# Intelligent Protection Management Corp.: Form 10-Q/A for the period ended Jun 30, 2012

- Company: [Intelligent Protection Management Corp.](/companies/ipm.md) (CIK 1355839)
- Form: 10-Q/A
- Filed: 2012-12-07
- Accepted by EDGAR: Dec 7, 2012, 16:55 ET
- Period: 2012-06-30
- Accession: 0001213900-12-006686
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1355839/000121390012006686/f10q0612a1_snap.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1355839/000121390012006686/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2012-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2012-04-01 to 2012-06-30 | $5.2m | us-gaap:Revenues |
| Revenue | 6 months, 2012-01-01 to 2012-06-30 | $11.0m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2012-04-01 to 2012-06-30 | $1.3m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2012-01-01 to 2012-06-30 | $2.4m | us-gaap:CostOfRevenue |
| Operating income | 3 months, 2012-04-01 to 2012-06-30 | −$1.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2012-01-01 to 2012-06-30 | −$2.9m | us-gaap:OperatingIncomeLoss |
| Diluted EPS | 3 months, 2012-04-01 to 2012-06-30 | −$0.03 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2012-01-01 to 2012-06-30 | −$0.10 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2012-04-01 to 2012-06-30 | −$0.03 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2012-01-01 to 2012-06-30 | −$0.10 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2012-04-01 to 2012-06-30 | 38,580,261 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2012-01-01 to 2012-06-30 | 38,580,261 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2012-01-01 to 2012-06-30 | −$1.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2012-01-01 to 2012-06-30 | $88.2k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2012-06-30 | $5.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2012-06-30 | $8.4m | us-gaap:AssetsCurrent |
| Total assets | at 2012-06-30 | $9.1m | us-gaap:Assets |
| Current liabilities | at 2012-06-30 | $5.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2012-06-30 | $7.9m | us-gaap:Liabilities |
| Shareholders' equity | at 2012-06-30 | $1.2m | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 49,395 characters.

*This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with: (i) the accompanying unaudited condensed consolidated financial statements and notes thereto for the three and six months ended June 30, 2012, (ii) the consolidated financial statements and notes thereto for the year ended December 31, 2011 included in our Amendment No. 1 to Annual Report on Form 10-K/A filed with the Securities and Exchange Commission (the “SEC”) on December 7, 2012 and (iii) the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Amendment No. 1 to Annual Report on Form 10-K/A. Aside from certain information as of December 31, 2011, all amounts herein are unaudited.*

### Forward-Looking Statements

In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Item 1A. Risk Factors” of our Amendment No. 1 to Annual Report on Form 10-K/A. See “Forward-Looking Statements.”

### Overview

We are an Internet company providing services in the expanding social networking and online dating markets. We own and operate a dating and social networking software application under the *AreYouInterested.com* brand that can be accessed on Facebook®, mobile devices such as iPhone® and Android®, as well as a stand-alone website. Our product is fully integrated across all gateways we offer and incorporates the Facebook Connect® integration tool, which allows users to “connect” their Facebook identity and friends to our website. Since August 2007, *AreYouInterested.com* has been one of the leading dating applications on Facebook based on the publicly reported number of daily and monthly active users.

We primarily generate revenue from subscription fees and, as of August 1, 2012, we had approximately 118,000 active subscribers. We consider a subscriber to be “active” if he or she has pre-paid for current access to premium features and the term of the subscriber’s subscription period has not yet expired. The number of our daily and monthly active users as publicly reported by AppData®, which includes non-paying users and paying subscribers, varies greatly on a daily and monthly basis, respectively, and is greater than the number of our active subscribers for the same measurement period.

In February 2012, we announced that we are focusing on rebuilding the *AreYouInterested.com* brand around interest-based matching and social discovery. As of August 1, 2012, we had more than seven million monthly active users (“MAUs”) of the *AreYouInterested.com* application on Facebook platform. We believe that our extensive user base, along with the overwhelming amount of data that we have accumulated for several years across multiple platforms and data gathered in conjunction with Facebook platform’s real-time application programming interface (“API”), allows us to create a one-of-a-kind experience for users looking to meet people with similar interests. We believe that our user base has reached a critical mass, which would be prohibitively expensive to replicate through traffic acquisition alone for even well-funded start-up Facebook dating applications and constitutes a significant obstacle for new entrants to attracting new users and generating significant revenue.

During the last six months and particularly during the quarter ended June 30, 2012, we have been primarily focused on the redesign and rebuild of our *AreYouInterested.com* product. As part of the development process and in preparation for the re-launch of the product, we began a number of key initiatives during the period, including:

- aggressive hiring to build out our development and product teams;
- investing in new technologies, software and infrastructure in order to support our new product; and
- significantly reducing our rate of advertising and marketing expense during the second quarter of 2012 in order to conserve liquidity and better align our marketing plan to our long-term product roadmap.

While we believe that our actions will yield long-term positive results, in the short-term these actions have caused:

- a decrease in both revenues and bookings during the second quarter of 2012 as compared to the first quarter of 2012;
- a decrease in the number of active subscribers during the second quarter of 2012; and
- a reduction in net loss during the second quarter of 2012 as compared to the first quarter of 2012, as the decrease in advertising and marketing expenses more than offset the effects of lower revenues and bookings.

The redesigned *AreYouInterested.com* product was launched to all new users in June 2012. We are in the process of optimizing the new product and adding new features to increase user engagement and, thereby, improve rates at which installs are converted into paying subscribers. In July 2012, we began the process of switching our existing user base to the redesigned product and expect to complete that process in August 2012. We expect to keep our advertising and marketing expense at reduced levels during the third quarter of 2012 as we continue to prioritize the optimization of the new product, and as a result we believe that revenues and bookings may further decline in the short-term.

Our application development processes are designed to enable us to rapidly and cost effectively develop our application to meet the expectations and preferences of users and the requirements of the third party platforms on which we offer our product. Expanding our presence on mobile platforms is currently a core objective for us. Although revenue opportunities on our mobile products are still in their early stages, we are investing heavily in engineering on our mobile products while we continue to develop such products and user acquisition costs are relatively inexpensive given our user base. We believe that our mobile dating and social discovery application will offer significant opportunities in the future and have increased the resources allocated to this product with the goal of positioning us as a leading provider of this product. A primary component of our mobile initiatives is to continue creating a seamless experience for users of our product across multiple platforms. We believe that this approach will better position us to be a leading provider of mobile dating services in the future as web browsing and web activity shifts to smartphones and other mobile devices. As a result of these efforts, we have seen meaningful traction with our mobile product line, as nearly 14% of logins in June 2012 to the *AreYouInterested.com* brand were made through a mobile device.

The majority of our logins occur on third party platforms, such as Facebook. We believe we provide value to these third parties by (i) creating and maintaining user engagement on, and integrating with, the platforms, (ii) driving traffic to the platforms to generate advertising revenue for such platforms, including through the placement of advertisements on our application pages, and (iii) directly purchasing advertising from the platforms.

Recent product highlights for the second quarter of 2012 include:

- Adding 3.7 million new profiles to the *AreYouInterested.com* brand;
- Providing approximately 325,000 downloads of our *AreYouInterested.com* iPhone application through the iPhone App Store;
- Generating mobile engagement of approximately 14% of all unique logins during June 2012; and
- Launching the redesigned *AreYouInterested.com* product to all new users in June 2012.

During the remainder of 2012, our business objectives include:

- Migrating all users to the redesigned *AreYouInterested.com* product and optimizing the *AreYouInterested.com* brand;
- Continuing to integrate and expand the overall product offering between the *AreYouInterested.com* Facebook application, *AreYouInterested.com* website and *AreYouInterested.com* iPhone and Android applications for an enhanced user experience across all platforms;
- Increasing the amount of resources devoted to mobile initiatives and increasing user engagement on our mobile products;
- Refining our marketing and statistical tracking tools; and
- Identifying and exploring new opportunities in our rapidly evolving industry.

17

### How We Generate Revenue

We generate the majority of our revenue through subscription fees and premium sales on our *AreYouInterested.com* application. Most of our revenue is generated from subscriptions originating on our *AreYouInterested.com* Facebook dating application, and an increasing amount of our revenue is being generated through subscription sales on mobile platforms. While growing the subscription base of *AreYouInterested.com* on the Internet remains an objective, one of our core objectives for *AreYouInterested.com* will continue to be focused on developing mobile gateways to access *AreYouInterested.com* and user acquisition on mobile products. We also generate a small portion of our revenue through advertisements on our products and, until we discontinued the option in February 2012, we generated revenue from the sale of “points” that were used to purchase virtual gifts on the application and access certain other premium features.

Our users have a variety of methods by which to purchase subscriptions to *AreYouInterested.com*. Users can pay by credit card, PayPal, Boku (a mobile payment provider) or as an in-app purchase through Apple Inc.’s iPhone App Store. Pursuant to Apple Inc.’s terms of service, Apple Inc. retains 30% of the revenue that is generated from sales on our iPhone application through in-app purchases in the United States. Regardless of which payment method is utilized, users may access the *AreYouInterested.com* product through any of the gateways we offer.

We recognize revenue from monthly premium subscription fees in the month in which the services are provided. Revenues are presented net of refunds, credits, and known and estimated credit card chargebacks. During 2011, subscriptions were offered in durations of one-, three- and six-month terms. A twelve-month subscription term was added in February 2012. Longer-term plans (those with durations longer than one month) are generally available at discounted monthly rates. All subscription fees, however, are collected at the time of purchase regardless of the length of the subscription term. Revenues from multi-month subscriptions are recognized over the length of the subscription term rather than when the subscription is purchased. Pursuant to our terms of service, subscriptions automatically renew for periods of the same length as the original subscription term until subscribers terminate them.

During 2011 and the first half of 2012, we recognized revenue from the direct sale of “points” over a two-month time period. Users could either purchase or earn points by performing activities, such as by browsing profiles that could be used in exchange for accessing certain premium features on our applications. Determining whether the criteria for spending points had been satisfied often involved management making assumptions and judgments that may have an impact on the timing and amount of revenue we recognized in each period. In February 2012, we discontinued the sale of points and decided to focus solely on subscription and advertising revenues.

We recognize advertising revenue as earned on a “click-through,” impression and registration or subscription basis.

### Key Metrics

Our management relies on certain performance indicators to manage and assess our business. The key performance indicators set forth below help us evaluate growth trends, establish budgets, measure the effectiveness of our advertising and marketing efforts and assess operational efficiencies. We discuss revenue and net cash used in operating activities under ‟Results of Operations” and ‟Liquidity and Capital Resources” below. Deferred revenue and bookings, additional measures of our performance, are also discussed below.

| Consolidated Statements of Operations Data: | Three Months Ended June 30, 2012 | 2011 | Six Months Ended June 30, 2012 | 2011 |
| --- | ---: | ---: | ---: | ---: |
| Total revenues | $5,212,637 | $4,826,783 | $10,958,088 | $8,563,682 |
| **Consolidated Balance Sheets Data:** |  |  |  |  |
| Deferred revenue at period end | $3,654,943 | $2,823,714 | $3,654,943 | $2,823,714 |
| **Consolidated Statements of Cash Flows Data:** |  |  |  |  |
| Net cash used in operating activities | $(138,051) | $(438,966) | $(1,697,958) | $(1,144,087) |

18

#### Deferred Revenue

Revenues from multi-month subscriptions are recognized over the length of the subscription term rather than when the subscription is purchased. Because a significant amount of our subscription sales occurred from subscriptions with a term of six or more months, we apportion that revenue over the duration of the subscription term even though it is collected in full at the time of purchase. The difference between the gross cash receipts collected and the recognized revenue from those sales during that reporting period is reported as deferred revenue.

#### Bookings

Bookings is a non-GAAP financial measure representing the aggregate dollar value of subscription fees and premium sales received during the period. We calculate bookings as subscription revenue recognized during the period plus the change in deferred revenue during the period. We record subscription revenue from subscription fees and premium sales as deferred revenue and then recognize that revenue ratably over the length of the subscription term. In addition to subscription revenue, bookings is a “top-line” financial metric that we use to manage our business. We believe that this non-GAAP financial measure is useful in evaluating our business because we believe, as compared to subscription revenue, it is a better indicator of the subscription activity in a given period. In addition, we use bookings to evaluate our results of operations, to assess the effectiveness of, and plan future, user acquisition campaigns.

Over the long term, the factors impacting our bookings and revenue are the same. However, in the short term, factors exist that may cause revenue to exceed or be less than bookings in any period. While we believe that bookings is useful in evaluating our business, it should be considered as supplemental in nature and it is not meant to be a substitute for subscription revenue recognized in accordance with the generally accepted accounting principles in the United States of America (“GAAP”).

The following table presents a reconciliation of subscription revenue to bookings for each of the periods presented:

| Reconciliation of Subscription Revenue to Bookings | Three Months Ended June 30, 2012 | 2011 | Six Months Ended June 30, 2012 | 2011 |
| --- | ---: | ---: | ---: | ---: |
| Subscription revenue | $5,110,907 | $4,824,358 | $10,696,945 | $8,547,919 |
| Change in deferred revenue | 224,865 | 430,690 | 516,537 | 885,799 |
| Bookings | $5,335,772 | $5,255,048 | $11,213,482 | $9,433,718 |

#### Limitations of Bookings

Some limitations of bookings as a financial measure include that:

- Bookings does not reflect that we defer and recognize revenue from subscription fees and premium sales over the length of the subscription term; and
- Other companies, including companies in our industry, may calculate bookings differently or choose not to calculate bookings at all, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider bookings along with other financial performance measures, including total revenues, deferred revenue, net income (loss) and our financial results presented in accordance with GAAP.

### Results of Operations

The following table sets forth Consolidated Statements of Operations data for each of the periods indicated as a percentage of total revenues.

|  | Three Months Ended June 30, 2012 (As Restated) | 2011 (As Restated) | Six Months Ended June 30, 2012 (As Restated) | 2011 (As Restated) |
| --- | ---: | ---: | ---: | ---: |
| Revenues | 100.0% | 100.0% | 100.0% | 100.0% |
| Costs and expenses: |  |  |  |  |
| Programming, hosting and technology | 24.4% | 12.6% | 22.2% | 12.4% |
| Compensation | 15.1% | 4.6% | 13.1% | 4.9% |
| Professional fees | 3.5% | 3.5% | 3.0% | 3.4% |
| Advertising and marketing | 58.0% | 79.5% | 68.8% | 84.2% |
| General and administrative | 20.9% | 13.2% | 18.9% | 13.5% |
| Total costs and expenses | 122.0% | 113.2% | 126.1% | 118.3% |
| Loss from operations | (22.0)% | (13.2)% | (26.1)% | (18.3)% |
| Interest income, net | 0.2% | 0.1% | 0.2% | 0.2% |
| Mark-to-market adjustment on warrant liability | 2.2% | 56.7% | (10.7)% | 16.1% |
| Other income (expense) | (0.3)% | 0.0% | (0.2)% | 0.0% |
| Net loss before income tax | (19.8)% | 43.6% | (36.8)% | (2.0)% |
| Provision for income taxes | 0.0% | 0.0% | 0.0% | 0.0% |
| Net loss | (19.8)% | 43.6% | (36.8)% | (2.0)% |

19

### Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011

### Revenues

Revenues increased to $5,212,637 for the three months ended June 30, 2012, from $4,826,783 for the three months ended June 30, 2011. The increase is primarily related to increased revenue from subscription sales on the *AreYouInterested.com* brand in the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. While marketing and advertising expenses decreased versus the prior year period, which primarily affects new subscriptions, we benefited from a higher number of recurring subscriptions versus the prior year period. The following table sets forth our revenue for the three months ended June 30, 2012, as compared to the three months ended June 30, 2011, the increase between those periods, the percentage increase between those periods, and the percentage of total revenue that each represented for those periods:

|  | Three Months Ended June 30, 2012 | 2011 | Increase | % Increase | % Revenue Three Months Ended June 30, 2012 | 2011 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Subscription revenue | $5,110,907 | $4,824,358 | $286,549 | 5.9% | 98.0% | 99.9% |
| Advertising revenue | 101,730 | 2,425 | 99,305 | 4,095.1% | 2.0% | 0.1% |
| Total revenue | $5,212,637 | $4,826,783 | $385,854 | 8.0% | 100.0% | 100.0% |

*Subscription –* The results for the three months ended June 30, 2012 reflect an increase in subscription revenue of $286,549, or 5.9%, as compared to the three months ended June 30, 2011. The increase in subscription revenue for the three months ended June 30, 2012, was primarily driven by an increase in our subscriber base as compared to the prior year period. Subscription revenue as a percentage of total revenue was 98.0% for the three months ended June 30, 2012, as compared to 99.9% for the three months ended June 30, 2011.

*Advertising –* The results for the three months ended June 30, 2012 reflect an increase in advertising revenue of $99,305, or 4,095.1%, as compared to the three months ended June 30, 2011. The increase in advertising revenue for the three months ended June 30, 2012 was primarily driven by an increase in revenue received from online advertising campaigns as compared to the prior year period. Advertising revenue as a percentage of total revenue was 2.0% for the three months ended June 30, 2012, as compared to 0.1% for the three months ended June 30, 2011. Advertising revenue is dependent upon traffic as well as the advertising inventory we placed on our products. At this time, we do not actively manage our advertising revenue.

### Costs and Expenses

Total costs and expenses for the three months ended June 30, 2012 reflect an increase in costs and expenses of $891,163, or 16.3%, as compared to the three months ended June 30, 2011. The following table presents our costs and expenses for the three months ended June 30, 2012, as compared to the three months ended June 30, 2011, the increase or decrease between those periods, and the percentage increase or decrease between those periods:

|  | Three Months Ended June 30, 2012 | 2011 | Increase (Decrease) | % Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Programming, hosting and technology | $1,271,250 | $606,307 | $664,943 | 109.7% |
| Compensation | 788,018 | 220,803 | 567,215 | 256.9% |
| Professional fees | 183,909 | 166,840 | 17,069 | 10.2% |
| Advertising and marketing | 3,023,656 | 3,836,652 | (812,996) | (21.2)% |
| General and administrative | 1,090,334 | 635,402 | 454,932 | 71.6% |
| Total costs and expenses | $6,357,167 | $5,466,004 | $891,163 | 16.3% |

*Programming, Hosting and Technology –* The results for the three months ended June 30, 2012 reflect an increase in programming, hosting and technology expense of $664,943, or 109.7%, as compared to the three months ended June 30, 2011. The increase in product development expense for the three months ended June 30, 2012, was primarily driven by increased salary expenses due to expansion of our engineering and development staff as well as increased expenses related to hosting and bandwidth, primarily to support the redesigned *AreYouInterested.com* product. Because the markets for our application are characterized by rapid technological change, particularly in the technical capabilities of mobile phones and changing end-user preferences, continuous investment is required to innovate and to regularly update our dating and social networking application and our stand-alone website. Programming, hosting and technology expense as a percentage of total revenues was 24.4% for the three months ended June 30, 2012, as compared to 12.6% for the three months ended June 30, 2011.

*Compensation –* The results for the three months ended June 30, 2012 reflect an increase in compensation expense, which excludes the cost of developers and programmers included in programming, hosting and technology expense above, of $567,215, or 256.9%, as compared to the three months ended June 30, 2011. The increase in compensation expense for the three months ended June 30, 2012, was primarily driven by an increase in stock-based compensation expense and increased headcount in management and support areas compared to the second quarter of 2011. We anticipate experiencing further increases in compensation expense as we expect to hire additional employees during the remainder of 2012. Compensation expense as a percentage of total revenues was 15.1% for the three months ended June 30, 2012, as compared to 4.6% for the three months ended June 30, 2011.

*Professional fees –* The results for the three months ended June 30, 2012 reflect an increase in professional fees of $17,069, or 10.2%, as compared to the three months ended June 30, 2011. The increase in professional fees for the three months ended June 30, 2012, was primarily driven by an increase in professional fees, including increased legal fees, particularly in the areas of intellectual property, trademarks, consumer privacy and regulatory compliance, as well as increased accounting fees as a result of the overall expansion of our business. Professional fees as a percentage of total revenues were 3.5% for the three months ended June 30, 2012 and 2011.

*Advertising and Marketing –* The results for the three months ended June 30, 2012 reflects a decrease in advertising and marketing expense of $812,996, or 21.2%, as compared to the three months ended June 30, 2011. The decrease in advertising and marketing expense for the three months ended June 30, 2012, as compared to the prior year period, was primarily driven by decreasing the number of user acquisition campaigns. During the quarter ended June 30, 2012, we significantly reduced our rate of advertising and marketing expense as compared to the prior year period as we concentrated our focus on the redesign and redevelopment of the *AreYouInterested.com* product. We expect to keep our advertising and marketing expense at reduced levels during the third quarter of 2012 but expect that our advertising and marketing expense in 2012 will exceed that in 2011 as we seek to expand our user base following the anticipated release of our redesigned product. Advertising and marketing as a percentage of total revenues was 58.0% for the three months ended June 30, 2012, as compared to 79.5% for the three months ended June 30, 2011.

*General and Administrative –* The results for the three months ended June 30, 2012 reflect an increase in general and administrative expense of $454,932, or 71.6%, as compared to the three months ended June 30, 2011. The increase in general and administrative expense for the three months ended June 30, 2012, as compared to the prior year period, was primarily driven by increases in recruiting expense, other employee related expenses and other increased costs associated with the overall expansion of our business. General and administrative expense as a percentage of total revenues was 20.9% for the three months ended June 30, 2012, as compared to 13.2% for the three months ended June 30, 2011.

### Non-Operating Income

The following table presents the components of non-operating income for the three months ended June 30, 2012, as compared to the three months ended June 30, 2011, the increase or decrease between those periods and the percentage increase or decrease between those periods:

|  | Three Months Ended June 30, 2012 (As Restated) | 2011 (As Restated) | Increase (Decrease) | % Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Interest income, net | $10,067 | $6,353 | $3,714 | 58.5% |
| Mark-to-market adjustment on warrant liability | 117,125 | 2,738,700 | (2,621,575) | (95.7%) |
| Other income (expense) | (16,885) | - | (16,885) | \* |
| Total non-operating income | $110,307 | $2,745,053 | $(2,634,746) | (96.0%) |

\* Not meaningful.

#### Interest Income, net

Interest income, net for the three months ended June 30, 2012 equaled $10,067, an increase of $3,714, or 58.5%, as compared to $6,353 for the three months ended June 30, 2011. Interest income, net, represented 0.2% and 0.1% of total revenues for the three months ended June 30, 2012 and 2011, respectively.

#### Mark-to-Market Adjustment on Warrant Liability

Our warrant liability is marked-to-market at each reporting period, with changes in fair value reported in earnings. The mark-to-market income of $117,125 and $2,738,700 for the three months ended June 30, 2012 and June 30, 2011, respectively, represent the changes in fair value of the warrant liability during those periods.

#### Other Income (Expense)

We had fixed asset disposals totaling $16,885 for the three months ended June 30, 2012, as compared to no other expense for the three months ended June 30, 2011. Other expense represented 0.3% and 0.0% of total revenues for the three months ended June 30, 2012 and 2011, respectively.

### Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011

### Revenues

Revenues increased to $10,958,088 for the six months ended June 30, 2012, from $8,563,682 for the six months ended June 30, 2011. The increase in revenue is due primarily to an increase in subscription sales on the *AreYouInterested.com* brand in the six months ended June 30, 2012 as compared to the six months ended June 30, 2011, which we believe resulted in part from our increased advertising and marketing expense, as well as an increase in recurring subscription revenues compared to the prior year period. The following table sets forth our revenue for the six months ended June 30, 2012, as compared to the six months ended June 30, 2011, the increase between those two periods, the percentage increase between those periods, and the percentage of total revenue that each represented for those periods:

|  | Six Months Ended June 30, 2012 | 2011 | Increase | % Increase | % Revenue Six Months Ended June 30, 2012 | 2011 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Subscription revenue | $10,696,945 | $8,547,919 | $2,149,026 | 25.1% | 97.6% | 99.8% |
| Advertising revenue | 261,143 | 15,763 | 245,380 | 1,556.7% | 2.4% | 0.2% |
| Total revenue | $10,958,088 | $8,563,682 | $2,394,406 | 28.0% | 100.0% | 100.0% |

*Subscription –* The results for the six months ended June 30, 2012 reflect an increase in subscription revenue of $2,149,026, or 25.1%, as compared to the six months ended June 30, 2011. The increase in subscription revenue for the six months ended June 30, 2012, was primarily driven by an increase in our subscriber base as compared to the prior year period. Subscription revenue as a percentage of total revenues was 97.6% for the six months ended June 30, 2012, as compared to 99.8% for the six months ended June 30, 2011.

*Advertising –* The results for the six months ended June 30, 2012 reflect an increase in advertising revenue of $245,380, or 1,556.7%, as compared to the six months ended June 30, 2011. The increase in advertising revenue for the six months ended June 30, 2012 was primarily driven by an increase in revenue received from online advertising campaigns as compared to the prior year period. Advertising revenue as a percentage of total revenues was 2.4% for the six months ended June 30, 2012, as compared to 0.2% for the six months ended June 30, 2011. Advertising revenue is dependent upon traffic as well as the advertising inventory we placed on our products. At this time, we do not actively manage our advertising revenue.

### Costs and Expenses

Total costs and expenses for the six months ended June 30, 2012 reflect an increase in costs and expenses of $3,684,306, or 36.4%, as compared to the six months ended June 30, 2011. The following table presents our costs and expenses for the six months ended June 30, 2012, as compared to the six months ended June 30, 2011, the increase between those periods and the percentage increase between those periods:

|  | Six Months Ended June 30, 2012 | 2011 | Increase | % Increase |
| --- | ---: | ---: | ---: | ---: |
| Programming, hosting and technology | $2,427,578 | $1,060,946 | $1,366,632 | 128.8% |
| Compensation | 1,440,159 | 420,027 | 1,020,132 | 242.9% |
| Professional fees | 332,226 | 288,416 | 43,810 | 15.2% |
| Advertising and marketing | 7,543,897 | 7,208,610 | 335,287 | 4.7% |
| General and administrative | 2,074,553 | 1,156,108 | 918,445 | 79.4% |
| Total costs and expenses | $13,818,413 | $10,134,107 | $3,684,306 | 36.4% |

*Programming, Hosting and Technology –* The results for the six months ended June 30, 2012 reflect an increase in programming, hosting and technology expense of $1,366,632, or 128.8%, as compared to the six months ended June 30, 2011. The increase in product development expense for the six months ended June 30, 2012, was primarily driven by increased salary expenses due to expansion of our engineering and development staff as well as increased expenses related to hosting and bandwidth, primarily to support the redesigned *AreYouInterested.com* product. Because the markets for our application are characterized by rapid technological change, particularly in the technical capabilities of mobile phones and changing end-user preferences, continuous investment is required to innovate and to regularly update our dating and social networking application and our stand-alone website. Programming, hosting and technology expense as a percentage of total revenues was 22.2% for the six months ended June 30, 2012, as compared to 12.4% for the six months ended June 30, 2011.

*Compensation –* The results for the six months ended June 30, 2012 reflect an increase in compensation expense, which excludes the cost of developers and programmers included in programming, hosting and technology expense above, of $1,020,132, or 242.9%, as compared to the six months ended June 30, 2011. The increase in compensation expense for the six months ended June 30, 2012, was primarily driven by an increase in stock-based compensation expense and increased headcount in management and support areas compared to the first half of 2011. We anticipate experiencing further increases in compensation expense as we expect to hire additional employees during the remainder of 2012. Compensation expense as a percentage of total revenues was 13.1% for the six months ended June 30, 2012, as compared to 4.9% for the six months ended June 30, 2011.

*Professional fees –* The results for the six months ended June 30, 2012 reflect an increase in professional fees of $43,810, or 15.2%, as compared to the six months ended June 30, 2011. The increase in professional fees for the six months ended June 30, 2012, was primarily driven by an increase in professional fees, including increased legal fees, particularly in the areas of intellectual property, trademarks, consumer privacy and regulatory compliance, as well as increased accounting fees as a result of the overall expansion of our business. Professional fees as a percentage of total revenues was 3.0% for the six months ended June 30, 2012, as compared to 3.4% for the six months ended June 30, 2011.

*Advertising and Marketing –* The results for the six months ended June 30, 2012 reflects an increase in advertising and marketing expense of $335,287, or 4.7%, as compared to the six months ended June 30, 2011. The increase in advertising and marketing expense for the six months ended June 30, 2012, as compared to the prior year period, was primarily driven by an increase in user acquisition campaigns. During the second quarter of 2012, we significantly reduced our rate of advertising and marketing expense as compared to the prior year period as we concentrated our focus on the development of our redesigned *AreYouInterested.com* product. We expect to keep our advertising and marketing expense at reduced levels during the third quarter of 2012, but expect that our advertising and marketing expense in 2012 will exceed that in 2011 as we seek to expand our user base following the anticipated release of our redesigned product. Advertising and marketing as a percentage of total revenues was 68.8% for the six months ended June 30, 2012, as compared to 84.2% for the six months ended June 30, 2011.

*General and Administrative –* The results for the six months ended June 30, 2012 reflect an increase in general and administrative expense of $918,445, or 79.4%, as compared to the six months ended June 30, 2011. The increase in general and administrative expense for the six months ended June 30, 2012, as compared to the prior year period, was primarily driven by increases in transaction fees related to accepting subscription payments, including credit card processing fees and foreign currency transaction fees. General and administrative expense also increased due to increased insurance expense, recruiting expense, and increased costs associated with the overall expansion of our business. General and administrative expense as a percentage of total revenues was 18.9% for the six months ended June 30, 2012, as compared to 13.5% for the six months ended June 30, 2011.

### Non-Operating Income (Expense)

The following table presents the components of non-operating income (expense) for the six months ended June 30, 2012, as compared to the six months ended June 30, 2011, the increase or decrease between those periods and the percentage increase or decrease between those periods:

|  | Six Months Ended June 30, 2012 (As Restated) | 2011 (As Restated) | Increase (Decrease) | % Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Interest income, net | $18,600 | $12,908 | $5,692 | 44.1% |
| Mark-to-market adjustment on warrant liability | (1,171,250) | 1,382,100 | (2,553,350) | (184.7%) |
| Other income (expense) | (16,885) | 3,909 | (20,794) | (532.0%) |
| Total non-operating income (expense) | $(1,169,535) | $1,398,917 | $(2,568,452) | (183.6%) |

#### Interest Income, net

Interest income, net for the six months ended June 30, 2012 equaled $18,600, an increase of $5,692, or 44.1%, as compared to $12,908 for the six months ended June 30, 2011. Interest income, net, represented 0.2% of total revenues for the six months ended June 30, 2012 and 2011.

#### Mark-to-Market Adjustment on Warrant Liability

Our warrant liability is marked-to-market at each reporting period, with changes in fair value reported in earnings. The mark-to-market expense of $1,171,250 and income of $1,382,100 for the six months ended June 30, 2012 and 2011, respectively, represent the changes in fair value of the warrant liability during those periods.

#### Other Income (Expense)

We had fixed asset disposals totaling $16,885 for the six months ended June 30, 2012, as compared to $3,909 of other income earned for the six months ended June 30, 2011. Other income (expense) represented 0.2% and 0.0% of total revenues for the six months ended June 30, 2012 and 2011, respectively.

### Liquidity and Capital Resources

| Consolidated Statements of Cash Flows Data: | Six Months Ended June 30, 2012 | 2011 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(1,697,958) | $(1,144,087) |
| Net cash provided by (used in) investing activities | 4,894,431 | (6,806,227) |
| Net cash provided by financing activities | - | 8,003,825 |
| Net increase in cash and cash equivalents | $3,196,473 | $53,511 |

We have historically financed our operations through cash generated from our January 2011 financing, subscription fees received from our *AreYouInterested.com* application and online dating website, fees for premium features on our application and revenues derived from advertisements purchased on our application.

Our overall liquidity consists of cash and cash equivalents and investments. As of June 30, 2012, we had $5,594,301 in cash and cash equivalents compared to $2,397,828 as of December 31, 2011. As of June 30, 2012, we had $1,500,857 in investments, as compared to $6,481,205 as of December 31, 2011. Historically, our working capital has been generated through operations and equity offerings. If we continue to grow and expand our operations, our need for working capital will increase. For the remainder of 2012, we do not anticipate being profitable because we intend to maintain our current levels of marketing and advertising expense to acquire new users and we expect to hire additional employees. We further expect that our cash and cash equivalents will decrease throughout the remainder of 2012. We intend to finance our growth with cash on hand, cash provided from operations, borrowings, debt or equity offerings, or some combination thereof. We believe that our cash provided from operations, cash on hand and investments will provide sufficient capital to fund our operations for the next twelve months.

A significant portion of our expenses is related to user acquisition costs. Our marketing and advertising expenses are primarily spent on channels where we can estimate the return on investment without long-term commitments. Accordingly, we can adjust our marketing and advertising expenditures quickly based on the expected return on investment, which provides flexibility and enables us to manage our marketing and advertising expense.

### Operating Activities

Net cash used in operating activities was $1,697,958 for the six months ended June 30, 2012, as compared to net cash used in operating activities of $1,144,087 for the six months ended June 30, 2011. This increase of $553,871 is primarily a result of the increase in net loss, particularly from increases in programming, hosting and technology expense, compensation expense and general and administrative expense as described above, as well as an increase in prepaid expenses. These uses of cash were offset in part by sources of cash from increases in deferred revenue and accounts payable.

Net cash used in operating activities during the six months ended June 30, 2012, was $1,697,958, and consisted of $2,154,108 in cash used in operations, offset by a net increase in our operating assets and liabilities of $456,150. Significant items impacting cash flow in the period included increased cash outlays relating to advertising and marketing spend, and an increase in salaries and related benefits associated with the growth of our business. These uses of cash were offset in part by increased collections on subscription revenue streams, the credit card collections noted above, and payments received from the growth of advertising revenue during the quarter.

Net cash used in operating activities during the six months ended June 30, 2011, were $1,144,087, primarily as a result of $1,448,916 in cash used in operations, partially offset by a net increase in our operating assets and liabilities of $304,829. Significant items impacting cash flow in the period included increased cash outlays relating to advertising and marketing spend and launching the *WhoIsNear.com* product, increases in salaries and related benefits associated with the growth of our business and our annual bonus payments of approximately $500,000 that were paid in February 2011. These uses of cash were offset in part by an increase in collections on subscription revenues.

### Investing Activities

Cash provided by (used in) investing activities for the six months ended June 30, 2012 and 2011 was $4,894,431 and ($6,806,227), respectively. Cash used in investing activities included purchases of property and equipment totaling $88,241 and $41,289 during the six months ended June 30, 2012 and 2011, respectively, and consisted primarily of computers and servers. We continue to invest in technology hardware and software to support our growth. Purchases of property and equipment may vary from period to period due to the timing of the expansion of our operations and software development.

Redemption of investments during the six months ended June 30, 2012 totaled $3,500,000, consisting of redemptions of our certificates of deposit and U.S. Treasury notes purchased in the prior year. Investments maturing in less than 90 days contributed $1,475,000 to cash and cash equivalents during the six months ended June 30, 2012. We also received cash of $7,672 during the first quarter of 2012 through the partial repayment of a note receivable issued to an employee.

### Financing Activities

Cash provided by financing activities for the six months ended June 30, 2012 and 2011 was $0 and $8,003,825, respectively. Cash provided by financing activities for the first half of 2011 is attributable to proceeds from the issuance of common stock and warrants in January 2011, net of stock offering costs.

### Off-Balance Sheet Arrangements

As of June 30, 2012, we did not have any off-balance sheet arrangements.

### Contractual Obligations and Commitments

During the six months ended June 30, 2012, there were no material changes to the Company’s contractual obligations and commitments from those disclosed in “Note 9. Commitments” in the Notes to the Condensed Consolidated Financial Statements included in our Amendment No. 1 to Annual Report on Form 10-K/A for the year ended December 31, 2011, filed with the SEC on December 7, 2012, which is hereby incorporated by reference herein.

### Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements that have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities on an ongoing basis. We evaluate these estimates including those related to the determination of the fair value of stock options and non-cash capital stock issuances, future chargebacks and refunds on subscription revenue, collectability of accounts receivable, and the valuation allowance on deferred tax assets. Actual results may differ from those estimates under different assumptions or conditions.

During the six months ended June 30, 2012, there were no material changes to our significant accounting policies from those contained in our Amendment No. 1 to Annual Report on Form 10-K/A for the year ended December 31, 2011, filed with the SEC on December 7, 2012, which is hereby incorporated by reference herein, other than those disclosed below.

### Recently Adopted Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board (“FASB”) issued revised authoritative guidance (ASU No. 2009-13) covering Multiple-Deliverable Revenue Arrangements. The revised authoritative guidance amends the previous guidance on arrangements with multiple deliverables to (1) provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and how consideration should be allocated, (2) require an entity to allocate revenue in an arrangement using estimated selling prices ("ESP") of each deliverable if a vendor does not have vendor-specific objective evidence ("VSOE") or third-party evidence of selling price ("TPE"), (3) eliminate the residual allocation method which will be replaced by the relative selling price allocation method for all arrangements, and (4) significantly expand the disclosure requirements. The revised authoritative guidance is effective for new or materially modified arrangements in fiscal years beginning on or after June 15, 2010. The Company adopted this revised authoritative guidance prospectively for new or materially modified arrangements beginning January 1, 2011. The adoption of this revised authoritative guidance update did not have a significant impact on the Company’s consolidated financial statements. Additionally, the Company does not currently foresee any changes to its services or pricing practices that will have a significant effect on its consolidated financial statements in periods after the initial adoption.

On May 12, 2011, the FASB issued revised authoritative guidance (ASU No. 2011-04) covering fair value measurements and disclosures. The amended guidance include provisions for (1) the application of concepts of "highest and best use" and "valuation premises", (2) an option to measure groups of offsetting assets and liabilities on a net basis, (3) incorporation of certain premiums and discounts in fair value measurements, and (4) measurement of the fair value of certain instruments classified in stockholders' equity. The revised guidance is effective for interim and annual periods beginning after December 15, 2011. The Company adopted this revised authoritative guidance prospectively for new or materially modified arrangements beginning January 1, 2012. The adoption of this revised authoritative guidance update did not have a significant impact on the Company’s consolidated financial statements.

On June 16, 2011, the FASB issued revised authoritative guidance (ASU No. 2011-05) covering the presentation of comprehensive income, which revises the manner in which entities present comprehensive income in their financial statements. The revised guidance removes the presentation options in the current guidance and requires entities to report components of comprehensive income in either a continuous statement of comprehensive income, or two separate but consecutive statements. The revised authoritative guidance does not change the items that must be reported in other comprehensive income. The revised guidance is effective for interim and fiscal years beginning after December 15, 2011. The Company adopted this revised authoritative guidance prospectively for new or materially modified arrangements beginning January 1, 2012. The adoption of this revised authoritative guidance update did not have a significant impact on the Company’s consolidated financial statements.

On September 15, 2011, the FASB issued authoritative guidance (ASU No. 2011-08), which gives companies the option of performing a qualitative assessment of goodwill prior to calculating the fair value of a reporting unit in “step 1” of the goodwill impairment test. If the company determines, on the basis of qualitative factors, that the fair value of a reporting unit is more likely than not less than the carrying amount, the two-step impairment test is required to be performed. The guidance is effective for all entities for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company adopted this revised authoritative guidance prospectively for new or materially modified arrangements beginning January 1, 2012. The adoption of this revised authoritative guidance update did not have a significant impact on the Company’s consolidated financial statements.

## Controls and procedures

As filed, 4,356 characters.

### Restatement of Previously Issued Financial Statements

As we announced on November 15, 2012, our Board of Directors determined that previously issued consolidated financial statements for the year ended December 31, 2011 as filed on our Annual Report on Form 10-K and the quarterly periods ended March 31, 2012 and June 30, 2012 as filed in our Quarterly Reports on Form 10-Q would need to be restated (as described below).

### Evaluation of Disclosure Controls and Procedures

Our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ‟Exchange Act”)) as of the end of the period covered by this report. Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on that evaluation, our chief executive officer and chief financial officer concluded in our original Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 that our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Subsequent to the evaluation made in the original filing and in connection with the restatement of our financial statements included in this Amendment No. 1 to Quarterly Report on Form 10-Q/A, our management has re-evaluated, under the supervision and with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures. Based upon that re-evaluation, our chief executive officer and chief financial officer concluded that because of the material weaknesses in the internal control over financial reporting discussed below, our disclosure controls and procedures were not effective as of June 30, 2012.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of June 30, 2012, the Company determined that the following items constituted material weaknesses:

- The Company does not have policies and procedures in place to ensure the timely review, disclosure and accurate financial reporting for significant agreements and transactions.
- The Company does not have an independent audit committee in place, which would provide oversight of the Company’s officers, operations and financial reporting function.
- Management failed to identify, value and disclose the impact of common stock warrants and the resulting liability, which resulted in this restatement in Amendment No. 1 to Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2012.
- Management did not disclose warrants issued in connection with an equity financing in a timely manner.

### Changes in Internal Control over Financial Reporting

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

## Risk factors

As filed, 6,301 characters.

There were no material changes to the Risk Factors disclosed in “Item 1A. Risk Factors” of our Amendment No. 1 to Annual Report on Form 10-K/A for the year ended December 31, 2011, except for the following risk factors. For more information concerning our risk factors, please refer to “Item 1A. Risk Factors” of our Amendment No. 1 to Annual Report on Form 10-K/A.

***Our stock price has been and will likely continue to be volatile, and our stock price may decline if we fail to meet the expectations of securities analysts or investors.***

The trading price of our common stock has been, and is likely to continue to be, highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed herein and those included in our Amendment No. 1 to Annual Report on Form 10-K/A, other factors that may cause volatility in our stock price include:

- changes in expectations as to our future financial performance;
- announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships or capital commitments;
- the timing of the launch and the popularity of new applications and enhancements to our existing application by us or our competitors;
- the amount of advertising and marketing that is available and spent on user acquisition campaigns;
- changes to the third party platforms on which we operate;
- disruptions in the availability of our application or of third party platforms;
- actual or perceived violations of privacy obligations and compromises of our subscribers’ data;
- the entrance of new competitors in our market;
- additions or departures of key personnel and the cost of attracting and retaining employees, including application developers and other software engineers;
- fluctuations in the financial performance or valuation of companies perceived by investors to be comparable to us, including Facebook and Zynga; and
- general market conditions, including market volatility.

Given our operating history and the rapidly evolving industry in which we operate, our historical operating results may not be useful in predicting our future operating results. In addition, metrics available from third parties regarding our industry and the performance of our application may not be indicative of our financial performance.

***We have identified material weaknesses in our internal control over financial reporting. These material weaknesses, if not corrected, could affect the reliability of our financial statements and have other adverse consequences.***

We have identified material weaknesses in our internal control over financial reporting. These material weaknesses, if not corrected, could affect the reliability of our financial statements and have other adverse consequences.

Under Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish a report by our management on internal control over financial reporting. This report must contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by our management.

We have identified material weaknesses in our internal control over financial reporting as of June 30, 2012, as disclosed in “Item 4. Controls and Procedures.” We determined that we had a material weakness with respect to warrant liability, which resulted in a restatement of our financial statements for the year ended December 31, 2011 and for the quarters ended March 31, 2012 and June 30, 2012. Failure to have effective internal controls could impair our ability to produce accurate financial statements on a timely basis and could lead to a restatement of our financial statements. If, as a result of deficiencies in our internal controls, we cannot provide reliable financial statements, our business decision processes may be adversely affected, our business and operating results could be harmed, investors could lose confidence in our reported financial information, the price of our common stock could decrease and our ability to obtain additional financing, or additional financing on favorable terms, could be adversely affected. In addition, failure to maintain effective internal control over financial reporting could result in investigations or sanctions by regulatory authorities.

We intend to take action to remediate the material weaknesses and improve the effectiveness of our internal control over financial reporting. However, we can give no assurances that the measures we may take will remediate the material weaknesses identified or that any additional material weaknesses will not arise in the future due to our failure to implement and maintain adequate internal control over financial reporting. In addition, even if we are successful in strengthening our controls and procedures, those controls and procedures may not be adequate to prevent or identify irregularities or ensure the fair presentation of our financial statements included in our periodic reports filed with the Securities and Exchange Commission (the “SEC”).

***The restatement of our financial statements has subjected us to additional risks and uncertainties, including the increased possibility of legal proceedings.***

As a result of the restatement of our financial statements for the year ended December 31, 2011 and our financial statements for the quarters ended March 31, 2012 and June 30, 2012, we have become subject to additional risks and uncertainties, including, among others, increased professional fees and expenses, the increased possibility of legal proceedings, the review of the SEC and other regulatory bodies which could cause investors to lose confidence in our reported financial information and could subject us to civil or criminal penalties, shareholder class actions or derivative actions. We could face monetary judgments, penalties or other sanctions that could have a material adverse effect on our business, financial condition and results of operations and could cause our stock price to decline.

Filed Dec 7, 2012.
Source: SEC EDGAR, the filing index for accession 0001213900-12-006686. Last ingested by Listed: Nov 11, 2026, 00:54 ET. No prices; not investment advice.