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Paltalk, Inc. Reports Increased Operating Efficiencies with 69% Reduction in Net Loss for Fiscal Year 2023

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Net Cash Used in Operating Activities for Q4 2023 was $0.1 Million

Q4 2023 Cash Balance Remains Strong at $13.6 Million and No Long-Term Debt

JERICHO, NY, March 15, 2024 (GLOBE NEWSWIRE) — via NewMediaWire — Paltalk, Inc. (“Paltalk,” the “Company,” “we,” “our” or “us”) (Nasdaq: PALT), a communications software innovator that powers multimedia social applications, today announced financial and operational results for the fourth quarter and year ended December 31, 2023.

Key Financial Highlights for Fourth Quarter Ended December 31, 2023 Compared to Prior Year Period

Key Financial Highlights for Year Ended December 31, 2023 Compared to Prior Year Period

Business Highlights for the Year Ended December 31, 2023

        1 Adjusted EBITDA is a non-GAAP financial measure. Please see the discussion below under the heading “Non-GAAP Financial Measures and Key Metrics” and the reconciliations at the end of this release for additional information concerning this and other non-GAAP financial measures.

Management Commentary

Jason Katz, Chairman and CEO of Paltalk, commented, “Several of our initiatives have led to a significant decrease in operating expenses and an improvement in reducing our operating and net losses. As a result, our operating expenses as a percentage of revenue declined to 118% for the fourth quarter of 2023, versus 129% for the fourth quarter of 2022.”

Katz, continued, “On the sales side, our marketing efforts have become more efficient, and we have expanded ManyCam to the enterprise segment. We believe we are well-positioned for organic and acquisitive growth, as our current expense infrastructure can support additional revenue, and our cash position as of December 31, 2023 remains strong at $13.6 million.”

Katz, concluded, “On the strategic opportunities front, we have continued to actively identify and analyze potential mergers or acquisitions of other assets or entities that are synergistic to our business, which we believe have the potential to increase shareholder value. Our trial against Cisco has been set to begin in April 2024, and we look forward to continuing to defend our intellectual property.”

Patent Litigation Update – Trial Expected to Begin in April 2024

On July 23, 2021, a wholly owned subsidiary of the Company, Paltalk Holdings, Inc., filed a patent infringement lawsuit against WebEx Communications, Inc., Cisco WebEx LLC, and Cisco Systems, Inc. (collectively, “Cisco”), in the U.S. District Court for the Western District of Texas (the “Court”). We allege that certain of Cisco’s products have infringed U.S. Patent No. 6,683,858, and that we are entitled to damages.

A Markman hearing took place on February 24, 2022. On September 7, 2022, the United States Patent Office issued a reexamination of U.S. Patent No. 6,683,858, and on January 19, 2023, the Examiner issued an Ex Parte Reexamination Certificate, ending the reexamination and confirming the patentability of claims 1-10 of U.S. Patent No. 6,683,858. On June 29, 2023, the Court held a pretrial conference with the parties and denied Cisco’s motion for summary judgement. The trial is expected to begin on April 8, 2024.

If we receive a jury verdict in our favor or receive settlement proceeds in connection with the foregoing litigation, the exact amount of such 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 will not receive the majority of any gross proceeds resulting from any potential verdict or settlement.  For the foregoing reasons, we are unable to predict the outcome of this litigation and its ultimate cost.

Financial Results for Three Months Ended December 31, 2023

Financial Results for Year Ended December 31, 2023

Key Financial and Operating Metrics from Operations:
(in thousands, except for percentages)

  Three Months Ended        
  December 31, (unaudited)   Change
    2023     2022   $   %
    Subscription revenue $ 2,583   $ 2,717   $ (134 ) -4.9 %
    Advertising revenue $ 109   $ 78   $ 31   39.9 %
               
Total revenues $ 2,692   $ 2,795   $ (103 ) -3.7 %
Loss from operations $ (494 ) $ (802 ) $ 308   38.4 %
Net loss $ (283 ) $ (494 ) $ 211   42.7 %
Net Cash Provided by (Used in) Operating Activities $ (99 ) $ (333 ) $ 234   70.3 %
Adjusted EBITDA (a non-GAAP measure) $ (223 ) $ (473 ) $ 250   52.8 %
               
               
  Year Ended        
  December 31,   Change
    2023     2022   $   %
    Subscription revenue $ 10,647   $ 10,663   $ (16 ) -0.1 %
    Advertising revenue $ 333   $ 327   $ 6   1.9 %
               
Total revenues $ 10,980   $ 10,990   $ (10 ) -0.1 %
Loss from operations $ (2,070 ) $ (3,659 ) $ 1,589   43.4 %
Net loss $ (1,067 ) $ (3,412 ) $ 2,345   68.7 %
Net cash used in operating activities $ (1,080 ) $ (2,957 ) $ 1,877   63.5 %
Adjusted EBITDA (a non-GAAP measure) $ (1,013 ) $ (2,647 ) $ 1,634   61.7 %

ABOUT PALTALK, INC. (Nasdaq: PALT)

Paltalk, Inc. is a communications software innovator that powers multimedia social applications. Our product portfolio includes Paltalk and Camfrog, which together host a large collection of video-based communities. Our other products include ManyCam, Tinychat and Vumber. The Company has an over 20-year history of technology innovation and holds 8 patents. For more information, please visit: http://www.paltalk.com.

To be added to our news distribution list, please visit: http://www.paltalk.com/investor-alerts/.

FORWARD-LOOKING STATEMENTS:

This press release contains “forward-looking statements.” Such statements may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential,” or similar words.  Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, any economic recession and the overall inflationary environment on our results of operations and our business; our ability to effectively market and generate revenue from our applications; our ability to generate and maintain active users and to effectively monetize our user base; our ability to improve, market and promote the ManyCam software; the Company’s ability to retain the listing of its common stock on The Nasdaq Capital Market; our ability to release new applications or improve upon or add features to existing applications on schedule or at all; risks and uncertainties related to our increasing focus on the use of new and novel technologies to enhance our applications, and our ability to timely complete development of applications using new technologies; our ability to effectively compete with existing competitors and new market entrants; our ability to effectively secure new software development and licensing customers; our ability to protect our intellectual property rights; the use of the internet and privacy and protection of user data; our ability to consummate favorable acquisitions and effectively integrate any companies or properties that we acquire; and our ability to manage our partnerships and strategic alliances. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (“SEC”), including the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s website at www.sec.gov.

All forward-looking statements speak only as of the date on which they are made. The Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement was made, except to the extent required by applicable securities laws.

Investor Contacts:
IR@paltalk.com
ClearThink
nyc@clearthink.capital
917-658-7878

PALTALK, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS

    Three Months Ended   Year Ended  
    December 31, (Unaudited)   December 31, (Unaudited)  
    2023     2022   2023     2022  
Reconciliation of Net Loss to Adjusted EBITDA:                      
Net loss   $ (283,090 )   $ (494,234 ) $ (1,067,335 )   $ (3,412,250 )
Stock-based compensation expense     65,302       62,476     234,993       333,825  
Depreciation and amortization expense     205,584       266,298     822,334       670,863  
Impairment loss on digital tokens     –       –     –       7,262  
Interest income, net     (177,178 )     (105,260 )   (639,611 )     (74,895 )
Other income, net     –       –     (343,045 )     –  
Income tax benefit     (33,842 )     (202,161 )   (20,252 )     (171,665 )
Reported Adjusted EBITDA   $ (223,224 )   $ (472,881 ) $ (1,012,916 )   $ (2,646,860 )
                               

Non-GAAP Financial Measures and Key Metrics

The Company has provided in this release Adjusted EBITDA, a non-GAAP financial measure, to supplement the consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Adjusted EBITDA is defined as net (loss) income adjusted to exclude stock-based compensation expense, depreciation and amortization expenses, impairment loss on digital token, interest income, net, other (income) expense, net, and income tax (benefit) expense.

Management uses Adjusted EBITDA internally in analyzing the Company’s financial results to assess operational performance and to determine the Company’s future capital requirements. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. The Company believes that both management and investors benefit from referring to Adjusted EBITDA in assessing its performance and when planning, forecasting and analyzing future periods. The Company believes Adjusted EBITDA is useful to investors and others to understand and evaluate the Company’s operating results and it allows for a more meaningful comparison between the Company’s performance and that of competitors. 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; net loss from discontinued operations; interest income, net; other expense, net; income tax expense from continuing operations; our working capital requirements; the impairment loss on digital tokens; the potentially dilutive impact of stock-based compensation; and the provision for income taxes. Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA along with other financial performance measures, including total revenues, subscription revenue, deferred revenue, net loss, cash and cash equivalents, restricted cash, net cash used in operating activities and our financial results presented in accordance with GAAP.

PALTALK, INC.
CONSOLIDATED BALANCE SHEETS

    December 31,     December 31,  
    2023     2022  
Assets            
Current assets:            
Cash and cash equivalents   $ 13,568,049     $ 14,739,933  
Accounts receivable, net of allowances of $23,326 and $3,648 as of December 31, 2023 and 2022, respectively     92,704       122,297  
Employee retention tax credit receivable, net     114,212       –  
Prepaid expense and other current assets     990,634       543,199  
Total current assets     14,765,599       15,405,429  
Operating lease right-of-use asset     77,005       159,181  
Goodwill     6,326,250       6,326,250  
Intangible assets, net     2,704,477       3,526,811  
Other assets     13,937       13,937  
Total assets   $ 23,887,268     $ 25,431,608  
                 
Liabilities and stockholders’ equity                
Current liabilities:                
Accounts payable   $ 792,053     $ 1,013,637  
Accrued expenses and other current liabilities     226,120       225,193  
Operating lease liabilities, current portion     77,005       82,176  
Contingent Consideration     –       85,000  
Deferred subscription revenue     2,043,362       2,257,452  
Total current liabilities     3,138,540       3,663,458  
Operating lease liabilities, non-current portion     –       77,005  
Deferred tax liability     614,041       716,903  
Total liabilities     3,752,581       4,457,366  
Commitments and contingencies                
Stockholders’ equity:                
Common stock, $0.001 par value, 25,000,000 shares authorized, 9,864,120 shares issued and 9,222,157 and 9,227,349 shares outstanding as of December 31, 2023 and 2022, respectively     9,864       9,864  
Treasury stock, 641,963 and 636,771 shares repurchased as of December 31, 2023 and 2022, respectively     (1,199,337 )     (1,192,124 )
Additional paid-in capital     36,208,728       35,973,735  
Accumulated deficit     (14,884,568 )     (13,817,233 )
Total stockholders’ equity     20,134,687       20,974,242  
Total liabilities and stockholders’ equity   $ 23,887,268     $ 25,431,608  
                 

PALTALK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

    Years Ended  
December 31,
    2023     2022  
Revenues:            
Subscription revenue   $ 10,646,700     $ 10,662,691  
Advertising revenue     333,144       326,854  
Total revenues     10,979,844       10,989,545  
Costs and expenses:                
Cost of revenue     3,238,243       2,823,570  
Sales and marketing expense     878,657       1,571,275  
Product development expense     4,860,607       5,934,433  
General and administrative expense     4,072,580       4,311,815  
Impairment loss on digital tokens     –       7,262  
Total costs and expenses     13,050,087       14,648,355  
Loss from operations     (2,070,243 )     (3,658,810 )
Interest income (expense), net     639,611       74,895  
Other income (expense)     343,045       –  
Loss from operations before provision for income taxes     (1,087,587 )     (3,583,915 )
Income tax benefit (expense)     20,252       171,665  
Net loss   $ (1,067,335 )   $ (3,412,250 )
                 
Net loss per share of common stock:                
Basic   $ (0.12 )   $ (0.35 )
Diluted   $ (0.12 )   $ (0.35 )
Weighted average number of shares of common stock used in calculating net loss per share of common stock:                
Basic     9,222,206       9,638,567  
Diluted     9,222,206       9,638,567  
                 

PALTALK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

    Years Ended  
December 31,
    2023     2022  
Cash flows from operating activities:            
Net loss   $ (1,067,335 )   $ (3,412,250 )
Adjustments to reconcile net loss from operations to net cash used in operating activities:                
Depreciation of property and equipment     –       69,599  
Amortization of intangible assets     822,334       601,264  
Amortization of operating lease right-of-use assets     82,176       80,310  
Impairment loss on digital tokens     –       7,262  
Income tax benefit     20,252       –  
Deferred tax liability     (123,114 )     (171,665 )
Stock-based compensation     234,993       333,825  
Bad debt expense     49,274       –  
Changes in operating assets and liabilities:                
Accounts receivable, net     (19,681 )     31,151  
Operating lease liability     (82,176 )     (80,310 )
Employee retention tax credit receivable, net     (114,212 )     –  
Prepaid expense and other current assets     (447,435 )     (303,941 )
Accounts payable, accrued expenses and other current liabilities     (220,657 )     (453,928 )
Deferred subscription revenue     (214,090 )     341,959  
Net cash used in operating activities     (1,079,671 )     (2,956,724 )
Cash flows from investing activities activities:                
Acquisition of ManyCam assets     –       (2,700,000 )
Acquisition related costs of ManyCam assets     –       (242,279 )
Payment of contingent consideration     (85,000 )     –  
Net cash used in investing activities     (85,000 )     (2,942,279 )
Cash flows from financing activities:                
Purchase of treasury stock     (7,213 )     (997,924 )
Net cash used in financing activities     (7,213 )     (997,924 )
Net decrease in cash and cash equivalents     (1,171,884 )     (6,896,927 )
Balance of cash and cash equivalents at beginning of period     14,739,933       21,636,860  
Balance of cash and cash equivalents at end of period   $ 13,568,049     $ 14,739,933  
Supplemental disclosure of cash flow information:                
Non-cash investing and financing activities:                
Deferred tax liability associated with the acquisition of ManyCam assets   $ –     $ 904,253  
Accrued contingent consideration   $ –     $ 85,000  


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