INTELLIGENT PROTECTION MANAGEMENT CORP. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the accompanying notes thereto included in “Item 8. Financial Statements and Supplementary Data.” Except where expressly provided, all information for the fiscal year ended December 31, 2024 relates to the Company prior to the Transactions (defined below) and all information for the fiscal year ended December 31, 2025 relates to the Company following the Transactions. Forward-Looking Statements In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Item 1A. Risk Factors” in this Annual Report on Form 10-K (the “Annual Report on Form 10-K”). Overview We provide a comprehensive range of IT-related services, including managed IT security services, secure private cloud hosting, managed backup and disaster recovery, professional services, procurement services, web hosting, and other related services including consulting and implementing technology solutions for large enterprise and commercial clients across the United States as well as small-and-medium sized businesses. We also offer and support our ManyCam software, which is a live streaming software and virtual camera that allows users to deliver professional live videos on streaming platforms, video conferencing apps and distance learning tools. We have an over 20-year history of technology innovation and hold eight patents. 18 Prior to the completion of the Transactions, we operated a network of consumer applications. Our product portfolio included Paltalk, Camfrog and Tinychat, which together hosted a large collection of video-based communities. Our other products included Vumber, a telecommunications service provider. Following the Divestiture, we are no longer engaged in the business of providing video-based, live streaming, virtual camera and telecommunications software to consumers, as and to the extent such businesses were previously conducted by us pursuant to the Vumber, Paltalk and Camfrog applications. In addition, prior to the Closing Date (defined below), we ceased all operations of our Tinychat service and application. Our IT and Cloud-Based Solutions We sell and provide a range of services across six core areas, each as further described below: (i) managed IT security services, (ii) secure private cloud hosting, (iii) managed backup and disaster recovery, (iv) professional services, (v) procurement services and (vi) web hosting. 1. Managed IT Security Services Our managed IT security services provide clients with ongoing management and support of their IT systems and services under a subscription or contract-based model. Our managed IT security services include proactive monitoring, regular system maintenance, comprehensive cybersecurity management, data backup, and disaster recovery, as well as help desk support for users. Managed IT security services are intended to ensure that a client’s IT infrastructure and services remain operational, secure and optimized. 2. Secure Private Cloud Hosting Our secure private cloud hosting offerings include a digital infrastructure which consists of dedicated and fully isolated cloud environments designed to deliver security, control and compliance for business-critical applications and client data. We operate a secure private cloud from private suites in completely isolated areas that are leased within two Tier 3 data center facilities located in Phoenix, Arizona, and Edison, New Jersey (the “Data Centers”), pursuant to certain license agreements. As of December 31, 2025, the terms of the license agreements for the Data Centers located in Arizona and New Jersey extended through 2027 and 2026, respectively. Subsequent to year end, we amended our agreement with the Data Center in Phoenix, Arizona through August 31, 2032. With respect to the Data Center in Edison, New Jersey, we expect to either enter into a lease extension by the end of the lease term or lease private suites at another Tier 3 data center facility. Although we do not own or operate the Data Centers, we aim to use the high-level operations and standards provided by the Data Centers through our license agreements to provide our customers with secure and flexible cloud services. The Data Centers each conform to The Uptime Institute’s Tier 3 Certification, which is a globally recognized standard for validating critical data center infrastructure. The Tier 3 classification provides us with a degree of confidence that the Data Centers provide the necessary power, cooling, maintenance, and fault tolerance required for secure and reliable operations. Our critical infrastructure, hosted within the Data Centers, is designed to meet and exceed Tier 3 standards in all relevant categories. This allows us to deliver secure and compliant services to customers within heavily regulated industries, including financial services and healthcare, and other industries. Additionally, we incorporate a redundant, carrier-neutral network design for communications paths, along with multiple hosting locations for our services, which improve the availability and resilience of our cloud services. We leverage state-of-the-art security measures, including data encryption, network segmentation, advanced firewalls, multi-factor authentication and continuous monitoring to safeguard against unauthorized access and cyber threats. We believe our secure private cloud hosting provides our clients with strong availability, data integrity and reliable performance, while meeting stringent compliance requirements. Our secure private cloud hosting solutions are backed by 24/7 support from our expert team, with the goal of delivering secure, flexible and resilient infrastructure tailored to each client’s unique business needs. We actively engage with third parties to enhance our secure private cloud offerings with artificial intelligence (“AI”) features and benefits. 3. Managed Backup and Disaster Recovery Our managed backup and disaster recovery solutions provide comprehensive protection for customers’ critical data and IT infrastructure, which is intended to ensure business continuity and rapid recovery in the event of data loss, cyberattacks or system failures. We utilize advanced backup technologies with automated, regular data backups, off-site replication and secure storage to prevent data corruption or loss. Our disaster recovery solutions are designed to offer quick restoration of systems and data with minimal downtime, supported by flexible recovery plans tailored to meet customers’ specific needs. With continuous monitoring, end-to-end encryption, and expert support available 24/7, we aim to ensure that our customers’ data is secure, accessible and compliant with industry standards. Pricing for our managed backup and disaster recovery solutions is based upon the customer contract and depends on the amount of backup storage needed. Customers are typically charged set rates per the contract and are charged monthly based on usage. 19 4. Professional Services Our professional services include the design and implementation of a wide range of IT products and services, such as cybersecurity, software planning, IT infrastructure, data center design and configuration, hybrid or cloud computing solutions, website development, developing or integrating systems and software, and IT cost management. In addition, we are planning to launch an AI Data Readiness solution in the second quarter of 2026 that we believe will improve the reliability, security, and outcome of adopting AI technologies by assessing, structuring, and securing business data in a safe and effective manner. 5. Procurement Services We offer two types of procurement services to our customers. We can either: (i) obtain software and hardware products on behalf of our customers, in which case our vendors drop ship the products to our end customers, or (ii) obtain hardware or software on behalf of our customers and perform additional configuration and/or add additional inputs to the products before the products are shipped to our customers. In the instance where we sell hardware and software products as a solution bundled with services, we typically obtain the products or software from our vendors, add the additional inputs/configuration as detailed in the customer contract, and then ship the products to the end customer. For each type of procurement service, our customers have their own negotiated contract and payment terms. 6. Web Hosting Our web hosting services consist of several advanced security measures, including Secure Sockets Layer and Transport Layer Security (“SSL/TLS”) encryption, firewalls, distributed denial-of-service (“DDoS”) protection, malware scanning, and secure server configurations. Our web hosting services include features such as regular data backups, web application firewalls, strict access control policies and continuous monitoring and expert support, all of which are intended to ensure our customers’ compliance with industry standards and provide a reliable and secure environment for our customers’ online presence. Our web hosting services are designed to provide customer websites with an additional layer of protection from cyber attacks and threats. Our ManyCam Software Product In addition to our IT and cloud-based solutions, we offer and support our ManyCam software, which is a live streaming software and virtual camera that allows users to deliver professional live videos on streaming platforms, video conferencing apps and distance learning tools. The ManyCam software provides multiple camera feeds, backgrounds and effects while also enabling users to share presentations, spreadsheets and documents. We cross sell ManyCam as an offering for our customers and seek to optimize our cross-selling efforts of ManyCam with our other technology solutions. As a result of the Transactions, we are no longer engaged in the business of providing video-based, live streaming, virtual camera and telecommunications software to consumers, as and to the extent such businesses were previously conducted by us and our subsidiaries. Recent Developments The Acquisition On January 2, 2025 (the “Closing Date”), we completed the acquisition of Newtek Technology Solutions, Inc., a New York corporation (“NTS”), pursuant to that certain Agreement and Plan of Merger (the “Acquisition Agreement”), by and among us, PALT Merger Sub 1, Inc., a New York corporation and our direct and wholly owned subsidiary (“First Merger Sub”), PALT Merger Sub 2, LLC, a Delaware limited liability company and our direct and wholly owned subsidiary (“Second Merger Sub”), NTS and NewtekOne, Inc., a Maryland corporation and the sole stockholder of NTS (“Newtek”). Pursuant to the terms of the Acquisition Agreement, on the Closing Date: (i) NTS merged with and into First Merger Sub, with NTS continuing as the surviving entity (the “Interim Surviving Entity” and such merger, the “First Step Merger”), and (ii) immediately following the consummation of the First Step Merger, the Interim Surviving Entity merged with and into Second Merger Sub (the “Second Step Merger” and, together with the First Step Merger, the “Acquisition”), with the Second Merger Sub surviving as our wholly owned subsidiary (in such capacity, the “Surviving Entity”). Following the closing of the Acquisition (the “Acquisition Closing”), we changed our name from “Paltalk, Inc.” to “Intelligent Protection Management Corp.” 20 The aggregate consideration we delivered to Newtek at the Acquisition Closing consisted of (i) $4,000,000 in cash (as adjusted pursuant to the Acquisition Agreement, the “Acquisition Closing Cash Consideration”) and (ii) 4,000,000 shares of our Series A Non-Voting Common Equivalent Stock (the “Series A Preferred Stock” and such shares issued at the Acquisition Closing, the “Acquisition Closing Stock Consideration” and together with the Acquisition Closing Cash Consideration, the “Acquisition Closing Consideration”). The Series A Preferred Stock will automatically convert into one share of our common stock, par value $0.001 per share (subject to certain customary anti-dilution adjustments), upon the occurrence of certain qualifying transfers by Newtek to third parties. In addition to the Acquisition Closing Consideration, Newtek is entitled to earn-out payments under certain circumstances. For more information, see the “ Liquidity and Capital Resources ” section below. The Divestiture On the Closing Date and prior to the Acquisition Closing, we completed the sale to Meteor Mobile Holdings, Inc., a Delaware corporation (“Meteor Mobile”), of our telecommunications services provider, “Vumber”, as well as our “Paltalk” and “Camfrog” applications and certain assets and liabilities related to such services provider and applications (the “Transferred Assets” and such sale, the “Divestiture”) pursuant to that certain Asset Purchase Agreement (the “Divestiture Agreement”), by and among the us, our wholly owned subsidiaries Paltalk Holdings, Inc. (“Paltalk Holdings”), Paltalk Software, Inc., Camshare, Inc., A.V.M. Software, Inc., and Vumber, LLC (collectively, the “Sellers”), and Meteor Mobile. As a result of the Divestiture, we are no longer engaged in the business of providing video-based, live streaming, virtual camera and telecommunications software to consumers, as and to the extent such businesses were previously conducted by us pursuant to the “Vumber,” “Paltalk” and “Camfrog” applications (the “Business”). In addition, prior to the Acquisition Closing, we ceased all operations of our “Tinychat” service and application. The consideration delivered by Meteor Mobile to us at the closing of the Divestiture consisted of (i) $1,350,000 in cash and (ii) the assumption of all of the liabilities of the Sellers arising out of, or relating to, the Business or the Transferred Assets, other than certain excluded liabilities (the “Divestiture Closing Consideration”). In connection with the Divestiture, we are entitled to earn-out payments under certain circumstances. For more information, see the “ Liquidity and Capital Resources ” section below. Business Loan Agreement and Credit Agreement and Revolving Promissory Note On April 10, 2025, we, Intelligent Protection LLC, our wholly owned subsidiary (“IPM LLC”), and 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 us and IPM LLC in the maximum amount of $1,000,000 on the terms and conditions set forth in the Loan Agreements (the “Facility”). The Loan Agreements are secured by substantially all of our assets and the assets of IPM LLC. The Facility will mature on April 10, 2026. As of the date of this Annual Report on Form 10-K, no amounts were outstanding under the Facility. For more information regarding the Facility, see the “ Liquidity and Capital Resources ” section below. Stock Repurchase Plan On May 8, 2025, our Board of Directors (the “Board”) approved a stock repurchase plan for up to $400,000 of our 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 our common stock, general market and economic conditions, alternative investment opportunities and other corporate considerations. Patent Litigation On July 23, 2021, Paltalk Holdings filed a patent infringement lawsuit (the “Lawsuit”) against WebEx Communications, Inc., Cisco WebEx LLC, and Cisco Systems, Inc. (collectively, “Cisco”), in the U.S. District Court for the Western District of Texas (the “Trial Court”). We alleged that certain of Cisco’s products infringed U.S. Patent No. 6,683,858, and that we were entitled to damages. 21 On August 29, 2024, the jury awarded us $65.7 million (the “Award”) in a jury verdict in connection with the Lawsuit. On October 8, 2024, an order granting a motion for final judgment (the “Final Judgment”) was entered into in the Trial Court in connection with the Lawsuit in our favor of the Company in the amount of the Award and started the time for filing any post-trial motions or appeal. In response to the Final Judgment, Cisco filed a motion for Judgment as a Matter of Law (“JMOL”) with the Trial Court. On August 27, 2025, the Trial Court denied Cisco’s JMOL as to validity and infringement. However, the Trial Court granted Cisco’s motion for a new trial with respect to damages. On October 29, 2025, the Trial Court ordered a motions hearing set for November 12, 2025 to consider our motion for reconsideration; however, on November 11, 2025, the Trial Court denied our motion for reconsideration. Cisco also appealed the Trial Court judgment of validity and infringement (the “Appeal”) to the U.S. Court of Appeals for the Federal Circuit (the “Appeals Court”). Each party is expected to complete and submit its briefs with respect to the Appeal by March 31, 2026. Upon submission of such briefs, the Appeals Court will then decide whether the parties will appear to argue the Appeal or to render a decision on the Appeal based on the briefs submitted by each party. The exact amount of the Award proceeds to be received by us will be determined based on a number of factors and will reflect the deduction of significant litigation-related expenses, including legal fees. Consequently, we estimate that we would receive no more than one third of the gross proceeds in connection with the Award, subject to post-trial proceedings (including any potential appellate proceedings by Cisco). We have not recorded any gain contingency in connection with the Award. On March 7, 2025, Cisco Systems, Inc. and Cisco Technology, Inc. filed a complaint against us in the U.S. District Court for the District of Delaware, alleging that our ManyCam software has infringed U.S. Patent Nos. 8,830,293 and 8,941,708 and seeking damages and injunctive relief. We intend to vigorously defend against these claims. In October 2025, we filed an inter partes review (“IPR”) with the Patent Review Board to invalidate Cisco Patents 8,830,293 and 8,941,708. On February 24, 2026, the Patent Review Board denied the IPR related to Cisco Patent 8,941,708. The Patent Review Board has not yet rendered a decision on the validity of Cisco Patent 8,830,293. We have not recorded any liability for this matter as we do not believe a loss is probable, and we cannot estimate any reasonably possible loss or range of possible loss. It is possible that an unfavorable resolution to this matter could have an adverse effect on our results of operations, financial position or cash flows. As of December 31, 2025, we had incurred approximately $0.7 million in expense for the year ended December 31, 2025 in defense of these claims. Full Year 2025 Operational Highlights Operational highlights during the year ended December 31, 2025: ● selected by Hewlett Packard Enterprise to be an accredited partner for its HPE Private Cloud AI solution; ● announced the initiation of a collaboration with IT Ally, a trusted business and technology services provider focused on lower middle-market private equity firms and their portfolio companies; ● began offering Aura to our customers, a leading AI-powered online safety solution for individuals and families, to help minimize the impact of data breaches, scams and other online threats on consumers; ● entered into a reseller agreement with MindsDB, a leading open-source AI platform that delivers AI analytics capabilities for complex business questions, that can operate anywhere (on-prem, VPC, serverless); ● rolled out our “Heroes Program” in October 2025 to provide a 10% discount for all of our products and services to all existing and future customers who qualify as Military, First Responder, Healthcare, Teachers or Veterinary business owners; ● entered into a collaborative growth initiative to refer integrated communications, AI-driven analytics, and managed security and hosting solutions to our respective customers; ● successfully achieved SOC 2 Type 1 compliance, a key milestone in our ongoing commitment to safeguarding customer data and delivering trusted cybersecurity and cloud infrastructure solutions; and ● subsequent to year end, executed an extension of our existing Phoenix data center colocation license agreement with an industry-leading data center provider through August 2032. Financial highlights during the three months and year ended December 31, 2025: ● revenue for the year ended December 31, 2025 increased by 2050% to approximately $23.6 million compared to $1.1 million for the year ended December 31, 2024, as a result of the Acquisition; ● revenue for the three months ended December 31, 2025 increased by 2092% to approximately $6.1 million compared to $0.3 million for the three months ended December 31, 2024, as a result of the Acquisition; while sequential growth for the fourth quarter decreased by 1.7%, growth in managed information technology revenue increased by 4.3% compared to the three months ended September 30, 2025; 22 ● operating loss from continuing operations for the three months ended December 31, 2025 was $0.8 million and included $0.7 million of non-cash expense, consisting of amortization and depreciation and share based compensation, compared to an operating loss from continuing operations of $1.6 million for the three months ended December 31, 2024, which included non-cash expenses of $0.2 million, subscriptions sales from ManyCam software as well as all of our general and administrative expenses, which included all professional fees and public company expenses; ● operating loss from continuing operations for the year ended December 31, 2025 was $4.7 million and included $2.9 million of non-cash expense, consisting of amortization and depreciation and share based compensation, compared to a operating loss from continuing operations of $5.1 million for the year ended December 31, 2024; which included non-cash expenses of $1.0 million, sales from ManyCam software as well as all of our general and administrative expenses, which included all professional fees and public company expenses; ● net loss from continuing operations for the three months ended December 31, 2025 totaled $0.6 million compared to a net loss from continuing operations of $1.4 million for the three months ended December 31, 2024; this represents an improvement of over 55% over the prior year period and an improvement of over 41% compared to the previous quarter; ● net loss from continuing operations for the year ended December 31, 2025 totaled $2.0 million compared to a net loss from continuing operations of $4.3 million for the year ended December 31, 2024; net loss for the year ended December 31, 2025 included approximately $0.7 million of litigation expenses incurred in connection with the Cisco ManyCam Litigation (as described and defined below); during the year ended December 31, 2025, the increase in net loss was offset by us recording an income tax benefit during the first quarter of 2025 of approximately $2.1 million in connection with the Transactions; ● net loss decreased by 77% to $2.0 million for the year ended December 31, 2025, compared to net loss of $8.4 million for the year ended December 31, 2024; the decrease in net loss compared to the prior year is related to a one-time non-cash charge of $3.8 million of as a result of the impairment loss in connection with the Divestiture, as well as one time legal and accounting expenses of $1.8 million incurred in connection with the Acquisition both recorded during the year ended December 31, 2024; ● A djusted EBITDA for the three months ended December 31, 2025 was positive $5.0 thousand compared to negative $1.5 million for the three months ended December 31, 2024, an improvement of 100% over the prior year period and an improvement of 102% compared to the previous quarter. Adjusted EBITDA for the year ended December 31, 2025 was negative $1.1 million compared to negative $4.4 million for the year ended December 31, 2024; ● cash provided by operations was $0.1 million for the three months ended December 31, 2025 compared to cash used in continuing operations of $1.5 million for the three months ended December 31, 2024; ● cash provided by operations was $1.1 million for the year ended December 31, 2025 compared to cash used in operations of $3.0 million for the year ended December 31, 2024; and ● at December 31, 2025, we had $8.4 million of cash and cash equivalents, including $1.0 million of restricted cash, on our balance sheet and no long-term debt. 2026 Business Objectives For the near term, our business objectives following the Transactions include: ● continuing the integration of our comprehensive range of IT-related solutions; ● incorporating ManyCam as an offering for our new customers and seek to optimize our cross-selling efforts with our other technology solutions; ● continuing to explore strategic opportunities, including, but not limited to, potential mergers or acquisitions of other assets or entities that are synergistic to our businesses; and ● continuing to defend our intellectual property. 23 Sources of Revenue Our main sources of revenue are described below. As a result of the variability of contract and service type, some of the revenue we report in each period is deferred revenue from contracts we entered into during previous periods. This may make it difficult for us to quickly increase revenue through the entry into new contracts in any period, and a decline in new or renewed contracts in any one quarter will negatively affect our revenue in future quarters. As a result, revenue generated in prior quarters may not provide a reliable indication of future results. Managed IT Security Services Customers of our managed IT security services typically pay a recurring fee, often based on service-level agreements that define the specific services and performance metrics. Secure Private Cloud Hosting Our secure private cloud hosting offerings include a digital infrastructure which consists of dedicated and fully isolated cloud environments designed to deliver security, control and compliance for business-critical applications and client data. Customers of our secure private cloud hosting services are generally invoiced on a monthly basis and pay a monthly fee, with revenue recognized on a monthly basis. We operate a secure private cloud from private suites in completely isolated areas that are leased within two Tier 3 data center facilities located in Phoenix, Arizona, and Edison, New Jersey (the “Data Centers”), pursuant to certain license agreements. As of December 31, 2025, the terms of the license agreements for the Data Centers located in Arizona and New Jersey extended through 2027 and 2026, respectively. Subsequent to year end, we amended our agreement with the Data Center in Phoenix, Arizona through August 31, 2032. With respect to the Data Center in Edison, New Jersey, we expect to either enter into a lease extension by the end of the lease term or lease private suites at another Tier 3 data center facility. Although we do not own or operate the Data Centers, we aim to use the high-level operations and standards provided by the Data Centers through our license agreements to provide our customers with secure and flexible cloud services. The Data Centers each conform to The Uptime Institute’s Tier 3 Certification, which is a globally recognized standard for validating critical data center infrastructure. The Tier 3 classification provides us with a degree of confidence that the Data Centers provide the necessary power, cooling, maintenance, and fault tolerance required for secure and reliable operations. Our critical infrastructure, hosted within the Data Centers, is designed to meet and exceed Tier 3 standards in all relevant categories. This allows us to deliver secure and compliant services to customers within heavily regulated industries, including financial services and healthcare, and other industries. Additionally, we incorporate a redundant, carrier-neutral network design for communications paths, along with multiple hosting locations for our services, which improve the availability and resilience of our cloud services. We leverage state-of-the-art security measures, including data encryption, network segmentation, advanced firewalls, multi-factor authentication and continuous monitoring to safeguard against unauthorized access and cyber threats. We believe our secure private cloud hosting provides our clients with strong availability, data integrity and reliable performance, while meeting stringent compliance requirements. Our secure private cloud hosting solutions are backed by 24/7 support from our expert team, with the goal of delivering secure, flexible and resilient infrastructure tailored to each client’s unique business needs. In the future, we plan to make arrangements with third parties to incorporate artificial intelligence (“AI”) features into our secure private cloud offerings. Revenue from such cloud services is recognized ratably over the period in which the cloud services are provided. Managed Backup and Disaster Recovery Pricing for our managed backup and disaster recovery solutions is based upon the customer contract and depends on the amount of backup storage needed. Customers are typically charged set rates per the contract and are charged monthly based on usage. Professional Services Revenue in connection with professional services is generally recognized upon achievement of milestones or on a straight line basis for all fixed fee arrangements. 24 Procurement Services For each type of procurement service, our customers have their own negotiated contract and payment terms. When we provide a combination of hardware and software products with the provision of services, we will separately identify our performance obligations under the contract and the hardware and/or software products or services that will be provided. The total transaction price for an arrangement with multiple performance obligations is typically allocated at contract inception to each performance obligation in proportion to the stand-alone selling price of the hardware or software. The selling price is the price at which we would sell a promised good or service separately to a customer. We estimate the price based on observable inputs, including direct labor hours and allocable costs, or use observable stand-alone prices when they are available. Web Hosting Each of our customers has their own contract and payment terms with respect to our web hosting services. The duration of such contracts is typically between one and four years, although the term may vary based on the needs of each particular customer. Customers of our web hosting services are invoiced on a monthly basis and pay a monthly fee, with revenue recognized on a monthly basis. Subscription Revenue We also generate subscription revenue from monthly premium subscription services for our ManyCam software. Subscription revenues are presented net of refunds, credits and known and estimated credit card chargebacks. During the year ended December 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 consolidated balance sheets. Costs and Expenses Cost of revenue Cost of revenue consists primarily of compensation and other employee-related costs for personnel engaged in data center and customer care functions, credit card processing fees, hosting fees, data center rent, bandwidth costs and, in the case of procurement, revenue the cost of the hardware and/or subscriptions. Cost of revenue also includes compensation and other employee-related costs for technical personnel, consultants and subcontracting costs. Sales marketing and product development expense Sales marketing and product development expense consists primarily of (i) advertising expenditures and compensation (including stock-based compensation) and other employee-related costs for personnel and consultants engaged in sales and sales support marketing and development functions and (ii) development of the technology of our applications, and consultant-related costs that are not capitalized for personnel engaged in the design, testing and enhancement of service offerings. Advertising and promotional spend includes online marketing, including fees paid to search engines and offline marketing, which primarily consists of partner-related payments to those who direct traffic to our brands. General and administrative expense General and administrative expense consists primarily of compensation (including non-cash stock-based compensation) and other employee-related costs for personnel engaged in executive management, finance, legal, tax and human resources and facilities costs and fees for other professional services and cost of insurance. 25 Depreciation and amortization expense Depreciation and amortization expenses consists primarily of amortization of intangible assets as well as depreciation on property and equipment. Litigation expenses Litigation expenses relate to expenses incurred in our patent defense against Cisco Systems, Inc. and Cisco Technology, Inc. (the “Cisco ManyCam Litigation”). Factors Affecting the Comparability of Our Financial Condition and Results of Operations As described above, we completed the Transactions in January 2025. As a result, our historical financial condition and results of operations for the periods presented may not be comparable, either from period to period or going forward. For more information on the Transactions, see Note 1, Organization and Description of Business and Note 13, Discontinued Operations , in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Key Metrics Our management relies on certain non-GAAP financial measures to manage and evaluate our business. The non-GAAP financial measures set forth below help us evaluate growth trends, establish budgets, measure the effectiveness of our advertising and marketing efforts and assess operational efficiencies. Adjusted EBITDA is discussed below. We also discuss “Devices under Management ” and net cash provided by operating activities under the “ Liquidity and Capital Resources ” section below. Year Ended December 31, 2025 2024 Net cash provided by (used in) operating activities – continuing operations $ 1,076,724 $ (2,661,653 ) Operating loss from continuing operations $ (4,719,179 ) $ (5,121,549 ) Loss from continuing operations as a percentage of total revenues (20.0 )% (466.3 )% Net loss from continuing operations $ (1,956,536 ) $ (4,268,675 ) Net loss from continuing operations as a percentage of total revenues (8.3 )% (388.7 )% Net loss $ (1,956,536 ) $ (8,426,209 ) Adjusted EBITDA $ (1,116,037 ) $ (4,431,852 ) Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as net income (loss) adjusted to exclude interest (income) expense, net, other (income) expense, net, income tax (benefit) expense, depreciation and amortization expense, stock-based compensation expense, net loss from discontinued operations, impairment loss in connection with the Divestiture and litigation expenses relating to the Cisco ManyCam Litigation. Prior to the fiscal quarter ended September 30, 2025, the Company did not exclude litigation expenses related to the Cisco ManyCam Litigation in calculating Adjusted EBTIDA as they were not material. However, after reevaluation, the Company has determined that presenting Adjusted EBITDA without excluding such costs provides less valuable information about the Company’s core operations. As a result, beginning with the fiscal quarter ended September 30, 2025, litigation expenses related to the Cisco ManyCam Litigation are now excluded from the calculation of Adjusted EBITDA. We present Adjusted EBITDA because it is a key measure used by our management and Board to understand and evaluate our core operating performance and trends, to develop short- and long-term operational plans and to allocate resources to expand our business. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of the cash operating income generated by our business. We believe that Adjusted EBITDA is useful to investors and others to understand and evaluate our operating results, and it allows for a more meaningful comparison between our performance and that of competitors. 26 Limitations of Adjusted EBITDA Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that Adjusted EBITDA does not reflect, among other things: cash capital expenditures for assets underlying depreciation and amortization expense that may need to be replaced or for new capital expenditures; interest income, net; other expense, net; the potentially dilutive impact of stock-based compensation; the provision for income taxes; litigation expenses incurred in connection with our patent defense against Cisco Systems, Inc. and Cisco Technology, Inc. (the “Cisco ManyCam Litigation”); and net loss from discontinued operations. Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure. Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income (loss) and our other GAAP results. The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA for each of the periods indicated: Three Months Ended December 31, (unaudited) Year Ended December 31, 2025 2024 2025 2024 Reconciliation of net loss to Adjusted EBITDA: Net loss $ (631,968 ) $ (1,422,089 ) $ (1,956,536 ) $ (4,268,675 ) Net loss from discontinued operations -- (4,068,412 ) -- (4,157,534 ) Interest income, net (67,655 ) (115,284 ) (340,831 ) (569,016 ) Income tax expense, discontinued operations 15,586 -- 24,357 Income tax benefit (88,905 ) (40,742 ) (2,326,799 ) (137,589 ) Other income, net (31,263 ) -- (95,013 ) (146,269 ) Litigation expenses relating to the Cisco ManyCam Litigation 210,599 -- 717,780 -- Depreciation and amortization expense 559,277 204,946 2,541,512 821,696 Impairment loss in connection with Divestiture -- 3,849,766 -- 3,849,766 Stock-based compensation expense 54,545 27,282 343,850 151,412 Adjusted EBITDA $ 4,630 $ (1,548,947 ) $ (1,116,037 ) $ (4,431,852 ) Devices Under Management Devices under management represent the number of endpoints, servers and network devices that are outsourced to us under managed services agreements. It is derived directly from our contract management system and adjusted monthly for additions and retirements (if any). Management uses this metric to measure growth and a measure of customer confidence in our ability to manage devices on their behalf. As of December 31, 2025, we had over 11,000 devices under management. Results of Operations Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 Revenue Total revenue increased by 2,049.9% to $23,612,459 for the year ended December 31, 2025 from $1,098,280 for the year ended December 31, 2024. This increase was driven by new revenue streams acquired in connection with the Acquisition and the fact that revenue for the prior year period did not include revenue from discontinued operations. 27 The following table sets forth our total revenue for the year ended December 31, 2025 and the year ended December 31, 2024, the increase between those periods, the percentage increase between those periods and the percentage of total revenue that each represented for those periods: % Revenue Year Ended Year Ended December 31, $ % December 31 2025 2024 Increase Increase 2025 2024 Managed information technology revenue $ 14,813,411 -- 14,813,411 -- 62.7 % -- Procurement revenue 5,389,906 -- 5,389,906 -- 22.8 % -- Professional services revenue 2,305,787 -- 2,305,787 -- 9.8 % -- Subscription revenue 1,103,355 1,098,280 5,075 0.5 % 4.7 % 100.0 % Total revenue $ 23,612,459 $ 1,098,280 $ 22,514,179 2,049.9 % 100.0 % 100.0 % Managed Information technology revenue includes revenue from our managed IT security services, web hosting, secure private cloud hosting and managed backup and disaster recovery. Our subscription revenue for the year ended December 31, 2025 relates to the sales from our ManyCam software, which increased by $5,075, or 0.5%, as compared to the year ended December 31, 2024. The increase in subscription revenue was primarily driven by an increase in new subscribers to our ManyCam software. Costs and Expenses Total costs and expenses for the year ended December 31, 2025 increased by $22,111,809, to $28,331,638, or 355.5%, as compared to the year ended December 31, 2024. The following table presents our costs and expenses for the year ended December 31, 2025 and 2024, the increase between those periods, the percentage increase between those periods and the percentage of total revenue that each represented for those periods: % of Revenue Year Ended Year Ended December 31, $ % December 31, 2025 2024 Increase Increase 2025 2024 Cost of revenue $ 11,272,929 $ 262,888 $ 11,010,041 4,188.1 % 47.7 % 23.9 % Sales marketing and product development expense 3,253,890 277,244 2,976,646 1,073.7 % 13.8 % 25.2 % General and administrative expense 10,545,528 4,858,001 5,687,527 117.1 % 44.7 % 442.3 % Depreciation and amortization 2,541,511 821,696 1,719,815 209.3 % 10.8 % 74.8 % Litigation expenses relating to the Cisco ManyCam Litigation 717,780 -- 717,780 -- 3.0 % -- Total costs and expenses $ 28,331,638 $ 6,219,829 $ 22,111,809 355.5 % 119.9 % 566.3 % Cost of revenue Our cost of revenue for the year ended December 31, 2025 increased by $11,010,041, or 4,188.1%, as compared to the year ended December 31, 2024. The increase in our cost of revenue was primarily due to an increase in expenses related to the new revenue streams acquired in connection with the Acquisition, including but not limited to, costs associated with procurement equipment and related costs of $4,253,932, managed services expenses of $1,993,691, subscriptions and licensing expenses of $2,448,102, professional and consulting costs of $987,982, web hosting expense of $458,600 and rent related to our Data Centers of $334,218. Sales marketing and product development expense Our sales marketing and product development expense for the year ended December 31, 2025 increased by 2,976,646, or 1,073.7%, as compared to the year ended December 31, 2024. The increase in sales marketing and product development expense for the year ended December 31, 2025 was primarily due to an increase in salary-related expenses of approximately $1,967,167 and commissions of $562,284 earned by our sales team to service and grow our customer base. In addition, consulting expenses totaled $195,390 related to marketing activities. As a result of the Transactions, headcount on our sales team increased from zero in the prior year period to approximately 15 people in the current period, and their associated salary costs are included in sales marketing and product development expense for the year ended December 31, 2025. 28 General and administrative expense Our general and administrative expense for the year ended December 31, 2025 increased by $5,687,527, or 117.1%, as compared to the year ended December 31, 2024. The increase in general and administrative expenses for the year ended December 31, 2025 was primarily due to legal and accounting expenses of $1,254,936. In addition, the Company incurred public company expenses of $630,602, rent expense of $334,218 in connection with our Data Centers and insurance costs of $813,282. Salary and salary related expenses totaled $6,267,902 for the year ended December 31, 2025, plus $343,852 of non-cash share-based compensation. As a result of the Transactions, employee headcount increased from four individuals in the prior year period to approximately 40 individuals in the current period, and their associated salary and salary related costs are included in general and administrative expenses for the year ended December 31, 2025. Of the total expenses described above, approximately $334,970 were one-time expenses related to the Transactions. Depreciation and amortization expenses Depreciation and amortization expenses increased by $1,719,815 to $2,541,511 for the year ended December 31, 2025. The increase relates to increased amortization and depreciation in connection with the intangible and fixed assets acquired in the Acquisition. Litigation expenses Litigation expense totaled $717,780 for the year ended December 31, 2025 and related to the costs incurred in connection with the Cisco ManyCam Litigation. Non-Operating Income The following table presents the components of non-operating income for the year ended December 31, 2025 and the year ended December 31, 2024, the decrease between those periods, the percentage decrease between those periods and the percentage of total revenue that each represented for those periods: % of Revenue Year Ended Year Ended December 31, $ % December 31, 2025 2024 (Decrease) (Decrease) 2025 2024 Interest income, net $ 340,831 $ 569,016 $ (228,185 ) (40.1 )% 1.4 % 51.8 % Other income, net 95,013 146,269 (51,256 ) (35.0 )% 0.4 % 13.3 % Total non-operating income $ 435,844 $ 715,285 $ (279,441 ) (39.1 )% 1.8 % 65.1 % Non-operating income for the year ended December 31, 2025 was $435,844, a decrease of $279,441, or 39.1%, as compared to non-operating income of $715,285 for the year ended December 31, 2025. The decrease in non-operating income was primarily a result of a decrease in the amount of interest that we earned on our cash balances which were invested in liquid instruments like certificates of deposit and money markets. Other income for the year ended December 31, 2025, related to the sale of a domain name that we are not using as well as proceeds of $31,263 from the initial receipt of the earnout payment from the Divestiture. During the year ended December 31, 2024 other income included proceeds from a class action lawsuit against a service provider. 29 Liquidity and Capital Resources Year Ended December 31, 2025 2024 Consolidated Statements of Cash Flows Data: Net cash provided by (used in) operating activities – continuing operations $ 1,076,724 $ (3,019,287 ) Net cash used in operating activities – discontinued operations -- (357,634 ) Net cash used in investing activities (4,280,149 ) -- Net cash provided by financing activities 1,048,952 39,772 Net decrease in cash, cash equivalents and restricted cash $ (2,154,473 ) $ (2,979,515 ) Currently, our primary source of liquidity is cash on hand and cash available through the Facility. As of the date of this report, no amounts were outstanding under the Facility. We believe that our cash and cash equivalents balance, our cash available through the Facility and our expected cash flows from operations will be sufficient to meet all of our financial obligations for one year from the date these financial statements are issued. As of December 31, 2025, we had $8,434,061 of cash and cash equivalents, which included $1,035,747 of restricted cash. Additionally, we expect our long-term liquidity position will be sufficient to meet our long-term liquidity needs with cash flows from operations and financing arrangements. However, in the event of changes in business conditions or other developments, including a sustained market deterioration, unanticipated regulatory developments, significant acquisitions, competitive pressures, or to the extent our liquidity needs prove to be greater than expected or cash generated from operations is less than anticipated, we may need additional liquidity. To the extent we elect to finance our long-term liquidity needs, we believe that the potential financing capital available to us in the future will be sufficient. Our primary use of working capital is related to investment in marketing initiatives to grow the business in order to maintain and create new services and features in applications for our clients and users. In the future, we may seek to grow our business by expending our capital resources to fund strategic acquisitions, investments and partnership opportunities. Stock Repurchase Plan On May 8, 2025, the Board approved the Stock Repurchase Plan for up to $400,000 of our outstanding common stock, which expires on the one-year anniversary of such date. We intend to utilize the Stock Repurchase Plan to minimize the dilutive impact of awards granted under our equity incentive plans and to repurchase shares opportunistically. Shares of common stock 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 plans. The Stock Repurchase Plan does not obligate us to repurchase any shares of common stock, and the Stock Repurchase Plan may be modified, suspended, extended or terminated at any time by our Board. 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 our common stock, general market and economic conditions, alternative investment opportunities and other corporate considerations. As of December 31, 2025, 151,258 shares of common stock had been repurchased pursuant to the Stock Repurchase Plan for an aggregate purchase price of approximately $304,887, before fees. NTS Acquisition On January 2, 2025, we closed the Acquisition, pursuant to which we acquired NTS through a two-step merger process. The aggregate consideration we delivered to Newtek at the Acquisition Closing consisted of (i) $4,000,000 in cash and (ii) 4,000,000 shares of our Series A Preferred Stock. In addition to the Acquisition Closing Consideration, the Acquisition Agreement provides that Newtek is entitled to receive an amount up to $5,000,000 (the “Acquisition Earn-Out Amount”) based on our achievement of certain cumulative average Adjusted EBITDA thresholds for the 2025 and 2026 fiscal years. The Acquisition Earn-Out Amount may be paid, in our sole discretion, in cash (the “Acquisition Earn-Out Cash Consideration”), in shares of Series A Preferred Stock (the “Acquisition Earn-Out Stock Consideration”) or in a combination thereof. Pursuant to the Acquisition Agreement, to the extent that all or a portion of the Acquisition Earn-Out Amount is paid in shares of Series A Preferred Stock, the number of shares of Series A Preferred Stock to be issued to Newtek will be calculated based on the average of the daily volume weighted average prices of our common stock during each trading day during a 60 calendar-day period ending on December 31, 2026; provided, that in no event shall such price be less than $1.00. 30 Pursuant to the Acquisition Agreement, if the issuance of the Acquisition Earn-Out Stock Consideration would cause Newtek’s “total equity” (as calculated under the Bank Holding Company Act of 1956, as amended, and as implemented and interpreted by the Board of Governors of the Federal Reserve System) in us to exceed one-third of our total equity (the “Total Equity Cap”), then the number of shares of Series A Preferred Stock issuable as Acquisition Earn-Out Stock Consideration will be adjusted so that we will issue to Newtek the maximum number of shares of Series A Preferred Stock that would not cause Newtek’s total equity to exceed the Total Equity Cap, with a corresponding increase to the Acquisition Earn-Out Cash Consideration. The Divestiture On January 2, 2025, we completed the sale to Meteor Mobile of the Transferred Assets. The consideration delivered by Meteor Mobile to us at the closing of the Divestiture consisted of (i) $1,350,000 in cash and (ii) the assumption of all of the liabilities of the Sellers arising out of, or relating to, the Business or the Transferred Assets, other than certain excluded liabilities. In addition to the Divestiture Closing Consideration, we are entitled to receive, with respect to each Earn-Out Period, as defined and described below, certain payments in cash based on the cash revenue, net of any refunds, received by Meteor Mobile that is attributable to the Business (such cash revenue, the “Legacy Business Revenue”), as follows: ● from the six-month period beginning on July 1, 2025 and ending on December 31, 2025 (“Earn-Out Period 1”), an amount equal to (i) for any Legacy Business Revenue greater than or equal to $3,500,000 and less than $4,250,000, the amount of such Legacy Business Revenue multiplied by 0.30 plus (ii) for any Legacy Business Revenue greater than or equal to $4,250,000, the amount of such Legacy Business Revenue in excess of $4,250,000 multiplied by 0.40; and ● from each of the twelve-month period beginning on January 1, 2026 and ending on December 31, 2026 (“Earn-Out Period 2”), the twelve-month period beginning on January 1, 2027 and ending on December 31, 2027 (“Earn-Out Period 3”) and the twelve-month period beginning on January 1, 2028 and ending on December 31, 2028 (“Earn-Out Period 4” and collectively with Earn-Out Period 1, Earn-Out Period 2 and Earn-Out Period 3, the “Earn-Out Periods”), an amount equal to (i) for any Legacy Business Revenue greater than or equal to $7,000,000 and less than $8,500,000, the amount of such Legacy Business Revenue multiplied by 0.30 plus (ii) for any Legacy Business Revenue greater than or equal to $8,500,000, the amount of such Legacy Business Revenue in excess of $8,500,000 multiplied by 0.40 (the aggregate amount, if any, earned during the Earn-Out Periods, the “Divestiture Earn-Out Amount”). In the event of a change of control (as defined in the Divestiture Agreement) of Meteor Mobile during any of the Earn-Out Periods, we are entitled to receive an acceleration payment in cash, net of any Divestiture Earn-Out Amounts previously paid to us (the “Acceleration Payment”). If any of the Transferred Assets are sold independently from the other assets of Meteor Mobile, we will be entitled to (i) 50% of the aggregate consideration paid to Meteor Mobile for the Transferred Assets minus (ii) the aggregate amount of any Divestiture Earn-Out Amounts received by the Sellers by the date of the change of control, minus (iii) the aggregate amount of any Acceleration Payments previously paid through such date. If any of the Transferred Assets are sold contemporaneously with other assets of Meteor Mobile, we are entitled to (x) the aggregate consideration paid to Meteor Mobile for the Transferred Assets multiplied by the ratio of the trailing 12-month EBITDA of the Transferred Assets sold and the EBITDA of all assets sold minus (y) the aggregate amount of any Divestiture Earn-Out Amounts received by the Sellers by the date of the change of control, minus (z) the aggregate amount of any Acceleration Payments previously paid through such date. The minimum Acceleration Payment for the sale of “Paltalk,” “Camfrog” and “Vumber” is $1,650,000, $450,000 and $300,000, respectively, and the Acceleration Payments payable to us are capped at $5,000,000 in the aggregate. The amount earned in Earn Out Period 1 was $31,263 and is included in other income in the consolidated statement of operations. Business Loan Agreement and Credit Agreement and Revolving Promissory Note On April 10, 2025, we, IPM LLC, and Newtek Bank, a subsidiary of Newtek, entered into the Loan Agreements that set forth the terms and conditions for the Facility, which consists of a secured revolving line of credit to us and IPM LLC in the maximum amount of $1,000,000. The Loan Agreements are secured by substantially all of our assets and the assets of IPM LLC. The Facility will mature on April 10, 2026. As of the date of this Annual Report on Form 10-K, no amounts were outstanding under the Facility. Operating Activities Net cash provided by operating activities was $1,076,724 for the year ended December 31, 2025, as compared to net cash used in operating activities from continuing operations of $2,661,653 for the year ended December 31, 2024. The increase in the amount of cash provided by operations for the year ended December 31, 2025 was primarily attributed to the change in the business activities of the Company following the Transactions compared to the year ended December 31, 2024. 31 Investing Activities Net cash used in investing activities for the year ended December 31, 2025 was $4,280,149 and related to the cash consideration paid by the Company to Newtek in connection with the Acquisition as well as the acquisition of fixed assets. Financing Activities Net cash provided by financing activities was $1,048,952 for the year ended December 31, 2025, which was attributed to the $1,350,000 received in connection with the Divestiture netted against the $301,048 (net of fees) used in connection with the Stock Repurchase Plan. Cash provided by financing activities for the year ended December 31, 2024 related to the exercise of employee stock options was $39,772. Contractual Obligations and Commitments As of December 31, 2025, we leased space in the Data Centers as well as office space under non-cancellable operating lease agreements with remaining lease terms ranging from one to two years. Our lease obligations consist primarily of fixed monthly rental payments, subject in some cases to escalation clauses and common area maintenance charges. As of December 31, 2025 we had aggregate undiscounted future minimum lease payments of approximately $1,181,617, of which $789,270 is payable within the next twelve months. We believe our existing cash balances and cash flows from operations will be sufficient to satisfy our lease payment obligations as they become due. There have been no other material changes to our contractual obligations and commitments disclosed in the contractual obligations and commitments section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K. Off-Balance Sheet Arrangements As of December 31, 2025, we did not have any off-balance sheet arrangements. Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. The Company makes significant estimates and uses judgement related to assessing the goodwill valuation and recoverability of intangible assets. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. We believe the following critical accounting policy affects our more significant judgments and estimates used in the preparation of our consolidated financial statements: Business Combinations We apply the acquisition method of accounting for business combinations. Under the acquisition method, the acquiring entity recognizes all of the identifiable assets acquired and liabilities assumed at their acquisition date fair values. We use our best estimates and assumptions to estimate the fair values of these tangible and intangible assets. Any excess of the purchase price over amounts allocated to the assets acquired is recorded as goodwill. The acquired intangible assets are amortized using the straight-line method over the estimated useful lives of the respective assets. Goodwill is reviewed for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may be impaired. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 32