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 March 31, 2018

 

OR

 

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      000-52176

 

PEERSTREAM, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   20-3191847
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

122 East 42nd Street

New York, NY 10168

(Address of principal executive offices) (Zip Code)

 

(212) 594-5050

(Registrant’s telephone number, including area code)

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
(Do not check if a 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 ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class   Outstanding at May 4, 2018
Common Stock, par value $0.001 per share   6,723,723*

  

* Excludes 158,571 shares of unvested restricted stock.

   

 

 

 

 

PEERSTREAM, INC. QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2018

 

Table of Contents

  

    Page Number
  PART I. FINANCIAL  INFORMATION  
ITEM 1. Financial Statements 1
     
  Condensed Consolidated Balance Sheets as of March 31, 2018 (Unaudited) and December 31, 2017 1
     
  Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2018 and 2017 (Unaudited) 2
     
  Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2018 (Unaudited) 3
     
  Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017 (Unaudited) 4
     
  Notes to Condensed Consolidated Financial Statements (Unaudited) 5
     
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 12
     
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 20
     
ITEM 4. Controls and Procedures 20
     
  PART II. OTHER INFORMATION  
     
ITEM 1. Legal Proceedings 21
     
ITEM 1A. Risk Factors 21
     
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
     
ITEM 3. Defaults Upon Senior Securities 21
     
ITEM 4. Mine Safety Disclosures 21
     
ITEM 5. Other Information 21
     
ITEM 6. Exhibits 22

 

Effective March 12, 2018, we changed our name from “Snap Interactive, Inc.” to “PeerStream, Inc.” Unless the context otherwise indicates, references to “PeerStream,” “Snap,” “we,” “our,” “us” and the “Company” refer to PeerStream, Inc. and its subsidiaries on a consolidated basis.

 

FirstMet, PeerStream, Paltalk, the PeerStream logo and other trademarks or service marks appearing in this report are the property of PeerStream, Inc. Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective owners.

 

Unless otherwise indicated, metrics for users are based on information that is reported by Facebook® and internally-derived metrics for users across all platforms through which our applications are accessed. References in this report to users means those persons who have created a user name and password, and active subscribers means users that have prepaid a fee, redeemed credits or received an upgrade from another user as a gift for current unlocked features such as enhanced voice and video access, elevated status in the community or unrestricted communication on our applications and whose subscription period has not yet expired. The metrics for active subscribers are based on internally-derived metrics across all platforms through which our applications are accessed.

  

i  

 

  

EXPLANATORY NOTE

 

Name Change

 

Effective March 12, 2018, we changed our name from “Snap Interactive, Inc.” to “PeerStream, Inc.” In connection with the name change, we also changed our trading symbol on the OTCQB Marketplace from “STVI” to “PEER.” The new brand is intended to honor the Company’s legacy of empowering consumers to meet new people and connect with peers via social video applications, while also referencing the anticipated importance of peer-to-peer networks and multimedia streaming in the Company’s future.

 

ii  

 

 

FORWARD-LOOKING STATEMENTS

 

Certain statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended that are based on current expectations, estimates, forecasts and assumptions and are subject to risks and uncertainties. Words such as “anticipate,” “assume,” “began,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “would” and variations of such words and similar expressions are intended to identify such forward-looking statements. All forward-looking statements speak only as of the date on which they are made. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following:

 

  our ability to generate and maintain active subscribers and to maintain engagement with our user base;
  the intense competition in the online live video and dating industries and our ability to effectively compete with existing competitors and new market entrants;
  our increasing focus on the use of new and novel technologies, such as blockchain, to enhance our applications, and our ability to timely complete development of applications using new technologies;
  our ability to effectively market and generate revenue from our new business solutions unit;
  the dependence of our applications on mobile platforms and operating systems that we do not control, including our heavy reliance on the platforms of Apple Inc. (“Apple”), Facebook, Inc. (“Facebook”) and Google Inc. (“Google”) and their ability to discontinue, limit or restrict access to their platforms by us or our applications, change their terms and conditions or other policies or features (including restricting methods of collecting payments, sending notifications or placing advertisements), establish more favorable relationships with one or more of our competitors or develop applications or features that compete with our applications;
  our ability to obtain additional capital or financing to execute our business plan, including through offerings of debt, equity or initial coin offerings;
  our ability to develop, establish and maintain strong brands;
  the effects of current and future government regulation, including laws and regulations regarding the use of the internet, privacy and protection of user data and blockchain and cryptocurrency technologies;
  legal and regulatory requirements related to us investing in cryptocurrencies and our acceptance of cryptocurrencies as a method of payment;
  our ability to manage our partnerships and strategic alliances, including the resolution of any material disagreements and the ability of our partners to satisfy their obligations under these arrangements;
  our ability to offset fees associated with the distribution platforms that host our applications;
  our reliance on our executive officers;
  our reliance on internally derived data to accurately report user metrics and other measures of our performance;
  our ability to release new applications on schedule or at all, as well as our ability or improve upon existing applications;
  our ability to update our applications to respond to rapid technological changes;
  our ability to protect our intellectual property rights;
  our ability to successfully integrate the operations of PeerStream and AVM and manage our growth;

  

iii  

 

 

  our ability to adapt or modify our applications for the international market and derive revenue therefrom;
  the ability of foreign governments to restrict access to our applications or impose new regulations, including the European Union’s General Data Protection Regulation (“GDPR”);
  the reliance of our mobile applications on high-bandwidth data capabilities;
  our reliance on third party email service providers for delivery of email campaigns to convert users to subscribers and to retain subscribers;
  our reliance on third party investor relations firms to help create awareness of our Company and compliance by such third parties with regulatory requirements related to promotional reports;
  the effect of security breaches, computer viruses and computer hacking attacks;
  our reliance upon credit card processors and related merchant account approvals and the impact of chargeback liabilities that we may face from credit card processors;
  the impact of any claim that we have infringed on intellectual property rights of others;
  our ability to effectively integrate companies and properties that we acquire;
  the risk that we might be deemed a “dating service” or an “Internet dating service” under various state regulations;
  the possibility that our users or third parties may be physically or emotionally harmed following interaction with other users;
  the risk that we may face litigation resulting from the transmission of information through our applications;
  our ability to attract and retain qualified employees; and
  our ability to maintain effective internal controls over financial reporting.

 

For a more detailed discussion of these and other factors that may affect our business, see the discussion in “Item 1A. Risk Factors” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report and the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, which was filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2018. We caution that the foregoing list of factors is not exclusive, and new factors may emerge, or changes to the foregoing factors may occur, that could impact our business. We do not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this report, except to the extent required by applicable securities laws.

  

iv  

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

PEERSTREAM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    March 31,
2018
    December 31,
2017
 
    (unaudited)        
             
Assets            
Current assets:            
Cash and cash equivalents   $ 3,514,069     $ 4,137,050  
Credit card holdback receivable     125,684       140,789  
Accounts receivable, net of allowances and reserves of $41,840 and $42,006, respectively     444,722       479,148  
Prepaid expense and other current assets     215,226       228,296  
Total current assets     4,299,701       4,985,283  
Property and equipment, net     602,672       622,712  
Goodwill     13,086,472       13,086,472  
Intangible assets, net     3,499,255       3,920,443  
Other receivables     52,267       52,267  
Other assets     85,657       97,270  
Total assets   $ 21,626,024     $ 22,764,447  
                 
Liabilities and stockholders’ equity                
Current liabilities:                
Accounts payable   $ 2,084,402     $ 2,374,253  
Accrued expenses and other current liabilities     124,282       405,646  
Deferred subscription revenue     2,406,058       2,553,826  
Total current liabilities     4,614,742       5,333,725  
Total liabilities     4,614,742       5,333,725  
Commitments and Contingencies                
                 
Stockholders’ equity:                
Common stock, $0.001 par value, 25,000,000 shares authorized; and 6,881,794 shares issued and outstanding     6,882       6,882  
Additional paid-in capital     18,736,129       18,346,914  
Accumulated deficit     (1,731,729 )     (923,074 )
Total stockholders’ equity     17,011,282       17,430,722  
Total liabilities and stockholders’ equity   $ 21,626,024     $ 22,764,447  

 

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

  

  1  

 

 

PEERSTREAM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

    Three Months Ended
March 31,
 
    2018     2017  
Revenues:            
Subscription revenue   $ 5,426,623     $ 6,223,685  
Advertising revenue     321,427       495,267  
Total revenues     5,748,050       6,718,952  
Costs and expenses:                
Cost of revenue     1,012,027       1,282,505  
Sales and marketing expense     1,389,992       2,230,492  
Product development expense     2,148,915       2,211,344  
General and administrative expense     2,008,709       2,070,127  
Total costs and expenses     6,559,643       7,794,468  
Loss from operations     (811,593 )     (1,075,516 )
Interest income, net     2,938       36,813  
Loss before provision for income taxes     (808,655 )     (1,038,703 )
Provision for income taxes     -       -  
Net loss   $ (808,655 )   $ (1,038,703 )
                 
Net loss per share of common stock:                
Basic and diluted   $ (0.12 )   $ (0.15 )
Weighted average number of shares of common stock used in calculating net loss per share of common stock:                
Basic and diluted     6,881,794       6,714,915  

 

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

  

  2  

 

 

PEERSTREAM, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

    Common Stock     Additional
Paid-in
    Accumulated     Total Stockholders’  
    Shares     Amount     Capital     Deficit     Equity  
Balance at January 1, 2018     6,881,794     $ 6,882     $ 18,346,914     $ (923,074 )   $ 17,430,722  
Stock-based compensation expense for restricted stock awards and stock options     -       -       389,215       -       389,215  
Net loss for the period     -       -       -       (808,655 )     (808,655 )
Balance at March 31, 2018     6,881,794     $ 6,882     $ 18,736,129     $ (1,731,729 )   $ 17,011,282  

 

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

  

  3  

 

  

PEERSTREAM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

    Three Months Ended
March 31,
 
    2018     2017  
Cash flows from operating activities:            
Net loss   $ (808,655 )   $ (1,038,703 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                
Depreciation of property and equipment     99,990       130,637  
Amortization of intangible assets     421,188       421,188  
Stock-based compensation expense     389,215       309,702  
Changes in operating assets and liabilities:                
Credit card holdback receivable     15,105       (1,410 )
Accounts receivable     34,426       273,382  
Other assets     11,613       -  
Prepaid expenses and other current assets     13,070       647,865  
Accounts payable, accrued expenses and other current liabilities     (571,215 )     276,141  
Deferred rent     -       4,775  
Deferred subscription revenue     (147,768 )     (80,477 )
Net cash (used in) provided by operating activities     (543,031 )     943,100  
Cash flows from investing activities:                
Purchase of property and equipment     (79,950 )     (62,595 )
Accrued interest from notes receivables issued to employees     -       (1,993 )
Net cash used in investing activities     (79,950 )     (64,588 )
Cash flows from financing activities:                
Payments of capital lease obligations     -       (17,144 )
Net cash used in financing activities     -       (17,144 )
Net (decrease) increase in cash and cash equivalents     (622,981 )     861,368  
Balance of cash and cash equivalents at beginning of period     4,137,050       4,162,596  
Balance of cash and cash equivalents at end of period   $ 3,514,069     $ 5,023,964  
                 
Supplemental disclosure of cash flow information:                
Cash paid in interest   $ -     $ 158  
Cash paid in taxes   $ -     $ 18,304  

 

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

   

  4  

 

 

PEERSTREAM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Organization and Basis of Presentation

 

The accompanying condensed consolidated financial statements include PeerStream, Inc., and its wholly owned subsidiaries, A.V.M Software, Inc., Paltalk Software Inc., Paltalk Holdings, Inc., Tiny Acquisition Inc., Camshare, Inc., Fire Talk LLC, PeerStream Mobile Limited (UK) and Vumber LLC (collectively, the “Company”).

 

Effective March 12, 2018, the Company changed its name from “Snap Interactive, Inc.” to “PeerStream, Inc.” In connection with the name change, the Company also changed its trading symbol on the OTCQB Marketplace from “STVI” to “PEER.”

 

The Company is an Internet software company. Under its registered trademarks, the Company develops and operates computer software that enables spontaneous global real time audio/video conversation via the internet and operates a portfolio of dating applications. On March 8, 2018, the Company launched PeerStream Business Solutions to provide technology licensing, services and support related to multimedia streaming and communications for third party developers and corporate clients (“PeerStream Business Solutions”).

 

The condensed consolidated financial statements included in this report have been prepared on a going concern basis in accordance with GAAP and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. The Company has not included certain information normally included in annual financial statements pursuant to those rules and regulations, although it believes that the disclosure included herein is adequate to make the information presented not misleading. The condensed consolidated financial statements contained herein should be read in conjunction with the Company’s audited consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 22, 2018 (the “Form 10-K”).

 

In the opinion of management, the accompanying unaudited condensed consolidated financial information contains all normal and recurring adjustments necessary to fairly present the condensed consolidated balance sheet, results of operations, cash flows and changes in the stockholders’ equity of the Company for the interim periods presented. The Company’s historical results are not necessarily indicative of future operating results and the results for the three months ended March 31, 2018 are not necessarily indicative of results for the year ending December 31, 2018, or for any other period.

 

Reverse Stock Split

 

The Company completed a 1-for-35 reverse stock split which became effective at the close of regular trading hours on January 5, 2017, and the Company’s common stock began trading on a post-reverse stock split basis at the opening of regular trading hours on January 6, 2017. Except as otherwise provided herein, all share and per-share amounts of the Company’s common stock and stock options have been adjusted to give effect to the reverse stock split for all periods presented.

 

2. Summary of Significant Accounting Policies

 

For a detailed discussion about the Company’s significant accounting policies, see the Form 10-K.

 

During the three months ended March 31, 2018, other than the following, there were no significant changes made to the Company’s significant accounting policies.  

  

  5  

 

 

PEERSTREAM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Significant Estimates and Assumptions

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

 

Significant estimates relied upon in preparing these financial statements include the estimates used to determine the fair value of the stock options issued in share based payment arrangements, collectability of the Company’s accounts receivable and the valuation allowance on deferred tax assets. Management evaluates these estimates on an ongoing basis. Changes in estimates are recorded in the period in which they become known. The Company bases estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from the Company’s estimates.

 

Recent Accounting Pronouncements

   

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”), which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will be effective beginning in the first quarter of 2019. Early adoption of ASU 2016-02 is permitted. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting ASU 2016-02 on its consolidated financial statements.

 

In January 2017, the FASB issued ASU 2017-04,  Intangibles - Goodwill and Other (Topic 350) : Simplifying the Accounting for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This standard, which will be effective for the Company beginning in the first quarter of fiscal year 2020, is required to be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.

 

In December 2017, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 118, which provides guidance on accounting for the tax effects of the U.S. Tax Cuts and Jobs Act (the “Tax Act”). The purpose of SAB No. 118 was to address any uncertainty or diversity of view in applying ASC Topic 740, Income Taxes in the reporting period in which the Tax Act was enacted. SAB No. 118 addresses situations where the accounting is incomplete for certain income tax effects of the Tax Act upon issuance of a company’s financial statements for the reporting period that includes the enactment date. SAB No. 118 allows for a provisional amount to be recorded if it is a reasonable estimate of the impact of the Tax Act. Additionally, SAB No. 118 allows for a measurement period to finalize the impacts of the Tax Act, not to extend beyond one year from the date of enactment.

 

As we collect and prepare necessary data and interpret the Tax Act and any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially impact our provision for income taxes and effective tax rate in the period in which the adjustments are made. The accounting for the tax effects of the Tax Act will be completed in 2018.

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (the “new revenue standard” or Accounting Standards Codification 606, (“ASC 606”)) which provided accounting guidance on the recognition of revenue from contracts with customers. ASC 606 superseded the existing revenue recognition guidance under GAAP. The Company has adopted the new revenue standards on January 1, 2018 using the modified retrospective approach. Based on our analysis, we did not identify a cumulative effect adjustment to retained earnings at January 1, 2018.

 

  6  

 

  

PEERSTREAM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The most significant aspect of the Company’s evaluation of ASC 606 related to ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). This guidance discusses principal versus agent considerations and gross versus net revenue reporting. Through the Company’s evaluation, the Company has concluded that its subscription and advertising revenues will be reported on a gross basis, which is consistent with its current revenue recognition policies. We determined that we are the principal agent for subscription revenue since we control the promised service before transferring to the customer and have latitude in establishing the subscription price. We report advertising revenue also on a gross basis predominately because we are the primary obligor responsible for fulfilling advertisement delivery, including the acceptability of the services delivered. For advertising revenue, we also have control in establishing the price of the advertisements.

 

Revenue

 

In accordance with ASC 606, revenue from contracts with customers is recognized when control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods or services. Sales tax is excluded from reported revenue.

 

Subscription Revenue

 

The Company generates subscription revenue from monthly premium subscription services. Subscription revenues are presented net of refunds, credits, and known and estimated credit card chargebacks. During the three months ended March 31, 2018 and 2017, subscriptions were offered in durations of one-, three-, six- and twelve- month terms. All subscription fees, however, are paid by credit card at the origination of the subscription regardless of the term of the subscription, therefore determining the fixed transaction price. Revenues from multi-month subscriptions are recognized on a straight-line basis over the period where the service is offered to our customer, indicated by length of the subscription term purchased. The unearned portion of subscription revenue is presented as deferred revenue in the accompanying condensed consolidated balance sheets. The deferred revenue at December 31, 2017 was $2,553,826, of which approximately $1,069,700 was subsequently recognized as subscription revenue during the three months ended March 31, 2018. The deferred revenue at March 31, 2018 was $2,406,058, of which approximately $1,894,900 was from contracts originated during the first quarter of 2018.

 

In addition, the Company offers virtual gifts and micro-transactions to its users. Users may purchase credits in $5, $10 or $20 increments that can be redeemed for a host of virtual gifts such as a rose, a beer, a car, among other items. These gifts are given among users to enhance communication and are typically redeemed within the month of purchase. Upon purchased, the virtual gifts are within the users’ control and the Company has no other performance obligations. Virtual gift and micro-transaction revenue are recognized at the point of sale at the fixed transaction price on a gross basis and included in subscription revenue in the accompanying condensed consolidated statements of operations. Virtual gift and micro-transaction revenue was approximately $2,010,500 for the three months ended March 31, 2018.

 

Advertising Revenue

 

The Company generates advertising revenue from the display of advertisements on its products through contractual agreements with third parties that are either on a fixed fee basis over a period of time or based on the number of advertising impressions delivered. When a customer clicks an advertisement (CPC basis), views an advertisement impression (CPM basis), registers for an external website via an advertisement by clicking on or through our application (CPA basis), or clicks on an offer to subscribe to premium features on the application, the amount earned is recognized as revenue. Revenue related to fixed fee arrangements is recognized ratably over the service period. In determining whether an arrangement exists, we ensure that an agreement has been fully executed. Advertising revenue is dependent upon traffic as well as the advertising inventory placed on our products.

 

  7  

 

 

PEERSTREAM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

3. Property and Equipment, Net

 

Property and equipment, net consisted of the following at March 31, 2018 and December 31, 2017:

 

   

March 31,
2018

   

December 31,
2017

 
    (unaudited)        
Computer equipment   $ 3,706,017     $ 3,706,017  
Website development     2,422,392       2,342,442  
Furniture and fixtures     89,027       89,027  
Leasehold improvements     32,726       32,726  
Total property and equipment     6,250,162       6,170,212  
Less: Accumulated depreciation     (5,647,490 )     (5,547,500 )
Total property and equipment, net   $ 602,672     $ 622,712  

 

Depreciation expense for the three months ended March 31, 2018 was $99,990, as compared to $130,637 for the three months ended March 31, 2017. 

The Company only holds property and equipment in the United States.  

4 . Intangible Assets, Net

 

Intangible assets, net consisted of the following at March 31, 2018 and December 31, 2017:  

 

    March 31,     December 31,  
    2018     2017  
    (unaudited)        
    Gross
Carrying
Amount
    Accumulated
Amortization
    Net
Carrying
Amount
    Gross
Carrying
Amount
    Accumulated
Amortization
    Net
Carrying
Amount
 
Patents   $ 50,000     $ (21,875 )   $ 28,125     $ 50,000     $ (21,250 )   $ 28,750  
Trade names, trademarks product names, URLs     1,555,000       (649,354 )     905,646       1,555,000       (585,479 )     969,521  
Internally developed software     2,720,000       (2,001,363 )     718,637       2,720,000       (1,900,696 )     819,304  
Subscriber/customer relationships     4,219,000       (2,442,653 )     1,776,347       4,219,000       (2,221,882 )     1,997,118  
Lead pool     282,000       (211,500 )     70,500       282,000       (176,250 )     105,750  
Total intangible assets   $ 8,826,000     $ (5,326,745 )   $ 3,499,255     $ 8,826,000     $ (4,905,557 )   $ 3,920,443  

  

Amortization expense for the three months ended March 31, 2018 was $421,188, as compared to $421,188 for the three months ended March 31, 2017. The estimated aggregate amortization expense for each of the next five years and thereafter will be $1,178,531 in 2018, $1,087,333 in 2019, $592,681 in 2020, $444,167 in 2021 and $196,543 thereafter.

5. Accrued Expenses and Other Current Liabilities

 

Accrued expenses and other current liabilities consisted of the following at March 31, 2018 and December 31, 2017:

    March 31,     December 31,  
    2018     2017  
    (unaudited)        
Compensation, benefits and payroll taxes   $ 86,482     $ 310,775  
Professional fees     31,800       -  
Other accrued expenses     6,000       94,871  
Total accrued expenses and other current liabilities   $ 124,282     $ 405,646  

   

  8  

 

 

PEERSTREAM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

   

6. Stockholders’ Equity

 

The PeerStream, Inc. Amended and Restated 2011 Long-Term Incentive Plan (the “2011 Plan”) was terminated as to future awards on May 16, 2016. A total of 181,604 shares of the Company’s common stock may be delivered pursuant to outstanding options awarded under the 2011 Plan; however, no additional awards may be granted under such plan. The PeerStream, Inc. 2016 Long-Term Incentive Plan (the “2016 Plan”) was adopted by the Company’s stockholders on May 16, 2016 and permits the Company to award stock options (both incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other stock-based awards and cash-based incentive awards to its employees (including an employee who is also a director or officer under certain circumstances), non-employee directors and consultants. The maximum number of shares of common stock that may be issued pursuant to awards under the 2016 Plan is 1,300,000 shares, 100% of which may be issued pursuant to incentive stock options. In addition, the maximum number of shares of common stock that may be issued under the 2016 Plan may be increased by an indeterminate number of shares of common stock underlying outstanding awards issued under the 2011 Plan that are forfeited, expired, cancelled or settled in cash. As of March 31, 2018, there were 432,697 shares available for future issuance under the 2016 Plan.

 

Stock Options

 

The following table summarizes the assumptions used in the Black-Scholes pricing model to estimate the fair value of the options granted during the following periods:

 

    Three Months
Ended
 
    March 31,  
    2018  
Expected volatility     159.0-160.0 %
Expected life of option     5.2-6.3  
Risk free interest rate     2.3-2.7 %
Expected dividend yield     0.0 %

 

The expected life of the options is the period of time over which employees and non-employees are expected to hold their options prior to exercise. The expected life of options has been determined using the “simplified” method as prescribed by Staff Accounting Bulletin 110, which uses the midpoint between the vesting date and the end of the contractual term. The volatility of the Company’s common stock is calculated using the Company’s historical volatilities beginning at the grant date and going back for a period of time equal to the expected life of the award. The Company estimates potential forfeitures of stock awards and adjusts recorded stock-based compensation expense accordingly. The Company estimates pre-vesting forfeitures primarily based on the Company’s historical experience and is adjusted to reflect actual forfeitures as the stock based awards vest.

 

The following tables summarize stock option activity during the three months ended March 31, 2018:

 

          Weighted  
    Number of     Average
Exercise
 
    Options     Price  
Stock Options:            
Outstanding at January 1, 2018     980,588     $ 5.02  
Granted     70,830       6.09  
Expired or canceled, during the period     -       -  
Forfeited, during the period     (1,717 )     3.67  
Outstanding at March 31, 2018     1,049,701     $ 5.10  
Exercisable at March 31, 2018     463,939     $ 6.59  

 

On March 31, 2018, the aggregate intrinsic value of stock options that were outstanding and exercisable was $2,458,362 and $920,452, respectively. On March 31, 2017, the aggregate intrinsic value of stock options that were outstanding and exercisable was $61,478 and $35,154, respectively. The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the fair value of such awards as of the period-end date.

  

  9  

 

 

PEERSTREAM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

During the three months ended March 31, 2018, the Company granted options to employees to purchase an aggregate 70,830 shares of common stock at exercise prices ranging from $5.70 to $6.99. The options vest between one, three and four years and have a term of ten years.

 

The aggregate fair value for the options granted during the three months ended March 31, 2018 was $422,550. The aggregate fair value for the options granted during the three months ended March 31, 2017 was $206,064.

 

Stock-based compensation expense for the Company’s stock options included in the condensed consolidated statements of operations is as follows:

 

    Three Months Ended  
    March 31,  
    2018     2017  
Cost of revenue   $ 690     $ 4,426  
Sales and marketing expense     1,252       1,700  
Product development expense     6,387       15,568  
General and administrative expense     195,512       102,634  
Total stock compensation expense   $ 203,841     $ 124,328  

 

At March 31, 2018, there was $1,791,468 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 2.5 years.

 

Restricted Stock Awards

 

The following table summarizes restricted stock award activity for the three months ended March 31, 2018:

 

          Weighted  
          Average  
    Number of     Grant Date  
    RSAs     Fair Value  
Restricted Stock Awards:            
Outstanding at January 1, 2018   $ 158,571     $ 20.29  
Granted     -       -  
Expired or canceled, during the period     -       -  
Forfeited, during the period     -       -  
Outstanding at March 31, 2018   $ 158,571     $ 20.29  

  

At March 31, 2018, there was $1,112,243 of total unrecognized compensation expense related to unvested restricted stock awards, which is expected to be recognized over a weighted average period of 1.5 years.

 

Stock-based compensation expense relating to restricted stock awards for the three months ended March 31, 2018 was $185,374, as compared to $185,374 for the three months ended March 31, 2017.

   

7. Net Loss Per Share

 

Basic net loss per share of common stock is computed based upon the number of weighted average shares of common stock outstanding as defined by ASC Topic 260, Earnings Per Share. Diluted net loss per share of common stock includes the dilutive effects of stock options and stock equivalents. To the extent stock options are antidilutive, they are excluded from the calculation of diluted net loss per share of common stock. For the three months ended March 31, 2018, 1,049,701 shares upon the exercise of outstanding stock options and 158,571 shares of unvested restricted stock were not included in the computation of diluted net loss per share because their inclusion would be antidilutive. 

 

For the three months ended March 31, 2017, 606,754 shares upon the exercise of outstanding stock options were not included in the computation of diluted net loss per share because their inclusion would be antidilutive.

 

  10  

 

 

PEERSTREAM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

8. Commitments

 

Operating Lease Agreements

 

On January 18, 2016, the Company entered into a lease agreement for office space located at 122 East 42nd Street in New York, NY and paid a security deposit in the amount of $37,000. The term of the lease runs until May 30, 2019. The Company’s monthly office rent payments under the lease are currently approximately $12,300 per month and escalate on an annual basis for each year of the term of the lease thereafter.

 

On June 7, 2016, the Company entered into a lease agreement with Jericho Executive Center LLC for office space at 30 Jericho Executive Plaza in Jericho, New York which commenced on September 1, 2017 and runs through November 30, 2021. The Company’s monthly office rent payments under the lease are currently approximately $5,900 per month.

 

On September 18, 2017, the Company entered into a lease agreement for a second office space located at 122 East 42nd Street in New York, NY and paid a security deposit in the amount of $8,000. The term of the lease runs until July 31, 2019. The Company’s monthly office rent payments under the lease are currently approximately $4,000 per month.

 

On October 27, 2017, the Company entered into a lease agreement for an office space located at Sparks-Ledesma House 1306 East 7th Street in Austin, TX that expires in October 31, 2018. The Company’s monthly office rent payments under the lease are currently approximately $1,129 per month.

 

Legal Proceedings

 

On December 16, 2016, a wholly owned subsidiary of the Company, Paltalk Holdings, Inc., filed a patent infringement lawsuit in Delaware against Riot Games, Inc. and Valve Corporation for infringement of U.S. Patent Nos. 5,822,523 and 6,226,686 with respect to their online games League of Legends and Defense of the Ancients 2. These two patents were previously asserted against, and then licensed to, Microsoft, Sony, and Activision. In 2018, Valve Corporation made a motion to move the litigation from Delaware to the Western District of Washington which was granted by the court.

 

Riot Games, Inc. has filed a total of four inter partes reviews at the patent office, two per patent held by Paltalk Holdings, Inc., seeking to have the Paltalk Holdings, Inc. patents declared invalid. The patent office has not ruled on these motions.

 

The Company may be included in legal proceedings, claims and assessments arising in the ordinary course of business. The Company evaluates the need for a reserve for specific legal matters based on the probability of an unfavorable outcome and the reasonability of an estimable loss. No reserve was deemed necessary as of March 31, 2018.  

 

9. ProximaX Agreement

 

On March 21, 2018, as a first step in providing services through PeerStream Business Solutions, the Company entered into a technology services agreement with ProximaX Limited (“ProximaX”) whereby the Company agreed to provide certain development and related services to ProximaX to facilitate the implementation of PeerStream Protocol (“PSP”) into ProximaX’s proprietary blockchain protocol that is currently under development. Pursuant to the terms of the agreement, ProximaX agreed to pay the Company up to an aggregate of $10.0 million of cash in exchange for the Company’s services, with $5.0 million due upon the successful consummation of a future initial coin offering by ProximaX and up to an additional $5.0 million due upon the Company’s achievement of certain development milestones set forth in the agreement. In addition, ProximaX agreed to issue the Company a number of tokens equal to 2.4% of all outstanding tokens on the date of the planned initial coin offering and to reserve an additional 2% of such tokens to be issued as payment for future services provided by the Company, subject, in each case, to such initial coin offering generating aggregate gross proceeds of at least $30.0 million. If the planned initial coin offering does not raise at least $30.0 million or ProximaX fails to pay the Company the upfront cash payment of $5.0 million by June 1, 2018, the Company and ProximaX have agreed to negotiate alternative compensation for the Company’s services in good faith.

 

On April 30, 2018, ProximaX closed its initial coin offering, which generated aggregate gross proceeds in excess of $30.0 million for purposes of the Company’s technology services agreement with ProximaX. On May 6, 2018, as agreed under the terms of the technology services agreement, ProximaX paid the Company the $5.0 million fee due upon consummation of its initial coin offering.

 

10. Subsequent Events

 

Management has evaluated subsequent events or transactions occurring through the date the condensed consolidated financial statements were issued and determined that no other events or transactions are required to be disclosed herein.

    

  11  

 

   

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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 months ended March 31, 2018, (ii) the consolidated financial statements and notes thereto for the year ended December 31, 2017 included in our Annual Report on Form 10-K (the “Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2018 and (iii) the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K. Aside from certain information as of December 31, 2017, 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. See “Forward-Looking Statements.” 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” in the Form 10-K.

 

Background of Presentation and Recent Developments

 

Name Change

 

Effective March 12, 2018, we changed our name from “Snap Interactive, Inc.” to “PeerStream, Inc.” In connection with the name change, we also changed our trading symbol on the OTCQB Marketplace from “STVI” to “PEER.” The new brand is intended to honor the Company’s legacy of empowering consumers to meet new people and connect with peers via social video applications, while also referencing the anticipated importance of peer-to-peer networks and multimedia streaming in the Company’s future.

 

Presentation for Reverse Stock Split

 

On January 5, 2017, we effected a 1-for-35 reverse stock split of our issued and outstanding common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, each issued and outstanding share of our common stock, and the per share exercise price of and number of shares of our common stock underlying our outstanding stock options, was automatically proportionally adjusted based on the 1-for-35 Reverse Stock Split ratio. Except as otherwise provided herein, all share and per-share amounts of our common stock and stock options have been adjusted to give effect to the Reverse Stock Split for all periods presented. The Reverse Stock Split did not alter the par value of our common stock, which remains at $0.001 per share, modify any voting rights or other terms of our common stock or impact the amount of preferred stock we are authorized to issue.

 

Business Solutions and Technology Services Agreement with ProximaX

 

On March 8, 2018, we launched PeerStream Business Solutions to provide technology licensing, services and support related to multimedia streaming and communications for third party developers and corporate clients (“PeerStream Business Solutions”). PeerStream Business Solutions is intended to leverage our nearly 20 years of technology innovation to tap into a potential new business-to-business revenue stream and support the efforts of a broad range of prospective corporate clients to adopt blockchain technology.

 

  12  

 

 

On March 21, 2018, as a first step in providing services through PeerStream Business Solutions, we entered into a technology services agreement with ProximaX Limited (“ProximaX”) whereby we agreed to provide certain development and related services to ProximaX to facilitate the implementation of PeerStream Protocol (“PSP”) into ProximaX’s proprietary blockchain protocol that is currently under development. Pursuant to the terms of the agreement, ProximaX agreed to pay us up to an aggregate of $10.0 million of cash in exchange for our services, with $5.0 million due upon the successful consummation of a future initial coin offering by ProximaX and up to an additional $5.0 million due upon our achievement of certain development milestones set forth in the agreement. In addition, ProximaX agreed to issue us a number of tokens equal to 2.4% of all outstanding tokens on the day of the planned initial coin offering and to reserve an additional 2% of such tokens to be issued as payment for future services provided by us, subject, in each case, to such initial coin offering generating aggregate gross proceeds of at least $30.0 million. If the planned initial coin offering does not raise at least $30.0 million or ProximaX fails to pay us the upfront cash payment of $5.0 million by June 1, 2018, we and ProximaX have agreed to negotiate alternative compensation for our services in good faith.

 

On April 30, 2018, ProximaX closed its initial coin offering, which generated aggregate gross proceeds in excess of $30.0 million for purposes of our technology services agreement with ProximaX. On May 6, 2018, as agreed under the terms of the technology services agreement, ProximaX paid us the $5.0 million fee due upon consummation of its initial coin offering.

 

Overview

 

We are a leading developer of innovative decentralized technologies that power multimedia social applications and business communication solutions worldwide. Our product portfolio includes Paltalk and Camfrog, which together host one of the world's largest collections of video-based communities, and FirstMet, a prominent interactive dating brand serving users 35 and older. Our other products include Tinychat, Firetalk, 50More, Ribbit Live, The Grade, and Vumber. We recently announced a number of initiatives that feature enhancements of our technology platform using blockchain, and plans to offer aspects of our multimedia streaming and communications technology to third party developers and corporate clients. We are also currently developing a new video-enabled secure messaging service built on blockchain technology called Backchannel that we expect to launch in the fourth quarter of 2018.

 

Our leading network of products creates a unique social media enterprise where users can meet, see, chat, broadcast and message in real time in a secure environment with others in our network. Our products are generally available through Windows ® , Mac TM OS, iOS TM and Android TM platforms. The proprietary technology underlying our products allows us to operate thousands of simultaneous streams, including on mobile platforms, which support interactions on a one-on-one, one-to-many and many-to-many basis. We also have a worldwide established presence and brand identity in both live video chat and interactive dating, with users in over 180 countries as of May 1, 2018. Furthermore, most of our technology is supported by a portfolio of 26 issued patents.

 

We believe that live video is in the early stages of adoption for applications related to meeting, chatting, dating, broadcasting and other interactive purposes and over time presents an attractive growth opportunity as it becomes pervasively integrated across the social networking and interactive communications industries. As individuals become more reliant on communicating through applications, we believe it is becoming increasingly more important to many users that they have a secure and private environment on which to interact via live video online.

 

During 2018, we plan to pursue a strategy of using blockchain technology to improve our existing technology platform, to build new proprietary applications and to offer technology solutions to third parties, in each case taking advantage of the enhanced security, scalability and cost-effectiveness that blockchain technology offers. We recently announced that we are developing an open source, multimedia delivery platform based on blockchain technology called “PeerStream Protocol,” or “PSP,” that is expected to specialize in routing live, rich media content and powering applications that require real time data and video communications. At launch, we plan for this platform to host new proprietary apps we develop, as well as to allow third-party developers to build the next generation of social networking, messaging, group collaboration and live video streaming applications based on blockchain technologies. In concert with PSP, we are currently developing Backchannel, a blockchain-based secure messaging application that we believe will be the first video messaging application to eliminate a centralized intermediary responsible for hosting and storing user information, thereby reducing the risk that communications between users can be hacked, stolen or leaked.

 

We believe that we are well-positioned to take advantage of key business opportunities in our industry by leveraging our technology, user base and suite of complementary applications to provide video, voice and chat experiences with superior security, scalability and cost-efficiency.

 

Our Products

 

Live Video Chat

 

We have five existing products in the video chat space: Paltalk, Camfrog, Tinychat, Ribbit Live, and Firetalk. In addition, we are currently developing a new blockchain based video application, Backchannel, which is expected to launch in the fourth quarter of 2018. The major revenue-generating live video chat products are Paltalk and Camfrog. Each product enables individuals to self-organize around topics and users with common affinities. Tinychat, Ribbit Live and Firetalk enable adaptations of our video technology for alternative uses and opportunities in the future.

 

  13  

 

 

Paltalk and Camfrog . Paltalk and Camfrog are our major video chat applications and are both leading providers of live video social networking applications available on Windows, Mac OS, iOS, Android and other tablet devices. Together, these products power one of the world’s largest global collections of video based communities, with proprietary technology to host thousands of simultaneous live group conversations on topics such as politics, financial markets, music and dating. Our proprietary client server technology helps maintain high quality video and audio even as many users simultaneously watch a particular broadcaster. Paltalk and Camfrog both have hundreds of millions of registered users and attract a demographically and geographically diverse user base, with users in over 180 different countries. Paltalk users are approximately one-third domestic and two-thirds international, whereas the majority of Camfrog users are international, with a particular concentration in Southeast Asia. 

 

In the first half of 2017, we founded an innovation lab to leverage our technology and commercial platform to support growth initiatives in the live video markets. Through the support of our innovation lab, we recently updated Camfrog to support one-to-many live streaming video capabilities through the launch of Camfrog Live. Camfrog Live offers a wide variety of live video broadcasting entertainment while allowing spontaneous, real-time engagement at a more personal level. The platform offers these viewing users a unique way of connecting and sharing through live interaction with content creators, allowing them to offer feedback and appreciation, including cash donations and tips. Camfrog will continue to support its industry-leading traditional group video chat service, which the Company believes is complemented by the addition of live streaming entertainment. We expect to offer similar one-to-many live streaming video capabilities within our Paltalk application in 2018.

 

Blockchain Initiatives

 

PSP. PSP is an open source, decentralized, peer-to-peer multimedia and messaging protocol that, when coupled with blockchain technology, is designed to increase scalability, cost efficiency and security for real-time communication applications in such areas as video conferencing, messaging and workforce collaboration. We expect PSP to be completed in the fourth quarter of 2018. PSP is presently being licensed by and integrated with the ProximaX blockchain protocol.

 

Backchannel . Backchannel is a blockchain-based video-enabled secure messaging service we are developing that we plan to release in the fourth quarter of 2018. Backchannel is expected to enable real-time text, voice, and video messaging between individuals and among small groups and to leverage blockchain and other decentralization technologies to offer unique security and privacy benefits. We plan to market Backchannel to privacy-minded consumers around the world, as well as business, legal and government end-users.

 

Backchannel is expected to integrate end-to-end and forward secrecy encryption best practices for communication applications. In addition, we anticipate that Backchannel will use blockchain technology to validate and authenticate users with a crypto identity that does not require any personally identifiable information from the user. As a result, Backchannel will never request or hold the real world identity of its users, and therefore will not have any personal information that could be stolen by hackers. In addition, Backchannel is intended to decentralize the transmission of all communications within its network, meaning that communications will never pass through Backchannel servers, making the application more resistant to censorship, disruption and eavesdropping than traditional communication platforms.

 

Dating

 

We currently have three dating applications: FirstMet, 50more and The Grade. FirstMet generates substantially all of the revenue in our dating portfolio. 50more, our product targeting users over 50, was launched commercially in July 2017. For the foreseeable future, we expect to focus our dating application resources on FirstMet and 50more.

 

FirstMet . We provide a leading online dating application under the FirstMet brand. FirstMet is native on Facebook, iOS and Android platforms and is also accessible on mobile devices and desktops at FirstMet.com. FirstMet is extremely scalable and requires limited incremental operational cost to add users, active subscribers or new features catering to additional discrete audiences.

 

FirstMet attracts a demographically and geographically diverse user base, with users in over 180 different countries. FirstMet is intuitive, and allows users and subscribers to easily find, connect and communicate with each other. 

 

50more . We introduced 50more commercially in July 2017 as our dating application targeting adults over the age of 50. 50more is based on our FirstMet platform and utilizes the underlying FirstMet infrastructure and technology, a strategy which allowed us to streamline the process of launching 50more as a new and fresh online dating product. 50more has similar functionality to FirstMet but offers more information-rich user profiles and addresses a different target audience of adults over 50.

 

We expect that we will operate 50more in parallel with FirstMet in order to leverage the overlap with FirstMet’s user base and cross sell our users with multiple brands. 50more is available on mobile and desktop platforms.

 

The Grade . The Grade is a free mobile dating application offered on iOS and Android designed to foster a high quality community of users by rewarding good behavior and exposing improper behavior through a programmatic grading algorithm. Despite the uniqueness and early success of The Grade, we decided in late 2015 to shift our promotional and product development resource-focus to FirstMet, with its established user base, and the development of 50more. We believe The Grade remains a viable product with relevant technology, and it may provide a platform in the future for other product opportunities.

 

  14  

 

 

Telecommunications  

We own and operate a small telecommunications provider called Vumber that enables users to have multiple phone numbers in any area code through which calls can be forwarded to a user’s existing cell phone or land line telephone number. Vumber serves both the retail and small business community. Vumber not only allows individuals to communicate while protecting privacy, but also gives business professionals the ability to add a new business line with any chosen area code to their cell phones. Vumber provides an in-depth data analytics platform that can track, record and analyze calls to gain new insights into one’s business. 

Product Development and Innovation Lab  

We are continually using our efforts to develop new products, as well as optimize our existing platforms and feature sets in order to meet the evolving needs of our user base and advertising partners. 

We develop most of our software internally. We will, however, purchase technology and license intellectual property rights where it is strategically important, operationally compatible, or economically advantageous. For instance, we partner with third parties to further our internationalization efforts as we look to bring additional languages into our existing platforms. We are not materially dependent upon licenses and other agreements with third parties relating to product development. 

In the first half of 2017, we founded an innovation lab to leverage our technology and commercial platform to support growth initiatives in the live video markets. Our innovation lab contributed to the launch of the blockchain initiative, and is currently pursuing live video social networking and live streaming entertainment opportunities on mobile, two areas that we believe show extraordinary promise for user adoption and revenue growth. As described above, our innovation lab recently launched Camfrog Live as an update to our existing Camfrog application to provide support for one-to-many live streaming videos and to include new monetization opportunities for content creators. We believe that the launch of Camfrog Live has the potential to substantially grow our user base by providing a compelling platform for live video interactions. 

Product Payment Options  

Our users have a variety of methods by which to purchase product subscriptions across all of our platforms. Users can pay by credit card, PayPal, Western Union, Check, local e-wallet providers, or complete an in-app purchase through the Apple App Store or Google Play for Android users. We also expanded our payment options on certain of our applications in 2017 to include bitcoin as a method of payment. However, any payment made in bitcoin is automatically converted by our payment processor into U.S. dollars so that we receive U.S. dollars for the transaction. 

Subscriber Base  

Our applications and the majority of revenues generated therefrom are supported by a large user database which includes approximately 164,000 active subscribers worldwide as of May 1, 2018. Our management believes that the scale of our subscriber base presents a competitive advantage in the video social networking industry and can present growth opportunities to combine video with dating to advance existing products with upsell opportunities as well as to build future brands with cross-sell offers. We believe the scale of our user base also offers us the opportunity to build our third party advertising revenue. 

Operational Highlights and Objectives  

During the three months ended March 31, 2018, we executed key components of our objectives: 

  rebranded our corporate entity to PeerStream, Inc., which we believe better reflects our mission to connect peers via multimedia streaming and communications;
  began development of PSP, an open source, multimedia delivery protocol that is built on blockchain technology and designed to increase scalability, cost efficiency and security for real-time communication applications in such areas as video conferencing, messaging and workforce collaboration;
  launched PeerStream Business Solutions to provide technology licensing, services and support related to multimedia streaming and communications for third party developers and corporate clients, leveraging the Company’s blockchain technology base; and
  entered into a technology services agreement with ProximaX as an initial step in providing services through PeerStream Business Solutions.

 

For the near term, our business objectives include:

 

  advancing development of PSP, our multimedia delivery protocol that integrates with blockchain technology;
  developing our business solutions offerings and customer pipeline;
  launching a beta version of Backchannel, our new secure video messaging service leveraging blockchain technology and its benefits;
  growing our live video streaming entertainment business by increasing the content creator base and monetization for Camfrog Live, and extending this service to users of the Paltalk application;
 

seeking additional partnerships with blockchain-based companies to enhance the breadth of our technology capabilities;

  exploring strategic opportunities such as business partnerships and merger and acquisition opportunities;
  continuing to take steps towards listing our common stock on a national securities exchange; and
  continuing to defend our intellectual property.

 

Sources of Revenue

 

Currently, our sources of revenue are subscription, advertising and other fees generated from users of our video chat and dating products. In future periods, we plan to also generate revenue through the services provided by our PeerStream Business Solutions unit.

 

  15  

 

 

Subscription Revenue

 

Our video chat platforms generate revenue primarily through subscription fees. Our tiers of subscriptions provide users with unlimited video windows and levels of status within the community. Multiple subscription tiers are offered in different durations depending on the product from one-, six- and twelve- month terms, which continue to vary as we continue to test and optimize length and pricing. Longer-term plans (those with durations longer than one month) are generally available at discounted monthly rates. Levels of membership benefits are offered in tiers, with the least membership benefits in the lowest paid tier and the most membership benefits in the highest paid tier. Our membership tiers are “Plus,” “Extreme,” “VIP” and “Prime” for Paltalk and “Pro,” “Extreme” and “Gold” for Camfrog. We also hold occasional promotions that offer discounted subscriptions and virtual gifts.

 

Our dating applications generate revenue primarily through subscription fees. Multiple subscription tiers are offered in one-, three- and six-month terms, which continue to vary as we continue to test and optimize length and pricing. Longer-term plans (those with durations longer than one month) are generally available at discounted monthly rates. Pursuant to the terms of service of our dating platforms, subscriptions automatically renew for periods of the same length and at the same price as the original subscription term until terminated by the subscriber. We also hold occasional promotions that offer initial discounted subscriptions that renew at the regular price. 

 

We recognize revenue from monthly premium subscription services beginning in the month in which the subscriptions are originated. Revenues from multi-month subscriptions are recognized on a gross and straight-line basis over the length of the subscription period. The unearned portion of subscription revenue is presented as deferred revenue in the accompanying condensed consolidated balance sheets.

 

We also offer virtual gifts and micro-transactions to our users. Users may purchase credits that can be redeemed for a host of virtual gifts such as a rose, a beer or a car, among other items. Micro-transactions allow users to increase the visibility of their profile and messages by paying for such services. Virtual gift and micro-transaction revenue is recognized at the point of sale, as they are incurred as purchased, and included in subscription revenue.

 

Advertising Revenue

 

We also generate a portion of our revenue on both our video and dating platforms through advertisements. Advertising revenue is dependent upon traffic as well as the advertising inventory we place on our products. We recognize advertising revenue as earned on a click-through, impression, registration or subscription basis. When a user clicks an advertisement (CPC basis), views an advertisement impression (CPM basis), registers for an external website via an advertisement by clicking on or through our application (CPA basis) or clicks on an offer to subscribe to premium features on the application, the contract amount is recognized as revenue.

 

Costs and Expenses

 

Cost of revenue. Cost of revenue consists primarily of compensation (including stock-based compensation) and other employee-related costs for personnel engaged in data center and customer care functions, credit card processing fees, hosting fees, and data center rent and bandwidth costs.

  

Sales and marketing expense. Sales and marketing expense consists primarily of advertising expenditures and compensation (including stock-based compensation) and other employee-related costs for personnel engaged in sales, and sales support functions. Advertising and promotional spend includes online marketing, including fees paid to search engines, and offline marketing, which is primarily partner-related payments to those who direct traffic to our brands. We plan to continue to expand sales and marketing efforts to attract new users, retain existing users and increase sales to both new and existing users. 

 

Product development expense. Product development expense, which relates to the development of technology of our applications, consists primarily of compensation (including stock-based compensation) and other employee-related costs that are not capitalized for personnel engaged in the design, testing and enhancement of service offerings as well as amortization of capitalized website development costs.

 

General and administrative. General and administrative expense consists primarily of compensation (including stock-based compensation) and other employee-related costs for personnel engaged in executive management, finance, legal, tax, human resources and facilities costs and fees for other professional services. General and administrative expense also includes depreciation of property and equipment and amortization of intangible assets.

 

  16  

 

Key Metrics

 

Our management relies on certain non-GAAP and/or unaudited performance indicators to manage and evaluate 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 also discuss net cash used in operating activities under the ‟Results of Operations” and ‟Liquidity and Capital Resources” sections below. Bookings and Adjusted EBITDA are discussed below.

 

    Three Months Ended  
    March 31,  
    2018     2017  
Bookings   $ 5,278,855     $ 6,143,208  
Net cash (used in) provided by operating activities   $ (543,031 )   $ 943,100  
Net loss   $ (808,655 )   $ (1,038,703 )
Adjusted EBITDA   $ 104,676     $ (213,990 )
Adjusted EBITDA as percentage of total revenues     1.8 %     (3.2 )%

 

Bookings

 

Bookings is a financial measure representing the aggregate dollar value of subscription fees and micro-transactions received during the period. We calculate bookings as subscription revenue recognized during the period plus the change in deferred subscription revenue recognized during the period. We record subscription revenue from subscription fees and micro-transactions as deferred subscription revenue and then recognize that revenue ratably over the length of the subscription term. Our management uses bookings internally in analyzing our financial results to assess operational performance and to assess the effectiveness of, and plan future, user acquisition campaigns. We believe that this 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. We believe that both management and investors benefit from referring to bookings in assessing our performance and when planning, forecasting and analyzing future periods.

 

While the factors that affect bookings and subscription revenue are generally the same, certain factors may affect subscription revenue more or less than such factors affect 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 GAAP.

 

Adjusted EBITDA

 

Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as net (loss) income adjusted to exclude interest expense, net, income tax (benefit), depreciation and amortization expense, other income, net and stock-based compensation expense.

 

We present Adjusted EBITDA because it is a key measure used by our management and Board of Directors to understand and evaluate our core operating performance and trends, to develop short- and long-term operational plans and to allocate resources to expand our business. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of the cash operating income generated by our business. We believe that Adjusted EBITDA is useful to investors and others to understand and evaluate our operating results, and it allows for a more meaningful comparison between our performance and that of competitors.

  

Limitations of Adjusted EBITDA

 

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

 

  Adjusted EBITDA does not reflect cash capital expenditures for assets underlying depreciation and amortization expense that may need to be replaced or for new capital expenditures;
  Adjusted EBITDA does not reflect our working capital requirements;
  Adjusted EBITDA does not consider the potentially dilutive impact of stock-based compensation; and
  other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

 

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net loss and our other GAAP results. The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA for each of the periods indicated:

 

    Three Months Ended  
    March 31,  
    2018     2017  
Reconciliation of Net loss to Adjusted EBITDA:            
Net loss   $ (808,655 )   $ (1,038,703 )
Interest expense (income), net     2,938       (36,813 )
Depreciation and amortization expense     521,178       551,824  
Stock-based compensation expense     389,215       309,702  
Adjusted EBITDA   $ 104,676     $ (213,990 )

 

  17  

 

  

Results of Operations

 

The following table sets forth condensed consolidated statements of operations data for each of the periods indicated as a percentage of total revenues: 

 

    Three Months Ended  
    March 31,  
    2018     2017  
Total revenue     100.0 %     100.0 %
Costs and expenses:                
Cost of revenue     17.6 %     19.1 %
Sales and marketing expense     24.2 %     33.2 %
Product development expense     37.4 %     32.9 %
General and administrative expense     34.9 %     30.8 %
Total costs and expenses     114.1 %     116.0 %
Loss from operations     (14.1 )%     (16.0 )%
Interest income, net     0.1 %     0.5 %
Total other income, net     0.1 %     0.5 %
Loss before income taxes     (14.1 )%     (15.5 )%
Provision for income taxes     -       -  
Net loss     (14.1 )%     (15.5 )%

 

Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017

 

Revenues

 

Revenues decreased to $5,748,050 for the three months ended March 31, 2018 from $6,718,952 for the three months ended March 31, 2017. The decrease was mainly driven by a decline in FirstMet and Paltalk revenue as a result of declining active subscribers, as well as a decrease in advertising revenue across all products. 

 

The following table sets forth our subscription revenue, advertising revenue and total revenues for the three months ended March 31, 2018 and the three months ended March 31, 2017, the decrease between those periods, the percentage decrease between those periods and the percentage of total revenues that each represented for those periods: 

   

                            % Revenue  
    Three Months Ended                 Three Months Ended  
    March 31,     $     %     March 31,  
    2018     2017     Decrease     Decrease     2018     2017  
Subscription revenue   $ 5,426,623     $ 6,223,685     $ (797,062 )     (12.8 )%     94.4 %     92.6 %
Advertising revenue     321,427       495,267       (173,840 )     (35.1 )%     5.6 %     7.4 %
Total revenues   $ 5,748,050     $ 6,718,952     $ (970,902 )     (14.5 )%     100.0 %     100.0 %

  

Subscription – Our subscription revenue for the three months ended March 31, 2018 decreased by $797,062, or 12.8%, as compared to the three months ended March 31, 2017. We believe that the decrease in subscription revenue was driven primarily by a decrease in new transaction revenue in the FirstMet and Paltalk products. We believe that the decrease in FirstMet revenue was driven by our increasing allocation of resources to new higher growth opportunities in the live video market. We believe that the decrease in Paltalk subscription revenue was driven, in part, by lower volume of usage and diminished marketing and advertising spend. 

 

Advertising – Our advertising revenue for the three months ended March 31, 2018 decreased by $173,840, or 35.1%, as compared to the three months ended March 31, 2017. The decrease in advertising revenue primarily resulted from both a decline in active users as well as transitional costs as we changed to a new full service digital advertising agency. We also believe the decrease was related to challenges in the digital advertising industry due to a greater emphasis on fraud control resulting in lower demand and pricing.

 

  18  

 

 

Costs and Expenses

 

Total costs and expenses for the three months ended March 31, 2018 reflect a decrease in costs and expenses of $1,234,825, or 15.8%, as compared to the three months ended March 31, 2017. The following table presents our costs and expenses for the three months ended March 31, 2018 and 2017, the decrease between those periods and the percentage decrease between those periods: 

 

                            % Revenue  
    Three Months Ended                 Three Months Ended  
    March 31,     $     %     March 31,  
    2018     2017     Decrease     Decrease     2018     2017  
Cost of revenue   $ 1,012,027     $ 1,282,505     $ (270,478 )     (21.1 )%     17.6 %     19.1 %
Sales and marketing expense     1,389,992       2,230,492       (840,500 )     (37.7 )%     24.2 %     33.2 %
Product development expense     2,148,915       2,211,344       (62,429 )     (2.8 )%     37.4 %     32.9 %
General and administrative expense     2,008,709       2,070,127       (61,418 )     (3.0 )%     34.9 %     30.8 %
Total costs and expenses   $ 6,559,643     $ 7,794,468     $ (1,234,825 )     (15.8 )%     114.1 %     116.0 %

 

Cost of revenue - Our cost of revenue for the three months ended March 31, 2018 decreased by $270,478, or 21.1%, as compared to the three months ended March 31, 2017. This decrease for the three months ended March 31, 2018 was primarily driven by decreases in customer service consulting fees, decreases in payment processing fees as a result of reduced subscription revenue and reduced payroll expenses as a result of a move to cloud web hosting services. The transition to cloud services also led to decreases in headcount in our information technology support areas. 

 

Sales and marketing expense - Our sales and marketing expense for the three months ended March 31, 2018 decreased by $840,500, or 37.7%, as compared to the three months ended March 31, 2017. The decrease in sales and marketing expense for the three months ended March 31, 2018 was primarily due to a reduction in advertising campaigns for the FirstMet and Paltalk products.

 

Product development expense - Our product development expense for the three months ended March 31, 2018 decreased by $62,429, or 2.8%, as compared to the three months ended March 31, 2017. The decrease was primarily due to the Company’s ability to utilize shared resources across products as a result of reduced headcount in the product development and engineering teams.

 

General and administrative expense - Our general and administrative expense for the three months ended March 31, 2018 decreased by $61,418, or 3.0%, as compared to the three months ended March 31, 2017. The decrease in general and administrative expense for the three months ended March 31, 2018 was primarily driven by a decrease in nonrecurring legal and other consulting fees related to our merger with A.V.M. Software, Inc. (d/b/a Paltalk) (the “AVM Merger”) as well as a decrease in insurance expense following the AVM Merger.

 

Non-Operating Income

 

The following table presents the components of non-operating income for the three months ended March 31, 2018 and the three months ended March 31, 2017, the decrease between those periods and the percentage decrease between those periods: 

 

                            % Revenue  
    Three Months Ended                 Three Months Ended  
    March 31,     $     %     March 31,  
    2018     2017     Decrease     Decrease     2018     2017  
Interest income (expense), net   $ 2,938     $ 36,813     $ (33,875 )     (92.0 )%     0.1 %     0.5 %
Total non-operating income (expense), net   $ 2,938     $ 36,813     $ (33,875 )     (92.0 )%     0.1 %     0.5 %

 

Non-operating income for the three months ended March 31, 2018 was $ 2,938, a net decrease of $33,875, or 92.0%, as compared to a non-operating income of $36,813 for the three months ended March 31, 2017. The decrease in non-operating income was driven by a decrease in contractual interest accrued.  

 

Liquidity and Capital Resources

 

    Three Months Ended  
    March 31,  
    2018     2017  
Condensed Consolidated Statements of Cash Flows Data:            
Net cash (used in) provided by operating activities   $ (543,031 )   $ 943,100  
Net cash used in investing activities     (79,950 )     (64,588 )
Net cash used in financing activities     -       (17,144 )
Net (decrease) increase in cash and cash equivalents   $ (622,981 )   $ 861,368  

 

  19  

 

 

We undertook a plan to reduce costs and increase profitability following the AVM Merger, and we believe that our cash balance and our expected cash flow from operations will be sufficient to meet all of our financial obligations for the twelve months from the filing date of this Form 10-Q. It is possible that we would need additional capital in the future to fund our operations, particularly growth initiatives, which we expect we would raise through a combination of equity offerings, debt financings, other third party funding and other collaborations and strategic alliances. Our future capital requirements will depend on many factors including our growth rate, headcount, sales and marketing activities, research and development efforts and the introduction of new features, products, acquisitions and continued user engagement.

 

Our primary use of working capital is related to user acquisition costs, including sales and marketing expense and product development expense. Our sales and marketing expenditures are primarily spent on channels where we can estimate the return on investment without making long-term commitments. Accordingly, we believe we can adjust our advertising and marketing expenditures quickly based on the expected return on investment, which should provide flexibility and should enable us to manage our advertising and marketing expense. In addition, we allocate significant resources to product development in order to maintain and create new features and products which will enable a better user experience and increase interactions. We may also seek to grow our business by expending our capital resources to fund strategic investments and partnership opportunities. 

 

Operating Activities

 

Net cash used in operating activities was $543,031 for the three months ended March 31, 2018, as compared to net cash provided by operating activities of $943,100 for the three months ended March 31, 2017. The decrease in net cash used in operating activities of $1,486,131 was mainly a result of a decrease in subscription revenue received during the period and the payment of remaining legal fees related to the cancellation of our merger agreement with LiveXLive Media, Inc.

 

Significant items impacting cash flow in the three months ended March 31, 2017 included collections of subscription revenue received during the period, offset by cash outlays relating to advertising and marketing.

 

Investing Activities

 

Net cash used in investing activities for the three months ended March 31, 2018 and 2017 was $79,950 and $64,588, respectively. The increase in cash used in investing activities for the three months ended March 31, 2018 was primarily the result of increased purchases of computers and office furniture. Purchases of property and equipment may vary from period to period due to the timing of the expansion of our operations and software development. 

 

Financing Activities

 

Net cash used in financing activities for the three months ended March 31, 2018 and 2017 was $0 and $17,144, respectively. The cash used in financing activities for the three months ended March 31, 2017 was related to the repayment of capital leases.

 

Off-Balance Sheet Arrangements

 

As of March 31, 2018, we did not have any off-balance sheet arrangements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

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 Exchange Act) as of the end of the period covered by this report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. 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.

  

Based on the evaluation as of March 31, 2018, we determined that we maintain effective internal control over financial reporting.

 

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 quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

 

  20  

 

 

PART II: OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

On December 16, 2016, a wholly owned subsidiary of the Company, Paltalk Holdings, Inc., filed a patent infringement lawsuit in Delaware against Riot Games, Inc. and Valve Corporation for infringement of U.S. Patent Nos. 5,822,523 and 6,226,686 with respect to their online games League of Legends and Defense of the Ancients 2. These two patents were previously asserted against, and then licensed to, Microsoft, Sony, and Activision. In 2018, Valve Corporation made a motion to move the litigation from Delaware to the Western District of Washington which was granted by the court.

 

Riot Games, Inc. has filed a total of four inter partes reviews at the patent office, two per patent held by Paltalk Holdings, Inc., seeking to have the Paltalk Holdings, Inc. patents declared invalid. The patent office has not ruled on these motions.

 

To our knowledge, other than as described above, there are no material pending legal proceedings to which we are a party or of which any of our property is the subject.

 

ITEM 1A. RISK FACTORS

 

There were no material changes to the Risk Factors disclosed in “Item 1A. Risk Factors” in the Form 10-K. For more information concerning our risk factors, please see “Item 1A. Risk Factors” in the Form 10-K.

  

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Unregistered Sale of Equity Securities 

 

There were no sales of unregistered securities during the quarter ended March 31, 2018 that were not previously reported on a Current Report on Form 8-K.

 

Dividend Policy

 

We do not anticipate paying any dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. Any future determination to declare dividends will be subject to the discretion of our Board of Directors and will depend on various factors, including applicable Delaware law, future earnings, capital requirements, results of operations and any other relevant factors. In general, as a Delaware corporation, we may pay dividends out of surplus capital or, if there is no surplus capital, out of net profits for the fiscal year in which a dividend is declared and/or the preceding fiscal year.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

  21  

 

 

ITEM 6. EXHIBITS

 

(a) Exhibits required by Item 601 of Regulation S-K.

 

Exhibit

Number

  Description
2.1#   Agreement and Plan of Merger, dated September 13, 2016, by and among PeerStream, Inc., SAVM Acquisition Corporation, A.V.M. Software, Inc. and Jason Katz (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of the Company filed on September 14, 2016 by the Company with the SEC).
3.1   Certificate of Incorporation, dated July 19, 2005 (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 (File No. 333-172202) of the Company filed on February 11, 2011 by the Company with the SEC).
3.2   Certificate of Amendment of Certificate of Incorporation, dated November 20, 2007 (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (File No. 333-172202) of the Company filed on February 11, 2011 by the Company with the SEC).
3.3   Certificate of Amendment to Certificate of Incorporation, dated March 8, 2016 (incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K filed on March 14, 2016 by the Company with the SEC).
3.4   Certificate of Amendment to Certificate of Incorporation, dated May 19, 2016 (incorporated by reference to Exhibit 3.4 to the Quarterly Report on Form 10-Q of the Company filed on August 11, 2016 by the Company with the SEC).
3.5   Certificate of Amendment to Certificate of Incorporation, dated January 5, 2017 (incorporated by reference to Exhibit 3.5 to the Annual Report on Form 10-K filed on March 28, 2017 by the Company with the SEC).
3.6   Certificate of Amendment to Certificate of Incorporation, dated May 25, 2017 (incorporated by reference to Exhibit 3.6 to the Quarterly Report on Form 10-Q of the Company filed on August 8, 2017 by the company with the SEC).
3.7   Certificate of Amendment to Certificate of Incorporation, effective March 12, 2018 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Company filed on March 13, 2018 by the Company with the SEC).
3.8   Amended and Restated By-Laws of PeerStream, Inc., as amended April 19, 2012 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 000-52176) of the Company filed April 25, 2012 by the Company with the SEC).
3.9   Amendment No. 1 to the Amended and Restated By-Laws of PeerStream, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Company filed September 11, 2017 by the Company with the SEC).
3.10   Amendment No. 2 to the Amended and Restated By-Laws of PeerStream, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of the Company filed on March 13, 2018 by the Company with the SEC).
10.1*   Employment Agreement, dated May 5, 2017, by and between PeerStream, Inc. and Arash Vakil.
10.2   Technology Services Agreement, dated as of March 21, 2018, by and between PeerStream, Inc. and ProximaX Limited. (incorporated by reference to Exhibit 10.41 to the Annual Report on Form 10-K of the Company filed on March 22, 2018 by the Company with the SEC).
31.1*   Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*   Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**   Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*   The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, formatted in XBRL (eXtensible Business Reporting Language), (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements.

 

# Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. PeerStream, Inc. hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.

 

* Filed herewith.

 

** The certification attached as Exhibit 32.1 is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of PeerStream, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of the Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

 

  22  

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    PeerStream, Inc.
     
Date: May 9, 2018 By: /s/ Alexander Harrington
    Alexander Harrington
    Chief Executive Officer
    (Principal Executive Officer)
     
Date: May 9, 2018 By: /s/ Judy Krandel
    Judy Krandel
    Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

 

23

 

Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This Executive Employment Agreement (“Agreement”) is entered into on Monday. May 1, 2017 (the “Effective Date”), by and between Snap Interactive, Inc., a Delaware corporation (the “Company”), and Arash Vakil (“Executive”). In consideration of the mutual promises and covenants contained in this Agreement, the parties agree as follows:

 

1.    Agreement to Employ. The Company desires to secure the services of Executive as its Chief Product Officer (“CPO”). The Company and Executive desire to enter into this Agreement to, among other things, set forth the terms of Executive’s employment with the Company. The Company and Executive acknowledge that this Agreement supersedes any other offer, agreement or promises made by anyone, specifically concerning the offer of employment by the Company, and this Agreement comprises the complete agreement between Executive and the Company concerning Executive’s employment by the Company. ·

 

2.   Term of Agreement. This Agreement shall be binding upon and enforceable against the Company and Executive immediately when both parties execute the Agreement. The Agreement’s stated term and the employment relationship created hereunder will begin on the Effective Date and will remain in effect for one (1) year, unless earlier terminated in accordance with Section 9 (the “Initial Employment Term” ). This Agreement shall be automatically renewed for successive one (1) year terms after the Initial Employment Term (each a “Renewal Term” ), unless terminated by either party upon written notice (“Non-Renewal Notice”) given at least ninety (90) days before the end of the Initial Employment Term or any Renewal Term, as applicable, or unless earlier terminated in accordance with Section 9. The period during which Executive is employed under this Agreement (including any Renewal Term(s)) will be referred to as the “Employment Period.”

 

3.  Surviving Agreement Provisions. Notwithstanding any provision of this Agreement to the contrary, the parties’ respective rights and obligations under Sections 6 through 12 shall survive any termination or expiration of this Agreement or the termination of Executive’s employment for any reason whatsoever.

 

4. Services to be Provided by Executive.

 

(a)   Position and Responsibilities. Executive’s services hereunder will commence as of the Effective Date. Subject to the Agreement’s terms, Executive agrees to serve the Company as its CPO. Executive shall have the duties and privileges customarily associated with executives occupying the role of CPO, and Executive shall perform all reasonable acts customarily associated with such roles, or necessary and/or desirable to protect and advance the best interests of the Company. Executive will report to the Chief Executive Officer (“CEO”). Executive agrees to devote substantially all of his business time to the business of the Company (except as provided below).

 

(b)   Executive’s Employment Representations. Executive agrees that he (i) shall not serve as a member of any board of directors, or as a trustee of, or in any manner be affiliated with, any present or future agency or organization (except for civic, religious, and not for profit organizations) without the consent of the Board of Directors (“Board’’) (which consent will not be unreasonably withheld); (ii) will serve as an Executive of the Company; and (iii) shall not, directly or indirectly, have any interest in, or perform any services for, any business competing with or similar in nature to the Company’s Business as set forth in Section 7. Executive further represents to the Company that (i) he is not violating and will not violate any contractual, legal, or fiduciary obligations or burdens to which Executive is subject by entering into this Agreement or providing services under the Agreement’s terms; (ii) Executive is under no contractual, legal, or fiduciary obligation or burden that he will allow to interfere with Executive’s ability to perform services under the Agreement’s terms; and (iii) he has no bankruptcies, convictions , disputes with regulatory agencies, or other disclosable or disqualifying events that would impact the Company or its ability to conduct securities offerings.

 

5.   Compensation for Services . As compensation for the services Executive will perform under this Agreement during the Employment Period, the Company will pay Executive, and Executive shall accept as full compensation, the following:

 

(a) Base Salary. Executive shall receive an annualized base salary (“Base Salary”) of Two Hundred Thirty-Five Thousand Dollars (US $235,000), effective retroactively from February 1, 2017 and prorated for any partial years of employment. Additionally, the Company will review Executive’s Base Salary at least annually during the Employment Period, and, in the sole discretion of the Board, may increase (but not decrease) such Base Salary from time to time, but shall not be obligated to effectuate such an increase. Executive’ s compensation shall be subject to all appropriate federal and state withholding taxes and shall be payable in accordance with the Company’s normal payroll procedures.

 

 

 

 

(b) Bonus Compensation.

 

(i) For the 2017 calendar year, Executive shall be eligible to receive an annual incentive bonus (the “Annual Incentive Bonus”) of up to Sixty Thousand Dollars (US $60,000) as follows:

 

(A)   Fifteen Thousand Dollars (US $15,000) of such Annual Incentive Bonus shall be paid to Executive during the annual review period (generally January or February) in 2018 and in each subsequent year at the same amount or higher, provided Executive is employed by the Company on th_e date the Annual Incentive Bonus is paid; and

 

(B) The Board shall determine, in its sole discretion, what, if any, portion of the remaining Forty-Five Thousand (US $45,000) of the Annual Incentive Bonus should be paid to Executive, and the Company shall pay such additional amount (if any) at the same time as the guaranteed portion described above in (A), provided that Executive is employed by the Company on the date the Annual Incentive Bonus is paid. As soon as practicable after the Effective Date, the CEO will endeavor in good faith to formulate benchmarks and/or targets on the basis of which the portion of the Annual Incentive Bonus subject to this subsection (B) will be determined, and the CEO will promptly communicate those benchmarks and/or targets, in writing, to Executive.

 

(ii) Annual incentive bonuses awarded to Executive for subsequent calendar years shall be determined by the Board, based on criteria to be established jointly by the CEO and Executive. Each such annual incentive bonus shall be payable during the annual review period (generally January or February) in the calendar year following the calendar year to which the annual incentive bonus relates, provided Executive is employed by the Company on such payment date.

 

(c)   Vacation. During the Employment Period, Executive shall be entitled to four (4) weeks paid vacation annually. Vacation shall be taken at such times and intervals as shall be determined by Executive, subject to the reasonable business needs of the Company. Upon the termination of Executive’s employment, for any reason, Executive will forfeit any accrued but unused vacation.

 

(d)   Other Benefits and Perquisites. Executive shall be entitled to participate in the-benefit plans provided by the Company for all employees generally, and for the Company’s executive employees. The Company shall be entitled to change or terminate these plans in its sole discretion at any time. Any reimbursement of expenses made under this Agreement shall only be made for eligible expenses incurred during the Employment Period, and no reimbursement of any expense shall be made by the Company after December 31st of the year following the calendar year in which the expense was incurred. The amount eligible for reimbursement under this Agreement during a taxable year may not affect expenses eligible for reimbursement in any other taxable year, and the right to reimbursement under this Agreement is not subject to liquidation or exchange for another benefit. Executive will comply with the Company’s policies regarding these benefits, including all Internal Revenue Service rules and requirements.

 

(e)   Withholdings and Deductions. The compensation described in this Section 5 is subject to all legally required and authorized withholdings and deductions.

 

(f)    2017 Equity Award. As soon as administratively practicable after the effective date of this Agreement and subject to Board approval, Executive will receive, by separate agreement, a stock option granted under the Snap Interactive, Inc. 2016 Long-Term Incentive Plan (the “LTIP”) with respect to Fourteen Thousand Two Hundred and Eighty-Six (14,286) shares of the Company’s common stock (as may be adjusted pursuant to the terms of the LTIP), with an exercise price equal to the fair market value (as determined in accordance with the LTIP) of the Company’s common stock on the date of grant, vesting in four (4) separate tranches of twenty-five percent (25%) each, with the first tranche vesting on the one (1) year anniversary of the date of grant and the remaining three (3) tranches vesting on one (1) year intervals thereafter (subject to early termination or forfeiture in accordance with the terms of the award agreement) (the “2017 Stock Option”).

 

  2  

 

 

6. Confidential Information.

 

(a)    Confidential Information. The Company shall provide Executive with confidential information and trade secrets of the Company (hereinafter referred to as “Confidential Information” ) and shall place Executive in a position to develop and have ongoing access to Confidential Information of the Company, shall entrust Executive with business opportunities of the Company, and shall place Executive in a position to develop business goodwill on behalf of the Company. For purposes of this Agreement, Confidential Information includes, but is not limited to:

 

(i) Technologies developed by the Company and any resarch data or other documentation related to the development of such technologies, including all designs, ideas, concepts, improvements, product developments, discoveries and inventions, whether patentable or not, that are conceived, developed or acquired by Executive, individually or in conjunction with others during the period of Executive’s employment by the Company;

 

(ii) All documents, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, logs, drawings, models and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression that are conceived, developed or acquired by Executive individually or in conjunction with others during the Employment Period (whether during business hours or otherwise and whether on any Company premises or otherwise) that relate to the Company’s business, trade secrets, products or services;

 

(iii) Customer lists and prospect lists developed by the Company;

 

(iv) Information regarding the Company’s customers which Executive acquired as a result of his employment with the Company, including but not limited to, customer contracts, work performed for customers, customer contacts, customer requirements and needs, data used by the Company to formulate customer bids, customer financial information, and other information regarding the customer’s business;

 

(v) Information related to the Company’s business, including but not limited to marketing strategies and plans, sales procedures, operating policies and procedures, pricing and pricing strategies, business plans, sales, profits, and other business and financial information of the Company;

 

(vi) Training materials developed by and utilized by the Company; and

 

(vii) Any other information that Executive acquired as a result of his employment with the Company and which Executive has a reasonable basis to believe the Company would not want disclosed to a business competitor or to the general public.

 

Executive understands and acknowledges that such Confidential Information gives the Company a competitive advantage over others who do not have the information, and that the Company would be harmed if the Confidential Information were disclosed.

 

The Company hereby notifies Executive in accordance with the Defend Trade Secrets Act of 2016 that Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding . The Company further notifies Executive that if Executive files a lawsuit for retaliation against the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive: (a) files any document containing the trade secret under seal; and (b) does not disclose the trade secret, except pursuant to court order.

 

(b)     Disclosure Of Confidential Information. Executive agrees that he shall hold all Confidential Information of the Company in trust for the Company and shall not during or after his employment terminates for any reason: (a) use the information for any purpose other than the benefit of the Company; or (b) disclose to any person or entity any Confidential Information of the Company except as necessary during Executive’s employment with the Company to perform services on behalf of the Company. Executive shall also take reasonable steps to safeguard such Confidential Information and to prevent its disclosure to unauthorized persons.

 

  3  

 

 

(c) Return Of Information. Upon termination of employment, or at any earlier time as directed by the Company, Executive shall immediately deliver to the Company any and all Confidential Information in Executive’s possession, any other documents or information that Executive acquired as a result of his employment with the Company and any copies of any such documents /information. Executive shall not retain any originals or copies of any documents or materials related to the Company’s business, which Executive came into possession of or created as a result of his employment with the Company. Executive acknowledges that such information, documents and materials are the exclusive property of the Company. In addition, upon termination of employment, or at any time earlier as directed by the Company, Executive shall immediately deliver to the Company any property of the Company in Executive’s possession.

 

7.   Restrictive Covenants. In consideration for (i) the Company’s promise to provide Confidential Information to Executive, (ii) the substantial economic investment made by the Company in the Confidential Information and goodwill of the Company, and the business opportunities disclosed or entrusted to Executive, (iii) the compensation and other benefits provided by the Company to Executive, and (iv) the Company’s employment of Executive pursuant to this Agreement, and to protect the Company’s Confidential Information, Executive agrees to enter into the following restrictive covenants.

 

(a)      Non-Competition. Executive agrees that, during the Employment Period and during the Non Competition Period (defined below), other than in connection with his duties under this Agreement , he shall not , without the prior written consent of the Company, directly or indirectly, either individually or as a principal, partner, stockholder, manager, agent, consultant, contractor, employee, lender, investor, or as a director or officer of any corporation or association, or in any other manner or capacity whatsoever, become employed by, control, carry on, join, lend money for, operate, engage in, establish, perform services for, invest in, solicit investors for, consult for, do business with or otherwise engage in the Company’s Business (defined below) within the Restricted Area (defined below) . Notwithstanding the foregoing, Executive shall be permitted during the Employment Period to own, directly or indirectly, solely as an investment, securities of any organization or entity, which are traded on any national securities exchange or NASDAQ if Executive is not the controlling shareholder, or a member of a group that controls such organization or entity, and directly or indirectly, does not own three percent (3%) or more of any class of securities of such organization or entity.

 

For purposes of this Agreement:

 

“Non-Competition Period” means a period of twelve (12) months immediately following the date of Executive’s termination from employment for any reason.

 

“Non-Solicitation Period” means a period of twenty-four (24) months immediately following the date of Executive’s termination from employment for any reason.

 

“Business” means the business of establishing and/or providing online dating services, the business of establishing and/or providing business to consumer (B2C) group video chat and live video streaming applications and any other commercially available businesses in which the Company is actually engaged as of the date Executive’s employment terminates and as to which Executive participated or had knowledge of Confidential Information.

 

“Restricted Area” means, because the Company’s business is nationwide, Executive’s responsibilities are nationwide in scope, and Executive has access to the Company’s Confidential Information on a nationwide basis, all States comprising the United States, and any other geographic area in which the Company conducts business and for which Executive has responsibilities during Executive’s employment.

 

(b)   Non-Solicitation. Executive agrees that, during the Employment Period and during the Non-Solicitation Period, other than in connection with his duties under this Agreement, Executive shall not, directly or indirectly, either as a principal, manager , agent, employee, consultant, officer, director, stockholder, partner, investor or lender or in any other capacity, and whether personally or through other persons:

 

(i) Solicit business from, interfere with, attempt to solicit business with, or do business with any customer and/or business partner of the Company with whom the Company did business or who the Company solicited within the preceding two (2) years, and who or which: (1) Executive contacted, called on, serviced or did business with during Executive’s employment at the Company; (2) Executive learned of solely as a result of Executive’s employment with the Company; or (3) about whom Executive received Confidential Information. The parties acknowledge and agree that, for purposes of this Agreement, the term “customer” does not include actual or potential consumers or users of the Company’s services, including its online dating services. This restriction in this Section 7(b)(i) applies only to the Business (as defined above) of the Company or any affiliate thereof; or

 

  4  

 

 

(ii) Solicit, induce or attempt to solicit or induce, engage or hire, on behalf of himself or any other person or entity, any person who is an employee or consultant of the Company or who was employed by the Company within the preceding twelve (12) months.

 

(c)     Non-Disparagement. Executive agrees that the Company’s goodwill and reputation are assets of great value to the Company and its affiliates which were obtained through great costs, time and effort. Therefore, Executive agrees that during his employment and after the termination of his employment, Executive shall not in any way; directly or indirectly, publicly disparage, libel or defame the Company, its beneficial owners or its affiliates, their respective business or business practices, products or services, or employees.

 

(d)   Tolling. If Executive violates any of the restrictions contained in this Section 7 (other than subsection (c) of this Section 7), the Non-Competition Period and/or Non-Solicitation Period, as applicable, shall be suspended and will not run in favor of Executive from the time of the commencement of any violation until the time when Executive cures the violation to the reasonable satisfaction of the Company.

 

(e)   Remedies. Executive acknowledges that the restrictions contained in Sections 6 and 7 of this Agreement, in view of the nature of the Company’s business and his position with the Company, are reasonable and necessary to protect the Company’s legitimate business interests and that any violation of Sections 6 and 7 of this Agreement would result in irreparable injury to the Company. In the event of a breach by Executive of Sections 6 or 7 of this Agreement, then the Company shall be entitled to (i) a temporary restraining order and injunctive relief restraining Executive from the commission of any breach , and/or (ii) recover attorneys’ fees, expenses and costs the Company incurs in such action. Further, if the Company prevails in any action brought by Executive (or anyone acting on his behalf) seeking to declare any term in this Section 7 void or unenforceable or subject to reduction or modification, then the Company shall be entitled to recover attorneys’ fees, expenses and costs the Company incurs in such action.

 

(f) Reformation. The courts shall be entitled to modify the duration and scope of any restriction contained herein to the extent such restriction would otherwise be unenforceable, and such restriction as modified shall be enforceable. Executive acknowledges that the restrictions imposed by this Agreement are legitimate, reasonable and necessary to protect the Company’s investment in its businesses and the goodwill thereof. Executive acknowledges that the scope and duration of the restrictions contained herein are necessary and reasonable in light of the time that Executive has been engaged in the business of the Company, Executive’s reputation in the markets for the Company’s business and Executive’s relationship with the suppliers, customers and clients of the Company.

 

8.  Trading Restrictions. Executive will be subject to trading and sales volume limitations in accordance with (a) applicable law, including Rule 144 under the Securities Act of 1933 as amended; and (b) such written insider trading policies as the Board may adopt and promulgate for Company employees generally.

 

9.   Termination of Agreement. The employment relationship between Executive and the Company created under this Agreement shall terminate before the expiration of the stated term of this Agreement upon the occurrence of any one of the following events:

 

(a)    Death or Permanent Disability. This Agreement, and Executive’s employment, shall be terminated effective on the death or permanent disability of Executive. For this purpose, ” permanent disability” shall mean that Executive is, by reason of any medically determinable physical or mental impairment that is expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company or is determined to be totally disabled by the U.S. Social Security Administration.

 

(b)    Termination for Cause. The Company shall have the option to terminate Executive’s employment during the Employment Period, effective upon written notice of such termination to Executive, for Cause as the Company determines. Under the Agreement, termination for “Cause” means the Company’s termination of Executive’s employment upon the occurrence of any of the following events:

 

(i) Any act of fraud, misappropriation or embezzlement by Executive regarding any aspect of the Company’s business;

 

  5  

 

 

(ii) The material breach by Executive of any Agreement provision and the failure of Executive to cure the same in all material respects within thirty (30) days after written notice thereof from the CEO or Board;

 

(iii) The conviction of Executive by a court of competent Jurisdiction of a felony or a crime involving moral turpitude;

 

(iv) The intentional and material breach by Executive of any non-disclosure or non- competition/non-solicitation provision of any agreement to which Executive and the Company or any of its subsidiaries are parties;

 

(v) The substantial failure by Executive to perform in all material respects his duties and responsibilities (other than as a result of death or disability) and the failure of Executive to cure the same in all material respects within thirty (30) days after written notice thereof from the CEO or Board;

 

(vi) The failure or refusal of Executive to follow the lawful directives of the Company, which, if curable, Executive failed or refused to cure within thirty (30) days after written demand is delivered;

 

(vii) Willful conduct by Executive that is materially injurious to the Company;

 

(viii) Acceptance of employment with any employer other than the Company except upon written permission of the Board; or

 

(ix) The breach by Executive of his fiduciary duties to the Company.

 

In the event Executive’s employment is terminated for Cause under this Agreement, Executive shall be entitled to the compensation provided in Section 10(a) below.

 

(c)   Termination by the Company without Cause. The Company may terminate this Agreement without Cause at any time upon thirty (30) days’ written notice to Executive, during which period Executive shall not be required to perform any services for the Company other than to assist the Company in training his successor and generally preparing for an orderly transition; PROVIDED, HOWEVER, that, Executive shall be entitled to compensation upon such termination as provided in Sections l0 (a) and (b) below.

 

(d)   Termination by Executive for Good Reason. Executive may terminate his employment at any time for Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following without Executive’s prior written consent: (i) Executive’s being required to report to a regular place of employment outside New York, New York; (ii) the Company’s material breach of any of the terms and conditions of this Agreement; or (iii) a detrimental and material change in Executive’s title, compensation, duties, or responsibilities; provided, however, that within ninety (90) days following Executive’s learning of such Good Reason, (1) the Company shall be given written notice of Executive’s intent to terminate his employment under this paragraph, and (2) the Company shall have thirty (30) days from receipt of such written notice to cure any such breach or change to the reasonable satisfaction of Executive. Upon such termination for Good Reason, Executive shall be entitled to compensation as provided in Sections l0 (a) and (b) below.

 

(e)    Termination by Executive Other Than for Good Reason. Executive may terminate this Agreement other than for Good Reason at any time upon forty-five (45) days’ written notice to the Company. Upon termination of this Agreement, the Company shall have no obligation to Executive other than as set forth in Section 10 (a).

 

(f) Separation from Service. For purposes of this Agreement, including, without limitation, Sections 10 and 11, any references to a termination of Executive’s employment shall mean a “separation from service” as defined by Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations and other guidance issued thereunder.

 

  6  

 

 

10. Compensation Upon Termination. Upon the termination of Executive’s employment under this Agreement before the expiration of the stated term in this Agreement, Executive shall be entitled to the following:

 

(a)    Compensation Upon Termination for Any Reason. Upon termination of Executive’s employment during the Employment Period before the expiration of the stated term hereof for any reason, Executive shall be entitled to the following within thirty (30) days of such termination:

 

(i) Salary . The Base Salary earned by him before the effective date of termination as provided in Section 5(a) (including salary payable during any applicable notice period), prorated on the basis of the number of full days of service rendered by Executive during the salary payment period to the effective date of termination; and

 

(ii) Unreimbursed Business Expenses; Company Benefit Plans . Any unreimbursed reasonable business expenses and any amounts to which Executive is entitled to under the Company’s benefit plans in accordance with their terms.

 

(b)   Additional Compensation and Benefits Upon Non-Renewal by the Company or Upon Termination by the Company Without Cause or by Executive for Good Reason. If, at any time, (i) the Company elects not to renew this Agreement for any Renewal Term and Executive’s employment terminates as a result of such non renewal, (ii) the Company terminates Executive’ s employment without Cause (as defined in Section 9(b) above), or (iii) Executive terminates his employment for Good Reason (as defined in Section 9(d) above), then the Company shall, subject to Executive’s execution of a general release of claims in favor of the Company and subject to Executive’s compliance with Section 6 and Section 7, provide to Executive, in addition to the amounts set forth in Section l0(a) above, an amount equal to three (3) months of Executive’s then-current annualized Base Salary, payable in three (3) equal monthly installments commencing on the Company’s first regular payroll date after the release of claims provided by Executive has become effective and binding upon Executive, provided, that, if the maximum forty-five (45) day consideration period and revocation period described in Section 10(d) spans two tax years, then the payments shall commence in the second tax year. Additionally, if Executive is eligible and timely elects to continue his health insurance coverage pursuant to the COBRA statute, and subject to Executive’s execution of the release of claims referred to above, the Company will continue to pay its portion of Executive’s monthly health insurance premiums for the earlier of (A) the three (3) months following the effective date of termination of Executive’s employment or, (B) the date Executive’s coverage under such group health plans terminates for any reason; provided that the Company’s payment of such premiums shall be limited to the same proportion of the cost of coverage under the Company’s group health plans as the Company pays on behalf of its employees generally (the “COBRA Entitlement”).

 

Executive shall have no obligation to mitigate any severance obligation of the Company under this Agreement by seeking new employment. The Company shall not be entitled to set off or reduce any severance payments owed to Executive under this Agreement by the amount of earnings or benefits received by Executive in future employment.

 

Notwithstanding the foregoing, with respect to any stock options, restricted stock, or other plans or programs in which Executive is participating at the time of termination of his employment, Executive’s rights and benefits under each of these plans shall be determined in accordance with the terms, conditions, and limitations of the plans and any separate agreement executed by Executive which may then be in effect.

 

(c)    Penalty for Breach of Covenants. For any period of time that Executive is in breach of Section 6 or Section 7, the Company shall not be obligated to pay any severance payments referenced in this Agreement, the Company’s severance obligations shall terminate and expire, and the Company shall have no further obligations to Executive from and after the date of such breach. Additionally, the Company may recover any severance pay previously paid to Executive for the period of time that Executive was in breach of Section 6 or Section 7. The Company shall have all other rights and remedies available under this Agreement or any other agreement at law or in equity.

 

(d)    Release. Payment of any of the amounts described in this Section 10 is conditioned upon Executive’s execution of a Waiver and Release of Claims in the form attached hereto as Exhibit A relating to the period of Executive’s employment with the Company, within the forty-five (45) day period following the end of Executive’s employment and not revoking such Waiver and Release of Claims during any applicable revocation period.

 

  7  

 

 

11. Compensation Upon Change in Control.

 

(a)   Change in Control. For purposes of this Agreement, a “Change in Control” of the Company occurs upon a change in the Company’s ownership or the ownership of a substantial portion of its assets, as follows:

 

(i) Change in Ownership . A change in ownership of the Company occurs on the date that any Person, other than (1) the Company or any of its subsidiaries, (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (3) an underwriter temporarily holding stock pursuant to an offering of such stock, or (4) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of the Company’s stock, acquires ownership of the Company’s stock that, together with stock held by such Person, constitutes more than 50% of the total fair market value or total voting power of the Company’s stock. However, if any Person is considered to own already more than 50% of the total fair market value or total voting power of the Company’s stock, the acquisition of additional stock by the same Person is not considered to be a Change· of Control;

 

(ii) Change in Ownership of Substantial Portion of Assets . A change in the ownership of a substantial portion of the Company’s assets occurs on the date that a Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such Person) all or a substantial portion of the assets of the Company, by reason of any sale, lease, exchange or other transfer of the assets of the Company. For purposes hereof, a “substantial portion of the assets of the Company” shall mean any portion of the Company’s overall assets representing more than fifty percent (50%) of the fair market value of the Company’s overall assets. However, there is no Change in Control when there is such a transfer to an entity that is controlled by the shareholders of the Company immediately after the transfer, through a transfer to (1) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’ s stock; (2) an entity, at least 50% of the total value or voting power of the stock of which is owned, directly or indirectly, by the Company; (3) a Person that owns directly or indirectly, at least 50% of the total value or voting power of the Company’s outstanding stock; or (4) an entity, at least 50% of the total value or voting power of the stock of which is owned by a Person that owns, directly or indirectly, at least 50% of the total value or voting power of the Company’s outstanding stock.

 

For purposes of paragraphs (i) and (ii):

 

“Person” shall have the meaning given in Section 770l (a)(l) of the Code. Person shall include more than one Person acting as a group as defined by the Treasury Regulations issued under Section 409A of the Code.

 

“Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Securities Exchange Act of 1934, as amended.

 

The provisions of this Section 11(a) shall be interpreted in accordance with the requirements of the Treasury Regulations under Section 409A of the Code, it being the intent of the parties that this Section 11(a) shall be in compliance with the requirements of said Code Section and said Treasury Regulations. Notwithstanding, anything in this Agreement to the contrary, the transaction contemplated in the Agreement and Plan of Merger between SNAP Interactive, Inc., SAVM Acquisition Corporation, and A.V.M. Software, Inc. and Jason Katz, as the Company Representative, dated as of September 13, 2016 (the “Merger” ) shall not be deemed a Change in Control for purposes of this Agreement.

 

(b) Benefits Upon Termination Following Change in Control.

 

(i) Severance Benefits . If, during the sixty (60) day period immediately prior to a Change in Control or during the one year period beginning on the date of a Change in Control (the “Change Period’’), (A) Executive’s employment is terminated by the Company (or by the acquiring or successor business entity following a Change in Control) other than for Cause (as defined in. Section 9(b) above), or (B) Executive terminates his employment with the Company (or with the acquiring or successor business entity following a Change in Control) for Good Reason (as defined in Section 9(d) above), then Executive shall receive, in lieu of the severance benefits described in Section 10(b) above and subject to Executive’s execution of a general release of claims as provided in Section 11(d) below, a severance benefit in an amount equal to three (3) months of Executive’s annualized Base Salary (specified in Section 5(a)) as in effect on the date of the Change in Control plus three (3) month of the COBRA Entitlement.

 

  8  

 

 

(ii) No Payments Upon Breach . The Company shall have no obligation to provide Executive with any severance compensation under this Section 11 if Executive is in breach or violation of any of the covenants contained in Sections 6 or 7, which are applicable to Executive at the time of the severance payment.

 

(iii) No Duplication of Payment . The payment of severance benefits under this Section 11 shall be in lieu of, and not in addition to, any payments under Section 10(b).

 

(iv) Time and Form of Payment . Except as otherwise provided by Section 12, the Company shall pay the severance amount referenced in Section 11(b)(i) in a lump sum on the date that is sixty (60) days after the date of Executive’s termination.

 

(v) Notwithstanding the foregoing, with respect to any stock options, restricted stock, or other plans or programs in which Executive is participating at the time of termination of his employment, Executive’s rights and benefits under each such plan shall be determined in accordance with the terms, conditions, and limitations of the plan and any separate agreement executed by Executive which may then be in effect

 

(c)   No Mitigation or Offset. Executive shall not be required to mitigate the amount of any payment provided for in this Section 11 by seeking other employment or otherwise. The Company shall not be entitled to set off or reduce any severance payments owed to Executive under this Section 11 by the amount of earnings or benefits received by Executive in future employment.

 

(d)    Release. Payment of any of the amounts described in this Section 11 is conditioned upon Executive’s execution of a Waiver and Release of Claims in the form attached hereto as Exhibit A relating to the period of Executive’s employment with the Company, within the forty-five (45) day period following the end of Executive’s employment and not revoking such Waiver and Release of Claims during any applicable revocation period.

 

12. Other Provisions.

 

(a)    Remedies; Legal Fees. Each of the parties to this Agreement shall be entitled to enforce his or its rights under this Agreement, specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in his or its favor. In any action resulting from a breach of this Agreement, the prevailing party shall be entitled to recover his or its attorneys’ fees.

 

(b)    Limitations on Assignment. In entering into this Agreement, the Company is relying on the unique personal services of Executive; services from another person will not be an acceptable substitute. Except as provided in this Agreement, Executive may not assign this Agreement or any of the rights or obligations set forth in this Agreement without the explicit written consent of the Company. Any attempted assignment by Executive in violation of this Section 12(b) shall be void. Except as provided in this Agreement, nothing in this Agreement entitles any person other than the parties to the Agreement to any claim, cause of action, remedy, or right of any kind, including, without limitation, the right of continued employment.

 

(c)   Severability and Reformation. The parties intend all provisions of this Agreement to be enforced to the fullest extent permitted by law. If, however, any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future law, such provision shall be fully severable, and this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision were never a part hereof, and the remaining provisions shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance. In lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible, and the Company and Executive hereby request the court to whom disputes relating to this Agreement are submitted to reform the otherwise unenforceable covenant in accordance with this Section 12(c).

 

(d) Notices. Any notice or other communication required, permitted or desired to be given under this Agreement shall be deemed delivered when personally delivered; the business day, if delivered by overnight courier; the same day, if transmitted by facsimile on a business day before noon, Eastern Standard Time; the next business day, if otherwise transmitted by facsimile; and the third business day after mailing, if mailed by prepaid certified mail, return receipt requested, as addressed or transmitted as follows (or to such subsequent addresses as the parties may give one another notice of):

 

If to Executive, at the address last on record for him with the Company.

 

If to the Company:

 

Snap Interactive, Inc.

320 W. 37 th Street, 13 th Floor

New York, NY 10018

 

  9  

 

 

(e)    Further Acts. Whether or not specifically required under the terms of this Agreement, each party shall execute and deliver such documents and take such further actions as shall be necessary in order for such party to perform all of his or its obligations specified in the Agreement or reasonably implied from the Agreement’s terms.

 

(f)   Publicity and Advertising. Executive agrees that the Company may use his name, picture, or likeness for any advertising, publicity or other business purpose at any time, during the term of this Agreement and may continue to use materials generated during the term of this Agreement for a period of six (6) months thereafter. The use of Executive’s name, picture, or likeness shall not be deemed to result in any invasion of Executive’s privacy or in violation of any property right Executive may have; and Executive shall receive no additional consideration if his name, picture or likeness is so used. Executive further agrees that any negatives, prints or other material for printing or reproduction purposes prepared in connection with the use of his name, picture or likeness by the Company shall be and are the sole property of the Company.

 

(g)    GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS (RULES) OR CHOICE OF LAWS (RULES) THEREOF.

 

(h) Venue. The exclusive venue for all suits or proceedings arising from or related to this Agreement shall be in a court of competent jurisdiction in New York, New York.

 

(i) Waiver. A party’s waiver of any breach or violation of any Agreement provisions shall not operate as, or be construed to be, a waiver of any later breach of the same or other Agreement provision.

 

(j) Entire Agreement, Amendment, Binding Effect. This Agreement constitutes the entire agreement between the parties concerning the subject matter in this Agreement. No oral statements or prior written material not specifically incorporated in this Agreement shall be of any force and effect, and no changes in or additions to this Agreement shall be recognized, unless incorporated in this Agreement by written amendment, such amendment to become effective on the date stipulated in it. Executive acknowledges and represents that in executing this Agreement, he did not rely, and has not relied, on any communications, promises, statements, inducements, or representation(s), oral or written, by the Company, except as expressly contained in this Agreement. Any amendment to this Agreement must be signed by all parties to this Agreement. This Agreement will be binding on and inure to the benefit of the parties hereto and their respective successors, heirs, legal representatives, and permitted assigns (if any). This Agreement supersedes any prior agreements between Executive and the Company concerning the subject matter of this Agreement.

 

(k) Counterparts. This Agreement may be executed in counterparts, with the same effect as if both parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument.

 

(l) Directors and Officers Insurance/Indemnification. During the Employment Period, the Company shall maintain Executive as an insured party on directors’ and officers’ insurance maintained by the Company for the benefit of its directors and officers. Either through its directors and officers insurance policy and pursuant to the terms thereof or, if such insurance is not available, otherwise, the Company will indemnify and hold Executive harmless against any liability, damage, cost or expense incurred in connection with the defense of any action, suit or proceeding to which Executive is a party, or threat thereof, by reason of his being or having been an officer or director of the Company or any affiliate of the Company, to the extent permitted by applicable law; provided, however, that this indemnity shall not apply if Executive is determined by a court of competent jurisdiction to have acted against the interests of the Company with gross negligence, gross misconduct, or gross malfeasance. Promptly after receipt by Executive of notice of the commencement of any action (including any governmental action) or threat thereof, Executive shall, if a claim covered by this Section 12(1) is to be made or is threatened against Executive, deliver to the Company a written notice of the commencement or threat thereof and the Company shall have the right to participate in, and, to the extent ,the Company so desires to assume the defense thereof with counsel selected by the Company and approved by Executive (whose approval shall not be unreasonably withheld); provided, however, that Executive (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the Company, if, and only if, representation of Executive by the counsel retained by the Company would be inappropriate due to actual or potential differing interests between Executive and any other party represented by such counsel in such proceeding. Executive’s failure to deliver written notice to the Company within a reasonable time of the commencement’ or threat of any action for which Executive seeks indemnification under this Section 12(1), if prejudicial to the Company’s ability to defend such action, shall relieve the Company of any liability to Executive under this Agreement.

 

  10  

 

 

13. Section 409A of the Code

 

(a)     To the extent (i) any payments to which Executive becomes entitled under this Agreement, or any agreement or plan referenced herein, in connection with Executive’s termination of employment with the Company constitute deferred compensation subject to Section 409A of the Code; (ii) Executive is deemed at the time of his separation from service to be a “specified employee” under Section 409A of the Code; and (iii) at the time of Executive’s separation from service the Company is publicly traded (as defined in Section 409A of Code), then such payments (other than any payments permitted by Section 409A of the Code to be paid within six (6) months of Executive’s separation from service) shall not be made until the earlier of (x) the first day of the seventh month following Executive’s separation from service or (y) the date of Executive’s death following such separation from service. During any period that payment or payments to Executive are deferred pursuant to the foregoing, Executive shall be entitled to interest on the deferred payment or payments at a per annum rate equal to the highest rate of interest applicable to six (6) month money market accounts offered by the following institutions: Citibank N.A., Wells Fargo Bank, NA., or Bank of America, on the date of such “separation from service.” Upon the expiration of the applicable deferral period, any payments which would have otherwise been made during that period (whether in a single sum or in installments) in the absence of this Section 13 (together with accrued interest thereon) shall be paid to Executive or Executive’s beneficiary in one lump sum.

 

(b)   It is intended that this Agreement comply with or be exempt from the provisions of Section 409A of the Code and the Treasury Regulations and guidance of general applicability issued thereunder so as to not subject Executive to the payment of additional interest and taxes under Section 409A of the Code, and in furtherance of this intent, this Agreement shall be interpreted, operated and administered in a manner consistent with these intentions.

 

{Signature Page Follows}

 

  11  

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first indicate above.

 

  THE COMPANY:
   
  Snap Interactive, Inc.
     
  By: /s/ Alexander Harrington
  Name: Alexander Harrington
  Title: CEO

 

  EXECUTIVE:
     
  By:                      
  Arash Vakil

 

 

12

 

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a) /15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Alexander Harrington, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of PeerStream, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

   
Date: May 9, 2018 By:  /s/ Alexander Harrington
    Alexander Harrington

C hief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

 

CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Judy Krandel, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of PeerStream, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

   
Date: May 9, 2018 By:  /s/ Judy Krandel
   

Judy Krandel

Chief Financial Officer

(Principal Financial and Accounting Officer)

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of PeerStream, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

 

The Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-Q.

 

   
Date: May 9, 2018 By:  /s/ Alexander Harrington
    Alexander Harrington

C hief Executive Officer

(Principal Executive Officer)

 

   
Date: May 9, 2018 By:  /s/ Judy Krandel
   

Judy Krandel

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.