Bright Mountain Media, Inc. 10-K

ITEM 3. LEGAL PROCEEDINGS From time-to-time, we may be involved in litigation or be subject to claims arising out of our operations or content appearing on our websites in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on our company because of defense and settlement costs, diversion of management resources and other factors. In 2020, Synacor, Inc commenced an action against MediaHouse, LLC, Inform, Inc. and the Company, alleging the sum of approximately $230,000 was owed based on invoices provided in 2019 in respect to that certain Content Provider & Advertising Agreement with MediaHouse. This is recorded as an accrued liability as of December 31, 2020. There was an understanding reached in principle with MediaHouse, subject to finalization and execution of a definitive agreement, in or about December 1, 2021. During January 2022, the Company entered into a settlement agreement related to the legal proceeding with Synacor referenced in Note 11. The agreement obligates the Company to pay $12,000 per month beginning January 24, 2022 for 12 consecutive months and then a final one-time payment in the amount of $40,000 to be paid on or before January 24, 2023. Notwithstanding, the Company has an early settlement option to pay-off the obligation with a discount if it pays $160,000 to Synacor on or before September 1, 2022, which amount shall be inclusive of the monthly installments previously mentioned prior to the date when early settlement payment is transmitted to Synacor. At December 31, 2021, the Company has included the $230,000 in accounts payable. A former employee of the Company filed a suit against the Company, MediaHouse, Inc., and Gregory A. Peters, a former Executive, (the “Defendants”) alleging two counts of defamation. Any potential losses associated with this matter cannot be estimated at this time. Encoding.com, Inc. (“Encoding”) was a former digital media customer of MediaHouse. Encoding had a long overdue outstanding receivable from MediaHouse’s predecessor company, Inform, Inc. MediaHouse did not assume the liability at acquisition. In 2020, the Company and Encoding agreed to settle the overdue receivable through the issuance of 175,000 warrants to purchase Company stock with a $1.00 exercise price. This is recorded as an accrued liability as of December 31, 2020 and the warrants were issued in May of 2021. Bright Mountain has been sued by plaintiffs Joey Winshman, Eli Desatnik and Nadav Slutzky (“Plaintiffs”) in a lawsuit filed in the United States District Court for the Southern District of Florida on December 17, 2021 (the “Lawsuit”). Plaintiffs allege that BMM defaulted on its obligations to Plaintiffs under three promissory notes that arose from the merger between Bright Mountain Israel Acquisition Ltd., a wholly owned subsidiary of Bright Mountain, and Slutzky & Winshman Ltd. Plaintiffs seek to recover from Bright Mountain the principal balance of the promissory notes, interest, attorney’s fees, and costs. Discovery in the Lawsuit is underway and the parties continue to intermittently explore the possibility of settlement. Any potential losses associated with this matter cannot be estimated at this time. ITEM 4. MINE SAFETY DISCLOSURES Not applicable to our company. 23 PART II