Financial Performance - Total revenues for the three months ended September 30, 2024, were $2,121,234, a decrease of 23.4% compared to $2,767,939 for the same period in 2023[11]. - Subscription revenue for the nine months ended September 30, 2024, was $6,649,206, down 17.6% from $8,063,992 in the prior year[11]. - Net loss for the three months ended September 30, 2024, was $1,509,250, compared to a net loss of $181,576 for the same period in 2023, representing an increase in loss of 730.5%[11]. - For the three months ended September 30, 2024, the net loss was $2,935,708, compared to a net loss of $784,245 for the same period in 2023, representing an increase in net loss of approximately 273%[13]. - Total revenue decreased by 23.4% to $2,121,234 for the three months ended September 30, 2024, and by 16.2% to $6,943,589 for the nine months ended September 30, 2024, compared to the same periods in 2023[105]. - Net loss increased by 731.2% to $1,509,250 for the three months ended September 30, 2024, and by 274.3% to $2,935,708 for the nine months ended September 30, 2024, compared to the same periods in 2023[105]. Assets and Liabilities - Total current assets decreased to $13,153,581 as of September 30, 2024, from $14,765,599 as of December 31, 2023, a decline of 10.9%[10]. - Total liabilities increased to $4,313,920 as of September 30, 2024, compared to $3,752,581 as of December 31, 2023, an increase of 14.9%[10]. - Cash and cash equivalents decreased to $12,056,085 as of September 30, 2024, from $13,568,049 as of December 31, 2023, a decline of 11.1%[10]. - Accumulated deficit increased to $(17,820,276) as of September 30, 2024, from $(14,884,568) as of December 31, 2023, reflecting a deterioration of 19.6%[10]. Mergers and Acquisitions - The Company entered into a merger agreement to acquire Newtek Technology Solutions, Inc. for a total consideration of $4,000,000 in cash and 4,000,000 shares of preferred stock[18]. - The merger agreement includes an earn-out provision of up to $5,000,000 based on achieving certain cumulative average Adjusted EBITDA thresholds for the fiscal years 2025 and 2026[18]. - The company is required to divest its Paltalk, Camfrog, and Tinychat applications as a condition for the merger closing[20]. - The company entered into a Divestiture Agreement on November 7, 2024, to sell its telecommunications services provider "Vumber" and related applications for aggregate consideration of $1.35 million[71]. - Following the merger, Newtek is expected to own 30.2% of the company's common or common-equivalent equity on a fully diluted basis[89]. - The closing of the mergers is subject to customary conditions, including stockholder approval and the absence of any material adverse effects[90][91]. Revenue Streams - Virtual gift revenue decreased to $647,779 for the three months ended September 30, 2024, compared to $1,110,396 for the same period in 2023, representing a decline of approximately 42%[34]. - Subscription revenue for the nine months ended September 30, 2024, was recognized at $1,525,120 from deferred subscription revenue of $2,043,362 as of December 31, 2023[33]. - Advertising revenue decreased by $6,696, or 7.1%, attributed to a decrease in advertising impressions related to third-party advertising partners[129]. - Subscription revenue decreased by $640,009, or 23.9%, primarily due to a decline in virtual gift revenue by $463,000[128]. Expenses - Total costs and expenses increased by $651,413, or 20.6%, reaching $3,808,768 for the three months ended September 30, 2024[130]. - General and administrative expenses surged by $709,710, or 76.6%, primarily due to increased professional and legal fees related to upcoming mergers[137]. - For the nine months ended September 30, 2024, total costs and expenses increased by $703,283, or 7.1%, to $10,567,374 compared to $9,864,091 for the same period in 2023[148]. - The company expects general and administrative expenses to continue increasing in future periods due to ongoing merger-related activities[137]. Cash Flow and Liquidity - Net cash used in operating activities for the three months ended September 30, 2024, was $1,551,736, an increase from $980,720 in the same period of 2023[13]. - As of September 30, 2024, the company had $12,056,085 in cash and cash equivalents, indicating sufficient liquidity to meet financial obligations for the next year[156]. Market and Economic Factors - The Company’s results may be negatively impacted by macro-economic factors, including inflation and economic uncertainty, affecting customer engagement and spending[23]. - Macro-economic factors, including inflation and economic uncertainty, have negatively impacted the company's operations and may continue to do so[104]. Future Outlook - The company aims to enhance its advertising revenue by 40% through targeted marketing strategies in the upcoming year[204]. - The management provided an optimistic outlook, projecting a revenue increase of 20% for the next fiscal year[204]. - The company is exploring potential acquisition opportunities to bolster its technology capabilities and market reach[204].
Paltalk(PALT) - 2024 Q3 - Quarterly Report