What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-12 · 118 added, 262 removed, 199 unchanged (66% of the section changed)

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Factors that could cause or contribute to these differences include, but are not limited to, those identified below, and in the section "Cautionary Statement Regarding Forward-Looking Information", those discussed in “Item 1A.

Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, and in any subsequent filing we make with the SEC.

Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024, and those discussed in any subsequent filing we make with the SEC.

Business Overview

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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.

During the year ended December 31, 2023, the Company completed the acquisition of two business units of Big Village (Big Village Insights, Inc., and Big Village Agency LLC (together, referred to as the "Big Village Entities")), in an all-cash transaction funded by the Centre Lane Senior Secured Credit Facility (the "Big Village Acquisition").

(together with its wholly-owned subsidiaries, the “Company,” “Bright Mountain” or “we”) 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

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Media Services

Our media services division focuses on advertisers and agencies by providing access to premium inventory, leveraging data to optimize programmatic campaigns.

Our media services division focuses on advertisers and agencies by providing access to premium inventory, and 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.

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• 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");

• 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;

• provision of creative and media services to advertisers.

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.

Typically advertising technology companies report a material portion of their revenues during the third and fourth calendar quarters as a result of back-to-school and holiday-related advertising spend.

We continue to experience this trend in our advertising technology division.

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Limited Number of Customers .

During the nine months ended September 30, 2024 and 2023, one customer represented 13.4% and 13.5% of revenue, respectively.

During the three months ended March 31, 2025 and 2024, one customer represented 15.4% and 14.9% of revenue, respectively.

The loss of this customer could have a material adverse impact on our results of operations in future periods.

Managing Industry Dynamics .

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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 iPhone.

(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.

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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 is our analysis for the three and nine months ended September 30, 2024 and 2023:

The following is our analysis for the three months ended March 31, 2025 and 2024:

Three Months Ended

Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(in thousands)

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General and administrative expenses

Impairment of goodwill and intangibles

Financing and other expense, net

Net loss from operations

Adjusted EBITDA (1)

Adjusted EBITDA (loss) (1)

(1) For a reconciliation of net loss to Adjusted EBITDA see “Use of Non-GAAP Financial Measures” below.

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• 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");

• 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");

Revenue decreased $1.1 million or 7%, for the three months ended September 30, 2024, compared to the same period in 2023.

Revenue increased $10.2 million, or 35%, for the nine months ended September 30, 2024, compared to the same period in 2023.

See below for a detailed analysis of revenue for the three and nine months ended September 30, 2024, and 2023.

• provision of creative and media services to advertisers.

Revenue increased $1.7 million, or 14%, for the three months ended March 31, 2025, compared to the same period in 2024.

See below for a detailed analysis of revenue for the three months ended March 31, 2025, and 2024.

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.

Cost of revenue decreased approximately $2.1 million, or 18%, for the three months ended September 30, 2024 compared to the same period in 2023.

Cost of revenue increased approximately $6.6 million or 30%, for the nine months ended September 30, 2024 compared to the same period in 2023.

See below for a detailed analysis of cost of revenue for the three and nine months ended September 30, 2024, and 2023.

Cost of revenue increased approximately $607,000, or 7%, for the three months ended March 31, 2025 compared to the same period in 2024.

See below for a detailed analysis of cost of revenue for the three months ended March 31, 2025, and 2024.

General and Administrative Expenses

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and (v) facility costs.

General and administrative expenses increased approximately $300,000, or 7%, for the three months ended September 30, 2024 compared to the same period in 2023.

General and administrative expenses remained consistent for the nine months ended September 30, 2024 compared to the same period in 2023.

See below for a detailed analysis of general and administrative expenses for the three and nine months ended September 30, 2024 and 2023.

General and administrative expenses decreased approximately $720,000, or 14%, for the three months ended March 31, 2025 compared to the same period in 2024.

See below for a detailed analysis of general and administrative expenses for the three months ended March 31, 2025 and 2024.

Results of Operations

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This analysis should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this Quarterly Report on Form 10-Q.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Net loss from operations for the quarter ended September 30, 2024 was $27,000 as compared to a net loss of $17.0 million for the same period in 2023.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Net loss for the quarter ended March 31, 2025 was $3.2 million as compared to a net loss of $4.8 million for the same period in 2024.

The following is our analysis for the period:

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(in thousands)

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General and administrative expenses

Impairment of goodwill and intangibles

Loss from operations

Financing and other expense, net

Net loss from operations

Gross margin percentage

Our revenue decreased $1.1 million, or 7%, for the three months ended September 30, 2024, compared to the same period in 2023.

The reduction in revenue was largely attributable to our digital publishing and consumer insihts divisions.

Our revenue increased $1.7 million, or 14%, for the three months ended March 31, 2025, compared to the same period in 2024.

The increase in revenue was largely attributable to our advertising technology division.

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:

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(in thousands)

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Digital Publishing

Digital publishing revenue decreased by $0.5 million, or 50%, for the three months ended September 30, 2024,compared to the same period in 2023.

Approximately $0.5 million, or 4%, of the Company’s revenue for the three months ended September 30, 2024, was generated from our digital publishing customers, compared to $1.0 million, or 7%, 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.

Digital publishing revenue increased by $149,000, or 34%, for the three months ended March 31, 2025, compared to the same period in 2024.

Approximately $583,000, or 4%, of the Company’s revenue for the three months ended March 31, 2025, was generated from our digital publishing customers, compared to $434,000, or 3%, for the same period in 2024.

This increase reflects a one-time payment that is non-recurring in nature, and which we received on account of a contract that has ended.

Advertising Technology

Advertising technology revenue increased by $1.0 million or 28%, for the three months ended September 30, 2024, compared to the same period in 2023.

Approximately $4.7 million, or 33%, of the Company’s revenue for the three months ended September 30, 2024, was generated from our advertising technology customers compared to $3.6 million, or 24%, for the same period in 2023.

Advertising technology revenue increased by $1.6 million, or 61%, for the three months ended March 31, 2025, compared to the same period in 2024.

Approximately $4.2 million, or 30%, of the Company’s revenue for the three months ended March 31, 2025, was generated from our advertising technology customers compared to $2.6 million, or 21%, for the same period in 2024.

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.

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Consumer Insights

Consumer insights revenue decreased by $1.2 million or 16%, for the three months ended September 30, 2024, compared to the same period in 2023.

Approximately $6.8 million, or 48%, of the Company’s revenue for the three months ended September 30, 2024 was generated from our consumer insights customers compared to $8.0 million, or 52%, for the same period in 2023.

This decrease was primarily related to the slowdown of Altria product testing, resulting in a negative revenue impact.

Consumer insights revenue increased by $349,000, or 5%, for the three months ended March 31, 2025, compared to the same period in 2024.

Approximately $7.0 million, or 49%, of the Company’s revenue for the three months ended March 31, 2025 was generated from our consumer insights customers compared to $6.7 million, or 54%, for the same period in 2024.

Creative Services

Creative services revenue decreased by $185,000 or 10% for the three months ended September 30, 2024, compared to the same period in 2023.

Approximately $1.6 million, or 11%, of the Company’s revenue for the three months ended September 30, 2024, was generated from our creative services customers compared to $1.8 million, or 12% for the same period in 2023.

Creative services revenue decreased by $563,000, or 27%, for the three months ended March 31, 2025, compared to the same period in 2024.

Approximately $1.5 million, or 11%, of the Company’s revenue for the three months ended March 31, 2025, was generated from our creative services customers compared to $2.1 million, or 17% for the same period in 2024.

This decrease was primarily related to a decrease in the number of projects for smaller tier revenue customers.

Media Services

Media services revenue decreased by $203,000, or 26%, for the three months ended September 30, 2024, compared to the same period in 2023.

Approximately $600,000, or 4%, of the Company’s revenue for the three months ended September 30, 2024, was generated from our media services customers compared to $793,000, or 5%, for the same period in 2023.

This decrease was primarily related to the timing of customer needs and the moving of certain projects to year-end.

Media services revenue increased by $200,000, or 31%, for the three months ended March 31, 2025, compared to the same period in 2024.

Approximately $841,000, or 6%, of the Company’s revenue for the three months ended March 31, 2025, was generated from our media services customers compared to $641,000, or 5%, for the same period in 2024.

This increase was primarily related to the timing of customer needs and the moving of certain projects from year-end 2024 to the first quarter of 2025.

Cost of Revenue

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(in thousands)

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Sales commissions

Cost of revenue decreased $2.1 million or 18% for the three months ended September 30, 2024, compared to the same period for 2023.

This reduction is due to the factors discussed below:

Cost of revenue increased $607,000, or 7%, for the three months ended March 31, 2025, compared to the same period for 2024.

This increase is due to the factors discussed below:

Direct Salaries and Labor Cost

Direct salaries and labor cost decreased $1.1 million, or 18%, for the three months ended September 30, 2024, when compared to the same period in 2023.

Approximately $1.5 million, or 15%, of the Company's cost of revenue for the three months ended September 30, 2024, was a result of direct salaries and labor cost compared to $2.7 million, or 23% 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 and media services divisions.

Direct salaries and labor cost decreased $117,000, or 6%, for the three months ended March 31, 2025, when compared to the same period in 2024.

Approximately $1.8 million, or 18%, of the Company's cost of revenue for the three months ended March 31, 2025, was a result of direct salaries and labor cost compared to $1.9 million, or 21% for the same period in 2024.

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 decreased $487,000, or 14%, for the three months ended September 30, 2024 when compared to the same period in 2023.

Approximately $3.0 million, or 31%, of the Company's cost of revenue for the three months ended September 30, 2024, was a result of direct project cost compared to $3.5 million, or 29%, during the same period in 2023.

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 and media services divisions.

The decrease in direct project costs is related to the decrease in revenue from our consumer insights, creative and media services divisions.

Direct project cost increased $485,000, or 15%, for the three months ended March 31, 2025 when compared to the same period in 2024.

Approximately $3.6 million, or 37%, of the Company's cost of revenue for the three months ended March 31, 2025, was a result of direct project cost compared to $3.1 million, or 34%, during the same period in 2024.

Non-Direct Project Cost

Non-direct cost was $1.8 million, or 18%, of the Company's cost of revenue for the three months ended September 30, 2024, compared to $2.9 million, or 24%, for the same period in 2023.

These costs represent overall client service costs that are not specifically related to a particular project, but relate to services for our consumer insights, creative and media services divisions.

The decrease in non-direct project costs is related to the decrease in revenue from our consumer insights, creative and media services divisions.

Non-direct cost was $1.0 million, or 10%, of the Company's cost of revenue for the three months ended March 31, 2025, compared to $2.1 million, or 22%, for the same period in 2024.

These costs represent overall client service costs that are not specifically related to a particular project, but relate to services for our consumer insights, creative services, and media services divisions.

The decrease in non-direct project costs is related to the decrease in revenue from our creative services division.

Publisher Cost

Publisher cost was $3.0 million, which represents 31% of overall cost of revenue, and $2.1 million, or 18%, of overall cost of revenue, for the three months ended September 30, 2024 and 2023, respectively.

We experienced an increase of $930,000, or 45%, for the three months ended September 30, 2024, compared to the same period in 2023.

Publisher cost was $3.0 million, which represents 31% of overall cost of revenue, and $1.8 million, or 19%, of overall cost of revenue, for the three months ended March 31, 2025 and 2024, respectively.

We experienced an increase of $1.2 million, or 68%, for the three months ended March 31, 2025, compared to the same period in 2024.

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.

Gross margin was $4.4 million and $3.4 million for the three months ended September 30, 2024 and 2023, respectively.

Our gross margin increased $1.0 million, or 31%, for the three months ended September 30, 2024, when compared to the same period of 2023.

Gross margin as a percentage of revenue increased to 31% for the three months ended September 30, 2024 compared to 22% for the same period of 2023.

Gross margin was $4.3 million and $3.1 million for the three months ended March 31, 2025 and 2024, respectively.

Our gross margin increased $1.1 million, or 36%, for the three months ended March 31, 2025, when compared to the same period of 2024.

Gross margin as a percentage of revenue increased to 30% for the three months ended March 31, 2025 compared to 25% for the same period of 2024.

General and Administrative Expenses

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(in thousands)

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Gross margin as a percentage of general and administrative expense

General and administrative expenses increased by $293,000 or 7%, for the three months ended September 30, 2024, compared to the same period in 2023.

The increase is due to a combination of factors as discussed below.

General and administrative expenses decreased by $720,000, or 14%, for the three months ended March 31, 2025, compared to the same period in 2024.

The decrease is due to a combination of factors as discussed below.

Personnel Cost

Personnel cost decreased by approximately $381,000, or 17%, for the three months ended September 30, 2024, compared to the same period in 2023.

This change is mainly driven by a decrease in the Company's head count by a net change of 47 employees, including 13 employees that were terminated as a reduction in force.

The Company employee's headcount was 141 and 188 at September 30, 2024 and 2023, respectively.

Professional Fees

Professional fees increased by $1.4 million, or 224%, for the three months ended September 30, 2024, compared to the same period in 2023.

This increase is mainly driven by an increase in legal fees related to the Ladenburg litigation as discussed in Note 17 above.

Personnel cost decreased by approximately $664,000, or 27%, for the three months ended March 31, 2025, compared to the same period in 2024.

This change is mainly driven by a decrease in the Company's head count by a net change of 51 employees.

The Company employee's headcount was 116 and 167 at March 31, 2025 and 2024, respectively.

Legal fees increased by $173,000, or 62%, for the three months ended March 31, 2025, compared to the same period in 2024.

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 16, Commitments and Contingencies, to the consolidated financial statements.

Data Processing

Data processing increased by $38,000, or 17%, for the three months ended September 30, 2024, compared to the same period in 2023.

Impairment of Goodwill and Intangibles

During the three months ended September 30, 2023, the Company performed an assessment of its goodwill and intangible assets.

The assessment indicated that the carrying value was in excess of its implied fair value, resulting in an impairment charge of $13.7 million and $2.5 million for goodwill and intangibles, respectively.

There was no impairment recorded for the same period of 2024.

Financing and Other Expense, Net

Data processing decreased by $110,000, or 27%, for the three months ended March 31, 2025, compared to the same period in 2024.

This reduction is due largely to the reclassification of certain components of data processing costs from data processing to website expenses.

Financing Expense (Income)

Three Months Ended

September 30, 2024

September 30, 2023

(in thousands)

Interest expense

Other expense (income)

Total financing and other expense, net

Financing and other expense, net increased by $480,000, or 17%, for the three months ended September 30, 2024, compared to the same period in 2023.

This increase was largely attributable to a $477,000 increase in interest expense related to the Centre Lane Senior Secured Credit Facility, which reflected higher principal and fees due to the Centre Lane Senior Secured Credit Facility amendments during the year ended December 31, 2023.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Net loss from operations for the nine months ended September 30, 2024 was $4.0 million as compared to a net loss of $23.8 million for the same period in 2023.

The following is our analysis for the period.

Nine Months Ended

September 30, 2024

September 30, 2023

(in thousands)

Cost of revenue

General and administrative expenses

Impairment of goodwill and intangibles

Loss from operations

Financing and other expense, net

Net loss from operations

Gross margin percentage

Our revenue increased by $10.2 million, or 35%, for the nine months ended September 30, 2024 compared to the same period in 2023.

For the nine months ended September 30, 2024, revenue includes $27.3 million, which represents the impact of the Big Village Acquisition, which was completed in April 2023.

This compares to $19.8 million for the same period in 2023.

Changes in revenue generated by each such division are set forth below:

Nine Months Ended

September 30, 2024

September 30, 2023

(in thousands)

Digital publishing

Advertising technology

Consumer insights

Creative services

Media services

Digital Publishing

Digital publishing revenue decreased by $2.0 million, or 57%, for the nine months ended September 30, 2024, compared to the same period in 2023.

Approximately $1.5 million, or 4%, of the Company’s revenue for the nine months ended September 30, 2024, was generated from our digital publishing customers compared to $3.4 million, or 12%, for the same period in 2023.

Advertising Technology

Advertising technology revenue increased by $4.7 million, or 77%, for the nine months ended September 30, 2024, compared to the same period in 2023.

Approximately $10.9 million, or 28%, of the Company’s revenue for the nine months ended September 30, 2024, was generated from our advertising technology customers compared to $6.1 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 $5.2 million, or 35%, for the nine months ended September 30, 2024, compared to the same period in 2023.

Approximately $20.1 million, or 51%, of the Company’s revenue for the nine months ended September 30, 2024 was generated from our consumer insights customers compared to $14.9 million, or 51%, for the same period in 2023.

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 nine months ended September 30, 2024.

Creative Services

Creative services revenue increased by $1.8 million or 53%, for the nine months ended September 30, 2024, compared to the same period in 2023.

Approximately $5.3 million, or 13% of the Company’s revenue for the nine months ended September 30, 2024, was generated from our creative services customers compared to $3.5 million, or 12%, for the same period in 2023.

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 nine months ended September 30, 2024.

Media Services

Media services revenue increased by $366,000 or 26%, for the nine months ended September 30, 2024, compared to the same period in 2023.

Approximately $1.8 million, or 5%, of the Company’s revenue for the nine months ended September 30, 2024, was generated from our media services customers compared to $1.4 million, or 5%, for the same period in 2023.

As discussed above, the Big Village Acquisition was completed in April 2023, and is the main driver of the increase in media services revenue for the nine months ended September 30, 2024.

Cost of Revenue

Nine Months Ended

September 30, 2024

September 30, 2023

(in thousands)

Direct salaries and labor costs

Direct project costs

Non-direct project costs

Publisher costs

Content creation

Sales commissions

Cost of revenue increased $6.6 million, or 30%, for the nine months ended September 30, 2024, compared to the same period of 2023.

For the nine months ended September 30, 2024, cost of revenue includes $20.3 million, or 71% from the impact of the Big Village Acquisition, which was completed in April 2023.

This compares to $16.5 million, or 75%, for the same period in 2023.

As a result, the Big Village Acquisition is the main driver of the increase in cost of revenue for the nine months ended September 30, 2024.

Direct Salaries and Labor Cost

Direct salaries and labor cost increased $415,000, or 8%, for the nine months ended September 30, 2024, when compared to the same period in 2023.

Approximately $5.1 million, or 20%, of the Company's cost of revenue for the nine months ended September 30, 2024 was a result of direct salaries and labor cost compared to $5.2 million, or 24%, 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 salaries and labor cost for the nine months ended September 30, 2024.

These costs represent salary and labor cost of employees that work directly on customer projects for our consumer insights, creative and media services divisions.

Direct Project Cost

Direct project cost increased $3.1 million, or 52%, for the nine months ended September 30, 2024 when compared to the same period in 2023.

Approximately $9.2 million, or 32%, of the Company's cost of revenue for the nine months ended September 30, 2024, was a result of direct project cost compared to $6.1 million, or 27%, 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 nine months ended September 30, 2024.

Non-Direct Project Cost

Non-direct project cost increased $187,000, or 4%, for the nine months ended September 30, 2024, when compared to the same period in 2023.

Approximately $5.5 million, or 19%, of the Company's cost of revenue for the nine months ended September 30, 2024, was a result of non-direct project cost compared to $6.1 million, or 24%, 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 non-direct project cost for the nine months ended September 30, 2024.

These costs represent overall client service costs that are not specifically related to a particular project.

Publisher Cost

Publisher cost was $7.1 million, which represents 25% of overall cost of revenue, and $3.7 million, or 17%, of overall cost of revenue for the nine months ended September 30, 2024 and 2023, respectively.

We experienced an increase of $3.4 million, or 92%, for the nine months ended September 30, 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.

Our gross margin increased $3.6 million, or 49%, for the nine months ended September 30, 2024, compared to the same period of 2023.

Gross margin as a percentage of revenue increased to 28% for the nine months ended September 30, 2024, compared to 25% for the same period of 2023.

General and Administrative Expenses

Nine Months Ended

September 30, 2024

September 30, 2023

(in thousands)

Personnel costs

Professional fees

Website expenses

Data processing

Gross margin as a percentage of general and administrative expense

General and administrative expenses increased by $43,000 for the nine months ended September 30, 2024, compared to the same period in 2023.

The increase is primarily due to a combination of factors as discussed below:

Personnel Cost

Personnel cost increased by $734,000, or 12%, for the nine months ended September 30, 2024 compared to the same period in 2023.

The Company reduced its head count by 47 employees, including 22 employees that were terminated as a reduction in force.

The Company incurred severance cost of approximately $93,000 in connection with this reduction.

The Company incurred severance cost of approximately $322,000 associated with a head count reduction during the same period for 2023.

Professional Fees

Professional fees decreased by $530,000 or 18% for the nine months ended September 30, 2024, compared to the same period in 2023.

$685,000 of professional fees for the nine months ended September 30, 2023 represented costs associated with the Big Village Acquisition.

Data Processing

Data processing increased by $550,000, or 130%, for the nine months ended September 30, 2024, compared to the same period of 2023.

As discussed above, the Big Village Acquisition was completed in April 2023, and contributed to data processing for six months of the prior period and for the full nine months of the current period, and is the main driver of the increase in data processing for the nine months ended September 30, 2024.

Impairment of Goodwill and Intangibles

During the nine months ended September 30, 2023, the Company performed an assessment of its goodwill and intangible assets.

There was no impairment recorded for the same period of 2024.

Financing and Other Expense, Net

Nine Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(in thousands)

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Total financing and other expense, net

Financing and other expense, net increased by $3.4 million, or 59%, for the nine months ended September 30, 2024, compared to the same period during 2023.

This increase was largely attributable to $3.4 million or 55%, increase in interest expense related to the Centre Lane Senior Secured Credit Facility which reflected higher principal and fees due to the Centre Lane Senior Secured Credit Facility amendments during the year ended December 31, 2023.

Financing and other expense, net increased by $320,000, or 12%, for the three months ended March 31, 2025, compared to the same period in 2024.

Use of Non-GAAP Financial Measure

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Three Months Ended

Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(in thousands)

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Amortization of intangibles

Impairment of goodwill and intangibles

Amortization of debt discount

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Non-recurring severance expense

Adjusted EBITDA

Adjusted EBITDA (loss)

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 September 30, 2024, as compared to December 31, 2023.

September 30, 2024

The following table summarizes total current assets, total current liabilities, and net working capital (deficit) as of March 31, 2025, as compared to December 31, 2024.

March 31, 2025

December 31, 2024

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Net working capital (deficit)

As of September 30, 2024, we had a cash balance of $2.5 million compared with a cash balance of $4.0 million as of December 31, 2023.

As of March 31, 2025, we had a cash balance of $2.2 million and a restricted cash balance of $1.9 million compared with a cash balance of $2.5 million and a restricted cash balance of $1.9 million as of December 31, 2024.

The Company’s liquidity needs, and a discussion of how it intends to meet those needs, is discussed below.

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Going Concern

Historically, the Company has incurred losses, which have resulted in an accumulated deficit of approximately $163.1 million as of September 30, 2024.

Cash flows used in operating activities were $451,000 and $5.9 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, the Company had a working capital deficit of approximately $13.0 million, inclusive of $2.5 million in cash and cash equivalents.

Historically, the Company has incurred losses, which have resulted in an accumulated deficit of approximately $170.1 million as of March 31, 2025.

Cash flows (used in) provided by operating activities were $(350,000) and $920,000 for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, the Company had a working capital deficit of approximately $14.8 million, inclusive of $2.2 million in cash and cash equivalents and $1.9 million in restricted cash.

The Company's current cash and working capital, as of the filing of this Quarterly Report on Form 10-Q, is not expected to be sufficient to fund its anticipated level of operations over the next twelve months.

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During the next year, we anticipate that we will need approximately $5.6 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 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 Facility, or raising equity capital.

The ability to access the capital markets depends, in part, upon the volume and market price of the Company's stock, which cannot be assured.

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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 and Centre Lane Partners Master Credit Fund II, L.P., as Administrative Agent and Collateral Agent (“Centre Lane Partners”), as amended (the “Credit Agreement”).

On June 5, 2020, the Company and its subsidiaries entered into to the Amended and Restated Senior Secured Credit Facility between themselves, the lenders party thereto 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.

The outstanding principal owed to Centre Lane Partners was $77.0 million and $70.2 million as of September 30, 2024 and December 31, 2023, respectively, and matures on April 20, 2026.

Of the amount outstanding at September 30, 2024, approximately $1.3 million is due by December 31, 2024 with $2.9 million due by September 30, 2025.

The balance of $72.9 million is due in 2026.

The amount due under the Credit Agreement bears interest at 7.0% per annum plus the Secured Overnight Financing Rate ("SOFR").

At September 30, 2024, the SOFR was 5.30%, thus the overall interest rate on this facility was 12.33% per annum at September 30, 2024.

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;

As of March 31, 2025, Centre Lane Partners has loaned the Company $38.9 million through Amendments One through Eight (the "Second Out Loans"), Amendments Nine through Sixteen (the "First Out Loans"), and Amendments Seventeen, Twenty-One, and Twenty-Two (the "Third Out Loans").

Effective March 31, 2025, the Company, the Lenders, and Centre Lane Partners entered into the Twenty-Second Amendment to the Credit Agreement, pursuant to which the following adjustments were made to the outstanding loans as follows:

• Extending the maturity date of the First Out Loans (which no longer include the Seventeenth Amendment Term Loans and the Twenty-First Amendment Term Loans), Second Out Loans (formerly defined as the Last Out Loans), and Third Out Loans (comprised of the Seventeenth Amendment Term Loans and the Twenty-First Amendment Term Loans) from April 20, 2026 to December 20, 2026;

• Changing the Second Out Loans PIK rate to the Term Secured Overnight Financing Rate (“SOFR”) plus 3% and the Second Out loans cash interest rate to 2%;

• Changing the First Out Loans cash interest rate to the Term SOFR plus 2%;

• Changing the Third Out Loans PIK rate to 15%;

• Adjusting the amortization of the Second Out Loans such that quarterly installments of 1% of the aggregate principal amount (after giving effect to capitalized PIK interest) are paid for each quarter in 2025, and quarterly installments of 2% of the aggregate principal amount (after giving effect to capitalized PIK interest) are paid thereafter until maturity;

• Adjusting the amortization of the First Out Loans such that an installment of $700,000 is paid on March 31, 2025, and quarterly installments of $575,000 are paid thereafter until maturity.

The outstanding principal owed to Centre Lane Partners was $81.1 million and $78.8 million as of March 31, 2025 and December 31, 2024, respectively.

Of the amount outstanding at March 31, 2025, approximately $5.3 million is due by March 31, 2026.

The balance of $75.8 million is due in December 2026.

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.

Summary of Cash Flows

The following table summarizes cash flow activities during the nine months ended September 30, 2024 and 2023:

The following table summarizes cash flow activities during the three months ended March 31, 2025 and 2024:

Three Months Ended

(in thousands)

Nine Months Ended September 30,

Cash flow used in operating activities

March 31, 2025

March 31, 2024

Cash flow (used in) provided by operating activities

Cash flow used in investing activities

Cash flow (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents, net of impact of exchange rates

Cash flow used in financing activities

Net increase in cash and cash equivalents, net of impact of exchange rates

Operating Activities

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Our primary uses of our operating cash, are for cost of revenue expenses, personnel-related expenditures and other general administrative expenses.

For the nine months ended September 30, 2024, cash used in operating activities was $451,000.

The primary factors affecting our operating cash flows during the period were our net loss of $13.2 million, adjusted for non-cash charges of $1.4 million for amortization of intangible assets, $2.2 million of amortization of debt discount, $6.9 million in interest paid in kind on the Centre Lane Senior Secured Credit Facility, $191,000 for stock compensation expense, and a $1.8 million net change in operating assets and liabilities.

The primary drivers of the changes in operating assets and liabilities were a $2.3 million increase in accounts receivable, a $543,000 decrease in accounts payable, and a $363,000 decrease in other liabilities, partially offset by a $200,000 increase in deferred revenue.

For the nine months ended September 30, 2023, cash used in operating activities was $5.9 million.

The primary factors affecting our operating cash flows during the period were our net loss of $29.6 million, adjusted for non-cash charges of $1.9 million for amortization of intangible assets, $1.4 million of amortization of debt discount, $16.3 million impairment of goodwill and intangibles, $4.5 million in interest paid in kind on the Centre Lane Senior Secured Credit Facility, $177,000 for the provision of bad debt, $115,000 for stock option compensation expense, and a $802,000 net change in operating assets and liabilities.

The primary drivers of the changes in operating assets and liabilities were a $277,000 increase in accounts receivables offset by a $2.3 million increase in accounts payable and accrued expenses, an increase in other liabilities of $2.2 million, an increase in prepaid expenses and other current assets of $573,000, and a $942,000 increase in deferred revenue.

For the three months ended March 31, 2025, cash used in operating activities was $350,000.

The primary factors affecting our operating cash flows during the period were our net loss of $3.2 million, adjusted for non-cash charges of $485,000 for amortization of intangible assets, $633,000 of amortization of debt discount, $2.3 million in interest paid in kind on the Centre Lane Senior Secured Credit Facility, $37,000 for stock compensation expense, and a $585,000 net change in operating assets and liabilities.

The primary drivers of the changes in operating assets and liabilities were a $3.9 million decrease in accounts payable and a $543,000 decrease in other liabilities, partially offset by a $3.5 million increase in deferred revenue and a $762,000 decrease in accounts receivable.

For the three months ended March 31, 2024, cash flow provided by operating activities was $920,000.

The primary factors affecting our operating cash flows during the period were our net loss of $4.8 million, adjusted for non-cash charges of $481,000 for amortization of intangible assets, $615,000 of amortization of debt discount, $2.2 million in interest paid-in-kind on the Centre Lane Senior Secured Credit Facility, $65,000 for stock option compensation expense, and a $2.3 million net change in operating assets and liabilities.

The primary drivers of the changes in operating assets and liabilities were a $2.2 million decrease in accounts receivables partially offset by a $1.7 million decrease in accounts payable and accrued expenses, an increase in prepaid expenses and other current assets of $123,000, a $138,000 increase in interest payable on the Centre Lane Senior Secured Credit Facility, and a $1.7 million increase in deferred revenue.

Investing Activities

Cash used in investing activities of $100,000 and $14,000 for the nine months ended September 30, 2024 and 2023, respectively, was due to $14,000 and $14,000, respectively, for the purchase of property and equipment, and $86,000 for website enhancement during the nine months ended September 30, 2024.

Cash used in investing activities of $10,000 and $2,000 for the three months ended March 31, 2025 and 2024, respectively, was attributable to the purchase of property and equipment.

Financing Activities

During the nine months ended September 30, 2024, the Company used cash of $892,000 in financing activities, which is largely attributable to repayment of principal on the Centre Lane Senior Secured Credit Facility of $879,000.

During the nine months ended September 30, 2023, the Company drew $8.6 million of debt financing from the Centre Lane Senior Secured Credit Facility, which was used primarily to fund our working capital.

During the three months ended March 31, 2025 and 2024, the Company used cash of $4,000 in financing activities, which is attributable to principal payments on finance lease obligations.

Contractual Obligations and Commitments

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 a lease term of five 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.

As of September 30, 2024, the Company entered into two sublease agreements of its Boca Raton corporate offices.

The subleases will continue for the remaining term on the initial lease agreement of 3 years with no option to extend.

The aggregate minimum annual rental income under the subleases is approximately $137,000 with 3% escalations per annum.

See Note 12, “ Leases ,” to the Company's consolidated financial statements for details regarding the Company’s lease.

On June 30, 2024, the Company also entered into the Twentieth Amendment to the Credit Facility, which, among other things, restructured certain payments such that the amounts due within the next 12 months were reduced.

See Note 10, “ Centre Lane Senior Secured Credit Facility ,” to the Company’s consolidated financial statements for details regarding the Twentieth Amendment.

There were no other material changes in our contractual obligations and commitments from those disclosed above and in the Annual Report on Form 10-K for the year ended December 31, 2023.

There were no other material changes in our contractual obligations and commitments from those disclosed above in Note 10, Centre Lane Senior Secured Credit Facility, and Note 12, Leases, to the consolidated financial statements, and in the Annual Report on Form 10-K for the year ended December 31, 2024.

Off-Balance Sheet Arrangements

As of September 30, 2024 and December 31, 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.

As of March 31, 2025 and December 31, 2024, 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.

Critical Accounting Policies and Estimates

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There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.

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.

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, the valuation of the Center Lane Senior Secured Facility to determine whether a debt modification or extinguishment has occurred, and the valuation allowance on deferred tax assets.

Critical accounting policies are those policies that management believes are very important to the portrayal of our financial position and results of operations, and that require management to make estimates that are difficult, subjective or otherwise complex.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis