The inability to accurately derive our metrics or data analytics could result in incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement of our active users were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of userssubscribers to satisfy our growth strategies. If advertisers or investors do not perceive our user,subscription, geographic or other demographic metrics to be accurate representations of our user base, or if we discover material inaccuracies in our user,subscription, geographic or other demographic metrics, our reputation may be seriously harmed. At the same time, advertisers may be less willing to allocate their budgets or resources to our products, which could seriously harm our business, results of operation or financial condition.

Because we recognize revenue from subscriptions over the term of the subscription, term, the full impact of downturns or upturns in subscription sales may not be immediately reflected in our results of operations or financial condition.

We recognize subscription revenue from customers monthly over the term of the subscription, term, and subscriptions are generally offered in durations of one-, three-, six-, twelve-, and fifteen-monthtwelve-month terms, depending on the particular product. As a result, much of the subscription revenue we report in each period is deferred revenue from subscription agreements entered into during previous periods. Consequently, a decline in new or renewed subscriptions in any one quarter will negatively affect our revenue in future quarters. In addition, we might not be able to immediately adjust our costs and expenses to reflect these reduced revenues. Accordingly, the effect of significant downturns in user acceptance of our applications may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to quickly increase our revenue through additional sales in any period, as revenue from new subscribers must be recognized over the subscription term.term of the subscription. As a result, you should not rely on the amount of subscription revenue generated in prior quarters as an indication of future results.

The online live video and dating industries are characterized by rapid technological change and the development enhancements and new applications, and if we fail to keep pace with technological developments or launch new applications, our business may be adversely affected.

The online live video and dating industries are characterized by rapid change, and our future success is dependent upon our ability to adopt and innovate. To attract new users and increase revenues from existing users, we need to enhance, add new features to and improve our existing applications and introduce new applications in the future. The success of any enhancements or new features and applications depends on several factors, including timely completion, introduction and market acceptance. For example, we recently announced a strategic shift towards focusing on blockchain technology, a rapidly evolving technology that we have limited operational history or experience with. Building a new brand or product is generally an iterative process that occurs over a meaningful period of time and involves considerable resources and expenditures, and we may expend significant time and resources developing and launching an application that may not result in revenues in the anticipated timeframe or at all, or may not result in revenue growth that is sufficient to offset increased expenses. If we are unable to successfully develop enhancements, new features or new applications to meet user trends and preferences, our business and operating results could be adversely affected.

In addition, our applications are designed to operate on a variety of network, hardware and software platforms using Internet tools and protocols and we need to continuously modify and enhance our applications to keep pace with technological changes. If we are unable to respond in a timely and cost-effective manner, our current and future applications may become less marketable and less competitive or even obsolete.

If we are unable to protect our intellectual property rights, we may be unable to compete with competitors developing similar technologies.

Historically, our defense of our intellectual property rights has been a significant aspect of our business and has meaningfully contributed to our results of operations. Accordingly, our success and ability to compete are often dependent upon the development of intellectual property for our applications.

We aim to protect our confidential proprietary information, in part, by entering into confidentiality agreements and invention assignment agreements with all our employees, consultants, advisors and any third parties who access or contribute to our proprietary know-how, information, or technology. We also rely on trademark, copyright, patent, trade secret, and domain-name-protection laws to protect our proprietary rights. In the United States and internationally, we have filed various applications to protect aspects of our intellectual property, and we currently hold a number of issued patents in multiple jurisdictions. In the future we may acquire additional patents or patent portfolios, which could require significant cash expenditures. However, third parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietary rights held by us, and pending and future trademark and patent applications may not be approved. In addition, effective intellectual property protection may not be available in every country in which we operate or intend to operate our business.

In any of these cases, we may be required to expend significant time and expense to prevent infringement or to enforce our rights. Although we have taken measures to protect our proprietary rights, others may offer products or concepts that are substantially similar to ours and compete with our business. If we are unable to protect our proprietary rights or prevent unauthorized use or appropriation by third parties, the value of our brand and other intangible assets may be diminished, and competitors may be able to more effectively mimic our service and methods of operations. Any of these events could seriously harm our business.

Our business has recently undergone significant changes, including management, personnel and business changes. We may not be able to effectively manage the integration of our business and our growth following the completion of the AVM Merger.

As a result of the completion of the AVM Merger in October 2016, our employee headcount and the scope and complexity of our business have increased significantly. Following the AVM Merger, our management consists of Alexander Harrington, our Chief Executive Officer and the Chief Executive Officer of pre-AVM Merger PeerStream, Jason Katz, our Chairman of the Board of Directors and Chief Operating Officer and the Chief Executive Officer of pre-AVM Merger AVM, Judy Krandel, our Chief Financial Officer and a member of the Board of Directors of pre- AVM Merger PeerStream, Arash Vakil, our Chief Product Officer and the Chief Product Officer of pre-AVM Merger AVM, and Eric Sackowitz, our Chief Technology Officer and the Chief Technology Officer of pre-AVM Merger AVM. Our new management team has been working to adapt to operating our business in a manner that differs meaningfully from prior periods, but may not successfully adapt to these changes.

Following the AVM Merger, business and product integration has been a significant focus of management and has created new challenges, including managing new relationships with users, advertisers, and other third parties. The integration of our products may cause disruptions in our business, and any such disruption could have a material adverse effect on our results of operations and financial condition. Further, any delay in the timing of product integration could decrease and/or delay our expense savings expected in respect of such integration, and any such disruption could have a material adverse effect on our results of operations and financial condition.

Although we are focused on reducing costs and increasing profitability following the AVM Merger, as we continue to grow, we must expend significant resources to identify, hire, integrate, develop, motivate and retain a number of qualified employees. If we fail to effectively manage our employment needs and successfully integrate our new hires, our ability to launch new applications and enhance or support our existing applications could suffer and it could have a material adverse effect on our business, results of operations or financial condition. In addition, we may also find it increasingly difficult to maintain the benefits of our corporate culture, including our ability to quickly develop and launch new and innovative products, as a result of rapid growth. Moreover, if our operations continue to grow, our information-technology systems and our internal controls and procedures may not adequately support our operations. Any of these factors could negatively affect our business performance and seriously harm our business.

If our use of the NEM blockchain protocol is limited, it could materially or permanently disrupt our blockchain initiatives.

We have selected the NEM blockchain protocol to power our core blockchain infrastructure, including our in-development blockchain-based application Backchannel. We are not party to any agreement with the NEM Foundation to use the NEM technology, and no person, business, governmental authority or other entity or authority of any kind has any obligation to provide any financial, technical or other support to the continued operation or development of the NEM blockchain protocol. If the NEM blockchain protocol were to become unavailable to us in its current form and functionality for any reason, we would need to use a different blockchain protocol to power our applications, which could delay the launch of PSP, Backchannel or any of our other blockchain initiatives on a long-term or permanent basis.

The failure to complete the LiveXLive merger may have negatively affected our results of operations and may have negatively impacted our existing or prospective relationships with users or vendors.

On September 6, 2017, we entered into the LiveXLive Merger Agreement. On October 31, 2017, we terminated the LiveXLive Merger Agreement pursuant to Section 8.2(a) of the LiveXLive Merger Agreement due to certain conditions of the LiveXLive Merger Agreement not having been fulfilled as of October 27, 2017, which us of our obligations under the LiveXLive Merger Agreement. No termination fee was payable by us in connection with the termination of the LiveXLive Merger Agreement.

Although no termination fee was payable by us in connection with the termination of the LiveXLive Merger Agreement, the termination has had a negative impact on our results of operations. Due to the uncertainty surrounding the closing of the merger with LiveXLive, we ceased certain employee actions during the pendency of the LiveXLive Merger Agreement, such as hiring, terminating and reallocating personnel. During this time, our employees and management reallocated significant time to integration efforts, and we were also caused to defer and delay the pursuit of new product initiatives and financing options, such as equity issuances or debt facilities, which temporarily decreased our operational efficiency and effectiveness. This temporary allocation of resources to the LiveXLive merger may have adversely impacted our results of operations as we continue to operate as a standalone company. We also expended significant resources in connection with due diligence and negotiations with LiveXLive.

We plan to continue expanding our operations internationally and may be subject to increased business and economic risks that could seriously harm our business.

Presently, we derive a significant portion of revenue from international territories, and we plan to continue expanding our business operations abroad. In addition, we rely on outsourced development services from companies with employees and consultants based in Russia, India and elsewhere. The invasion of Ukraine by Russia has escalated tensions among the United States, the North Atlantic Treaty Organization member states, and Russia. The United States, other North Atlantic Treaty Organization member states, as well as non-member states, have imposed sanctions against Russia and certain Russian banks, enterprises and individuals. These and any future additional sanctions and any resulting conflict between Russia, the United States and other countries may, on a short term, disrupt, or in the future could disrupt, the consulting services provided by our third-party developers residing in Russia. This conflict may increase our costs with respect to any current or future planned development services in Russia or could result in negative publicity.

We may enter new international markets where we have limited or no experience in marketing, selling and deploying our products. If we fail to deploy or manage our operations in international markets successfully, our business may suffer. As our international operations increase our operating results may become more greatly affected by fluctuations in the exchange rates of the currencies in which we do business. In addition, we are subject to a variety of risks inherent in doing business internationally, including:

If we are unable to expand internationally and manage the complexity of our global operations successfully, our business could be seriously harmed.

A portion of our revenue is dependent on third-party resellers, the efforts of which we do not control.

We are dependent on the efforts of third parties who resell our subscriptions for a portion of our revenue. In particular, video chat users in certain international territories have an option to purchase subscriptions through local resellers. These local resellers prepay in bulk for services and debit the prepaid balance as one-time subscriptions and virtual currency are sold to end users.

We do not control the efforts of these resellers. If they fail to market or sell our subscriptions successfully, merge or consolidate with other businesses, declare bankruptcy or depart from their respective industries, our business could be harmed. If we are unable to maintain or replace our contractual relationships with resellers, efficiently manage our relationships with them or establish new contractual relationships with other third parties, we may fail to retain subscribers or acquire potential new subscribers and may experience delays and increased costs in adding or replacing subscribers that were lost, any of which could materially affect our business, operating results and financial condition.

Foreign governments restricting access to our applications could materially adversely impact our business.

We have continued to focus on increasing the international presence of our applications by expanding the localized and translated versions for additional international countries that are culturally aligned with our products. Foreign data protection, privacy, consumer protection, content regulation, and other laws and regulations are often more restrictive than those in the United States. Foreign governments may censor our products in their countries, restrict access to our products from their countries entirely, or impose other restrictions that may affect their citizens’ ability to access our products for an extended period of time or even indefinitely. If foreign governments think we are violating their laws, or for other reasons, they may seek to restrict access to our products, which would give our competitors an opportunity to penetrate geographic markets that we cannot access. As a result, our ability to grow our international user base would be impaired, and we may not be able to maintain or grow our revenue as anticipated and our business could be seriously harmed.

Our mobile applications rely on high-bandwidth data capabilities, which are subject to hardware, networks, regulations and standards that we do not control.

Our mobile applications require high-bandwidth data capabilities. If the costs of data usage increase or access to cellular networks is limited, our user growth and retention on mobile platforms may be seriously harmed. Additionally, to deliver high-quality video and other content over mobile cellular networks, our products must work well with a range of mobile technologies, systems, networks, regulations and standards that we do not control, and any changes to those mobile technologies, systems, networks, regulations or standards could impact the usability of our mobile applications, which would materially adversely affect our business, results of operations or financial condition.

Our business depends, in large part, upon the availability of cost-effective advertising space through a variety of media and keeping pace with trends in consumer behavior.

We depend upon the availability of advertising space through a variety of media, including third partythird-party applications on platforms such as Facebook, to recruit new users and subscribers, generate activity from existing users and subscribers and direct traffic to our application.applications. Historically, we have had to increase our marketing expenditures in order to attract and retain users and sustain our growth. For example, during 2022, we engaged two marketing agencies to help us drive consumer engagement through the Paltalk and Camfrog applications. The availability of advertising space varies, and a shortage of advertising space in any particular media or on any particular platform, or the elimination of a particular medium on which we advertise, could limit our ability to generate new subscribers, generate activity from existing subscribers or direct traffic to our applications, any of which could have a material adverse effect on our business, results of operations and financial condition. In addition, evolving consumer behavior can affect the availability of profitable marketing opportunities. For example, as consumers communicate less via email and more via text messaging and other virtual means, the reach of email campaigns designed to attract new and repeat users (and retain current users) for our applications is adversely impacted. To continue to reach potential users and grow our business, we must devote more of our overall marketing expenditures to newer advertising channels, which may be unproven and undeveloped, and we may not be able to continue to manage and fine-tune our marketing efforts in response to these trends.

Our applications rely heavily on email campaigns. We face a risk that any disruptions in Any future marketing efforts may be ineffective or restrictions on the sendinginadequate to attract potential users or receipt of emails, or any increase in the associated costs could adversely affect our business, results of operations or financial condition.retain existing users. 

Our emails are an important driver of our users’ and subscribers’ activities. We send a large volume of emails to our subscribers notifying them of a variety of activities on our applications, such as new matches. We face a risk that service providers or email applications may block bulk email transmissions or otherwise experience technical difficulties that result in our inability to successfully deliver emails to our users and subscribers. Third parties may also block our emails as spam, impose restrictions on, or start to charge for, the delivery of emails through their email systems. Without the ability to email these users and subscribers, we may have limited means of promoting new subscriptions and inducing subscribers to return to and use our applications.

In addition, we face the risk that, as consumer habits evolve, usage of email will decline as users focus on communicating through text messages and social networking applications. While we continually work to find new means of communicating and connecting with our members, these new means may not be as effective as email has historically been for us. Due to the importance of email to our business, any disruptions or restrictions on the distribution or receipt of emails or increase in the associated costs or erosion in our ability to communicate with our users via email could have a material adverse effect on our business, results of operations and financial condition.

Interruption, maintenance or failure of our programming code, servers or technological infrastructure could hurt our ability to effectively provide our applications, which could damage our reputation and harm our results of operations.

The availability of our applications depends on the continued operation of our programming code, databases, servers and technological infrastructure. Any damage to, or failure of, our systems could result in interruptions in service for our applications, which could damage our brands and have a material adverse effect on our business, results of operations or financial condition. Our systems are vulnerable to damage or interruption from terrorist attacks, floods, fires, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our systems. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities.

In addition, from time to time we experience limited periods of server downtime due to maintenance or enhancements. If our applications are unavailable during these periods of downtime or if our users are unable to access our applications within a reasonable amount of time, users may not return to our applications in the future, or at all. As our user base and the volume and types of information shared on our applications continues to grow, we will need an increasing amount of technology infrastructure, including network capacity and computing power, to continue to satisfy our users’ needs. It is possible that we may fail to effectively scale and grow our technology infrastructure to accommodate these increased demands. Any failure to support and scale our technology infrastructure could adversely impact the reputation of our brands and harm our results of operations.

Security breaches, computer viruses and computer hacking attackscybersecurity incidents could harm our business, results of operations or financial condition.

We receive, process, store and transmit a significant amount of personal user and other confidential information, including credit card information, and enable our users to share their personal information with each other. In some cases, we retain third party vendors to store this information. We continuously develop and maintain systems to protect the security, integrity and confidentiality of this information, but cannot guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this information despite our efforts. If any such event were to occur, we may not be able to remedy the event, and we may have to expend significant capital and resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring.

Security breaches, computer malware and computer hacking attackscybersecurity incidents have become more prevalent in our industry have occurred on our systems in the past, and may occur on our systems in the future. Although it is difficult to determine what, if any, harm may directly result from an interruption or attack, any security breach caused by hacking, including efforts to gain unauthorized access to our applications, servers or websites, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses could harm our business, financial condition and results of operations. If a breach of our security (or the security of our vendors and partners) occurs, the perception of the effectiveness of our security measures and our reputation may be harmed, we could lose current and potential users and the recognition of our various brands and their competitive positions could be diminished, any or all of which could adversely affect our business, financial condition and results of operations.

Spammers may attempt to use our products to send targeted and untargeted spam messages to users, which may embarrass or annoy users and make our products less user friendly. We cannot be certain that the technologies that we have developed to repel spamming attacks will be able to eliminate all spam messages from our products. Our actions to combat spam may also require diversion of significant time and focus of our engineering team from improving our products. As a result of spamming activities, our users may use our products less or stop using them altogether, and result in continuing operational cost to us.

Similarly, terror and other criminal groups may use our products to promote their goals and encourage users to engage in terror and other illegal activities. We expect that as more people use our products, these groups will increasingly seek to misuse our products. Although we invest resources to combat these activities, including by suspending or terminating accounts we believe are violating our Terms of Service, we expect these groups will continue to seek ways to act inappropriately and illegally on our products. Combating these groups requires our engineering team to divert significant time and focus from improving our products. In addition, we may not be able to control or stop our products from becoming the preferred application of use by these groups, which may become public knowledge and seriously harm our reputation or lead to lawsuits or attention from regulators. If these activities increase, our reputation, user growth and user engagement, and operational cost structure could be seriously harmed.

If there are changes in Furthermore, many governments have enacted laws or regulations regarding privacy and the protection of user data, or if we failrequiring companies to comply with such laws or regulations, we may face claims brought against us by regulators or users that could adversely affect our business, results of operations or financial condition.

State, federal and international laws and regulations govern the collection, use, retention, sharing and securityprovide notice of data that we receive fromsecurity incidents involving certain types of personal data. Such laws are inconsistent, and about our users. These laws can be particularly restrictive in countries outside of the United States. In addition, the application and interpretation of these laws and regulations are often uncertain, particularlycompliance in the new and rapidly evolving industries in which we operate.event of a widespread data breach is costly.

Any failure, or perceived failure, by us to comply with such laws and regulations, including Federal Trade Commission requirements or industry self-regulatory principles, could result in proceedings or actions against us by governmental entities or others, which could potentially have an adverse effect on our business. As a result of the COVID-19 pandemic, we adopted a work-from-home policy in March 2020, and we expect this practice to continue for the foreseeable future. Remote work and remote access increase our vulnerability to cybersecurity attacks. We may see an increase in cyberattack volume, frequency and sophistication driven by the global enablement of remote workforces. We seek to detect and investigate unauthorized attempts and attacks against our network, products and services and to prevent their recurrence where practicable through changes to our internal processes and tools and changes or updates to our products and services; however, we remain potentially vulnerable to additional known or unknown threats. In some instances, we and the users of our applications can be unaware of an incident or its magnitude and effects. Moreover, globally there has been an increase in cybersecurity attacks since Russia invaded Ukraine. The risk of state-supported and geopolitical-related cyber-attacks may increase in connection with the war in Ukraine and any related political or economic responses and counter-responses. We may not discover all such a failure,incidents or perceived failure,activity or be able to respond or otherwise address them promptly, in sufficient respects or at all.

Our existing general liability insurance coverage and the coverage we carry for cyber-related liabilities may not continue to be subjectavailable on acceptable terms or be available in sufficient amounts to a claimcover one or class-action lawsuit regarding our online services.more large claims or that the insurer will not deny coverage as to any future claim. The successful assertion of a claimone or more large claims against us that are not covered or a regulatory action against us,exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could result in significant monetary damages, diversion of management resources and require us to make significant payments and incur substantial legal expenses. Any claims with respect to violation of privacy or misappropriation of user data brought against us may have a material adverse effect on our business, results of operations and financial condition.

Several proposals are pending before federal, state, and foreign legislative and regulatory bodies that could significantly affect our business. For example, the GDPR in the European Union, which will go into effect on May 25, 2018, will require us to change our policies and procedures regarding the handling of personal and sensitive data in the European Union. The failure to comply with the GDPR could, in certain instances, result in penalties of up to 4% of our worldwide revenues. As a result, a failure to comply with the GDPR could seriously harm our business.

Continued privacy concerns may result in new or amended laws and regulations. Future laws and regulations with respect to the collection, compilation, use and publication of information and consumer privacy could result in limitations on our operations, increased compliance or litigation expense, adverse publicity or loss of revenue, which any of which could have a material adverse effect on our business, financial condition and results of operations. It is also possible that we could be prohibited from collecting or disseminating certain types of data, which could affect our ability to meet our users’ needs.

Changes in laws or regulations that impact the use of the internet, including internet neutrality laws, could adversely affect our business, results of operations or financial condition.

The adoption of any laws or regulations that adversely affect the growth or use of the internet, including laws governing internet neutrality, could decrease the demand for our products and increase our cost of doing business. Current Federal Communications Commission “open internet rules” prohibit internet providers in the United States from impeding access to most content, or otherwise unfairly discriminating against content providers like us. These rules also prohibit mobile providers from entering into arrangements with specific content providers for faster or better access over their data networks. The European Union similarly requires equal access to internet content. If the Federal Communications Commission, Congress, the European Union or courts modify these open internet rules, mobile providers may be able to limit our users’ ability to access our applications or make our applications a less attractive alternative to our competitors’ applications, which could materially adversely affect our business, results of operations and financial condition.

We have faced, and we expect that we will continue to face, chargeback liability when our credit card providers resolve chargebacks in favor of their customers. We cannot accurately anticipate the extent of these liabilities, and if not properly addressed, these liabilities could increase our operating expenses or preclude us from accepting certain credit cards as a method of payment, either of which would materially adversely affect our results of operations and financial condition.

We depend on the ability to accept credit and debit card payments from our subscribers and our ability to maintain the good standing of our merchant account with our credit card providers to process subscription payments. In the event that one of our customers initiates a billing dispute and one of our credit card providers resolves the dispute in the customer’s favor, the transaction is normally “charged back”charged back to us and the purchase price is credited or otherwise refunded to the customer. In addition, under current credit card practices, a merchant is liable for fraudulent credit card transactions when, as is the case with the transactions we process, that merchant does not obtain a cardholder’s signature.

We have suffered losses and we expect that we will continue to suffer losses as a result of subscriptions placed with fraudulent credit card data, as well as users who chargeback their purchases. Any failure to adequately control fraudulent credit card transactions or keep our chargebacks under an acceptable threshold would result in significantly higher credit card-related costs and, therefore, materially increase our operating expenses.

We face certain risks related to the physical and emotional safety of users and third parties.

We cannot control the actions of our users in their communications or physical actions. There is a possibility that users or third parties could be physically or emotionally harmed following interaction with another user. We warn our users that we do not screen other users and, given our lack of physical presence, we do not take any action to ensure personal safety on a meeting between users or subscribers arranged following contact initiated via our applications or ensure personal safety of our users against self-harming following contact with other users initiated via our applications. If we are subject to intellectual property infringement claims, itan unfortunate incident of this nature occurred in a meeting of two people following contact initiated on our applications or that of one of our competitors, any resulting negative publicity could materially and adversely affect us or the online video chat industry in general. Any such incident involving our applications could damage our reputation and our brand, which could have a material adverse effect on our business, results of operations or financial condition. In addition, the affected users or third parties could initiate legal action against us, which could divert management attention from operations, cause us to incur significant expenses, pay substantial damageswhether we are successful or royaltiesnot, and prevent us from offeringdamage our applications.reputation.

From time to time, third parties may claim that our applications infringe or violate their intellectual property rights. Any claims of infringement could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages and prevent us from using licensed technology that may be fundamental to our applications. Even if we were to prevail, any litigation regarding intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations. We maintain insurance to protect against intellectual property infringement claims and resulting litigation, but such insurance may not cover or may not be sufficient to cover all potential claims, liability or expenses. We may also be obligated to indemnify our business partners in any such litigation, which could further exhaust our resources. Furthermore, as a result of an intellectual property challenge, we may be prevented from offering our applications unless we enter into royalty, license or other agreements. We may not be able to obtain such agreements at all or on terms acceptable to us, and as a result, we may be precluded from offering our applications and services.

We may need additional capital to execute our business plan. If we do not obtain additional financing, it could have a material adverse effect on our business, results of operations or financial condition.

We might need to raise additional capital or financing through debt or equity offerings to support our expansion, marketing efforts and application development programs in the future. For instance, we might require additional capital or financing to:

We may be unable to obtain future capital or financing on favorable terms or at all. If we cannot obtain additional capital or financing, we may need to reduce, defer or cancel application development programs, planned initiatives, marketing or advertising expenses or costs and expenses. The failure to obtain necessary additional capital or financing on favorable terms, if at all, could have a material adverse effect on our business, results of operations or financial condition.

If the distribution of our products through application stores increases, we may incur additional fees from the developers of application stores.

As the user base of our consumer applications continues to shift to mobile solutions, we increasingly rely on the Apple iOS and Google Android platforms to distribute our products. While our products are free to download from these stores, we offer our users the opportunity to purchase paid memberships and certain premium features through our products. We determine the prices at which these memberships and features are sold and, in exchange for facilitating the purchase of these memberships and features through our products to users who download our products from these stores, we pay Apple or Google, as applicable, a share, which is currently up to 30% of the revenue we receive from these transactions. In the future, other distribution platforms that we utilize may charge us fees for the distribution of our applications. If the distribution of our products through application stores increases, the amount of fees that we must pay to the developers of these application stores will also increase. Unless we find a way to offset these fees, our business, financial condition and results of operations could be adversely affected. 

We may make or attempt to make acquisitions in the future, which could require significant management attention, disrupt our business, dilute our stockholders and seriously harm our business.

As part of our business strategy, we have made and intend to make acquisitions to add specialized employees and complementary companies, products and technologies. In the future, we may not be able to find other suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms, if at all. Our previous and future acquisitions may not achieve our goals, and any future acquisitions we complete could be viewed negatively by users, advertisers or investors. In addition, if we fail to successfully close transactions or integrate new teams, or integrate the products and technologies associated with these acquisitions into our company, our business could be seriously harmed. Any integration process may require significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or use the acquired products, technology and personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges. We may also incur unanticipated liabilities that we assume as a result of acquiring companies. We may have to pay cash, incur debt or issue equity securities to pay for any acquisition, any of which could negatively impact our business and financial condition. Issuing equity to finance any such acquisitions would also dilute our existing stockholders. Incurring debt would increase our fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

We face risks of litigation and regulatory actions if we are deemedmay conduct a dating service or Internet dating service.

In certain states, companies that provide dating services or Internet dating services are subject to various regulations. Because our applications provide online dating features, we could be exposed to regulation as a dating or Internet dating service. If we were considered to be a dating service or Internet dating service in any of the jurisdictions in which we operate, we might be required to comply with regulations that would require us to, among other things, provide disclosure regarding our screening practices and warnings on our applications regarding the dangers associated with the useportion of our applications. If a legal authority determines that we have providedoperations through informal relationships, partnerships, strategic alliances or joint ventures, and are providing dating servicesour failure to continue such relationships or Internet dating services that are regulated by certain states, we could be deemed to be out of complianceresolve any material disagreements with such regulations and could be liable for any damages as a result of our past non-compliance, either of whichthese third parties could have a material adverse effect on the success of these operations, our business, financial condition orand our results of operations.

We face certain risks relatedmay conduct a portion of our operations through partnerships, strategic alliances or joint ventures and therefore we may depend on third parties for elements of these arrangements that are important to the physical and emotional safetysuccess of users andthe relationship, such as the development of features or technologies to be incorporated into our applications. The performance of these third-party obligations or the ability of third parties.

We cannot control the actionsparties to meet their obligations under these arrangements would be outside of our userscontrol. If these third parties do not meet or satisfy their obligations under these arrangements, the performance and success of these arrangements, and their value to us, would be adversely affected. If our current or future partners are unable to meet their obligations, we may be forced to undertake the obligations ourselves and/or incur additional expenses in their communications order to have some other party perform such obligations. In such cases we may also be required to seek legal enforcement of our rights, the outcome of which would be uncertain. If any of these events occur, they may adversely impact us, our financial performance and results of operations, and/or physical actions. There is a possibility that users oradversely impact our ability to enter into similar relationships in the future.

Strategic arrangements with third parties could be physically or emotionally harmed following interaction with another user. We warninvolve risks not otherwise present when we directly manage our users that we do not screen other users and, given our lack of physical presence, we do not take any action to ensure personal safety on a meeting between users or subscribers arranged following contact initiated via our applications or ensure personal safety of our users against self-harming following contact with other users initiated via our applications. If an unfortunate incident of this nature occurred in a meeting of two people following contact initiated on our applications or that of one of our competitors, any resulting negative publicity could materially and adversely affect us or the online video chat and dating industries in general. Any such incident involving our applications could damage our reputation and our brand, which could have a material adverse effect on our business, results of operations, or financial condition. In addition, the affected users or third parties could initiate legal action against us, which could divert management attention from operations, cause us to incur significant expenses, whether we are successful or not, and damage our reputation.including, for example:

Legal and Regulatory Risks

We may be liable as a result of information retrieved from or transmitted over the Internet.internet.

We may be sued for defamation, civil rights infringement, negligence, copyright or trademark infringement, invasion of privacy, personal injury, product liability or under other legal theories relating to information that is published or made available on our websites or applications. These types of claims have been brought, sometimes successfully, against online services in the past. We also offer messaging services on our applications and we send emails directly and through third parties to our users, which may subject us to potential risks, such as liabilities or claims resulting from unsolicited email or spamming, lost or misdirected messages, security breaches, illegal or fraudulent use of email or personal information or interruptions or delays in email service. Our insurance does not specifically provide for coverage of these types of claims and, therefore, may be inadequate to protect us against them. In addition, we could incur significant costs in investigating and defending such claims, even if we ultimately are not held liable. If any of these events occurs,occur, our revenue could be materially adversely affected or we could incur significant additional expense, and the market price of our securities may decline.

We may need additional capitalChanges in laws or regulations, including laws and regulations that impact the use of the internet, such as internet neutrality laws, or laws that relate to executecontent provided over the internet or monitoring such content, could adversely affect our business, plan.results of operations or financial condition.

The adoption of any laws or regulations that adversely affect the growth or use of the internet, including laws governing internet neutrality, could decrease the demand for our products and increase our cost of doing business. In January 2018, the Federal Communications Commission (the “FCC”) released an order that repealed the “open internet rules,” often known as “net neutrality,” which prohibit internet providers in the United States from impeding access to most content, or otherwise unfairly discriminating against content providers like us. These rules also prohibited mobile providers from entering into arrangements with specific content providers for faster or better access over their data networks. The FCC order repealing the open internet rules went into effect in June 2018. In response to this decision, California and a number of states implemented their own net neutrality rules which largely mirrored the repealed federal regulations. The U.S. Department of Justice (“DOJ”) has filed suit to bar implementation of these state laws and their application remains uncertain. For instance, on February 8, 2021, the DOJ voluntarily dismissed its suit against California’s net neutrality bill. We cannot predict the outcome of similar litigation or whether the FCC order or state initiatives regulating providers will be modified, overturned, or vacated by other legal action, federal legislation, or the FCC, or the degree to which this repeal would adversely affect our business, if at all. The European Union similarly requires equal access to internet content. If the FCC, Congress, the European Union or courts modify these open internet rules, mobile providers may be able to limit our users’ ability to access our applications or make our applications a less attractive alternative to our competitors’ applications, which could materially adversely affect our business, results of operations and financial condition.

In addition, it is possible that a number of additional laws and regulations may be adopted or construed to apply to us, including gambling laws. Some of the video card games that we offer on our Paltalk application are based upon traditional casino games, such as poker and blackjack. We have structured and operate these games and features with gambling laws in mind and believe that these games and features do not constitute gambling. Our games are offered for entertainment purposes only and do not offer an opportunity to win real money. However, our video card games could in the future become subject to gambling-related laws and regulations and expose us to civil and criminal penalties. If were to become subject to such laws and regulations, we might be required to seek licenses, authorizations or approvals from relevant regulators, the granting of which may be dependent on us meeting certain capital and other requirements, and we may be subject to additional regulation and oversight, such as reporting to regulators, all of which could significantly increase our operating costs. Changes in current laws or regulations or the imposition of new laws and regulations in the United States, Europe or elsewhere regarding these activities may lessen the growth of video card game services and impair our business.

Changes in tax laws could materially affect our financial condition, results of operations and cash flows.

The tax regimes we are subject to or operate under, including income and non-income taxes, are unsettled and may be subject to significant change. For example, the Inflation Reduction Act (the “IRA”) was signed into law on August 16, 2022 and will become effective beginning in fiscal 2023. The IRA imposes a 1% excise tax on certain share repurchases occurring after December 31, 2022 (including, potentially pursuant to our Stock Repurchase Program (as defined herein)). We do not currently expect that the IRA will have a material impact on our income tax liability. We are unable to predict what changes to the tax laws of the U.S. and other jurisdictions may be proposed or enacted in the future or what effect such changes would have on our business. Any significant increase in our future effective tax rate could have a material adverse impact on our business, financial condition, results of operations, or cash flows.

If there are changes in laws or regulations regarding privacy and the protection of user data, or if we fail to comply with such laws or regulations, we may face claims brought against us by regulators or users that could adversely affect our business, results of operations or financial condition.

State, federal and international laws and regulations govern the collection, use, retention, sharing and security of data that we receive from and about our users. These laws can be particularly restrictive in certain states and in countries outside of the United States. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industries in which we operate.

The European Union has implemented a privacy regulation called the GDPR that imposes a high level of regulatory scrutiny on our business’ processing of personal data from the European Economic Area, with possible financial consequences for noncompliance of up to 4% of our worldwide revenues.

The FTC regularly investigates and brings enforcement actions against companies that have used personally identifiable information in a deceptive or unfair manner or in violation of a posted privacy policy. If we do not obtain additional financing, itare accused of violating the terms of our privacy policy, implementing unfair privacy practices or otherwise breaching data privacy laws, we may be forced to expend significant financial and managerial resources to defend against an action by the FTC, European Data Protection Authorities, or other state or federal enforcement agencies. Our user database holds the personal information of our users and subscribers residing in the United States and other countries, and we could be sued by those users if any of the information is misused or misappropriated.

Growing public concern about privacy and the use of personal information may subject us to increased regulatory scrutiny. Regulations related to treatment of user data by online services are evolving as several U.S. state governments have recently adopted new, or modified existing, laws and regulations addressing data privacy and the collection, processing, storage, transfer and use of data. These state laws include, for example: CCPA, the CPRA, which became effective on January 1, 2023, and expands upon the CCPA, the Virginia Consumer Data Protection Act, the Colorado Privacy Act, the Connecticut Act Concerning Personal Data Privacy and Online Monitoring, the Utah Consumer Privacy Act, and the New York SHIELD Act. In addition, every U.S. state has passed laws requiring notification to users when there is a security breach resulting in unauthorized disclosure of certain types of personal information, many of which are modeled on California’s Information Practices Act. There are a number of legislative proposals pending before the U.S. Congress and various state legislative bodies concerning data protection that could, if adopted, have an adverse effect on our business. We are unable to determine if and when such legislation may be adopted.

Many other jurisdictions, including the European Union, have adopted breach notification and other data protection notification laws designed to inform users of unauthorized disclosure of personally identifiable information. The introduction of new privacy and data breach laws and the interpretation of existing privacy and data breach laws in the United States, Europe and other foreign jurisdictions is constantly evolving. There is a risk that new laws may be introduced or that existing laws may be applied in a way that would conflict our current data protection practices or prevent the transfer of data between countries in which we operate. Future laws and regulations with respect to the collection, compilation, use and publication of information and consumer privacy could result in limitations on our operations, increased compliance or litigation expense, adverse publicity or loss of revenue, any of which could have a material adverse effect on our business, financial condition and results of operations.

Any failure, or perceived failure, by us to comply with such laws and regulations, including FTC requirements or industry self-regulatory principles, could result in proceedings or actions against us by governmental entities or others, which could potentially have an adverse effect on our business. As a result of such a failure, or perceived failure, we may be subject to a claim or class-action lawsuit regarding our online services. The successful assertion of a claim against us, or a regulatory action against us, could result in significant monetary damages, diversion of management resources and require us to make significant payments and incur substantial legal expenses. Any claims with respect to violation of privacy or misappropriation of user data brought against us may have a material adverse effect on our business, results of operations orand financial condition.

We might needIt is also possible that we could be prohibited from collecting or disseminating certain types of data, which could affect our ability to raise additional capital or financing through debt or equity offeringsmeet our users’ needs.

Risks Related to supportOur Intellectual Property

If we are unable to protect our expansion, marketing efforts and application development programs in the future. We might require additional capital or financing to:

Weintellectual property rights, we may be unable to compete with competitors developing similar technologies.

Historically, our defense of our intellectual property rights has been a significant aspect of our business and has meaningfully contributed to our results of operations. Accordingly, our success and ability to compete are often dependent upon the development of intellectual property for our applications.

We aim to protect our confidential proprietary information, in part, by entering into confidentiality agreements and invention assignment agreements with all our employees, consultants, advisors and any third parties who access or contribute to our proprietary know-how, information, or technology. We also rely on trademark, copyright, patent, trade secret, and domain-name-protection laws to protect our proprietary rights. We have filed various applications to protect aspects of our intellectual property, and we currently hold a number of issued patents. In the future we may acquire additional patents or patent portfolios, which could require significant cash expenditures. However, third parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietary rights held by us, and pending and future trademark and patent applications may not be approved. In addition, effective intellectual property protection may not be available in every country in which we operate or intend to operate our business.

In any of these cases, we may be required to expend significant time and expense to prevent infringement or to enforce our rights. Although we have taken measures to protect our proprietary rights, others may offer products or concepts that are substantially similar to ours and compete with our business. If we are unable to protect our proprietary rights or prevent unauthorized use or appropriation by third parties, the value of our brand and other intangible assets may be diminished, and competitors may be able to more effectively mimic our service and methods of operations. Any of these events could seriously harm our business.

If we are subject to intellectual property infringement claims, it could cause us to incur significant expenses, pay substantial damages or royalties and prevent us from offering our applications.

From time to time, third parties may claim that our applications infringe or violate their intellectual property rights. Any claims of infringement could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages and prevent us from using licensed technology that may be fundamental to our applications. Even if we were to prevail, any litigation regarding intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations. We maintain insurance to protect against intellectual property infringement claims and resulting litigation, but such insurance may not cover or may not be sufficient to cover all potential claims, liability or expenses. We may also be obligated to indemnify our business partners in any such litigation, which could further exhaust our resources. Furthermore, as a result of an intellectual property challenge, we may be prevented from offering our applications unless we enter into royalty, license or other agreements. We may not be able to obtain future capitalsuch agreements at all or financing on favorable terms acceptable to us, and as a result, we may be precluded from offering our applications and services. 

Risks Related to Ownership of Our Common Stock

Our common stock is historically thinly traded, stockholders may be unable to sell at or near ask prices or at all. Ifall and the price of our common stock may be volatile.

Historically, shares of our common stock were thinly traded on the OTCQB and have usually been thinly traded following our uplist to The Nasdaq Capital Market (“Nasdaq”), meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we cannot obtain additional capitalare a small company that is relatively unknown to stock analysts, stockbrokers, institutional investors and others in the investment community that generate or financing, weinfluence sales volume. As a consequence, there may needbe periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to reduce, defer or cancel application development programs, planned initiatives, marketing or advertising expenses or costsa seasoned issuer that has a large and expenses. The failure to obtain necessary additional capital or financing on favorable terms, if at all, could have a materialsteady volume of trading activity that will generally support continuous sales without an adverse effect on stock price.

However, during certain periods we have received, and may continue to receive, a high degree of media coverage that is published or otherwise disseminated by third parties, including blogs, articles, message boards and social and other media. This may include coverage that is not attributable to statements made by the Company or our Board of Directors. Information provided by third parties may not be reliable or accurate and could materially impact the trading price of our common stock which could cause stockholders to lose their investments.

The market prices and trading volume of our common stock have recently experienced, and may continue to experience, extreme volatility, which could cause purchasers of our common stock to incur substantial losses. We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, resultsor macro or industry fundamentals, and we do not know if these dynamics will continue.

Although our common stock is listed for trading on Nasdaq, a broader or more active public trading market for our common stock may not develop or be sustained, and the current trading level of our common stock may not be sustained. Due to these conditions, stockholders may be unable to sell their common stock at or near ask prices or at all if they desire to sell shares of common stock.

The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of our common stock, especially in light of the macro-economic factors including rising inflation rates, the war in Ukraine and the COVID-19 pandemic. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability and reputation.

Because of the limited trading market for our common stock, and because of the possible price volatility, stockholders may not be able to sell their shares of common stock when you desire to do so. The inability to sell shares in a rapidly declining market may substantially increase the risk of loss because of such illiquidity and because the price for our common stock may suffer greater declines because of its price volatility.

The ownership of our common stock is significantly concentrated in a small number of investors, some of whom are affiliated with our Board of Directors and management, which could prevent stockholders from having input on the course of our operations or financial condition.otherwise lead to actual or potential conflicts of interest.

As of March 15, 2023, Jason Katz, our Chairman of the Board of Directors, Chief Executive Officer, Chief Operating Officer and President, beneficially owned approximately 38% of our outstanding common stock, including shares of common stock held directly by Mr. Katz’s spouse, and The J. Crew Delaware Trust A, a trust formed by Mr. Katz for the benefit of certain of his family members. Mr. Katz is not a beneficiary of the trust and does not hold voting or dispositive power over the shares held by the trust.

Mr. Katz, The J. Crew Delaware Trust A and others that have significant beneficial ownership of our common shares have substantial influence regarding matters submitted for stockholder approval, including proposals regarding:

The current or increased ownership position of any of these stockholders and/or their respective affiliates could delay, deter or prevent a change of control or adversely affect the price that investors might be willing to pay in the future for our common shares. In addition, the interests of these stockholders and/or their respective affiliates may significantly differ from the interests of our other stockholders and they may vote the common shares they beneficially own in ways with which our other stockholders disagree.

If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud and our business may be harmed and our stock price may be adversely impacted.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and to effectively prevent fraud. Any inability to provide reliable financial reports or to prevent fraud could harm our business. The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires management to evaluate and assess the effectiveness of our internal control over financial reporting. In order to continue to comply with the requirements of the Sarbanes-Oxley Act, we are required to continuously evaluate and, where appropriate, enhance our policies, procedures and internal controls. If weWe have in the past failed, and may in the future fail, to maintain the adequacy of our internal controls over financial reporting, wereporting. Such failure could be subject us to litigation or regulatory scrutiny and investors could lose confidence in the accuracy and completeness of our financial reports. We cannot provide any assurance that in the future we will be able to fully comply with the requirements of the Sarbanes-Oxley Act or that management will conclude that our internal control over financial reporting is effective. If we fail to fully comply with the requirements of the Sarbanes-Oxley Act, our business may be harmed, and our stock price may decline.

With respect to the year ended December 31, 2017, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, our management concluded that our disclosure controls and procedures over financial reporting were effective as of December 31, 2017.

We may not be effective in protecting our internet domain names.

We currently hold various Internet domain names related to our brands and in the future may acquire new Internet domain names. The regulation of domain names in the United States and in foreign countries is subject to change. Governing bodies may establish additional top level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire or maintain relevant domain names in all countries in which we conduct business. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our existing trademarks and other proprietary rights or those we may seek to acquire. Any such inability to protect ourselves could cause us to lose a significant portion of our members and paying subscribers to our competitors.

Risks Related to our Common Stock

Our results of operations are volatile and difficult to predict, and our stock price may decline if we fail to meet the expectations of stockholders.

Our revenue and results of operations could vary significantly from period-to-period and year-to-year and may fail to match our past performance because of a variety of factors, many of which are outside of our control. Any of these events could cause the market price of our common stock to fluctuate. Factors that may contribute to the variability of our results of operations include:

Given the rapidly evolving industriesindustry in which we operate, our historical results of operations may not be useful in predicting our future results of operations. In addition, metrics available from third parties regarding our industry and the performance of our applications may not be indicative of our future financial performance.

Our common stock is usually thinly traded, youWe may be adversely affected by the effects of inflation.

Increased inflation may result in decreased demand for our products and services, increased operating costs (including our labor costs), reduced liquidity, and limitations on our ability to access credit or otherwise raise debt and equity capital. In addition, the United States Federal Reserve has raised, and may continue to raise, interest rates in response to concerns about inflation. Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks. In an inflationary environment, we may be unable to sellraise the prices of our subscriptions at or near ask prices orabove the rate at allwhich our costs increase, which could/would reduce our profit margins and the price of our common stock may be volatile.

The shares of our common stock have usually been thinly-traded on the OTCQB Marketplace (the “OTCQB”), meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without anmaterial adverse effect on stock price. In addition, weour financial results and net income. We also may experience unusuallower than expected sales and potential adverse impacts on our competitive position if there is a decrease in consumer spending or infrequent trading events that cause the price ofa negative reaction to our common stockpricing. A reduction in our revenue would be detrimental to fluctuate wildly. For example, in February 2017, a number of third party publications reported that the trading price of our common stock increased by over 100% when investors inadvertently purchasedprofitability and financial condition and could also have an adverse impact on our common stock thinking it was the common stock of Snap Inc., a camera company that, among other things, owns the application Snapchat.future growth.

A broader or more active public trading market for our common stock may not develop or be sustained, and the current trading level of our common stock may not be sustained. Due to these conditions, you may be unable to sell your common stock at or near ask prices or at all if you desire to sell shares of common stock.

Because of the limited trading market for our common stock, and because of the possible price volatility, you may not be able to sell your shares of common stock when you desire to do so. The inability to sell your shares in a rapidly declining market may substantially increase your risk of loss because of such illiquidity and because the price for our common stock may suffer greater declines because of its price volatility.

The ownership of our common stock is significantly concentrated in a small number of investors, some of whom are affiliated with our Board of Directors and management, which could prevent shareholders from having input on the course of our operations or otherwise lead to actual or potential conflicts of interest.

As of March 16, 2018, Jason Katz, our Chairman of the Board of Directors and Chief Operating Officer, beneficially owned approximately 10.1% of our outstanding common stock, including shares of common stock held directly by Mr. Katz’ spouse and The J. Crew Delaware Trust A, a trust formed by Mr. Katz, also beneficially owned approximately 34.2% of our outstanding common stock as of March 16, 2018. In addition, as of March 16, 2018, Clifford Lerner, a member of our Board of Directors, held approximately 11.9% of our outstanding common stock.

These shareholders and others that have significant beneficial ownership of our common shares have substantial influence regarding matters submitted for shareholder approval, including proposals regarding:

The current or increased ownership position of any of these shareholders and/or their respective affiliates could delay, deter or prevent a change of control or adversely affect the price that investors might be willing to pay in the future for our common shares. In addition, the interests of these shareholders and/or their respective affiliates may significantly differ from the interests of our other shareholders and they may vote the common shares they beneficially own in ways with which our other shareholders disagree.

The issuance of shares upon the exercise of derivative securitiesstock options and unvested shares of restricted common stock may cause immediate and substantial dilution to our existing stockholders.

As of December 31, 2017,2022, we had approximately 448,623792,055 shares of common stock that were issuable upon the exercise of vested outstanding stock options. The issuance of shares upon the exercise of these options may result in substantial dilution to the equity interest and voting power of holders of our common stock.

In the future, we may also issue additional shares of common stock or other securities convertible into or exchangeable for shares of common stock. Our Certificate of Incorporation as amended, currently authorizes us to issue up to 25,000,000 shares of common stock, of which 6,723,7459,864,120 were outstanding as of March 16, 2018,December 31, 2022, which excludes 158,571 of unvested restricted shares, andincludes 10,000,000 shares of preferred stock with such designations, preferences and rights as determined by our Board of Directors, of which none were outstanding as of March 16, 2018.December 31, 2022. The issuance of additional shares of our common stock may substantially dilute the ownership interests of our existing stockholders. Furthermore, sales of a substantial amount of our common stock in the public market, or the perception that these sales may occur, could reduce the market price of our common stock. This could also impair our ability to raise additional capital through the sale of our securities.

Delaware law and our Certificate of Incorporation, as amended, and Amended and Restated By-Laws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable.

Under our Certification of Incorporation, as amended, our Board of Directors is authorizedBecause we have no current plans to issue shares of preferred stock in one or more series and to fix the voting powers, preferences and the qualifications, limitations or restrictions of the preferred stock. Accordingly, we may issue shares of preferred stock with a preference overpay cash dividends on our common stock with respect to dividends or distributionsfor the foreseeable future, a stockholder might not receive any return on liquidation or dissolution, or that may otherwise adversely affectinvestment unless the voting or other rights of the holdersstockholder sold its shares of common stock. Issuances of preferred stock depending upon the rights, preferences and designations of the preferred stock, may have the effect of delaying, deterring or preventing a change of control, even if that change of control might benefit our stockholders.

We are also subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction inprice greater than that for which the person became an interested stockholder, unless (i) prior to the date of the transaction, the Board of Directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (ii) the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers and (b) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (iii) on or subsequent to the date of the transaction, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.were purchased.

If we fail to remain current on our reporting requirements, we could be removed from the OTCQB, which would limit the ability of broker-dealers to sell our common stock and the ability of stockholders to sell their common stock in the secondary market.

Companies trading on the OTCQB must be reporting issuers under Section 12 of the Exchange Act, and must be current in their filings under the Exchange Act to maintain price quotation privileges on the OTCQB. If we fail to remain current on our reporting requirements, we could be removed from the OTCQB. As a result, the liquidity for our common stock could be adversely affected by limiting the ability of broker-dealers to sell our common stock and the ability of stockholders to sell their common stock in the secondary market.

We do not expect to pay dividends and stockholders should not expect to receive dividends.

We do not anticipate that we will declare or pay any dividends on our common stock in the foreseeable future. Consequently, stockholders will only realize an economic gain on their investment in our common stock if the price appreciates. Stockholders should not purchase our common stock expecting to receive cash dividends. Because we currently do not pay dividends, and there may be limited trading in our common stock, stockholders may not have any manner to liquidate or receive any payment on their common stock. Therefore, our failure to pay dividends may cause stockholders to not see any return on their common stock even if we are successful in our business operations. In addition, because we do not pay dividends, we may have trouble raising additional funds which could affect our ability to expand our business operations.

Our Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or stockholders.

Our Certificate of Incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of our Company, (ii) action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee, agent, or stockholder of our Company to the Company or the Company’s stockholders, (iii) action asserting a claim against the Company or any director, officer, employee, agent, or stockholder of the Company arising pursuant to any provision of the Delaware General Corporation Law or our Certificate of Incorporation or our Amended and Restated By-Laws, as amended, or (iv) action asserting a claim against the Company or any director, officer, employee, agent, or stockholder of the Company governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above.

This exclusive forum provision applies to state and federal law claims, although our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. In addition, this exclusive forum selection provision will not apply to claims under the Exchange Act. Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce our forum selection provision as written in connection with claims arising under the Securities Act. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers and employees.

Investor relations activities, nominal “float” and supply and demand factors may affect the price of our common stock.

We have engaged an investor relations firm to create investor awareness for our Company. These campaigns may include non-deal road shows and personal, video and telephone conferences with investors and prospective investors in which our business and business practices are described. We provide compensation to our investor relations firm, and may in the future provide compensation to additional investor relations firms or financial advisory firms, for these services, and pay for newsletters, websites, mailings and email campaigns that are produced by third-partiesthird parties based upon publicly available information concerning us. We do not intend to review or approve of the content of such analyst reports or other writings and communications that are based upon analysts’ own research or methods. Investor relations firms are generally required to disclose when they are compensated for their efforts and the source of such compensation, but whether such disclosure is made or in compliance with applicable laws is not under our control. In addition, our investors in the Company may, from time to time, take steps to encourage investor awareness through similar activities that may be undertaken at the expense of such investors. Investor awareness activities may also be suspended or discontinued, which may impact the trading market of our common stock.

The SEC and FINRAthe Financial Industry Regulatory Authority enforce various statutes and regulations intended to prevent manipulative or deceptive devices in connection with the purchase or sale of any security and carefully scrutinize trading patterns and company news and other communications for false or misleading information, particularly in cases where the hallmarks of “pump and dump” activities may exist, such as rapid share price increases or decreases. We and our stockholders may be subjected to enhanced regulatory scrutiny due to the fact that our affiliates hold a majority of our outstanding common stock and we have a limited number of shares of common stock that are publicly available for resale. The limited trading markets in which our shares of common stock may be offered or sold have often been associated with improper activities concerning penny-stocks, such as the OTCQB Marketplace or the pink sheets.

The Supreme Court of the United States has stated that manipulative action is a term of art connoting intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities. Often times, manipulation is associated by regulators with forces that upset the supply and demand factors that would normally determine trading prices. Securities regulators have often cited thinly-traded markets, small numbers of holders and awareness campaigns as components of their claims of price manipulation and other violations of law when combined with manipulative trading, such as wash sales, matched orders or other manipulative trading timed to coincide with false or touting press releases. There can be no assurance that our activities or the activities of third parties, or the small number of potential sellers or small percentage of stock in our public float, or determinations by purchasers or holders as to when or under what circumstances or at what prices they may be willing to buy or sell stock, will not artificially impact (or would be claimed by regulators to have affected) the normal supply and demand factors that determine the price of our common stock.

If we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our securities.

Our common stock was approved for listing on Nasdaq under the symbol “PALT” and began trading on Nasdaq on August 3, 2021. We have incurred andcannot assure our stockholders that our securities will continue to incur substantial costs as a result of being a reporting company.

We have faced and will continuebe listed on Nasdaq in the future. In order to face substantial legal, accounting, administrativemaintain that listing, we must satisfy minimum financial and other costs as a result of being a publicly reporting company. In addition to thecontinued listing requirements of the Sarbanes-Oxley Act, rules implemented by the SEC and the Public Company Accounting Oversight Board require us to maintainstandards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance practices. Historically, these rulesrequirements. We may not be able to comply with the applicable listing standards and regulations have increasedNasdaq could delist our legal and financial compliance costs and madesecurities as a result.

We cannot assure our legal, accounting and administrative activitiesstockholders that our common stock, if delisted from Nasdaq, will be listed on another national securities exchange. If our common stock is delisted by Nasdaq, our common stock would likely trade on the OTCQB where an investor may find it more time-consuming and costly, and we expect these costsdifficult to continue insell our shares or obtain accurate quotations as to the future. For example, we recently formed an audit committeemarket value of our independent directors and adopted an audit committee charter containing policies regarding internal control over financial reporting and disclosure controls and procedures. We are also incurring higher costs to obtain directors’ and officers’ insurance than in prior periods as a result of the addition of several new independent directors following the Merger. In addition, we may identify and incur additional costs and expenses associated with being a publicly held company.common stock. 

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Our principal executive office is located at 122 East 42nd Street in New York, NY 10168. We have two leases for office space in this location that run until May 30, 2019 and July 31, 2019, respectively. We currently do not own any real property. We also lease office space at 30 Jericho Executive Plaza in Jericho, New York 10168.11753. The lease for the 30 Jericho Executive Plaza office space lease expires on November 30, 2021.2024. We currently do not own any real property.

ITEM 3. LEGAL PROCEEDINGS

On August 2, 2016, Banertek LLC filed a complaint against us in the United States District Court for the Eastern District of Texas, Marshall Division (Case No. 2:16-cv-00836). The complaint alleged that we infringed upon one of Banertek LLC’s patents (U.S. Patent No. 6,839,731 B2) by, among other things, using our FirstMet application as a system and method for providing data communication in a device network in violation of such patent. On April 6, 2017, we confidentially settled this claim on terms mutually agreeable to the parties and each of the parties agreed to file a dismissal with prejudice with respect to the claim.

On December 16, 2016,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 Delaware against Riot Games, Inc. and Valve Corporationthe U.S. District Court for infringement of U.S. Patent Nos. 5,822,523 and 6,226,686 with respect to their online games League of Legends and Defense of the Ancients 2. These two patents were previously asserted against, and then licensed to, Microsoft, Sony, and Activision. In 2018, Valve Corporation made a motion to move the litigation from Delaware to the Western District of Washington which was granted byTexas. The Company alleges that Cisco’s Webex products have infringed U.S. Patent No. 6,683,858, and that the court.Company is entitled to damages.

Riot Games, Inc. has filedA Markman hearing took place on February 24, 2022. On September 7, 2022, the United States Patent Office issued a totalreexamination of fourinter partes reviews atU.S. Patent No. 6,683,858, and on January 19, 2023, the patent office, two per patent held by Paltalk Holdings, Inc., seeking to haveExaminer issued an Ex Parte Reexamination Certificate, ending the Paltalk Holdings, Inc. patents declared invalid. The patent office has not ruled on these motions.reexamination and confirming the patentability of claims 1-10 of U.S. Patent No. 6,683,858. Trial is now scheduled for early third quarter of 2023.

To our knowledge, other than as described above, there are no material pending legal proceedings to which we are a party or of which any of our property is the subject.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable. 

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is traded on Nasdaq under the symbol “PALT.”

Holders

As of March 12, 2018, our common stock has been quoted on the OTCQB under the symbol “PEER.” Prior to our name change to “PeerStream, Inc.,” our common stock was quoted on the OTCQB under the symbol “STVI.” The following table sets forth the range of the quarterly high and low bid price information for the fiscal quarters indicated below as reported by the OTCQB. Reported prices for periods prior to October 7, 2016 reflect the prices of pre-AVM Merger PeerStream’s common stock. Prior to the AVM Merger, AVM’s common stock was not listed for trading on a national securities exchange or quoted on an over-the-counter market.

* The over-the-counter market quotations of the bid prices reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.

The market price of our common stock is subject to significant fluctuations in response to variations in our quarterly operating results, general trends in the market, and other factors, over many of which we have little or no control. In addition, broad market fluctuations, as well as general economic, business and political conditions, may adversely affect the market for our common stock, regardless of our actual or projected performance.

Holders

As of March 16, 2018,15, 2023, there were approximately 7552 holders of record of our common stock. This does not reflect the number of persons or entities who held stock in nominee or street name through various brokerage firms.

Dividend Policy

We have not declared any dividends on our common stock in the past two fiscal years and we do not anticipate paying any dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. Any future determination to declare dividends will be subject to the discretion of our Board of Directors and will depend on various factors, including applicable Delaware law, future earnings, capital requirements, results of operations and any other relevant factors. In general, as a Delaware corporation, we may pay dividends out of surplus capital or, if there is no surplus capital, out of net profits for the fiscal year in which a dividend is declared and/or the preceding fiscal year.

Recent Sales of Unregistered Securities

There were no sales of unregistered securities during the year ended December 31, 20172022 that were not previously reported on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.

Issuer Purchases of Equity Securities

We did not repurchase anyThe following table details our repurchases of our equity securitiescommon stock during the fourth quarter of the fiscal yearthree months ended December 31, 2017.

2022:

Not applicable.ITEM 6. Reserved 

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.”

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.

Overview

We are a leading communications software innovator that powers multimedia social applications. Our product portfolio includes Paltalk, Camfrog and Tinychat, which together host one of the world’s largest collections of video-based communities. Our other products are ManyCam and Vumber. ManyCam is a live streaming software and virtual camera that allows users to deliver professional live videos on streaming platforms, video conferencing apps and distance learning tools. Vumber is a telecommunications services provider that enables users to communicate privately by having multiple phone numbers with any area code through which calls can be forwarded to a user’s existing telephone number. We have an over 20-year history of technology innovation and hold 10 patents.

We believe that the scale of our user base presents a competitive advantage in the video social networking industry and provides growth opportunities to advance our existing products with up-sell opportunities and build future brands with cross-sell offers. We also believe that our proprietary consumer app technology platform can scalably support large communities of users in activities such as video, voice and text chat, online card games and board games and provide robust user monetization tools.

Our continued growth depends on attracting new consumer application users through the introduction of new applications, features and partnerships and further penetration of our existing markets. Our principal growth strategy is to invest in the development of proprietary software, expand our sales and marketing efforts with respect to such software, and increase our consumer application user base through potential platform partnerships and new and existing advertising campaigns that we run through internet and mobile advertising networks, all while balancing the capital needs of the business. Our strategy also includes the acquisition of, or investment in, technologies, solutions or businesses that complement our business.

Our strategy is to approach these opportunities in a measured way, being mindful of our resources and evaluating factors such as potential revenue, time to market and amount of capital needed to invest in the opportunity.

Background of Presentation and Recent Developments

Name ChangeStock Repurchase Plan

EffectiveOn March 12, 2018,23, 2022, we changed our name from “Snap Interactive, Inc.”announced that the Board of Directors of the Company approved a stock repurchase plan for up to “PeerStream, Inc.” In connection with$1,750,000 of the name change, we also changed our trading symbolCompany’s outstanding common stock (the “Stock Repurchase Plan”). The Stock Repurchase Plan is effective as of March 29, 2022 and expires on the OTCQB Marketplaceone-year anniversary of such date. Shares may be repurchased from “STVI” to “PEER.”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 new brand is intended to honoractual timing, number and value of shares repurchased was determined by a committee of the Board of Directors at its discretion and depends on a number of factors, including the market price of the Company’s legacycommon stock, general market and economic conditions, alternative investment opportunities and other corporate considerations. During the year ended December 31, 2022, the Company purchased a total of empowering consumers to meet new people604,808 at an average share price of $1.65 per share.

ManyCam Asset Acquisition

On June 9, 2022 (the “Effective Date”), we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) by and connect with peers via social video applications, while also referencingamong the anticipated importanceCompany, ManyCam ULC, an unlimited liability company incorporated under the laws of peer-to-peer networksthe Province of Alberta and multimedia streaming in the Company’s future.

AVM Merger

On October 7, 2016, we completed a merger with A.V.M. Software, Inc. (d/b/a Paltalk) (“AVM”), pursuant to which SAVM Acquisition Corporation, our wholly owned subsidiary, merged with and into AVM, with AVM surviving as a wholly owned subsidiary of the Company (the “AVM Merger”“Purchaser”). As, Visicom Media Inc., a resultCanadian corporation (“Visicom”), and 2434936 Alberta ULC, an unlimited liability company incorporated under the laws of the AVM Merger,Province of Alberta (“Target NewCo”), pursuant to which the former shareholdersPurchaser purchased, effective as of AVM received sharesthe Effective Date, all of our common stockthe issued and replacement options representing approximately 77.9% of the outstanding shares of common stock of the post- AVM Merger combined company, and the Company’s former shareholders retained approximately 22.1% of the outstanding shares of common stock of the post- AVM Merger combined company, in each case including unvested shares of restricted stock in the total number of shares of common stock outstanding.

The AVM Merger has been accounted for as a “reverse merger” under the acquisition method of accounting for business combinations with AVM being treated as the accounting acquirer of PeerStream. As such, the historical financial statements of AVM are treated as the historical financial statements of the combined company. Accordingly, the financial results for the fiscal year ended December 31, 2016 presented in this Form 10-K reflect the operations of AVM for the period of January 1, 2016 through October 7, 2016, and the operations of the post-combination company for the period of October 8, 2016 through December 31, 2017.

Except as otherwise specifically provided, this Management’s Discussion and Analysis of Financial Condition and Results of Operations relatesTarget NewCo (the “ManyCam Acquisition”). Prior to the business and operations of AVM and its consolidated subsidiaries for the periods priorManyCam Acquisition, Target NewCo held all assets related to, the closing of the AVM Merger and on a consolidated basis with PeerStream and its subsidiary for periods after the closing of the AVM Merger. Unless the context otherwise indicates, references to “PeerStream,” “we,” “our,” “us” and the “Company” refer to the post- AVM Merger combined company and its subsidiaries on a consolidated basis.

Presentation for Reverse Stock Split

On January 5, 2017, we effected a 1-for-35 reverse stock split of our issued and outstanding common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, each issued and outstanding share of our common stock, and the per share exercise price of and number of shares of our common stock underlying our outstanding stock options, was automatically proportionally adjusted based on the 1-for-35 Reverse Stock Split ratio. Except as otherwise provided herein, all share and per-share amounts of our common stock and stock options have been adjusted to give effect to the Reverse Stock Split for all periods presented. The Reverse Stock Split did not alter the par value of our common stock, which remains at $0.001 per share, modify any voting rights or other terms of our common stock, or impact the amount of preferred stock we are authorized to issue.

Terminated LiveXLive Merger Agreement

On September 6, 2017, we entered into an Agreement and Plan of Merger with LiveXLive Media, Inc. (“LiveXLive”), LXL Video Acquisition Corp., a wholly owned subsidiary of LiveXLive (“Merger Sub”), and Jason Katz, as the agent of the stockholders of the Company, pursuant to which we would have merged with and into Merger Sub, with Merger Sub surviving as a wholly owned subsidiary of LiveXLive (the “LiveXLive Merger Agreement”).

On October 31, 2017, we terminated the LiveXLive Merger Agreement pursuant to Section 8.2(a) of the LiveXLive Merger Agreement due to certain conditions of the LiveXLive Merger Agreement not having been fulfilled as of October 27, 2017, which relieved us of all of our obligations under the LiveXLive Merger Agreement. No termination fee was payableused by the CompanyVisicom in connection with, the terminationbusiness of developing and distributing virtual webcam driver software, including virtual backgrounds and/or “masks” or other camera effects (other than the Excluded Contracts (as defined in the Securities Purchase Agreement)), whether tangible or intangible, including, but not limited to, Target NewCo’s ManyCam software (“ManyCam”) and related source code, customer lists, customer relationships and all associated customer information, contracts with contractors and suppliers, brand names, trade secrets, trademarks, trade names, designs, copyrights, websites, all URLs, goodwill and intellectual property associated with each of the LiveXLive Merger Agreement.foregoing (collectively, the “Conveyed Assets”).

Private PlacementThe Purchaser acquired the Conveyed Assets for a cash purchase price of Equity Securities$2.7 million (the “Cash Consideration”). In addition to the Cash Consideration, Visicom is entitled to receive an additional payment of up to $600,000 (the “Earn-Out Payment”) based on the sales of the ManyCam software less chargebacks and refunds (“Gross Sales”) in the six-month period following the closing (the “Earn-Out Period”) as follows: (i) if the Gross Sales during the Earn-Out Period are greater than $800,000, the Earn-Out Payment shall be $600,000, (ii) if the Gross Sales during the Earn-Out Period are greater than $700,000 but less than $800,000, the Earn-Out Payment shall be $300,000, (iii) if the Gross Sales during the Earn-Out Period are greater than $600,000 but less than $700,000, the Earn-Out Payment shall be $150,000 and (iv) if the Gross Sales during the Earn-Out Period do not exceed $600,000, then Visicom will not be paid any portion of the Earn-Out Payment.

On December 19, 2017,June 30, 2022, we entered into a securities purchase agreementLicense Agreement with Hershey Strategic Capital, LP (“Hershey Capital”Visicom (the “License Agreement”), pursuant to which we issuedagreed to distribute, at the discretion and sold 200,000 sharesdirection of our common stockVisicom, a specified number of ManyCam software updates to Hershey Capitalcertain license holders to whom Visicom has previously granted a “lifetime” license to ManyCam software. As consideration for distributing the software updates, Visicom paid us an aggregateinitial upfront nonrefundable payment of $65,000. The License Agreement provides that Visicom may purchase priceadditional licenses at prices specified therein. Other than providing a one-time, limited license to Visicom for the distribution of $1,000,000, or $5.00 per share, in a private placement exempt fromManyCam software updates pursuant to the registration requirementsterms of the Securities Act. In connection with the entry into the securities purchase agreement,License Agreement, we entered into a professional services agreement with Adam Hershey, the managing member of Hershey Capital, pursuant to which Mr. Hershey agreed to advise us on matters related to our capital markets strategy. We intend to use the proceeds from the offering for general corporate purposes, including the development of our blockchain product initiatives.

Business Solutions and Technology Services Agreement with ProximaX

On March 8, 2018, we launched PeerStream Business Solutionsdo not have any obligation to provide technology licensing, services and support relatedor service to multimedia streaming and communications for third party developers and corporate clients (“PeerStream Business Solutions”). PeerStream Business Solutions is intended to leverage our nearly 20 years of technology innovation to tap into a potential new B2B revenue stream and support the efforts of a broad range of prospective corporate clients to adopt blockchain technology.licensee end users.

On March 21, 2018, as a first step in providing services through PeerStream Business Solutions, we entered into a technology services agreement with ProximaX Limited (“ProximaX”) whereby we agreed to provide certain development and related services to ProximaX to facilitateGross Sales during the implementation of PSP into ProximaX’s proprietary blockchain protocol that is currently under development.Earn-Out Period exceeded $600,000 but were less than $700,000. Pursuant to the terms of that certain Letter Agreement, by and between Visicom, the agreement, ProximaX agreedPurchaser and the Company, dated February 24, 2023, the Company made an Earn-Out Payment to pay us up to an aggregate of $10.0 million of cash in exchange for our services, with $5.0 million due upon the successful consummation of a future initial coin offering by ProximaX and up to an additional $5.0 million due upon our achievement of certain development milestones set forthVisicom in the agreement. In addition, ProximaX agreed to issue usamount of $85,000 (the “Adjusted Earn-Out Payment”). We recorded a number of tokens equal to 2.4% of all outstanding tokens onliability in the dayamount of the planned initial coin offeringAdjusted Earn-Out Payment, with a corresponding adjustment to the cost basis of the Conveyed Assets. The Company expects that the Adjusted Earn-Out Payment will be paid in the first quarter of 2023.

As part of the accounting for the Conveyed Assets, we provisionally recorded a deferred tax liability of $0.9 million with an offset to intangible assets related to the excess financial reporting basis over the tax basis of the Conveyed Assets.

Macro-Economic Factors and to reserve an additional 2%COVID-19 Update

Our results of such tokensoperations have been and may continue to be issued as payment for future services providednegatively impacted by us, subject, in each case,the uncertainty regarding COVID-19 and macro-economic factors, including the timing of economic recessions and/or recovery and the overall inflationary environment. Prolonged periods of inflation may affect our ability to such initial coin offering generating aggregate gross proceeds of at least $30.0 million. If the planned initial coin offering does not raise at least $30.0 million or ProximaX fails to pay us the upfront cash payment of $5.0 million by June 1, 2018, we and ProximaX have agreed to negotiate alternative compensation for our services in good faith.

Overview

We are a leading developer of innovative decentralized technologies that power multimedia social applications and business communication solutions worldwide. Our product portfolio includes Paltalk and Camfrog, which together host one of the world's largest collections of video-based communities, and FirstMet, a prominent interactive dating brand serving users 35 and older. Our other products include Tinychat, Firetalk, 50More, Ribbit Live, The Grade, and Vumber. We recently announced a number of initiatives that feature enhancements of our technology platform using blockchain, and plans to offer aspects of our multimedia streaming and communications technology to third party developers and corporate clients. We are also currently developing atarget new video-enabled secure messaging service built on blockchain technology called Backchannel that we expect to launch in the fourth quarter of 2018.

Our leading network of products creates a unique social media enterprise where users can meet, see, chat, broadcast and message in real time in a secure environment with others in our network. Our properties are generally available through Windows^®, Mac^TMOS, iOS^TMand Android^TM platforms. The proprietary technology underlying our products allows us to operate thousands of simultaneous streams, including on mobile platforms, which support interactions on a one-on-one, one-to-many and many-to-many basis. We also have a worldwide established presence and brand identity in both live video chat and interactive dating, with users in over 180 countries as of March 16, 2018. Furthermore, most of our technology is supported by a portfolio of 26 issued patents.

We believe that live video is in the early stages of adoption for applications related to meeting, chatting, dating, broadcasting and other interactive purposes and over time presents an attractive growth opportunity as it becomes pervasively integrated across the social networking and interactive communications industries. As individuals become more reliant on communicating through applications, we believe it is becoming increasingly more important to many users that they have a secure and private environment on which to interact via live video online.

In 2018, we plan to pursue a strategy of using blockchain technology to improve our existing technology platform, to build new proprietary applications and to offer technology solutions to third parties, in each case taking advantage of the enhanced security, scalability and cost-effectiveness that blockchain technology offers. We recently announced that we are developing an open source, multimedia delivery platform based on blockchain technology called “PeerStream Protocol,” or “PSP,” that is expected to specialize in routing live, rich media content and powering applications that require real time data and video communications. At launch, we plan for this platform to host new proprietary apps we develop,customers as well as keep existing customers engaged and may ultimately have a correlating effect on our users’ discretionary spending. Our user growth may continue to allow third-party developersslow or decline as the impact of the COVID-19 pandemic continues to buildtaper, particularly in light of a potential economic downturn. Furthermore, the next generationrecent strength of social networking, messaging, group collaboration and live video streaming applicationsthe US dollar compared to foreign currencies could have a negative effect on our non-US customer base, as our subscription prices are based on blockchain technologies. In concert with PSP we are currently developing, Backchannel, a blockchain-based secure messaging application that we believe will be the first video messaging application to eliminate a centralized intermediary responsible for hosting and storing user information, thereby reducing the risk that communications between users can be hacked, stolen or leaked.in US dollars.

We believe that we are well-positioned to take advantage of key business opportunities in our industry by leveraging our technology, user base and suite of complementary applications to provide video, voice and chat experiences with superior security, scalability and cost-efficiency.

Operational Highlights and Objectives

During the year ended December 31, 2017,2022, we executed key components of our objectives:

In addition, in the portion of 2018 that has already transpired, we accomplished the following objectives:

For the near term, our business objectives include:

Sources of Revenue

Currently, our onlyOur main sources of revenue are subscription, advertising and other fees generated from users of our core video chartchat products, Paltalk and datingCamfrog, as well as revenue downloads of our ManyCam software products. InWe expect that the majority of our revenue in future periods we planwill continue to be generated from our core video chat products. We also generate technology service revenue through theunder licensing and service agreements that we negotiate with third parties which includes development, integration, engineering, licensing or other services provided by our PeerStream Business Solutions unit.that we provide.

Subscription

Subscription Revenue

Our video chat platforms generate revenue primarily through subscription fees. Our tiers of subscriptions provide users with unlimited video windows and levels of status within the community. Multiple subscription tiers are offered in different durations depending on the product from one-, six-, twelve-, and fifteen-monthtwelve-month terms, which continue to vary as we continue to test and optimize length and pricing. Longer-term plans (those with durations longer than one month) are generally available at discounted monthly rates. Levels of membership benefits are offered in tiers, with the least membership benefits in the lowest paid tier and the most membership benefits in the highest paid tier. Our membership tiers are “Plus,” “Extreme,” “VIP” and “Prime” for Paltalk and “Pro,” “Extreme” and “Gold” for Camfrog. We also hold occasional promotions that offer discounted subscriptions and virtual gifts. Subscriptions for ManyCam are generally offered in annual and two-year terms, with exceptions made for enterprise sales.

Our dating applications generate revenue primarily through subscription fees. Multiple subscription tiers are offered in one-, three- and six-month terms, which continue to vary as we continue to test and optimize length and pricing. Longer-term plans (those with durations longer than one month) are generally available at discounted monthly rates. Pursuant to the terms of service of our dating platforms, subscriptions automatically renew for periods of the same length and at the same price as the original subscription term until terminated by the subscriber. We also hold occasional promotions that offer initial discounted subscriptions that renew at the regular price. 

We recognize revenue from monthly premium subscription services beginning in the month in which the subscriptions are originated. Revenues from multi-month (or annual) subscriptions are recognized on a gross and straight-line basis over the length of the subscription period. The unearned portion of subscription revenue is presented as deferred revenue in the accompanying Consolidated Balance Sheets.consolidated balance sheets.

Advertising

We also generate a portion of our revenue on both our video and dating platforms through advertisements. Advertising revenue is dependent upon traffic as well as the advertising inventory we place on our products. We recognize advertising revenue as earned on a click-through, impression, registration or subscription basis. When a user clicks an advertisement (CPC basis), views an advertisement impression (CPM basis), registers for an external website via an advertisement by clicking on or through our application (CPA basis) or clicks on an offer to subscribe to premium features on the application, the contract amount is recognized as revenue.

Virtual Gifts/Micro-transactions

In our video chat platforms we offer virtual gifts to our users.users through our Paltalk, Camfrog and TinyChat applications. Users may purchase credits that can be redeemed for a host of virtual gifts such as a rose, a beer, or a car, among other items. These gifts are given among users to enhance communication and are generally redeemed within the month of purchase. Virtual gift revenue is recognized atupon the pointusers’ utilization of sale, as they are incurred as purchased,the virtual gift and included in subscription revenue. The unearned portion of virtual gifts revenue is presented as deferred revenue in the accompanying consolidated balance sheets.

Advertising Revenue

We also offer micro-transactionsgenerate a portion of our revenue through advertisements on our video platforms. Advertising revenue is dependent upon the volume of advertising impressions viewed by active users as well as the advertising inventory we place on our products. We recognize advertising revenue as earned on a click-through, impression, registration or subscription basis. Measurements of impressions include when a user clicks on an advertisement (CPC basis), views an advertisement impression (CPM basis), or registers for an external website via an advertisement by clicking on or through our application (CPA basis).

Technology Service Revenue

Technology service revenue is generated under service and partnership agreements that we negotiate with third parties, which includes development, integration, engineering, licensing or other services that we provide.

During the year ended December 31, 2021, we recorded technology service revenue in connection with our agreement to serve as a launch partner with Open Props, Inc. (formerly YouNow, Inc., and referred to herein as “YouNow”) and to integrate YouNow’s props infrastructure (the “Props platform”) into our dating users. Micro-transactions allow users to increaseCamfrog and Paltalk applications (as amended, the visibility“YouNow Agreement”).

In August 2021, we received notice from YouNow that it was terminating the YouNow Agreement, and that it would no longer support the Props platform past the end of their profile and messages by paying forcalendar year 2021. The YouNow Agreement was terminated effective on November 23, 2021. We expect that the majority of our future technology service revenue, if any, will result from opportunistic collaborations with third parties, however, any such services. In addition, micro-transactions include activation fees for new subscriptions. While microtransactionscollaborations are not currently a significant driver of revenue, we believe that micro-transactions increase user engagement with our applications andprimary focus for the likelihood that users will become paid subscribers. Micro-transaction revenue is recognized at the point of sale and included in subscription revenue.Company.

Costs and Expenses

Cost of revenue.revenue

Cost of revenue consists primarily of compensation (including stock-based compensation) and other employee-related costs for personnel engaged in data center and customer care functions, credit card processing fees, hosting fees, and data center rent and bandwidth costs. Cost of revenue also includes compensation and other employee-related costs for technical personnel, consultants and subcontracting costs relating to technology service revenue.

Sales and marketing expense.expense

Sales and marketing expense consistsconsist primarily of advertising expenditures and compensation (including stock-based compensation) and other employee-related costs for personnel and consultants engaged in sales and sales support functions. Advertising and promotional spend includes online marketing, including fees paid to search engines, and offline marketing, which is primarily consists of partner-related payments to those who direct traffic to our brands. We plan to continue to expand sales and marketing efforts to attract new users, retain existing users and increase sales to both new and existing users.

Product development expense.expense

Product development expense, which relates to the development of technology of our applications, consists primarily of compensation (including stock-based compensation) and other employee-related and consultants-related costs that are not capitalized for personnel engaged in the design, testing and enhancement of service offerings as well as amortization of capitalized website development costs.

General and administrative.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 including fees in connection with the AVM Merger and the terminated merger with LiveXLive.cost of insurance. General and administrative expense also includes depreciation of property and equipment and amortization of intangible assets.

Impairment loss on digital tokens

Impairment loss on digital tokens results from the daily assessment of the Props tokens’ quoted market prices, as reflected on CoinmarketCap, and adjusting the recorded carrying amount to the amount equal to the lowest quoted market price during the period in which the Props tokens are held. During the years ended December 31, 2022 and 2021, we recorded a non-cash impairment charge in the amount of $7,262 and $765,232, respectively, which is reported in our accompanying consolidated statements of operations as a result of recent decline in the quoted market prices below the market price of their acquisition.

Key Metrics

Key Metrics

Our management relies on certain non-GAAP and/or unaudited performance indicators to manage and evaluate our business. The key performance indicators set forth below help us evaluate growth trends, establish budgets, measure the effectiveness of our advertising and marketing efforts and assess operational efficiencies. Historically, we used Subscription Bookings to represent the aggregate dollar value of subscription fees and virtual gifts purchases received during the period. However, going forward, we have decided to not report Subscription Bookings as we believe that this key performance indicator is no longer an appropriate metric to evaluate our business. We also discuss net cash used inprovided by operating activities under the ‟Results of Operations” and ‟Liquidity“Liquidity and Capital Resources” sections below. Bookings and Adjusted EBITDA areis discussed below.

Bookings

Bookings is a financial measure representing the aggregate dollar value of subscription fees and micro-transactions received during the period. We calculate bookings as subscription revenue recognized during the period plus the change in deferred subscription revenue recognized during the period. We record subscription revenue from subscription fees and micro-transactions as deferred subscription revenue and then recognize that revenue ratably over the length of the subscription term. Our management uses bookings internally in analyzing our financial results to assess operational performance and to assess the effectiveness of, and plan future, user acquisition campaigns. We believe that this financial measure is useful in evaluating our business because we believe, as compared to subscription revenue, it is a better indicator of the subscription activity in a given period. We believe that both management and investors benefit from referring to bookings in assessing our performance and when planning, forecasting and analyzing future periods.

While the factors that affect bookings and subscription revenue are generally the same, certain factors may affect subscription revenue more or less than such factors affect bookings in any period. While we believe that bookings is useful in evaluating our business, it should be considered as supplemental in nature and it is not meant to be a substitute for subscription revenue recognized in accordance with GAAP.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as net income (loss) adjusted to exclude net loss from interest expense,income, net, provision for income tax (benefit),taxes, gain on office lease termination, impairment loss on goodwill, gain from sale of Secured Communication Assets, gain on the extinguishment of term debt, provision for income taxes, depreciation and amortization expense, loss on disposal of property and equipment, other income, netexpense, impairment loss on digital tokens, gain on extinguishment of digital tokens payable, realized loss (gain) from the sale of digital tokens and stock-based compensation expense.

We present Adjusted EBITDA because it is a key measure used by our management and Board of Directors 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.

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:are that Adjusted EBITDA does not reflect: 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; gain on sale of the Dating Services Business; income tax expense from continuing operations; gain on office lease termination; impairment loss on goodwill; gain from sale of Secured Communication Assets; loss on disposal of property and equipment; our working capital requirements; the impairment loss on digital tokens; realized gain (loss) from the sale of digital tokens; the potentially dilutive impact of stock-based compensation; gain on the extinguishment of term debt; gain on extinguishment of digital tokens payable; 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 alongside other financial performance measures, including various cash flow metrics, net lossincome and our other GAAP results. The following table presents a reconciliation of net loss,income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA for each of the periods indicated:

Results of Operations

The following table sets forth Consolidated Statementsconsolidated statements of Operationsoperations data for each of the periods indicated as a percentage of total revenues:revenue:

Year Ended December 31, 20172022, Compared to Year Ended December 31, 20162021

Revenue

Total revenues increasedrevenue decreased to $24,841,283$10,989,545 for the year ended December 31, 20172022, from $20,988,429$13,273,849 for the year ended December 31, 2016.2021. The increase isdecrease was primarily driven by the inclusion of FirstMet revenue for the full 2017 fiscal year as a result of the AVM Merger, offset by a declinedecrease in Paltalk subscription revenue and advertising revenue.virtual gift revenue from the Paltalk and Camfrog applications, as well as a decrease in technology service revenue driven by the termination of the YouNow Agreement, effective November 23, 2021. The decrease was partially offset by revenue recognized from sales of the ManyCam product.

The following table sets forth our subscription revenue, advertising revenue, technology service revenue and total revenuesrevenue for the year ended December 31, 20172022, and the year ended December 31, 2016,2021, the increase/increase or decrease between those periods, the percentage increase/increase or decrease between those periods, and the percentage of total revenue that each represented for those periods:

Subscription Revenue

Our subscription revenue for the year ended December 31, 2017 increased2022 decreased by $4,250,675,$1,705,317, or 22.8%13.8%, as compared to the year ended December 31, 2016. This increase2021. The decrease in subscription revenue for the year ended December 31, 2017 was primarily due to the inclusion of a full fiscal year of FirstMet subscription revenue in 2017 following the completion of the AVM Merger which resulted in an increase of $5,446,000, offset by a decline in fiscal year 2017 Paltalk subscription revenue of approximately $1,000,000 compared to fiscal year 2016. We believe that the decrease in Paltalk subscription revenue was driven in part, by a decrease in the new transactionsubscribers as well as a decrease in virtual gift revenue inacross the Paltalk product driven by lower volumeand Camfrog applications. We attribute this decrease to the overall macro-economic environment that may limit a customer’s access to discretionary spending, as well as, to a lesser degree, the lifting of usagevarious COVID-19 related restrictions in certain of our target markets that had previously prohibited individuals from leaving their homes and, diminished marketing and advertising spend.as a result, caused customers to devote less time to their social applications. As ManyCam primarily sells annual subscriptions, its revenue is consistent with similar annual subscription models in their early stages, as the cash received traditionally will outpace the subscription revenue recognized. We believeanticipate that subscription revenue related to ManyCam will increase in future quarters as the decrease was also the result of a decline in our international markets, where lower reseller volume led to reduced revenue.deferred revenue generated from ManyCam subscriptions is recognized.

Advertising Revenue

Our advertising revenue for the year ended December 31, 20172022 decreased by $397,821,$124,483, or 17.0%27.6%, as compared to the year ended December 31, 2016.2021. The decrease in advertising revenue was primarily resulted from internal disruption as we changed our advertising partners by moving to an exclusive relationship with a full service agency to outsource our advertising operations. The digital advertising industry is also experiencing some challenges due to a greater emphasis on fraud control.decrease in the volume of advertising impressions related to changes in and the optimization of third-party advertising partners due to a slower growing user base as well as overall decline in the advertising market.

Technology Service Revenue

Our technology service revenue for the year ended December 31, 2022, decreased by $454,504, or 100.0%, as compared to the year ended December 31, 2021. The decrease in technology service revenue was driven by the termination of the YouNow Agreement, effective November 23, 2021.

Costs and Expenses

Total costs and expenses for the year ended December 31, 2017 reflect an increase in costs and expenses of $7,769,071,2022 increased by $1,893,996 or 34.2%14.8%, as compared to the year ended December 31, 2016.2021. The following table presents our costs and expenses for the yearyears ended December 31, 20172022 and 2016,2021, the increase or decrease between those periods and the percentage increase or decrease between those periods and the percentage of total revenue that each represented for those periods: