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EXCEL - IDEA: XBRL DOCUMENT - VAPIR ENTERPRISES INC.Financial_Report.xls
EX-31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF CHIEF EXECUTIVE OFFICER - VAPIR ENTERPRISES INC.f10q0313ex31i_appsgenius.htm
EX-31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATE OF PRINCIPAL FINANCIAL OFFICER - VAPIR ENTERPRISES INC.f10q0313ex31ii_appsgenius.htm
EX-32.1 - SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER - VAPIR ENTERPRISES INC.f10q0313ex32i_appsgenius.htm


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

FORM 10-Q

(Mark One)

þ Quarterly Report PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

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

For the transition period from __________ to __________

COMMISSION FILE NUMBER: 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.)
 
431 Fairway Drive – Suite 260
Deerfield Beach, FL 33441
(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.  36,739,192 shares of common stock are issued and outstanding as of May 16, 2013.
 


 
 
 
 
 
APPS GENIUS CORP
FORM 10-Q
March 31, 2013

TABLE OF CONTENTS
 
   
Page No.  
 
PART I. - FINANCIAL INFORMATION
Item 1.
Financial Statements.
3
 
Balance Sheets as of March 31, 2013 (Unaudited) and December 31, 2012
 3
 
Statements of Operations for the Three Months Ended March 31, 2013 and 2012 (Unaudited)
 4
 
Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012 (Unaudited)
 5
 
Notes to Unaudited Financial Statements.
7
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
15
Item 3
Quantitative and Qualitative Disclosures About Market Risk.
21
Item 4
Controls and Procedures.
21
     
 PART II - OTHER INFORMATION  
 
Item 1.
Legal Proceedings.
22
Item 1A.
Risk Factors.
22
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
22
Item 3.
Defaults Upon Senior Securities.
22
Item 4.
Mine Safety Disclosures.
22
Item 5.
Other Information.
22
Item 6.
Exhibits.
22
 
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

 
 
APPS GENIUS CORP
BALANCE SHEETS
             
   
March 31,
   
December 31,
 
   
2013
   
2012
 
   
(Unaudited)
       
ASSETS
           
             
CURRENT ASSETS:
           
    Cash
  $ 10,829     $ 77,716  
    Accounts receivable
    13       815  
                 
        Total Current Assets
    10,842       78,531  
                 
PROPERTY AND EQUIPMENT, net
    2,605       3,057  
                 
        Total Assets
  $ 13,447     $ 81,588  
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
               
                 
CURRENT LIABILITIES:
               
    Accounts payable and accrued expenses
  $ 46,802     $ 43,933  
    Accounts payable - related party
    15,000       9,000  
    Accrued salaries
    28,000       10,000  
 
               
        Total Current Liabilities
    89,802       62,933  
                 
     Commitments & Contingencies - (Note 5)
               
                 
STOCKHOLDERS' (DEFICIT) EQUITY:
               
Preferred stock ($0.001 par value; 20,000,000 shares authorized; No shares
         
       issued or outstanding at March 31, 2013 and December 31, 2012)
    -       -  
    Common stock ($0.001 par value; 100,000,000 shares authorized;
               
        36,539,192 and 36,449,372 shares issued and outstanding
               
        at March 31, 2013 and December 31, 2012, respectively)
    36,539       36,449  
    Additional paid-in capital
    2,521,299       2,519,106  
    Accumulated deficit
    (2,634,193 )     (2,536,900 )
                 
        Total Stockholders' (Deficit) Equity
    (76,355 )     18,655  
                 
        Total Liabilities and Stockholders' (Deficit) Equity
  $ 13,447     $ 81,588  
                 
See notes to unaudited financial statements
 
 
3

 
 
APPS GENIUS CORP
STATEMENTS OF OPERATIONS
             
   
For the Three Months Ended
March 31,
 
   
2013
   
2012
 
   
(Unaudited)
   
(Unaudited)
 
             
REVENUES
  $ 693     $ 3,726  
                 
OPERATING EXPENSES:
               
     Licensing fees and expenses
    -       54,586  
     Research and development
    16,333       40,765  
     Administrative compensation
    42,000       19,000  
     Professional fees
    23,501       139,176  
     Other selling, general and administrative
    16,045       27,695  
                 
        Total Operating Expenses
    97,879       281,222  
                 
LOSS FROM OPERATIONS
    (97,186 )     (277,496 )
                 
OTHER INCOME (EXPENSE):
               
     Interest expense
    -       (560 )
     Interest expense - related party
    -       (79 )
     Loss on disposal of property and equipment
    (115 )     -  
     Interest income
    8       67  
                 
        Total Other Income (Expense)
    (107 )     (572 )
                 
NET LOSS
  $ (97,293 )   $ (278,068 )
                 
NET LOSS PER COMMON SHARE:
               
    Basic and diluted
  $ -     $ (0.01 )
                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
               
    Basic and diluted
    36,449,372       29,343,693  
                 
See notes to unaudited financial statements
 
 
4

 
 
APPS GENIUS CORP
STATEMENTS OF CASH FLOWS
             
   
For the Three Months Ended
March 31,
 
   
2013
   
2012
 
   
(Unaudited)
   
(Unaudited)
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (97,293 )   $ (278,068 )
Adjustments to reconcile net loss from operations to net cash
               
used in operating activities:
               
Stock-based compensation and fees
    2,283       140,065  
Loss on disposal of property and equipment
    115       -  
Depreciation
    337       329  
Changes in assets and liabilities:
               
Accounts receivable
    802       1,100  
Prepaid expenses
    -       3,695  
Security deposit
    -       (675 )
Accounts payable and accrued expenses
    2,869       (13,521 )
Accrued salaries
    18,000       -  
Accounts payable - related party
    6,000       (9,000 )
Due to related parties
    -       4,539  
                 
NET CASH USED IN OPERATING ACTIVITIES
    (66,887 )     (151,536 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from notes payable
    -       7,500  
Payment of notes payable
    -       (108,650 )
Payment of notes payable - related party
    -       (10,000 )
Payment of insurance premium finance payable
    -       (3,348 )
Proceeds from sale of common stock
    -       1,000,000  
Payment of placement costs and fees
    -       (161,850 )
                 
NET CASH PROVIDED BY FINANCING ACTIVITIES
    -       723,652  
                 
NET (DECREASE) INCREASE IN CASH
    (66,887 )     572,116  
                 
CASH  - beginning of year
    77,716       7,728  
                 
CASH - end of year
  $ 10,829     $ 579,844  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:
               
Cash paid for:
               
Interest
  $ -     $ 2,637  
Income taxes
  $ -     $ -  
                 
Non-cash investing and financing activities:
               
Issuance of common stock and warrants for services charged to prepaid expenses
  $ -     $ 252,890  
Common stock issued for accounts payable- related party
  $ -     $ 12,000  
                 
See notes to unaudited financial statements.
 
 
5

 
 
APPS GENIUS CORP
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 2013
(Unaudited)
                                           
   
Preferred Stock
   
Common Stock
   
Additional
         
Total
 
   
Number of
         
Number of
         
Paid-in
   
Accumulated
   
Stockholders'
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Equity
 
                                           
Balance, December 31, 2012
    -     $ -       36,449,372     $ 36,449     $ 2,519,106     $ (2,536,900 )   $ 18,655  
                                                         
Issuance on warrants and options for services
    -       -       -       -       783       -       783  
                                                         
Issuance of common stock for services
    -       -       89,820       90       1,410       -       1,500  
                                                         
Net loss, for the three months ended March 31, 2013
    -       -       -       -       -       (97,293 )     (97,293 )
                                                         
Balance, March 31, 2013
    -       -       36,539,192       36,539       2,521,299       (2,634,193 )     (76,355 )
                                                         
See notes to unaudited financial statements
 
 
6

 
 
APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2013
 
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 business is 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. Beginning in January 2013, the Company changed the focus of its business plan to develop and operate a crowdfunding platform.  Crowdfunding describes the collective cooperation, attention, and trust by people who network and pool their resources, usually via the Internet, to support efforts initiated by other people or organizations. The Company currently has two vertical sites which have been released and are in operation.

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, 2012.  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.

As reflected in the accompanying financial statements, the Company had a net loss and net cash used in operations of $97,293 and $66,887, respectively, for the three months ended March 31, 2013 and working capital deficit, stockholder’s deficit and an accumulated deficit of $78,960, $76,355 and $2,634,193 respectively at March 31, 2013 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 more revenues. Management intends to attempt to raise additional funds by way of a public or private offering.  While the Company believes in the viability of its strategy to raise additional funds, there can be no assurances to that effect.
 
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 three months ended March 31, 2013 and 2012 include the useful life of property and equipment, allowance for doubtful accounts receivable, assumptions used in assessing impairment of long-term assets, 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.

Concentrations

Concentration of credit risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. The Company has not experienced any losses in such accounts through March 31, 2013. There were no balances in excess of FDIC insured levels as of March 31, 2013.

 
7

 
 
APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2013
 
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentrations (continued)

Concentration of revenue and geographic area

The Company sells its products to its customers through revenue sharing arrangements. The following represents identifiable concentrations for any arrangement where revenue exceeded 10% of the total revenues for the three months ended March 31, 2013 as follows:

 
Arrangement
 
Percentage of total revenues
For the three months ended March 31, 2013
 
Percentage of accounts receivable
balance at March 31, 2013
1
 
77.9%
 
-

The Company has customers in countries other than USA. During the three months ended March 31, 2013 and 2012, customers located in the USA represented substantially all of the Company’s total revenues.

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 March 31, 2013 and December 31, 2012, 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, 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.

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.

 
8

 
 
APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2013

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

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 three months ended March 31, 2013 and 2012, 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 three months ended March 31, 2013 and 2012.

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.   Virtual currency revenue for the three months ended March 31, 2013 and 2012 was insignificant. For revenues generated through Facebook, Facebook enables payments to the Company through their users. Facebook users can make payments on the Facebook Platform by using credit cards or other payment methods available on its website. The primary process for these transactions is through the purchase of Facebook virtual currency. Facebook users then use this virtual currency to purchase virtual and digital goods in games and apps from developers on the Facebook Platform. When a user engages in a payment transaction utilizing the virtual currency to purchase the Company’s applications or games, Facebook will remit to the Company an amount that is based on the total amount of virtual currency redeemed less the processing fee that Facebook charges the Company for the service performed. At such time as the revenue is earned, the Company records as revenue the net amount of the transaction due to the Company from Facebook.
 
We recognize revenues from our Crowdfunding platforms when the projects are funded and the funds are dispersed to the participants.

 
9

 
 
APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2013
 
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 longer meet 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. 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 Three months ended March 31, 2013 and 2012, advertising expense was $514 and $8,204, 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 three months ended March 31, 2013 and 2012, research and development costs were $16,333 and $40,765, respectively.

Net loss per share of common stock
 
Basic net loss per common 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 common 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.  Potentially dilutive common shares consist of common stock warrants (using the treasury stock method). These common stock equivalents may be dilutive in the future. All potentially dilutive common shares were excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following:
 
   
Three Months Ended
March 31,
 
   
2013
   
2012
 
Warrants
   
9,014,286
     
8,414,286
 
Stock options
   
525,000
     
525,000
 
Total
   
9,539,286
     
8,939,286
 
 
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.
 
 
10

 
  
APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2013
 
NOTE 2 - PROPERTY AND EQUIPMENT

At March 31, 2013 and December 31, 2012, property and equipment consisted of the following:

 
Useful Life
 
March 31,
2013
   
December 31, 2012
 
Office equipment and furniture
7 Years
 
$
-
   
$
214
 
Computer equipment
5 Years
   
6,581
     
6,581
 
       
6,581
     
6,795
 
Less: accumulated depreciation
     
(3,976
)
   
(3,738
)
     
$
2,605
   
$
3,057
 

For the three months ended March 31, 2013 and 2012, depreciation expense amounted to $337 and $329, respectively. In March 2013, the Company disposed its office equipment and furniture with a net book value of $115 realizing a loss on disposal of property and equipment of $115.

NOTE 3 – RELATED PARTY TRANSACTIONS

As of March 31, 2013 and December 31, 2012, the Company owed $15,000 and $9,000, respectively, to a company owned by its chief financial officer for services rendered.
 
NOTE 4 – STOCKHOLDERS’ (DEFICIT) 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 March 31, 2013.

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 $.001 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 March 31, 2013, no instruments have been granted under the Plan.

Common stock

In March 2013, the Company issued 89,820 shares of its common stock to a consultant for payment of public relations services rendered. The Company valued these common shares at the fair value of $0.0167 per common share (see Note 5) per the terms of the consulting agreement which approximated fair value during the service period and recorded stock-based compensation of $1,500 during the three months ended March 31, 2013. 

 
11

 

APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2013

NOTE 4 – STOCKHOLDERS’ (DEFICIT) EQUITY (continued)

Common stock warrants

On January 16, 2013, the Company entered into an Advisory Board Agreement (the “Agreement”). Pursuant to the Agreement, the Company issued warrants exercisable for the purchase of 100,000 shares of the Company’s common stock at an exercise price equal to $0.05 per share.  The warrants will be exercisable until January 2016. The Company accounted for the equity instruments issued pursuant to the Agreement in accordance with ASC 505-50, “Equity Based Payments to Non-Employees”.  

The Company calculated the fair value of the 100,000 warrants granted using the Black-Scholes option pricing model and recorded the fair value of $783. In applying the Black-Scholes method, the Company calculated volatility using actual historical volatility, 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 3 years. The value of the warrant on the grant date was based upon the following Black-Scholes assumptions; exercise prices of $.05, actual historical volatility of 123%, expected term of 3 years and discount rate of 0.39%. In connection with these warrants, the Company recorded stock-based consulting expense of $783 during the three months ended March 31, 2013.

Warrant activities for the three months ended March 31, 2013 are summarized as follows:

   
Number of
Warrants
   
Weighted
Average
Exercise Price
   
Weighted
Average
Remaining
Contractual Life (Years)
   
 
Aggregate
Intrinsic Value
 
Balance at December 31, 2012
   
8,914,286
   
$
0.26
             
Issued
   
100,000
     
0.05
             
Exercised/forfeited
   
-
     
-
             
Balance at March 31, 2013
   
9,014,286
   
$
0.25
     
2.81
   
$
-
 
Warrants exercisable at March 31, 2013
   
8,439,286
   
$
0.26
     
2.98
   
$
-
 

Stock option activities for the three months ended March 31, 2013 are summarized as follows:

   
Number of
Options
   
Weighted
Average
Exercise Price
   
Weighted
Average
Remaining
Contractual Life (Years)
   
 
Aggregate
Intrinsic Value
 
Balance at December 31, 2012
   
525,000
   
$
0.14
             
Granted
   
-
     
-
             
Exercised/forfeited
   
-
     
-
             
Balance at March 31, 2013
   
525,000
   
$
0.14
     
3.78
   
$
-
 
Options exercisable at March 31, 2013
   
525,000
   
$
0.14
     
3.78
   
$
-
 

The weighted-average grant-date fair value of options granted to employees/consultants during the three months ended March 31, 2013 was none. As of March 31, 2013, there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $0.

 
12

 
 
APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2013
 
NOTE 5 – COMMITMENT AND CONTINGENCIES

Licensing Agreements

NEP Snooki Enterprises, LLC

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 “NEP”) 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 and the release of the second App in February 2012. 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 an additional cash fee, shall be entitled to release up to four additional new Products and the Term shall be extended for an additional one-year period.

In consideration for the exclusive license granted by NEP 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 NEP 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 NEP 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, on the Effective Date, the Company issued NEP 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 (i) one hundred fifty (150) days following the end of the Term (and any extensions thereto) or (ii) 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.
 
Mike Sorrentino and MPS Entertainment LLC

On February 9, 2012 (the “Effective Date”), the Company entered into an exclusive, worldwide licensing agreement (the “MPS License Agreement”) with Mike Sorrentino and MPS Entertainment LLC (“MPS”) and Starz Management & PR (“Starz”), which grants the Company the right to use Mike Sorrentino’s (known by the stage name “The Situation”) 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 MPS License Agreement, the Company will develop a total of four Apps within 18 months of the Effective Date (the “Initial Term”), with the release of the first, second, and third App occurring within 3 months, 6 months and 9 months of the Effective Date, respectively. The fourth App shall be released no later than 15 months from the Effective Date. The term of the License (the “Term”) shall be 18 months from the Effective Date.

The Company shall pay MPS non-returnable royalties (“Royalties”) in an amount equal to 42.5% 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 15% 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 bonus payments made. The Company shall pay a bonus to Licensor equal to $10,000 per 100,000 active users up to 1,000,000 active users. The bonus is fully recoupable by the Company against future revenues.

 
13

 

APPS GENIUS CORP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2013
 
NOTE 5 – COMMITMENT AND CONTINGENCIES (continued)

Licensing Agreements (continued)

In consideration for the exclusive license granted by Licensor during the Term, the Company has issued Licensor warrants exercisable for the purchase of 1,000,000 shares of the Company’s common stock at an exercise price equal to $0.23 per share (the “Situation Warrants”) and the Company has issued Starz warrants exercisable for the purchase of 100,000 shares of the Company’s common stock at an exercise price equal to $0.23 per share (the “Starz Warrants”).  The Situation Warrants will be exercisable by Licensor until the later of (i) one hundred fifty (150) days following the end of the Term (and any extensions thereto) or (ii) eighteen (18) months following the Effective Date.  The Situation warrants can be exercised as follows: 500,000 warrants on the Effective date, and 166,667 on the release of the second game, 166,667 upon release of the third game and 166,666 upon release of the fourth game.  The Starz Warrants shall vest upon the release of each game at 25,000 warrants per game.

Consulting Agreement for Public Relations Services

On February 6, 2013, the Company entered into a 5 month consulting agreement for public relations services.  Pursuant to the consulting agreement, the Company shall pay the consultant (a) $1,250 per month and (b) $750 per month payable in the Company’s common stock equal to either the previous months running average of the daily close price or $0.0167, whichever is greater. In March 2013, the Company issued 89,820 shares of its common stock to such consultant which represents payment for February and March 2013 services. The consulting agreement maybe cancelled in writing by either party with at least 30 days notice. Effective March 31, 2013, the Company cancelled this consulting agreement. The Company has paid its obligation under this consulting agreement.

NOTE 6 – SUBSEQUENT EVENTS

In April 2013, the Company issued 200,000 shares of its common stock to two consultants for services rendered in April 2013 and May 2013. The Company valued these common shares at the fair value of $0.012 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 stock-based consulting of $2,400.

 
14

 
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.

Initially, the Company developed, marketed, published and distributed social games and software applications that consumers could use on a variety of platforms. Included were such platforms as social networks, wireless devices such as cellular phones and smart phones including the Apple iPhone™ and standalone websites. We released several applications including ‘Bruisers’, a game application for Facebook, ‘My Mad Millions’, a game application for Facebook™, Drama Llama, an application for Facebook™, ‘Slap a Friend’, a game application for the Apple Iphone™, Bed Bug Alert, a utility application for Apple Iphone™ and Crazy Dream Application for Facebook™, Snookify Me! application for Iphone and Android, and Snooki’s Match Game Application for Facebook amongst other games and apps.

Beginning in January 2013, we changed the focus of our Business Plan to develop and operate a crowdfunding platform.  We currently have two vertical sites which have been released and are in operation.

On April 19, 2012, we acquired the domain name “GetFunded.com” in order to explore potential opportunities in crowdfunding.  “Crowdfunding” describes the collective cooperation, attention, and trust by people who network and pool their resources, usually via the Internet, to support efforts initiated by other people or organizations.  Crowdfunding can occur for a wide variety of purposes, both for-profit and not-for-profit, including mobile app development, disaster relief, citizen journalism, support of artists by fans, political campaigns, startup company funding, movie or software development, and scientific research.  Crowdfunding has experienced a sudden increase in popularity and could become a viable means for start-up companies to raise capital from investors because of the Jumpstart Our Business Startups Act or “JOBS” Act, which was signed into law by President Obama on April 5, 2012.  The JOBS Act eases certain securities regulations, particularly for smaller issuers of securities, and creates an exemption from registration under the Securities Act of 1933 for crowdfunding, subject to certain restrictions and qualifications.  The SEC had until December 31, 2012 to enact a regulatory system for crowdfunding, but this could potentially be extended until a later date.
 
Initially, our Beta version of www.GetFunded.com was open for registration to all businesses.  The GetFunded.com platform initially allowed users to donate financially to the development of a wide range of products and services. In our initial release, GetFunded.com allowed users to contribute to a project in exchange for services or products.   We have since moved to restrict GetFunded.com to be used solely for the purpose of raising funds for the benefit of 503C non-profit corporations that benefit animals.

Additionally, in late December 2012 we launched our second vertical of our crowdfunding platform, www.GetGayFunded.com which is dedicated to the Lesbian Gay Bisexual Transgendered community and their causes.

Our website, www.GetFunded.com will position us to be part of crowdfunding when the SEC regulations become effective and entrepreneurs are able to solicit capital from investors through these channels. Crowdfunding has already received a large amount of publicity.
 
Both of our crowdfunding platforms use Amazon payments to process pledges made to individual projects listed on our sites.  Our revenue is earned when a project is funded, and Amazon sends us our fees at that time.

Limited Operating History

We have generated a limited financial history and have not previously demonstrated that we will be able to expand our business. 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.

 
15

 
 
Critical Accounting Policies and Estimates

While our significant accounting policies are more fully described in Note 1 to our financial statements for the three months ended March 31, 2013, 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.

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 three months ended March 31, 2013 and 2012.
 
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.

 
16

 
 
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.  Virtual currency revenue for the three months ended March 31, 2013 and 2012 was insignificant. For revenues generated through Facebook, Facebook enables payments to the Company through their users. Facebook users can make payments on the Facebook Platform by using credit cards or other payment methods available on its website. The primary process for these transactions is through the purchase of Facebook virtual currency. Facebook users then use this virtual currency to purchase virtual and digital goods in games and apps from developers on the Facebook Platform. When a user engages in a payment transaction utilizing the virtual currency to purchase the Company’s applications or games, Facebook will remit to the Company an amount that is based on the total amount of virtual currency redeemed less the processing fee that Facebook charges the Company for the service performed. At such time as the revenue is earned, the Company records as revenue the net amount of the transaction due to the Company from Facebook.

We recognize revenues from our Crowdfunding platforms when the projects are funded and the funds are dispersed to the participants.

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. 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.

Results of Operations

For the Three Months Ended March 31, 2013 and 2012

Revenues

For the three months ended March 31, 2013 and 2012, we recognized revenues of $693 and $3,726, respectively, a decrease of $3,033 or 81%.  The decrease in revenues was mainly attributable to a decrease in the sale of previously developed applications and advertising revenues and a lack in the development of new games and applications due to a lack of working capital and development activities. In addition, we changed the focus of our business plan to develop and operate a crowdfunding platform.  Our revenues for the three months ended March 31, 2013 was mainly attributable to our crowdfunding business. During the remainder of fiscal 2013, we do not plan on further developing any new games or applications. 
 
 
17

 
 
Operating Expenses

For the three months ended March 31, 2013 and 2012, operating expenses amounted to $97,879 and $281,222 respectively, a decrease of $183,343 or 65%. Changes in operating expenses consisted of the following:

   
Three Months Ended
March 31,
 
   
2013
   
2012
 
Licensing fees and expenses
 
$
-
   
$
54,586
 
Research and development
   
16,333
     
40,765
 
Administrative compensation
   
42,000
     
19,000
 
Professional fees
   
23,501
     
139,176
 
Other selling, general and administrative
   
16,045
     
27,695
 
   
$
97,879
   
$
281,222
 
 
*
For the three months ended March 31, 2013 and 2012, license fees and expenses amounted to $0 and $54,586, respectively. We did not incur license fees and expenses in connection with our social games and mobile applications during the three months ended March 31, 2013 as we have changed the focus of our business plan to develop and operate a crowdfunding platform.  

*
Research and development expenses consist primarily of salaries and fees paid to third parties for the development of software and applications as well as the development of the “Get Funded.com” website. For the three months ended March 31, 2013, research and development expenses decreased by $24,432 or 60% as compared to the three months ended March 31, 2012.  During the three months ended March 31, 2013, we substantially decreased development activities until we generate sufficient revenues from our current portfolio of products or we were able to raise additional working capital funds from debt or equity financing or loans. During the remainder of fiscal 2013, we expect research and development activities to decrease due to limited working capital.
 
*
For the three months ended March 31, 2013, administrative compensation increased by $23,000 or 121% as compared to the three months ended March 31, 2012. The increase is primarily attributable to an increase in wages of our Chief Executive Officer. We expect administrative salaries to increase in 2013 as we increase our operations.
 
*
For the three months ended March 31, 2013, professional fees decreased by $115,675 or 83% as compared to the three months ended March 31, 2012. During the three months ended March 31, 2013, we incurred stock-based professional fees of $2,283 as compared to $91,318 for the three months ended March 31, 2012 related to business development and investor relations services. 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.
 
*
For the three months ended March 31, 2013, other selling, general and administrative expenses decreased by $11,650 or 42% as compared to the three months ended March 31, 2012.  During the three months ended March 31, 2012, we incurred marketing expense of approximately $8,100 in connection with our exhibition and attendance at the 2012 game Developers Conference as compared to $0 for the 2013 period. Additionally, for the three months ended March 31, 2013, travel expenses also decreased as compared to the 2012 period. 
 
Other Income

For the three months ended March 31, 2013 and 2012, we recognized interest income of $8 and $67, respectively. The decrease in interest income was attributable to having a lower cash balance with which to earn interest on. Additionally, for the three months ended March 31, 2013 and 2012, we incurred aggregate interest expense of $0 and $560 related to outstanding notes payable and related party notes, respectively.

Net Loss

As a result of the factors described above, our net loss for the three months ended March 31, 2013 and 2012 was $97,293 and $278,068, or a net loss per common share of ($0.00) and ($0.01) (basic and diluted), respectively.

 
18

 

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:

An increase in working capital requirements to finance additional product and App development,

Addition of administrative and sales personnel as the business grows,

Increases in advertising, public relations and sales promotions for existing and new brands as the company expands within existing markets or enters new markets,

The cost of being a public company, and

Capital expenditures to add additional technology.
 
Our net revenues are not sufficient to fund our operating expenses.  At March 31, 2013, we had a cash balance of $10,829. Since inception we have funded our operations as follows:

In 2010, we raised net proceeds of $652,000 from the sale of common stock to fund our operating expenses, pay our obligations, and for working capital purposes.
 
In 2011, we borrowed $111,150 ($101,150 from third parties and $10,000 from our chief executive officer) pursuant to note agreements. In January 2012, we borrowed an additional $7,500 from third parties. These funds were used for working capital purposes and to pay the fee for the License Agreement. These notes were unsecured, had interest at 6.0% per annum and were generally due with one year or less of the original note date or within three business days of the closing of a private placement of certain equity securities offered by the Company. In February 2012, the Company raised net proceeds of approximately $830,000 in a private placement as discussed below and these notes and all accrued interest were repaid out of the net proceeds.

On February 9, 2012, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain accredited investors (the “Investors”) relating to the sale and issuance by us to the Investors of an aggregate of 5,714,286 units, each unit consisting of (i) one share of common stock, par value $0.001 per share (“Common Stock”), of the Company, and (ii) a five-year warrant to purchase one share of Common Stock at an exercise price of $0.25 per share (each, a “Warrant,” and collectively, the “Warrants”).  Each unit was sold at a price of $0.175. Pursuant to the Securities Purchase Agreement, on February 14, 2012 (the closing date), we issued 5,714,286 shares of common stock and issued 5,714,286 Warrants for net proceeds to us from the sale of the units, after deducting the placement agent’s fees and offering expenses, of approximately $830,000. We conducted the Offering pursuant to a registration statement on Form S-1 which was declared effective by the Securities and Exchange Commission on February 9, 2012.The Securities Purchase Agreement contains provisions that restrict the Company from issuing, except pursuant to certain exceptions, any Common Stock or Common Stock equivalents involving a Variable Rate Transaction (as that term is defined in the Securities Purchase Agreement) until five years from the closing.
 
 
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We currently have no material commitments for capital expenditures. We will 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 be insufficient to satisfy our cash requirements under our present operating expectations. Other than working capital and funds received pursuant to the Securities Purchase Agreement, we presently have no other alternative source of working capital. We have used these funds to fund our operating expenses, pay our obligations, grow our company, and to develop products as required by our License Agreement and for the development of new Apps and games. We will need to raise significant additional capital to fund our operations and to provide working capital for our ongoing operations and obligations. We do not anticipate we will be profitable in 2013.  Therefore our future operations may 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 may 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, 2012.
 
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.

Our estimates use of cash flow forecast within 12 months is outlined below:
 
Description
 
Estimated Cost
 
Selling and marketing expenses
 
$
5,000
 
Research and development activities
   
15,000
 
Professional fees
   
65,000
 
General and administrative
   
70,000
 
Total
 
$
155,000
 
 
Research and development activities- In February 2012, we began limited development activities and we estimate that we will incur cash costs and expenses of approximately $15,000 during the subsequent twelve month period on research and development activities (excluding non-cash stock-based fees).
 
Professional fee - Primarily includes professional fees associated with becoming a public company as summarized as follows:
 
   
Amount
 
Auditing fees
 
$
25,000
 
Legal fees
   
30,000
 
Other professional fees
   
10,000
 
Total
 
$
65,000
 
 
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
 
$
60,000
 
Other
   
10,000
 
Total
 
$
70,000
 
 
Our operating funds are not sufficient, therefore we will have to scale back our operating plans and it will be unlikely that we will be able to pursue our overall business plan without raising additional working capital.

 
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Operating activities
 
For the three months ended March 31, 2013, net cash flows used in operating activities amounted to $66,887 and was primarily attributable to our net losses of $97,293 offset by the add back of non-cash items such as depreciation expense of $337, loss on disposal of property and equipment of $115 and stock based compensation and fees of $783, and changes in operating assets and liabilities of $29,171.

For the three months ended March 31, 2012, net cash used in operations of $151,536 was primarily attributable to our net losses of $278,068 offset by the add back of non-cash items such as depreciation expense of $329 and stock based compensation and fees of $140,065, and changes in operating assets and liabilities of $(13,862). 

Financing activities
 
For the three months ended March 31, 2013 and 2012 net cash flows provided by financing activities was $0 and $723,652, respectively. During the three months ended March 31, 2012, we received net proceeds from sale of common stock of $838,150 and proceeds from notes payable of $7,500 offset by the payments of notes payable $118,650 and the payment of insurance premium finance payable of $3,348. 
 
Contractual Obligations

In the normal course of business, we may 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. At March 31, 2013, we did not have any material contractual obligations that would require us to pay cash in future periods.
 
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 of March 31, 2013. 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 are 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 March 31, 2013 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 January 16, 2013, pursuant to the terms of an Advisory Board Agreement, we issued warrants exercisable into 100,000 shares of common stock at an exercise price of $0.05 per share. The warrants have an expiration date of January 16, 2016. 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.
 
Pursuant to a Consulting Agreement dated February 6, 2013, we issued 89,820 shares of common stock to a consultant. The shares were issued based on a value of $0.0167 per share for services rendered for February and March 2013. 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. 
Mine Safety Disclosures.
 
Not applicable
 
Item 5. 
Other Information.
 
None.

Item 6. 
Exhibits.

Exhibit No.
Description
31.1*
Rule 13a-14(a)/15d-14(a) certification of Chief 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 Schema
   
101.CAL †
XBRL Taxonomy Calculation Linkbase
   
101.DEF †
XBRL Taxonomy Definition Linkbase
   
101.LAB †
XBRL Taxonomy Label Linkbase
   
101.PRE †
XBRL Taxonomy Presentation Linkbase

* Filed herewith.
** In accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are furnished and not filed.
† 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 of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
APPS GENIUS CORP
     
Date: May 16, 2013
By:
/s/ Adam Kotkin  
   
Adam Kotkin, Chief Executive Officer
(Principal Executive Officer)
     
Date: May 16, 2013
By:
/s/ Adam Wasserman 
   
Adam Wasserman,
Chief Financial Officer and Principal Accounting Officer
 
 
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