PALTALK INC

Previous wording

On August 11, 2024, we entered into the Merger Agreement with Newtek to acquire NTS through a two-step merger process. The consummation of the Mergers is subject to a number of conditions, including, among others, (i) the Paltalk Stockholder Approval, (ii) the absence of any governmental order enjoining or otherwise prohibiting the performance of the Merger Agreement or any of the transactions contemplated thereby, (iii) the absence of a Material Adverse Effect (as defined in the Merger Agreement) on the Company or NTS, (iv) receipt by Newtek from the Federal Reserve of regulatory approval or a non-objection notice relating to the Mergers and the transactions related thereto, and (v) the completion of the Divestiture Transaction. These closing conditions may not be fulfilled in a timely manner or at all, and, accordingly, the Mergers may not be consummated. Any delay in completing the Mergers could cause us not to realize, or to be delayed in realizing, some or all of the benefits that we expect to achieve if the Mergers are successfully consummated within our expected timeframe.

Current wording

On August 11, 2024, we entered into the Merger Agreement with Newtek to acquire NTS through a two-step merger process. The consummation of the Mergers is subject to a number of conditions, including, among others, (i) the Paltalk Stockholder Approval, (ii) the absence of any governmental order enjoining or otherwise prohibiting the performance of the Merger Agreement or any of the transactions contemplated thereby, (iii) the absence of a Material Adverse Effect (as defined in the Merger Agreement) on the Company or NTS, (iv) receipt by Newtek from the Federal Reserve of regulatory approval or a non-objection notice relating to the Mergers and the transactions related thereto, and (v) the completion of the Divestiture.

Previous wording

In addition, Newtek and the Company can mutually decide to terminate the Merger Agreement at any time, before or after Paltalk Stockholder Approval, or Newtek or the Company may elect to terminate the Merger Agreement in certain other circumstances.

Current wording

In addition, Newtek and the Company can mutually decide to terminate the Merger Agreement at any time, before or after Paltalk Stockholder Approval.

Previous wording

If the Mergers are not completed for any reason, including as a result of our stockholders declining to approve the Parent Stock Issuance or the Divestiture Transaction, we would be subject to a number of risks, including the following:

Current wording

If the Mergers are not completed for any reason, including as a result of our stockholders declining to approve the Parent Stock Issuance or the Divestiture, we would be subject to a number of risks, including the following:

Previous wording

In addition, the acquisition of the new business is complex, costly and time consuming, and we have devoted, and will continue to devote, significant management attention and resources to integrating the respective business practices and operations of NTS. Potential difficulties that we may encounter as part of the integration process include the following:

Current wording

In addition, the acquisition of NTS is complex, costly and time consuming, and we have devoted, and will continue to devote, significant management attention and resources to integrating the respective business practices and operations of NTS. Potential difficulties that we may encounter as part of the integration process include the following:

Previous wording

The announcement and pendency of the Mergers and the other transactions contemplated by the Merger Agreement, including the Divestiture Transaction, whether or not completed, may adversely affect our business.

Current wording

The announcement and pendency of the Mergers and the other transactions contemplated by the Merger Agreement, including the Divestiture, whether or not completed, may adversely affect our business.

Previous wording

The announcement and pendency of the Mergers, including the Divestiture Transaction, may adversely affect the trading price of our common stock, our business or our relationships with our users, consultants and employees. Third parties may be unwilling to enter into material agreements with respect to our business in light of the proposed transactions. In addition, new or existing customers, suppliers and business partners of NTS may prefer to enter into agreements with NTS’ competitors who have not expressed an intention to sell their business because customers, suppliers and business partners may perceive that such new relationships are likely to be more stable. Additionally, our employees may become concerned about the future of our business and NTS and lose focus or seek other employment.

Current wording

The announcement and pendency of the Mergers, including the Divestiture, may adversely affect the trading price of our common stock, our business or our relationships with our users, consultants and employees. Third parties may be unwilling to enter into material agreements with respect to our business in light of the proposed transactions. In addition, new or existing customers, suppliers and business partners of NTS may prefer to enter into agreements with NTS’ competitors who have not expressed an intention to sell their business because customers, suppliers and business partners may perceive that such new relationships are likely to be more stable. Additionally, our employees may become concerned about the future of our business and NTS and lose focus or seek other employment.

Previous wording

Through the Mergers, we are attempting to enter a new line of business which is highly competitive and regulated.

Current wording

Through the Mergers, we are attempting to enter a new line of business which is highly competitive.

Previous wording

Entering a new line of business has many risks, including obtaining sufficient capital to cover integration expenses and to continue to fund operations until sales are sufficient to fund ongoing operations. A new business line may never generate significant revenues, bring products and services to market or have enough sales to be profitable, as the case may be. With respect to any new line of business, we may have competitors that are better established in the market, have greater experience with such line of business or have greater resources than we do. We anticipate that products and services of NTS will be developed for and distributed to the market, but there can be no guaranty that sufficient revenue to support operations will ever be generated. Furthermore, certain of our current employees may have limited experience with dedicated server hosting, cloud hosting, data storage, managed security, backup and disaster recovery, and other related services and may have limited experience with respect to any other line of business we may enter into as we seek to expand NTS’s operations.

Current wording

Through the Mergers, we are acquiring NTS’s operations. Entering a new line of business has many risks, including the ability to generate sufficient revenue to fund operations in the future. While we believe we have sufficient capital to cover integration expenses, we may have to fund NTS’s operations from cash on hand until sales are sufficient to fund ongoing operations. A new business line may never generate significant revenues, bring products and services to market or have enough sales to be profitable, as the case may be. With respect to any new line of business, we may have competitors that are better established in the market, have greater experience with such line of business or have greater resources than we do. We anticipate that products and services of NTS will be developed for and distributed to the market, but there can be no guaranty that sufficient revenue to support operations will ever be generated. Furthermore, certain of our current employees may have limited experience with dedicated server hosting, cloud hosting, data storage, managed security, backup and disaster recovery, and other related services and may have limited experience with respect to any other line of business we may enter into as we seek to expand NTS’s operations.

Previous wording

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 the outstanding shares of the Company as of August 9, 2024.The shares of our common stock issuable upon conversion of the Preferred Stock issued to Newtek (the will become freely tradable once registered pursuant to the Registration Rights Agreement between us and Newtek, which will become effective at the closing of the Mergers. Once registered, the shares of common stock underlying the Preferred Stock held by Newtek will have no restrictions, other than described below, and such shares generally will not require further registration under the Securities Act, provided, however, that any stockholders who are deemed to be affiliates of us will be subject to the resale restrictions of Rule 144 under the Securities Act.

Current wording

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. As a holder of Preferred Stock, Newtek generally will not have voting rights, except with respect to certain protective matters, such as amendments to the Company’s Amended and Restated Certificate of Incorporation, as amended, or the Certificate of Designations designating the Preferred Stock that significantly and adversely affect the preferences, rights, privileges or powers of the Preferred Stock. The Preferred Stock is convertible into common stock only upon certain qualifying transfers to third parties. The shares of our common stock issuable upon conversion of the Preferred Stock issued to Newtek (the will become freely tradable once registered pursuant to the Registration Rights Agreement between us and Newtek, which will become effective at the closing of the Mergers. Once registered, the shares of common stock underlying the Preferred Stock held by Newtek will have no restrictions, other than described below, and such shares generally will not require further registration under the Securities Act, provided, however, that any stockholders who are deemed to be affiliates of us will be subject to the resale restrictions of Rule 144 under the Securities Act.

Previous wording

We may be the target of securities class action and derivative lawsuits, which could result in substantial costs and may delay or prevent the Mergers from being completed.

Current wording

We may be the target of securities class action and derivative lawsuits, which could result in substantial costs and may delay or prevent the Mergers or the Divestiture from being completed.

Previous wording

Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into acquisition agreements. Defending against these claims can result in substantial costs and divert management time and resources, even if the lawsuits are without merit. An adverse judgment could result in monetary damages, which could have a negative impact on our business, results of operations and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Mergers, the injunction may delay or prevent the Mergers from being completed, which may adversely affect our business, results of operations and financial condition.

Current wording

Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into acquisition agreements. Defending against these claims can result in substantial costs and divert management time and resources, even if the lawsuits are without merit. An adverse judgment could result in monetary damages, which could have a negative impact on our business, results of operations and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Mergers or the Divestiture, the injunction may delay or prevent the Mergers or the Divestiture, as applicable, from being completed, which may adversely affect our business, results of operations and financial condition.