Item 3. Legal Proceedings
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We have settled our previously disclosed material legal proceedings and are not currently a party to any legal proceedings that, in the opinion of our management, would have a material adverse effect on our business, financial condition, operating results or cash flows.
Synacor Litigation
In 2020, Synacor, Inc. (“Synacor”) commenced an action against MediaHouse, LLC, Inform, Inc. and the Company, alleging approximately $230,000 was owed based on invoices issued in 2019 in respect to that certain Content Provider & Advertising Agreement with MediaHouse. During January 2022, the Company entered into a settlement agreement related to the legal proceedings with Synacor totaling $184,000. 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. The Company previously reserved approximately $245,000 towards this litigation, and following the settlement, the Company recognized an adjustment of $61,000 included in litigation settlement on the consolidated statements of operations for the year ended December 31, 2022.
At December 31, 2022, the Company paid $144,000 in connection with the Synacor settlement agreement, leaving an outstanding balance of $40,000. This amount is included in other liabilities on the consolidated balance sheet at December 31, 2022.
MediaHouse Defamation
A former employee of the Company filed a suit against the Company, MediaHouse, LLC, and Gregory A. Peters, a former Executive, (the “Defendants”) alleging two counts of defamation.
On August 2, 2022, the parties engaged in mediation, which resulted in a settlement of the lawsuit on August 4, 2022. The Company agreed to pay $62,500 over a 12-month period, with the first payment commencing on September 8, 2022, and final payment due on August 1, 2023. Approximately $42,000 was outstanding at December 31, 2022. This amount is included in other liabilities on the consolidated balance sheet at December 31, 2022.
Slutzky & Winshman – Default on Obligations
Bright Mountain has been sued by plaintiffs Joey Winshman, Eli Desatnik and Nadav Slutzy (“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 Bright Mountain 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.
On September 6, 2022, the Company’s Board of Directors approved a settlement of $650,000 payable over a 50-month period commencing January 2023. The amount is included in other liabilities on the consolidated balances sheets. See Note 10, "Oceanside Share Exchange Loan" to the accompanying consolidated financial statements for further information.
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
21
Table of Contents
litigations and 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. The outcome is not determinable as of the issuance of these financial statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
22
Table of Contents
PART II