IPM

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2024, for Intelligent Protection Management Corp. (formerly Paltalk, Inc.). The reporting period reflects a transformative transition in the company's business model. On January 2, 2025, immediately following the fiscal year-end, the Company completed two major transactions: the acquisition of Newtek Technology Solutions, Inc. (NTS) and the divestiture of its legacy consumer applications (Paltalk, Camfrog, Vumber, and Tinychat) to Meteor Mobile Holdings, Inc. Consequently, the Company changed its name and shifted its focus from consumer video-based communities to providing enterprise IT services, including managed IT security, cloud hosting, and data storage. The financial statements for 2024 present the legacy consumer business as discontinued operations.

Key Financial Metrics

Material Changes Versus Prior Period

• Revenue Growth in Continuing Operations: Revenue from continuing operations (primarily ManyCam software) increased by 14.2% to $1.10 million, driven by increased subscription sales.
• Significant Increase in Net Loss: The net loss widened by 689.5% to $8.43 million. This was primarily driven by a $3.85 million non-cash impairment loss related to the divestiture of legacy assets and $1.8 million in one-time professional fees associated with the acquisition and divestiture transactions.
• Discontinued Operations Turnaround: The legacy business, previously profitable in 2023 with $1.62 million in income, reported a loss of $4.16 million in 2024. This shift was due to a $2.0 million decline in subscription and virtual gift revenue and the aforementioned impairment charge.
• Expense Increases: General and administrative expenses surged by 39.5% to $5.68 million, largely due to transaction-related professional fees. Conversely, cost of revenue and sales and marketing expenses decreased slightly.
• Liquidity: Cash and cash equivalents decreased by approximately $3.0 million during the year, reflecting the net cash burn from operations.

Guidance, Outlook, Risks, and Unusual Items

Outlook and Strategy

Following the January 2025 transactions, the Company's strategy focuses on integrating NTS's IT services with its existing ManyCam software. Management aims to cross-sell ManyCam to NTS's enterprise client base and expand into cloud infrastructure and cybersecurity sectors. The Company plans to incorporate AI features into its secure private cloud offerings in the future.

Unusual Items

• Patent Litigation Win: In August 2024, a jury awarded the Company $65.7 million in a patent infringement lawsuit against Cisco Systems regarding WebEx. However, the Company estimates it will receive no more than one-third of the gross proceeds after legal fees, and the amount is subject to appeal. No gain was recorded in the financial statements.
• Patent Litigation Risk: In March 2025, Cisco filed a counter-suit alleging the Company's ManyCam software infringes on two of Cisco's patents. The Company has not recorded a liability but notes the potential for adverse effects.

Risks and Contingencies

• Integration Risk: The Company faces risks in integrating NTS's operations, including potential failure to realize synergies and reliance on Newtek for managerial support and customer referrals.
• Customer Concentration: NTS historically relied on a limited number of customers, with Newtek itself accounting for a material portion of revenue (27% in the nine months ended Sept 30, 2024).
• Internal Controls: NTS had previously identified material weaknesses in internal controls over financial reporting. The Company is currently evaluating and remediating these controls.
• Cybersecurity: As a provider of IT and cloud services, the Company faces significant risks related to data breaches and cyber-attacks, which could damage its reputation and result in liability.

Investor Verification Checklist

• Transaction Closing Details: Verify the final cash consideration paid for the NTS acquisition ($4.0 million) and the divestiture proceeds received ($1.35 million), along with the terms of the earn-out provisions for both deals.
• Patent Litigation Status: Monitor the status of the $65.7 million Cisco WebEx award (potential collection vs. appeal) and the defense strategy for the new Cisco ManyCam infringement suit filed in March 2025.
• Customer Concentration: Assess the stability of the relationship with Newtek, which serves as both a major customer and a referral source for the newly acquired NTS business.
• Internal Control Remediation: Review future filings for updates on the remediation of material weaknesses in internal controls previously identified at NTS.
• Liquidity Position: Confirm that the $10.6 million cash balance at year-end, combined with expected cash flows, is sufficient to fund the integration of NTS and ongoing operations without immediate need for additional capital.