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EX-10.1 - LETTER OF AGREEMENT WITH THE INVESTOR RELATIONS GROUP DATED SEPTEMBER 19, 2011 - VAPIR ENTERPRISES INC.f10q0911ex10i_appsgenius.htm
EX-31.1 - CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT - VAPIR ENTERPRISES INC.f10q0911ex31i_appsgenius.htm
EXCEL - IDEA: XBRL DOCUMENT - VAPIR ENTERPRISES INC.Financial_Report.xls
EX-31.2 - CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT - VAPIR ENTERPRISES INC.f10q0911ex31ii_appsgenius.htm
EX-32.1 - CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT - VAPIR ENTERPRISES INC.f10q0911ex32i_appsgenius.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT 13 OR 15 (d) OF THE SECURITIES ACT OF 1934

For the quarterly period ended September 30, 2011

o TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT

For the transition period from __________ to __________

COMMISSION FILE NUMBER: 333-170715

APPS GENIUS CORP
 (Name of Registrant as specified in its charter)

 NEVADA
 
 27-1517938
(State or other jurisdiction of  incorporation of organization)                
 
 (I.R.S. Employer Identification No.)
 
157 Broad Street, Suite 109C
Red Bank, NJ 07701
 (Address of principal executive office)

(732) 530-1267
 (Registrant’s telephone number)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ   No o

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

Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
(Do not check if smaller reporting company)
o
Smaller reporting company
þ

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.  26,221,400 shares of common stock are issued and outstanding as of November 10, 2011.
 
 
 

 
 
APPS GENIUS CORP
FORM 10-Q
September 30, 2011

TABLE OF CONTENTS
 
 
   
Page No.  
 
PART I. - FINANCIAL INFORMATION
 
Item 1.
Financial Statements.
3
 
Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010
3
 
Statements of Operations for the Three and Nine Months Ended September 30, 2011 and 2010 (Unaudited)
4
 
Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 (Unaudited)
5
 
Notes to Unaudited Financial Statements.
6  - 13
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
14
Item 3
Quantitative and Qualitative Disclosures About Market Risk.
20
Item 4
Controls and Procedures.
20
 
 
PART II - OTHER INFORMATION
 
Item 1.
Legal Proceedings.
21
Item 1A.
Risk Factors.
21
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
21
Item 3.
Defaults Upon Senior Securities.
21
Item 4.
(Removed and Reserved).
21
Item 5.
Other Information.
21
Item 6.
Exhibits.
21

FORWARD LOOKING STATEMENTS
 
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
 
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and in other reports that we file with the SEC.   You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
 
We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
 
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

 
 
2

 
 
PART 1 - FINANCIAL INFORMATION

Item 1. 
Financial Statements.
 
APPS GENIUS CORP
BALANCE SHEETS
             
   
September 30,
   
December 31,
 
   
2011
   
2010
 
   
(Unaudited)
       
ASSETS
           
             
CURRENT ASSETS:
           
    Cash
  $ 13,113     $ 121,426  
    Accounts receivable
    1,434       4,163  
    Prepaid expenses
    175,556       -  
    Deferred financing costs
    7,500       -  
                 
        Total Current Assets
    197,603       125,589  
                 
PROPERTY AND EQUIPMENT, net
    4,740       5,750  
                 
        Total Assets
  $ 202,343     $ 131,339  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
CURRENT LIABILITIES:
               
    Notes payable
  $ 75,000     $ -  
    Note payable - related party
    5,000       -  
    Accounts payable and accrued expenses
    32,325       13,294  
    Accounts payable - related party
    12,000       2,500  
    Due to related party
    129       100  
 
               
        Total Current Liabilities
    124,454       15,894  
                 
                 
STOCKHOLDERS' EQUITY:
               
    Preferred stock ($0.001 par value; 20,000,000 shares authorized; No shares
               
       issued or outstanding at September 30, 2011 and December 31, 2010)
    -       -  
    Common stock ($0.001 par value; 100,000,000 shares authorized;
               
        26,151,400 and 25,596,400 shares issued and outstanding
               
        at September 30, 2011 and December 31, 2010, respectively)
    26,151       25,596  
    Additional paid-in capital
    846,469       690,024  
    Accumulated deficit
    (794,731 )     (600,175 )
                 
        Total Stockholders' Equity
    77,889       115,445  
                 
        Total Liabilities and Stockholders' Equity
  $ 202,343     $ 131,339  
 
See notes to unaudited financial statements
 
 
 
3

 
 
APPS GENIUS CORP
STATEMENTS OF OPERATIONS
(UNAUDITED)
                         
   
For the Three Months Ended
   
For the Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2011
   
2010
   
2011
   
2010
 
                         
NET REVENUES
  $ 1,915     $ 11,671     $ 10,450     $ 11,724  
                                 
OPERATING EXPENSES:
                               
     Research and development
    -       252,547       43,960       296,314  
     Administrative compensation
    12,000       42,108       40,025       52,208  
     Professional fees
    24,416       37,220       91,466       37,545  
     Other selling, general and administrative
    5,218       42,929       28,888       48,113  
                                 
        Total Operating Expenses
    41,634       374,804       204,339       434,180  
                                 
LOSS FROM OPERATIONS
    (39,719 )     (363,133 )     (193,889 )     (422,456 )
                                 
OTHER INCOME (EXPENSE):
                               
     Interest expense
    (675 )     -       (675 )     -  
     Interest expense - related party
    (29 )     -       (29 )     -  
     Interest income
    -       568       37       670  
                                 
        Total Other Income (Expense)
    (704 )     568       (667 )     670  
                                 
NET LOSS
  $ (40,423 )   $ (362,565 )   $ (194,556 )   $ (421,786 )
                                 
NET LOSS PER COMMON SHARE:
                               
    Basic and diluted
  $ -     $ (0.01 )   $ (0.01 )   $ (0.02 )
                                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
                         
    Basic and diluted
    25,799,226       25,585,530       25,687,078       24,348,630  
 
See notes to unaudited financial statements
 
 
 
4

 
 
APPS GENIUS CORP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
             
   
For the Nine Months Ended September 30,
   
For the Nine Months Ended September 30,
 
   
2011
   
2010
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (194,556 )   $ (421,786 )
Adjustments to reconcile net loss from operations to net cash
               
used in operating activities:
               
Stock-based compensation and fees
    30,444       -  
Contributed services
    6,000       -  
Depreciation
    1,010       708  
Changes in assets and liabilities:
               
Accounts receivable
    2,729       (9,799 )
Prepaid expenses
    (55,000 )     -  
Accounts payable and accrued expenses
    19,031       (5,347 )
Accounts payable - related party
    9,500       -  
Due to related parties
    29       (1,157 )
                 
NET CASH USED IN OPERATING ACTIVITIES
    (180,813 )     (437,381 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchase of property and equipment
    -       (5,895 )
                 
NET CASH USED IN INVESTING ACTIVITIES
    -       (5,895 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from notes payable
    75,000       -  
Proceeds from note payable - related party
    5,000       -  
Payment of deferred financing costs
    (7,500 )     -  
Repayment of subscription payable
    -       (18,600 )
Proceeds from sale of common stock
    -       670,600  
                 
NET CASH PROVIDED BY FINANCING ACTIVITIES
    72,500       652,000  
                 
NET (DECREASE) INCREASE IN CASH
    (108,313 )     208,724  
                 
CASH  - beginning of year
    121,426       40,100  
                 
CASH - end of period
  $ 13,113     $ 248,824  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:
               
Cash paid for:
               
Interest
  $ -     $ -  
Income taxes
  $ -     $ -  
                 
Non-cash investing and financing activities:
               
Common stock issued for future services
  $ 120,556     $ -  
 
See notes to unaudited financial statements.
 
 
 
5

 
 
APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2011

 
NOTE 1 –
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Apps Genius Corp (the “Company”) was incorporated in the State of Nevada on December 17, 2009.  The Company’s principal business is focused on creating innovative social games and mobile applications that let people play together with real-world friends and family using the currently available infrastructure built by both social and mobile networks. The Company’s cross-platform gaming and mobile applications allow users to play and interact with multiple people on multiple networks whether or not they have a preexisting relationship with them. The Company’s Social Gaming and Mobile App technology allows users and players to reach across the multiple networks into a virtual application or gaming environment.  Additionally, the Company has developed unique player incentive platforms that allow users to share in the success of the game or application.  Currently, the Company is developing its platform for Facebook, MySpace, iPhone and Android.

Basis of presentation and going concern

Management acknowledges its responsibility for the preparation of the accompanying interim financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the interim period presented. These financial statements should be read in conjunction with the summary of significant accounting policies and notes to financial statements included in the Company’s Form 10-K annual report for the year ended December 31, 2010.  The accompanying unaudited financial statements for Apps Genius Corp have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S.”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

The Company was previously presented as a development stage company. Planned principal operations are underway and generating revenue, therefore the Company has exited the development stage.

As reflected in the accompanying financial statements, the Company had a net loss and net cash used in operations of $194,556 and $180,813, respectively, for the nine months ended September 30, 2011 and an accumulated deficit of $794,731 at September 30, 2011 and has minimal revenues. These matters raise substantial doubt about the company’s ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan, raise additional capital, and generate revenues. Currently, management is seeking capital to implement its business plan.   Management believes that the actions presently being taken provide the opportunity for the Company to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Use of estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates in the 2011 and 2010 periods include the useful life of property and equipment, allowance for doubtful accounts receivable, assumptions used in assessing impairment of long-term assets and valuation of deferred tax assets, and the value of stock-based compensation and fees.

Cash and cash equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents.


 
6

 
 
APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2011

 
NOTE 1 –
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentrations

Concentration of credit risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash. Balances at financial institutions in the United States are insured up to $250,000 at each bank. There were no deposits in excess of federally insured limits at September 30, 2011.  The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

Concentration of revenue

The Company sells its products to its customers through five revenue sharing arrangements. The following represents identifiable concentrations for any arrangement where revenue exceeded 10% of the total revenues for the nine months ending September 30, 2011 as follows:
 
Arrangement
 
Percentage of total revenues
   
Percentage of accounts receivable balance at
September 30, 2011
 
1    
50.9%
     
12.8%
 
2    
29.1%
     
0.0%
 

Accounts receivable

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. At September 30, 2011 and December 31, 2010, the Company does not, based on a review of its outstanding balances, have an allowance for doubtful accounts.

Fair value measurements and fair value of financial instruments

The Company adopted ASC Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

*
Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

*
Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.

*
Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable, notes payable, and amounts due to related party approximate their fair market value based on the short-term maturity of these instruments. The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.

 
 
7

 

APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2011

 
NOTE 1 –
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Property and equipment

Property and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.  When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

Software development costs

Costs incurred in connection with the development of software products are accounted for in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 985 “Costs of Software to Be Sold, Leased or Marketed.”  Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market. Amortization of capitalized software development costs begins upon initial product shipment. Capitalized software development costs are amortized over the estimated life of the related product (generally thirty-six months), using the straight-line method. The Company evaluates its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable.  Recoverability of software assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset.  If such software assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software asset.  During the 2011 and 2010 periods, the Company did not capitalize any software development costs.

Impairment of long-lived assets

In accordance with ASC Topic 360, the Company reviews, long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment charges during the nine months ended September 30, 2011 or 2010.

Revenue recognition

The Company recognizes 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.  For all revenue sources discussed below, in accordance ASC 605-45 “Principal Agent Considerations”, the Company recognizes revenue net of amounts retained by third party entities pursuant to revenue sharing agreements. The Company’s specific revenue recognition policies are as follows:

The Company recognizes revenue from the sale of its social games and mobile applications (“Apps”) when the App is sold and downloaded by the customer and collection is reasonably assured.

The Company recognizes revenues from the placement of banner ads on its social games and mobile applications upon placement of the banner and when collection is reasonably assured.

Some of the Company’s social games contain a virtual currency or point systems that allow users to increase their game playing levels and gain special privileges.  Users collect points by moving through the levels, buying them or by completing offers from third-party advertisers that convert into points or virtual currency. When a user completes an offer for one of our third-party advertisers, the advertiser pays the Company a commission.  The commission is recognized as revenue upon completion of the offer and the receipt by the Company of an electronic confirmation from the advertiser and when collection is reasonably assured.  The Company recognizes revenues from the sale of virtual currency to users upon the delivery of the virtual currency to the user’s account and when collection is reasonably assured.
 
 
 
8

 

APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2011

 
NOTE 1 –
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income taxes

The Company is governed by the Income Tax Law of the United States. The Company utilizes ASC Topic 740, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Under ASC Topic 740, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements.

A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longermeet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.  

Stock-based compensation

The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. There were no options outstanding as of September 30, 2011 and 2010. The Company accounts for non-employee share-based awards in accordance with ASC Topic 505-50.

Advertising

Advertising is expensed as incurred and is included in selling, general and administrative expenses on the accompanying statements of operations. For the nine months ended September 30, 2011 and 2010, advertising expense was $215 and $2,000, respectively.

Research and development

Research and development costs which consist primarily of salaries and fees paid to third parties for the development of software and applications are expensed as incurred. For the nine months ended September 30, 2011 and 2010, research and development costs were $43,960 and $296,314, respectively.

Net loss per share of common stock
 
Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. At September 30, 2011 and 2010, the Company did not have potentially dilutive common stock equivalents.

Recent accounting pronouncements

Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

 
 
9

 

APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2011

 
NOTE 2 -
PROPERTY AND EQUIPMENT

At September 30, 2011 and December 31, 2010, property and equipment consist of the following:

 
Useful Life
 
2011
   
2010
 
Office equipment and furniture
5-7 Years
 
$
214
   
$
214
 
Computer equipment
5 Years
   
6,581
     
6,581
 
       
6,795
     
6,795
 
Less: accumulated depreciation
     
(2,055
)
   
(1,045
)
     
$
4,740
   
$
5,750
 

For the nine months ended September 30, 2011 and 2010, depreciation expense amounted to $1,010 and $708, respectively.
 
NOTE 3 –
RELATED PARTY TRANSACTIONS

Note payable – related party

In August 2011, the Company entered into a note agreement with Adam Kotkin, the Company’s chief executive officer (“CEO”). The note is unsecured, bears interest at 6.0% and is due on the earlier of 1) August 31, 2012 or 2) within three business days of the closing of a private placement of certain equity securities offered by the Company, of a minimum amount of $250,000, with the proceeds of the offering to be received directly by the Company. At the sole option of the Company, the Maturity Date may be extended from the Maturity Date, in 30 day increments, for up to 12 months during which the Company will accrue at an annual interest rate of 6.5%. At September 30, 2011, the principal amount due under this loan amounted to $5,000. At September 30, 2011, interest due under the note amounted to $29 which has been included in due to related party on the accompanying balance sheet. For the nine months ended September 30, 2011, interest expense related to this note amounted to $29.

Other

The Company’s CEO from time to time, provided advances to the Company for working capital purposes. At September 30, 2011 and December 31, 2010, the Company had a payable to the CEO of $100 and $100, respectively. These advances were short-term in nature and non-interest bearing and are included in due to related party on the accompanying balance sheet.

As of September 30, 2011 and December 31, 2010, the Company owed $12,000 and $2,500 to a company owned by its chief financial officer for services rendered, respectively.

During the nine months ended September 30, 2011, an officer donated services valued at $6,000 which was treated as contributed capital.

NOTE 4 –
NOTES PAYABLE

On June 28, 2011, the Company entered into two note agreements with two individuals. The notes are unsecured, bear interest at 6.0% and are due on the earlier of 1) December 28, 2011 or 2) within three business days of the closing of a private placement of certain equity securities offered by the Company, of a minimum amount of $250,000, with the proceeds of the offering to be received directly by the Company. At the sole option of the Company, the Maturity Date may be extended from the Maturity Date, in 30 day increments, for up to 12 months during which the Company will accrue at an annual interest rate of 6.5%. At September 30, 2011, the principal amount due under the loans amounted to $20,000.

In August 2011, the Company entered into three note agreements with three parties. The notes are unsecured, bear interest at 6.0% and are due on the earlier of 1) August 31, 2012 or 2) within three business days of the closing of a private placement of certain equity securities offered by the Company, of a minimum amount of $250,000, with the proceeds of the offering to be received directly by the Company. At the sole option of the Company, the Maturity Date may be extended from the Maturity Date, in 30 day increments, for up to 12 months during which the Company will accrue at an annual interest rate of 6.5%. At September 30, 2011, the principal amounts due under the loans amounted to $55,000.

At September 30, 2011, interest amounts due under the loans amounted to $674. The weighted average interest rate on the Company’s short-term obligations was 6%.

 
 
10

 

APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2011

 
NOTE 5 –
STOCKHOLDERS’ EQUITY

Preferred stock

The Company authorized 20,000,000 preferred shares.  Preferred shares may be designated by the Company’s board of directors’.  There were no shares designated as of September 30, 2011.

Common stock

On May 12, 2011, the Company issued 80,000 shares of its common stock to the Company’s chief financial officer for services rendered. The Company valued these common shares at the fair value of $0.15 per common share based on the sale of common stock in a private placement at $0.15 per common share. In connection with issuance of these common shares, the Company recorded stock-based compensation of $12,000.

On June 1, 2011, the Company issued 75,000 shares of its common stock to a consultant for business development services rendered. The Company valued these common shares at the fair value of $0.20 per common share based on the fair value of services provided. In connection with issuance of these common shares, the Company recorded professional fees of $15,000.
 
On September 19, 2011, the Company issued 400,000 shares of its common stock to a consultant for investor relations services to be provided over a one-year term. The Company valued these common shares at the fair value of $0.31 per common share based on the quoted trading price of the common stock on the grant date which is the measurement date. In connection with issuance of these common shares, the Company recorded professional fees in 2011 of $3,444 and a prepaid expense at September 30, 2011 of $120,556.

Equity Incentive Plan

On September 23, 2010, the Company’s board of directors adopted, and the Company’s stockholders approved the Apps Genius Corp Equity Incentive Plan (the “Plan”), which covers 5,000,000 shares of common stock.  The purpose of the Plan is to advance the interests of the Company by enhancing the ability of the Company to (i) attract and retain employees and other persons or entities who are in a position to make significant contributions to the success of the Company and its subsidiaries; (ii) reward such persons for such contributions; and (iii) encourage such persons or entities to take into account the long-term interest of the Company through ownership of shares of the Company’s common stock, par value $.0001 per share.
 
The Plan is intended to accomplish these objectives by enabling the Company to grant awards in the form of incentive and nonqualified stock options, stock appreciation rights, restricted stock, deferred stock, or other stock based awards. The Plan will be administered by the Board of Directors of the Company or, upon its delegation, by the Compensation Committee of the Board of Directors.  The Plan became effective on September 23, 2010 and will terminate on September 23, 2020.

Subject to adjustment as provided in the Plan, the aggregate number of shares of common stock reserved for issuance pursuant to awards granted under the Plan shall be five million (5,000,000) shares; provided, however ,  that within sixty (60) days of the end of each fiscal year following the adoption of the Plan, the Board, in its discretion, may increase the aggregate number of shares of Common Stock available for issuance under the Plan by an amount not greater than the difference between (i) the number of shares of Common Stock available for issuance under the Plan on the last day of the immediately preceding fiscal year, and (ii) the number of shares of Common Stock equal to 15% of the shares of Common Stock outstanding on the last day of the immediately preceding fiscal year.

As of September 30, 2011, no shares of common stock have been issued under the Plan.
 
NOTE 6 –
COMMITMENT AND CONTINGENCIES

Retainer Agreement – Registered Direct Offering

On June 28, 2011 the Company signed a retainer agreement with its attorney to act as counsel for the Company with respect to a registered direct financing transaction (the “financing”) for a fee of $75,000 payable as follows plus expenses:

1.  
In the event that the Financing closes. $75,000 to be paid from the proceeds of the Financing: or

2.  
In the event that the Financing does not close, $1,500 cash per month for a period of 24 months and 200,000 shares of common stock.

 
 
11

 
 
APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2011

 
NOTE 6 –
COMMITMENT AND CONTINGENCIES (continued)

Agreement for Exclusive Placement Agent

In connection with the Company’s plans to raise funds, on June 29, 2011, the Company signed an agreement with Rodman &Renshaw, LLC ("Rodman" or the "Placement Agent"), whereby Rodman shall serve as the exclusive placement agent for the Company, on a "reasonable best efforts" basis, in connection with a proposed placement (the "Placement") of registered securities (the "Securities") of the Company, including shares of the Company's common stock, par value $0.001 per share (the "Shares" or "Common Stock") and warrants to purchase shares of Common Stock.   The Company and Rodman amended the agreement on August 8, 2011. As compensation for the services provided by Rodman hereunder, the Company agrees to pay to Rodman:

(A) The fees set forth below with respect to the Placement:
 
1.  
A cash fee payable immediately upon the closing of the Placement and equal to 7% of the aggregate gross proceeds raised in the Placement.
  
2.  
Such number of warrants (the "Rodman Warrants") to Rodman or its designees at the Closing to purchase shares of Common Stock equal to 7% of the aggregate number of Shares sold in the Placement, plus any Shares underlying any convertible Securities sold in the Placement to such purchasers. The Rodman Warrants shall have the same terms as the warrants (if any) issued to the Purchasers in the Placement except that the exercise price shall be 125% of the public offering price per share and the expiration date shall be five years from the effective date of the required registration statement.  The Rodman Warrants shall not have anti-dilution protections or be transferable for six months from the date of the Placement, except as permitted by Financial Industry Regulatory Authority (''FINRA'') Rule 5110, and further, the number of Shares underlying the Rodman Warrants shall be reduced if necessary to comply with FINRA rules or regulations.
 
(B) The Company agreed to pay Rodman a fee equal to 5% in kind consideration of the aggregate consideration paid or received by the Company in connection with a transaction consummated during the term or tail period, as defined, with (a) a candidate introduced to the Company by Rodman (a “Rodman Candidate”) or (b) a candidate introduced to the Company by a Rodman candidate. A transaction or combination of transactions shall include the purchase of sale of assets or outstanding stock, or a merger, acquisition or other business combinations.

(C) The Company also agrees to pay to Rodman a non-accountable expense allowance equal to 2.0% of the aggregate gross proceeds raised in the Placement (provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement). Such non-accountable expense allowance shall be payable immediately upon (but only in the event of) the closing of the Placement. In September 2011, the Company paid a $7,500 advance to Rodman upon execution of this Agreement, which shall be applied against the 2.0% non-accountable expense allowance. At September 30, 2011, the $7,500 advance has been reflected as deferred financing costs on the accompanying balance sheet.

Consulting Agreement for Business Development Services

On June 1, 2011, the Company entered into a consulting agreement for financials and business advisory services.  In connection with the agreement, the Company paid the consultant cash of $5,000 and issued 75,000 shares of its common stock.  The Company valued these common shares at the fair value of $0.20 per common share based on the fair value of services provided. In connection with issuance of these common shares, the Company recorded professional fees of $15,000. In addition, if directly or indirectly as a result of introductions or other efforts of the consultant, one or more individuals or entities purchases or invests in the Company, the Company shall pay the consultant (a) 10% of the amount of the investment and (b) a non-accountable expense allowance of 3% of the aggregate amount of the investment and (c) a cashless warrant representing underlying shares equal to 10% of the shares purchased in any investment, which will be exercisable for seven years at the same exercise price as the investors.

 
 
12

 

APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2011

 
NOTE 7 –
SUBSEQUENT EVENTS

Licensing Agreement

On October 17, 2011 (the “Effective Date”), the Company entered into an exclusive, worldwide licensing agreement (the “License Agreement”) with NEP Snooki Enterprises, LLC (the “Licensor”) and Starz Management & PR (“Starz”), which grants the Company the right to use Nicole Polizzi’s (known by the stage name “Snooki”) name and likeness in the development, manufacture, marketing, sale and distribution of social applications and social games (the “Apps”) to be released and offered on the Android, Apple's iOS, Facebook, and Google+ platforms. Pursuant to the License Agreement, the Company will develop a total of four Apps within one year of the Effective Date (the “Initial Term”), with the release of the first App scheduled for late November 2011. The term of the License (the “Term”) shall be one (1) year from the earlier of (i) the Release Date of fourth App described above or (ii) eight months after the Effective Date.  In the event that the Company successfully releases four Products within the Term, the Company, with the mutual agreement of the parties and the payment of the an additional cash fee, shall be entitled to release up to four additional new Products and the Initial Term shall be extended for an additional one-year period.
 
In consideration for the exclusive license granted by Licensor during the Initial Term, the Company paid a non-refundable license fee of $55,000 (the “Cash Fee”). In the event that the Company and the Licensor mutually agree to extend the Term and produce additional products, then upon such mutual agreement, the Company shall pay an Additional Cash Fee of $50,000. The Company shall be entitled to recover the Cash Fees or Additional Cash Fees from any revenue generated by the sale of the products related to the License Agreement by deducting the Cash Fee (or Additional Cash Fees, if applicable) prior to the payment of any royalties, as described below; provided, however, the Company shall only be entitled to deduct a maximum of $13,750 for each product.

The Company shall pay Licensor non-returnable royalties (“Royalties”) in an amount equal to 50% of the revenue generated, directly or indirectly, from the virtual sale of the Products, advertising sponsorship, commercial tie-ins and/or product placement related to the licensed property, and shall pay Starz Royalties equal to 10% of the revenue generated from the sale of the products related to the licensed property. The revenue shall be calculated as the gross revenue less any mandatory third party commissions, including fees from all sites that sell and market the products and any additional marketing or advertising expenses, and any recovery of Cash Fees as permitted, as discussed above.

In addition, the Company has issued Licensor or assignees warrants exercisable for the purchase of 1,100,000 shares of the Company’s common stock at an exercise price equal to $0.31 per share on a for-cash or cashless exercise basis (the “Warrants”) and 70,000 shares of the Company’s common stock were issued to Starz.  The Warrants will be exercisable by Licensor until the later of (iii) one hundred fifty (150) days following the end of the Term (and any extensions thereto) or (iv) eighteen (18) months following the Effective Date.  If at any time after the six (6) month anniversary of the date hereof, there is no effective Registration Statement registering, or no current prospectus available for, the resale of the Warrant shares by the holder, then this Warrant may be exercised, in whole or in part, at such time by means of a cashless exercise.
 
The Company shall account for the equity instruments issued pursuant to the License Agreement in accordance with ASC 505-50, “Equity Based Payments to Non-Employees”.  

The Company calculated the fair value of the 1,100,000 warrants granted using the Black-Scholes option pricing model and recorded the fair value of $147,884 as a deferred license costs which will be amortized over the initial estimated license term of 18 months.  In applying the Black-Scholes method, the Company calculated volatility based upon the volatility of several similar companies with historical market prices for their common stock, utilized discount rates obtained from the Federal Reserve Statistical Release for treasury instruments of the same duration, and an expected term based on the estimated contractual term of the warrants of 23 months. Since the expiration date of the warrants has not been determined, the fair market value of warrants granted pursuant to the License Agreement is subject to adjustment by the Company if the estimates of the initial expiration date changes.

In connection with issuance of the 70,000 shares of the Company’s common stock, the Company valued these common shares at the fair value of $0.315 per common share based on the quoted trading price of the common stock on the grant date which is the measurement date. In connection with issuance of these common shares, the Company recorded a deferred license cost of $22,050 which will be amortized over the initial estimated license term of 18 months.

 
 
13

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

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Plan of Operations

We were incorporated in the State of Nevada on December 17, 2009 as Apps Genius Corp.

We create innovative social games and mobile application that let you play together with real-world friends and family using the infrastructure built by social and wireless networks. Our cross-platform gaming and mobile applications allow users to play and interact with the same people such user would play cards, board games or go bowling within the real world, regardless of the network they are on.  Our Social Gaming and Mobile App technology allows users and players to reach across the different networks into a virtual application or gaming environment.  Additionally, we have developed unique player incentive platforms that allow users to share in the success of the game or application.  Currently we are developing our platform for Facebook, MySpace, iPhone and Android.
 
We monetize our social games through virtual currencies through Radium One (formerly gWallet) and banner ads through Cubics.com, a division of adKnowledge. Our mobile applications are monetized by either charging fees for downloading through the Apple iTunes Store or by offering free applications with banner advertising supplied by Cubics. To date, we have commenced limited operations and will require outside capital to implement our business model.

Limited Operating History

We have generated limited financial history and have not previously demonstrated that wewill be able to expand ourbusiness. Our business is subject to risks inherent in growing an enterprise, including limited capital resources and possible rejection of our business model and/or sales methods.

Critical Accounting Policies and Estimates

While our significant accounting policies are more fully described in Note 1 to our financial statements for the nine months ended September 30, 2011, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.
 
Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, recovery of long-lived assets, income taxes, and the valuation of equity transactions. We base our estimates on historical experience and on various other assumptions that we believed to be 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. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements.


 
14

 
 
Software development costs

Costs incurred in connection with the development of software products are accounted for in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 985 “Costs of Software to Be Sold, Leased or Marketed.”  Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market. Amortization of capitalized software development costs begins upon initial product shipment. Capitalized software development costs are amortized over the estimated life of the related product (generally thirty-six months), using the straight-line method. The Company evaluates its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable.  Recoverability of software assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset.  If such software assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software asset.  We have not capitalized any software development costs.

Impairment of long-lived assets

In accordance with ASC Topic 360, we review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. We recognize an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. We did not record any impairment charges during the nine months ended September 30, 2011 and 2010, respectively.

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.  For all revenue sources discussed below, in accordance ASC 605-45 “Principal Agent Considerations”, we recognize revenue net of amounts retained by third party entities pursuant to revenue sharing agreements. Our specific revenue recognition policies are as follows:

We recognize revenue from the sale of our social games and mobile applications (“Apps”) when the App is sold and downloaded by the customer and collection is reasonably assured.

We recognize revenues from the placement of banner ads on social games and mobile applications upon placement of the banner and when collection is reasonably assured.

Some of the our social games contain a virtual currency or point systems that allow users to increase their game playing levels and gain special privileges.  Users collect points by moving through the levels, buying them or by completing offers from third-party advertisers that convert into points or virtual currency. When a user completes an offer for one of our third-party advertisers, the advertiser pays us a commission.  The commission is recognized as revenue upon completion of the offer and the receipt by us of an electronic confirmation from the advertiser and when collection is reasonably assured.  The Company recognizes revenues from the sale of virtual currency to users upon the delivery of the virtual currency to the user’s account and when collection is reasonably assured.

Stock-based compensation

We account for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. There were no options outstanding as of September 30, 2011. We account for non-employee share-based awards in accordance with ASC Topic 505-50.
  
Recent accounting pronouncements

Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

 
 
15

 

Results of Operations

For the Three and Nine Months Ended September 30, 2011 and 2010

Revenues

For the nine months ended September 30, 2011 and 2010, we recognized revenues of $10,450 and $11,724 respectively from the sale of games and from advertising.  For the three months ended September 30, 2011 and 2010, we recognized revenues of $1,915 and $11,671 respectively from the sale of games and from advertising. The decreases were mainly attributable to the lack of marketing and promotional efforts due to the Company’s lack of working capital.
 
Operating Expenses

For the nine months ended September 30, 2011 and 2010, operating expenses amounted to $204,339 and $434,180 respectively, a decrease of $229,841 or 52.9%. For the three months ended September 30, 2011 and 2010, operating expenses amounted to $41,634 and $374,804, respectively, a decrease of $333,170 or 88.9%.  Changes in operating expenses consisted of the following:

   
Three Months ended
September 30,
   
Nine Months ended
September 30,
 
   
2011
   
2010
   
2011
   
2010
 
     Research and development
 
$
-
   
$
252,547
   
$
43,960
   
$
296,314
 
     Administrative compensation
   
12,000
     
42,108
     
40,025
     
52,208
 
     Professional fees
   
24,416
     
37,220
     
91,466
     
37,545
 
     Other selling, general and administrative
   
5,218
     
42,929
     
28,888
     
48,113
 
                                 
   
$
41,634
   
$
374,804
   
$
204,339
   
$
434,180
 

*
For the nine months ended September 30, 2011, research and development expenses, which consists primarily of salaries and fees paid to third parties for the development of software and applications decreased by $252,354 or 85.2% as compared to the same period in 2010.  For the three months ended September 30, 2011, research and development expenses decreased by $252,547 or 100% as compared to the same period in 2010.  Due to a lack of working capital, we reduced the number of research and development personnel. In May 2011, we temporarily ceased our research and development activities until we generate sufficient revenues from our current portfolio of products or we are able to raise additional working capital funds from debt or equity financing or loans. At such time we will resume our research & development activities to develop new applications.
 
*
For the nine months ended September 30, 2011, administrative compensation decreased by $12,183 or 23.3% as compared to the same period in 2010.  For the three months ended September 30, 2011, administrative compensation decreased by $30,108 or 71.5% as compared to the same period in 2010. We have reduced administrative staff due to the lack of working capital.  For the nine months ended September 30, 2011, administrative compensation includes $6,000 of services contributed to us by our chief executive officer.
 
*
For the nine months ended September 30, 2011, professional fees increased by $53,921 or 143.6% as compared to the same period in 2010.  For the three months ended September 30, 2011, professional fees decreased by $12,804 or 34.4% as compared to the same period in 2010.  We expect professional fees to increase as we incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. Additionally, during the three and nine months ended September 30, 2011, we incurred stock based professional fees of $3,444 and $30,444 related to business development and investor relations services, respectively.
 
*
For the nine months ended September 30, 2011, other selling, general and administrative expenses decreased by $19,225 or 40.0% as compared to the same period in 2010.  For the three months ended September 30, 2011, other selling, general and administrative expenses decreased by $37,711 or 87.8% as compared to the same period in 2010.   During the three months ended September 30, 2011, we reduced general and administrative expenses due to a lack of working capital. We expect other selling, general and administrative expenses to increase in the future at such time as we resume the implementation of our business plan.


 
16

 
 
Other Income

For the nine months ended September 30, 2011 and 2010, we recognized interest income of $37 and $670, respectively. For the three months ended September 30, 2011 and 2010, we recognized interest income of $0 and $568, respectively. The decrease in interest income was attributable to having a lower cash balance with which to earn interest on. Additionally, for the three and nine months ended September 30, 2011, we incurred aggregate  interest expense of $704 and $704 related to outstanding notes payable and a related party note, respectively,

Net Loss

As a result of the factors described above, our net loss for the nine months ended September 30, 2011 and 2010 was $194,556 and $421,786, or a net loss per common share of $0.01 and $0.02 (basic and diluted), respectively. Our net loss for the three  months ended September 30, 2011 and 2010 was $40,423 and $362,565, or a net loss per common share of $0.00 and $0.01 (basic and diluted), respectively.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. To date, we have funded our operations through the sale of our common stock.

Our primary uses of cash have been for salaries and fees paid to third parties for the development of our products. All funds received have been expended in the furtherance of growing the business and establishing brand portfolios. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term:
 
 
o
An increase in working capital requirements to finance additional product development,
 
o
Addition of administrative and sales personnel as the business grows,
 
o
Increases in advertising, public relations and sales promotions for existing and new brands as the company expands within existing markets or enters new markets,
 
o
The cost of being a public company, and
 
o
Capital expenditures to add additional technology.
  
Our net revenues are not sufficient to fund our operating expenses.  At September 30, 2011, we had a cash balance of $13,113. Since inception, we raised gross proceeds of $692,000 from the sale of common stock to fund our operating expenses, pay our obligations, and grow our company. Additionally, from June 2011 to September 2011, we borrowed $80,000 ($75,000 from third parties and $5,000 from our chief executive officer). These funds were used to working capital purposes and to pay the fee for the License Agreement. We currently have no material commitments for capital expenditures. We need to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations.   We estimate that based on current plans and assumptions, that our available cash will not be sufficient to satisfy our cash requirements under our present operating expectations, without further financing, for up to 12 months. Other than working capital, we presently have no other alternative source of working capital. We do not have sufficient working capital to fund the expansion of our operations and to provide working capital necessary for our ongoing operations and obligations. We will need to raise significant additional capital to fund our operating expenses, pay our obligations, grow our company, and to develop products as required by our License Agreement. We do not anticipate we will be profitable in 2011.  Therefore our future operations will be dependent on our ability to secure additional financing.  Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will be required to further curtail our marketing and development plans and possibly cease our operations.
 
We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern on their audit opinion for the year ended December 31, 2010.
 
 
 
17

 

Our liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly.

Assuming that we receive financing, our business plan within 12 months is outlined below:
 
Description
 
Estimate Cost
 
Selling and marketing expenses
 
$
18,000
 
Research and development activities
 
$
250,000
 
Professional fees, including fees associated with becoming a public company
 
$
175,000
 
General and administrative
 
$
130,000
 
         
Total
 
$
573,000
 

Selling and marketing expenses- Sales and marketing is performed through the placement of ads on social media networks such as Facebook. Upon the resumption of the implementation of our business plan, we estimate that we will incur approximately $18,000 during a twelve month period on these advertisements.
 
Research and development activities- In May 2011, we temporarily ceased our research and development activities until we generate sufficient revenues from our current portfolio of products or we are able to raise additional working capital funds from debt or equity financing or loans.  We have reduced our other research and development costs which presently only consist of hosting fees and server maintenance to approximately $1,000 per month. Upon the resumption of the implementation of our business plan, we estimate that we will incur approximately $250,000 during a twelve month period on research and development activities.

Professional fees, including fees associated with becoming a public company – Primarily includes professional fees associated with becoming a public company as summarized as follows:

   
Amount
 
Auditing fees
 
$
50,000
 
Legal fees
   
120,000
 
Other professional fees
   
5,000
 
         
     Total
 
$
175,000
 

General and administrative – Over the next 12 months, we estimate that we will incur general and administrative expenses as follows:
 
   
Amount
 
Administrative salaries and benefits
 
$
125,000
 
Other
   
5,000
 
         
     Total
 
$
130,000
 
 
As of November 10, 2011, we have a cash balance of approximately $8,500. Accordingly, in order to pay our outstanding obligations of approximately $124,000 at September 30, 2011 and to continue to implement our business plan, we will need additional cash of $605,500 over the next 12 months assuming we collect expected sales of $100,000. Based on our projected monthly working capital needs, we need working capital to pay our outstanding obligations, to fund our business plan, and to continue operating. We have scaled back our operations, and have reduced our monthly operating expenses from $40,000 per month to under $5,000 per month. It will be unlikely that we will be able to pursue our overall business plan without raising additional working capital.

 
18

 
 
In connection with our plans to raise funds, we signed an agreement with Rodman &Renshaw, LLC ("Rodman" or the "Placement Agent"), whereby Rodman shall serve as the exclusive placement agent for the Company, on a "reasonable best efforts" basis, in connection with a proposed placement (the "Placement") of registered securities (the "Securities") of the Company, including shares of the Company's common stock, par value $0.001 per share (the "Shares" or "Common Stock") and warrants to purchase shares of Common Stock.   As compensation for the services provided by Rodman hereunder, the Company agrees to pay to Rodman:

(A) The fees set forth below with respect to the Placement:
 
1. A cash fee payable immediately upon the closing of the Placement and equal to 7% of the aggregate gross proceeds raised in the Placement.
 
2. Such number of warrants (the "Rodman Warrants") to Rodman or its designees at the Closing to purchase shares of Common Stock equal to 7% of the aggregate number of Shares sold in the Placement, plus any Shares underlying any convertible Securities sold in the Placement to such purchasers. The Rodman Warrants shall have the same terms as the warrants (if any) issued to the Purchasers in the Placement except that the exercise price shall be 125% of the public offering price per share and the expiration date shall be five years from the effective date of the required registration statement.  The Rodman Warrants shall not have anti-dilution protections or be transferable for six months from the date of the Placement, except as permitted by Financial Industry Regulatory Authority (''FINRA'') Rule 5110, and further, the number of Shares underlying the Rodman Warrants shall be reduced if necessary to comply with FINRA rules or regulations.

(B) The Company agreed to pay Rodman a fee equal to 5% in kind consideration of the aggregate consideration paid or received by the Company in connection with a transaction consummated during the term or tail period, as defined, with (a) a candidate introduced to the Company by Rodman (a “Rodman Candidate”) or (b) a candidate introduced to the Company by a Rodman candidate. A transaction or combination of transactions shall include the purchase of sale of assets or outstanding stock, or a merger, acquisition or other business combinations.

(C) The Company also agreed to pay to Rodman a non-accountable expense allowance equal to 2.0% of the aggregate gross proceeds raised in the Placement (provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement). Such non-accountable expense allowance shall be payable immediately upon (but only in the event of) the closing of the Placement. In September 2011, we paid a $7,500 advance to Rodman upon execution of this Agreement, which shall be applied against the 2.0% non-accountable expense allowance.

Operating activities
 
For the nine months ended September 30, 2011 and 2010, net cash flows used in operating activities amounted to $180,813 and $437,381, respectively. For the nine months ended September 30, 2011, net cash used in operations of $180,813 was primarily attributable to our net losses of $194,556 offset by the add back of non-cash items such as depreciation expense of $1,010, stock based compensation of $30,444, and contributed services of $6,000, and changes in operating assets and liabilities of $23,711. For the nine months ended September 30, 2010, net cash used in operation of $437,381 was primarily attributable to our net losses of $421,786 offset by the add back of non-cash items such as depreciation expense of $708 and changes in operating assets and liabilities of  $(16,303).
 
Investing activities
 
For the nine months ended September 30, 2011 and 2010 net cash used in investing activities were $0 and $5,895, respectively, and represented the purchase of property and equipment.
 
Financing activities
 
For the nine months ended September 30, 2011 and 2010 net cash flows provided by financing activities was $72,500 and $652,000, respectively. In the 2011 period, we received proceeds from notes payable of $75,000, received proceeds from a note payable – related party of $5,000, and paid $7,500 of deferred financing costs.  In the 2010 period, we received net proceeds of $652,000 from the sale of our common stock.

 
 
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Contractual Obligations

We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our financial position, results of operations, and cash flows.

The following tables summarize our contractual obligations as of September 30, 2011 and the effect these obligations are expected to have on our liquidity and cash flows in future periods.
 
   
Payments due by period
 
Contractual obligations
 
Total
   
Less than 1 year
   
1-3 Years
   
3-5 Years
   
5+ Years
 
Notes payable
  $ 75,000     $ 75,000     $ -     $ -     $ -  
Note payable – related party
    5,000       5,000                          
Total contractual obligations
  $ 80,000     $ 80,000     $ -     $ -     $ -  

Off-Balance Sheet Arrangements
 
We have no off-balance sheet arrangements.
 
Item 3. 
Quantitative and Qualitative Disclosures About Market Risk.
 
Not required for smaller reporting companies.

Item 4. 
Controls and Procedures.

Evaluation of disclosure controls and procedures
 
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as September 30, 2011. Based on this evaluation, our principal executive officer and principal financial officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules.
 
Changes in Internal Controls
 
There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the quarter ended September 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
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PART II - OTHER INFORMATION

Item 1. 
Legal Proceedings.
 
We are not a party to, and none of our property is the subject of, any pending legal proceedings. To our knowledge, no governmental authority is contemplating any such proceedings.
 
Item 1A. 
Risk Factors.
 
Not required to be provided by smaller reporting companies.
 
Item 2. 
Unregistered Sales of Equity Securities and Use of Proceeds.
 
On September 19, 2011, we issued 400,000 shares of our common stock to a consultant for investor relations services rendered. We valued these common shares at the fair value of $0.31 per common share based on the quoted trading price of common stock on the grant date which is the measurement date. In connection with issuance of these common shares, the Company recorded professional fees in 2011 of $3,444 and a prepaid expense at September 30, 2011 of $120,556.

These issuances were exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that Act,.  Each person to whom the shares were issued was an accredited investor and acquired the shares for investment and not with a view to the sale or distribution and received information concerning us, our business and our financial condition, and the stock certificates bear an investment legend.  No brokerage fees were paid in connection with any of these stock issuances.
 
Item 3. 
Defaults Upon Senior Securities.
 
None.

Item 4. 
(Removed and Reserved)
 
 
Item 5. 
Other Information.
 
None.
 
Item 6. 
Exhibits.

Exhibit Number
 
Description
10.1  
Letter of Agreement with The Investor Relations Group dated September 19, 2011.
31.1   Rule 13a-14(a)/15d-14(a) certification of Principal Executive Officer
31.2   Rule 13a-14(a)/15d-14(a) certificate of Principal Financial Officer
32.1*   Section 1350 certification of Chief Executive Officer and Chief Financial Officer
101.INS**
 
XBRL Instance Document
101.SCH**
 
XBRL Taxonomy Extension Schema Document
101.CAL**
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE**   
 
XBRL Taxonomy Extension Presentation Linkbase Document

* The certifications attached as Exhibit 32.1 and Exhibit 32.2 accompanying this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Apps Genius Corp., under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
 
** Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
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SIGNATURES

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

 
APPS GENIUS CORP
     
Date: November 14, 2011
By:
/s/ Adam Kotkin 
   
Adam Kotkin, Chief Executive Officer
(Principal Executive Officer)
     
Date: November 14, 2011    
By:
/s/ Adam Wasserman
   
Adam Wasserman, Chief Financial Officer and Principal Accounting Officer

 
 
 
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