Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
MEET > SEC Filings for MEET > Form 10-K on 25-Mar-2014All Recent SEC Filings

Show all filings for MEETME, INC.

Form 10-K for MEETME, INC.


25-Mar-2014

Annual Report


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion in conjunction with our audited historical consolidated financial statements, which are included elsewhere in this report. Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed elsewhere in this report, particularly in "Risk Factors," located under Item 1A.

Company Overview

MeetMe is a social network for meeting new people both on the web and on mobile platforms, including on iPhone, Android, iPad and other tablets, that facilitates interactions among users and encourages users to connect with each other. MeetMe monetizes through advertising, virtual currency, and paid subscriptions. MeetMe provides users with access to an expansive, multilingual menu of resources that promote social interaction, information sharing and other topics of interest to users. The Company offers online marketing capabilities, which enable marketers to display their advertisements in different formats and in different locations. The Company works with its advertisers to maximize the effectiveness of their campaigns by optimizing advertisement formats and placement.

Just as Facebook has established itself as the social network of friends and family, and LinkedIn as the social network of colleagues and business professionals, MeetMe is creating the social network not of the people you know but of the people you want to know. We believe meeting new people is a basic human need, especially for users aged 18-30, when so many long-lasting relationships are made. There are more than 1 billion people aged 18-30 worldwide with more than 50 million such people in the United States.

We believe that we have significant growth opportunities ahead as people increasingly use their mobile devices to discover the people around them. Given the importance of establishing connections within a user's geographic proximity, we believe it is critical to establish a high density of users within the geographic regions we serve. As the MeetMe network grows the number of users in a location, we believe users who are seeking to meet new people will incrementally benefit from the quantity of relevant connections.

2013 Highlights

? Mobile revenue was a record of $12.6 million for the fiscal year ended December 31, 2013, up 106% from $6.1 million in the corresponding period in 2012.

? Adjusted EBITDA was $1.8 million for the year. Over the final three quarters of the year, the Company generated Adjusted EBITDA of $3.5 million. Net loss for 2013 was $11 million. (See the important discussion about the presentation of non-GAAP financial measures, and reconciliation to the most directly comparable GAAP financial measures, below.)

? Cash and Cash Equivalents totaled $6.3 million at December 31, 2013, up from $5.0 million at December 31, 2012.

Factors Affecting Our Performance

? Number of MAUs and DAUs: We believe ability to grow web and mobile MAUs and DAUs affects our revenue and financial results by influencing the number of advertisements we are able to show, the value of those advertising, and the volume of virtual currency purchases, as well as our expenses and capital expenditures.

? User Engagement: Changes in user engagement patterns we believe also affect our revenue and financial performance. Specifically, the number of visits and page views each MAU or DAU generates affects the number of advertisements we are able to display and therefore the rate at which we are able to monetize our active user base. We continue to create new features and enhance existing features to drive additional engagement.

? Platform Trends: Increasing use of MeetMe on mobile devices may affect our revenue and financial results, as we currently display fewer advertising on average to mobile users compared to users on personal computers, and we earn less revenue per ad impression as a result of the mobile advertising market being less established than the web advertising market. For example, in the fourth quarter of 2013, over 70% of our DAUs on average accessed MeetMe on mobile devices, yet we generated only 47% of our core platform revenue from our mobile usage. Improving the rate at which we monetize our growing mobile traffic is a key priority in 2014, as we expect our users to continue to shift their usage from web to mobile for the foreseeable future. The transition in our user access to mobile may impact revenues negatively in the short-term and medium-term as mobile monetization continues to mature slowly.

? Advertising Rates: Our revenue and financial results are materially dependent on industry trends, and any changes to the revenue we earn per thousand advertising impressions (CPM), could affect our revenue and financial results. We expect to continue investing in new types of advertising and new placements, especially in our mobile applications. Additionally, we are prioritizing initiatives that generate revenue directly from users, including new virtual currency products and a premium subscription product, in part to reduce our dependency on advertising revenue.


? User Geography: The geography of our users influences our revenue and financial results because we currently monetize users in distinct geographies at varying average rates. For example, ARPU in the United States and Canada is significantly higher than in Latin America. In 2012 and early 2013, we laid the foundation for future international growth by localizing the core MeetMe service into five additional languages with a focus on Western Europe and three additional languages with a focus on Asia. We plan to continue to invest in user growth across the world, including in geographies where current per user monetization rates are relatively lower than in the United States and Canada.

? New User Sources: The percentage of our new users that are acquired through inorganic, paid sources has a material impact on our financial performance, specifically with regard to ARPU for web and mobile. Inorganically acquired users tend to have lower engagement rates, tend to generate fewer visits and ad impressions and to be less likely to buy virtual currency products. When paid marketing campaigns are ongoing, our overall usage and traffic increases due to the influx of inorganically acquired users, but the rate at which we monetize the average active user overall declines as a result.

? Ad Inventory Management: Our revenue trends are affected by advertisement inventory management changes affecting the number, size, or prominence of advertisements we display. In general, more prominently displayed advertising units will generate more revenue per impression. Our Social Theater campaign expenses are materially dependent on the percentage of Social Theater campaigns that run on MeetMe.com and the percentage that run on our partners' cross-platform networks. We work to maximize the share of Social Theater campaigns that run on MeetMe.com and run campaigns on our partners' networks only when necessary to increase their reach.

? Increased Social Theater Competition: A significant portion of the revenue generated by the Social Theater is derived from advertising campaigns, powered by Social Theater technology, that run on our partners' cross-platform networks and not on MeetMe.com. A recent increase in competitors offering similar technology solutions, and in some cases their own cross-platform distribution networks, may make it difficult to compete on price and win business. We expect this downward pressure on price to continue and impact our operating results in the future.

? Seasonality: Advertising spending is traditionally seasonal with a peak in the fourth quarter of each year. We believe that this seasonality in advertising spending affects our quarterly results, which generally reflect a growth in advertising revenue between the third and fourth quarters and a decline in advertising spending between the fourth and subsequent first and second quarters of each year.

? Headcount: We plan to invest more heavily in mobile products in 2014 expecting to grow headcount by 15% or approximately 20 people, primarily to expand the size of the mobile development team.

Growth trends in web and mobile MAUs and DAUs are critical variables that affect our revenue and financial results by influencing the number of advertisements we are able to show, the value of those advertising, the volume of payments transactions, as well as our expenses and capital expenditures.

Changes in user engagement patterns from web to mobile and international diversification also affect our revenue and financial performance. We believe that overall engagement as measured by the percentage of users who create content (such as status posts, messages, or photos) or generate feedback increases as our user base grows. We continue to create new apps and enhance existing apps to lift social sharing and increase monetization. The launch of additional languages to the platform facilitates international user growth.

We believe our revenue trends are also affected by advertisement inventory management changes affecting the number, size, or prominence of advertisements we display and traditional seasonality. Social Theater is a revenue product for the MeetMe platform and on third-party sites. Social Theater growth may be affected by large brand penetration, the ability to grow the advertiser base and advertiser spending budgets.


The following table sets forth a modified version of our Consolidated Statements of Operations and Comprehensive Loss that is used in the following discussions of our results of operations:

                                                                    2012 to 2013       2012 to 2013
                                   2013              2012            Change ($)         Change (%)

Revenues                       $  40,378,007     $  46,657,959     $   (6,279,952 )             (13.5 )%

Operating Costs and Expenses
Sales and marketing                7,799,077         8,467,158           (668,081 )              (7.9 )%
Product development and
content                           26,660,709        29,510,917         (2,850,208 )              (9.7 )%
General and administrative         7,875,395         9,663,323         (1,787,928 )             (18.5 )%
Depreciation and
amortization                       4,387,464         3,962,290            425,174                10.7 %
Acquisition and
restructuring costs                2,540,896           422,488          2,118,408               501.4 %
Loss on debt restructure           1,174,269                 -          1,174,269               100.0 %
Operating Expenses                50,437,810        52,026,176         (1,588,366 )              (3.1 )%
Loss from Operations             (10,059,803 )      (5,368,217 )        4,691,586                87.4 %
Other Income (Expense):

Interest income                        9,725            16,569              6,844                41.3 %
Interest expense                    (848,247 )      (1,285,674 )         (437,427 )             (34.0 )%
Other income                               -             9,611              9,611               100.0 %
Total Other Income (Expense)        (838,522 )      (1,259,494 )         (420,972 )             (33.4 )%

Net loss from continuing
operations                     $ (10,898,325 )   $  (6,627,711 )   $    4,270,614                64.4 %
Net loss from discontinued
operations                     $           -     $  (3,680,627 )   $   (3,680,627 )            (100.0 )%
Net loss                       $ (10,898,325 )   $ (10,308,338 )   $      589,987                 5.7 %

Comparison of the year ended December 31, 2013 with the year ended December 31, 2012

Revenues

Our revenues were approximately $40.4 million, for the year ended December 31, 2013, a decrease of $6.3 million or 13.5% compared to $46.7 million for the same period in 2012. Revenues for the year ended December 31, 2012 included $6.0 million of Social Theater revenue from MATT, Inc. ("MATT"). The Company did not have Social Theater revenue from affiliates for the year ended December 31, 2013. Our revenue from non-affiliates of $40.4 million, for the year ended December 31, 2013, decreased approximately $0.3, or 1.0% from the same period in 2012. The decline in revenue is also attributable to a deceleration in web advertising and web virtual currency product revenues of $6.5 million and reductions in Social Theater revenue due to timing of campaign substantially offset by an increase of $6.5 million in mobile virtual currency product and advertising revenue.

Operating Costs and Expenses

Sales and Marketing: Sales and marketing expenses decreased approximately $668,000, or 7.9% to $7.8 million for the year ended December 31, 2013 from $8.5 million in 2012. Decreased sales and marketing expenses are primarily attributable to a decrease of approximately $568,000 in salaries, and a decrease in advertising and marketing expense of $100,000.

Product Development and Content: Product development and content expenses decreased approximately $2.9 million, or 9.7%, to $26.7 million, for the year ended December 31, 2013 from $29.5 million in 2012. The net decrease in product development and content expense is primarily attributable to a net reduction of $2.7 million of third party content costs for cross platform Social Theater affiliate campaigns. The decrease in the year ended December 31, 2013 expenses also reflects cost reductions of approximately $933,000 associated with (i) decreases in salary, bonuses, related expenses, and stock compensation costs relating to a decreased domestic workforce, (ii) cost savings achieved with the closure of our former Mexico service center and related workforce reduction,
(iii) migration and merger of Quepasa.com, and (iv) $300,000 in the cost of the Company's platform language internationalization projects which were ongoing during 2012 and completed in the first quarter of 2013.

General and Administrative: General and administrative expenses decreased $1.8 million, or 18.5%, to $7.9 million for the year ended December 31, 2013 from $9.7 million for the same period in 2012. The aggregate decrease in general and administrative costs is due to reductions of approximately $450,000 in salaries, business related expenses, and stock-based compensation costs, $1.2 million in legal settlement costs, and a net decrease of $172,000 in travel costs.


Comparison of Stock-Based Compensation and Other Costs and Expenses

Stock-Based Compensation

Stock-based compensation expense for continuing operations, included in the operating expense by category, decreased approximately $124,000 to $3.8 million for the year ended December 31, 2013 from $3.9 million for the year ended December 31, 2012. The net decrease is primarily the result of approximately $564,000 of accelerated stock compensation attributable to the immediate vesting of stock options for the Company's former Chief Executive Officer and former Chief Financial Officer offset substantially by the reversals of unvested stock compensation for terminated employees related to the reduction in workforce that occurred in May 2013. Stock-based compensation expense for discontinued operations, included in the loss from discontinued operations category, was approximately $152,000 for the year ended December 2012 and zero for the comparable period in 2013. Stock-based compensation expense for continuing operations represented 7% of operating expenses for the year ended December 31, 2013 and 2012, respectively. As of December 31, 2013, there was approximately $3.3 million and $1.9 million of unrecognized compensation cost related to stock options and unvested restricted stock awards, respectively, which is expected to be recognized over a period of approximately two to three years.

                                                 For the years ended            2013 to 2012
                                                    December 31,                Changes ($)
                                              2013              2012
Sales and marketing                      $     392,020     $     347,555       $       44,465
Product and content development              1,755,712         1,856,622             (100,910 )
General and administrative                   1,610,311         1,677,717              (67,406 )
Total stock-based compensation for
continuing operations                        3,758,043         3,881,894             (123,851 )
Total stock-based compensation for
discontinued operations                              -           151,508             (151,508 )
Total stock-based compensation           $   3,758,043     $   4,033,402       $     (275,359 )

Stock-based compensation for continuing operations is composed of the following:

                                                         2013               2012
Vesting of stock options                            $    3,249,302     $    3,881,894
Vesting of restricted stock awards                         508,741                  -
Total stock-based compensation for continuing
operations                                          $    3,758,043     $    3,881,894

The amortization of prepaid expenses includes compensation for professional services in which the related stock options vested prior to the performance of services. The amount of compensation is amortized over the lengths of the contracts.

Depreciation and Amortization Expense

Depreciation and amortization expense increased approximately $425,000 million to $4.4 million for the year ended December 31, 2013 from $3.9 million in the year ended December 31, 2012. The increase is due to the depreciation and amortization of tangible and intangible assets associated with the server and computer acquisitions made in 2012 and 2013.

Acquisition and Restructuring Costs

For the years ended December 31, 2013 and 2012 restructuring costs were approximately $2.5 million and $423,000, respectively, including the accrual of the exit cost of non-cancellable leases, employee exit and relocation costs, excluding the impact of stock-based compensation expense reversals associated with employee terminations resulting from the restructure. The Company paid approximately $1.8 million of the accrued restructuring expenses in severance and related employee exit costs to its former Chief Executive Officer and former Chief Financial Officer during 2013.


Discontinued Operations- Quepasa Games



                                                                    For the year ended
                                                                       December 31,
                                                                           2012
Games Revenues                                                     $            840,190
Games expenses                                                                1,032,366
Product development and content                                                 552,563
Depreciation and amortization                                                    16,102
Exit costs                                                                      431,418
Loss on disposable of assets                                                     48,084
Stock-based compensation                                                        151,508
Loss on impairment of goodwill                                                2,288,776
Total                                                                         4,520,817
Loss from discontinued operations attributable to Quepasa Games    $         (3,680,627 )

There were no revenues or related expenses from discontinued games operations for the year ended December 31, 2103. The games revenues and related games expenses for 2012 represented operations for less than six full months. The Wonderful City Rio and Amazon Alive games were launched in April of 2011 and May 2012, respectively. Games operations were discontinued on June 30, 2012.

Liquidity and Capital Resources

                                                          For the years ended December 31,
                                                            2013                   2012
Net cash used in operating activities                 $       (725,257 )     $        (832,134 )
Net cash used in investing activities                          (37,495 )              (787,494 )
Net cash provided by (used in) financing activities          2,098,146              (1,624,060 )
                                                      $      1,335,394       $      (3,243,688 )

Net cash used in operations was approximately $725,000 for the year ended December 31, 2013 compared to cash used by operations of $832,000 for the same period in 2012. For the year ended December 31, 2013, net cash provided by continuing operations consisted primarily of a net loss from continuing operations of approximately $10.9 million offset by non-cash expenses of approximately $4.4 million from depreciation and amortization expense, $3.8 million related to stock-based compensation, $1.1 million of loss on debt restructure, and $160,000 in amortization of discounts on notes payable and debt issuance costs offset by a $52,000 recovery on bad debt allowances. Additionally, changes in working capital increased the net cash provided by continuing operations. These changes included decreases of $737,000 in prepaid expenses and other current assets.

For the year ended December 31, 2012, net cash provided by continuing operations consisted primarily of a net loss from continuing operations of approximately $6.6 million offset by non-cash expenses of approximately $4.0 million of depreciation and amortization expense, $3.9 million related to stock-based compensation for the vesting of stock options, $292,000 in amortization of discounts on notes payable and debt issuance costs, $277,000 net write-off of trade receivables and allowance adjustments. Additionally, changes in working capital increased the net cash used in continuing operations. These changes included increases in accounts receivable of $5.7 million offset by net decreases of $275,000 in restricted cash, $304,000 in prepaid expenses, other current assets and other assets and increases in accounts payable and accrued expenses of $4.0 million and of $322,000 in deferred revenues. Net cash used in discontinued operations of Quepasa Games of approximately $1.8 million consisted of a net loss from discontinued operations of $3.7 million offset by noncash expenses of $2.3 million loss on impairment of goodwill, $152,000 related to stock-based compensation for the vesting of stock options, $48,000 loss on disposal of property and equipment, and $16,000 of depreciation and amortization.

Net cash used in investing activities for the year ended December 31, 2013 of approximately $37,000, was due to capital expenditures of $149,000 for computer equipment to increase capacity and improve performance offset by $112,000 of loan receivable payments received from BRC Group, LLC ("BRC"). Net cash used in investing activities in the year ended December 31, 2012 of approximately $787,000 was attributable to payments of $720,000 primarily for computer servers to provide redundant backup for content and increase capacity and of $125,000 for the purchase of a trademark, offset by $57,000 of loan receivable payments received from BRC. Net cash used in investing activities in the year ended December 31, 2013 and 2012 exclude approximately $519,000 and $1.5 million, respectively, of computer equipment purchased using capital leases.


Net cash provided by financing activities in the year ended December 31, 2013 of approximately $2.1 million was due to $5.0 million drawn on the growth capital loan, offset by $2.2 million of debt payments, and $784,000 of capital lease payments offset by $123,000 of proceeds from the exercise of stock options. Net cash provided by financing activities in the year ended December 31, 2013 excludes the $6.0 million subordinate note payable with accrued interest and accounts receivable offset and $2.8 million of warrant exercises and cancellation of subordinated note payable with accrued interest that were non-cash transactions. Net cash used in financing activities in the year ended December 31, 2012 of approximately $1.6 million was due to $2.4 million of debt payments and a $100,000 preferred stock dividend payment offset by $1.3 million proceeds from the exercise of stock options.

                             December 31,      December 31,
                                 2013              2012
Cash and cash equivalents    $   6,330,532     $   5,022,007
Total assets                 $  95,576,240     $ 104,434,667
Percentage of total assets               7 %               5 %

Our cash balances are kept liquid to support our growing infrastructure needs for operational expansion. The majority of our cash is concentrated in two large financial institutions, Comerica and JP Morgan Chase.

As of the date of March 14, 2014, the Company had a cash balance of $5.3 million. As of December 31, 2013 and 2012, the Company had positive working capital of approximately $6.9 million and $12.0 million, respectively. The reduction in the Company's working capital is primarily attributable to the offset of $6.0 million in accounts receivable and the cancellation of the subordinate note payable with accrued interest from MATT. During the first quarter of 2013, MATT exercised warrants dated October 17, 2006 at an exercise price of $2.75 per share (the "MATT Warrants") to purchase 2,147 shares of common stock using the amount by which the outstanding principal and accrued interest under the note payable exceeded the amount in accounts receivable. As a result of these transactions, both the note payable and the accounts receivable have been deemed fully satisfied. In connection therewith, MATT has agreed to exercise or forfeit the MATT Warrants with an aggregate exercise price of $2,000,000 over an eleven-month period beginning in March 2013.

During the first quarter of 2013, the Company and Richard L. Scott Investments, LLC ("RSI") entered into an agreement pursuant to which RSI exercised warrants dated as of March 21, 2006 to purchase one million shares of common stock at an exercise price of $2.75 per share (the "RSI Warrants"). RSI paid the exercise price of the RSI Warrants by offsetting that same amount under the Company's $2,000,000 Subordinated Promissory Note dated January 25, 2008 (the "RSI Note"). The Company paid RSI $107,504 in cash, which represented the difference between the aggregate exercise price of the RSI Warrants of $2,750,000, and the total amount of principal and interest under the RSI Note that would have accrued through the 2016 due date of $2,857,504. As a result of these transactions, the RSI Warrants have been fully exercised and are of no further force or effect, and the RSI Note has been deemed fully satisfied.

The Company may borrow up to $8.0 million of debt through the 2013 Loan Agreement. In addition, the Company may borrow up to $6.0 million of debt from other financial institutions and under capital leases, provided that the Company has unrestricted cash and accounts receivable greater than 200% of its . . .

  Add MEET to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for MEET - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.