MeetMe, Inc. (Form: 10-K, Received: 03/14/2013 17:28:24)

Table of Contents

	Page

Report of Independent Registered Public Accounting Firm	F-1


Consolidated Balance Sheets	F-2

Consolidated Statements of Operations and Comprehensive Loss	F-3

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)	F-4

Consolidated Statements of Cash Flows	F-5

Notes to Consolidated Financial Statements	F-6 - F-29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of:

MeetMe, Inc.

We have audited the accompanying consolidated balance sheets of MeetMe, Inc. and Subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2012. We also have audited MeetMe, Inc. and Subsidiaries internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall consolidated financial statement presentation. Our audits of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of MeetMe, Inc. and Subsidiaries as of December 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, MeetMe, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

/S/ Salberg & Company, P.A.

SALBERG & COMPANY, P.A.

Boca Raton, Florida

March 14, 2013

2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7328

Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920

www.salbergco.com • info@salbergco.com

Member National Association of Certified Valuation Analysts • Registered with the PCAOB

Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality

F-1

MEETME, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	December 31,
	2012			2011
Assets
Current Assets
Cash and cash equivalents	$	5,022,007		$	8,271,787
Accounts receivable, net of allowance of $547,000 and $270,210, at D ecember 31, 2012 and 2011, respectively		15,744,789			10,293,752
Notes receivable - current portion, including $0 and $559 of accrued interest, at December 31, 2012 and 2011, respectively		111,569			169,955
Prepaid expenses and other current assets		870,881			1,082,184
Restricted cash		-			275,000
Current asset from discontinued operations		-			149,796
Total current assets		21,749,246			20,242,474

Goodwill, net		70,646,036			70,646,036
Goodwill and intangible assets from discontinued operations, net		-			2,402,446
Intangible assets, net		6,746,273			8,567,772
Property and equipment, net		4,772,632			4,318,619
Property and equipment from discontinued operations, net		-			90,075
Other assets		520,480			385,683
Other assets from discontinued operations		-			151,591
Total assets	$	104,434,667		$	106,804,696

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	3,528,607		$	1,841,595
Accrued expenses and other liabilities		3,211,681			1,713,870
Current liabilities from discontinued operations		1,434			693,947
Deferred revenue		392,612			70,516
Accrued dividends		69,455			169,455
Unearned grant income		-			9,040
Current portion of long-term debt		2,551,941			2,405,191
Total current liabilities		9,755,730			6,903,614

Long term debt, net of discount		9,156,788			9,255,508
Total liabilities		18,912,518			16,159,122

Commitments and Contingencies (see Note 10)

Stockholders' Equity:
Preferred stock, $.001 par value, authorized 5,000,000 shares:
Convertible preferred stock Series A, $.001 par value; authorized - 1,000,000 shares; no shares issued and outstanding at December 31, 2012 and 2011, Liquidation preference of $2,500,000		-			-
Convertible preferred stock Series A-1, $.001 par value; authorized - 5,000,000 shares; 1,000,000 shares issued and outstanding at December 31, 2012, and 2011,respectively		1,000			1,000
Common stock, $.001 par value; authorized - 100,000,000 shares; 37,046,405 and 36,145,084 shares issued and outstanding at December 31, 2012 and 2011, respectively		37,050			36,146
Additional paid-in capital		275,261,794			269,974,789
Accumulated deficit		(189,211,750	)		(178,903,412	)
Accumulated other comprehensive loss		(565,945	)		(462,949	)
Total stockholders’ equity		85,522,149			90,645,574
Total liabilities and stockholders’ equity	$	104,434,667		$	106,804,696

See notes to consolidated financial statements.

F-2

MEETME, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Loss

	For the Years Ended December 31,
	2012			2011			2010

Revenues	$	46,657,959		$	10,705,693		$	6,054,141
Operating Costs and Expenses:
Sales and marketing		8,467,158			2,030,522			990,076
Product development and content		29,510,917			8,543,404			5,123,965
General and administrative		9,663,323			5,094,770			5,675,716
Depreciation and amortization		3,962,290			870,369			319,779
Acquisition and restructuring costs		422,488			1,948,431			-
Total Operating Costs and Expenses		52,026,176			18,487,496			12,109,536
Loss from Operations		(5,368,217	)		(7,781,803	)		(6,055,395	)
Other Income (Expense):
Interest income		16,569			57,265			6,229
Interest expense		(1,285,674	)		(657,184	)		(603,609	)
Other income (expense), net		9,611			2,211			2,125
Total other income (expense)		(1,259,494	)		(597,708	)		(595,255	)
Loss before income taxes		(6,627,711	)		(8,379,511	)		(6,650,650	)
Income taxes		-			-			-
Net loss from continuing operations	$	(6,627,711	)	$	(8,379,511	)	$	(6,650,650	)
Loss from discontinued operations, net of taxes	$	(3,680,627	)	$	(4,386,307	)	$	-
Net loss	$	(10,308,338	)	$	(12,765,818	)	$	(6,650,650	)
Preferred stock dividends		-			(40,705	)		(111,500	)
Net Loss Allocable To Common Shareholders	$	(10,308,338	)	$	(12,806,523	)	$	(6,762,150	)

Basic and diluted net loss per common shareholders:
Continuing operations	$	(0.18	)	$	(0.44	)	$	(0.52	)
Discontinued operations	$	(0.10	)	$	(0.23	)	$	-
Basic and diluted net loss per common shareholders	$	(0.28	)	$	(0.67	)	$	(0.52	)
Weighted Average Number of Shares Outstanding, Basic and Diluted:		36,461,615			19,092,121			13,117,845

Net Loss	$	(10,308,338	)	$	(12,765,818	)	$	(6,650,650	)
Foreign currency translation adjustment		(102,996	)		(456,098	)		(796	)
Comprehensive Loss	$	(10,411,334	)	$	(13,221,916	)	$	(6,651,446	)

See notes to consolidated financial statements.

F-3

MEETME, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

For the Years Ended December 31, 2012, 2011, and 2010

	Preferred Stock						Common Stock				Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares			Amount			Shares		Amount		Capital			Deficit			Loss			Equity

Balance—December 31, 2009		25,000		$	25			12,743,111	$	12,743	$	155,425,366		$	(159,334,739	)	$	(6,055	)	$	(3,902,660	)
Vesting of stock options for compensation											$	5,574,536									5,574,536
Issuance of (cancellation) common stock for professional services								6,600		7		26,327									26,334
Issuance of common stock for cash, net of offering costs								1,753,329		1,753		12,630,604									12,632,357
Re-pricing of warrants												147,813									147,813
Issuance of warrants												116,286									116,286
Exercise of stock options								784,240		784		1,355,387									1,356,171
Preferred stock dividends															(111,500	)					(111,500	)
Foreign currency translation adjustment																		(796	)		(796	)
Net loss															(6,650,650	)					(6,650,650	)

Balance—December 31, 2010		25,000		$	25			15,287,280	$	15,287	$	175,276,319		$	(166,096,889	)	$	(6,851	)	$	9,187,891
Vesting of stock options for compensation												4,169,236									4,169,236
Vesting of warrants												178,903									178,903
Issuance of common stock for the acquisition of Quepasa Games								348,723		349		2,730,152									2,730,501
Contingent issuance of stock for the acquisition of Quepasa Games												978,750									978,750
Issuance of common stock for conversion of preferred stock		(25,000	)		(25	)		336,927		337		(312	)								-
Issuance of preferred stock for cash		2,000,000			2,000							9,998,000									10,000,000
Issuance of common stock for conversion of preferred stock		(1,000,000	)		(1,000	)		1,479,949		1,480		(480	)								-
Issuance of common stock for cash								716,246		716		2,556,284									2,557,000
Issuance of common stock for the acquisition of Insider Guides, Inc.								16,999,943		17,000		72,062,761									72,079,761
Exercise of stock options								811,016		812		1,282,841									1,283,653
Exercise of warrants								165,000		165		742,335									742,500
Preferred stock dividends															(40,705	)					(40,705	)
Foreign currency translation adjustment																		(456,098	)		(456,098	)
Net loss															(12,765,818	)					(12,765,818	)

Balance—December 31, 2011		1,000,000		$	1,000			36,145,084	$	36,146	$	269,974,789		$	(178,903,412	)	$	(462,949	)	$	90,645,574
Vesting of stock options for compensation												4,033,402									4,033,402
Exercise of stock options								901,321		904		1,253,603									1,254,507
Foreign currency translation adjustment																		(102,996	)		(102,996	)
Net loss															(10,308,338	)					(10,308,338	)

Balance—December 31, 2012		1,000,000		$	1,000			37,046,405	$	37,050	$	275,261,794		$	(189,211,750	)	$	(565,945	)	$	85,522,149

See notes to consolidated financial statements.

F-4

MEETME, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	For the Years Ended December 31,
	2012			2011			2010
Cash flows from operating activities:
Net loss from continuing operations	$	(6,627,711	)	$	(8,379,511	)	$	(6,650,650	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,962,290			870,369			319,779
Vesting of stock options for compensation		3,881,896			3,438,476			5,574,536
Repricing of warrants		-			-			147,813
Vesting of warrants		-			178,903			116,286
Issuance of common stock and stock option for professional services		-			-			26,334
Loss on disposal of property and equipment		11,081			-			-
Grant income		(9,594	)		(2,164	)		(1,446	)
Bad debt expense (recovery)		276,790			257,877			(22,529	)
Amortization of discounts on notes payable and debt issuance costs		292,210			291,405			291,409
Changes in operating assets and liabilities:
Accounts receivable		(5,733,953	)		(1,726,253	)		(1,027,714	)
Prepaid expenses, other current assets, and other assets		303,845			(59,331	)		(198,769	)
Restricted cash		275,000			-			-
Accounts payable and accrued expenses		4,015,689			(706,016	)		715,150
Deferred revenue		322,096			21,970			-
Net cash provided (used) by continuing operating activities		969,639			(5,814,275	)		(709,801	)
Net cash provided (used) by discontinued operations:		(1,801,773	)		(1,940,454	)		-
Net cash provided (used) by operating activities		(832,134	)		(7,754,729	)		(709,801	)
Cash flows from investing activities:
Acquisition of Insider Guides, Inc.		-			(10,684,025	)		-
Acquisition of Quepasa Games		-			(500,000	)		-
Purchase of property and equipment		(720,321	)		(574,972	)		(542,959	)
Purchase of trademarks		(125,000	)		-			-
Loan payments from BRC		57,827			80,604			-
Advance to Hollywood Creations		-			(40,000	)		(216,667	)
Net cash provided (used) by investing activities		(787,494	)		(11,718,393	)		(759,626	)
Cash flows from financing activities:
Proceeds from exercise of stock options		1,254,507			2,026,152			1,356,171
Net proceeds from the issuance of common stock		-			2,557,000			12,632,357
Net proceeds from the issuance of convertible preferred stock		-			10,000,000			-
Payments of capital leases		(373,376	)		-			-
Payments of dividends		(100,000	)		(150,000	)		-
Payments on long-term debt		(2,405,191	)		(219,412	)		-
Net cash provided (used) by financing activities		(1,624,060	)		14,213,740			13,988,528
Change in cash and cash equivalents prior to effect of foreign currency exchange rate on cash		(3,243,688	)		(5,259,382	)		12,519,101
Effect of foreign currency exchange rate on cash		(6,092	)		(15,403	)		(796	)
Net increase (decrease) in cash and cash equivalents		(3,249,780	)		(5,274,785	)		12,518,305
Cash and cash equivalents at beginning of the year		8,271,787			13,546,572			1,028,267
Cash and cash equivalents at end of year	$	5,022,007		$	8,271,787		$	13,546,572

Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	527,759		$	-		$	-
Cash paid for income taxes	$	-		$	-		$	-

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Purchaseof property and equipment through capital leases	$	(1,488,073	)	$	-		$	-
Preferred stock dividends accrued and charged to accumulated deficit	$	-		$	40,705		$	(111,500	)

See notes to consolidated financial statements.

F-5

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Note 1—Description of Business, Basis of Presentation and Summary of Significant Accounting Policies

MeetMe, Inc., (the “Company” or “MeetMe”), was incorporated in Nevada in June 1997. On December 6, 2011, the Company changed its legal domicile to Delaware. Effective June 1, 2012, the Company changed its name from Quepasa Corporation. The Company is a social media technology company which owns and operates MeetMe.com previously known as myYearbook.com and Quepasa.com which transitioned to MeetMe.com in the fourth quarter of 2012. MeetMe is a social discovery network company that makes meeting new people fun through social games and applications, monetized through both advertising and virtual currency. MeetMe.com and Quepasa.com are collectively referred to in this Report as the “MeetMe Platforms”.

The MeetMe Platforms provides users with access to an expansive, multilingual menu of resources that promote social interaction, information sharing, and other topics of interest to users. We offer online marketing capabilities, which enable marketers to display their advertisements in different formats and in different locations on our website. We work with our advertisers to maximize the effectiveness of their campaigns by optimizing advertisement formats and placement on the website.

The Company acquired XtFt Games S/S Ltda (“XtFt”), on March 2, 2011. On July 14, 2011, XtFt’s name was changed to Quepasa Games S/S Ltda (“Quepasa Games”). The Company’s wholly owned Brazilian based subsidiary, Quepasa Games, managed game development and creation of intellectual properties business. On June 30, 2012, the Company discontinued the games development business and creation of intellectual properties business of Quepasa Games. On July 14, 2012 the corporate shell of Quepasa Games S/S Ltda was renamed MeetMe Online Brasil S/S Ltda and is focused on advertising sales in the Sao Paolo, Brazil office.

On November 10, 2011, the Company, IG Acquisition Company (“Merger Sub”), a wholly-owned subsidiary of the Company, and Insider Guides, Inc., doing business as myYearbook.com (“myYearbook”) closed a Merger under which myYearbook merged with and into Merger Sub (the “Merger”). Insider Guides, Inc. operated a social networking website, open to people of all ages, with a concentration of members between the ages of 13 and 24. As Merger consideration, the security holders of myYearbook securities received approximately $18 million in cash and approximately 17 million shares of the Company common stock (not including cash for fractional shares). Following the Merger, Merger Sub changed its name to Insider Guides, Inc. MeetMe, Inc. and its wholly owned subsidiary, Insider Guides, legally merged as of January 1, 2012.

Principles of Consolidation

The consolidated financial statements include the accounts of MeetMe and its wholly-owned subsidiaries, Quepasa.com de Mexico, Quepasa Serviços em Solucoes de Publicidade E Tecnologia Ltda (inactive), MeetMe Online S/S Ltda (formerly Quepasa Games S/S Ltda from March 2, 2011), and Insider Guides, Inc. (from November 10, 2011 until its merger into MeetMe, Inc. on January 1, 2012). All intercompany accounts and transactions have been eliminated in consolidation. On June 30, 2012 the Company discontinued its game development and creation of intellectual properties business. Accordingly, games operations have been classified as discontinued operations for all periods presented.

Cash and Cash Equivalents and Cash Concentrations

We consider all highly liquid instruments purchased with an original maturity of three months or less to be cash and cash equivalents. We continually monitor our positions with, and the credit quality of, the financial institutions with which we invest.

Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. We have not experienced any losses related to these balances. Such amounts on deposit in excess of federally insured limits at December 31, 2012 and 2011 approximated $3.9 million and $5.8 million, respectively.

Accounts Receivable — Trade

We extend credit on a non-collateralized basis primarily to United States and international customers. We perform periodic credit evaluations of our customers’ financial condition as part of our decision to provide credit terms. We maintain an allowance for potential credit losses and for potential discounts based on historical experience and other information available to management. Discounts historically represent less than 1% of the related revenues. The fees associated with display advertising are often based on “impressions,” which are created when the ad is viewed. The amount of impressions often differs between non-standardized tracking systems, resulting in discounts on some payments. Difference between ad serving platforms with respect to impressions is primarily due to lag time between serving of ads and other technical differences.

F-6

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Notes Receivable

We have entered into loan agreements with several entities as part of an ongoing effort to provide additional content and revenue streams to the website. The portion of notes receivable due within twelve months of the balance sheet date is classified as current. In accordance with GAAP, we review our notes receivable for impairment whenever events or changes in circumstances indicate that the carrying amount of the receivable may not be recovered. If such receivables are considered to be impaired, the impairment loss recognized is the amount by which the carrying value exceeds the fair value of the receivable. During the year ended December 31, 2011, a note receivable and related accrued interest of $271,404 was deemed uncollectible, was written off and the bad debt expense was included in general and administrative expense. No impairment occurred during the years ended December 31, 2012 and 2010.

Restricted Cash

We were required by state laws to hold funds for certain DSM contests in separate trust accounts that required written notice from the state to be released. Restricted cash is classified as current when the restriction is expected to lift within twelve months of the balance sheet date. The restricted cash balances were released and transferred to the cash and cash equivalents in March 2012, upon receipt of written notice of the completion of the DSM contests completion.

Consolidated Statement of Cash Flows – Supplemental Disclosure

Non-Monetary transactions:

On March 2, 2011, the following assets and liabilities of Quepasa Games were acquired:

Goodwill	$	3,772,792
Property and equipment		106,626
Other assets		170,843
Total assets acquired		4,050,261
Accounts payable and accrued liabilities		(341,010	)
Total liabilities assumed		(341,010	)
Issuance of common stock, 348,723 shares		2,730,501
Contingent issuance of common stock for acquisition		978,750

On November 10, 2011, the following assets and liabilities of Insider Guides, Inc. were acquired:

Goodwill	$	59,961,662
Intangible assets		8,889,994
Accounts receivable		7,207,685
Property and equipment		3,650,119
Other assets		1,257,263
Total assets acquired		80,966,723
Accounts payable and accrued liabilities		(3,878,238	)
Notes payable		(5,008,724	)
Total liabilities assumed		(8,886,962	)
Issuance of common stock, 16,999,943 shares		72,079,761

F-7

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Goodwill

Goodwill represents the excess of the Company’s purchase prices of Insider Guides, Inc. and Quepasa Games (formerly known as XtFt Games S/S Ltda), over the fair values of the respective identifiable assets acquired and liabilities assumed. Goodwill is not amortized. For the 2011 acquisitions, goodwill is not recognized for tax purposes. Goodwill is subject to impairment tests on an annual basis or more frequently if facts and circumstances warrant such a review. Goodwill is evaluated using specific methods required in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), including potentially, a discounted cash flows method to determine the fair value of a reporting unit and comparison of the carrying value of goodwill to its implied fair value. The analysis necessarily involves significant management judgment to evaluate the capacity of an acquired business to perform within projections. If the carrying amount of a reporting unit exceeds its fair value, determined by conducting a valuation, then the goodwill impairment test is performed to measure the amount of the impairment loss, if any. Management initially performs a qualitative assessment of goodwill to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill. In the event facts and circumstances indicate the carrying value of goodwill is impaired, the goodwill carrying value will be reduced to its implied fair value through a charge to operating expenses.

During the year ended December 31, 2012 the Company recorded approximately $2.3 million goodwill impairment charges related to the discontinuance of Quepasa Games operations. During the year ended December 31, 2011 the Company recorded approximately $1.4 million impairment charges related to goodwill of Quepasa Games operations. Impairment charges for Quepasa Games are included in discontinued operations for all financial periods presented.

Intangible Assets

Intangible assets consist of acquired trademarks, domain names, advertising customer relationships, mobile applications, and customer contracts recorded at fair value. Amortization is recorded using the straight-line method over the estimated useful lives of the assets as follows:

	(years)
Trademarks	5
Domain names	5
Applications, purchased and internally developed	5
Advertiser customer relationships	3

Advertiser customer relationships met the contractual identification criteria, and purchase price allocation was based on a value as determined by the excess earnings approach from historical advertising revenues. Advertiser customer relationships are amortized using the straight-line method over the term of the average contract term. Amortization expense for continuing operations was approximately $1.9 million, $322,000, and $0 for the years ended December 31, 2012, 2011, 2010, respectively. Amortization expense for discontinued operations was approximately $600, $197,000, and $0 for the years ended December 31, 2012, 2011, 2010, respectively.

Prepaid Expenses and Other Assets

Prepaid expenses and other assets primarily consist of prepaid support and service contracts and prepaid rent, debt issue costs and deposits. Debt issue costs, principally loan origination and related fees, are deferred and amortized over the life of the respective debt using the straight-line method.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. The cost of improvements that extend the life of property and equipment are capitalized. All ordinary repair and maintenance costs are expensed as incurred. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as follows:

	(years)
Software	2 to 3
Servers and Computer equipment	3 to 5
Vehicles	4 to 5
Office furniture and equipment	5 to 10
Other equipment	3 to 13

F-8

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Leasehold improvements are amortized using the straight-line method over the term of the individual lease. Depreciation expense for continuing operations was approximately $2 million, $548,000 and $320,000 for the years ended December 31, 2012, 2011, and 2010, respectively. Depreciation expense for discontinued operations was approximately $16,000, $30,000 and $0 for the years ended December 31, 2012, 2011, and 2010, respectively.

Long-Lived Assets

In accordance with GAAP, we review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. For assets which are held and used in operations, the asset is deemed to be impaired if its carrying value exceeds its estimated undiscounted future cash flows. If such assets are considered to be impaired, the impairment loss recognized is the amount by which the carrying value exceeds the fair value of the asset or estimated discounted future cash flows attributable to the asset. No asset impairment occurred during the years ended December 31, 2012, 2011 and 2010.

Fair Value of Financial Instruments and Fair Value Measurements

We measure our financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, the carrying amounts approximate fair value due to their short maturities. Amounts recorded for subordinated notes payable, net of discount, and loans payable also approximate fair value because current interest rates available to us for debt with similar terms and maturities are substantially the same .

We follow accounting guidance for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).

The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Most significant estimates in the accompanying consolidated financial statements include revenue recognition, the allowance on accounts receivable, valuation of notes receivable, valuation of deferred tax assets, valuation of stock-based employee and non-employee awards, valuation of assets acquired and liabilities assumed in business combinations, evaluating goodwill, intangible and long-lived assets for impairment, useful lives of intangibles assets and property and equipment, and the measurement and accrual of restructuring costs and contingent liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Foreign Currency

The functional currency of our foreign subsidiaries is the local currency. The financial statements of these subsidiaries are translated to United States dollars using period-end rates of exchange for assets and liabilities and average quarterly rates of exchange for revenues and expenses. Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Net gains and losses resulting from foreign exchange transactions are included in other income (expense).

F-9

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Net Loss per Share

The Company computes and presents earnings or losses per share in accordance with FASB ASC Topic 260, Earnings per share . Basic earnings or losses per share are computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings or loss per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares and common stock equivalents outstanding, calculated on the treasury stock method for options and warrants using the average market prices during the period.

As the Company incurred a net loss in all periods presented, all potentially dilutive securities were excluded from the computation of diluted loss per share since the effect of including them is anti-dilutive.

The following table summarizes the number of dilutive securities, which may dilute future earnings per share, outstanding for each of the periods presented, but not included in the calculation of diluted loss per share:

	December 31,		December 31,		December 31,
	2012		2011		2010
Stock options		9,082,753		9,611,931		7,679,149
Warrants		4,200,000		4,200,000		4,465,000
Convertible preferred stock		1,479,949		1,479,949		336,927
Totals		14,762,702		15,291,880		12,481,076

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured. We recognize revenue in accordance with ASC 605, “ Revenue Recognition ,” ASC 605-25, “ Multiple-Element Arrangements, ” and ASC 605-45 “ Principal Agent Considerations .”

During the years ended December 31, 2012, 2011 and 2010, we performed transactions with several partners that qualify as principal agent considerations. We recognize revenue net of amounts retained by third party entities, pursuant to revenue sharing agreements with advertising networks for advertising and with other partners for royalties on product sales.

During the years ended December 31, 2012, 2011 and 2010, our revenue is generated from two principal sources: revenue earned from the sales of advertising on our websites and virtual currency products.

Advertising Revenue

Advertising and custom sponsorship revenues consist primarily of advertising fees earned from the display of advertisements and click-throughs on text based links on our websites. Revenue from online advertising is recognized as impressions are delivered. An impression is delivered when an advertisement appears on pages viewed by members of the Company’s websites. Revenue from the display of click-throughs on text based links is recognized as click-throughs occur. Consistent with GAAP, we recognize advertising revenue from customers that are advertising networks on a net basis, while advertising revenues earned directly from advertisers are recognized on a gross basis. Sponsorship revenue is recognized over the time period in which the sponsorship on the website occurs. Approximately 56%, 52% and 4% of our revenue came from advertising during the years ended December 31, 2012, 2011 and 2010, respectively.

Virtual Currency Products

Revenue is earned from virtual currency monetization products sold to our website users. The Company offers Credits and “Lunch Money” as virtual currency to our platform users. Users buy Lunch Money and credits to purchase the Company’s virtual products which put them in the spotlight, helping to get more attention from the community and thereby meet more people faster on our platform. These virtual products are consumed immediately. Lunch Money is virtual currency purchased using PayPal by our users to buy premium virtual products on our platform. Credits can be purchased using PayPal on the website and mobile applications. Platform users do not own the Credits but have a limited right to use the credits on virtual products offered for sale on the Company’s platform. Credits are non-refundable, we may change the purchase price of Credits at any time, and we reserve the right to stop issuing credits in the future. The Company’s virtual currencies are not transferable, cannot be sold or exchanged outside our platform, are not redeemable for any sum of money, and can only be used for virtual products sold on our platform. Lunch Money is purchased by users and used and recorded as revenue immediately. Credits are recorded in deferred revenue when purchased and recognized as revenue when used. For “VIP” and other subscriptions based products, the Company recognizes revenue over the one-month period of the subscription.

F-10

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

The Company also earns revenue from advertisement products from currency engagement actions (i.e. sponsored engagement advertisements) by users on all of our platforms, including cost-per-action (CPA) currency incented promotions and sales on our proprietary cross-platform currency monetization product, “Social Theater”. The Company controls and develops the Social Theater product and CPA promotions and acts as a principal in these transactions and recognizes the related revenue on a gross basis when collections are reasonably assured and upon delivery of the virtual currency to the users’ account. When a user performs an action, the user earns virtual currency and the Company earns product revenue from the advertiser.

Social Theater is a product that allows us to offer advertisers a way to leverage the Facebook platform through guaranteed actions by Facebook’s user base. Social Theater is also hosted on the Company’s platform. Typical guaranteed actions available to advertisers are video views, fan page growth, quizzes and surveys. Social Theatre revenue is recognized when persuasive evidence of an arrangement exists, the sales price is fixed or determinable, collectability is reasonable assured, and the service has been rendered. The Social Theater prices are both fixed and determinable based on the contract with the advertiser. The user completes an action and the electronic record of the transaction triggers the revenue recognition. The collection of the Social Theater revenue is reasonably assured by contractual obligation and historical payment performance. The delivery of virtual currency from the hosting platform to a user evidences the completion of the action required by the customer that the service has been rendered for Social Theater revenue recognition.

During the years ended December 31, 2011 and 2010, we executed three contracts with Altos Hornos de Mexico, S.A.B. de C.V. (“AHMSA”), which owns Mexicans & American Trading Together, Inc. (“MATT Inc.”), which qualify as Multiple-Element Arrangements. The first was a $3.5 million contract to develop a website and a series of environmental campaigns using our DSM technology, with multiple delivery dates from May 2010 through February 2011. The second was a $3.0 million contract to develop a website and a legislative campaign using our DSM Technology, with multiple delivery dates from June through December 2010. The third was a $3.0 million contract to develop the “Job of Your Dreams” (El Empleo de tus Suenos) campaign using our DSM technology, with multiple delivery dates from March 2011 through December 2011. The revenue from these contracts is allocated between DSM and website development as separate units of accounting based on their relative selling price. The selling price for DSM was determined using the ad impressions and click through rate that other advertising would require to generate similar engagements, since the DSM technology was a relatively new concept we developed. The selling price for website development was determined using the projected hours and prevailing rates for website development plus the cost of hardware, third party vendors and premium for use of our development resources. Effective November 2011 in connection with the Merger with myYearbook, the Company’s DSM products became a part of Social Theater, a cross platform, virtual currency product. DSM product revenue for the years ended December 31, 2011 and 2010 have been classified as Social Theater cross platform revenue. Approximately 44% of our revenue came from virtual currency product revenues during the year ended December 31, 2012. Approximately 48% and 96% of our revenue came from Social Theater cross platform DSM campaigns during the years ended December 31, 2011 and 2010.

Significant Customers and Concentration of Credit Risk

During the year ended December 31, 2012, customers (1) and (2) comprised approximately 13% and 25%, of total revenues, respectively. For the year ended December 31, 2012, 2011 and 2010 customer (1), the Company’s principal shareholder, MATT Inc. and its parent company, comprised 13%, 40%, and 95%, respectively, of total revenues. Three customers comprised 58% and 36% of total accounts receivable as of December 31, 2012 and 2011, respectively.

Discontinued Operations from Quepasa Games

On June 30, 2012, the Company discontinued its games development and hosting operations. Accordingly, games operations have been classified as discontinued operations for all periods presented. Game revenue was recognized when persuasive evidence of an arrangement exists, the sales price was fixed or determinable, collectability was reasonable assured, and the service was rendered. For the purpose of determining when the service had been provided to the player, we determined an implied obligation existed to the paying player to continue displaying the purchased virtual items within the online game of a paying player over their estimated life.

F-11

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

The virtual goods were categorized as either consumable or durable. Consumable goods represent goods that are consumed immediately by a specific player action and have no residual value. Revenue from consumable goods was recognized at the time of sale. Durable goods add to the player’s game environment over the playing period. Durable items, that otherwise do not have a limitation on repeated use, were recorded as deferred revenue at time of sale and recognized as revenue ratably over the estimated average playing period of a paying player. For these items, the Company considered the average playing period that the paying players typically play the game, to be 18 months. If we did not have the ability to differentiate revenue attributable to durable virtual goods from the consumable virtual goods for the specific game, we recognized revenue on the sale of the virtual goods for the game ratably over the estimated average playing period that paying players typically play the game. Any adjustments arising from changes in the average playing period would have been applied prospectively on the basis that such changes are caused by new information indicating a change in the game player behavior patterns. As the Company controlled the game process and acted as a principal in the transaction, revenue for internally developed games was recognized on a gross basis from sales proceeds reported by pay aggregators which were net of payment rejections, charge-backs and reversals.

Games expenses represented the direct expenses for hosting, marketing, site fees, reporting and foreign taxes. Games product development and content expenses included salaries, benefits, and share-based compensation for our employees, utility charges, and production office costs, were charged to discontinuing operations as incurred. Game exit costs included severance costs of terminated employees and exit costs of office closure expenses and were charged to discontinuing operations as incurred.

Unearned Grant Income

Unearned grant income represents the unamortized portion of a cash grant received from the Mexican government for approved capital expenditures. The grant was recognized into other income on the accompanying statements of operations on a straight-line basis over the useful lives of the purchased assets.

Income Taxes

We use the asset and liability method to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.

The Company follows the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Product Development and Content Costs

Product development and content costs, including costs incurred in the classification and organization of listings within our websites, salaries, benefits, and stock-based compensation, utility charges, occupancy and support for our offsite technology infrastructure, bandwith and content delivery fees, and internet game development and maintenance costs, are charged to expense as incurred.

Acquisition and Restructuring Costs

Acquisition and restructuring costs, include costs incurred related to the business acquisitions made by the Company and costs incurred in conjunction with the restructuring of the Company’s business processes. Acquisition costs include the fees for broker commissions, investment banking, legal, accounting and other professional services, proxy, printing and filing costs, and travel costs incurred by the Company during the acquisition process. During November 2011, management announced plans to restructure certain business processes that included consolidation of development offices and closure of duplicative facilities. During 2012, management re-engineered their websites and migrated to a rebranded common platform. Restructuring costs include employee termination and relocation costs recorded as incurred, and exit costs for the closure of our Los Angeles office, Mexico and Dallas data and service centers. We incurred acquisition costs of $0 and of approximately $1.6 million during the years ended December 31, 2012 and 2011. We incurred restructuring costs of approximately $423,000 and $352,000 during the years ended December 31, 2012 and 2011. No acquisition and restructuring costs were incurred during the year ended December 31, 2010.

F-12

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Stock-Based Compensation

We follow the fair value recognition provisions of ASC 718, “ Compensation – Stock Compensation ”. The fair values of share-based payments are estimated on the date of grant using the Black-Scholes option pricing model, based on weighted average assumptions. Expected volatility is based on historical volatility of our common stock. We have elected to use the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin Topic 14C to estimate the expected term of employee stock options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation expense is recognized on a straight-line basis over the requisite service period of the award.

The assumptions used in calculating the fair value of stock-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

Comprehensive Income (Loss)

Comprehensive income (loss) includes all changes in stockholders’ equity during a period from non-owner sources. Comprehensive income (loss) consists of foreign currency translation adjustments which are added to net loss to compute total comprehensive loss.

Leases

In accordance with GAAP, we perform a review of newly acquired leases to determine whether a lease should be treated as a capital or operating lease. Capital lease assets are capitalized and depreciated over the term of the initial lease. A liability equal to the present value of the aggregated lease payments is recorded utilizing the stated lease interest rate. If an interest rate is not stated, we will determine an estimated cost of capital and utilize that rate to calculate the present value. If the lease has an increasing rate over time, and (or) is an operating lease, all leasehold incentives, rent holidays, or other incentives will be considered in determining if a deferred rent liability is required. Leasehold incentives are capitalized and depreciated over the initial term of the lease.

Contingencies

We accrue for contingent obligations, including legal costs and restructuring costs, when the obligation is probable and the amount can be reasonably estimated. As facts concerning contingencies become known we reassess our position and make appropriate adjustments to the consolidated financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory matters that are subject to change as events evolve and additional information becomes available.

Recent Issued Accounting Standards

We have implemented all new accounting standards that are in effect and that may impact our consolidated financial statements and do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our consolidated financial position or results of operations.

Reclassifications

Certain prior period amounts in the consolidated financial statements have been reclassified to conform to the current period’s presentation. For the year ended December 31, 2011 and 2010 approximately $1.7 million and $137,000 for production office costs, staffing services, and acquisition costs related the acquisition of Quepasa Games and Insider Guides were respectively reclassified from general and administrative expense to acquisition and restructuring costs, product development and content expense, and sales and marketing expenses. Prepaid advertising and deferred subscription revenue of approximately $71,000 was reclassified from accrued liabilities to deferred revenue for the December 31, 2011 balance sheet. Reclassification adjustments for discontinued operations were made to the consolidated balance sheets and statements of operations for the periods presented.

F-13

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Note 2—Business Acquisitions

On March 2, 2011, we completed a Stock Purchase Agreement (the “Agreement”) with XtFt, the owner of substantially all of the assets and business of TechFront Desenvolvimento de Software S/S Ltda, a Brazilian company (“TechFront”). The Company acquired XtFt to obtain its game development expertise and existing and future intellectual properties. On July 14, 2011 XtFt’s name was changed to Quepasa Games.

We acquired all of the outstanding equity interests of XtFt. The shares issued to XtFt’s owners were calculated contractually based on $3,700,000 of our common stock (348,723 shares) at $10.61 per share which was based on the average closing price per share for the 10 trading days prior to the date of closing the Agreement. The acquisition date value of the shares issued of $2,730,501 was calculated using the fair market value of the 348,723 shares, at $7.83, the closing price of our common stock on the acquisition date. The prior owners of XtFt were eligible to receive a potential earn out fee of 250,000 shares of our common stock based on Quepasa Games achieving specific performance milestones. Because the 2011 milestones were not met, the prior owners of XtFt forfeited one-third of the earn-out or 83,334 shares. An additional cost of acquisition of $978,750 for the contingent earn out provision was calculated using the fair market value of the probable shares to be granted based on the terms of the Agreement at a price per share valued at the date of acquisition.

In connection with the Agreement, on February 1, 2011, we entered into a Secured Revolving Line of Credit Agreement (“Credit Agreement”) with TechFront and agreed to lend up to $500,000. Advances under the Credit Agreement may be used to pay off certain Techfront loans specified in the Agreement. The secured revolving line of credit shall become due and payable on February 1, 2017. The Credit Agreement is secured by certain U.S. and Brazilian Trademarks of TechFront. Prior to the acquisition date, $500,000 was advanced to TechFront under the Credit Agreement. The collectability of this amount was deemed by management to be doubtful immediately upon the date of the first advance and therefore in substance was deemed to be an additional cost of the acquisition.

The purchase price was allocated first to record identifiable assets and liabilities at fair value and the remainder to goodwill as follows:

Property and equipment	$	119,760
Other assets		191,887
Total assets acquired		311,647
Accounts payable and accrued liabilities		(383,014	)
Total liabilities assumed		(383,014	)
Goodwill		4,280,618
Total purchase price	$	4,209,251

The Company incurred approximately $368,000 of broker commissions, legal and professional fees and travel costs during the acquisition of Quepasa Games that were expensed as incurred and classified as acquisition and restructuring costs during the year ended December 31, 2011.

On November 10, 2011, the Company, Merger Sub, and Insider Guides, Inc., closed the Merger. Insider Guides Inc. operated the myYearbook.com platform. The Company and Insider Guides Inc. had similar focus on social discovery, social gaming, virtual goods and brand advertising and could capitalize on combined business strengths. As Merger consideration, the security holders of myYearbook received approximately $18 million in cash and approximately 17 million shares of the Company’s common stock (not including cash for fractional shares). Following the Merger, Merger Sub changed its name to Insider Guides, Inc. which later merged into MeetMe.

F-14

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

The purchase price was allocated first to record identifiable assets and liabilities at fair value and the remainder to goodwill as follows:

Goodwill	$	70,646,036
Intangible assets		8,889,994
Cash and cash equivalents		7,315,783
Accounts receivable		7,207,685
Property and equipment		3,650,119
Other assets		1,257,263
Total assets acquired		98,966,880
Accounts payable, accrued and other liabilities		(3,878,238	)
Notes payable		(5,008,724	)
Total liabilities assumed		(8,886,962	)
Total purchase price	$	90,079,918

The Company incurred approximately $1.2 million of investment banking, legal and professional fees, proxy printing and filing fees and travel costs during the acquisition of Insider Guides, Inc. that were expensed as incurred and classified as acquisition and restructuring costs during the year ended December 31, 2011.

The amounts of revenues and net losses from Insider Guides, Inc. and Quepasa Games included in the Company’s consolidated statement of operations for the year ended December 31, 2011, and the unaudited supplemental pro forma revenues and net income (loss) of the combined entity that give effect to the acquisitions had they occurred January 1, 2010 are as follows:

	(Unaudited)
	Revenues		Net Income (Loss)

Insider Guides, Inc. actual for the period November 10, 2011 to December 31, 2011	$	5,709,194	$	1,003,411
Quepasa Games actual for the period March 2, 2011 to December 31, 2011	$	1,154,489	$	(3,049,058	)

Supplemental unaudited consolidated pro forma information for the year ended December 31, 2010	$	30,944,817	$	(7,391,384	)

In preparing the unaudited pro forma information, various assumptions were made, and the Company does not purport this information to be indicative of what would have occurred had acquisition been made as of January 1, 2010, nor is it indicative of the results of future combined operations.

Note 3 —Discontinued Operations – Quepasa Games

The games development business of our Brazilian subsidiary, Quepasa Games, were discontinued on June 30, 2012 in order to streamline efforts to improve efficiencies, reduce costs and focus on the Company’s core social network business. In connection with this closure, the Company transferred the hosting responsibilities of its games Wonderful City Rio and Amazon Alive to third parties, Quepasa Games office in Curitiba, Brazil was closed and all Quepasa Games employees were terminated. The games business closure qualifies as a discontinued operation and accordingly the Company has excluded results for Quepasa Games operations from its continuing operations in the Consolidated Statement of Operations for all periods presented. The following table shows the results of Quepasa Games included in the loss from discontinued operations:

F-15

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

	For the Years Ended December 31,
	2012			2011
Games Revenues	$	840,190		$	1,144,443
Games Expenses		1,032,366			1,553,450
Product development and content		552,563			1,609,917
Depreciation and amortization		16,102			227,498
Exit costs		431,418
Loss on disposable of assets		48,084
Stock-based compensation		151,508			730,758
Loss on impairment of goodwill		2,288,776			1,409,127
Total		4,520,817			5,530,750
Loss from discontinued operations attributable to Quepasa Games	$	(3,680,627	)	$	(4,386,307	)

The major classes of assets and liabilities of discontinued operations on the balance sheet are as follows:

	December 31, 2012		December 31, 2011
Assets
Accounts receivable, prepaid and other current assets	$	-	$	149,796

Goodwill, net		-		2,402,446
Property and equipment, net		-		90,075
Other assets		-		151,591
Total assets of discontinued operations	$	-	$	2,793,908
Liabilities
Accounts payable and accrued expenses	$	1,434	$	693,947
Total current liabilities of discontinued operations	$	1,434	$	693,947

Note 4—Notes Receivable

In February 2010, we entered into a settlement agreement (the “Settlement”) with BRC effective as of September 22, 2009. Under the Settlement, BRC’s indebtedness to us was reduced from $350,000 to $250,000, evidenced by a new promissory note (the “Note”) dated September 22, 2009. The Note contains a repayment term of 18 months commencing June 1, 2011, bearing interest at the rate of 4% per annum, such interest to begin accruing February 1, 2011. As collateral for the Note, BRC issued us a warrant (the “Warrant”) permitting us to receive up to a 30% membership interest in BRC upon default. If BRC defaults under the Note and the Warrant is exercised, BRC shall have 90 days to repurchase the membership interest for the balance of the remaining principal and interest to date. As a result of the Settlement and the Note, both parties agreed to a mutual release of the current litigation between the parties by filing a dismissal of the litigation with prejudice. Furthermore, both parties agreed to terminate all prior agreements between each other entered into before September 22, 2009, along with all duties rights and obligations thereunder. The current balance of BRC Note receivable was $111,569 and $169,955 at December 31, 2012 and 2011, respectively. BRC continues to make payments on the Note receivable which is currently due and payable, and expects to repay the balance in full during 2013.

On September 20, 2010, we entered into a Note Purchase Agreement with Hollywood Creations, Inc. (“Hollywood”) and agreed to lend Hollywood $650,000 in three separate equal installments. This agreement relates to an arrangement for MeetMe’s exclusive right and license to market and distribute games developed by Hollywood to MeetMe end users. Those rights were to be subject to a revenue sharing agreement. Each loan was to be evidenced by a 6% Convertible Promissory Note due one year from the date of issuance (“Note”). The Note may be converted under certain circumstances. In the year ended December 31, 2010, we lent the first $216,667 installment and Hollywood issued us a Note due on September 20, 2011. In February 2011, we made another $40,000 advance due September 2011. In October, 2011 we deemed the Note uncollectible and we charged the note receivable and related accrued interest of $271,404 to bad debt expense.

F-16

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Note 5—Goodwill

Goodwill represents the fair value of the intangible assets, not subject to amortization, from the acquisitions of Quepasa Games and Insider Guides, Inc. At December 31, 2011, management assessed relevant events and circumstances in evaluating whether it was more likely than not that its fair values were less than respective carrying amounts of the acquired subsidiaries pursuant to ASC 350 Intangibles, Goodwill and Other . After evaluation of Quepasa Games’ performance for the period ended December 31, 2011 and projected 2012 performance, management determined that Quepasa Games could not achieve the performance necessary for the earn-out provision of the stock-purchase agreement and would require an impairment adjustment. A valuation of the Quepasa Games was performed and a $2.5 million fair value was determined. A comparison of the Company’s approximately $3.8 million carrying value of the Quepasa Games and the $2.4 million implied value of goodwill resulted in a loss on impairment of approximately $1.4 million in 2011. Quepasa Games operations were discontinued on June 30, 2012 and accordingly a loss on impairment of goodwill of approximately $ 2.2 million was recorded as loss from discontinued operations for the year ended December 31, 2012. The translated value of goodwill for Quepasa Games varied at each interim reporting period due to changes in the foreign exchange rates.

Management’s assessment of the events and circumstance since the acquisition of Insider Guides, Inc. shows positive operating performance, key metrics, customer retention, and no indicators that its fair value was less than its carrying amount at December 31, 2011. No impairment to goodwill occurred during the year ended December 31, 2012 for Insider Guides.

Goodwill consists of the following:

	Continuing operations		Discontinued operations
Goodwill, opening balance January 1, 2011	$	-	$	-
Additions:
Goodwill, Quepasa Games		-		4,280,618
Goodwill, translation adjustments				(469,045	)
Goodwill, Insider Guides, Inc.		70,646,036		-

Less impairment losses for Quepasa Games		-		(1,409,127	)

Total Goodwill—net at December 31, 2011	$	70,646,036	$	2,402,446
Additions:		-		-
Goodwill, translation adjustments				(113,670	)
Less impairment losses for Quepasa Games		-		(2,288,776	)

Total Goodwill—net at December 31, 2012	$	70,646,036	$	-

Note 6—Intangible Assets

Intangible assets consist of the following:

	December 31, 2012			December 31, 2011

Trademarks and domains names	$	6,124,994		$	5,999,994
Advertising customer relationships		1,165,000			1,165,000
Mobile applications		1,725,000			1,725,000
		9,014,994			8,889,994
Less accumulated amortization		(2,268,721	)		(322,222	)
Intangible assets from continuing operations		6,746,273			8,567,772
Intangible assets from discontinued operations		-			170,843
Less accumulated amortization		-			(170,445	)
Intangible assets from discontinued operations-net		-			398
Intangible assets—net	$	6,746,273		$	8,568,170

F-17

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Annual future amortization expense for the Company’s intangible assets is as follows:

Years ending December 31:

2013	$	1,958,332
2014		1,893,610
2015		1,569,999
2016		1,324,332
2017		-
Total	$	6,746,273

Note 7—Property and Equipment

Property and equipment consist of the following:

	December 31, 2012			December 31, 2011

Servers and computer equipment and software	$	6,805,099		$	6,458,584
Vehicle		-			16,180
Office furniture and equipment		143,037			150,762
Leasehold Improvements		367,437			58,935
Other equipment		-			8,459
Property and equipment from continuing operations		7,315,573			6,692,920
Less accumulated depreciation		(2,542,941	)		(2,374,301	)
Property and equipment from continuing operations-net		4,772,632			4,318,619
Property and equipment from discontinued operations		-			117,727
Less accumulated depreciation		-			(27,652	)
Property and equipment from discontinued operations-net		-			90,075
Property and equipment—net	$	4,772,632		$	4,408,694

Note 8—Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following:

	December 31, 2012		December 31, 2011

Accrued expenses	$	2,524,034	$	990,240
Accrued employee benefits		463,323		528,428
Accrued restructuring costs		224,324		195,202
Accrued expenses and other liabilities	$	3,211,681	$	1,713,870

F-18

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Note 9— Long-term Debt

Subordinated Notes Payable

On January 25, 2008, we entered into a Note Purchase Agreement (the “MATT Agreement”) with MATT Inc. Pursuant to the terms of the MATT Agreement: (i) MATT Inc. invested $5,000,000 in the Company and the Company issued MATT Inc. a subordinated promissory note due October 16, 2016 with 4.46% interest per annum (the “MATT Note”); (ii) the exercise price of MATT Inc.’s outstanding Series 1 Warrant to purchase 1,000,000 shares of our common stock was reduced from $12.50 per share to $2.75 per share; (iii) the exercise price of MATT Inc.’s outstanding Series 2 Warrant to purchase 1,000,000 shares of our common stock was reduced from $15.00 per share to $2.75 per share (see Note 10); and (iv) the Amended and Restated Support Agreement between The Company and MATT Inc. was terminated, which terminated MATT Inc.’s obligation to provide us with the use of a corporate jet for up to 25 hours per year through October 2016. Debt issuance costs of $24,580 related to this transaction have been capitalized within the other assets section of the balance sheet and are being amortized to interest expense over the life of the note. The balance of deferred debt issuance costs was approximately $11,000 and $13,500 at December 31, 2012 and 2011 respectively and is included in other assets.

MATT note payable consisted of the following:

	December 31, 2012			December 31, 2011
Notes Payable, face amount	$	5,000,000		$	5,000,000
Discounts on Notes:
Revaluation of Warrants		(1,341,692	)		(1,341,692	)
Termination of Jet Rights		(878,942	)		(878,942	)
Accumulated Amortization		1,255,596			1,000,574
Total Discounts		(965,038	)		(1,220,060	)
Accrued Interest		1,204,980			877,132
MATT Note Payable, net	$	5,239,942		$	4,657,072

On January 25, 2008, we entered into a Note Purchase Agreement (the “RSI Agreement”) with Richard L. Scott Investments, LLC (“RSI”). Pursuant to the terms of the RSI Agreement: (i) RSI invested $2,000,000 in the Company and the Company issued RSI a subordinated promissory note due March 21, 2016 with 4.46% interest per annum (the “RSI Note”); (ii) the exercise price of RSI’s outstanding Series 2 Warrant to purchase 500,000 shares of our common stock was reduced from $4.00 per share to $2.75 per share, (See Note 10); and (iii) the exercise price of RSI’s outstanding Series 3 Warrant to purchase 500,000 shares of our common stock was reduced from $7.00 per share to $2.75 per share. Debt issuance costs of $15,901 related to this transaction have been capitalized within the Other Assets section of the balance sheet and are being amortized to interest expense over the life of the note. The balance of deferred debt issuance costs was approximately $6,300 and $8,200 at December 31, 2012 and 2011 respectively and is included in other assets.

RSI note payable consisted of the following:

	December 31, 2012			December 31, 2011
Notes Payable, face amount	$	2,000,000		$	2,000,000
Discounts on Notes:
Revaluation of Warrants		(263,690	)		(263,690	)
Accumulated Amortization		159,560			127,152
Total Discounts		(104,130	)		(136,538	)
Accrued Interest		481,993			350,853
RSI Notes Payable, net	$	2,377,863		$	2,214,315

Loans Payable

On November 10, 2011 in conjunction with the acquisition of Insider Guides, Inc., the Company assumed loans payable consisting of a growth capital term loan and three equipment term loans. The loans payable are collateralized by substantially all the assets of the Company. Under the Loan and Security Agreement Number 2 (“LSA2”) growth term and equipment term loans, dated December 13, 2010, principal and interest are payable monthly at a fixed interest rate of 12.50% per annum, and the loans are due September 2014. Under the Supplemental Loan and Security Agreement (“SLSA”), dated November 21, 2008, principal and interest are payable in monthly at a fixed interest rate of 12.60% per annum, and the loan was repaid by April 2012. Under the Supplement Number 2 Loan and Security Agreement (“S2LSA”) dated January 22, 2010, principal and interest are payable in monthly at a fixed interest rate of 12.50% per annum, and the loan is due June 2013. On February 13, 2012, the loans payable and security agreements were amended and restated to include additional debt covenants. The amendment includes limitations of additional $6 million of bank borrowing and indebtedness for leased office equipment. The amendment requires that the Company’s unrestricted cash and accounts receivable be greater than or equal to 200% of the borrowers indebtedness and the Company’s unrestricted cash be greater than or equal to the aggregate amount of interest that will accrue and be payable through the maturity date of loans payable and security agreement. At December 31, 2012, the Company was in compliance with the amended loans payable and security agreements debt covenants.

F-19

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Capital Leases

During the first quarter 2012, the Company executed two non-cancelable master lease agreements one for $1.5 million with Dell Financial Services, and one for $500,000 with HP Financial Services. Both are for the purchase or lease of equipment for our data centers. The HP Financial Services master lease agreement was increased to $1.5 million in the second quarter 2012. Principal and interest are payable monthly at interest rates of ranging from 4.5% to 7.99% per annum, rates varying based on the type of equipment purchased. The capital leases are secured by the leased equipment, and outstanding principal and interest are due respectively in January and March 2015.

The following is a schedule of the long term debt:

	Borrowings		Interest Rates				December 31, 2012			December 31, 2011
Growth Term Loans:
LSA2	$	97,500			12.50	%	$	125,679		$	290,960
Equipment Term Loans:
SLSA		2,500,000			12.60	%		-			272,172
S2LSA		2,500,000			12.50	%		496,381			1,336,342
LSA2		8,607			12.50	%		1,762,061			2,889,838
	$	5,106,107						2,384,121			4,789,312


Capital Leases		1,500,000	6.46	-	7.99	%	$	1,397,970			-
		1,500,000	4.5	-	7.40	%	$	308,833			-
	$	3,000,000						1,706,803			-

Loans payable - current portion								1,903,368			2,405,191
Capital lease - current portion								648,573
Long term debt - current portion							$	2,551,941		$	2,405,191

Loans payable - long term portion								480,753			2,384,121
MATT Note payable		5,000,000			4.46	%		5,000,000			5,000,000
RSI Note payable		2,000,000			4.46	%		2,000,000			2,000,000
								7,480,753			9,384,121
Add: Accrued interest								1,686,973			1,227,985
Less: unamortized discounts								(1,069,168	)		(1,356,598	)
Total notes payable - long term portion								8,098,558			9,255,508
Capital lease - long term portion								1,058,230			-
Long term debt, net of discounts							$	9,156,788		$	9,255,508

F-20

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

The following is a schedule of the aggregate maturities of the loans payable and subordinated notes including accrued interest:

Years ending December 31:

2013		2,556,542
2014		1,173,155
2015		361,227
2016		-
2017		8,686,973
Total	$	12,777,897

Note 10—Commitments and Contingencies

Operating Leases

We lease our operating facilities in the United States of America, and Sao Paulo, Brazil, under operating leases and accordingly rent is expensed as incurred. Future minimum lease payments under these leases as of December 31, 2012 are as follows:

2013	$	1,436,800
2014		522,400
2015		450,800
2016		457,100
2017		115,000
Thereafter		-
	$	2,982,100

Rent expense for under these leases was approximately $2 million, $434,000 and $129,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

Litigation

From time to time, we are party to certain legal proceedings that arise in the ordinary course and are incidental to our business. We operate our business online, which is subject to extensive regulation by federal and state governments. In July 2011, the Company received a subpoena from the New York Attorney General (“NYAG”) seeking records relating to our operations including specifically our e-mail marketing practices. Our attorneys advised us that federal law preempted the NYAG’s inquiry in the absence of any deceptive acts, and that they did not believe our e-mail marketing involved any deceptive practices. Nevertheless, we chose to cooperate fully with the NYAG and made certain changes to our email practices on Quepasa.com to address the concerns. On August 15, 2012, we entered into an Assurance of Discontinuance with NYAG, agreed to pay $20,000 to NYAG, and agreed to comply with the State of New York laws and industry practices regarding certain e-mail marketing campaigns. The Company charged this expense to general and administrative expenses. The NYAG agreed to discontinue its investigation.

On August 3, 2011, Michelle Kaffko (the “Plaintiff’) filed a class action lawsuit against the Company in the United States District Court for the District of Nevada. The Company filed a motion to transfer the case to the Southern District of Florida and the Court granted that motion. On March 30, 2012, the Plaintiff filed an amended complaint in the United States District Court for the Southern District of Florida to add two additional defendants to the case. The amended complaint alleges that the Company sent unauthorized text messages to thousands of consumers by using equipment that had the capacity to generate random telephone numbers. The Plaintiff is seeking, for herself and on behalf of the members of the class, $500 for each alleged violation. On August 3, 2012, the Plaintiff filed a Stipulation to Dismiss the case for reason of failure to effectuate service on either of the additional defendants. On October 2, 2012, the Court issued an order dismissing the case.

On November 18, 2011, Jeffrey Valdez, a former member of the Company’s Board of Directors who was also a paid consultant to the Company sued the Company in the Superior Court of California for breach of contract relating to the ownership and use of certain intellectual property that he allegedly created. The plaintiff also claimed that the Company and John Abbott, its Chief Executive Officer, never intended to honor the contract. The Company denies these allegations and maintains that the plaintiff did not create any original intellectual property and that the Company is not otherwise using any intellectual property created by the plaintiff. The Court has granted the Company’s motion to dismiss Valdez’s claim that the Company fraudulently induced him to enter into the Consulting Agreement. The Court also dismissed the claim against Mr. Abbott. On June 25, 2012, the Company entered into a settlement agreement and made a $150,000 payment to the plaintiff for release of all claims and charged this expense to general and administrative expenses. Accordingly, the United States District Court in the Central District of California issued an Order to Dismiss with Prejudice on July 2, 2012.

F-21

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

On September 8, 2011, Stacey Caplan, a former employee of the Company, filed a complaint with the Equal Employment Opportunity Commission (“EEOC”) alleging sexual discrimination by the Company in the period following her voluntary resignation from the Company. The Company denied the allegations. On July 6, 2012, the EEOC found the complaint unfounded and closed its file. On January 28, 2013, Stacey Caplan sued the Company and its Chief Financial Officer, Michael Matte, in the Florida Circuit Court for Palm Beach County for alleged unlawful discrimination on the basis of sex and tortious interference with contractual relations. The Company believes the plaintiff’s claims are without merit and intends to defend against them vigorously.

By letter dated October 23, 2012, a third party accused the Company of breach of contract and infringement of trademark. Said party has not filed suit against the Company. The Company recorded a contingent liability of $1 million for the probable settlement of this matter to accrued expense and other liabilities and charged this expense to general and administrative expenses. The parties are negotiating a settlement of the matter and the Company expects to pay $400,000 and issue a $600,000 non-interest bearing note payable to the other party to resolve the outstanding claim.

Future events or circumstances, currently unknown to management, will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods.

Restructuring Costs

On November 16, 2011, management announced a restructure plan consolidating operations. Restructuring costs include the employee relocation expenses, severance costs of terminated employees, the costs of contractual termination benefits and future service required payments, and exit costs of office, data and service center closures. Employee relocation expenses and severance costs are expensed as incurred and classified as acquisition and restructuring costs. Accrued restructuring expenses were approximately $224,000 and $195,000 at December 31, 2012, and December 31, 2011, respectively. The severance cost of payments requiring future service was measured at December 31, 2012 and December 31, 2011 totaling approximately $0 and $550,000, respectively, and was amortized over the expected service period during 2012.

Note 11—Convertible Preferred Stock

On June 30, 2008, we entered into a transaction with Mexicans & Americans Thinking Together Foundation, Inc. (“the Organization”) terminating the Corporate Sponsorship and Management Services Agreement (the “CSMSA”). In consideration for the Transaction, we issued the Organization 25,000 shares of Series A Preferred Stock, par value $0.001, (the “Original Series A”). Dividends on the Original Series A accrued from the date of issuance at the rate per annum of 4.46% on the Stated Value ($100 per share) and were cumulative. Accrued dividends were $69,455 and $169,455 at December 31, 2012 and 2011, respectively. On May 12, 2011 the preferred stock was converted to 336,927 of common shares at the election of the Organization and dividend accrual terminated at the date of the conversion. On August 22, 2011, November 28, 2011, and January 18, 2012, $100,000, $50,000, and $100,000 respectively, partial dividend payments were made to the Organization.

On September 20, 2011, the Company amended the rights and preferences of the Original Series A (“Series A”). The Company sold 1,000,000 shares of new Series A convertible preferred for $5,000,000 to Harvest Small Cap Partners Master, LTD and Harvest Small Cap Partners, LP, (collectively “Harvest’). The new Series A shares were convertible at a conversion price per share based on the following: the lower of (i) $3.5785 or (ii), if the Merger of the Company and myYearbook closed, the lower of (A) 85% of the closing price of the Company’s common stock on the closing date of the Merger or (B) 85% of the volume weighted average price during the 20 trading days ending with the date of the closing of the Merger. On November 10, 2011, Harvest converted the Series A into 1,479,949 shares of the Company’s common stock, at a purchase price per share of approximately $3.38.

In connection with the closing of the Merger, the Company sold 1,000,000 shares of Series A-1 Preferred Stock (“Series A-1”) to MATT Inc. for $5,000,000. MATT Inc. was an existing stockholder of the Company. The Series A-1 shares are convertible, at MATT Inc.’s option, into 1,479,949 shares of the Company’s common stock, at a purchase price per share of approximately $3.38, and have voting rights on as converted basis.

F-22

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Note 12—Common Stock

The Company issued 901,321 shares, 811,016 shares and 784,240 shares of common stock in connection with the exercises of stock options during the years ended December 31, 2012, 2011 and 2010, respectively (see Note 13). During the year ended December 31, 2011, the Company issued 165,000 common shares in connections with the exercises of warrants (see Note 14).

On March 2, 2011, the Company shares issued 348,723 common shares to XtFt’s owners (currently known as Quepasa Games) in connection with the acquisition of all of the outstanding equity interests of XtFt (see Note 2). The Company issued 336,927 shares of common in connection with the conversion of preferred stock on May 12, 2011 (see Note 11). On November 9, 2011, our shareholders approved an increase in the Company’s authorized common stock from 50 million to 100 million shares. On November 10, 2011, the Company issued 1,479,949 common shares upon the conversion of the Series A preferred stock (see Note 11). On November 10, 2011, the Company issued 16,999,943 shares of common stock to the owners of Insider Guides, Inc. in connection with the closing of the Merger (see Note 2). On November 10, 2011 and November 15, 2011, in connection with the closing of the Merger, the Company sold 436,134 and 280,112, respectively, shares of common stock to four shareholders for $2,557,000.

On December 21, 2010, we sold 1,753,329 shares of common stock in a private placement at $7.50 per share for $13,149,968 in gross proceeds. We registered all of the shares in an S-1 filed with the Securities and Exchange Commission (“SEC”) on December 29, 2010. In connection with this private placement, we paid Merriman Capital, Inc. a fee of $434,999 for acting as placement agent. Also, we paid $10,000 to Merriman for reimbursement of legal fees and other expenses. Other offering costs of $72,612 for legal and filing fees have been incurred as of December 31, 2010, resulting in net proceeds of $12,632,357. We are using the proceeds from the private placement to support our growth and for general corporate purposes, including working capital, capital expenditures and acquisition consideration.

Note 13—Stock-Based Compensation

The fair values of share-based payments are estimated on the date of grant using the Black-Scholes option pricing model, based on weighted average assumptions. Expected volatility is based on historical volatility of our common stock. The risk-free rate is based on the U.S. Treasury yield curve in effect over the expected term at the time of grant. Compensation expense is recognized on a straight-line basis over the requisite service period of the award. During 2012, 2011 and 2010, we continued to use the simplified method to determine the expected option term since our stock option exercise experience does not provide a reasonable basis upon which to estimate the expected option term.

Stock based compensation expense includes incremental stock-based compensation expense as follows:

	For the Years Ended December 31,
	2012		2011		2010
Sales and marketing	$	347,555	$	567,380	$	412,183
Product development and content		1,856,624		953,742		918,844
General and administrative		1,677,717		2,096,258		4,533,942
Total stock-based compensation for continuing operations		3,881,896		3,617,380		5,864,969
Total stock-based compensation for discontinued operations		151,506		730,758		-
Total stock-based compensation for vesting of options	$	4,033,402	$	4,348,138	$	5,864,969

As of December 31, 2012, there was approximately $6.3 million of total unrecognized compensation cost, which is expected to be recognized over a period of approximately two years.

F-23

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Stock Option Plans

2012 Omnibus Incentive Plan

On June 1, 2012, the stockholders approved the 2012 Omnibus Incentive Plan (the “2012 Plan”), providing for the issuance of up to 5,700,000 shares of common stock, including approximately 2,100,000 shares previously approved by the Company’s stockholders under our Amended and Restated 2006 Stock Incentive Plan (the “2006 Stock Plan”, less one share of common stock for every one share of common stock that was subject an option or other award granted after December 31, 2011 under the 2006 Stock Plan, plus an additional number of shares of common stock equal to the number of shares previously granted under the 2006 Stock Plan that either terminate, expire, or are forfeited after the December 31, 2011. As of December 31, 2012, there were approximately 7,494,000 shares of common stock available for grant. A summary of stock option activity under the 2012 Plan during the year ended December 31, 2012 is as follows:

Options	Number of Stock Options			Weighted- Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at December 31, 2011		-		$	-
Granted		189,875		$	1.82
Exercised		-		$	-
Forfeited or expired		(2,500	)	$	1.84
Outstanding at December 31, 2012		187,375		$	1.84	9.5	$	$127,309
Exercisable at December 31, 2012		70,919		$	2.68	9.4	$	$42,983

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	For the year ended December 31,
	2012
Risk-free interest rate:		0.64	%
Expected term (in years):		5.7
Expected dividend yield:		-
Expected volatility:		84	%

2006 Stock Incentive Plan

On June 27, 2007, the stockholders approved the 2006 Stock Plan, providing for the issuance of up to 3,700,000 shares of common stock plus an additional number of shares of common stock equal to the number of shares previously granted under the 1998 Stock Option Plan that either terminate, expire, or lapse after the date of the Board of Directors’ approval of the 2006 Plan.

In 2008, our Board of Directors and stockholders approved an amendment to the 2006 Plan to authorize the issuance of an additional 2,000,000 shares of common stock. In November 2009, our Board of Directors approved an amendment to the 2006 Plan to authorize the issuance of an additional 2,000,000 shares of common stock. On June 4, 2010, our stockholders ratified this amendment to the 2006 Plan. In June 2011 and November 2011, our Board of Directors and stockholders approved amendments to the 2006 Plan to authorize the issuances of 4,000,000 additional shares of common stock. Pursuant to the terms of the 2006 Plan, eligible individuals could be granted incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, or stock grant awards.

F-24

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

A summary of stock option activity under the 2006 Stock Plans during the year ended December 31, 2012 is as follows:

Options	Number of Stock Options			Weighted- Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at December 31, 2011 (1)		9,168,893		$	2.70
Granted (2)		1,309,750		$	3.69
Exercised		(901,321	)	$	1.39
Forfeited or expired (3)		(1,124,982	)	$	5.93
Outstanding at December 31, 2012 (4)		8,452,340		$	2.56		6.8	$	10,845,396
Exercisable at December 31, 2012 (5)		5,819,245		$	1.92		5.9	$	10,760,862

(1)	Includes 138,864 outstanding options to purchase common stock at a weighted average exercise price of $3.58 per share being held by consultants.

(2)	Includes 10,000 outstanding options to purchase common stock at a weighted average exercise price of $4.20 per share being held by consultants.

(3)	Includes 13,333 of forfeited options to purchase common stock at a weighted average exercise price of $3.60 per share formerly held by consultants

(4)	Includes 135,531 options granted to purchase common stock at a weighted average exercise price of $3.62 per share being held by consultants.

(5)	Includes 91,352 exercisable options to purchase common stock at a weighted average exercise price of $3.06 per share being held by consultants.

The total intrinsic values of options exercised during the year ended December 31, 2012, 2011 and 2010 were approximately $1.8 million, $4.9 million and $2.2 million, respectively. The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	For the Years Ended December 31,
	2012			2011			2010
Risk-free interest rate:		0.80	%		1.31	%		1.86	%
Expected term (in years):		6.0			6.0			5.8
Expected dividend yield:		-			-			-
Expected volatility:		82	%		83	%		89	%

Non-Plan Options

The Board of Directors has approved and our stockholders have ratified the issuance of stock options outside of our stock incentive plans. A summary of Non-Plan option activity during the year ended December 31, 2012 is as follows:

Options	Number of Stock Options		Weighted- Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at December 31, 2011		443,038	$	1.34
Granted		-	$	-
Exercised		-	$	-
Forfeited or expired		-	$	-
Outstanding at December 31, 2012		443,038	$	1.34		6.9	$	668,987
Exercisable at Decemberr 31, 2012		443,038	$	1.34		6.9	$	668,987

F-25

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

On July 8, 2009, our Board of Directors authorized an option exchange of 5,751,937 existing stock options to a new exercise price of $1.00 per share in order to provide incentive for certain key employees. Some of the exchanged options were granted to our named executive officers including: 2,268,466 to John Abbott, the Chief Executive Officer, 1,826,971 to Michael Matte, the Chief Financial Officer and 732,500 to Louis Bardov, the former Chief Technology Officer. The financial impact of this transaction was an increase of $1,052,010 in stock based compensation to be amortized over the remaining life of the options and was recognized through year ended December 31, 2010.

Note 14—Warrants

In March 2006, we issued warrants to purchase 200,000 shares of common stock at an exercise price of $3.55 per share as compensation to our then Chief Executive Officer. These warrants were still outstanding on December 31, 2012 and expire in March 2016. During March 2006, we issued three series (Series 1, 2 and 3) of warrants to purchase 1,000,000 shares of common stock each at exercise prices of $2.87, $4.00, and $7.00 as compensation for certain strategic initiatives, including acquiring the services of our then Chief Executive Officer. The Series 1 warrant was exercised in 2006. Of the remaining warrants 50% (1,000,000) were owned by RSI. On January 25, 2008, the Company and RSI entered into a Note Purchase Agreement (the “RSI Agreement”). Pursuant to the terms of the RSI Agreement the exercise price of RSI’s outstanding warrants were reduced to $2.75 per share. The warrant re-pricing resulted in a discount on the Note Payable of $263,690, to be amortized over the life of the note, see Note 9. The Series 2 and Series 3 warrants were outstanding at December 31, 2012 and expire in March 2016. The fair value of the warrant re-pricing was determined by comparing the fair value of the modified warrant with the fair value of the unmodified warrant on the modification date and recording any excess as a discount on the note

On February 19, 2010, we reduced the exercise price of the remaining 1,000,000 outstanding warrants to $3.55 per share. The Series 2 and Series 3 warrants were outstanding at December 31, 2012 and expire in March 2016. The fair value of the warrant re-pricing was determined by comparing the fair value of the modified warrant with the fair value of the unmodified warrant on the modification date. The fair value of the modified warrants was calculated using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate:	3.24%
Expected term:	6. years
Expected dividend yield:	—
Expected volatility:	105.7%

In October 2006, we issued two series of warrants to purchase 1,000,000 shares of common stock each at exercise prices of $12.50 and $15.00 per share to MATT Inc. in connection with the issuance of common stock. On January 25, 2008, we entered into a Note Purchase Agreement (the “MATT Agreement”) with MATT Inc. Pursuant to the terms of the MATT Agreement the exercise price of MATT Inc.’s outstanding warrants were reduced to $2.75 per share. The warrant re-pricing resulted in a discount on the Note Payable of $1,341,692, to be amortized over the life of the note, (see Note 9). These warrants expire in October 2016 and were outstanding as of December 31, 2012. The fair value of the warrant re-pricing was determined by comparing the fair value of the modified warrant with the fair value of the unmodified warrant on the modification date and recording any excess as a discount on the note.

In September 2010, we granted warrants to purchase 265,000 shares of common stock at an exercise price of $4.50 per share as compensation to a consultant. These warrants were subject to vesting based on performance standards detailed in the agreement. Warrants to purchase 165,000 shares vested and the remaining 100,000 expired. During the year ended December 31, 2011 warrants to purchase 165,000 shares were exercised. No warrants to purchase shares were outstanding and exercisable on December 31, 2012. The fair value of these warrants of $178,903 was determined using the Black-Scholes option-pricing model with the assumptions listed below and recognized in general and administrative expenses on the accompanying statements of operations for 2011.

Risk-free interest rate:	0.87%
Expected term (years):	3.0
Expected dividend yield:	—
Expected volatility:	79.02%

F-26

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

A summary of warrant activity for the year ended December 31, 2012 is as follows:

Warrants	Number of Warrants		Weighted- Average Exercise Price
Outstanding at December 31, 2011		4,200,000	$	2.98
Granted		-	$	-
Exercised		-	$	-
Forfeited or expired		-	$	-
Outstanding at December 31, 2012		4,200,000	$	2.98
Exercisable at December 31, 2012		4,200,000	$	2.98

Note 15—Income Taxes

The Company did not provide a current or deferred U.S. federal, state, or foreign income tax provision or benefit for any of the periods presented because it has experienced recurring operating losses. The Company has provided a full valuation allowance on the deferred tax assets, consisting primarily of the net operating losses, because evidence does not indicate that the deferred tax assets will more likely than not be realized.

At December 31, 2012, the Company had net operating loss carryforwards of approximately $130,867,000 related to U.S. federal and state jurisdictions. Utilization of the net operating loss carryforwards, which expire at various times starting in 2013 through 2032, may be subject to certain limitations under Section 382 of the Internal Revenue Code, as amended, and other limitations under state and foreign tax laws. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of December 31, 2012, tax years 2009, 2010, and 2011 remain open for IRS audit. The Company has received no notice of audit from the Internal Revenue Service for any of the open tax years.

Actual income tax expense differs from the amount calculated using the Federal statutory tax rate of 34% as follows:

	2012			2011			2010
U.S. federal income tax at statutory rate	$	(3,505,000	)	$	(4,340,000	)	$	(2,261,000	)
Nondeductible expenses		69,000			113,000			2,000
Exercise and forfeitures of stock based compensation		(383,000	)		(1,298,000	)		(290,000	)
Change in valuation allowance		2,869,000			5,261,000			2,919,000
State tax benefit, net of federal provision (benefit)		(428,000	)		(677,000	)		(383,000	)
Foreign subsidiary loss		673,000			419,000			14,000
Adjustment for business combinations		704,000			522,000			-
Other		1,000			-			(1,000	)
Income Tax Expense	$	-		$	-		$	-

F-27

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Significant components of the Company's deferred tax assets (liabilities) are approximately as follows:

	December 31, 2012			December 31, 2011
Net operating loss	$	50,515,000		$	48,820,000
Property and equipment		(2,447,000	)		(2,999,000	)
Stock options and warrants		7,960,000			7,916,000
Other		1,269,000			691,000
Total deferred tax assets		57,297,000			54,428,000
Valuation allowance		(57,297,000	)		(54,428,000	)
Net deferred tax assets	$	-		$	-

Note 16—Related Party Transactions

Alonso Ancira serves on our Board of Directors as a non-employee director. Mr. Ancira also serves on the Board of Directors of the Organization, is the Chairman of the Board of Directors of MATT Inc., a principal stockholder of the Company and is the Chairman of the Board of Directors of AHMSA, which owns MATT Inc. We have participated in several significant transactions with MATT Inc., the Organization and AHMSA. See Note 9 – Notes and Loans Payable, Note 11 – Convertible Preferred Stock, and Note 14 – Warrants. These relationships do not qualify as related parties for accounting purposes under GAAP.

We earned approximately $0, $ 2 million, and $4.5 million of DSM revenue and $0, $70,000, and $1.2 million of website development revenue for the years ended December 31, 2012, 2011 and 2010, respectively, from AHMSA and MATT Inc. We earned $6 million of Social Theater revenue for the year ended December 31, 2012 from MATT Inc. At December 31, 2012 and December 31, 2011, approximately $6.0 million and $2 million respectively of our combined accounts receivable were from AHMSA and MATT Inc. John Abbott, the Company’s Chief Executive Officer and Chairman of the Board, has been a financial advisor to AHMSA. In connection with providing these services, AHMSA has been paying Mr. Abbott $30,000 per month.

Note 17—Subsequent Events

On March 5, 2013, the Company, AHMSA and MATT entered into an agreement to offset the Company’s $5,000,000 Subordinated Promissory Note dated January 25, 2008 (the “Note”) with approximately $6 million of accounts receivable that MATT and AHMSA owed to the Company (the “Receivable”). As of March 5, 2013, $6,254,178 in principal and accrued interest was outstanding under the Note, and the Receivable had a balance of $6,025,828 plus interest of $222,446 from the agreement. MATT exercised warrants dated October 17, 2006 at an exercise price of $2.75 per share (the “MATT Warrants”) to purchase 2,147 shares of common stock using the amount by which the outstanding principal and accrued interest under the Note exceeded the amount of the Receivable. As a result of these transactions, both the Note and the Receivable have been deemed fully satisfied. In connection therewith, MATT has agreed to exercise or forfeit the MATT Warrants with an aggregate exercise price of $2,000,000 over an eleven-month period beginning in March 2013. The Receivable represented approximately 38.2% of our accounts receivable and approximately 50% of our working capital as of December 31, 2012.

On March 5, 2013 the Company and Richard L. Scott Investments, LLC (“RSI”) entered into an agreement pursuant to which RSI exercised warrants dated as of March 21, 2006 to purchase one million shares of common stock at an exercise price of $2.75 per share (the “RSI Warrants”). RSI paid the exercise price of the RSI Warrants by offsetting that same amount under the Company’s $2,000,000 Subordinated Promissory Note dated January 25, 2008 (the “RSI Note”). The Company paid RSI $107,504 in cash, which represented the difference between the aggregate exercise price of the RSI Warrants of $2,750,000, and the total amount of principal and interest under the RSI Note that would have accrued through the 2016 due date of $2,857,504. As a result of these transactions, the RSI Warrants have been fully exercised and are of no further force or effect, and the RSI Note has been deemed fully satisfied.

F-28

MEETME, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2012, 2011, and 2010

Note 18—Quarterly Results of Operations Data (Unaudited)

The following tables set forth our unaudited quarterly consolidated statements of operations data for each of the eight quarters in the period ended December 31, 2012. In the opinion of management, the financial information reflects all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of this data.

	Three Months Ended,
	2012												2011
	December 31,			September 30,			June 30,			March 31,			December 31,			September 30,			June 30,			March 31,
Revenues	$	11,608,937		$	11,598,432		$	13,054,861		$	10,395,729		$	5,912,174		$	929,482		$	1,620,473		$	2,243,564

Operating Costs and Expenses
Sales and marketing		2,367,564			2,656,955			1,676,243			1,766,396			1,069,251			328,118			285,262			347,891
Product development and content		6,905,722			7,883,987			8,224,749			6,496,459			3,906,947			1,515,499			1,498,007			1,622,951
General and administrative		3,337,527			2,001,950			2,379,313			944,533			2,536,627			774,342			877,928			905,873
Depreciation and amortization		1,073,330			1,025,421			965,155			898,384			593,735			96,943			93,521			86,170
Acquisition and restructuring costs		(469,011	)		353,555			247,877			290,067			779,439			732,075			69,166			367,751
Operating Expenses		13,215,132			13,921,868			13,493,337			10,395,839			8,885,999			3,446,977			2,823,884			3,330,636

Loss from Operations		(1,606,195	)		(2,323,436	)		(438,476	)		(110	)		(2,973,825	)		(2,517,495	)		(1,203,411	)		(1,087,072	)
Other Income (Expense):

Interest income		2,811			3,866			4,318			5,574			7,805			15,426			17,474			16,560
Interest expense		(418,538	)		(280,852	)		(288,216	)		(298,068	)		(204,199	)		(151,780	)		(151,219	)		(149,986	)
Other income		-			8,581			497			533			493			548			574			596
Total Other Income (Expense)		(415,727	)		(268,405	)		(283,401	)		(291,961	)		(195,901	)		(135,806	)		(133,171	)		(132,830	)

Net loss from continuing operations	$	(2,021,922	)	$	(2,591,841	)	$	(721,877	)	$	(292,071	)	$	(3,169,726	)	$	(2,653,301	)	$	(1,336,582	)	$	(1,219,902	)
Net loss from discontinued operations	$	-		$	-		$	(3,114,040	)		(566,587	)	$	(2,287,545	)	$	(859,511	)	$	(970,026	)		(269,225	)
Net loss	$	(2,021,922	)	$	(2,591,841	)	$	(3,835,917	)	$	(858,658	)	$	(5,457,271	)	$	(3,512,812	)	$	(2,306,608	)	$	(1,489,127	)

Basic and diluted loss per common shareholders:
Continuing operations	$	(0.05	)	$	(0.07	)	$	(0.02	)	$	(0.01	)	$	(0.11	)	$	(0.16	)	$	(0.08	)	$	(0.08	)
Discontinued operations	$	-		$	-		$	(0.09	)	$	(0.02	)	$	(0.08	)	$	(0.05	)	$	(0.06	)	$	(0.02	)
Basic and diluted loss per common shareholders	$	(0.05	)	$	(0.07	)	$	(0.11	)	$	(0.02	)	$	(0.20	)	$	(0.22	)	$	(0.14	)	$	(0.10	)

F-29

NON-QUALIFIED STOCK OPTION AGREEMENT

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the “Agreement”) entered into as of _____________ (the “Grant Date”) between MeetMe, Inc. (the “Company”) and ________ (the “Optionee”).

WHEREAS, by action taken by the Company’s Board of Directors (the “Board”) it has adopted the 2012 Omnibus Incentive Plan (the “Plan”); and

WHEREAS, pursuant to the Plan, it has been determined that in order to enhance the ability of the Company to attract and retain qualified employees, consultants and directors, the Company has granted the Optionee the right to purchase the common stock of the Company pursuant to stock options.

NOW THEREFORE, in consideration of the mutual covenants and promises hereafter set forth and for other good and valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows:

1. Grant of Non-Qualified Options . The Company irrevocably granted to the Optionee, as a matter of separate agreement and not in lieu of salary or other compensation for services, the right and option to purchase all or any part of ______ shares of authorized but unissued or treasury common stock of the Company (the “Options”) on the terms and conditions herein set forth. This Agreement replaces any stock option agreement previously provided to the Optionee, if any, with respect to these Options. The Optionee acknowledges receipt of a copy of the Plan, as amended.

2. Price . The exercise price of the Options is $_____ per share.

3. Vesting - When Exercisable .

(a) The Options shall vest in equal monthly increments over a period of one year with the first vesting date being _________, subject to the Optionee’s continued service as a Director (as defined under the Plan) of the Company on each applicable vesting date. Any fractional vesting shall be rounded up to the extent necessary. Notwithstanding any other provision in this Agreement, the Options shall vest immediately on the occurrence of a Change of Control as defined under Section 11.3 of the Plan.

(b) Subject to Sections 3(c) and 4 of this Agreement, any of the vested Options may be exercised prior to and until 6:00 p.m. New York time 10 years from the Grant Date (the “Expiration Date”). None of the Options may be exercised prior to vesting.

(c) Notwithstanding any other provision of this Agreement, upon resolution of the Board or the Committee (as defined in the Plan), the Options, whether vested or unvested, shall be immediately forfeited in the event any of the following events occur:

(1) Prior to the termination of the Optionee’s service as a Director (or one year thereafter, as applicable), the Optionee breaches any fiduciary duty to the Company, engages in any fraudulent acts or makes any false or misleading statement relating to the Company, or intentionally violates any rules or policies of the Company, and as a result of the foregoing acts the Company is damaged;

(2) The Optionee purchases or sells securities of the Company in violation of the Company’s insider trading guidelines then in effect;

(3) The Optionee breaches any duty of confidentiality including that required by the Company insider trading guidelines then in effect;

(4) The Optionee competes with the Company;

(5) The Optionee recruits Company personnel for another entity or business; or

(6) The Optionee acts in a disloyal manner to the Company.

4. Termination of Relationship .

(a) If for any reason, except death or disability as provided below, the Optionee ceases to be a Director, then all rights granted hereunder shall terminate effective one year from that date. Any part of the Options that was not vested immediately before termination of the Optionee’s employment shall terminate at that time.

(b) If the Optionee shall die prior to the termination of service as a Director, the Optionee’s estate or any Transferee, as defined herein, shall have the right within one year of death to exercise the Optionee’s vested Options subject to Section 3(c). For the purpose of this Agreement, “Transferee” shall mean a person to whom such shares are transferred by will or by the laws of descent and distribution.

(c) If the Optionee becomes disabled (within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986) prior to termination of service as a Director, and the Optionee’s services are terminated as a consequence of such disability, then the vested Options may be exercised within one year from the date the services were terminated as a result of the disability.

(d) Notwithstanding anything contained in this Section 4, the Options may not be exercised after the Expiration Date.

5. Profits on the Sale of Certain Shares; Redemption . Upon occurrence of any of the events specified in Section 3(c) of this Agreement (the “Event Date”), all profits earned from the sale of shares of common stock underlying this Option, during the one-year period commencing on the Event Date, shall be forfeited and immediately paid by the Optionee to the Company. Further, in such event, the Company may at its option redeem shares of common stock acquired upon exercise of this Option by payment of the exercise price to the Optionee.

6. Method of Exercise . The Options shall be exercisable by a written notice in the form attached to this Agreement, which shall:

(a) be signed by the person or persons entitled to exercise the Options and, if the Options are being exercised by any person or persons other than the Optionee, be accompanied by proof, satisfactory to counsel for the Company, of the right of such person or persons to exercise the Options;

(b) be accompanied by full payment of the exercise price by (i) tender to the Company of an amount equal to the exercise price multiplied by the number of underlying shares being purchased either in cash, by wire transfer, or by certified check or bank cashier’s check, payable to the order of the Company; (ii) a reduction in the number of shares of common stock received upon an exercise of the Option equal to the exercise price, as described in the following paragraph (a “Net Exercise”); (iii) a broker assisted cashless exercise, whereby a broker-dealer advances the exercise price to the Company on behalf of the Optionee; or (iv) by a combination of any of the foregoing methods;

If the Optionee elects to conduct a Net Exercise pursuant to (ii) above, the Company shall cause to be delivered to the Optionee a certificate or certificates representing the number of shares of common stock computed using the following formula:

X=Y (A-B)

Where:

X = the number of shares of common stock to be issued to the Optionee;

Y = the portion of the Option (in number of shares of common stock) being exercised by the Optionee (at the date of such calculation);

A = the Fair Market Value (as defined in the Plan) of one share of common stock; and

B = exercise price (as adjusted to the date of such calculation).

(c) be accompanied by payment of any amount that the Company, in its sole discretion, deems necessary to comply with any federal, state or local withholding requirements for income and employment tax purposes. If the Optionee fails to make such payment in a timely manner, the Company may: (i) decline to permit exercise of the Options or (ii) withhold and set-off against compensation and any other amounts payable to the Optionee the amount of such required payment. Such withholding may be in the shares underlying the Options if a Net Exercise is elected or otherwise at the sole discretion of the Company.

The certificate or certificates for shares of common stock as to which the Options shall be exercised shall be registered in the name of the person or persons exercising the Options.

7. Anti-Dilution Provisions . The Options granted hereunder shall have the anti-dilution rights set forth in Section 12.2 of the Plan.

8. Necessity to Become Holder of Record . Neither the Optionee, the Optionee’s estate, nor any Transferee shall have any rights as a shareholder with respect to any shares underlying the Options until such person shall have become the holder of record of such shares. No dividends or cash distributions, ordinary or extraordinary, shall be provided to the holder if the record date is prior to the date on which such person became the holder of record thereof.

9. Reservation of Right to Terminate Relationship . Nothing contained in this Agreement shall restrict the right of the Company to terminate the relationship of the Optionee at any time, with or without cause. The termination of the relationship of the Optionee by the Company, regardless of the reason therefor, shall have the results provided for in Sections 3 and 4 of this Agreement.

10. Conditions to Exercise of Options . If a Registration Statement on Form S-8 (or any other successor form) is not effective as to the shares of common stock issuable upon exercise of the Options, the remainder of this Section 10 is applicable as to federal law. In order to enable the Company to comply with the Securities Act of 1933 (the “Securities Act”) and relevant state law, the Company may require the Optionee, the Optionee’s estate, or any Transferee as a condition of the exercising of the Options granted hereunder, to give written assurance satisfactory to the Company that the shares subject to the Options are being acquired for such person’s own account, for investment only, with no view to the distribution of same, and that any subsequent resale of any such shares either shall be made pursuant to a registration statement under the Securities Act and applicable state law which has become effective and is current with regard to the shares being sold, or shall be pursuant to an exemption from registration under the Securities Act and applicable state law.

The Options are further subject to the requirement that, if at any time the Board shall determine, in its discretion, that the listing, registration, or qualification of the shares of common stock underlying the Options upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with the issue or purchase of shares underlying the Options, the Options may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected.

11. Transfer . No transfer of the Options by the Optionee by will or by the laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of the letters testamentary or such other evidence as the Board may deem necessary to establish the authority of the estate and the acceptance by the Transferee or Transferees of the terms and conditions of the Options.

12. Duties of the Company . The Company will at all times during the term of the Options:

(a) Reserve and keep available for issue such number of shares of its authorized and unissued common stock as will be sufficient to satisfy the requirements of this Agreement;

(b) Pay all original issue taxes with respect to the issuance of shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith;

(c) Use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.

13. Parties Bound by Plan . The Plan and each determination, interpretation or other action made or taken pursuant to the provisions of the Plan shall be final and shall be binding and conclusive for all purposes on the Company and the Optionee and the Optionee’s respective successors in interest.

14. Severability . In the event any parts of this Agreement are found to be void, the remaining provisions of this Agreement shall nevertheless be binding with the same effect as though the void parts were deleted.

15. Arbitration . Any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement which the parties are unable to resolve by mutual agreement, except to the extent a party is seeking equitable relief, shall be settled by submission by either party of the controversy, claim or dispute to binding arbitration in Bucks County, Pennsylvania (unless the parties agree in writing to a different location), before a single arbitrator in accordance with the rules of the American Arbitration Association then in effect. The decision and award made by the arbitrator shall be final, binding and conclusive on all parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof.

16. Benefit . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their legal representatives, successors and assigns.

17. Notices and Addresses . All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing and shall be delivered to the addresses in person, by FedEx or similar receipted delivery as follows:

The Optionee:

The Company: MeetMe, Inc.

312 Clematis Street, Suite 407

West Palm Beach, FL 33401

Attention:

with a copy to:

or to such other address as either of them, by notice to the other may designate from time to time.

18. Attorney’s Fees . In the event that there is any controversy or claim arising out of or relating to this Agreement, or to the interpretation, breach or enforcement thereof, and any action or proceeding is commenced to enforce the provisions of this Agreement, the prevailing party shall be entitled to a reasonable attorneys’ fees, costs and expenses.

19. Governing Law . This Agreement and any dispute, disagreement, or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance shall be governed or interpreted according to the laws of Delaware without regard to choice of law considerations.

20. Oral Evidence . This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, except by a statement in writing signed by the party or parties against which enforcement or the change, waiver discharge or termination is sought.

21. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The execution of this Agreement may be by actual or facsimile signature.

22. Section or Paragraph Headings . Section headings herein have been inserted for reference only and shall not be deemed to limit or otherwise affect, in any matter, or be deemed to interpret in whole or in part any of the terms or provisions of this Agreement.

23. Stop-Transfer Orders .

(a) The Optionee agrees that, in order to ensure compliance with the restrictions set forth in the Plan and this Agreement, the Company may issue appropriate “stop transfer” instructions to its duly authorized transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(b) The Company shall not be required (i) to transfer on its books any shares of the Company’s common stock that have been sold or otherwise transferred in violation of any of the provisions of the Plan or the Agreement or (ii) to treat the owner of such shares of common stock or to accord the right to vote or pay dividends to any purchaser or other Transferee to whom such shares of common stock shall have been so transferred.

24. Exclusive Jurisdiction and Venue . Any action brought by either party against the other concerning the transactions contemplated by or arising under this Agreement shall be brought only in the state or federal courts of Pennsylvania and venue shall be in Bucks County or appropriate federal district and division. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.

[Signature Page to Follow]

IN WITNESS WHEREOF the parties hereto have set their hand and seals the day and year first above written.

WITNESSES:		Meetme, inc.


	By:

		Chief Financial Officer


		OPTIONEE:

NOTICE OF EXERCISE

To: __________________________

__________________________

Attention _________, _______________

Facsimile: (____) _____-______

Please be advised that I hereby elect to exercise my option to purchase shares of ___________, pursuant to the Stock Option Agreement dated __________________.

Number of Shares to Be Purchased: _______________

Multiplied by: Purchase Price Per Share $_______________

Total Purchase Price $_______________

Please check the payment method below:

____ Enclosed is a check for the total purchase price above.

____ Wire transfer sent on _____________, 20__.

Please contact me as soon as possible to discuss the possible payment of withholding taxes and any other documents we may require.

Name of Option Holder (Please Print): ________________________________

Address of Option Holder

________________________________________________________________

Telephone Number of Option Holder: ________________________________

Social Security Number of Option Holder: ________________________________

If the certificate is to be issued to person other than the Option Holder, please provide the following for such person:

________________________________

(Name)

________________________________

(Address)

________________________________

(Telephone Number)

________________________________

(Social Security Number)

In connection with the issuance of the Common Stock, if the Common Stock may not be immediately publicly sold , I hereby represent to the Company that I am acquiring the Common Stock for my own account for investment and not with a view to, or for resale in connection with, a distribution of the shares within the meaning of the Securities Act of 1933 (the “Securities Act”).

I am______ am not ______ [ please initial one ] an accredited investor for at least one of the reasons on the attached Exhibit A. If the SEC has amended the rule defining the definition of accredited investor, I acknowledge that as a condition to exercise the Options, the Company may request updated information regarding the Holder’s status as an accredited investor. My exercise of the Options shall be in compliance with the applicable exemptions under the Securities Act and applicable state law.

________________________________

Dated: _________________

Signature of Option Holder

Exhibit A

To Stock Option Agreement

For Individual Investors Only:

1. A person who has an individual net worth, or a person who with his or her spouse has a combined net worth, in excess of $1,000,000. For purposes of calculating net worth under this paragraph (1), (i) the primary residence shall not be included as an asset, (ii) to the extent that the indebtedness that is secured by the primary residence is in excess of the fair market value of the primary residence, the excess amount shall be included as a liability, and (iii) if the amount of outstanding indebtedness that is secured by the primary residence exceeds the amount outstanding 60 days prior to exercising the stock options, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability.

2a. A person who had individual income (exclusive of any income attributable to the person’s spouse) of more than who has $200,000 in each of the two most recently completed years and who reasonably expects to have an individual income in excess of $200,000 this year.

2b. Alternatively, a person, who with his or her spouse, has joint income in excess of $300,000 in each applicable year.

3. A director or executive officer of the Company.

Other Investors:

4. Any bank as defined in Section 3(a)(2) of the Securities Act of 1933 (“Securities Act”) whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; insurance company as defined in Section 2(13) of the Securities Act; investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000, or if a self-directed plan, with investment decisions made solely by persons that are accredited investors.

5. A private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940.

6. An organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.

7. A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the Securities Act.

8. An entity in which all of the equity owners are accredited investors.

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

For the fiscal year ended: December 31, 2012

Or

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

For the transition period from: to

Delaware	001-33105	86-0879433
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation or Organization)	File Number)	Identification No.)

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

Title of each class		Name of each exchange on which registered
Common Stock, $0.001 par value		NYSE MKT LLC

Securities registered pursuant to Section 12(g) of the Act: None

Large accelerated filer	o	Accelerated filer	þ
Non-accelerated filer	o	Smaller reporting company	o

PART I

Item 1.	Business	1

Item 1A.	Risk Factors	8

Item 1B.	Unresolved Staff Comments	18

Item 2.	Properties	19

Item 3.	Legal Proceedings	19

Item 4.	Mine Safety Disclosures	19

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20

Item 6.	Selected Financial Data	23

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 8.	Financial Statements and Supplementary Data	39

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	39

Item 9A.	Controls and Procedures	39

Item 9B.	Other Information	40

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	41

Item 11.	Executive Compensation	41

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	41

Item 13.	Certain Relationships and Related Transactions, and Director Independence	41

Item 14.	Principal Accountant Fees and Services	41

PART IV

Item 15.	Exhibits and Financial Statement Schedules	42

Signatures		43

	Monthly Average for the Quarter Ended December 31,
	2012		2011		2010
MAU- MeetMe		5,508,822		2,975,792		2,085,448
MAU - Quepasa (1)		-		1,191,677		2,771,716
Total		5,508,822		4,167,469		4,857,164

	For the Quarter Ended December 31,
	2012		2011		2010
Visits - MeetMe (2)		392,465,540		282,300,423		159,882,444
Visits - Quepasa		-		26,512,522		63,647,862
Total		392,465,540		308,812,945		223,530,306

Pageveiws - MeetMe (2)		10,227,133,397		7,999,614,088		3,905,932,204
Pageveiws - Quepasa		-		678,296,301		520,851,172
Total		10,227,133,397		8,677,910,389		4,426,783,376

Month Ending	Number of Members
January 31, 2013	99,135,430
December 31, 2012	95,880,968
November 30, 2012	94,061,095
October 31, 2012	91,814,990
September 30, 2012	89,209,509
August 31, 2012	87,308,204
July 31, 2012	85,743,278
June 30, 2012	84,562,796
May 31, 2012	83,588,508
April 30, 2012	82,617,928
March 31, 2012	81,533,528
February 28, 2012	80,456,035
January 31, 2012	79,442,018

YEAR ENDED DECEMBER 31, 2012:	HIGH		LOW

First quarter	$	5.47	$	3.01
Second quarter	$	4.65	$	2.12
Third quarter	$	3.20	$	1.55
Fourth quarter	$	4.31	$	2.14

YEAR ENDED DECEMBER 31, 2011:

First quarter	$	14.98	$	5.15
Second quarter	$	9.64	$	4.86
Third quarter	$	10.42	$	3.40
Fourth quarter	$	4.98	$	2.74

	12/07	12/08	12/09	12/10	12/11	12/12

MeetMe, Inc.	100.00	68.44	86.07	479.51	136.07	143.03
Russell 2000	100.00	66.21	84.20	106.82	102.36	119.09
RDG Internet Composite	100.00	56.53	98.33	110.81	114.60	136.20

	Years Ended December 31,
	2012			2011			2010			2009			2008
Statement of Operations data:
Revenues (1)	$	46,657,959		$	10,705,693		$	6,054,141		$	535,976		$	56,006
Operating Expenses (3)		52,026,176			18,487,496			12,109,536			10,466,656			11,967,511
Net loss from continuing operations (1)(4)	$	(6,627,711	)	$	(8,379,511	)	$	(6,650,650	)	$	(10,575,507	)	$	(7,139,319	)
Net loss from discontinued operations (2)	$	(3,680,627	)	$	(4,386,307	)	$	-		$	-		$	-
Net loss	$	(10,308,338	)	$	(12,765,818	)	$	(6,650,650	)	$	(10,575,507	)	$	(7,139,319	)
Preferred stock dividends	$	-		$	(40,705	)	$	(111,500	)	$	(111,500	)	$	(55,750	)
Net loss allocable to common shareholders	$	(10,308,338	)	$	(12,806,523	)	$	(6,762,150	)	$	(10,687,007	)	$	(7,195,069	)
Basic and diluted net loss per common shareholder:
Continuing operations	$	(0.18	)	$	(0.44	)	$	(0.52	)	$	(0.84	)	$	(0.57	)
Discontinued operations	$	(0.10	)	$	(0.23	)	$	-		$	-		$	-
Basic and diluted net loss per common shareholder	$	(0.28	)	$	(0.67	)	$	(0.52	)	$	(0.84	)	$	(0.57	)
Dividends per common share	$	-		$	-		$	-		$	-		$	-

Balance Sheet Data:
Working Capital	$	11,993,518		$	13,338,650		$	14,618,305		$	1,050,212		$	5,023,950
Total assets		104,434,667			106,804,696			16,452,789			2,250,391			6,741,705
Current portion of long-term debt		2,551,941			2,450,191			-			-			-
Long term debt, net of discounts		9,156,788			9,255,508			6,272,545			5,673,702			5,074,858
Stockholders' equity		85,522,149			90,645,574			9,187,891			(3,902,660	)		1,338,811

	For the years ended December 31,						2012 to 2011 Changes ($)			2011 to 2010 Changes ($)
	2012		2011		2010
Sales and marketing	$	347,555	$	567,380	$	412,183	$	(219,825	)	$	155,197
Product and content development		1,856,622		953,743		918,844		902,879			34,899
General and administrative		1,677,717		2,096,258		4,533,942		(418,541	)		(2,437,684	)
Total stock based compensation for continuing operations		3,881,894		3,617,381		5,864,969		264,513			(2,247,588	)
Total stock based compensation for discontinued operations		151,508		730,758		-		(579,250	)		730,758
Total stock based compensation	$	4,033,402	$	4,348,139	$	5,864,969	$	(314,737	)	$	4,348,139

	For the year ended December 31,
	2012			2011			Change
Games Revenues	$	840,190		$	1,144,443		$	(304,253	)
Games expenses		1,032,366			1,553,450			(521,084	)
Product development and content		552,563			1,609,917			(1,057,354	)
Depreciation and amortization		16,102			227,498			(211,396	)
Exit costs		431,418			-			431,418
Loss on disposable of assets		48,084			-			48,084
Stock-based compensation		151,508			730,758			(579,250	)
Loss on impairment of goodwill		2,288,776			1,409,127			879,649
Total		4,520,817			5,530,750			(1,009,933	)
Loss from discontinued operations attributable to Quepasa Games	$	(3,680,627	)	$	(4,386,307	)	$	705,680

From	Total		Less Than 1 Year		1-3 Years		3-5 Years		More than 5 Years
To
Long Term Debt (1)	$	11,071,094	$	1,903,368	$	480,753	$	8,686,973	$	-
Capital Lease Obligations (2)		1,706,803		648,573		1,058,230				-
Operating Lease Obligations (3)		2,982,100		1,436,800		973,200		572,100		-
Purchase Obligations		-		-		-		-		-
Other Long Term Liabilities on Balance Sheet		-		-		-		-		-
Total	$	15,759,997	$	3,993,342	$	2,507,582	$	9,259,073	$	-

	MEETME, INC.


	By:	/s/ Geoffrey Cook
		Geoffrey Cook
		Chief Executive Officer

Signatures	Title	Date

/s/ Michael Matte	Executive Vice President of Finance	March 14, 2013
Michael Matte	(Principal Financial Officer)

/s/ John Abbott	Chairman of the Board of Directors	March 14, 2013
John Abbott

/s/ Alonso Ancira	Director	March 14, 2013
Alonso Ancira

/s/ Lars Batista	Director	March 14, 2013
Lars Batista

/s/ Steven Besbeck	Director	March 14, 2013
Steven Besbeck

/s/ Geoffrey Cook	Director and Chief Executive Officer	March 14, 2013
Geoffrey Cook	(Principal Executive Officer)

/s/ Ernesto Cruz	Director	March 14, 2013
Ernesto Cruz

/s/ Terry Herndon	Director	March 14, 2013
Terry Herndon

/s/ Malcolm Jozoff	Director	March 14, 2013
Malcolm Jozoff

/s/Richard Lewis	Director	March 14, 2013
Richard Lewis

		Incorporated by Reference			Filed or Furnished
Exhibit No.	Exhibit Description	Form	Date	Number	Herewith

2.1	Agreement of Merger and Plan of Merger and Reorganization – Delaware Reincorporation	8-K	12/8/11	2.1
2.2	Agreement and Plan of Merger among Quepasa, IG Acquisition Company and Insider Guides, Inc. dated July 19, 2011*	8-K	7/20/11	2.1
2.3	Amendment to the Agreement and Plan of Merger among Quepasa Corporation, IG Acquisition Company and Insider Guides, Inc. dated July 19, 2011	8-K	9/21/11	2.1
3.1	Certificate of Incorporation	8-K	12/8/11	3.1
3.2	Certificate of Amendment to the Certificate of Incorporation – Name Change	10-Q	8/9/12	3.2
3.2	Certificate of Designation – Series A-1	8-K	11/10/11	3.1
3.3	Bylaws	8-K	12/8/11	3.2
4.1	Form of Hollywood Note	8-K	9/24/10	4.1
10.1	Amended and Restated 2006 Stock Incentive Plan**	10-Q	8/9/10	10.1
10.2	Amendment to the Amended and Restated 2006 Stock Incentive Plan**	S-8	7/1/11	4.1
10.3	2012 Omnibus Incentive Plan**	8-K	6/5/12	10.1
10.4	2012 Management Bonus Plan**	8-K	8/21/12	10.1
10.5	John Abbott Employment Agreement**	8-K	10/30/07	10.2
10.6	Abbott Employment Agreement Amendment No. 1**	10-KSB	3/31/08	10.18
10.7	Abbott Employment Agreement Amendment No. 2**	S-1	12/29/10	10.6
10.8	Michael Matte Employment Agreement**	8-K	10/30/07	10.3
10.9	Matte Employment Agreement Amendment No. 1**	10-KSB	3/31/08	10.21
10.10	Matte Employment Agreement Amendment No. 2**	S-1	12/29/10	10.9
10.11	Matte Employment Agreement Amendment No. 3**				Filed
10.12	Louis Bardov Employment Agreement**	10-Q	7/25/08	10.18
10.13	Geoffrey Cook Employment Agreement**	8-K	7/20/11	10.5
10.14	William Alena Employment Agreement**	S-4	8/11/11	10.23
10.15	Frederic Beckley Employment Agreement**				Filed
10.16	Gavin Roy Employment Agreement **				Filed
10.17	AHMSA Marketing Services Agreement	10-Q	11/12/10	10.5
10.18	AHMSA Promotional Campaign Agreement	10-Q	11/12/10	10.6
10.19	MATT, Inc. Note Purchase Agreement	8-K	1/30/08	10.1
10.20	MATT, Inc. Subordinated Promissory Note	8-K	1/30/08	10.11
10.21	RSI LLC Note Purchase Agreement	8-K	1/30/08	10.6
10.22	RSI LLC Promissory Note	8-K	1/30/08	10.12
10.23	Securities Purchase Agreement - MATT, Inc.	S-3	11/18/11	10.2
10.24	Registration Rights Agreement - MATT, Inc.	S-3	11/18/11	4.3
10.25	Hollywood Note Purchase Agreement	8-K	9/24/10	4.1
10.26	Form of Employee Option Agreement	10-K	3/14/12	10.22
10.27	Form of Director Option Agreement**				Filed
10.28	Form of Indemnification Agreement	S-4	8/11/11	10.29
10.29	Form of Indemnification Agreement – Lewis	S-4	8/11/11	10.30
10.30	Loan and Security Agreement dated November 21, 2008*	10-K	3/14/12	10.27
10.31	Supplement No. 1 to the Loan and Security Agreement dated November 21, 2008*	10-K	3/14/12	10.28

(i)	the representations and warranties contained in the agreement were made for the purposes of allocating contractual risk between the parties and not as a means of establishing facts;
(ii)	the agreement may have different standards of materiality than standards of materiality under applicable securities laws;
(iii)	the representations are qualified by a confidential disclosure schedule that contains nonpublic information that is not material under applicable securities laws;
(iv)	facts may have changed since the date of the agreement; and
(v)	only parties to the agreement and specified third-party beneficiaries have a right to enforce the agreement.

Richard L. Scott Investments, LLC				MeetMe, Inc.

By:				By:

Name:				Name:

Title:				Title:

Name	Richard L. Scott Investments, LLC
	(Please typewrite or print in block letters)

Address:



	Signature

Mexicans & Americans Trading Together, Inc.		MeetMe, Inc.

By:	By:

Name:	Name:

Title:	Title:

Quepasa.com de Mexico	Mexico
MeetMe Online Brasil S/S Ltda	Brazil

/s/ Geoffrey Cook
Geoffrey Cook Chief Executive Officer (Principal Executive Officer)

/s/ Michael Matte
Michael Matte Executive Vice President of Finance (Principal Financial Officer)