Intelligent Protection Management Corp.: Form 10-Q for the period ended Mar 31, 2026

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with: (i) the accompanying unaudited condensed consolidated financial statements and notes thereto for the three months ended March 31, 2026 and 2025, (ii) the consolidated financial statements and notes thereto for the year ended December 31, 2025 included in our Annual Report on Form 10-K (the “Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2026 and (iii) the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Form 10-K. Aside from certain information as of December 31, 2025, all amounts herein are unaudited.

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 Part II of this report and “Item 1A. Risk Factors” in the Form 10-K.

Overview

We provide a comprehensive range of IT-related services, including managed IT security services, secure private cloud hosting, managed backup and disaster recovery, professional services, procurement services, web hosting, 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 also offer and 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.

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 six core areas, each as further described below: (i) managed IT security services, (ii) secure private cloud hosting, (iii) managed backup and disaster recovery, (iv) professional services, (v) procurement services and (vi) web hosting.

1. 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.

2. 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. As of March 31, 2026, the terms of the license agreements for the Data Centers located in Arizona and New Jersey extend through 2032 and 2026, respectively. With respect to the Data Center in Edison, New Jersey, the lease automatically renewed on April 30, 2026 for a one year term. 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 and healthcare, and other 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. We actively engage with third parties to enhance our secure private cloud offerings with artificial intelligence (“AI”) features and benefits.

3. 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.

4. 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, hybrid or cloud computing solutions, website development, developing or integrating systems and software, and IT cost management. In addition, we are planning to launch an AI Data Readiness solution in the second quarter of 2026 that we believe will improve the reliability, security, and outcome of adopting AI technologies by assessing, structuring, and securing business data in a safe and effective manner.

5. 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. Procurement revenue can be uneven throughout the year as it is the result of our customers both replacing existing hardware as well as purchasing new hardware in connection with new projects, which projects are traditionally tied to customer budgets that are often higher early in the calendar year.

6. 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.

Our ManyCam Software Product

In addition to our IT and cloud-based solutions, we offer and 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 cross sell ManyCam as an offering for our new customers and seek to optimize our cross-selling efforts of ManyCam with our other technology solutions.

First Quarter 2026 Operational Highlights

Operational highlights during the three months ended March 31, 2026:

• executed an extension of our existing Phoenix data center colocation license agreement with an industry-leading data center provider through August 2032;
• entered into a strategic collaboration with MASORI Therapeutics (“MASORI”), an advanced artificial intelligence (“AI”) platform that accelerates results by reducing cost, complexity, and time for small and medium AI models, allowing organizations to save significantly by decreasing necessary code development and providing AI-related benefits;
• successfully achieved SOC 2 Type 1 compliance, a key milestone in our ongoing commitment to safeguarding customer data and delivering trusted cybersecurity and cloud infrastructure solutions;
• during the first quarter of 2026, 50,000 shares of common stock, were repurchased under the Stock Repurchase Plan (defined below) for an aggregate of $83,491. As of March 31, 2026, all shares of common stock available for repurchase under the Stock Repurchase Plan had been repurchased;
• for the three months ended March 31, 2026 revenue totaled $6.4 million compared to $5.5 million for the three months ended March 31, 2025, an increase of 15.2%, primarily attributed to an increase in managed IT services (excluding web hosting) of 19% compared to the prior year period, as well as an increase in procurement revenue of 78.4% compared to the prior year period;
• net loss for the three months ended March 31, 2026 totaled $0.7 million compared to net income of $0.8 million for the three months ended March 31, 2025. Net income in 2025 was attributed to us recording an income tax benefit during the first quarter of 2025 of approximately $2.1 million in connection with the Transactions (defined below);
• Adjusted EBITDA for the three months ended March 31, 2026 totaled negative $0.2 million compared to negative $0.5 million at March 31, 2025;
• we had cash used by operations of $0.2 million; for the three months ended March 31, 2026 compared to cash provided by operations of $1.7 million for the three months ended March 31, 2025;
• deferred revenue was $4.7 million as of March 31, 2026, which will be recognized as revenue in future quarters as products and/or services are installed; and
• at March 31, 2026, we had $8.1 million of cash and cash equivalents, including $1.0 million of restricted cash, on our balance sheet and no long-term debt.

2026 Business Objectives

For the near term, our business objectives include:

• continuing the integration of our comprehensive portfolio of IT-related solutions and expanding functionality through strategic partnerships. We are collaborating with strategic third parties to integrate AI and predictive analytics capabilities into our platform, enabling customers to leverage AI-driven insights within existing data environments. In addition, our partnership with MASORI supports advanced AI and is designed to accelerate results that enhance automation and system integration capabilities, improving workflow efficiency and scalability. These partnerships are intended to strengthen our technology offerings and enhance customer value;
• undertaking an initiative to consolidate our accounting-based systems through the implementation of a third-party e-commerce integration system. This implementation is intended to support improved system integration, increased automation of financial processes, and enhanced consistency of financial data across our operations. We believe this initiative will contribute to more efficient financial management and support future growth initiatives;
• incorporating ManyCam as an offering for our new customers and seeking 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.

Sources of Revenue

Our main sources of revenue are described below. As a result of the variability of contract and service type, some of the revenue we report in each period is deferred revenue from contracts we entered into during previous periods. This may make it difficult for us to quickly increase revenue through the entry into new contracts in any period, and a decline in new or renewed contracts in any one quarter will negatively affect our revenue in future quarters. As a result, revenue generated in prior quarters may not provide a reliable indication of future results.

Managed IT Security Services

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.

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 license agreements that extend until 2032 and 2027, 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. We actively engage with third parties to enhance our secure private cloud offerings with AI features and benefits. Revenue from such cloud services is recognized ratably over the period in which the cloud services are provided.

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.

Professional Services

Revenue in connection with professional services is generally recognized upon achievement of milestones or on a straight line basis for all fixed fee arrangements.

Procurement Services

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.

Web Hosting

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.

Subscription Revenue

We also generate subscription revenue from monthly premium subscription services for our ManyCam software. Subscription revenues are presented net of refunds, credits and known and estimated credit card chargebacks. During the three months ended March 31, 2026 and 2025, subscriptions were offered in durations of twelve-month and twenty-four-month terms. All subscription fees, however, are paid by credit card at the origination of the subscription regardless of the term of the subscription. Revenues from multi-month subscriptions are recognized on a straight-line basis over the period where the service is offered to the customer, indicated by length of the subscription term purchased. The unearned portion of subscription revenue is presented as deferred revenue in the accompanying condensed consolidated balance sheets.

Costs and Expenses

Cost of revenue

Cost of revenue consists primarily of compensation and other employee-related costs for personnel engaged in data center and customer care functions, credit card processing fees, hosting fees, data center rent, bandwidth costs and, in the case of procurement revenue, the cost of the hardware and/or subscriptions. Cost of revenue also includes compensation and other employee-related costs for technical personnel, consultants and subcontracting costs.

Sales marketing and product development expense

Sales marketing and product development expense consists primarily of (i) advertising expenditures and compensation (including stock-based compensation) and other employee-related costs for personnel and consultants engaged in sales and sales support marketing and development functions and (ii) development of the technology of our applications, and consultant-related costs that are not capitalized for personnel engaged in the design, testing and enhancement of service offerings. Advertising and promotional spend includes 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.

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.

Depreciation and amortization expense

Depreciation and amortization expenses consist primarily of amortization of intangible assets as well as depreciation on property and equipment.

Litigation expenses

Litigation expenses relate to expenses incurred in our patent defense against Cisco Systems, Inc. and Cisco Technology, Inc. (the “Cisco ManyCam Litigation”).

Key Metrics

Our management relies on certain non-GAAP financial measures to manage and evaluate our business. The non-GAAP financial measures set forth below help 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.

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Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as net income (loss) adjusted to exclude interest (income) expense, net, other (income) expense, net, income tax (benefit) expense, depreciation and amortization expense, stock-based compensation expense, net loss from discontinued operations, impairment loss in connection with the Divestiture and litigation expenses relating to the Cisco ManyCam Litigation, as each are applicable to the periods presented.

We present Adjusted EBITDA because it is a key measure used by our management and Board of Directors (the “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, among other things: cash capital expenditures for assets underlying depreciation and amortization expense that may need to be replaced or for new capital expenditures; interest income, net; other expense, net; the potentially dilutive impact of stock-based compensation; the provision for income taxes; litigation expenses incurred in connection with the Cisco ManyCam Litigation; and net loss from discontinued operations. 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 (loss) and our other GAAP results. The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA for each of the periods indicated:

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Results of Operations

The following table sets forth condensed consolidated statements of operations data for each of the periods indicated as a percentage of total revenues:

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Revenue

Total revenue increased by 15.2% to $6,354,751 for the three months ended March 31, 2026 from $5,518,038 for the three months ended March 31, 2025. This increase was driven by increased managed information technology revenue, attributed to both new customers as well as the expansion of services sold to existing customers, and an increase in procurement revenue related to sale of AI-related equipment to customers, partially offset by decreases in professional services revenue and subscription revenue.

The following table sets forth our total revenue for the three months ended March 31, 2026 and 2025, 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:

The increase in revenue is attributed to an increase in managed information technology revenue of 10.2% compared to the prior year period, as well as an increase in procurement revenue of 78.4% compared to the prior year period. With respect to our core managed information technology solutions, which consist of managed IT security services and managed backup and disaster recovery solutions, revenue increased 19% compared to the prior year period. The increase in revenue was partially offset by a decrease in professional services revenue compared to the prior year of $243,307, or 33.5%, and a decrease in subscription revenue compared to the prior year of $27,163, or 9.7%. Our subscription revenue relates to the sales from our ManyCam software. The decrease in subscription revenue was primarily driven by increased competition in the virtual camera and streaming software space.

Costs and Expenses

Total costs and expenses for the three months ended March 31, 2026 increased by $270,968, or 4.0%, as compared to the three months ended March 31, 2025. The following table presents our costs and expenses for the three months ended March 31, 2026 and 2025, the increase or decrease between those periods and the percentage increase or decrease between those periods and the percentage of total revenue that each represented for those periods:

Cost of revenue

Our cost of revenue for the three months ended March 31, 2026 increased by $795,503, or 32.3%, as compared to the three months ended March 31, 2025. This increase was primarily due to an increase in costs associated with procurement equipment of $656,624, managed services expenses of $2,851, subscriptions and licensing expenses of $352,364, and rent related to our Data Centers of $11,898, offset by decreases in professional and consulting costs of $184,744 and web hosting expense of $8,147.

Sales marketing and product development expense

Our sales marketing and product development expense for the three months ended March 31, 2026 increased by $12,665, or 1.7%, as compared to the three months ended March 31, 2025. The increase in sales marketing and product development expense for the three months ended March 31, 2026 was primarily due to an increase in consulting expense of $26,150 and commissions of $31,014, partially offset by a decrease in salary and salary-related expenses of approximately $81,080. Headcount on our sales team decreased from 15 in the prior year period to approximately 13 people in the three months ended March 31, 2026, and the associated salary and salary-related costs are included in “sales marketing and product development expense” for the three months ended March 31, 2026.

General and administrative expense

Our general and administrative expense for the three months ended March 31, 2026 decreased by $430,266, or 14.6%, as compared to the three months ended March 31, 2025. The decrease in general and administrative expense for the three months ended March 31, 2026 was primarily due to a decrease in legal, professional and accounting expenses of $207,686, as the prior year included Transaction-related expenses and a decrease in insurance costs of $49,476, compared to prior year which included some initial start-up costs. Salary and salary related expenses increased by $87,404, primarily as a result of increased benefit costs compared to the three months ended March 31, 2026, but was offset by a decrease in $144,075 of non-cash share-based compensation. Overall headcount remained unchanged at 41 individuals.

Non-Operating Income

The following table presents the components of non-operating income for the three months ended March 31, 2026 and the three months ended March 31, 2025, the increase or decrease between those periods and the percentage increase or decrease between those periods and the percentage of total revenue that each represented for those periods:

Non-operating income for the three months ended March 31, 2026 was $83,378, an increase of $986, or 1.2%, as compared to non-operating income of $82,392 for the three months ended March 31, 2025. The increase was primarily a result of a decrease in the amount of principal we invested and at varying interest rates.

Income Taxes

Our provision for income taxes consists of federal, foreign and state taxes, as applicable, in amounts necessary to align our year-to-date tax provision with the effective rate that we expect to achieve for the full year. For the three months ended March 31, 2026, we recorded an income tax benefit of $24,590 consisting primarily of foreign taxes. For the three months ended March 31, 2025, we recorded a non-recurring income tax benefit of $2,060,065, primarily related to a partial reversal of our U.S. valuation allowance as the Acquisition (defined below) created a source of future U.S. taxable income allowing for the recognition of certain deferred tax assets.

Liquidity and Capital Resources

Currently, our primary source of liquidity is cash on hand. We believe that our cash and cash equivalents balance, and our expected cash flows from operations will be sufficient to meet all of our financial obligations for at least one year from the date these financial statements are issued. As of March 31, 2026, we had $8,084,650 of cash and cash equivalents, which included $1,046,021 of restricted cash.

Additionally, we expect our long-term liquidity position will be sufficient to meet our long-term liquidity needs with cash flows from operations. However, in the event of changes in business conditions or other developments, including a sustained market deterioration, unanticipated regulatory developments, significant acquisitions, competitive pressures, or to the extent our liquidity needs prove to be greater than expected or cash generated from operations is less than anticipated, we may need additional liquidity. To the extent we elect to finance our long-term liquidity needs, we believe that the potential financing capital available to us in the future will be sufficient.

Our primary use of working capital is related to product development resources and investment in marketing initiatives to grow the business in order to maintain and create new services and features in applications for our clients and users. In the future, we may seek to grow our business by expending our capital resources to fund strategic acquisitions, investments and partnership opportunities.

Stock Repurchase Plan

On May 8, 2025, the Board approved a stock repurchase plan for up to $400,000 of our outstanding common stock (the “Stock Repurchase Plan”), which expired on the one-year anniversary of such date. For the three months ended March 31, 2026, we purchased 50,000 shares of common stock pursuant to the Stock Repurchase Plan at an average price of $1.67 per share, or an aggregate of $83,491.

NTS Acquisition

On January 2, 2025, we acquired Newtek Technology Solutions, Inc. (“NTS”) from NewtekOne, Inc., the sole stockholder of NTS (“Newtek”), through a two-step merger process (the “Acquisition”) pursuant to an agreement and plan of merger (the “Acquisition Agreement”). The aggregate consideration we delivered to Newtek at the closing of the Acquisition consisted of (i) $4,000,000 in cash and (ii) 4,000,000 shares of our Series A Non-Voting Common Equivalent Stock (“Series A Preferred Stock”). In addition to the foregoing 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 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” and the Divestiture and the Acquisition together, the “Transactions”) pursuant to that certain Asset Purchase Agreement (the “Divestiture Agreement”), by and among us, our wholly owned subsidiaries Paltalk Holdings, Inc., Paltalk Software, Inc., Camshare, Inc., A.V.M. Software, Inc., and Vumber, LLC (collectively, the “Sellers”), and Meteor Mobile. 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 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”) or the Transferred Assets, other than certain excluded liabilities (the “Divestiture Closing Consideration”). 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.

The amount earned in Earn Out Period 1 was $31,263 and was included in other income in the consolidated statement of operations for the year ended December 31, 2025.

Business Loan Agreement and Credit Agreement and Revolving Promissory Note

On April 10, 2025, we, Intelligent Protection LLC, our wholly owned subsidiary (“IPM LLC” and, together with the Company, the “Borrowers”), and Newtek Bank, National Association (“Newtek Bank”), a subsidiary of Newtek, entered into that certain business loan agreement and that certain credit agreement and revolving promissory note (together, the “Loan Agreements”), which provided for a secured revolving line of credit to the Borrowers in the maximum amount of $1,000,000 on the terms and conditions set forth in the Loan Agreements (the “Facility”). The obligations of the Borrowers under the Loan Agreements were secured by substantially all of the assets of the Borrowers.

The Facility matured on April 10, 2026. No amounts were drawn on the revolving line of credit during its term.

Operating Activities

Net cash used in operating activities was $195,712 for the three months ended March 31, 2026, as compared to net cash provided by operating activities of $1,744,783 for the three months ended March 31, 2025. The amount of cash provided by operations for the three months ended March 31, 2025 was primarily attributed to the change in the business activities of the Company following the Transactions compared to the three months ended March 31, 2026, specifically, the collection of accounts receivable (favorable by $0.2 million), the timing of payment of payables (favorable by $0.7 million), as well as amounts collected by the Company during the first quarter following the Divestiture due to Meteor Mobile and paid subsequent to quarter end of $0.4 million.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2026 was $70,208 and was used to purchase fixed assets for use in the business. Net cash used in investing activities for the three months ended March 31, 2025 was $4,000,000 and related to the cash consideration paid by the Company to Newtek in connection with the Acquisition.

Financing Activities

Net cash used in financing activities was $83,491 for the three months ended March 31, 2026, and was used to repurchase shares of our common stock pursuant to our Stock Repurchase Plan. Net cash provided by financing activities was $1,350,000 for the three months ended March 31, 2025 and was attributed to the consideration received in connection with the Divestiture.

Contractual Obligations and Commitments

There have been no other material changes to our contractual obligations and commitments disclosed in the contractual obligations and commitments section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K.

Off-Balance Sheet Arrangements

As of March 31, 2026, 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. Our critical accounting estimates have not significantly changed since December 31, 2025 and are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.

Evaluation of Disclosure Controls and Procedures

Our management, including our principal executive officer and principal 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, our chief executive officer 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 March 31, 2026, our management, including our principal executive officer and principal 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.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no material changes to the Risk Factors disclosed in “Item 1A. Risk Factors” in the Form 10-K during the three months ended March 31, 2026. For more information concerning our risk factors, please see “Item 1A. Risk Factors” in the Form 10-K.