Bright Mountain Media, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2022. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of the period ended December 31, 2022, due to the existence of the material weaknesses in the Company’s internal control over financial reporting described below, the Company’s disclosure controls and procedures were not effective. Management's Annual Report on Internal Control over Financial Reporting 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"). Based upon this assessment, because of the effect of the material 36 Table of Contents weaknesses described below, management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2022. As set forth below, management will take steps to remediate the material weaknesses identified below. Notwithstanding the material weaknesses described below, we have performed additional analyses and other procedures to enable management to conclude that our consolidated financial statements included in this Form 10-K fairly present, in all material respects, our financial condition and results of operations as of and for the year ended December 31, 2022. Material Weaknesses A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. As of December 31, 2022, management identified the material weakness described below: In conducting an analysis of the Centre Lane Senior Secured Credit Facility, errors were identified in connection with the accounting related to Amendments No. 8 – 15 of the Centre Lane Senior Secured Credit Facility, which resulted in the understatement of interest payable and interest expense for each of the interim quarterly periods ended June 30, 2022, and September 30, 2022 and the year-to-date 2022 period. The Company has initiated a remediation plan to enhance controls relating to the accounting of its debt arrangements that includes the following: • Internal interest calculations are to be prepared and compared to the model provided by the external evaluators, along with outstanding principal and carrying value; • Quarterly statements are to be received from Centre Lane where the balances will be compared to internal schedules; • Monthly journal entries for interest expense and supporting documentation will be reviewed by an individual independent of its preparation as part of the month end close; and • Monthly reconciliations will be performed to support the month end close, which will be reviewed and evidenced by both preparer’s and reviewer’s signature to demonstrate independence and accountability. Management had previously identified the following material weaknesses, which caused management to conclude that as of December 31, 2021 our internal controls over financial reporting were not effective at the reasonable assurance level: • Insufficient segregation of duties, oversight of work performed and lack of compensating controls in our finance and accounting functions due to limited personnel; • The Company’s systems that impact financial information and disclosures have ineffective information technology controls; • Inadequate controls surrounding revenue recognition, to ensure that all material transactions and developments impacting the financial statements are reflected and properly recorded; • Management evaluation of 1) the disclosure controls and procedures and 2) internal control over financial reporting was not sufficiently comprehensive due to limited personnel; • Ineffective controls and procedures in area of review and preparation of Form 10-K and other filings on a timely basis; and • Inadequate controls surrounding information provided to third party valuation reports in connection with acquisitions to ensure that the financial information is accurate and free from misstatements. The Company has implemented a remediation plan to remediate the material weaknesses identified during the year ended December 31, 2021 as follows: 37 Table of Contents • We have hired a new Chief Financial Officer with extensive knowledge of implementing procedures to remediate material weaknesses in companies. • We have expanded our finance department through the hiring of a certified public accountant with previous experience as an auditor and knowledge of SEC filings and technical issues. We believe this will strengthen our finance department as we work towards segregation of duties, strong internal controls and provide guidance to enhance our current staff. Management will further expand the accounting and finance function by hiring additional staff to ensure segregation of duties is enforced. • We no longer rely on a third party consultant to prepare our SEC filings, and this is now being done internally. • We have engaged a third party company to assist the Company with SOX compliance. • As of our filing date, we are in the process of completing our information technology general controls ("ITGC") risk assessment and moving forward to document and implement controls over the revenue 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 and as funds allow. This Annual Report on Form 10-K does not include an attestation report of the Company’s registered independent public accounting firm on management’s assessment regarding internal controls over financial reporting due to the exemption from such requirements established by rules of the SEC for smaller reporting companies. 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 December 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Limitations on Effectiveness of Controls and Procedures In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 38 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by Item 10 of Part III of Form 10-K will be set forth in our definitive proxy statement for our 2023 Annual Meeting of Shareholders, to be filed with the SEC within 120 days of December 31, 2022, and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 of Part III of Form 10-K will be set forth in our definitive proxy statement for our 2023 Annual Meeting of Shareholders, to be filed with the SEC within 120 days of December 31, 2022, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by Item 12 of Part III of Form 10-K will be set forth in our definitive proxy statement for our 2023 Annual Meeting of Shareholders, to be filed with the SEC within 120 days of December 31, 2022, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by Item 13 of Part III of Form 10-K will be set forth in our definitive proxy statement for our 2023 Annual Meeting of Shareholders, to be filed with the SEC within 120 days of December 31, 2022, and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by Item 14 of Part III of Form 10-K will be set forth in our definitive proxy statement for our 2023 Annual Meeting of Shareholders, to be filed with the SEC within 120 days of December 31, 2022, and is incorporated herein by reference. 39 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)(1) Financial Statements The financial statements and notes are listed in the Index to Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K and are included in Part II, Item 8 of this Annual Report on Form 10-K. (a)(2) Financial Statement Schedules All financial statement schedules are omitted because they are not applicable or the required information is included in the Consolidated Financial Statements or notes thereto listed in the Index to Consolidated Financial Statements , starting on page F-1 of this Annual Report on Form 10-K. (a)(3) Exhibits The following exhibits listed in the Exhibit Index below are filed as part of, and incorporated by reference into, this Annual Report on Form 10-K. EXHIBIT INDEX Incorporated by Reference Filed or Furnished No. Exhibit Description Form Date Filed Number Herewith 2.1 Share Exchange Agreement and Plan of Merger dated July 31, 2019 by and among Bright Mountain Media, Inc., Bright Mountain Israel Acquisition Ltd. (a to be formed entity), Slutzky & Winshman Ltd. and the shareholders of Slutzky & Winshman, Ltd. 8-K 8/1/19 2.1 2.2 Merger Agreement and Plan of Merger dated November 8, 2019 by and among Bright Mountain Media, Inc. BMTMZ, and News Distribution Network, Inc. 8-K 11/21/19 2.1 3.1 Amended and Restated Articles of Incorporation 10 1/31/13 3.3 3.2 Articles of Amendment to the Amended and Restated Articles of Incorporation 8-K 7/9/13 3.3 3.3 Articles of Amendment to the Amended and Restated Articles of Incorporation 8-K 11/16/13 3.4 3.4 Articles of Amendment to the Amended and Restated Articles of Incorporation 8-K 12/30/13 3.4 3.5 Articles of Amendment to the Amended and Restated Articles of Incorporation 10-K 3/31/14 3.5 3.6 Articles of Amendment to the Amended and Restated Articles of Incorporation 8-K 7/28/14 3.6 3.7 Articles of Amendment to the Amended and Restated Articles of Incorporation 10-K/A 4/1/15 3.5 3.8 Articles of Amendment to the Amended and Restated Articles of Incorporation 8-K 12/4/15 3.7 3.9 Articles Amendment to the Amended and Restated Articles of Incorporation 8-K 11/13/18 3.10 3.10 Amended and Restated Bylaws 10 1/31/13 3.2 4.1 Form of unit warrant 2018 private placement 10-K 4/2/18 4.1 4.2 Form of placement agent warrant 2018 private placement 10-K 4/2/18 4.2 4.3 Specimen common stock certificate 10-K 5/14/20 4.3 4.4 Form of unit warrant 2019 private placement 8-K 1/14/19 4.1 40 Table of Contents 4.5 Form of placement agent warrant 2019 private placement 8-K 1/14/19 4.2 4.6 Description of Securities X 10.1 2011 Stock Option Plan 10 1/31/13 10.1 10.2 2013 Stock Option Plan 10-Q 11/13/13 10.18 10.3 2015 Stock Option Plan 8-K 5/27/15 10.36 10.4 2019 Stock Option Plan 10-K 12/23/21 10.4 10.5 2022 Stock Option Plan 8-K 4/20/22 10.3 10.6 Letter A greement dated September 19, 2017 with Vinay Belani 8-K 9/25/17 10.2 10.7 Consulting Agreement dated September 6, 2017 by and between Spartan Capital Securities, LLC and Bright Mountain Media, Inc. 8-K 10/4/18 10.45 10.8 M&A Advisory Agreement dated September 6, 2017 by and between Spartan Capital Securities, LLC and Bright Mountain Media, Inc. 8-K 10/4/18 10.46 10.9 Finder’s Agreement dated October 31, 2018 by and between Spartan Capital Securities, LLC and Bright Mountain Media, Inc. 10-Q 11/20/18 10.2 10.10 Uplisting Advisory and Consulting Agreement dated December 11, 2018 by and between Spartan Capital Securities, LLC and Bright Mountain Media, Inc. 8-K 1/14/19 10.1 10.11 Lease Agreement dated August 24, 2014 for registrant’s principal executive offices 10-Q 11/12/14 10.26 10.12 Addendum to Lease dated August 5, 2015 for registrant’s principal executive offices 10-Q 8/11/15 10.37 10.13 Amendment to Lease Agreement dated August 8, 2018 for registrant’s principal executive offices 10-Q 11/20/18 10.1 10.14 Executive Employment Agreement effective April 1, 2020 by and between W. Kip Speyer and Bright Mountain Media, Inc. 8-K 3/31/20 10.1 10.15 Letter Agreement dated February 8, 2023 by and between W. Kip Speyer and Bright Mountain Media, Inc. 8-K 2/10/23 10.1 10.16 Consulting Agreement effective January 1, 2021 between Greg Peters and Bright Mountain Media, Inc. 8-K 1/6/21 10.1 10.17 Amendment dated July 31, 2019 to Finder’s Fee Agreement by and between Bright Mountain Media, Inc. and Spartan Capital Securities, LLC 8-K 8/7/19 10.2 10.18 Promissory Note dated August 15, 2019 due to Joey Winshman 8-K 8/16/19 10.1 10.19 Promissory Note dated August 15, 2019 to Nadav Slutzky 8-K 8/16/19 10.2 10.20 Promissory Note dated August 15, 2019 to Eli Desatnik 8-K 8/16/19 10.3 10.21 Employment Agreement dated August 15, 2019 by and between Slutzky & Winshman Ltd. and Joey Winshman 8-K 8/16/19 10.8 10.22 Consulting Agreement dated August 15, 2019 by and between Bright Mountain Media, Inc., Slutzky & Winshman Ltd. and Nadav Slutzky 8-K 8/16/19 10.9 10.23 Membership Interest Purchase Agreement dated June 5, 2020 between Centre Lane Partners Master Credit Fund II and Bright Mountain Media, Inc. 8-K 6/8/20 10.1 41 Table of Contents 10.24 Credit Agreement dated as of June 5, 2020 by and among CL Media Holdings, LLC, as the Borrower, the Financial Institutions thereto and Centre Lane Partners Master Fund II, L.P. as Agent 8-K 6/8/20 10 10.25 Form of Warrant for November 2019 Private Placement 8-K 2/4/20 10.2 10.26 First Amendment to an Amended and Restated Senior Credit Agreement dated April 26, 2021. 8-K 4/30/21 10.1 10.27 Second Amendment to an Amended and Restated Senior Credit Facility Agreement dated May 26, 2021. 8-K 6/2/21 10.1 10.28 Third Amendment to Amended and Restated Senior Credit Facility Agreement dated December 20, 2021 8-K 8/18/21 10.1 10.29 Fourth Amendment to Amended and Restated Senior Secured Credit Agreement dated August 31, 2021 8-K 9/7/21 10.1 10.30 Fifth Amendment to Amended and Restated Senior Secured Credit Agreement dated October 8, 2021 8-K 10/8/21 10.1 10.31 Sixth Amendment to Amended and Restated Senior Secured Credit Agreement dated November 5, 2021 8-K 11/5/21 10.1 10.32 Seventh Amendment to an Amended and Restated Senior Secured Credit Agreement dated December 23, 2021 8-K 12/29/21 10.1 10.33 Eighth Amendment to an Amended and Restated Senior Secured Credit Agreement dated January 26, 2022 8-K 1/20/22 10.1 10.34 Ninth Amendment to an Amended and Restated Senior Secured Credit Agreement dated February 11, 2022 8-K 2/17/22 10.1 10.35 Annex A to the Credit Agreement dated February 11, 2022 8-K 2/17/22 10.2 10.36 Tenth Amendment to an Amended and Restated Senior Secured Credit Agreement dated March 11, 2022 8-K 3/16/22 10.1 10.37 Annex A to the Credit Agreement dated March 11, 2022 8-K 3/16/22 10.2 10.38 Eleventh Amendment to an Amended and Restated Senior Secured Credit Agreement dated March 25, 2022 8-K 3/31/22 10.1 10.39 Annex A to the Credit Agreement dated March 25, 2022 8-K 3/31/22 10.2 10.40 Twelfth Amendment to an Amended and Restated Senior Secured Credit Agreement dated April 15, 2022 8-K 4/20/22 10.1 10.41 Annex A to the Credit Agreement dated April 15, 2022 8-K 4/20/22 10.2 10.42 Thirteenth Amendment to an Amended and Restated Senior Secured Credit Agreement dated May 10, 2022 8-K 5/16/22 10.1 10.43 Annex A to the Credit Agreement dated May 10, 2022 8-K 5/16/22 10.2 10.44 Fourteenth Amendment to an Amended and Restated Senior Secured Credit Agreement dated June 10, 2022 8-K 6/16/22 10.1 10.45 Annex A to the Credit Agreement dated June 10, 2022 8-K 6/16/22 10.2 42 Table of Contents 10.46 Fifteenth Amendment to an Amended and Restated Senior Secured Credit Agreement dated July 8, 2022 8-K 7/13/22 10.1 10.47 Annex A to the Credit Agreement dated July 8, 2022 8-K 7/13/22 10.2 10.48 Sixteenth Amendment to an Amended and Restated Senior Secured Credit Agreement dated February 10, 2023 8-K 2/16/23 10.1 10.49 Annex A to the Credit Agreement dated February 10, 2023 8-K 2/16/23 10.2 10.50 Share Issuance Agreement between Spartan Capital Securities, LLC and Bright Mountain Media, Inc. dated September 22, 2021 8-K 9/28/21 10.1 21.1 List of subsidiaries X 23.1 Consent of WithumSmith+Brown, PC X 31.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) X 31.2 Certification of the Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) X 32.1* Certification of the Principal Executive Officer and the P rincipal F inancial O fficer pursuant to Section 1350 X 32.2* Certification of the Chief Financial Officer and Principal Financial and Accounting Officer pursuant to Section 1350 X 101.INS INLINE XBRL INSTANCE DOCUMENT X 101.SCH INLINE XBRL TAXONOMY EXTENSION SCHEMA X 101.CAL INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE X 101.DEF INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE X 101.LAB INLINE XBRL TAXONOMY EXTENSION LABEL LINKBASE X 101.PRE INLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE X 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) X * Furnished herewith. This certification is deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. 43 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BRIGHT MOUNTAIN MEDIA, INC. Date: March 28, 2023 By: /s/ Matthew Drinkwater Matthew Drinkwater Chief Executive Officer and Director (Principal Executive Officer) Date: March 28, 2023 By: /s/ Miriam Martinez Miriam Martinez Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 28, 2023 By: /s/ W. Kip Speyer W. Kip Speyer Chairman of the Board of Directors Date: March 28, 2023 By: /s/ Matthew Drinkwater Matthew Drinkwater Director and Chief Executive Officer Date: March 28, 2023 By: /s/ Harry Schulman Harry Schulman Director Date: March 28, 2023 By: /s/ Pamela Parizek Pamela Parizek Director Date: March 28, 2023 By: /s/ Gretchen Tibbits Gretchen Tibbits Director Date: March 28, 2023 By: /s/ Todd Speyer Todd Speyer Director 44 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID # 100 ) F - 2 Consolidated balance sheets at December 31, 2022 and 2021 F - 5 Consolidated statements of operations and comprehensive loss for the years ended December 31, 2022 and 2021 F - 6 Consolidated statements of changes in stockholders’ deficit for the years ended December 31, 2022 and 2021 F - 7 Consolidated statements of cash flows for the years ended December 31, 2022 and 2021 F - 8 Notes to consolidated financial statements F - 8 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Bright Mountain Media, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Bright Mountain Media, Inc. (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for each of the years ended December 31, 2022 and 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021, and the consolidated results of their operations and their cash flows for each of the years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt Regarding the Company’s Ability to Continue as a Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Emphasis of the Matter – Restatement of Interim Financial Statements As disclosed in Note 21 of the consolidated financial statements, the unaudited interim financial statements as of and for the periods ended June 30, 2022 and September 30, 2022 have been restated to correct an understatement of interest expense and interest payable. This matter is described in more detail in Note 21 of the consolidated financial statements. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue Recognition – Refer to Note 2 and Note 14 to the consolidated financial statements Critical Audit Matter Description The Company recognizes revenue at a point in time when control of services is transferred to the customer. The Company recognizes revenue primarily from delivering digital advertisements on its owned and operated publishing websites, as well as advertising on partner websites, mobile apps and digital streaming services such as CTV (Connected Television) Channels in its customer agreements. In determining revenue recognition for these customer agreements, the Company performs the following five steps: (i) identify the contract with customer (ii) identify the performance obligation in the contract; (iii) determine the transaction price; (iv) allocate the F-2 Table of Contents transaction price to the performance obligations in the contract; and (v) recognize revenue when the Company satisfies a performance obligation. How the Critical Audit Matter Was Addressed in the Audit Our principal audit procedures related the Company’s revenue recognition for these customer agreements included the following: • We performed a walkthrough of the design effectiveness and implementation of internal controls with respect to the Company’s revenue and cash receipts cycle. • We selected a sample of customer agreements and performed the following procedures: ◦ Obtained and read a sample of contract source documents for each selection as well as amendments thereto. ◦ We obtained an understanding of the performance obligations associated with the Company’s revenue contracts, such as number of ads displayed, consumer clicks on the ads, or consumer actions that were required by the contract. ◦ We tested the transaction price within the contract, which was represented by the amount of impressions that must be delivered by the Company. ◦ We determine that the allocation of the transaction price was to a single performance obligation. ◦ We tested the amount of impressions delivered by the Company to the customer from the independent ad server data to test the properness of recognized revenue with the terms of the contract. • We tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements. Valuation of goodwill - Refer to Notes 2 and 7 to the consolidated financial statements Critical Audit Matter Description As reflected in the Company’s consolidated financial statements at December 31, 2022 the Company’s goodwill was approximately $19.6 million. As disclosed in Note 1 to the consolidated financial statements, the Company tests goodwill for impairment at the reporting unit level on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value, which are determined through a qualitative assessment. A qualitative assessment includes consideration of the economic, industry and market conditions in addition to the overall financial performance of the Company and these assets. If the qualitative assessment does not conclude that it is more likely than not that the estimated fair value of the reporting unit is greater than the carrying value, the Company performs a quantitative analysis. In a quantitative test, the fair value of a reporting unit is determined based on a discounted cash flow analysis and further analyzed using other methods of valuation. A discounted cash flow analysis requires the Company to make various assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s long-term projections. Assumptions used in the Company’s impairment testing are consistent with the Company’s internal forecasts and operating plans. The Company’s discount rate is based on the Company’s debt structure, adjusted for current market conditions. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment. To the extent the carrying amount exceeds its fair value, an impairment charge of the reporting unit’s goodwill would be necessary. How the Critical Audit Matter Was Addressed in the Audit We read and evaluated the impairment analysis summary report, prepared by the Company's external valuation specialists that assessed the fair value of the Company's goodwill as of December 31, 2022. We performed a walk-through of the design effectiveness and implementation of internal controls related to financial reporting of the goodwill. Additional procedures included testing management's process for developing their impairment estimate, which included evaluating the appropriateness of the method used by the Company to develop cash flow projections for goodwill, as well as testing the completeness and accuracy of the underlying data used in the estimates. In addition, we evaluated the reasonableness of significant assumptions including future sales, long-term growth rates, and future economic conditions and performed sensitivity testing on some assumptions. We evaluated these assumptions for their reasonableness considering (i) historical performance; (ii) industry and economic forecast and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Along with the procedures previously described, we performed the following procedures: • We utilized the knowledge, experience, and expertise of our internal valuation specialists to execute the planned valuation procedures related to the valuation by assessing the reasonableness of the methodologies employed to value the goodwill. • We reviewed the professional qualifications and objectivity/independence of the external valuation specialist. • We independently performed a calculation of the fair value to evaluate whether the external valuation specialist’s conclusion was reasonable and consistent with our conclusion. Accounting for debt modifications - Refer to Note 9 to the consolidated financial statements F-3 Table of Contents Critical Audit Matter Description During the year ended December 31, 2022, the Company entered into various amendments to the credit facility for additional loans used for working capital. Part of the amendments include fees that would be added and capitalized into the principal amount of the original loan. The Company is required to perform an analysis of the change in each amendment to determine whether the change is a modification or an extinguishment of debt. Under a modification, no gain or loss is recorded, and a new effective interest rate is established based on the carrying value of the debt and revised cash flow. If the debt is extinguished, the old debt is derecognized and the new debt is recorded as fair value, which becomes the new carrying value. How the Critical Audit Matter Was Addressed in the Audit We read and evaluated the debt extinguishment analysis report, prepared by the Company's external valuation specialist that assessed each amendment to the credit agreement. There were a total of 15 amendments that were executed. For each amendment, the external valuation specialist calculated the present value of the cash flows under the terms of the amendment and determine if it was considered substantially different by at least a 10% difference from the present value of the remaining cash flow of the original debt instrument. We performed a walk-through of the design effectiveness and implementation of internal controls related to financial reporting of the debt cycle. Along with the procedures previously described, we performed the following procedures: • We agreed data from the authorized amendments to the analysis performed by the external valuation specialist. • We tested the external valuation analysis for clerical accuracy and completeness. • We utilized the knowledge, experience, and expertise of our internal valuation specialists to assess the reasonableness of the methodologies employed to value the calculate the present values of the debt instrument under the amended terms and original terms. • We reviewed the professional qualifications and objectivity/independence of the external valuation specialist. • We independently performed a calculation of the present value of the debt instrument under the new terms from the amendment and the original terms of the debt instrument to evaluate whether the external valuation specialist’s conclusion were reasonable and consistent with our conclusion. /s/ WithumSmith+Brown, PC We have served as the Company's auditor since 2021. East Brunswick, New Jersey March 28, 2023 PCAOB ID Number 100 F-4 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2022 2021 ASSETS Current Assets Cash and cash equivalents $ 316 $ 781 Accounts receivable, net 3,585 3,550 Prepaid expenses and other current assets 600 926 Total Current Assets 4,501 5,257 Property and equipment, net 40 65 Intangible assets, net 4,510 6,069 Goodwill 19,645 19,645 Operating lease right-of-use asset 367 — Other assets 137 528 Total Assets $ 29,200 $ 31,564 LIABILITIES AND STOCKHOLDERS’ (DEFICIT) Current Liabilities Accounts payable and accrued expenses $ 10,317 $ 10,967 Other liabilities 1,838 1,598 Interest payable – 10 % Convertible Promissory Notes– related party 31 23 Interest payable – Centre Lane Senior Secured Credit Facility – related party — 617 Deferred revenue 737 1,162 PPP Loan and other loans — 1,387 Note payable – 10 % Convertible Promissory Notes, net of discount, related party 68 — Note payable – Centre Lane Senior Secured Credit Facility – related party (current portion) 4,860 7,316 Total Current Liabilities 17,851 23,070 Note payable – Centre Lane Senior Secured Credit Facility – net of discount, related party 25,101 15,164 Note payable – 10 % Convertible Promissory Notes, net of discount, related party — 54 Operating lease liability 319 — Total Liabilities 43,271 38,288 Stockholders’ Deficit Convertible preferred stock, par value $ 0.01 , 20,000,000 shares authorized: Series A-1, 2,000,000 shares designated, no shares issued or outstanding at December 31, 2022 and December 31, 2021 — — Series B-1, 6,000,000 shares designated, no shares issued or outstanding at December 31, 2022 and December 31, 2021 — — Series E, 2,500,000 shares designated, 0 and 125,000 shares issued and outstanding at December 31, 2022 and December 31, 2021; liquidation preference of $ 0.40 per share — 1 Series F, 4,344,017 shares designated, no shares issued or outstanding at December 31, 2022 and December 31, 2021 — — Common stock, par value $ 0.01 , 324,000,000 shares authorized, 150,444,636 and 149,810,383 issued and 149,619,461 and 148,985,208 outstanding at December 31, 2022 and December 31, 2021, respectively 1,504 1,498 Treasury stock, at cost; 825,175 shares at December 31, 2022 and December 31, 2021, respectively ( 220 ) ( 220 ) Additional paid-in-capital 98,797 98,129 Accumulated deficit ( 114,269 ) ( 106,144 ) Accumulated other comprehensive income 117 12 Total stockholders’ deficit ( 14,071 ) ( 6,724 ) Total liabilities and stockholders’ deficit $ 29,200 $ 31,564 See accompanying notes to consolidated financial statements. F-5 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except share and per share data) For the Years Ended December 31, 2022 2021 Revenue $ 19,580 $ 12,925 Cost of revenue 10,493 6,350 Gross margin 9,087 6,575 General and administrative expenses 14,249 18,482 Total operating expenses 14,249 18,482 Loss from operations ( 5,162 ) ( 11,907 ) Financing income (expense) Gain on forgiveness of PPP loan 1,137 2,172 Other income 163 2 Interest expense - Centre Lane Senior Secured Credit Facility- related party ( 4,227 ) ( 2,163 ) Interest expense - Convertible Promissory notes - related party ( 22 ) ( 22 ) Other interest expense ( 14 ) ( 82 ) Total financing income (expense) ( 2,963 ) ( 93 ) Net loss before income tax ( 8,125 ) ( 12,000 ) Income tax provision (benefit) — — Net loss ( 8,125 ) ( 12,000 ) Dividends Common stock deemed dividend — ( 212 ) Preferred stock dividends ( 5 ) ( 242 ) ( 5 ) ( 454 ) Net loss attributable to common stockholders $ ( 8,130 ) $ ( 12,454 ) Foreign currency translation 105 35 Comprehensive loss $ ( 8,025 ) $ ( 12,419 ) Net loss per common share: Basic and diluted $ ( 0.05 ) $ ( 0.10 ) Weighted average shares outstanding Basic and diluted 149,191,057 128,163,616 See accompanying notes to consolidated financial statements. F-6 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share and per share data) Years Ended December 31, 2022 and 2021 Preferred Stock Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss (Income) Total Stockholders’ (Deficit) Equity Shares Amount Shares Amount Shares Amount Balance, December 31, 2020 8,044,017 $ 80 118,162,150 $ 1,182 ( 825,175 ) $ ( 220 ) $ 96,427 $ ( 93,932 ) $ ( 23 ) $ 3,514 Net loss — — — — — — — ( 12,000 ) — ( 12,000 ) Series A-1, E and F preferred stock dividend — — — — — — ( 242 ) — — ( 242 ) Common stock issued for services rendered — — 176,250 2 — — — — — 2 Exercise of stock options — — 100,000 1 — — 13 — — 14 Exercise of warrants — — 25,000 — — — 10 — — 10 Centre Lane Partners debt financing — — 12,650,000 127 — — 1,002 — — 1,129 Conversion of preferred to common shares ( 7,919,017 ) ( 79 ) 7,919,017 79 — — — — — — Common stock deemed dividend — — 10,398,700 104 — — 108 ( 212 ) — — Common stock issued for Oceanside acquisition — — 379,266 4 — — 603 — — 607 Stock based compensation — — — — — — 207 — — 207 Adjustment from foreign currency translation, net — — — — — — — — 35 35 Balance, December 31, 2021 125,000 $ 1 149,810,383 $ 1,498 ( 825,175 ) $ ( 220 ) $ 98,129 $ ( 106,144 ) $ 12 $ ( 6,724 ) Net loss — — — — — — — ( 8,125 ) — ( 8,125 ) Series E preferred stock dividend — — — — — — ( 5 ) — — ( 5 ) Series E preferred stock conversion ( 125,000 ) ( 1 ) 125,000 1 — — — — — — Exercise of stock options — — 100,000 1 — — — — — 1 Stock based compensation — — — — — — 144 — — 144 Common stock issued for Oceanside acquisition — — 174,253 2 — — 277 — — 279 Warrants issued in settlement of liability — — — — — — 216 — — 216 Common stock issued for services rendered — — 235,000 2 — — 36 — — 38 Adjustment from foreign currency translation, net — — — — — — — — 105 105 Balance, December 31, 2022 — $ — 150,444,636 $ 1,504 ( 825,175 ) $ ( 220 ) $ 98,797 $ ( 114,269 ) $ 117 $ ( 14,071 ) See accompanying notes to consolidated financial statements. F-7 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 8,125 ) $ ( 12,000 ) Adjustments to reconcile net loss to net cash used in operations: Effects of foreign currency translation 105 35 Depreciation 38 48 Interest paid-in kind on Centre Lane Credit Facility 3,104 1,660 Amortization of operating lease right-of-use asset 15 — Amortization of debt discount 1,199 578 Amortization of intangibles 1,558 1,591 Stock based compensation 144 207 Common stock and warrants issued for services 38 12 Stock compensation for Oceanside shares 89 281 Write off doubtful accounts — ( 240 ) Gain on forgiveness of PPP loan ( 1,137 ) ( 2,172 ) Provision for bad debt 84 74 Changes in operating assets and liabilities: Accounts receivable ( 119 ) 3,050 Prepaid expenses and other current assets 695 426 Operating lease right-of-use asset ( 382 ) — Operating lease liability 357 — Accounts payable and accrued expenses ( 593 ) 51 Other liabilities 698 — Interest payable – Centre Lane Senior Secured Credit Facility, related party ( 465 ) ( 358 ) Interest payable – 10% Convertible Promissory note, related party 8 8 Deferred revenues ( 426 ) 816 Net cash used in operating activities ( 3,115 ) ( 5,933 ) Cash flows from investing activities: Cash paid for property and equipment ( 14 ) — Net cash (used in) provided by investing activities ( 14 ) — Cash flows from financing activities: Preference dividend payments ( 5 ) ( 5 ) Proceeds from Centre Lane Senior Secured Credit Facility, related party 3,050 5,125 Repayment of principal on Centre Lane Senior Secured Credit Facility, related party — ( 150 ) Repayments of debt ( 250 ) ( 135 ) Principal payments received (funded) for notes receivable 21 ( 8 ) Proceeds from stock option exercises 1 14 Payment of interest on Centre Lane Senior Secured Credit Facility, related party ( 153 ) — Proceeds from PPP loan — 1,137 Net cash provided by financing activities 2,664 5,978 Net (decrease) increase in cash and cash equivalents ( 465 ) 45 Cash and cash equivalents at beginning of year 781 736 Cash and cash equivalents at end of year $ 316 $ 781 Supplemental disclosure of cash flow information: Cash paid for interest $ 153 $ — Interest paid-in-kind on Centre Lane Credit Facility $ 3,104 $ 1,660 Supplemental disclosure of non-cash investing and financing activities Recognition of right-of-use asset and operating lease liability $ 382 $ — Conversion of Preferred shares to Common shares $ 1 $ 212 Common stock issued to Oceanside to settle share liability $ 279 $ — Debt issued in accordance with legal settlement $ — $ 79 Common stock issued to Centre Lane for debt issuance $ — $ 1,003 Warrants issued to settle liability $ 216 $ — See accompanying notes to consolidated financial statements. F-8 BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – DESCRIPTION OF BUSINESS Organization and Nature of Operations Bright Mountain Media, Inc. (the “Company” or “Bright Mountain” or “we”), is a holding Company which focuses on digital publishing and advertising technology. The Company is engaged in content creation and advertising technology development that helps customers connect with, and market to, targeted audiences in high quality environments using a variety of digital ad formats. 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, in-app). Programmatic advertising relies on artificial intelligence powered software programs that leverage data and proprietary algorithms to match the optimal selection of an ad with a bid price offered by advertisers. The Company generates revenue through sales of advertising services which generate revenue from advertisements placed on the Company’s owned and managed sites, as well as from advertisements placed on partner websites, for which the Company earns a share of the revenue. Additionally, we also generate advertising services revenue from facilitating the real-time buying and selling of advertisements at scale between networks of buyers known as DSPs and sellers known as SSPs. Application to OTC On July 1, 2022, the Company filed an application with the Over-The-Counter (“OTC”) Markets Group Inc. for a review of its candidature to be upgraded to the OTCQB exchange from the OTC Expert Market as the Company is now current with its SEC filing obligations. The application was approved on August 19, 2022 and as of August 19, 2022, the Company's Common Stock is quoted for trading on the OTCQB Market under the symbol "BMTM," and continues to be quoted on this exchange at December 31, 2022. F-9 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Basis of Presentation The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of the Company and all its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation, including revenue and cost of revenue for services performed by a subsidiary company. Going Concern and Liquidity Historically, the Company has incurred losses, which has resulted in an accumulated deficit of approximately $ 114.3 million as of December 31, 2022. Cash flows used in operating activities were $ 3.1 million and $ 5.9 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, the Company had a working capital deficit of approximately $ 13.3 million inclusive of $ 316,000 in cash and cash equivalents. The Company’s ability to continue as a going concern is dependent on its ability to meet its liquidity needs through a combination of factors. The Company is currently exploring all strategic alternatives, including restructuring or refinancing its debts, seeking additional debt, such as borrowings under the Centre Lane Senior Secured Credit Facility or equity capital. The ability to access the capital market is also dependent on the stock volume and market price of the Company's stock, which cannot be assured. Other measures include reducing or delaying certain business activities, reducing general and administrative expenses, including a reduction in headcount. The ultimate success of these plans is not guaranteed. In considering our forecast for the next twelve months, the current cash and working capital, as of the filing of this Annual Report on Form 10-K, the Company’s available cash will not be sufficient to fund its anticipated level of operations. As a result, such matters create a substantial doubt regarding the Company’s ability to meet its financial needs and continue as a going concern. The accompanying condensed 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. Subsequent Event On February 28, 2023, the Company reduced its headcount from 57 employees to 52 employees. No executive officer was included in this reduction. See Note 22, "Subsequent Events", to the accompanying consolidated financial statements for further information. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less, when acquired, to be cash equivalents. The Company maintains its cash with various commercial banks in the U.S. and other foreign countries in which the Company operates. As of December 31, 2022, the Company's interest and noninterest bearing accounts were within the federally insured limits of $ 250,000 . As of December 31, 2021, the Company exceeded the federally insured limit of $ 250,000 for interest and noninterest bearing accounts. As of December 31, 2022, the Company exceeded the insurance limit for one of its international bank accounts by $ 66,000 . The Company had cash balances with a single financial institution in excess of the FDIC insured limits by amounts of $ 0 and $ 93,000 as of December 31, 2022 and December 31, 2021, respectively. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows. F-10 At December 31, 2022, and 2021, the Company had $ 316,000 and $ 781,000 , respectively, in cash and cash equivalents. Subsequent Event On March 10, 2023, the FDIC took over Silicon Valley Bank ("SVB"), which is one of the Company's banking institution. See Note 22, "Subsequent Events", to the accompanying consolidated financial statements for further information. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable represent receivables from customers in the ordinary course of business and are recorded in accordance with FASB Accounting Standards Codification No. 310, Receivables, (ASC 310) . Receivables are recorded at the invoice amount on the date revenue is recognized and are presented net of the allowance for doubtful accounts in the accompanying consolidated balance sheets. Receivables are subjected to adjustments from traffic settlements that are deducted from open invoices. Our receivables are not interest bearing and not collateralized. The allowance for doubtful accounts is based on our assessment of the collectability of customer accounts. We regularly review our receivables that remain outstanding past their applicable payment terms and establish an allowance for potential write-offs by considering factors such as historical experience, credit quality, age of the accounts receivable balances, and current and forecasted economic conditions that may affect a customer’s ability to pay. The policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30 or net 60 days. Once collection efforts by the Company is exhausted, the determination for charging off uncollectible receivables is made. Property and Equipment, net Property and equipment are recorded at cost, less accumulated depreciation in accordance with FASB Accounting Standards Codification No. 360, Property, Plant and Equipment, (ASC 360) . Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets. Leasehold improvements are amortized over the lesser of the lease term or the useful life of the improvements. Goodwill We account for Goodwill under FASB Accounting Standards Codification No. 350, Goodwill and Other, (ASC 350). Goodwill represents the cost in excess of the fair value of the net assets acquired in a business combination. The Company categorizes Goodwill into two reporting units: “Owned & Operated” and “Ad Network”. Goodwill is tested for impairment at the reporting unit level on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value, which are determined through a qualitative assessment. A qualitative assessment includes consideration of the economic, industry and market conditions in addition to the overall financial performance of the Company and these assets. If our qualitative assessment does not conclude that it is more likely than not that the estimated fair value of the reporting unit is greater than the carrying value, we perform a quantitative analysis. In a quantitative test, the fair value of a reporting unit is determined based on a discounted cash flow analysis and further analyzed using other methods of valuation. A discounted cash flow analysis requires us to make various assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on our long-term projections. Assumptions used in our impairment testing are consistent with our internal forecasts and operating plans. Our discount rate is based on our debt structure, adjusted for current market conditions. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment. To the extent the carrying amount exceeds its fair value, an impairment charge of the reporting unit’s goodwill would be necessary. We performed our annual goodwill impairment test as of December 31, 2022, and 2021, and we determined there were no events or circumstances which indicated that the carrying value of a reporting unit exceeded the fair value. F-11 Intangible Assets We account for intangibles under FASB Accounting Standards Codification No. 350, Goodwill and Other, (ASC 350). Intangible assets acquired in a business combination or an asset acquisition are recorded at fair value on the date of acquisition and amortized over their estimated useful lives. Intangible assets include trade name, customer relationships, IP/technology and non-compete agreements. The Company’s trade name and customer relationships are amortized on a straight-line basis over a useful life of five years . IP/technology is amortized on a straight-line basis over a useful life of ten years . Non-compete agreements are amortized on a straight-line basis over the length of each agreement, typically between 3 years- five years . The Company reviews for impairment indicators of finite-lived intangibles and other long-lived assets as described below in “Amortization and Impairment of Long-Lived Assets.” Amortization and Impairment of Long-Lived Assets Long-lived assets, such as property, equipment, right-of-use assets, and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending upon the nature of the assets. There were no impairment losses related to long-lived assets in any of the periods presented. Leases The Company determines whether an arrangement contains a lease at inception in accordance with FASB Accounting Standards Codification No. 842, Leases, (ASC 842) . Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liability on our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We do not include options to extend or terminate the lease term unless it is reasonably certain that we will exercise any such options. We recognize rent expense under our operating leases on a straight-line basis. Variable lease costs such as operating costs and property taxes are expensed as incurred. Revenue Recognition The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification No. 606, Revenue from Contracts with Customers, (ASC 606) . The Company recognizes revenue at a point-in-time when control of services is transferred to the customer. Cash received by the Company prior to when control of services is transferred to the customer is recorded as deferred revenue. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it provides to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the services promised within each F-12 contract and determines those that are performance obligations and assesses whether each promised service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation based on relative fair values, when (or as) the performance obligation is satisfied. The Company recognizes revenue primarily from delivering digital advertisements on its owned and operated publishing websites, as well as advertising on partner websites, mobile apps and digital streaming services such as CTV (Connected Television) channels. Advertising revenue is generated by audiences seeing or clicking on digital advertisements utilizing several advertiser partners. Revenue is recognized net of adjustments based on the number of advertisements delivered and are billed monthly or generated via custom content production and extensions on our social media platforms. There is no significant initial cost incurred to obtain contracts with customers, and no contract assets or contract liability recorded in our consolidated financial statements other than those classified as deferred revenue. Deferred Revenue The Company records deferred revenue when cash payments are received in advance of performance obligations. The Company expects to recognize deferred revenue in the following period when it provides its services and, therefore, satisfies its performance obligation to the customer. Cost of Revenue Cost of revenue includes payment to third parties for services performed to drive revenue, including revenue share paid for ad exchange on third party’s site, advertising fees, fees paid for content creation, influencers, writers and sales commissions. Website Development Costs The Company accounts for its website development costs in accordance with FASB Accounting Standards Codification No. 350, Website Development Costs (ASC 350) . These costs, if any, are included in intangible assets in the accompanying consolidated balance sheets. Upgrades or enhancements that add functionality are capitalized while other costs during the operating stage are expensed as incurred. The Company amortizes the capitalized website development costs over an estimated life of five years . As of December 31, 2022 and 2021, all website development costs have been expensed. While it is likely that we will have significant amortization expense as we continue to acquire websites, we believe that intangible assets represent costs incurred by the acquired website to build value prior to acquisition and the related amortization and impairment charges of assets, if applicable, are not ongoing costs of doing business. Advertising and Marketing Advertising and marketing expenses are recognized as incurred and are included in general and administrative expenses on the accompanying consolidated statements of operations and comprehensive loss. For the years ended December 31, 2022 and 2021, advertising and marketing expense was $ 46,000 and $ 58,000 , respectively. Stock Based Compensation We account for stock based compensation in accordance with FASB Accounting Standards Codification No. 718, Compensation - Stock Compensation (ASC 718) . ASC 718 addresses accounting for share-based awards, including stock options, restricted stock, performance shares and warrant. Stock-based compensation for stock options to employees and non-employees is based upon the fair value of the award on the date of grant. We record forfeitures as they occur. The compensation cost is recognized over the requisite service period, which is generally the vesting period, and is included in general and administrative expenses in the consolidated statements of operations. The Company estimates the fair value of stock options using the Black-Scholes valuation model. The expected life represents the term the options granted are expected to be outstanding. The expected volatility is determined using the F-13 historical volatility of similar publicly traded companies. The risk-free interest rate is based on the U.S. Treasury rate in effect at the time of grant. Treasury Stock The Company accounts for its treasury stock as set forth in FASB Accounting Standards Codification No. 505, Treasury Stock (ASC 505-30) . Under ASC 505-30 the total amount paid to acquire the stock is recorded and no gain or loss is recognized at the time of purchase. Gains and losses are recognized at the time the treasury stock is reinstated or retired and are recorded in additional paid in capital or retained earnings. At December 31, 2022 and 2021, the Company owned 825,175 shares of treasury stock. Loss Per Share The Company computes net loss per share in accordance with FASB Accounting Standards Codification No. 260, Earnings Per Share (ASC 260) . Under the provisions of ASC 260, basic net loss per share is computed by dividing the net loss available to common shareholders by the weighted average common shares outstanding during the period. Diluted net loss per share adjusts basic net loss per share for the effect of stock options, warrants, convertible notes and restricted stock awards only in periods, or for such awards in which the effect is dilutive. ASC 260 also requires the Company to present basic and diluted loss per share information separately for each class of equity instruments that participates in any income distribution with primary equity instruments. Deferred Debt Costs Deferred debt costs include costs incurred in connection with acquiring and maintaining debt arrangements. These costs are directly deducted from the carrying amount of the liability in the consolidated balance sheets, are amortized over the life of the related debt using the effective interest method and are classified as interest expense in the accompanying consolidated statements of operations. These deferred debt costs are related to the Company's Centre Lane Secured Credit Facility. Income Taxes We use the asset and liability method to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws in the period those differences are expected to reverse. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized. The Company follows the provisions of FASB Accounting Standards Codification No. 740, Income Taxes (ASC 740). When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax expenses are recognized as tax expenses in the consolidated statement of operations and comprehensive loss. Segment Reporting Consistent with FASB Accounting Standards Codification No. 280, Segment Reporting (ASC "280"), our Chief Financial Officer reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. There are no segment managers who are held accountable by the Chief Financial Officer, F-14 or anyone else, for operations, operating results and planning for levels or components below the consolidated unit level. Accordingly, we determined we have one operating and reportable segment. Use of 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 condensed consolidated financial statements as well as reported amounts of revenue and expenses during the periods presented. Our 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, estimates of amortization period for intangible assets, estimates of depreciation period for property and equipment, the valuation of equity-based transactions, valuation of the Center Lane Senior Secured Facility carrying value regarding debt modification or extinguishment, and the valuation allowance on deferred tax assets. Foreign Currency We translate the financial statements of our foreign subsidiaries, which have a functional currency in the respective country’s local currency, to U.S. dollars using month-end exchange rates for assets and liabilities and actual exchange rates for revenue, costs and expenses on the date of the transaction. Translation gains and losses as a result of consolidation are included in accumulated other comprehensive loss. Transaction gains and losses are included within “general and administrative expense” on the consolidated statements of operations and comprehensive loss. Concentrations of Credit Risk Financial instruments that potentially subject us to concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with high credit-quality financial institutions. Such deposits may be in excess of federally insured limits. In addition, the Company maintains various bank accounts in Thailand and Israel, which are not insured. To date, we have not experienced any losses on our cash and cash equivalents. We perform periodic evaluations of the relative credit standing of the financial institutions. We perform credit evaluations of our customers’ financial condition and require no collateral from our customers. We maintain an allowance for doubtful accounts receivable based upon the expected collectability of accounts receivable balances. The Company generates revenue through sales of advertising services which generate revenue from advertisements placed on the Company’s owned and managed sites, as well as from advertisements placed on partner websites, for which the Company earns a share of the revenue. The follow table provides information about customer and vendor concentration that exceeds 10% of revenue, accounts receivable and accounts payable for the years ended December 31, 2022 and 2021: December 31, 2022 2021 Revenue Concentration Customers exceeding 10% of revenue 1 1 % of overall revenue Customer 1 37.7 % 8.6 % Total % of revenue 37.7 % 8.6 % F-15 December 31, 2022 2021 Accounts Receivable Concentration Customers exceeding 10% of receivable 1 2 % of accounts receivable Customer 1 43.5 % 13.1 % Customer 2 — % 12.0 % Total % of accounts receivable 43.5 % 25.1 % December 31, 2022 2021 Accounts Payable Concentration Vendors exceeding 10% of payable 2 1 % of accounts payable Customer 1 11.0 % 11.2 % Customer 2 10.8 % — % Total % of accounts payable 21.8 % 11.2 % Off-balance Sheet Arrangements There are no off-balance sheet arrangements as of December 31, 2022 and December 31, 2021. Reclassification During the year ended December 31, 2022, reclassification of certain accounts has been made to previously reported amounts to conform to their treatment to the current period. Specifically, the Company identified a reclassification of commissions from general and administrative expenses to cost of revenue on the consolidated statements of operations and comprehensive loss, reclassification between note receivable to prepaid expense and other current assets, website acquisition assets to intangible asset, as well as a reclassification between property and equipment and accumulated depreciation, accrued expenses to other liabilities on the consolidated balance sheets. These reclassifications had no impact on the previously reported net loss for year ended December 31, 2021. Effective Accounting Pronouncements In January 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-04 (amended by ASU 2019-10), Intangibles – Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment. which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. The current guidance requires companies to calculate the implied fair value of goodwill in Step 2 by calculating the fair value of all assets (including any unrecognized intangible assets) and liabilities of the reporting unit and subtracting it from the fair value of the reporting unit previously calculated in Step 1. The amendments in this update modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. This update is effective beginning after December 15, 2021. We adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on our condensed consolidated financial statements for the year ended December 31, 2022. In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes. The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC 740, including requirements related to the following: (1) hybrid tax regimes; (2) tax basis step-up in goodwill obtained in a transaction that is not a business combination; (3) separate financial statements of entities not subject to tax; (4) intra-period tax allocation exception to the incremental approach; (5) ownership changes in investments; (6) interim-period accounting for enacted changes in tax law; and (7) year-to-date loss limitation in interim-period tax accounting. The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. This update is effective beginning after December 15, 2021. We adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on our consolidated financial statements for the year ended December 31, 2022. F-16 In January 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-01, Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 . The amendments in this update clarify certain interactions between the guidance to account for certain equity securities. This update is effective beginning after December 15, 2021. We adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on our consolidated financial statements for the year ended December 31, 2022. Recent Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13 (amended by ASU 2019-10), Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, regarding the measurement of credit losses for certain financial instruments. which replaces the incurred loss model with a current expected credit loss (“CECL”) model. The CECL model is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company is required to adopt the new guidance on January 1, 2023. The Company does not anticipate adopting this guidance will have a material impact on its consolidated financial statements. In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. The new standard is effective January 1, 2024 (early adoption is permitted, but not earlier than January 1, 2021). The Company is currently evaluating the impact this guidance will have on the Company’s consolidated financial statements. In October 2021, the FASB issued Accounting Standards Update (“ASU”) No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customer s. The amendments in this update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in this update should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company does not anticipate adopting this guidance will have a material impact on its consolidated financial statements. NOTE 3 – ACCOUNTS RECEIVABLE Accounts receivable, net consisted of the following: December 31, ($ in thousands) 2022 2021 Accounts receivable $ 3,447 $ 4,048 Unbilled receivables ( A ) 724 — 4,171 4,048 Less: allowance for doubtful accounts ( 586 ) ( 498 ) Accounts receivable, net $ 3,585 $ 3,550 (A) - Unbilled receivable represents amounts for services rendered at the end of the period pending generation of invoice to the customer. Bad debt expense was $ 84,000 , and $ 74,000 for the years ended December 31, 2022, and 2021, respectively. NOTE 4 – PREPAID EXPENSE AND OTHER ASSETS F-17 Prepaid expenses and other assets consisted of the following: December 31, ($ in thousands) 2022 2021 Prepaid insurance $ 1 $ 427 Prepaid consulting service agreements – Spartan (1) 285 665 Deposits 137 243 Other 314 119 Total prepaid expense and other assets $ 737 $ 1,454 Less: Non-current other assets – Spartan (1) ( 137 ) ( 528 ) Prepaid expenses and other current assets $ 600 $ 926 (1) Spartan Capital is a broker-dealer that has assisted the Company with a range of services including capital raising activities, M&A advisory, and consulting services. The Company has a five -year agreement with Spartan Capital commencing October 2018 for the provision of such services. During the years ended December 31, 2018 to December 31, 2020, a series of payments were made under the terms of this agreement, resulting in amounts being capitalized and amortized over the remaining life of the agreement. These amounts will be fully amortized by September 30, 2023. Approximately $ 285,000 included in non-current for 2021 relates to Spartan. NOTE 5 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following: Estimated Useful Life (Years) December 31, ($ in thousands) 2022 2021 Furniture and fixtures 3 - 5 $ 49 $ 39 Computer equipment 3 340 176 389 215 Less: accumulated depreciation ( 349 ) ( 150 ) Property and equipment, net $ 40 $ 65 Depreciation expense was $ 38,000 , and $ 48,000 for the years ending December 31, 2022, and 2021, respectively and is included in general and administrative expenses on the consolidated statements of operations and comprehensive loss. NOTE 6 – INTANGIBLE ASSETS, NET Website acquisitions, net consisted of the following: December 31, ($ in thousands) 2022 2021 Website acquisition assets $ 1,124 $ 1,124 Less: accumulated amortization ( 1,122 ) ( 920 ) Less: accumulated impairment loss — ( 200 ) Website acquisition assets, net $ 2 $ 4 F-18 Other intangible assets, net consisted of the following: December 31, 2022 December 31, 2021 ($ in thousands) Useful Life (Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Trade name 5 $ 2,759 $ ( 1,617 ) $ 1,142 $ 2,759 $ ( 1,141 ) $ 1,618 IP/Technology 10 1,983 ( 899 ) 1,084 1,983 ( 753 ) 1,230 Customer relationships 5 6,680 ( 4,419 ) 2,261 6,680 ( 3,494 ) 3,186 Non-compete agreements 3 - 5 402 ( 381 ) 21 402 ( 371 ) 31 Total $ 11,824 $ ( 7,316 ) $ 4,508 $ 11,824 $ ( 5,759 ) $ 6,065 December 31, 2022 2021 Website $ 2 $ 4 Other intangibles 4,508 6,065 Total intangible, net $ 4,510 $ 6,069 Amortization expense for the years ended December 31, 2022, and 2021 was approximately $ 1.6 million, and $ 1.6 million, respectively, related to both the website acquisition costs and the intangible assets and is included in general and administrative expense in the statements of operations and comprehensive loss. As of December 31, 2022, expected remaining amortization expense of intangible assets and website acquisition by fiscal year is as follows: ($ in thousands) Amount 2023 $ 1,544 2024 1,542 2025 780 2026 147 Thereafter 497 Total $ 4,510 NOTE 7 – GOODWILL The following table represents the allocation of Goodwill as of December 31, 2022 and 2021: ($ in thousands) Owned & Operated Ad Network Total December 31, 2021 $ 9,725 $ 9,920 $ 19,645 Additions – – – December 31, 2022 $ 9,725 $ 9,920 $ 19,645 Goodwill is tested for impairment at least annually and if triggering events are noted prior to the annual assessment. Impairment is deemed to occur when the carrying value of the Goodwill associated with the reporting unit exceeds the implied value of the Goodwill associated with the reporting unit. At December 31, 2022 and 2021, an assessment was performed using a qualitative assessment which includes consideration of the economic, industry and market conditions in addition to the overall financial performance of the Company and these assets. Our qualitative assessment did not conclude that it is more likely than not that the estimated fair value of the reporting unit is greater than the carrying value, and we performed a quantitative analysis. In a quantitative test, the fair value of a reporting unit is determined based on a discounted cash flow analysis and further analyzed using other methods of valuation. A discounted cash flow analysis requires us to make various assumptions, including F-19 assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on our long-term projections. Assumptions used in our impairment testing are consistent with our internal forecasts and operating plans. Our discount rate is based on our debt structure, adjusted for current market conditions. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment. To the extent the carrying amount exceeds its fair value, an impairment charge of the reporting unit’s goodwill would be necessary. NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following: December 31, ($ in thousands) 2022 2021 Accounts payable $ 8,585 $ 8,460 Accrued wages, commissions and bonus 380 1,459 Publisher cost 559 — Professional fees 677 775 Other 116 273 Total accounts payable and accrued expenses $ 10,317 $ 10,967 NOTE 9 – CENTRE LANE SENIOR SECURED CREDIT FACILITY Effective June 1, 2020, the Company entered into a membership interest purchase agreement to acquire 100 % of Wild Sky Media, a subsidiary (the “Purchase Agreement”). To finance this acquisition, the Company obtained a first lien senior secured credit facility from Centre Lane Partners Master Credit Fund II, L.P. (“Centre Lane Partners”) in the amount of $ 16.5 million, comprised of $ 15.0 million of initial indebtedness, repayment of Wild Sky’s existing accounts receivable factoring facility of approximately $ 900,000 and approximately $ 500,000 of expenses. Centre Lane Partners subsequently loaned the Company an additional $ 8.2 million to provide liquidity to fund operations beginning in April 26, 2021 (as amended, the “Centre Lane Senior Secured Credit Facility”). This Centre Lane Senior Secured Credit Facility has been determined to qualify as a related party transaction as shares were issued to Centre Lane Partners as part of the transaction resulting in Centre Lane Partners owning 10 % of the Company's Common Stock as of December 31, 2022. A related party is a party that can exercise significant influence over the Company in making financial and/or operating decisions. The note issued under the Centre Lane Senior Secured Credit Facility initially bore interest at a rate of 6.0 % per annum and is scheduled to mature on June 30, 2025, with payments of 2.5 % of outstanding principal beginning on June 30, 2023. The interest rate was increased to 10.0 % pursuant to the first amendment to the Centre Lane Senior Secured Credit Facility and interest payable under the note is payable-in-kind (“PIK Interest”) in lieu of cash payment. Commencing with the ninth amendment, the interest rate was increased to 12 % on all subsequent draws with 8 % payable quarterly in cash and 4 % payable-in-kind in lieu of cash payment. These draws are known as the "last in first out loans", totaling $ 2.8 million inclusive of exit fees at December 31, 2022, due and payable on June 30, 2023. There is no prepayment penalty associated with this Centre Lane Senior Secured Credit Facility. However, partial or full prepayments of the Centre Lane Senior Secured Credit Facility would be required in the event of certain future capital raises. Optional Prepayment The Company may at any time, voluntarily prepay, in whole or in part, a minimum of $ 250,000 of the outstanding principal of the loans, plus any accrued but unpaid interest on the aggregate principal amount of the loans being prepaid. Repayment of Loans The Company is required to repay in cash to Centre Lane Partners (i) commencing with the fiscal quarter ending on June 30, 2023, in consecutive quarterly installments to be paid on the last day of each fiscal quarter of the Company, an amount equal to 2.5 % of the outstanding aggregate principal amount of the loans (after giving effect to capitalized PIK F-20 Interest) and (ii) on the maturity date all outstanding obligations (including, without limitation, all accrued and unpaid principal and interest on the principal amounts of the Loans (including any accrued but uncapitalized PIK Interest)) of the loan parties that are due and payable on such date. During the years ended December 31, 2022, and 2021, the Company paid approximately $ 153,000 and $ 0 , respectively, toward outstanding interest payable. During the years ended December 31, 2022, and 2021, the Company paid approximately $ 0 and $ 150,000 , respectively, toward outstanding principal. Fees Under the terms of the Centre Lane Senior Secured Credit Facility, the Company is also required to pay Centre Lane Partners a non-refundable annual administration fee equal to $ 35,000 for agency services provided under this agreement. The Centre Lane Senior Secured Credit Facility provides that this fee shall be in all respects fully earned, due and paid-in-kind by the Company on the effective date (“Effective Date”) of the Centre Lane Senior Secured Credit Facility and on each anniversary of the Effective Date during the term of this agreement by adding and capitalizing the full amount of such fee to the outstanding principal balance of the loans. For the year ended December 31, 2022, the accumulated administrative fee was $ 105,000 and is included in outstanding principal. The below table summarizes the loan balances and accrued interest for the year ended December 31, 2022 and 2021: December 31, ($ in thousands) 2022 2021 Note payable – Centre Lane Senior Secured Credit Facility, related party (current portion) $ 4,860 $ 7,316 Note payable – Centre Lane Senior Secured Credit Facility – net of discount, related party 25,101 15,164 Net principal at December 31, 2022 and 2021 29,961 22,480 Add: debt discount 3,148 3,854 Outstanding principal at December 31, 2022 and 2021 $ 33,109 $ 26,334 The below table summarizes the movement in the outstanding principal from inception through December 31, 2022: December 31, ($ in thousands) 2022 2021 Opening balance $ 26,334 $ 16,416 Add: Draws 3,050 5,125 Exit and other fees 621 3,283 Interest capitalized 3,104 1,660 33,109 26,484 Less: Payment — ( 150 ) Outstanding principal $ 33,109 $ 26,334 Amendments to Centre Lane Senior Secured Credit Facility Commencing April 2021, the Company and certain of its subsidiaries entered into various amendments to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners. The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent. The Credit Agreement was amended to provide for additional loans used for working capital. In addition, and as part of the transaction, there are Exit Fees (“the Exit Fees”), which will be added and capitalized to the principal amount of the original loan. As of December 31, 2022, there were fifteen amendments to the Centre Lane Senior Secured Credit Facility. F-21 Consistent with FASB ASC Topic 470 Debt , (“ASC 470”), the Company is required to perform an analysis of the change in each amendment to determine whether the change is a modification or an extinguishment of debt. Under a modification, no gain or loss is recorded, and a new effective interest rate is established based on the carrying value of the debt and revised cash flow. If the debt is extinguished, the old debt is derecognized and the new debt is recorded as fair value, which becomes the new carrying value. A gain or loss is recorded for the difference between the net carrying value or the original debt and the fair value of the new debt. Interest expense is recorded based on the effective interest rate of the new debt. A debt is considered extinguished if the present value of the new cash flows under the term of the new debt is at least 10 % different from the present value of the remaining cash flows under the terms of the old debt. The below table summarizes the amendments that were executed by the Company since the inception of the facility to December 31, 2022, (in thousands), except for share data: Number Date Draw $'000 Repayment Date Interest Rate (PIK) Interest Rate (Cash) Agency Fee Exit Fee (B) Common Stock Issued Accounting Impact 1 4/26/2021 $ — 6/30/2025 10 % — % $ — $ — 150,000 Extinguishment (A) 2 5/26/2021 1,500 6/30/2025 10 % — % — 750 3,000,000 Modification 3 8/12/2021 500 6/30/2025 10 % — % — 250 2,000,000 Modification 4 8/31/2021 1,100 6/30/2025 10 % — % — 550 — Modification 5 10/8/2021 725 6/30/2025 10 % — % — 363 — Extinguishment 6 11/5/2021 800 6/30/2025 10 % — % — 800 7,500,000 Modification 7 12/23/2021 500 6/30/2025 10 % — % 70 500 — Modification $ 5,125 $ 70 $ 3,213 12,650,000 8 1/26/2022 350 6/30/2025 10 % — % — 350 — Modification 9 2/11/2022 250 6/30/2023 4 % 8 % — 13 — Modification 10 3/11/2022 300 6/30/2023 4 % 8 % — 15 — Modification 11 3/25/2022 500 6/30/2023 4 % 8 % — 25 — Modification 12 4/15/2022 450 6/30/2023 4 % 8 % — 23 — Modification 13 5/10/2022 500 6/30/2023 4 % 8 % 35 25 — Modification 14 6/10/2022 350 6/30/2023 4 % 8 % — 18 — Modification 15 7/8/2022 350 6/30/2023 4 % 8 % — 18 — Modification $ 3,050 $ 35 $ 487 — Total $ 8,175 $ 105 $ 3,700 12,650,000 A. The Centre Lane Senior Secured Credit Facility was amended to permit the Company to raise up to $ 6.0 million of total cash proceeds from the sale of its preferred stock prior to December 31, 2021, without having to make a mandatory prepayment of the loans. Additionally, the Company may issue up to $ 800,000 in dividends from the previous limit of $ 500,000 per annum. B. Added and capitalized to the principal amount of the original loan and the original loan terms apply. Draws advanced by amendments 2 through 8 totaling $ 5.5 million and exit fees totaling $ 3.6 million, were due for full repayment on February 28, 2022; prior to this date, the loan agreement allowed the Company to waive accrual of interest on these amounts. There was no repayment of these amounts, and as a result, on March 11, 2022, amendment 10 was executed, changing the repayment date of the outstanding principal and commencing interest accrual on the exit fees. All amounts advanced for Amendments 9 through 15 are due on June 30, 2023 along with accrued and unpaid interest. The outstanding amount at December 31, 2022 is $ 2.8 million, inclusive of interest paid in kind. Commencing June 30, 2023, the Company is required to pay 2.5 % of the original principal plus draws advanced by amendments 2 through 8 along with accrued and unpaid interest. The outstanding amount at December 31, 2022 is $ 30.3 million, inclusive of interest paid in kind As of December 31, 2022, and 2021, the carrying value of the Centre Lane Senior Secured Credit Facility was $ 30.0 million and $ 22.5 million, respectively, net of unamortized debt discount of $ 3.1 million and $ 3.9 million, respectively. F-22 The discount is being amortized over the remaining life of the Centre Lane Senior Secured Credit facility using the effective interest method. During the years ended December 31, 2022 and 2021, the Company recorded amortization of debt discount of $ 1.2 million and $ 563,000 , respectively on the Centre Lane Senior Secured Credit Facility. Interest expense for the year ended December 31, 2022, and 2021 consisted of the following: December 31, ($ in thousands) 2022 2021 Interest expense $ 3,042 $ 1,600 Amortization 1,185 563 Total interest expense $ 4,227 $ 2,163 The minimum annual principal payments of notes payable at December 31, 2022 were: ($ in thousands) Amount 2023 $ 4,860 2024 2,700 2025 25,549 Total $ 33,109 NOTE 10 – OCEANSIDE SHARE EXCHANGE LOAN On July 31, 2019, the Company executed a Share Exchange Agreement and Plan of Merger (the “Oceanside Merger Agreement”) with Slutzky & Winshman Ltd., an Israeli company (“Oceanside”) and the shareholders of Oceanside (the “Oceanside Shareholders”). The merger closed on July 31, 2019, and the Company acquired all of the outstanding shares of Oceanside. Pursuant to the terms of the Oceanside Merger Agreement, the Company issued 12,513,227 shares valued at $ 20.0 million to owners and employees of Oceanside and contingent consideration of $ 750,000 paid through the delivery of unsecured, interest free, one and two-year promissory notes (the “Closing Note(s)”). At the time of the acquisition and under FASB ASC Topic 805, Business Combinations (“ASC 805”), these Closing Notes were recorded ratably as compensation expense into the statement of operations and comprehensive loss over the 24-month term and the Company recorded an accrued payable over the same period. As of August 15, 2020, the Company did not make payment on the one-year Closing Note and thereby defaulted on its obligation and the two-year Closing Note accelerated to become payable as of August 15, 2020. Upon default, the Closing Notes accrue interest at a 1.5 % per month rate, or 18 % annual rate. As a result, the Company recorded a total charge of $ 301,000 during the third quarter of 2020, comprised of $ 250,000 in compensation expense and $ 51,000 in interest expense. The Company also established a reserve for the $ 750,000 Closing Note principal balance which is included in litigation reserves. On September 6, 2022, the Company’s Board of Directors approved a settlement with the Oceanside Shareholders providing for payment of $ 650,000 payable over a 50-month period commencing January 2023. The Company recognized a gain of approximately $ 286,000 which includes $ 100,000 for the reduction in the settlement amount and $ 186,000 representing interest that was previously accrued as of December 30, 2021. The amount is included in litigation settlement in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2022. NOTE 11 – 10% CONVERTIBLE PROMISSORY NOTES During November 2018, the Company issued 10 % convertible promissory notes ("Convertible Notes") in the amount of $ 80,000 to the Chairman of the Board, a related party. The Convertible Notes are unsecured and mature five years from F-23 issuance and are convertible at the option of the holder into shares of common stock at any time prior to maturity at a conversion price of $ 0.40 per share. A beneficial conversion feature exists on the date the Convertible Notes were issued whereby the fair value of the underlying common stock to which the Convertible Notes are convertible is in excess of the face value of the Convertible Notes of $ 80,000 . The principal balance of these Convertible Notes payable was $ 80,000 at December 31, 2022 and 2021. The total Convertible Notes payable was $ 68,000 and $ 54,000 , net of discount of $ 12,000 and $ 26,000 , at December 31, 2022 and 2021, respectively. Interest expense for the Convertible Notes was $ 22,000 inclusive of interest of $ 8,000 and discount amortization was $ 14,000 for the years ended December 31, 2022, and 2021, respectively. The outstanding principal and interest is due and payable November 2023. NOTE 12 – PAYCHECK PROTECTION PROGRAM The Paycheck Protection Program (“PPP”) was established by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, administered by the Small Business Administration (“SBA”). During 2020 to 2021, the Company and one of its subsidiaries. Wild Sky Media, entered into agreements to borrow funds under the PPP. Under the terms of the CARES Act, PPP loan recipients could apply for and be granted forgiveness for all, or a portion of loans granted under the PPP. Bright Mountain PPP Loan On April 24, 2020, the Company entered into a promissory note of $ 465,000 with Regions Bank (the “Bright Mountain PPP Loan”) which had a two-year term and bore interest at a rate of 1.0 % per annum. On January 28, 2021, the Company applied for the promissory note to be forgiven by the SBA in whole or in part and on July 16, 2021, the Company obtained the forgiveness of the Bright Mountain PPP Loan in whole and recorded a non-cash gain of $ 465,000 on the Bright Mountain PPP Loan forgiveness during the year ended December 31, 2021. Second Bright Mountain PPP Loan On February 17, 2021, the Company entered into a promissory note of $ 296,000 with Regions Bank (the “Second Bright Mountain PPP Loan”) which had a two-year term and bore interest at a rate of 1.0 % per annum. This was the second tranche available under the PPP and was forgiven as of June 15, 2022, and the Company recorded a non-cash gain of $ 296,000 on the Second Bright Mountain PPP Loan forgiveness during the year ended December 31, 2022. Wild Sky PPP Loan Effective June 1, 2020, the Company acquired Wild Sky and assumed the $ 1.7 million promissory note (the “Wild Sky PPP Loan”) with Holcomb Bank received under the PPP. On January 22, 2021, the Company applied for the promissory note to be forgiven by the SBA in whole or in part and on March 29, 2021, the Company obtained the forgiveness of the Wild Sky PPP Loan in whole and recorded a non-cash gain of $ 1.7 million on the Wild Sky PPP Loan forgiveness during the year ended December 31, 2021. Second Wild Sky PPP Loan On March 23, 2021, Wild Sky entered into a promissory note of $ 842,000 with Holcomb Bank (the “Second Wild Sky PPP Loan”) which had a two-year term and bore interest at a rate of 1.0 % per annum. This was the second tranche available under the PPP and was forgiven as of March 23, 2022, and the Company recorded a non-cash gain of $ 842,000 on the Second Wild Sky PPP Loan forgiveness during the year ended December 31, 2022. Total non-cash gain recorded by the Company for the PPP was $ 1.1 million and $ 2.2 million for the years ended December 31, 2022, and 2021, respectively. F-24 NOTE 13 – FAIR VALUE MEASUREMENTS The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities: Level 1: Valuation is based on unadjusted quoted prices in active markets for identical assets and liabilities that are accessible at the reporting date. Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Level 2 : Valuation is determined from pricing inputs that are other than quoted prices in active markets that are either directly or indirectly observable as of the reporting date. Observable inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and interest rates and yield curves that are observable at commonly quoted intervals. Level 3 : Valuation is based on inputs that are both significant to the fair value measurement and unobservable. Level 3 inputs includes situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value generally require significant management judgment or estimation. Fair Value Considerations Financial instruments recognized in the consolidated balance sheets consist of cash, accounts receivable, other liabilities and accounts payable. The Company believes that the carrying value of its current financial instruments approximates their fair value due to the short-term nature of these instruments. The carrying value of the Centre Lane Senior Secured Credit Facility and the 10 % Convertible Promissory Note approximates the fair value due to their nature and level of risk. NOTE 14 – REVENUE RECOGNITION The following table represents our revenues disaggregated by type (in thousands): Year Ended December 31, 2022 2021 Revenue: Digital publishing $ 8,032 $ 2,887 Advertising technology 11,548 10,038 Total revenue $ 19,580 $ 12,925 Geographic Information Revenue by geographical region consist of the following (in thousands): F-25 Year Ended December 31, 2022 2021 Revenue: United States $ 18,400 $ 11,662 Israel 1,180 1,263 Total revenue $ 19,580 $ 12,925 Revenue by geography is generally based on the country of the Company’s contracting entity. Total United States revenue was approximately 94 %, and 90 % of total revenue for the years ended December 31, 2022, and 2021, respectively. As of December 31, 2022, and 2021, approximately 100 % of our long-lived assets were attributable to operations in the United States. Long-lived assets include websites and other intangibles assets that are utilized in overall revenue generation. Deferred Revenue The movement in deferred revenue during the year ended December 31, 2022 and 2021, comprised the following (in thousands): December 31, 2022 December 31, 2021 Deferred revenue at start of the year $ 1,162 $ 347 Amounts invoiced during the year 588 1,060 Less: revenue recognized during the year ( 1,013 ) ( 245 ) Deferred revenue at end of the year $ 737 $ 1,162 NOTE 15 – COMMITMENTS AND CONTINGENCIES Lease Agreements The Company accounts for its operating lease under FASB ASC Topic 842, Leases (“ASC 842”), which requires lessees to recognize on the balance sheet at lease commencement, the lease assets and the related lease liabilities for the rights and obligations created by operating and finance leases with lease terms of more than 12 months. The Company leases its corporate offices in Boca Raton, Florida under a long-term non-cancellable lease agreement that expired on October 31, 2021. On June 14, 2022, the Company signed a second lease addendum (“Second Addendum”) to the lease with a lease term for five years beginning upon completion of improvements to the office space by the landlord, which was completed on September 12, 2022. The annual base rent is $ 100,000 , with a provision for a 3 % increase on each anniversary of the rent commencement date. The Company has the option to renew the lease for one additional five-year term. At December 31, 2022, the operating lease asset was $ 367,000 and is included under assets on the consolidated balance sheets. At December 31, 2022, the operating lease liability was $ 357,000 and is included under liabilities on the consolidated balance sheets. Over the lease term, the Company is required to amortize the operating lease asset and record interest expense on the lease liability created at lease commencement. Operating lease expense was approximately $ 33,000 for the year ended December 31, 2022. Rent expense prior to commencement of the lease was $ 110,000 , net of landlord incentives of $ 95,000 for the year ended December 31, 2022. Rent expense for the year ended December 31, 2021 was $ 203,000 . The Company’s non-lease components are primarily related to property maintenance and other operating services, which varies based on future outcomes and is recognized in rent expense when incurred and not included in the measurement of the lease liability. F-26 As of December 31, 2022 and 2021, the right-of-use asset and lease liability for the operating lease are summarized as follows (in thousands): December 31, 2022 2021 Assets Operating lease right-of-use asset $ 367 $ — Liabilities Operating lease liability, current $ 38 $ — Operating lease liability, net of current portion 319 — Total operating lease liabilities $ 357 $ — Weighted average remaining lease terms (in years) 4.75 — Weighted average discount rate 14.39 % — Current portion of operating lease liability of $ 38,000 is included in other liabilities on the balance sheets at December 31, 2022. Litigation In accordance with applicable accounting guidance, the Company establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. In such cases, there may be exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency related to a litigation or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. When a loss contingency related to a litigation or regulatory matter is deemed to be both probable and estimable, the Company will establish an accrued liability with respect to such loss contingency and record a corresponding amount of litigation-related expense. The Company will then continue to monitor the matter for further developments that could affect the amount of any such accrued liability. 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 which was 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, F-27 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 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. NOTE 16 – STOCK BASED COMPENSATION On April 14, 2022, the Board of Directors of the Company and the Compensation Committee of the Board adopted and approved the 2022 Bright Mountain Media Stock Option Plan (the “Stock Option Plan”). The Stock Option Plan provides for the grant of awards to eligible employees, directors and consultants in the form of stock options. The purpose of the Stock Option Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. The Stock Option Plan is the successor to the Company’s prior stock option plans (2011, 2013, 2015, and 2019 Plans) and accordingly no new grants will be made under the prior plans from and after the date of adoption of the Stock Option Plan. The Stock Option Plan has a term of 10 years and authorizes the issuance of up to 22,500,000 shares of the Company’s common stock. As of December 31, 2022, 15,982,340 shares were remaining under the Stock Option Plan for the future issuance. Options As of December 31, 2022, options to purchase 6,517,660 shares of common stock were outstanding under the Stock Option Plan at a weighted average exercise price of $ 0.33 per share. Compensation expense recorded in connection with the Stock Option Plan was $ 144,000 , and $ 207,000 for the years ended December 31, 2022, and 2021, respectively. These amounts have been recognized as a component of general and administrative expenses in the accompanying condensed consolidated financial statements. The following table presents the activity of the Company’s outstanding stock options of common stock for the year ended December 31, 2022: F-28 Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Balance Outstanding, December 31, 2021 1,415,227 $ 0.62 6.2 $ — Granted 5,612,433 0.04 9.3 — Exercised ( 100,000 ) — — — Forfeited ( 338,000 ) — — — Expired ( 72,000 ) — — — Balance Outstanding, December 31, 2022 6,517,660 $ 0.33 7.8 — Exercisable at December 31, 2022 796,796 $ 0.67 4.5 $ — Unvested at December 31, 2022 5,720,864 100,000 common stock options were exercised during the years ended December 31, 2022 and 2021, respectively, with an intrinsic value of $ 44,000 and $ 295,000 , respectively. Summarized information with respect to options outstanding under the stock option plans at December 31, 2022, is as follows: Options Outstanding Options Exercisable Range or Exercise Price Number Outstanding Weighted Average Exercise Price Remaining Contractual Life (In Years) Number Exercisable Weighted Average Exercise Price 0.002 - 0.13 5,062,433 $ 0.01 9.4 137,500 $ 0.01 0.14 - 0.24 767,000 0.18 9.8 — — 0.25 - 0.49 54,000 0.28 0.5 54,000 0.28 0.50 - 0.85 501,000 0.69 2.5 501,000 0.69 0.86 - 1.75 133,227 1.64 6.9 104,296 1.64 6,517,660 $ 0.12 8.8 796,796 $ 0.67 As of December 31, 2022, there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $ 154,000 to be recognized over a weighted-average period of 1.95 years. The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of our stock price over the expected option term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The following table provides the weighted average assumptions used in determining the fair value of the stock-based awards for the year ended December 31, 2022 and 2021: December 31, 2022 December 31, 2021 Expected Term (years) 6.25 6.25 Expected volatility 96 % - 104 % 94 % - 96 % Risk -free interest rate 2.73 % - 2.93 % 0.67 % Dividend yield — — Expected forfeiture rate — — F-29 The expected life is computed using the simplified method, which is the average of the vesting term and the contractual term. The expected volatility is based on an average of similar public company’s historical volatility, as the Company’s common stock is quoted in the over-the-counter market on the OTCQB Tier of the OTC Markets, Inc. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected term of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased. The Company has elected to account for forfeitures as they occur. Restricted Stock Awards (RSAs) During the years ended December 31, 2022, and 2021, the Company granted 235,000 and 176,250 in RSAs to its independent directors and recognized compensation expense of approximately $ 2,400 and $ 1,800 , respectively. Shares Held in Escrow As part of the Company’s acquisition of Oceanside, the Company assumed the existing S&W Option plan (“Israel Sub Plan”). The Israel Sub Plan was cancelled and 26 individuals who were participants in the plan had their options under the Israel Sub Plan convert into options to purchase stock of the Company, with their original vesting period. The grant date was determined to be the acquisition date and the stock price on the acquisition date of $ 1.60 was determined to be the grant price. As of the acquisition date, there were a total of 546,773 shares that will be issued between acquisition date and March 31, 2023. During the year ended December 31, 2022, and 2021, shares of 174,253 and 379,266 were issued under the Israel Sub Plan. During the year ended December 31, 2022, and 2021, the Company recognized stock based compensation expense of $ 89,000 and $ 281,000 , respectively, in connection with the Oceanside employee share issuances. These are included in general and administrative expenses on the consolidated statements of operation and comprehensive loss. NOTE 17 – STOCKHOLDER'S DEFICIT Preferred Stock The Company has authorized 20,000,000 shares of preferred stock with a par value of $ 0.01 (the “Preferred Stock”), issuable in such series and with such designations, rights and preferences as the board of directors may determine. The Company’s board of directors has previously designated five series of preferred stock, consisting of 10% Series A Convertible Preferred Stock (“Series A Stock”), 10% Series B Convertible Preferred Stock (“Series B Stock”), 10% Series C Convertible Preferred Stock (“Series C Stock”), 10% Series D Convertible Preferred Stock (“Series D Stock”), 10% Series E Convertible Preferred Stock (“Series E Stock”) and 10% Series F Convertible Preferred Stock (“Series F Stock”) . The designations, rights and preferences of the Series F-1, Series F-2 and Series F-3 are identical, other than the dividend rate, liquidation preference and date of automatic conversion into shares of our common stock. The Series F-1 pays dividends at the rate of 12 % per annum and automatically converted into shares of our common stock on April 10, 2022. The Series F-2 pays dividends at the rate of 6 % per annum and automatically converted into shares of our common on July 27, 2022. The Series F-3 pays dividends at the rate of 10 % per annum and automatically converted into shares of our common stock on August 30, 2022. The Series E pays dividends at the rate of 10 % per annum and automatically converted into shares of our common stock on November 21, 2022. Additional terms of the designations, rights and preferences of the Series F-1, Series F-2 and Series F-3 include: • the shares have no voting rights, except as may be provided under Florida law; • the shares pay cash dividends subject to the provisions of Florida law at the dividend rates set forth above, payable monthly in arrears; • the shares are convertible at any time at the option of the holder into shares of our common stock on a 1:1 basis. The conversion ratio is proportionally adjusted in the event of stock splits, recapitalization or similar corporate events. Any shares not previously converted will automatically convert into shares of our common stock on the dates set forth above; F-30 • the shares rank junior to our 10% Series A Convertible Preferred Stock and our 10% Series E Convertible Preferred Stock; • in the event of a liquidation or winding up of the Company, the shares have a liquidation preference of $ 0.50 per share for the Series F-1, $ 0.50 per share for the Series F-2 and $ 0.40 per share for the Series F-3; and • the shares are not redeemable by the Company. Other designations, rights and preferences of each of series of preferred stock are identical, including: (i) shares do not have voting rights, except as may be permitted under Florida law, (ii) are convertible into shares of our common stock at the holder’s option on a one for one basis, (iii) are entitled to a liquidation preference equal to a return of the capital invested, and (iv) each share will automatically convert into shares of common stock five years from the date of issuance or upon a change in control. Both the voluntary and automatic conversion formulas are subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events. On August 31, 2021, W. Kip Speyer, the Company’s CEO, at that time, gave notice that all his held preferred stock was converted in accordance with the original terms. Accordingly, 7,919,017 shares of the Company’s common stock were issued to Mr. Speyer. The Company recognized the conversion of the preferred stock on August 31, 2021 and provided all rights as a common shareholder with regard to said shares to Mr. Speyer, including all voting rights. The Company confirms that there was no inducement to convert the shares and that the correct shares were issued in accordance with the original conversion terms. Approximately $ 691,000 in outstanding dividend related to this preferred stock is included in other liabilities on the consolidated balance sheet at December 31, 2022. At December 31, 2022 and 2021, 0 and 125,000 shares of Series E Stock were issued and outstanding, respectively. There are no shares of Series A-1 Stock, Series B Stock, Series B-1 Stock, Series C Stock, Series D or Series F Stock issued and outstanding. The Series E stock automatically converted into shares of our common stock on November 21, 2022, and 1,250 shares were transferred to common stock to satisfy this transaction. Dividends for Series A Convertible Preferred Stock were $ 0 and $ 40,000 during the years ended December 31, 2022 and 2021, respectively. Dividends for Series E Convertible Preferred Stock were $ 5,000 and $ 68,000 , for the years ended December 31, 2022 and 2021, respectively. Dividend for Series F Convertible Preferred Stock were $ 0 and $ 134,000 during the years ended December 31, 2022 and 2021, respectively. At December 31, 2022 and 2021, accrued unpaid preference dividend was $ 691,000 and $ 692,000 , respectively, amounts for 2021 included $ 242,000 due within that year. These amounts are payable to the Company's Chairman, Mr. Kip Speyer and is included under other liabilities in the consolidated balance sheet as at December 31, 2022. Common Stock Shares of Common Stock under the Stock Option Plan On April 14, 2022, the Board and the Compensation Committee of the Board adopted and approved the 2022 Stock Option Plan. The Stock Option Plan has a term of 10 years and authorizes the issuance of up to 22,500,000 shares of the Company’s common stock. As of December 31, 2022, 15,982,340 shares were remaining under the 2022 Plan for the future issuance. Issue of Common Stock During the year ended December 31, 2022, the Company issued 634,253 shares of our common stock for the following concepts (in thousands, except share data): F-31 Shares (#) Value $'000 Conversion of Preferred Stocks 125,000 1 Services rendered 235,000 38 Options exercised by employees 100,000 1 Shares issued to Oceanside employees per the acquisition agreement valued at $ 1.60 174,253 279 Total 634,253 $ 319 During the year ended December 31, 2021, the Company issued 31,648,233 shares of our common stock for the following concepts (in thousands, except share data): Shares (#) Value $'000 Shares issued to Centre Lane related to debt financing 12,650,000 $ 1,129 Services rendered 176,250 2 Options exercised by employees 100,000 14 Warrants exercised 25,000 10 Stock issued for deemed dividend 10,398,700 — Conversion of Preferred Stocks 7,919,017 79 Shares issued to Oceanside employees per the acquisition agreement valued at $ 1.60 379,266 607 Total 31,648,233 $ 1,841 Stocks Issued for Deemed Dividend On September 22, 2021, the Company entered into a share issuance settlement with Spartan Capital Securities, LLC (“Spartan”). Under the terms of the agreement, the Company agreed to issue a total of 10,398,700 of its common stock to seventy-five accredited investors who participated in the Company’s Private Placement offering, which began in November 2019 and was completed in August 2020. This issuance was determined to be a deemed dividend. Treasury Stocks During the year ended December 2020, the Company executed a settlement agreement with three shareholders who relinquished their Bright Mountain common stock shares. A total of 825,175 shares were acquired with a value of $ 220,000 . The shares are being held as Treasury Stock by the Company. F-32 Warrants At December 31, 2022 and 2021, we had 35,998,316 and 35,823,316 common stock warrants outstanding to purchase shares of our common stock, respectively, with an exercise price ranging between $ 0.65 and $ 1.00 per share. A summary of the Company’s warrants outstanding as of December 31, 2022 is presented below: Warrants Exercise Price Number Outstanding Gross cash proceeds if exercised $'000 $ 1.00 4,992,308 $ 4,992 0.65 15,550,000 10,108 $ 0.75 15,456,008 11,592 35,998,316 $ 26,692 During the year ended December 31, 2022, a total of 175,000 warrants were issued in settlement of liability of $ 216,000 . A summary of the Company’s warrants outstanding as of December 31, 2021, is presented below: Warrants Exercise Price Number Outstanding Gross cash proceeds if exercised $'000 $ 1.00 4,817,308 $ 4,817 0.65 15,550,000 10,108 $ 0.75 15,456,008 11,592 35,823,316 $ 26,517 During the year ended December 31, 2021, a total of 25,000 warrants were exercised at $ 0.40 per share. NOTE 18 – LOSS PER SHARE As of December 31, 2022, and 2021, there were 150,444,636 and 149,810,383 shares of common stock issued, respectively, and 149,619,461 and 148,985,208 shares of common stock outstanding, respectively. Outstanding shares as of December 31, 2022, and 2021, have been adjusted to reflect 825,175 treasury shares. Basic net loss per share is computed by dividing the net earnings attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding, increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Conversion or exercise of the potential common shares is not reflected in diluted earnings per share unless the effect is dilutive. The dilutive effect, if any, of outstanding common share equivalents is reflected in diluted earnings per share by application of the treasury stock method, and if-converted method as applicable. The following tables reconcile actual basic and diluted earnings per share for the years ended December 31, 2022, and 2021 (in thousands except shares and per share data). F-33 December 31, 2022 2021 Loss per share: Numerator: Net loss $ ( 8,125 ) $ ( 12,000 ) Preferred stock dividends ( 5 ) ( 242 ) Common stock deemed dividend — ( 212 ) Net loss available to common stockholders $ ( 8,130 ) $ ( 12,454 ) Denominator Weighted-average common shares outstanding Basic and diluted 149,191,057 128,163,616 Net loss per common share Basic and diluted $ ( 0.05 ) $ ( 0.10 ) The anti-dilutive securities excluded from the weighted-average shares used to calculate the diluted net loss per common share for the years ended December 31, 2022, and 2021 were as follows: December 31, 2022 2021 Common stock equivalent from: Shares unvested and subject to exercise of stock options 6,517,660 1,415,227 Shares subject to warrants stock conversion 35,998,316 35,823,316 Shares subject to convertible preferred stock conversion — 125,000 Shares subject to convertible notes stock conversion 200,000 200,000 NOTE 19 – RELATED PARTY TRANSACTIONS Centre Lane Partners Centre Lane Partners Master Credit Fund II, L.P. (“Centre Lane Partners”), who sold the Wild Sky business to the Company in June 2020 has partnered and assisted the Company from a liquidity perspective during 2021 and through the year ended December 31, 2022. This relationship has been determined to qualify as a related party. A related party is a party that can exercise significant influence over the Company in making financial and/or operating decisions. Through December 31, 2022, the Company has entered into 15 amendments to the Amended and Restated Senior Secured Credit agreement between itself and Centre Lane Partners. See Note 9 - Centre Lane Senior Secured Credit Facility for more information. The total related party debt owed to Centre Lane Partners was $ 33.1 million and $ 26.3 million as of December 31, 2022 and 2021, respectively. See Note 9, Centre Lane Senior Secured Credit Facility for details on this facility. Convertible Promissory Note As discussed in Note 11, 10 % Convertible Promissory Note, the note payable to the Chairman of the Board amounted to $ 80,000 as of December 31, 2022, and 2021, respectively, See Note 11, 10 % Convertible Promissory Note for further discussion on these notes payable. Preferred Stocks During the years ended December 31, 2022 and 2021, the Company paid cash dividends on the outstanding shares of the Company’s Series E and F Preferred Stock of $ 5,000 and $ 5,000 , respectively, held by affiliates of the Company. At December 31, 2022 and 2021, accrued unpaid preference dividend was $ 691,000 and $ 692,000 , respectively, amounts for 2021 included $ 242,000 due with that year. These amounts are payable to the Company's Chairman, Mr. kip Speyer. F-34 Oceanside Acquisition The unsecured and interest free Closing Notes of $ 750,000 related to the Oceanside acquisition were recorded ratably as compensation expense into the consolidated statement of operations and comprehensive loss over the 24-month term and an accrued payable is being recognized over the same period. As of August 15, 2020, the Company did not make payment on the one-year closing note and thereby defaulted on its obligation and the two-year closing note accelerated to become payable as of August 15, 2020. Upon default, the closing notes accrue interest at a 1.5 % per month rate, or 18 % annual rate. As a result, there was a total charge of $ 301,000 recorded during the third quarter of 2020 which was $ 250,000 of compensation expense and $ 51,000 of interest expense. The Company established a reserve for the $ 750,000 which was included in litigation reserves. 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 Company recognize a gain of approximately $ 286,000 which includes $ 100,000 for the reduction in the settlement and $ 186,000 representing interest that was previously accrued up to December 30, 2021, the amount is included in litigation settlement in the consolidated statement of operations and comprehensive loss. For details on the Oceanside Acquisition, see Note 10, "Oceanside Shares Exchange", to the consolidated financial statements. NOTE 20 – INCOME TAXES The Company is subject to federal and various state income taxes in the United States as well as income taxes in various foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations. On December 27, 2020, the Consolidations Appropriations Act, 2021 (“CAA” or the “Act”) was signed into law and included government appropriations and additional economic stimulus. Notable provisions of the CAA included changes to the PPP including legislation concluding that expenses used to obtain loan forgiveness are tax deductible. The Company evaluated the various aspects of the Act and determined that it was eligible for the PPP. During the year ended December 31, 2021, the Company obtained two PPP loans for $ 842,000 and $ 296,000 . These loans were forgiven in 2022. The Cancellation of Debt Income ("CODI") from these loans were deemed excludable from taxable income and therefore deducted as a permanent book tax difference during the year ended December 31, 2022. During the year ended December 30, 2020, the Company obtained two PPP loans of $ 1.7 million and $ 465,000 . These were forgiven during the year ended December 31, 2021, the CODI from these loans were deemed excludable from taxable income and therefore deducted as a permanent book tax difference. The Company’s loss before income taxes consists of the following: Year Ended December 31, 2022 2021 United States $ (7,596) $ ( 11,002 ) Foreign ( 529 ) ( 998 ) Total loss before provision for income taxes $ (8,125) $ ( 12,000 ) F-35 A reconciliation of the federal statutory income tax rate to the effective tax rate is as follows: December 31, 2022 2021 Amount Rate Amount Rate Federal tax expense (benefit) at the statutory rate from operations $ ( 1,706 ) 21.00 % $ ( 2,520 ) 21.00 % State tax benefit, net of federal income tax benefit ( 872 ) 10.73 % ( 754 ) 6.29 % PPP loan forgiveness ( 62 ) 0.76 % ( 456 ) 3.80 % Other adjustments ( 73 ) 0.90 % ( 9 ) 0.08 % Effect of foreign taxes 43 ( 0.53 ) % 52 ( 0.43 ) % Transaction costs — — % 22 ( 0.18 ) % Stock compensation 38 ( 0.46 ) % 234 ( 1.95 ) % Other permanent differences — — % 70 ( 0.58 ) % Change in valuation allowance 2,632 ( 32.40 ) % 3,361 ( 28.03 ) % Total tax provision (benefit) $ — — % $ — — % The tax effect of significant components of the Company’s deferred tax assets and liabilities at December 31, 2022, and 2021, are as follows: December 31, 2022 2021 Deferred tax assets: Net operating loss carryforward $ 16,552 $ 14,269 Other 1,028 676 Total gross deferred tax assets 17,580 14,945 Less: Deferred tax asset valuation allowance ( 17,570 ) ( 14,938 ) Total net deferred tax assets $ 10 $ 7 Property and equipment ( 10 ) ( 7 ) Net deferred tax liability $ — $ — As of December 31, 2022, the Company had U.S. federal net operating loss carryforwards of $ 57.0 million that expire at various dates from 2030 through 2038, and includes $ 46.7 million that have an unlimited carryforward period. As of December 31, 2022, the Company had state and local net operating loss carryforwards of $ 74.2 million that expire at various dates from 2030 through 2041, and includes $ 19.1 million that have an unlimited carryforward period. As of December 31, 2022, the Company had foreign net operating loss carryforwards of $ 4.8 million primarily in Israel that have an unlimited carryforward period. The utilization of the Company’s net operating losses may be subject to a U.S. federal limitation due to the “change in ownership provisions” under Section 382 of the Internal Revenue Code and other similar limitations in various state jurisdictions. Such limitations may result in the expiration of net operating loss carryforwards before their utilization. The Company has not completed a study to assess whether an “ownership change” as defined in Section 382 has occurred or whether there have been multiple ownership changes since the Company’s inception. Future changes in the Company’s stock ownership, which may be outside of the Company’s control, may trigger an “ownership change.” In addition, future equity offerings or acquisitions that have equity as a component of the purchase price could result in an “ownership change.” In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent F-36 upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Because of the historical earnings history of the Company and its foreign subsidiaries, the net deferred tax assets less deferred tax liabilities for 2022 were fully offset by the deferred tax liability and a 100% valuation allowance on the remaining balance. Based on all available evidence, management determined that it is more likely than not that the Company's net deferred tax assets will not be realized. As a result, the Company continues to maintain a full valuation against its net deferred tax assets. For the years ended December 31, 2022, and 2021, the change in the valuation allowance was an increase of approximately $ 2.6 million and an increase of approximately $ 3.4 million, respectively. The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which it operates or does business in. A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation, on the basis of the technical merits. The Company records tax positions as liabilities and adjusts these liabilities when its judgement changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the recognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2022, and 2021, the Company has not recorded any liabilities for uncertain tax positions in its consolidated financial statements. The Company records interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of December 31, 2022 and 2021, no accrued interest or penalties are recorded on the balance sheet, and the Company has not recorded any related expenses. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examinations by federal, foreign, and state and local jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years currently open under statute from 2018 to the present in the U.S. and from 2019 to present in the Company’s foreign operations. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state and local tax authorities to the extent utilized in a future period. NOTE 21 – RESTATEMENT OF PREVIOUSLY ISSUED UNAUDITED FINANCIAL STATEMENTS On March 6, 2023, the Board, upon the recommendation of the Audit Committee of the Company’s Board (the “Audit Committee”), determined that the Company’s previously issued unaudited consolidated financial statements as of and for each of the periods ended June 30, 2022 and September 30, 2022 (collectively, the “Prior Quarters Unaudited Financial Statements”) should no longer be relied upon due to material errors contained in those financial statements primarily relating to the understatement of interest payable and interest expense (the “Restatement Items”). In October 2022, under the direction of the Company’s recently appointed Chief Financial Officer, a detailed analysis was performed of the Amended and Restated Senior Secured Credit Agreement, dated June 5, 2020, among the Company, the lenders party thereto and Centre Lane Partners Master Credit Fund II, L.P. (“Centre Lane”), as amended. During the course of this analysis, errors were identified in connection with the accounting related to Amendments No. 8 – 15 of the Centre Lane Senior Secured Credit Facility, which resulted in the understatement of interest payable and interest expense for each of the interim quarterly periods ended June 30, 2022 and September 30, 2022 and the year-to-date 2022 period. As a result of such errors, the management of the Company, the Audit Committee and the Board of Directors have determined that it is appropriate to restate the Prior Period Financial Statements to correct the accounting of the Restatement Items. From December 30, 2021 to January 26, 2022, draws advanced by Amendments 2 through 8 of the Centre Lane Senior Secured Credit Facility totaling $ 5.5 million, and exit fees totaling $ 3.6 million, were due for full repayment on February 28, 2022. On March 11, 2022, there was a further amendment (Amendment 10) to the Centre Lane Senior Secured Credit Facility, which changed the repayment date of the outstanding principal and capitalized these exit fees with a new repayment date. The Company did not commence accruing interest on these amounts. Consistent with FASB ASC No. 250, Accounting Changes and Error Corrections, (ASC 250), we are restating these amounts. F-37 The table below reflects the impact of the correction of the understatement of the interest payable on the consolidated balance sheet as at June 30, 2022, in thousands: June 30, 2022 As Previously Filed Restatement Adjustment As Restated Total Assets $ 30,701 $ — $ 30,701 Liabilities Current Liabilities Interest payable – Centre Lane Senior Secured Credit Facility – related party 1,702 270 1,972 Other current liabilities 15,796 — 15,796 Total current Liabilities 17,498 270 17,768 Long term liabilities 22,878 — 22,878 Total Liabilities 40,376 270 40,646 Shareholders’ deficit Accumulated deficit ( 109,448 ) ( 270 ) ( 109,718 ) Other 99,773 — 99,773 Total shareholders’ deficit ( 9,675 ) ( 270 ) ( 9,945 ) Total liabilities and shareholders’ deficit $ 30,701 $ — $ 30,701 The table below reflects the impact of the correction of the understatement of the interest expense on the consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2022, in thousands, except for shares and per share data: F-38 Three Months Ended June 30, 2022 Six Months Ended June 30, 2022 As Previously Filed Restatement Adjustment As Restated As Previously Filed Restatement Adjustment As Restated Gross margin $ 2,817 $ — $ 2,817 $ 4,586 $ — $ 4,586 General and administrative expenses 3,443 — 3,443 7,331 — 7,331 Loss from operations ( 626 ) — ( 626 ) ( 2,745 ) — ( 2,745 ) Financing income (expense) Interest expense - Centre Lane Senior Secured Credit Facility- related party ( 885 ) ( 270 ) ( 1,155 ) ( 1,724 ) ( 270 ) ( 1,994 ) Other 323 — 323 1,164 — 1,164 Total financing income (expense) ( 562 ) ( 270 ) ( 832 ) ( 560 ) ( 270 ) ( 830 ) Net loss before income tax ( 1,188 ) ( 270 ) ( 1,458 ) (3,305) ( 270 ) ( 3,575 ) Income tax provision (benefit) — — — — — — Net loss $ ( 1,188 ) $ ( 270 ) $ ( 1,458 ) $ (3,305) $ ( 270 ) $ ( 3,575 ) Net loss attributable to common shareholders $ ( 1,189 ) ( 270 ) ( 1,459 ) $ ( 3,307 ) $ ( 270 ) $ ( 3,577 ) Comprehensive loss $ ( 1,172 ) $ ( 270 ) $ ( 1,442 ) $ ( 3,290 ) $ ( 270 ) $ ( 3,560 ) Basic and diluted net loss per share $ ( 0.01 ) $ — $ ( 0.01 ) $ ( 0.02 ) $ — $ ( 0.02 ) Weighted average shares outstanding Basic and diluted 149,159,461 — 149,159,461 149,130,579 — 149,130,579 The table below reflects the impact of the correction of the understatement of the interest payable on the consolidated balance sheet as at September 30, 2022, in thousands: F-39 September 30, 2022 As Previously Filed Restatement Adjustment As Restated Total Assets $ 30,284 $ — $ 30,284 Liabilities Current Liabilities Interest payable – Centre Lane Senior Secured Credit Facility – related party 1,855 582 2,437 Other current liabilities 16,551 — 16,551 Total current Liabilities 18,406 582 18,988 Long term liabilities 23,979 — 23,979 Total Liabilities 42,385 582 42,967 Shareholders’ deficit Accumulated deficit ( 111,948 ) ( 582 ) ( 112,530 ) Other 99,847 — 99,847 Total shareholders’ deficit ( 12,101 ) ( 582 ) ( 12,683 ) Total liabilities and shareholders’ deficit $ 30,284 $ — $ 30,284 The table below reflects the impact of the correction of the understatement of the interest expense on the consolidated statement of operations and comprehensive loss for the three and nine months ended September 30, 2022, in thousands, except for shares and per share data: F-40 Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 As Previously Filed Restatement Adjustment As Restated As Previously Filed Restatement Adjustment As Restated Gross margin $ 2,146 $ — $ 2,146 $ 6,694 $ — $ 6,694 General and administrative expenses 3,323 — 3323 10,616 — 10,616 Loss from operations ( 1,177 ) — ( 1,177 ) ( 3,922 ) — ( 3,922 ) Financing income (expense) Interest expense - Centre Lane Senior Secured Credit Facility- related party ( 744 ) ( 312 ) ( 1,056 ) ( 2,468 ) ( 582 ) ( 3,050 ) Other 3 — 3 1,168 — 1,168 Total financing income (expense) ( 741 ) ( 312 ) ( 1,053 ) ( 1,300 ) ( 582 ) ( 1,882 ) Net loss before income tax ( 1,918 ) ( 312 ) ( 2,230 ) ( 5,222 ) ( 582 ) ( 5,804 ) Income tax provision (benefit) — — — — — — Net loss $ ( 1,918 ) $ ( 312 ) $ ( 2,230 ) $ ( 5,222 ) $ ( 582 ) $ ( 5,804 ) Net loss attributable to common shareholders ( 1,919 ) ( 312 ) ( 2,231 ) ( 5,225 ) $ ( 582 ) $ ( 5,807 ) Comprehensive loss ( 1,882 ) $ ( 312 ) $ ( 2,194 ) ( 5,171 ) $ ( 582 ) $ ( 5,753 ) Basic and diluted net loss per share $ 0.01 $ — $ 0.01 $ 0.04 $ — $ 0.04 Weighted average shares outstanding Basic and diluted 149,159,461 — 149,159,461 149,140,312 — 149,140,312 NOTE 22 – SUBSEQUENT EVENTS Centre Lane Senior Secure Credit Facility Amendment On February 10, 2023, the Company and its subsidiaries CL Media Holdings LLC, Bright Mountain Media, Inc., Bright Mountain LLC, MediaHouse, Inc. entered into the Sixteenth Amendment to Amended and Restated Senior Secured Credit Agreement (the “Agreement”). The Company and its subsidiaries are parties to a credit agreement between itself, the lenders party thereto and Centre Lane Partners Master Credit Fund II, L.P. as Administrative Agent and Collateral Agent dated June 5, 2020, as amended (the “Credit Agreement”). The Credit Agreement was amended to provide for an additional term loan amount of $ 1.5 million. This term loan matures on June 30, 2023. As of February 10, 2023, the accumulated term loan principal is $ 32.6 million, inclusive of fees and interest paid in kind capitalized. Reduction in Work Force On February 28, 2023, the Company reduced its headcount from 57 employees to 52 employees. There were no executive officers included in this reduction. As a result, the Company will recognize a onetime severance cost of approximately $ 122,000 during the first quarter of 2023. The reduction in force will result in annual savings of approximately $ 343,000 or 7 % of gross salary. Non-Reliance on Previously Issued Financial Statements On March 6, 2023, the Board of Directors, upon the recommendation of the Audit Committee, determined that the Company’s previously issued unaudited consolidated financial statements as of and for each of the interim quarterly periods ended June 30, 2022 and September 30, 2022 (collectively, the “Prior Period Financial Statements”), should no F-41 longer be relied upon due to material errors contained in those financials statements primarily relating to the understatement of interest payable and interest expense (the “Restatement Items”). The Company is restating its financial statements as of and for each of the periods ended June 30, 2022 and September 30, 2022 in this Annual Report on Form 10-K for the year ended December 31, 2022. See Note 21, "Restatement of Previously Issued Unaudited Financial Statements", to the consolidated financial statements for details of the restatement. Collapse of Silicon Valley Bank On March 10, 2023, the FDIC took over Silicon Valley Bank ("SVB"), which is one of the Company's banking institution. At December 31, 2022 approximately $ 152,000 , including a corporate credit card deposit of $ 50,000 , was held by the bank, this was subsequently reduced to $ 51,000 as of our filing date, consisting mainly of the corporate credit card deposit. F-42