What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-15 compared with 2023-03-23 · 316 added, 486 removed, 434 unchanged (65% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm (PCAOB No.

Consolidated Balance Sheets as of December 31, 2022 and 2021 F-4

Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021 F-5

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2022 and 2021 F-6

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 F-7

Notes to Consolidated Financial Statements F-8

FINANCIAL STATEMENTS AND SUPPLEMENTARY

Report of Independent Registered

Public Accounting Firm (PCAOB No.

Consolidated Balance Sheets

as of December 31, 2023 and 2022

Consolidated Statements of

Operations for the Years Ended December 31, 2023 and 2022

Consolidated Statements of

Changes in Stockholders’ Equity for the Years Ended December 31, 2023 and 2022

Consolidated Statements of

Cash Flows for the Years Ended December 31, 2023 and 2022

Notes to Consolidated Financial

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Paltalk,

and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations,

changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related

notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in

all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its

cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted

in the United States of America.

We have audited the accompanying consolidated

balance sheets of Paltalk, Inc.

and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated

statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended December

31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of

its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles

generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting

firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent

with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are

free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an

audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control

over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over

financial reporting.

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were

we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an

understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the

Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material

misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures

included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included

evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation

of the financial statements.

Our audits included performing procedures to

assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that

respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well

as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from

Critical Audit Matters

Critical audit matters are matters arising from

the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and

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subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial

statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical

audit matter or on the accounts or disclosures to which it relates.

Valuation of the ManyCam Asset Acquisition

As described in Note 1 and Note 12 to the consolidated financial statements,

the Company acquired certain intangible assets (the “ManyCam Asset Acquisition”) during the year ended December 31, 2022

for $2.7 million.

This transaction included internally developed software, intellectual property (trade names, trademarks and URLs) and

customer relationships of $1.5 million, $0.3 million and $0.9 million, respectively.

We identified the valuation of the ManyCam Asset Acquisition as a critical

audit matter.

Auditing the Company’s accounting for these acquired intangible assets was complex due to the significant estimation required

in managements determination of the fair value of intangible assets.

The significant estimation was primarily due to the sensitivity of

the respective fair values to the underlying assumptions, including discount rates, weighted average cost of capital and projected revenue

growth rates.

The primary procedures we performed to address

this critical audit matter included the following:

● Evaluated the Company’s use of valuation methodologies.

● Evaluated the prospective financial information and tested

the completeness and accuracy of underlying data.

● With the assistance of our valuation specialists, tested the

significant assumptions used to value the acquired intangible assets by comparing the significant assumptions to current industry, market

and economic trends.

● Performed sensitivity analyses of the significant assumptions

to evaluate the change in fair value resulting from changes in the assumptions.

We determined that there are no critical audit matters.

/s/ Marcum llp

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Cash and cash equivalents

Accounts receivable, net of allowances of $ 3,648 as of December 31, 2022 and 2021, respectively

Accounts receivable, net of allowances of $ 23,326 and $ 3,648 as of December 31, 2023 and 2022, respectively

Employee retention tax credit receivable, net

Prepaid expense and other current assets

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Operating lease right-of-use asset

Property and equipment, net

Intangible assets, net

Digital tokens

Liabilities and stockholders’ equity

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( 1,199,337 )

( 1,192,124 )

Additional paid-in capital

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( 13,817,233 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

Total stockholders’

Total liabilities and

stockholders’ equity

The accompanying notes are an integral part of

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Advertising revenue

Technology service revenue

Total revenue

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Total costs and expenses

(Loss) Income from operations

Loss from operations

( 2,070,243 )

( 3,658,810 )

Interest income, net

Gain on extinguishment of term debt

Realized gain from the sale of digital tokens

(Loss) Income from operations before income tax benefit (expense)

Other income, net

Loss from operations before income tax benefit

( 1,087,587 )

Income tax benefit (expense)

Net (loss) income

( 3,583,915 )

Net (loss) income per share of common stock:

Weighted average number of shares of common stock used in calculating net (loss) income per share of common stock:

Income tax benefit

$ ( 1,067,335 )

( 3,412,250 )

Net loss per share of common stock:

Weighted average number of shares of common stock used in calculating

net loss per share of common stock:

The accompanying notes are an integral part of

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

Stockholders’

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$ ( 194,200 )

$ ( 10,404,983 )

Stock-based compensation expense

Issuance of common stock

Issuance of common stock pursuant to cashless option exercises

Treasury stock received from cashless option exercises

Issuance of common stock pursuant to option exercise

Repurchases of common stock

( 3,412,250 )

Balance at December 31, 2022

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Cash flows from operating activities:

Net (loss) income

$ ( 1,067,335 )

Adjustments to reconcile net (loss) income from operations to net cash (used in) provided by operating activities:

$ ( 3,412,250 )

Adjustments to reconcile net loss from operations to net cash

used in operating activities:

Depreciation of property and equipment

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Amortization of operating lease right-of-use assets

Gain on extinguishment of digital token liability

Impairment loss on digital tokens

Realized (gain) loss from the sale of digital tokens

Deferred tax benefit

Gain on extinguishment of term debt

Income tax benefit

Deferred tax liability

Stock-based compensation

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Changes in operating assets and liabilities:

Digital tokens

Accounts receivable, net

Digital tokens receivable

Operating lease liability

Digital tokens payable

Employee retention tax credit receivable, net

Prepaid expense and other current assets

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Deferred subscription revenue

Net cash (used in) provided by operating activities

Net cash used in operating activities

( 1,079,671 )

( 2,956,724 )

Cash flows from investing activities:

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Acquisition related costs of ManyCam assets

Proceeds from the sale of digital tokens

Net cash (used in) provided by investing activities

Payment of contingent consideration

Net cash used in investing activities

( 2,942,279 )

Cash flows from financing activities:

Proceeds from issuance of common stock, net of issuance costs

Proceeds from issuance of common stock pursuant to option exercise

Purchase of treasury stock

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net cash used in financing activities

Net decrease in cash and cash equivalents

( 1,171,884 )

( 6,896,927 )

Balance of cash and cash equivalents at beginning of period

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Non-cash investing and financing activities:

Deferred tax liability associated with the acquisition of ManyCam assets

Deferred tax liability associated with the acquisition of ManyCam

Accrued contingent consideration

Modification of operating lease right-of-use asset and liability

Issuance of common stock pursuant to cashless option exercises

Treasury stock received from cashless option exercises

The accompanying notes are an integral part of

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PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Organization and Description

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and Description of Business

The accompanying consolidated financial statements

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Inc., Camshare, Inc., Fire Talk LLC, Vumber LLC and ManyCam ULC (collectively, the “Company”).

The Company’s product portfolio includes

Paltalk, Camfrog and Tinychat, which together host a large collection of video-based communities.

The Company’s other products

are ManyCam and Vumber.

ManyCam 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.

Vumber 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.

The Company has an over 20-year history of technology innovation and hold 10 patents.

ManyCam Asset Acquisition

On June 9, 2022 (the “Effective Date”),

the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) by and among the Company,

ManyCam ULC, an unlimited liability company incorporated under the laws of the Province of Alberta and a wholly owned subsidiary of the

Company (the “Purchaser”), Visicom Media Inc., a Canadian corporation (“Visicom”), and 2434936 Alberta ULC, an

unlimited liability company incorporated under the laws of the Province of Alberta (“Target NewCo”), pursuant to which the

Purchaser purchased, effective as of the Effective Date, all of the issued and outstanding shares of Target NewCo (the “ManyCam

Acquisition”).

Prior to the ManyCam Acquisition, Target NewCo held all assets related to, or used by Visicom in connection with,

the business of developing and distributing virtual webcam driver software, including virtual backgrounds and/or “masks”

or other camera effects (other than the Excluded Contracts (as defined in the Securities Purchase Agreement)), whether tangible or intangible,

including, but not limited to, Target NewCo’s ManyCam software (“ManyCam”) and related source code, customer lists,

customer relationships and all associated customer information, contracts with contractors and suppliers, brand names, trade secrets,

trademarks, trade names, designs, copyrights, websites, all URLs, goodwill and intellectual property associated with each of the foregoing

(collectively, the “Conveyed Assets”).

The Company concluded that the Conveyed Assets were not considered a business for

purposes of Regulation S-X and Accounting Standards Codification (“ASC”) 805, Business Combinations.

On June 30, 2022, we entered into a License Agreement

with Visicom (the “License Agreement”), pursuant to which we agreed to distribute, at the discretion and direction of Visicom,

a specified number of ManyCam software updates to certain license holders to whom Visicom has previously granted a “lifetime”

license to ManyCam software.

As consideration for distributing the software updates, Visicom paid us an initial upfront nonrefundable

payment of $ 65,000 .

The License Agreement provides that Visicom may purchase additional licenses at prices specified therein.

providing a one-time, limited license to Visicom for the distribution of ManyCam software updates pursuant to the terms of the License

Agreement, we do not have any obligation to provide support or service to the licensee end users.

For more information regarding the ManyCam Acquisition,

Macro-Economic Factors and Update on COVID-19

The Company is a communications software innovator

that powers multimedia social applications.

The Company’s product portfolio includes Paltalk, Camfrog and Tinychat, which together

host a large collection of video-based communities.

The Company’s other products are ManyCam and Vumber.

ManyCam 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.

Vumber 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.

The Company has an

over 20-year history of technology innovation and holds 8 patents.

Impact of Macro-Economic Factors

The Company’s results of operations have

been and may continue to be negatively impacted by the uncertainty regarding COVID-19 and macro-economic factors, including the timing

of economic recessions and/or recovery and the overall inflationary environment.

Prolonged periods of inflation may affect the Company’s

ability to target new customers as well as keep existing customers engaged and may ultimately have a correlating effect on the Company’s

users’ discretionary spending.

Furthermore, the recent strength of the US dollar compared to foreign currencies could have a negative

effect on the Company’s non-US customer base, as the Company’s subscription prices are based in US dollars.

Our user growth

may continue to slow or decline as the impact of the COVID-19 pandemic continues to taper, particularly in light of a potential economic

Furthermore, the recent strength of the US dollar compared to foreign currencies could have a negative effect on our non-US

customer base, as our subscription prices are based in US dollars.

PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Summary of Significant

Accounting Policies

been and may continue to be negatively impacted by macro-economic factors, including the timing of economic recessions and/or recovery

and the overall inflationary environment.

Prolonged periods of inflation have affected, and may continue to affect, the Company’s

ability to target new customers as well as keep existing customers engaged and may ultimately have a correlating effect on its users’

discretionary spending.

Additionally, the closures of certain banks in 2023 and their placement into receivership with the Federal Deposit

Insurance Corporation created bank-specific and broader financial institution liquidity challenges and concerns.

Future adverse developments

with respect to specific financial institutions or the broader financial services industry may create additional market and economic

uncertainty, which could affect the Company’s industry.

Employee Retention

Under the provisions

of the extension of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Company was eligible for

a refundable employee retention tax credit (the “ERTC”) subject to certain criteria.

During the year ended December 31, 2023,

the Company applied for the ERTC and recorded a receivable in the amount of $ 343,045 , net of related costs, which was recognized in the

Company’s condensed consolidated statement of operations as other income.

As of December 31, 2023, the Company received an aggregate

of $ 294,833 , which was recorded as a reduction of the receivable on our condensed consolidated balance sheet.

of Significant Accounting Policies

Principles of Consolidation

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All intercompany balances and transactions have been eliminated upon consolidation.

Recent Accounting Standards

In December 2023, the Financial Accounting Standards

Board issued Accounting Standards Update (“ASU”) 2023-09, “ Income Taxes (Topic 740):

Improvements to Income Tax

Disclosures ”.

ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures for publicly

traded companies.

The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes

to the rate reconciliation and income taxes paid information.

ASU 2023-09 will be effective for the Company in the annual period beginning

January 1, 2025, though early adoption is permitted.

The Company is currently in the process of determining the impact of adoption of

the provisions of ASU 2023-09 on its financial position, results of operations and cash flows.

In June 2016, the Financial Accounting Standards

Board issued ASU No.

2016-13 “Financial Instruments - Credit Losses (Topic 326)” and also issued subsequent amendments to

the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05 (collectively, “Topic 326”).

Topic 326 requires the measurement

and recognition of expected credit losses for financial assets held at amortized cost.

This replaces the existing incurred loss model

with an expected loss model and requires the use of forward-looking information to calculate credit loss estimates.

The Company adopted

ASU 2016-13 on January 1, 2023.

The adoption of ASU 2016-13 did not have a material impact on the Company’s financial position,

results of operations or cash flows.

PALTALK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Use of Estimates

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be material to the financial statements.

The most significant accounting estimate inherent in the preparation of our financial statements

include the discount rates and weighted average costs of capital used in the fair value of the ManyCam Assets and in assigning

their respective useful lives.

These fair values and estimates were based on a number of factors, including a valuation by an independent

During the year ended December 31, 2023, there

were no critical accounting estimates made by management that would have a material effect on the financial statements.

During the year ended December 31, 2022, the

most significant accounting estimate inherent in the preparation of the financial statements included the discount rates and weighted

average costs of capital used in the fair value of the ManyCam intangible assets and in assigning their respective useful lives.

fair values and estimates were based on a number of factors, including a valuation from an independent third party.

Revenue Recognition

In accordance with Accounting Standards Codification

In accordance with Accounting Standards and Codifications

(“ASC”) 606, Revenue from Contracts with Customers , revenue from contracts with customers is recognized when control

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at December 31, 2023 was $ 2,043,362 .

$ 2,257,452 .

In addition, the Company offers virtual gifts

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PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Advertising Revenue

The Company generates advertising revenue from

the display of advertisements on its products through contractual agreements with third parties that are based on the number of advertising

impressions delivered.

Measurements of impressions include when a customer clicks an advertisement (CPC basis), views an advertisement

impression (CPM basis), or registers for an external website via an advertisement by clicking on or through the application (CPA basis).

Advertising revenue is dependent upon traffic as well as the advertising inventory placed on the Company’s products.

Technology Service Revenue

Technology service revenue was historically generated

under service and partnership agreements that the Company negotiated with third parties which included development, integration, engineering,

licensing or other services that the Company provided.

During 2021, the Company recorded technology

service revenue in connection with its agreement to serve as a launch partner with Open Props, Inc.

(formerly YouNow, Inc., and referred

to herein as “YouNow”) and to integrate YouNow’s props infrastructure (the “Props platform”) into the Company’s

Camfrog and Paltalk applications (as amended, the “YouNow Agreement”).

In August 2021, the Company received notice from

YouNow that it was terminating the YouNow Agreement, and that it would no longer support the Props platform past the end of calendar

The Company did not generate any technology service

revenue during the year ended December 31, 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net (Loss) Income Per Share

Basic earnings and net (loss) income per share

are computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding

during the period as defined by ASC Topic 260, Earnings Per Share .

Diluted earnings per share is computed using the weighted average

number of common shares and, if dilutive, potential common shares outstanding during the period.

Potential common shares consist of the

incremental common shares issuable upon the exercise of stock options (using the treasury stock method).

To the extent stock options

are antidilutive, they are excluded from the calculation of diluted income per share.

Basic earnings and net (loss) income per share are computed by dividing

the net (loss) income available to common stockholders by the weighted average number of common shares outstanding during the period as

defined by ASC Topic 260, Earnings Per Share .

Diluted earnings per share is computed using the weighted average number of common

shares and, if dilutive, potential common shares outstanding during the period.

Potential common shares consist of the incremental common

shares issuable upon the exercise of stock options (using the treasury stock method).

To the extent stock options are antidilutive, they

are excluded from the calculation of diluted income per share.

Cash and Cash Equivalents

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The Company tests the recorded amount of goodwill

for impairment on an annual basis on December 31 of each fiscal year or more frequently if there are indicators that the carrying amount

of the goodwill exceeds its carried value.

for impairment on an annual basis on December 31 of each fiscal year or more frequently if there are indicators that the fair value of

the goodwill exceeds its carrying amount.

The Company has one reporting unit.

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that no impairment existed as of December 31, 2023 and 2022.

PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

The Company accounts for income taxes under the

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accordance with ASC No.

740, Accounting for Income Taxes (“ASC 740”) on the basis of a two-step process in which (1) the

Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of

the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest

amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

740, Accounting for Income Taxes (“ASC 740”) on the basis of a two-step process in which (1)

the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits

of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the

largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company recognizes interest and penalties

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and penalties would be included on the related tax liability line in the accompanying consolidated balance sheets.

The Company’s

policy for global intangible low taxed income is to treat as a period cost when incurred.

The Company’s policy for global intangible

low-taxed income is to treat, as a period cost, when incurred.

Reduction Act of 2022

On August 16,

2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law.

The IR Act provides for, among other

things, a new U.S.

federal 1 % excise tax on certain repurchases of stock by publicly traded U.S.

domestic corporations and certain U.S.

domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023.

The excise tax is imposed on

the repurchasing corporation itself, not its shareholders from which shares are repurchased.

The amount of the excise tax is generally

1 % of the fair market value of the shares repurchased at the time of the repurchase.

However, for purposes of calculating the excise tax,

repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock

repurchases during the same taxable year.

In addition, certain exceptions apply to the excise tax.

Department of the Treasury

has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.

The IR Act was not applicable to the Company in the current year given that repurchases of

stock were below the threshold required to be subject to taxation.

PALTALK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible Assets

The Company acquired amortizable intangible assets

as part of a purchase agreement consisting of internally developed software, intellectual property (trade names, trademarks and URLs)

and subscriber relationships/ customer lists.

The Company’s intangible assets represent definite lived intangible assets, which

are being amortized on a straight-line basis over their estimated useful lives as follows:

The Company’s acquired amortizable intangible

assets primarily consist of the ManyCam assets acquired in June 2022, which consist of internally developed software, intellectual property

(trade names, trademarks and URLs) and subscriber relationships/ customer lists.

The Company’s intangible assets represent

definite lived intangible assets, which are being amortized on a straight-line basis over their estimated useful lives as follows:

Trade names, trademarks, product names, URLs

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presented in these consolidated financial statements.

PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Intangible Assets, Net

Intangible assets, net consisted of the following for the periods

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$ ( 5,278,721 )

expense for the years ended December 31, 2022 and 2021 was $ 601,264 and $ 184,667 , respectively.

The aggregate amortization expense for

each of the next five years and thereafter is estimated to be $ 822,333 in 2023,

$ 821,687 in 2024, $ 568,529 in 2025, $ 382,133 in 2026, $ 382,133 in 2027, and $ 549,996 thereafter.

Digital Tokens

Digital tokens, consist of Props tokens received

in connection with the YouNow Agreement.

Given that there is limited precedent regarding the classification and measurement of cryptocurrencies

and other digital tokens under current GAAP, the Company has determined to account for these tokens as indefinite-lived intangible assets

in accordance with ASC 350, Intangibles-Goodwill and Other until further guidance is issued by the FASB.

During the years ended December 31, 2022 and

2021, the Company recorded a non-cash impairment charge in the amount of $ 7,262 and $ 765,232 , respectively, which is reported in the

accompanying consolidated statements of operations as a result of recent declines in the quoted market prices of certain digital tokens

below the market price of their acquisition.

During year the ended December 31, 2021, the

Company sold approximately 36.9 million Props tokens for proceeds $ 0.9 million.

The realized gain of the sale of digital tokens was $ 307,934 for the year ended December 31, 2021 and is included in the consolidated statements of operations.

The Inflation Reduction Act (“IRA”)

and Chips and Science Act (“CHIPS Act”) were both enacted in August 2022.

The IRA introduced new provisions including a 15 %

corporate alternative minimum tax for certain large corporations that have at least an average of $ 1 billion adjusted financial statement

income over a consecutive three-tax-year period and a 1 % excise tax surcharge on stock repurchases.

The CHIPS Act provides a variety

of incentives associated with investments in domestic semiconductor manufacturing and related activities.

Both the IRA and CHIPS Act

are applicable for tax years beginning after December 31, 2022 and had no impact to the Company’s consolidated financial statements

for the year ended December 31, 2022.

On March 11, 2021, the American Rescue Plan Act

of 2021 (“American Rescue Plan”) was signed into law to provide additional relief in connection with the ongoing COVID-19

The American Rescue Plan includes, among other things, provisions relating to PPP loan expansion, defined pension contributions,

excessive employee remuneration, and the repeal of the election to allocate interest expense on a worldwide basis.

Under ASC 740, the

effects of new legislation are recognized upon enactment.

The enactment of the American Rescue Plan did not impact the Company’s

income tax provision.

During the year ended December 31, 2023, in connection

with the previously acquired ManyCam assets and pursuant to the securities purchase agreement related to such asset acquisition, the

Company made an earn-out payment of $ 85,000 because the sales of the ManyCam software, less chargebacks and refunds, in the six-month

period following the closing of the acquisition exceeded $ 600,000 but were less than $ 700,000 .

Amortization expense for the years ended December

31, 2023 and 2022 was $ 822,334 and $ 601,264 , respectively.

The aggregate amortization expense for each of the next five years and thereafter

is estimated to be $ 821,687 in 2024, $ 568,529 in 2025, $ 382,133 in 2026, $ 382,133 in 2027, $ 382,133 in 2028, and $ 167,862 thereafter.

The Organization for Economic Co-operation and

Development (OECD) Pillar Two Model Rules are intended to apply for tax years beginning in 2024.

The Pillar Two Model Rules establishes

a global minimum tax of 15 % for multinational companies with consolidated revenue above € 750 million.

Many foreign jurisdictions

have adopted the Pillar Two Model Rules and other foreign jurisdictions are in the process of enacting legislation to adopt it.

does not expect to be impacted by the Pillar Two Model Rules as it will not meet the consolidated revenue threshold in the near term.

PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

The components of income (loss) before the provision

(benefit) for income taxes are as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of loss before income tax benefit

are as follows:

Domestic Operations

$ ( 498,673 )

$ ( 2,683,143 )

Foreign Operations

$ ( 1,087,587 )

The Company’s provision for income taxes

$ ( 3,583,915 )

The Company’s benefit for income taxes

is comprised of the following:

4 unchanged sentences

Total Deferred

Total (Benefit) Provision

Total Benefit

$ ( 171,665 )

1 unchanged sentence

from the U.S.

federal statutory income tax rate of 21 % for 2022 and 2021 as follows:

Income tax benefit (expense) at federal statutory rate

federal statutory income tax rate of 21 3 %

for 2023 and 2022 as follows:

Income tax benefit at federal statutory rate

Permanent Differences

3 unchanged sentences

Share based compensation

PPP Loan Forgiveness

Foreign Income Tax Rate Differential

Effective tax rate

PALTALK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred income taxes reflect the net tax effects

18 unchanged sentences

$ ( 614,041 )

PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

$ ( 716,903 )

In assessing the Company’s ability to recover

23 unchanged sentences

As of December 31, 2023, the Company has U.S.

federal net operating loss carryforwards of approximately $15.2 million, of which $12.5 million may be subject to an annual limitation

under Section 382 of the Internal Revenue Code.

Of the $15.2 million, approximately, $14.0 million are available to offset 100% of future

taxable income but expire in varying amounts between 2031 to 2037, if not utilized.

The remaining $1.2 million is available to offset

80% of future taxable income but may be carried forward indefinitely.

The Company also has foreign net operating loss carryforwards of

approximately $0.5 million, which begin to expire in 2042.

federal net operating loss carryforwards of approximately $12.8 million, of which $10.4 million continue to be subject to a severe annual

limitation under Section 382.

Approximately $1.3 million of the $2.4 million not subject to limitation under Section 382 may be used

to offset 100% of future taxable income but expire in 2036-2037, if not utilized.

The remaining $1.1 million not subject to limitation

under Section 382 may be used to offset 80% of future taxable income and can be carried forward indefinitely.

The Company applies the applicable authoritative

5 unchanged sentences

the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months from December 31, 2023.

The Company files a federal income tax return,

income tax returns in various state tax jurisdictions, and income tax returns in Canada.

PALTALK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The open tax years for the federal income tax

3 unchanged sentences

the Company’s federal and state net operating losses begin in 2020.

Accrued Expenses and

Other Current Liabilities

Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following

3 unchanged sentences

Total accrued expenses and other current liabilities

PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Stockholders’

19 unchanged sentences

were 665,335 shares available for future issuance under the 2016 Plan.

August 2021 Underwritten Public Offering

On August 5, 2021, the Company announced the

pricing and closing of an underwritten public offering (the “August 2021 Offering”), in which the Company sold an aggregate

of 1,333,310 shares of the Company’s common stock (which includes 173,910 shares sold to the underwriter pursuant to the full exercise

of the underwriter’s over-allotment option) at a public offering price of $3.00 per share.

The August 2021 Offering was made pursuant

to the Company’s Registration Statement on Form S-1 (Registration No.

333-257036), initially filed with the SEC on June 11, 2021,

and was subsequently amended and declared effective on August 2, 2021.

Gross proceeds received by the Company from the

August 2021 Offering were approximately $ 4.0 million, before deducting underwriting discounts and commissions and other estimated offering

expenses of approximately $ 769,200 .

These costs were recorded in stockholders’ equity as a reduction of additional paid-in capital

in connection with Staff Accounting Bulletin Topic 5A.

In connection with the August 2021 Offering,

the Company’s common stock was approved for listing on The Nasdaq Capital Market under the symbol “PALT” and began

trading on The Nasdaq Capital Market on August 3, 2021.

October 2021 Underwritten Public Offering

On October 19, 2021, we announced the pricing

and closing of an underwritten public offering of an aggregate of 1,552,500 shares of our common stock (which includes 202,500 shares

sold to the underwriter pursuant to the full exercise of the underwriter’s over-allotment option) at a public offering price of

$ 7.50 per share (the “October 2021 Offering”).

The October 2021 Offering was made pursuant to an effective shelf Registration

Statement on Form S-3 (Registration No.

333-260063), previously filed with the SEC on October 5, 2021 and declared effective on October

The October 2021 Offering was offered by means of a prospectus supplement and accompanying prospectus, forming part of the

registration statement.

Gross proceeds received by the Company from the

October 2021 Offering were approximately $ 11.6 million, before deducting underwriting discounts and commissions and other estimated offering

expenses of approximately $ 955,400 .

These costs were recorded in stockholders’ equity as a reduction of additional paid-in capital

in connection with Staff Accounting Bulletin Topic 5A.

PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Stock Options

2 unchanged sentences

Expected volatility

178.0 – 197.0 %

Expected life of option

Risk free interest rate

0.81 – 0.88 %

Expected dividend yield

9 unchanged sentences

as the stock-based awards vest.

PALTALK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables summarize stock option activity during the year

6 unchanged sentences

Exercisable at December 31, 2023

December 31, 2022, there was $ 338,374 of total unrecognized compensation expense related to stock options, which is expected to be recognized

over a weighted average period of 3.04 years.

December 31, 2022, the aggregate intrinsic value of stock options that were outstanding and exercisable was $ 9,360 .

On December 31, 2021, the aggregate intrinsic value of stock options that were outstanding and exercisable was $ 149,394 and $ 109,644 ,

respectively.

The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the fair value

of such awards as of the period-end date.

At December 31, 2023, there was $ 338,194 of total

unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 2.94

On December 31, 2023, the aggregate intrinsic

value of stock options that were outstanding and exercisable was $ 136,971 and $ 79,371 , respectively.

On December 31, 2022, the aggregate

intrinsic value of stock options that were outstanding and exercisable was $ 9,360 .

The intrinsic value for stock options is calculated

based on the exercise price of the underlying awards and the fair value of such awards as of the period-end date.

During the year ended December 31, 2023, the

Company granted stock options to members of the Board of Directors to purchase an aggregate of 24,000 shares of common stock at an exercise

price of $ 2.66 per share.

The stock options vest in four equal quarterly installments on the last day of each calendar quarter in 2022

and have a term of ten years.

During the year ended December 31, 2022, the Company also granted options to employees to purchase an aggregate

of 224 ,501shares of common stock.

These options have a vesting date ranging between the grant date and up to four years, have a term

of ten years and have an exercise price of $ 2.66 .

The aggregate fair value for the options granted during the years

ended December 31, 2022 and 2021 was $ 636,957 and $ 145,522 , respectively.

PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Stock-based compensation expense for the Company’s stock options

included in the consolidated statements of operations was as follows:

Company granted stock options to members of the Board of Directors (other than Mr.

Cook) to purchase an aggregate of 24,000 shares of

common stock at an exercise price of $ 1.94 per share.

The stock options vest in four equal quarterly installments on the last day of

each calendar quarter in 2023 and have a term of ten years.

In addition to the foregoing, the Company granted a stock option to Mr.

to purchase an aggregate of 100,000 shares of common stock at an exercise price of $ 1.86 .

The stock option vests in four equal annual

installments beginning on the first anniversary of the date of the grant and has a term of ten years.

During the year ended December

31, 2023, the Company also granted options to employees to purchase an aggregate of 25,000 shares of common stock.

These options have

a vesting date ranging between the grant date and up to four years, have a term of ten years and have an exercise price of $ 1.94 .

The aggregate fair value for the options granted

during the years ended December 31, 2023 and 2022 was $ 268,200 and $ 636,957 , respectively.

Stock-based compensation expense for the Company’s

stock options included in the consolidated statements of operations was as follows:

Cost of revenue

4 unchanged sentences

Treasury Shares

The Board of Directors of the Company approved

a stock repurchase plan for up to $ 1,750,000 of the Company’s outstanding common stock (the “Stock Repurchase Plan”),

effective as of March 29, 2022 and expiring on the one-year anniversary of such date.

Shares may be repurchased from time-to-time in

open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal

securities laws, including Rule 10b5-1 programs, and the Stock Repurchase Plan may be suspended or discontinued at any time.

timing, number and value of shares repurchased will be determined by a committee of the Board of Directors at its discretion and will

depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions,

The Board of Directors approved a stock repurchase

plan for up to $ 1,750,000 of the Company’s outstanding common stock (the “Stock Repurchase Plan”), effective as of

March 29, 2022 and expiring on the one-year anniversary of such date.

Under the Stock Repurchase Plan, shares may be repurchased from

time-to-time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance

with federal securities laws, including Rule 10b5-1 programs, and the Stock Repurchase Plan may be suspended or discontinued at any time.

The actual timing, number and value of shares repurchased will be determined by a committee of the Board of Directors at its discretion

and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions,

alternative investment opportunities and other corporate considerations.

The Stock Repurchase Plan expired on March 29, 2023 pursuant

to its terms and has not been renewed.

PALTALK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, the Company had 641,963

shares of its common stock classified as treasury shares on the Company’s consolidated balance sheets.

Net (Loss) Income Per

Basic earnings and net income per share are computed

by dividing the net income available to common stockholders by the weighted average number of common shares outstanding during the period

as defined by ASC Topic 260, Earnings Per Share .

Diluted earnings per share is computed using the weighted average number of common

shares and, if dilutive, potential common shares outstanding during the period.

Potential common shares consist of the incremental common

shares issuable upon the exercise of stock options (using the treasury stock method).

To the extent stock options are antidilutive, they

are excluded from the calculation of diluted loss per share.

For the year ended December 31, 2022, 622,074 of shares issuable upon the

exercise of outstanding stock options were not included in the computation of diluted net loss per share from operations because their

inclusion would be antidilutive.

For the year ended December 31, 2022, no shares issuable upon the exercise of outstanding stock options

were included in the computation of diluted net income per share from operations because their inclusion would be dilutive.

ended December 31, 2021, 392,749 of shares issuable upon the exercise of outstanding stock options were not included in the computation

of diluted net income per share for operations because their inclusion would be antidilutive.

For the year ended December 31, 2021, 43,021

of shares issuable upon the exercise of outstanding stock options were included in the computation of diluted net income per share for

operations because their inclusion would be dilutive.

The following table summarizes the net (loss) income per share calculation

Income Per Share

Basic earnings and net (loss) income per share

are computed by dividing the net (loss) income available to common stockholders by the weighted average number of common shares outstanding

during the period as defined by ASC Topic 260, Earnings Per Share .

Diluted earnings per share is computed using the weighted average

number of common shares and, if dilutive, potential common shares outstanding during the period.

Potential common shares consist of the

incremental common shares issuable upon the exercise of stock options (using the treasury stock method).

To the extent stock options

are antidilutive, they are excluded from the calculation of diluted loss per share.

For the year ended December 31, 2023, 740,814 of

shares issuable upon the exercise of outstanding stock options were not included in the computation of diluted net loss per share from

operations because their inclusion would be antidilutive.

For the year ended December 31, 2023, no shares issuable upon the exercise

of outstanding stock options were included in the computation of diluted net income per share from operations because their inclusion

would be dilutive.

For the year ended December 31, 2022, 622,074 of shares issuable upon the exercise of outstanding stock options were

not included in the computation of diluted net loss per share from operations because their inclusion would be antidilutive.

year ended December 31, 2022, no shares issuable upon the exercise of outstanding stock options were included in the computation of diluted

net income per share from operations because their inclusion would be dilutive.

The following table summarizes the net loss per share calculation

for the periods presented:

Net (loss) income from operations – basic and diluted

Net loss from operations – basic and diluted

$ ( 1,067,335 )

$ ( 3,412,250 )

Weighted average shares outstanding – basic

3 unchanged sentences

Diluted from operations

PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Operating Leases

1 unchanged sentence

agreement with Jericho Executive Center LLC for office space at 30 Jericho Executive Plaza in Jericho, New York, which commenced on September

1, 2016 and runs through November 30, 2021.

1, 2016 and ran through November 30, 2021.

The Company’s monthly office rent payments under the lease are currently approximately

7 unchanged sentences

leases that had not yet commenced.

PALTALK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2023, the Company had operating

lease liabilities of approximately $ 159,000 and right-of-use assets of approximately $ 159,000 , which are included in the consolidated

balance sheets.

lease liabilities of approximately $ 77,005 and right-of-use assets of approximately $ 77,005 , which are included in the consolidated balance

Total rent expense for the year ended December

31, 2023 was $ 82,447 , of which $ 6,000 was sublease income.

Total rent expense for year ended December 31, 2021 was $ 84,525 , of which

Total rent expense for the year ended December 31, 2022 was $ 83,084 , of which

$ 6,000 was sublease income.

2 unchanged sentences

operating leases for the periods presented:

Cash paid for amounts included in the measurement of operating lease liabilities:

Cash paid for amounts included in the measurement of operating lease

Weighted average assumptions:

6 unchanged sentences

Present value of minimum lease payments

On April 13, 2020, to help ensure adequate liquidity

in light of the uncertainties posed by the coronavirus pandemic, the Company applied for a loan under the SBA PPP under the CARES Act.

On May 3, 2020, the Company entered into the Note in favor of the Lender.

The Note had an aggregate principal amount of

$ 506,500 , a two -year term, a maturity date of May 3, 2022 and borne interest at a stated rate of 1.0 % per annum.

The Company did not

provide any collateral or guarantees for the Note, nor did the Company pay any facility charge to obtain the Note.

The Note provided

for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, breaches of representations

and material adverse effects.

On January 13, 2021, the Note was fully

forgiven by the SBA and the Lender in compliance with the provisions of the CARES Act, and the Company recognized a $ 506,500 gain on

extinguishment of term debt.

PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Commitments and Contingencies

Patent Litigations

On July 23, 2021, a

wholly owned subsidiary of the Company, Paltalk Holdings, Inc., filed a patent infringement lawsuit against WebEx Communications, Inc.,

Cisco WebEx LLC, and Cisco Systems, Inc.

and Contingencies

Patent Litigation

On July 23, 2021, a wholly owned subsidiary of

the Company, Paltalk Holdings, Inc., filed a patent infringement 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

The Company alleges that Cisco’s Webex products have infringed U.S.

District Court for the Western District of Texas (the “Court”).

The Company alleges that certain of Cisco’s products have infringed U.S.

6,683,858, and that the Company is entitled

A Markman hearing took

place on February 24, 2022.

A Markman hearing took place on February 24,

On September 7, 2022, the United States Patent Office issued a reexamination of U.S.

and on January 19, 2023, the Examiner issued an Ex Parte Reexamination Certificate, ending the reexamination

and confirming the patentability of claims 1-10 of U.S.

Trial is now scheduled for early third quarter

6,683,858, and on January 19, 2023,

the Examiner issued an Ex Parte Reexamination Certificate, ending the reexamination and confirming the patentability of claims 1-10 of

On June 29, 2023, the Court held a pretrial conference and denied Cisco’s motion for summary judgment.

The trial is expected to be held in April of 2024.

Legal Proceedings

5 unchanged sentences

December 31, 2023.

Officer Employment Agreements

On March 23, 2022, the Company entered into Amended

and Restated Employment Agreements with the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”),

which amended and restated their existing employment agreements with the Company dated October 7, 2016 and December 9, 2019, respectively.

The agreements are each for a term of one year with auto renewal provisions.

Except for adjustments to base salaries, all other terms

and conditions of the prior employment agreements between the Company and the CEO and CFO remained in full force and effect.

agreement is retroactive to February 2021.

The CFO agreement is retroactive to January 2022.

Aggregate commitments of base salaries under

the agreements for 2022 total $ 490,000 .

Should the agreements be renewed for 2023 and beyond, the aggregate base salary commitments would total

$ 510,000 per year.

Asset Acquisition – Securities Purchase

As discussed above in Note 1, on June 9,

2022, the Company entered into the Securities Purchase Agreement by and among the Company, the Purchaser, Visicom and Target NewCo, pursuant

to which the Purchaser purchased, effective as of the Effective Date, all of the issued and outstanding shares of Target NewCo.

The Purchaser acquired the Conveyed Assets for

a cash purchase price of $ 2.7 million (the “Cash Consideration”).

In addition to the Cash Consideration, Visicom is entitled

to receive an additional payment of up to $ 600,000 (the “Earn-Out Payment”) based on the sales of the ManyCam software less

chargebacks and refunds (“Gross Sales”) in the six-month period following the Closing (the “Earn-Out Period”)

(i) if the Gross Sales during the Earn-Out Period are greater than $800,000, the Earn-Out Payment shall be $600,000, (ii)

if the Gross Sales during the Earn-Out Period are greater than $700,000 but less than $800,000, the Earn-Out Payment shall be $300,000,

(iii) if the Gross Sales during the Earn-Out Period are greater than $600,000 but less than $700,000, the Earn-Out Payment shall be $150,000

and (iv) if the Gross Sales during the Earn-Out Period do not exceed $600,000, then the Seller will not be paid any portion of the Earn-Out

The Company concluded that the Conveyed Assets were not considered a business for purposes of Regulation S-X and ASC 805, Business

Combinations.

While Gross Sales during the Earn Out Period exceeded $600,000 and was less than $700,000, there were some adjustments

made to calculation and it was agreed by both parties to a negotiated amount.

As a result, the Company recorded a liability in the amount

of $85,000 for payment to the Seller, with a corresponding adjustment to the cost basis of the Conveyed Assets.

As part of a valuation analysis, the Company

identified intangible assets, including internally developed software, subscriber relationships/customer list and intellectual property

(trade names, trademarks, URLs).

The fair value of identifiable intangible assets is determined primarily using the “income approach,”

which requires a forecast of all of the expected future cash flows and includes significant inputs such as the weighted average cost

of capital and the discount premium.

On the date of measurement the weighted average cost of capital was 23.2 % and the discount premium

The Company considered several factors to estimate

the economic useful life of the Customer Relationships including those noted under ASC 350-30-35-3.

The Customer Relationships were estimated

to have an economic useful life of three years for tradenames and seven years for developed software and customer list.

This assumption

was deemed reasonable based on reviewing useful lives for the comparable companies.

PALTALK, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Final allocation was determined with the assistance

of a third-party valuation specialist hired by Company management.

The following table summarizes the fair value of the identifiable

intangible assets and their respective useful lives:

Consideration

Allocation at

Internally developed software

Intellectual property (trade names, trademarks, URLs)

Subscriber Relationships/Customer List

Total acquired assets

estimated aggregate amortization expense for each of the next five years and thereafter will approximate $ 804,333 in 2023, $ 804,333 in

2024, $ 566,029 in 2025, $ 379,633 in 2026, $ 379,633 in 2027 and $ 546,250 thereafter.

The Company incurred approximately $ 242,000 of

expenses in connection with the ManyCam Acquisition and capitalized them accordingly.

As part of the accounting for the ManyCam assets,

the Company provisionally recorded a deferred tax liability of $ 0.9 million with an offset to intangible assets related to the excess

financial reporting basis over the tax basis of the Conveyed Assets.

On June 30, 2022, the Company entered into the

License Agreement with Visicom, pursuant to which the Company agreed to distribute, at the discretion and direction of Visicom, a specified

number of ManyCam software updates to certain license holders to whom Visicom has previously granted a “lifetime” license

to ManyCam software.

As consideration for distributing the software updates, Visicom paid the Company an initial upfront nonrefundable

payment of $ 65,000 .

The License Agreement provides that Visicom may purchase additional licenses at prices specified therein.

providing a one-time, limited license to Visicom for the distribution of ManyCam software updates pursuant to the terms of the License

Agreement, the Company does not have any obligation to provide support or service to the licensee end users.

The Company recognized the

$ 65,000 payment as revenue during the period ended December 31, 2022, as it satisfied its performance obligation as specified in the

License Agreement.

Subsequent Events

Management has evaluated subsequent events

or transactions occurring through the date the consolidated financial statements were issued and determined that no other events or transactions

Management has evaluated subsequent events or

transactions occurring through the date the consolidated financial statements were issued and determined that no other events or transactions

are required to be disclosed herein.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURE

CHANGES IN AND

DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data