Paltalk Pioneers Profitable Dot.Com Business Model; New Instant Messaging Software Enables Simultaneous Voice and Video Communications for 1,000 Voices and Six Streaming Video Windows.

Business Editors & High-Tech Writers

NEW YORK--(BUSINESS WIRE)--July 31, 2002

Paltalk.com, the leading provider of Internet-based voice and video communications, today announced that it reached profitability.

This financial milestone announcement is being made in conjunction with the launch of its new product Paltalk Version 6.0, which will be available for users on August 5.

The company said it has been cash flow positive since September 2001, and 80 percent of revenue comes from subscription sales. Its user base recently surpassed 13 million - an expansion of nearly 600 percent over the last year. The four-year old company enables participants to communicate, one-on-one or in-groups, via instant messaging, voice or video over the Internet.

"We are a dot.com that has created a business model that works," said Jason Katz, Chief Executive Officer and founder of Paltalk. "These milestone are very significant for the company and are a reflection of the demand for the new type of communication and entertainment that Paltalk enables. We are on track for another profitable quarter."

Paltalk's new product enables text instant messaging in multimedia chat rooms. In these rooms, users can talk with more than 1,000 people, while at the same time seeing six images from other users streaming video over the Internet.

In August 2001, the company introduced a premium video and voice service for an annual fee, which has been well received among users. During 2001, Paltalk users averaged a total of 3.3 billion minutes a month online interacting with each other through the company's voice and video technology.

The increasing popularity of instant messaging in businesses has brought attention to Paltalk's voice and video software. Paltalk has approximately 200 business customers. IDC predicted that corporate IM use would grow from about 5.5 million users in 2000 to over 181 million by 2004.

"Through the down economy and online advertising slump, we have been able to successfully execute on our vision and exceed our technical and financial milestones," said Mr. Katz. "We have acquired the assets of competitors that once had higher valuations than our own. We continue to run our business very conservatively and will build upon these milestones."

Last year, Paltalk solidified its market leadership position by acquiring patents, source code technology, trademarks, domain names and equipment from HearMe and Firetalk. A month ago, the company announced a partnership with StreamCast Networks, to use Paltalk's software to power Morpheus Messenger. In February, the company began offering software that interoperates with America Online Instant Messenger. With this service, Paltalk's 13 million users can interact with AOL users through one buddy list. Also, AOL users can deploy Paltalk software to text instant messaging in multimedia chat rooms with groups. Paltalk said that its users have created over 100,000 voice forums and at any given time over 1,500 of these rooms are in operation.

For more information visit www.paltalk.com.

About Paltalk

Paltalk is a New York-based, privately held company that produces software enabling voice conferencing (VOIP), video conferencing, instant messaging, voice e-mail and video e-mail over the Internet. Paltalk was founded in June of 1998 and was the first company to launch video and voice combined with an on-line contact list in one package. Paltalk offers more functionality than any of the popular instant messengers, including AOL, MSN, ICQ and Yahoo. Paltalk's user base expanded nearly 600% over the last year and includes customers in over 140 countries. The Company currently handles over 350 million minutes of voice communication per month. Paltalk has relationships with IBM, AT&T, Exodus, DeltaThree, Earthlink, Doubleclick, L90, Valueclick, and Advertising.com.