PALTALK INC
For the period ended Sep 30, 2024. Filed Nov 12, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 12, 2024
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-Q
Period ended 2024-06-30; filed 2024-08-13.
0001213900-24-068283
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001213900-24-096808
Item 2. 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 111 previous paragraphs and 122 current paragraphs.
73 unchanged; 35 reworded; 14 added; 3 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 19 previous and 19 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 (14)
Current report
Divestiture Agreement
Current report
On November 7, 2024, we entered into an Asset Purchase Agreement (the “Divestiture Agreement”) with our wholly owned subsidiaries Paltalk Holdings, Inc. (“Paltalk Holdings”), Paltalk Software, Inc. (“Paltalk Software”), Camshare, Inc. (“Camshare”), A.V.M. Software, Inc. (“AVM”), and Vumber, LLC (“Vumber” and, collectively with the Company, Paltalk Holdings, Paltalk Software, Camshare, and AVM, the “Sellers,” and each individually, a “Seller”), and Meteor Mobile Holdings, Inc., a Delaware corporation (the “Buyer”), pursuant to which we agreed to sell to the Buyer 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 “Divestiture”). Following the Divestiture, we will no longer be engaged in the business of providing video-based, live streaming, virtual camera and telecommunications software to consumers, as and to the extent we currently conduct such businesses pursuant to the “Vumber,” “Paltalk” and “Camfrog” applications (the “Business”).
Current report
Pursuant to the Divestiture Agreement, the Buyer agreed to (i) acquire certain assets of the Sellers relating to the “Vumber,” “Paltalk” and “Camfrog” applications, including, among other things, the Sellers’ intellectual property and technology, the rights of the Sellers under certain contracts, all rights to any actions of any nature available to or being pursued by Seller to the extent related to the Business, the Transferred Assets (as defined below) or the assumed liabilities, whether arising by way of counterclaim or otherwise, other than any such action to the extent related to certain excluded assets or excluded liabilities, all of the Sellers’ rights under warranties, indemnities and all similar rights against third parties to the extent related to any Transferred Assets, all rights to insurance proceeds to the extent received or receivable in respect of the Business, the Transferred Assets or the assumed liabilities, all documents that are related to the Business, and all goodwill and the going concern value of the Business, other than certain excluded assets (collectively, the “Transferred Assets”) and (ii) assume all of the liabilities of the Sellers arising out of or relating to the Business or the Transferred Assets other than certain excluded liabilities, in each case upon the terms and subject to the conditions set forth in the Divestiture Agreement, for aggregate consideration of $1.35 million (the “Divestiture Closing Consideration”), to be paid by the Buyer to us in cash on the closing date of the Divestiture (the “Divestiture Closing”). Pursuant to the Divestiture Agreement, the Sellers will retain all patents and patent applications and any rights or causes of action related to such patent and patent applications (including the Company’s previously disclosed patent litigation against Cisco Systems, Inc.).
Current report
In addition to the Divestiture Closing Consideration, the Sellers are entitled to receive, with respect to each Earn-Out Period described below, certain payments in cash based on the cash revenue, net of any refunds, received by the Buyer that is attributable to the Business (“Revenue”), as follows:
Current report
In the event of a Change of Control (as defined in the Divestiture Agreement) of the Buyer during any of the Earn-Out Periods, we are entitled to receive an acceleration payment in cash, net of any Divestiture Earn-Out Amounts previously paid to us (the “Acceleration Payment”). If any of the Transferred Assets are sold independently from the other assets of the Buyer, we will be entitled to (i) 50% of the aggregate consideration paid to the Buyer for the Transferred Assets minus (ii) the aggregate amount of any Divestiture Earn-Out Amounts received by the Sellers by the date of the Change of Control, minus (iii) the aggregate amount of any Acceleration Payments previously paid through such date. If any of the Transferred Assets are sold contemporaneously with other assets of the Buyer, we are entitled to (x) the aggregate consideration paid to Buyer for the Transferred Assets multiplied by the ratio of the trailing 12-month EBITDA of the Transferred Assets sold and the EBITDA of all assets sold minus (y) the aggregate amount of any Divestiture Earn-Out Amounts received by the Sellers by the date of the Change of Control, minus (z) the aggregate amount of any Acceleration Payments previously paid through such date. The minimum Acceleration Payment for the sale of “Paltalk,” “Camfrog” and “Vumber” is $1,650,000, $450,000 and $300,000, respectively, and the aggregate Acceleration Payment payable to us is capped at $5,000,000.
Current report
As a condition to the Divestiture Closing, the Divestiture Agreement provides that all conditions to closing the transactions contemplated by the Merger Agreement must have been satisfied or waived, and the parties to the Merger Agreement stand ready, willing and able to close the transactions contemplated by the Merger Agreement, subject only to the closing of the transactions contemplated by Divestiture Agreement. In addition, as a condition to the Divestiture Closing, the Sellers and the Buyers must negotiate and enter into a patent license agreement that will provide the Buyer with certain rights related to the patent used in connection with the “Vumber” application. The Divestiture Closing is also subject to the satisfaction of various customary closing conditions, including, among others, (i) the absence of any governmental order enjoining or otherwise prohibiting the performance of the Divestiture Agreement or any of the transactions contemplated thereby and (ii) the absence of a Material Adverse Effect (as defined in the Divestiture Agreement) on the Sellers or the Buyer.
Current report
The Divestiture Agreement contains certain termination rights for both the Sellers and the Buyer, including, among other things, if the Divestiture Closing has not occurred prior to March 11, 2025. In the event that we terminate the Divestiture Agreement due to the parties to the Merger Agreement not having satisfied or waived all conditions to the closing of the Merger, we are required to pay the Buyer up to $50,000 in actual out of pocket fees incurred in connection with the Divestiture Agreement.
Current report
The Divestiture Agreement also contains customary representations, warranties and covenants from Sellers and the Buyer.
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 allege that certain of Cisco’s products have infringed U.S. Patent No. 6,683,858, and that we are 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
The following is a summary of operational highlights during the three and nine months ended September 30, 2024:
Current report
As a result of the entry into the Merger Agreement and the Divestiture Agreement, our near-term business objectives include:
Removed paragraphs (3)
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 condensed consolidated statement of operations as other income. As of June 30, 2024, we received an aggregate of $294,833 or $228,833 net of related costs which was recorded as a reduction of the receivable on our condensed consolidated balance sheet.
Previous report
During the three and six months ended June 30, 2024, we executed key components of our objectives:
Previous report
For the near term, our business objectives include:
Reworded paragraphs (35)
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: (i) the accompanying unaudited condensed consolidated financial statements and notes thereto for the three and six months ended June 30, 2024 and 2023, (ii) the consolidated financial statements and notes thereto for the year ended December 31, 2023 included in our Annual Report on Form 10-K (the “Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2024 and (iii) the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Form 10-K. Aside from certain information as of December 31, 2023, all amounts herein are unaudited.
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: (i) the accompanying unaudited condensed consolidated financial statements and notes thereto for the three and nine months ended September 30, 2024 and 2023, (ii) the consolidated financial statements and notes thereto for the year ended December 31, 2023 included in our Annual Report on Form 10-K (the “Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2024 and (iii) the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Form 10-K. Aside from certain information as of December 31, 2023, all amounts herein are unaudited.
Previous wording
Pursuant to the Merger Agreement, as consideration for the Mergers, we agreed to (i) pay Newtek an amount in cash equal to $4,000,000, which is subject to customary purchase price adjustments as set forth in the Merger Agreement, including a working capital adjustment (the “Closing Cash Consideration”) and (ii) issue Newtek 4,000,000 shares (the “Closing Stock Consideration” and together with the Closing Cash Consideration, the “Closing Consideration”) of a newly created series of preferred stock, the Series A Non-Voting Common Equivalent Stock of the Company, par value $0.001 per share (the “Preferred Stock”). In addition to the Closing Consideration, the Merger Agreement provides that Newtek is entitled to receive an amount up to $5,000,000 (the “Earn-Out Amount”) based on our achievement certain cumulative average Adjusted EBITDA thresholds for the 2025 and 2026 fiscal years. The Earn-Out Amount may be paid, in our sole discretion, in cash (the “Earn-Out Cash Consideration”), in shares of Preferred Stock (the “Earn-Out Stock Consideration”) or in a combination thereof. The issuance of the Closing Stock Consideration, the Earn-Out Stock Consideration (if any) and the shares of common stock issuable upon conversion of the Preferred Stock is referred to herein as the “Parent Stock Issuance”.
Current wording
Pursuant to the Merger Agreement, as consideration for the Mergers, we agreed to (i) pay Newtek an amount in cash equal to $4,000,000, which is subject to customary purchase price adjustments as set forth in the Merger Agreement, including a working capital adjustment (the “Merger Closing Cash Consideration”) and (ii) issue Newtek 4,000,000 shares (the “Merger Closing Stock Consideration” and together with the Merger Closing Cash Consideration, the “Merger Closing Consideration”) of a newly created series of preferred stock, the Series A Non-Voting Common Equivalent Stock of the Company, par value $0.001 per share (the “Preferred Stock”). In addition to the Merger Closing Consideration, the Merger Agreement provides that Newtek is entitled to receive an amount up to $5,000,000 (the “Merger Earn-Out Amount”) based on our achievement certain cumulative average Adjusted EBITDA thresholds for the 2025 and 2026 fiscal years. The Merger Earn-Out Amount may be paid, in our sole discretion, in cash (the “Merger Earn-Out Cash Consideration”), in shares of Preferred Stock (the “Merger Earn-Out Stock Consideration”) or in a combination thereof. The issuance of the Merger Closing Stock Consideration, the Merger Earn-Out Stock Consideration (if any) and the shares of common stock issuable upon conversion of the Preferred Stock is referred to herein as the “Parent Stock Issuance”.
Previous wording
Pursuant to the Merger Agreement, if the issuance of the Closing Stock Consideration or the Earn-Out Stock Consideration would cause Newtek’s “total equity” (as calculated under the Bank Holding Company Act of 1956, as amended, and as implemented and interpreted by the Board of Governors of the Federal Reserve System (the “Federal Reserve”)) in the Company to exceed 33.33% (the “Total Equity Cap”), then the number of shares of Preferred Stock issuable as Closing Stock Consideration and/or Earn-Out Stock Consideration, as applicable, will be adjusted so that we will issue Newtek the maximum number of shares of Preferred Stock that would not cause Newtek’s total equity to exceed the Total Equity Cap, with a corresponding increase to the Closing Cash Consideration and the Earn-Out Cash Consideration, as applicable. Following the consummation of the Mergers and the issuance of the Closing Stock Consideration, Newtek would beneficially own approximately 30.3% of our issued and outstanding Common Stock on an as-converted and fully-diluted basis, calculated based on our outstanding shares of common stock as of August 9, 2024.
Current wording
Pursuant to the Merger Agreement, if the issuance of the Merger Closing Stock Consideration or the Merger Earn-Out Stock Consideration would cause Newtek’s “total equity” (as calculated under the Bank Holding Company Act of 1956, as amended, and as implemented and interpreted by the Board of Governors of the Federal Reserve System (the “Federal Reserve”)) in the Company to exceed 33.33% (the “Total Equity Cap”), then the number of shares of Preferred Stock issuable as Merger Closing Stock Consideration and/or Merger Earn-Out Stock Consideration, as applicable, will be adjusted so that we will issue Newtek the maximum number of shares of Preferred Stock that would not cause Newtek’s total equity to exceed the Total Equity Cap, with a corresponding increase to the Merger Closing Cash Consideration and the Merger Earn-Out Cash Consideration, as applicable. Following the consummation of the Mergers and the issuance of the Merger Closing Stock Consideration, Newtek would beneficially own 30.2% of the Company’s common or common-equivalent equity (on an as-converted and fully-diluted basis), calculated based on the number of shares of the Company’s common stock outstanding as of November 8, 2024.
Previous wording
As a condition to the closing of the Mergers and the transactions contemplated by the Merger Agreement, the Merger Agreement provides that we must effectuate the sale of our Paltalk, Camfrog, and Tinychat applications and all assets and liabilities related to such applications (the “Divestiture Transaction”). Following the Divestiture Transaction, we will retain (i) all patents, patent applications, and any rights or causes of action related to such applications, and (ii) any assets (including intellectual property) that are not exclusively related to such applications.
Current wording
As a condition to the closing of the Mergers and the transactions contemplated by the Merger Agreement, the Merger Agreement provides that we must effectuate the sale of our Paltalk, Camfrog, and Tinychat applications and all assets and liabilities related to such applications. Subsequent to the parties’ entry into the Merger Agreement, Newtek agreed to waive the condition requiring the sale of the Company’s “Tinychat” application so long as all operations of Tinychat have ceased upon the closing of the Mergers. As a result of the waiver, we plan to cease operations of the Tinychat application prior to the closing of the Mergers.
Previous wording
In addition, the closing of the Mergers is subject to the satisfaction of various customary closing conditions, including, among others, approval of the Parent Stock Issuance and the Divestiture Transaction by our stockholders. The Merger Agreement contains certain termination rights for both us and Newtek, on behalf of itself and NTS, including, among other things, if the closing has not occurred prior to February 9, 2025. In the event the Merger Agreement is terminated, neither party thereto will owe a termination fee or otherwise incur a liability to any other party under or relating to the Merger Agreement.
Current wording
In addition, the closing of the Mergers is subject to the satisfaction of various customary closing conditions, including, among others, approval of the Parent Stock Issuance and the Divestiture by our stockholders. The Merger Agreement contains certain termination rights for both us and Newtek, on behalf of itself and NTS, including, among other things, if the closing has not occurred prior to February 9, 2025. In the event the Merger Agreement is terminated, neither party thereto will owe a termination fee or otherwise incur a liability to any other party under or relating to the Merger Agreement.
Previous wording
Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as net income (loss) adjusted to exclude interest (income) expense, net, other (income) expense, net, income tax (benefit) expense, depreciation and amortization expense, and stock-based compensation expense.
Current wording
Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as net loss adjusted to exclude interest (income) expense, net, other (income) expense, net, income tax (benefit) expense, depreciation and amortization expense, and stock-based compensation expense.
Previous wording
Total revenue decreased by 24.7% to $2,224,625 for the three months ended June 30, 2024 from $2,956,002 for the three months ended June 30, 2023. This decrease was primarily driven by a decrease in virtual gift revenue.
Current wording
Total revenue decreased by 23.4% to $2,121,234 for the three months ended September 30, 2024 from $2,767,939 for the three months ended September 30, 2023. This decrease was primarily driven by a decrease in virtual gift revenue.
Previous wording
The following table sets forth our subscription revenue, advertising revenue and total revenue for the six months ended June 30, 2024 and the six months ended June 30, 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:
Current wording
The following table sets forth our subscription revenue, advertising revenue and total revenue for the three months ended September 30, 2024 and the three months ended September 30, 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
Our subscription revenue for the three months ended June 30, 2024 decreased by $752,089, or 26.1%, as compared to the three months ended June 30, 2023. The decrease in subscription revenue was primarily driven by a decrease in virtual gift revenue. We expect that virtual gift revenue may continue to decline as customers limit their discretionary spending in light of the current economic environment.
Current wording
Our subscription revenue for the three months ended September 30, 2024 decreased by $640,009, or 23.9%, as compared to the three months ended September 30, 2023. The decrease in subscription revenue was primarily driven by a decrease in virtual gift revenue by $463,000. We expect that virtual gift revenue may continue to decline as customers limit their discretionary spending in light of the current economic environment.
Previous wording
Our advertising revenue for the six months ended June 30, 2024 increased by $77,113 or 59.6%, as compared to the six months ended June 30, 2023. The increase in advertising revenue was primarily due to an increase in the volume of advertising impressions related to changes in the optimization of third-party advertising partners.
Current wording
Our advertising revenue for the three months ended September 30, 2024 decreased by $6,696, or 7.1%, as compared to the three months ended September 30, 2023. The decrease in advertising revenue was primarily due to a decrease in the volume of advertising impressions related to changes in the optimization of third-party advertising partners for the Paltalk application.
Previous wording
Total costs and expenses for the three months ended June 30, 2024 increased by $164,985, or 5.1%, as compared to the three months ended June 30, 2023. The following table presents our costs and expenses for the three months ended June 30, 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:
Current wording
Total costs and expenses for the three months ended September 30, 2024 increased by $651,413, or 20.6%, as compared to the three months ended September 30, 2023. The following table presents our costs and expenses for the three months ended September 30, 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 cost of revenue for the three months ended June 30, 2024 increased by $36,465, or 4.7%, as compared to the three months ended June 30, 2023. This increase in cost of revenue is primarily due to an increase in hosting expense due to increased usage and per unit cost from web hosting providers of $20,375, an increase in ManyCam consulting fees of $9,852 and increased credit card provider fees of $6,972.
Current wording
Our cost of revenue for the three months ended September 30, 2024 decreased by $66,496, or 8.0%, as compared to the three months ended September 30, 2023. This decrease in cost of revenue is primarily due to an increase in hosting expense of $41,776, and decreased credit card provider fees of $23,222.
Previous wording
Our sales and marketing expense for the three months ended June 30, 2024 decreased by $27,995, or 12.7%, as compared to the three months ended June 30, 2023. The decrease in sales and marketing expense for the three months ended June 30, 2024 was primarily due to a decrease in salary-related expenses of approximately $55,653, partially offset by increased in marketing-related expenses of $28,670.
Current wording
Our sales and marketing expense for the three months ended September 30, 2024 decreased by $7,697, or 3.7%, as compared to the three months ended September 30, 2023. The decrease in sales and marketing expense for the three months ended September 30, 2024 was primarily due to a decrease in headcount expenses of approximately $53,357, offset by an increase in marketing and advertising of $46,108.
Previous wording
Our product development expense for the three months ended June 30, 2024 increased by $48,580, or 4.2%, as compared to the three months ended June 30, 2023. The increase in product development expense was primarily due to an increase in software expenses of $18,799. There was also an increase in salary-related expenses of $17,401 and dues and subscriptions expenses of $10,408.
Current wording
Our product development expense for the three months ended September 30, 2024 increased by $15,896, or 1.3%, as compared to the three months ended September 30, 2023. The increase in product development expense was primarily due to an increase in salary-related expenses of $18,035 and dues and subscriptions expenses of $10,474, offset by a decrease in software expenses of $14,954.
Previous wording
Our general and administrative expense for the three months ended June 30, 2024 increased by $107,935 or 10.0%, as compared to the three months ended June 30, 2023. The increase in general and administrative expense for the three months ended June 30, 2024 was primarily due to an increase of approximately $249,828 in professional and tax fees. in connection with the Mergers and the transactions related thereto, which are expected to close in fourth quarter of 2024 or the first quarter of 2025. We expect that our general and administrative expense will continue to increase in future periods in connection with the Mergers. These expenses were offset by decreases in the following: public company expenses of $71,923, franchise taxes of $28,358 and stock-based compensation expense of $24,594.
Current wording
Our general and administrative expense for the three months ended September 30, 2024 increased by $709,710 or 76.6%, as compared to the three months ended September 30, 2023. The increase in general and administrative expense for the three months ended September 30, 2024 was primarily due to an increase of approximately $160,741 in professional fees and legal fees of $605,251 in connection with the Mergers and the transactions related thereto, which are expected to close in fourth quarter of 2024 or the first quarter of 2025. We expect that our general and administrative expense will continue to increase in future periods in connection with the Mergers and the transactions related thereto. These increases were offset slightly by decreases in insurance expense of $33,316 and accounting fees of $17,671.
Previous wording
Non-operating income for the three months ended June 30, 2024 was $290,500, a decrease of $223,886, or 43.5%, as compared to non-operating income of $514,386 for the three months ended June 30, 2023. The decrease in non-operating income was primarily a result of the ERTC refund recognized in June 2023.
Current wording
Non-operating income for the three months ended September 30, 2024 was $157,517, a decrease of $12,408, or 7.3%, as compared to non-operating income of $169,925 for the three months ended September 30, 2023.
Previous wording
Our provision for income taxes consists of federal, foreign and state taxes, as applicable, in amounts necessary to align our year-to-date tax provision with the effective rate that we expect to achieve for the full year. For the three months ended June 30, 2024 and June 30, 2023, we recorded an income tax provision of $50,591 and $101,058, respectively, consisting primarily of federal, foreign, state and local taxes.
Current wording
Our benefit (provision) for income taxes consists of federal, foreign and state taxes, as applicable, in amounts necessary to align our year-to-date tax provision with the effective rate that we expect to achieve for the full year. For the three months ended September 30, 2024 and September 30, 2023, we recorded an income tax benefit of $20,767 and $37,915, respectively, consisting primarily of federal, foreign, state and local taxes.
Previous wording
Six Months Ended June 30, 2024 Compared to Six Months Ended June, 2023
Current wording
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September, 2023
Previous wording
Total revenue decreased by 12.6% to $4,822,355 for the six months ended June 30, 2024 from $5,520,019 for the six months ended June 30, 2023. This decrease was primarily driven by a decrease in virtual gift revenue in the three months ended June 30, 2024.
Current wording
Total revenue decreased by 16.2% to $6,943,589 for the nine months ended September 30, 2024 from $8,287,958 for the nine months ended September 30, 2023. This decrease was primarily driven by a decrease in virtual gift revenue in the nine months ended September 30, 2024.
Previous wording
The following table sets forth our subscription revenue, advertising revenue and total revenue for the three months ended June 30, 2024 and the three months ended June 30, 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:
Current wording
The following table sets forth our subscription revenue, advertising revenue and total revenue for the nine months ended September 30, 2024 and the nine months ended September 30, 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 subscription revenue for the six months ended June 30, 2024 decreased by $774,777 or 14.4%, as compared to the six months ended June 30, 2023. The decrease in subscription revenue was primarily driven by a decrease in virtual gifts across the Paltalk and Camfrog applications during the three months ended June 30, 2024.
Current wording
Our subscription revenue for the nine months ended September 30, 2024 decreased by $1,414,786 or 17.5%, as compared to the nine months ended September 30, 2023. The decrease in subscription revenue was primarily driven by a decrease in virtual gifts across the Paltalk and Camfrog applications during the three months ended September 30, 2024.
Previous wording
Our advertising revenue for the three months ended June 30, 2024 increased by $20,712, or 29.2%, as compared to the three months ended June 30, 2023. The increase in advertising revenue was primarily due to an increase in the volume of advertising impressions related to changes in the optimization of third-party advertising partners.
Current wording
Our advertising revenue for the nine months ended September 30, 2024 increased by $70,417 or 31.4%, as compared to the nine months ended September 30, 2023. The increase in advertising revenue was primarily due to an increase in the volume of advertising impressions related to changes in the optimization of third-party advertising partners.
Previous wording
Total costs and expenses for the six months ended June 30, 2024 increased by $51,870, or 0.8%, as compared to the six months ended June 30, 2023. The following table presents our costs and expenses for the six months ended June 30, 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:
Current wording
Total costs and expenses for the nine months ended September 30, 2024 increased by $703,283, or 7.1%, as compared to the nine months ended September 30, 2023. The following table presents our costs and expenses for the nine months ended September 30, 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 cost of revenue for the six months ended June 30, 2024 increased by $53,065, or 3.4%, as compared to the six months ended June 30, 2023. This increase was primarily due to an increase in hosting expenses.
Current wording
Our cost of revenue for the nine months ended September 30, 2024 decreased by $13,431, or 0.6%, as compared to the nine months ended September 30, 2023. This decrease was due to a decrease in credit card processing fees of $28,996, slightly offset by an increase in hosting fees of $10,572.
Previous wording
Our sales and marketing expense for the six months ended June 30, 2024 decreased by $92,269, or 19.4%, as compared to the six months ended June 30, 2023. The decrease in sales and marketing expense for the six months ended June 30, 2024 was primarily due to a decrease in salary-related expenses ($114,375) and partially offset by an increase of marketing user acquisition expenses, including agent fees and marketing and branding expense ($20,869).
Current wording
Our sales and marketing expense for the nine months ended September 30, 2024 decreased by $99,966, or 14.6%, as compared to the nine months ended September 30, 2023. The decrease in sales and marketing expense for the nine months ended September 30, 2024 was primarily due to a decrease in headcount expenses of $167,733 and partially offset by an increase of advertising and marketing expenses of $67,053.
Previous wording
Our product development expense for the six months ended June 30, 2024 increased by $11,699, or 0.5%, as compared to the six months ended June 30, 2023. The increase was primarily due to an increase in dues and subscriptions of $39,010 and salary-related expenses of $29,093, slightly offset by decreased software expense cost of $60,723.
Current wording
Our product development expense for the nine months ended September 30, 2024 increased by $27,595, or 0.8%, as compared to the nine months ended September 30, 2023. The increase was due to an increase in dues and subscriptions of $49,484 and salary-related expenses of $47,128, offset slightly by a decrease in consulting fees of $75,677.
Previous wording
Our general and administrative expense for the six months ended June 30, 2024 increased by $79,375, or 3.5%, as compared to the six months ended June 30, 2023. The increase in general and administrative expense for the six months ended June 30, 2024 was due to an increase of approximately $278,078 in professional and tax fees in connection with the Mergers and the transactions related thereto, which are expected to close in fourth quarter of 2024 or the first quarter of 2025. We expect that our general and administrative expense will continue to increase in future periods in connection with the Mergers. These expenses were offset by decreases in public company expenses of $94,928 and franchise taxes of $117,000.
Current wording
Our general and administrative expense for the nine months ended September 30, 2024 increased by $789,085, or 24.9%, as compared to the nine months ended September 30, 2023. The increase in general and administrative expense for the nine months ended September 30, 2024 was due to an increase of approximately $160,815 in professional and tax fees and legal fees of $892,620 in connection with the Mergers and the transactions related thereto, which are expected to close in fourth quarter of 2024 or the first quarter of 2025. We expect that our general and administrative expense will continue to increase in future periods in connection with the Mergers and the transactions related thereto. These expenses were offset by decreases in the following: public company expenses of $88,170, insurance expenses of $46,747, taxes of $139,319 and non-cash stock compensation expense $46,417.
Previous wording
The following table presents the components of non-operating income for the six months ended June 30, 2024 and the six months ended June 30, 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:
Current wording
The following table presents the components of non-operating income for the nine months ended September 30, 2024 and the nine months ended September 30, 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
Non-operating income for the six months ended June 30, 2024 was $442,484, a decrease of $193,069, or 30.4%, as compared to non-operating income of $635,553 for the six months ended June 30, 2023. The decrease in non-operating income was primarily the result of recording the ERTC in June 2023.
Current wording
Non-operating income for the nine months ended September 30, 2024 was $600,001, a decrease of $205,477 or 25.5%, as compared to non-operating income of $805,478 for the nine months ended September 30, 2023. The decrease in non-operating income was primarily the result of recording the ERTC in June 2023.
Previous wording
Our provision for income taxes consists of federal and state taxes, as applicable, in amounts necessary to align our year-to-date tax provision with the effective rate that we expect to achieve for the full year. For the six months ended June 30, 2024 and 2023, we recorded an income tax benefit of $67,309 and an income tax provision $51,504, respectively, consisting primarily of federal, foreign, state and local taxes.
Current wording
Our provision for income taxes consists of federal and state taxes, as applicable, in amounts necessary to align our year-to-date tax provision with the effective rate that we expect to achieve for the full year. For the nine months ended September 30, 2024 and 2023, we recorded an income tax benefit of $88,076 and an income tax provision $13,590, respectively, consisting primarily of federal, foreign, state and local taxes.
Previous wording
Currently, our primary source of liquidity is cash on hand, and we believe that our cash and cash equivalents balance and our expected cash flows 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 June 30, 2024, we had $12,796,004 of cash and cash equivalents.
Current wording
Currently, our primary source of liquidity is cash on hand, and we believe that our cash and cash equivalents balance and our expected cash flows 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 September 30, 2024, we had $12,056,085 of cash and cash equivalents.
Previous wording
Net cash used in operating activities was $772,045 for the six months ended June 30, 2024, as compared to net cash used in operating activities of $996,778 for the six months ended June 30, 2023. The decrease in the amount of cash used in operations for the six months ended June 30, 2024 was primarily attributed to cash management of payables and prepaid expenses, as compared to the six months ended June 30, 2023.
Current wording
Net cash used in operating activities was $1,551,736 for the nine months ended September 30, 2024, as compared to net cash used in operating activities of $980,720 for the nine months ended September 30, 2023. The increase in the cash used in operations for the nine months ended September 30, 2024 was primarily attributed to increased professional expenses related to the Merger, as compared to the nine months ended September 30, 2023.
Previous wording
There was no net cash provided by or used in investing activities for the six months ended June 30, 2024. The net cash used in investing activities during the six months ended June 30, 2023 consisted of the earn-out payment made in connection with the ManyCam acquisition.
Current wording
There was no net cash provided by or used in investing activities for the nine months ended September 30, 2024. The net cash used in investing activities during the nine months ended September 30, 2023 consisted of the earn-out payment made in connection with the ManyCam acquisition.
Previous wording
There was no net cash provided by or used in financing activities for the six months ended June 30, 2024, as compared to $7,213 of net cash used in financing activities for the six months ended June 30, 2023. This higher use of cash used in financing activities during the six months ended June 30, 2023 is attributed to a stock repurchase plan that was approved by our Board of Directors in March 2022. The stock repurchase plan expired on March 29, 2023 pursuant to its terms and has not been renewed.
Current wording
Net cash provided by financing activities was $39,772 for the nine months ended September 30, 2024, as compared to $7,213 of net cash used in financing activities for the nine months ended September 30, 2023. This higher amount of cash provided by financing activities during the nine months ended September 30, 2024 is attributed to employee stock options exercised compared to the stock repurchase plan that was approved by our Board of Directors in March 2022. The stock repurchase plan expired on March 29, 2023 pursuant to its terms and has not been renewed.
Previous wording
During the six months ended June 30, 2024, 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.
Current wording
During the nine months ended September 30, 2024, 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.