Bright Mountain Media Inc

NOTE 1 –DESCRIPTION OF BUSINESS

Bright Mountain Media, Inc. (together with its wholly-owned subsidiaries, the “Company,” “Bright Mountain” or “we”) has an end-to-end digital media and advertising services platform that efficiently connects brands with targeted consumer demographics. We focus on digital publishing, advertising technology, consumer insights, creative and media services.

Our digital publishing division focuses on developing content that attracts an audience and monetizes that audience through advertising. The current portfolio of owned and operated websites is focused on moms, parenting, families, and more broadly, women. The portfolio consists of popular websites including Mom.com, Cafemom.com, LittleThings.com, and MamasLatinas.com. This demographic is highly sought after by brands and their advertising agencies. We use internal and external technologies to constantly improve the effectiveness and efficiency of the content we create. Our publishing division monetizes its audiences through both direct and programmatic advertising sales.

Our advertising technology division focuses on delivering targeted ads to audiences on owned and operated sites as well as third-party publishers in a cost-effective manner through the deployment of proprietary technologies. By developing our own proprietary technology stack, we are able to pass along efficiencies to both the demand and supply side of the ecosystem. Our goal is to enable and support a streamlined, end-to-end advertising model that addresses both demand (buy side) and publisher supply (sell side) programmatic sales and delivery of digital advertisements using an array of audience targeting tools and advertising formats (display, audio, video, CTV, in-app). Programmatic advertising relies on software programs that leverage data and proprietary algorithms to match the optimal selection of an ad with a bid price offered by advertisers.

Our consumer insights division focuses on providing primary and secondary research, competitive intelligence, and expert insight to address customers' strategic issues. We provide cutting-edge and dynamic research, offering clients a comprehensive perspective on their consumers. This insight extends to strategic guidance on the optimal timing and channels to effectively connect with target audiences. Our cutting-edge approach combines advanced data analytics, artificial intelligence, and comprehensive market research, to uncover actionable insights that drive informed decision-making.

Our creative services division transforms data into award-winning campaigns. We are uniquely able to leverage insights teams with highly strategic media planning and buying teams to ensure brands not only position their advertising precisely, but also yield impactful business results. Our goal is to combine data-driven decisions with creativity fueled by a deep understanding of modern culture.

Our media services division focuses on advertisers and agencies by providing access to premium inventory, leveraging data to optimize programmatic campaigns. Our aim is to empower clients to access the most sought-after advertising spaces across diverse platforms tailored to their specific needs and preferences. Our data-driven approach ensures that ad placements are not only well-targeted, but also continuously optimized for maximum efficiency and ROI. Our commitment to combining premium inventory access with data-driven programmatic campaign optimization makes us an indispensable partner in the success of our clients' advertising and marketing endeavors.

•the selling of advertisements placed on our owned and managed sites and on partner websites where we earn a share of the revenue,

•facilitating the seamless, real-time exchange of advertisements on a large scale, bridging networks of buyers (referred to as "DSPs") and networks of sellers (referred to as "SSPs"),

•serving advertisers through providing access to premium resources and leveraging data to optimize programmatic campaigns, where revenue is derived from the planning and execution of creative and media marketing campaigns, and

•providing primary and secondary research, competitive intelligence, and expert insights to address customers' strategic issues, where revenue is primarily derived from providing a single integrated service for such research.

Asset Purchase Agreement

On April 3, 2023, in accordance with certain procedures (the “Bidding Procedures”) adopted by the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) in In re Big Village Holding LLC, et al., jointly-administered under case No. 23-10174 (the “Bankruptcy Case”), the “Company” submitted a bid (the “Bid”) for the acquisition of certain assets of Big Village Insights, Inc., a Delaware corporation f/k/a Engine International, Inc., Big Village Agency LLC, a Delaware limited liability company f/k/a Engine USA LLC, Big Village Group Inc., a Delaware corporation f/k/a Engine Group Inc., Deep Focus, Inc., a New York corporation, EMX Digital Inc., a Delaware corporation, Balihoo, Inc., a Delaware corporation, and Big Village Media LLC, a Delaware limited liability company f/k/a Engine Media LLC in the Bankruptcy Case (collectively, the “Sellers”) related to the Sellers’ Agency Business and Insights Business (as defined in the APA) (collectively, the “Business”).

On April 10, 2023, the Company entered into a definitive asset purchase agreement to acquire the assets oftwo business units of Big Village (Big Village Insights, Inc and Big Village Agency LLC, (together, the “Big Village Entities”)) for approximately $20.0 million, plus assumed liabilities, in an all-cash transaction funded by a senior secured credit facility (the "Big Village Acquisition"). On April 20, 2023, the Company completed the Big Village Acquisition.

As part of the Big Village Acquisition, the Company formed BV Insights, LLC ("Insights") and Big-Village Agency, LLC ("Agency") to incorporate the assets acquired in the transactions. Additionally, letters of employment were extended to certain legacy employees of the Big Village Entities, resulting in a total of 203 employees accepting an offer of employment by the Company.

Centre Lane Senior Secure Credit Facility

The Company and its subsidiaries are parties to the Amended and Restated Senior Secured Credit Agreement between itself, the lender party thereto, and Centre Lane Partners Master Credit Fund II, L.P., as Administrative Agent and Collateral Agent (“Centre Lane Partners”), dated June 5, 2020, as amended (the “Credit Agreement”).

On April 4, 2023, the Company entered into a commitment letter (the “Commitment Letter”) with Centre Lane Solutions Partners, LP (together with any designated affiliates thereof, the “CLP Lenders”), pursuant to which CLP Lenders would provide financing in the form of a senior secured credit facility for the Big Village Acquisition.

On April 20, 2023, the Company and its subsidiaries CL Media Holdings LLC, Bright Mountain LLC, Mediahouse, Inc., Big-Village Agency LLC, and BV Insights LLC, and Centre Lane Partners entered into the Seventeenth Amendment to the Credit Agreement (the “Seventeenth Amendment”). The Credit Agreement was amended, as provided in the Seventeenth Amendment, to provide for an additional term loan amount of $26.3 million to, among other things, finance the Big Village Acquisition. This term loan, which was provided by BV Agency, LLC, (an affiliate of Centre Lane Solutions Partners, LP) matures on April 20, 2026 and was issued at a discount of 5% or $1.3 million. Interest of 15% is payable under the note, payable-in-kind in lieu of cash payments through April 30, 2024, then 5% is payable quarterly in cash and 10% payable-in-kind in lieu of cash payments until maturity of April 20, 2026.

Also, in connection with the Seventeenth Amendment, on April 20, 2023, the Company issued 21,401,993 shares of common stock of the Company to BV Agency, LLC, an entity beneficially owned by CLP Lenders. The issuance of the shares of common stock were not registered under the Securities Act of 1933, as amended (the “Securities Act”), in accordance with Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. As of December 31, 2023, BV Agency, LLC and Centre Lane Partners own approximately 12.4% and 8.8% of the Company’s outstanding common stock, respectively.

Other Developments

During 2022, the Company began scaling down its operations of Slutzky & Winshman Ltd, a digital media company located in Israel that was acquired in August 2019. This decision was made after a consistent decline in revenue. In 2023, we terminated operations in Israel and all employees were terminated.

Also in 2023, we terminated the operation of News Distribution Network, Inc., a newspaper technology company, which we also acquired in 2019, and subsequently rebranded this service as Mediahouse, also as a result of a declining revenue stream.

There were no specific costs associated with these exits. At December 31, 2023, these two entities have not yet been dissolved.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of the Company and all its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation, including revenue and cost of revenue for services performed by a subsidiary company.

Going Concern and Liquidity

Historically, the Company has incurred losses, which has resulted in an accumulated deficit of approximately $149.8 million as of December 31, 2023. Cash flows used in operating activities were $4.7 million and $3.1 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the Company had a working capital deficit of approximately $11.1 million inclusive of $4.0 million in cash and cash equivalents.

The Company’s ability to continue as a going concern is dependent upon its ability to meet its liquidity needs through a combination of factors. The Company is currently exploring several strategic alternatives, including restructuring or refinancing its debt, or seeking additional debt, including borrowing under the Centre Lane Senior Secured Credit Agreement or raising equity capital. The ability to access the capital market is also dependent upon the stock volume and market price of the Company's stock, which cannot be assured. Other measures include reducing or delaying certain business activities, reducing general and administrative expenses, including a reduction in headcount. The ultimate success of these plans is not guaranteed.

The Company's current cash and working capital, as of the filing of this Annual Report on Form 10-K, is not expected to be sufficient to fund its anticipated level of operations over the next twelve months. As a result, such matters create a substantial doubt regarding the Company’s ability to meet its financial needs and continue as a going concern.

The accompanying condensed consolidated financial statements are prepared on a going concern basis and do not include any adjustments that might result from uncertainty about the Company’s ability to continue as a going concern.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when acquired, to be cash equivalents. The Company maintains its cash with various commercial banks in the U.S. and other foreign countries in which the Company operates.

As of December 31, 2023, the Company exceeded the federally insured limits of $250,000 for interest and non-interest-bearing accounts. The Company held a cash balance with a single financial institution in excess of the FDIC insured limit in the amount of $3.7 million as of December 31, 2023. As of December 31, 2022, the Company's interest and non-interest-bearing accounts were within the federally insured limit.

As of December 31, 2023 and 2022, the Company exceeded the insurance limit of $29,000 for one of its international bank accounts by $31,000 and $66,000, respectively.

Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows.

At December 31, 2023, and 2022, the Company had $4.0 million and $316,000, respectively, in cash and cash equivalents.

Accounts Receivable and Allowances

Accounts receivable represent receivables from customers in the ordinary course of business and are recorded in accordance with FASB Accounting Standards Codification No. 310, Receivables, (ASC 310). Receivables are recorded at the invoice amount on the date revenue is recognized and are presented net of the allowance for current expected credit losses in the accompanying consolidated balance sheets. Certain receivables are subject to adjustments from traffic settlements that are deducted from open invoices. Our receivables are not interest bearing and are not collateralized.

Unbilled receivables are the results of timing differences between billings to clients and are included in accounts receivable.

The allowance for current expected credit losses is based on our assessment of the collectability of customer accounts. We regularly review our receivables that remain outstanding past their applicable payment terms and establish an allowance for potential write-offs by considering factors including historical experience, credit quality, age of the accounts receivable balances, and current and forecasted economic conditions that may affect a customer’s ability to pay.

The policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30 or net 60 days. Once collection efforts by the Company are exhausted, the determination for charging off uncollectible receivables is made. Expected credit losses are recorded as general and administrative expenses on our consolidated statements of operations and comprehensive loss.

Property and Equipment, net

Property and equipment are recorded at cost, less accumulated depreciation in accordance with FASB Accounting Standards Codification No. 360, Property, Plant and Equipment, (ASC 360). Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets. Leasehold improvements and assets under finance lease are amortized over the lesser of the lease term or the useful life of the improvements. When assets are sold or retired, the applicable cost and accumulated depreciation or amortization are removed from the accounts. The resulting gains or losses are reflected in the combined statements of operations and comprehensive loss.

Goodwill

We account for goodwill under FASB Accounting Standards Codification No. 350, Goodwill and Other, (ASC 350). Goodwill represents the cost in excess of the fair value of the net assets acquired in a business combination. We allocate goodwill to reporting units based on the expected benefit from business combination. The Company categorizes goodwill into three reporting units: “Owned & Operated”, “Ad Network” and “Insights”.

Goodwill is tested for impairment at the reporting unit level on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value, which are determined through a qualitative assessment.

A qualitative assessment includes consideration of the economic, industry, and market conditions in addition to the overall financial performance of the Company and these assets. If our qualitative assessment does not conclude that it is more likely than not that the estimated fair value of the reporting unit is greater than the carrying value, we perform a quantitative analysis. In a quantitative test, the fair value of a reporting unit is determined based on a discounted cash flow analysis and further analyzed using other methods of valuation. A discounted cash flow analysis requires us to make various assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on our long-term projections. Assumptions used in our impairment testing are consistent with our internal forecasts and operating plans. Our discount rate is based on our debt structure, adjusted for current market conditions. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment. To the extent the carrying amount exceeds its fair value, an impairment charge of the reporting unit’s goodwill would be necessary. See Note 7, Goodwill, to the consolidated financial statements for details regarding goodwill impairment.

Intangible Assets

We account for intangibles under FASB Accounting Standards Codification No. 350, Goodwill and Other, (ASC 350). Intangible assets acquired in a business combination or an asset acquisition are recorded at fair value on the date of acquisition and amortized over their estimated useful lives.

Intangible assets include trade name, customer relationships, IP/technology and non-compete agreements.

The Company’s trade name is amortized on a straight-line basis over a useful life of 2 years to 10 years. Customer relationships are amortized on a straight-line basis over a useful life of 5 years to 10 years. IP/technology is amortized on a straight-line basis over a useful life of 10 years. Non-compete agreements are amortized on a straight-line basis over the length of each agreement, typically between 3 years to 5 years. The Company reviews for impairment indicators of finite-lived intangibles and other long-lived assets as described below in “Amortization and Impairment of Long-Lived Assets.”

Amortization and Impairment of Long-Lived Assets

Long-lived assets, such as property, equipment, right-of-use assets, and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending upon the nature of the assets. See Note 6, Intangibles, to the consolidated financial statements for details regarding impairment of intangibles.

Leases

The Company determines whether an arrangement contains a lease at inception in accordance with FASB Accounting Standards Codification No. 842, Leases, (ASC 842). A contract is, or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We do not include options to extend or terminate the lease term unless it is reasonably certain that we will exercise any such options. We recognize rent expense under our operating leases on a straight-line basis, variable lease costs such as operating costs and property taxes are expensed as incurred. For finance leases, we record interest expense on the lease liability in addition to amortizing the right-of-use asset (generally straight-line) over the shorter of the lease term or the useful life of the right-of-use asset. Finance leases are included in property and equipment, net, finance lease obligations, and finance lease obligations, non-current on our consolidated balance sheets.

Revenue Recognition

The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification No. 606, Revenue from Contracts with Customers, (ASC 606). The Company recognizes revenue at a point in time when control is transferred to the customer or over time as a percentage of completion or otherwise in accordance with the terms of the contract. Cash received by the Company prior to when control of services is transferred to the customer is recorded as deferred revenue.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract; and

(v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it provides to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the services promised within each contract and determines those that are performance obligations and assesses whether each promised service is distinct. The Company then recognizes revenue when (or as) the performance obligation is satisfied.

•serving advertisers through providing access to premium resources and leveraging data to optimize programmatic campaigns, where revenue is derived from the planning and execution of creative and media marketing campaigns; and

•providing primary and secondary research, competitive intelligence, and expert insights to address customers' strategic issues, where revenue is primarily derived from providing a single integrated service for such research.

Digital publishing and advertising technology revenues are generated by audiences seeing or clicking on digital advertisements utilizing several advertising partners. The Company recognizes revenue once the performance obligation is satisfied at a point in time, on a gross basis net of adjustments based on the number of advertisements delivered. Customers are billed monthly or billing is generated via custom content production and extensions on our social media platforms.

Consumer insights revenues are generated by providing primary and secondary research, competitive intelligence, and expert insight to address customers' strategic issues. The Company recognizes revenue as the services are rendered, by applying the percentage of completion method on a cost-to-cost basis to measure progress toward satisfaction of the performance obligation. Progress toward satisfaction of the performance obligation is measured based on costs incurred to-date relative to the total estimated costs expected to be incurred in providing services. The Company does not include costs that do not contribute to its progress toward satisfying its promise to the customer.

Creative services revenues are generated by delivering campaign services to customers. Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for the individual performance obligations separately if they are distinct. If recurring services are performed, the Company recognizes revenue as the services are rendered over time, generally on a ratable basis over the contract term beginning on the date that the service is made available to the customer. For campaign services that require a one-time deliverable, we recognize revenue once the performance obligation is satisfied at a point in time.

Media services revenues are generated through the access to programmatic campaigns. The Company recognizes revenue as the services are rendered over time, on a ratable basis over the contract term, beginning on the date that the service is made available to the customer.

There is no significant initial cost incurred to obtain contracts with customers.

The Company records deferred revenue when cash payments are received or amounts are invoiced in advance of performance obligations. The Company expects to recognize deferred revenue in the period when it provides its services and, therefore, satisfies its performance obligation to the customer.

Cost of revenue includes internal labor and payment to third parties for services performed to drive revenue, which includes the publisher cost paid for ad exchange on third party sites, advertising fees, personnel costs, technology and data related costs, fees paid for content creation, influencers, writers and sales commission.

Website Development Costs

The Company accounts for its website development costs in accordance with FASB Accounting Standards Codification No. 350, Website Development Costs (ASC 350). These costs, if any, are included in intangible assets in the accompanying consolidated balance sheets. Upgrades or enhancements that add functionality are capitalized while other costs during the operating stage are expensed as incurred. The Company amortizes the capitalized website development costs over an estimated life offive years.

During the year ended December 31, 2023 and 2022, all website development costs have been expensed. While it is likely that we will have significant amortization expense as we continue to acquire websites, we believe that intangible assets represent costs incurred by the acquired website to build value prior to an acquisition, and any related amortization and impairment expenses are not representative of ongoing costs of doing business.

Advertising and Marketing

Advertising and marketing expenses are recognized as incurred and are included in general and administrative expenses on the accompanying consolidated statements of operations and comprehensive loss. For the years ended December 31, 2023 and 2022, advertising and marketing expense was $257,000 and $46,000, respectively.

Stock Based Compensation

We account for stock based compensation in accordance with FASB Accounting Standards Codification No. 718, Compensation - Stock Compensation (ASC 718). ASC 718 addresses accounting for share-based awards, including stock options, restricted stock, performance shares and warrants. Stock-based compensation for stock option grants to employees and non-employees is based on the fair value of the award on the date of grant. We record forfeitures as they occur. The Company calculates stock compensation expense using the graded vesting method, which begins expensing each tranche on the expense begin date through the vesting date. This will result in front-loaded expenses, and is included in general and administrative expenses in the consolidated statements of operations.

Compensation cost is recognized over the requisite service period, which is generally the vesting period, and is included in general and administrative expenses in the consolidated statements of operations. The Company estimates the fair value of stock options using the Black-Scholes valuation model. The expected life represents the term the options granted are expected to be outstanding. The expected volatility is determined using the historical volatility of similar publicly traded companies. The risk-free interest rate is based on the U.S. Treasury rate in effect at the time of grant.

Treasury Stock

The Company accounts for its treasury stock as set forth in FASB Accounting Standards Codification No. 505, Treasury Stock (ASC 505-30). Under ASC 505-30 the total amount paid to acquire the stock is recorded and no gain or loss is recognized at the time of purchase. Gains and losses are recognized at the time the treasury stock is reinstated or retired and are recorded in additional paid-in capital or retained earnings. At December 31, 2023 and 2022, the Company owned 825,175 shares of treasury stock.

Loss Per Share

The Company computes net loss per share in accordance with FASB Accounting Standards Codification No. 260, Earnings Per Share (ASC 260). Under the provisions of ASC 260, basic net loss per share is computed by dividing the net loss available to common shareholders by the weighted average common shares outstanding during the period. Diluted net loss per share adjusts basic net loss per share for the effect of stock options, warrants, convertible notes and restricted stock awards only in periods, or for such awards in which the effect is dilutive. ASC 260 also requires the Company to present basic and diluted loss per share information separately for each class of equity instruments that participates in any income distribution with primary equity instruments.

Deferred Debt Costs

Deferred debt costs include costs incurred in connection with acquiring and maintaining debt arrangements. These costs are directly deducted from the carrying amount of the liability in the consolidated balance sheets, are amortized over the life of the related debt using the effective interest method and are classified as interest expense in the accompanying consolidated statements of operations. These deferred debt costs are related to the Company's Centre Lane Secured Credit Facility.

Income Taxes

We use the asset and liability method to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws in the period those differences are expected to reverse. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.

The Company follows the provisions of FASB Accounting Standards Codification No. 740, Income Taxes (ASC 740). When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax expenses are recognized as tax expenses in the consolidated statement of operations and comprehensive loss.

Segment Reporting

Consistent with FASB Accounting Standards Codification No. 280, Segment Reporting (ASC "280"), our Chief Financial Officer reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Our components are digital publishing, advertising technology, consumer insights, creative and media services. There are no segment managers who are held accountable by the Chief Financial Officer, or anyone else, for operations, operating results and planning for levels or components below the consolidated unit level. Accordingly, we determined we haveone operating and reportable segment.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of our consolidated financial statements as well as reported amounts of revenue and expenses during the periods presented. Our consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results.

Significant estimates included in the accompanying consolidated financial statements include, valuation of goodwill and intangible assets, allowance for current expected credit losses, the determination of the relative selling prices of our services, percentage of completion for revenue recognition, estimates of amortization period for intangible assets, estimates of depreciation period for property and equipment, discount rates used in the valuation of right-of-use assets and lease liabilities, litigation reserves, the valuation of equity-based transactions, valuation of the Center Lane Senior Secured Facility carrying value regarding debt modification or extinguishment, and the valuation allowance on deferred tax assets. While these estimates are based on our best knowledge of current events and actions that may affect us in the future, actual results may differ materially from these estimates.

Foreign Currency

We translate the financial statements of our foreign subsidiaries, which have a functional currency in the respective country’s local currency, to U.S. dollars using month-end exchange rates for assets and liabilities and actual exchange rates for revenue, costs and expenses on the date of the transaction. Translation gains and losses as a result of consolidation are included in accumulated other comprehensive loss. Transaction gains and losses are included within “general and administrative expense” on the consolidated statements of operations and comprehensive loss.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with high credit-quality financial institutions. Such deposits may be in excess of federally insured limits. In addition, the Company maintains various bank accounts in Thailand and Israel, with some level of insurance. We perform periodic evaluations of the relative credit standing of financial institutions. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows.

We perform credit evaluations of our customers’ financial condition and require no collateral from our customers. We maintain an allowance for current expected credit losses based upon the expected collectability of accounts receivable balances.

The Company generates revenue as follows:

•selling of advertisements placed on the Company’s owned and managed sites, as well as from advertisements placed on partner websites, for which the Company earns a share of the revenue;

•facilitating the real-time buying and selling of advertisements at scale between networks of buyers, known as DSPs and sellers known as SSPs;

•serving advertisers and agencies by providing access to premium inventory and leveraging data to optimize programmatic campaigns, where revenue is derived from the planning and execution of creative and media marketing campaign; and

•providing primary research and secondary research, competitive intelligence and expert insight to address customer's strategic issues, where revenue is primarily derived from providing a single integrated service for research.

The following table provides information about customer and vendor concentration that exceeds 10% of revenue, accounts receivable and accounts payable for the years ended December 31, 2023 and 2022:

Off-balance Sheet Arrangements

There are no off-balance sheet arrangements as of December 31, 2023 and December 31, 2022.

Reclassification

As of and for the year ending December 31, 2023, certain amounts have been reclassified for comparative purposes. Changes were made for foreign currency translation from operating activities to showing the cash and cash equivalent impact only as a separate line item below financing activities, right of use asset and liability showing a net position instead showing a separate line item for asset and liabilities and reclassification on other operating activities line items for accounts payable and accrued expenses on the consolidated statement of cash flows. Changes were made for other expenses under finance income (expense), to general and administrative expense, which impacted our loss from operations

Effective Accounting Pronouncements Adopted

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13 (amended by ASU 2019-10), Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, regarding the measurement of credit losses for certain financial instruments. which replaces the incurred loss model with a current expected credit loss (“CECL”) model. The CECL model is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company was required to adopt the new guidance on January 1, 2023. Based on the nature of our business, the adoption of this standard did not have a material impact on our consolidated financial statements for the year ended December 31, 2023.

In October 2021, the FASB issued Accounting Standards Update (“ASU”) No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in this update should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company adopted this standard in accounting for its Big Village Acquisition.

Recent Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. The new standard is effective January 1, 2024 (early adoption is permitted, but not earlier than January 1, 2021). The Company is currently evaluating the impact this guidance will have on the Company’s consolidated financial statements.

NOTE 3 –ACCOUNTS RECEIVABLE

Accounts receivable, net consisted of the following:

(A) - Unbilled receivable represents amounts for services rendered at the end of the period pending generation of invoice to the customer.

Accounts receivable, net at January 1, 2022 was $3.6 million.

Expected credit losses was $58,000, and $84,000 for the years ended December 31, 2023, and 2022, respectively. These amounts are included in general and administrative expenses in the consolidated statements of operations and comprehensive loss.

NOTE 4 –PREPAID EXPENSE AND OTHER ASSETS

Prepaid expenses and other assets consisted of the following:

NOTE 5 –PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

Depreciation expense was $125,000, and $38,000 for the years ending December 31, 2023, and 2022, respectively and is included in general and administrative expenses on the consolidated statements of operations and comprehensive loss.

NOTE 6 –INTANGIBLE ASSETS, NET

Website acquisitions, net consisted of the following:

Other intangible assets, net consisted of the following:

The Company performed an impairment assessment at September 30, 2023 and December 31, 2023, and recorded an impairment loss of $2.9 million. There wasno impairment loss for the year ended December 31, 2022. Impairment loss is included in the below table:

During the year ended December 31, 2023, the Company acquired intangible assets through the acquisition of the Big Village Entities as follows:

For further details on the Big Village Acquisition, see Note 13, Business Combinations to the consolidated financial statements.

Amortization expense for the years ended December 31, 2023, and 2022 was approximately $2.5 million, and $1.6 million, respectively, related to both the website acquisition costs and the intangible assets and is included in general and administrative expense in the statements of operations and comprehensive loss.

As of December 31, 2023, expected remaining amortization expense of intangible assets and website acquisition by fiscal year is as follows:

NOTE 7 –GOODWILL

The following table represents the allocation of goodwill as of December 31, 2023 and 2022:

Goodwill acquired as part of the Big Village Acquisition totals $2.3 million and represents the value of unidentifiable intangible assets including assembled workforce and strategic benefits that are expected to be achieved. We allocate goodwill to reporting units based on the expected benefit and synergies with our current reporting units. The Company categorizes goodwill into three reporting units: “Owned & Operated”, “Ad Network” and “Insights”. See Note 13, Business Combinations to the consolidated financial statements.

Goodwill is tested for impairment at least annually and if triggering events are noted prior to the annual assessment. Impairment is deemed to occur when the carrying value of the goodwill associated with the reporting unit exceeds the implied value of the goodwill associated with the reporting unit.

At September 30, 2023 and December 31, 2023, an impairment assessment was performed on goodwill for Ad Network, Owned & Operating and Insights reporting units. The assessment used a qualitative assessment which includes consideration of the economic, industry and market conditions in addition to the overall financial performance of the Company and these assets. Our qualitative assessment concluded that it is more likely than not that the estimated fair value of the Ad Network and Owned & Operating reporting units is less than the carrying value, hence, we performed a quantitative analysis. Our assessment for Insights reporting unit did not have such conclusion, hence a quantitative analysis was not required.

In a quantitative test, the fair value of a reporting unit is determined based on a discounted cash flow analysis and further analyzed using other methods of valuation. A discounted cash flow analysis requires us to make various assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on our long-term projections. Assumptions used in our impairment testing are consistent with our internal forecasts and operating plans. Our discount rate is based on a market participant debt structure and cost of capital. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment. To the extent the carrying amount exceeds its fair value, an impairment charge of the reporting unit’s goodwill would be necessary.

Our quantitative analysis showed that the implied fair value of our goodwill for Ad Network and Owned & Operating reporting units is less than its carrying value which resulted in an impairment charge of approximately $14.1 million.

NOTE 8 –ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

A. Accounts payable includes $5.2 million, and $5.9 million at December 31, 2023 and, 2022, respectively, for Slutzky & Winshman Ltd and Mediahouse, whose operations were terminated during the year ended December 31, 2023.

NOTE 9 –OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following:

(1) Represents amount advanced by customers to cover third party expenses specifically related to their project, these expenses are offset against the advance and are not part of the Company's income statement.

NOTE 10 –CENTRE LANE SENIOR SECURED CREDIT FACILITY

Effective June 1, 2020, the Company entered into a membership interest purchase agreement to acquire 100% of Wild Sky Media, a subsidiary (the “Purchase Agreement”). To finance this acquisition, the Company obtained a first lien senior secured credit facility from Centre Lane Partners Master Credit Fund II, L.P. (“Centre Lane Partners”) in the amount of $16.5 million, comprised of $15.0 million of initial indebtedness, repayment of Wild Sky’s existing accounts receivable factoring facility of approximately $900,000 and approximately $500,000 of expenses.

On April 4, 2023, the Company entered into a commitment letter (the “Commitment Letter”) with Centre Lane Partners, pursuant to which they would provide financing in the form of a senior secured credit facility for the acquisition of the Big Village Entities.

On April 20, 2023, the Company and its subsidiaries entered into the Seventeenth Amendment to the Credit Agreement (the “Seventeenth Amendment”) with Centre Lane Partners. The Credit Agreement was amended, as provided in the Seventeenth Amendment, to provide for an additional term loan amount of $26.3 million to, among other things, finance the Acquisition. This term loan, which was provided by BV Agency, LLC, matures on April 20, 2026 and was issued at a discount of 5% or $1.3 million. Interest of 15% payable under the note is payable-in-kind in lieu of cash payment up to April 30, 2024, then 5% payable quarterly in cash and 10% payable-in-kind in lieu of cash payment until maturity of April 20, 2026.

As part of the Seventeenth Amendment, the Company is required to pay an amendment fee of 2% of the principal amount of the existing initial principal plus amendments one to eight ("First In Last Out Loans") and amendments nine to sixteen ("Last In First Out Loans"), totaling $706,000, additionally, an exit fee of $18,000 of the loan to finance the Big Village Acquisition. The outstanding principal on these at April 20, 2023 was $31.0 million and $4.3 million, respectively. These fees total $724,000 and are due and payable at maturity. Additionally, the maturity dates were extended to April 20, 2026.

Also, in connection with the Seventeenth Amendment, on April 20, 2023, the Company issued 21,401,993 shares of common stock of the Company to BV Agency, LLC, an entity beneficially owned by Centre Lane Partners. The shares valued $1.9 million, based on a per share price of $0.09, which was the closing price of the Company’s common stock at close of market on April 19, 2023. The issuance of the shares of common stock were not registered under the Securities Act of 1933, as amended (“Securities Act”), in accordance with Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. As of December 31, 2023, BV Agency, LLC and Centre Lane Partners own approximately 12.4% and 8.8% of the Company’s outstanding common stock, respectively.

On July 28, 2023, the Company and its subsidiaries entered into the Nineteenth Amendment to the Credit Agreement (the “Nineteenth Amendment”) with Centre Lane Partners. The Credit Agreement was amended, as provided in the Nineteenth Amendment, to provide for an additional term loan amount of $2.0 million to, among other things, finance the integration and further growth of the Company post-Acquisition. This term loan is part of the last in first out loans and matures on June 28, 2024 .

Including the Nineteenth Amendment, Centre Lane Partners subsequently loaned the Company an additional $38.0 million to provide liquidity to fund operations beginning in April 2021 (as amended, the “Centre Lane Senior Secured Credit Facility”). This Centre Lane Senior Secured Credit Facility has been determined to qualify as a related party transaction as shares were issued to Centre Lane Partners as part of the transaction. A related party is a party that can exercise significant influence over the Company in making financial and/or operating decisions.

The original note issued under the Centre Lane Senior Secured Credit Facility initially bore interest at a rate of 6.0% per annum, with payments of 2.5% of outstanding principal beginning on June 30, 2023. The interest rate was increased to 10.0% pursuant to the first amendment to the Centre Lane Senior Secured Credit Facility and interest payable under the note is payable-in-kind (“PIK Interest”) in lieu of cash payment.

Commencing with the ninth amendment, the interest rate was increased to 12% per annum on all subsequent draws with 8% per annum payable quarterly in cash and 4% per annum payable-in-kind in lieu of cash payment. These last in first out loans, totals $6.9 million inclusive of exit fees at December 31, 2023, due and payable on April 20, 2026, excluding the Nineteenth Amendment which is due and payable on June 28, 2024.

In connection with the Nineteenth Amendment, adjustments were made to the interest rate for outstanding loans with the exception of the draw under the Seventeenth Amendment as follows:

•The interest rate per annum changed to 7.0% per annum plus the Secured Overnight Financing Rate ("SOFR"). At December 31, 2023, the SOFR was 5.39% per annum, overall interest on these facilities was 12.39%, per annum at December 31, 2023;

•The cash pay rate for the last in first out loans was changed to the SOFR plus 3.0% per annum, at December 31, 2023, the rate was 8.39%, per annum;

•Effective July 1, 2024, the first in last out loans PIK Rate per annum will be 7.0% per annum plus SOFR plus 5.0% per annum.

There is no prepayment penalty associated with this Centre Lane Senior Secured Credit Facility. However, partial or full prepayments of the Centre Lane Senior Secured Credit Facility would be required in the event of certain future capital raises.

Optional Prepayment

The Company may at any time, voluntarily prepay, in whole or in part, a minimum of $250,000 of the outstanding principal of the loans, plus any accrued but unpaid interest on the aggregate principal amount of the loans being prepaid.

Repayment of Loans

The Company is required to repay in cash to Centre Lane Partners (i) commencing with the fiscal quarter ending on June 30, 2023, in consecutive quarterly installments to be paid on the last day of each fiscal quarter of the Company, an amount equal to 2.5% of the outstanding aggregate principal amount of the original principal plus draws advanced by amendments 2 through 8 along with accrued and unpaid interest (after giving effect to capitalized PIK Interest) and (ii) on the maturity date all outstanding obligations (including, without limitation, all accrued and unpaid principal and interest on the principal amounts of the Loans (including any accrued but uncapitalized PIK Interest)) of the loan parties that are due and payable on such date. The outstanding amount for these draws at December 31, 2023 is $34.1 million, inclusive of interest paid in kind.

On June 30, 2023, the Company and its subsidiaries entered into its Eighteenth Amendment with Centre Lane Partners regarding installment payments which were due on June 30, 2023. The Eighteenth Amendment required equal monthly installments on July 3, 2023, August 7, 2023 and September 5, 2023, respectively. There was no impact on principal or interest and no fees incurred by the Company for this amendment.

In connection with the Nineteenth Amendment, quarterly installments equal to 2.5% of the outstanding aggregate principal are due on the first in last out loans commencing March 31, 2024.

During the years ended December 31, 2023, and 2022, the Company paid approximately $425,000 and $153,000, respectively, toward outstanding interest payable.

During the years ended December 31, 2023, and 2022, the Company paid approximately $270,000 and $0, respectively, toward outstanding principal.

Fees

Under the terms of the Centre Lane Senior Secured Credit Facility, the Company is also required to pay Centre Lane Partners a non-refundable annual administration fee equal to $35,000 for agency services provided under this agreement. The Centre Lane Senior Secured Credit Facility provides that this fee shall be in all respects fully earned, due and paid-in-kind by the Company on the effective date (“Effective Date”) of the Centre Lane Senior Secured Credit Facility and on each anniversary of the Effective Date during the term of this agreement by adding and capitalizing the full amount of such fee to the outstanding principal balance of the loans. The accumulated administrative fee since inception of the facility is $140,000 and is included in outstanding principal. The administrative fee charged for the years ended December 31, 2023, and 2022 was $35,000, respectively.

The below table summarizes the loan balances and accrued interest for the years ended December 31, 2023 and 2022:

The below table summarizes the movement in the outstanding principal from inception through December 31, 2023:

Amendments to Centre Lane Senior Secured Credit Facility

Commencing April 2021, the Company and certain of its subsidiaries entered into various amendments to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners. The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent. The Credit Agreement was amended to provide for additional loans used for working capital. In addition, and as part of the transaction, there are Exit Fees (“the Exit Fees”), which will be added and capitalized to the principal amount of the original loan. As of December 31, 2023, there were nineteen amendments to the Centre Lane Senior Secured Credit Facility.

Consistent with FASB ASC Topic 470 Debt, (“ASC 470”), the Company is required to perform an analysis of the change in each amendment to determine whether the change is a modification or an extinguishment of debt. Under a modification, no gain or loss is recorded, and a new effective interest rate is established based on the carrying value of the debt and revised cash flow. If the debt is extinguished, the old debt is derecognized and the new debt is recorded as fair value, which becomes the new carrying value. A gain or loss is recorded for the difference between the net carrying value of the original debt and the fair value of the new debt, additionally, in the event the transaction is with a related party, this gain or loss should be recognized against additional paid in capital. Interest expense is recorded based on the effective interest rate of the new debt. A debt is considered extinguished if the present value of the new cash flows under the term of the new debt is at least 10% different from the present value of the remaining cash flows under the terms of the old debt.

In connection with the Seventeenth Amendment, the Company determined that the change was an extinguishment consistent with ASC 470, Debt, the old debt of $35.5 million was derecognized and the new debt of $62.7 million was recognized at estimated fair value. A gain on extinguishment was recognized against additional paid in capital of $671,000, as Centre Lane Partners is a related party.

The below table summarizes the amendments that were executed by the Company since the inception of the facility to December 31, 2023, (in thousands, except for share data):

Draws advanced by amendments 2 through 8 totaling $5.5 million and exit fees totaling $3.6 million, were due for full repayment on February 28, 2022; prior to this date, the loan agreement allowed the Company to waive accrual of interest on these amounts. There was no repayment of these amounts, and as a result, on March 11, 2022, amendment 10 was executed, changing the repayment date of the outstanding principal and commencing interest accrual on the exit fees.

All amounts advanced for Amendments 9 through 16 were due on June 30, 2023 along with accrued and unpaid interest, however, the maturity date was changed to April 20, 2026 with amendment 17. The outstanding amount at December 31, 2023 is $6.9 million, inclusive of interest paid in-kind.

As of December 31, 2023, and 2022, the carrying value of the Centre Lane Senior Secured Credit Facility was $64.3 million and $30.0 million, respectively, net of unamortized debt discount of $6.0 million and $3.1 million, respectively. The discount is being amortized over the remaining life of the Centre Lane Senior Secured Credit facility using the effective interest method.

During the years ended December 31, 2023 and 2022, the Company recorded amortization of debt discount of $2.1 million and $1.2 million, respectively on the Centre Lane Senior Secured Credit Facility.

Interest expense for the year ended December 31, 2023, and 2022 consisted of the following:

The minimum annual principal payments of notes payable at December 31, 2023 were:

NOTE 11 – 10% CONVERTIBLE PROMISSORY NOTES

During November 2018, the Company issued 10% convertible promissory notes ("Convertible Notes") in the amount of $80,000 to the Chairman of the Board, a related party. The Convertible Notes are unsecured and mature five years from issuance and are convertible at the option of the holder into shares of common stock at any time prior to maturity at a conversion price of $0.40 per share. A beneficial conversion feature exists on the date the Convertible Notes were issued whereby the fair value of the underlying common stock to which the Convertible Notes are convertible is in excess of the face value of the Convertible Notes of $80,000.

The principal balance of these Convertible Notes payable was $80,000 at December 31, 2023 and 2022. The total Convertible Notes payable was $80,000 and $68,000, net of discount of $0 and $12,000, at December 31, 2023 and 2022, respectively.

Interest expense for the Convertible Notes was $20,000 and $22,000, inclusive of interest of $8,000 and discount amortization of $12,000 and $14,000 for the years ended December 31, 2023, and 2022, respectively.

The outstanding principal and interest of the Convertible Notes was due and payable November 2023, the loan remains unpaid at December 31, 2023 with outstanding principal of $80,000 and interest payable of $39,000. The outstanding principal continues to accrue interest.

NOTE 12 –LEASES

The Company accounts for its lease under FASB ASC Topic 842, Leases(“ASC 842”), which requires lessees to recognize on the balance sheet at lease commencement, the lease assets and the related lease liabilities for the rights and obligations created by operating and finance leases with lease terms of more than 12 months.

Operating Lease

The Company leases its corporate offices in Boca Raton, Florida under a long-term non-cancellable lease agreement which was signed on June 14, 2022, with lease term forfive years beginning upon completion of improvements to the office space by the landlord, which was completed on September 12, 2022. The annual base rent is $100,000, with a provision for a 3% increase on each anniversary of the rent commencement date. The Company has the option to renew the lease for one additional five-year term.

At December 31, 2023, and 2022, the operating lease right-of-use asset was $306,000 and 367,000, respectively, and is included under assets on the consolidated balance sheets.

At December 31, 2023, and 2022, the operating lease right-of-use lease liability was $303,000 and $357,000, respectively, including the current portion of $64,000 and $38,000, respectively, and is included under liabilities on the consolidated balance sheets.

Over the lease term, the Company is required to amortize the operating lease asset and record interest expense on the lease liability created at lease commencement. Operating lease expense was approximately $161,000 and $33,000 for the years ended December 31, 2023 and 2022. Rent expense prior to commencement of the lease was $110,000, net of landlord incentives of $95,000 for the year ended December 31, 2022, and is included in general and administrative expense in the statements of operations and comprehensive loss.

The Company’s non-lease components are primarily related to property maintenance and other operating services, which vary based on future outcomes and are recognized in rent expense when incurred and not included in the measurement of the lease liability.

Finance Lease

On October 1, 2023, the Company entered into a lease agreement for computer equipment with a lease term ofthree years. At December 31, 2023, the finance lease asset was $60,000 and is included under assets on the consolidated balance sheets. At December 31, 2023, the finance lease liability was $60,000, including the current portion of $18,000, and is included under liabilities on the consolidated balance sheets.

Finance lease expense for the year ended December 31, 2023 was $7,000, inclusive of interest of $3,000 and amortization of $4,000, included in general and administrative expense the statements of operations and comprehensive loss.

As of December 31, 2023 and 2022, the right-of-use asset and lease liability for the operating lease are summarized as follows (in thousands):

(1) Finance lease represents computer software, see Note 5 "Property and Equipment".

As of December 31, 2023, the aggregate annual lease obligations were as follows (in thousands):

NOTE 13 –BUSINESS COMBINATIONS

On April 20, 2023, the Company completed the Big Village Acquisition oftwo business units of Big Village Holding LLC for approximately $20.0 million, plus assumed liabilities, in an all-cash transaction funded by a senior secured credit facility.

As part of the Big Village Acquisition, the Company formed BV Insights, LLC ("Insights") and Big-Village Agency, LLC ("Agency") to incorporate the assets acquired in the transactions, additionally, letters of employment were extended to certain legacy employees of the Big Village Entities, resulting in a total of 203 employees accepting the offer of employment by the Company. The purpose of the acquisition was to add synergies to our existing revenue stream.

The purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill and intangibles. The goodwill of $2.3 million recognized was attributable to assembled workforce and strategic benefits that are expected to be achieved and is tax deductible for a period of 15 years. Identified intangibles total $16.2 million inclusive of the below:

The following table summarizes the allocation of the purchase price based on the estimated fair value of the acquired assets and assumed liabilities at the date of the Big Village Acquisition and subsequent adjustment:

We incurred costs related to the Big Village Acquisition of approximately $2.2 million during the year ended December 31, 2023. Additionally, $2.8 million in cure claims was paid to accepted vendors on the closing date and $1.2 million was subsequently paid to employees representing bonus. Amounts for cure claims and bonuses are included above as part of assumed liability. All acquisition related costs were expensed as incurred and have been recorded in general and administrative expenses in our consolidated statements of operations and comprehensive loss.

The final allocation of purchase price has changed from the preliminary allocation because of a reduction in the fair value of assets acquired of $2.4 million and liabilities assumed of $1.4 million, resulting in an increase in goodwill of approximately $1.0 million.

Proforma Results

Our results for the year ended December 31, 2023 include results from the Big Village Acquisition between April 20, 2023 to December 31, 2023. Standalone revenue related to the entities acquired in the Big Village Acquisition was $31.0 million, for the year ended December 31, 2023. The following unaudited pro forma information presents the Company's results of operations as if the Big Village Acquisition had occurred on January 1, 2022. The proforma results do not purport to represent what the Company's results of operations actually would have been if the transaction had occurred on January 1, 2022 or what the Company's operating results will be in future periods.

Supplemental pro forma information is as follows:

NOTE 14 –REVENUE RECOGNITION

The following table represents our revenue disaggregated by type (in thousands):

Geographic Information

Revenue by geographical region consist of the following (in thousands):

Revenue by geography is generally based on the country of the Company’s contracting entity. Total United States revenue was approximately 100%, and 94% of total revenue for the years ended December 31, 2023, and 2022, respectively.

As of December 31, 2023, and 2022, approximately 100% of our long-lived assets were attributable to operations in the United States. Long-lived assets include websites and other intangibles assets that are utilized in overall revenue generation.

The movement in deferred revenue during the years ended December 31, 2023 and 2022, comprised the following (in thousands):

NOTE 15 –STOCK BASED COMPENSATION

On April 14, 2022, the Board of Directors of the Company and the Compensation Committee of the Board adopted and approved the 2022 Bright Mountain Media Stock Option Plan (the “Stock Option Plan”). The Stock Option Plan provides for the grant of awards to eligible employees, directors and consultants in the form of stock options. The purpose of the Stock Option Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. The Stock Option Plan has a term of 10 years and authorizes the issuance of up to 22,500,000 shares of the Company’s common stock. As of December 31, 2023,11,771,640 shares were remaining under the Stock Option Plan for the future issuance.

Options

As of December 31, 2023, options to purchase 10,728,360 shares of common stock were outstanding under the Stock Option Plan at a weighted average exercise price of $0.12 per share.

Compensation expense recorded in connection with the Stock Option Plan was $196,000, and $144,000 for the years ended December 31, 2023, and 2022, respectively. These amounts have been recognized as a component of general and administrative expenses in the accompanying condensed consolidated financial statements.

The following table presents the activity of the Company’s outstanding stock options of common stock for the year ended December 31, 2023:

During the years ended December 31, 2023 and 2022,90,000 and 100,000 common stock options were exercised with an aggregate intrinsic value of $10,000 and $44,000, respectively.

Summarized information with respect to options outstanding under the stock option plans at December 31, 2023, is as follows:

As of December 31, 2023, there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $503,000 to be recognized through July 2027.

The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of our stock price over the expected option term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates.

The following table provides the weighted average assumptions used in determining the fair value of the stock-based awards for the year ended December 31, 2023 and 2022:

The expected life is computed using the simplified method, which is the average of the vesting term and the contractual term. The expected volatility is based on an average of similar public company’s historical volatility, as the Company’s common stock is quoted in the over-the-counter market on the OTCQB Tier of the OTC Markets, Inc. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected term of the related option at the time of the grant.

Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased. The Company has elected to account for forfeitures as they occur.

NOTE 16 –FAIR VALUE MEASUREMENTS

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).

The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1: Valuation is based on unadjusted quoted prices in active markets for identical assets and liabilities that are accessible at the reporting date. Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Level 2: Valuation is determined from pricing inputs that are other than quoted prices in active markets that are either directly or indirectly observable as of the reporting date. Observable inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and interest rates and yield curves that are observable at commonly quoted intervals.

Level 3: Valuation is based on inputs that are both significant to the fair value measurement and unobservable. Level 3 inputs includes situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value generally require significant management judgment or estimation.

Fair Value Considerations

Financial instruments recognized in the consolidated balance sheets consist of cash, accounts receivable, other liabilities and accounts payable. The Company believes that the carrying value of its current financial instruments approximates their fair value due to the short-term nature of these instruments. The carrying value of the Centre Lane Senior Secured Credit Facility and the 10% Convertible Promissory Note approximates the fair value due to their nature and level of risk.

Assets Measured at Fair Value on a Nonrecurring Basis

The Company has certain non-financial assets that are measured at fair value on a non-recurring basis when there is an indicator of impairment, and they are recorded at fair value only when impairment is recognized. These assets include goodwill and intangible assets, net.

The below table shows the quantitative information for assets measured at fair value on a non-recurring basis:

Goodwill and Intangibles Assets

At September 30, 2023 and December 31, 2023 an impairment assessment was performed on goodwill and intangibles for Ad Network, Owned & Operating and Insights reporting units. We estimated the fair value of our reporting units utilizing an income approach (discounted cash flow method), which incorporated significant unobservable Level 3 inputs. The assessment indicated that the carrying value was in excess of its implied fair value, resulting in an impairment charge of $14.1 million and $2.9 million for goodwill and intangible assets, respectively.

During the year ended December 31, 2023, goodwill and intangibles acquired by the Company were $2.3 million and $16.2 million, respectively.

The fair value assigned to the acquired intangibles is based on a discounted flow analysis, in which the Company makes various assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s long-term projections. Assumptions used in the Company’s fair value calculations are consistent with the Company’s internal forecasts and operating plans. The Company’s discount rate is based on the Company’s debt structure, adjusted for current market conditions. Goodwill represents the residual value after the fair value of the intangibles were identified.

Centre Lane Senior Secured Credit Facility

The Company is required to perform an analysis of the change in each amendment to determine whether the change is a modification or an extinguishment of debt. Under a modification, no gain or loss is recorded, and a new effective interest rate is established based on the carrying value of the debt and revised cash flow. If the debt is extinguished, the old debt is derecognized and the new debt is recorded as fair value, which becomes the new carrying value.

Amendment seventeen was considered an extinguishment, the company utilize a third party valuation company to calculate the present value of the cash flows under the terms of the amendment and determine if it was considered substantially different by at least a 10% difference from the present value of the remaining cash flow of the original debt instrument.

NOTE 17 –COMMITMENTS AND CONTINGENCIES

Litigation

In accordance with applicable accounting guidance, the Company establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. In such cases, there may be exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency related to a litigation or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. When a loss contingency related to a litigation or regulatory matter is deemed to be both probable and estimable, the Company will establish an accrued liability with respect to such loss contingency and record a corresponding amount of litigation-related expense. The Company will then continue to monitor the matter for further developments that could affect the amount of any such accrued liability.

Ladenburg

On July 11, 2023, Ladenburg Thalmann & Co. Inc. (“Ladenburg”) filed an action against the Company for breach of contract in the United States District Court for the Southern District of Florida, Case No. 9:23-cv-81019-AMC. Ladenburg alleges that it entered into an Investment Banking Agreement (the “Agreement”) with the Company on September 1, 2020. According to Ladenburg, that Agreement provided that Ladenburg would be the exclusive investment advisor and banker for the Company. Ladenburg alleges that the Agreement entitles them to a fee for any financing transactions (debt financing or merger and acquisition transactions) that the Company engages in during the term of the contract. In April 2023, the Company informed Ladenburg of an impending Big Village Acquisition. Ladenburg now seeks $1.5 million plus interest, costs and attorneys’ fees and expenses as a result of that acquisition and debt financing, claiming that it is entitled to a fee. The Company disputes the allegations and disputes that Ladenburg is entitled to receive any fee since it did not perform any work pertaining to such acquisition. The outcome of this matter is not determinable as of the date of issuance of these financial statements.

Other Litigation

Other litigation is defined as smaller claims or litigation that are neither individually nor collectively material. It does not include lawsuits that relate to collections.

The Company is party to various other legal proceedings that arise in the ordinary course of business, separate from normal course accounts receivable collections matters. Due to the inherent difficulty of predicting the outcome of these litigations and other legal proceedings, the Company cannot predict the eventual outcome of these matters, and it is reasonably possible that some of them could be resolved unfavorably to the Company. As a result, it is possible that the Company’s results of operations or cash flows in a particular fiscal period could be materially affected by an unfavorable resolution of pending litigation or contingencies. The outcome is not determinable as of the issuance of these financial statements.

NOTE 18 - STOCKHOLDERS' DEFICIT

Preferred Stock

The Company has authorized 20,000,000 shares of preferred stock with a par value of $0.01 (the “Preferred Stock”), issuable in such series and with such designations, rights and preferences as the board of directors may determine. The Company’s board of directors has designated six series of preferred stock, consisting of:

1.10% Series A Convertible Preferred Stock (“Series A Stock”);

2.10% Series B Convertible Preferred Stock (“Series B Stock”);

3.10% Series C Convertible Preferred Stock (“Series C Stock”);

4.10% Series D Convertible Preferred Stock (“Series D Stock”);

5.10% Series E Convertible Preferred Stock (“Series E Stock”); and

6.10% Series F Convertible Preferred Stock (“Series F Stock”).

The designations, rights and preferences of the Series F-1, Series F-2 and Series F-3 are identical, other than the dividend rate, liquidation preference and date of automatic conversion into shares of our common stock. The Series F-1 pays dividends at the rate of 12% per annum and automatically converted into shares of our common stock on April 10, 2022. The Series F-2 pays dividends at the rate of 6% per annum and automatically converted into shares of our common on July 27, 2022. The Series F-3 pays dividends at the rate of 10% per annum and automatically converted into shares of our common stock on August 30, 2022. The Series E pays dividends at the rate of 10% per annum and automatically converted into shares of our common stock on November 21, 2022.

Additional terms of the designations, rights and preferences of the Series F-1, Series F-2 and Series F-3 include:

•the shares have no voting rights, except as may be provided under Florida law;

•the shares pay cash dividends subject to the provisions of Florida law at the dividend rates set forth above, payable monthly in arrears;

•the shares are convertible at any time at the option of the holder into shares of our common stock on a 1:1 basis. The conversion ratio is proportionally adjusted in the event of stock splits, recapitalization or similar corporate events. Any shares not previously converted will automatically convert into shares of our common stock on the dates set forth above;

•the shares rank junior to our 10% Series A Convertible Preferred Stock and our 10% Series E Convertible Preferred Stock;

•in the event of a liquidation or winding up of the Company, the shares have a liquidation preference of $0.50 per share for the Series F-1, $0.50 per share for the Series F-2 and $0.40 per share for the Series F-3; and

•the shares are not redeemable by the Company.

Other designations, rights and preferences of each of series of preferred stock are identical, including:

•shares do not have voting rights, except as may be permitted under Florida law;

•are convertible into shares of our common stock at the holder’s option on aone for one basis;

•are entitled to a liquidation preference equal to a return of the capital invested; and

•each share will automatically convert into shares of common stock five years from the date of issuance or upon a change in control.

Both the voluntary and automatic conversion formulas are subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events.

There wereno shares of preferred stock issued or outstanding at December 31, 2023, and 2022.

The Series E stock automatically converted into shares of our common stock on November 21, 2022, and 1,250 shares were transferred to common stock to satisfy this transaction.

Dividends for Series E Convertible Preferred Stock were $5,000, for the year ended December 31, 2022, There were no preferred stock dividends paid in the year ended December 31, 2023.

At December 31, 2023 and 2022, accrued unpaid preference dividend was $691,000. This amount is payable to the Company's Chairman, Mr. Kip Speyer and is included under other liabilities in the consolidated balance sheet at December 31, 2023.

Common Stock

Shares of Common Stock under the Stock Option Plan

On April 14, 2022, the Board and the Compensation Committee of the Board adopted and approved the 2022 Stock Option Plan. The Stock Option Plan has a term of 10 years and authorizes the issuance of up to 22,500,000 shares of the Company’s common stock. As of December 31, 2023,11,771,640 shares were remaining under the 2022 Plan for the future issuance.

Issue of Common Stock

During the year ended December 31, 2023, the Company issued 21,658,498 shares of our common stock for the following concepts (in thousands, except share data):

(A) -represents an adjustment to reconcile shares actually issued related to the Oceanside acquisition in 2019.

During the year ended December 31, 2022, the Company issued 634,253 shares of our common stock for the following concepts (in thousands, except share data):

Treasury Stocks

During the year ended December 31, 2021, three shareholders relinquished their Bright Mountain common stock shares. A total of 825,175 shares were acquired with a value of $220,000. The shares are being held as Treasury Stock by the Company.

Warrants

At December 31, 2023 and 2022, we had 21,362,066 and 35,998,316 common stock warrants outstanding to purchase shares of our common stock, respectively, with an exercise price ranging between $0.65 and $1.00 per share.

Approximately 14,636,250 common stock warrants expired during the year ended December 31, 2023, there wasno expiration for the year ended December 31, 2022.

A summary of the Company’s warrants outstanding as of December 31, 2023 and 2022 is presented below:

NOTE 19 –LOSS PER SHARE

As of December 31, 2023, and 2022, there were 172,103,134 and 150,444,636 shares of common stock issued, respectively, and 171,277,959 and 149,619,461 shares of common stock outstanding, respectively. Outstanding shares as of December 31, 2023, and 2022, have been adjusted to reflect 825,175 treasury shares.

Basic net loss per share is computed by dividing the net earnings attributable to common shareholders by the weighted average number of common shares outstanding during the period.

Diluted loss per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding, increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Conversion or exercise of the potential common shares is not reflected in diluted earnings per share unless the effect is dilutive. The dilutive effect, if any, of outstanding common share equivalents is reflected in diluted earnings per share by application of the treasury stock method, and if-converted method as applicable.

The following tables reconcile actual basic and diluted earnings per share for the years ended December 31, 2023, and 2022 (in thousands except shares and per share data).

The anti-dilutive securities excluded from the weighted-average shares used to calculate the diluted net loss per common share for the years ended December 31, 2023, and 2022 were as follows:

NOTE 20 –RELATED PARTY TRANSACTIONS

Centre Lane Partners

Centre Lane Partners, who sold the Wild Sky business to the Company in June 2020 has partnered and assisted the Company from a liquidity perspective during 2022 and through the year ended December 31, 2023.

Additionally, in connection with the Seventeenth Amendment, on December 31, 2023, the Company issued 21,401,993 shares of common stock of the Company to BV Agency, LLC, an entity beneficially owned by Centre Lane Partners.

This relationship has been determined to qualify as a related party, BV Agency, LLC and Centre Lane Partners own approximately 12.4% and 8.8% of the Company’s outstanding common stock, respectively.

A related party is a party that can exercise significant influence over the Company in making financial and/or operating decisions. Through December 31, 2023, the Company has entered into 19 amendments to the Credit Agreement between itself and Centre Lane Partners.

The total related party debt owed to Centre Lane Partners was $70.2 million and $33.1 million as of December 31, 2023 and 2022, respectively. See Note 10 - Centre Lane Senior Secured Credit Facility for details on this facility.

Convertible Promissory Note

As discussed in Note 11,10% Convertible Promissory Note, the note payable to the Chairman of the Board amounted to $80,000 as of December 31, 2023, and 2022, respectively. See Note 11,10% Convertible Promissory Note for further discussion on these notes payable.

Preferred Stocks

During the years ended December 31, 2023 and 2022, the Company paid cash dividends on the outstanding shares of the Company’s Series E and F Preferred Stock of $0 and $5,000, respectively, held by affiliates of the Company.

At December 31, 2023 and 2022, accrued unpaid preference dividend was $691,000. These amounts are payable to the Company's Chairman, Mr. Kip Speyer.

NOTE 21 –INCOME TAXES

The Company is subject to federal and various state income taxes in the United States as well as income taxes in various foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations.

On December 27, 2020, the Consolidations Appropriations Act, 2021 (“CAA” or the “Act”) was signed into law and included government appropriations and additional economic stimulus. Notable provisions of the CAA included changes to the PPP including legislation concluding that expenses used to obtain loan forgiveness are tax deductible.

The Company evaluated the various aspects of the Act and determined that it was eligible for the PPP. During the year ended December 31, 2021, the Company obtained two PPP loans for $296,000 and $842,000. These loans were forgiven in 2022. The Cancellation of Debt Income ("CODI") from these loans were deemed excludable from taxable income and therefore deducted as a permanent book tax difference during the year ended December 31, 2022.

The Company’s loss before income taxes consists of the following:

A reconciliation of the federal statutory income tax rate to the effective tax rate is as follows:

The tax effect of significant components of the Company’s deferred tax assets and liabilities at December 31, 2023, and 2022, are as follows:

As of December 31, 2023, the Company had U.S. federal net operating loss carryforwards of $74.3 million that expire at various dates from 2030 through 2038, and includes $64.0 million that have an unlimited carryforward period. As of December 31, 2023, the Company had state and local net operating loss carryforwards of $91.2 million that expire at various dates from 2030 through 2042, and includes $30.7 million that have an unlimited carryforward period. As of December 31, 2023, the Company had foreign net operating loss carryforwards of $4.6 million primarily in Israel that have an unlimited carryforward period.

The utilization of the Company’s net operating losses may be subject to a U.S. federal limitation due to the “change in ownership provisions” under Section 382 of the Internal Revenue Code and other similar limitations in various state jurisdictions. Such limitations may result in the expiration of net operating loss carryforwards before their utilization. The Company has not completed a study to assess whether an “ownership change” as defined in Section 382 has occurred or whether there have been multiple ownership changes since the Company’s inception. Future changes in the Company’s stock ownership, which may be outside of the Company’s control, may trigger an “ownership change.” In addition, future equity offerings or acquisitions that have equity as a component of the purchase price could result in an “ownership change.”

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Because of the historical earnings history of the Company and its foreign subsidiaries, the net deferred tax assets less deferred tax liabilities for 2023 were fully offset by the deferred tax liability and a 100% valuation allowance on the remaining balance. Based on all available evidence, management determined that it is more likely than not that the Company's net deferred tax assets will not be realized. As a result, the Company continues to maintain a full valuation against its net deferred tax assets. For the years ended December 31, 2023, and 2022, the change in the valuation allowance was an increase of approximately $5.2 million and an increase of approximately $2.6 million, respectively.

The Tax Cuts and Jobs Act (TCJA) resulted in significant changes to the treatment of research and developmental (R&D) expenditures under Section 174 of the IRC. For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&D expenditures that are paid or incurred in connection with their trade or business. Specifically, costs for U.S.-based R&D activities must be amortized over five years and costs for foreign R&D activities must be amortized over 15 years—both using a midyear convention. As of December 31, 2023, the Company capitalized a substantial amount of R&D expenditures primarily related to research and development activities performed in the U.S.

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which it operates or does business in. A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation, on the basis of the technical merits.

The Company records tax positions as liabilities and adjusts these liabilities when its judgement changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the recognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2023, and 2022, the Company has not recorded any liabilities for uncertain tax positions in its consolidated financial statements.

The Company records interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of December 31, 2023 and 2022, no accrued interest or penalties are recorded on the balance sheets, and the Company has not recorded any related expenses.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examinations by federal, foreign, and state and local jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years currently open under statute from 2018 to the present in the U.S. and from 2020 to present in the Company’s foreign operations. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state and local tax authorities to the extent utilized in a future period.

NOTE 22 –SUBSEQUENT EVENTS

Departure of Director

On January 18, 2024, Pamela J. Parizek, a director, notified the Company that she was resigning from the Board of Directors, effective immediately. At the time of her resignation, Ms. Parizek was the Chair of the Company's Audit Committee.