lov-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the Quarterly Period Ended June 30, 2023


☐			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 001-38252

Spark Networks SE

(Exact name of Registrant as specified in its Charter)


Germany			N/A
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
Kohlfurter Straße 41/43 Berlin Germany			10999
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (+49) 30 868000

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

American Depository Shares each representing one-tenth of an ordinary share

LOV

The Nasdaq Stock Market, LLC

Ordinary shares, €1.00 nominal value per share*

* Not for trading purposes, but only in connection with the registration of American Depository Shares pursuant to the requirements of the Securities and Exchange Commission.

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes ☒ No ☐

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of ordinary shares outstanding as of August 8, 2023 was 2,625,475.

Table of Contents


		Page
PART I
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 202 3 and December 31, 202 2	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 202 3 and 202 2	4
	Condensed Consolidated Statements of Shareholders' (Deficit) Equity for the three and six months ended June 30, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022	6
	Notes to Condensed Consolidated Financial Statements	8
	Note 1 - Basis of Presentation and Summary of Significant Accounting Policies	8
	Note 2 - Revenue	9
	Note 3 - Income Taxes	10
	Note 4 - Goodwill and Intangible Assets	10
	Note 5 - Accrued Expenses and Other Liabilities	12
	Note 6 - Debt	13
	Note 7 - Contingencies	14
	Note 8 - Financial Instruments and Fair Value Measurements	15
	Note 9 - Stock-based Compensation	15
	Note 10 - Subsequent Events	17
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
	Signatures	32

PART I

Financial Information

Item 1. Financial Statements

Spark Networks SE

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)


	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	5,683	$	11,438
Accounts receivable, net of allowance of $566 and $85, respectively	5,473		5,154
Prepaid expenses	3,166		3,514
Other current assets	1,654		1,557
Total current assets	15,976		21,663
Property and equipment, net of accumulated depreciation of $5,474 and $4,782, respectively	5,769		4,956
Goodwill	98,620		119,276
Intangible assets, net of accumulated amortization of $17,425 and $16,798, respectively	10,393		13,299

Other assets	4,028		5,183
Total assets	$	134,786	$	164,377
Liabilities and Shareholders' Deficit
Current liabilities:
Debt	$	94,197	$	94,817
Accounts payable	7,142		6,487
Deferred revenue	27,401		28,085
Accrued expenses and other current liabilities	27,611		24,247
Total current liabilities	156,351		153,636

Deferred tax liabilities	368		409
Other liabilities	16,697		17,118
Total liabilities	173,416		171,163
Contingencies (Note 7)
Shareholders' Deficit:
Common stock, €1.00 nominal value; 3,992,078 shares authorized; 2,661,386 shares issued; 2,625,476 and 2,623,820 shares outstanding as of June 30, 2023 and December 31, 2022	3,064		3,064
Treasury stock, at €1.00 nominal value; 35,910 shares as of June 30, 2023 and 37,566 shares as of December 31, 2022	(40)		(42)
Additional paid-in capital	224,915		224,506
Accumulated deficit	(275,878)		(244,593)
Accumulated other comprehensive income	9,309		10,279
Total shareholders' deficit	(38,630)		(6,786)
Total liabilities and shareholders' deficit	$	134,786	$	164,377

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

Spark Networks SE

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue	$	41,202	$	48,035	$	82,541	$	97,942
Operating costs and expenses:
Cost of revenue, exclusive of depreciation and amortization	22,790		36,356		50,082		70,602
Other operating expenses	18,920		14,520		32,426		29,955
Depreciation and amortization	625		577		1,243		1,180
Impairment of intangible assets	21,847		—		22,947		—
Total operating costs and expenses	64,182		51,453		106,698		101,737
Operating loss	(22,980)		(3,418)		(24,157)		(3,795)
Other income (expense):
Interest income	7		—		47		—
Interest expense	(4,065)		(2,706)		(7,922)		(9,588)
Gain (Loss) on foreign currency transactions	(216)		(2,441)		464		(3,208)
Other income (expense)	276		(3)		276		260
Total other expense, net	(3,998)		(5,150)		(7,135)		(12,536)
Loss before income taxes	(26,978)		(8,568)		(31,292)		(16,331)
Income tax benefit (expense)	52		(193)		7		99
Net loss	(26,926)		(8,761)		(31,285)		(16,232)
Other comprehensive (loss) income:
Foreign currency translation adjustment	145		3,880		(970)		4,973
Comprehensive loss	$	(26,781)	$	(4,881)	$	(32,255)	$	(11,259)

Loss per share:
Basic loss per share	$	(10.26)	$	(3.35)	$	(11.92)	$	(6.20)
Diluted loss per share	$	(10.26)	$	(3.35)	$	(11.92)	$	(6.20)

Weighted average shares outstanding:
Basic	2,625,476		2,617,397		2,625,137		2,617,397
Diluted	2,625,476		2,617,397		2,625,137		2,617,397

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

Spark Networks SE

Condensed Consolidated Statements of Shareholders' (Deficit) Equity (Unaudited)

(in thousands, except share data)


	Three Months Ended June 30, 2023
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total shareholders' deficit
Balance at April 1, 2023	2,661,386	$	3,064	(35,910)	$	(40)	$	224,664	$	(248,952)	$	9,164	$	(12,100)
Stock-based compensation	—	—		—	—		251		—		—		251

Net loss	—	—		—	—		—		(26,926)		—		(26,926)
Foreign currency translation adjustments	—	—		—	—		—		—		145		145
Balance at June 30, 2023	2,661,386	$	3,064	(35,910)	$	(40)	$	224,915	$	(275,878)	$	9,309	$	(38,630)

	Three Months Ended June 30, 2022
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total shareholders' equity
Balance at April 1, 2022	2,661,386	$	3,064	(43,989)	$	(48)	$	223,605	$	(207,874)	$	8,070	$	26,817
Stock-based compensation	—	—		—	—		490		—		—		490

Net loss	—	—		—	—		—		(8,761)		—		(8,761)
Foreign currency translation adjustments	—	—		—	—		—		—		3,880		3,880
Balance at June 30, 2022	2,661,386	$	3,064	(43,989)	$	(48)	$	224,095	$	(216,635)	$	11,950	$	22,426


	Six Months Ended June 30, 2023
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total shareholders' equity
Balance at January 1, 2023	2,661,386	$	3,064	(37,566)	$	(42)	$	224,506	$	(244,593)	$	10,279	$	(6,786)
Stock-based compensation	—	—		—	—		424		—		—		424
Treasury stock issued pursuant to equity-based plans				1,656	2		(15)						(13)
Net loss	—	—		—	—		—		(31,285)		—		(31,285)
Foreign currency translation adjustments	—	—		—	—		—		—		(970)		(970)
Balance at June 30, 2023	2,661,386	$	3,064	(35,910)	$	(40)	$	224,915	$	(275,878)	$	9,309	$	(38,630)

	Six Months Ended June 30, 2022
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total shareholders' equity
Balance at January 1, 2022	2,661,386	$	3,064	(43,989)	$	(48)	$	223,103	$	(200,403)	$	6,977	$	32,693
Stock-based compensation	—	—		—	—		992		—		—		992

Net loss	—	—		—	—		—		(16,232)		—		(16,232)
Foreign currency translation adjustments	—	—		—	—		—		—		4,973		4,973
Balance at June 30, 2022	2,661,386	$	3,064	(43,989)	$	(48)	$	224,095	$	(216,635)	$	11,950	$	22,426

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

Spark Networks SE

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Six Months Ended June 30,
	2023		2022
Net loss	$	(31,285)	$	(16,232)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,243		1,180
Impairment of intangible assets	22,947		—
Loss on tangible and intangible assets	—		30
Unrealized (gain) loss on foreign currency transactions	(140)		3,837
Stock-based compensation expense	424		992
Amortization of debt issuance costs and accretion of debt discounts	1,124		1,343
Non-cash PIK interest	83		—
Loss on extinguishment of debt	—		3,964
Deferred tax expense	(40)		(158)
Provision for credit losses	44		256
Non-cash lease expense	1,134		1,092
Change in operating assets and liabilities:
Accounts receivable	(329)		326
Prepaid expenses and other current assets	285		(2,687)
Other assets	55		(5)
Accounts payable, accrued expenses, and other current liabilities	3,838		(2,980)
Other liabilities	(1,113)		(1,045)
Deferred revenue	(940)		(608)
Net cash used in operating activities	$	(2,670)	$	(10,695)

Capital expenditures	(1,393)		(1,268)

Net cash used in investing activities	$	(1,393)	$	(1,268)

Proceeds from debt, net of discount and issuance costs	$	—	$	97,750
Repayment of debt	(1,250)		(85,552)
Debt issuance costs paid to third parties	—		(3,531)
Payment of early extinguishment of debt charge	—		(893)




Net cash (used in) provided by financing activities	$	(1,250)	$	7,774

Net change in cash and cash equivalents and restricted cash	(5,313)		(4,189)
Effects of exchange rate fluctuations on cash and cash equivalents and restricted cash	(439)		(613)
Net decrease in cash and cash equivalents and restricted cash	$	(5,752)	$	(4,802)
Cash and cash equivalents and restricted cash at beginning of period	11,569		16,279
Cash and cash equivalents and restricted cash at end of period	$	5,817	$	11,477

Supplemental disclosure of cash flow information:
Cash paid for interest including payment of early extinguishment of debt charges of $0 and $893, respectively	$	6,713	$	5,107
Cash paid for income taxes	$	260	$	2,538
Non-cash investing and financing activities:

SEC Form 10-Q filed by Spark Networks SE