Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Con dition and Results of Operations.
The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2024. In addition to historical consolidated financial information, this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. 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, 2024, and those discussed in any subsequent filing we make with the SEC.
Business Overview
Organization and Nature of Operations
Bright Mountain Media, Inc. (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
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, and 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, competitive intelligence, and expert insight to address customers' strategic issues. We provide cutting-edge and dynamic research, offering clients a comprehensive perspective on their consumers. This insight extends to strategic guidance on the optimal timing and channels to effectively connect with target audiences. Our cutting-edge approach combines advanced data analytics 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.
31
Table of Contents
Media Services
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. Our data-driven approach ensures that ad placements are not only well-targeted, but also continuously optimized for maximum efficiency and return on investment. Our commitment to combining premium inventory access with data-driven programmatic campaign optimization makes us an indispensable partner in the success of our clients' advertising and marketing endeavors.
The 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.
Key Factors Affecting Our Performance
Seasonal Fluctuations . 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. 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 . 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 . 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.
32
Table of Contents
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 is our analysis for the three months ended March 31, 2025 and 2024:
Three Months Ended
March 31, 2025
March 31, 2024
(in thousands)
Revenue
$
14,190
$
12,448
Cost of revenue
9,918
9,311
Gross margin
4,272
3,137
General and administrative expenses
4,524
5,244
Financing and other expense, net
2,979
2,659
Net loss
$
(3,231
)
$
(4,766
)
Adjusted EBITDA (loss) (1)
$
816
$
(1,113
)
(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 $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 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
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.
33
Table of Contents
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
The following is our analysis of the results of operations for the periods indicated below. 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 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
March 31, 2025
March 31, 2024
Change
(in thousands)
Revenue
$
14,190
$
12,448
$
1,742
14
%
Cost of revenue
9,918
9,311
607
7
%
Gross margin
4,272
3,137
1,135
36
%
General and administrative expenses
4,524
5,244
(720
)
(14
)%
Loss from operations
(252
)
(2,107
)
1,855
(88
)%
Financing and other expense, net
(2,979
)
(2,659
)
(320
)
12
%
Net loss
$
(3,231
)
$
(4,766
)
$
1,535
(32
)%
Gross margin percentage
30
%
25
%
5
%
Revenue
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
March 31, 2025
March 31, 2024
Change
(in thousands)
Digital publishing
$
583
$
434
$
149
34
%
Advertising technology
4,232
2,625
1,607
61
%
Consumer insights
7,039
6,690
349
5
%
Creative services
1,495
2,058
(563
)
(27
)%
Media services
841
641
200
31
%
$
14,190
$
12,448
$
1,742
14
%
Digital Publishing
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.
34
Table of Contents
Advertising Technology
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. This led to an increase in volume, as well as rates and overall revenue.
Consumer Insights
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 $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 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
March 31, 2025
March 31, 2024
Change
(in thousands)
Direct salaries and labor costs
$
1,813
$
1,930
$
(117
)
(6
)%
Direct project costs
3,634
3,149
485
15
%
Non-direct project costs
999
2,088
(1,089
)
(52
)%
Publisher costs
3,025
1,798
1,227
68
%
Content creation
179
193
(14
)
(7
)%
Sales commissions
259
101
158
156
%
Other
9
52
(43
)
-83
%
$
9,918
$
9,311
$
607
7
%
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 $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.
35
Table of Contents
Direct Project Cost
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. 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 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 $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
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
March 31, 2025
March 31, 2024
Change
(in thousands)
Personnel costs
$
1,828
$
2,492
$
(664
)
(27
)%
Legal fees
453
280
173
62
%
Professional fees
764
845
(81
)
(10
)%
Insurance
131
203
(72
)
(35
)%
Depreciation
13
40
(27
)
(68
)%
Amortization
485
481
4
1
%
Website expenses
329
297
32
11
%
Data processing
304
414
(110
)
(27
)%
Other
217
192
25
13
%
$
4,524
$
5,244
$
(720
)
(14
)%
Gross margin as a percentage of general and administrative expense
94
%
60
%
35
%
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 $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.
36
Table of Contents
Legal Fees
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 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
March 31, 2025
March 31, 2024
Change
(in thousands)
Interest expense
$
3,026
$
3,004
$
22
1
%
Other expense (income)
(47
)
(345
)
298
(86
)%
Total financing and other expense, net
$
2,979
$
2,659
$
320
12
%
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
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.
37
Table of Contents
A reconciliation of net loss before taxes to non-GAAP EBITDA and Adjusted EBITDA is as follows:
Three Months Ended
March 31, 2025
March 31, 2024
(in thousands)
Net loss before tax
$
(3,231
)
$
(4,766
)
Depreciation expense
13
40
Amortization of intangibles
485
481
Amortization of debt discount
633
615
Other interest expense
6
11
Interest expense - Centre Lane Senior Secured Credit Facility and Convertible Promissory Notes
2,387
2,378
EBITDA
293
(1,241
)
Stock compensation expense
37
65
Non-recurring professional fees
241
-
Non-recurring legal fees
245
55
Non-recurring severance expense
-
8
Adjusted EBITDA (loss)
$
816
$
(1,113
)
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 March 31, 2025, as compared to December 31, 2024.
March 31, 2025
December 31, 2024
(in thousands)
Total current assets
$
19,620
$
20,299
Total current liabilities
34,444
33,780
Net working capital (deficit)
$
(14,824
)
$
(13,481
)
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. See –“Going Concern.”
Going Concern
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. As a result, such matters create a substantial doubt regarding the Company’s ability to meet its financial obligations and continue as a going concern. 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 $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 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. Other measures include reducing or delaying certain business activities, and reducing general and administrative expenses, including a reduction in headcount. The ultimate success of these plans is not guaranteed.
The accompanying unaudited 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.
38
Table of Contents
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 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.
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; and
• 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 three months ended March 31, 2025 and 2024:
Three Months Ended
(in thousands)
March 31, 2025
March 31, 2024
Cash flow (used in) provided by operating activities
$
(350
)
$
920
Cash flow used in investing activities
(10
)
(2
)
Cash flow used in financing activities
(4
)
(4
)
Net increase in cash and cash equivalents, net of impact of exchange rates
$
(365
)
$
920
39
Table of Contents
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 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 $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 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
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 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
The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of our unaudited consolidated financial statements as well as reported amounts of revenue and expenses during the periods presented. Our unaudited consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. 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, 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.
40
Table of Contents
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. For further information on all of our significant accounting policies, see the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Recent Accounting Pronouncements
Recent accounting pronouncements are detailed in the “Summary of Significant Accounting Policies” in Note 2 to our unaudited consolidated financial statements.
Smaller Reporting Company Status
We are a “smaller reporting company” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may continue to be a smaller reporting company even though we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
41
Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.