Snap Interactive, Inc. (STVI) to Merge with Paltalk

September 14, 2016 8:22 AM EDT

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A.V.M. Software, Inc. (d/b/a Paltalk) ("Paltalk") and Snap Interactive, Inc. ("SNAP") (OTC: STVI) announced that they have entered into a definitive merger agreement for the previously announced proposed merger between Paltalk and SNAP. The agreement was approved by the holders of a majority of Paltalk's outstanding shares yesterday afternoon.

The proposed merger is structured as a tax-free stock-for-stock transaction. Pursuant to the merger agreement, Paltalk will merge into a newly formed wholly owned subsidiary of SNAP, with Paltalk surviving as a wholly owned subsidiary of Snap.

Following the completion of the proposed merger, Paltalk's stockholders will own a majority of SNAP's outstanding common stock on a fully-diluted basis. The proposed merger is expected to close in the fourth quarter of 2016.

The mission of the combined company is to become the leading platform in connecting a global audience of users around interest categories and dating by leveraging live video and chat as the core method of communication. Transaction highlights include:

  • a combined user database of over 250 million registered users;
  • greater scale and diversification, with eight products and combined annual revenues estimated at approximately $30 million;
  • a strong balance sheet, with Paltalk reporting more than $6 million of cash and cash equivalents at June 30, 2016, representing ample cash resources to fund growth and existing debt commitments of the combined company;
  • a global video communication network of social applications spanning chat and dating, with pioneering products in the dynamic and growing live video space;
  • a very large, international database ripe for cross-selling existing products, as well as anticipated new live video product introductions;
  • a "next wave" disruptive product opportunity incorporating the intersection of dating and real time video;
  • a public vehicle with potential to execute additional acquisitions of companies in the $4 billion interactive dating industry; and
  • potential IP licensing opportunities, including those arising from AVM's diversified and active patent portfolio, including patent numbers 5,822,523 and 6,226,686, which were previously licensed to Microsoft Corp., Sony Corporation of America and Activision Blizzard Inc.

Upon the completion of the proposed merger, the combined company will be led by Alexander Harrington, SNAP's current Chief Executive Officer and Chief Financial Officer, who will serve as the combined company's Chief Executive Officer and interim Chief Financial Officer. In addition, Jason Katz, Paltalk's current Chief Executive Officer, will serve as the combined company's Chairman of the Board, President and Chief Operating Officer.

In addition to Messrs. Harrington and Katz, the combined company's board of directors will include two members of the current Paltalk board - Lance Laifer and John Silberstein, one member of the current SNAP board -- Clifford Lerner, who co-founded SNAP and served as its Chief Executive Officer through 2015, and two new board members -- Yoram "Rami" Abada and Michael Levit.

Mr. Harrington said, "With the explosion of live video and chat evidenced by Snapchat's rapid rise and Facebook's adoption of live technologies and video profiles, we expect live video communication will become the standard for social networking and online dating sites in the upcoming years."

Mr. Harrington continued, "We believe that the combined company has extraordinary strengths. SNAP's expertise in social dating and data-driven culture made it the first successful Facebook dating app. Paltalk has gained massive adoption powered by the technical knowhow supporting a best-in-class live video chat platform. These capabilities present a wide array of growth opportunities. In particular, the combined company is well-positioned to integrate dating and real time video into a 'next wave' disruptive product in the fast growing online dating space."

Mr. Katz concluded, "Paltalk has had a successful track record of M&A, with strategic acquisitions underlying four of the company's key products: Camfrog, Tinychat, Firetalk and Vumber, as well as IP acquisitions. As we look ahead to the merger with Snap, the increased scale and liquidity of the combined company will enable it to grow organically and potentially through further acquisitions. We are excited to work together to combine our complementary resources and create a stronger company that will be responsive to the needs of today's industry. I look forward to contributing to the success and growth of the combined company."

The consummation of the proposed merger is subject to the satisfaction or waiver of customary closing conditions. There can be no assurance that SNAP and Paltalk will consummate, or fulfill the necessary conditions to consummate, the proposed merger.

Haynes and Boone, LLP is serving as legal counsel to SNAP and Pryor Cashman LLP is serving as legal counsel to Paltalk in connection with the proposed merger.

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