Bright Mountain Media, Inc. 10-Q

Item 3. 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 3 to Form 10-Q. Item 4. Controls and Pro cedures. Evaluation of Disclosure Controls and Procedures The Company’s management, with the participation of the Company’s Chief Executive Officer (its principal executive officer) and Chief Financial Officer (its principal financial officer), have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2025. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of and for the period ended March 31, 2025, our disclosure controls and procedures were effective to provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Our senior management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our Board, senior management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We continue to review our internal control over financial reporting and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). As the Company continues to improve its accounting staff and processes, internal controls are at the forefront of our efforts to produce accurate and complete financial statements. The Company has provided standard operating procedures to ensure each process is both functioning and performed correctly. This allows for documented updates and improvements. The implementation of the month end close software also elevated our internal controls and documentation. Management does recognize that without updated systems, the manual processes will allow for possible material weaknesses in the future. Notwithstanding the significant deficiencies described below, based on the Company's continued improvements in its accounting staff and processes described above, the Company's Chief Executive Officer and Chief Financial Officer evaluated our internal controls and concluded that as of and for the quarter ended March 31, 2025, they were effective, and that our consolidated financial statements included in this Quarterly Report on Form 10-Q fairly represent, in all material respects, our financial condition and results of operations as of and for the quarter ended March 31, 2025. Outlined below are the significant deficiencies identified by management, along with the remedial actions planned. Significant Deficiency A significant deficiency or a combination of deficiencies in internal control over financial reporting is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the Company’s financial reporting. The presence of such a deficiency does not mean that a material misstatement has occurred, but it indicates the possibility of such an occurrence in the future. 42 Table of Contents As the Company continues to update and integrate its accounting and project systems, we have identified deficiencies in our overall internal controls, specifically as identified below: • Inadequate controls related to revenue recognition and cost of revenue processes leading to the possibility of the misstatement of material transactions impacting financial statements. • Ineffectiveness of the Company’s information technology systems and controls concerning financial information. • Inadequate controls related to share cancellation processes leading to the possibility of misstatement of transactions impacting financial statements. To address these weaknesses, the Company has initiated a remediation plan comprising the following measures: • Updating the information technology general controls ("ITGC") risk assessment to ensure reliability, integrity, security, and confidentiality of the Company’s infrastructure and data. • Examination of information technology systems to ascertain necessary updates to support the financial reporting process. • Implementing the compliance option in Floqast to identify and document key controls. This will create a key control matrix to establish and document controls related to revenue recognition, cost of sales, equity, and other processes to enhance internal controls over financial reporting. • In the year ended December 31, 2024, the accounting and finance department improved with the hiring of an experienced operational Controller and Accounting Manager as well as the VP of Finance. These positions complement and collaborate with the existing SEC Reporting Manager. We believe this will strengthen our department as we work towards strong internal controls and provide guidance beyond the finance functions for those we rely on to provide information to support our financial reporting process. We will continue to monitor and evaluate the effectiveness of our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary. Changes in Internal Control over Financial Reporting Other than the matters set forth above, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 43 Table of Contents PART II – OTH ER INFORMATION Item 1. Legal Proc eedings. For a description of developments to legal proceedings during the three months ended March 31, 2025, see “Litigation” under Note 16, Commitments and Contingencies, to our consolidated financial statements.