Bright Mountain Media, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our consolidated financial condition and results of operations for the years ended December 31, 2024, and 2023 should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this Annual Report on Form 10-K. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the "Risk Factors," "Cautionary Notice Regarding Forward-Looking Statements" and "Business" sections in this annual report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could” and similar expressions to identify forward-looking statements. Overview Organization and Nature of Operations Bright Mountain Media, Inc. is an end-to-end marketing services company that helps brands with the right audiences, at the right time, with the right message, both effectively and efficiently by removing the middlemen in the marketing workflow. Our end-to-end offerings combine consumer insights with creative services, media services, and advertising technology to deliver solutions to improve audience fidelity for brands. We focus on digital publishing, advertising technology, consumer insights, creative services, and media services. Digital Publishing 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. Advertising Technology 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. Consumer Insights Our consumer insights division focuses on providing primary and secondary research and competitive intelligence 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. Creative Services 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. 30 Table of Contents Media Services 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 aims to ensure 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 a valuable partner in the success of our clients' advertising and marketing endeavors. The Company generates revenue through: • the selling of advertisements placed on our owned and managed sites and on partner websites where we earn a share of the revenue; • fees for 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; • 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; and • provision of creative and media services to advertisers. Recent 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. 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. During 2024, we terminated the operation of Wild Sky Media Co Ltd., located in Thailand, and all employees were terminated. At December 31, 2024, these three entities have not yet been dissolved. During 2024, the Company's consumer insights division maintained a business line which connected clients to individuals with expertise across a multitude of disciplines for consulting on particular projects for those clients. In March of 2024, the consumer insights division stopped offering those expert broker services and sold the assets related to its expert broker business to a third party. In June of 2024, W. Kip Speyer retired from his position as Chairman of the Board, and Harry Schulman resigned from his position as a member of the Board. In August of 2024, the Board of Directors of the Company appointed Ms. Elaine Riddell, Mr. Joseph T. Pergola, and Mr. Thomas A. Triscari as directors of the Company, effective August 8, 2024. On November 27, 2024, a judgment was entered against the Company granting damages of $1.7 million in connection with the Ladenburg litigation described in Item 3. On December 26, 2024, the Company and its subsidiaries entered into the Twenty-First Amendment to the Credit Agreement for the purpose of securing a bond to stay execution of the judgment. The Company obtained the bond and a stay of execution of the judgment was granted on February 3, 2025. The Company currently plans to appeal the judgment. Key Factors Affecting Our Performance Seasonal Fluctuations . Typically advertising technology companies report a material portion of their revenues during the third and fourth calendar quarter as a result of back-to-school and holiday-related advertising spend. We continue to experience this trend in our advertising technology division. Because of seasonal fluctuations, there can be no assurance that the results of any quarter or full year will be indicative of results for future years or quarters. Limited Number of Customers . For the year ended December 31, 2024, one customer represented 12.2% of our revenue, and for the year ended December 31, 2023, two customers represented 13.0% and 10.0% of our revenue, respectively. The loss of either of these customers could have a material adverse impact on our results of operations in future periods. 31 Table of Contents Managing Industry Dynamics . We operate in the rapidly evolving digital advertising industry. Advances in programmatic advertising technologies, and the efficient and automated method of purchasing ads online, has enabled publishers to auction their ad inventory to more buyers simultaneously, in real time. As advertisers stay ahead of evolving trends in consumer engagement with digital media, an expansive opportunity for innovation emerges. Our commitment to understanding customer needs empowers us, and our continuous pursuit of innovation enables swift adaptation to industry shifts. This approach not only facilitates the development of cutting-edge solutions, but also does so in a cost-effective manner. As regulatory concerns accelerate the impact on existing industry standards, companies are actively seeking new methods to finely tailor their messages to target audiences. Tech companies will be limited in how they monetize personal information for advertising purposes. This trend is exemplified by two imminent developments: (1) the anticipated erosion of Google's third-party cookies and (2) the data security measures integrated into Apple iPhones. Consequently, companies must explore innovative methods to better understand their target audiences and have the tools to effectively engage with them. Key Operating and Financial Metrics We monitor the following key financial and operational metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. The following are the key financial and operational metrics for the years ended December 31, 2024, and 2023: Year Ended December 31, 2024 December 31, 2023 (in thousands) Revenue $ 56,681 $ 44,546 Cost of revenue 40,221 31,766 Gross margin 16,460 12,780 General and administrative expenses 21,378 22,522 Impairment of goodwill and intangibles - 17,070 Financing and other expense, net (12,106 ) (8,752 ) Net loss $ (17,024 ) $ (35,564 ) Adjusted EBITDA (loss) (1) $ 790 $ (3,932 ) (1) For a reconciliation of net loss to Adjusted EBITDA see “Use of Non-GAAP Financial Measures” below. Revenue The Company generates revenue through: • the selling of advertisements placed on our owned and managed sites and on partner websites where we earn a share of the revenue; • fees for 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; • 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; and • provision of creative and media services to advertisers. Revenue increased approximately $12.1 million, or 27%, for the year ended December 31, 2024 when compared to the same period in 2023. See below for a detailed analysis of revenue for the years ended December 31, 2024, and 2023. Cost of Revenue 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. 32 Table of Contents Cost of revenue increased approximately $8.4 million, or 27%, for the year ended December 31, 2024 compared to 2023. See below for a detailed analysis of cost of revenue for the years ended December 31, 2024, and 2023. General and Administrative Expenses General and administrative expenses consist primarily of (i) personnel and related costs for our executive, finance and accounting, human resources, and, administrative personnel, including salaries, benefits, bonuses, and stock-based compensation; (ii) legal, accounting and other professional service fees; (iii) other corporate expenses; (iv) information technology costs; and (v) facility costs. General and administrative expenses decreased approximately $1.1 million, or 5%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. See below for a detailed analysis of general and administrative expenses for the years ended December 31, 2024 and 2023. Impairment of goodwill and intangibles Impairment of goodwill and intangibles decreased approximately $17.1 million, or 100%, for the for the year ended December 31, 2024 compared to 2023. Results of Operations The following is our analysis of the results of operations for the years ended December 31, 2024, and 2023. This analysis should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this Annual Report on Form 10-K. Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Net loss from operations for the year ended December 31, 2024 was $17.0 million as compared to a net loss of $35.6 million for the year ended December 31, 2023. The following is our analysis for the period. Year Ended December 31, 2024 December 31, 2023 Change (in thousands) Revenue $ 56,681 $ 44,546 $ 12,135 27 % Cost of revenue 40,221 31,766 8,455 27 % Gross margin 16,460 12,780 3,680 29 % General and administrative expenses 21,378 22,522 (1,144 ) -5 % Impairment of goodwill and intangibles — 17,070 (17,070 ) -100 % Loss from operations (4,918 ) (26,812 ) 21,894 -82 % Financing and other expense, net (12,106 ) (8,752 ) (3,354 ) -38 % Net loss $ (17,024 ) $ (35,564 ) $ 18,540 -52 % Gross margin percentage 29 % 29 % 0 % 33 Table of Contents Revenue Our revenue increased by $12.1 million, or 27%, for the year ended December 31, 2024, compared to the same period in 2023. For the year ended December 31, 2024, revenue includes $36.5 million, which represents the impact of the Big Village Acquisition, completed in April 2023. This compares to $31.0 million for the same period in 2023. The Company focuses on digital publishing, advertising technology, consumer insights, creative services, and media services. Changes in revenue generated by each such division are set forth below: Year Ended December 31, 2024 December 31, 2023 Change (in thousands) Digital publishing $ 1,733 $ 4,130 $ (2,397 ) -58 % Advertising technology 18,449 9,463 8,986 95 % Consumer insights 26,572 23,868 2,704 11 % Creative services 7,505 5,130 2,375 46 % Media services 2,422 1,955 467 24 % $ 56,681 $ 44,546 $ 12,135 27 % Digital Publishing Digital publishing revenue decreased by $2.4 million, or 58%, for the year ended December 31, 2024 compared to the same period of 2023. Approximately $1.7 million, or 3%, of the Company’s revenue for the year ended December 31, 2024 was generated from our digital publishing customers compared to $4.1 million, or 9%, for the same period in 2023. This division was significantly impacted by macroeconomic factors, which reduced traffic to our website, coupled with an overall reduction in spending by some customers related to inflationary concerns and reduction in website traffic. Advertising Technology Advertising technology revenue increased by $9.0 million, or 95%, for the year ended December 31, 2024 compared to the same period of 2023. Approximately $18.4 million, or 33%, of the Company’s revenue for the year ended December 31, 2024 was generated from our advertising technology customers compared to $9.5 million, or 21%, for the same period in 2023. This growth was driven by our ability to leverage our resources to attract top advertisers, which in turn has allowed us to onboard premium publishers. This led to an increase in volume, as well as rates and overall revenue. Consumer Insights Consumer insights revenue increased by $3.2 million, or 13%, for the year ended December 31, 2024 compared to the same period in 2023 and represented approximately 48% of the Company’s revenue for the year ended December 31, 2024. As discussed above, the Big Village Acquisition was completed in April 2023, and is the main driver of the increase in consumer insights revenue for the year ended December 31, 2024. Creative Services Creative services revenue increased by $1.9 million, or 38%, for the year ended December 31, 2024 compared to the same period in 2023, and represented approximately 13% of the Company’s revenue for the year ended December 31, 2024. As discussed above, the Big Village Acquisition was completed in April 2023, and is the main driver of the increase in creative services revenue for the year ended December 31, 2024. Media Services Media services revenue increased by $467,000, or 24%, for the year ended December 31, 2024 compared to the same period in 2023, and represented approximately 4% of the Company’s revenue for the year ended December 31, 2024. 34 Table of Contents Cost of Revenue Year Ended December 31, 2024 December 31, 2023 Change (in thousands) Direct salaries and labor costs $ 7,557 $ 7,355 $ 202 3 % Direct project costs 11,723 10,246 1,477 14 % Non-direct project costs 6,617 6,371 246 4 % Publisher costs 12,384 5,877 6,507 111 % Content creation 699 1,078 (379 ) -35 % Sales commissions 1,152 764 388 51 % Other 89 75 14 19 % $ 40,221 $ 31,766 $ 8,455 27 % Cost of revenue increased $8.4 million, or 27%, for the year ended December 31, 2024, compared to the same period of 2023. For the year ended December 31, 2024, cost of revenue includes $25.9 million, or 64% from the impact of the Big Village Acquisition, which was completed in April 2023. This compares to $24.0 million, or 75% for the same period in 2023. Direct Salaries and Labor Cost Direct salaries and labor cost increased $202,000, or 3% for the year ended December 31, 2024 when compared to the same period in 2023. Approximately $7.6 million, or 19%, of the Company's cost of revenue for the year ended December 31, 2024 was a result of direct salaries and labor cost, compared to $7.4 million, or 23% for the same period in 2023. These costs represent salary and labor cost of employees that work directly on customer projects for our consumer insights, creative services, and media services divisions. Direct Project Cost Direct project cost increased $1.5 million, or 14% for the year ended December 31, 2024 when compared to the same period in 2023. Approximately $11.7 million, or 29%, of the Company's cost of revenue for the year ended December 31, 2024, was a result of direct project cost compared to $10.2 million, or 32%, for the same period in 2023. As discussed above, the Big Village Acquisition, which was completed in April 2023, is the main driver of the increase in direct project cost for the year ended December 31, 2024. These costs include payments made to third-parties that are directly attributable to the completion of projects that allow for revenue recognition for our consumer insights, creative services, and media services divisions. Non-Direct Project Cost Non-direct project cost increased $246,000, or 4%, for the year ended December 31, 2024, when compared to the same period in 2023. Approximately $6.6 million, or 16%, of the Company's cost of revenue for the year ended December 31, 2024, was a result of non-direct project cost compared to $6.4 million, or 20%, for the same period in 2023. These costs represent overall client service costs that are not specifically related to a particular project. Publisher Cost Publisher cost was $12.4 million, which represents 31% of overall cost of revenue, and $5.9 million, or 18%, of overall cost of revenue for the years ended December 31, 2024 and 2023, respectively. We experienced an increase of $6.5 million, or 111%, for the year ended December 31, 2024 compared to the same period in 2023. This increase is consistent with the increase noted in revenue for our advertising technology division. These costs represent payments to media providers and website publishers which drive revenue for our advertising technology division. Gross Margin Gross margin was $16.5 million, and $12.8 million for the years December 31, 2024 and 2023. Our gross margin increased $3.7 million or 29% for the year ended December 31, 2024, when compared to the same period for 2023. Gross margin as a percentage of revenue remained consistent at 29% for both years ended December 31, 2024 and 2023. 35 Table of Contents General and Administrative Expenses Year Ended December 31, 2024 December 31, 2023 Change (in thousands) Personnel costs $ 8,750 $ 10,024 $ (1,274 ) -13 % Legal fees 2,618 981 1,637 167 % Professional fees 3,568 4,750 (1,182 ) -25 % Insurance 775 1,014 (239 ) -24 % Depreciation 127 125 2 2 % Amortization 1,924 2,490 (566 ) -23 % Website expenses 1,183 1,193 (10 ) -1 % Data processing 1,408 899 509 57 % Other 1,025 1,046 (21 ) -2 % $ 21,378 $ 22,522 $ (1,144 ) -5 % Gross margin as a percentage of general and administrative expense 77 % 57 % 20 % General and administrative expenses decreased $1.1 million, or 5%, for the year ended December 31, 2024, compared to the same period in 2023. The decrease is due to a combination of factors as discussed below. Personnel Cost Personnel cost decreased by approximately $1.3 million, or 13%, for the year ended December 31, 2024 compared to the same period in 2023. The Company reduced its headcount in 2024 by 71 employees, including 28 employees that were terminated as a reduction in force. The Company incurred severance cost of approximately $250,000 in connection with this reduction. The Company incurred severance cost of approximately $389,000 associated with a headcount reduction during the same period for 2023. We had 119 total employees as of December 31, 2024, compared to 190 total employees as of December 31, 2023. Legal Fees Legal fees increased by $1.6 million, or 167%, for the year ended December 31, 2024, compared to the same period in 2023. This increase is due largely to payments made as part of the ongoing litigation with Ladenburg. For a full description of litigation matters, see Note 17, "Commitments and Contingencies," to the consolidated financial statements. Professional Fees Professional fees decreased by $1.2 million, or 25%, during the year ended December 31, 2024, when compared to the same period in 2023. Approximately $1.5 million of overall professional fees during 2023 represented costs associated with the Big Village Acquisition that were one-time in nature, and were not repeated during the current year. Data Processing Data processing costs increased by $509,000, or 57%, during the year ended December 31, 2024, when compared to the same period in 2023. As discussed above, the Big Village Acquisition was completed in April 2023, and contributed to data processing for nine months of the prior period and for the full twelve months of the current period, and is the main driver of the increase in data processing for the year ended December 31, 2024. Impairment of Goodwill and Intangibles During the year ended December 31, 2023, the Company performed an impairment assessment on goodwill and intangibles for the Ad Network, Owned & Operated, and Insights reporting units. The assessment indicated that the carrying value was in excess of its implied fair value for the Ad Network and Owned & Operated reporting units, resulting in an impairment charge of $14.1 million and $2.9 million for goodwill and intangibles, respectively. There was no such charge for the same period in 2024, after performing an impairment assessment on goodwill and intangibles for the Ad Network, Owned & Operated, and Insights reporting units. See Note 6, "Intangible Assets, Net", and Note 7, "Goodwill", to the consolidated financial statements. 36 Table of Contents Financing Expense (Income) Year Ended December 31, 2024 December 31, 2023 Change (in thousands) Interest expense $ 12,653 $ 9,189 $ 3,464 38 % Other expense (income) (547 ) (437 ) (110 ) 25 % Total financing and other expense, net $ 12,106 $ 8,752 $ 3,354 38 % Financing expense increased $3.4 million, or 38%, for the year ended December 31, 2024, compared to the same period in 2023. This increase was largely attributable to a $3.5 million increase in interest expense related to the Centre Lane Senior Secured Credit Facility, which reflected higher principal and fees as a result of amendments to the Centre Lane Senior Secured Credit Facility during the year ended December 31, 2024. Liquidity and Capital Resources Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. The following table summarizes total current assets, total current liabilities and net working capital (deficit) as of December 31, 2024 as compared to December 31, 2023. December 31, 2024 December 31, 2023 (in thousands) Total current assets $ 20,299 $ 19,737 Total current liabilities 33,780 30,802 Net working capital (deficit) $ (13,481 ) $ (11,065 ) As of December 31, 2024, we had a cash balance of $2.5 million and a restricted balance of $1.9 million, compared with a cash balance of $4.0 million as of December 31, 2023. The Company’s liquidity needs, and a discussion of how it intends to meet those needs, is discussed below. See –“Going Concern.” During the year ended December 31, 2024 and 2023, the Company received $1.9 million and $8.6 million, respectively, in debt financing from the Centre Lane Senior Secured Credit Facility. We used these funds to secure a bond in connection with our appeal of the Ladenburg litigation during 2024, and to fund the Big Village Acquisition in 2023. Going Concern Historically, the Company has incurred losses, which has resulted in an accumulated deficit of approximately $166.9 million as of December 31, 2024. Cash flows provided by (used in) operating activities were $1.9 million and $(4.7) million for the years ended December 31, 2024, and 2023, respectively. As of December 31, 2024, the Company had a working capital deficit of approximately $13.5 million, inclusive of $2.5 million in cash and cash equivalents and $1.9 million in restricted cash. 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. During the next year, we anticipate that we will need approximately $3.9 million to meet our contractual obligations in addition to amounts needed for our working capital needs. 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 markets is also dependent upon the volume and market price of the Company's stock, which cannot be assured. Other measures include reducing or delaying certain business activities, or reducing general and administrative expenses, including a reduction in headcount. The ultimate success of these plans is not guaranteed. 37 Table of Contents 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 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. Financing Arrangement Summary Centre Lane Senior Secured Credit Facility On June 5, 2020, the Company and its subsidiaries entered into to the Amended and Restated Senior Secured Credit Agreement between themselves, the lenders party thereto (the "Lenders") and Centre Lane Partners Master Credit Fund II, L.P., as Administrative Agent and Collateral Agent (“Centre Lane Partners”), as amended (the “Credit Agreement”). The Credit Agreement has been amended numerous times to change the terms, including the amounts outstanding, the interest rate, the maturity date and other payment terms. In connection with the Twentieth Amendment, adjustments were made to the interest rate for outstanding loans as follows: • Changing the last out term loan PIK rate to the SOFR plus 7% until December 31, 2024, and to the SOFR plus 2% (previously 5%) thereafter; • Conversion of interest payable on the Seventeenth Amendment loans from April 2024 until June 30, 2025 from a combination of cash and PIK to solely PIK at the rate of 15%, with an option to maintain such terms after June 30, 2025 in exchange for an additional 2% PIK fee or transition to payments made 10% PIK and 5% in cash; • Extending the due date for the 5% exit fee with respect to the Nineteenth Amendment to December 31, 2024. On December 26, 2024, the Company, the Lenders, and Centre Lane Partners entered into the Twenty-First Amendment to the Credit Agreement, pursuant to which the Company borrowed an additional approximately $1.9 million from the Lenders (“Twenty-First Amendment Loan Amounts”). Interest incurred on the Twenty-First Amendment Loan Amounts will be payable in a combination of cash and payments in kind. Interest to be paid in cash will accrue at (i) a rate of 0% per annum from the date the Twenty-First Amendment Loan Amounts are funded until June 30, 2025 and (ii) a rate of 5% per annum thereafter; provided, however, if prior to June 30, 2025, the Company informs Centre Lane Partners that it will pay the PIK Fee (as defined below) to the Lenders, then the interest rate will remain 0% per annum. Interest to be paid in kind will accrue at (x) a rate of 15% per annum from the date the Twenty-First Amendment Loan Amounts are funded until June 30, 2025 and (y) a rate of 10% per annum thereafter; provided, however, if prior to June 30, 2025, the Company informs Centre Lane Partners that it will pay the PIK Fee to the Lenders, then the interest rate will remain 15% per annum. For purposes of the foregoing, the “PIK Fee” shall mean an amount equal to 2% of the Twenty-First Amendment Loan Amounts outstanding payable in kind. The outstanding principal owed to Centre Lane Partners was $78.8 million and $70.2 million as of December 31, 2024 and December 31, 2023, respectively. Of the amount outstanding at December 31, 2024, approximately $3.8 million is due by December 31, 2025. The balance of $75.0 million is due in 2026. The First Out Loans and the Last Out Loans have a maturity date of April 20, 2026; the Twenty-First Amendment Loan Amounts have a maturity date of the earlier of (i) the date upon which certain litigation is resolved and results in the Company being obligated to pay a certain amount in connection with such litigation and (ii) April 20, 2026; and the Nineteenth Amendment Term Loans had a maturity date of December 31, 2024, in which the loan balance was repaid. The amount due under the Credit Agreement bears interest at 7.0% per annum plus the Secured Overnight Financing Rate ("SOFR"). At December 31, 2024, the SOFR was 4.71%, thus the overall interest rate on this facility was 11.71% per annum at December 31, 2024. For a full description of the Centre Lane Senior Secured Credit Facility, see Note 10, "Centre Lane Senior Secured Credit Facility," to the consolidated financial statements. 38 Table of Contents Summary of Cash Flows The following table summarizes cash flow activities during the years ended December 31, 2024, and 2023: Year Ended December 31, (in thousands) 2024 2023 Cash flow provided by (used in) operating activities $ 1,878 $ (4,658 ) Cash flow used in investing activities (110 ) (14 ) Cash flow (used in) provided by financing activities (1,361 ) 8,353 Net increase in cash and cash equivalents, net of impact of exchange rates $ 406 $ 3,685 Operating Activities Our largest source of operating cash is cash collections from customers from revenue. Our primary uses of our operating cash, are for cost of revenue expenses, personnel-related expenditures and other general administrative expenses. For the year ended December 31, 2024, cash provided by operating activities was $1.9 million. The primary factors affecting our operating cash flows during the period were our net loss of $17.0 million, adjusted for non-cash charges of $1.9 million for amortization of intangible assets, $2.7 million of amortization of debt discount, $9.4 million in interest paid in kind on the Centre Lane Senior Secured Credit Facility, $254,000 for stock option compensation expense, and a $4.4 million net change in operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities were a $1.7 million decrease in deferred revenue, a $369,000 decrease in accounts receivable, a $198,000 decrease in prepaid expenses and other current assets, a $5.2 million increase in accounts payable and accrued expenses, and a $1.2 million increase in other liabilities. For the year ended December 31, 2023, cash used in operating activities was $4.7 million. The primary factors affecting our operating cash flows during the period were our net loss of $35.6 million, adjusted for non-cash charges of $2.5 million for amortization of intangible assets, $2.1 million of amortization of debt discount, $17.1 million impairment of goodwill and intangibles, $6.7 million in interest paid in kind on the Centre Lane Senior Secured Credit Facility, $58,000 for the allowance of expected credit losses, $196,000 for stock option compensation expense, and a $2.1 million net change in operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities were a $1.3 million increase in accounts receivables, a $735,000 decrease in accounts payable and accrued expenses, a decrease in other liabilities of $472,000, a decrease in prepaid expenses and other current assets of $360,000, and a $701,000 decrease in deferred revenue. Investing Activities Cash used in investing activities of $110,000 and $14,000 for the years ended December 31, 2024 and 2023, respectively, was related to $14,000 used for the purchase of property and equipment in both 2023 and 2024, and $96,000 used for website enhancement during the year ended December 31, 2024. Financing Activities During the year ended December 31, 2024, the Company used cash of $1.4 million in financing activities, which is largely attributable to repayment of principal on the Centre Lane Senior Secured Credit Facility of $3.1 million, partially offset by the draw of $1.9 million on the Centre Lane Senior Secured Credit Facility that we used to secure a bond in connection with our appeal of the Ladenburg litigation. During the year ended December 31, 2023, the Company drew $8.4 million of debt financing from the Centre Lane Senior Secured Credit Facility, which was primarily used to fund our working capital needs. 39 Table of Contents Contractual Obligations and Commitments The following table represents our contractual obligations as of December 31, 2024, aggregated by type: Total Due in less than 1 year Due 1-3 years Due 3-5 years More than 5 years ($ in thousands) Operating lease $ 252 $ 79 $ 173 $ - $ - Finance lease 42 22 20 - - Centre Lane Senior Secured Credit Facility 78,822 3,808 75,014 - - Interest payable - Centre Lane Senior Secured Credit Facility 21 21 - - - $ 79,137 $ 3,930 $ 75,207 $ - $ - The Company’s liquidity needs, and a discussion of how it intends to meet those needs, is discussed above. See –“Going Concern.” Use of Non-GAAP Financial Measures Non-GAAP results are presented only as a supplement to the financial statements and for use within management's discussion and analysis based on U.S. generally accepted accounting principles ("GAAP"). The non-GAAP financial information is provided to enhance the reader's understanding of the Company's financial performance, but non-GAAP measures should not be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. All of the items included in the reconciliation from net loss before taxes to EBITDA and from EBITDA to Adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles, stock-based compensation, etc.) or (ii) items that management does not consider to be useful in assessing the Company's ongoing operating performance (e.g., M&A costs, income taxes, gain on sale of investments, loss on disposal of assets, etc.). In the case of the non-cash items, management believes that investors can better assess the Company's operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect the Company's ability to generate free cash flow or invest in its business. We use, and we believe investors benefit from the presentation of, EBITDA and Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Because not all companies use identical calculations, the Company's presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the Company's performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures. 40 Table of Contents A reconciliation of net loss before taxes to non-GAAP EBITDA and Adjusted EBITDA is as follows: Year Ended December 31, 2024 December 31, 2023 (in thousands) Net loss before tax $ (17,024 ) $ (35,564 ) Depreciation expense 127 125 Amortization of intangibles 1,924 2,490 Impairment of goodwill and intangibles - 17,070 Amortization of debt discount 2,697 2,074 Other interest expense 39 27 Interest expense - Centre Lane Senior Secured Credit Facility and Convertible Promissory Notes 9,917 7,088 EBITDA (2,320 ) (6,690 ) Stock compensation expense 254 196 Non-recurring professional fees 390 1,462 Non-recurring legal fees 2,216 711 Non-recurring severance expense 250 389 Adjusted EBITDA (loss) $ 790 $ (3,932 ) Critical Accounting Policies Critical Accounting Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions. Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements, describes the significant accounting policies used in preparation of the consolidated financial statements. Management believes the most complex and sensitive judgments, because of their significance to the consolidated financial statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. The most significant areas involving management judgments and estimates are described below. Actual results in these areas could differ from management's estimates. 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. 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. 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. 41 Table of Contents 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. See Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements. Goodwill We have generated goodwill as a result of our acquisitions. At the time of acquisition, we account for business acquisitions using the purchase method of accounting, in accordance with which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. The fair value of the consideration paid, including contingent consideration, is assigned to the assets acquired and liabilities assumed based on their respective fair values. Goodwill represents the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed. We review our goodwill for impairment on an annual basis at September 30 or more frequently if events or a change in circumstances indicates that the carrying amount may not be recoverable. We test goodwill for impairment at a level within the Company referred to as a reporting unit. We have determined that there are three reporting units: “Owned & Operated”, “Ad Network” and “Insights”. In accordance with FASB Accounting Standards Codification No. 350, Goodwill and Other, (ASC 350) , we initially perform a qualitative assessment (commonly known as "step zero") to determine whether further impairment testing is necessary before performing the two-step test. The qualitative assessment requires judgment by management about economic conditions including the entity's operating environment, its industry and other market considerations, entity-specific events related to financial performance or loss of key personnel and other events that could impact the reporting unit. If management concludes, based on assessment of relevant events, facts, and circumstances, that it is more likely than not that a reporting unit's fair value is greater than its carrying value, no further impairment testing is required. If we determine, based on this assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying value, we perform a quantitative goodwill impairment test by comparing the reporting unit's fair value with its carrying value. An impairment loss is recognized for the amount by which the reporting unit's carrying value exceeds its fair value, up to the total amount of goodwill allocated to the reporting unit. No impairment loss is recognized if the fair value of the reporting unit exceeds its carrying value. See Note 7, "Goodwill" to the consolidated financial statements for details regarding goodwill impairment. Valuation for Debt Modifications and Extinguishment The Company enters into various amendments to our credit facility for additional loans used for working capital. Part of the amendments include fees that would be added and capitalized to 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 represents 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 de-recognized and the new debt is recorded at fair value, which becomes the new carrying value. Significant, complex calculations are inherently required in determining the proper accounting treatment. For each amendment, we calculate the present value of the cash flows under the terms of the amendment, and determine if it is considered substantially different by at least a 10% difference from the present value of the remaining cash flow of the original debt instrument. See Note 10, "Centre Lane Senior Secured Credit Facility" to the consolidated financial statements. 42 Table of Contents 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 statements of operations and comprehensive loss. See Note 21, "Income Taxes" to the consolidated financial statements. 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 services, 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 have one operating and reportable segment. Off Balance Sheet Arrangements As of December 31, 2024 and 2023, there were no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders. 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 income. Transaction gains and losses are included within “general and administrative expense” on the consolidated statements of operations and comprehensive loss. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company as defined in Rule 12b-2 of the Exchange Act, we are not required to include information otherwise required by this Item 7A to Form 10-K.