# Intelligent Protection Management Corp.: Form 10-K for the period ended Dec 31, 2024 - Company: [Intelligent Protection Management Corp.](/companies/ipm.md) (CIK 1355839) - Form: 10-K - Filed: 2025-03-24 - Accepted by EDGAR: Mar 24, 2025, 16:15 ET - Period: 2024-12-31 - Accession: 0001013762-25-001600 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1355839/000101376225001600/ea0233784-10k_intelligent.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1355839/000101376225001600/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2024-12-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 12 months, 2024-01-01 to 2024-12-31 | $1.1m | us-gaap:Revenues | | Cost of revenue | 12 months, 2024-01-01 to 2024-12-31 | $262.9k | us-gaap:CostOfRevenue | | Research and development | 12 months, 2024-01-01 to 2024-12-31 | $215.5k | us-gaap:ResearchAndDevelopmentExpense | | Operating income | 12 months, 2024-01-01 to 2024-12-31 | −$5.1m | us-gaap:OperatingIncomeLoss | | Income tax | 12 months, 2024-01-01 to 2024-12-31 | −$137.6k | us-gaap:IncomeTaxExpenseBenefit | | Net income | 12 months, 2024-01-01 to 2024-12-31 | −$8.4m | us-gaap:NetIncomeLoss | | Diluted EPS | 12 months, 2024-01-01 to 2024-12-31 | −$0.91 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 12 months, 2024-01-01 to 2024-12-31 | −$0.91 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2024-01-01 to 2024-12-31 | 9,227,197 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2024-01-01 to 2024-12-31 | −$3.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Cash and equivalents | at 2024-12-31 | $10.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2024-12-31 | $11.2m | us-gaap:AssetsCurrent | | Total assets | at 2024-12-31 | $15.9m | us-gaap:Assets | | Current liabilities | at 2024-12-31 | $3.5m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2024-12-31 | $4.0m | us-gaap:Liabilities | | Shareholders' equity | at 2024-12-31 | $11.9m | us-gaap:StockholdersEquity | ## Business As filed, 20,983 characters. ### Company Overview Prior to the completion of the Transactions, we operated a network of consumer applications. Our product portfolio included Paltalk, Camfrog and Tinychat, which together hosted a large collection of video-based communities. Our other products included Vumber, which is a telecommunications services provider that enables users to communicate privately by having multiple phone numbers with any area code through which calls can be forwarded to a user’s existing telephone number. As discussed below, following the Transactions, we continue to support our ManyCam software, which is a live streaming software and virtual camera that allows users to deliver professional live videos on streaming platforms, video conferencing apps and distance learning tools. Following the Transactions, we provide a comprehensive range of IT-related services, including dedicated server hosting, cloud hosting, data storage, managed security, backup and disaster recovery, and other related services including consulting and implementing technology solutions for large enterprise and commercial clients across the United States as well as small-and-medium sized businesses. We have an over 20-year history of technology innovation and hold eight patents. We were incorporated under the laws of the State of Delaware in 2005. Our principal executive office is located at 30 Jericho Executive Plaza Suite 400E, Jericho, NY 11753. ### Our IT and Cloud-Based Solutions We sell and provide a range of services across five core areas, each as further described below: managed IT security services, professional services, procurement services, secure private cloud hosting, managed backup and disaster recovery and web hosting. #### Managed IT Security Services Our managed IT security services provide clients with ongoing management and support of their IT systems and services under a subscription or contract-based model. Our managed IT security services include proactive monitoring, regular system maintenance, comprehensive cybersecurity management, data backup, and disaster recovery, as well as help desk support for users. Managed IT security services are intended to ensure that a client’s IT infrastructure and services remain operational, secure and optimized. Customers of our managed IT security services typically pay a recurring fee, often based on service-level agreements that define the specific services and performance metrics. #### Professional Services Our professional services include the design and implementation of a wide range of IT products and services, such as cybersecurity, software planning, IT infrastructure, data center design and configuration, designing and implementing on-premises, hybrid or cloud computing solutions, website development, developing or integrating systems and software and IT cost management. Customers of our professional services are typically invoiced either based on a time and materials basis or on a straight-line basis for all fixed fee arrangements. #### Procurement Services We offer two types of procurement services to our customers. We can either: (i) obtain software and hardware products on behalf of our customers, in which case our vendors drop ship the products to our end customers, or (ii) obtain hardware or software on behalf of our customers and perform additional configuration and/or add additional inputs to the products before the products are shipped to our customers. In the instance where we sell hardware and software products as a solution bundled with services, we typically obtain the products or software from our vendors, add the additional inputs/configuration as detailed in the customer contract, and then ship the products to the end customer. For each type of procurement service, our customers have their own negotiated contract and payment terms. When we provide a combination of hardware and software products with the provision of services, we will separately identify our performance obligations under the contract and the hardware and/or software products or services that will be provided. The total transaction price for an arrangement with multiple performance obligations is typically allocated at contract inception to each performance obligation in proportion to the stand-alone selling price of the hardware or software. The selling price is the price at which we would sell a promised good or service separately to a customer. We estimate the price based on observable inputs, including direct labor hours and allocable costs, or use observable stand-alone prices when they are available. #### Secure Private Cloud Hosting Our secure private cloud hosting offerings include a digital infrastructure which consists of dedicated and fully isolated cloud environments designed to deliver security, control and compliance for business-critical applications and client data. We operate a secure private cloud from private suites in completely isolated areas that are leased within two Tier 3 data center facilities located in Phoenix, Arizona, and Edison, New Jersey (the “Data Centers”), pursuant to certain license agreements. The terms of the license agreements for the Data Centers located in Arizona and New Jersey extend through 2027 and 2026, respectively. Although we do not own or operate the Data Centers, we aim to use the high-level operations and standards provided by the Data Centers through our license agreements to provide our customers with secure and flexible cloud services. The Data Centers each conform to The Uptime Institute’s Tier 3 Certification, which is a globally recognized standard for validating critical data center infrastructure. The Tier 3 classification provides us with a degree of confidence that the Data Centers provide the necessary power, cooling, maintenance, and fault tolerance required for secure and reliable operations. Our critical infrastructure, hosted within the Data Centers, is designed to meet and exceed Tier 3 standards in all relevant categories. This allows us to deliver secure and compliant services to customers within heavily regulated industries, including financial services, healthcare, and other highly regulated industries. Additionally, we incorporate a redundant, carrier-neutral network design for communications paths, along with multiple hosting locations for our services, which improve the availability and resilience of our cloud services. We leverage state-of-the-art security measures, including data encryption, network segmentation, advanced firewalls, multi-factor authentication and continuous monitoring to safeguard against unauthorized access and cyber threats. We believe our secure private cloud hosting provides our clients with strong availability, data integrity and reliable performance, while meeting stringent compliance requirements. Our secure private cloud hosting solutions are backed by 24/7 support from our expert team, with the goal of delivering secure, flexible and resilient infrastructure tailored to each client’s unique business needs. In the future, we plan to make arrangements with third parties to incorporate artificial intelligence (“AI”) features into our secure private cloud offerings. Revenue from such cloud services is recognized ratably over the period in which the cloud services are provided. #### Managed Backup and Disaster Recovery Our managed backup and disaster recovery solutions provide comprehensive protection for customers’ critical data and IT infrastructure, which is intended to ensure business continuity and rapid recovery in the event of data loss, cyberattacks or system failures. We utilize advanced backup technologies with automated, regular data backups, off-site replication and secure storage to prevent data corruption or loss. Our disaster recovery solutions are designed to offer quick restoration of systems and data with minimal downtime, supported by flexible recovery plans tailored to meet customers’ specific needs. With continuous monitoring, end-to-end encryption, and expert support available 24/7, we aim to ensure that our customers’ data is secure, accessible and compliant with industry standards. Pricing for our managed backup and disaster recovery solutions is based upon the customer contract and depends on the amount of backup storage needed. Customers are typically charged set rates per the contract and are charged monthly based on usage. #### Web Hosting Our web hosting services consist of several advanced security measures, including Secure Sockets Layer and Transport Layer Security (“SSL/TLS”) encryption, firewalls, distributed denial-of-service (“DDoS”) protection, malware scanning, and secure server configurations. Our web hosting services include features such as regular data backups, web application firewalls, strict access control policies and continuous monitoring and expert support, all of which are intended to ensure our customers’ compliance with industry standards and provide a reliable and secure environment for our customers’ online presence. Our web hosting services are designed to provide customer websites with an additional layer of protection from cyber attacks and threats. Each of our customers has their own contract and payment terms with respect to our web hosting services. The duration of such contracts is typically between one and four years, although the term may vary based on the needs of each particular customer. Customers of our web hosting services are invoiced on a monthly basis and pay a monthly fee, with revenue recognized on a monthly basis. ### Our ManyCam Software Product Following the Transactions, we continue to support our ManyCam software, which is a live streaming software and virtual camera that allows users to deliver professional live videos on streaming platforms, video conferencing apps and distance learning tools. The ManyCam software provides multiple camera feeds, backgrounds and effects while also enabling users to share presentations, spreadsheets and documents. We anticipate integrating ManyCam as an offering for our new customers and seek to optimize our cross-selling efforts of ManyCam with our other technology solutions. ### Customers We serve a diverse customer base across various industries including, among others, finance, legal, healthcare and manufacturing, providing innovative solutions that enhance operational reliability and prevent cybersecurity risk. ### Seasonality Other than our procurement services, our business generally does not experience significant seasonality, and demand for our solutions remains steady throughout the year. Our procurement services experience a seasonal pattern as revenues will typically be lower as our customers get closer to the end of their budgeted spending periods, which generally tend to be the fourth quarter. ### Employees and Human Capital We are committed to fostering a diverse and inclusive workplace, investing in employee development, and maintaining a strong culture of innovation and collaboration. As of March 14, 2025, we had 55 full-time employees and one part-time employee. We believe that our future success depends, in part, on our continued ability to hire, assimilate and retain qualified personnel. We attract and retain employees by offering training, bonus opportunities, competitive salaries and a comprehensive benefits package. ### Company Business Strategies #### Cloud Infrastructure and Cybersecurity Solutions Our continued growth depends on attracting new customers through the introduction of new services and further penetration of the cloud infrastructure and cybersecurity sectors. Our principal growth strategy is to invest in the development of proprietary solutions, expand our sales and marketing efforts with respect to such solutions, and increase our customer base through potential platform partnerships and new and existing advertising campaigns that we run through internet and mobile advertising networks, all while balancing the capital needs of our business. With respect to our cloud infrastructure solutions, we intend to drive growth by leveraging strategic partnerships, expanding our market reach by leveraging our high-performance, scalable solutions, and optimizing deployment speed to meet the evolving needs of enterprises migrating to the cloud. Our strategy for cybersecurity solutions focuses on delivering cutting-edge, compliance-driven security solutions through an integrated approach, prioritizing proactive threat mitigation, automation, and seamless implementation to enhance customer trust and accelerate adoption. Our strategy is to approach these opportunities in a measured way, being mindful of our resources and evaluating factors such as potential revenue, time to market and amount of capital needed to invest in the opportunity. #### Acquiring and Investing in Complementary Technologies and Businesses Our strategy also includes acquiring, or investing in technologies, solutions or businesses that complement our business and cross-selling them to additional synergistic businesses. In furtherance of this strategy, we have strategically added specialized employees and complementary companies, products and technologies to our existing business. In addition, we continue to explore strategic opportunities, including, but not limited to, potential mergers or acquisitions of other assets or entities that are synergistic to our business. #### Defend our Intellectual Property We have a portfolio of eight issued patents. We have successfully defended certain of our intellectual property in the past and have historically generated revenue through licensing fees for the use of our patents. We intend to continue defending our intellectual property rights. ### Marketing Strategy We invest in advertising and marketing primarily for the purpose of acquiring customers for our products and solutions. By emphasizing our deep expertise in cloud infrastructure, cybersecurity, and managed services, we differentiate from commodity providers through a consultative approach that drives strategic value. We aim to accelerate growth through targeted industry verticals, strategic partnerships, and direct client engagement, leveraging our proven ability to streamline IT operations, enhance security postures, and enable businesses to focus on their core objectives. We believe our proactive, high-touch service model ensures long-term client relationships and sustained competitive advantage in a rapidly evolving market. We sell our solutions exclusively through our sales force. Our sales force is comprised of senior account executives that concentrate on named account territories, senior solution architects that provide dedicated support to our senior account executives and affiliate sales efforts, as well as other sales personnel that manage inbound leads from our website and referrals from Newtek under our referral arrangement. In addition to managing client relationships, our sales force is focused on expanding the number of solutions our customers purchase from us by introducing them to additional solutions. Going forward, we plan to utilize search engine optimization, search engine marketing, generative engine optimization and targeted marketing campaigns in furtherance of our goals. ### Competition and Our Industry Competition in our industry remains fierce. The market for cloud-managed IT and cybersecurity solutions is extremely dynamic and is undergoing constant change. We believe this environment creates significant opportunities for us as well as our direct and indirect competitors. Our principal competitors are managed IT service providers, such as Konica Minolta Business Solutions, Rackspace Technology, Inc., Cognizant Technology Solutions Corporation, NTT Ltd., All Covered, Flexential, DXC Technology Company, Logicalis Group, Insight Enterprises, Inc., and CDW Corporation. Many of our competitors have substantially greater financial, managerial, technological and other resources than we do and may be more effective at developing, promoting and supporting their products. Additionally, our competitors may offer products and services that we do not provide, which may have desirable features or may be offered at lower prices. In addition, many of our competitors have more extensive customer bases and broader customer relationships than we have, including relationships with our potential customers. Additionally, in the future, we plan to make arrangements with third parties to incorporate AI features into our secure private cloud offerings. Developments in the AI sector are occurring at a rapid pace, and our competitors’ services may already include AI features. In order to compete effectively, we seek to offer solutions that are differentiated from existing services, superior in quality and more appealing than those of our competitors. We believe that our solutions compete favorably against those offered by our competitors due to our hands-on, white-glove consulting approach, which we believe goes beyond standard offerings to deliver personalized, expert driven solutions. Unlike providers that take a one-size-fits-all-approach, we aim to strategically advise our customers, enabling businesses to offload complex IT, cloud, and cybersecurity needs to a trusted advisor. This allows our customers to focus on higher-value initiatives, while we provide execution, proactive problem solving, and a fully-optimized technology environment tailored to their specific goals. ### Governmental Regulations and Other Compliance Obligations We are subject to a number of U.S. federal and state laws, regulations and policies that affect companies conducting business on the internet, many of which are still evolving and being litigated in the courts and could be interpreted in ways that could harm our business. These laws and regulations may involve, among other things, AI, intellectual property, distribution, electronic contracts, competition, wiretapping, consumer protection and taxation. The application and interpretation of these laws, regulations and policies are often uncertain and may have unpredictable consequences, particularly in the new and rapidly evolving industry in which we operate. We are subject to periodic examination by regulators under the authority of the Federal Financial Institutions Examination Council (“FFIEC”) under its Guidance on the Supervision of Technology Services Providers and the Gramm-Leach-Bliley Act of 1999, and federal, state and other laws that apply to technology service providers as a result of the services we provide to the institutions and entities they regulate. As a technology service provider, we are examined by federal financial regulators on a rotating basis. These examinations are based on guidance from the FFIEC, which is a formal interagency body empowered to prescribe uniform principles, standards and report forms for the examination of financial institutions and to make recommendations to promote uniformity in the supervision of financial institutions. The examinations cover a wide variety of subjects, including our management, acquisition and development activities, support and delivery, information technology audits, cybersecurity, as well as our disaster preparedness and business recovery planning. The FFIEC has broad supervisory authority to remedy any shortcomings identified in an examination. Following an examination, our financial institution customers may request the open section of the report of examination through their lead examination agency. The regulatory landscape related to generative AI and machine learning is rapidly evolving and is likely to remain uncertain for the foreseeable future. As we develop products or incorporate technologies from third parties, such as generative AI and machine learning, we must comply with applicable laws and regulation. ### Company Internet Site and Availability of SEC Filings Our corporate website is located at *www.ipm.com*. We make available on that site, as soon as reasonably practicable, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, proxy statements, Current Reports on Form 8-K, other reports filed with or furnished to the Securities and Exchange Commission (“SEC”), as well as any amendments to those filings. Our SEC filings, as well as our Code of Conduct and other corporate governance documents, can be found in the Investor Relations section of our site and are available free of charge. Amendments to our Code of Conduct and any grant of a waiver from a provision of the Code of Conduct requiring disclosure under applicable SEC rules will be disclosed on our website. Information on our website is not part of this Annual Report on Form 10-K. In addition, the SEC maintains a website at *www.sec.gov* that contains reports, proxy and information statements, and other information regarding us and other issuers that file electronically with the SEC. ## Risk factors As filed, 58,016 characters. Risks Related to Our Business ***We could be adversely affected by information security breaches or cyber security attacks.*** Our web and cloud services involve the storage and transmission of our customers’ and employees’ proprietary information. Our business relies on our digital technologies, computer and email systems, software and networks to conduct our operations. Our technologies, systems and networks may become the target of criminal cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of us or third parties with whom we deal, or otherwise disrupt our or our customers’ or other third parties’ business operations. It is critical to our business strategy that our facilities and infrastructure remain secure and are perceived by the marketplace to be secure. Although we believe we employ appropriate security technologies, we cannot guarantee that the security technologies (including data encryption processes, intrusion detection systems) we employ, the comprehensive risk assessments we conduct, or our other internal control procedures will ensure the security of our customers’ data. If our security measures are breached due to third-party action, employee error or otherwise, and as a result, our customers’ data becomes available to unauthorized parties, we could incur liability and our reputation would be damaged, which could lead to the loss of current and potential customers. Furthermore, we maintain a work-from-home policy for our employees. Remote work and remote access increase our vulnerability to cybersecurity attacks. We may see an increase in cyberattack volume, frequency and sophistication driven by the global enablement of remote workforces. We seek to detect and investigate unauthorized attempts and attacks against our network, products and services and to prevent their recurrence where practicable through changes to our internal processes and tools and changes or updates to our products and services; however, we remain potentially vulnerable to additional known or unknown threats. In some instances, we and our customers can be unaware of an incident or its magnitude and effects. Additionally, the rapid evolution and increasing prevalence of AI technologies may also increase our cybersecurity risks. Moreover, globally there has been an increase in cybersecurity attacks since Russia invaded Ukraine. The risk of state-supported and geopolitical-related cyber-attacks may increase in connection with the war in Ukraine and any related political or economic responses and counter-responses. We may not discover all such incidents or activity or be able to respond or otherwise address them promptly, in sufficient respects or at all. In addition, we have in the past and may in the future be required to expend significant capital and other resources to detect, remedy, protect against or alleviate breaches of our network and security, and we may not be able to remedy these problems in a timely manner, or at all. Because techniques used by outsiders to obtain unauthorized network access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. For example, in early 2018, following an unauthorized third party misappropriating three of NTS’s domain names, NTS’s management and forensic investigators determined that attackers compromised a portion of its shared webhosting system, and may have acquired certain customer information limited to its shared webhosting customers and/or gained access to certain of its shared webhosting servers. In response, NTS took a range of steps designed to further secure its systems, enhance its security protections, enhance access controls and prevent future unauthorized activity. Further, any breaches to our security measures in the future as a result of third-party action, employee error or otherwise could increase the cost of cybersecurity insurance, which, in turn, could adversely affect our financial condition and results of operations. Our existing general liability insurance coverage and the coverage we carry for cyber-related liabilities may not continue to be available on acceptable terms or be available in sufficient amounts to cover one or more large claims or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that are not covered or exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could harm our business. ***We rely on third-party license agreements with the owners of the Data Centers to operate our secure private cloud which, if terminated, could have an adverse material effect on our business.*** We operate a secure private cloud from private suites in completely isolated areas that are leased within two Tier 3 data center facilities located in Phoenix, Arizona, and Edison, New Jersey. We are party to license agreements with Aligned Data Centers (Phoenix) PropCo, LLC and Iron Mountain Data Centers LLC with respect the Data Centers located in Phoenix, Arizona, and Edison, New Jersey, respectively, through which we offer our secure private cloud hosting services. The Data Centers host our critical infrastructure and are designed to conform to the global standards for such centers. Although the terms of the license agreements for the Data Centers located in Arizona and New Jersey currently extend through 2027 and 2026, respectively, such license agreements may not continue to be available on commercially reasonable terms, or at all. Additionally, termination of such license agreements would require us to identify replacement facilities for our secure private cloud hosting services, which may not be available at all. Any delay or interruption in our ability to meet demand for our secure private cloud hosting services and other IT-related services will result in the loss of potential revenues and could have a material adverse effect on our business, results of operations, and financial condition. ***We operate in a highly competitive industry in which technological change can be rapid.*** The information technology industry involves a broad range of rapidly changing technologies, including AI. Our equipment and the technologies on which it is based may not remain competitive over time, and others may develop superior technologies that render our products non-competitive, without significant additional capital expenditures. Some of our competitors are significantly larger and have substantially greater market presence, as well as greater financial, technical, operational, marketing and other resources and experience than we do. In the event that such a competitor expends significant sales and marketing resources in one or several markets in which we operate, we may not be able to compete successfully in such market(s). We believe that competition will continue to increase, placing downward pressure on prices. Such pressure could adversely affect our gross margins if we are not able to reduce our costs commensurate with such price reductions. ***We rely on a limited number of customers for a material portion of our revenues and income.*** Prior to the consummation of the Transactions, during the 2023 and 2024 fiscal years, NTS relied on a limited number of customers for a material portion of its revenues. Additionally, during 2024, NTS’s second largest customer informed NTS it would cease utilizing its services due to a consolidation of its vendors. Following the completion to the Transactions, this customer has since resumed utilizing our services, but we cannot be certain at what level, or for what period, the customer relationship will continue. A loss of one or more of our customers, if not replaced, could adversely impact our financial condition and prospects. ***Our technology solutions business depends on the efficient and uninterrupted operation of our Data Centers and computer and communications hardware systems and infrastructure.*** Despite precautions we implement against possible failure of our systems, interruptions could result from natural disasters, power loss, the inability to acquire fuel for our backup generators, telecommunications failure, terrorist attacks and similar events. We also lease telecommunications lines from local, regional and national carriers whose service may be interrupted. Our business, financial condition and results of operations could be harmed by any damage or failure that interrupts or delays our operations. Our insurance may not cover all of the losses or compensate us for the possible loss of clients occurring during any period that we are unable to provide service. Additionally, since the Data Centers through which we operate rely on third parties to provide power sufficient to meet operational needs, the Data Centers could have a limited or inadequate amount of electrical resources necessary to meet our customer requirements. The operators for the Data Centers attempt to limit exposure to system downtime due to power outages by using backup generators and power supplies. However, these protections may not limit our exposure to power shortages or outages entirely. Any system downtime resulting from insufficient power resources or power outages could cause physical damage to equipment, increase our susceptibility to security breaches, damage our reputation and lead us to lose current and potential customers, which would harm our business, financial condition and results of operations. ***Failure to have reliable Internet, telecommunications and fiber optic network connectivity and capacity from third-party providers may adversely affect our results of operations.*** Our success depends in part upon the capacity, reliability and performance of our network infrastructure, including our Internet, telecommunications and fiber optic network connectivity providers. We depend on these companies to provide uninterrupted and error-free service through their telecommunications networks. Some of these providers are also our competitors. We exercise little control over these providers, which increases our vulnerability to problems with the services they provide. We have experienced, and expect to continue to experience, interruptions or delays in network service. Any failure on our part or the part of our third-party suppliers to achieve or maintain high data transmission capacity, reliability or performance could significantly reduce customer demand for our services and have a material and adverse effect on our business, financial condition and results of operations. As our customers’ usage of telecommunications capacity increases, we will be required to make additional investments in our capacity to maintain adequate data transmission speeds, the availability of which may be limited or the cost of which may be on terms unacceptable to us. If adequate capacity is not available to us as our customers’ usage increases, our network may be unable to achieve or maintain sufficiently high data transmission capacity, reliability or performance. In addition, our business and results of operations would suffer if our network suppliers increased the prices for their services and we were unable to successfully pass along the increased costs to our customers. ***Real or perceived errors, failures or bugs in our customer solutions, software or technology could adversely affect our business, financial condition and results of operations.*** Undetected real or perceived errors, failures, bugs or defects may be present or occur in the future in our customer solutions, software or technology or the technology or software we license from third parties, including open source software. Despite testing by us, real or perceived errors, failures, bugs or defects may not be found until our customers use our services. Real or perceived errors, failures, bugs or defects in our customer solutions could result in negative publicity, loss of or delay in market acceptance of our services and harm to our brand, weakening of our competitive position, claims by customers for losses sustained by them or failure to meet the stated service level commitments in our customer agreements. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend significant additional resources to help correct the problem. Any real or perceived errors, failures, bugs or defects in our customer solutions could also impair our ability to attract new customers, retain existing customers or expand their use of our services, which could adversely affect our business, financial condition and results of operations. ***If we are unable to attract new customers, retain existing customers and sell additional services at comparable gross margins to customers, our revenue and results of operations could be adversely affected.*** Our ability to maintain or increase our revenues and make a profit may be impacted by a number of factors, including our ability to attract new customers, retain existing customers and sell additional services at comparable gross margins to our customers. In addition, as we seek to grow our customer base, we expect to incur higher customer acquisition costs and, to the extent we are unable to retain and sell additional services to existing customers, our revenue and results of operations may decrease. Growth in the demand for our services may be inhibited, and we may be unable to profitably maintain or grow our customer base for a number of reasons, such as: - our inability to provide compelling services or effectively market them to new and existing customers; - customer migration to platforms that we do not have expertise in managing; - the inability of customers to differentiate our services from those of our competitors or our inability to effectively communicate such distinctions; - the decision of customers to host internally, in third-party cloud infrastructure, or in third-party colocation facilities as an alternative to the use of our services; - the decision of customers to use internal or other third-party resources to manage their platforms and applications; - reductions in IT spending by customers or potential customers; - a reduction in the demand for our services due to macroeconomic factors in the markets in which we operate; - our inability to strengthen awareness of our brand; - past or future cybersecurity-related incidents; and - reliability, quality or compatibility problems with our services. Moreover, we may face difficulty retaining existing customers over the long term. Certain customer contracts, frequently have initial terms (typically from 24 to 36 months) and, unless terminated, may be renewed or automatically extended for shorter, rolling periods after the initial term. Our customers have no obligation to renew their services after their initial contract periods expire and any termination fees associated with an early termination may not be sufficient to recover our costs associated with such contracts. In addition, most of our services can be canceled at any time without penalty. As a result, we may face high rates of customer churn if we are unable to meet our customer needs, requirements and preferences. Our costs associated with generating revenue from existing customers are generally lower than costs associated with generating revenue from new customers, and depending on the customer and the service offering, there may be substantial variation in the gross margins associated with existing and new customers. Any failure by us in continuing to attract new customers or grow our revenue from existing customers could have a material and adverse effect on our business, financial condition and results of operations. ***Our business depends on Microsoft Corporation and others for the licenses to use software and other intellectual property in the managed technology solutions business.*** Our managed technology business is built on technological platforms that rely on the Microsoft Windows products and other intellectual property that we currently license. As a result, if we are unable to continue to have the benefit of those licensing arrangements, or if the products upon which our platform is built become obsolete, our business could be materially and adversely affected. ***If we fail to hire and retain qualified employees and management personnel, our strategies and our business could be harmed.*** Our ability to be successful and to execute on our strategies depends on our ability to identify, hire, train and retain qualified executives, IT professionals, technical engineers, software developers, operations employees and sales and senior management personnel who maintain relationships with our customers and who can provide the technical, strategic and marketing skills required for our company to grow. Our ability to execute on our sales strategy is also dependent on our ability to identify, hire, train and retain a sufficient number of qualified sales personnel. There is a shortage of qualified personnel in these fields, and like many other companies we have recently encountered additional challenges in hiring and retaining qualified personnel. We compete with other companies for this limited pool of potential employees. Furthermore, the implementation of our strategies may result in changes throughout our business, which may create uncertainty for our employees. Such uncertainties may impair our ability to attract, retain and motivate key personnel and could cause customers, suppliers and others who deal with us to seek to change existing business relationships. In addition, the industry in which we operate is generally characterized by significant competition for skilled personnel, and as our industry becomes more competitive, it could become especially difficult to retain personnel with unique in-demand skills and knowledge, whom we would expect to become recruiting targets for our competitors. We may not be able to recruit or retain qualified personnel or successfully transition knowledge from departing employees, and any failure to do so could cause a dilution of our service-oriented culture and weaken our ability to develop and deliver existing or new operations and services, either of which could cause our business to be negatively impacted. ***Our future success is dependent, in part, on the performance and continued service of our executive officers. Without their continued service, we may be forced to interrupt or eventually cease our operations.*** We are dependent to a great extent upon the experience, abilities and continued service of Jason Katz, our Chief Executive Officer and Chairman of the Board of Directors (the “Board”), Kara B. Jenny, our Chief Financial Officer and director, Jared Mills, our President, and Adam Zalko, our Chief Operating Officer. The loss of the services of these individuals would substantially affect our business or operations and could have a material adverse effect on our business, results of operations or financial condition. ***Because we recognize revenue from subscriptions over the term of the subscription, the full impact of downturns or upturns in subscription sales may not be immediately reflected in our results of operations or financial condition.*** We recognize subscription revenue from ManyCam customers monthly over the term of the subscription, which are offered in twelve- and twenty-four-month terms. As a result, much of the subscription revenue we report in each period is deferred revenue from subscription agreements entered into during previous periods. Consequently, a decline in new or renewed subscriptions in any one quarter will negatively affect our revenue in future quarters. In addition, we might not be able to immediately adjust our costs and expenses to reflect these reduced revenues. Accordingly, the effect of significant downturns in user acceptance of ManyCam may not be fully reflected in our results of operations until future periods. Our subscription model for ManyCam also makes it difficult for us to quickly increase revenue generated from ManyCam through additional sales in any period, as revenue from new subscribers must be recognized over the term of the subscription. As a result, you should not rely on the amount of subscription revenue generated in prior quarters as an indication of future results. ***Our business is affected by general economic conditions, including inflation, and uncertainties affecting markets in which we operate, and economic volatility could adversely impact our business.*** Our overall performance depends in part on worldwide economic and geopolitical conditions. The United States has experienced cyclical downturns from time to time in which economic activity was impacted by rising inflation, falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit and fluctuating interest rates, equity and foreign exchange markets, bankruptcies and overall uncertainty with respect to the economy. These economic conditions can arise suddenly, and the full impact of such conditions can remain uncertain. In addition, geopolitical developments, such as existing and potential wars, trade wars or other conflicts, changes in foreign policy and other events are beyond our control. Any form of civil unrest or other conflict can increase levels of political and economic unpredictability regionally or globally and has the potential to increase the volatility of global financial markets. Any of these effects could have a material and adverse impact on our business, financial condition and results of operations. Sustained levels of high inflation could cause the U.S. Federal Reserve and other central banks to continue to increase interest rates, which could have the effects of raising the cost of capital and depressing economic growth, either of which, or the combination thereof, could hurt the financial and operating results of our business and impact our ability to raise capital. ***We may need additional capital to execute our business plan. If we are not able to obtain additional financing, it could have a material adverse effect on our business, results of operations or financial condition.*** We might need to raise additional capital or financing through debt or equity offerings to support our expansion, marketing efforts and application development programs in the future. For instance, we might require additional capital or financing to: - hire and retain talented employees, including technical employees, executives, and marketing experts; - effectuate our long-term growth strategy and expand our application development programs; and - market and advertise our products and solutions to acquire additional customers. We may be unable to obtain future capital or financing on favorable terms or at all. If we cannot obtain additional capital or financing, we may need to reduce, defer or cancel planned initiatives, marketing or advertising expenses or costs and expenses. The failure to obtain necessary additional capital or financing on favorable terms, if at all, could have a material adverse effect on our business, results of operations or financial condition. ***We may make or attempt to make acquisitions in the future, which could require significant management attention, disrupt our business, dilute our stockholders and significantly harm our business.*** As part of our business strategy, we have made in the past, and intend to make in the future, acquisitions to add specialized employees and complementary companies, products and technologies. In the future, we may not be able to find suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms, if at all. Our previous and future acquisitions may not achieve our goals, and any future acquisitions we complete could be viewed negatively by customers, advertisers or investors. In addition, if we fail to successfully close transactions or integrate new teams, or integrate the products and technologies associated with these acquisitions into our company, our business could be seriously harmed. Any integration process may require significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or use the acquired products, technology and personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges. We may also incur unanticipated liabilities that we assume as a result of acquiring companies. We may have to pay cash, incur debt or issue equity securities to pay for any acquisition, any of which could negatively impact our business and financial condition. Issuing equity to finance any such acquisitions would also dilute our existing stockholders. Incurring debt would increase our fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations. Risks Related to the Transactions ***Shares issuable upon conversion of the Series A Preferred Stock, could depress our stock price.*** As partial consideration for the Acquisition, we issued Newtek 4,000,000 shares of the Company’s Series A Non-Voting Common Equivalent Stock, par value $0.001 per share (the “Series A Preferred Stock”). As of March 14, 2025, Newtek owns approximately 30.2% of our issued and outstanding common stock or common-equivalent equity (on an as-converted and fully-diluted basis), calculated based on the number of shares of our common stock outstanding as of March 14, 2025. As a holder of our Series A Preferred Stock, Newtek does not have voting rights, except with respect to certain protective matters, such as amendments to the Charter or Series A Preferred Stock Certificate of Designations (the “Certificate of Designations”) that significantly and adversely affect the preferences, rights, privileges or powers of the Series A Preferred Stock. The Series A Preferred Stock is convertible into common stock only upon certain qualifying transfers to third parties. In addition, we entered into a Registration Rights Agreement with Newtek at the closing of the Acquisition (the “Registration Rights Agreement”), pursuant to which, among other things, we are obligated to use our reasonable best efforts to prepare and file a registration statement registering the resale the shares of our common stock issuable upon conversion of the Series A Preferred Stock. Once registered, the shares of common stock issuable upon conversion of the Series A Preferred Stock held by Newtek generally will not require further registration under the Securities Act, *provided*, however, that to the extent that Newtek is deemed to be our affiliate for purposes of the Securities Act, its sales of common stock issuable upon conversion of the Series A Preferred Stock will be subject to the resale restrictions of Rule 144 under the Securities Act. Pursuant to the Registration Rights Agreement, Newtek is subject to certain lockup and transfer restrictions with respect to the Series A Preferred Stock for one year following the closing of the Acquisition. Following this lockup period, Newtek may wish to dispose of some or all of its Series A Preferred Stock, and as a result, may seek to sell its shares of Series A Preferred Stock, which would automatically convert into shares of our common stock upon the occurrence of certain qualifying transfers. Any such sale (or the perception that any such a sale may occur), coupled with the increase in the outstanding number of shares of our common stock following the conversion of the Series A Preferred Stock upon transfer, could have a dilutive effect to our existing stockholders and may affect the market for, and the market price of, shares of common stock in an adverse manner. ***We may not be able to effectively integrate the businesses of NTS or realize the anticipated benefits and synergies expected from the Acquisition.*** The success of the Acquisition and the transactions contemplated thereby will depend, in part, on our ability to realize the anticipated benefits from acquiring NTS and its business. The anticipated benefits and estimates of future growth, synergies and optimizations of the Acquisition may not be realized fully or at all, may take longer to realize than expected or could have other adverse effects that we do not currently foresee. The failure to realize the anticipated benefits and synergies expected from the Acquisition could adversely affect our business, financial condition and operating results. In addition, we have devoted, and continue to devote, significant management attention and resources to integrate the respective business practices and operations of NTS. Potential difficulties that we may encounter as part of the integration process include the following: - our inability to successfully combine our ManyCam product with the business of NTS in a manner that permits us to achieve, on a timely basis or at all, the enhanced revenue opportunities, cost savings and other benefits anticipated to result from the Acquisition; - complexities associated with managing our existing business and NTS, including difficulty addressing possible differences in operational philosophies and the challenge of integrating complex systems, technology, networks and other assets of NTS in a seamless manner that minimizes any adverse impact on customers, suppliers, employees and other constituencies; - the assumption of contractual obligations with less favorable or more restrictive terms; and - potential unknown liabilities and unforeseen increased expenses or delays associated with the transactions. Any of these issues could adversely affect our ability to maintain relationships with customers, suppliers, employees and other constituencies or achieve the anticipated benefits of the Acquisition or could negatively impact our earnings or otherwise adversely affect our business and financial results. ***Through the Acquisition, we are entering a new line of business which is highly competitive.*** Through the Acquisition, we acquired NTS’s existing 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 or have enough sales to be profitable. These risks may be further exacerbated by the sale of the Transferred Assets, which have historically been our main source of revenue. 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. 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 our operations. ***Newtek previously identified material weaknesses in NTS’s internal controls over financial reporting. If the material weaknesses are not remediated, it may adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner or lower investor confidence in our Company and, as a result, negatively affect the value of our common stock.*** As disclosed in Newtek’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on April 1, 2024, Newtek’s management concluded that NTS did not maintain effective internal controls over financial reporting as of December 31, 2023, as a result of the material weaknesses related to deficiencies in the conversion of NTS’s system of record for webhosting revenue and ineffective control design and implementation over revenue recognition. As we continue to integrate NTS’s operations into our business, we are evaluating our internal controls over financial reporting, including internal controls related to NTS, following the Acquisition. As a result of these integration activities, certain internal controls may be changed. We are permitted to exclude NTS from our assessment of internal controls over financial reporting during the first year following the Acquisition. If we fail to maintain adequate internal controls over financial reporting, we may be subject to litigation or regulatory scrutiny and investors could lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. ***We may record goodwill and other intangible assets that could become impaired and result in material non-cash charges to our results of operations in the future.*** We accounted for the Acquisition using the acquisition method of accounting in accordance with the accounting principles generally accepted in the United States (“GAAP”). Under the acquisition method of accounting, the assets and liabilities of NTS were recorded, as of completion, at their respective fair values and added to those of the Company. The reported financial condition and results of operations of the Company for periods after completion of the Acquisition will reflect NTS’s balances and results after completion of the Acquisition but will not be restated retroactively to reflect the historical financial position or results of operations of NTS for periods prior to the Acquisition. Under the acquisition method of accounting, the total purchase price is allocated to NTS’s tangible assets and liabilities and identifiable intangible assets based on their fair values as of the Closing Date. The excess of the purchase price over those fair values is recorded as goodwill. We expect that the Acquisition may result in the creation of goodwill based upon the application of the acquisition method of accounting. To the extent goodwill or intangibles are recorded and the values become impaired, we may be required to recognize material non-cash charges relating to such impairment. Our operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment. ***NTS historically relied on Newtek for managerial, financial and accounting support and benefitted from Newtek’s referral network, and we expect to rely on Newtek’s referral network in the future.*** NTS historically relied on Newtek for managerial, financial and accounting support to manage NTS’s business. We may not be able to effectively manage our operations without the managerial assistance of Newtek, and the Acquisition may result in the disruption of, or the loss of momentum in, our ongoing businesses or inconsistencies in standards, controls, procedures and policies, either of which could negatively impact our ability to generate revenue and income at the levels NTS historically performed. In addition, NTS materially benefited from Newtek’s referral network, including Newtek’s patented NewTracker software, to assist NTS in generating new customers and revenues. For example, historically approximately 40% of new NTS webhosting customers have resulted from internal and external referrals from Newtek without material expenditures by NTS for marketing or advertising. In connection with the Acquisition, we entered into a referral arrangement with Newtek pursuant to which Newtek will continue to refer potential clients to us for a fee. Our referral arrangement with Newtek is terminable by either us or Newtek at any time. If Newtek does not provide customer referrals to us at the same level it provided NTS, or if Newtek terminates our referral arrangement, our ability to gain new customers would be materially adversely affected. ***Newtek historically accounted for a material portion of NTS’s revenue and income.*** Newtek historically was NTS’s largest customer in terms of revenue and income. For example, during the fiscal year ended December 31, 2023 and the nine months ended September 30, 2024, Newtek accounted for 16% and 27% of NTS’s revenue, respectively. In connection with the Acquisition, we entered into master services agreements with Newtek and Newtek Bank, National Association (“Newtek Bank”), pursuant to which we provide Newtek and Newtek Bank with the same level of managed IT services at the same or similar billing rates as NTS provided. If we are unable to deliver the contracted services or a party terminates or breaches the agreements, or if Newtek or Newtek Bank fail to renew the agreements at the end their term, the loss of revenues would materially impact our financial condition. Legal and Regulatory Risks ***Customers could potentially expose us to lawsuits for their lost profits or damages, which could impair our results of operations.*** Because our services are critical to many of our customers’ businesses, any significant disruption in our services could result in lost profits or other indirect or consequential damages to our customers. Although we generally require our customers to sign agreements that contain provisions attempting to limit our liability for service outages, a court may not enforce any contractual limitations on our liability in the event that one of our customers brings a lawsuit against us as the result of a service interruption or other Internet site or application problems that they may ascribe to us. The outcome of any such lawsuit would depend on the specific facts of the case and any legal and policy considerations that we may not be able to mitigate. In such cases, we could be liable for substantial damage awards that may exceed our insurance coverage by unknown but significant amounts, which could materially and adversely impair our business, financial condition and results of operations. ***As a technology service provider to U.S. financial institutions, we are subject to regulation, supervision, and enforcement authority of numerous governmental and regulatory bodies in the jurisdictions in which we operate, which includes banking regulators.*** Because we are a technology service provider to U.S. financial institutions and host, secure and manage banking software, we are subject to regular oversight and examination by the FFIEC, which is an inter-agency body of federal banking regulators. The FFIEC has broad discretion in the implementation, interpretation and enforcement of banking and consumer protection laws. Our failure to comply with these laws, or our failure to meet the supervisory expectations of the banking regulators, could result in adverse action against us. The regulators have the power to, among other things, enjoin “unsafe or unsound” practices, require affirmative actions to correct any violation or practice, issue administrative orders that can be judicially enforced, direct the sale of subsidiaries or other assets, and assess civil money penalties. Our failure to comply with these laws, or our failure to meet the supervisory expectations of the banking regulators, could result in adverse action against us, which could have a material adverse impact on our business and results of operations. ***Government regulation is continuously evolving and, depending on its evolution, may adversely affect our business, financial condition and results of operations.*** We are subject to varying degrees of regulation in each of the jurisdictions in which we provide services. Local laws and regulations, and their interpretation and enforcement, differ significantly among those jurisdictions. These regulations and laws may cover taxation, privacy, data protection, pricing, content, intellectual property and proprietary rights, distribution, mobile communications, electronic device certification, electronic waste, electronic contracts and other communications, consumer protection, web services, the provision of online payment services, unencumbered Internet access to our services, the design and operation of websites and the characteristics and quality of services. These laws can be costly to comply with, can be a significant diversion to management’s time and effort and can subject us to claims or other remedies, as well as negative publicity. Many of these laws were adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate or address the unique issues that the Internet and related technologies currently produce. Some of the laws that do reference the Internet and related technologies have been and continue to be interpreted by the courts, but their applicability and scope remain largely uncertain. Additionally, the increasing focus on the risks and strategic importance of AI technologies has already resulted in regulatory restrictions that target products and services capable of enabling or facilitating AI and may in the future result in additional restrictions impacting some or all of our product and service offerings. Concerns regarding third-party use of AI for purposes contrary to local governmental interests, including concerns relating to the misuse of AI applications, models, and solutions, could result in unilateral or multilateral restrictions on products that can be used for training, refining, and deploying large language models. Such restrictions could limit the ability of downstream customers and users worldwide to acquire, deploy, and use systems that include our products, software, and services, and negatively impact our business and financial results. Risks Related to Our Intellectual Property ***If we are unable to protect our intellectual property rights, we may be unable to compete with competitors developing similar technologies.*** Historically, our defense of our intellectual property rights has been a significant aspect of our business and has meaningfully contributed to our results of operations. We aim to protect our confidential proprietary information, in part, by entering into confidentiality agreements and invention assignment agreements with all our employees, consultants, advisors and any third parties who access or contribute to our proprietary know-how, information, or technology. We also rely on trademark, copyright, patent, trade secret, and domain-name-protection laws to protect our proprietary rights. We have filed various applications to protect aspects of our intellectual property, and we currently hold eight patents. In the future we may acquire additional patents or patent portfolios, which could require significant cash expenditures. However, third parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietary rights held by us, and pending and future trademark and patent applications may not be approved. In addition, effective intellectual property protection may not be available in every country in which we operate or intend to operate our business. In any of these cases, we may be required to expend significant time and expense to prevent infringement or to enforce our rights. Although we have taken measures to protect our proprietary rights, others may offer products or concepts that are substantially similar to ours and compete with our business. If we are unable to protect our proprietary rights or prevent unauthorized use or appropriation by third parties, the value of our brand and other intangible assets may be diminished, and competitors may be able to more effectively mimic our service and methods of operations. Any of these events could seriously harm our business. ***Intellectual property infringement claims against us could cause us to incur significant expenses, pay substantial damages or royalties and prevent us from offering our products and solutions.*** Third parties have in the past, and may in the future, claim that our products and solutions infringe or violate their intellectual property rights. For instance, on March 7, 2025, Cisco Systems, Inc. and Cisco Technology, Inc. filed a complaint against the Company in the U.S. District Court for the District of Delaware, alleging that the Company’s ManyCam software has infringed certain patents and seeking damages and injunctive relief. Such claim, and any future claims of infringement, could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages and prevent us from using licensed technology that may be fundamental to our products and solutions. Even if we were to prevail, any litigation regarding intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations. We maintain insurance to protect against intellectual property infringement claims and resulting litigation, but such insurance may not cover or may not be sufficient to cover all potential claims, liability or expenses. We may also be obligated to indemnify our business partners in any such litigation, which could further exhaust our resources. Furthermore, as a result of an intellectual property challenge, we may be prevented from offering our products and solutions unless we enter into royalty, license or other agreements. We may not be able to obtain such agreements at all or on terms acceptable to us, and as a result, we may be precluded from offering our products and solutions. Risks Related to Ownership of Our Common Stock ***Our common stock is historically thinly traded, stockholders may be unable to sell at or near ask prices or at all and the price of our common stock may be volatile.*** Historically, shares of our common stock have been thinly traded The Nasdaq Capital Market (“Nasdaq”), meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stockbrokers, institutional investors and others in the investment community that generate or influence sales volume. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on stock price. However, during certain periods, we have received, and may continue to receive, a high degree of media coverage that is published or otherwise disseminated by third parties, including blogs, articles, message boards and social and other media. This may include coverage that is not attributable to statements made by the Company or our Board. Information provided by third parties may not be reliable or accurate and could materially impact the trading price of our common stock, which could cause stockholders to lose their investments. The market prices and trading volume of our common stock have in the past experienced, and may continue to experience in the future, extreme volatility, which could cause purchasers of our common stock to incur substantial losses. We believe that the historical volatility and our historical market prices during such periods reflected market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know if these dynamics will continue in the future. Although our common stock is listed for trading on Nasdaq, a broader or more active public trading market for our common stock may not develop or be sustained, and the current trading level of our common stock may not be sustained. Due to these conditions, stockholders may be unable to sell their common stock at or near ask prices or at all if they desire to sell shares of common stock. The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of our common stock, especially in light of the macro-economic factors including rising inflation rates, increased interest rates, bank-specific and broader financial institution liquidity challenges, the Russia-Ukraine conflict and the Israel-Hamas conflict. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability and reputation. Because of the limited trading market for our common stock, and because of the possible price volatility, stockholders may not be able to sell their shares of common stock when you desire to do so. The inability to sell shares in a rapidly declining market may substantially increase the risk of loss because of such illiquidity and because the price for our common stock may suffer greater declines because of its price volatility. ***The ownership of our common stock is significantly concentrated in a small number of investors, some of whom are affiliated with our Board and management, which could prevent stockholders from having input on the course of our operations or otherwise lead to actual or potential conflicts of interest.*** As of March 14, 2025, Jason Katz, our Chairman of the Board, and our Chief Executive Officer, and our largest stockholder, The J. Crew Delaware Trust B, beneficially owned an aggregate of approximately 25.9% of our outstanding common stock. The J. Crew Delaware Trust B is a trust formed by Mr. Katz for the benefit of certain of his family members. Mr. Katz is not a beneficiary of the trust and does not hold voting or dispositive power over the shares held by the trust. Mr. Katz, The J. Crew Delaware Trust B and others that have significant beneficial ownership of our common stock have substantial influence regarding matters submitted for stockholder approval, including proposals regarding: - any merger, consolidation or sale of all or substantially all of our assets; - the election of members of our Board; and - any amendment to our Certificate of Incorporation, as amended (the “Certificate of Incorporation”). The current or increased ownership position of any of these stockholders and/or their respective affiliates could delay, deter or prevent a change of control or adversely affect the price that investors might be willing to pay in the future for our common stock. In addition, the interests of these stockholders and/or their respective affiliates may significantly differ from the interests of our other stockholders and they may vote the common stock they beneficially own in ways with which our other stockholders disagree. ***Our results of operations are volatile and difficult to predict, and our stock price may decline if we fail to meet the expectations of stockholders.*** Our revenue and results of operations could vary significantly from period-to-period and year-to-year and may fail to match our past performance because of a variety of factors, many of which are outside of our control. Any of these events could cause the market price of our common stock to fluctuate. Factors that may contribute to the variability of our results of operations include: - changes in expectations as to our future financial performance; - announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships or capital commitments; - market acceptance of our new products and solutions; - the amount of advertising and marketing that is available and spent on customer campaigns; - disruptions in the availability of our applications on third party platforms; - actual or perceived violations of privacy obligations and compromises of customer data; - the entrance of new competitors in our market whether by established companies or the entrance of new companies; - additions or departures of key personnel and the cost of attracting and retaining application developers and other software engineers; - general market conditions, including market volatility and the impact of inflation; and - developments in connection with our current patent litigation or future patent litigation. Given the rapidly evolving industry in which we operate, our historical results of operations may not be useful in predicting our future results of operations. In addition, metrics available from third parties regarding our industry and the performance of our products and solutions may not be indicative of our future financial performance. ***Investor relations activities, nominal “float” and supply and demand factors may affect the price of our common stock.*** We have engaged an investor relations firm to create investor awareness for our Company. These campaigns may include non-deal road shows and personal, video and telephone conferences with investors and prospective investors in which our business and business practices are described. We provide compensation to our investor relations firm and may in the future provide compensation to additional investor relations firms or financial advisory firms, for these services, and pay for newsletters, websites, mailings and email campaigns that are produced by third parties based upon publicly available information concerning us. We do not intend to review or approve of the content of such analyst reports or other writings and communications that are based upon analysts’ own research or methods. Investor relations firms are generally required to disclose when they are compensated for their efforts and the source of such compensation, but whether such disclosure is made or in compliance with applicable laws is not under our control. In addition, our investors may, from time to time, take steps to encourage investor awareness through similar activities that may be undertaken at the expense of such investors. Investor awareness activities may also be suspended or discontinued, which may impact the trading market of our common stock. The SEC and the Financial Industry Regulatory Authority enforce various statutes and regulations intended to prevent manipulative or deceptive devices in connection with the purchase or sale of any security and carefully scrutinize trading patterns and company news and other communications for false or misleading information, particularly in cases where the hallmarks of “pump and dump” activities may exist, such as rapid share price increases or decreases. We and our stockholders may be subjected to enhanced regulatory scrutiny due to the fact that our affiliates hold a majority of our outstanding common stock and we have a limited number of shares of common stock that are publicly available for resale. The Supreme Court of the United States has stated that manipulative action is a term of art connoting intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities. Often times, manipulation is associated by regulators with forces that upset the supply and demand factors that would normally determine trading prices. Securities regulators have often cited thinly-traded markets, small numbers of holders and awareness campaigns as components of their claims of price manipulation and other violations of law when combined with manipulative trading, such as wash sales, matched orders or other manipulative trading timed to coincide with false or touting press releases. Our activities or the activities of third parties, or the small number of potential sellers or small percentage of stock in our public float, or determinations by purchasers or holders as to when or under what circumstances or at what prices they may be willing to buy or sell stock, could artificially impact (or could be claimed by regulators to have affected) the normal supply and demand factors that determine the price of our common stock. ***If we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our securities.*** Our common stock began trading on Nasdaq on August 3, 2021. However, our common stock may not continue to be listed on Nasdaq in the future. In order to maintain our listing on Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. We may not be able to comply with the applicable listing standards, and Nasdaq could delist our common stock as a result. If our common stock is delisted from Nasdaq, we may be unable to list our common stock on another national securities exchange. If our common stock is delisted by Nasdaq, our common stock would likely trade on the OTCQB where an investor may find it more difficult to sell our shares or obtain accurate quotations as to the market value of our common stock. ## Cybersecurity As filed, 5,928 characters. ### Overview At IPM, cybersecurity is at the core of our business operations and an integral part of our commitment to delivering secure, compliant, and resilient technology solutions to customers operating in highly regulated industries. Prior to the Transactions, the Company employed a comprehensive strategy with respect to cybersecurity, which was supported by both management and our Board. Historically, our Board was responsible for overseeing our risk management activities in general, and certain of our Board committees assisted the Board in the role of risk oversight. The operations team prior to the Transactions conducted manual and automated testing of our systems, with the goal of identifying vulnerabilities and proactively strengthening our defenses. Following the Transactions, in order to support our comprehensive range of IT-related services and digital infrastructure, we have embraced a multi-layered defense approach, which helps us recognize and address the dynamic nature of cyber threats. By integrating diverse security measures, we aim to fortify our infrastructure against a spectrum of potential risks and adapt to the ever-evolving cybersecurity landscape. Our cybersecurity strategy is proactively designed to protect our digital infrastructure, customer environments, and business continuity. This approach is supported by our management and Board, with structured oversight to ensure compliance with evolving regulatory, risk, and industry best practices. ### Proactive Security Measures and Threat Management We employ a multi-layered defense strategy, leveraging advanced threat intelligence, automation, and security analytics to proactively detect, prevent, and respond to cyber threats. Our core security practices include: - continuous threat monitoring and response utilizing real-time security operations centers and next-generation endpoint detection and response to rapidly identify and neutralize threats; - regular vulnerability assessments and penetration testing conducted through automated and manual assessments with prioritized remediation workflows to enhance security across infrastructure, applications, and client environments; - zero trust security architecture, which implements strict identity verification, least privilege access and network segmentation to reduce attack surfaces and prevent lateral movement of threats; and - partnerships with leading cybersecurity firms for independent security audits, risk assessments, and compliance reviews as described below. Recognizing that human factors play a critical role in cybersecurity, our workforce and compliance training includes comprehensive security awareness program. All employees undergo quarterly security training, covering data protection, insider threat mitigation, phishing awareness, and compliance best practices. Additionally, we implement strict enforcement of multi-factor authentication, just-in-time access controls, and continuous user behavior monitoring. ### Incident Response and Business Continuity Our incident response framework follows a structured escalation and notification process focused on rapid containment, mitigation, and recovery from cybersecurity incidents. Key response protocols include: - automated detection and response workflows to leverage rapid assessment detection technology to detect breaches in real time; - escalation of critical incidents to our Chief Executive Officer, President, and Chief Operating Officer and the Board based on severity and regulatory reporting requirements; and - secure backup and disaster recovery, which implement immutable backups, air-gapped storage, and rapid failover solutions to protect data integrity and minimize downtime in case of cyber incidents. ### Governance Both management and the Board are actively involved in the oversight of risks from cybersecurity threats. Our information security program is designed to ensure that management and the Board are adequately informed about, and provided with the tools necessary to monitor, (i) material risks from cybersecurity threats and (ii) our efforts related to the prevention, detection, mitigation, and remediation of cybersecurity incidents. ### Role of the Board Our Board oversees cybersecurity risk as part of our enterprise risk management strategy. The Board receives comprehensive cybersecurity updates from our President at least quarterly to inform our directors of evolving threats and regulatory developments. We undergo regular independent audits, cybersecurity risk assessments, and compliance reviews to validate our security posture, and our Audit Committee receives annual reports regarding our ongoing security measures. ### Role of Management At the management level, our Chief Information Security Officer (“CISO”) leads cybersecurity initiatives and reports regularly to the President on security posture, risk trends, and key incidents. Our President is a seasoned technology and business leader with over 20 years of experience in managed IT services and global scale multi-site private cloud datacenter operations. His background and experience provide him with expertise regarding data privacy and security, vulnerability management, security operations, and application security. In addition, our Chief Operating Officer has many years of experience with managed IT cyber application delivery. We face risks from cybersecurity threats that could have a material adverse effect on its business, financial condition, results of operations, cash flows or reputation. To date, we have not experienced any risks from cybersecurity threats that have materially affected, or are reasonably likely to materially affect, our business strategy, financial condition, results of operations, or cash flows. See “*Risk Factors – Risks Related to Our Business – We could be adversely affected by information security breaches or cyber security attacks.”* ## Properties As filed, 501 characters. Our principal executive office is located at 30 Jericho Executive Plaza in Jericho, New York 11753. The lease for the 30 Jericho Executive Plaza office space expires on November 30, 2026. We operate a secure private cloud from private suites in completely isolated areas that are leased within two Tier 3 data center facilities located in Phoenix, Arizona, and Edison, New Jersey pursuant to license agreements that extend until 2027 and 2026, respectively. We currently do not own any real property. ## Legal proceedings As filed, 2,273 characters. ### Cisco WebEx Litigation On July 23, 2021, a wholly owned subsidiary of the Company, 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”***). The Company alleged that certain of Cisco’s products have infringed U.S. Patent No. 6,683,858, and that the Company was entitled to damages. On August 29, 2024, the jury awarded the Company $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 was entered into in the Court in connection with the Lawsuit. The final judgment was entered in the Company’s favor in the amount of the Award and started the time for filing any post-trial motions or appeal. The exact amount of the Award proceeds to be received by the Company will be determined based on a number of factors and will reflect the deduction of significant litigation-related expenses, including legal fees. Consequently, the Company estimates that it would receive no more than one third of the gross proceeds in connection with the Award, which Award is subject to post-trial proceedings (including any potential appellate proceedings by Cisco). ### Cisco ManyCam Litigation On March 7, 2025, Cisco Systems, Inc. and Cisco Technology, Inc. filed a complaint against the Company in the U.S. District Court for the District of Delaware, alleging that the Company’s ManyCam software has infringed U.S. Patent Nos. 8,830,293 and 8,941,708 and seeking damages and injunctive relief. The Company intends to vigorously defend itself against these claims. The Company has not recorded any liability for this matter as it does not believe a loss is probable, and it cannot estimate any reasonably possible loss or range of possible loss. It is possible that an unfavorable resolution to this matter could have an adverse effect on the Company’s results of operations, financial position or cash flows. To our knowledge, other than as described above, there are no material pending legal proceedings to which we are a party or of which any of our property is the subject. ## Management's discussion and analysis As filed, 53,324 characters. This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the accompanying notes thereto included in “Item 8. Financial Statements and Supplementary Data.” Except where expressly provided, all information relates to the Company prior to the Transactions (defined below). ### Forward-Looking Statements In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Item 1A. Risk Factors” in this Annual Report on Form 10-K (the “Annual Report on Form 10-K”). ### Overview Prior to the completion of the Transactions, we operated a network of consumer applications. Our product portfolio included Paltalk, Camfrog and Tinychat, which together hosted a large collection of video-based communities. Our other products included Vumber, which is a telecommunications services provider that enables users to communicate privately by having multiple phone numbers with any area code through which calls can be forwarded to a user’s existing telephone number. As discussed below, following the Transactions, we continue to support our ManyCam software, which is a live streaming software and virtual camera that allows users to deliver professional live videos on streaming platforms, video conferencing apps and distance learning tools. As of January 2, 2025, we provide a comprehensive range of IT-related services, including dedicated server hosting, cloud hosting, data storage, managed security, backup and disaster recovery, and other related services including consulting and implementing technology solutions for large enterprise and commercial clients across the United States as well as small-and-medium sized businesses. We have an over 20-year history of technology innovation and hold eight patents. ### Our IT and Cloud-Based Solutions We sell and provide a range of services across five core areas, each as further described below: managed IT security services, professional services, procurement services, secure private cloud hosting, managed backup and disaster recovery and web hosting. #### Managed IT Security Services Our managed IT security services provide clients with ongoing management and support of their IT systems and services under a subscription or contract-based model. Our managed IT security services include proactive monitoring, regular system maintenance, comprehensive cybersecurity management, data backup, and disaster recovery, as well as help desk support for users. #### Professional Services Our professional services include the design and implementation of a wide range of IT products and services, such as cybersecurity, software planning, IT infrastructure, data center design and configuration, designing and implementing on-premises, hybrid or cloud computing solutions, website development, developing or integrating systems and software and IT cost management. #### Procurement Services We offer two types of procurement services to our customers. We can either: (i) obtain software and hardware products on behalf of our customers, in which case our vendors drop ship the products to our end customer, or (ii) obtain hardware or software on behalf of our customers and perform additional configuration and/or add additional inputs to the products before the products are shipped to our customer. In the instance where we sell hardware and software products as a solution bundled with services, we typically obtain the products or software from our vendors, add the additional inputs/configuration as detailed in the customer contract, and then ship the products to the end customer. #### Secure Private Cloud Hosting Our secure private cloud hosting offerings include a digital infrastructure which consists of dedicated and fully isolated cloud environments designed to deliver security, control and compliance for the business-critical applications and client data. We operate a secure private cloud from private suites in completely isolated areas that are leased within two Tier 3 data center facilities located in Phoenix, Arizona, and Edison, New Jersey (the “Data Centers”), pursuant to license agreements that extend until 2027 and 2026, respectively. Although we do not own or operate the Data Centers, we aim to use the high-level operations and standards provided by the Data Centers through our license agreements to provide our customers with secure and flexible cloud services. We leverage state-of-the-art security measures, including data encryption, network segmentation, advanced firewalls, multi-factor authentication and continuous monitoring to safeguard against unauthorized access and cyber threats. We believe our secure private cloud hosting provides our clients with strong availability, data integrity and reliable performance, while meeting stringent compliance requirements. Our secure private cloud hosting solutions are backed by 24/7 support from our expert team, with the goal of delivering secure, flexible and resilient infrastructure tailored to each client’s unique business needs. In the future, we plan to make arrangements with third parties to incorporate AI features into our secure private cloud offerings. #### Managed Backup and Disaster Recovery Our managed backup and disaster recovery solutions provide comprehensive protection for customers’ critical data and IT infrastructure, which is intended to ensure business continuity and rapid recovery in the event of data loss, cyberattacks or system failures. We utilize advanced backup technologies with automated, regular data backups, off-site replication and secure storage to prevent data corruption or loss. #### Web Hosting Our web hosting services consist of several advanced security measures, including Secure Sockets Layer and Transport Layer Security (“SSL/TLS”) encryption, firewalls, distributed denial-of-service (“DDoS”) protection, malware scanning, and secure server configurations. Our web hosting services include features such as regular data backups, web application firewalls, strict access control policies and continuous monitoring and expert support, all of which are intended to ensure our customers’ compliance with industry standards and provide a reliable and secure environment for our customers’ online presence. ### Our ManyCam Software Product Following the Transactions, we continue to support our ManyCam software, which is a live streaming software and virtual camera that allows users to deliver professional live videos on streaming platforms, video conferencing apps and distance learning tools. The ManyCam software provides multiple camera feeds, backgrounds and effects while also enabling users to share presentations, spreadsheets and documents. We anticipate integrating ManyCam as an offering for our new customers and seek to optimize our cross-selling efforts of ManyCam with our other technology solutions. As a result of the Transactions, we are no longer engaged in the business of providing video-based, live streaming, virtual camera and telecommunications software to consumers, as and to the extent such businesses were previously conducted by us and our subsidiaries. ### Recent Developments #### The Acquisition On January 2, 2025 (the “Closing Date”), we completed the acquisition of Newtek Technology Solutions, Inc., a New York corporation (“NTS”), pursuant to that certain Agreement and Plan of Merger (the “Acquisition Agreement”), by and among us, PALT Merger Sub 1, Inc., a New York corporation and our direct and wholly owned subsidiary (“First Merger Sub”), PALT Merger Sub 2, LLC, a Delaware limited liability company and our direct and wholly owned subsidiary (“Second Merger Sub”), NTS and NewtekOne, Inc., a Maryland corporation and the sole stockholder of NTS (“Newtek”). Pursuant to the terms of the Acquisition Agreement, on the Closing Date: (i) NTS merged with and into First Merger Sub, with NTS continuing as the surviving entity (the “Interim Surviving Entity” and such merger, the “First Step Merger”), and (ii) immediately following the consummation of the First Step Merger, the Interim Surviving Entity merged with and into Second Merger Sub (the “Second Step Merger” and, together with the First Step Merger, the “Acquisition”), with the Second Merger Sub surviving as our wholly owned subsidiary (in such capacity, the “Surviving Entity”). Following the closing of the Acquisition (the “Acquisition Closing”), we changed our name from “Paltalk, Inc.” to “Intelligent Protection Management Corp.” The aggregate consideration we delivered to Newtek at the Acquisition Closing consisted of (i) $4,000,000 in cash (as adjusted pursuant to the Acquisition Agreement, the “Acquisition Closing Cash Consideration”) and (ii) 4,000,000 shares of our Series A Non-Voting Common Equivalent Stock (the “Series A Preferred Stock” and such shares issued at the Acquisition Closing, the “Acquisition Closing Stock Consideration” and together with the Acquisition Closing Cash Consideration, the “Acquisition Closing Consideration”). The Series A Preferred Stock will automatically convert into one share of our common stock, par value $0.001 per share (subject to certain customary anti-dilution adjustments), upon the occurrence of certain qualifying transfers by Newtek to third parties. In addition to the Acquisition Closing Consideration, Newtek is entitled to earn-out payments under certain circumstances. For more information, see the “*Liquidity and Capital Resources”* section below. #### The Divestiture On the Closing Date and prior to the Acquisition Closing, we completed the sale to Meteor Mobile Holdings, Inc., a Delaware corporation (“Meteor Mobile”), of our telecommunications services provider, “Vumber”, as well as our “Paltalk” and “Camfrog” applications and certain assets and liabilities related to such services provider and applications (the “Transferred Assets” and such sale, the “Divestiture”) pursuant to that certain Asset Purchase Agreement (the “Divestiture Agreement”), by and among the us, our wholly owned subsidiaries Paltalk Holdings, Inc. (“Paltalk Holdings”), Paltalk Software, Inc., Camshare, Inc., A.V.M. Software, Inc., and Vumber, LLC (collectively, the “Sellers”), and Meteor Mobile. As a result of the Divestiture, we are no longer engaged in the business of providing video-based, live streaming, virtual camera and telecommunications software to consumers, as and to the extent such businesses were previously conducted by us pursuant to the “Vumber,” “Paltalk” and “Camfrog” applications (the “Business”). In addition, prior to the Acquisition Closing, we ceased all operations of our “Tinychat” service and application. The consideration delivered by Meteor Mobile to us at the closing of the Divestiture consisted of (i) $1,350,000 in cash and (ii) the assumption of all of the liabilities of the Sellers arising out of, or relating to, the Business or the Transferred Assets, other than certain excluded liabilities (the “Divestiture Closing Consideration”). In connection with the Divestiture, we are entitled to earn-out payments under certain circumstances. For more information, see the “*Liquidity and Capital Resources”* section below. #### Board Appointments Pursuant to the Acquisition Agreement, we agreed to cause one representative nominated by Newtek (the “Newtek Representative”) to be appointed to our Board of Directors (the “Board”) promptly following the closing of the Acquisition. Newtek designated Barry Sloane, who is currently Newtek’s Chairman, Chief Executive Officer and President, as the Newtek Representative. Effective as of January 7, 2025, the Board increased the size of the Board from five (5) directors to seven (7) directors and appointed Mr. Sloane to the Board, to serve in such capacity until our 2025 annual meeting of stockholders (the “2025 Annual Meeting”) and until his successor is duly elected and qualified or until his earlier death, disqualification, resignation or removal. Mr. Sloane was not appointed to any committee of the Board. In order for the majority of the Board to be comprised of independent directors in accordance with Rule 5605(b) of the listing rules of The Nasdaq Stock Market, LLC and as a result of his expertise in cloud infrastructure and applications and artificial intelligence, the Board also appointed Sidney Rabsatt to the Board, effective as of January 7, 2025. Mr. Rabsatt will serve in such capacity until the 2025 Annual Meeting and until his successor is duly elected and qualified or until his earlier death, disqualification, resignation or removal. Mr. Rabsatt was also appointed to serve on the Strategic Transactions Committee of the Board. #### Patent Litigation On July 23, 2021, Paltalk Holdings filed a patent infringement lawsuit (the “Lawsuit”) against WebEx Communications, Inc., Cisco WebEx LLC, and Cisco Systems, Inc. (collectively, “Cisco”), in the U.S. District Court for the Western District of Texas (the “Court”). We alleged that certain of Cisco’s products infringed U.S. Patent No. 6,683,858, and that we were entitled to damages. 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. 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. ### Pre-Transaction Operational Highlights Operational highlights during the year ended December 31, 2024: - after over 18 months, we identified a business in a complimentary industry, signed definitive documents to acquire a business approximately three times our revenue size, divested from our video-based businesses and, subsequent to year end, closed on these transformative transactions; - revenue from continuing operations increased by 14.2% to approximately $1.1 million compared to $1.0 million for the year ended December 31, 2023, as sales from ManyCam increased; - net loss increased by 689.5% to $8.4 million for the year ended December 31, 2024, compared to net loss of $1.1 million for the year ended December 31, 2023, which increase included a one-time non-cash charge of $3.8 million of as a result of the impairment loss in connection with the Divestiture, as well as one time legal and accounting expenses of $1.8 million incurred in connection with the Acquisition; - net loss from continuing operations increased by 58.9% to a net loss of $4.3 million for the year ended December 31, 2024, compared to net loss of $2.7 million for the year ended December 31, 2023; and - compared to the prior year period, cash flows used in operations increased by $1.9 million to $3.0 million for the year ended December 31, 2024, as decreases in cost of revenue and marketing expense were offset by increased professional fees in connection with the Transactions. ### 2025 Business Objectives For the near term, our business objectives following the Transactions include: - continuing the integration of our comprehensive range of IT-related solutions; - incorporating ManyCam as an offering for our new customers and seek to optimize our cross-selling efforts with our other technology solutions; - continuing to explore strategic opportunities, including, but not limited to, potential mergers or acquisitions of other assets or entities that are synergistic to our businesses; and - continuing to defend our intellectual property. ### Revenue Generation Following the Transactions Following the Transactions, we now generate revenue from our five core areas as described below: #### Managed IT Security Services Customers pay for our managed IT security services on a subscription or contract-based model. Customers typically pay a recurring fee, which is generally based on service level agreements that define the specific services and performance metrics. #### Professional Services Customers are invoiced for our professional services either based on a time and materials basis or on a straight-line basis for all fixed fee arrangements. We are the principal in these transactions as we control the specified good or service before it is transferred to the customer. Additionally, we are primarily responsible for fulfillment of the order and have pricing discretion. As a result, we recognize revenue from our professional services revenue on a gross basis. #### Procurement Services Our procurement services include either (i) obtaining software and hardware products on behalf of our customers, in which case our vendors drop ship the products to our end customer, or (ii) obtaining hardware or software on behalf of our customers and performing additional configuration and/or add additional inputs to the products before the products are shipped to our customer. For both types of procurement services each customer has their own negotiated contract and payment terms. If a customer orders both hardware and additional configurations to those laptops, typically these will both be covered under separate contracts. The services provided are considered distinct as the additional configurations are not required for the hardware purchased to operate effectively. Customers are invoiced, and revenue is recognized, when the hardware purchased is shipped, as control transfers to the customer free on board (“FOB”) shipping point. We are an agent in these transactions because we (i) do not obtain control over the product as products are drop shipped from their vendors directly to the customer; (ii) have no inventory risk and (iii) have general pricing discretion in our transactions with customers. Our pricing discretion is limited by the going market rate of our services offered by other providers. Based on this assessment, we recognize revenue from procurement services on a net basis. Additionally, certain procurement contracts with customers include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. #### Secure Private Cloud Hosting When a cloud-based service includes both on-premises software licenses and cloud services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the cloud service and recognized over time. Certain cloud services depend on a significant level of integration, interdependency, and interrelation between the desktop applications and cloud services, and are accounted for together as one performance obligation. Revenue from such cloud services is recognized ratably over the period in which the cloud services are provided. Our secure private cloud offerings include a digital infrastructure which consists of servers which are dedicated to a single customer. We offer secure private cloud offerings through our Data Centers as well as off premise. Our secure private cloud offerings typically are one performance obligation where we are providing the cloud storage to the customer and customers pay a monthly fixed fee for the service. #### Managed Backup and Disaster Recovery Pricing for our managed backup and disaster recovery solutions is based upon the customer contract and depends on the amount of backup storage needed. Customers are typically charged set rates per the contract and are charged monthly based on usage. There are typically no upfront fees for these contracts. Customers are invoiced and revenue is recognized on a monthly basis. #### Web Hosting Each customer of our web hosting solutions has their own contract and payment terms. Contract duration is typically between 1-4 years, although the term may vary based on the customer’s needs. Web hosting services customers pay a monthly fee and there are typically no upfront costs associated with web hosting services. Customers are invoiced and revenue is recognized on a monthly basis. #### Revenue Recognition Following the Transactions, our revenue is measured based on the consideration specified in a contract with a customer. We contract with customers often include promises to transfer multiple products and services. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. When a cloud-based service includes both on-premises software licenses and cloud services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the cloud service and recognized over time. Certain cloud services depend on a significant level of integration, interdependency, and interrelation between the desktop applications and cloud services, and are accounted for together as one performance obligation. Revenue from cloud services is recognized ratably over the period in which the cloud services are provided. We otherwise recognize revenue when it satisfies a performance obligation by transferring control of a product or service or by arranging for the sale of a vendor’s products or service to a customer. We recognize revenue from sale of services as they perform the underlying services, typically based on time and materials basis based upon hours incurred for the performance completed to date for which we have the right to consideration. We recognize revenue on sales of goods at a point in time when customer takes control of goods, which typically occurs when title and risk of loss have passed to the customer. We recognize revenue on a gross basis for each of its services and product offerings principally because it is primarily responsible for fulfilling the promise to provide specified goods or service and it has discretion in establishing the price of specified good or service. We classify our right to consideration in exchange for deliverables as either a receivable or a contract asset (unbilled receivable). A receivable is a right to consideration that is unconditional (*i.e.*, only the passage of time is required before payment is due). For example, we recognize a receivable for revenue related to our transaction or volume-based contracts when earned regardless of whether amounts have been billed. Such receivables will be presented in accounts receivable, net in our consolidated balance sheets. We maintain an allowance for credit losses to provide for the estimated amount of receivables that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables, judgment, and other applicable factors. A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets will be presented in “current and other assets” in our consolidated balance sheets and primarily relate to unbilled amounts on fixed-price contracts utilizing the output method of revenue recognition. Our contract assets and liabilities are reported at the end of each reporting period. The difference between the opening and closing balances of the contract assets and deferred revenue primarily results from the timing difference between performance obligations and the customer’s payment. We receive payments from customers based on the terms established in their contracts, which may vary generally by contract type. Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. The difference between the opening and closing balances of the contract assets and deferred revenue primarily results from the timing difference between performance obligations and the customer’s payment. We receive payments from customers based on the terms established in their contracts, which may vary generally by contract type. We sell hardware and software products on both a stand-alone basis without any services and as a solution bundled with services. When we provide a combination of hardware and software products with the provision of services, we separately identify our performance obligations under the contract and the hardware and/or software products or services that will be provided. The total transaction price for an arrangement with multiple performance obligations is allocated at contract inception to each performance obligation in proportion to the stand-alone selling price of the hardware or software. The selling price is the price at which we would sell a promised good or service separately to a customer. We estimate the price based on observable inputs, including direct labor hours and allocatable costs, or use observable stand-alone prices when they are available. Our professional services include the design and implementation of a wide range of IT products and services. Such services are typically provided by us or third-party subcontractor vendors on a stand-alone basis. ### Revenue Generation Prior to the Transactions Prior to the completion of the Transactions, our main sources of revenue were subscription revenue, which includes virtual gift revenue, and advertising revenue generated from users of our former core video chat products, Paltalk and Camfrog, most of which is presented as discontinued operations. Because we are no longer engaged in the business of providing access to video-based live streaming, virtual camera and telecommunications software to consumers following the Transactions, we will not generate subscription revenue or advertising revenue related to the Transferred Assets in the future. We also generated revenue from subscriptions for our ManyCam software product, which is presented as continuing operations. ### Subscription Revenue Our video chat platforms generated revenue primarily through subscription fees. Our tiers of subscriptions provided users with unlimited video windows and levels of status within the community. Multiple subscription tiers were offered in different durations depending on the product from one-, three-, six-, twelve-, and twenty-four-month terms. Longer-term plans (those with durations longer than one month) were generally available at discounted monthly rates. Levels of membership benefits were offered in tiers, with the least membership benefits in the lowest paid tier and the most membership benefits in the highest paid tier. Our membership tiers were “Plus,” “Extreme,” “VIP” and “Prime” for Paltalk and “Pro,” “Extreme” and “Gold” for Camfrog. We also held occasional promotions that offer discounted subscriptions and virtual gifts. Subscriptions for ManyCam were generally offered in annual and two-year terms, with exceptions made for enterprise sales. We recognized revenue from monthly premium subscription services beginning in the month in which the subscriptions are originated. Revenues from multi-month (or annual) subscriptions were recognized on a gross and straight-line basis over the length of the subscription period. The unearned portion of subscription revenue was presented as deferred revenue in the accompanying consolidated balance sheets. We also offered virtual gifts to our users through our Paltalk, Camfrog and TinyChat applications. Users were able to purchase credits that could be redeemed for a host of virtual gifts such as a rose, a beer, or a car, among other items. Virtual gift revenue was recognized upon the users’ utilization of the virtual gift and included in subscription revenue. The unearned portion of virtual gifts revenue is presented as deferred revenue in the accompanying consolidated balance sheets. ### Advertising Revenue We generated a portion of our revenue through advertisements on our video platforms. Advertising revenue was dependent upon the volume of advertising impressions viewed by active users as well as the advertising inventory we place on our products. We recognized advertising revenue as earned on a click-through, impression, registration or subscription basis. Measurements of impressions included when a user clicks on an advertisement (CPC basis), views an advertisement impression (CPM basis), or registers for an external website via an advertisement by clicking on or through our application (CPA basis). ### Costs and Expenses ### Cost of revenue Cost of revenue consists primarily of compensation (including stock-based compensation) and other employee-related costs, which prior to the Transactions, consisted of costs for personnel engaged in data center and customer care functions, credit card processing fees, hosting fees, and data center rent and bandwidth costs. Prior to the Transactions, cost of revenue also included compensation and other employee-related costs for technical personnel, consultants and subcontracting costs relating to technology service revenue. ### Sales and marketing expense Prior to the Transactions, sales and marketing expense consisted primarily of advertising expenditures and compensation (including stock-based compensation) and other employee-related costs for personnel and consultants engaged in sales and sales support functions. Advertising and promotional spend included online marketing, including fees paid to search engines, and offline marketing, which primarily consists of partner-related payments to those who direct traffic to our brands. ### Product development expense Prior to the Transactions, product development expense, which related to the development of technology of our applications, consisted primarily of compensation (including stock-based compensation) and other employee-related and consultant-related costs that are not capitalized for personnel engaged in the design, testing and enhancement of service offerings as well as amortization of capitalized website development costs. ### General and administrative expense General and administrative expense consists primarily of compensation (including non-cash stock-based compensation) and other employee-related costs for personnel engaged in executive management, finance, legal, tax and human resources and facilities costs and fees for other professional services and cost of insurance. General and administrative expense also includes amortization of intangible assets. ### Key Metrics Our management relies on certain non-GAAP and/or unaudited performance indicators to manage and evaluate our business. The key performance indicators set forth below helped us evaluate growth trends, establish budgets, measure the effectiveness of our advertising and marketing efforts and assess operational efficiencies. We also discuss net cash provided by operating activities under the “Liquidity and Capital Resources” section below. Adjusted EBITDA is discussed below. | | Year Ended December 31, 2024 | 2023 | | --- | ---: | ---: | | Net cash used in operating activities | $(3,019,287) | $(1,079,671) | | Net loss | $(8,426,209) | $(1,067,335) | | Adjusted EBITDA | $(4,431,852) | $(1,012,916) | | Adjusted EBITDA as percentage of total revenue | (48.8)% | (9.2)% | #### Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure, and includes results from continuing and discontinued operations. Adjusted EBITDA is defined as net (loss) income adjusted to exclude stock-based compensation expense, depreciation and amortization expenses, impairment loss in connection with the Divestiture, interest income, net, other (income) expense, net, and income tax (benefit) expense. The impairment loss in connection with the Divestiture relates to a one-time impairment charge recorded in connection with the Company’s divestiture of the Transferred Assets. We present Adjusted EBITDA because it is a key measure used by our management and Board to understand and evaluate our core operating performance and trends, to develop short- and long-term operational plans and to allocate resources to expand our business. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of the cash operating income generated by our business. We believe that Adjusted EBITDA is useful to investors and others to understand and evaluate our operating results, and it allows for a more meaningful comparison between our performance and that of competitors. #### Limitations of Adjusted EBITDA Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that Adjusted EBITDA does not reflect: cash capital expenditures for assets underlying depreciation and amortization expense that may need to be replaced or for new capital expenditures; net loss from discontinued operations; interest income, net; other expense, net; income tax expense from continuing operations; our working capital requirements; the impairment loss on digital tokens; the potentially dilutive impact of stock-based compensation; and the provision for income taxes. Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure. Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income and our other GAAP results. The following table presents a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA for each of the periods indicated. Adjusted EBITDA and net loss related to discontinued operations have not been segregated. Accordingly, the data below includes the results from continuing and discontinued operations: | Reconciliation of Net Loss to Adjusted EBITDA: | Year Ended December 31, 2024 | 2023 | | --- | ---: | ---: | | Net loss | $(8,426,209) | $(1,067,335) | | Stock-based compensation expense | 151,412 | 234,993 | | Depreciation and amortization expense | 821,696 | 822,334 | | Impairment loss in connection with Divestiture | 3,849,766 | -- | | Interest income, net | (569,016) | (639,611) | | Other income, net | (146,269) | (343,045) | | Income tax benefit | (113,232) | (20,252) | | Adjusted EBITDA | $(4,431,852) | $(1,012,916) | ### Results of Operations ### Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 ### Revenue Revenue from continuing operations increased by 14.2% to approximately $1.1 million compared to $1.0 million for the year ended 2023, as sales from ManyCam increased. The following table sets forth our subscription revenue for the years ended December 31, 2024 and 2023, the increase between those periods, the percentage increase between those periods, and the percentage of total revenue that subscription revenue represented for those periods: | | Years Ended December 31, 2024 | 2023 | $% Increase | Increase | % of Revenue Years Ended December 31, 2024 | 2023 | | --- | ---: | ---: | ---: | ---: | ---: | ---: | | Subscription revenue | $1,098,280 | $962,032 | $136,248 | 14.2% | 100% | 100% | 30 #### Subscription Revenue Our subscription revenue for the year ended December 31, 2024 increased by $136,248, or 14.2%, as compared to the year ended December 31, 2023. The increase in subscription revenue was driven by increased revenue from ManyCam for the year ended December 31, 2024 compared to the year ended December 31, 2023. ### Costs and Expenses Total costs and expenses for the year ended December 31, 2024 increased by $1,560,186, or 33.5%, as compared to the year ended December 31, 2023. The following table presents our costs and expenses for the years ended December 31, 2024 and 2023, the increase or decrease between those periods, the percentage increase or decrease between those periods, and the percentage of total revenue that each represented for those periods: | | Years Ended December 31, 2024 | 2023 | $% Increase (Decrease) | Increase (Decrease) | % of Revenue Years Ended December 31, 2024 | 2023 | | --- | ---: | ---: | ---: | ---: | ---: | ---: | | Cost of revenue | $262,888 | $284,892 | $(22,004) | (7.7)% | 23.9% | 29.6% | | Sales and marketing expense | 61,706 | 91,939 | (30,233) | (32.9)% | 5.6% | 9.6% | | Product development expense | 215,538 | 210,232 | 5,306 | 2.5% | 19.6% | 21.9% | | General and administrative expense | 5,679,697 | 4,072,580 | 1,607,117 | 39.5% | 517.1% | 423.3% | | Total costs and expenses | $6,219,829 | $4,659,643 | $1,560,186 | 33.5% | 566.3% | 484.4% | #### Cost of revenue Our cost of revenue for the year ended December 31, 2024 decreased by $22,004, or 7.7%, as compared to the year ended December 31, 2023. The decrease in cost of revenue for the year ended December 31, 2024, was primarily driven by a decrease in hosting expenses of $24,956 compared to the prior year ended December 31, 2023. #### Sales and marketing expense Our sales and marketing expense for the year ended December 31, 2024 decreased by $30,233, or 32.9%, as compared to the year ended December 31, 2023. The decrease in sales and marketing expense for the year ended December 31, 2024 was primarily due to a decrease of approximately $32,982 in marketing user acquisition expenses compared to the prior year. #### Product development expense Our product development expense for the year ended December 31, 2024 increased by $5,306, or 2.5%, as compared to the year ended December 31, 2023. The increase was primarily due to a increase of approximately $3,549 related to consulting/software expenses. #### General and administrative expense Our general and administrative expense for the year ended December 31, 2024 increased by $1,607,117, or 39.5%, as compared to the year ended December 31, 2023. The increase in general and administrative expense for the year ended December 31, 2023, was mainly due to an increase in professional expenses of $1,798,992, attributed to the Transactions, which closed subsequent to year end, on January 2, 2025. In addition, there was an increase of $54,456 in connection with bonus expense (primary retention bonuses to IPM employees). These increases were partially offset by a decrease of $34,121 related to insurance expense, a decrease of $25,041 related to bad debt expense and a decrease of $161,625 related to taxes compared to the year ended December 31, 2023. ### Non-Operating Income The following table presents the components of non-operating income for the years ended December 31, 2024 and 2023, the decrease between those periods, the percentage decrease between those periods, and the percentage of total revenue that each represented for those periods: | | Years Ended December 31, 2024 | 2023 | $% Decrease | Decrease | % of Revenue Years Ended December 31, 2024 | 2023 | | --- | ---: | ---: | ---: | ---: | ---: | ---: | | Interest income, net | $569,016 | $639,611 | $(70,595) | (11.0)% | 51.8% | 66.4% | | Other income, net | 146,269 | 343,045 | (196,776) | (57.4)% | 13.3% | 35.7% | | Total non-operating income | $715,285 | $982,656 | $(267,371) | (27.2)% | 65.1% | 102.1% | Non-operating income for the year ended December 31, 2024 was $715,285, a decrease of $267,371, or 27.2%, compared to non-operating income of $982,656 for the year ended December 31, 2023. The decrease in interest income was the result of interest earned in a high-yield bank account during 2023, and a lower cash balance and interest rate compared to the year ended December 31, 2024. Other income during 2023 was the result of recording the refundable employee retention tax credit received under the Coronavirus Aid, Relief, and Economic Security Act. ### (Loss) Income from Discontinued Operations Loss from discontinued operations for the year ended December 31, 2024 was $4,157,534, an increase of $5,777,207, or 356.7%, compared to income from discontinued operations of $1,619,673 for the year ended December 31, 2023. The increase in loss from discontinued operations was primarily the result of a decrease in subscription revenue and virtual gift revenue from the Paltalk and Camfrog applications included in discontinued operations of $2.0 million as well as a non-cash impairment loss in connection with Divestiture of $3.8 million. ### Liquidity and Capital Resources Currently, our primary source of liquidity is cash on hand and cash flows from continuing operations, and we believe that our cash and cash equivalents balance and our expected cash flow from operations will be sufficient to meet all of our financial obligations for the next 12 months. As of December 31, 2024, we had approximately $10.6 million of cash and cash equivalents. Historically, our use of working capital was related to product development resources and an investment in marketing activities in order to maintain and create new services and features in applications for our users. In particular, a significant portion of our working capital had been allocated to the improvement of our products. During the year ended December 31, 2024, stock options representing the right to purchase 14,830 shares of our common stock were exercised for net proceeds to the Company of $39,772. During the year ended December 31, 2023, we purchased a total of 5,192 shares of common stock under the stock repurchase plan for an aggregate purchase price of $7,213, at an average share price of $1.39 per share. The stock repurchase plan expired on March 29, 2023 pursuant to its terms and has not been renewed. In the future, we may continue to seek to grow our business by expending our capital resources to fund strategic acquisitions, investments and partnership opportunities. ### NTS Acquisition On January 2, 2025, we closed the Acquisition, pursuant to which we acquired NTS through a two-step merger process. The aggregate consideration we delivered to Newtek at the Acquisition Closing consisted of (i) $4,000,000 in cash and (ii) 4,000,000 shares of our Series A Preferred Stock. In addition to the Acquisition Closing Consideration, the Acquisition Agreement provides that Newtek is entitled to receive an amount up to $5,000,000 (the “Acquisition Earn-Out Amount”) based on our achievement of certain cumulative average adjusted EBITDA thresholds for the 2025 and 2026 fiscal years. The Acquisition Earn-Out Amount may be paid, in our sole discretion, in cash (the “Acquisition Earn-Out Cash Consideration”), in shares of Series A Preferred Stock (the “Acquisition Earn-Out Stock Consideration”) or in a combination thereof. Pursuant to the Acquisition Agreement, to the extent that all or a portion of the Acquisition Earn-Out Amount is paid in shares of Series A Preferred Stock, the number of shares of Series A Preferred Stock to be issued to Newtek will be calculated based on the average of the daily volume weighted average prices of our common stock during each trading day during a 60 calendar-day period ending on December 31, 2026; provided, that in no event shall such price be less than $1.00. Pursuant to the Acquisition Agreement, if the issuance of the Acquisition 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) in us to exceed one-third of our total equity (the “Total Equity Cap”), then the number of shares of Series A Preferred Stock issuable as Acquisition Earn-Out Stock Consideration will be adjusted so that we will issue to Newtek the maximum number of shares of Series A Preferred Stock that would not cause Newtek’s total equity to exceed the Total Equity Cap, with a corresponding increase to the Acquisition Earn-Out Cash Consideration. ### The Divestiture On January 2, 2025, we completed the sale to Meteor Mobile of the Transferred Assets. The consideration delivered by Meteor Mobile to us at the closing of the Divestiture consisted of (i) $1,350,000 in cash and (ii) the assumption of all of the liabilities of the Sellers arising out of, or relating to, the Business or the Transferred Assets, other than certain excluded liabilities. In addition to the Divestiture Closing Consideration, we are entitled to receive, with respect to each Earn-Out Period, as defined and described below, certain payments in cash based on the cash revenue, net of any refunds, received by Meteor Mobile that is attributable to the Business (such cash revenue, the “Legacy Business Revenue”), as follows: - from the six-month period beginning on July 1, 2025 and ending on December 31, 2025 (“Earn-Out Period 1”), an amount equal to (i) for any Legacy Business Revenue greater than or equal to $3,500,000 and less than $4,250,000, the amount of such Legacy Business Revenue multiplied by 0.30 plus (ii) for any Legacy Business Revenue greater than or equal to $4,250,000, the amount of such Legacy Business Revenue in excess of $4,250,000 multiplied by 0.40; and - from each of the twelve-month period beginning on January 1, 2026 and ending on December 31, 2026 (“Earn-Out Period 2”), the twelve-month period beginning on January 1, 2027 and ending on December 31, 2027 (“Earn-Out Period 3”), and the twelve-month period beginning on January 1, 2028 and ending on December 31, 2028 (“Earn-Out Period 4” and collectively with Earn-Out Period 1, Earn-Out Period 2 and Earn-Out Period 3, the “Earn-Out Periods”), an amount equal to (i) for any Legacy Business Revenue greater than or equal to $7,000,000 and less than $8,500,000, the amount of such Legacy Business Revenue multiplied by 0.30 plus (ii) for any Legacy Business Revenue greater than or equal to $8,500,000, the amount of such Legacy Business Revenue in excess of $8,500,000 multiplied by 0.40 (the aggregate amount, if any, earned during the Earn-Out Periods, the “Divestiture Earn-Out Amount”). In the event of a change of control (as defined in the Divestiture Agreement) of Meteor Mobile 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 Meteor Mobile, we will be entitled to (i) 50% of the aggregate consideration paid to Meteor Mobile 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 Meteor Mobile, we are entitled to (x) the aggregate consideration paid to Meteor Mobile 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 Acceleration Payments payable to us are capped at $5,000,000 in the aggregate. ### Cash Flow Analysis The components of cash flows information related to discontinued operations have not been segregated in the table below. Accordingly, the net cash used in operating, investing and the cash provided by and used in financing activities include the results from continuing and discontinued operations: | Consolidated Statements of Cash Flows Data: | Years Ended December 31, 2024 | 2023 | | --- | ---: | ---: | | Net cash used in operating activities | $(3,019,287) | $(1,079,671) | | Net cash used in investing activities | -- | (85,000) | | Net cash provided by (used in) financing activities | 39,772 | (7,213) | | Net change in cash and cash equivalents | $(2,979,515) | $(1,171,884) | #### Operating Activities Net cash used in operating activities was $3,019,287 for the year ended December 31, 2024, as compared to net cash used in operating activities of $1,079,671 for the year ended December 31, 2023. The increase in cash used in operating activities during the year ended December 31, 2024 was primarily the result of an increase in net loss, which was attributed to increases in professional fees as a result of the Transactions. #### Investing Activities Net cash used in investing activities was $85,000 for the year ended December 31, 2023 compared to no cash used in investing activities for the year ended December 31, 2024. Net cash used in investing activities for the year ended December 31, 2023 was related to payment of contingent consideration in connection with our acquisition of ManyCam in 2022. #### Financing Activities Net cash provided by financing activities was $39,772 for the year ended December 31, 2024, compared to net cash used in financing activities of $7,213 for the year ended December 31, 2023. During the year ended December 31, 2024, stock options representing the right of purchase 14,830 shares of common stock were exercised for net proceeds to the Company of $39,772. These stock options had an average exercise price of $2.68 per share and a weighted average share price of $4.12 per share on the date of exercise. ### Contractual Obligations and Commitments As of December 31, 2024, there were no material changes to our contractual obligations and commitments. Following fiscal year end, we completed the Acquisition as described above. In connection with the Acquisition, Newtek is entitled to receive an amount up to $5,000,000 based on our achievement of certain cumulative average adjusted EBITDA thresholds for the 2025 and 2026 fiscal years. The Acquisition Earn-Out Amount may be paid, in our sole discretion, in cash, in shares of Series A Preferred Stock or in a combination thereof. ### Off-Balance Sheet Arrangements As of December 31, 2024, we did not have any off-balance sheet arrangements. ### Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. During the year ended December 31, 2024, the most significant accounting estimate inherent in the preparation of our financial statements was the evaluation of goodwill for impairment. Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. We evaluate our goodwill for impairment in accordance with Accounting Standards and Codifications (“ASC”) 350, *Intangibles – Goodwill and Other (as amended by Accounting Standards Update 2017-04)*, by assessing qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. We perform the quantitative goodwill impairment test, if, after assessing the totality of events or circumstances such as those described in paragraph ASC 350-20-35-3C(a) through (g), we determine that it was more likely than not that the fair value of a reporting unit is less than its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeded the reporting unit’s fair value, limited to the total amount of goodwill related to the reporting unit. ## Controls and procedures As filed, 4,966 characters. ### Evaluation of Disclosure Controls and Procedures Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Internal controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized, recorded and reported; and (2) our assets are safeguarded against unauthorized or improper use, to permit the preparation of our consolidated financial statements in conformity with GAAP. Our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based on the evaluation as of December 31, 2024, for the reasons set forth below, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. ### Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act). Our internal control system was designed to, in general, provide reasonable assurance to our management and the Board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Our chief executive officer and chief financial officer evaluated the effectiveness of our internal control over financial reporting as of December 31, 2024, and based on that evaluation, management concluded that our internal control over financial reporting was effective. Therefore, our management, including our chief executive officer and chief financial officer, have concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management to allow timely decisions regarding required disclosures. The framework used by management in making that assessment was the criteria set forth in the document entitled “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. ### Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended December 31, 2024 (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Following fiscal year end, on January 2, 2025, the Company completed the Acquisition. As a result, the evaluation of the effectiveness of internal control over financial reporting did not include the internal controls of NTS, the entity acquired in the Acquisition. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year following an acquisition, while integrating an acquired company. The Company is in the process of integrating its internal controls over financial reporting following the Acquisition. As a result of these integration activities, certain controls will be evaluated and may be changed. Filed Mar 24, 2025. Source: SEC EDGAR, the filing index for accession 0001013762-25-001600. Last ingested by Listed: Oct 24, 2026, 15:09 ET. No prices; not investment advice.