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 purpose of disclosure controls is 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. The Company’s management, with the participation of the Company’s Chief Executive Officer (its principal executive officer), who is also presently acting as the Company’s interim 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, 2026. Based on that evaluation, the Company’s Chief Executive Officer has concluded that as of March 31, 2026, our disclosure controls and procedures were effective. 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, 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 part of this evaluation, we noted that the Company continues to improve its accounting processes, and that management has implemented, and continues to implement, a series of measures designed to strengthen the Company's control environment, risk assessment processes, and control activities. The Company updated its information technology general controls ("ITGC") risk assessment to better evaluate risks affecting the reliability, integrity, security, and confidentiality of the Company's information systems and underlying financial data, and our Chief Executive Officer evaluated our accounting processes as follows:. First, the Company implemented the compliance model within Floqast to formalize identification, documentation, and monitoring of key internal controls. Through this initiative, management developed a comprehensive key control matrix that documents key controls related to significant financial statement areas, including revenue recognition, cost of sales, equity transactions, and other material account balances and disclosures. This framework enhances management's ability to evaluate internal control design, monitor operating effectiveness, and maintain clear documentation supporting financial reporting controls. Second, to improve timeliness and consistency of financial reporting, the Company optimized its month-end close process by enhancing cross-departmental coordination, automating key reconciliation and reporting activities, and reducing reliance on manual processes. These improvements have shortened the monthly close timeline and strengthened management review controls over financial results. Third, the Company implemented a new accounting system, Microsoft Dynamics 365 Business Central ("Business Central"), to enhance the efficiency, accuracy, and integration of financial data across departments. The implementation of this system supports improved segregation of duties, system-based controls, audit trail functionality, and more consistent application of accounting policies, further strengthening internal controls over financial reporting. Management believes these remediation efforts have materially improved the design and execution of the Company's internal control framework. The Company will continue to monitor the effectiveness of these controls and pursue additional enhancements as necessary to ensure a sustainable and effective control environment.   47 Table of Contents Based on the Company's continued improvements in its accounting processes described above, the Company's Chief Executive Officer, acting as the Company’s principal executive officer and principal financial officer, evaluated our internal controls and concluded that as of March 31, 2026, 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, 2026. 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, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 48 Table of Contents PART II – OTH ER INFORMATION Item 1. Legal Proc eedings. From time to time, we may become involved in legal proceedings and claims arising in the ordinary course of business, including but not limited to, disputes in the areas of contracts, data protection, content regulation, intellectual property, consumer protection, e-commerce, marketing, advertising, rights of publicity, health and safety, employment and labor, competition, and taxation. We record a liability when we believe that it is probable that we will incur a loss, and the amount of that loss can be reasonably estimated. Ladenburg On July 11, 2023, Ladenburg Thalmann & Co. Inc. (“Ladenburg”) filed an action against the Company for breach of contract in the United States District Court for the Southern District of Florida (the “District Court”), Case No. 9:23-cv-81019-AMC. Ladenburg alleges that it entered into an Investment Banking Agreement (the “Agreement”) with the Company on September 1, 2020. According to Ladenburg, that Agreement provided that Ladenburg would be the exclusive investment advisor and banker for the Company. Ladenburg alleges that the Agreement entitles them to a fee for any financing transactions (debt financing or merger and acquisition transactions) that the Company engages in during the term of the contract. In April 2023, the Company informed Ladenburg of the impending acquisition of Big Village Insights, Inc. and Big Village Agency, LLC (together, the "Big Village Acquisition"). Ladenburg now seeks $1.5 million, plus interest, costs and attorneys’ fees and expenses as a result of that acquisition and debt financing, claiming that it is entitled to a fee. The Company disputes the allegations and disputes that Ladenburg is entitled to receive any fee since it did not perform any work pertaining to such acquisition. On November 27, 2024, the District Court entered a judgment in favor of Ladenburg and against the Company granting damages of $1.7 million to Ladenburg. On December 26, 2024, the Company filed a motion with the District Court requesting that the District Court reconsider its judgment. This motion was denied on January 30, 2025. Also on December 26, 2024, the Company and its subsidiaries entered into the Twenty-First Amendment to the Credit Agreement with Centre Lane Partners for the purpose of securing a bond to stay execution of the judgment. See Note 10, Centre Lane Senior Secured Credit Facility, to the consolidated financial statements. The Company obtained the bond and a stay of execution of the judgment was granted on February 3, 2025. On May 9, 2025, the Company appealed to the United States Court of Appeals for the Eleventh Circuit Court of Appeals. Ladenburg filed a response on July 9, 2025, and the Company accrued an additional $242,000 to cover fees related to this matter. The Company replied to Ladenburg's response on August 29, 2025. On March 26, 2026, the Company and Ladenburg entered into a binding settlement agreement and mutual release. Pursuant to the settlement agreement, the Company agreed to pay a total settlement amount of $950,000. The settlement amount is expected to be funded from the restricted cash collateral securing the appeal bond. Following payment of the settlement amount and satisfaction of related obligations, any remaining bond funds are expected to be returned to Centre Lane Partners. The Company recorded the effect of the settlement in its consolidated financial statements for the three months ended March 31, 2026. The settlement resulted in a reduction of litigation-related accruals and the recognition of a net gain of approximately $1.1 million reflected within legal fees in general and administrative expenses for the three months ended March 31, 2026. Other Litigation Other litigation is defined as smaller claims or litigation that are neither individually nor collectively material. It does not include lawsuits that relate to collections. The Company is party to various other legal proceedings that arise in the ordinary course of business, separate from normal course accounts receivable collections matters. Due to the inherent difficulty of predicting the outcome of these other legal proceedings, the Company cannot predict the eventual outcome of these matters, and it is reasonably possible that some of them could be resolved unfavorably to the Company. As a result, it is possible that the Company’s results of operations or cash flows in a particular fiscal period could be materially affected by an unfavorable resolution of pending litigation or contingencies.