Core Viewpoint - Paltalk, Inc. has received a favorable final judgment in its patent infringement lawsuit against Cisco Systems, resulting in a jury award of $65.7 million for the company [1][2][3]. Group 1: Lawsuit Details - The lawsuit was filed on July 23, 2021, by Paltalk Holdings, Inc., alleging that certain Cisco products infringed U.S. Patent No. 6,683,858 [2]. - The final judgment was signed by Judge Alan D. Albright and confirms the jury's award amount [3]. Group 2: Financial Implications - The exact amount Paltalk will receive from the award will be influenced by litigation-related expenses, including legal fees, with an estimate that the company may receive no more than one third of the gross proceeds [4]. Group 3: Patent Portfolio - Paltalk holds a total of 8 issued U.S. patents and intends to vigorously defend these patents [5].

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JERICHO, NY, Aug. 30, 2024 (GLOBE NEWSWIRE) -- Paltalk, Inc. ("Paltalk," the "Company," "we," "our" or "us") (Nasdaq: PALT), a communications software innovator that powers multimedia social applications, today announced that a jury in the District Court for the Western District of Texas (the "Court") has awarded the Company $65.7 million in a verdict against Cisco Systems, Inc. ("Cisco") for infringing U.S. Patent No. 6,683,858. As previously disclosed, on July 23, 2021, Paltalk Holdings, Inc., a wholly ow ...

Financial Performance - Revenue for Q2 2024 decreased by 24.7% to $2.2 million compared to $2.9 million in Q2 2023[1] - Subscription revenue for Q2 2024 decreased by 26.1% to $2.1 million, while advertising revenue increased by 29.2% to $0.1 million[1] - Net loss for Q2 2024 was $0.9 million, a decline of 788.8% compared to a net income of $0.1 million in Q2 2023[1] - Total revenues for the three months ended June 30, 2024, were $2,224,625, a decrease of 25% compared to $2,956,002 for the same period in 2023[24] - The net loss for the three months ended June 30, 2024, was $(934,151), compared to a net income of $135,629 for the same period in 2023[24] - Adjusted EBITDA loss for Q2 2024 was $0.9 million, an increase of approximately 6164.5% compared to a loss of $14,945 in Q2 2023[1] - Adjusted EBITDA for the three months ended June 30, 2024, was $(936,227), compared to $(14,945) for the same period in 2023[17] Cash and Assets - Cash balance as of June 30, 2024, was $12.8 million, a decrease of $0.2 million from Q1 2024[1] - Total current assets decreased to $13,724,546 as of June 30, 2024, from $14,765,599 as of December 31, 2023[22] - Cash and cash equivalents were $12,796,004 as of June 30, 2024, down from $13,568,049 as of December 31, 2023[22] - The balance of cash and cash equivalents at the end of the period was $12,796,004, down from $13,650,942 at the end of June 2023[25] Liabilities and Expenses - Total liabilities as of June 30, 2024, were $3,674,642, a slight decrease from $3,752,581 as of December 31, 2023[22] - The company reported a total cost of revenue of $810,493 for the three months ended June 30, 2024, compared to $774,028 for the same period in 2023[24] - The company incurred product development expenses of $1,212,220 for the three months ended June 30, 2024, an increase from $1,163,640 in the same period of 2023[24] - Stock-based compensation decreased to $91,561 in June 2024 from $112,311 in June 2023, reflecting cost management efforts[25] Deferred Revenue and Future Outlook - Deferred revenue decreased by 12.6% to $1.9 million as of June 30, 2024, compared to the previous year[1] - Deferred subscription revenue increased by $64,317, from $87,998 in June 2023 to $152,315 in June 2024, indicating potential growth in future revenue[25] - The company plans to focus on improving and marketing its ManyCam software as part of its future business objectives[16] Acquisition and Legal Matters - The company entered into an agreement to acquire Newtek Technology Solutions for $4 million in cash and 4 million shares of preferred stock, with potential earn-out payments of up to $5 million[2] - The company is defending its intellectual property in a patent litigation case against Cisco, with the trial expected to begin on August 26, 2024[6] Cash Flow Management - Net cash used in operating activities for the six months ended June 30, 2024, decreased by 22.5% to $0.8 million[1] - Net cash used in operating activities decreased to $772,045 in June 2024 from $996,778 in June 2023, showing improved cash flow management[25] - The company did not make any payments for contingent consideration in June 2024, compared to $85,000 in June 2023[25] Tax and Credit Management - The company reported a tax expense of $9,550 in June 2024, down from $18,551 in June 2023, indicating a reduction in tax liabilities[25] - The company recorded an allowance for credit losses of $3,233 in June 2024, which was not present in June 2023, suggesting a cautious approach to credit risk[25]

Core Insights - Paltalk, Inc. reported a significant decline in revenue and increased net losses for the second quarter and the first half of 2024, indicating challenges in its business operations [1][5][10]. Financial Highlights - For the second quarter ended June 30, 2024, revenue decreased by 24.7% to $2.2 million, with subscription revenue down 26.1% to $2.1 million, while advertising revenue increased by 29.2% to $0.1 million [1][11]. - The net loss for the second quarter was $0.9 million, a decline of 788.8% compared to a net income of $0.1 million in the same period last year [1][8]. - For the six months ended June 30, 2024, revenue decreased by 12.6% to $4.8 million, with subscription revenue down 14.4% to $4.6 million and advertising revenue up 59.6% to $0.2 million [1][10]. - The net loss for the first half of 2024 was $1.4 million, an increase of 136.7% compared to a net loss of $0.6 million for the same period in 2023 [1][10]. Operational Highlights - Paltalk entered into an agreement to acquire Newtek Technology Solutions, Inc. for $4 million in cash and 4 million shares of preferred stock, with potential earn-out payments of up to $5 million based on future performance [2]. - The acquisition is contingent upon the divestiture of Paltalk's "Paltalk", "Camfrog", and "Tinychat" applications, ensuring that the company no longer operates these applications post-transaction [2]. Business Objectives - The company aims to maximize stockholder value through divestiture opportunities and the completion of the Newtek acquisition [3]. - Paltalk is focused on enhancing user experience with ManyCam software and optimizing marketing spend to achieve a positive return on investment [3]. - The company plans to implement enhancements to its live video chat applications and explore partnerships with third-party communities to promote co-branded versions of its products [3]. Management Commentary - The CEO of Paltalk highlighted the acquisition of Newtek as a transformational opportunity for the company, emphasizing the potential for organic and acquisitive growth [5]. - The management acknowledged a decline in discretionary spending by subscribers due to macroeconomic factors, which they believe are not indicative of long-term trends [5]. Patent Litigation Update - Paltalk is involved in ongoing patent litigation against Cisco, with a trial set to begin on August 26, 2024, regarding alleged patent infringement [6][7].

Core Viewpoint - NewtekOne, Inc. has entered into a definitive agreement to sell its subsidiary Newtek Technology Solutions, Inc. to Paltalk, Inc. as part of its transition to a financial holding company and compliance with Federal Reserve requirements [1][2]. Group 1: Transaction Details - Paltalk will pay NewtekOne $4 million in cash and issue 4 million shares of a new series of non-voting preferred stock as part of the sale [2]. - NewtekOne may receive an additional earn-out of up to $5 million based on achieving certain Adjusted EBITDA thresholds for the fiscal years 2025 and 2026 [2]. - The anticipated closing of the sale is expected in Q4 2024 or Q1 2025, pending stockholder and regulatory approvals [3]. Group 2: Company Strategy and Management - NewtekOne's CEO emphasized the importance of finding the right management team for NTS to ensure continued growth and service quality for its 17,000 customers [4]. - The current management team at NTS will remain intact post-sale, ensuring continuity in operations and client service [4]. - NewtekOne will retain its intellectual property and patented technology, maintaining a non-voting ownership interest in Paltalk [4]. Group 3: Financial Implications - NTS's revenue in 2023 was approximately three times greater than Paltalk's revenue for the same year, indicating a significant potential impact on Paltalk's financials post-acquisition [4]. - NewtekOne's equity interest in Paltalk is projected to be about 30.3% on a fully diluted basis at the time of closing [3].

Paltalk, Inc. (NASDAQ:PALT) Q1 2024 Earnings Conference Call May 9, 2024 9:00 AM ET Company Participants Kara Jenny - Chief Financial Officer Jason Katz - Chief Executive Officer Conference Call Participants Operator Good morning, everyone, and welcome to the Paltalk First Quarter 2024 Results Conference Call. At this time, all participants have been placed on a listen-only mode. It is now my pleasure to turn the floor over to your host, CFO, Kara Jenny. Ma'am, the floor is yours. Kara Jenny Hello, everyone ...

PART I. FINANCIAL INFORMATION Paltalk's unaudited Q1 2024 financial statements and management's discussion and analysis are presented [ITEM 1. Financial Statements](index=6&type=section&id=ITEM%201.%20Financial%20Statements) Paltalk, Inc.'s unaudited condensed consolidated financial statements for Q1 2024, covering balance sheets, operations, equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | March 31, 2024 (Unaudited) | December 31, 2023 | | :-------------------------------- | :--------------------------- | :------------------ | | **Assets** | | | | Cash and cash equivalents | $13,047,255 | $13,568,049 | | Total current assets | $14,052,770 | $14,765,599 | | Total assets | $22,948,015 | $23,887,268 | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | $2,763,367 | $3,138,540 | | Total liabilities | $3,246,324 | $3,752,581 | | Total stockholders' equity | $19,701,691 | $20,134,687 | | Total liabilities and stockholders' equity | $22,948,015 | $23,887,268 | - Total assets decreased from **$23,887,268** at December 31, 2023, to **$22,948,015** at March 31, 2024[17](index=17&type=chunk) - Cash and cash equivalents decreased by **$520,794** from **$13,568,049** at December 31, 2023, to **$13,047,255** at March 31, 2024[17](index=17&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Subscription revenue | $2,482,982 | $2,505,670 | | Advertising revenue | $114,748 | $58,347 | | Total revenues | $2,597,730 | $2,564,017 | | Total costs and expenses | $3,359,921 | $3,473,036 | | Loss from operations | $(762,191) | $(909,019) | | Interest income, net | $151,984 | $121,167 | | Net loss | $(492,307) | $(738,298) | | Net loss per share (Basic & Diluted) | $(0.05) | $(0.08) | - Total revenues increased by **1.3%** to **$2,597,730** for the three months ended March 31, 2024, compared to **$2,564,017** for the same period in 2023, primarily due to an increase in advertising revenue[20](index=20&type=chunk)[104](index=104&type=chunk) - Net loss decreased by **33.3%** to **$492,307** for the three months ended March 31, 2024, from **$738,298** in the prior year, driven by increased revenues, reduced expenses, and improved operating efficiencies[20](index=20&type=chunk)[85](index=85&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) | Metric | Balance at Dec 31, 2023 | Stock-based Compensation Expense | Net Loss | Balance at Mar 31, 2024 | | :----------------------- | :---------------------- | :------------------------------- | :------- | :---------------------- | | Common Stock Amount | $9,864 | - | - | $9,864 | | Treasury Stock Amount | $(1,199,337) | - | - | $(1,199,337) | | Additional Paid-in Capital | $36,208,728 | $59,311 | - | $36,268,039 | | Accumulated Deficit | $(14,884,568) | - | $(492,307) | $(15,376,875) | | Total Stockholders' Equity | $20,134,687 | $59,311 | $(492,307) | $19,701,691 | - Total stockholders' equity decreased from **$20,134,687** at December 31, 2023, to **$19,701,691** at March 31, 2024, primarily due to the net loss of **$492,307**, partially offset by stock-based compensation expense[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(520,794) | $(802,991) | | Net cash used in investing activities | - | - | | Net cash used in financing activities | - | $(7,213) | | Net decrease in cash and cash equivalents | $(520,794) | $(810,204) | | Balance of cash and cash equivalents at end of period | $13,047,255 | $13,929,729 | - Net cash used in operating activities decreased by **35.1%** to **$520,794** for the three months ended March 31, 2024, compared to **$802,991** for the same period in 2023, mainly due to a decrease in operating expenses[25](index=25&type=chunk)[85](index=85&type=chunk)[118](index=118&type=chunk) - The Company had no cash flows from investing activities in either period[25](index=25&type=chunk)[119](index=119&type=chunk) - Net cash used in financing activities was **$0** for the three months ended March 31, 2024, compared to **$7,213** in 2023, as the stock repurchase plan expired in March 2023 and was not renewed[25](index=25&type=chunk)[120](index=120&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Organization and Description of Business](index=10&type=section&id=1.%20Organization%20and%20Description%20of%20Business) - Paltalk, Inc. is a communications software innovator with a portfolio including Paltalk, Camfrog, Tinychat (video-based communities), ManyCam (live streaming software), and Vumber (telecommunications services)[29](index=29&type=chunk) - The Company has over **20 years** of technology innovation and holds **8 patents**[29](index=29&type=chunk) - Macro-economic factors, including inflation and potential recessions, may negatively impact the Company's ability to attract and retain customers and affect discretionary spending[30](index=30&type=chunk) - The Company received **$294,833** of the **$343,045** Employee Retention Tax Credit (ERTC) receivable as of March 31, 2024[31](index=31&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - No significant changes were made to the Company's accounting policies during the three months ended March 31, 2024[34](index=34&type=chunk) - The Inflation Reduction Act of 2022's **1%** excise tax on stock repurchases was not applicable to the Company for the periods presented due to repurchase amounts being below the taxation threshold[36](index=36&type=chunk) - Subscription revenue, including virtual gift revenue, is recognized over the subscription period or upon virtual gift redemption. Advertising revenue is recognized based on impressions, clicks, or registrations[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - Goodwill is tested for impairment annually on December 31 or more frequently if indicators arise; no impairment was noted as of December 31, 2023 and 2022[46](index=46&type=chunk) Intangible Assets, Net (March 31, 2024 vs. December 31, 2023) | Intangible Asset Category | March 31, 2024 (Net Carrying Amount) | December 31, 2023 (Net Carrying Amount) | | :-------------------------------- | :----------------------------------- | :------------------------------------ | | Patents | $13,125 | $13,750 | | Trade names, trademarks, product names, URLs | $357,466 | $378,035 | | Internally developed software | $1,623,383 | $1,701,597 | | Subscriber/customer relationships | $504,920 | $611,095 | | **Total intangible assets** | **$2,498,894** | **$2,704,477** | Amortization expense for the three months ended March 31, 2024, was **$205,583**, consistent with **$205,584** for the same period in 2023[48](index=48&type=chunk) [3. Intangible Assets, Net](index=13&type=section&id=3.%20Intangible%20Assets%2C%20Net) Intangible Assets, Net (March 31, 2024 vs. December 31, 2023) | Intangible Asset Category | March 31, 2024 (Net Carrying Amount) | December 31, 2023 (Net Carrying Amount) | | :-------------------------------- | :----------------------------------- | :------------------------------------ | | Patents | $13,125 | $13,750 | | Trade names, trademarks, product names, URLs | $357,466 | $378,035 | | Internally developed software | $1,623,383 | $1,701,597 | | Subscriber/customer relationships | $504,920 | $611,095 | | **Total intangible assets** | **$2,498,894** | **$2,704,477** | Amortization expense for the three months ended March 31, 2024, was **$205,583**, consistent with **$205,584** for the same period in 2023[48](index=48&type=chunk) - The aggregate amortization expense for the remainder of 2024 is estimated to be **$616,104**[48](index=48&type=chunk) [4. Accrued Expenses and Other Current Liabilities](index=14&type=section&id=4.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Accrued Expenses and Other Current Liabilities | Category | March 31, 2024 (Unaudited) | December 31, 2023 | | :-------------------------------- | :--------------------------- | :------------------ | | Compensation, benefits and payroll taxes | $22,950 | $91,250 | | Other accrued expenses | $82,238 | $134,870 | | **Total accrued expenses and other current liabilities** | **$105,188** | **$226,120** | - Total accrued expenses and other current liabilities decreased by **$120,932** from December 31, 2023, to March 31, 2024[49](index=49&type=chunk) [5. Income Taxes](index=14&type=section&id=5.%20Income%20Taxes) - The Company recorded an income tax benefit of **$117,900** for the three months ended March 31, 2024, compared to **$49,554** for the same period in 2023[51](index=51&type=chunk)[52](index=52&type=chunk) - The effective tax rate for Q1 2024 was **19.3%**, differing from the statutory rate of **21%** due to changes in valuation allowance and foreign/state/local taxes[51](index=51&type=chunk) - The Company maintains a full valuation allowance against its U.S. deferred tax assets, concluding they are not realizable on a more-likely-than-not basis[51](index=51&type=chunk)[52](index=52&type=chunk) [6. Stockholders' Equity](index=15&type=section&id=6.%20Stockholders%27%20Equity) - As of March 31, 2024, **632,257** shares were available for future issuance under the 2016 Long-Term Incentive Plan[53](index=53&type=chunk) Stock Option Activity (Three Months Ended March 31, 2024) | Metric | Number of Options | Weighted Average Exercise Price | | :-------------------------------- | :---------------- | :------------------------------ | | Outstanding at January 1, 2024 | 740,814 | $3.32 | | Granted during the period | 28,000 | $2.78 | | Expired during the period | (5,078) | $13.49 | | Outstanding at March 31, 2024 | 763,736 | $3.23 | | Exercisable at March 31, 2024 | 586,849 | $3.56 | - Total unrecognized compensation expense related to stock options was **$341,530** as of March 31, 2024, to be recognized over a weighted average period of **2.68 years**[56](index=56&type=chunk) - Stock-based compensation expense for Q1 2024 was **$59,311**, up from **$55,141** in Q1 2023[59](index=59&type=chunk) - The Company held **641,963** treasury shares as of March 31, 2024, and December 31, 2023[61](index=61&type=chunk) [7. Net Loss Per Share](index=17&type=section&id=7.%20Net%20Loss%20Per%20Share) Net Loss Per Share Calculation | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss – basic and diluted | $(492,307) | $(738,298) | | Weighted average shares outstanding – basic | 9,222,157 | 9,222,356 | | Weighted average shares outstanding – diluted | 9,222,157 | 9,222,356 | | Per share data: Basic | $(0.05) | $(0.08) | | Per share data: Diluted | $(0.05) | $(0.08) | - Net loss per share (basic and diluted) improved to **$(0.05)** in Q1 2024 from **$(0.08)** in Q1 2023[64](index=64&type=chunk) - **763,736** and **650,155** outstanding stock options were excluded from diluted EPS calculation for Q1 2024 and Q1 2023, respectively, as their inclusion would be antidilutive[63](index=63&type=chunk) [8. Leases](index=17&type=section&id=8.%20Leases) - The Company has an operating lease for office space in Jericho, New York, expiring November 30, 2024, with monthly payments of approximately **$7,081**[65](index=65&type=chunk) - As of March 31, 2024, operating lease liabilities and ROU assets were approximately **$56,164**[66](index=66&type=chunk) - Total rent expense for Q1 2024 was **$21,825** (including **$1,500** sublease income), compared to **$20,448** for Q1 2023[67](index=67&type=chunk) Operating Lease Information | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Cash paid for operating lease liabilities | $20,841 | $20,367 | | Weighted average remaining lease term | 0.66 years | 1.7 years | | Weighted average discount rate | 2.3% | 2.3% | - Future minimum payments under non-cancelable operating leases for the year ending December 31, 2024, are **$56,650**[69](index=69&type=chunk) [9. Commitments and Contingencies](index=18&type=section&id=9.%20Commitments%20and%20Contingencies) - Paltalk Holdings, Inc. has a patent infringement lawsuit against Cisco (WebEx Communications, Inc., Cisco WebEx LLC, and Cisco Systems, Inc.) regarding U.S. Patent No. 6,683,858[70](index=70&type=chunk) - The patentability of claims 1-10 of U.S. Patent No. 6,683,858 was confirmed on January 19, 2023, after reexamination[71](index=71&type=chunk) - Cisco's motion for summary judgment was denied on June 29, 2023, and the trial is expected in August 2024[71](index=71&type=chunk) - The Company cannot predict the outcome or ultimate cost of the litigation, and any gross proceeds from a verdict or settlement would be significantly reduced by litigation expenses[72](index=72&type=chunk)[134](index=134&type=chunk) [10. Subsequent Events](index=18&type=section&id=10.%20Subsequent%20Events) - Management has evaluated subsequent events through the financial statements issuance date and determined no events require disclosure[73](index=73&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis of Paltalk's Q1 2024 financial condition, operations, and liquidity, highlighting revenue growth, reduced net loss, and strategic objectives [Overview](index=19&type=section&id=Overview) - Paltalk is a communications software innovator operating multimedia social applications like Paltalk, Camfrog, and Tinychat, which host video-based communities[77](index=77&type=chunk)[78](index=78&type=chunk) - Other products include ManyCam (live streaming software) and Vumber (telecommunications services)[78](index=78&type=chunk) - Revenue is primarily generated from subscription fees and advertising arrangements[77](index=77&type=chunk) - The Company's growth strategy involves investing in proprietary software, expanding sales and marketing, increasing user base through partnerships and advertising, and exploring synergistic acquisitions[80](index=80&type=chunk) [Recent Developments](index=20&type=section&id=Recent%20Developments) - Macro-economic factors, including inflation and potential recessions, continue to pose risks to customer acquisition, engagement, and discretionary spending[83](index=83&type=chunk) - The Company received **$294,833** of the **$343,045** Employee Retention Tax Credit (ERTC) receivable as of March 31, 2024[84](index=84&type=chunk) [Operational Highlights and Business Objectives](index=20&type=section&id=Operational%20Highlights%20and%20Business%20Objectives) - Total revenue increased by approximately **1.3%** to **$2,597,730** for Q1 2024, primarily due to increased advertising revenue[85](index=85&type=chunk) - Net loss decreased by **33.3%** to **$492,307** for Q1 2024, attributed to increased revenues, reduced expenses, and improved operating efficiencies[85](index=85&type=chunk) - Cash flows used in operations decreased by **35.1%** to **$282,197** for Q1 2024, mainly due to a decrease in operating expenses[85](index=85&type=chunk) - Near-term business objectives include leveraging ManyCam integration, optimizing marketing spend, improving user experience, enhancing live video chat features for retention and monetization, exploring strategic opportunities (M&A), developing platform partnerships, and defending intellectual property[85](index=85&type=chunk) [Sources of Revenue](index=21&type=section&id=Sources%20of%20Revenue) - Main revenue sources are subscription fees (including virtual gifts) and advertising from core video chat products (Paltalk, Camfrog) and ManyCam software[86](index=86&type=chunk) - Subscription revenue is recognized on a straight-line basis over the subscription term, with virtual gift revenue recognized upon user utilization[88](index=88&type=chunk)[89](index=89&type=chunk) - Advertising revenue is earned based on impressions (CPM), clicks (CPC), or registrations (CPA) through third-party agreements[90](index=90&type=chunk) [Costs and Expenses](index=21&type=section&id=Costs%20and%20Expenses) - Cost of revenue includes compensation, credit card processing fees, hosting fees, and data center costs[91](index=91&type=chunk) - Sales and marketing expense covers advertising expenditures and personnel costs for sales and support functions[93](index=93&type=chunk) - Product development expense primarily consists of compensation for personnel involved in design, testing, and enhancement of service offerings, and amortization of capitalized website development costs[94](index=94&type=chunk) - General and administrative expense includes executive, finance, legal, HR personnel costs, facilities, professional services, insurance, and amortization of intangible assets[95](index=95&type=chunk) [Key Metrics](index=22&type=section&id=Key%20Metrics) Key Performance Indicators (Three Months Ended March 31) | Metric | 2024 (Unaudited) | 2023 (Unaudited) | | :-------------------------------- | :--------------- | :--------------- | | Net cash used in operating activities | $(520,794) | $(802,991) | | Net loss | $(492,307) | $(738,298) | | Net loss as a percentage of total revenues | (19.0)% | (28.8)% | | Adjusted EBITDA | $(497,297) | $(648,294) | | Adjusted EBITDA as percentage of total revenues | (19.1)% | (25.3)% | - Adjusted EBITDA is a non-GAAP measure used by management to evaluate core operating performance, excluding interest, taxes, depreciation, amortization, and stock-based compensation[98](index=98&type=chunk)[99](index=99&type=chunk) [Adjusted EBITDA](index=22&type=section&id=Adjusted%20EBITDA) - Adjusted EBITDA is a non-GAAP financial measure 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[98](index=98&type=chunk) - Management uses Adjusted EBITDA to understand core operating performance, develop operational plans, and allocate resources, believing it provides a useful measure for period-to-period comparisons[99](index=99&type=chunk) [Limitations of Adjusted EBITDA](index=23&type=section&id=Limitations%20of%20Adjusted%20EBITDA) - Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP results[101](index=101&type=chunk) - It does not reflect cash capital expenditures, net loss from discontinued operations, working capital requirements, the dilutive impact of stock-based compensation, or income tax provisions[101](index=101&type=chunk) - Comparability with other companies may be limited due to differing calculation methods[101](index=101&type=chunk) Reconciliation of Net Loss to Adjusted EBITDA | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(492,307) | $(738,298) | | Interest income, net | $(151,984) | $(121,167) | | Income tax (benefit) | $(117,900) | $(49,554) | | Depreciation and amortization expense | $205,583 | $205,584 | | Stock-based compensation expense | $59,311 | $55,141 | | **Adjusted EBITDA** | **$(497,297)** | **$(648,294)** | [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Condensed Consolidated Statements of Operations Data as a Percentage of Total Revenues | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenue | 100.0% | 100.0% | | Cost of revenue | 31.5% | 31.3% | | Sales and marketing expense | 7.3% | 9.9% | | Product development expense | 46.6% | 48.7% | | General and administrative expense | 43.9% | 45.5% | | Total costs and expenses | 129.3% | 135.5% | | Loss from operations | (29.3)% | (35.5)% | | Net loss | (19.0)% | (28.8)% | [Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023](index=24&type=section&id=Three%20Months%20Ended%20March%2031%2C%202024%20Compared%20to%20Three%20Months%20Ended%20March%2031%2C%202023) [Revenue](index=24&type=section&id=Revenue) - Total revenue increased by **1.3%** to **$2,597,730** for Q1 2024, from **$2,564,017** in Q1 2023, primarily driven by an increase in advertising revenue[104](index=104&type=chunk) Revenue Breakdown (Three Months Ended March 31) | Revenue Type | 2024 | 2023 | Change ($) | Change (%) | % of Total Revenue 2024 | % of Total Revenue 2023 | | :----------------- | :--------- | :--------- | :--------- | :--------- | :---------------------- | :---------------------- | | Subscription revenue | $2,482,982 | $2,505,670 | $(22,688) | (0.9)% | 95.6% | 97.7% | | Advertising revenue | $114,748 | $58,347 | $56,401 | 96.7% | 4.4% | 2.3% | | **Total revenues** | **$2,597,730** | **$2,564,017** | **$33,713** | **1.3%** | **100.0%** | **100.0%** | [Subscription Revenue](index=24&type=section&id=Subscription%20Revenue) - Subscription revenue decreased by **$22,688**, or **0.9%**, in Q1 2024 compared to Q1 2023[106](index=106&type=chunk) - This decrease was primarily due to lower subscription revenue from Camfrog and Tinychat, partially offset by increases from ManyCam[106](index=106&type=chunk) [Advertising Revenue](index=24&type=section&id=Advertising%20Revenue) - Advertising revenue increased significantly by **$56,401**, or **96.7%**, in Q1 2024 compared to Q1 2023[107](index=107&type=chunk) - The increase was mainly due to a higher volume of advertising impressions resulting from optimization changes with third-party advertising partners[107](index=107&type=chunk) [Costs and Expenses](index=24&type=section&id=Costs%20and%20Expenses) - Total costs and expenses decreased by **$113,115**, or **3.3%**, in Q1 2024 compared to Q1 2023[108](index=108&type=chunk) Costs and Expenses Breakdown (Three Months Ended March 31) | Expense Type | 2024 | 2023 | Change ($) | Change (%) | % of Total Revenue 2024 | % of Total Revenue 2023 | | :-------------------------- | :--------- | :--------- | :--------- | :--------- | :---------------------- | :---------------------- | | Cost of revenue | $819,075 | $802,475 | $16,600 | 2.1% | 31.5% | 31.3% | | Sales and marketing expense | $190,594 | $254,868 | $(64,274) | (25.2)% | 7.3% | 9.9% | | Product development expense | $1,211,701 | $1,248,582 | $(36,881) | (3.0)% | 46.6% | 48.7% | | General and administrative expense | $1,138,551 | $1,167,111 | $(28,560) | (2.4)% | 43.9% | 45.5% | | **Total costs and expenses** | **$3,359,921** | **$3,473,036** | **$(113,115)** | **(3.3)%** | **129.3%** | **135.5%** | [Cost of revenue](index=25&type=section&id=Cost%20of%20revenue) - Cost of revenue increased by **$16,600**, or **2.1%**, in Q1 2024, primarily due to higher hosting expenses from increased usage and per-unit costs, partially offset by reduced consulting fees[109](index=109&type=chunk) [Sales and marketing expense](index=25&type=section&id=Sales%20and%20marketing%20expense) - Sales and marketing expense decreased by **$64,274**, or **25.2%**, in Q1 2024, mainly due to a decrease in salary-related expenses of approximately **$59,361**[110](index=110&type=chunk) [Product development expense](index=25&type=section&id=Product%20development%20expense) - Product development expense decreased by **$36,881**, or **3.0%**, in Q1 2024[111](index=111&type=chunk) - This reduction was primarily due to a **$79,522** decrease in software expenses, achieved by streamlining offshore development and reallocating in-house resources, partially offset by increased dues and subscriptions and salary-related expenses[111](index=111&type=chunk) [General and administrative expense](index=25&type=section&id=General%20and%20administrative%20expense) - General and administrative expense decreased by **$28,560**, or **2.4%**, in Q1 2024, mainly due to a decrease in professional and tax fees[112](index=112&type=chunk) [Non-Operating Income](index=25&type=section&id=Non-Operating%20Income) - Non-operating income increased by **$30,817**, or **25.4%**, to **$151,984** in Q1 2024, compared to **$121,167** in Q1 2023[113](index=113&type=chunk) - This increase was primarily a result of higher interest earned in a high-yield bank account[113](index=113&type=chunk) [Income Taxes](index=26&type=section&id=Income%20Taxes) - The Company recorded an income tax benefit of **$117,900** for Q1 2024, compared to **$49,554** for Q1 2023, consisting primarily of federal, foreign, state, and local taxes[115](index=115&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) Condensed Consolidated Statements of Cash Flows Data | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(520,794) | $(802,991) | | Net cash used in investing activities | - | - | | Net cash used in financing activities | - | $(7,213) | | **Net decrease in cash and cash equivalents** | **$(520,794)** | **$(810,204)** | - As of March 31, 2024, the Company had **$13,047,255** in cash and cash equivalents[116](index=116&type=chunk) - Management believes current cash and expected cash flows from operations will be sufficient to meet financial obligations for one year[116](index=116&type=chunk) - Primary use of working capital is for product development to maintain and create new services and features, with potential future allocation for strategic acquisitions, investments, and partnerships[117](index=117&type=chunk) [Operating Activities](index=26&type=section&id=Operating%20Activities) - Net cash used in operating activities improved to **$520,794** for Q1 2024, from **$802,991** in Q1 2023, primarily due to a decrease in total operating expenses[118](index=118&type=chunk) [Investing Activities](index=26&type=section&id=Investing%20Activities) - There was no net cash provided by investing activities for the three months ended March 31, 2024 or 2023[119](index=119&type=chunk) [Financing Activities](index=26&type=section&id=Financing%20Activities) - Net cash used in financing activities was **$0** for Q1 2024, compared to **$7,213** in Q1 2023[120](index=120&type=chunk) - The higher cash use in 2023 was due to a stock repurchase plan that expired on March 29, 2023, and was not renewed[120](index=120&type=chunk) [Contractual Obligations and Commitments](index=27&type=section&id=Contractual%20Obligations%20and%20Commitments) - There have been no material changes to the Company's contractual obligations and commitments since the Form 10-K filing[122](index=122&type=chunk) [Off-Balance Sheet Arrangements](index=27&type=section&id=Of%20-Balance%20Sheet%20Arrangements) - As of March 31, 2024, the Company did not have any off-balance sheet arrangements[123](index=123&type=chunk) [Critical Accounting Estimates](index=27&type=section&id=Critical%20Accounting%20Estimates) - No critical accounting estimates involving significant estimation uncertainty were made by management during Q1 2024 that would materially impact the financial statements[125](index=125&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No quantitative or qualitative disclosures about market risk are applicable to the Company for the reported period - This item is not applicable for the Company[126](index=126&type=chunk) [ITEM 4. Controls and Procedures](index=27&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Paltalk's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls [Evaluation of Disclosure Controls and Procedures](index=27&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2024[127](index=127&type=chunk) - They concluded that the disclosure controls and procedures were effective in providing reasonable assurance that required information is recorded, processed, summarized, and reported within SEC specified time periods[128](index=128&type=chunk) [Changes in Internal Control over Financial Reporting](index=27&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There were no changes in internal control over financial reporting during the quarter ended March 31, 2024, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[129](index=129&type=chunk) PART II. OTHER INFORMATION Details on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [ITEM 1. Legal Proceedings](index=28&type=section&id=ITEM%201.%20Legal%20Proceedings) Paltalk Holdings, Inc. is engaged in a patent infringement lawsuit against Cisco, with trial expected in August 2024 - Paltalk Holdings, Inc. filed a patent infringement lawsuit against Cisco (WebEx Communications, Inc., Cisco WebEx LLC, and Cisco Systems, Inc.) on July 23, 2021, alleging infringement of U.S. Patent No. 6,683,858[132](index=132&type=chunk) - The United States Patent Office confirmed the patentability of claims 1-10 of U.S. Patent No. 6,683,858 on January 19, 2023[133](index=133&type=chunk) - Cisco's motion for summary judgment was denied on June 29, 2023, and the trial is expected in August 2024[133](index=133&type=chunk) - The Company cannot predict the outcome or ultimate cost of the litigation, and any gross proceeds from a verdict or settlement would be significantly reduced by litigation-related expenses[134](index=134&type=chunk) [ITEM 1A. Risk Factors](index=28&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes to risk factors were disclosed from the Company's prior Form 10-K - No material changes to the Risk Factors disclosed in the Form 10-K occurred during the three months ended March 31, 2024[135](index=135&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Paltalk did not engage in unregistered equity sales or common stock repurchases during Q1 2024 - There were no unregistered sales of equity securities during the quarter ended March 31, 2024[136](index=136&type=chunk) - The Company did not repurchase any shares of common stock during the three months ended March 31, 2024[137](index=137&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=28&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities for the period - There were no defaults upon senior securities[138](index=138&type=chunk) [ITEM 4. Mine Safety Disclosures](index=28&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The Company reported no mine safety disclosures for the period - There were no mine safety disclosures[139](index=139&type=chunk) [ITEM 5. Other Information](index=28&type=section&id=ITEM%205.%20Other%20Information) CEO Jason Katz adopted and terminated a Rule 10b5-1 trading arrangement for 80,000 shares in Q1 2024, no sales - Jason Katz, CEO, adopted a Rule 10b5-1 trading arrangement on December 14, 2023, for the sale of up to **80,000** shares[140](index=140&type=chunk) - The 10b5-1 Plan was terminated on February 7, 2024, and no sales were made under it[140](index=140&type=chunk) - No other directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[141](index=141&type=chunk) [ITEM 6. Exhibits](index=29&type=section&id=ITEM%206.%20Exhibits) Exhibits filed with the Form 10-Q include key agreements, corporate documents, and CEO/CFO certifications - Exhibits include the Securities Purchase Agreement (June 9, 2022), Certificate of Incorporation (amended May 11, 2023), Amended and Restated Bylaws (March 17, 2023), and Specimen Stock Certificate[142](index=142&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed[142](index=142&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File) are included[142](index=142&type=chunk)

Exhibit 99.1 Paltalk, Inc. Reports Slight Increase in Revenue and 33% Reduction in Net Loss for First Quarter 2024 Cash Balance of $13.0 Million at March 31, 2024 Jericho, NY - May 9, 2024 (GLOBE NEWSWIRE) -- via NewMediaWire -- Paltalk, Inc. ("Paltalk," the "Company," "we," "our" or "us") (Nasdaq: PALT), a communications software innovator that powers multimedia social applications, today announced financial and operational results for the first quarter ended March 31, 2024. Key Financial Highlights for Fi ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Fiscal Year Ended December 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 001-38717 PALTALK, INC. (Exact name of registrant as specified in its charter) | Delaware | 20-3191847 | | --- | --- | | (State or other jurisdiction of | (I.R.S. Employer | | incorporatio ...