everywhere-not just paying subscribers. We believe meeting new people is a basic human need, especially for users aged 18-30,18-34, when so many long-lasting relationships are made.the MeetMe network growsThe Meet Group’s networks grow and the number of users in a location increases, we believe that users who are seeking to meet new people will incrementally benefit from the quantity of relevant connections.SeptemberJune 30, 20162017 and 2015,2016, the total MeetMeCompany MAUs were approximately 5.7413.87 million and 4.915.83 million, respectively, and total MeetMeCompany DAUs were approximately 1.303.43 million and 1.161.29 million, respectively. The aggregate total Monthly Average for the Quarter Ended June 30, 2017 2016 MAU 13,869,145 5,834,642 For the Quarter Ended June 30, 2017 2016 DAU 3,432,355 1,291,146 registered users on MeetMe platforms2017 Highlightsapproximately 160$23.3 million in the second quarter of 2017, up 55% from $15.1 million in the second quarter of 2016.129reconciliation to the most directly comparable GAAP financial measures, below.)as of Septemberat June 30, 2016 and 2015, respectively. 5,739,328 4,912,894 1,298,950 1,162,232 MeetMethe Company’s apps in terms of average revenue per user (“ARPU”) and average daily revenue per daily active user (“ARPDAU”). We define ARPU as the average quarterly revenue per MAU. We define ARPDAU as the average quarterly revenue per DAU. We define mobile MAU as a user who accessed our sites by one of our mobile applications for all platforms or by the mobile optimized version of our website for MeetMe and Skout, whether on a mobile phone or tablet during the month of measurement. We define a mobile DAU as a user who accessed our sites by one of our mobile applications for all platforms or by the mobile optimized version of our website for MeetMe and Skout, whether on a mobile phone or tablet during the day of measurement. Visits represent the number of times during the measurement period that users came to the website or mobile applications for distinct sessions. A page view is a page that a user views during a visit.SeptemberJune 30, 2016, MeetMe2017, the Company averaged 5.0210.67 million mobile MAUs and 5.7413.87 million total MAUs on average, as compared to 3.814.84 million mobile MAUs and 4.915.83 million total MAUs on average in the quarter ended SeptemberJune 30, 2015,2016, a net increase of 1.25.83 million or 32%120% for mobile MAUs, and a net increase of 826,0008.04 million or 17%138% for total MeetMeCompany MAUs. Mobile DAUs were 1.252.70 million for the quarter ended SeptemberJune 30, 2016, an 18%2017, a 122% increase, from 1.061.22 million in the quarter ended SeptemberJune 30, 2015.2016. For the quarter ended SeptemberJune 30, 2016, MeetMe2017, the Company averaged 1.303.43 million total DAUs, as compared to 1.161.29 million total DAUs on average for the quarter ended SeptemberJune 30, 2015,2016, a net increase of approximately 137,0002.14 million total DAUs, or 12%166%.
We believe the shift of our audience from web to mobile is an important driver of our business. Although decreasing web traffic has resulted in declining web revenue, we have successfully increased our mobile revenue by 39% and our mobile ARPDAU by 18% to $16.0 million and $0.139, respectively, for the quarter ended September 30, 2016 from $11.6 million and $0.118, respectively, for the quarter ended September 30, 2015. We believe our ability to continue to grow our mobile audience and our mobile monetization at a faster pace than the decline in our web revenue will impact the performance of our business. 
SeptemberJune 30, 2016, MeetMe2017, the Company earned an average of $0.26$1.45 ARPU on the web and $3.19$2.19 ARPU in our mobile applications, as compared to $0.71 in$0.36 ARPU on the web ARPU and $3.03$3.11 in mobile ARPU for the quarter ended SeptemberJune 30, 2015.2016. In the quarter ended SeptemberJune 30, 2016, MeetMe2017, the Company earned an average of $0.040$0.086 in web ARPDAU and $0.139$0.095 in mobile ARPDAU, as compared to $0.091$0.053 in web ARPDAU and $0.118$0.136 in mobile ARPDAU for the quarter ended SeptemberJune 30, 2015.
Third Quarter of 2016 Highlights●Mobile revenue was $16.0 million in the third quarter of 2016, up 39% from $11.6 million in the corresponding period in 2015.●Net income for the third quarter of 2016 was $4.4 million. Adjusted EBITDA was $6.9 million for the third quarter of 2016. Adjusted EBITDA is a non-GAAP financial measure. For definition of Adjusted EBITDA, please refer to the Non-GAAP – Financial Measures included below in this filing.●Cash and Cash Equivalents totaled $46.0 million at September 30, 2016, an increase of $26.7 million, from $19.3 million at December 31, 2015.
●Number of MAUs and DAUs: We believe our ability to grow web and mobile MAUs and DAUs affects our revenue and financial results by influencing the number of advertisements we are able to show, the value of those advertisements, and the volume of in-app purchases, as well as our expenses and capital expenditures.●User Engagement: We believe changes in user engagement patterns affect our revenue and financial performance. Specifically, the number of visits and page views each MAU or DAU generates affects the number of advertisements we are able to display and therefore the rate at which we are able to monetize our active user base. We continue to create new features and enhance existing features to drive additional engagement.●Advertising Rates: We believe our revenue and financial results are materially dependent on industry trends, and any changes to the revenue we earn per thousand advertising impressions (CPM) could affect our revenue and financial results. We expect to continue investing in new types of advertising and new placements, especially in our mobile applications. Additionally, we are prioritizing initiatives that generate revenue directly from users, including new virtual currency products and a premium subscription product, in part to reduce our dependency on advertising revenue.●User Geography: The geography of our users influences our revenue and financial results because we currently monetize users in distinct geographies at varying average rates. For example, ARPU in the United States and Canada is significantly higher than in Latin America. We laid the foundation for future international growth by localizing the core MeetMe service into twelve languages in addition to English. We plan to continue to invest in user growth across the world, including in geographies where current per user monetization rates are relatively lower than in the United States and Canada.●New User Sources: The percentage of our new users that are acquired through inorganic, paid sources impacts our financial performance, specifically with regard to ARPU for web and mobile. Inorganically acquired users tend to have lower engagement rates, tend to generate fewer visits and ad impressions and to be less likely to make in-app purchases. When paid marketing campaigns are ongoing, our overall usage and traffic increases due to the influx of inorganically acquired users, but the rate at which we monetize the average active user overall declines as a result.●Ad Inventory Management: Our revenue trends are affected by advertisement inventory management changes affecting the number, size, or prominence of advertisements we display. In general, more prominently displayed advertising units generate more revenue per impression. Our Social Theater campaign expenses are materially dependent on the percentage of Social Theater campaigns that run on MeetMe versus the percentage that run on other networks. We work to maximize the share of Social Theater campaigns that run on MeetMe and run campaigns on other networks only when necessary.●Increased Social Theater Competition: A significant portion of the revenue generated by the Social Theater is derived from advertising campaigns, powered by Social Theater technology, that run on networks other than MeetMe. A recent increase in competitors offering similar technology solutions, and in some cases their own cross-platform distribution networks, has made it more difficult to compete on price and win business. We expect this downward pressure on price to continue and impact our operating results in the future.●Seasonality: Advertising spending is traditionally seasonal with a peak in the fourth quarter of each year. We believe that this seasonality in advertising spending affects our quarterly results, which generally reflect a growth in advertising revenue between the third and fourth quarters and a decline in advertising spending between the fourth and subsequent first and second quarters each year. We believe that this seasonality in advertising spending affects our quarterly results, which generally reflect a growth in advertising revenue between the third and fourth quarters and a decline in advertising spending between the fourth and subsequent first and second quarters each year.on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 8, 2016.9, 2017. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates during the ninesix months ended SeptemberJune 30, 2016,2017, compared to those discussed in our Annual Report.10-K for the year ended December 31, 2015.Recent Accounting Pronouncements10-Q.In May 2014, the FASB issued ASU 2014-09,Revenue from Contracts with Customers.ASU 2014-09 supersedes the revenue recognition requirementsFASB ASC Topic 605,Revenue Recognitionand most industry-specific guidance throughout the ASC, resulting in the creation of FASB ASC Topic 606,Revenue from Contracts with Customers. ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. This ASU provides alternative methods of adoption. In August 2015, the FASB issued ASU 2015-14,Revenue from Contracts with Customers, DeferralOperationsEffective Date. ASU 2015-14 defers the effective date of ASU 2014-09 to annual reporting periods beginning after December 15,three months ended June 30, 2017 and interim periods within those reporting periods beginning after that date, and permits early adoption of the standard, but not before the original effective date for fiscal years beginning after December 15, 2016. In March 2016 the FASB issued ASU 2016-08,Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) clarifying the implementation guidance on principal versus agent considerations. Specifically, an entity is required to determine whether the nature of a promise is to provide the specified good or service itself (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The determination influences the timing and amount of revenue recognition. In April 2016, the FASB issued ASU 2016-10,Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing clarifying the implementation guidance on identifying performance obligations and licensing. Specifically, the amendments reduce the cost and complexity of identifying promised goods or services and improves the guidance for determining whether promises are separately identifiable. The amendments also provide implementation guidance on determining whether an entity's promise to grant a license provides a customer with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). The effective date and transition requirements for ASU 2016-08 and ASU 2016-10 are the same as the effective date and transition requirements for ASU 2014-09. In May, 2016 the FASB issued ASU No. 2016-12Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which clarifies guidance in certain narrow areas and adds a practical expedient for certain aspects of the guidance. The amendments do not change the core principle of the guidance in ASU 2014-09. The Company is currently assessing the potential impact of adopting ASU 2014-09, ASU 2016-08, ASU 2016-10 and ASU 2016-12 on its financial statements and related disclosures.In July 2015, the FASB issued ASU 2015-14, which delayed the effective date of ASU 2014-09. As a result, this guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We are currently evaluating the new guidance and have not determined the impact this standard may have on our consolidated financial statements, nor decided upon the method of adoption.In June 2014, the FASB issued ASU No. 2014-12,Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The adoption of ASU 2014-12 had no material impact on our consolidated financial statements.In August 2014, the FASB issued ASU 2014-15,Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 explicitly requires management to evaluate, at each annual or interim reporting period, whether there are conditions or events that exist which raise substantial doubt about an entity’s ability to continue as a going concern and to provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and annual and interim periods thereafter, with early adoption permitted. We are currently evaluating the impact of adopting this new standard on our consolidated financial statement disclosures.In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The new standard requires debt issuance costs, related to a recognized debt liability, be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. The update requires the guidance to be applied retrospectively. The update is effective for fiscal years beginning after December 15, 2015. The adoption of ASU 2015-03 had no material impact on our consolidated financial statements.In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which will require entities to present all deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) as non-current on the balance sheet. This guidance is effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. Early adoption is permitted, and entities may choose whether to adopt this update prospectively or retrospectively. On December 31, 2015, we elected to adopt ASU 2015-17 and changed our method of classifying DTAs and DTLs as either current or non-current to classifying all DTAs and DTLs as non-current, using a prospective method. Prior balance sheets were not retrospectively adjusted. The adoption did not have a material effect on our financial position.In January 2016, the FASB issued ASU 2016-01,Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under ASC 820,Fair Value Measurements, and as such these investments may be measured at cost. ASU 2016-01 will be effective for annual periods and interim periods within those annual periods beginning after December 15, 2017 and early adoption is not permitted. The adoption of ASU 2016-01 is not expected to have a material effect on our consolidated financial statements.In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, and annual and interim periods thereafter, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact that the adoption of this new standard will have on our consolidated financial statements.In March 2016, the FASB issued ASU No. 2016-09,Compensation - Stock Compensation (Topic 718). The amendments of ASU No. 2016-09 were issued as part of the FASB's Simplification Initiative focused on improving areas of GAAP for which cost and complexity may be reduced while maintaining or improving the usefulness of information disclosed within the financial statements. The amendments focused on simplification specifically with regard to share-based payment transactions, including income tax consequences, classification of awards as equity or liabilities and classification on the statement of cash flows. The guidance in ASU No. 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. We are currently evaluating the impact that the adoption of this new standard will have on our consolidated financial statements.In June 2016, the FASB issued ASU 2016-13,Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard provides for a new impairment model which requires measurement and recognition of expected credit losses for most financial assets held. ASU No. 2016-13 is effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. We are currently evaluating the impact that the adoption of this new standard will have on our consolidated financial statements.In August 2016, the FASB issued ASU No. 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, providing additional guidance on several cash flow classification issues, with the goal of the update to reduce the current and potential future diversity in practice. The amendments in this update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We are currently evaluating the impact that the adoption of this new standard will have on the consolidated financial statements.Consolidated Statementscondensed consolidated statements of Operationsoperations for the three months ended SeptemberJune 30, 20162017 and 20152016 that is used in the following discussions of our results of operations: $ 17,191,261 $ 14,308,080 $ 2,883,181 20 3,228,262 1,483,252 1,745,010 118 5,808,449 6,175,566 (367,117 -6 2,215,727 7,802,367 (5,586,640 -72 761,460 762,830 (1,370 0 467,777 — 467,777 100 12,481,675 16,224,015 (3,742,340 -23 4,709,586 (1,915,935 6,625,521 346 7,135 5,303 1,832 35 (4,123 (93,383 89,260 96 (318,983 45,532 (364,515 801 (1,206 (78,987 77,781 98 (317,177 (121,535 (195,642 -161 4,392,409 (2,037,470 6,429,879 316 — 1,849 (1,849 -100 $ 4,392,409 $ (2,035,621 $ 6,428,030 316 Comparison of the three months endedSeptember 30, 2016 and 2015 Three Months Ended June 30, Change From Prior Year 2017 2016 ($) % Revenues $ 31,329,468 $ 16,388,991 $ 14,940,477 91.2 % Operating costs and expenses: Sales and marketing 4,599,842 3,226,344 1,373,498 42.6 % Product development and content 16,526,905 6,214,062 10,312,843 166.0 % General and administrative 5,160,799 1,867,590 3,293,209 176.3 % Depreciation and amortization 2,965,175 753,918 2,211,257 293.3 % Acquisition and restructuring costs 3,769,425 1,160,349 2,609,076 224.9 % Total operating costs and expenses 33,022,146 13,222,263 19,799,883 149.7 % (Loss) income from operations (1,692,678 ) 3,166,728 (4,859,406 ) (153.5 )% Other income (expense): Interest income 1,400 6,447 (5,047 ) (78.3 )% Interest expense (175,254 ) (5,360 ) (169,894 ) (3,169.7 )% Change in warrant liability — (787,391 ) 787,391 100.0 % (Loss) gain on foreign currency adjustment (9,229 ) 18,201 (27,430 ) (150.7 )% Total other expense (183,083 ) (768,103 ) 585,020 76.2 % (Loss) income before income taxes (1,875,761 ) 2,398,625 (4,274,386 ) (178.2 )% Benefit from income taxes 2,732,356 27,219,764 (24,487,408 ) (90.0 )% Net income $ 856,595 $ 29,618,389 $ (28,761,794 ) (97.1 )% $17.2$31.3 million for the three months ended SeptemberJune 30, 2016,2017, an increase of $2.9$14.9 million or 20%91.2% compared to $14.3$16.4 million for the same period in 2015.three months ended June 30, 2016. The increase in revenue is attributable to a $4.5an $8.3 million increase in mobile revenue, partially offset by $1.6a $6.1 million decreaseincrease in web advertisingrevenue, and cross platforma $0.5 million increase in cross-platform revenue. TheWe believe the increase in mobile advertising revenue is primarily due to growth with ourincreased mobile traffic metrics, specifically DAUs on mobile devices,advertising impressions and increased advertising rates on mobile devices.in-app purchases, as a result of the Skout and if(we) acquisitions. The decrease inincreased web advertising revenue is attributableprimarily due to user generated revenue and subscription revenue from the decline in web DAUs.$1.7$1.4 million, or 118%42.6%, to $4.6 million for the three months ended June 30, 2017 from $3.2 million for the three months ended SeptemberJune 30, 2016 from $1.5 million for the same period2016. The net increase in 2015. Increased sales and marketing expenses, are primarily attributableincluding the Skout and if(we) sales and marketing related expense, is due to anincreased advertising spend of approximately $1.0 million and increased employee expenses of approximately $0.3 million. The increase in advertisingemployee expenses is primarily due to the Skout and marketing spend.if(we) acquisitions.decreasedincreased approximately $367,000,$10.3 million, or 6%166.0%, to $5.8$16.5 million for the three months ended SeptemberJune 30, 20162017 from $6.2 million for the same period in 2015.three months ended June 30, 2016. The net decreaseincrease in product development and content expense, including the Skout and if(we) product development related expense, is attributable to a decrease of $598,000 of third party content costs for cross platform Social Theater affiliate campaigns, offset by an increase of $148,000 in employee expenses of $4.5 million, data center and $115,000technical operations of $2.5 million, stock-based compensation expenses. The decrease in third partyof $1.0 million, mobile content cost of $0.8 million and Social Theater content costs for cross platform Social Theater campaigns was due to lower cross platform revenue and an improvement on costs structure for those cross platform revenue products.of $0.5 million. The increase in employee expenses, wasdata center and technical operations, stock-based compensation and mobile content costs is attributable to the Skout and if(we) acquisitions. The increase in Social Theater content costs is due to annual salary increases and increased benefit costs.Social Theater revenue.decreased $5.6increased $3.3 million or 72%176.3%, to $2.2$5.2 million for the three months ended SeptemberJune 30, 20162017 from $7.8 million for the same period in 2015. The aggregate decrease in general and administrative costs is primarily attributable to the bad debt write-off of Beanstock’s outstanding receivable balance for the three months ended September 30, 2015.Acquisition and Restructuring Costs:Acquisition and restructuring costs were approximately $0.5$1.9 million for the three months ended SeptemberJune 30, 2016,2016. The net increase in general andprofessional fees incurred in connection withan increase of employee expenses of $0.9 million, stock-based compensation of $0.4 million, office related expenses of $0.3 million, and travel related costs of $0.2 million. These increases are primarily attributable to the Skout acquisition.$250,000$1.5 million to $911,000$2.4 million for the three months ended SeptemberJune 30, 20162017 from $661,000$0.9 million for the three months ended SeptemberJune 30, 2015.2016. Stock-based compensation expense represented 7% and 4% of operating expenses for both the three months ended SeptemberJune 30, 20162017 and 2015, respectively.SeptemberJune 30, 2016,2017, there was approximately $2.6$7.6 million and $3.6$12.2 million of unrecognized compensation cost related to stock options and unvested restricted stock awards, respectively, which is expected to be recognized over a period of approximately two years. 2015 to 2016 $ 94,997 $ 83,264 $ 11,733 368,150 253,436 114,714 448,343 324,726 123,617 $ 911,490 $ 661,426 $ 250,064 Three Months Ended June 30, Change from Prior Year 2017 2016 ($) Sales and marketing $ 101,035 $ 95,295 $ 5,740 Product development and content 1,428,743 403,956 1,024,787 General and administrative 838,414 416,321 422,093 Total stock-based compensation expense $ 2,368,192 $ 915,572 $ 1,452,620 $761,000$3.0 million and $763,000$0.8 million for the three months ended SeptemberJune 30, 2017 and 2016, respectively. The increase in depreciation and amortization expense is primarily attributable to the amortization of intangibles related to the Skout and if(we) acquisitions.2015, respectively.Consolidated Statementcondensed consolidated statements of Operationsoperations for the six months ended June 30, 2017 and 2016 that is used in the following discussions of our results of operations for the nine month period ended September 30, 2016: $ 46,901,923 $ 37,023,933 $ 9,877,990 27 8,776,029 3,792,639 4,983,390 131 17,730,610 18,578,826 (848,216 -5 6,431,486 11,197,263 (4,765,777 -43 2,266,642 2,380,004 (113,362 -5 1,628,126 — 1,628,126 100 36,832,893 35,948,732 884,161 2 10,069,030 1,075,201 8,993,829 836 18,697 15,733 2,964 19 (16,228 (375,239 359,011 96 (864,596 6,212 (870,808 14018 33,347 (862,078 895,425 104 — 163,333 (163,333 -100 (828,780 (1,052,039 223,259 21 9,240,250 23,162 9,217,088 39794 27,125,446 (126,801 27,252,247 21492 $ 36,365,696 $ (103,639 $ 36,469,335 35189 Comparison of the nine months ended September 30, 2016 and 2015 Six Months Ended June 30, Change From Prior Year 2017 2016 ($) % Revenues $ 51,388,265 $ 29,710,662 $ 21,677,603 73.0 % Operating costs and expenses: Sales and marketing 9,705,350 5,547,767 4,157,583 74.9 % Product development and content 24,984,399 11,922,162 13,062,237 109.6 % General and administrative 8,023,226 4,215,758 3,807,468 90.3 % Depreciation and amortization 4,650,014 1,505,182 3,144,832 208.9 % Acquisition and restructuring costs 5,269,854 1,160,349 4,109,505 354.2 % Total operating costs and expenses 52,632,843 24,351,218 28,281,625 116.1 % (Loss) income from operations (1,244,578 ) 5,359,444 (6,604,022 ) (123.2 )% Other income (expense): Interest income 3,970 11,562 (7,592 ) (65.7 )% Interest expense (177,586 ) (12,105 ) (165,481 ) 1,367.0 % Change in warrant liability — (545,614 ) 545,614 (100.0 )% (Loss) gain on foreign currency adjustment (11,429 ) 34,553 (45,982 ) (133.1 )% Total other expense (185,045 ) (511,604 ) 326,559 (63.8 )% (Loss) income before income taxes (1,429,623 ) 4,847,840 (6,277,463 ) (129.5 )% Benefit from income taxes 2,732,064 27,125,446 (24,393,382 ) (89.9 )% Net income $ 1,302,441 $ 31,973,286 $ (30,670,845 ) (95.9 )% $46.9$51.4 million for the ninesix months ended SeptemberJune 30, 2016,2017, an increase of approximately $9.9$21.7 million or 27%,73.0% compared to $37.0$29.7 million for the same periodsix months ended June 30, 2016. The increase in 2015. The increaserevenue is attributable to a $14.8$15.3 million increase in mobile revenue, partially offset by a $4.9$5.7 million decreaseincrease in web advertising revenue, and a $0.6 million increase in cross platform revenue. TheWe believe the increase in mobile advertising revenue is primarily due to growth with ourincreased mobile traffic metrics, specifically DAUs on mobile devices,advertising impressions and increased advertising rates on mobile devices. The decrease inin-app purchases resulting from the Skout and if(we) acquisitions, and the increased web advertising revenue is attributableprimarily due to user generated revenue and subscription revenue from the decline in web DAUs.Marketing:Marketing:Sales and marketing expenses increased approximately $5.0$4.2 million, or 131%74.9%, to approximately $8.8$9.7 million for the ninesix months ended SeptemberJune 30, 20162017 from $3.8$5.5 million for the same period of 2015. Increasedsix months ended June 30, 2016. The net increase in sales and marketing expenses, are primarily attributableincluding the Skout and if(we) sales and marketing related expense, is due to anincreased advertising spend of approximately $3.6 million, and increased employee expenses of approximately $0.4 million. The increase in advertisingemployee expenses is primarily due to the Skout and marketing spend.if(we) acquisitions.Content:Content:Product development and content expenses decreasedincreased approximately $848,000,$13.1 million, or 5%109.6%, to $17.7$25.0 million for the ninesix months ended SeptemberJune 30, 20162017 from $18.6$11.9 million for the same period of 2015.six months ended June 30, 2016. The net decreaseincrease in product development and content expense, including the Skout and if(we) product development related expense, is attributable to a net decreasean increase of employee expenses of $5.4 million, data center and technical operations of $3.3 million, stock-based compensation of $1.2 million, mobile content cost of third party$0.9 million, and Social Theater content costs for cross platform Social Theater affiliate campaigns, a decrease in data center expense of approximately $700,000, offset by an increase in employee expenses of $1.1$0.7 million. The decrease in third party content costs for cross platform Social Theater campaigns was due to lower cross platform revenue and an improvement on costs structure for those cross platform revenue products. The decrease in data center expenses was a result of the consolidation of servers in our data center. The increase in employee expenses, was primarilydata center and technical operations, stock-based compensation, and mobile content costs is attributable to the Skout and if(we) acquisitions. The increase in Social Theater content costs is due to annual salary increases and increased benefit costs.Social Theater revenue.Administrative:Administrative: General and administrative expenses decreased approximately $4.8increased $3.8 million or 43%90.3%, to $6.4$8.0 million for the ninesix months ended SeptemberJune 30, 20162017 from $11.2$4.2 million for the same period of 2015.six months ended June 30, 2016. The aggregate decreasenet increase in general and administrative costsexpense, including the Skout and if(we) general and administrative related expense, is primarily due to the bad debt write-off of Beanstock’s outstanding receivable balance for the three months ended September 30, 2015, partially offset by an increase in travel expenses of $227,000, an increase in stock compensation costs of $358,000, and an increase in employee expenses of $210,000. The increase in$1.2 million, stock-based compensation of $0.6 million, office related expenses of $0.4 million, professional fees ofexpenses wasrelated costs of $0.2 million. These increases are attributable primarily related to the Skout acquisition, and the increase in employee expenses was due to annual salary increases and increased benefit costs.AcquisitionRestructuringOther Costs:Acquisition and restructuring costs wereExpensesninesix months ended SeptemberJune 30, 2016, due to professional fees incurred in connection with2016. Stock-based compensation expense represented 7% of operating expenses for both the Skout acquisition.Benefit (Provision) for Income Taxes:We have incurred NOLs on a consolidated basis for all years since 1998. Accordingly, we have historically recorded a valuation for the full amount of gross deferred tax assets, as the future realization of the tax benefit was not “currently more likely than not.” six months ended June 30, 2017 and 2016.2016, we concluded that it is more likely than not that the Company will be able to realize the full or a portion of the benefit of the U.S. federal and state deferred tax assets in the future. As a result, we released $27.3 million of the valuation allowance against our net deferred tax assets during the nine months ended September 30, 2016.Stock Based CompensationStock based compensation expense increased approximately $545,000 to $2.6 million for the nine months ended September 30, 2016 from $2.0 million for the same period of 2015. Stock based compensation expense represented 7% and 6% of operating expenses for the nine months ended September 30, 2016 and 2015. As of September 30, 2016 and 2015,2017, there was approximately $2.6$7.6 million and $3.6$12.2 million respectively, of unrecognized compensation cost related to stock options and unvested restricted stock awards, respectively, which is expected to be recognized over a period of approximately two years. 2015 to 2016 $ 250,729 $ 229,508 $ 21,221 1,075,803 909,714 166,089 1,228,310 870,520 357,790 $ 2,554,842 $ 2,009,742 $ 545,100 Six Months Ended June 30, Change from Prior Year 2017 2016 ($) Sales and marketing $ 202,304 $ 155,732 $ 46,572 Product development and content 1,930,043 707,653 1,222,390 General and administrative 1,370,003 779,967 590,036 Total stock-based compensation expense $ 3,502,350 $ 1,643,352 $ 1,858,998 Depreciation and amortizationexpense was $2.3$4.7 million and $2.4$1.5 million for the ninesix months ended SeptemberJune 30, 2017 and 2016, respectively. The increase in depreciation and amortization expense is primarily attributable to the amortization of intangibles related to the Skout and if(we) acquisitions.2015, respectively. $ 16,320,303 $ 1,925,415 (635,605 (1,042,237 10,955,086 (2,251,742 $ 26,639,784 $ (1,368,564 Six Months Ended June 30, 2017 2016 Net cash provided by operating activities $ 16,662,265 $ 10,311,169 Net cash used in investing activities (66,397,918 ) (494,744 ) Net cash provided by financing activities 60,647,858 2,920,019 $ 10,912,205 $ 12,736,444 $16.3$16.7 million for the ninesix months ended SeptemberJune 30, 20162017 compared to net cash provided by operations of approximately $1.9$10.3 million for the same period in 2015. ninesix months ended SeptemberJune 30, 2016,2017, net cash provided by operations consisted primarily of net income of approximately $36.4$1.3 million adjusted for certain non-cash expenses of approximately $2.3$4.7 million of depreciation and amortization expense $2.6and $3.5 million related to stock based compensation for the vesting of stock options, $27.3 million related to deferred taxes, $33,000 related to gain on cumulative foreign currency translation adjustment, $57,000 for bad debt expense and $865,000 for change in warrant liability. Changesoptions. Additionally, changes in working capital increased the net cash provided by operations. These changes included decreases in accounts receivable of approximately $2.9$5.9 million resulting from collections $216,000and decreases of $1.6 million in prepaid expenses, and other current assets and other assets, accounts payable and accrued liabilities of $1.6 million.ninesix months ended SeptemberJune 30, 20162017 of approximately $636,000 was primarily due to the acquisition of if(we) of $65.8 million, net of cash and restricted cash acquired, as well as approximately $0.6 million due to capital expenditures for computer equipment to increase capacity and improve performance.ninesix months ended SeptemberJune 30, 20162017 of approximately $11.0$60.6 million was due to approximately $8.8$43.0 million of proceeds from exercise ofa common stock optionsand $4.5offering, $15.0 million of proceeds from debt, $2.8 million from the exercise of warrants,stock options and $2.4 million from the exercise of warrants. These increases in cash were partially offset by $2.0$1.9 million payments of debt, $0.5 million of treasurypayments for restricted stock repurchasesawards withheld for taxes and $297,000$0.1 million of capital lease payments. $ 45,971,169 $ 19,298,038 $ 160,604,013 $ 111,490,673 29 17 June 30,
2017 December 31,
2016Cash and cash equivalents $ 32,252,734 $ 21,852,531 Total assets $ 278,274,133 $ 209,489,484 Percentage of total assets 11.6 % 10.4 % SeptemberJune 30, 2016, the Company2017, we had positive working capital of approximately $54.5$33.3 million.On April 29, 2013, the Company (i) entered into a loan and security agreement with a leading provider of debt financing to technology companies (the “Loan Agreement”) and (ii) issued two warrant agreements (“Warrants”), for the purchase of shares of the Company’s common stock to the lenders under the Loan Agreement. The Loan Agreement had an aggregate commitment of $8.0 million. The Company borrowed $5.0 million under the Loan Agreement on April 29, 2013. Had it achieved certain financial goals, the Company could have borrowed two additional tranches of loans, each in an aggregate principal amount of up to $1.5 million. All loans under the Loan Agreement had a term of 36 months and may not be re-borrowed after repayment. The purchase price for the shares of common stock issuable upon exercise of the Warrants is equal to, at each Warrant holder’s option, the lower of (x) $1.96 and (y) the price per share of the stock issued in the next equity placement of the Company’s stock, subject to certain restrictions set forth in the Warrants. The Warrants may have been exercised prior to February 28, 2024. As of September 30, 2016 and November 4, 2016, the Company did not have any outstanding indebtedness under the Loan Agreement. The remaining warrants were exercised in 2016.ninesix months ended SeptemberJune 30, 20162017, the Company did not enter into any additional capital leases.On October 3, 2016, in connection with acquisition of Skout, the Company disbursed approximately $32.9 million of cash, as merger consideration and as non-compete payments associated with the acquisition. As of November 7, 2016, the CompanyJune 30, 2017, capital leases that were previously entered into had approximately $15$0.1 million in principal amount of cash and cash equivalents. The Company believescapital lease indebtedness, all of which is due in the remainder of 2017.itthe Company will have sufficient funds to meet its anticipated cash needs for at least the next 12 months.$1approximately $3.4 million for the remainder of 2016,2017, which we believe will support our growth of domestic and international business through increased capacity, performance improvement and expanded content.SeptemberJune 30, 2016,2017, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.–- Financial Measuretheour historical operating results of the Company nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.shareholdersstockholders benefit from referring to the following non-GAAP financial measureadjusted EBITDA in planning, forecasting, and analyzing future periods. Our management usesWe use this non-GAAP financial measure in evaluating itsour financial and operational decision making and as a means to evaluate period-to-period comparison. Our management uses and relies on the following non-GAAP financial measure:gaingains on salesales of asset,assets, bad debt expense outside the normal range, and goodwill and long-lived asset impairment charges, if any. We exclude stock-based compensation because it is non-cash in nature. Our management believesWe believe Adjusted EBITDA is an important measure of our operating performance because it allows management, investors, and analysts to evaluate and assess our core operating results from period to period after removing the impact of acquisition related costs, and other items of a non-operational nature that affect comparability. Our management recognizesWe recognize that Adjusted EBITDA has inherent limitations because of the excluded items.Net Income (Loss),net income, which is the most comparable financial measure calculated in accordance with GAAP, to our non-GAAP financial measure.Adjusted EBITDA. We believe that providing thethis non-GAAP financial measure, together with the reconciliation from GAAP, helps investors make comparisons between the Companyus and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.Net Income,net income, a GAAP financial measure, to Adjusted EBITDA: $ 4,392,409 $ (2,035,621 $ 36,365,696 $ (103,639 4,123 93,383 16,228 375,239 318,983 (45,532 864,596 (6,212 — (1,849 (27,125,446 126,801 761,460 762,830 2,266,642 2,380,004 467,777 — 1,628,126 — 911,490 661,426 2,554,842 2,009,742 — 5,735,204 — 5,735,204 1,206 78,987 (33,347 862,078 — — — (163,333 $ 6,857,448 $ 5,248,828 $ 16,537,337 $ 11,215,884 Three Months Ended June 30, Six Months Ended June 30, ADJUSTED EBITDA 2017 2016 2017 2016 Net income $ 856,595 $ 29,618,389 $ 1,302,441 $ 31,973,286 Interest expense 175,254 5,360 177,586 12,105 Change in warrant liability — 787,391 — 545,614 Benefit from income taxes (2,732,356 ) (27,219,764 ) (2,732,064 ) (27,125,446 ) Depreciation and amortization 2,965,175 753,918 4,650,014 1,505,182 Stock-based compensation expense 2,368,192 915,572 3,502,350 1,643,352 Acquisition and restructuring 3,769,425 1,160,349 5,269,854 1,160,349 Loss (gain) on foreign currency adjustment 9,229 (18,201 ) 11,429 (34,553 ) ADJUSTED EBITDA $ 7,411,514 $ 6,003,014 $ 12,181,610 $ 9,679,889 RISKThere were no material changesRISK.market risk during the three months ended September 30, 2016.insured depository accounts, of which $30.0 million exceeded insurance limits.ProceduresSeptemberJune 30, 2016,2017, noted during the evaluation of controls as of the end of the period covered by this report, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.6 7-Commitments and Contingenciesto the unaudited condensed consolidated financial statements contained in this report for information on specific matters.20152016 filed with the SEC on March 8, 20169, 2017 and our CurrentQuarterly Report on Form 8-K10-Q for the quarter ended March 31, 2017 filed with the SEC on October 4, 2016May 10, 2017 include detailed discussions of our risk factors under the headings “Part I, Item 1A. Risk Factors” and “Item 8.01. Other Events,”“Part II, Item 1A. Risk Factors” respectively. You should carefully consider the risk factors discussed in our Annual Report on Form 10-K and CurrentQuarterly Report on Form 8-K,10-Q, as well as the other information in this report, which could materially harm our business, financial condition, results of operations, or the value of our common shares.sharesItems 2 (a) and (b) are inapplicable.(c) STOCK REPURCHASES N/A N/A N/A N/A N/A N/A N/A N/A 343,234 $5.93 343,234 $12,966,000 (1) Shares purchased pursuant to the August 29, 2016 publicly announced share repurchase program, authorizing the repurchase of up to $15 million of the Company’s outstanding common stock. See Note 7 of the Notes to the consolidated financial statements for a description of the repurchase program, which is incorporated herein by reference.DisclosuresNot applicable.Effective June 1, 2016, the Company amended and restated its employment agreements with William Alena, the Company’s Chief Revenue Officer, Frederic Beckley, the Company’s General Counsel and Executive Vice President, Business Affairs, and Jonah Harris, the Company’s Chief Technology Officer (each an “Executive” and collectively, the “Executives”). The form of amended and restated employment agreement between the Executives and the Company (the “Agreement”) is the form of employment agreement currently in effect between the Company and its Chief Financial Officer. The terms of the Agreement include an extended initial term, modifications to the terms providing for termination without cause and termination for cause, modifications to the definitions of cause and good reason, and modification to the terms regarding potential participation in the Company’s severance program. In addition, the initial base salary for each Executive under the Agreement is $329,600 for Mr. Alena, $278,138 for Mr. Beckley and $265,668 for Mr. Harris.The foregoing description of the Agreement is qualified in its entirety by reference to the full text of the Agreement. Incorporated by Reference Exhibit No. Exhibit Description Form Date Number 31.1 Certification of Principal Executive Officer (Section 302) Filed 31.2 Certification of Principal Financial Officer (Section 302) Filed 32.1 Certification of Principal Executive Officer (Section 906) Furnished* 32.2 Certification of Principal Financial Officer (Section 906) Furnished* 101.INS XBRL Instance Document ** 101.SCH XBRL Taxonomy Extension Schema Document ** 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document ** 101.DEF XBRL Taxonomy Extension Definition Linkbase Document ** 101.LAB XBRL Taxonomy Extension Label Linkbase Document ** 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document ** SeptemberJune 30, 20162017 formatted in XBRL (eXtensible Business Reporting Language). The XBRL-related information in Exhibit 101 in this report shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of those sections. MEETME,THE MEET GROUP, INC. November 9, 2016 November 9, 2016