UNITED STATES
 SECURITIES AND EXCHANGE
COMMISSION
 Washington, D.C.
20549
  FORM 10-KSB
  (Mark
One)
  x
              ANNUAL REPORT UNDER SECTION 13
      OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
  1934
  For the fiscal year ended December
31, 2007
  o
              TRANSITION REPORT UNDER SECTION
      13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
  1934
  For the transition period from
___________ to ___________
  Commission file number 000-52176
  SNAP INTERACTIVE,
INC.
 (Exact
name of registrant as specified in its charter)
  366
North Broadway, Suite 41042,
 Jericho,
NY  11753
 (Address
and Telephone Number of Registrant’s Principal
 Executive
Offices and Principal Place of Business)
 
 Clifford Lerner
 366
North Broadway, Suite 41042,
 Jericho,
NY  11753
 (516)
942-2030
  ETWINE HOLDINGS,
INC.
 (Former
name, former address and former fiscal year,
 if
changed since last report)
 Delaware
              20-3191847(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)366
      North Broadway, Suite 41042,  Jericho, New York
              11753(Address
      of principal executive offices)
              (Zip
      Code)
 
 Registrant’s
      telephone number, including area code
              (516)
      942-2030
  Securities
      registered under Section 12(b) of the Exchange Act:Title
      of each class
              Name
      of each exchange on which registeredNone
              NoneSecurities
      registered under Section 12(g) of the Exchange Act:Common Stock, par value
      $.001(Title
      of class)
  Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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 x  No o
  Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. o
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o  No x
 
 State
issuer’s revenues for its most recent fiscal year. $424,564
 
 Aggregate market
value of the common stock held by non-affiliates of the Company as of
March 24, 2008: $2,987, 648
 Number of shares of
the registrant’s common stock outstanding as of March 24,
2008:  10,383,895shares of Common Stock.
   
  TABLE OF
CONTENTS
 
 
 Part
      IItem
      1.
              Description
      of Business.
              1Item
      2.
              Description
      of Property.
              3Item
      3.
              Legal
      Proceedings.
              3Item
      4.
              Submission
      of Matters to a Vote of Security Holders.
              3Part
      IIItem
      5.
              Market
      for Common Equity and Related Stockholder Matters.
              4Item
      6.
              Management’s
      Discussion and Analysis or Plan of Operations.
              6Item
      7.
              Financial
      Statements.
              F-1Item
      8.
              Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure.
              10Item
      8A.
              Controls
      and Procedures.
              10Item
      8B.
              Other
      Information.
              10Part
      IIIItem
      9.
              Directors,
      Executive Officers, Promoters and Control Persons; Compliance with Section
      16(a) of the Exchange Act.
              11Item
      10.
              Executive
      Compensation.
              12Item
      11.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
              13Item
      12.
              Certain
      Relationships and Related Transactions.
              13Item
      13.
              Exhibits.
              14Item
      14.
              Principal
      Accountant Fees and Services.
              14Signatures
              
              16
 
  Table of Contents
  Except
as otherwise required by the context, all references in this prospectus to "we",
"us”, "our", “eTwine”  “Snap,” or "Company" refer to the consolidated
operations o f Snap Interactive, Inc.., a Delaware corporation, and its wholly
owned subsidy.
  Forward-Looking Statements and
Associated Risks
   The
Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for
certain forward-looking statements. Some of the statements contained in this
annual report of Snap discuss future expectations, contain projections of
our operations or financial condition or state other forward-looking
information. Some statements contained in this annual report on Form 10-KSB that
are not historical facts (including without limitation statements to the effect
that we "believe," "expect," "anticipate," "plan," "intend," "foresee," or other
similar expressions) and are forward-looking statements. These forward-looking
statements are based on our current expectations and beliefs concerning future
developments and their potential effects on us. There can be no assurance that
future developments affecting us will be those anticipated by us. All comments
concerning our expectations for future revenue and operating results are based
on our forecasts of our plan of operation and do not include the potential
impact of any future acquisitions or operations. These forward-looking
statements involve significant risks and uncertainties (some of which are beyond
our control) and assumptions. Should one or more of these risks or uncertainties
materialize, or should any of our assumptions prove incorrect, actual results
may vary in material respects from those projected in the forward-looking
statements.
 PART
I
  Item 1. Description
of Business.
  General
  We were
incorporated under the laws of the State of Delaware on July 19, 2005. Clifford
Lerner is our sole officer and director, as well as our controlling stockholder.
We currently have four other employees.. On December 30, 2005, we obtained all
of the shares of eTwine, Inc., a New York Corporation pursuant to a Stock
Purchase Agreement and Share Exchange between eTwine, Inc. and us in
consideration for the issuance of 8,227,000 shares to the eTwine, Inc.
shareholders. Clifford Lerner remained our sole officer and director after the
agreement and pursuant to the agreement eTwine, Inc. became our wholly owned
subsidiary. Now we own and operate two online dating websites. The purpose of
this merger was to create a holding company in the event we decide to acquire
other entities in this industry in the future. In addition, the purpose was for
the public entity to be a Delaware corporation which has provisions of its laws
that are more favorable to our shareholders than New York
laws.
 We
launched our primary online dating website IamFreeTonight.com
(http://www.IamFreeTonight.com) in November 2006. Our subsidiary, eTwine, Inc.
was incorporated in the State of New York on May 7, 2004, and launched its
website in May 2004.
 
 In
November 2006, we launched an online dating website located at
http://www.IamFreeTonight.com. IamFreeTonight.com offers several unique features
for singles and utilizes the latest technologies to give singles an enhanced
user experience compared to other online dating sites currently on the
market.
  In
December 2006, IamFreeTonight.com introduced the popular concept of the
'Wingman' into its dating application. By bringing the real-world wingman
concept online, IamFreeTonight.com differentiates itself from traditional
dating sites by creating new and exciting ways for singles to meet both online
and in-person. Additionally, the ‘wingman’ concept enables the site to grow
internally as members must invite friends to register in order to utilize the
‘wingman’ feature.
 
 In
January 2007, IamFreeTonight.com launched its unique ‘Date Now!’ concept. The
‘Date Now!’ concept offers singles a new way to meet online by enabling them to
find and schedule dates in a matter of seconds. IamFreeTonight.com's
Date Now! feature gives users the ability to post when they're actually free to
go out on a date as well as what they'd like to do on their date.
  1
 Table of Contents
  Members
can search the Date Now! listings to see which members are free and looking to
date on a given night, and the listings are posted prominently throughout the
IamFreeTonight.com website. Date
Now ! is
designed to fit the needs of busy single professionals who may not have large
amounts of time to spend online emailing back and forth. We believe that this
feature differentiates IamFreeTonight.com from other online dating sites by
making it easier to arrange dates and reducing the amount of time it takes to
transition from initial contact to actually meeting in person.
 
 In June
2007 we launched our first application on Facebook.com called Meet New
People.  Meet New People, which was upgraded in December 2007, allows
users to flirt with each other by messaging online and post when they are free
to hang out.
 In August
2007 we launched our second application on Facebook.com called Are You
Interested.  For the past several months, Are You Interested has
consistently been one of the  leading pure-dating application on
Facebook.com as defined by Most Daily Active Users.  Are You
Interested allows users to view pictures of other members and indicate if they
are “interested” by clicking “yes” on the picture.  We notify members
when there is a mutual match.
  In
December 2007 we changed our name from eTwine Holdings, Inc. to Snap
Interactive, Inc. to reflect the company’s shifting focus on producing dating
applications for Social Networking websites.
 Throughout
2008 we will continue to enhance our existing applications as well as launch new
applications on other Social Networking websites as they open their developer
platforms.
  Revenue
Streams:
  Our
primary revenue stream is currently derived from placing advertisements on
various pages of our applications.  We use advertising networks as
well as individual deals and affiliate deals.
 
 In 2008
we will carefully contemplate inserting a subscription-based pay model into our
applications to generate additional revenue.  The timing of
implementing a subscription model is dependent upon a number of factors
including, but not limited to, the payment processing capabilities in place on
the various Social Networking platforms on which we maintain
applications.  We also intend to focus more closely on optimizing the
advertisements on our applications, as well as consider sponsorship or branding
deals as well as more deeply integrated affiliate and partnership
deals.
  We
presently maintain our principal offices at 366 North Broadway, Suite 41042,
Jericho, NY 11753. Our telephone number is (516) 942-2030.
 Marketing
 We
anticipate spending a very limited amount, if anything, on marketing in
2008.  Our applications have gained their user base primarily through
viral growth and we have not purchased advertisements to promote them since the
first month of their launch.  We believe that our existing
applications will continue to grow virally, and any new applications will
develop their member base through viral growth, internal promotion through our
existing applications, or as a result of partnerships we may
create.
  2
 Table of Contents
 
 Competition
  In the
application field, we believe our primary competition comes from other leading
developers such as Rock You & Slide who also have multiple applications
among their leaders on Facebook.com.  In the Dating category of
applications, we are consistently one of the leaders  in the category
as measured by both Daily Active Users and Total Installs.
 We
believe that our primary competition for IamFreeTonight.com is from other online
dating services. There are approximately 30 to 50 major online dating websites,
and several hundred recognized sites overall. Based on membership totals, we are
currently a small site in the industry. Presently the market is quite segmented
with Yahoo! Personals & Match.Com widely considered the industry
leaders.  Other large sites in the industry include True.com,
SinglesNet.com, & several sites that comprise Spark Networks. Achieving
critical mass with respect to market share is critical for our business.
Competitors who already have an established market share will, therefore, be in
a better competitive position than us. We hope to offset any such competitive
advantages by offering products and services which are unique to the industry,
superior in quality to and more appealing than those of our competitors, and by
launching an effective marketing campaign. We also believe that the industry
offers substantial room for growth as the internet continues to become more of
an accepted tool for finding a mate.
  Patent and
Trademarks
  We have
filed various trademark and provisional patent applications in order to protect
our product names, concepts, and associated intellectual property
rights.
  Governmental
Regulations
  There are
no governmental approvals necessary to conduct our current business and the
consulting industry is not generally subject to any governmental regulation.
Although this permits us to provide our services without the time and expense of
governmental supervision it also allows competitors to more easily enter this
business market.
  Employees
  We
currently have five full-time employees as well as one full-time programmer
that we employ on an independent contractor basis.
 Item 2. Description
of Property.
 We
presently maintain our principal offices at 366 N. Broadway, Suite 41042,
Jericho, NY, 11753.  We also maintain offices at 1375 Broadway, Floor
3, New York, NY, 10018. We lease office space at this location on a monthly
basis. We are presently seeking additional office space to accommodate our
growth.
 Item
3. Legal
Proceedings.
  Neither
the Company nor any of its subsidiaries is a party to any pending or threatened
legal proceedings.
  Item 4. Submission
of Matters to a Vote of Security Holders.
  None.
   3
 Table of Contents
  PART
II
  Item 5. Market
for Common Equity and Related Stockholder
Matters.
  Market
Information
 
 Our
common stock has traded on the OTC Bulletin Board system under the symbol “STVI”
since December 14, 2007.  We change our symbol in conjunction with our
name change to “SNAP Interactive, Inc.” at that time.  Previously we
traded under the symbol “ETWI” since October 6, 2006. There is a limited trading
market for our Common Stock. The following table sets forth the range of high
and low bid quotations for each quarter within the last fiscal year. These
quotations as reported by the OTCBB reflect inter-dealer prices without retail
mark-up, mark-down, or commissions and may not necessarily represent actual
transactions.
  High
                  
                  
                  LowOctober
      6, 2006 to December 31, 2006
                  
                  $
                  0.57
                  
                  
                  $
                  0.20January
      1, 2007 to March 31, 2007
                  
                  $
                  0.50
                  
                  
                  $
                  .20April
      1, 2007 to June 30, 2007
                  
                  $
                  0.95
                  
                  
                  $
                  0.40July
      1, 2007 to September 30, 2007
                  
                  $
                  0.95
                  
                  
                  $
                  0.60October
      1, 2007 to December 31, 2007
                  
                  $
                  1.05
                  
                  
                  $
                  0.70
  The
source of these high and low prices was the OTC Bulletin Board. These quotations
reflect inter-dealer prices, without retail mark-up, markdown or commissions and
may not represent actual transactions. The high and low prices listed have been
rounded up to the next highest two decimal places.
  The
market price of our common stock is subject to significant fluctuations in
response to variations in our quarterly operating results, general trends in the
market, and other factors, over many of which we have little or no control. In
addition, broad market fluctuations, as well as general economic, business and
political conditions, may adversely affect the market for our common stock,
regardless of our actual or projected performance.
 
 Holders
  As of
March 24, 2008 in accordance with our transfer agent records, we had 40
recordholders of our Common Stock.
 
 Dividends
  Holders
of our common stock are entitled to receive dividends if, as and when declared
by the Board of Directors out of funds legally available therefore. We have
never declared or paid any dividends on our common stock. We intend to retain
any future earnings for use in the operation and expansion of our business.
Consequently, we do not anticipate paying any cash dividends on our common stock
to our stockholders for the foreseeable future.
 
 Recent Sales of Unregistered
Securities
  On March
6, 2007, the Company executed an agreement with an unrelated third party to
provide business investor relations services for a period of 90 days in exchange
for total compensation of $15,000 and 60,000 shares of common stock payable
monthly.   The Company issued 20,000 shares of common stock which
had a fair value of $4,000 based upon the quoted closing trading price on the
date of the agreement.  The Company was obligated to issue an
additional 20,000 shares of common stock on April 5, 2007 and May 5, 2007 and
pay $5,000 on each date.  The fair value of the April 5, 2007 issuance
was $11,800. The Company also paid $5,000.  During May
2007,   the Company and the service provider mutually agreed to
terminate the contract. In summary, during the six months ended June 30, 2007,
the Company issued 40,000 shares of common stock having a fair value of $15,800
and paid $10,000.  No further amounts are due under the contact. Such
shares were issued pursuant to an exemption from registration at Section 4(2) of
the Securities Act of 1933 and are restricted in accordance with Rule 144 of the
Securities Act of 1933.
 
 On May 14, 2007, the Company
sold 100,000 shares of common stock for $55,000 pursuant to the terms of a
private placement.   Such shares were issued pursuant to an
exemption from registration at Section 4(2) of the Securities Act of 1933 and
are restricted in accordance with Rule 144 of the Securities Act of
1933.
  4
 Table of Contents
 
 On June
30, 2007, the Company issued 50,000 shares of common stock having a fair value
of $47,500 in exchange for web development and programming
services.  Such shares were issued pursuant to an exemption from
registration at Section 4(2) of the Securities Act of 1933 and are restricted in
accordance with Rule 144 of the Securities Act of 1933.
 
 On July
3, 2007 the Company sold 250,000 units that consisted of 250,000 shares of
common stock and 250,000 warrants exercisable at $1.20 which expire July 3,
2010, for total cash of $150,000. Such shares were issued pursuant to an
exemption from registration at Section 4(2) of the Securities Act of 1933 and
are restricted in accordance with Rule 144 of the Securities Act of
1933.
 
 On July
12, 2007 the Company collected $219,000 for the sale of 406,727 shares of common
stock. Such shares were issued pursuant to an exemption from registration at
Section 4(2) of the Securities Act of 1933 and are restricted in accordance with
Rule 144 of the Securities Act of 1933.
 
 On
October 2, 2007 the Company issued 50,000 shares of common stock for public
relations services having a fair value of $35,000. Such shares were issued
pursuant to an exemption from registration at Section 4(2) of the Securities Act
of 1933 and are restricted in accordance with Rule 144 of the Securities Act of
1933.  Such shares were issued pursuant to an exemption from
registration at Section 4(2) of the Securities Act of 1933 and are restricted in
accordance with Rule 144 of the Securities Act of 1933.
 
 On
October 3, 2007 the Company sold 33,333 shares of common stock for $20,000. Such
shares were issued pursuant to an exemption from registration at Section 4(2) of
the Securities Act of 1933 and are restricted in accordance with Rule 144 of the
Securities Act of 1933.
 
 On
October 15, 2007, the Company issued 14,286 shares of common stock as
compensation having a fair value of $10,000 based upon fair value on the date of
grant.  The stock vests on October 13, 2008 and as of December 31,
2007, $7,890 is recorded as deferred compensation.  Such shares were
issued pursuant to an exemption from registration at Section 4(2) of the
Securities Act of 1933 and are restricted in accordance with Rule 144 of the
Securities Act of 1933.
 
 On
October 29, 2007 the Company sold 30,769 shares of common stock for
$20,000.  Such shares were issued pursuant to an exemption from
registration at Section 4(2) of the Securities Act of 1933 and are restricted in
accordance with Rule 144 of the Securities Act of 1933.
 
 On
December 1, 2007 the Company issued 100,000 shares of common stock as
compensation having a fair value of $72,000.  Such shares were issued
pursuant to an exemption from registration at Section 4(2) of the Securities Act
of 1933 and are restricted in accordance with Rule 144 of the Securities Act of
1933.
  On
December 19, 2007 the Company issued 50,000 shares of common stock for web
development and programming services having a fair value of
$36,000.   Such shares were issued pursuant to an exemption from
registration at Section 4(2) of the Securities Act of 1933 and are restricted in
accordance with Rule 144 of the Securities Act of 1933.
 5
 Table of Contents
   Item 6. Management’s
Discussion and Analysis or Plan of Operations.
 The following discussion contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to
future events or our future performance. Actual results may materially differ
from those projected in the forward-looking statements as a result of certain
risks and uncertainties set forth in this prospectus. Although management
believes that the assumptions made and expectations reflected in the
forward-looking statements are reasonable, there is no assurance that the
underlying assumptions will, in fact, prove to be correct or that actual results
will not be different from expectations expressed in this
report.
  Plan of
Operations
 
 During
the next twelve months, we expect to take the following steps in connection with
the further development of our business and the implementation of our plan of
operations:
 ●
              In
      November 2006, we launched a new online dating website located at
      www.IamFreeTonight.com. We continue to own and operate IamFreeTonight.com
      but our emphasis has shifted towards building and operating dating
      applications for Social Networking websites.  We expect to dedicate
      most of our resources to our applications.  We anticipate spending
      approximately $30,000 per month for overall programming costs during the
      next 3 months●
              In
      June 2007, we launched an online dating application built on Facebook
      Platform called 'Meet New People' which enables user to send and receive
      flirts as well as post when they are free to hang out.  In August
      2007 we launched a second dating application on Facebook called 'Are
      You Interested' which enables members to indicate interest in other
      members.  More than 7.7 million users have added our applications
      since their launch.  In the next 12 months, we will continue to
      enhance our current applications as well as consider building similar
      types of application on other large social networking sites as they launch
      their developer platforms.●
              We
      will consider implementing premium fee-based content as well as converting
      our applications to a subscription-based pay model in 2008.  Our
      decision to convert to a pay model and charge for premium content is
      dependent upon a variety of factors. Some of these factors include how
      much activity there is on the applications, the nature of the payment
      processing tools available on the underlying Social Networking website, as
      well as the success and popularity of new features we add in the coming
      months.  Each application will be evaluated on a case-by-case basis
      in light of the above factors.  Additionally, we will consider
      building stand alone websites bearing similar features to those of our
      applications●
              Our
      applications have primarily grown virally to date, with little spent to
      market them.  We will attempt to continue to grow our applications
      virally and do not anticipate spending significant amounts to market our
      applications.  With a large user base on our existing
      applications, we also have the ability to use cross-promotion to gain new
      members.●
              In
      order to further grow our applications, we plan to add new and exciting
      features to the existing feature-set of our applications.  We also
      plan to launch similar types of applications on other social networking
      sites so we can expose our applications to a broader
      audience.●
              We
      will also actively pursue partnership opportunities with other online
      dating and social networking companies to increase our member base and
      monetize our existing user base. In addition, we will consider acquiring
      other applications and established online dating sites in order to grow
      our member bases. We expect to use a combination of stock and cash to
      purchase other online dating sites and
  applications.
   6
 Table of Contents
   Results
of Operations for the Twelve Months Ended December 31, 2007 Compared to the
Twelve Months Ended December 31, 2006
 Revenue
increased from $92 for the twelve months ended December 31, 2006 to $424,564 for
the twelve months ended December 31, 2007 an increase of $424,472. These
revenues are primarily generated from advertisements placed on our Are You
Interested & Meet New People applications. The increase was due to the
growth of our applications and the increased usage in the Fourth Quarter of
2007.
  Research
and development expenses for the twelve months ended December 31, 2007 increased
to $412,098 from $126,590 for the twelve months ended December 31, 2006,
representing an increase of $285,508. The increase in research and development
is primarily attributable to the increase in spending on the continued
development of our applications and our IamFreeTonight.com website.
 
 General
and Administrative expenses for the twelve months ended December 31, 2007
increased to $172,521 from $83,215 for the twelve months ended December 31,
2006, representing an increase of $89,306.  The increase in general
and administrative expenses is primarily attributable to the overall expansion
of our operations as compared to the previous year, at which time we were a
development stage company.   Consulting fees for the twelve
months ended December 31, 2007 increased to $104,593 from $0 for the twelve
months ended December 31, 2006, representing an increase of
$104,593.  The increase in consulting fees was due to fees paid for
web development and programming services, advertising and public relation
services paid to third parties for the first time.  Total compensation
fees for the twelve months ended December 31, 2007 increased to $465,705 from
$365,250 for the twelve months ended December 31, 2006, representing an increase
of $100,455.  The increase in compensation fees was due to additional
options and shares issued to consultants and programmers in
2007.  Officer’s salary expenses for the twelve months ended December
31, 2007 increased to $30,000 from $0 for the twelve months ended December 31,
2006, representing an increase of $30,000.  The increase in salary
expense was due to salary compensation paid to Clifford Lerner for the first
time.  Advertising expenses for the twelve months ended December 31, 2007
increased to $176,906 from $1,677 for the twelve months ended December 31, 2006,
representing an increase of $175,229.  The increase in advertising
expenses is primarily attributable to various marketing efforts made on behalf
of IamFreeTonight.com during the first half of
2007.
  Liquidity and Capital
Resources
  The
Company is currently financing its operations primarily through cash generated
by its previous financing activities and revenues derived from advertisements
placed on our Facebook applications.
  At
December 31, 2007, the Company had cash of $318,143 and accounts receivable
totaling $248,902.
  As
reflected in the accompanying consolidated financial statements, the Company has
a net loss of $914,997 and a negative cash flow from operations of $357,392, for
the year ended December 31, 2007.  This raises substantial doubt about
its 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
raise additional capital and implement its business plan.  The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
  Management
believes that actions presently being taken to obtain additional equity funding
and implement its strategic plans along with the increase in operations and
revenues being generated, provide the opportunity for the Company to continue as
a going concern.
  Transaction with Dutchess
Private Equities Fund II, LLP
  On
November 22, 2006, we entered into an Investment Agreement (the “Agreement”)
with Dutchess Private Equities Fund, Ltd. (“Dutchess”) to provide us with an
equity line of credit. Pursuant to this Agreement, Dutchess is
contractually obligated to purchase up to $10,000,000 of the Company’s
Stock over the course of 36 months (“Line Period”), after our registration
statement was declared effective (“Effective Date”). The amount that the Company
is entitled to request from each of the purchase “Puts”, is  equal to
either 1) $100,000 or 2) 200% of the average daily volume (U.S market only)
(“ADV”), multiplied by the average of the three (3) daily closing prices
immediately preceding the Put Date.  The ADV is computed using the ten (10)
trading days prior to the Put Date. The Purchase Price for the common stock
identified in the Put Notice is set at ninety-five percent (95%) of the lowest
closing bid price of the common stock during the Pricing Period. The Pricing
Period is equal to the period beginning on the Put Notice Date and ending on and
including the date that is five (5) trading days after such Put Notice
Date.
  7
 Table of Contents
   Critical Accounting
Pronouncements
 Our
significant accounting policies are summarized in Note 1 of our financial
statements.
 
 We have
adopted the following accounting standards. While all of these significant
accounting policies impact our financial condition, our views of these policies
are critical. Policies determined to be critical are those policies that have
the most significant impact on our financial statements and require management
to use a greater degree of judgment and estimates. Actual results may differ
from those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would cause effect on our consolidated results of
operations, financial position or liquidity for the periods presented in this
report:
 
 We
account for income taxes under the Statement of Financial Accounting Standards
No. 109, “Accounting for Income Taxes” (“Statement 109”).  Under
Statement 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or
settled.
  Under
Statement 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.  As of December 31, 2007, the Company has a net operating loss
carryforward of $757,758 available to offset future taxable income through
2027.  The valuation allowance at December 31, 2007 was
$548,584.  The net change in the valuation allowance for the year
ended December 31, 2007 was an increase of $309,039.
 
 We value
property and equipment at cost and depreciates these assets using the
straight-line method over their expected useful life. We use a three year life
for software and five year life for computer equipment.
 
 In
December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which
replaces SFAS No. 123 and supersedes APB Opinion No. 25.  Under SFAS
No. 123(R), companies are required to measure the compensation costs of
share-based compensation arrangements based on the grant-date fair value and
recognize the costs in the financial statements over the period during which
employees are required to provide services. Share-based compensation
arrangements include stock options, restricted share plans, performance-based
awards, share appreciation rights and employee share purchase plans. In March
2005 the SEC issued Staff Accounting Bulletin No. 107, or "SAB 107". SAB 107
expresses views of the staff regarding the interaction between SFAS No. 123(R)
and certain SEC rules and regulations and provides the staff's views regarding
the valuation of share-based payment arrangements for public companies. SFAS No.
123(R) permits public companies to adopt its requirements using one of two
methods.  On April 14, 2005, the SEC adopted a new rule amending the
compliance dates for SFAS 123R. Companies may elect to apply this statement
either prospectively, or on a modified version of retrospective application
under which financial statements for prior periods are adjusted on a basis
consistent with the pro forma disclosures required for those periods under SFAS
123. Effective January 1, 2006, the Company has fully adopted the provisions of
SFAS No. 123R and related interpretations as provided by SAB 107.  As
such, compensation cost is measured on the date of grant at their fair
value.  Such compensation amounts, if any, are amortized over the
respective vesting periods of the option grant.  The Company applies
this statement prospectively.
 
 Equity
instruments (“instruments”) issued to other than employees are recorded on the
basis of the fair value of the instruments, as required by SFAS
No. 123(R).  EITF Issue 96-18,“Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services.” defines the measurement date and recognition
period for such instruments.   In general, the measurement date
is when either a (a) performance commitment, as defined, is reached or (b) the
earlier of (i) the non-employee performance is complete or (ii) the instruments
are vested. The measured value related to the instruments is recognized over a
period based on the facts and circumstances of each particular grant as defined
in the EITF.
 
 Basic and
diluted net loss per common share is computed based upon the weighted average
common shares outstanding as defined by Financial Accounting Standards No. 128,
“Earnings per Share.”  The 175,185 and 370,592 shares issuable upon
conversion of the note payable were not included in the computation of loss per
share for December 31, 2007 and 2006, because their inclusion is
anti-dilutive.  The 2,800,000 and 1,500,000 shares issuable upon the
exercise of stock options were not included in the computation of loss per share
for December 31, 2007 and 2006, respectively because their inclusion is
anti-dilutive.
   8
 Table of Contents
  We have
adopted the provisions of Emerging Issues Task Force 00-2, “Accounting for Web
Site Development Costs.”  Costs incurred in the planning stage of a
website are expensed as research and development while costs incurred in the
development stage are capitalized and amortized over the life of the asset,
estimated to be five years.  Expenses subsequent to the launch have
been expensed as research and development expenses.
 
 We
recognize revenue on arrangements in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial
Statements” and No. 104, “Revenue Recognition”.  In all cases, revenue
is recognized only when the price is fixed or determinable, persuasive evidence
of an arrangement exists, the service is performed and collectability is
reasonably assured.
 
 We
recognize revenue as earned on a click through basis.  As the traffic
moves through the websites per click, the contract amount is recognized as
revenue.  “Click-throughs” are defined as the number of times a user
clicks on an advertisement or search result.
 Recent Accounting
Pronouncements
  In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
objective of SFAS 157 is to increase consistency and comparability in fair value
measurements and to expand disclosures about fair value
measurements.  SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. SFAS 157 applies under other
accounting pronouncements that require or permit fair value measurements and
does not require any new fair value measurements. The provisions of SFAS No. 157
are effective for fair value measurements made in fiscal years beginning after
November 15, 2007. The adoption of this statement is not expected to have a
material effect on the Company's future reported financial position or results
of operations.
 
 In
February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
159, “The Fair Value Option
for Financial Assets and Financial Liabilities – Including an Amendment of FASB
Statement No. 115”.  This statement permits entities to choose
to measure many financial instruments and certain other items at fair value.
Most of the provisions of SFAS No. 159 apply only to entities that elect the
fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments
in Debt and Equity Securities” applies to all entities with
available-for-sale and trading securities. SFAS No. 159 is effective as of the
beginning of an entity’s first fiscal year that begins after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that begins on
or before November 15, 2007, provided the entity also elects to apply the
provision of SFAS No. 157, “Fair Value Measurements”. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
 
 In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
160, “Noncontrolling Interests
in Consolidated Financial Statements – an amendment of ARB No.
51”.  This statement improves the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require; the ownership interests in subsidiaries held by parties
other than the parent and the amount of consolidated net income attributable to
the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently, when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value, entities provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners.  SFAS No. 160
affects those entities that have an outstanding noncontrolling interest in one
or more subsidiaries or that deconsolidate a subsidiary.  SFAS No. 160
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Early adoption is prohibited. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
 Off-Balance Sheet
Arrangements
  We do not
have any off-balance sheet arrangements, financings, or other relationships with
unconsolidated entities or other persons, also known as “special purpose
entities” (SPEs).
  Item 7. Financial
Statements.
    9
 Table of Contents


















SNAP
INTERACTIVE, INC AND SUBSIDIARY
 (F/K/A
eTwine Holdings, Inc.)
 
 
 
 
 CONTENTS
 
 
 PAGE
              F-1
              REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMPAGE
              F-2
              CONSOLIDATED
      BALANCE SHEETS AS OF DECEMBER 31, 2007 AND 2006PAGE
              F-3
              CONSOLIDATED
      STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2007 AND
      2006PAGE
              F-4
              CONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER
      31, 2007 AND 2006.PAGE
              F-5
              CONSOLIDATED
      STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007 AND
      2006PAGES
              F-6
      – F-18
              NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS








Table of Contents




REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Board of Directors of:
 Snap
Interactive, Inc. and Subsidiary (F/K/A eTwine Holdings, Inc.)
 
 We have
audited the accompanying consolidated balance sheets of Snap Interactive, Inc.
and Subsidiary (F/K/A eTwine Holdings, Inc.) as of December 31, 2007 and 2006,
and the related consolidated statements of operations, changes in stockholders’
equity and cash flows for the years ended December 31, 2007 and 2006. These
financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly
in all material respects, the financial position of Snap Interactive, Inc. and
Subsidiary (F/K/A eTwine Holdings, Inc.) as of December 31, 2007 and
2006 and the results of its operations and its cash flows for the years
ended December 31, 2007 and 2006 in conformity with accounting principles
generally accepted in the United States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 7
to the financial statements, the Company has a net loss of $914,997 and a
negative cash flow from operations of $357,392 for the year ended December 31,
2007. This raises substantial doubt about its ability to continue as a going
concern.  Management’s plans concerning this matter are also described
in Note 7.  The accompanying consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
 
 
 WEBB
& COMPANY, P.A.
 Certified
Public Accountants
 
 Boynton
Beach, Florida
 February
28, 2008














F-1
 Table of Contents










Snap Interactive, Inc. and
Subsidiary(f/k/a
      eTwine Holdings, Inc. and Subsidiary)Consolidated
      Balance SheetsASSETS12/31/2007
              
              
              12/31/2006Current
      AssetsCash
              
              $
              318,143
              
              
              $
              215,792Accounts
      receivable, net
              
              
              248,902
              
              
              
              52Prepaid
      Expense
              
              
              24,904
              
              
              
              -Total
      Current Assets
              
              
              591,949
              
              
              
              215,844Property
      and Equipment, net
              
              
              16,640
              
              
              
              21,437Other
      AssetsSecurity
      Deposit
              
              
              1,210
              
              
              
              -Total Other Assets
              
              
              1,210
              
              
              
              -Total
      Assets
              
              $
              609,799
              
              
              $
              237,281LIABILITIES AND
      STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
              
              $
              26,131
              
              
              $
              856Notes
      Payable
              
              
              45,589
              
              
              
              -Convertible
      Notes Payable - Stockholder
              
              
              35,348
              
              
              
              10,138Accrued
      interest
              
              
              16,039
              
              
              
              12,649Total
      Current Liabilities
              
              
              123,107
              
              
              
              23,643Long
      Term LiabilitiesNotes
      Payable
              
              
              45,126
              
              
              
              -Convertible
      Notes Payable - Stockholder
              
              
              10,138
              
              
              
              85,348Total
      Liabilities
              
              
              178,371
              
              
              
              108,991Commitments
      and Contingencies
              
              
              -
              
              
              
              -Stockholders'
      EquityPreferred
      stock, $0.001 par value, 10,000,000 shares authorized,
noneissued
      and outstanding
              
              
              -
              
              
              
              -Common
      stock,  $0.001 par value; 100,000,000 shares
      authorized,10,333,895
      and 9,008,780 shares issued and outstanding, respectively
              
              
              10,334
              
              
              
              9,009Additional
      paid-in capital
              
              
              2,048,525
              
              
              
              829,075Accumulated
      deficit
              
              
              (1,619,541
              )
              
              
              (704,544
              )Less:
      deferred compensation
              
              
              (7,890
              )
              
              
              (5,250
              )Total
      Stockholders' Equity
              
              
              431,428
              
              
              
              128,290Total
      Liabilities and Stockholders' Equity
              
              $
              609,799
              
              
              $
              237,281










F-2
 Table of Contents






Snap Interactive, Inc. and
Subsidiary(f/k/a
      eTwine Holdings, Inc. and Subsidiary)Consolidated
      Statements of OperationsFor
      the Year Ended December 312007
              
              
              2006Revenue
              
              $
              424,564
              
              
              $
              92Operating
      ExpensesDepreciation
      and Amortization
              
              
              9,054
              
              
              
              8,100Research
      and Development
              
              
              412,098
              
              
              
              126,590Compensation
      expense
              
              
              465,705
              
              
              
              365,250Consulting
      Fees
              
              
              104,593
              
              
              
              -Advertising
      expense
              
              
              176,906
              
              
              
              1,677General
      and administrative
              
              
              172,521
              
              
              
              83,215Total
      Operating Expenses
              
              
              1,340,877
              
              
              
              584,832Loss
      from Operations
              
              
              (916,313
              )
              
              
              (584,740
              )Other
      Income (Expense)Interest
      Expense
              
              
              (3,390
              )
              
              
              (5,954
              )Interest
      Income
              
              
              6,081
              
              
              
              3,910Total
      Other Expense, net
              
              
              2,691
              
              
              
              (2,044
              )Loss
      Before Provision For Income Taxes
              
              
              (913,622
              )
              
              
              (586,784
              )Provision
      for Income Taxes
              
              
              (1,375
              )
              
              
              -Net
      Loss
              
              $
              (914,997
              )
              
              $
              (586,784
              )Net
      Loss Per Share  - Basic and Diluted
              
              
              (0.09
              )
              
              
              (0.07
              )Weighted
      average number of shares outstandingduring
      the period - Basic and Diluted
              
              
              9,660,466
              
              
              
              8,314,211















F-3
 Table of Contents






Snap
      Interactive, Inc. and Subsidiary(f/k/a
      eTwine Holdings, Inc. and Subsidiary)Consolidated
      Statement of Changes in Stockholders' EquityFor
      the years ended December 31, 2006 and 2007Preferred
      Stock
              
              
              Common
      stock$.001
      Par Value
              
              
              $.001
      Par Value
              
              
              Additional
              
              
              
              
              
              
              
              
              
              
              
              TotalNumber
      of
              
              
              
              
              
              
              
              
              
              
              
              paid-in
              
              
              Accumulated
              
              
              Deferred
              
              
              Subscription
              
              
              Stockholder'sShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              capital
              
              
              Deficit
              
              
              Compensation
              
              
              Receivable
              
              
              EquityBalance,
      December 31,   2005
              
              
              -
              
              
              $
              -
              
              
              
              8,227,000
              
              
              $
              8,227
              
              
              $
              230,823
              
              
              $
              (117,760
              )
              
              $
              (22,656
              )
              
              $
              (100,800
              )
              
              $
              (2,166
              )Cash
      received on subscription receivable
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              100,800
              
              
              
              100,800Deferred
      Compensation Realized
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              22,656
              
              
              
              
              
              
              
              22,656Shares
      issued for services
              
              
              -
              
              
              
              -
              
              
              
              281,780
              
              
              
              282
              
              
              
              83,502
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              83,784Stock
      options granted for services
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              365,250
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              365,250Stock
      issued for cash
              
              
              
              
              
              
              
              
              
              
              500,000
              
              
              
              500
              
              
              
              149,500
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              150,000Stock
      based compensation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              (5,250
              )
              
              
              -
              
              
              
              (5,250
              )Net
      loss, December 31, 2006
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (586,784
              )
              
              
              -
              
              
              
              -
              
              
              
              (586,784
              )Balance,
      for the year ended December 31, 2006
              
              
              -
              
              
              
              -
              
              
              
              9,008,780
              
              
              
              9,009
              
              
              
              829,075
              
              
              
              (704,544
              )
              
              
              (5,250
              )
              
              
              -
              
              
              
              128,290Shares
      issued for services
              
              
              -
              
              
              
              -
              
              
              
              304,286
              
              
              
              304
              
              
              
              215,996
              
              
              
              -
              
              
              
              (2,640
              )
              
              
              -
              
              
              
              213,660Stock
      options granted for services
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              490,475
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              490,475Stockholder
      note payable converted to common  stock
              
              
              -
              
              
              
              -
              
              
              
              200,000
              
              
              
              200
              
              
              
              49,800
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              50,000Shares
      issued for cash
              
              
              
              
              
              
              
              
              
              
              820,829
              
              
              
              821
              
              
              
              463,179
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              464,000Net
      Loss, December 31, 2007
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (914,997
              )
              
              
              -
              
              
              
              -
              
              
              
              (914,997
              )Balance,
      for the year ended December 31, 2007
              
              
              -
              
              
              $
              -
              
              
              
              10,333,895
              
              
              $
              10,334
              
              
              $
              2,048,525
              
              
              $
              (1,619,541
              )
              
              $
              (7,890
              )
              
              $
              -
              
              
              $
              431,428









F-4
 Table of Contents






Snap
      Interactive, Inc. and Subsidiary(f/k/a
      eTwine Holdings, Inc. and Subsidiary)Consolidated
      Statements of Cash FlowsFor
      the year ended December 31,2007
              
              
              2006Cash
      Flows From Operating Activities:Net
      Loss
              
              $
              (914,997
              )
              
              $
              (586,784
              )Adjustments
      to reconcile net loss to net cash used in operationsDepreciation/Amortization
              
              
              6,414
              
              
              
              8,100Stock
      issued for services
              
              
              216,300
              
              
              
              101,190Stock
      option
              
              
              490,475
              
              
              
              365,250Settlement
      payable
              
              
              90,715
              
              
              
              -(Increase)
      Decrease in:Accounts
      Receivable
              
              
              (248,850
              )
              
              
              9Prepaid
      Expense
              
              
              (24,904
              )
              
              
              -Security
      Deposit
              
              
              (1,210
              )
              
              
              -Increase
      (Decrease) in:Accounts
      payable
              
              
              25,275
              
              
              
              (2,145
              )Accrued
      interest payable
              
              
              3,390
              
              
              
              5,955Net
      Cash Used In Operating Activities
              
              
              (357,392
              )
              
              
              (108,425
              )Cash
      Flows From Investing Activities:Purchase
      of Fixed Assets
              
              
              (4,257
              )
              
              
              (949
              )Net
      Cash Used In Investing Activities
              
              
              (4,257
              )
              
              
              (949
              )Cash
      Flows From Financing Activities:Proceeds
      from issuance of stock, net of subscriptions receivable
              
              
              464,000
              
              
              
              243,500Net
      Cash Provided By Financing Activities
              
              
              464,000
              
              
              
              243,500Net
      Increase in Cash
              
              
              102,351
              
              
              
              134,126Cash
      at Beginning of Period
              
              
              215,792
              
              
              
              81,666Cash
      at End of Period
              
              $
              318,143
              
              
              $
              215,792Supplemental
      disclosure of cash flow information:Cash
      paid for interest
              
              $
              -
              
              
              $
              -Cash
      paid for taxes
              
              $
              1,375
              
              
              $
              -Supplemental
      disclosure of non-cash investing and financingactivities:


$50,000
of a convertible note payable was converted to 200,000 shares of Common
Stock.






F-5
 Table of Contents




SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006






NOTE
      1
              SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES AND
ORGANIZATION
 
 (A)
Organization
 
 Snap
Interactive, Inc. f/k/a eTwine Holdings, Inc. (“the Company”) was incorporated
under the laws of the State of Delaware on July 19, 2005.  eTwine,
Inc. was incorporated under the laws of the State of New York on May 7,
2004.
 
 On
November 20, 2007 the eTwine Holdings, Inc changed its name to Snap Interactive,
Inc.
 
 The
Company was organized to operate an online dating and social community website
that is proactive in understanding the singles
environment.    During 2007 the Company is no longer
considered to be in the development stage.
 
 (B) Principles of
Consolidation
 
 The
accompanying 2007 and 2006 consolidated financial statements include the
accounts of Snap Interactive, Inc. and its 100% owned subsidiary eTwine, Inc.
All intercompany accounts have been eliminated in the
consolidation.
 
 (C) Use of
Estimates
 
 In
preparing financial statements in conformity with generally accepted accounting
principles, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reported period.  Actual results could differ from
those estimates.
 
 (D) Cash and Cash
Equivalents
 
 For
purposes of the cash flow statements, the Company considers all highly liquid
investments with original maturities of three months or less at the time of
purchase to be cash equivalents.
 
 (E) Income
Taxes
 
 The
Company accounts for income taxes under the Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes” (“Statement
109”).  Under Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases.  Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.
   F-6
 Table of Contents
 SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
  Under
Statement 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.  As of December 31, 2007, the Company has a net operating loss
carryforward of $757,758 available to offset future taxable income through
2027.  The valuation allowance at December 31, 2007 was
$548,584.  The net change in the valuation allowance for the year
ended December 31, 2007 was an increase of $309,039.
 
 (F) Property and
Equipment
 
 The
Company values property and equipment at cost and depreciates these assets using
the straight-line method over their expected useful life. The Company uses a
three year life for software and five year life for computer
equipment.
 
 (G) Stock-Based
Compensation
 
 In
December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which
replaces SFAS No. 123 and supersedes APB Opinion No. 25.  Under SFAS
No. 123(R), companies are required to measure the compensation costs of
share-based compensation arrangements based on the grant-date fair value and
recognize the costs in the financial statements over the period during which
employees are required to provide services. Share-based compensation
arrangements include stock options, restricted share plans, performance-based
awards, share appreciation rights and employee share purchase plans. In March
2005 the SEC issued Staff Accounting Bulletin No. 107, or "SAB 107". SAB 107
expresses views of the staff regarding the interaction between SFAS No. 123(R)
and certain SEC rules and regulations and provides the staff's views regarding
the valuation of share-based payment arrangements for public companies. SFAS No.
123(R) permits public companies to adopt its requirements using one of two
methods.  On April 14, 2005, the SEC adopted a new rule amending the
compliance dates for SFAS 123R. Companies may elect to apply this statement
either prospectively, or on a modified version of retrospective application
under which financial statements for prior periods are adjusted on a basis
consistent with the pro forma disclosures required for those periods under SFAS
123. Effective January 1, 2006, the Company has fully adopted the provisions of
SFAS No. 123R and related interpretations as provided by SAB 107.  As
such, compensation cost is measured on the date of grant at their fair
value.  Such compensation amounts, if any, are amortized over the
respective vesting periods of the option grant.  The Company applies
this statement prospectively.
 
 Equity
instruments (“instruments”) issued to other than employees are recorded on the
basis of the fair value of the instruments, as required by SFAS
No. 123(R).  EITF Issue 96-18,“Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services.” defines the measurement date and recognition
period for such instruments.
   F-7
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 SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
  In
general, the measurement date is when either a (a) performance commitment, as
defined, is reached or (b) the earlier of (i) the non-employee performance is
complete or (ii) the instruments are vested. The measured value related to the
instruments is recognized over a period based on the facts and circumstances of
each particular grant as defined in the EITF.
 
 (H) Business
Segments
 
 The
Company operates in one segment and therefore segment information is not
presented.
 
 (I) Loss Per
Share
 
 Basic and
diluted net loss per common share is computed based upon the weighted average
common shares outstanding as defined by Financial Accounting Standards No. 128,
“Earnings per Share.”  The 175,185 and 370,592 shares issuable upon
conversion of the note payable were not included in the computation of loss per
share for December 31, 2007 and 2006, because their inclusion is
anti-dilutive.  The 2,800,000 and 1,500,000 shares issuable upon the
exercise of stock options were not included in the computation of loss per share
for December 31, 2007 and 2006, respectively because their inclusion is
anti-dilutive.
 
 (J) Fair Value of
Financial Instruments
 
 The
carrying amounts reported in the balance sheet for accounts receivable, accounts
payable, advances from stockholder and notes payable approximate fair value
based on the short-term maturity of these instruments.
 
 (K) Research and
Development
 
 The
Company has adopted the provisions of Emerging Issues Task Force 00-2,
“Accounting for Web Site Development Costs.”  Costs incurred in the
planning stage of a website are expensed as research and development while costs
incurred in the development stage are capitalized and amortized over the life of
the asset, estimated to be five years.  Expenses subsequent to the
launch have been expensed as research and development expenses.
 
 (L) Concentration of Credit
Risk
 
 At
December 31, 2007, 21.1% of sales were earned from Customer A, 17.9% of sales
were earned from Customer B, 16.5% of sales were earned from Customer C, 13.5%
of sales were earned from Customer D and 10.5% from Customer E.
    F-8
 Table of Contents
 SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 At
December 31, 2007, 21.5% of accounts receivable were due from Customer A, 19.8%
were due from Customer D, 18.3% were due from Customer B, 15.4% were due from
Customer F and 14.8% were due from Customer C.
 
 At
December 31, 2006, 100% of sales were earned from one customer.
 
 The
Company at times has cash in banks in excess of FDIC insurance limits. The
Company had approximately $245,088 and $126,601 in excess of FDIC insurance
limits as of December 31, 2007 and 2006, respectively.
 
 (M) Revenue
Recognition
 
 The
Company recognizes revenue on arrangements in accordance with Securities and
Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in
Financial Statements” and No. 104, “Revenue Recognition”.  In all
cases, revenue is recognized only when the price is fixed or determinable,
persuasive evidence of an arrangement exists, the service is performed and
collectability is reasonably assured.
 
 The
Company recognizes revenue as earned on a click through basis.  As the
traffic moves through the websites per click, the contract amount is recognized
as revenue.  “Click-throughs” are defined as the number of times a
user clicks on an advertisement or search result.
 
 (N)
Reclassification
 
 Certain
amounts from prior periods have been reclassified to conform to the current year
presentation.
 
 (O) Recent Accounting
Pronouncements
 
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
objective of SFAS 157 is to increase consistency and comparability in fair value
measurements and to expand disclosures about fair value
measurements.  SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. SFAS 157 applies under other
accounting pronouncements that require or permit fair value measurements and
does not require any new fair value measurements. The provisions of SFAS No. 157
are effective for fair value measurements made in fiscal years beginning after
November 15, 2007. The adoption of this statement is not expected to have a
material effect on the Company's future reported financial position or results
of operations.
   F-9
 Table of Contents
 SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 
 In
February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
159, “The Fair Value Option
for Financial Assets and Financial Liabilities – Including an Amendment of FASB
Statement No. 115”.  This statement permits entities to choose
to measure many financial instruments and certain other items at fair value.
Most of the provisions of SFAS No. 159 apply only to entities that elect the
fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments
in Debt and Equity Securities” applies to all entities with
available-for-sale and trading securities. SFAS No. 159 is effective as of the
beginning of an entity’s first fiscal year that begins after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that begins on
or before November 15, 2007, provided the entity also elects to apply the
provision of SFAS No. 157, “Fair Value Measurements”. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
 
 In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
160, “Noncontrolling Interests
in Consolidated Financial Statements – an amendment of ARB No.
51”.  This statement improves the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require; the ownership interests in subsidiaries held by parties
other than the parent and the amount of consolidated net income attributable to
the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently, when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value, entities provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners.  SFAS No. 160
affects those entities that have an outstanding noncontrolling interest in one
or more subsidiaries or that deconsolidate a subsidiary.  SFAS No. 160
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Early adoption is prohibited. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
 
 NOTE
      2
              PROPERTY AND
      EQUIPMENT
 
 At
December 31, 2007 and 2006 property and equipment is as follows:
 
 2007
              
              
              2006Computer
      and Equipment
              
              $
              4,257
              
              
              $
              -Software
              
              
              949
              
              
              
              949Website
      costs
              
              
              40,500
              
              
              
              40,500Less
      accumulated depreciation and amortization
              
              
              (29,066
              )
              
              
              (20,012
              )$
              16,640
              
              
              $
              21,437
 
   F-10
 Table of Contents
 SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 Depreciation
and amortization expense for the years ended December 31, 2007 and 2006 was
$9,054 and $8,100, respectively.
 
 Estimated
future amortization of intangible assets is as follows:
 
 Year
              
              Amount2008
              
              $
              9,2682009
              
              
              5,3102010
              
              
              8522011
              
              
              8522012
              
              
              358$
              16,640
 
 NOTE
      3
              STOCKHOLDERS’
      EQUITY
 
  (A)Common Stock Issued for
Services
  On
December 19, 2007 the Company issued 50,000 shares of common stock for web
development and programming services having a fair value of
$36,000.
 
 On
December 1, 2007 the Company issued 100,000 shares of common stock as
compensation having a fair value of $72,000.
 
 On
October 15, 2007, the Company issued 14,286 shares of common stock as
compensation having a fair value of $10,000 based upon fair value on the date of
grant.  The stock vests on October 13, 2008 and as of December 31,
2007, $7,890 is recorded as deferred compensation.
 
 On
October 2, 2007 the Company issued 50,000 shares of common stock for public
relations services having a fair value of $35,000.
 
 On June
30, 2007, the Company issued 50,000 shares of common stock having a fair value
of $47,500 in exchange for web development and programming
services.
 
 On March
6, 2007, the Company executed an agreement with an unrelated third party to
provide business investor relations services for a period of 90 days in exchange
for total compensation of $15,000 and 60,000 shares of common stock payable
monthly.   The Company issued 20,000 shares of common stock which
had a fair value of $4,000 based upon the quoted closing trading price on the
date of the agreement.  The Company was obligated to issue an
additional 20,000 shares of common stock on April 5, 2007 and May 5, 2007 and
pay $5,000 on each date.  The fair value of the April 5, 2007 issuance
was $11,800. The Company also paid $5,000.
   F-11
 Table of Contents
 SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
  During
May 2007,   the Company and the service provider mutually agreed
to terminate the contract. In summary, during the six months ended June 30,
2007, the Company issued 40,000 shares of common stock having a fair value of
$15,800 and paid $10,000.  No further amounts are due under the
contact.
  (B)  Stock Issued for
Cash
 On
October 29, 2007 the Company sold 30,769 shares of common stock for
$20,000.
 
 On
October 3, 2007 the Company sold 33,333 shares of common stock for
$20,000.
 
 On July
3, 2007 the Company sold 250,000 units that consisted of 250,000 shares of
common stock and 250,000 warrants exercisable at $1.20 which expire July 3,
2010, for total cash of  $150,000.
 
 On July
12, 2007 the Company collected $219,000 for the sale of 406,727 shares of common
stock.
 
 On May
14, 2007, the Company sold 100,000 shares of common stock for $55,000 pursuant
to the terms of a private placement.
 
 
 (C)  Stock Options
Issued for Services
 
 On
December 13, 2006, the Company executed an employment agreement with its
President and CEO.  The term ceases December 1, 2007, but was extended
for one year through December 1, 2008.  Pursuant to the terms of the
agreement, the employee will receive 1,500,000 options of the Company having an
exercise price of $0.40 per share. The
options vest immediately and the Company recorded compensation expense of
$365,250, with an offsetting credit to additional paid in capital. The Company
has valued these options at their fair value using the Black-Scholes option
pricing method.  The assumptions used were as follows:
 
 Expected
      life
              2
      yearsExpected
      volatility
              71.86%Risk
      free interest rate
              4.86%Expected
      dividends
              0%
 
 On
December 1, 2007, the Company executed an employment agreement with its
co-founder.  The term ceases December 1, 2008, there is an automatic
option to extend the agreement for a period of three additional
years.  Pursuant to the terms of the agreement, the individual will
receive 1,000,000 options of the Company having an exercise price of $0.70 and
$1.50 per share (500,000 at $0.70 and 500,000 at $1.50).  The options
vest immediately and the Company recorded compensation expense of $305,150, with
an offsetting credit to additional paid in
capital.
   F-12
 Table of Contents
 SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
  The
Company has valued these options at their fair value using the Black-Scholes
option pricing method.  The assumptions used were as
follows:
 
 Expected
      life
              1
      yearExpected
      volatility
              141.34%Risk
      free interest rate
              3.31%Expected
      dividends
              0%
 
 On
December 31, 2007, the Company issued 150,000 options having an exercise price
of $1.00 and $0.50 per share (100,000 at $1.00 and 50,000 at
$0.50).  The options vest immediately and the Company recorded
research and development expense of $86,445, with an offsetting credit to
additional paid in capital. The Company has valued these options at their fair
value using the Black-Scholes option pricing method.  The assumptions
used were as follows:
 
 Expected
      life
              1
      yearExpected
      volatility
              146.35%Risk
      free interest rate
              3.34%Expected
      dividends
              0%
 
 On
December 31, 2007, the Company issued 150,000 options having an exercise price
of $3 per share. The options vest immediately and the Company recorded research
and development expense of $98,880 with an offsetting credit to additional paid
in capital. The Company has valued these options at their fair value using the
Black-Scholes option pricing method.  The assumptions used were as
follows:
 
 Expected
      life
              3
      yearsExpected
      volatility
              146.35%Risk
      free interest rate
              3.07%Expected
      dividends
              0%
 
  The
following tables summarize all stock option grants to employees and consultants
as of December 31, 2007 and December 31, 2006, and the related changes during
these periods are presented below.
   F-13
 Table of Contents
 SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
   Number
      of
                Options
              
              
              Weighted
      Average Exercise PriceStock
      OptionsBalance
      at December 31, 2005
              
              
              -
              
              
              $
              -Granted
              
              
              1,500,000
              
              
              $
              0.40Exercised
              
              
              -
              
              
              $
              -Forfeited
              
              
              -
              
              
              $
              -Balance
      at December 31, 2006
              
              
              1,500,000
              
              
              $
              0.40Granted
              
              
              1,300,000
              
              
              
              1.29Exercised
              
              
              -
              
              
              
              -Forfeited
              
              
              -
              
              
              
              -Balance
      at December 31, 2007
              
              
              2,800,000
              
              
              
              0.81Options
      exercisable at December 31, 2007
              
              
              2,800,000
              
              
              $
              0.81Weighted
      average fair value of options
                granted
      during 2007
              
              
              
              
              
              $
              1.29
  Of the
total options granted, all 2,800,000 are fully vested, exercisable and
non-forfeitable.
   The
following table summarizes information about stock options for the Company
at December 31, 2007 and 2006:
  2007
      Options Outstanding
              
              
              Options
      ExercisableRange
      of Exercise Price
              
              
              Number
                Outstanding
      at December 31, 2007
              
              
              Weighted
      Average Remaining Contractual Life
              
              
              Weighted
      Average Exercise Price
              
              
              Number
                Exercisable
      at December 31, 2007
              
              
              Weighted
      Average Exercise Price$
              0.40
              
              
              
              1,500,000
              
              
              
              4.96
              
              
              $
              0.40
              
              
              
              1,500,000
              
              
              $
              0.40$
              0.50
      - 3.00
              
              
              
              1,300,000
              
              
              
              4.17
              
              
              $
              1.29
              
              
              
              1,300,000
              
              
              $
              1.29
 
 
 2006
      Options Outstanding
              
              
              Options
      ExercisableRange
      of Exercise Price
              
              
              Number
                Outstanding
      at December 31, 2006
              
              
              Weighted
      Average Remaining Contractual Life
              
              
              Weighted
      Average Exercise Price
              
              
              Number
                Exercisable
      at December 31, 2006
              
              
              Weighted
      Average Exercise Price$
              0.40
              
              
              
              1,500,000
              
              
              
              5.96
              
              
              $
              0.40
              
              
              
              1,500,000
              
              
              $
              0.40
 
 
 
 
 
 F-14
 Table of Contents
 
 SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 
 NOTE
      4
              CONVERTIBLE NOTES
      PAYABLE – STOCKHOLDER
 
  On
December 29, 2005, $92,648 of stockholder advances were converted into an
unsecured convertible note payable, due December 31, 2008 and bearing interest
at a rate of 6% per annum. All debt can be converted at the rate of $0.25 per
share for each $1 of debt.  The cash offering price at that time was
$0.25 and therefore there was no beneficial conversion feature on the note as
the market price and conversion price were equivalent.  During 2006,
the stockholder exchanged $7,300 of the note payable in full payment of a
subscription receivable.  On March 27, 2007, a stockholder converted
additional debt totaling $50,000 in exchange for 200,000 shares of common
stock.  The fair value of the common stock was $0.25 per share based
upon the terms of the convertible note entered into on December 29,
2005.  Accordingly, no gain or loss is recognized in this transaction.
At December 31, 2007, the Company had a remaining balance due December 31, 2008
of $35,348.
   On March
1, 2007, $10,138 of the stockholder advances were converted into an unsecured
convertible note payable, due March 1, 2010 and bearing interest at a rate of 6%
per annum.  All debt can be converted at the rate of $0.30 per share
for each $1 of debt.  There was no beneficial conversion recognized on
the conversion.  At December 31, 2007, the Company had a remaining
balance due March 1, 2010 of $10,138.
  NOTE
      5
              COMMITMENTS
 
 (A) Employment
Agreements
 
 On
December 1, 2007 the Company entered into a one year employment agreement with
its co-founder.As compensation for services received, the Company is required to
issue100,000 shares of common stock, an option to purchase 1,000,000 shares (See
Notes 3(A) and (C)) and annual compensation of $160,000 a year beginning January
2008 with annual bonus and salary increases determined by the
Company.  The agreement also calls for the employee to receive health
benefits, monthly membership for a health and fitness facility as well as a
complete annual physical.  In addition, upon a change in control of
the Company, the employee will receive severance payments equal to the remaining
amounts due under the employment agreement plus a minimum of two years base
compensation, plus any prorated share of incentive compensation and stock
options associated with any signing bonus, plus health benefits up to two years
and up to $50,000 in job search costs.
 
 On
December 13, 2006 the Company executed an employment agreement with its
President and CEO.  The term ceases December 1, 2007 but it was
renewed for a period of one additional year through December 1,
2008.  As compensation for services, the employee will receive
1,500,000 options of the Company having an exercise price of $0.40 per share
(See Note 3(C)), and annual compensation of $160,000 a year beginning January 1,
2008.
    F-15
 Table of Contents
 SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
  The
agreement also calls for the employee to receive health benefits, monthly
membership for a health and fitness facility as well as a complete annual
physical.  In addition, upon a change in control of the Company, the
employee will receive severance payments equal to the remaining amounts due
under the employment agreement plus a minimum of two years base compensation,
plus any prorated share of incentive compensation and stock options associated
with any signing bonus, plus health benefits up to two years and up to $50,000
in job search costs.  In October 2007, the employee received $30,000
as salary and bonus for services rendered to the Company from July 1, 2007
through December 31, 2007.
 
 (B) Consulting
Agreements
  On
October 1, 2007 the company entered in to a three month consulting agreement
with a
public-relations company.  The company is required to issue 50,000
shares of common stock and
$17,000 payable in two installments.  The first payment of $10,000 is
to be paid upon
entering into the agreement and $7,000 shall be paid seventy five days after the
first payment. On October 1, 2007 $10,000 was paid and on October 2, 2007 50,000
shares of common stock have been issued.  As of December 31, 2007 the $7,000
payment has not been made and is being disputed by the Company due to breach of
contract.
 
 During
May 2007, the Company entered into an agreement with a consultant to issue the
consultant up to 50,000 shares of common stock and up to 50,000 common stock
options at an exercise price of $2.00 per share expiring in 2011 at the
discretion of the Company based on services performed through December 31,
2007.  The stock and options will vest 1 year from
issuance.  As of December 31, 2007, no stock or options have been
awarded.. (See Note 8(C )).
 
 On
      May 15, 2007, the Company entered into a service agreement with an
      unrelated third party to provide public relations services.  The
      term of the services to be provided is from May 15, 2007 to September 15,
      2007.  As compensation for services received the Company will be
      required to pay $6,500 per month.     The
      agreement was terminated effective November 9, 2007.  During
      December, 2007 the Company renewed the agreement for an additional four
      months for a fee of $6,500.  For the year ended December 31,
      2007 in total $44,507 in compensation has been
  paid.
 
 On
      January 10, 2007, the Company entered into a service agreement with an
      unrelated third party to provide marketing and advertising
      services.  The term of the services to be provided is from March
      1, 2007 to April 30, 2007.   As compensation for services
      received the Company will be required to pay shares of common stock having
      a fair value of $0.30 per share based on recent cash
      offerings.  The Company is not required to pay any stock based
      compensation until the end of the service period and if the service
      provider has surpassed certain predetermined milestones.  For
      the period ended December 31, 2007 no shares of common stock are due has
      the service provider has not met the milestones under the agreement.
      Effective December 31, 2007 the agreement has been mutually
      terminated.
    F-16
 Table of Contents
 SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 In
September 2006, the Company entered into a six-month consulting agreement with a
web site development company.  Pursuant to the terms of the agreement,
the consultant will receive payments of common stock based upon the achievement
of certain milestones.  The Company is required to pay the consultant
$1,400 per week plus 4,000 shares of common stock having a fair value of $1,000
per week if certain milestones were met.  The shares were valued at
the Company’s then cash offering price of $0.25.  Aggregate cash and
non cash compensation on a weekly basis, exclusive of any milestones is
$1,400.  On December 20, 2006, the Company entered into a new
consulting agreement.  The term of the new agreement is from January
1, 2007 to December 31, 2007.  As compensation for services received
the Company is required to pay $2,300 per week for programmers.  The
company will also issue an additional 100,000 shares of common stock, fair value
will be determined on issuance date provided the required services have been
performed.  As of June 30, 2007, the Company issued 50,000 shares of
common stock at a recent cash offering price of $0.95 per share in exchange for
research and development services rendered having a fair value at the grant date
of $47,500.  Effective October 15, 2007 the Company is required to pay
$3,700 per week since an additional programmer has been hired. In addition,
based on the Company’s discretion it will grant up to 150,000 stock options as
follows:
  June
      30
              2007
      – exercise price $0.50June
      30
              2007
      – exercise price $1.00December
      31
              2007
      – exercise price $0.50December
      31
              2007
      – exercise price $1.00
  As of
December 31, 2007 the Company had issued all shares and options under the
initial arrangement.  On December 31, 2007, the agreement was
terminated. In connection with the termination, the Company compensated the
consultant by granting 150,000 options (See Note 3(C)), paid $15,980 of
outstanding amounts due under the agreement, will pay $25,000 as an employment
fee and $72,000 payable in 36 monthly installments with imputed interest rate of
6%, and reimburse the consultant $500 for advertising costs.
 
 (C) Lease
Agreements
 
 On
November 27, 2007 the Company entered into a twelve month computer
hosting
 agreement.  The
Company is required to pay $8,812 per month for the services
provided
 
 NOTE
      6
              RELATED PARTY
      TRANSACTIONS
 
 On
December 1, 2007 the Company entered into a one year employment
agreement.  As compensation for services received the Company is
required to issue 100,000 shares of common stock, an option to purchase
1,000,000 shares (See Notes 3(A) and (C)) and an annual compensation of $160,000
per year beginning January 2008.
    F-17
 Table of Contents
  SNAP
INTERACTIVE, INC. AND SUBSIDIARY
 F/K/A
ETWINE HOLDINGS, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 On March
27, 2007, a stockholder converted $50,000 of a convertible note payable into
200,000 shares of common stock.
 
 On March
1, 2007, $10,138 of the stockholder advances were converted into an unsecured
convertible note payable, due March 1, 2010 and bearing interest at a rate of 6%
per annum.
 
 NOTE
      7
              GOING
      CONCERN
 
 As
reflected in the accompanying consolidated financial statements, the Company has
a net loss of $914,997 and a negative cash flow from operations of $357,392, for
the year ended December 31, 2007.  This raises substantial doubt about
its 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
raise additional capital and implement its business plan.  The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
 
 Management
believes that actions presently being taken to obtain additional equity funding
and implement its strategic plans along with the increase in operations and
revenue being generated, provide the opportunity for the Company to continue as
a going concern.
 
 NOTE
      8
              SUBSEQUENT
      EVENTS
 
 (A) Consulting
Agreement
 
 Effective
January 9, 2008 the Company entered into a consulting agreement with an
unrelated third party to provide marketing and advertising
services.  In exchange for consulting services the Company granted an
option to purchase 10,000 shares of the Company’s common stock at an exercise
price of $1 per share.  These options vest immediately and have an
expiration date of 3 years.
 
 (B) Employment
Agreement
 
 In
January 2008, the Company entered into agreements with various employees for
terms up to two-years with salaries totaling no less than an aggregate of
$338,000 and minimum bonuses of no less than an aggregate of $50,000 subject to
various performance requirements.   In addition, the Company will
issue 25,000 shares of stock and 125,000 options (25,000 at $1.00, 50,000 at
$2.00, and 50,000 at $3.00) over the term, and up to an additional 35,000 shares
of stock and 145,000 options (25,000 at $1.00, 70,000 at $2.00, and 50,000 at
$3.00) subject to various performance requirements.  The agreements
also call for the Company’s employees to receive health
benefits.
 (C)  Stock and
Stock Options Issued for Services
  On
January 1, 2008 the consultant earned the 50,000 shares of common stock and
50,000 common stock options at an exercise price of $2.00 per share expiring in
2011.  The stock and stock options will be issued based on the
employment requirement with the firm through January 1, 2009.










F-18
 Table of Contents








Item
8.  Changes
In and Disagreements With Accountants on Accounting and Financial
Disclosure.
  None.
  Item 8A. Controls
and Procedures.
  Evaluation of Disclosure
Controls and Procedures
 
 Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief
Accounting Officer (“CAO”) (the Company’s principal financial and accounting
officer), of the effectiveness of the Company’s disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this report. Based upon that evaluation, the
Company’s CEO and CAO concluded that the Company’s disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that the Company files or submits under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, including the Company’s CEO and
CAO, as appropriate, to allow timely decisions regarding required
disclosure.
  Management’s Report on
Internal Controls over Financial Reporting
 
 Internal
control over financial reporting is a process to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally
accepted accounting principles.  There has been no change in the Company’s
internal control over financial reporting during the year ended
December 31, 2007 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
  The
Company’s management, including the Company’s CEO and CAO, does not expect that
the Company’s disclosure controls and procedures or the Company’s internal
controls will prevent all errors and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of the
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.
 
 Management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, management concluded that the
company’s internal control over financial reporting was effective as of December
31, 2007.
 Item 8B. Other
Information.
  None.
 
  10
 Table of Contents
  PART
III
  Item 9. Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act.
  The
following table sets forth the name and age of our sole executive officer and
director.
 
 Name
              
              Age
              
              Position
              
              Date of
      AppointmentClifford
      Lerner
              
              30
              
              President,
      Chief Executive Officer, Chief Financial Officer, Chairman
              
              Inception
  Set forth
below is a brief description of the background and business experience of our
sole executive officer and director for the past five years.
 
 CLIFFORD LERNER is our
President and Chief Executive Officer as well as Chairman of our Board of
Directors. Prior to joining us in July 2005, Clifford spent his professional
career from July 2000 to May 2005 at Lehman Brothers Inc. as an Analyst in its
Equities division. Clifford worked as an Analyst in the Product Management Group
where his duties involved helping to coordinate the morning and afternoon equity
research calls. He received his undergraduate degree from Cornell University in
2000 where he majored in Applied Economics & Business
Management.
  Term of
Office
  Our
director is appointed for a one-year term to hold office until the next annual
general meeting of our shareholders or until removed from office in accordance
with our bylaws. Our officers are appointed by our board of directors and hold
office until removed by the board.
 Significant
Employees
  None.
 
 Family
Relationships
  No family
relationships exist among our directors or executive officers.
 
 Involvement in Certain Legal
Proceedings
  To our
knowledge, during
the past five years, none of our directors, executive officers, promoters,
control persons, or nominees has been:
  •
              the
      subject of any bankruptcy petition filed by or against any business of
      which such person was a general partner or executive officer either at the
      time of the bankruptcy or within two years prior to that time;
 
 •
              convicted
      in a criminal proceeding or is subject to a pending criminal proceeding
      (excluding traffic violations and other minor offenses);
 
 •
              subject
      to any order, judgment, or decree, not subsequently reversed, suspended or
      vacated, of any court of competent jurisdiction, permanently or
      temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      or
 
 •
              found
      by a court of competent jurisdiction (in a civil action), the Commission
      or the Commodity Futures Trading Commission to have violated a federal or
      state securities or commodities law.
   11
 Table of Contents
  Code of Ethics
  We have
adopted a Code of Ethics applicable to our Chief Executive Officer and Chief
Financial Officer. This Code of Ethics is filed herewith as an
exhibit.
 
 Compliance with Section
16(a) of the Exchange Act
  Section
16(a) of the Securities Exchange Act of 1934 requires the Company's officers and
directors, and persons who own more than ten (10%) percent of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (SEC). Officers,
directors, and greater than 10 percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
 To the
Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company, all reports under Section 16(a) required to be filed
by its officers and directors and greater than ten percent beneficial owners
were timely filed as of the date of this filing.
  Item 10. Executive
Compensation.
  Compensation of Executive
Officers
  The
following summary compensation table sets forth all compensation awarded to,
earned by, or paid to the named executive officers paid by us during the fiscal
years ended December 31, 2007 and 2006 in all capacities for the accounts of our
executives, including the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO):
 SUMMARY COMPENSATION
TABLE
 
 Name and Principal
      Position
              
              
              Year
              
              
              Salary
                ($)
              
              
              Bonus
                ($)
              
              
              Stock
Awards
                ($)
              
              
              Option
      Awards
                ($)
              
              
              Non-Equity Incentive Plan
      Compensation ($)
              
              
              Non-Qualified Deferred
      Compensation Earnings
                ($)
              
              
              All Other
      Compensation
                ($)
              
              Totals
                ($)Clifford
      Lerner,(1)
                President,
      Chief
              
              
              2007
              
              $
              30,000
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              $
              30,000Executive
      Officer,
              
              
              2006
              
              $
              0
              
              
              0
              
              
              0
              
              
              365,250
              
              
              0
              
              
              0
              
              
              0
              $
              365,250Chief
      Financial Officer
 
 (1)
              Pursuant
      to his employment agreement with us, Clifford Lerner received options to
      purchase one million five hundred thousand shares of the Company’s Common
      Stock at a price of $0.40 that vested on the date of grant, such options
      to expire in 2012.
  Outstanding Equity Awards at Fiscal
Year-End Table.  We
granted to Clifford Lerner options to purchase one million five hundred thousand
shares of the Company’s Common Stock at a price of $0.40, such options to expire
in 2012.  The options vested immediately and we recorded compensation
expense of $365,250, with an offsetting credit to additional paid in
capital.  We have valued these options at their fair value using the
Black-Scholes option pricing method.  The assumptions used were as
follows:
  Expected
      life
                2
      yearsExpected
      volatility
                71.86%Risk
      free interest rate
                4.86%Expected
      dividends
                0%
  Employment
Agreements
  Employment
and Consulting Agreements
  We
entered into an employment agreement with Mr. Clifford Lerner, our Chief
Executive Officer, President, and Chairman of the Board of Directors, on
December 14, 2006. Pursuant to such agreement, we granted to Clifford Lerner
options to purchase one million five hundred thousand shares of the Company’s
Common Stock at a price of $0.40, such options to expire in 2012.  The
term ceased December 1, 2007, but it was renewed for a period of one additional
year through December 1, 2008.  Beginning January 1, 2008, Clifford
Lerner shall receive annual compensation of $160,000 per year during the term of
the Agreement. During 2007, we paid a bonus of $30,000 to Mr.
Lerner.
 12
 Table of Contents
  Compensation of
Directors
  For the
fiscal year ended December 31, 2007, we did not compensate our director
for his services.
  Item 11. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  The
following table sets forth certain information regarding the ownership of our
capital stock, as of March 24, 2008, for: (i) each director; (ii) each person
who is known to us to be the beneficial owner of more than 5%of our outstanding
common stock; (iii) each of our executive officers named in the Summary
Compensation Table; and (iv) all of our current executive officers and directors
of as a group. Except as otherwise indicated in the footnotes, all information
with respect to share ownership and voting and investment power has been
furnished to us by the persons listed. Except as otherwise indicated in the
footnotes, each person listed has sole voting power with respect to the shares
shown as beneficially owned.
  Title
      of Class
                Name
      and Address of Beneficial Owner
                Amount
      and Nature of Beneficial Owner
                Percent
      of Class (1)Common
      Stock
                Clifford
      Lerner
                7,000,000
      (2)
                67.41%Common
      Stock
                All
      executive officers and directors as a group
                7,000,000
      (2)
                67.41%
  (1) The
percent of class is based on 10,383,895  shares of common stock issued
and outstanding as of March 24, 2008.
 (2) In
addition to the 7,000,000 shares set forth above, Clifford Lerner owns the
option to purchase an additional 1,500,000 shares of our common stock at $.40
pursuant to his employment agreement with us.
  Item 12. Certain
Relationships and Related Transactions.
  On
December 1, 2007 we entered into a one year employment agreement with our
co-founder.  As compensation for services received, we
are required to issue 100,000 shares of common stock, an option to purchase
1,000,000 shares (See Notes 3(A) and (C)) and an annual compensation of $160,000
per year beginning January 2008.
 On March
27, 2007, a stockholder converted $50,000 of a convertible note payable into
200,000 shares of common stock.
 
 On March
1, 2007, $10,138 of the stockholder advances were converted into an unsecured
convertible note payable, due March 1, 2010 and bearing interest at a rate of 6%
per annum.
  13
 Table of Contents
  Item 13. Exhibits.
  Exhibit No.
              
              Title of
      Document
              
              Location3.1.1
              
              Articles
      of Incorporation
              
              Incorporated
      by reference to Form SB-2 filed on March 14, 20063.2
              
              Bylaws
              
              Incorporated
      by reference to Amendment No. 1 to Form SB-2 filed on September 16,
      200510.1
              
              Investment
      Agreement dated November 22, 2006 and between the Company and Dutchess
      Private Equities Fund, Ltd
              
              Incorporated
      by reference to Form SB-2 filed on December 26, 200610.2
              
              Registration
      Rights Agreement dated June 29, 2006 by and between the Company and
      Dutchess Private Equities Fund, Ltd.
              
              Incorporated
      by reference to Form SB-2 filed on December 26, 200610.3
              
              Stock
      Purchase Agreement and Share Exchange
              
              Incorporated
      by reference to Amendment No. 1 to the Form SB-2 filed on May 12,
      200610.4
              
              Promissory
      Note
              
              Incorporated
      by reference to Amendment No. 1 to Form SB-2 filed on May 12,
      200610.5
              
              Private
      Placement and Subscription Agreement
              
              Incorporated
      by reference to Amendment No. 3 to Form SB-2 filed on June 28,
      200610.6
              
              Employment
      Agreement
              
              Incorporated
      by reference to Form SB-2 filed on August 31, 200631.1
              
              Certification
      of Chief Executive Officer Pursuant to Rule 13a-14(a) of the
      Securities Exchange Act of 1934
              
              Filed
      herewith32.1
              
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
              
              Filed
      herewith
  Item 14. Principal
Accounting Fees and Services.
  Audit
Fees
  For our
fiscal year ended December 31, 2007, we were billed approximately $14,926 for
professional services rendered for the audit and reviews of our financial
statements. For our fiscal year ended December 31, 2006, we were billed
approximately $14,034 for professional services rendered for the audit and
reviews of our financial statements.
  Audit Related
Fees
  For our
fiscal years ended December 31, 2007 and 2006 we did not incur any audit related
fees.
   14
 Table of Contents
   
 Tax Fees
  For our
fiscal years ended December 31, 2007 and 2006, we were billed $1,000 and $1,000,
respectively. for professional services rendered for tax compliance, tax advice,
and tax planning.
  All Other
Fees
  The
Company did not incur any other fees related to services rendered by our
principal accountant for the fiscal years ended December 31, 2007 and
2006.
 
 Audit and Non-Audit Service
Pre-Approval Policy
 
 In
accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules
and regulations promulgated thereunder, the Audit Committee has adopted an
informal approval policy that it believes will result in an effective and
efficient procedure to pre-approve services performed by the independent
registered public accounting firm.
  Audit Services.Audit services
include the annual financial statement audit (including quarterly reviews) and
other procedures required to be performed by the independent registered public
accounting firm to be able to form an opinion on our financial statements. The
Audit Committee pre-approves specified annual audit services engagement terms
and fees and other specified audit fees. All other audit services must be
specifically pre-approved by the Audit Committee. The Audit Committee monitors
the audit services engagement and may approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope or other
items.
 
 Audit-Related Services.Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of our financial
statements which historically have been provided to us by the independent
registered public accounting firm and are consistent with the SEC’s rules on
auditor independence. The Audit Committee pre-approves specified audit-related
services within pre-approved fee levels. All other audit-related services must
be pre-approved by the Audit Committee.
 
 Tax Services.The Audit
Committee pre-approves specified tax services that the Audit Committee believes
would not impair the independence of the independent registered public
accounting firm and that are consistent with SEC rules and guidance. The Audit
Committee must specifically approve all other tax services.
 
 All Other Services.Other
services are services provided by the independent registered public accounting
firm that do not fall within the established audit, audit-related and tax
services categories. The Audit Committee pre-approves specified other services
that do not fall within any of the specified prohibited categories of
services.
 
 Procedures.All proposals for
services to be provided by the independent registered public accounting firm,
which must include a detailed description of the services to be rendered and the
amount of corresponding fees, are submitted to the Chairman of the Audit
Committee and the Chief Financial Officer. The Chief Financial Officer
authorizes services that have been pre-approved by the Audit Committee. If there
is any question as to whether a proposed service fits within a pre-approved
service, the Audit Committee chair is consulted for a determination. The Chief
Financial Officer submits requests or applications to provide services that have
not been pre-approved by the Audit Committee, which must include an affirmation
by the Chief Financial Officer and the independent registered public accounting
firm that the request or application is consistent with the SEC’s rules on
auditor independence, to the Audit Committee (or its Chair or any of its other
members pursuant to delegated authority) for approval.
   15
 Table of Contents
   SIGNATURES
  In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  ETWINE HOLDINGS,
      INC.By:
              /s/ Clifford
      LernerCLIFFORD
      LERNERPresident,
      Chief Executive Officer,
                Chief
      Financial OfficerDate:
              March 24,
      2008
 
 In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
 
 Name
              
              Title
              
              Date/s/ Clifford
      Lerner
              
              President,
      Chief Executive Officer,
              
              March 24,
      2008CLIFFORD
      LERNER
              
              Chief
      Financial Officer