Bright Mountain Media Inc

To the Board of Directors and Stockholders of

Bright Mountain Media, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Bright Mountain Media, Inc. (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for each of the years ended December 31, 2023 and 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Bright Mountain Media, Inc. as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the period ended, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt Regarding the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to Bright Mountain Media, Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Bright Mountain Media, Inc. is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition – Refer to Note 2 and Note 14 to the consolidated financial statements

The Company derives revenue from three revenue streams which include (i) digital advertisements on its owned and operating publishing websites, as well as advertising on partner mobile apps and digital streaming services such as CTV (Connected Television) Channels in its customer agreements, (ii) providing creative and media services to customers, and (iii), consumer insights over time as the research, intelligence, and insight services are performed for the customer.

The Company recognizes the first revenue stream at a point in time when control of services is transferred to the customer. The Company recognizes the second revenue stream over time based on the signed contract terms which includes the service period. The Company recognizes the third revenue stream as a percentage of total budgeted project costs as the underlying project costs are incurred for signed contracts.

In determining revenue recognition for these customer agreements, the Company performs the following five steps: (i) identify the contract with customer (ii) identify the performance obligation 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 the Company satisfies a performance obligation.

We identified revenue recognition as a critical audit matter due to significant management estimates and judgments inherently required in determining revenue to be recognized. This in turn led to an especially high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the reasonableness of management’s significant estimates and assumptions surrounding revenue recognition.

Our principal audit procedures related the Company’s revenue recognition for these revenue streams included the following:

•Digital Advertising

▪Obtained and read a sample of contract source documents for each selection as well as amendments thereto.

▪We obtained an understanding of the performance obligations associated with the Company’s revenue contracts, such as number of ads displayed, consumer clicks on the ads, or consumer actions that were required by the contract.

▪We tested the transaction price within the contract, which was represented by the amount of impressions that must be delivered by the Company.

▪We obtained the amount of impressions delivered by the Company to the customer from the third-party ad server data to test the appropriateness of recognized revenue with the terms of the contract.

•Creative and Media Services

▪Obtained and read the contract source documents for each selection as well as amendments thereto.

▪We obtained an understanding of the performance obligations associated with the Company’s revenue contracts.

▪We tested the transaction price within the contract, which was represented by the total value for creative and media services that must be delivered by the Company.

▪We tested the appropriateness of recognized revenue with the terms of the contract.

•Consumer Insights

▪Obtained and read the contract source documents for each selection as well as amendments thereto.

▪We obtained an understanding of the performance obligations associated with the Company’s revenue contracts.

▪We tested the transaction price within the contract, which was represented by the total value for consumer insights that must be delivered by the Company.

▪We tested the appropriateness of recognized revenue with the terms of the contract by evaluating the underlying budgeted costs and actual costs that drive the percent of the total contract value recognized during the year.

Valuation of Intangible Assets and Goodwill - Refer to Notes 2, 6, and 7 to the consolidated financial statements

As reflected in the Company’s consolidated financial statements at December 31, 2023 the Company’s intangible assets and goodwill was approximately $15 million and $7.8 million, respectively. As disclosed in Note 2 to the consolidated financial statements, the Company tests goodwill 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 the 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, the Company performs 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 the Company 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 the Company’s long-term projections. Assumptions used in the Company’s impairment testing 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. 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 intangible assets and goodwill would be necessary.

We identified the evaluation of the Company's impairment test of goodwill and intangible assets as a critical audit matter due to significant management estimates and judgements inherently required in determining the fair value of estimates. This in turn led to a high degree of auditor judgement, subjectivity, and effort in performing procedures to evaluate the reasonableness of management's significant estimates and assumptions, several of which extend many years into the future. Additionally, the audit effort involved the use of professionals with specialized skill and knowledge.

We read and evaluated the impairment analysis summary report, prepared by the Company's external valuation specialists that assessed the fair value of the Company's goodwill as of December 31, 2023. We performed a walk-through of the design effectiveness and implementation of internal controls related to financial reporting of the goodwill. Additional procedures included testing management's process for developing their impairment estimate, which included evaluating the appropriateness of the method used by the Company to develop cash flow projections for goodwill, as well as testing the completeness and accuracy of the underlying data used in the estimates. In addition, we evaluated the reasonableness of significant assumptions including future sales, long-term growth rates, and future economic conditions and performed sensitivity testing on some assumptions. We evaluated these assumptions for their reasonableness considering (i) historical performance; (ii) industry and economic forecast and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

•We utilized the knowledge, experience, and expertise of our internal valuation specialists to execute the planned valuation procedures related to the valuation by assessing the reasonableness of the methodologies employed to value the goodwill.

•We tested the underlying assumptions presented in the impairment assessment as it relates to projections

Accounting and Valuation for Debt Modifications and Extinguishment - Refer to Note 10 to the consolidated financial statements

During the year ended December 31, 2023, the Company entered into various amendments to the credit facility for additional loans used for working capital. Part of the amendments include fees that would be added and capitalized into the principal amount of the original loan. 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.

We identified the evaluation of the Company’s accounting for debt modifications as a critical audit matter due to significant complex calculations inherently required in determining proper accounting treatment. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the reasonableness of management’s assumptions and calculations. Additionally, the audit effort involved the use of professionals with specialized skill and knowledge.

We read and evaluated the debt modification and extinguishment analysis report, prepared by the Company's external valuation specialist that assessed each amendment to the credit agreement. There were a total of 4 amendments that were executed during the year. For each amendment, the external valuation specialist calculated 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. We performed a walk-through of the design effectiveness and implementation of internal controls related to financial reporting of the debt cycle.

•We agreed data from the authorized amendments to the analysis performed by the external valuation specialist.

•We tested the external valuation analysis for clerical accuracy and completeness.

•We utilized the knowledge, experience, and expertise of our internal valuation specialists to assess the reasonableness of the methodologies employed to value the calculate the present values of the debt instrument under the amended terms and original terms.

•We independently performed a calculation of the present value of the debt instrument under the new terms from the amendment and the original terms of the debt instrument to evaluate whether the external valuation specialist’s conclusion were reasonable and consistent with our conclusion.

Business Combination - Refer to Note 13 to the consolidated financial statements

As reflected in the Company’s consolidated financial statements at December 31, 2023, the Company completed a business combination on April 20, 2023, for approximately $20.0 million. As disclosed in Note 13 to the consolidated financial statements, the Company allocated the purchase price to acquired assets and liabilities, including intangibles and the residual value being assigned to goodwill.

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.

We identified the evaluation of the Company's fair value valuation of acquired intangibles and residual goodwill as a critical audit matter due to significant management estimates and judgements inherently required in determining the fair value estimates. This in turn led to a high degree of auditor judgement, subjectivity, and effort in performing procedures to evaluate the reasonableness of management's significant estimates and assumptions, several of which extend many years into the future. Additionally, the audit effort involved the use of professionals with specialized skill and knowledge.

We identified the evaluation of the fair value measurement of the acquired Trade Name, Customer Relationships, and Developed Technology as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate certain key assumptions used to estimate the acquisition-date fair value of the acquired intangible assets. Specifically, the key assumptions for certain intangible assets, including revenue growth rates and the discount rate, represented subjective determinations of future market and economic conditions. Changes to those assumptions could have had a significant effect on the determination of the fair value measurements.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the development of the key assumptions for certain tangible and intangible assets. We performed sensitivity analyses over the key assumptions for revenue growth rates to assess the impact of changes in those key assumptions on the Company’s determination of the fair value of the intangible assets, respectively. We evaluated the reasonableness of the Company’s forecasted revenue growth rates by comparing them to historical results for comparable products and peer companies, analyst expectations, and industry related third-party data. We evaluated the data sources used by management in determining the key assumptions for the intangible assets by comparing to industry standards and evidence obtained in other areas of the audit. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

(1) evaluating the discount rates used by the Company for the intangible assets by comparing them against discount rate ranges that were independently developed using publicly available market data for comparable entities

(2) testing the source information underlying the determination of the discount rates

•We evaluated management's assessment that the acquisition accurately represented a business combination and properly identified the accounting acquirer of the underlying transaction

•We utilized the knowledge, experience, and expertise of our internal valuation specialists to execute the planned valuation procedures related to the valuation by assessing the reasonableness of the methodologies employed to value the intangibles and goodwill.

•We tested the underlying assumptions presented in the business combination as it relates to projections

/s/WithumSmith+Brown, PC

We have served as the Company's auditor since 2021.

East Brunswick, New Jersey

April 1, 2024

PCAOB ID Number 100