INTELLIGENT PROTECTION MANAGEMENT CORP.
For the period ended Dec 31, 2024. Filed Mar 24, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 24, 2025
IPM$1.62-3.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-15.
0001213900-24-023064
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-24.
0001013762-25-001600
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 83 previous paragraphs and 127 current paragraphs.
32 unchanged; 27 reworded; 68 added; 24 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 19 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (68)
Current report
As of January 2, 2025, we provide a comprehensive range of IT-related services, including dedicated server hosting, cloud hosting, data storage, managed security, backup and disaster recovery, and other related services including consulting and implementing technology solutions for large enterprise and commercial clients across the United States as well as small-and-medium sized businesses. We have an over 20-year history of technology innovation and hold eight patents.
Current report
Our IT and Cloud-Based Solutions
Current report
We sell and provide a range of services across five core areas, each as further described below: managed IT security services, professional services, procurement services, secure private cloud hosting, managed backup and disaster recovery and web hosting.
Current report
Our managed IT security services provide clients with ongoing management and support of their IT systems and services under a subscription or contract-based model. Our managed IT security services include proactive monitoring, regular system maintenance, comprehensive cybersecurity management, data backup, and disaster recovery, as well as help desk support for users.
Current report
Our professional services include the design and implementation of a wide range of IT products and services, such as cybersecurity, software planning, IT infrastructure, data center design and configuration, designing and implementing on-premises, hybrid or cloud computing solutions, website development, developing or integrating systems and software and IT cost management.
Current report
We offer two types of procurement services to our customers. We can either: (i) obtain software and hardware products on behalf of our customers, in which case our vendors drop ship the products to our end customer, or (ii) obtain hardware or software on behalf of our customers and perform additional configuration and/or add additional inputs to the products before the products are shipped to our customer. In the instance where we sell hardware and software products as a solution bundled with services, we typically obtain the products or software from our vendors, add the additional inputs/configuration as detailed in the customer contract, and then ship the products to the end customer.
Current report
Our secure private cloud hosting offerings include a digital infrastructure which consists of dedicated and fully isolated cloud environments designed to deliver security, control and compliance for the business-critical applications and client data. We operate a secure private cloud from private suites in completely isolated areas that are leased within two Tier 3 data center facilities located in Phoenix, Arizona, and Edison, New Jersey (the “Data Centers”), pursuant to license agreements that extend until 2027 and 2026, respectively. Although we do not own or operate the Data Centers, we aim to use the high-level operations and standards provided by the Data Centers through our license agreements to provide our customers with secure and flexible cloud services.
Current report
We leverage state-of-the-art security measures, including data encryption, network segmentation, advanced firewalls, multi-factor authentication and continuous monitoring to safeguard against unauthorized access and cyber threats. We believe our secure private cloud hosting provides our clients with strong availability, data integrity and reliable performance, while meeting stringent compliance requirements. Our secure private cloud hosting solutions are backed by 24/7 support from our expert team, with the goal of delivering secure, flexible and resilient infrastructure tailored to each client’s unique business needs. In the future, we plan to make arrangements with third parties to incorporate AI features into our secure private cloud offerings.
Current report
Our managed backup and disaster recovery solutions provide comprehensive protection for customers’ critical data and IT infrastructure, which is intended to ensure business continuity and rapid recovery in the event of data loss, cyberattacks or system failures. We utilize advanced backup technologies with automated, regular data backups, off-site replication and secure storage to prevent data corruption or loss.
Current report
Our web hosting services consist of several advanced security measures, including Secure Sockets Layer and Transport Layer Security (“SSL/TLS”) encryption, firewalls, distributed denial-of-service (“DDoS”) protection, malware scanning, and secure server configurations. Our web hosting services include features such as regular data backups, web application firewalls, strict access control policies and continuous monitoring and expert support, all of which are intended to ensure our customers’ compliance with industry standards and provide a reliable and secure environment for our customers’ online presence.
Current report
Our ManyCam Software Product
Current report
Following the Transactions, we continue to support our ManyCam software, which is a live streaming software and virtual camera that allows users to deliver professional live videos on streaming platforms, video conferencing apps and distance learning tools. The ManyCam software provides multiple camera feeds, backgrounds and effects while also enabling users to share presentations, spreadsheets and documents. We anticipate integrating ManyCam as an offering for our new customers and seek to optimize our cross-selling efforts of ManyCam with our other technology solutions.
Current report
As a result of the Transactions, we are no longer engaged in the business of providing video-based, live streaming, virtual camera and telecommunications software to consumers, as and to the extent such businesses were previously conducted by us and our subsidiaries.
Current report
The Acquisition
Current report
On January 2, 2025 (the “Closing Date”), we completed the acquisition of Newtek Technology Solutions, Inc., a New York corporation (“NTS”), pursuant to that certain Agreement and Plan of Merger (the “Acquisition Agreement”), by and among us, PALT Merger Sub 1, Inc., a New York corporation and our direct and wholly owned subsidiary (“First Merger Sub”), PALT Merger Sub 2, LLC, a Delaware limited liability company and our direct and wholly owned subsidiary (“Second Merger Sub”), NTS and NewtekOne, Inc., a Maryland corporation and the sole stockholder of NTS (“Newtek”). Pursuant to the terms of the Acquisition Agreement, on the Closing Date: (i) NTS merged with and into First Merger Sub, with NTS continuing as the surviving entity (the “Interim Surviving Entity” and such merger, the “First Step Merger”), and (ii) immediately following the consummation of the First Step Merger, the Interim Surviving Entity merged with and into Second Merger Sub (the “Second Step Merger” and, together with the First Step Merger, the “Acquisition”), with the Second Merger Sub surviving as our wholly owned subsidiary (in such capacity, the “Surviving Entity”). Following the closing of the Acquisition (the “Acquisition Closing”), we changed our name from “Paltalk, Inc.” to “Intelligent Protection Management Corp.”
Current report
The aggregate consideration we delivered to Newtek at the Acquisition Closing consisted of (i) $4,000,000 in cash (as adjusted pursuant to the Acquisition Agreement, the “Acquisition Closing Cash Consideration”) and (ii) 4,000,000 shares of our Series A Non-Voting Common Equivalent Stock (the “Series A Preferred Stock” and such shares issued at the Acquisition Closing, the “Acquisition Closing Stock Consideration” and together with the Acquisition Closing Cash Consideration, the “Acquisition Closing Consideration”). The Series A Preferred Stock will automatically convert into one share of our common stock, par value $0.001 per share (subject to certain customary anti-dilution adjustments), upon the occurrence of certain qualifying transfers by Newtek to third parties. In addition to the Acquisition Closing Consideration, Newtek is entitled to earn-out payments under certain circumstances. For more information, see the “Liquidity and Capital Resources” section below.
Current report
The Divestiture
Current report
On the Closing Date and prior to the Acquisition Closing, we completed the sale to Meteor Mobile Holdings, Inc., a Delaware corporation (“Meteor Mobile”), of our telecommunications services provider, “Vumber”, as well as our “Paltalk” and “Camfrog” applications and certain assets and liabilities related to such services provider and applications (the “Transferred Assets” and such sale, the “Divestiture”) pursuant to that certain Asset Purchase Agreement (the “Divestiture Agreement”), by and among the us, our wholly owned subsidiaries Paltalk Holdings, Inc. (“Paltalk Holdings”), Paltalk Software, Inc., Camshare, Inc., A.V.M. Software, Inc., and Vumber, LLC (collectively, the “Sellers”), and Meteor Mobile. As a result of the Divestiture, we are no longer engaged in the business of providing video-based, live streaming, virtual camera and telecommunications software to consumers, as and to the extent such businesses were previously conducted by us pursuant to the “Vumber,” “Paltalk” and “Camfrog” applications (the “Business”). In addition, prior to the Acquisition Closing, we ceased all operations of our “Tinychat” service and application.
Current report
The consideration delivered by Meteor Mobile to us at the closing of the Divestiture consisted of (i) $1,350,000 in cash and (ii) the assumption of all of the liabilities of the Sellers arising out of, or relating to, the Business or the Transferred Assets, other than certain excluded liabilities (the “Divestiture Closing Consideration”). In connection with the Divestiture, we are entitled to earn-out payments under certain circumstances. For more information, see the “Liquidity and Capital Resources” section below.
Current report
Board Appointments
Current report
Pursuant to the Acquisition Agreement, we agreed to cause one representative nominated by Newtek (the “Newtek Representative”) to be appointed to our Board of Directors (the “Board”) promptly following the closing of the Acquisition. Newtek designated Barry Sloane, who is currently Newtek’s Chairman, Chief Executive Officer and President, as the Newtek Representative.
Current report
Effective as of January 7, 2025, the Board increased the size of the Board from five (5) directors to seven (7) directors and appointed Mr. Sloane to the Board, to serve in such capacity until our 2025 annual meeting of stockholders (the “2025 Annual Meeting”) and until his successor is duly elected and qualified or until his earlier death, disqualification, resignation or removal. Mr. Sloane was not appointed to any committee of the Board.
Current report
In order for the majority of the Board to be comprised of independent directors in accordance with Rule 5605(b) of the listing rules of The Nasdaq Stock Market, LLC and as a result of his expertise in cloud infrastructure and applications and artificial intelligence, the Board also appointed Sidney Rabsatt to the Board, effective as of January 7, 2025. Mr. Rabsatt will serve in such capacity until the 2025 Annual Meeting and until his successor is duly elected and qualified or until his earlier death, disqualification, resignation or removal. Mr. Rabsatt was also appointed to serve on the Strategic Transactions Committee of the Board.
Current report
Patent Litigation
Current report
On July 23, 2021, Paltalk Holdings filed a patent infringement lawsuit (the “Lawsuit”) against WebEx Communications, Inc., Cisco WebEx LLC, and Cisco Systems, Inc. (collectively, “Cisco”), in the U.S. District Court for the Western District of Texas (the “Court”). We alleged that certain of Cisco’s products infringed U.S. Patent No. 6,683,858, and that we were entitled to damages.
Current report
On August 29, 2024, the jury awarded us $65.7 million (the “Award”) in a jury verdict in connection with the Lawsuit. On October 8, 2024, an order granting a motion for final judgment (the “Final Judgment”) was entered into in the Court in connection with the Lawsuit. The Final Judgment was entered in our favor in the amount of the Award and started the time for filing any post-trial motions or appeal.
Current report
The exact amount of the Award proceeds to be received by us will be determined based on a number of factors and will reflect the deduction of significant litigation-related expenses, including legal fees. Consequently, we estimate that we would receive no more than one third of the gross proceeds in connection with the Award, subject to post-trial proceedings (including any potential appellate proceedings by Cisco). We have not recorded any gain contingency in connection with the Award.
Current report
Pre-Transaction Operational Highlights
Current report
Operational highlights during the year ended December 31, 2024:
Current report
2025 Business Objectives
Current report
Revenue Generation Following the Transactions
Current report
Following the Transactions, we now generate revenue from our five core areas as described below:
Current report
Customers pay for our managed IT security services on a subscription or contract-based model. Customers typically pay a recurring fee, which is generally based on service level agreements that define the specific services and performance metrics.
Current report
Customers are invoiced for our professional services either based on a time and materials basis or on a straight-line basis for all fixed fee arrangements. We are the principal in these transactions as we control the specified good or service before it is transferred to the customer. Additionally, we are primarily responsible for fulfillment of the order and have pricing discretion. As a result, we recognize revenue from our professional services revenue on a gross basis.
Current report
Our procurement services include either (i) obtaining software and hardware products on behalf of our customers, in which case our vendors drop ship the products to our end customer, or (ii) obtaining hardware or software on behalf of our customers and performing additional configuration and/or add additional inputs to the products before the products are shipped to our customer. For both types of procurement services each customer has their own negotiated contract and payment terms. If a customer orders both hardware and additional configurations to those laptops, typically these will both be covered under separate contracts. The services provided are considered distinct as the additional configurations are not required for the hardware purchased to operate effectively. Customers are invoiced, and revenue is recognized, when the hardware purchased is shipped, as control transfers to the customer free on board (“FOB”) shipping point. We are an agent in these transactions because we (i) do not obtain control over the product as products are drop shipped from their vendors directly to the customer; (ii) have no inventory risk and (iii) have general pricing discretion in our transactions with customers. Our pricing discretion is limited by the going market rate of our services offered by other providers. Based on this assessment, we recognize revenue from procurement services on a net basis.
Current report
Additionally, certain procurement contracts with customers include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Current report
When a cloud-based service includes both on-premises software licenses and cloud services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the cloud service and recognized over time. Certain cloud services depend on a significant level of integration, interdependency, and interrelation between the desktop applications and cloud services, and are accounted for together as one performance obligation. Revenue from such cloud services is recognized ratably over the period in which the cloud services are provided.
Current report
Our secure private cloud offerings include a digital infrastructure which consists of servers which are dedicated to a single customer. We offer secure private cloud offerings through our Data Centers as well as off premise. Our secure private cloud offerings typically are one performance obligation where we are providing the cloud storage to the customer and customers pay a monthly fixed fee for the service.
Current report
Pricing for our managed backup and disaster recovery solutions is based upon the customer contract and depends on the amount of backup storage needed. Customers are typically charged set rates per the contract and are charged monthly based on usage. There are typically no upfront fees for these contracts. Customers are invoiced and revenue is recognized on a monthly basis.
Current report
Each customer of our web hosting solutions has their own contract and payment terms. Contract duration is typically between 1-4 years, although the term may vary based on the customer’s needs. Web hosting services customers pay a monthly fee and there are typically no upfront costs associated with web hosting services. Customers are invoiced and revenue is recognized on a monthly basis.
Showing the first 40 of 68 passages. Open the source sections for the rest.
Removed paragraphs (24)
Previous report
We are a communications software innovator that powers multimedia social applications. We operate a network of consumer applications that we believe create a unique social media enterprise where users can meet, see, chat, broadcast, play online card games and board games and message in real time in a secure environment with others in our network. Our consumer applications generate revenue principally from subscription fees and advertising arrangements.
Previous report
We believe that the scale of our user base presents a competitive advantage in the video social networking industry and provides growth opportunities to advance our existing products with up-sell opportunities and build future brands with cross-sell offers. We also believe that our proprietary consumer app technology platform can scalably support large communities of users in activities such as video, voice and text chat, online card games and board games and provide robust user monetization tools.
Previous report
Our continued growth depends on attracting new consumer application users through the introduction of new applications, features and partnerships and further penetration of our existing markets. Our principal growth strategy is to invest in the development of proprietary software, expand our sales and marketing efforts with respect to such software, and increase our consumer application user base through potential platform partnerships and new and existing advertising campaigns that we run through internet and mobile advertising networks, all while balancing the capital needs of the business. Our strategy also includes the acquisition of, or investment in, technologies, solutions or businesses that complement our business and cross-selling them to additional synergistic businesses.
Previous report
Our strategy is to approach these opportunities in a measured way, being mindful of our resources and evaluating factors such as potential revenue, time to market and amount of capital needed to invest in the opportunity.
Previous report
Director Appointment
Previous report
On October 9, 2023, our Board of Directors increased the size of the Board of Directors from five (5) directors to six (6) directors and filled the newly created vacancy by appointing Geoffrey Cook as a director of the Company, effective as of October 10, 2023. Mr. Cook was also appointed to serve as a member of the Nominating and Corporate Governance Committee of the Board of Directors and the Strategic Transactions Committee of the Board of Directors. We believe Mr. Cook is qualified to serve on our Board of Directors due to, among other things, his experience in the social media and consumer internet industries as well as his insights regarding corporate strategy and brand growth.
Previous report
Impact of Macro-Economic Factors
Previous report
Our results of operations have been and may continue to be negatively impacted by macro-economic factors, including the timing of economic recessions and/or recovery and the overall inflationary environment. Prolonged periods of inflation have affected, and may continue to affect, our ability to target new customers as well as keep existing customers engaged and may ultimately have a correlating effect on our users’ discretionary spending. Additionally, the closures of certain banks in the first and second quarters of 2023 and their placement into receivership with the Federal Deposit Insurance Corporation created bank-specific and broader financial institution liquidity challenges and concerns. Future adverse developments with respect to specific financial institutions or the broader financial services industry may create additional market and economic uncertainty, which could affect our industry.
Previous report
Under the provisions of the extension of the Coronavirus Aid, Relief, and Economic Security Act, we were eligible for a refundable employee retention tax credit (the “ERTC”) subject to certain criteria. During the year ended December 31, 2023, we applied for the ERTC and recorded a receivable in the amount of $343,045, net of related costs, which was recognized in our consolidated statement of operations as other income. As of December 31, 2023, we received an aggregate of $294,833, which was recorded as a reduction of the receivable on our consolidated balance sheet.
Previous report
Operational Highlights and Business Objectives
Previous report
During the year ended December 31, 2023 we executed key components of our objectives:
Previous report
Sources of Revenue
Previous report
The following table sets forth consolidated statements of operations data for each of the periods indicated as a percentage of total revenue:
Previous report
Total revenue remained relatively unchanged at $10,979,844 for the year ended December 31, 2023, compared to $10,989,545 for the year ended December 31, 2022. The change was primarily driven by a decrease in subscription revenue and virtual gift revenue from the Paltalk and Camfrog applications and was partially offset by revenue recognized from sales of the ManyCam product and Vumber.
Previous report
Our subscription revenue for the year ended December 31, 2023 decreased by $15,991, or 0.1%, as compared to the year ended December 31, 2022. The decrease in subscription revenue was primarily driven by a decrease in new subscribers as well as a decrease in virtual gift revenue across the Paltalk and Camfrog applications. We attribute this decrease to the overall macro-economic environment that may limit a customer’s access to discretionary spending. These decreases were partially offset by increased revenue from ManyCam as the revenue for the year ended December 31, 2023 represented revenue for twelve months, whereas the revenue for the year ended December 31, 2022, represented only six months of subscription revenue.
Previous report
Advertising Revenue
Previous report
Our advertising revenue for the year ended December 31, 2023 increased by $6,290, or 1.9%, as compared to the year ended December 31, 2022. The increase in advertising revenue was primarily due to an increase in the volume of advertising impressions related to changes in and the optimization of third-party advertising partners and partnering with a new facilitator in the market.
Previous report
Our cost of revenue for the year ended December 31, 2023 increased by $414,673, or 14.7%, as compared to the year ended December 31, 2022. The increase for the year ended December 31, 2023, was primarily driven by an increase in costs related to hosting expenses of approximately $364,000, as well as costs related to the ManyCam product, which launched in June of 2022, of approximately $61,000.
Previous report
Our product development expense for the year ended December 31, 2023 decreased by $1,073,826, or 18.1%, as compared to the year ended December 31, 2022. The decrease was primarily due to a decrease of approximately $825,000 related to software expenses. We accomplished this reduction by streamlining our offshore development efforts as well as reallocating in-house resources. In addition, headcount costs were reduced by approximately $83,000, dues and subscriptions decreased by approximately $74,000 and a decrease of approximately $69,000 in capitalized amortization software related to Paltalk.
Previous report
Our general and administrative expense for the year ended December 31, 2023 decreased by $239,235, or 5.5%, as compared to the year ended December 31, 2022. The decrease in general and administrative expense for the year ended December 31, 2023, was mainly due to a decrease of professional fees of $299,000, as well as a decrease in headcount costs, including non-cash stock compensation expense, of approximately $206,000. This was offset by an increase in non-cash amortization of approximately $221,000 related to the acquisition of the ManyCam assets.
Previous report
Impairment loss on digital tokens
Previous report
We recorded a non-cash impairment loss on digital tokens of $7,262 for the year ended December 31, 2022 as a result of the decline in the quoted market prices of certain digital tokens below the market price of their acquisition. There was no such impairment loss for year ended December 31, 2023.
Previous report
Net cash used in financing activities was $7,213 for the year ended December 31, 2023, as compared to net cash used in financing activities of $997,924 for the year ended December 31, 2022. During fiscal 2022, the use of cash of $997,924 was attributed to the Company’s repurchase of the Company’s stock pursuant to its Stock Repurchase Plan. The Stock Repurchase Plan expired on March 29, 2023 pursuant to its terms and has not been renewed.
Previous report
On June 7, 2016, we entered into a lease agreement with Jericho Executive Center LLC for office space at 30 Jericho Executive Plaza in Jericho, New York, which commenced on September 1, 2016 and ran through November 30, 2021. On April 9, 2021, we entered into a lease extension agreement with Jericho Executive Center LLC for the office space at 30 Jericho Executive Plaza in Jericho, New York, which commenced on December 1, 2021 and runs through November 30, 2024. Our monthly office rent payments under the lease are currently approximately $7,081 per month.
Reworded paragraphs (27)
Previous wording
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the accompanying notes thereto included in “Item 8. Financial Statements and Supplementary Data.”
Current wording
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the accompanying notes thereto included in “Item 8. Financial Statements and Supplementary Data.” Except where expressly provided, all information relates to the Company prior to the Transactions (defined below).
Previous wording
In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Item 1A. Risk Factors” in this Annual Report on Form 10-K.
Current wording
In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Item 1A. Risk Factors” in this Annual Report on Form 10-K (the “Annual Report on Form 10-K”).
Previous wording
Our product portfolio includes Paltalk, Camfrog and Tinychat, which together host a large collection of video-based communities. Our other products include ManyCam and Vumber. ManyCam is a live streaming software and virtual camera that allows users to deliver professional live videos on streaming platforms, video conferencing apps and distance learning tools. Vumber is a telecommunications services provider that enables users to communicate privately by having multiple phone numbers with any area code through which calls can be forwarded to a user’s existing telephone number. We have an over 20-year history of technology innovation and hold 8 patents.
Current wording
Prior to the completion of the Transactions, we operated a network of consumer applications. Our product portfolio included Paltalk, Camfrog and Tinychat, which together hosted a large collection of video-based communities. Our other products included Vumber, which is a telecommunications services provider that enables users to communicate privately by having multiple phone numbers with any area code through which calls can be forwarded to a user’s existing telephone number. As discussed below, following the Transactions, we continue to support our ManyCam software, which is a live streaming software and virtual camera that allows users to deliver professional live videos on streaming platforms, video conferencing apps and distance learning tools.
Previous wording
For the near term, our business objectives include:
Current wording
For the near term, our business objectives following the Transactions include:
Previous wording
Our main sources of revenue are subscription revenue, which includes virtual gift revenue, and advertising revenue generated from users of our core video chat products, Paltalk and Camfrog. We also generate revenue from subscriptions for our ManyCam software product. We expect that the majority of our revenue in future periods will continue to be generated from our core video chat products.
Current wording
Prior to the completion of the Transactions, our main sources of revenue were subscription revenue, which includes virtual gift revenue, and advertising revenue generated from users of our former core video chat products, Paltalk and Camfrog, most of which is presented as discontinued operations. Because we are no longer engaged in the business of providing access to video-based live streaming, virtual camera and telecommunications software to consumers following the Transactions, we will not generate subscription revenue or advertising revenue related to the Transferred Assets in the future. We also generated revenue from subscriptions for our ManyCam software product, which is presented as continuing operations.
Previous wording
Our video chat platforms generate revenue primarily through subscription fees. Our tiers of subscriptions provide users with unlimited video windows and levels of status within the community. Multiple subscription tiers are offered in different durations depending on the product from one-, three-, six-, twelve-, and twenty-four-month terms, which continue to vary as we continue to test and optimize length and pricing. Longer-term plans (those with durations longer than one month) are generally available at discounted monthly rates. Levels of membership benefits are offered in tiers, with the least membership benefits in the lowest paid tier and the most membership benefits in the highest paid tier. Our membership tiers are “Plus,” “Extreme,” “VIP” and “Prime” for Paltalk and “Pro,” “Extreme” and “Gold” for Camfrog. We also hold occasional promotions that offer discounted subscriptions and virtual gifts. Subscriptions for ManyCam are generally offered in annual and two-year terms, with exceptions made for enterprise sales.
Current wording
Our video chat platforms generated revenue primarily through subscription fees. Our tiers of subscriptions provided users with unlimited video windows and levels of status within the community. Multiple subscription tiers were offered in different durations depending on the product from one-, three-, six-, twelve-, and twenty-four-month terms. Longer-term plans (those with durations longer than one month) were generally available at discounted monthly rates. Levels of membership benefits were offered in tiers, with the least membership benefits in the lowest paid tier and the most membership benefits in the highest paid tier. Our membership tiers were “Plus,” “Extreme,” “VIP” and “Prime” for Paltalk and “Pro,” “Extreme” and “Gold” for Camfrog. We also held occasional promotions that offer discounted subscriptions and virtual gifts. Subscriptions for ManyCam were generally offered in annual and two-year terms, with exceptions made for enterprise sales.
Previous wording
We recognize revenue from monthly premium subscription services beginning in the month in which the subscriptions are originated. Revenues from multi-month (or annual) subscriptions are recognized on a gross and straight-line basis over the length of the subscription period. The unearned portion of subscription revenue is presented as deferred revenue in the accompanying consolidated balance sheets.
Current wording
We recognized revenue from monthly premium subscription services beginning in the month in which the subscriptions are originated. Revenues from multi-month (or annual) subscriptions were recognized on a gross and straight-line basis over the length of the subscription period. The unearned portion of subscription revenue was presented as deferred revenue in the accompanying consolidated balance sheets.
Previous wording
We also offer virtual gifts to our users through our Paltalk, Camfrog and TinyChat applications. Users may purchase credits that can be redeemed for a host of virtual gifts such as a rose, a beer, or a car, among other items. Virtual gift revenue is recognized upon the users’ utilization of the virtual gift and included in subscription revenue. The unearned portion of virtual gifts revenue is presented as deferred revenue in the accompanying consolidated balance sheets.
Current wording
We also offered virtual gifts to our users through our Paltalk, Camfrog and TinyChat applications. Users were able to purchase credits that could be redeemed for a host of virtual gifts such as a rose, a beer, or a car, among other items. Virtual gift revenue was recognized upon the users’ utilization of the virtual gift and included in subscription revenue. The unearned portion of virtual gifts revenue is presented as deferred revenue in the accompanying consolidated balance sheets.
Previous wording
We generate a portion of our revenue through advertisements on our video platforms. Advertising revenue is dependent upon the volume of advertising impressions viewed by active users as well as the advertising inventory we place on our products. We recognize advertising revenue as earned on a click-through, impression, registration or subscription basis. Measurements of impressions include when a user clicks on an advertisement (CPC basis), views an advertisement impression (CPM basis), or registers for an external website via an advertisement by clicking on or through our application (CPA basis).
Current wording
We generated a portion of our revenue through advertisements on our video platforms. Advertising revenue was dependent upon the volume of advertising impressions viewed by active users as well as the advertising inventory we place on our products. We recognized advertising revenue as earned on a click-through, impression, registration or subscription basis. Measurements of impressions included when a user clicks on an advertisement (CPC basis), views an advertisement impression (CPM basis), or registers for an external website via an advertisement by clicking on or through our application (CPA basis).
Previous wording
Cost of revenue consists primarily of compensation (including stock-based compensation) and other employee-related costs for personnel engaged in data center and customer care functions, credit card processing fees, hosting fees, and data center rent and bandwidth costs. Cost of revenue also includes compensation and other employee-related costs for technical personnel, consultants and subcontracting costs relating to technology service revenue.
Current wording
Cost of revenue consists primarily of compensation (including stock-based compensation) and other employee-related costs, which prior to the Transactions, consisted of costs for personnel engaged in data center and customer care functions, credit card processing fees, hosting fees, and data center rent and bandwidth costs. Prior to the Transactions, cost of revenue also included compensation and other employee-related costs for technical personnel, consultants and subcontracting costs relating to technology service revenue.
Previous wording
Sales and marketing expense consist primarily of advertising expenditures and compensation (including stock-based compensation) and other employee-related costs for personnel and consultants engaged in sales and sales support functions. Advertising and promotional spend includes online marketing, including fees paid to search engines, and offline marketing, which primarily consists of partner-related payments to those who direct traffic to our brands.
Current wording
Prior to the Transactions, sales and marketing expense consisted primarily of advertising expenditures and compensation (including stock-based compensation) and other employee-related costs for personnel and consultants engaged in sales and sales support functions. Advertising and promotional spend included online marketing, including fees paid to search engines, and offline marketing, which primarily consists of partner-related payments to those who direct traffic to our brands.
Previous wording
Product development expense, which relates to the development of technology of our applications, consists primarily of compensation (including stock-based compensation) and other employee-related and consultant-related costs that are not capitalized for personnel engaged in the design, testing and enhancement of service offerings as well as amortization of capitalized website development costs.
Current wording
Prior to the Transactions, product development expense, which related to the development of technology of our applications, consisted primarily of compensation (including stock-based compensation) and other employee-related and consultant-related costs that are not capitalized for personnel engaged in the design, testing and enhancement of service offerings as well as amortization of capitalized website development costs.
Previous wording
Our management relies on certain non-GAAP and/or unaudited performance indicators to manage and evaluate our business. The key performance indicators set forth below help us evaluate growth trends, establish budgets, measure the effectiveness of our advertising and marketing efforts and assess operational efficiencies. We also discuss net cash provided by operating activities under the “Liquidity and Capital Resources” section below. Adjusted EBITDA is discussed below.
Current wording
Our management relies on certain non-GAAP and/or unaudited performance indicators to manage and evaluate our business. The key performance indicators set forth below helped us evaluate growth trends, establish budgets, measure the effectiveness of our advertising and marketing efforts and assess operational efficiencies. We also discuss net cash provided by operating activities under the “Liquidity and Capital Resources” section below. Adjusted EBITDA is discussed below.
Previous wording
Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as net (loss) income adjusted to exclude stock-based compensation expense, depreciation and amortization expenses, impairment loss on digital token, interest income, net, other (income) expense, net, and income tax (benefit) expense.
Current wording
Adjusted EBITDA is a non-GAAP financial measure, and includes results from continuing and discontinued operations. Adjusted EBITDA is defined as net (loss) income adjusted to exclude stock-based compensation expense, depreciation and amortization expenses, impairment loss in connection with the Divestiture, interest income, net, other (income) expense, net, and income tax (benefit) expense. The impairment loss in connection with the Divestiture relates to a one-time impairment charge recorded in connection with the Company’s divestiture of the Transferred Assets.
Previous wording
We present Adjusted EBITDA because it is a key measure used by our management and Board of Directors to understand and evaluate our core operating performance and trends, to develop short- and long-term operational plans and to allocate resources to expand our business. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of the cash operating income generated by our business. We believe that Adjusted EBITDA is useful to investors and others to understand and evaluate our operating results, and it allows for a more meaningful comparison between our performance and that of competitors.
Current wording
We present Adjusted EBITDA because it is a key measure used by our management and Board to understand and evaluate our core operating performance and trends, to develop short- and long-term operational plans and to allocate resources to expand our business. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of the cash operating income generated by our business. We believe that Adjusted EBITDA is useful to investors and others to understand and evaluate our operating results, and it allows for a more meaningful comparison between our performance and that of competitors.
Previous wording
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income and our other GAAP results. The following table presents a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA for each of the periods indicated:
Current wording
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income and our other GAAP results. The following table presents a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA for each of the periods indicated. Adjusted EBITDA and net loss related to discontinued operations have not been segregated. Accordingly, the data below includes the results from continuing and discontinued operations:
Previous wording
The following table sets forth our subscription revenue, advertising revenue and total revenue for the year ended December 31, 2023, and the year ended December 31, 2022, the increase or decrease between those periods, the percentage increase or decrease between those periods, and the percentage of total revenue that each represented for those periods:
Current wording
The following table sets forth our subscription revenue for the years ended December 31, 2024 and 2023, the increase between those periods, the percentage increase between those periods, and the percentage of total revenue that subscription revenue represented for those periods:
Previous wording
Total costs and expenses for the year ended December 31, 2023 decreased by $1,598,268 or 10.9%, as compared to the year ended December 31, 2022. The following table presents our costs and expenses for the years ended December 31, 2023 and 2022, the increase or decrease between those periods and the percentage increase or decrease between those periods and the percentage of total revenue that each represented for those periods:
Current wording
Total costs and expenses for the year ended December 31, 2024 increased by $1,560,186, or 33.5%, as compared to the year ended December 31, 2023. The following table presents our costs and expenses for the years ended December 31, 2024 and 2023, the increase or decrease between those periods, the percentage increase or decrease between those periods, and the percentage of total revenue that each represented for those periods:
Previous wording
Our sales and marketing expense for the year ended December 31, 2023 decreased by $692,618, or 44.1%, as compared to the year ended December 31, 2022. The decrease in sales and marketing expense for the year ended December 31, 2023 was primarily due to a decrease of approximately $459,000 in marketing user acquisition expenses, including agent fees compared to the prior year. During the year ended December 31, 2022, we focused on increasing user engagement spend through the efforts of our third-party marketing agencies, which we have subsequently scaled back. This resulted in a decrease of approximately $203,000 in other marketing and branding expenses, as well as a decrease in headcount costs of approximately $46,000 for the year ended December 31, 2023 compared to 2022.
Current wording
Our sales and marketing expense for the year ended December 31, 2024 decreased by $30,233, or 32.9%, as compared to the year ended December 31, 2023. The decrease in sales and marketing expense for the year ended December 31, 2024 was primarily due to a decrease of approximately $32,982 in marketing user acquisition expenses compared to the prior year.
Previous wording
The following table presents the components of non-operating income for the year ended December 31, 2023 and the year ended December 31, 2022, the increase between those periods and the percentage increase between those periods and the percentage of total revenue that each represented for those periods:
Current wording
The following table presents the components of non-operating income for the years ended December 31, 2024 and 2023, the decrease between those periods, the percentage decrease between those periods, and the percentage of total revenue that each represented for those periods:
Previous wording
Non-operating income for the year ended December 31, 2023 was $982,656, an increase of $907,761, or 1,212.0%, as compared to non-operating income of $74,895 for the year ended December 31, 2022. The increase in interest income was the result of interest earned in a high-yield bank account. The increase in other income was the result of recording the ERTC.
Current wording
Non-operating income for the year ended December 31, 2024 was $715,285, a decrease of $267,371, or 27.2%, compared to non-operating income of $982,656 for the year ended December 31, 2023. The decrease in interest income was the result of interest earned in a high-yield bank account during 2023, and a lower cash balance and interest rate compared to the year ended December 31, 2024. Other income during 2023 was the result of recording the refundable employee retention tax credit received under the Coronavirus Aid, Relief, and Economic Security Act.
Previous wording
Currently, our primary source of liquidity is cash on hand and cash flows from continuing operations, and we believe that our cash and cash equivalents balance and our expected cash flow from operations will be sufficient to meet all of our financial obligations for one year from the date these financial statements are issued. As of December 31, 2023, we had approximately $13.6 million of cash and cash equivalents.
Current wording
Currently, our primary source of liquidity is cash on hand and cash flows from continuing operations, and we believe that our cash and cash equivalents balance and our expected cash flow from operations will be sufficient to meet all of our financial obligations for the next 12 months. As of December 31, 2024, we had approximately $10.6 million of cash and cash equivalents.
Previous wording
Our use of working capital is related to product development resources and an investment in marketing activities in order to maintain and create new services and features in applications for our users. In particular, a significant portion of our working capital has been allocated to the improvement of our products. In addition, during the year ended December 31, 2023, we spent $7,213 in connection with our stock repurchase plan (the “Stock Repurchase Plan”) as we purchased a total of 5,192 shares at an average share price of $1.39 per share. The Stock Repurchase Plan expired on March 29, 2023 pursuant to its terms and has not been renewed. In the future, we may continue to seek to grow our business by expending our capital resources to fund strategic acquisitions, investments and partnership opportunities.
Current wording
Historically, our use of working capital was related to product development resources and an investment in marketing activities in order to maintain and create new services and features in applications for our users. In particular, a significant portion of our working capital had been allocated to the improvement of our products. During the year ended December 31, 2024, stock options representing the right to purchase 14,830 shares of our common stock were exercised for net proceeds to the Company of $39,772. During the year ended December 31, 2023, we purchased a total of 5,192 shares of common stock under the stock repurchase plan for an aggregate purchase price of $7,213, at an average share price of $1.39 per share. The stock repurchase plan expired on March 29, 2023 pursuant to its terms and has not been renewed. In the future, we may continue to seek to grow our business by expending our capital resources to fund strategic acquisitions, investments and partnership opportunities.
Previous wording
Net cash used in operating activities was $1,079,671 for the year ended December 31, 2023, as compared to net cash used in operating activities of $2,956,724 for the year ended December 31, 2022. The decrease in cash used in the period was primarily the result of the improvement in the net loss, which was attributed to a reduction in operating expenses as a result of streamlined operations.
Current wording
Net cash used in operating activities was $3,019,287 for the year ended December 31, 2024, as compared to net cash used in operating activities of $1,079,671 for the year ended December 31, 2023. The increase in cash used in operating activities during the year ended December 31, 2024 was primarily the result of an increase in net loss, which was attributed to increases in professional fees as a result of the Transactions.
Previous wording
Net cash used in investing activities was $85,000 for the year ended December 31, 2023, as compared to net cash used in investing activities of $2,942,279 for the year ended December 31, 2022. The decrease in cash flows from investing activities resulted primarily from the ManyCam acquisition.
Current wording
Net cash used in investing activities was $85,000 for the year ended December 31, 2023 compared to no cash used in investing activities for the year ended December 31, 2024. Net cash used in investing activities for the year ended December 31, 2023 was related to payment of contingent consideration in connection with our acquisition of ManyCam in 2022.
Previous wording
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. Estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition.
Current wording
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements.
Previous wording
During the year ended December 31, 2023, there were no critical accounting estimates made by management that would involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material effect impact on the financial statements condition or results of operations of the Company. During the year ended December 31, 2022, the most significant accounting estimate inherent in the preparation of the financial statements included the discount rates and weighted average costs of capital used in the fair value of the ManyCam intangible assets and in assigning their respective useful lives. These fair values and estimates were based on a number of factors, including a valuation from an independent third party.
Current wording
During the year ended December 31, 2024, the most significant accounting estimate inherent in the preparation of our financial statements was the evaluation of goodwill for impairment.