UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~June 30, 2021~~March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number 001-38252

Spark Networks SE

(Exact name of Registrant as specified in its Charter)


Germany			N/A
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
Kohlfurter Straße 41/43 Berlin Germany			10999
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (+49) 30 868000

Securities registered pursuant to Section 12(b) of the Act:

~~Title of each class~~

~~Trading~~

~~Symbol(s)~~

~~Name of each exchange on which registered~~

~~American Depository Shares each representing one-tenth of an ordinary share~~

~~LOV~~

~~New York Stock Exchange~~

Ordinary shares, €1.00 nominal value per share*

~~LOV~~

~~New York Stock Exchange~~

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

American Depository Shares each representing one-tenth of an ordinary share

LOV

The Nasdaq Stock Market, LLC

Ordinary shares, €1.00 nominal value per share*

* Not for trading purposes, but only in connection with the registration of American Depository Shares pursuant to the requirements of the Securities and Exchange Commission.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐☒

Non-accelerated filer

☒☐

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 complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of ordinary shares outstanding as of ~~August 6, 2021~~May 2, 2022 was ~~2,613,258~~2,619,586.

Table of Contents


		Page
PART I
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of ~~June 30, 2021~~ March 31, 2022 and December 31, ~~2020~~2021	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020~~2021	4
	Condensed Consolidated Statements of Shareholders' Equity for the three months ended March 31, 2022 and 2021	5
	Condensed Consolidated Statements of ~~Shareholder~~s ' ~~Equity~~Cash Flows for the three ~~and six~~ months ended ~~June 30~~, March 31, 2022 and 2021 ~~and 2020~~	6
	~~Condensed Consolidated Statements of Cash Flows for the~~ ~~six~~ ~~months ended~~ ~~June 30, 2021 and 2020~~	7
	Notes to Condensed Consolidated Financial Statements	87
	Note 1 - Basis of Presentation and Summary of Significant Accounting Policies	87
	Note 2 - Revenue	98
	Note 3 - Income Taxes	98
	Note 4 - ~~Goodwill~~Accrued Expenses and ~~Intangible Assets~~Other Liabilities	109
	Note 5 - ~~Accrued Expenses~~Long-term Debt	9
	Note 6 - Contingencies	11
	Note 7 - Financial Instruments and ~~Other Liabilities~~Fair Value Measurements	12
	Note 6 8 - ~~Long-term Debt~~	12
	~~Note~~ 7 ~~- Contingencies~~	13
	~~Note~~ 8 ~~- Financial Instruments and Fair Value Measurements~~	15
	~~Note~~ 9 - Stock-based Compensation	1512


Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1815
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2520
Item 4.	Controls and Procedures	2520

PART II
Item 1.	Legal Proceedings	2722
Item 1A.	Risk Factors	2722
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2722
Item 3.	Defaults Upon Senior Securities	2722
Item 4.	Mine Safety Disclosures	2722
Item 5.	Other Information	2722
Item 6.	Exhibits	2823
	Signatures	2924

PART I

Financial Information

Item 1. Financial Statements

Spark Networks SE

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	11,054	$	19,267	Cash and cash equivalents	$	13,007	$	16,141
Accounts receivable, net of allowance of $447 and $93, respectively		9,340		5,507
Accounts receivable, net of allowance of $361 and $368, respectively						Accounts receivable, net of allowance of $361 and $368, respectively	5,753		6,261
Prepaid expenses	Prepaid expenses	4,757		4,366		Prepaid expenses	4,395		3,201
Other current assets	Other current assets	973		2,140		Other current assets	886		1,085
Total current assets	Total current assets	26,124		31,280		Total current assets	24,041		26,688
Property and equipment, net of accumulated depreciation of $5,751 and $6,252, respectively		10,576		11,418
Property and equipment, net of accumulated depreciation of $4,212 and $3,998, respectively						Property and equipment, net of accumulated depreciation of $4,212 and $3,998, respectively	3,748		3,613
Goodwill	Goodwill	134,775		156,582		Goodwill	134,733		134,744
Intangible assets, net of accumulated amortization of $18,563 and $18,631, respectively		45,296		58,999
Intangible assets, net of accumulated amortization of $15,799 and $15,522, respectively						Intangible assets, net of accumulated amortization of $15,799 and $15,522, respectively	29,049		29,369
Deferred tax assets	Deferred tax assets	7,326		23,522		Deferred tax assets	7,471		7,623
Other assets	Other assets	7,486		8,642		Other assets	7,142		7,764
Total assets	Total assets	$	231,583	$	290,443	Total assets	$	206,184	$	209,801
Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity					Liabilities and Shareholders' Equity
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long-term debt	Current portion of long-term debt	$	12,600	$	19,037	Current portion of long-term debt	$	—	$	17,593
Accounts payable	Accounts payable	12,450		11,127		Accounts payable	2,098		11,474
Deferred revenue	Deferred revenue	39,597		38,304		Deferred revenue	35,299		36,973
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	26,600		28,429		Accrued expenses and other current liabilities	26,359		27,042
Total current liabilities	Total current liabilities	91,247		96,897		Total current liabilities	63,756		93,082
Long-term debt, net of current portion	Long-term debt, net of current portion	74,600		80,109		Long-term debt, net of current portion	94,282		64,531
Deferred tax liabilities	Deferred tax liabilities	6,263		993		Deferred tax liabilities	999		1,077
Other liabilities	Other liabilities	17,309		17,541		Other liabilities	18,192		18,418
Total liabilities	Total liabilities	189,419		195,540		Total liabilities	177,229		177,108
Contingencies (Note 7)		0		0
Contingencies (Note 6)						Contingencies (Note 6)	0		0
Shareholders' Equity:	Shareholders' Equity:					Shareholders' Equity:
Common stock, €1.00 nominal value; 2,661,386 shares issued as of June 30, 2021 and December 31, 2020; 2,613,258 and 2,605,689 shares outstanding as of June 30, 2021 and December 31, 2020, respectively		3,064		3,064
Treasury stock, at nominal value; 48,128 and 55,697 shares as of June 30, 2021 and December 31, 2020, respectively		(53)		(61)
Common stock, €1.00 nominal value; 3,521,005 shares authorized; 2,661,386 shares issued; 2,617,397 shares outstanding as of March 31, 2022 and December 31, 2021						Common stock, €1.00 nominal value; 3,521,005 shares authorized; 2,661,386 shares issued; 2,617,397 shares outstanding as of March 31, 2022 and December 31, 2021	3,064		3,064
Treasury stock, at €1.00 nominal value; 43,989 shares as of March 31, 2022 and December 31, 2021						Treasury stock, at €1.00 nominal value; 43,989 shares as of March 31, 2022 and December 31, 2021	(48)		(48)
Additional paid-in capital	Additional paid-in capital	222,082		220,852		Additional paid-in capital	223,605		223,103
Accumulated deficit	Accumulated deficit	(187,779)		(132,248)		Accumulated deficit	(205,752)		(200,403)
Accumulated other comprehensive income	Accumulated other comprehensive income	4,850		3,296		Accumulated other comprehensive income	8,086		6,977
Total shareholders' equity	Total shareholders' equity	42,164		94,903		Total shareholders' equity	28,955		32,693
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	231,583	$	290,443	Total liabilities and shareholders' equity	$	206,184	$	209,801

The accompanying notes are an integral part of these consolidated financial statements.

Spark Networks SE

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except share and per share data)

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Revenue $ 55,253 $ 56,527 $ 111,632 $ 114,184
Operating costs and expenses:
Cost of revenue, exclusive of depreciation and amortization 32,881 33,223 69,799 69,764
Sales and marketing expenses 1,152 1,185 2,203 2,240
Customer service expenses 1,902 1,938 3,763 4,013
Technical operations and development expenses 4,774 4,189 9,694 9,659
General and administrative expenses 7,096 8,340 15,415 15,223
Depreciation and amortization 2,298 2,332 4,588 4,653
Impairment of intangible assets and goodwill 32,086 — 32,086 —
Total operating costs and expenses 82,189 51,207 137,548 105,552
Operating (loss) income (26,936) 5,320 (25,916) 8,632
Other income (expense):
Interest income — 9 — 40
Interest expense (3,802) (3,395) (7,242) (6,852)
Gain (loss) on foreign currency transactions 584 746 (1,144) (207)
Other income (expense) (2) 200 (18) 200
Total other expense, net (3,220) (2,440) (8,404) (6,819)
(Loss) income before income taxes (30,156) 2,880 (34,320) 1,813
Income tax expense(1)
(18,871) (2,046) (21,211) (3,141)
Net (loss) income (49,027) 834 (55,531) (1,328)
Other comprehensive income (loss):
Foreign currency translation adjustment (800) (1,104) 1,554 115
Comprehensive loss $ (49,827) $ (270) $ (53,977) $ (1,213)
(Loss) earnings per share:
Basic (loss) earnings per share $ (18.80) $ 0.32 $ (21.30) $ (0.51)
Diluted (loss) earnings per share $ (18.80) $ 0.32 $ (21.30) $ (0.51)
Weighted average shares outstanding:
Basic 2,608,370 2,605,689 2,607,038 2,605,689
Diluted 2,608,370 2,607,442 2,607,038 2,605,689

~~(1)~~ The Company identified an error related to the calculation of tax provision that impacted the comparative consolidated financial statements for the quarter ended March 31, 2020. Management evaluated these adjustments and concluded they were not material to any previously issued financial statements. For comparability, the prior period comparative figures that are presented herein have been revised to present the correct figures. Refer to Note 1 for additional information.


	Three Months Ended March 31,
	2022		2021
Revenue	$	52,374	$	56,379
Operating costs and expenses:
Cost of revenue, exclusive of depreciation and amortization	34,246		36,918
Other operating expenses	15,435		16,151
Depreciation and amortization	603		2,290

Total operating costs and expenses	50,284		55,359
Operating income	2,090		1,020
Other income (expense):

Interest expense	(6,882)		(3,440)
Loss on foreign currency transactions	(767)		(1,728)
Other income (expense)	263		(16)
Total other expense, net	(7,386)		(5,184)
Loss before income taxes	(5,296)		(4,164)
Income tax expense	(53)		(2,340)
Net loss	(5,349)		(6,504)
Other comprehensive income (loss):
Foreign currency translation adjustment	1,109		2,354
Comprehensive loss	$	(4,240)	$	(4,150)

Loss per share:
Basic loss per share	$	(2.04)	$	(2.50)
Diluted loss per share	$	(2.04)	$	(2.50)

Weighted average shares outstanding:
Basic	2,617,397		2,605,689
Diluted	2,617,397		2,605,689

The accompanying notes are an integral part of these consolidated financial statements.

Spark Networks SE

Condensed Consolidated Statements of Shareholders' Equity (Unaudited)

(in thousands, except share data)


	Three Months Ended March 31, 2022
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total shareholders' equity
Balance at January 1, 2022	2,661,386	$	3,064	(43,989)	$	(48)	$	223,103	$	(200,403)	$	6,977	$	32,693
Stock-based compensation	—	—		—	—		502		—		—		502

Net loss	—	—		—	—		—		(5,349)		—		(5,349)
Foreign currency translation adjustments	—	—		—	—		—		—		1,109		1,109
Balance at March 31, 2022	2,661,386	$	3,064	(43,989)	$	(48)	$	223,605	$	(205,752)	$	8,086	$	28,955


	Three Months Ended March 31, 2021
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total shareholders' equity
Balance at January 1, 2021	2,661,386	$	3,064	(55,697)	$	(61)	$	220,852	$	(132,248)	$	3,296	$	94,903
Stock-based compensation	—	—		—	—		1,036		—		—		1,036
Net loss	—	—		—	—		—		(6,504)		—		(6,504)
Foreign currency translation adjustments	—	—		—	—		—		—		2,354		2,354
Balance at March 31, 2021	2,661,386	$	3,064	(55,697)	$	(61)	$	221,888	$	(138,752)	$	5,650	$	91,789

The accompanying notes are an integral part of these consolidated financial statements.

Spark Networks SE

Condensed Consolidated Statements of ~~Shareholders' Equity~~Cash Flows (Unaudited)

(in ~~thousands, except share data)~~thousands)

Three Months Ended June 30, 2021
Common Stock Treasury Stock
Shares Amount Shares Amount Additional Paid-in Capital Accumulated
Deficit Accumulated Other Comprehensive Income Total
shareholders'
equity
Balance at April 1, 2021 2,661,386 $ 3,064 (55,697) $ (61) $ 221,888 $ (138,752) $ 5,650 $ 91,789
Stock-based compensation — — — — 580 — — 580
Treasury stock issued pursuant to equity-based plans — — 7,569 8 (386) — — (378)
Net loss — — — — — (49,027) — (49,027)
Foreign currency translation adjustments — — — — — — (800) (800)
Balance at June 30, 2021 2,661,386 $ 3,064 (48,128) $ (53) $ 222,082 $ (187,779) $ 4,850 $ 42,164
Three Months Ended June 30, 2020
Common Stock Treasury Stock
Shares Amount Shares Amount Additional Paid-in Capital Accumulated
Deficit Accumulated Other Comprehensive Income Total
shareholders'
equity
Balance at April 1, 2020 2,661,386 $ 3,064 (55,697) $ (61) $ 216,982 $ (87,802) $ 8,970 $ 141,153
Stock-based compensation — — — — 1,434 — — 1,434
Net income — — — — — 834 — 834
Foreign currency translation adjustments — — — — — — (1,104) (1,104)
Balance at June 30, 2020 2,661,386 $ 3,064 (55,697) $ (61) $ 218,416 $ (86,968) $ 7,866 $ 142,317

Six Months Ended June 30, 2021
Common Stock Treasury Stock
Shares Amount Shares Amount Additional Paid-in Capital Accumulated
Deficit Accumulated Other Comprehensive Income Total
shareholders'
equity
Balance at January 1, 2021 2,661,386 $ 3,064 (55,697) $ (61) $ 220,852 $ (132,248) $ 3,296 $ 94,903
Stock-based compensation — — — — 1,616 — — 1,616
Treasury stock issued pursuant to equity-based plans — — 7,569 8 (386) — — (378)
Net loss — — — — — (55,531) — (55,531)
Foreign currency translation adjustments — — — — — — 1,554 1,554
Balance at June 30, 2021 2,661,386 $ 3,064 (48,128) $ (53) $ 222,082 $ (187,779) $ 4,850 $ 42,164
Six Months Ended June 30, 2020
Common Stock Treasury Stock
Shares Amount Shares Amount Additional Paid-in Capital Accumulated
Deficit Accumulated Other Comprehensive Income Total
shareholders'
equity
Balance at January 1, 2020 2,661,386 $ 3,064 (55,697) $ (61) $ 216,072 $ (85,640) $ 7,751 $ 141,186
Stock-based compensation — — — — 2,344 — — 2,344
Net loss — — — — — (1,328) — (1,328)
Foreign currency translation adjustments — — — — — — 115 115
Balance at June 30, 2020 2,661,386 $ 3,064 (55,697) $ (61) $ 218,416 $ (86,968) $ 7,866 $ 142,317


	Three Months Ended March 31,
	2022		2021
Net loss	$	(5,349)	$	(6,504)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	603		2,290

Loss on tangible and intangible assets	15		—
Unrealized loss on foreign currency transactions	1,078		340
Stock-based compensation expense	502		1,036
Amortization of debt issuance costs and accretion of debt discounts	805		916
Loss on extinguishment of debt	3,964		—
Deferred tax expense	(79)		2,340
Provision for credit losses	142		95
Non-cash lease expense	546		470
Change in operating assets and liabilities:
Accounts receivable	261		(3,328)
Prepaid expenses and other current assets	(1,053)		(2,095)
Other assets	(31)		(33)
Accounts payable, accrued expenses, and other current liabilities	(9,937)		1,533
Other liabilities	(599)		(93)
Deferred revenue	(1,343)		2,646
Net cash used in operating activities	$	(10,475)	$	(387)

Capital expenditures	(490)		(423)

Net cash used in investing activities	$	(490)	$	(423)

Proceeds from debt, net of discount and issuance costs	$	97,750	$	—
Repayment of debt	(85,552)		(3,163)
Debt issuance costs paid to third parties	(3,531)		—
Payment of early extinguishment of debt charge	(893)		—
Payments directly related to debt	—		(523)



Net cash provided by (used in) financing activities	$	7,774	$	(3,686)

Net change in cash and cash equivalents and restricted cash	(3,191)		(4,496)
Effects of exchange rate fluctuations on cash and cash equivalents and restricted cash	55		781
Net decrease in cash and cash equivalents and restricted cash	$	(3,136)	$	(3,715)
Cash and cash equivalents and restricted cash at beginning of period	16,279		21,117
Cash and cash equivalents and restricted cash at end of period	$	13,143	$	17,402

Supplemental disclosure of cash flow information:
Cash paid for interest including payment of early extinguishment of debt charges of $893 and $0, respectively	$	2,953	$	2,497
Cash paid for income taxes	$	29	$	—





Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets	Mar-22		Dec-21
Cash and cash equivalents	$	13,007	$	16,141
Restricted cash included in other current assets	136		138
Total cash and cash equivalents and restricted cash as shown on the condensed consolidated statements of cash flows	$	13,143	$	16,279

The accompanying notes are an integral part of these consolidated financial statements.

Spark Networks SE

~~Condensed Consolidated Statements of Cash Flows (Unaudited)~~

~~(in thousands)~~

Six Months Ended June 30,
2021 2020
Net loss $ (55,531) $ (1,328)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization 4,588 4,653
Impairment of goodwill and intangible assets 32,086 —
Loss on tangible and intangible assets — 341
Unrealized loss (gain) on foreign currency transactions 1,630 (597)
Stock-based compensation expense 1,616 2,344
Amortization of debt issuance costs and accretion of debt discounts 2,275 1,773
Deferred tax expense 21,211 3,141
Provision for credit losses 214 108
Non-cash lease expense 563 953
Change in operating assets and liabilities:
Accounts receivable (4,099) (2,707)
Prepaid expenses and other current assets (793) (131)
Other assets 525 69
Accounts payable, accrued expenses, and other current liabilities (774) (1,794)
Other liabilities (814) (930)
Deferred revenue 1,932 1,312
Net cash provided by operating activities $ 4,629 $ 7,207
Capital expenditures (661) (1,438)
Acquisitions of businesses, net of cash acquired — (513)
Net cash used in investing activities $ (661) $ (1,951)
Repayment of bank loans (13,087) (9,319)
Payments directly related to loan facility (523) —
Net cash used in financing activities $ (13,610) $ (9,319)
Net change in cash and cash equivalents and restricted cash (9,642) (4,063)
Effects of exchange rate fluctuations on cash and cash equivalents and restricted cash (275) (2)
Net decrease in cash and cash equivalents and restricted cash $ (9,917) $ (4,065)
Cash and cash equivalents and restricted cash at beginning of period 21,117 17,457
Cash and cash equivalents and restricted cash at end of period $ 11,200 $ 13,392
Supplemental disclosure of cash flow information:
Cash paid for interest $ 4,849 $ 5,498
Cash paid for income taxes $ — $ 262
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets Jun-21 Dec-20
Cash and cash equivalents $ 11,054 $ 19,267
Restricted cash included in other current assets 146 1,850
Total cash and cash equivalents and restricted cash as shown on the condensed statements of cash flows $ 11,200 $ 21,117

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~Spark Networks SE~~

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1. Basis of Presentation and Summary of Significant Accounting Policies

Description of Business

Spark Networks SE (the "Company") is ~~domiciled~~a leader in ~~Germany and is a leading global operator of premium online~~social dating ~~sites and mobile applications. The Company targets~~platforms for meaningful relationships focusing on the 40+ age demographic and ~~religious-minded singles looking for serious relationships in North America and other international markets. The Company operates a portfolio of premium and freemium brands,~~faith-based affiliations, including Zoosk, ~~Inc. ("Zoosk"),~~ EliteSingles, SilverSingles, Christian Mingle, Jdate, and JSwipe, among others. The ~~Company’s~~Company's brands are tailored to quality dating with real users looking for love and companionship in a safe and comfortable environment. The Company is domiciled in Germany with significant corporate operations, including executive leadership, accounting and finance, located in the United States.

Basis of Presentation and Consolidation

The Company prepares its consolidated financial statements in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") and applicable rules and regulations of the U.S. Securities and Exchange Commission ~~(“SEC”~~("SEC"), regarding interim financial reporting. The condensed consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

In ~~management’s~~management's opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in management’s opinion, all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company's balance sheets, statement of operations and comprehensive loss, statement of shareholders' equity and statement of cash flows for the periods presented. Interim results are not necessarily indicative of the results that may be expected for the Company's entire fiscal year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, ~~2020.~~2021.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Significant estimates and assumptions are required in the determination of: revenue reserves, deferred tax asset valuation allowances, unrecognized tax benefits, ~~accounting for business combinations,~~ classification and measurement of virtual stock option plans, and annual impairment testing of goodwill and indefinite-lived intangible assets. The Company evaluates its estimates and judgements on an ongoing basis based on historical experience, expectations of future events and various other factors that it believes to be reasonable under the circumstances and revises them when necessary. Actual results may differ from the original or revised estimates.

Liquidity and Capital Resources

The ~~Company’s~~Company's financial statements are prepared ~~under~~in accordance with U.S. GAAP, ~~applicable to a going concern~~ which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of the date of the financial statements, the Company has generated losses from operations, incurred historical impairment charges to its Zoosk goodwill and intangible assets and has a working capital deficiency. These factors are potential indications of the ~~Company’s~~Company's inability to continue as a going concern. In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that these consolidated financial statements are issued.

The ~~Company’s~~Company's plans to alleviate these indicators include growing its subscriber base by improving its marketing techniques and implementing new features to increase customer engagement on its various platforms. IfFurther, on March 11, 2022, the Company ~~is unable~~completed the successful refinancing of its existing term and revolving facility, which provides more covenant flexibility and allows more resources to ~~achieve its plan,~~be invested into the ~~Company has the ability~~business to ~~control its direct marketing spend~~drive growth. Refer to ~~achieve compliance with its debt covenants.~~Note 5.Long-term Debt for additional information. The ~~Company’s plan including adjusting its direct marketing spend,~~Company's plans, along with its current cash and cash equivalents, ~~and cash flow from operations, are~~is expected to be sufficient to meet its anticipated cash requirements for financial liabilities, capital expenditures and contractual obligations, for at least the next 12 months from the issuance of these financial statements.

~~COVID-19 Update~~

COVID-19 Update

During 2020, the novel coronavirus ("COVID-19") outbreak spread worldwide and was declared a global pandemic in March 2020. Despite challenging economic conditions on consumers, ~~the Company~~we maintained stable churn levels during the period and experienced positive user engagement. The global outbreak of COVID-19 continues to rapidly ~~evolve as of the date these interim condensed consolidated financial statements are issued.~~evolve. Management is actively monitoring the global situation and potential impact on ~~its~~the Company's business. The effects of COVID-19 did not have a material impact on the ~~Company’s~~Company's result of operations or financial condition for the period ended ~~June 30, 2021.~~March 31, 2022. However, given the ~~daily~~ evolution of the COVID-19 situation, and the global responses to curb its spread, the Company is not able to estimate the effects COVID-19 may have on its future results of operations or financial condition.

~~Revision of Prior Period Consolidated Financial Statements~~

During the second quarter of 2021, management identified an overstatement of tax provision for the quarter ended March 31, 2020. Management concluded that this error was not material to previously issued consolidated financial statements and would be corrected through a revision to the comparative consolidated income statement presented for the six months ended June 30, 2020. The impact of the error for the quarter ended March 31, 2020 was $1.7 million overstatement of tax provision. The prior period comparative figures for the three and six months ended June 30, 2020 that are presented herein reflect the correct figures.

Recently Adopted Accounting Pronouncements

~~In December 2019,~~There were no new accounting pronouncements issued by the Financial Accounting ~~Standard~~Standards Board ~~("FASB") issued Accounting Standard Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying~~during the ~~Accounting for Income Taxes, which simplifies~~three months ended March 31, 2022 and through the ~~accounting for incomes taxes by removing certain exceptions~~date of filing of this report that had or are expected to the general principles in Topic 740. The amendments also improved consistent application of and simplify the accounting for other areas of Topic 740 by clarifying and amending existing guidance. The Company adopted the standard in the first quarter of 2021 and it did not have a material impact toon the Company’s financial ~~statements.~~position, results of operations or cash flows.

Note 2. Revenue

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ revenue was as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021
Subscription revenue	Subscription revenue	$	53,697	$	55,023	$	108,243	$	111,061	Subscription revenue	$	50,009	$	54,546
Virtual currency revenue	Virtual currency revenue	811		942		1,907		1,844		Virtual currency revenue	1,525		1,096
Advertising revenue	Advertising revenue	745		562		1,482		1,279		Advertising revenue	840		737
Total Revenue	Total Revenue	$	55,253	$	56,527	$	111,632	$	114,184	Total Revenue	$	52,374	$	56,379

Revenue disaggregated by geography, based on where the ~~billing address of the Company's customers,~~revenue is generated, consists of the following:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021
United States	United States	$	36,039	$	38,131	$	72,588	$	76,355	United States	$	34,569	$	36,550
France	France	5,347		2,897		10,721		5,860		France	3,229		5,374
Germany	Germany	305		431		638		883		Germany	308		333
Rest of world	Rest of world	13,562		15,068		27,685		31,086		Rest of world	14,268		14,122
Total Revenue	Total Revenue	$	55,253	$	56,527	$	111,632	$	114,184	Total Revenue	$	52,374	$	56,379

The Company's deferred revenue balances as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 are ~~$39.6~~$35.3 million and ~~$38.3~~$37.0 million, respectively. During the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company recognized ~~$34.1~~$26.1 million and ~~$35.2~~$28.8 million of revenue, respectively, that was included in the deferred revenue balances as of December 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

Note 3. Income Taxes

For the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company recorded income tax expense of ~~$18.9~~$0.1 million and ~~$2.0~~$2.3 million, respectively, which reflects an effective tax rate of ~~(62.7)~~(1.0)% and ~~69.2%, respectively. For the six months ended June 30, 2021 and 2020, the Company recorded income tax expense of $21.2 million and $3.1 million, respectively, which reflect an~~

~~effective tax rate of (61.9)% and 159.3%~~112.5%, respectively. The ~~increase~~decrease in the income tax expense for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 was primarily driven by ~~a change~~the Company benefiting from year to date losses in ~~valuation allowance for~~the U.S. ~~deferred tax assets and impairment of goodwill and intangible assets.~~jurisdiction.

The Company ~~regularly assesses the need for~~had a valuation allowance related to our deferred income tax assets, which includes consideration of both positive and negative evidence related to the likelihood of realization of such deferred income tax assets to determine, based on the weight of the available evidence, whether it is more-likely-than-not that some or all of our deferred tax assets will not be realized. In its assessment, the Company consider recent financial operating results, projected future taxable income, the reversal of existing taxable differences and tax planning strategies. During the quarter ended June 30, 2021, as a result of lower financial expectations for the remainder of 2021, the Company concluded that it was not more likely than not that a portion of theagainst certain U.S. deferred income tax assets would be realized. The Company provided a valuation allowance on U.S. federal and state net operating loss carryforwards, and other U.S. net deferred income tax assets that have a limited life and are not supportable by indefinite-lived intangibles deferred tax liability sourced income as of June 30, 2021. The Company accordingly recognized a charge of $21.5 million to establish a valuation allowance related to the U.S. deferred income tax assets which was recorded discretely in the quarter ended June 30, 2021. In addition, we intend to continue maintaining a valuation allowance on, Israel, and German deferred tax assets ~~until there is sufficient~~as of both March 31, 2022 and December 31, 2021. The Company evaluates on a quarterly basis whether the deferred tax assets are realizable which requires significant judgement. The Company considers all available positive and negative evidence, ~~to support reversal~~including historical operating performance and expectations of ~~all or some portion of these allowances.~~future operating performance.

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company has ~~$4.7~~$4.8 million and ~~$4.6~~$4.7 million of unrecognized tax benefits, ~~respectively, all~~respectively. Of the $4.8 million of ~~which~~unrecognized tax benefits as of March 31, 2022, $1.4 million would impact the effective tax rate if ~~recognized.~~recognized, and $2.9 million would result would result in an increase in the valuation allowance. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company has recorded ~~$0.5 million and $0.4~~$0.7 million of interest and penalties for both periods related to unrecognized tax ~~benefits, respectively, all of which would impact the effective tax rate if recognized. The Company recognized an increase to interest and penalties primarily due to U.S. tax credits and state nexus.~~benefits. The Company’s policy is to classify interest and penalties as a component of income tax expense. ~~There were no significant changes~~

As a matter of course, the Company may be audited by Germany, U.S. Federal and state, Israel, France, the U.K. and other foreign tax authorities within which it operates. From time to ~~unrecognized tax benefits during the six months ended June 30, 2021.~~time, these audits result in proposed assessments. The Company was notified during 2020 that the Israeli tax authorities were auditing Spark Networks Ltd. for the tax years 2016-2019. There is minimal activity in the entity and, while we do not expect adverse findings, any potential finding would result in a reduction of the net operating loss carryforward which has a full valuation allowance against it.The Company received correspondence from the German tax authorities auditing Spark SE for the tax years 2017-2018, as well as Spark GmbH for the tax years 2016-2018 after March 31, 2022. While the company is in the process of assessing the correspondence, there does not ~~anticipate~~appear to be any ~~significant~~material changes ~~with respect to unrecognized tax benefits within the next twelve months.~~ or adjustments.

Based on the current status of Germany, U.S. ~~federal,~~Federal, state, local and other foreign audits, the Company does not expect the amount of unrecognized tax benefits to significantly decrease in the next 12 months as a result of settlements of tax audits and/or the expiration of statutes of limitations.

As a matter of course, the Company may be audited by Germany, U.S. Federal and State, Israel, France, the U.K. and other foreign tax authorities within which it operates. From time to time, these audits may result in proposed assessments. The Company was notified during 2020 that the Israeli tax authorities were auditing the Company's subsidiary, Spark Networks Ltd. for the tax years 2015-2019. There is minimal activity in the entity and while the Company does not expect adverse findings, any adverse finding could result in a reduction of the net operating loss carryforward which has a full valuation allowance against it. The Company's subsidiaries are currently being audited by German tax authorities for the tax years 2017-2018 for Spark SE and for the tax years 2016-2018 for Spark GmbH. The Company is responding to questions and requests for information. At this point, there is no indication of any uncertainty with respect to Israel and German tax returns.

~~Note 4. Goodwill and Intangible Assets~~

The Company completes its annual goodwill impairment test during the fourth quarter of each year, or more frequently if triggering events indicate a possible impairment in one or more of its reporting units. During the second quarter of 2021, the Company lowered its financial expectations for the remainder of 2021 due to increased cyberattacks, delays in product initiatives and a more uncertain Covid-19 outlook. These factors constituted an interim triggering event as of the end of the Company's second quarter of 2021, and the Company performed an impairment analysis with regard to its indefinite-lived intangible assets and goodwill.

~~Goodwill~~

~~The following table summarizes the changes in the carrying amount of goodwill for the six months ended June 30, 2021 and the year ended December 31, 2020:~~


~~(in thousands)~~
~~Balance as of January 1, 2020~~	$	~~199,238~~

~~Impairment charges~~	~~(42,713)~~
~~Impact of currency translation~~	57
~~Balance as of December 31, 2020~~	$	~~156,582~~
~~Impairment charges~~	~~(21,786)~~
~~Impact of currency translation~~	~~(21)~~
~~Balance as of June 30, 2021~~	$	~~134,775~~

~~For the quarter ended June 30, 2021, as a result of the interim goodwill impairment test, the fair value of the Spark reporting~~

unit exceeded the carrying amount, and as a result, no goodwill impairment was recorded. Goodwill assigned to the Spark reporting unit was $24.5 million. For the Zoosk reporting unit, the fair value did not exceed the carrying value, and the Company recorded a goodwill impairment charge of $21.8 million. The Company estimated the fair value of its reporting units utilizing a present value cash flow model. The Company believes this non-cash impairment charge does not impact its ability to generate cash flow in the future and it is not tax deductible.

~~The total accumulated impairment loss of the Company's goodwill was $84.5 million and $62.7 million as of June 30, 2021 and December 31, 2020, respectively.~~

~~Intangible Assets~~

~~Intangible assets consists of the following as of June 30, 2021 and December 31, 2020:~~

June 30, 2021
(in thousands) Weighted-Average Remaining Amortization Period (Years) Gross Carrying Amount Accumulated Impairment Charges Accumulated Amortization Currency Translation Impact on Carrying Amount Net Carrying Amount
Indefinite-lived intangible assets:
Brands and trademarks $ 63,800 $ (21,260) $ — $ — $ 42,540
Long-lived intangible assets:
Brands and trademarks 0.1 3,025 (2,573) (417) 2 37
Acquired technology 1.9 5,910 — (3,346) — 2,564
Customer relationships 0.0 10,780 — (10,703) — 77
Licenses and domains 0.0 184 — (148) 2 38
Other 0.0 3,989 — (3,949) — 40
Total intangible assets 2.0 $ 87,688 $ (23,833) $ (18,563) $ 4 $ 45,296

December 31, 2020
(in thousands) Weighted-Average Remaining Amortization Period (Years) Gross Carrying Amount Accumulated Impairment Charges Accumulated Amortization Currency Translation Impact on Carrying Amount Net Carrying Amount
Indefinite-lived intangible assets:
Brands and trademarks $ 63,800 $ (10,960) $ — $ — $ 52,840
Long-lived intangible assets:
Brands and trademarks 0.1 3,025 (2,573) (409) 4 47
Acquired technology 1.3 7,300 — (3,997) — 3,303
Customer relationships 0.4 11,420 — (8,762) — 2,658
Licenses and domains 0.0 410 — (361) 3 52
Other 0.0 5,203 — (5,102) (2) 99
Total intangible assets 1.8 $ 91,158 $ (13,533) $ (18,631) $ 5 $ 58,999

For the interim assessment for the quarter ended June 30, 2021, the Company recognized a Zoosk trademark impairment charge of $10.3 million. The Company estimated the fair value using an income approach, specifically the relief-from-royalty method,

based on the present value of future cash flows.The Company used a royalty rate of 4.0% and discount rate of 14.5%. No impairment charge was recorded for the long-lived intangible assets for the six months ended June 30, 2021 and the year ended December 31, 2020.

~~Amortization expense for the six months ended June 30, 2021 and the year ended December 31, 2020 were $3.4 million and $7.3 million, respectively.~~

~~At June 30, 2021, amortization of long-lived intangible assets for each of the next five years and thereafter is estimated to be as follows:~~

(in thousands) Amortization Expense
2021 $ 827
2022 1,280
2023 632
2024 8
2025 8
Thereafter 1
Total estimated amortization expense $ 2,756

Note 5.4. Accrued Expenses and Other Liabilities

Accrued expenses and other current liabilities consist of the following as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


(in thousands)	(in thousands)	June 30, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
Accrued advertising	Accrued advertising	8,050		8,691		Accrued advertising	$	7,824	$	6,483
Accrued employee compensation and benefits	Accrued employee compensation and benefits	2,583		2,085		Accrued employee compensation and benefits	1,619		1,487
Accrued professional fees	Accrued professional fees	1,038		1,819		Accrued professional fees	1,001		835
Accrued service providers	Accrued service providers	2,016		2,433		Accrued service providers	2,018		1,806
Accrued value-added, sales, and other non-income-based taxes	Accrued value-added, sales, and other non-income-based taxes	8,459		8,897		Accrued value-added, sales, and other non-income-based taxes	7,629		8,837
Current portion of income tax payable	Current portion of income tax payable	1,380		1,536		Current portion of income tax payable	3,673		3,733
Current portion of lease liabilities	Current portion of lease liabilities	1,772		1,932		Current portion of lease liabilities	2,344		2,325
Other	Other	1,302		1,036		Other	251		1,536
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	$	26,600	$	28,429	Accrued expenses and other current liabilities	$	26,359	$	27,042

Other liabilities consist of the following as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


(in thousands)	(in thousands)	June 30, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
Deferred payment to Zoosk's shareholders	Deferred payment to Zoosk's shareholders	$	10,954	$	10,373	Deferred payment to Zoosk's shareholders	$	11,833	$	11,545
Lease liabilities, less current portion	Lease liabilities, less current portion	3,847		4,650		Lease liabilities, less current portion	3,272		3,887
Sublease security deposit	Sublease security deposit	1,038		1,038		Sublease security deposit	1,038		1,038
Other	Other	1,470		1,480		Other	2,049		1,948
Other liabilities	Other liabilities	$	17,309	$	17,541	Other liabilities	$	18,192	$	18,418

Note 6.5. Long-term Debt

MGG Term Loan Agreement

On March 11, 2022, the Company entered into a Financing Agreement with Zoosk, Inc. and Spark Networks, Inc., the subsidiary guarantor party thereto, the lender party thereto, and MGG Investment Group LP ("MGG"), as administrative agent and collateral agent (the "Term Loan"). The agreement provides for senior secured term loans of $100.0 million. Substantially all of the Company's assets are pledged as collateral. Borrowings under the Term Loan bear interest at a rate equal to LIBOR plus an applicable margin of 7.5% per annum. The proceeds were used to repay in full all amounts outstanding under the Loan Facilities with Blue Torch Finance LLC. The outstanding principal amounts will be repayable in quarterly payments of $1.25

million commencing with the quarter ending June 30, 2023 through March 31, 2025, and $2.50 million commencing with the quarter ending June 30, 2025 and thereafter.

The Term Loan was issued at a discount of 2.0% of the aggregate principal amount of the $100.0 million. Transaction costs and overhead fees of $3.5 million and $0.3 million, respectively, were paid at closing. Through the effective interest rate method, the discount and overhead fees on the Term Loan are amortized to interest expense in the Consolidated Statements of Operations and Comprehensive Loss through the maturity on March 11, 2027 ("Maturity Date"). The effective interest on the loan was 10.1%. In addition, pursuant to the terms of the Term Loan, within 5 days after the annual financial statements are required to be delivered to the lender, commencing with the delivery of the fiscal year 2022 audited financial statements, the Company is required to make a prepayment of the loan principal in an amount equal to a percentage of the excess cashflow of the most recently completed fiscal year.

The Loan Agreement requires the following financial covenants to be maintained: (i) quarterly leverage ratio no greater than 4.50 to 1.00 for the quarter ending June 30, 2022, 4.25 to 1.00 through June 30, 2023, 3.75 to 1.00 through June 30, 2024, 3.25 to 1.00 through June 30, 2025, 2.75 to 1.00 through June 30, 2026 and 2.25 to 1.00 through the maturity date of the loan; (ii) marketing efficiency ratio to be less than 1.36 to 1.00 for the quarter ending June 30, 2022 through the maturity date of the loan; and (iii) minimum liquidity of $5.0 million at any time. In addition, the Term Loan contains a number of covenants that, among other things, restrict, subject to certain exceptions, the Company and its subsidiaries' ability to: incur additional indebtedness, create liens, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions, make share repurchases, make certain acquisitions, engage in certain transactions with affiliates and change lines of business.

As of March 31, 2022, the aggregated outstanding principal balance and amortized cost basis of the Term Loan was $100.0 million and $94.3 million, respectively.

Blue Torch Term Loan Facility

On July 1, 2019, in connection with the acquisition of Zoosk, the Company entered into a Loan Agreement with Zoosk, Spark Networks, Inc., the subsidiary guarantors party thereto, the lenders party thereto, and Blue Torch Finance LLC ("Administrative Agent"), as administrative agent and collateral agent (the "Senior Secured Facilities Agreement") that provides for a four-year $125.0 million Senior Secured ~~Facility.~~Facility, maturing July 1, 2023 (the "Maturity Date"). The Senior Secured Facilities Agreement provides for a term loan facility in an aggregate amount equal to $120.0 million (the "Term Loan Facility") and a revolving credit facility in an aggregate amount equal to $5.0 million (the ~~“Revolving~~"Revolving Credit ~~Facility”~~Facility" and, together with the Term Loan Facility, the "Facilities"). Borrowings

under the Facilities bear interest at a rate equal to either LIBOR plus an applicable margin of 8.0% per ~~annum or the Base Rate with an applicable margin of 7.0% per~~ annum.

~~Term Loan Facility~~

On December 2, 2020, the Company entered into the Second Amendment to Loan Agreement (the "Second Amendment" and together with the Term Loan Facility, the "Amended Term Loan Facility"), which established an additional $6.0 million of term loan commitment to its existing Term Loan Facility. The additional borrowing was applied to pay the quarterly Term Loan Facility principal and interest payments on December 31, 2020 and March 31, 2021. The Second Amendment was accounted for as a modification of debt, and as such, the third-party costs incurred in connection with the Second Amendment of approximately $1.3 million were expensed as incurred. The debt issuance costs of $1.3 million that were paid directly to the lender at the closing date were capitalized and will be amortized using the effective interest method over the term of the loan. The effective interest rate on the modified loan is 11.3%. The Second Amendment ~~requires~~required repayment of the principal amount of ~~$150 thousand~~$0.15 million quarterly, beginning on March 31, 2021, in addition to the $3.0 million quarterly principal repayment of the original Term Loan Facility and the modified interest.

On March 5, 2021, the Company entered into a Limited Waiver under Loan Agreement (the "Limited Waiver") with the Administrative Agent and the lenders pursuant to which certain defaults under the ~~Loan~~Senior Secured Facilities Agreement were waived. In consideration of the Limited Waiver, the Company agreed to pay the Administrative Agent, for the ratable benefit of the lenders, a fee of $0.5 million upon the execution of the Limited Waiver, plus $0.3 million paid in kind by capitalizing such amount into the principal balance under the ~~Loan~~Senior Secured Facilities Agreement. The aggregated fees were capitalized and ~~will be~~was amortized using the effective interest rate of 11.8%.

On March 11, 2022, the Company entered into the Term Loan Agreement with MGG as described above and the facility was terminated. The aggregated outstanding principal balance of the existing Term Loan Facility and the Second Amendment ~~is $91.9~~was $85.6 million, and ~~$104.7~~the amortized cost basis was $82.1 million as of ~~June 30, 2021 and~~ December 31, ~~2020, respectively.~~2021. The ~~amortized~~Company recognized a loss on extinguishment of debt of $3.9 million in the first quarter of Fiscal 2022, which is comprised of $3.0 million of unamortized debt issuance cost ~~basis~~offset by the debt discount with the Blue Torch term loan facility, and a prepayment penalty of $0.9 million.

The loss on extinguishment of debt is included as a component of Interest expense in the ~~Term Loan Facility is $87.2 million~~Consolidated Statements of Operations and ~~$99.1 million as of June 30, 2021 and December~~Comprehensive Loss for the three months ended March 31, ~~2020, respectively.~~2022.

In addition, pursuant to the terms of the Term Loan Facility, within 5 days after the annual financial statements are required to be delivered to the lender, the Company is required to make a prepayment of the loan principal in an amount equal to a percentage of the excess cash flow, as defined in the Loan Agreement, of the most recently completed fiscal year. For the quarter ended June 30, 2021 and 2020, the Company made a prepayment of $6.8 million and $3.3 million, respectively.

Blue Torch Revolving Credit Facility

The $5.0 million Revolving Credit Facility has a commitment fee of 0.75% per annum on the unutilized commitments thereunder payable on the Maturity Date. As the Revolving Credit Facility is not expected to be drawn down, transaction costs and upfront fees totaling $0.3 million related to the Revolving Credit Facility were deferred and are being amortized over the term of the agreement. ~~There~~On March 11, 2022, the Company entered in to the Term Loan Agreement as described above and the facility was terminated, and there were no outstanding borrowings under the Revolving Credit Facility as of ~~June 30, 2021 and~~ December 31, ~~2020.~~2021. The Company recognized a loss on extinguishment of debt of $0.1 million in the first quarter of Fiscal 2022 for unamortized transaction costs and upfront fees related to the Revolving Credit Facility, which is included as a component of Interest expense in the Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022.

~~Covenants~~

The Facilities contain a number of covenants that, among other things, restrict, subject to certain exceptions, the Company's ability and the ability of its subsidiaries to: incur additional indebtedness, create liens, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions and make share repurchases, make certain acquisitions, engage in certain transactions with affiliates, and change lines of business.

In addition, the Facilities, as revised by the Second Amendment, require the following financial covenants to be maintained: (i) a fixed charge coverage ratio of no less than 1.05 and 1.25 for the quarter ended June 30, 2021 and December 31, 2020, respectively, (ii) a net leverage ratio of no greater than 2.60 for both the quarter ended June 30, 2021 and December 31, 2020, and (iii) a minimum liquidity threshold of $10.0 million at the end of each month following the closing date of the loan, consisting of available cash funds and availability under the Revolving Credit Facility. The Facilities also contain certain customary affirmative covenants and events of default, including a change of control. The Company iswas in compliance with all ~~of its~~applicable financial covenants as of ~~June 30, 2021 and December~~March 31, ~~2020.~~2022.

Note 7.6. Contingencies

The Company is involved in lawsuits, claims and proceedings incident to the ordinary course of business and establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where the Company believes an unfavorable

outcome is not probable and, therefore, no reserve is established. Any claims against the Company, whether meritorious or not, could result in costly litigation, require significant amounts of ~~management~~management's time and result in the diversion of significant operational resources. The results of these lawsuits, claims and proceedings cannot be predicted with certainty. However, the Company believes that the ultimate resolution of these current matters will not have a material adverse effect on its liquidity, results of operations or financial condition.

Cybersecurity Matters

On July 22, 2020, a putative class action was filed against the Company and Zoosk in the U.S. District Court for the Northern District of California by individuals claiming to be Zoosk users whose information was affected by the 2020 security incident disclosed by Zoosk. The complaint, as subsequently amended, asserts that by reason of the Zoosk security incident Spark and Zoosk violated the California Consumer Privacy Act ("CCPA"), the California Unfair Competition Law ~~(UCL)~~("UCL"), and common-law obligations. Based on these assertions, the complaint seeks statutory damages, compensatory damages, punitive damages, ~~attorneys’~~attorneys' fees, and injunctive relief. On December 14, 2020, plaintiffs voluntarily withdrew their claim under the CCPA. On January 30, 2021, the district court granted in part, and denied in part, ~~Zoosk’s~~Zoosk's motion to dismiss the remainder of the complaint for failure to state a claim by dismissing the UCL claim, but allowing the common-law claim to go forward. The ~~Court~~court held in abeyance the Company's motion to dismiss itself on jurisdictional grounds and for failure to state a claim. The court granted plaintiffs limited jurisdictional discovery as to the Company. Zoosk answered the portion of the complaint that asserts the one remaining common-law claim by denying its material allegations and asserting a number of affirmative defenses. The ~~Court~~court stayed the case pending resolution of the jurisdictional discovery. On May 6, 2021, plaintiffs voluntarily dismissed the Company from the case and the stay was lifted. On July 28, 2021, plaintiffs filed a second amended complaint re-alleging the UCL claim on behalf of a subclass. The court granted Zoosk’s motion to dismiss that amended claim on October 5, 2021. On October 28, 2021, plaintiffs sought leave to file a third amended complaint that re-alleges a UCL claim. Following briefing and oral argument, the court granted plaintiffs’ motion for leave to file an amended complaint as to one theory of UCL liability and ordered plaintiffs either file the third amended complaint or seek leave to file a fourth amended complaint by February 17, 2022. Plaintiffs filed a third amended complaint, then sought leave to file a fourth amended complaint to substitute one of the two named plaintiffs. On March 31 2022, the court granted Zoosk’s motion to dismiss with prejudice one named plaintiff for failure to prosecute. The court also granted Plaintiffs’ motion to substitute the dismissed plaintiff with a new plaintiff but ordered Plaintiffs to reimburse Zoosk for reasonable costs and ~~plaintiffs~~attorney fees incurred in connection with the dismissed named plaintiff. Fact discovery concluded on April 29, 2022 except as to discovery from the new named plaintiff, and the parties are ~~currently~~ engaged in ~~discovery~~expert discovery. The parties have submitted a proposed order to the court setting the deadline for plaintiffs’ motion for class certification on May 20, 2022 and ~~the case is scheduled for~~ trial ~~commencing September 12,~~in late 2022.

Separately, a group of lawyers that is different from those who filed the putative class action described above filed 77 separate arbitration demands against Zoosk in the Judicial Arbitration and Mediation Services, Inc. ("JAMS") arbitration forum. Zoosk has objected that neither JAMS nor any arbitrator appointed by JAMS has authority to arbitrate any of these claims or to rule on the issue of arbitrability. JAMS ~~has nonetheless determined~~decided to commence arbitration proceedings in regard to one of the arbitration claims filed to date, ~~and has appointed an arbitrator for~~but that ~~one claim. Zoosk is participating~~claim was withdrawn in November 2021 as it was established that ~~arbitration under protest and reserving its arbitrability objections. That arbitration is scheduled for hearing on January 18, 2022.~~

the claimant was not affected by the incident. On May 5, 2021, the same group of attorneys that filed the arbitration demands, described above, filed a petition to compel arbitration in the U.S. District Court for the Northern District of California on behalf of three other individuals claiming to be Zoosk users affected by the 2020 security incident. ~~Counsel for the petitioners~~The attorneys then voluntarily dismissed the petition in its entirety on July 15, 2021.

~~Elite Connexion v. Spark Networks Services GmbH~~

JAMS has initiated three further arbitration claims previously filed and intends to proceed with those arbitrations if requisite fees are paid. Zoosk has refused to pay the respondents’ share of the initiation fee for those arbitrations. On ~~September 20, 2018, Elite Connexion~~December 8, 2021, the same attorneys then filed a ~~cease~~petition to compel arbitration in Orange County Superior Court in California on behalf of those three individuals. In response, Zoosk filed a motion to dismiss the California petition based on the forum selection clause in the Zoosk Terms of Use that selects New York as the venue for any dispute. Zoosk's motion to dismiss was granted in April 2022. Zoosk has also filed a petition to stay arbitration in New York on the basis that the claimants breached the TOU when they filed their arbitration demands and desist order and damage claim in France against Spark Networks Services GmbH ("Spark GmbH"), alleging that Spark GmbH bid on search engine terms which violated an agreement between the parties. In Elite Connexion's claim, which was amended in September 2019, Elite Connection claimed damages for loss of profit, legal fees, and court fees. The parties agreed in principleZoosk is therefore under no obligation to a settlement in September 2020 subject to negotiation of the settlement agreement. The parties continued to negotiate the terms of the settlement agreement as of June 30, 2021, and the Company recorded an accrual for the loss contingency in relation to a potential settlement of these matters. On August 10, 2021, the Company entered into a settlement agreement with Elite Connexion to settle the dispute.arbitrate.

Intellectual Property

Trademarks are an important element in running online dating websites and mobile applications. Given the large number of markets and brands, the Company deals with claims against its trademarks from time to time in the ordinary course of business. ~~As of June 30, 2021, there are several ongoing national cases which affect trademarks within Germany, Finland, Ireland, France, Sweden, the United Kingdom, Poland and Benelux.~~ The Company vigorously defends against each of the above legal proceedings. ~~Following a favorable 2020 decision of the Court of Justice of the European Union, the Company is exploring options to settle certain national trademark disputes in Europe.~~

The Company ~~has additional legal claims and~~ may encounter future legal claims in the normal course of business.

~~The Company intends to defend vigorously against each of the above legal proceedings.~~ At this time, management does not believe the above matters, either individually or in the aggregate, will have a material adverse effect on the ~~Company’s~~Company's results

of operations or financial condition and believes the recorded legal provisions as of ~~June 30, 2021~~March 31, 2022 are adequate with respect to the probable and estimable liabilities. However, no assurance can be given that these matters will be resolved in the Company's favor.

Note 8.7. Financial Instruments and Fair Value Measurements

The Company records long-term debt at carrying value less unamortized discount and unamortized fees as it is not required to be carried at fair value on a recurring basis. The fair value of long-term debt was determined using observable inputs (Level 2). The valuation considers the present value of expected future repayments, discounted using a market interest rate equal to the interest margin on the borrowings and variable interest rate.

The following table presents the carrying values and the estimated fair values of long-term debt as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		June 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
(in thousands)	(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value		(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current portion(1)	Long-term debt, including current portion(1)	$	87,200	$	106,256	$	99,146	$	107,504	Long-term debt, including current portion(1)	$	94,282	$	100,161	$	82,124	$	96,089

(1) At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the carrying value of long-term debt is net of unamortized original issue discount and debt issuance costs of ~~$4.7~~$5.7 million and ~~$5.5~~$3.4 million, respectively.

The ~~Company’s~~Company's financial instruments, including cash and cash equivalents, deposits, accounts receivable, and accounts payable are carried at cost, which approximates their fair value due to the short-term nature of these instruments. The Company does not have financial instruments that are measured at fair value on a recurring basis as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

Note 9.8. Stock-based Compensation

Stock-based compensation expense reflects share awards issued under the Company's 2018 virtual stock option plan and the Long Term Incentive Plan adopted in 2020 (the "LTIP"). For the three months ended March 31, 2022 and 2021, the Company recognized total stock-based compensation expense for all the plans of $0.5 million and $1.0 million, respectively, which is included as a component of Other operating expenses in the Consolidated Statements of Operations and Comprehensive Loss.

2020 Long Term Incentive Plan

In January 2020, the Administrative Board of the Company (the "Administrative Board") adopted the LTIP for applicable executives and employees of the Company and its subsidiaries as part of their remuneration for future services. The LTIP provides for the grant of virtual stock options. Each option represents the right to receive, upon exercise, a certain amount in cash determined based on the relevant American Depository Shares ("ADS") Stock Price of the option minus the strike price of such option; provided, however, that the Company may elect to settle options in ADSs or ordinary shares of the Company instead of cash at its sole discretion. The LTIP provides that the strike price can be set at any amount determined by the Administrative Board, including zero. Under the LTIP, the "ADS Stock Price" is, as of the grant date, the average closing price of one of the Company's ADSs trading on the NYSE American for the period of five trading days prior to such date. The Company classifies awards under the LTIP as equity-settled.

Options granted under the LTIP have a contractual term of 85 months and vest, subject to the employee's continued service to the Company, as follows: (i) 25% of the total number of options granted to a participant vest 12 months after the grant date of such option, and (ii) an additional 6.25% of such options shall vest at the end of each additional three-month period thereafter until the end of the 48th month after the relevant grant date.

In connection with the adoption of the LTIP, the Administrative Board authorized for 2020 the i~~ssuance~~issuance of virtual options for up to 3000000 ADSs, including up to 1000000 zero-priced options. In 2021, the Administrative Board authorized the issuance of an additional 500,000 ADSs, which can be used for the issuance of both options and zero-priced options. The additional authorized ADSs were used in connection with the options granted in the first quarter of 2022. As of ~~June 30, 2021, 260,025~~March 31, 2022, 215,833 virtual options, and ~~404,868~~208,867 zero-priced options were available for future ~~grant.~~grant under the LTIP.

The fair value of the virtual stock options and zero-priced options are measured using a ~~Black-Scholes~~Black-Scholes option-pricing model for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. The inputs used in the measurement of the fair values at the date of grant are summarized below:


		Virtual Stock Options				Zero-Priced Options					Virtual Stock Options		Zero-Priced Options
		Long Call		Short Call		Long Call		Short Call			Long Call	Short Call	Long Call	Short Call
		Option		Option (Cap)		Option		Option (Cap)			Option	Option (Cap)	Option	Option (Cap)
Stock price	Stock price	$5.42		$5.42		$5.42		$5.42		Stock price	$2.70	$2.70	$2.70	$2.70
Strike price	Strike price	$5.34		$53.40		$—		$50.00		Strike price	$2.93	$29.30	$—	$50.00
Term	Term	4.67		4.67		4.67		4.67		Term	4.65	4.65	4.65	4.65
Volatility	Volatility	62.7	%	62.7	%	62.7	%	62.7	%	Volatility	65.0%	65.0%	65.0%	65.0%
Dividend	Dividend	—	%	—	%	—	%	—	%	Dividend	—%	—%	—%	—%
Risk-free rate	Risk-free rate	0.7	%	0.7	%	0.7	%	0.7	%	Risk-free rate	2.4%	2.4%	2.4%	2.4%

The following table summarizes the activity for the Company's options under the LTIP during the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:

Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
(in years)
Outstanding as of December 31, 2020 1,550,000 $4.74 6.22 $0.90
Granted 257,100 5.34
Exercised (10,750) 3.71
Forfeited (56,375) 3.69
Outstanding as of June 30, 2021 1,739,975 $4.87 5.92 $0.60
Vested and Exercisable at June 30, 2021 427,442


	Number of Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
			(in years)
Outstanding as of December 31, 2021	1,802,228	$4.71	5.62	$0.01
Granted	530,000	2.93

Forfeited	(48,061)	5.24

Outstanding as of March 31, 2022	2,284,167	4.29	5.76	0.01
Vested and exercisable at March 31, 2022	684,513	$4.81	4.95	$0.01


		Number of Options	Weighted Average Grant Date Fair Value		Number of Options	Weighted Average Grant Date Fair Value

Unvested as of December 31, 2020		1,550,000	$2.99
Unvested as of December 31, 2021				Unvested as of December 31, 2021	1,190,967	$2.53
Granted	Granted	257,100	2.40	Granted	530,000	1.20
Vested	Vested	(438,192)	3.08	Vested	(73,252)	3.03
Forfeited	Forfeited	(56,375)	3.69	Forfeited	(48,061)	2.56
Unvested as of June 30, 2021		1,312,533	$2.87
Unvested as of March 31, 2022				Unvested as of March 31, 2022	1,599,654	$2.06

The following table summarizes the activity for the Company's zero priced options under the LTIP during the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:


						Number of ~~Shares~~Options

Outstanding as of December 31, ~~2020~~2021						~~674,000~~584,068
Granted						~~77,600~~220,000
~~Exercised~~						~~(137,125)~~
Forfeited						~~(19,343)~~(12,935)
Outstanding as of ~~June 30, 2021~~March 31, 2022						~~595,132~~791,133
Vested and ~~Exercisable~~exercisable at ~~June 30, 2021~~March 31, 2022						~~60,537~~104,233


		Number of Options	Weighted Average Grant Date Fair Value		Number of Options	Weighted Average Grant Date Fair Value

Unvested as of December 31, 2020		674,000	$6.13
Unvested as of December 31, 2021				Unvested as of December 31, 2021	514,370	$5.29
Granted	Granted	77,600	5.01	Granted	220,000	2.59
Vested	Vested	(197,662)	6.25	Vested	(34,535)	6.21
Forfeited	Forfeited	(19,343)	4.60	Forfeited	(12,935)	5.35
Unvested as of June 30, 2021		534,595	$7.51
Unvested as of March 31, 2022				Unvested as of March 31, 2022	686,900	$4.38

The total unrecognized compensation expense related to awards granted under the LTIP at ~~June 30, 2021~~March 31, 2022 was ~~$4.36~~$3.2 million, which will be recognized over a weighted-average period of ~~2.90~~3.00 years.

~~Total stock-based compensation expense for all the plans are included in the Condensed Consolidated Statements~~As of ~~Operations~~March 31, 2022 and ~~Comprehensive Loss (Unaudited) is~~2021, diluted loss per share excludes 1,096,902 and 806,280 potentially dilutive common shares, respectively, related to vested option awards, as ~~follows:~~

Six Months Ended June 30,
(in thousands) 2021 2020
Cost of revenue, exclusive of depreciation and amortization $ — $ —
Sales and marketing 23 97
Customer service 12 18
Technical operations and development 145 201
General and administrative 1,436 2,028
Total stock-based compensation expense $ 1,616 $ 2,344
their effect was anti-dilutive.

1714

Item 2. ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations.

This section and other parts of this Quarterly Report on Form 10-Q (“("Form ~~10-Q”~~10-Q") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can be identified by words such as ~~“future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,”~~"future," "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "will," "would," "could," "can," "may," and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 under the heading ~~“Risk~~"Risk Factors.”" The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Overview

We are a ~~leading global operator of premium online~~leader in social dating ~~sites and mobile applications. Our focus is~~platforms for meaningful relationships focusing on ~~catering to~~ the 40+ age demographic and ~~religious minded singles looking for serious relationships in North America and other international markets.~~faith-based affiliations. Since our inception, we have had 93103 million users register with our dating platforms (which includes inactive accounts). We currently operate one or more of our brands worldwide.

~~Our strategy is to become the social dating for meaningful relationships leader.~~ We will continue to expand our presence in North America through significant marketing investment in this region as we look to drive both organic growth of our existing brand portfolio and expansion through the launch of new or acquired brands. We intend to incorporate more social features in our products with content, community and social discovery functionality to allow our users to meet in more informal ways and to provide new ways to date online. Our portfolio of strong brands along with our improved financial strength positions us to deliver a superior user experience to our customers and drive long-term value to shareholders.

Our ability to compete effectively will depend upon our ability to address the needs of our members and paying subscribers, on the timely introduction and performance of innovative features and services associated with our brands, and our ability to respond to services and features introduced by competitors. We must also achieve these objectives within the parameters of our consolidated and operating segment profitability targets. We are focused on enhancing and augmenting our portfolio of services while also continuing to improve the efficiency and effectiveness of our operations. We believe we have sufficient available cash resources on hand to accomplish the enhancements currently contemplated.

Operations Overview

We offer services both via websites and mobile applications and utilize a "subscription" business model, where certain basic functionalities are provided free of charge, while providing premium features (such as interacting with other community members via messages) only to paying subscribers. We generate revenues primarily through paid membership subscriptions. We manage our operations through one reportable segment.

In addition to operating in the United States ("U.S."), we also operate in various markets outside the U.S., primarily in various jurisdictions within the European Union ("EU"), and as a result, are exposed to foreign exchange risk for the ~~euro,~~Euro, U.S. dollar, British pound, Australian dollar and Canadian dollar. Financial statements of subsidiaries outside the U.S. are generally measured using the local currency as the functional currency. The revenue generated outside the U.S. is translated into U.S. dollar at the date of transactions and subject to unpredictable fluctuations if the value of other currencies change relative to the U.S. dollar. Fluctuating foreign exchange rates result in foreign currency exchange gains and losses. We have not and do not intend to hedge any foreign currency exposures.

We believe that any effect of inflation at current levels will be minimal. Historically, we have been able to increase prices at a rate equal to or greater than that of inflation and we believe that we will continue to be able to do so for the foreseeable future. In addition, we have been able to maintain a relatively stable variable cost structure for our products due, in part, to a continued optimization of marketing spend.

COVID-19 Update

~~During 2020,~~Management continues to actively monitor the novel coronavirus ("COVID-19") ~~outbreak spread worldwide~~developments and ~~was declared a global pandemic in March 2020. Despite challenging economic conditions~~potential impact on ~~consumers, we maintained stable churn levels during the period~~our employees, business and

experienced positive user engagement. The global outbreak of COVID-19 continues to rapidly evolve as of the date these interim condensed consolidated financial statements are issued. Management is actively monitoring the global situation on its business. operations. The effects of COVID-19 did not have a material impact on our result of operations or financial condition for the period ended ~~June 30, 2021.~~March 31, 2022. However, given the ~~daily~~ evolution of the COVID-19 situation, and the

global responses to curb its spread, we are not able to estimate the effects COVID-19 may have on our future results of operations or financial condition.

Key Business Metrics

We regularly review certain operating metrics in order to evaluate the effectiveness of our operating strategies and monitor the financial performance of the business. The key business metrics that we utilize include the following:

Total Registrations

Total registrations are defined as the total number of new members registering to our platforms with their email address. Those include members who enter into premium subscriptions and free memberships.

Average Paying Subscribers

Paying subscribers are defined as individuals who have paid a monthly fee for access to premium services, which include, among others, unlimited communication with other registered users, access to user profile pictures and enhanced search functionality. Average paying subscribers for each month are calculated as the sum of the paying subscribers at the beginning and the end of the month, divided by two. Average paying subscribers for periods longer than one month are calculated as the sum of the average paying subscribers for each month, divided by the number of months in such period.

Monthly Average Revenue Per User ("ARPU")

Monthly ARPU represents the total net subscriber revenue for the period divided by the number of average paying subscribers for the period, divided by the number of months in the period.

Contribution

Contribution is defined as revenue, net of refunds and credit card chargebacks, less direct marketing.

Direct Marketing

Direct Marketing is defined as online and offline advertising spend and is included within Cost of revenue, exclusive of depreciation and amortization within our Condensed Consolidated Statements of Operations and Comprehensive ~~Loss (Unaudited).~~Loss.

Unaudited selected statistical information regarding the key business metrics described above is shown in the table below:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Registrations	Registrations	3,186,853		3,759,674		6,794,555		7,668,580		Registrations	3,415,750		3,607,702
Average Paying Subscribers	Average Paying Subscribers	878,618		905,416		887,481		914,799		Average Paying Subscribers	838,961		896,344
Total Monthly ARPU	Total Monthly ARPU	$	20.96	$	20.81	$	20.96	$	20.80	Total Monthly ARPU	$	20.81	$	20.97

Net Revenue	Net Revenue	$	55,253	$	56,527	$	111,632	$	114,184	Net Revenue	$	52,374	$	56,379
Direct Marketing	Direct Marketing	26,426		26,798		56,829		56,630		Direct Marketing	27,696		30,403
Contribution	Contribution	$	28,827	$	29,729	$	54,803	$	57,554	Contribution	$	24,678	$	25,976

During the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, new members registered to our platforms decreased by ~~0.6~~0.2 million, or ~~15.2%~~5.3%, ~~and 0.9 million, or 11.4%, respectively,~~ compared to the same ~~periods~~period in ~~2020.~~2021. Average paying subscribers during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 decreased by ~~3.0% for both periods~~0.1 million, or 6.4%, compared to the same ~~periods~~period in ~~2020.~~2021. The decreases were primarily driven by ~~declines~~a reduction in ~~registration of~~marketing spend.

Monthly ARPU for three months ended March 31, 2022 decreased by 0.8% compared to the ~~Zoosk brand.~~same period in 2021.

1916

~~Monthly ARPU for both the three and six months ended June 30, 2021 remained relatively flat compared to the same periods in 2020.~~

Results of Operations

The following table shows our results of operations for the periods presented. The period-over-period comparison of our historical results are not necessarily indicative of the results that may be expected in the future.

Three Months Ended June 30,
2021 2020 $ Change % Change
Revenue $ 55,253 $ 56,527 $ (1,274) (2.3) %
Operating costs and expenses:
Cost of revenue, exclusive of depreciation and amortization 32,881 33,223 (342) (1.0) %
Sales and marketing expenses 1,152 1,185 (33) (2.8) %
Customer service expenses 1,902 1,938 (36) (1.9) %
Technical operations and development expenses 4,774 4,189 585 14.0 %
General and administrative expenses 7,096 8,340 (1,244) (14.9) %
Depreciation and amortization 2,298 2,332 (34) (1.5) %
Impairment of intangible assets and goodwill 32,086 — 32,086 100.0 %
Total operating costs and expenses 82,189 51,207 30,982 60.5 %
Operating (loss) income (26,936) 5,320 (32,256) (606.3) %
Other income (expense):
Interest income — 9 (9) (100.0) %
Interest expense (3,802) (3,395) (407) 12.0 %
Gain on foreign currency transactions 584 746 (162) (21.7) %
Other income (expense) (2) 200 (202) (101.0) %
Total other expense, net (3,220) (2,440) (780) 32.0 %
(Loss) income before income taxes (30,156) 2,880 (33,036) (1147.1) %
Income tax expense(1)
(18,871) (2,046) (16,825) 822.3 %
Net (loss) income $ (49,027) $ 834 $ (49,861) (5978.5) %


	Three Months Ended March 31,
	2022		2021		$ Change		% Change
Revenue	$	52,374	$	56,379	$	(4,005)	(7.1)	%
Operating costs and expenses:
Cost of revenue, exclusive of depreciation and amortization	34,246		36,918		(2,672)		(7.2)	%
Other operating expenses	15,435		16,151		(716)		(4.4)	%
Depreciation and amortization	603		2,290		(1,687)		(73.7)	%

Total operating costs and expenses	50,284		55,359		(5,075)		(9.2)	%
Operating income	2,090		1,020		1,070		104.9	%
Other income (expense):

Interest expense	(6,882)		(3,440)		(3,442)		100.1	%
Loss on foreign currency transactions	(767)		(1,728)		961		(55.6)	%
Other income (expense)	263		(16)		279		(1743.8)	%
Total other expense, net	(7,386)		(5,184)		(2,202)		42.5	%
Loss before income taxes	(5,296)		(4,164)		(1,132)		27.2	%
Income tax expense	(53)		(2,340)		2,287		(97.7)	%
Net loss	$	(5,349)	$	(6,504)	$	1,155	(17.8)	%

Six Months Ended June 30,
2021 2020 $ Change % Change
Revenue $ 111,632 $ 114,184 $ (2,552) (2.2) %
Operating costs and expenses:
Cost of revenue, exclusive of depreciation and amortization 69,799 69,764 35 0.1 %
Sales and marketing expenses 2,203 2,240 (37) (1.7) %
Customer service expenses 3,763 4,013 (250) (6.2) %
Technical operations and development expenses 9,694 9,659 35 0.4 %
General and administrative expenses 15,415 15,223 192 1.3 %
Depreciation and amortization 4,588 4,653 (65) (1.4) %
Impairment of intangible assets and goodwill 32,086 — 32,086 100.0 %
Total operating costs and expenses 137,548 105,552 31,996 30.3 %
Operating (loss) income (25,916) 8,632 (34,548) (400.2) %
Other income (expense):
Interest income — 40 (40) (100.0) %
Interest expense (7,242) (6,852) (390) 5.7 %
Loss on foreign currency transactions (1,144) (207) (937) 452.7 %
Other income (expense) (18) 200 (218) (109.0) %
Total other expense, net (8,404) (6,819) (1,585) 23.2 %
(Loss) income before income taxes (34,320) 1,813 (36,133) (1993.0) %
Income tax expense(1)
(21,211) (3,141) (18,070) 575.3 %
Net (loss) income $ (55,531) $ (1,328) $ (54,203) 4081.6 %

~~(1)~~ We identified an error related to the calculation of tax provision that impacted the comparative consolidated financial statements for the quarter ended March 31, 2020. Management evaluated these adjustments and concluded they were not material to any previously issued financial statements. For comparability, the prior period comparative figures that are presented herein have been revised to present the correct figures. Refer to Note 1 for additional information.

Comparison of Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and March 31, 2021 ~~and June 30, 2020~~

Revenue

Revenue during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 decreased by ~~$1.3~~$4.0 million, or ~~2.3%~~7.1%, ~~and $2.6 million, or 2.2%, respectively,~~ compared to the same ~~periods~~period in ~~2020.~~2021. The decrease in revenue was attributable to the ~~3.0%~~6.4% decrease in the number of average paying subscribers, ~~related to Zoosk brand, partially offset~~driven by ~~the increase~~a reduction in ~~the core Spark brands.~~marketing spend.

Cost of revenue, exclusive of depreciation and amortization

Cost of revenue, exclusive of depreciation and amortization consists primarily of direct marketing expenses, data center expenses, credit card fees and mobile application processing fees. Cost of revenue during the three ~~and six~~ months ended ~~June 30, 2021 remained relatively flat compared to the same periods in 2020.~~

~~Sales and marketing expenses~~

Sales and marketing expenses consist primarily of salaries for our sales and marketing personnel and expenses for market research. During the three and six months ended June 30, 2021, sales and marketing expenses remained relatively flat compared to the same periods in 2020.

~~Customer service expenses~~

Customer service expenses consist primarily of third-party service fees and personnel costs associated with our customer service centers. The members of our customer service team primarily respond to billing questions, detect and eliminate suspected fraudulent activity, and address site usage and dating questions from our members. Customer service expenses remained relatively flat during the three months ended June 30, 2021 compared to the same period in 2020. During the six months ended June 30, 2021, customer service expensesMarch 31, 2022 decreased by ~~$0.3~~$2.7 million, or ~~6.2%~~7.2%, compared to the same period in ~~2020.~~2021. The decrease was ~~mainly attributable~~primarily due to a reduction in ~~personnel costs~~marketing spend and a decrease in commission expense for mobile application due to ~~consolidation of customer service employee headcount.~~the decline in revenue.

~~Technical operations and development~~Other operating expenses

~~Technical~~Other operating expenses consists primarily of costs for sales and marketing, customer service, technical operations and development, ~~expenses consist primarily of the~~and corporate functions. These costs include personnel, technology platform and ~~systems necessary to support our corporate technology requirements as well as~~system costs, ~~incurred in the development, enhancement~~third-party service and ~~maintenance of our new~~professional fees, occupancy and ~~existing technology platforms. Technical operations and development~~other overhead costs. Other operating expenses during the three months ended ~~June 30, 2021 increased~~March 31, 2022 decreased by ~~$0.6~~$0.7 million, or ~~14.0%~~4.4%, compared to the same period in ~~2020.~~2021. The ~~increase~~decrease was primarily driven by ~~an increase~~higher accounting and audit fees in connection with the U.S. GAAP conversion in the first quarter of 2021, and decreases in personnel costs due to higher headcount in the second quarter of 2021 compared to the second quarter of 2020. Technical operations and development expenses during the six months ended June 30, 2021 remained relatively flat compared to the same period in 2020.

~~General and administrative expenses~~

General and administrative expenses consist primarily of corporate personnel-related costs, professional fees, occupancy and other overhead costs. General and administrative expenses decreased by $1.2 million, or 14.9%, for the three months ended June 30, 2021, while it increased by $0.2 million, or 1.3%, during the six months ended June 30, 2021 compared to the same period in 2020. The decrease during the three months ended June 30, 2021 was primarily driven by ~~a decrease in the business tax expense in San Francisco as the Company no longer has operations in the city and~~lower stock-based compensation, ~~expense. The increase during the six months ended June 30, 2021 was primarily driven by an increase in insurance~~ and ~~professional fees, partially offset by a decrease in the business tax expense in San Francisco and stock-based compensation expense.~~recruiting fees.

Other income (expense)

Other expense, net, consist primarily of interest income and expenses, foreign exchange gains and losses, and other related finance costs. Other expenses, net, during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 increased by ~~$0.8~~$2.2 million, or ~~32.0%~~42.5%, and $1.6 million, or 23.2%, compared to the same periods in 2020. The increase in both periods was primarily related to an increase in interest expense on the deferred payment to Zoosk's shareholders due to an increase in the stated interest rate from 2% to 12% per annum, an increase in effective interest on borrowings under the Senior Secured Facilities Agreement, and losses on foreign currency transactions. During the three and six months ended June 30, 2021, interest expense on the deferred payment to Zoosk's shareholders increased $0.2 million and $0.4 million, respectively, compared to the same periods in 2020. Effective interest on borrowings under the Senior Secured Facilities Agreement during the three and six months ended June 30, 2021 increased $0.2 million and $0.1 million, respectively, as compared to the same periods in 2020. During the three months ended June 30, 2021, net foreign exchange gains decreased by $0.2 million compared to the same period in ~~2020. During~~2021. The increase was primarily related the ~~six months ended June 30, 2021, net~~$4.0 million loss recognized on extinguishment of

debt in connection with the Amended Term Loan Facility and Revolving Credit Facility, as discussed in Note 5.Long-term Debt. The increase was partially offset by a $1.0 million decrease in losses on foreign ~~exchange losses increased by $0.9 million~~currency transactions compared to the same period in ~~2020.~~

2021.

~~Impairment~~

During the second quarter of 2021, the Company lowered its financial expectations for the remainder of 2021 due to increased cyberattacks, delays in product initiatives and a more uncertain Covid-19 outlook.These factors constituted an interim triggering event as of the end of the Company's second quarter of 2021, and the Company performed an impairment analysis with regard to its indefinite-lived intangible assets and goodwill.For the quarter ended June 30, 2021, the fair value of the Spark reporting unit exceeded the carrying amount, and as a result, no goodwill impairment was recorded. For the Zoosk reporting unit, the Company recorded a goodwill impairment charge of $21.8 million. In addition, the Company recognized a Zoosk trademark impairment charge of $10.3 million.

~~See Note 4. Goodwill and Intangible Assets in the Notes to the Consolidated Financial Statements included in Item 1 of this quarterly report for further discussion of impairment.~~

Income tax expense

Income tax expense was ~~$18.9~~$0.1 million for the three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$2.0~~$2.3 million for the three months ended ~~June 30, 2020,~~March 31, 2021, which reflects an effective tax rate of ~~(62.7)~~(1.0)% and 69.2%, respectively. For the six months ended June 30, 2021 and 2020, the Company recorded income tax expense of $21.2 million and $3.1 million, respectively, which reflect an effective tax rate of (61.9)% and 159.3%112.5%, respectively. The ~~increase~~decrease in income tax expense was primarily driven by ~~change~~the Company benefiting from year to date losses in ~~valuation allowance for~~the U.S. ~~deferred tax assets and impairment of goodwill and intangible assets.~~jurisdiction.

See Note 3. Income Taxes in the Notes to the Consolidated Financial Statements included in Item 1 of this quarterly report for further discussion of income taxes.

~~Non-GAAP~~Non-U.S. GAAP Financial Measures

We report our financial results in accordance with ~~generally accepted accounting principles in the~~ U.S. ~~("U.S. GAAP").~~GAAP. However, management believes that certain ~~non-GAAP~~non-U.S. GAAP financial measures provide users of our financial information with additional useful information in evaluating our performance.

Adjusted EBITDA

Adjusted ~~EBITDA~~earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), a non-U.S. GAAP financial measure, is one of the primary metrics by which we evaluate the performance of our business, budget, forecast and compensate management. We believe this measure provides management and investors with a consistent view, period to period, of the core earnings generated from the ongoing operations and ~~excludes the impact of items that we do not consider representative of our ongoing performance. This includes: depreciation~~allows for greater transparency with respect to key metrics used by senior leadership in its financial and ~~amortization, share-based compensation, asset impairments, gains or losses~~operational decision-making. We define Adjusted EBITDA as net earnings (loss) excluding interest expense, (gain) loss on foreign currency transactions, income tax (benefit) expense, depreciation and ~~net interest~~amortization, asset impairments, stock-based compensation expense, acquisition related costs and other costs. Adjusted EBITDA has inherent limitations in evaluating ~~our~~the performance of the Company, including, but not limited to the following:

•Adjusted EBITDA does not reflect the cash capital expenditures during the measurement period;

•Adjusted EBITDA does not reflect any changes in working capital requirements during the measurement period;

•Adjusted EBITDA does not reflect the cash tax payments during the measurement period; and

•Adjusted EBITDA may be calculated differently by other companies in our industry, thus limiting its value as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net income (loss) and our other U.S. GAAP results. The following table reconciles Net ~~(loss) income~~loss to Adjusted EBITDA for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Net (loss) income $ (49,027) $ 834 $ (55,531) $ (1,328)
Net interest expense 3,802 3,386 7,242 6,812
(Gain) loss on foreign currency transactions (584) (746) 1,144 207
Income tax expense 18,871 2,046 21,211 3,141
Depreciation and amortization 2,298 2,332 4,588 4,653
Impairment of intangible assets and goodwill 32,086 — 32,086 —
Stock-based compensation expense 580 1,434 1,616 2,344
Acquisition related costs(1)
— 673 — 1,464
Other costs(2)
292 149 764 277
Adjusted EBITDA $ 8,318 $ 10,108 $ 13,120 $ 17,570


	Three Months Ended March 31,
(in thousands)	2022		2021
Net loss	$	(5,349)	$	(6,504)
Interest expense	6,882		3,440
Loss on foreign currency transactions	767		1,728
Income tax expense	53		2,340
Depreciation and amortization	603		2,290

Stock-based compensation expense	502		1,036


Other costs(1)	22		795
Adjusted EBITDA	$	3,480	$	5,125

(1)~~Acquisition-related costs primarily consist of transaction costs, including legal, consulting, advisory fees, and severance and retention costs.~~

~~(2)~~ Includes primarily consulting and advisory fees related to special projects, as well as non-cash acquisition related expenses, post-merger integration activities and long-term debt transaction and advisory fees.

Liquidity and Capital Resources

The Company's principal sources of liquidity are cash balances and cash flows from operations and borrowings. Our ongoing liquidity requirements arise primarily from working capital needs, research and development requirements and the debt service. In addition, we may use liquidity to fund acquisitions or make other investments. ~~Sources of liquidity are cash~~

~~balances and cash flows from operations and borrowings. From time to time, we may obtain additional liquidity through the issuance of equity or debt.~~ As of ~~June 30, 2021,~~March 31, 2022, we had cash and cash equivalents of ~~$11.1~~$13.0 million.

On March 11, 2022, the Company completed the successful refinancing of its existing term and revolving facility with borrowings under a new term loan facility with MGG Investment Group LP (the "Term Loan"). As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had outstanding principal debt balance of ~~$91.9~~$100.0 million and ~~$104.7~~$85.6 million, respectively. We believe that we will continue to have adequate liquidity on hand to meet our payment requirement under the Loan Agreement in the amount of $6.3 million during the second half of fiscal year 2021. We are in compliance with all of our financial covenants with a net leverage ratio of 2.30 as of June 30, 2021. See Note 6. 5.Long-term Debt in the Notes to the Consolidated Financial Statements included in Item 1 of this quarterly report for further discussion of our debt.

We believe that our current cash and cash flow from operations will be sufficient to meet our anticipated cash needs for financial liabilities, capital expenditures and contractual obligations, for at least the next 12 months. Our future capital requirements and the adequacy of available funds will depend on many factors and those set forth in Part II, Item 1A "Risk Factors" of our Form 10-K for the year ended December 31, 2020. We do not anticipate requiring additional capital; however, if required or desirable, we may utilize our Revolving Credit Facility or issue additional equity in the private or public markets. Under the Senior Secured Facilities Agreement, we are subject to various financial covenants including a monthly liquidity requirement and quarterly tests including guarantor coverage test, maximum leverage ratio and minimum asset coverage ratio. Additionally, it includes covenants that, among other things, restricts our ability and the ability of its subsidiaries to: incur additional indebtedness, create liens, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions and make share repurchases, make certain acquisitions, engage in certain transactions with affiliates, and change lines of business.2021. We do not have any off-balance sheet arrangements as of ~~June 30, 2021.~~March 31, 2022.

Cash Flows Information

The following table summarizes our cash flows for the periods presented:


		Six Months Ended June 30,					Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020		(in thousands)	2022		2021
Net cash provided by (used in):	Net cash provided by (used in):					Net cash provided by (used in):
Operating activities	Operating activities	$	4,629	$	7,207	Operating activities	$	(10,475)	$	(387)
Investing activities	Investing activities	(661)		(1,951)		Investing activities	(490)		(423)
Financing activities	Financing activities	(13,610)		(9,319)		Financing activities	7,774		(3,686)
Net change in cash and cash equivalents		$	(9,642)	$	(4,063)
Net change in cash and cash equivalents and restricted cash						Net change in cash and cash equivalents and restricted cash	$	(3,191)	$	(4,496)

Operating Activities

Our cash flows from operating activities primarily include net loss adjusted for (i) non-cash items included in net loss, such as depreciation and amortization, ~~impairment of goodwill~~ and ~~intangible assets,~~ stock-based compensation and (ii) changes in the balances of operating assets and liabilities.

Net cash ~~provided by~~used in operating activities was ~~$4.6~~$10.5 million for ~~the six months ended June 30, 2021, a decrease of $2.6 million compared to $7.2 million during~~ the three months ended ~~June 30, 2020.~~March 31, 2022, an increase of $10.1 million compared to $0.4 million during the same period in 2021. The ~~decrease~~increase was primarily driven by ~~an increase in net loss from $1.3 million to $55.5 million and the~~a decrease in accounts ~~receivable~~payable due to ~~timing.~~the timing of payments.

Investing Activities

Our cash flows from investing activities primarily include development of internal-use software, and purchase of property and ~~equipment and business acquisition.~~equipment.

Net cash used in investing activities was ~~$0.7~~$0.5 million for the ~~six~~three months ended ~~June 30, 2021, a decrease~~March 31, 2022, an increase of ~~$1.3~~$0.1 million compared to ~~$2.0~~$0.4 million during the ~~six~~three months ended ~~June 30, 2020.~~March 31 2021. The ~~decrease~~increase was primarily due to the ~~cash paid for the Zoosk acquisition final adjustment surplus of $0.5 million during the six months ended June 30, 2020, and the~~ additional capital expenditures of ~~$0.8~~$0.1 million during the ~~first six~~three months ~~of 2020.~~ended March 31, 2022.

Financing Activities

Our cash flows from financing activities primarily include changes in long-term debt.

Net cash provided by financing activities was $7.8 million for the three months ended March 31, 2022, an increase of $11.5 million compared to net cash used in financing activities ~~was $13.6 million for the six months ended June 30, 2021, an increase~~ of ~~$4.3 million compared to $9.3~~$3.7 million during the ~~three months ended June 30, 2020.~~same period in 2021. The increase was primarily attributable to $97.8 million of proceeds, net of discount and issuance costs, received from the ~~fee paid~~Term Loan, partially offset by the $85.6 million repayment of debt under the existing Term Loan Facility and the Second Amendment, transaction

2419

costs of $3.5 million paid to third parties in connection with the ~~execution of the Limited Waiver under~~Term Loan, ~~Agreement in March 2021 of $0.5 million~~ and a ~~higher mandatory~~$0.9 million prepayment ~~made during~~penalty in connection with the ~~second quarter of 2021 compared to same period~~existing Term Loan Facility and the Second Amendment, as discussed in ~~2020.~~Note 5.Long-term Debt.

Recent Accounting Pronouncements

See Note 11. Basis of Presentation and Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Part I. Item 1. of this quarterly report for a discussion of recently issued and adopted accounting standards.

Critical Accounting Policies and Estimates

Please refer to Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation, the “Critical Accounting Policies and Estimates” section of our Form 10-K for the fiscal year ended December ~~31,2020~~31, 2021 ("~~2020~~2021 Form 10-K") for a full description of all of our critical accounting estimates. We believe there have been no new critical accounting policies and estimates, or material changes to our existing critical accounting policies and estimates during the three months ended ~~June 30, 2021.~~March 31, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~Under the supervision and~~The Company’s management, with the participation of ~~our management, including our Chief Financial Officer (our principal accounting officer) and Chief Executive Officer (our~~its principal executive ~~officer), we~~officer and principal financial officer, evaluated the effectiveness of ~~the design and operation of our~~its disclosure controls and procedures ~~(as~~as of December 31, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange Act, means controls and other procedures of ~~1934,~~a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms promulgated by the Securities and Exchange Commission (the “SEC”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as ~~amended (Exchange Act)) as of the end of the period covered by this report.~~appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our management concluded that, as of ~~June 30, 2021,~~March 31, 2022, due to the material weakness in our internal control over financial reporting previously identified in our ~~2020~~2021 Form 10-K which continues to exist, our disclosure controls and procedures were not effective.

Remediation Plan for Material Weakness in Internal Control over Financial Reporting

In connection with the audit of our consolidated financial statements as of and for the years ended December 31, ~~2020~~2021 and ~~2019,~~2020, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Please refer to Part II. Item 9A. "Controls and Procedures" of our ~~2020~~2021 Form 10-K for a full description of the material weakness in our internal control over financial reporting and remediation plan.

Our remediation of the identified material weaknesses and the strengthening of our internal control environment is ongoing. We continue to focus on the design and implementation of processes and procedures to improve our new and existing controls and remediate our material weaknesses. We are committed to maintaining a strong control environment and believe that these remediation efforts represent continued improvements in our control environment. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may determine it is necessary to take additional action to address control deficiencies or modify certain of the remediation measures. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these enhanced internal controls are operating effectively. We will continue to monitor and evaluate the

effectiveness of our internal control over financial reporting in the areas affected by the material weaknesses. Our management is committed to remediating the material weakness in a timely manner.

Changes in Internal Control over Financial Reporting

There has been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

2621

PART II

Other Information

Item 1. Legal Proceedings

For information that updates the disclosure set forth under Part I. Item 3. Legal Proceedings in our ~~2020~~2021 Form 10-K, refer to Note 76. Contingencies to the Consolidated Financial Statements in this Form 10-Q.

Item 1A. Risk Factors

Please refer to Part I. Item 1A. Risk Factors of our ~~2020~~2021 Form 10-K for a discussion of our risk factors. The risks and uncertainties are not limited to those set forth in the ~~2020~~2021 Form 10-K. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. We believe there have been no new risk factors, or material changes to our existing risk factors, during the three months ended ~~June 30, 2021.~~

March 31, 2022.

Item 2. Recent Sales of Unregistered Securities

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~

On May 9, 2022, the Company and David Clark amended Mr. Clark’s Employment Agreement with the Company dated as of August 10, 2021, to provide that the amount of severance paid under the agreement shall no longer be subject to offset for any other remuneration paid to Mr. Clark during the severance period. A copy of the amendment is attached hereto as Exhibit 10.2 and incorporated herein by reference.

2722

Item 6. Exhibits

Incorporated by Reference

Filed/Furnished

Herewith

Incorporated by Reference

Filed/Furnished

Herewith

Exhibit

Number

Exhibit

Number

Description

Form

File No.

Exhibit

Filing Date

Exhibit No.

Exhibit

Number

Description

Form

File No.

Exhibit

Filing Date

Exhibit No.

3.1

Spark Networks SE Amended Articles of Association, dated August 17, 2021

Filed

10.1

Employment Agreement of David Clark, dated June 16, 2021

8-K

001-38252

6/17/21

10.1

Financing Agreement, dated as of March 11, 2022, between the Company, Zoosk, Inc., Spark Networks, Inc. and MGG Investment Group LP.

8-K

001-38252

March 14, 2022

10.1

10.2

Amended and Restated Employment Agreement of Gitte Bendzulla, dated June 15, 2021

8-K

001-38252

6/17/21

10.2

First Amendment to Employment Agreement with David Clark, dated May 9, 2022 .

10.3

Limited Waiver under Loan Agreement dated March 5, 2021

Filed

31.1

Certification of Principal Executive Officer pursuant to rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed

31.1

31.2

Certification of Principal Financial Officer pursuant to rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed

31.2

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

101.1

The following financial statements from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Extensible Business Reporting Language (“XBRL”):

•unaudited condensed consolidated balance sheets;

•unaudited condensed consolidated statements of operations and comprehensive loss;

•unaudited condensed consolidated statements of shareholders’ equity;

•unaudited condensed consolidated statement of cash flows; and

•notes to unaudited condensed consolidated financial statements.

101.1

The following financial statements from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Extensible Business Reporting Language (“XBRL”):

•unaudited condensed consolidated balance sheets;

•unaudited condensed consolidated statements of operations and comprehensive loss;

•unaudited condensed consolidated statements of shareholders’ equity;

•unaudited condensed consolidated statement of cash flows; and

•notes to unaudited condensed consolidated financial statements.

104

Cover Page Interactive Data File – the cover page

from this Quarterly Report on Form 10-Q for the

quarter ended March 31, 2022, is formatted in

Inline XBRL and contained in Exhibit 101.1


**			The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

2823

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Spark Networks SE

Date: ~~August 23, 2021~~May 10, 2022	By:	/s/ Eric Eichmann
		Eric Eichmann
		Chief Executive Officer
		(Principal Executive Officer)

Date: ~~August 23, 2021~~May 10, 2022	By:	/s/ David Clark
		David Clark
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

2924


	Three Months Ended June 30, 2021
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total shareholders' equity
Balance at April 1, 2021	2,661,386	$	3,064	(55,697)	$	(61)	$	221,888	$	(138,752)	$	5,650	$	91,789
Stock-based compensation	—	—		—	—		580		—		—		580
Treasury stock issued pursuant to equity-based plans	—	—		7,569	8		(386)		—		—		(378)
Net loss	—	—		—	—		—		(49,027)		—		(49,027)
Foreign currency translation adjustments	—	—		—	—		—		—		(800)		(800)
Balance at June 30, 2021	2,661,386	$	3,064	(48,128)	$	(53)	$	222,082	$	(187,779)	$	4,850	$	42,164

	Three Months Ended June 30, 2020
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total shareholders' equity
Balance at April 1, 2020	2,661,386	$	3,064	(55,697)	$	(61)	$	216,982	$	(87,802)	$	8,970	$	141,153
Stock-based compensation	—	—		—	—		1,434		—		—		1,434
Net income	—	—		—	—		—		834		—		834
Foreign currency translation adjustments	—	—		—	—		—		—		(1,104)		(1,104)
Balance at June 30, 2020	2,661,386	$	3,064	(55,697)	$	(61)	$	218,416	$	(86,968)	$	7,866	$	142,317


	Six Months Ended June 30, 2021
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total shareholders' equity
Balance at January 1, 2021	2,661,386	$	3,064	(55,697)	$	(61)	$	220,852	$	(132,248)	$	3,296	$	94,903
Stock-based compensation	—	—		—	—		1,616		—		—		1,616
Treasury stock issued pursuant to equity-based plans	—	—		7,569	8		(386)		—		—		(378)
Net loss	—	—		—	—		—		(55,531)		—		(55,531)
Foreign currency translation adjustments	—	—		—	—		—		—		1,554		1,554
Balance at June 30, 2021	2,661,386	$	3,064	(48,128)	$	(53)	$	222,082	$	(187,779)	$	4,850	$	42,164

	Six Months Ended June 30, 2020
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total shareholders' equity
Balance at January 1, 2020	2,661,386	$	3,064	(55,697)	$	(61)	$	216,072	$	(85,640)	$	7,751	$	141,186
Stock-based compensation	—	—		—	—		2,344		—		—		2,344
Net loss	—	—		—	—		—		(1,328)		—		(1,328)
Foreign currency translation adjustments	—	—		—	—		—		—		115		115
Balance at June 30, 2020	2,661,386	$	3,064	(55,697)	$	(61)	$	218,416	$	(86,968)	$	7,866	$	142,317


		June 30, 2021
(in thousands)	Weighted-Average Remaining Amortization Period (Years)	Gross Carrying Amount		Accumulated Impairment Charges		Accumulated Amortization		Currency Translation Impact on Carrying Amount		Net Carrying Amount
Indefinite-lived intangible assets:
Brands and trademarks		$	63,800	$	(21,260)	$	—	$	—	$	42,540
Long-lived intangible assets:
Brands and trademarks	0.1	3,025		(2,573)		(417)		2		37
Acquired technology	1.9	5,910		—		(3,346)		—		2,564
Customer relationships	0.0	10,780		—		(10,703)		—		77
Licenses and domains	0.0	184		—		(148)		2		38
Other	0.0	3,989		—		(3,949)		—		40
Total intangible assets	2.0	$	87,688	$	(23,833)	$	(18,563)	$	4	$	45,296


(in thousands)	Amortization Expense
2021	$	827
2022	1,280
2023	632
2024	8
2025	8
Thereafter	1
Total estimated amortization expense	$	2,756