INTELLIGENT PROTECTION MANAGEMENT CORP. 10-Q

ITEM 1. FINANCIAL STATEMENTS INTELLIGENT PROTECTION MANAGEMENT CORP. CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2025 December 31, 2024 Assets (unaudited) Current assets: Cash and cash equivalents $ 9,683,317 $ 10,588,534 Accounts receivable, net of $ 274,372 allowance 2,152,544 -- Accounts receivable – due from related party 436,425 -- Prepaid expense and other current assets 1,682,004 462,422 Operating lease right-of-use asset, current 882,568 74,490 Employee retention tax credit receivable, net 114,212 114,212 Assets held for sale - current -- 72,925 Total current assets 14,951,070 11,312,583 Property and equipment, net 632,070 -- Intangible assets, net 9,214,716 1,882,781 Goodwill 5,516,501 2,663,229 Operating lease right of use assets, noncurrent 810,130 -- Other assets 13,937 13,937 Total assets $ 31,138,424 $ 15,872,530 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 2,455,833 $ 380,298 Accrued expenses and other current liabilities 1,121,678 509,759 Operating lease liabilities, current portion 805,022 74,490 Deferred revenue 3,678,592 555,039 Earnout liability 704,000 -- Liabilities held for sale - current -- 2,024,237 Total current liabilities 8,765,125 3,543,823 Operating lease liabilities, non-current portion 879,098 Deferred tax liability 418,380 429,045 Total liabilities 10,062,603 3,972,868 Commitments and contingencies (Note 12) Stockholders’ equity: Series A Preferred Stock, $ 0.001 par value, 9,000,000 authorized, 4,000,000 and 0 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively 4,000 -- Common stock, $ 0.001 par value, 25,000,000 shares authorized, 9,878,950 shares issued and 9,236,987 shares outstanding as of March 31, 2025 and December 31, 2024 9,879 9,879 Treasury stock, 641,963 shares repurchased as of March 31, 2025 and December 31, 2024 ( 1,199,337 ) ( 1,199,337 ) Additional paid-in capital 44,763,526 36,399,897 Accumulated deficit ( 22,502,247 ) ( 23,310,777 ) Total stockholders’ equity 21,075,821 11,899,662 Total liabilities and stockholders’ equity $ 31,138,424 $ 15,872,530 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 INTELLIGENT PROTECTION MANAGEMENT CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, 2025 2024 Revenue Managed information technology, includes $ 1,688,583 of related party revenue $ 3,558,833 $ -- Procurement revenue, includes $ 54,520 of related party revenue 951,379 -- Professional services revenue, includes $51,850 of related party revenue 726,607 -- Subscription revenue 281,219 271,572 Total revenue 5,518,038 271,572 Costs and expenses Costs of revenue 2,464,663 61,636 Sales, marketing and product development expense 765,364 265,789 General and administrative expense 2,937,897 743,573 Depreciation and amortization 684,041 205,583 Total costs and expenses 6,851,965 1,276,581 Loss from continuing operations ( 1,333,927 ) ( 1,005,009 ) Interest income, net 82,392 151,984 Loss from continuing operations before income tax benefit ( 1,251,535 ) ( 853,025 ) Income tax benefit 2,060,065 598,710 Net income (loss) from continuing operations 808,530 ( 254,315 ) Loss from discontinued operations, net of income tax expense of $ 480,810 for the three months ended March 31, 2024 -- ( 237,992 ) Net income (loss) $ 808,530 $ ( 492,307 ) Net income (loss) per share of common stock: Basic – continuing operations $ 0.06 $ ( 0.03 ) Diluted – continuing operations $ 0.06 $ ( 0.03 ) Basic – discontinued operations $ -- $ ( 0.02 ) Diluted – discontinued operations $ -- $ ( 0.02 ) Basic $ 0.06 $ ( 0.05 ) Diluted $ 0.06 $ ( 0.05 ) Weighted average number of shares of common stock used in calculating net loss per share of common stock: Basic 13,192,543 9,222,157 Diluted 13,192,543 9,222,157 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 INTELLIGENT PROTECTION MANAGEMENT CORP. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (Unaudited) Series A Preferred Stock Stock Amount Common Shares Stock Amount Treasury Shares Stock Amount Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity Balance at December 31, 2023 - $ - 9,864,120 $ 9,864 ( 641,963 ) $ ( 1,199,337 ) $ 36,208,728 $ ( 14,884,568 ) $ 20,134,687 Stock-based compensation expense - - - - - - 59,311 - 59,311 Net loss - - - - - - - ( 492,307 ) ( 492,307 ) Balance at March 31, 2024 - - 9,864,120 $ 9,864 ( 641,963 ) $ ( 1,199,337 ) $ 36,268,039 $ ( 15,376,875 ) $ 19,701,691 Balance at December 31, 2024 - $ - 9,878,950 $ 9,879 ( 641,963 ) $ ( 1,199,337 ) $ 36,399,897 $ ( 23,310,777 ) $ 11,899,662 Stock-based compensation expense - - - - - - 167,629 - 167,629 Issuance of Series A Preferred Stock 4,000,000 4,000 - - - - 8,196,000 - 8,200,000 Net income - - - - - - - 808,530 808,530 Balance at March 31, 2025 4,000,000 $ 4,000 $ 9,878,950 $ 9,879 ( 641,963 ) $ ( 1,199,337 ) $ 44,763,526 $ ( 22,502,247 ) $ 21,075,821 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 INTELLIGENT PROTECTION MANAGEMENT CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net income (loss) $ 808,530 $ ( 492,307 ) Net loss from discontinued operations -- 237,992 Net income (loss) from continuing operations $ 808,530 $ ( 254,315 ) Adjustments to reconcile net income (loss) from continuing operations to net cash used in operating activities: Amortization of intangible assets and depreciation 578,065 205,583 Amortization of operating lease right-of-use assets 206,687 20,841 Depreciation on property and equipment 105,976 -- Deferred tax liability -- ( 13,184 ) Income tax benefit ( 2,060,065 ) ( 598,710 ) Stock-based compensation 167,629 59,311 Credit loss expense 3,436 -- Changes in operating assets and liabilities, net of acquired assets and disposition: Accounts receivable 1,015,863 -- Operating lease liability ( 215,265 ) ( 20,841 ) Prepaid expense and other current assets ( 784,774 ) 142,734 Accounts payable, accrued expenses and other current liabilities 2,245,148 280,963 Deferred revenue ( 326,447 ) ( 158,168 ) Net cash provided by (used in) operating activities – continuing operations 1,744,783 ( 335,786 ) Net cash (used in) provided by operating activities –discontinued operations -- ( 185,008 ) Net cash provided by (used in) operating activities 1,744,783 ( 520,794 ) Cash flows from investing activities: Cash paid for acquisition of NTS ( 4,000,000 ) -- Net cash used in investing activities ( 4,000,000 ) -- Cash flows from financing activities: Proceeds from sale of Transferred Assets 1,350,000 -- Net cash provided by financing activities 1,350,000 -- Net decrease in cash and cash equivalents ( 905,217 ) ( 520,794 ) Balance of cash and cash equivalents at beginning of period 10,588,534 13,568,049 Balance of cash and cash equivalents at end of period $ 9,683,317 $ 13,047,255 Supplemental non-cash disclosure: Non-cash portion of consideration for acquisition of NTS (Series A Preferred Stock issuance) $ 8,200,000 -- The accompanying notes are an integral part of these condensed consolidated financial statements. 4 INTELLIGENT PROTECTION MANAGEMENT CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Organization and Description of Business The accompanying condensed consolidated financial statements include Intelligent Protection Management Corp. (f/k/a Paltalk, Inc.) and its wholly owned subsidiaries, A.V.M. Software, Inc., Paltalk Software Inc., Paltalk Holdings, Inc., Tiny Acquisition Inc., Camshare, Inc., Fire Talk LLC, Vumber LLC and ManyCam ULC (collectively, the “Company”). Following the Transactions (as defined below), the Company provides a comprehensive range of IT-related services, including dedicated server hosting, cloud hosting, data storage, managed security, backup and disaster recovery, and other related services including consulting and implementing technology solutions for large enterprise and commercial clients across the United States as well as small-and-medium sized businesses. The Company has an over 20-year history of technology innovation and holds eight patents. Prior to the completion of the Transactions the Company operated a network of consumer applications. The Company’s product portfolio included Paltalk, Camfrog and Tinychat, which together hosted a large collection of video-based communities. The Company’s other products included Vumber. Following the Transactions, the Company continues to support its 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. Acquisition of NTS On January 2, 2025 (the “Closing Date”), the Company completed the acquisition of Newtek Technology Solutions, Inc., a New York corporation (“NTS”), pursuant to that certain Agreement and Plan of Merger (the “Acquisition Agreement”), dated August 11, 2024, by and among the Company, PALT Merger Sub 1, Inc., a New York corporation and a direct and wholly owned subsidiary of the Company (“First Merger Sub”), PALT Merger Sub 2, LLC, a Delaware limited liability company and a direct and wholly owned subsidiary of the Company (“Second Merger Sub”), NTS and NewtekOne, Inc., a Maryland corporation and the sole stockholder of NTS (“Newtek”. Pursuant to the terms of the Acquisition Agreement, on the Closing Date: (i) NTS merged with and into First Merger Sub, with NTS continuing as the surviving entity (the “Interim Surviving Entity” and such merger, the “First Step Merger”), and (ii) immediately following the consummation of the First Step Merger, the Interim Surviving Entity merged with and into Second Merger Sub (the “Second Step Merger” and, together with the First Step Merger, the “Acquisition”), with the Second Merger Sub surviving as a wholly owned subsidiary of the Company. Following the closing of the Acquisition (the “Acquisition Closing”), the Company changed its name from “Paltalk, Inc.” to “Intelligent Protection Management Corp.” The aggregate consideration delivered by the Company to Newtek at the Acquisition Closing consisted of (i) $ 4,000,000 in cash (as adjusted pursuant to the Acquisition Agreement, the “Acquisition Closing Cash Consideration”) and (ii) 4,000,000 shares of the Company’s Series A Non-Voting Common Equivalent Stock (the “Series A Preferred Stock” and such shares issued at the Acquisition Closing, the “Acquisition Closing Stock Consideration” and together with the Acquisition Closing Cash Consideration, the “Acquisition Closing Consideration”). The Series A Preferred Stock will automatically convert into one share of the Company’s common stock, par value $ 0.001 per share (subject to certain customary anti-dilution adjustments), upon the occurrence of certain qualifying transfers by Newtek to third parties. In addition to the Acquisition Closing Consideration, Newtek is entitled to earn-out payments under certain circumstances. For more information, see the Note 3, “ Acquisition ” below. In connection with the Acquisition, the Company incurred professional fees of $ 0.3 million for the three months ended March 31, 2025 and $ 1.8 million for the year ended December 31, 2024. These amounts are included in general and administrative expenses. Divestiture On the Closing Date and prior to the Acquisition Closing, the Company completed the sale to Meteor Mobile Holdings, Inc., a Delaware corporation (“Meteor Mobile”), of its telecommunications services provider, “Vumber”, as well as its “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, together with the Acquisition, the “Transactions”) pursuant to that certain Asset Purchase Agreement, dated November 7, 2024, by and among the Company, its 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. As a result of the Divestiture, the Company is no longer engaged in the business of providing video-based, live streaming, virtual camera and telecommunications software to consumers, as and to the extent such businesses were previously conducted by the Company pursuant to the “Vumber,” “Paltalk” and “Camfrog” applications. In addition, prior to the Acquisition Closing, the Company ceased all operations of its “Tinychat” service and application. The consideration delivered by Meteor Mobile to the Company at the closing of the Divestiture consisted of (i) $ 1,350,000 in cash and (ii) the assumption of all of the liabilities of the Sellers arising out of, or relating to, the Business or the Transferred Assets, other than certain excluded liabilities (the “Divestiture Closing Consideration”). In connection with the Divestiture, the Company is entitled to earn-out payments under certain circumstances. For more information, see the Note 6, “ Discontinued Operations ” below. 5 Discontinued Operations During the year ended December 31, 2024, the Transferred Assets met the criteria for classification as assets held for sale and discontinued operations as the Company received stockholder approval of the sale of its Transferred Assets at its special meeting of stockholders held on December 30, 2024. As such, assets and liabilities related to the Transferred Assets are presented as held for sale/discontinued operations on the consolidated balance sheet as of December 31, 2024 and the results of operations are presented as discontinued operations on the consolidated statement of operations for the three months ended March 31, 2024. On January 2, 2025, the Company completed the Divestiture as described above. Employee Retention Tax Credit Under the provisions of the extension of the Coronavirus Aid, Relief, and Economic Security 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. As of March 31, 2025 and December 31, 2024, the remaining balance due to the Company was $ 114,212 , which was included on the condensed consolidated balance sheet as a receivable. Basis of Presentation The condensed consolidated financial statements included in this report have been prepared on a going concern basis in accordance with generally accepted accounting principles in the United States (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. The Company has not included certain information and notes required by GAAP for complete financial statements pursuant to those rules and regulations, although it believes that the disclosure included herein is adequate to make the information presented not misleading. The condensed consolidated financial statements contained herein should be read in conjunction with the Company’s audited consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 24, 2025 (the “Form 10-K”). In the opinion of management, the accompanying unaudited condensed consolidated financial information contains all normal and recurring adjustments necessary to fairly present the condensed consolidated balance sheets and statements of operations, cash flows and changes in stockholders’ equity of the Company for the interim periods presented. The Company’s historical results are not necessarily indicative of future operating results, and the results for the three months ended March 31, 2025 are not necessarily indicative of results for the year ending December 31, 2025, or for any other period. 6 2. Summary of Significant Accounting Policies During the three months ended March 31, 2025, there were no significant changes made to the Company’s significant accounting policies. For a detailed discussion about the Company’s significant accounting policies, see the Form 10-K. Recently Accounting Standards In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Disaggregation of Income Statement Expenses. The new standard requires entities to disclose additional information about certain expenses, such as purchases of inventory, employee compensation, depreciation, intangible asset amortization, as well as selling expenses included in commonly presented expense captions on the income statement. The FASB further clarified the effective date in January 2025 with the issuance of ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Companies have the option to apply this guidance either on a retrospective or prospective basis, and early adoption is permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements and related disclosures. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market funds as well as certificate of deposits to satisfy the depository requirement in the Loan Agreements (as defined and discussed in Note 13). The Company maintains cash in bank accounts which, at times, may exceed federally insured limits. As part of its cash management process, the Company periodically reviews the relative credit standing of these banks. The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible. Accounts Receivable, net of allowance Accounts receivable represents amounts owed to the Company by third parties for technology services and related residuals. The Company generally records a receivable when revenue is recognized as the timing of revenue recognition may differ from the timing of payment from customers. Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 60 days. The Company’s accounts receivables do not bear interest and are recorded at the invoiced amount for those with unconditional rights to consideration. Account receivables are presented net of an allowance for credit loss on the condensed consolidated balance sheet for any potentially uncollectible accounts under the current expected credit loss model. Segment Reporting The Company reports its segment information to reflect the manner in which the chief operating decision maker (the “CODM”) reviews and assesses performance. The Company’s Chief Executive Officer, President and Chief Operating Officer have joint responsibility as the CODM and review and assess the performance of the Company as a whole. The primary financial measures used by the CODM to evaluate performance and allocate resources are net income (loss) and operating income (loss). The CODM uses net income (loss) and operating income (loss) to evaluate the performance of the Company’s ongoing operations and as part of the Company’s internal planning and forecasting processes. Information on net income (loss) and operating income (loss) is disclosed in the Consolidated Statements of Operations. Segment expenses and other segment items are provided to the CODM on the same basis as disclosed in the Consolidated Statements of Operations. The CODM does not evaluate performance or allocate resources based on segment assets, and therefore such information is not presented in the notes to the financial statements. The Company is a single-segment business. Use of 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. The most significant accounting estimates inherent in the preparation of the Company’s financial statements include impairments and fair value estimates for assets acquired in business combinations and assessment of useful lives of acquired intangible assets. The Acquisition related fair values and estimates were based on a number of factors, including a valuation by an independent third party. 7 Revisions to the Company’s estimates may result in increases or decreases to revenues and income and are reflected in the condensed consolidated financial statements in the periods in which they are first identified. If the Company’s estimates indicate that a contract loss will be incurred, a loss provision is recorded in the period in which the loss first becomes probable and can be reasonably estimated. Contract losses are the amount by which the estimated costs of the contract exceed the estimated total revenue that will be generated by the contract and are included in cost of revenues in the Company’s condensed consolidated statements of operations. There were no contract losses for the periods presented. Business Combinations The Company accounts for business combinations in accordance with the provisions of Accounting Standards and Codifications (“ASC”) Topic 805, Business Combinations . Business combinations are accounted for using the acquisition method, whereby the consideration transferred is allocated to the net assets acquired based on their respective fair values measured on the acquisition date. The difference between the fair value of these assets and the purchase price is recorded as goodwill. Transaction costs other than those associated with the issue of debt or equity securities, and other direct costs of a business combination are not considered part of the business acquisition transaction and are expensed as incurred. Revenue Recognition Following the Transactions, the Company’s revenue is measured based on the consideration specified in a contract with a customer. The Company’s contracts with its customers often include promises to transfer multiple products and services. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. When a cloud-based service includes both on-premises software licenses and cloud services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the cloud service and recognized over time. Certain cloud services depend on a significant level of integration, interdependency, and interrelation between the desktop applications and cloud services, and are accounted for together as one performance obligation. Revenue from cloud services is recognized ratably over the period in which the cloud services are provided. The Company otherwise recognizes revenue when it satisfies a performance obligation by transferring control of a product or service or by arranging for the sale of a vendor’s products or service to a customer. The Company recognizes revenue from sale of services as they perform the underlying services, typically based on time and materials basis based upon hours incurred for the performance completed to date for which the Company has the right to consideration. The Company recognizes revenue on sales of goods at a point in time when customer takes control of goods, which typically occurs when title and risk of loss have passed to the customer. In most cases, the Company serves as principal; therefore it recognizes revenue on a gross basis for each of the Company’s services and product offerings principally because the Company is primarily responsible for fulfilling the promise to provide specified goods or service, and the Company has discretion in establishing the price of specified good or service. When the Company serves as an agent, it recognizes revenue on a net basis. The Company classifies its right to consideration in exchange for deliverables as either a receivable or a contract asset (unbilled receivable). A receivable is a right to consideration that is unconditional ( i.e. , only the passage of time is required before payment is due). For example, the Company recognizes a receivable for revenue related to the Company’s transaction or volume-based contracts when earned regardless of whether amounts have been billed. Such receivables are presented in accounts receivable, net in the Company’s consolidated balance sheets. The Company maintains an allowance for credit losses to provide for the estimated amount of receivables that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables, judgment, and other applicable factors. A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets are presented in “current and other assets” in the Company’s consolidated balance sheets and primarily relate to unbilled amounts on fixed-price contracts utilizing the output method of revenue recognition. The Company’s contract assets and liabilities are reported at the end of each reporting period. The difference between the opening and closing balances of the contract assets and deferred revenue primarily results from the timing difference between performance obligations and the customer’s payment. The Company receives payments from customers based on the terms established in their contracts, which may vary generally by contract type. 8 The Company’s contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. The difference between the opening and closing balances of the contract assets and deferred revenue primarily results from the timing difference between performance obligations and the customer’s payment. The Company receives payments from customers based on the terms established in their contracts, which may vary generally by contract type. The Company sells hardware and software products on both a stand-alone basis without any services and as a solution bundled with services. When the Company provides a combination of hardware and software products with the provision of services, the Company separately identifies its performance obligations under the contract and the hardware and/or software products or services that will be provided. The total transaction price for an arrangement with multiple performance obligations is allocated at contract inception to each performance obligation in proportion to the stand-alone selling price of the hardware or software. The selling price is the price at which the Company would sell a promised good or service separately to a customer. The Company estimates the price based on observable inputs, including direct labor hours and allocatable costs, or uses observable stand-alone prices when they are available. The Company’s professional services include the design and implementation of a wide range of IT products and services. Such services are typically provided by us or third-party subcontractor vendors on a stand-alone basis. Subscription Revenue The Company also generates subscription revenue from monthly premium subscription services from sales of its ManyCam software. Subscription revenues are presented net of refunds, credits, and known and estimated credit card chargebacks. During the three months ended March 31, 2025 and 2024, 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. Intangible Assets Intangible assets include intellectual property either owned by the Company or to which the Company has a license. Intangible assets acquired in a business combination are recognized at fair value using generally accepted valuation methods deemed appropriate for the type of intangible asset acquired. The Company’s intangible assets include patents, internally developed software, intellectual property (trade names, trademarks and URLs) and subscriber relationships/customer lists. 9 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: Patents 20 years Trade names, trademarks, product names, URLs 5 - 10 years Internally developed software 5 - 7 years Non-compete agreements 3 years Subscriber/customer relationships 3 - 12 years Order Backlog 1 year The Company reviews intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows. No impairments were recorded on intangible assets as no impairment indicators were noted for the periods presented in these consolidated financial statements. Goodwill Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. The Company evaluates its goodwill for impairment in accordance with ASC Topic 350, Intangibles - Goodwill and Other , by assessing qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. The Company performs the quantitative goodwill impairment test, if, after assessing the totality of events or circumstances such as those described in paragraph ASC 350-20-35-3C(a) through (g), the Company determines that it was more likely than not that the fair value of a reporting unit is less than its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeded the reporting unit’s fair value, limited to the total amount of goodwill related to the reporting unit. 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 fair value of the goodwill exceeds its carrying amount. The Company has one reporting unit. Leases The Company determines if an arrangement is, or contains, a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, current and operating lease liabilities, noncurrent in the Company’s consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date (or acquisition date) based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the transition date and subsequent lease commencement dates in determining the present value of lease payments. This is the rate the Company would have to pay if borrowing on a collateralized basis over a similar term to each lease. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments made under operating leases is recognized on a straight-line basis over the lease term. 10 Property and equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of those assets, as follows: Computers and equipment 5 years Website development 3 years Furniture and fixtures 7 years Repairs and maintenance costs are expensed as incurred. Property and equipment is evaluated for recoverability whenever events or changes in circumstances indicate that the carrying amounts of the assets might not be recoverable. In evaluating an asset for recoverability, the Company estimates the future cash flow expected to result from the use and eventual disposition of the asset. If the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized. No impairment losses were recorded on property and equipment for the periods presented in these consolidated financial statements. Fair Value Measurements Fair value measurements affect the Company’s accounting for certain of its financial assets. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy that includes: Level 1: Observable inputs, such as quoted prices in active markets. Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly. Level 2 assets and liabilities include debt securities with quoted market prices that are traded less frequently than exchange-traded instruments. This category includes U.S. government agency-backed debt securities and corporate-debt securities. Level 3: Unobservable inputs in which there is little or no market data. In connection with the Acquisition, the Company recognized a non-current liability of $ 704,000 for the Earn-Out (as defined below). The Earn-Out Liability (as defined below) is classified as a Level 3 measurement for which fair value is derived from inputs that are unobservable and significant to the overall fair value measurement. The fair value of the Earn-Out Liability is estimated using a Monte Carlo simulation model that utilizes key assumptions including forecasted revenues and volatilities of the underlying financial metrics during the Earn-Out period. The Company assesses the fair value of the Earn-Out Liability at each reporting period. Any subsequent changes in the estimated fair value of the liability are reflected in selling, general and administrative expenses until the liability is settled. Concentration of Credit As of March 31, 2025, three of the Company’s customers had accounts receivable balances more than 10% of the total accounts receivable balance. Newtek, a related party, represented 17 % of the accounts receivable balance and two other customers represented 15% and 14 %, respectively. For the three months ended March 31, 2025, Newtek and its affiliates represented 33 % of total revenue. 3. Acquisition On the Closing Date, the Company acquired NTS through a two-step merger process. As a result of the Acquisition, the Company acquired all of the issued and outstanding equity interests of NTS. The Acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations . The aggregate purchase price delivered by the Company to Newtek was $ 12,904,000 , which consisted of (i) $ 4,000,000 in cash and (ii) 4,000,000 shares of Series A Preferred Stock, which had a fair value of $ 8,200,000 on the Closing Date. Newtek is also entitled to earnout payments under certain circumstances of up to $ 5,000,000 (the “Earn-Out” or “Earn-Out Liability”) based on the Company’s achievement of certain cumulative average adjusted EBITDA thresholds for the 2025 and 2026 fiscal years, which had a fair value of $ 704,000 on the Closing Date. The Company financed the cash portion of the purchase price using existing cash on-hand. 11 The Series A Preferred Stock will automatically convert into one share of the Company’s common stock, par value $ 0.001 per share (subject to certain customary anti-dilution adjustments), upon the occurrence of certain qualifying transfers by Newtek to third parties. The Earn-Out may be paid, in the Company’s sole discretion, in cash, 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 the Company’s 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 (the “BHCA”), and as implemented and interpreted by the Board of Governors of the Federal Reserve System) in the Company to exceed one-third of the Company’s 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 the Company 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 Amount paid in cash. The Company recorded a non-current liability of $ 704,000 for the fair value of the contingent consideration related to the expected Earn-Out. The Earn-Out Liability is classified as a Level 3 measurement for which fair value is derived from inputs that are unobservable and significant to the overall fair value measurement. The fair value of such Earn-Out Liability is estimated using a Monte Carlo simulation model that utilizes key assumptions including forecasted average EBITDA and volatilities of the underlying financial metrics during the Earn-Out periods. Under the acquisition method of accounting, the assets acquired and liabilities assumed were recorded at their fair values as of the Closing Date. The fair values of intangible assets were based on valuations using various income approaches and methods, such as the multi-period excess earnings method, relief from royalty method, etc., which require the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The results of NTS have been included in the Company’s single-segment business. The fair value of all the acquired identifiable assets and liabilities summarized below are based on preliminary valuations and are subject to change as the Company obtains additional information during the acquisition measurement period. The purchase price allocation as of the Closing Date was as follows: Assets acquired: Accounts receivable $ 3,535,343 Prepaid expenses and other current assets 129,233 Property and equipment, net 738,046 Operating lease right-of-use asset 212,452 Intangible assets 7,910,000 Other assets 998,228 Total assets acquired 13,523,302 Liabilities assumed: Accounts payable 46,692 Accrued expenses and other current liabilities 370,059 Operating lease liabilities 212,452 Deferred revenue 3,450,000 Deferred tax liability 2,056,600 Total liabilities assumed 6,135,803 Total identifiable net assets acquired 7,387,499 Total purchase price 12,904,000 Goodwill $ 5,516,501 The preliminary purchase price allocation resulted in goodwill of $ 5,516,501 , which will be deductible for income tax purposes. The resulting amount of goodwill is attributed to expected synergies from cross-sale opportunities and future growth. Intangible assets of $ 7,910,000 include customer relationships of $ 5,275,000 , order backlog of $ 438,000 , and trademarks and trade names of $ 2,197,000 , which are being amortized on a straight-line basis, over weighted-average useful lives of 8 years, 1 year, and 8 years, respectively. After the closing of the Acquisition, and in the normal course of business, certain amounts were due to the Company by Newtek and its affiliates. For the three months ended March 31, 2025, sales to Newtek and its affiliates totaled $ 1,794,953 . In connection with the Acquisition, the Company entered into a referral arrangement with Newtek pursuant to which Newtek will refer potential clients to the Company for a fee. The referral arrangement with Newtek is terminable by either the Company or Newtek at any time. 12 Supplemental Pro Forma Information The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the three months ended March 31, 2024 as if the Acquisition had occurred as of January 1, 2024 and gives effect to transactions that are directly attributable to the Acquisition. These amounts are based on financial information of NTS and are not necessarily indicative of what the Company’s operating results would have been had the Acquisition taken place on the date presented, nor is it indicative of the Company’s future operating results. As the Acquisition occurred on January 2, 2025, the Company’s results of operations for the three months ended March 31, 2025 include those results attributable to the acquired operations of NTS For the Three Months Ended March 31, 2024 Total Revenue $ 7,309,337 Net Income from Continuing Operations $ 81,179 The pro forma adjustments for the period presented include additional amortization expense related to the fair value of the acquired intangible assets as if such assets were acquired on January 1, 2024. 4. Property and Equipment, net Property and equipment consisted of the following for the periods presented: For the Three Months Ended March 31, 2025 (unaudited) For the Year Ended December 31, 2024 Computer equipment $ 169,121 $ -- Software 590,613 -- Datacenter software 50,379 -- Servers 66,838 -- Total property and equipment 876,951 -- Less: Accumulated depreciation ( 244,881 ) -- Total property and equipment, net $ 632,070 $ -- Depreciation expense, for the three months ended March 31, 2025 and 2024 was $ 105,976 and $0 , respectively. The Company only holds property and equipment in the United States. 5. Intangible Assets, Net Intangible assets, net consisted of the following at March 31, 2025 and December 31, 2024: March 31, 2025 (unaudited)* December 31, 2024 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying Amount Amortization Amount Amount Amortization Amount Patents $ 50,000 $ ( 39,375 ) $ 10,625 $ 50,000 $ ( 38,750 ) $ 11,250 Trade names, trademarks product names, URLs 2,664,425 ( 266,186 ) 2,398,239 1,022,425 ( 726,028 ) 296,397 Internally developed software 2,190,006 ( 879,480 ) 1,310,526 4,180,005 ( 2,791,266 ) 1,388,739 Subscriber/customer relationships 6,549,101 ( 1,382,275 ) 5,166,826 3,553,102 ( 3,366,707 ) 186,395 Order Backlog 438,000 ( 109,500 ) 328,500 -- -- -- Total intangible assets $ 11,891,532 $ ( 2,676,816 ) $ 9,214,716 $ 8,805,532 $ ( 6,922,751 ) $ 1,882,781 * Amounts at March 31, 2025 reflect the Company’s intangible assets following the Acquisition and Divestiture. Amortization expense for the three months ended March 31, 2025 was $ 578,065 , as compared to $ 205,583 for the three months ended March 31, 2024. The aggregate amortization expense for each of the next five years and thereafter is estimated to be $ 1,495,892 in 2025, $ 1,449,562 in 2026, 2027 and 2028, $ 1,235,295 in 2029 and $ 2,134,843 thereafter. 13 6. Discontinued Operations On January 2, 2025, the Company completed the Divestiture. The consideration delivered by Meteor Mobile to the Company at the closing of the Divestiture consisted of (i) $ 1,350,000 in cash and (ii) the assumption of all of the liabilities of the Sellers arising out of, or relating to, the Business or the Transferred Assets, other than certain excluded liabilities. In addition to the Divestiture Closing Consideration, the Company is 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, the Company is 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, the Company 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, the Company is 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 the Company are capped at $ 5,000,000 in the aggregate. As discussed above, during the year ended December 31, 2024, the Transferred Assets met the criteria for classification as assets held for sale and discontinued operations as the Company received stockholder approval of the sale of its Transferred Assets at its special meeting of stockholders held on December 30, 2024. Accordingly, the assets and liabilities related to the Transferred Assets are presented as discontinued operations as of December 31, 2024 and for the three months ended March 31, 2024. There were no remaining assets and liabilities related to the Divestiture as of March 31, 2025 and no results of operations for the three months ended March 31, 2025. The $ 3.8 million impairment loss associated with the Divestiture was recognized in the fourth quarter of 2024. In the normal course of business, certain amounts were due to Meteor Mobile by the Company. These amounts are included in other accrued liabilities on the consolidated balance sheet in the amount of $ 421,622 . The following table summarizes the operating results of the Transferred Assets for the period indicated: Three Months Ended March 31, 2024 (unaudited) Revenue Subscription revenue $ 2,211,410 Advertising revenue 114,748 Total Revenue 2,326,158 Costs and expenses Cost of revenue 757,439 Sales and marketing expense 175,569 Product development expense 1,150,332 General and administrative expense - Total Costs and Expenses 2,083,340 Income from discontinued operations 242,818 Income tax provision ( 480,810 ) Net loss from discontinued operations $ ( 237,992 ) 14 INTELLIGENT PROTECTION MANAGEMENT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the assets and liabilities of the Transferred Assets included in the consolidated balance sheets as of December 31, 2024, after recognition of the impairments described above and are included as assets and liabilities attributed to discontinued operations: As of December 31, 2024 Assets Accounts receivable, net $ 72,925 Total current assets 72,925 Goodwill 2,663,229 Total Assets - discontinued operations $ 2,736,154 Liabilities Accounts payable $ 311,506 Accrued expenses 116,532 Deferred revenue 1,596,199 Total Liabilities - discontinued operations $ 2,024,237 7. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following for the periods presented: March 31, December 31, 2025 2024 (unaudited) Commissions, compensation, benefits and payroll taxes $ 19,623 $ 151,500 Sales taxes 104,250 -- Amounts due to Meteor Mobile 421,622 -- Other accrued expenses 576,183 358,259 Total accrued expenses and other current liabilities $ 1,121,678 $ 509,759 8. Income Taxes The Company’s provision for income taxes consists of federal, foreign, and state taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary. For the three months ended March 31, 2025, the Company recorded an income tax benefit of $ 2,060,065 , which included a discrete tax benefit of $ 1,665,189 primarily related to a partial release of its valuation allowance as the Acquisition created a source of future taxable income allowing for the recognition of certain deferred tax assets due to the release of a portion of its valuation allowance. The effective tax rate for the three months ended March 31, 2025 was 164.7 % which differs from the statutory rate of 21 % primarily related to changes in the Company’s valuation allowance due to the business combination accounting. The Company continues to conclude that its U.S. deferred tax assets are not realizable on a more-likely-than-not basis and maintains a full valuation allowance against such deferred tax assets. For the three months ended March 31, 2024, the Company recorded an income tax benefit of $ 598,710 . The effective tax rate for the three months ended March 31, 2024 was 19.3 % which differs from the statutory rate of 21 % primarily relate to changes in the Company’s valuation allowance, difference in foreign tax rates from the U.S. statutory rate of 21 % and state and local taxes. The Company continues to conclude that its U.S. deferred tax assets are not realizable on a more-likely-than-not basis and maintains a full valuation allowance against such deferred tax assets. 15 9. Stockholders’ Equity The Intelligent Protection Management Corp. Amended and Restated 2011 Long-Term Incentive Plan (the “2011 Plan”) was terminated as to future awards on May 16, 2016. A total of 22,480 shares of the Company’s common stock may be issued pursuant to outstanding options awarded under the 2011 Plan; however, no additional awards may be granted under such plan. The Intelligent Protection Management Corp. 2016 Long-Term Incentive Plan (the “2016 Plan”) was adopted by the Company’s stockholders on May 16, 2016 and permits the Company to award stock options (both incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other stock-based awards and cash-based incentive awards to its employees (including an employee who is also a director or officer under certain circumstances), non-employee directors and consultants. The maximum number of shares of common stock that may be issued pursuant to awards under the 2016 Plan is 1,300,000 shares, 100 % of which may be issued pursuant to incentive stock options. In addition, the maximum number of shares of common stock that may be issued under the 2016 Plan may be increased by an indeterminate number of shares of common stock underlying outstanding awards issued under the 2011 Plan that are forfeited, expired, cancelled or settled in cash. As of March 31, 2025, there were 494,429 shares available for future issuance under the 2016 Plan. Stock Options The following table summarizes the assumptions used in the Black-Scholes pricing model to estimate the fair value of the options granted during the nine months ended March 31, 2025: Expected volatility 136.8 % Expected life of option (in years) 5.1 – 6.2 Risk free interest rate 4.4 % Expected dividend yield 0.0 % The expected life of the options is the period of time over which employees and non-employees are expected to hold their options prior to exercise. The expected life of options has been determined using the “simplified” method as prescribed by Staff Accounting Bulletin 110, which uses the midpoint between the vesting date and the end of the contractual term. The volatility of the Company’s common stock is calculated using the Company’s historical volatilities beginning at the grant date and going back for a period of time equal to the expected life of the award. The Company estimates potential forfeitures of stock awards and adjusts recorded stock-based compensation expense accordingly. The Company estimates pre-vesting forfeitures primarily based on the Company’s historical experience and is adjusts to reflect actual forfeitures as the stock-based awards vest. The following table summarizes stock option activity during the three months ended March 31, 2025: Weighted Average Number of Exercise Options Price Stock Options: Outstanding at January 1, 2025 618,898 $ 3.04 Granted during the period 275,000 1.98 Cancelled/Forfeited, during the period ( 45,386 ) 2.55 Expired, during the period ( 3,376 ) 2.55 Outstanding at March 31, 2025 845,136 $ 2.72 Exercisable at March 31, 2025 631,761 $ 2.97 16 At March 31, 2025, there was $ 342,315 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 1.4 years. On March 31, 2025, the aggregate intrinsic value of stock options that were outstanding and exercisable was $ 16,920 and $ 16,920 , respectively. On March 31, 2024, the aggregate intrinsic value of stock options that were outstanding and exercisable was $ 423,850 and $ 259,295 , respectively. The intrinsic value of 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 three months ended March 31, 2025, the Company granted stock options to members of the Board of Directors (the “Board”) to purchase an aggregate of 100,000 shares of common stock at a weighted average 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 2025 and have a term of ten years. During the three months ended March 31, 2025, the Company also granted options to employees to purchase an aggregate of 175,000 shares of common stock. These options vest in various tranches, ranging from equally over four years to fifty percent at grant date with the remaining balance vesting during the third quarter of fiscal 2025. The options have a term of ten years and have an exercise price of $2.01. The aggregate fair value for the options granted during the three months ended March 31, 2025 and 2024 was $ 545,550 and $ 72,240 , respectively. Stock-based compensation expense for the Company’s stock options for the three months ended March 31, 2025 and 2024, totaled $ 167,629 and $ 59,311 , respectively and is included in general and administrative expenses in the condensed consolidated statements of operations. Series A Preferred Stock On December 30, 2024, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designations designating the Series A Preferred Stock (the “Certificate of Designations”), and establishing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, or terms or conditions of redemption of the shares of Series A Preferred Stock. The total number of authorized shares of Series A Preferred Stock is 9,000,000 shares. On January 2, 2025, as partial consideration for the Acquisition, the Company issued 4,000,000 shares of Series A Preferred Stock. Treasury Shares As of March 31, 2025 and December 31, 2024, the Company had 641,963 shares of its common stock, respectively, classified as treasury shares on the Company’s consolidated balance sheets. 17 10. Net Income (Loss) 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 three months ended March 31, 2025 and 2024, 845,136 and 763,736 of shares issuable upon the exercise of outstanding stock options, respectively, were not included in the computation of diluted net loss per share because their inclusion would be antidilutive. The following table summarizes the net loss per share calculation for the periods presented: Three Months Ended March 31, (unaudited) 2025 2024 Net loss from continuing operations $ 808,530 $ ( 254,315 ) Net loss from discontinued operations $ -- $ ( 237,992 ) Net income (loss) – basic and diluted $ 808,530 $ ( 492,307 ) Weighted average shares outstanding – basic 13,192,543 9,222,157 Weighted average shares outstanding – diluted 13,192,543 9,222,157 Per share data: Basic from continuing operations $ 0.06 $ ( 0.03 ) Diluted from continuing operations $ 0.06 $ ( 0.03 ) Basic from discontinued operations $ -- $ ( 0.02 ) Diluted from discontinued operations $ -- $ ( 0.02 ) Basic from operations $ 0.06 $ ( 0.05 ) Diluted from operations $ 0.06 $ ( 0.05 ) 11. Leases On April 9, 2021, the Company entered into a lease extension agreement with Jericho Executive Center LLC (“JEC”) for its office space at 30 Jericho Executive Plaza in Jericho, New York, which commenced on December 1, 2021. On May 28, 2024, the Company entered into an additional lease extension agreement with JEC, which extends the lease period by two years to November 30, 2026 . Beginning on December 1, 2024, the monthly rent totaled $ 6,850 per month. The new extension gives the Company an option to terminate the second year in July 2025. The Company’s monthly office rent payments under the lease are currently approximately $ 7,081 per month. As of March 31, 2025, the Company had no long-term leases that were classified as financing leases and did not have additional operating or financing leases that had not yet commenced. In connection with the Acquisition, as described in Note 3, the Company assumed an operating lease with IO New Jersey One, LLC (“Iron Mountain”) for a data center that includes office space and equipment located at 3003 Woodbridge Avenue, Edison, New Jersey. The lease with Iron Mountain expires on April 30, 2026, and will automatically renew thereafter for additional terms of one year each, unless either party provides the other party with written notice that it will not renew the lease within ninety days of the current term. The renewal options have not been included in the Company’s operating lease right-of-use asset and liability, as the Company is not reasonably certain to exercise such options as of January 2, 2025 or March 31, 2025. The Company’s monthly rent payments under the lease are currently $ 17,767 per month. 18 In connection with the Acquisition, the Company also assumed an operating lease with Aligned Data Centers (Phoenix) PropCo, LLC (“ADC”) for a data center that includes office and storage space located at 2500 W. Union Hills Drive, Phoenix Arizona. As of the Closing Date, the lease with ADC was set to expire on August 30, 2025, subject to automatically one-year renewals thereafter, unless either party provided a notice of non-renewal within six months of the current term. Since the Company was not reasonably certain to exercise such options, and the remaining lease term did not extend beyond twelve months of the Closing Date, the Company applied the short-term measurement and recognition exemption in ASC Topic 842, Leases as of January 2, 2025. On January 24, 2025, the Company entered into a lease extension agreement with ADC, which extends the lease period by two years to August 30, 2027. Since the lease extension agreement resulted in a lease term greater than twelve months, the Company recorded an operating lease right-of-use asset and liability on January 24, 2025, which includes the remaining lease term of approximately seven months and two-year extension term. The lease extension agreement modified the automatic renewal term from one year to two years, which has not been included in the Company’s operating lease right-of-use asset and liability, as the Company is not reasonably certain exercise such options as of March 31, 2025. The Company’s monthly rent payments under the lease are currently $ 53,853 per month. As of March 31, 2025, the Company had no long-term leases that were classified as financing leases and did not have additional operating or financing leases that had not yet commenced. As of March 31, 2025, the Company had operating lease liabilities of approximately $ 1,684,120 (of which $ 805,022 is classified as short term liabilities and $ 879,098 is classified as long term liabilities) and operating lease right-of-use assets of approximately $ 1,692,698 (of which $ 882,568 is classified as a short term asset and $ 810,130 is classified as a long term asset) and all of which are included in the accompanying condensed consolidated balance sheets. Total rent expense for the three months ended March 31, 2025 was $ 185,628 , of which $ 1,500 was sublease income. Total rent expense for the year ended March 31, 2024 was $ 20,841 , of which $ 1,500 was sublease income. Rent expense is recorded under general and administrative expense in the consolidated statements of operations. The following table summarizes the Company’s operating leases for the periods presented: Three Months Ended March 31, 2025 2024 JEC Lease: Cash paid for amounts included in the measurement of operating lease liabilities: $ 20,550 $ 20,841 Weighted average assumptions: Remaining lease term 0.7 0.9 Discount rate 2.3 % 2.3 % Iron Mountain Lease: Cash paid for amounts included in the measurement of operating lease liabilities: $ 53,301 $ -- Weighted average assumptions: Remaining lease term 1.1 -- Discount rate 4.8 % -- ADC Lease: Cash paid for amounts included in the measurement of operating lease liabilities: $ 160,042 $ -- Weighted average assumptions: Remaining lease term 2.4 -- Discount rate 4.8 % -- As of March 31, 2025, future minimum payments under non-cancelable operating leases were as follows: For the years ending December 31, Amount 2025 $ 660,770 2026 713,920 2027 392,347 Total 1,767,037 Less: present value adjustment ( 82,917 ) Present value of minimum lease payments $ 1,684,120 19 INTELLIGENT PROTECTION MANAGEMENT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. Commitments and Contingencies Cisco WebEx Patent Litigation On July 23, 2021, a wholly owned subsidiary of the Company, Paltalk Holdings, Inc., filed a patent infringement lawsuit (the “Lawsuit”) against WebEx Communications, Inc., Cisco WebEx LLC, and Cisco Systems, Inc. (collectively, “Cisco”), in the U.S. District Court for the Western District of Texas (the “Court”). The Company alleged that certain of Cisco’s products have infringed U.S. Patent No. 6,683,858, and that the Company was entitled to damages. On August 29, 2024, the jury awarded the Company $ 65.7 million (the “Award”) in a jury verdict in connection with the Lawsuit. On October 8, 2024, an order granting a motion for final judgment was entered into in the Court in connection with Lawsuit in favor of the Company in the amount of the Award and started the time for filing any post-trial motions or appeal. The exact amount of the Award proceeds to be received by the Company (including any interest related thereto) will be determined based on a number of factors and will reflect the deduction of significant litigation-related expenses, including legal fees. Consequently, the Company estimates that it would receive no more than one third of the gross proceeds in connection with the Award, subject to post-trial proceedings (including any potential appellate proceedings by Cisco). Cisco ManyCam Litigation On March 7, 2025, Cisco Systems, Inc. and Cisco Technology, Inc. filed a complaint against the Company in the U.S. District Court for the District of Delaware, alleging that the Company’s ManyCam software has infringed U.S. Patent Nos. 8,830,293 and 8,941,708 and seeking damages and injunctive relief. The Company intends to vigorously defend itself against these claims. The Company has not recorded any liability for this matter as it does not believe a loss is probable, and it cannot estimate any reasonably possible loss or range of possible loss. Legal Proceedings The Company may be included in legal proceedings, claims and assessments arising in the ordinary course of business. The Company evaluates the need for a reserve for specific legal matters based on the probability of an unfavorable outcome and the reasonability of an estimable loss. No reserve was deemed necessary as of March 31, 2025. 20 13. Subsequent Events Business Loan Agreement and Credit Agreement and Revolving Promissory Note On April 10, 2025, the Company, Intelligent Protection LLC, a wholly owned subsidiary of the Company (“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 provide 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 are secured by substantially all of the assets of the Borrowers. The Facility will mature on April 10, 2026 (the “Maturity Date”), and all outstanding principal amounts and accrued and unpaid interest thereon shall be due and payable on such date unless the Facility is renewed or extended pursuant to the terms of the Loan Agreements. The Facility may be drawn from April 10, 2025 to the Maturity Date. As of the date of this Quarterly Report on Form 10-Q, no amounts were outstanding under the Facility. The rate at which borrowings under the Loan Agreements bear interest is determined by applying the applicable monthly periodic rate (the “Monthly Periodic Rate”) to the average daily balance of the Facility multiplied by the number of days in the month. The applicable Monthly Periodic Rate equals (i) the Annual Percentage Rate (defined below) (a) divided by 360, (b) multiplied by 365, and (c) divided by 12 (monthly). The Annual Percentage Rate is subject to change from time to time based on the rate index published by Newtek Bank plus a margin of 2.00 %; provided, however, that in no event will the Annual Percentage Rate be less than 6.07 %, nor will the Annual Percentage Rate exceed the maximum rate allowed by applicable law (the “Annual Percentage Rate”). Stock Repurchase Plan On May 8, 2025, the Board approved a stock repurchase plan for up to $ 400,000 of the Company’s outstanding common stock (the “Stock Repurchase Plan”), which expires 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. The actual timing, number and value of shares repurchased will be determined by a committee of the Board 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. As of the date of this report, no shares of common stock had been repurchased by the Company pursuant to the Stock Repurchase Plan. Charter Amendment On May 8, 2025, at the Company’s 2025 annual meeting of stockholders (the “Annual Meeting”), the Company’s stockholders approved an amendment to the Company’s Certificate of Incorporation, as amended, to increase the Company’s shares of authorized common stock from 25,000,000 to 50,000,000 . The amendment was filed with the Secretary of State of the State of Delaware on May 8, 2025. Intelligent Protection Management Corp. 2025 Long-Term Incentive Plan On May 8, 2025, at Annual Meeting, the Company’s stockholders approved the Intelligent Protection Management Corp. 2025 Long-Term Incentive Plan (the “2025 LTIP”). As a result, the 2025 LTIP became effective on May 8, 2025. Concurrently with the adoption of the 2025 LTIP, the 2016 Plan was terminated. The 2025 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other awards which may be granted singly, in combination, or in tandem, and which may be paid in cash, shares of common stock, other consideration, or any combination thereof. Subject to certain adjustments, the maximum aggregate number of shares of common stock that may be delivered pursuant to awards under the 2025 Plan is 1,200,000 shares, plus any Prior Plan Awards (as defined in the 2025 LTIP). Management has evaluated subsequent events or transactions occurring through the date the condensed consolidated financial statements were issued and determined that no other events or transactions are required to be disclosed herein. 21