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, 2023. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of the period ended December 31, 2023, our disclosure controls and procedures are adequate to provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. 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 45 Table of Contents deteriorate. We continue to review our internal control over financial reporting and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). As the Company integrates the operations acquired through the Big Village Acquisition, there is a risk of identifying deficiencies in our overall internal controls. Our focus is on implementing and maintaining effective financial management systems and internal controls, an ongoing process. However, given that all such controls are not yet fully operational, management has concluded that a material weakness exists in the Company’s internal controls over financial reporting, rendering them ineffective at December 31, 2023. 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 represent, in all material respects, our financial condition and results of operations as of and for the year ended December 31, 2023. Outlined below are the material weaknesses identified by management, along with the remedial actions planned. 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, 2023, management identified certain material weaknesses. As the Company continues to integrate the operations assumed as part of the Big Village Acquisition, we have identified deficiencies in our overall internal controls, specifically as identified below: • Inadequate controls related to revenue recognition, cost of revenue, and the accounts payable and accrual process leading to potential omission or misstatement of material transactions impacting financial statements; and • Ineffectiveness of the Company’s information technology systems and controls concerning financial information. To address these weaknesses, the Company has initiated a remediation plan comprising the following measures: • Updating the information technology general controls ("ITGC") risk assessment to incorporate operations from the Big Village Acquisition; • Examination of information technology systems to ascertain necessary updates to support the financial reporting process; • Collaboration with a third-party company to ensure SOX compliance, establish and document controls related to revenue recognition, accounts payable, and other processes to enhance internal controls over financial reporting; and • Expansion of our finance department through the hiring of certified public accountants with prior auditing experience, knowledge of SEC filings and technical issues. In the year ended December 31, 2023, two additional certified public accountants were onboarded, tasked with month end close oversights and SEC reporting. We believe this will strengthen our finance department as we work towards strong internal controls and provide guidance beyond the finance functions for those we rely on to provide information to support our financial reporting process. We will continue to monitor and evaluate the effectiveness of our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary. 46 Table of Contents Management had previously identified the following material weaknesses, which caused management to conclude that as of December 31, 2022 our internal controls over financial reporting were not effective at the reasonable assurance level: 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. During the year ended December 31, 2023, the Company implemented its remediation plan to enhance controls relating to the accounting of its debt arrangements that includes the following: • Internal interest calculations are prepared and compared to the model provided by the external evaluators, along with outstanding principal and carrying value; • Quarterly statements are being received from Centre Lane Partners where the balances are compared to internal schedules; • Monthly journal entries for interest expense and supporting documentation are being reviewed by an individual independent of its preparation as part of the month end close; and • Monthly reconciliations are being performed to support the month end close, which are being reviewed and evidenced by both preparer’s and reviewer’s signature to demonstrate independence and accountability. Due to the measures implemented to enhance controls relating to the accounting of the Company's debt as described above, at December 31, 2023, management concluded that such weakness did not exist at December 31, 2023. 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. 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, 2023 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. 47 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors Our Board currently consists of four members. Each director is elected at our annual meeting of shareholders and holds office until the next annual meeting of shareholders, or until his or her successor is elected and qualified. If any director resigns, dies or is otherwise unable to serve out his or her term, or if the board increases the number of directors, the board may fill any vacancy by a vote of a majority of the directors then in office. A director elected to fill a vacancy shall serve for the unexpired term of his or her predecessor. The following table sets forth the names, ages and positions of our directors: Name Age Position W. Kip Speyer 75 Chairman of the Board of Directors Matthew Drinkwater 50 Director and Chief Executive Officer Harry D. Schulman 72 Director Jeff Hirsch 65 Director W. Kip Speyer has been our Chairman of the Board since May 2010. Mr. Speyer also served as our Chief Executive Officer from May 2010 to December 2021. From 2005 to 2009, Mr. Speyer served as a director, the president and chief executive officer of Speyer Door and Window, LLC, which was sold to Haddon Windows, LLC (SecuraSeal, LLC, AccuWeld Corporation) in December 2009. From October 2002 to May 2005, Mr. Speyer was a private investor. Mr. Speyer was president and chief executive officer of Intelligent Systems Software, Inc. from October 2000 through June 2002, whereby Mr. Speyer became chief executive officer of ICAD, Inc. (NASDAQ: ICAD) which was a combination of ISSI and Howtek, Inc. (NASDAQ: HOWT). Mr. Speyer was the president and chief executive officer of Galileo Corporation (NASDAQ: GAEO) from 1998 to 1999. Galileo Corporation changed its name to NetOptix (NASDAQ: OPTX) and was merged with Corning Corporation (NYSE: GLW) in a stock purchase in May 2000. From 1996 to 1998 Mr. Speyer was the president of Leisegang Medical Group, three medical device companies owned by Galileo Corporation. Prior to joining Galileo Corporation, Mr. Speyer founded Leisegang Medical, Inc. and served as its president and chief executive officer from 1986 to 1996. Leisegang Medical, Inc. was a company specializing in medical devices for women’s health. Mr. Speyer is a graduate of Northeastern University, Boston, Massachusetts, where he earned a Bachelor of Science Degree in Business Administration in 1972. Mr. W. Kip Speyer is active in many local charities and is the father of Mr. Todd F. Speyer, our Senior Vice President of Revenue Operations and previously a member of our Board through March 31, 2023. We believe that Mr. Speyer possesses attributes that qualify him to serve as a member of our Board, including his extensive experience as the chief executive officer and/or chairman of the board of directors of other public companies. Matthew Drinkwater has been a member of our Board since January 2022 and was appointed Chief Executive Officer in December 2021. Mr. Drinkwater has an extensive track record of adding value to the companies he has worked for over his professional career in several key senior executive and sales roles at companies such as Buzzfeed Inc. (NASDAQ: BZFD), Twitter Inc., Groupon Inc. (NASDAQ: GRPN), Yahoo and America Online (AOL). Mr. Drinkwater is a digital executive with extensive, progressively advancing leadership experience at iconic high tech brands. Mr. Drinkwater was a member of Revenue Collective, a private organization for commercial growth operators, from 2020 to 2021. Mr. Drinkwater served as the Senior Vice President, International from 2017 to 2019 and General Manager, International from 2019 to 2020 for BuzzFeed Inc. He also was in Agency Development and Global Accounts at Twitter from 2015 to 2017 and head of Twitter’s Global Online Sales in San Paolo, Brazil from 2013 to 2015. Mr. Drinkwater served as Vice President of Groupon East Coast from 2011 to 2013 and Senior Director of Sales, New England and Canada at Yahoo from 2009 to 2011. Mr. Drinkwater holds a B.A. in Economics from College of the Holy Cross. We believe that Mr. Drinkwater possesses attributes that qualify him to serve as a member of our Board, including his experience serving in key management roles at public companies and extensive knowledge of the tech industry. Harry D. Schulman has been a member of our Board since November 2019. Mr. Schulman has been President of HDS Consulting LLC since 2008. Prior to this role, Mr. Schulman was an Operating Partner for Baird Capital Partners, a private equity firm managing over $3 billion in assets, assisting in creating sector strategy and finding executive leadership. 48 Table of Contents Mr. Schulman also formerly served as President and Chief Executive Officer of Applica Incorporated, a public company and distributor of small household appliances. For more than 20 years, Mr. Schulman has served on multiple boards including Baird Capital Partners, Hancock Fabrics, Inc., O2 Media, Inc., Q.E.P Co., Inc. and HeZhong International Holdings. Mr. Schulman holds a Master’s degree in International Business from the University of Miami and a Bachelor’s degree in Business from the University of Dayton. We believe that Mr. Schulman possesses attributes that qualify him to serve as a member of our Board, including his extensive experience serving on the boards of multiple companies. Jeff Hirsch has been a member of our Board since August 2023. Mr. Hirsch has over 25 years in technology, business, and sales organization development, brand strategy, and investor relations. Since April 2023, he has served as a consultant and as the Managing Partner of Aperiam, a firm that invests in ad tech. From July 2016 to April 2023, he held various leadership roles at PubMatic (NASDAQ: PUBM), a digital marketing company, including serving as Chief Commercial Officer from 2019 until April 2023. He also held prior executive roles as President of CPXi (now Digital Remedy), Chief Executive Officer of AudienceScience, Chief Marketing Officer of SundaySky, SVP of ValueClick, and was a founder and Chief Revenue Officer of Fastclick (NASDAQ: FSTC). Mr. Hirsch graduated from the University of California Santa Barbara with a B.A. in Experimental Psychology. We believe that Mr. Hirsch possesses attributes that qualify him to serve as a member of our Board, including his extensive experience in management, strategy, and investor relations in our industry. Director Independence Our Board has determined that Mr. Schulman and Mr. Hirsch qualify as “independent” directors within the meaning of the NYSE listing standards. The NYSE independence definition includes a series of objective tests regarding a director’s independence and requires that the Board make an affirmative determination that a director has no relationship with us that would interfere with such director’s exercise of independent judgment in carrying out the responsibilities of a director. There are currently no family relationships among any of our directors or executive officers. Mr. W. Kip Speyer serves as Chairman of the Board and is the father of Mr. Todd F. Speyer, our Senior Vice President of Revenue Operations and previously a member of our Board through March 31, 2023. Executive Officers Below are the names, ages, and positions of our current executive officers: Name Age Position Matthew Drinkwater 50 Chief Executive Officer and Director Ethan Rudin 49 Chief Financial Officer The following is certain biographical information describing the business experience of Mr. Rudin, who does not serve as a director. The biography of Mr. Drinkwater appears earlier in this section. See “Directors” above. Ethan Rudin has served as our Chief Financial Officer since October 2023. Prior to joining us, Mr. Rudin served as the Chief Financial Officer of Boundless Network, a private equity-backed promotional products distribution platform since November 2022. Mr. Rudin previously served as the Chief Financial Officer of BuildDirect Technologies, an online building materials retailer, from January 2021 to September 2022. Prior to joining BuildDirect Technologies, Mr. Rudin served as the Chief Financial Officer of Greenlane Holdings Inc., a distribution platform for premium vaporization products, from February 2019 to August 2020. Prior to joining Greenlane Holdings Inc., Mr. Rudin served in various roles at Napster/Rhapsody International Inc., an online music streaming platform, from August 2013 to December 2017, including as a special advisor to the Chief Executive Officer and as the Chief Financial Officer, Global Head of Label Relations & Business Development. Mr. Rudin earned his Bachelor of Arts in Economics from Tufts University in 1996 and his Masters of Business Administration from Columbia University Business School in 2022. Code of Business Conduct and Ethics In order to clearly set forth our commitment to conduct our operations in accordance with our high standards of business ethics and applicable laws and regulations, our Board adopted a Code of Business Conduct and Ethics (the “Code of Conduct”), which is applicable to all directors, officers and employees. The Code of Conduct includes our insider 49 Table of Contents trading policies and procedures. A copy of the Code of Conduct is available on our website under the Investor Relations tab at www.brightmountainmedia.com . You may also obtain a printed copy of our Code of Conduct, without charge, by sending a written request to our principal offices at 6400 Congress Avenue, Suite 2050, Boca Raton, Florida 33487. Amendments or waivers of the Code of Conduct will be provided on our website within four business days following the date of the amendment or waiver. Audit Committee. We have a separately designated standing audit committee of the Board (the “Audit Committee”) established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The current members of the Audit Committee are Harry Schulman (chair) and Jeff Hirsch. All members of the Audit Committee have been determined by the Board to be independent within the meaning of the NYSE corporate governance standards. The Board has determined that Mr. Schulman qualifies as an “audit committee financial expert,” as defined in Item 407 of Regulation S-K. The Audit Committee assists the Board with fulfilling its oversight responsibility relating to: • the integrity of the Company’s financial statements and financial reporting process; • the Company’s systems of internal controls; • the performance of the Company’s accounting function and independent auditors; and • the independent auditor’s qualifications and independence. Delinquent Section 16(a) Reports Section 16(a) of the Securities Exchange Act of 1934 requires that the Company’s directors, officers and persons who beneficially own 10% or more of the Company’s common stock file with the SEC initial reports of ownership and reports of changes in ownership of our stock and our other equity securities. To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the year ended December 31, 2023 and for prior fiscal years, all such filing requirements applicable to any person who served as a director, officer, or greater than 10% beneficial owner during the year ended December 31, 2023 were complied with except that the following persons are in the process of filing Form 3s and/or Form 4s to report (i) joining the Company as an executive officer or director, (ii) a grant of shares of common stock in connection with their services to the Board of Directors, or (iii) a grant of options to purchase shares of common stock in connection with their employment: Mr. W. Kip Speyer, Mr. Drinkwater, Ms. Martinez, Mr. Schulman, Mr. Hirsch, Ms. Parizek, Ms. Tibbits, and Mr. Todd F. Speyer. ITEM 11. EXECUTIVE COMPENSATION Our named executive officers for the fiscal year ended December 31, 2023 (the “named executive officers”) are: • Matthew Drinkwater, Chief Executive Officer and Director; • Ethan Rudin, Chief Financial Officer; and • Miriam Martinez, former Chief Financial Officer. Summary Compensation Table The following table summarizes the compensation paid to our named executive officers for the years ended December 31, 2023, and 2022. Name and Principal Position Year Salary Bonus Option Awards (1) Total Matt Drinkwater (2) 2023 317,500 62,679 * 380,179 Chief Executive Officer 2022 250,000 — * 250,000 Ethan Rudin (3) 2023 67,708 — * 67,708 Chief Financial Officer 2022 — — — — Miriam Martinez (4) 2023 222,952 — — 222,952 Former Chief Financial Officer 2022 85,240 — * 85,240 * Indicates that the grant date fair value of the option grant was less than one dollar. 50 Table of Contents (1) The amounts included in the Option Awards column reflects the aggregate fair market value of stock options to purchase our common stock on the grant date pursuant to FASB ASC Topic 718. All stock options set forth below were granted with an exercise price equal to the fair market value of the common stock on the date of the grant. (2) Mr. Drinkwater's annual base salary was increased to $400,000 effective June 1, 2023. He agreed to a 10% reduction in his base salary between September 2023 and December 31, 2023, which was contemporaneous with temporary salary reductions for Wild Sky Media employees. (3) Mr. Rudin was appointed Chief Financial Officer effective October 18, 2023. (4) Ms. Martinez transitioned from Chief Financial Officer to Principal Financial Officer on October 18, 2023 for a period of 60 days and then went on a leave of absence. On March 6, 2024, she ended her employment by the Company. Outstanding Equity Awards at Fiscal Year End The following table sets forth the outstanding equity awards held by our named executive officers as of December 31, 2023. Option Awards Name Number of Securities Underlying Unexercised Options Exercisable Number of Securities Underlying Unexercised Options Unexercisable Option Exercise Price (in $) Option Expiration Date Matthew Drinkwater 375,000 (1) 125,000 (1) $ 0.01 December 1, 2031 62,500 187,500 (2) $ 0.01 May 25, 2032 Ethan Rudin — 325,000 (3) $ 0.10 October 27, 2033 Miriam Martinez 112,500 112,500 (4) $ 0.20 August 14, 2032 (1) On December 1, 2021, Mr. Drinkwater was granted options to purchase 500,000 shares of common stock. These options (i) vested 25% on each of November 30, 2021, November 30, 2022, and November 30, 2023, and (ii) will vest 25% on November 30, 2024. (2) On May 25, 2022, Mr. Drinkwater was granted options to purchase 250,000 shares of common stock. These options (i) vested 25% on May 25, 2023 and (ii) will vest 25% on each of May 25, 2024, May 25, 2025, and May 25, 2026. (3) On October 27, 2023, Mr. Rudin was granted options to purchase 325,000 shares of common stock. These options will vest 25% on each of October 27, 2024, October 27, 2025, October 27, 2026, and October 27, 2027. (4) On August 15, 2022, Ms. Martinez was granted options to purchase 225,000 shares of common stock. These options vested 25% on August 14, 2023. The vesting for 25% of the unvested options was accelerated effective March 6, 2024 when she ended her employment. Executive Employment Agreements and Other Arrangements Matthew Drinkwater Effective December 1, 2021, we entered into an Executive Employment Agreement with Matthew Drinkwater, our Chief Executive Officer. His employment contract's term is for three years. His annual base salary is $250,000, and he has a discretionary bonus target of $250,000 subject to the achievement of certain year-over-year revenue and EBITDA performance metrics, with half of the bonus tied to the achievement of each of these goals. Additionally, Mr. Drinkwater was granted 500,000 options to purchase an equal number of shares of the Company's common stock at $0.01 per share. If Mr. Drinkwater is terminated without cause, he is entitled to severance equal to his base salary for the balance of the term of his contract. Finally, following Mr. Drinkwater's termination from the Company for any reason, he will be subject to a customary non-solicitation covenant for two years. Ethan Rudin On October 4, 2023, we entered into an Executive Employment Agreement with Ethan Rudin, our Chief Financial Officer. Pursuant to his employment contract, his annual base salary is $325,000, and he has a discretionary bonus target equivalent to 25% of his base salary subject to the achievement of certain performance metrics. In addition to his base salary and bonus, Mr. Rudin is eligible to participate in all of the Company's benefit plans offered from time to time, subject to satisfying eligibility requirements. Additionally, Mr. Rudin was granted options to purchase 325,000 shares of 51 Table of Contents the Company's common stock with an exercise price equal to the fair market value of our common stock on the date of grant. If Mr. Rudin is terminated without cause, subject to complying with certain conditions, he is entitled to severance equal to his annual salary payable in six equal monthly installments. Pursuant to the terms of the employment agreement, Mr. Rudin is bound by customary non-competition and non-solicitation covenants during his period of employment and for a period of one year after the date his employment with the Company terminates. Director Compensation Table On August 15, 2023, our Board of Directors adopted a new compensation policy for the directors of the board. Under the terms of the director compensation policy, directors will receive quarterly cash compensation of $10,000 for service as a director and additional cash compensation of $5,000 for service as chair of the board or of one or more of the Board's committees. The cash compensation payments are effective April 1, 2023 with payments commencing in October 2023. The director compensation policy, which was clarified on March 22, 2023, provides 100,000 shares of common stock per year for independent directors on a pro-rata basis for 2023 based on an individual's start date. Commencing January 1, 2024, directors will receive options to purchase 100,000 shares of our common stock at an exercise price equal to the fair market value of our common stock on the first business day of the year. Such options will vest in full on December 31 of the same year. Additionally, the Company reimburses each director for fees, travel, and expenses related to their attendance of Board and Committee meetings, if and when incurred, and for income taxes incurred on their respective stock grants. The following table summarizes the compensation earned by our directors for their services as members of our Board for the year ended December 31, 2023. The information in the following table excludes any reimbursement of out-of-pocket travel and lodging expenses which we may have paid. Name Fees Earned in Cash ($) Stock Awards ($) (1) All Other Compensation ($) (8) Total ($) W. Kip Speyer (2) $ 45,000 $ — $ 62,500 $ 107,500 Pamela Parizek (3) 45,000 6,000 1,800 52,800 Harry D. Schulman (4) 45,000 6,000 1,800 52,800 Gretchen Tibbits (5) — 2,482 745 3,227 Todd Speyer (6) — 15,000 175,000 190,000 Jeff Hirsch (7) 15,000 2,285 686 17,971 (1) The stock awards column represents the aggregate grant date fair value of awards earned during the calendar year determined pursuant to FASB ASC Topic 718. (2) Mr. Kip Speyer is not an independent director of our board and while he will receive cash compensation of $45,000 for services provided for the period between April 1, 2023 through December 31, 2023, he will not receive any stock compensation for services provided in the year ended December 31, 2023. (3) Ms. Parizek resigned from the Board of Directors effective January 18, 2024. The stock awards column for Ms. Parizek represents 100,000 shares of Company common stock granted for services provided in the year ended December 31, 2023. (4) The stock awards column for Mr. Schulman represents 100,000 shares of common stock granted for services provided in the year ended December 31, 2023. (5) Ms. Tibbits resigned from the Board of Directors effective June 1, 2023. Ms. Tibbits will not receive cash compensation for her service on the board as her resignation predates the changes in our compensation policy which allows for such compensation. The stock awards column for Ms. Tibbits represents 41,370 shares of common stock granted for services provided for the period from January 1, 2023 through May 31, 2023. (6) Mr. Todd Speyer resigned as a director effective March 31, 2023 and continues to be employed by the Company. The stock awards column for Mr. Todd Speyer represents 100,000 shares of common stock granted in connection with his resignation from the board on March 31, 2023. Mr. Todd Speyer will not be reimbursed for income taxes incurred on his stock grant as his resignation predates the change in our compensation policy which allows for cash reimbursement. (7) Mr. Hirsch was appointed a member of the Board of Directors effective August 15, 2023. The stock awards column for Mr. Hirsch represents 38,082 shares of common stock granted for services provided for the period from August 15, 2023 through December 31, 2023. 52 Table of Contents (8) All other compensation represents (i) amounts paid to each director who received shares of the Company's common stock as 2023 director compensation to compensate such director for income taxes due with respect to the value of such stock; and (ii) salary paid to each of Mr. W. Kip Speyer and to Mr. Todd Speyer earned during 2023 in the amount of $62,500 and $175,000, respectively. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Securities Authorized for Issuance Under Equity Compensation Plan The following table provides information as of December 31, 2023 with respect to all of our compensation plans under which equity securities are authorized for issuance: Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (1) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) Plan Category (a) (b) (c) Equity compensation plans approved by shareholders — $ — — Equity compensation plans not approved by shareholders (2) 10,728,360 $ 0.12 11,771,640 Total 10,728,360 $ 0.12 11,771,640 (1) This number reflects the weighted-average exercise price of outstanding options and has been calculated exclusive of outstanding restricted stock unit awards issued under our Stock Option Plan. (2) The below shows Stock Option Plans not approved by stockholders under which grants remain outstanding. Stock Option Plan Outstanding Options 2013 Stock Option Plan 215,000 No further grants can be made under this plan 2015 Stock Option Plan 266,000 No further grants can be made under this plan 2019 Stock Option Plan 633,227 No further grants can be made under this plan 2022 Stock Option Plan 9,614,133 Current plan 10,728,360 2022 Stock Option Plan 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 has a term of 10 years and 53 Table of Contents authorizes the issuance of up to 22,500,000 shares of the Company’s common stock. As of December 31, 2023, 11,771,640 shares were remaining under the Stock Option Plan for the future issuance. Security Ownership of Certain Beneficial Owners and Management Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. In accordance with the SEC rules, shares of our common stock that may be acquired upon exercise or vesting of equity awards within 60 days of the date of the table below are deemed beneficially owned by the holders of such options and are deemed outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person. As of March 29, 2024, 172,382,586 shares of our common stock were issued and 171,557,411 shares were outstanding. The following table sets forth information with respect to the beneficial ownership of our common stock as of March 29, 2024, by (i) each of our directors and named executive officers, (ii) all of our directors and executive officers as a group, and (iii) each shareholder known by us to be the beneficial owner of more than 5% of our common stock. To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of common stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. To our knowledge, there is no arrangement, including any pledge by any person of our securities or any of our parents, the operation of which may at a subsequent date result in a change in control of our company. Unless otherwise noted below, the address of each person listed on the table is c/o Bright Mountain Media, Inc., 6400 Congress Avenue, Suite 2050, Boca Raton, Florida 33487. Name and Address of Beneficial Owner (1) Amount and Nature of Beneficial Ownership Percentage of Outstanding Common Stock Owned (2) Matthew Drinkwater (3) 500,000 * Ethan Rudin — * Miriam Martinez (3) 112,500 * W. Kip Speyer (4) 31,393,157 18.3 % Harry Schulman (5) 172,500 * Jeff Hirsch — * All executive officers and directors as a group (6 persons) (6) 32,178,157 18.7 % Beneficial Ownership of 5% or more: * W. Kip Speyer (4) 31,393,157 18.3 % 10th Lane Partners, LP (7) 36,551,993 21.3 % Centre Lane Partners Master Credit Fund II, LP (8) 15,150,000 8.8 % BV Agency, LLC (9) 21,401,993 12.5 % Andrew Handwerker (10) 9,060,388 5.3 % * Represents beneficial ownership of less than 1%. (1) Except as otherwise indicated, the address of each beneficial owner is c/o Bright Mountain Media, Inc. 6400 Congress Avenue, Suite 2050, Boca Raton, Florida 33487. (2) The percentage of beneficial ownership of the Company is calculated based on 171,557,411 shares of common stock issued and outstanding as of March 29, 2024. (3) Represents shares underlying exercisable options to purchase shares of common stock. (4) Includes 62,500 shares underlying exercisable options to purchase common stock. The amount for Mr. W. Kip Speyer excludes 200,000 shares that could have been issued in connection with the conversion of $80,000 of convertible notes, which have matured and remain outstanding but are no longer convertible. (5) Includes 7,500 shares underlying exercisable options to purchases shares of common stock. (6) Includes 682,500 shares underlying exercisable options to purchase shares of common stock. 54 Table of Contents (7) Based on a Schedule 13G/A filed on May 10, 2023 by 10th Lane Partners, LP and Centre Lane Partners Master Credit Fund II, L.P., consists of 21,401,993 shares held of record by BV Agency, LLC and 15,150,000 shared held of record by Centre Lane Partners Master Credit Fund II, LP. 10th Lane Partners, LP is the Investment Adviser for these funds and has sole voting and dispositive power of these shares. The address for 10th Lane Partners, LP is 60 East 42nd Street, Suite 2220, New York, New York 10165. (8) Based on a Schedule 13G/A filed on May 10, 2023 by 10th Lane Partners, LP and Centre Lane Partners Master Credit Fund II, L.P., Centre Lane Partners Master Credit Fund II LP is the record holder of 15,150,000 shares but disclaims ownership of these shares as 10th Lane Partners LP is the Investment Adviser for this fund and has sole voting and dispositive power of these shares. The address for 10th Lane Partners, LP is 60 East 42nd Street, Suite 2220, New York, New York 10165. (9) Based on a Schedule 13G/A filed on May 10, 2023 by 10th Lane Partners, LP and Centre Lane Partners Master Credit Fund II, L.P., BV Agency, LLC is the record holder of 21,401,993 shares. 10th Lane Partners LP is the Investment Adviser for this fund and has sole voting and dispositive power of these shares. The address for 10th Lane Partners, LP is 60 East 42nd Street, Suite 2220, New York, New York 10165. (10) Mr. Handwerker has sole voting and dispositive power with respect to 4,078,388 shares and shared voting and dispositive power with respect to 4,732,000 shares. This information is based on a Schedule 13G/A filed on April 9, 2018, but has been adjusted to exclude 250,000 shares of underlying warrants that were exercisable at the time the Schedule 13G/A was filed but have since expired according to the Company's records. The address for Andrew Handwerker is 4399 Pine Tree Drive, Boynton Beach, Florida 33436. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Related Party Transaction Policy Under its written charter, the Audit Committee of our Board of Directors is responsible for reviewing and approving related party transactions (as defined in Item 404 of Regulation S-K). Our management is responsible for bringing any such transaction to the attention of the Audit Committee. In approving or rejecting any such transaction, the Audit Committee considers the relevant facts and circumstances, including the material terms of the transaction, risks, benefits, costs, availability of other comparable services or products and, if applicable, the impact on a director’s independence. Preferred Stock Purchases Cash dividends paid during the year ended December 31, 2023 and 2022 was $0 and $5,000, respectively. At December 31, 2023, accrued unpaid preference dividends on the preferred stock were $691,000. This amount is payable to Mr. W. Kip Speyer, a director of the Company. Convertible Notes During November 2018, we issued and sold Mr. W. Kip Speyer, a director of the Company, two five-year unsecured convertible notes in the aggregate principal amount of $80,000. These notes, which were convertible at the option of the holder at any time prior to maturity at a conversion price of $0.40 per share, matured in November 2023, but remain outstanding. We used the proceeds from these notes for working capital. The highest outstanding principal amount of the convertible notes held by Mr. W. Kip Speyer was $80,000 during the year ended December 31, 2023. Accrued interest owed to Mr. W. Kip Speyer was $39,000 as of December 31, 2023. 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 and beneficially owns more than 5% of the common stock of the Company, partnered and assisted the Company from a liquidity perspective during the year ended December 31, 2023. 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, 2023, the Company has entered into nineteen amendments to the Amended and Restated Senior Secured Credit Agreement between it and Centre Lane Partners (the “Credit Agreement”). The highest total amount of related party debt including fees and interest paid in kind capitalized owed to Centre Lane Partners was $70.2 million at December 31, 2023. Interest paid during the year was $425,000 in cash, and $6.7 million paid in kind. Employment Matters On February 8, 2023, the Company and Mr. W. Kip Speyer memorialized Mr. W. Kip Speyer’s continued service as Chairman of the Board of Directors. Also, the Company and Mr. W. Kip Speyer memorialized the expiration date for Mr. 55 Table of Contents W. Kip Speyer’s employment agreement with the Company as April 1, 2023. See the Director Compensation table above for Mr. W. Kip Speyer’s total compensation for the year ended December 31, 2023. Mr. Todd F. Speyer, who is the son of Mr. W. Kip Speyer, our Chairman of the Board, is employed by the Company as Senior Vice President of Revenue Operations. Mr. Todd F. Speyer was previously a member of our Board through March 31, 2023. We are not a party to an employment agreement with Mr. Todd Speyer. His compensation was determined by the compensation committee, based upon industry norms. We paid Mr. Todd Speyer $175,000 for his services as an employee of the Company during the year ended December 31, 2023. We did not pay Mr. Todd Speyer any amounts for his services as a director during the year ended December 31, 2023. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Principal Accountant Fees and Services WithumSmith+Brown, PC ("Withum") has served as the Company's independent registered public accounting firm for the years ended December 31, 2023 and 2022. The following table sets forth the fees for professional audit services and other services rendered by Withum for the years ended December 31, 2023 and 2022, respectively. December 31, 2023 December 31, 2022 Audit Fees (1) $ 790,261 $ 450,137 Audit-Related Fees (2) 32,319 48,854 Tax Fees (3) 37,704 895 All Other Fees (4) — — Total $ 860,284 $ 499,886 (1) Audit Fees. Audit Fees include fees of audits for our annual financial statements, reviews of the related quarterly financial statements, and services that are normally provided by the independent accountants in connection with statutory and regulatory filings or engagements, including reviews of documents filed with the SEC. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements. (2) Audit-Related Fees. Audit Related Fees include assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements or acquisition audits and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting. (3) Tax Fees. Tax Fees consist of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice. The Company’s tax return for the year ended December 31, 2023 has not been completed as of the date of this filing. (4) All Other Fees. All Other Fees consist of fees for professional services or costs not otherwise reported in Audit Fees, Audit-Related Fees or Tax Fees. No such fees were incurred during the years ended December 31, 2023 and 2022. Policy for Approval of Audit and Permitted Non-Audit Services Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Audit Committee of the Board approves the engagement letter with respect to audit, tax, and review services. Other fees are subject to pre-approval by the Audit Committee. The fees paid to the auditors with respect to 2023 and 2022 were pre-approved by the Audit Committee. 56 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 , filed March 11, 2013 X 3.2 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed July 9, 2013 8-K 7/9/13 3.3 3.3 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed November 21, 2013 8-K 11/16/13 3.4 3.4 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed December 27, 2013 8-K 12/30/13 3.4 3.5 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed February 25, 2014 10-K 3/31/14 3.5 3.6 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed July 10, 2014 8-K 7/28/14 3.6 3.7 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed September 24, 2014 10-K/A 4/1/15 3.5 3.8 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed March 20, 2015 X 3.9 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed October 27, 2015 8-K 12/4/15 3.7 57 Table of Contents 3.10 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed September 16, 20 16 X 3.11 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed September 6, 2017 X 3.12 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed September 29, 2017 X 3.13 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed November 5, 2018 8-K 11/13/18 3.10 3.14 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed July 31, 2019 X 3.15 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed September 3, 2019 X 3.16 Articles of Amendment to the Amended and Restated Articles of Incorporation , filed December 23, 2019 X 3.17 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 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 2013 Stock Option Plan 10-Q 11/13/13 10.18 10.2 201 5 Stock Option Plan 8-K 5/27/15 10.36 10.3 201 9 Stock Option Plan 10-K 12/23/21 10.4 10.4 2022 Stock Option Plan 8-K 4/20/22 10.3 10.5 Amendment to Lease Agreement dated August 8, 2018 for registrant’s principal executive offices 10-Q 11/20/18 10.1 10.6 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 10.7 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 10.8 Form of Warrant for November 2019 Private Placement 8-K 2/4/20 10.2 10.9 First Amendment to an Amended and Restated Senior Credit Agreement dated April 26, 2021. 8-K 4/30/21 10.1 10.10 Second Amendment to an Amended and Restated Senior Credit Facility Agreement dated May 26, 2021. 8-K 6/2/21 10.1 10.11 Third Amendment to Amended and Restated Senior Credit Facility Agreement dated December 20, 2021 8-K 8/18/21 10.1 10.12 Fourth Amendment to Amended and Restated Senior Secured Credit Agreement dated August 31, 2021 8-K 9/7/21 10.1 58 Table of Contents 10.13 Fifth Amendment to Amended and Restated Senior Secured Credit Agreement dated October 8, 2021 8-K 10/8/21 10.1 10.14 Sixth Amendment to Amended and Restated Senior Secured Credit Agreement dated November 5, 2021 8-K 11/5/21 10.1 10.15 Seventh Amendment to an Amended and Restated Senior Secured Credit Agreement dated December 23, 2021 8-K 12/29/21 10.1 10.16 Eighth Amendment to an Amended and Restated Senior Secured Credit Agreement dated January 26, 2022 8-K 1/20/22 10.1 10.17 Ninth Amendment to an Amended and Restated Senior Secured Credit Agreement dated February 11, 2022 8-K 2/17/22 10.1 10.18 Annex A to the Credit Agreement dated February 11, 2022 8-K 2/17/22 10.2 10.19 Tenth Amendment to an Amended and Restated Senior Secured Credit Agreement dated March 11, 2022 8-K 3/16/22 10.1 10.20 Annex A to the Credit Agreement dated March 11, 2022 8-K 3/16/22 10.2 10.21 Eleventh Amendment to an Amended and Restated Senior Secured Credit Agreement dated March 25, 2022 8-K 3/31/22 10.1 10.22 Annex A to the Credit Agreement dated March 25, 2022 8-K 3/31/22 10.2 10.23 Twelfth Amendment to an Amended and Restated Senior Secured Credit Agreement dated April 15, 2022 8-K 4/20/22 10.1 10.24 Annex A to the Credit Agreement dated April 15, 2022 8-K 4/20/22 10.2 10.25 Thirteenth Amendment to an Amended and Restated Senior Secured Credit Agreement dated May 10, 2022 8-K 5/16/22 10.1 10.26 Annex A to the Credit Agreement dated May 10, 2022 8-K 5/16/22 10.2 10.27 Fourteenth Amendment to an Amended and Restated Senior Secured Credit Agreement dated June 10, 2022 8-K 6/16/22 10.1 10.28 Annex A to the Credit Agreement dated June 10, 2022 8-K 6/16/22 10.2 10.29 Fifteenth Amendment to an Amended and Restated Senior Secured Credit Agreement dated July 8, 2022 8-K 7/13/22 10.1 10.30 Annex A to the Credit Agreement dated July 8, 2022 8-K 7/13/22 10.2 10.31 Sixteenth Amendment to an Amended and Restated Senior Secured Credit Agreement dated February 10, 2023 8-K 2/16/23 10.1 10.32 Annex A to the Credit Agreement dated February 10, 2023 8-K 2/16/23 10.2 10.33 Seventeenth Amendment to Amended and Restated Senior Secured Credit Agreement, dated April 20, 2023 8-K 4/23/23 10.1 10.34 Eighteenth Amendment to Amended and Restated Senior Secured Credit Agreement, dated July 28, 2023 X 59 Table of Contents 10.35 Nineteenth Amendment to Amended and Restated Senior Secured Credit Agreement, dated July 28, 2023 8-K 8/3/23 10.1 10.36 Annex A to the Credit Agreement, dated July 28, 2023 8-K 8/3/23 10.2 10.37 Employment Agreement by and between the Company and Ethan Rudin X 10.38 E mployment Agreement by and between the Company and Matthew Drinkwater 8-K 12/17/21 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 Principal Financial Officer 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 * This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference. 60 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: April 1, 2024 By: /s/ Matthew Drinkwater Matthew Drinkwater Chief Executive Officer and Director (Principal Executive Officer) Date: April 1, 2024 By: /s/ Ethan Rudin Ethan Rudin 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: April 1, 2024 By: /s/ W. Kip Speyer W. Kip Speyer Chairman of the Board of Directors Date: April 1, 2024 By: /s/ Matthew Drinkwater Matthew Drinkwater Director and Chief Executive Officer Date: April 1, 2024 By: /s/ Harry Schulman Harry Schulman Director Date: April 1, 2024 By: /s/ Jeff Hirsch Jeff Hirsch Director 61 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, 2023 and 2022 F - 7 Consolidated statements of operations and comprehensive loss for the years ended December 31, 2023 and 2022 F - 8 Consolidated statements of changes in stockholders’ deficit for the years ended December 31, 2023 and 2022 F - 9 Consolidated statements of cash flows for the years ended December 31, 2023 and 2022 F - 10 Notes to consolidated financial statements F - 11 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, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for each of the years ended December 31, 2023 and 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Bright Mountain Media, Inc. as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the period 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. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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 Bright Mountain Media, Inc. 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 and in accordance with auditing standards generally accepted in the United States of America. 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. Bright Mountain Media, Inc. 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 entity'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 derives revenue from three revenue streams which include (i) digital advertisements on its owned and operating publishing websites, as well as advertising on partner mobile apps and digital streaming services such as CTV (Connected Television) Channels in its customer agreements, (ii) providing creative and media services to customers, and (iii), consumer insights over time as the research, intelligence, and insight services are performed for the customer. F-2 Table of Contents The Company recognizes the first revenue stream at a point in time when control of services is transferred to the customer. The Company recognizes the second revenue stream over time based on the signed contract terms which includes the service period. The Company recognizes the third revenue stream as a percentage of total budgeted project costs as the underlying project costs are incurred for signed contracts. 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 transaction price to the performance obligations in the contract; and (v) recognize revenue when the Company satisfies a performance obligation. We identified revenue recognition as a critical audit matter due to significant management estimates and judgments inherently required in determining revenue to be recognized. This in turn led to an especially high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the reasonableness of management’s significant estimates and assumptions surrounding revenue recognition. How the Critical Audit Matter Was Addressed in the Audit Our principal audit procedures related the Company’s revenue recognition for these revenue streams included the following: • Digital Advertising ◦ 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 obtained the amount of impressions delivered by the Company to the customer from the third-party ad server data to test the appropriateness 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. • Creative and Media Services ◦ 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 the 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. ▪ We tested the transaction price within the contract, which was represented by the total value for creative and media services 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 appropriateness 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. • Consumer Insights ◦ We performed a walkthrough of the design effectiveness and implementation of internal controls with respect to the Company’s revenue and cash receipts cycle. F-3 Table of Contents ◦ We selected a sample of customer agreements and performed the following procedures: ▪ Obtained and read the 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. ▪ We tested the transaction price within the contract, which was represented by the total value for consumer insights 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 appropriateness of recognized revenue with the terms of the contract by evaluating the underlying budgeted costs and actual costs that drive the percent of the total contract value recognized during the year. ◦ We tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements. Valuation of Intangible Assets and Goodwill - Refer to Notes 2, 6, and 7 to the consolidated financial statements Critical Audit Matter Description As reflected in the Company’s consolidated financial statements at December 31, 2023 the Company’s intangible assets and goodwill was approximately $ 15 million and $ 7.8 million, respectively. As disclosed in Note 2 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 intangible assets and goodwill would be necessary. We identified the evaluation of the Company's impairment test of goodwill and intangible assets as a critical audit matter due to significant management estimates and judgements inherently required in determining the fair value of estimates. This in turn led to a high degree of auditor judgement, subjectivity, and effort in performing procedures to evaluate the reasonableness of management's significant estimates and assumptions, several of which extend many years into the future. Additionally, the audit effort involved the use of professionals with specialized skill and knowledge. 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, 2023. 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. F-4 Table of Contents • We reviewed the professional qualifications and objectivity/independence of the external valuation specialist. • We tested the underlying assumptions presented in the impairment assessment as it relates to projections Accounting and Valuation for Debt Modifications and Extinguishment - Refer to Note 10 to the consolidated financial statements Critical Audit Matter Description During the year ended December 31, 2023, 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. We identified the evaluation of the Company’s accounting for debt modifications as a critical audit matter due to significant complex calculations inherently required in determining proper accounting treatment. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the reasonableness of management’s assumptions and calculations. Additionally, the audit effort involved the use of professionals with specialized skill and knowledge. How the Critical Audit Matter Was Addressed in the Audit We read and evaluated the debt modification and extinguishment analysis report, prepared by the Company's external valuation specialist that assessed each amendment to the credit agreement. There were a total of 4 amendments that were executed during the year. 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. Business Combination - Refer to Note 13 to the consolidated financial statements Critical Audit Matter Description As reflected in the Company’s consolidated financial statements at December 31, 2023, the Company completed a business combination on April 20, 2023, for approximately $20.0 million. As disclosed in Note 13 to the consolidated financial statements, the Company allocated the purchase price to acquired assets and liabilities, including intangibles and the residual value being assigned to goodwill. The fair value assigned to the acquired intangibles is based on a discounted flow analysis, in which the Company makes 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 fair value calculations 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. We identified the evaluation of the Company's fair value valuation of acquired intangibles and residual goodwill as a critical audit matter due to significant management estimates and judgements inherently required in determining the fair F-5 Table of Contents value estimates. This in turn led to a high degree of auditor judgement, subjectivity, and effort in performing procedures to evaluate the reasonableness of management's significant estimates and assumptions, several of which extend many years into the future. Additionally, the audit effort involved the use of professionals with specialized skill and knowledge. How the Critical Audit Matter Was Addressed in the Audit We identified the evaluation of the fair value measurement of the acquired Trade Name, Customer Relationships, and Developed Technology as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate certain key assumptions used to estimate the acquisition-date fair value of the acquired intangible assets. Specifically, the key assumptions for certain intangible assets, including revenue growth rates and the discount rate, represented subjective determinations of future market and economic conditions. Changes to those assumptions could have had a significant effect on the determination of the fair value measurements. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the development of the key assumptions for certain tangible and intangible assets. We performed sensitivity analyses over the key assumptions for revenue growth rates to assess the impact of changes in those key assumptions on the Company’s determination of the fair value of the intangible assets, respectively. We evaluated the reasonableness of the Company’s forecasted revenue growth rates by comparing them to historical results for comparable products and peer companies, analyst expectations, and industry related third-party data. We evaluated the data sources used by management in determining the key assumptions for the intangible assets by comparing to industry standards and evidence obtained in other areas of the audit. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in: (1) evaluating the discount rates used by the Company for the intangible assets by comparing them against discount rate ranges that were independently developed using publicly available market data for comparable entities (2) testing the source information underlying the determination of the discount rates Along with the procedures previously described, we performed the following procedures: • We evaluated management's assessment that the acquisition accurately represented a business combination and properly identified the accounting acquirer of the underlying transaction • 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 intangibles and goodwill. • We reviewed the professional qualifications and objectivity/independence of the external valuation specialist. • We tested the underlying assumptions presented in the business combination as it relates to projections /s/ WithumSmith+Brown, PC We have served as the Company's auditor since 2021. East Brunswick, New Jersey April 1, 2024 PCAOB ID Number 100 F-6 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2023 2022 ASSETS Current Assets Cash and cash equivalents $ 4,001 $ 316 Accounts receivable, net 14,679 3,585 Prepaid expenses and other current assets 1,057 600 Total Current Assets 19,737 4,501 Property and equipment, net 199 40 Intangible assets, net 15,234 4,510 Goodwill 7,785 19,645 Operating lease right-of-use asset 306 367 Other assets, non-current 156 137 Total Assets $ 43,417 $ 29,200 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current Liabilities Accounts payable and accrued expenses $ 17,497 $ 10,317 Other current liabilities 3,025 1,838 Interest payable – 10 % Convertible Promissory Notes – related party 39 31 Deferred revenue 4,569 737 Note payable – 10 % Convertible Promissory Notes, net of discount – related party 80 68 Note payable – Centre Lane Senior Secured Credit Facility – related party (current portion) 5,592 4,860 Total Current Liabilities 30,802 17,851 Other liabilities, non-current 325 — Note payable – Centre Lane Senior Secured Credit Facility, net of discount – related party (non-current) 58,674 25,101 Finance lease obligations, non-current 42 — Operating lease liabilities, non-current 239 319 Total Liabilities 90,082 43,271 Stockholders’ Deficit Convertible preferred stock, par value $ 0.01 , 20,000,000 shares authorized, no shares issued or outstanding at December 31, 2023 and December 31, 2022 — — Common stock, par value $ 0.01 , 324,000,000 shares authorized, 172,103,134 and 150,444,636 issued and 171,277,959 and 149,619,461 outstanding at December 31, 2023 and December 31, 2022, respectively 1,721 1,504 Treasury stock, at cost; 825,175 shares at December 31, 2023 and December 31, 2022, respectively ( 220 ) ( 220 ) Additional paid-in-capital 101,405 98,797 Accumulated deficit ( 149,833 ) ( 114,269 ) Accumulated other comprehensive income 262 117 Total stockholders’ deficit ( 46,665 ) ( 14,071 ) Total liabilities and stockholders’ deficit $ 43,417 $ 29,200 See accompanying notes to consolidated financial statements. F-7 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, 2023 2022 Revenue $ 44,546 $ 19,580 Cost of revenue 31,766 10,493 Gross margin 12,780 9,087 General and administrative expenses 22,522 14,155 Impairment of goodwill and intangibles 17,070 — Loss from operations ( 26,812 ) ( 5,068 ) Financing (expense) income Gain on forgiveness of PPP loan — 1,137 Other income 437 69 Interest expense - Centre Lane Senior Secured Credit Facility- related party ( 9,142 ) ( 4,227 ) Interest expense - Convertible Promissory notes - related party ( 20 ) ( 22 ) Other interest expense ( 27 ) ( 14 ) Total financing (expense) ( 8,752 ) ( 3,057 ) Net loss before income tax ( 35,564 ) ( 8,125 ) Income tax provision — — Net loss ( 35,564 ) ( 8,125 ) Dividends Preferred stock dividends — ( 5 ) Net loss attributable to common stockholders $ ( 35,564 ) $ ( 8,130 ) Foreign currency translation 145 105 Comprehensive loss $ ( 35,419 ) $ ( 8,025 ) Net loss per common share: Basic and diluted $ ( 0.22 ) $ ( 0.05 ) Weighted average shares outstanding Basic and diluted 164,845,671 149,191,057 See accompanying notes to consolidated financial statements. F-8 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (in thousands, except share and per share data) Years Ended December 31, 2023 and 2022 Preferred Stock Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders’ Deficit Shares Amount Shares Amount Shares Amount Balance at 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 — — — — — — Common stock issued for options exercised — — 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 Issue of common stock 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 ) Net loss — — — — — — — ( 35,564 ) — ( 35,564 ) Adjustment to common stock issued for Oceanside acquisition — — ( 23,495 ) — — — — — — — Common stock issued for options exercised — — 90,000 1 — — — — — 1 Stock based compensation — — — — — — 196 — — 196 Common stock issued to Centre Lane Partners — — 21,401,993 214 — — 1,712 — — 1,926 Issue of common stock for services rendered — — 190,000 2 — — 29 — — 31 Extinguishment of Centre Lane Credit Facility — — — — — — 671 — — 671 Adjustment from foreign currency translation, net — — — — — — — — 145 145 Balance, December 31, 2023 — $ — 172,103,134 $ 1,721 ( 825,175 ) $ ( 220 ) $ 101,405 $ ( 149,833 ) $ 262 $ ( 46,665 ) See accompanying notes to consolidated financial statements. F-9 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except share and per share data) For the Years Ended December 31, 2023 2022 Cash flows from operating activities: Net loss $ ( 35,564 ) $ ( 8,125 ) Adjustments to reconcile net loss to net cash used in operations: Depreciation 125 38 Interest paid-in kind on Centre Lane Credit Facility 6,656 3,104 Amortization of operating lease right-of-use asset 61 15 Amortization of debt discount 2,074 1,199 Amortization of intangibles 2,490 1,558 Impairment of goodwill and intangibles 17,070 — Stock based compensation 196 144 Common stock issued for services rendered 31 38 Stock compensation for Oceanside shares — 89 Gain on forgiveness of PPP loan — ( 1,137 ) Expected credit losses 58 84 Changes in operating assets and liabilities: Accounts receivable 1,325 ( 119 ) Prepaid expenses and other current assets 360 695 Operating lease liability ( 54 ) ( 25 ) Accounts payable and accrued expenses 735 ( 487 ) Other liabilities 472 698 Interest payable – Centre Lane Senior Secured Credit Facility - related party — ( 465 ) Interest payable – 10% Convertible Promissory note - related party 8 8 Deferred revenue ( 701 ) ( 426 ) Net cash used in operating activities ( 4,658 ) ( 3,115 ) Cash flows from investing activities: Purchase of property and equipment ( 14 ) ( 14 ) Net cash used in investing activities ( 14 ) ( 14 ) Cash flows from financing activities: Preference dividend payments — ( 5 ) Proceeds from Centre Lane Senior Secured Credit Facility - related party 8,626 3,050 Repayment of principal on Centre Lane Senior Secured Credit Facility - related party ( 270 ) — Repayments of debt — ( 250 ) Principal payments received for notes receivable — 21 Principal payments on finance lease obligations ( 4 ) — Payment of interest on Centre Lane Senior Secured Credit Facility, related party — (153) Proceeds from stock option exercises 1 1 Net cash provided by financing activities 8,353 2,664 Effect of foreign exchange rates on cash and cash equivalents 4 ( 1 ) Net increase (decrease) in cash and cash equivalents 3,685 ( 466 ) Cash and cash equivalents at beginning of year 315 781 Cash and cash equivalents at end of year $ 4,000 $ 315 Supplemental disclosure of cash flow information: Cash paid for interest $ 425 $ 153 Interest paid-in-kind on Centre Lane Credit Facility $ 6,656 $ 3,104 Supplemental disclosure of non-cash investing and financing activities Recognition of right-of-use asset and lease liability $ 64 $ 382 Conversion of Preferred shares to Common shares $ — $ 1 Common stock issued to Oceanside to settle share liability $ — $ 279 Common stock issued to Centre Lane for debt issuance $ 1,926 $ — Issuance of debt to finance acquisition of Big Village Entities $ 19,874 $ — Extinguishment of Centre Lane Credit Facility $ 671 $ — Warrants issued to settle liability $ — $ 216 See accompanying notes to consolidated financial statements. F-10 BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – DESCRIPTION OF BUSINESS Organization and Nature of Operations Bright Mountain Media, Inc. (together with its wholly-owned subsidiaries, the “Company,” “Bright Mountain” or “we”) has an end-to-end digital media and advertising services platform that efficiently connects brands with targeted consumer demographics. We focus on digital publishing, advertising technology, consumer insights, creative and media services. 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 software programs that leverage data and proprietary algorithms to match the optimal selection of an ad with a bid price offered by advertisers. Consumer Insights Our consumer insights division focuses on providing primary and secondary research, competitive intelligence, and expert insight to address customers' strategic issues. We provide cutting-edge and dynamic research, offering clients a comprehensive perspective on their consumers. This insight extends to strategic guidance on the optimal timing and channels to effectively connect with target audiences. Our cutting-edge approach combines advanced data analytics, artificial intelligence, and comprehensive market research, to uncover actionable insights that drive informed decision-making. Creative Services Our creative services division transforms data into award-winning campaigns. We are uniquely able to leverage insights teams with highly strategic media planning and buying teams to ensure brands not only position their advertising precisely, but also yield impactful business results. Our goal is to combine data-driven decisions with creativity fueled by a deep understanding of modern culture. Media Services Our media services division focuses on advertisers and agencies by providing access to premium inventory, leveraging data to optimize programmatic campaigns. Our aim is to empower clients to access the most sought-after advertising spaces across diverse platforms tailored to their specific needs and preferences. Our data-driven approach ensures that ad placements are not only well-targeted, but also continuously optimized for maximum efficiency and ROI. Our commitment to combining premium inventory access with data-driven programmatic campaign optimization makes us an indispensable partner in the success of our clients' advertising and marketing endeavors. The Company generates revenue through: F-11 BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS • the selling of advertisements placed on our owned and managed sites and on partner websites where we earn a share of the revenue, • facilitating the seamless, real-time exchange of advertisements on a large scale, bridging networks of buyers (referred to as "DSPs") and networks of sellers (referred to as "SSPs"), • serving advertisers through providing access to premium resources and leveraging data to optimize programmatic campaigns, where revenue is derived from the planning and execution of creative and media marketing campaigns, and • providing primary and secondary research, competitive intelligence, and expert insights to address customers' strategic issues, where revenue is primarily derived from providing a single integrated service for such research. Asset Purchase Agreement On April 3, 2023, in accordance with certain procedures (the “Bidding Procedures”) adopted by the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) in In re Big Village Holding LLC , et al., jointly-administered under case No. 23-10174 (the “Bankruptcy Case”), the “Company” submitted a bid (the “Bid”) for the acquisition of certain assets of Big Village Insights, Inc., a Delaware corporation f/k/a Engine International, Inc., Big Village Agency LLC, a Delaware limited liability company f/k/a Engine USA LLC, Big Village Group Inc., a Delaware corporation f/k/a Engine Group Inc., Deep Focus, Inc., a New York corporation, EMX Digital Inc., a Delaware corporation, Balihoo, Inc., a Delaware corporation, and Big Village Media LLC, a Delaware limited liability company f/k/a Engine Media LLC in the Bankruptcy Case (collectively, the “Sellers”) related to the Sellers’ Agency Business and Insights Business (as defined in the APA) (collectively, the “Business”). On April 10, 2023, the Company entered into a definitive asset purchase agreement to acquire the assets of two business units of Big Village (Big Village Insights, Inc and Big Village Agency LLC, (together, the “Big Village Entities”)) for approximately $ 20.0 million, plus assumed liabilities, in an all-cash transaction funded by a senior secured credit facility (the "Big Village Acquisition"). On April 20, 2023, the Company completed the Big Village Acquisition. As part of the Big Village Acquisition, the Company formed BV Insights, LLC ("Insights") and Big-Village Agency, LLC ("Agency") to incorporate the assets acquired in the transactions. Additionally, letters of employment were extended to certain legacy employees of the Big Village Entities, resulting in a total of 203 employees accepting an offer of employment by the Company. Centre Lane Senior Secure Credit Facility The Company and its subsidiaries are parties to the Amended and Restated Senior Secured Credit Agreement between itself, the lender party thereto, and Centre Lane Partners Master Credit Fund II, L.P., as Administrative Agent and Collateral Agent (“Centre Lane Partners”), dated June 5, 2020, as amended (the “Credit Agreement”). On April 4, 2023, the Company entered into a commitment letter (the “Commitment Letter”) with Centre Lane Solutions Partners, LP (together with any designated affiliates thereof, the “CLP Lenders”), pursuant to which CLP Lenders would provide financing in the form of a senior secured credit facility for the Big Village Acquisition. On April 20, 2023, the Company and its subsidiaries CL Media Holdings LLC, Bright Mountain LLC, Mediahouse, Inc., Big-Village Agency LLC, and BV Insights LLC, and Centre Lane Partners entered into the Seventeenth Amendment to the Credit Agreement (the “Seventeenth Amendment”). The Credit Agreement was amended, as provided in the Seventeenth Amendment, to provide for an additional term loan amount of $ 26.3 million to, among other things, finance the Big Village Acquisition. This term loan, which was provided by BV Agency, LLC, (an affiliate of Centre Lane Solutions Partners, LP) matures on April 20, 2026 and was issued at a discount of 5 % or $ 1.3 million. Interest of 15 % is payable under the note, payable-in-kind in lieu of cash payments through April 30, 2024, then 5 % is payable quarterly in cash and 10 % payable-in-kind in lieu of cash payments until maturity of April 20, 2026. Also, in connection with the Seventeenth Amendment, on April 20, 2023, the Company issued 21,401,993 shares of common stock of the Company to BV Agency, LLC, an entity beneficially owned by CLP Lenders. The issuance of the shares of common stock were not registered under the Securities Act of 1933, as amended (the “Securities Act”), in accordance with Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. As of December 31, 2023, BV Agency, LLC and Centre Lane Partners own approximately 12.4 % and 8.8 % of the Company’s outstanding common stock, respectively. F-12 BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Other Developments During 2022, the Company began scaling down its operations of Slutzky & Winshman Ltd, a digital media company located in Israel that was acquired in August 2019. This decision was made after a consistent decline in revenue. In 2023, we terminated operations in Israel and all employees were terminated. Also in 2023, we terminated the operation of News Distribution Network, Inc., a newspaper technology company, which we also acquired in 2019, and subsequently rebranded this service as Mediahouse, also as a result of a declining revenue stream. There were no specific costs associated with these exits. At December 31, 2023, these two entities have not yet been dissolved. F-13 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 $ 149.8 million as of December 31, 2023. Cash flows used in operating activities were $ 4.7 million and $ 3.1 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the Company had a working capital deficit of approximately $ 11.1 million inclusive of $ 4.0 million in cash and cash equivalents. The Company’s ability to continue as a going concern is dependent upon its ability to meet its liquidity needs through a combination of factors. The Company is currently exploring several strategic alternatives, including restructuring or refinancing its debt, or seeking additional debt, including borrowing under the Centre Lane Senior Secured Credit Agreement or raising equity capital. The ability to access the capital market is also dependent upon 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. The Company's current cash and working capital, as of the filing of this Annual Report on Form 10-K, is not expected to be sufficient to fund its anticipated level of operations over the next twelve months. 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. 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, 2023, the Company exceeded the federally insured limits of $ 250,000 for interest and non-interest-bearing accounts. The Company held a cash balance with a single financial institution in excess of the FDIC insured limit in the amount of $ 3.7 million as of December 31, 2023. As of December 31, 2022, the Company's interest and non-interest-bearing accounts were within the federally insured limit. As of December 31, 2023 and 2022, the Company exceeded the insurance limit of $ 29 ,000 for one of its international bank accounts by $ 31 ,000 and $ 66 ,000, 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. At December 31, 2023, and 2022, the Company had $ 4.0 million and $ 316 ,000, respectively, in cash and cash equivalents. Accounts Receivable and Allowances 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 current expected credit losses in the accompanying consolidated balance sheets. Certain receivables are subject to adjustments from traffic settlements that are deducted from open invoices. Our receivables are not interest bearing and are not collateralized. Unbilled receivables are the results of timing differences between billings to clients and are included in accounts receivable. F-14 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The allowance for current expected credit losses 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 including 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 are exhausted, the determination for charging off uncollectible receivables is made. Expected credit losses are recorded as general and administrative expenses on our consolidated statements of operations and comprehensive loss. 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 and assets under finance lease are amortized over the lesser of the lease term or the useful life of the improvements. When assets are sold or retired, the applicable cost and accumulated depreciation or amortization are removed from the accounts. The resulting gains or losses are reflected in the combined statements of operations and comprehensive loss. 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. We allocate goodwill to reporting units based on the expected benefit from business combination. The Company categorizes goodwill into three reporting units: “Owned & Operated”, “Ad Network” and “Insights”. 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. See Note 7, Goodwill, to the consolidated financial statements for details regarding goodwill impairment. 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 is amortized on a straight-line basis over a useful life of 2 years to 10 years. Customer relationships are amortized on a straight-line basis over a useful life of 5 years to 10 years. IP/technology is amortized on a straight-line basis over a useful life of 10 years. Non-compete agreements are amortized on a straight-line basis over the length of each agreement, typically between 3 years to 5 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.” F-15 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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. See Note 6, Intangibles, to the consolidated financial statements for details regarding impairment of intangibles. Leases The Company determines whether an arrangement contains a lease at inception in accordance with FASB Accounting Standards Codification No. 842, Leases, (ASC 842) . A contract is, or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Right-of-use (“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. For finance leases, we record interest expense on the lease liability in addition to amortizing the right-of-use asset (generally straight-line) over the shorter of the lease term or the useful life of the right-of-use asset. Finance leases are included in property and equipment, net, finance lease obligations, and finance lease obligations, non-current on our consolidated balance sheets. 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 is transferred to the customer or over time as a percentage of completion or otherwise in accordance with the terms of the contract. 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 contract and determines those that are performance obligations and assesses whether each promised service is distinct. The Company then recognizes revenue when (or as) the performance obligation is satisfied. The Company generates revenue through: F-16 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS • the selling of advertisements placed on our owned and managed sites and on partner websites where we earn a share of the revenue; • facilitating the seamless, real-time exchange of advertisements on a large scale, bridging networks of buyers (referred to as "DSPs") and networks of sellers (referred to as "SSPs"); • serving advertisers through providing access to premium resources and leveraging data to optimize programmatic campaigns, where revenue is derived from the planning and execution of creative and media marketing campaigns; and • providing primary and secondary research, competitive intelligence, and expert insights to address customers' strategic issues, where revenue is primarily derived from providing a single integrated service for such research. Digital publishing and advertising technology revenues are generated by audiences seeing or clicking on digital advertisements utilizing several advertising partners. The Company recognizes revenue once the performance obligation is satisfied at a point in time, on a gross basis net of adjustments based on the number of advertisements delivered. Customers are billed monthly or billing is generated via custom content production and extensions on our social media platforms. Consumer insights revenues are generated by providing primary and secondary research, competitive intelligence, and expert insight to address customers' strategic issues. The Company recognizes revenue as the services are rendered, by applying the percentage of completion method on a cost-to-cost basis to measure progress toward satisfaction of the performance obligation. Progress toward satisfaction of the performance obligation is measured based on costs incurred to-date relative to the total estimated costs expected to be incurred in providing services. The Company does not include costs that do not contribute to its progress toward satisfying its promise to the customer. Creative services revenues are generated by delivering campaign services to customers. Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for the individual performance obligations separately if they are distinct. If recurring services are performed, the Company recognizes revenue as the services are rendered over time, generally on a ratable basis over the contract term beginning on the date that the service is made available to the customer. For campaign services that require a one-time deliverable, we recognize revenue once the performance obligation is satisfied at a point in time. Media services revenues are generated through the access to programmatic campaigns. The Company recognizes revenue as the services are rendered over time, on a ratable basis over the contract term, beginning on the date that the service is made available to the customer. There is no significant initial cost incurred to obtain contracts with customers. Deferred Revenue The Company records deferred revenue when cash payments are received or amounts are invoiced in advance of performance obligations. The Company expects to recognize deferred revenue in the period when it provides its services and, therefore, satisfies its performance obligation to the customer. Cost of Revenue Cost of revenue includes internal labor and payment to third parties for services performed to drive revenue, which includes the publisher cost paid for ad exchange on third party sites, advertising fees, personnel costs, technology and data related costs, fees paid for content creation, influencers, writers and sales commission. 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 . During the year ended December 31, 2023 and 2022, 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 F-17 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS assets represent costs incurred by the acquired website to build value prior to an acquisition, and any related amortization and impairment expenses are not representative of 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, 2023 and 2022, advertising and marketing expense was $ 257,000 and $ 46,000 , 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 warrants. Stock-based compensation for stock option grants to employees and non-employees is based on the fair value of the award on the date of grant. We record forfeitures as they occur. The Company calculates stock compensation expense using the graded vesting method, which begins expensing each tranche on the expense begin date through the vesting date. This will result in front-loaded expenses, and is included in general and administrative expenses in the consolidated statements of operations. 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 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, 2023 and 2022, 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. F-18 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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. Our components are digital publishing, advertising technology, consumer insights, creative and media services. There are no segment managers who are held accountable by the Chief Financial Officer, 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 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. Significant estimates included in the accompanying consolidated financial statements include, valuation of goodwill and intangible assets, allowance for current expected credit losses, the determination of the relative selling prices of our services, percentage of completion for revenue recognition, estimates of amortization period for intangible assets, estimates of depreciation period for property and equipment, discount rates used in the valuation of right-of-use assets and lease liabilities, litigation reserves, 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. While these estimates are based on our best knowledge of current events and actions that may affect us in the future, actual results may differ materially from these estimates. 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, with some level of insurance. We perform periodic evaluations of the relative credit standing of financial institutions. 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-19 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS We perform credit evaluations of our customers’ financial condition and require no collateral from our customers. We maintain an allowance for current expected credit losses based upon the expected collectability of accounts receivable balances. The Company generates revenue as follows: • selling of 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; • facilitating the real-time buying and selling of advertisements at scale between networks of buyers, known as DSPs and sellers known as SSPs; • serving advertisers and agencies by providing access to premium inventory and leveraging data to optimize programmatic campaigns, where revenue is derived from the planning and execution of creative and media marketing campaign; and • providing primary research and secondary research, competitive intelligence and expert insight to address customer's strategic issues, where revenue is primarily derived from providing a single integrated service for research. The following table provides information about customer and vendor concentration that exceeds 10% of revenue, accounts receivable and accounts payable for the years ended December 31, 2023 and 2022: December 31, 2023 2022 Revenue Concentration Customers exceeding 10% of revenue 2 1 % of overall revenue Customer 1 13.0 % — % Customer 2 10.0 % 37.7 % Total % of revenue 23.0 % 37.7 % December 31, 2023 2022 Accounts Receivable Concentration Customers exceeding 10% of receivable 2 1 % of accounts receivable Customer 1 15.7 % — % Customer 2 10.5 % 43.5 % Total % of accounts receivable 26.2 % 43.5 % December 31, 2023 2022 Accounts Payable Concentration Vendors exceeding 10% of payable — 2 % of accounts payable Customer 1 — % 11.0 % Customer 2 — % 10.8 % Total % of accounts payable — % 21.8 % F-20 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Off-balance Sheet Arrangements There are no off-balance sheet arrangements as of December 31, 2023 and December 31, 2022. Reclassification As of and for the year ending December 31, 2023, certain amounts have been reclassified for comparative purposes. Changes were made for foreign currency translation from operating activities to showing the cash and cash equivalent impact only as a separate line item below financing activities, right of use asset and liability showing a net position instead showing a separate line item for asset and liabilities and reclassification on other operating activities line items for accounts payable and accrued expenses on the consolidated statement of cash flows. Changes were made for other expenses under finance income (expense), to general and administrative expense, which impacted our loss from operations Effective Accounting Pronouncements 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 was required to adopt the new guidance on January 1, 2023. Based on the nature of our business, the adoption of this standard did not have a material impact on our consolidated financial statements for the year ended December 31, 2023. 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 adopted this standard in accounting for its Big Village Acquisition. Recent Accounting Pronouncements Not Yet Adopted 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. F-21 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – ACCOUNTS RECEIVABLE Accounts receivable, net consisted of the following: December 31, ($ in thousands) 2023 2022 Accounts receivable $ 13,799 $ 3,447 Unbilled receivables ( A ) 1,252 724 15,051 4,171 Less: allowance for current expected credit losses ( 372 ) ( 586 ) Accounts receivable, net $ 14,679 $ 3,585 (A) - Unbilled receivable represents amounts for services rendered at the end of the period pending generation of invoice to the customer. Accounts receivable, net at January 1, 2022 was $ 3.6 million. Expected credit losses was $ 58,000 , and $ 84,000 for the years ended December 31, 2023, and 2022, respectively. These amounts are included in general and administrative expenses in the consolidated statements of operations and comprehensive loss. NOTE 4 – PREPAID EXPENSE AND OTHER ASSETS Prepaid expenses and other assets consisted of the following: December 31, ($ in thousands) 2023 2022 Prepaid insurance (1) $ 618 $ 1 Prepaid consulting service — 285 Prepaid software 46 176 Deposits 156 137 Subscriptions 174 — Other current assets 219 138 Total prepaid expense and other assets 1,213 737 Less: other assets, non-current ( 156 ) ( 137 ) Prepaid expenses and other current assets $ 1,057 $ 600 (1) The amount of $ 618,000 is being paid over a period of time and is also included in accounts payable at December 31, 2023. F-22 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following: Estimated Useful Life (Years) December 31, ($ in thousands) 2023 2022 Furniture and fixtures 3 - 5 $ 8 $ 49 Computer equipment 3 190 340 Computer software 5 206 — 404 389 Less: accumulated depreciation ( 205 ) ( 349 ) Property and equipment, net $ 199 $ 40 Depreciation expense was $ 125,000 , and $ 38,000 for the years ending December 31, 2023, and 2022, 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) 2023 2022 Website acquisition assets $ 1,124 $ 1,124 Less: accumulated amortization ( 1,123 ) ( 1,122 ) Website acquisition assets, net $ 1 $ 2 F-23 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Other intangible assets, net consisted of the following: December 31, 2023 December 31, 2022 ($ in thousands) Useful Life (Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Trade name 2 - 10 $ 8,381 $ ( 3,167 ) $ 5,214 $ 2,759 $ ( 1,617 ) $ 1,142 IP/Technology 10 5,821 ( 2,180 ) 3,641 1,983 ( 899 ) 1,084 Customer relationships 5 - 10 13,380 ( 7,002 ) 6,378 6,680 ( 4,419 ) 2,261 Non-compete agreements 3 - 5 402 ( 402 ) — 402 ( 381 ) 21 Total $ 27,984 $ ( 12,751 ) $ 15,233 $ 11,824 $ ( 7,316 ) $ 4,508 The Company performed an impairment assessment at September 30, 2023 and December 31, 2023, and recorded an impairment loss of $ 2.9 million. There was no impairment loss for the year ended December 31, 2022. Impairment loss is included in the below table: (in thousands) Accumulated Amortization Impairment Loss Amortization Accumulated Amortization December 31, 2022 Twelve Months Ended December 31, 2023 December 31, 2023 Trade name $ 1,617 $ 742 $ 808 $ 3,167 IP/technology 899 900 381 2,180 Customer relationships 4,419 1,291 1,292 7,002 Non-compete agreements 381 13 8 402 Total $ 7,316 $ 2,946 $ 2,489 $ 12,751 During the year ended December 31, 2023, the Company acquired intangible assets through the acquisition of the Big Village Entities as follows: (in thousands) Useful Life (Years) Amount Trade name 7 to 10 $ 5,622 Developed technology 10 3,838 Customer relationships 7 to 10 6,700 Total $ 16,160 For further details on the Big Village Acquisition, see Note 13 , Business Combinations to the consolidated financial statements. December 31, 2023 2022 Website $ 1 $ 2 Other intangibles 15,233 4,508 Total intangible, net $ 15,234 $ 4,510 Amortization expense for the years ended December 31, 2023, and 2022 was approximately $ 2.5 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. F-24 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2023, expected remaining amortization expense of intangible assets and website acquisition by fiscal year is as follows: ($ in thousands) Amount 2024 $ 1,922 2025 1,845 2026 1,769 2027 1,769 2028 1,769 Thereafter 6,160 Total $ 15,234 NOTE 7 – GOODWILL The following table represents the allocation of goodwill as of December 31, 2023 and 2022: ($ in thousands) Owned & Operated Ad Network Insights Total December 31, 2021 $ 9,725 $ 9,920 $ — $ 19,645 Additions — — — — December 31, 2022 9,725 9,920 — 19,645 Additions 1,357 — 907 2,264 Impairment ( 8,217 ) ( 5,907 ) — ( 14,124 ) December 31, 2023 $ 2,865 $ 4,013 $ 907 $ 7,785 Goodwill acquired as part of the Big Village Acquisition totals $ 2.3 million and represents the value of unidentifiable intangible assets including assembled workforce and strategic benefits that are expected to be achieved. We allocate goodwill to reporting units based on the expected benefit and synergies with our current reporting units. The Company categorizes goodwill into three reporting units: “Owned & Operated”, “Ad Network” and “Insights”. See Note 13, Business Combinations to the consolidated financial statements. 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 September 30, 2023 and December 31, 2023, an impairment assessment was performed on goodwill for Ad Network, Owned & Operating and Insights reporting units. The assessment used 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 concluded that it is more likely than not that the estimated fair value of the Ad Network and Owned & Operating reporting units is less than the carrying value, hence, we performed a quantitative analysis. Our assessment for Insights reporting unit did not have such conclusion, hence a quantitative analysis was not required. 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 a market participant debt structure and cost of capital. 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. Our quantitative analysis showed that the implied fair value of our goodwill for Ad Network and Owned & Operating reporting units is less than its carrying value which resulted in an impairment charge of approximately $ 14.1 million . F-25 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following: December 31, ($ in thousands) 2023 2022 Accounts payable (A) $ 11,391 $ 8,585 Accrued wages, commissions and bonus 353 380 Publisher cost 1,153 559 Professional fees 1,322 677 Subcontractor 3,013 — Other 265 116 Total accounts payable and accrued expenses $ 17,497 $ 10,317 A. Accounts payable includes $ 5.2 million, and $ 5.9 million at December 31, 2023 and, 2022, respectively, for Slutzky & Winshman Ltd and Mediahouse, whose operations were terminated during the year ended December 31, 2023. NOTE 9 – OTHER CURRENT LIABILITIES Other current liabilities consisted of the following: (in thousands) December 31, 2023 December 31, 2022 Current portion of long term lease $ 82 $ 38 Dividend payable 692 692 Project advance expense (1) 1,401 — Litigation reserves 1,152 1,107 Other current liabilities 23 1 Total other current liabilities 3,350 1,838 Less: other liabilities, non-current ( 325 ) — Other current liabilities $ 3,025 $ 1,838 (1) Represents amount advanced by customers to cover third party expenses specifically related to their project, these expenses are offset against the advance and are not part of the Company's income statement. NOTE 10 – 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. On April 4, 2023, the Company entered into a commitment letter (the “Commitment Letter”) with Centre Lane Partners, pursuant to which they would provide financing in the form of a senior secured credit facility for the acquisition of the Big Village Entities. On April 20, 2023, the Company and its subsidiaries entered into the Seventeenth Amendment to the Credit Agreement (the “Seventeenth Amendment”) with Centre Lane Partners. The Credit Agreement was amended, as provided in the Seventeenth Amendment, to provide for an additional term loan amount of $ 26.3 million to, among other things, finance the Acquisition. This term loan, which was provided by BV Agency, LLC, matures on April 20, 2026 and was issued at a discount of 5 % or $ 1.3 million. Interest of 15 % payable under the note is payable-in-kind in lieu of cash F-26 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS payment up to April 30, 2024, then 5 % payable quarterly in cash and 10 % payable-in-kind in lieu of cash payment until maturity of April 20, 2026. As part of the Seventeenth Amendment, the Company is required to pay an amendment fee of 2 % of the principal amount of the existing initial principal plus amendments one to eight ("First In Last Out Loans") and amendments nine to sixteen ("Last In First Out Loans"), totaling $ 706,000 , additionally, an exit fee of $ 18,000 of the loan to finance the Big Village Acquisition. The outstanding principal on these at April 20, 2023 was $ 31.0 million and $ 4.3 million, respectively. These fees total $ 724,000 and are due and payable at maturity. Additionally, the maturity dates were extended to April 20, 2026. Also, in connection with the Seventeenth Amendment, on April 20, 2023, the Company issued 21,401,993 shares of common stock of the Company to BV Agency, LLC, an entity beneficially owned by Centre Lane Partners. The shares valued $ 1.9 million, based on a per share price of $ 0.09 , which was the closing price of the Company’s common stock at close of market on April 19, 2023. The issuance of the shares of common stock were not registered under the Securities Act of 1933, as amended (“Securities Act”), in accordance with Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. As of December 31, 2023, BV Agency, LLC and Centre Lane Partners own approximately 12.4 % and 8.8 % of the Company’s outstanding common stock, respectively. On July 28, 2023, the Company and its subsidiaries entered into the Nineteenth Amendment to the Credit Agreement (the “Nineteenth Amendment”) with Centre Lane Partners. The Credit Agreement was amended, as provided in the Nineteenth Amendment, to provide for an additional term loan amount of $ 2.0 million to, among other things, finance the integration and further growth of the Company post-Acquisition. This term loan is part of the last in first out loans and matures on June 28, 2024 . Including the Nineteenth Amendment, Centre Lane Partners subsequently loaned the Company an additional $ 38.0 million to provide liquidity to fund operations beginning in April 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. A related party is a party that can exercise significant influence over the Company in making financial and/or operating decisions. The original note issued under the Centre Lane Senior Secured Credit Facility initially bore interest at a rate of 6.0 % per annum, 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 % per annum on all subsequent draws with 8 % per annum payable quarterly in cash and 4 % per annum payable-in-kind in lieu of cash payment. These last in first out loans, totals $ 6.9 million inclusive of exit fees at December 31, 2023, due and payable on April 20, 2026, excluding the Nineteenth Amendment which is due and payable on June 28, 2024. In connection with the Nineteenth Amendment, adjustments were made to the interest rate for outstanding loans with the exception of the draw under the Seventeenth Amendment as follows: • The interest rate per annum changed to 7.0 % per annum plus the Secured Overnight Financing Rate ("SOFR"). At December 31, 2023, the SOFR was 5.39 % per annum, overall interest on these facilities was 12.39 %, per annum at December 31, 2023; • The cash pay rate for the last in first out loans was changed to the SOFR plus 3.0 % per annum, at December 31, 2023, the rate was 8.39 %, per annum; • Effective July 1, 2024, the first in last out loans PIK Rate per annum will be 7.0 % per annum plus SOFR plus 5.0 % per annum. 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. F-27 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 original principal plus draws advanced by amendments 2 through 8 along with accrued and unpaid interest (after giving effect to capitalized PIK 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. The outstanding amount for these draws at December 31, 2023 is $ 34.1 million, inclusive of interest paid in kind. On June 30, 2023, the Company and its subsidiaries entered into its Eighteen th Amendment with Centre Lane Partners regarding installment payments which were due on June 30, 2023. The Eighteenth Amendment required equal monthly installments on July 3, 2023, August 7, 2023 and September 5, 2023, respectively. There was no impact on principal or interest and no fees incurred by the Company for this amendment. In connection with the Nineteenth Amendment, quarterly installments equal to 2.5 % of the outstanding aggregate principal are due on the first in last out loans commencing March 31, 2024. During the years ended December 31, 2023, and 2022, the Company paid approximately $ 425,000 and $ 153,000 , respectively, toward outstanding interest payable. During the years ended December 31, 2023, and 2022, the Company paid approximately $ 270,000 and $ 0 , 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. The accumulated administrative fee since inception of the facility is $ 140,000 and is included in outstanding principal. The administrative fee charged for the years ended December 31, 2023, and 2022 was $ 35,000 , respectively. The below table summarizes the loan balances and accrued interest for the years ended December 31, 2023 and 2022: December 31, ($ in thousands) 2023 2022 Note payable – Centre Lane Senior Secured Credit Facility, related party (current portion) $ 5,592 $ 4,860 Note payable – Centre Lane Senior Secured Credit Facility – net of discount, related party 58,674 25,101 Net principal at December 31, 2023 and 2022 64,266 29,961 Add: debt discount 5,962 3,148 Outstanding principal at December 31, 2023 and 2022 $ 70,228 $ 33,109 The below table summarizes the movement in the outstanding principal from inception through December 31, 2023: F-28 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, ($ in thousands) 2023 2022 Opening balance $ 33,109 $ 26,334 Add: Draws 29,816 3,050 Exit and other fees 917 621 Interest capitalized 6,656 3,104 70,498 33,109 Less: Payment ( 270 ) — Outstanding principal $ 70,228 $ 33,109 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, 2023, there were nineteen amendments to the Centre Lane Senior Secured Credit Facility. 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 of the original debt and the fair value of the new debt, additionally, in the event the transaction is with a related party, this gain or loss should be recognized against additional paid in capital. 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. In connection with the Seventeenth Amendment, the Company determined that the change was an extinguishment consistent with ASC 470, Debt , the old debt of $ 35.5 million was derecognized and the new debt of $ 62.7 million was recognized at estimated fair value. A gain on extinguishment was recognized against additional paid in capital of $ 671,000 , as Centre Lane Partners is a related party. The below table summarizes the amendments that were executed by the Company since the inception of the facility to December 31, 2023, (in thousands, except for share data): F-29 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Number Date Draw $'000 Repayment Date Interest Rate (PIK) (D) Interest Rate (Cash) Agency Fee Exit Fee (A) Common Stock Issued Accounting Impact 1 4/26/2021 $ — 4/20/2026 12.39 % — % $ — $ — 150,000 Extinguishment (B) 2 5/26/2021 1,500 4/20/2026 12.39 % — % — 750 3,000,000 Modification (F) 3 8/12/2021 500 4/20/2026 12.39 % — % — 250 2,000,000 Modification (F) 4 8/31/2021 1,100 4/20/2026 12.39 % — % — 550 — Modification (F) 5 10/08/2021 725 4/20/2026 12.39 % — % — 363 — Extinguishment (F) 6 11/05/2021 800 4/20/2026 12.39 % — % — 800 7,500,000 Modification (F) 7 12/23/2021 500 4/20/2026 12.39 % — % 70 500 — Modification (F) $ 5,125 $ 70 $ 3,213 12,650,000 8 1/26/2022 350 4/20/2026 12.39 % — % — 350 — Modification (F) 9 2/11/2022 250 4/20/2026 4.00 % 8.39 % — 13 — Modification (G) 10 3/11/2022 300 4/20/2026 4.00 % 8.39 % — 15 — Modification (G) 11 3/25/2022 500 4/20/2026 4.00 % 8.39 % — 25 — Modification (G) 12 4/15/2022 450 4/20/2026 4.00 % 8.39 % — 23 — Modification (G) 13 5/10/2022 500 4/20/2026 4.00 % 8.39 % 35 25 — Modification (G) 14 6/10/2022 350 4/20/2026 4.00 % 8.39 % — 18 — Modification (G) 15 7/08/2022 350 4/20/2026 4.00 % 8.39 % — 18 — Modification (G) $ 3,050 $ 35 $ 487 — 16 2/10/2023 1,500 4/20/2026 4.00 % 8.39 % — 75 — Modification (G) 17 4/20/2023 26,316 4/20/2026 15.00 % — % 35 708 21,401,993 Extinguishment (C) 19 7/28/2023 2,000 6/28/2024 4.00 % 8.39 % $ — 100 — Modification (G) $ 29,816 $ 35 $ 883 21,401,993 Total $ 37,991 $ 140 $ 4,583 34,051,993 (A) Added and capitalized to the principal amount of the original loan and the original loan terms apply. (B) 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. (C) 15 % PIK until April 20, 2024, then 5 % cash and 10 % PIK thereafter. (D) New rates in effect in connection with amendment nineteen, Amendment 1 through 8 PIK rate was 10 %. (E) New rates in effect in connection with amendment nineteen, Amendment 9 through 16 cash rate was 8 %. (F) First In Last Out Loans. (G) Last In First Out Loans. (H) As discussed above, there was no impact on principal or interest and no fees incurred by the Company for amendment 18, hence not included in above table. 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 F-30 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 16 were due on June 30, 2023 along with accrued and unpaid interest, however, the maturity date was changed to April 20, 2026 with amendment 17. The outstanding amount at December 31, 2023 is $ 6.9 million, inclusive of interest paid in-kind. As of December 31, 2023, and 2022, the carrying value of the Centre Lane Senior Secured Credit Facility was $ 64.3 million and $ 30.0 million, respectively, net of unamortized debt discount of $ 6.0 million and $ 3.1 million, respectively. 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, 2023 and 2022, the Company recorded amortization of debt discount of $ 2.1 million and $ 1.2 million, respectively on the Centre Lane Senior Secured Credit Facility. Interest expense for the year ended December 31, 2023, and 2022 consisted of the following: December 31, ($ in thousands) 2023 2022 Interest expense $ 7,080 $ 3,042 Amortization 2,062 1,185 Total interest expense $ 9,142 $ 4,227 The minimum annual principal payments of notes payable at December 31, 2023 were: ($ in thousands) Amount 2024 $ 5,592 2025 3,517 2026 61,119 Total $ 70,228 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 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, 2023 and 2022. The total Convertible Notes payable was $ 80,000 and $ 68,000 , net of discount of $ 0 and $ 12,000 , at December 31, 2023 and 2022, respectively. Interest expense for the Convertible Notes was $ 20,000 and $ 22,000 , inclusive of interest of $ 8,000 and discount amortization of $ 12,000 and $ 14,000 for the years ended December 31, 2023, and 2022, respectively. The outstanding principal and interest of the Convertible Notes was due and payable November 2023, the loan remains unpaid at December 31, 2023 with outstanding principal of $ 80,000 and interest payable of $ 39,000 . The outstanding principal continues to accrue interest. NOTE 12 – LEASES The Company accounts for its 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. F-31 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Operating Lease The Company leases its corporate offices in Boca Raton, Florida under a long-term non-cancellable lease agreement which was signed on June 14, 2022, with 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, 2023, and 2022, the operating lease right-of-use asset was $ 306,000 and 367,000 , respectively, and is included under assets on the consolidated balance sheets. At December 31, 2023, and 2022, the operating lease right-of-use lease liability was $ 303,000 and $ 357,000 , respectively, including the current portion of $ 64,000 and $ 38,000 , respectively, 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 $ 161,000 and $ 33,000 for the years ended December 31, 2023 and 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, and is included in general and administrative expense in the statements of operations and comprehensive loss. The Company’s non-lease components are primarily related to property maintenance and other operating services, which vary based on future outcomes and are recognized in rent expense when incurred and not included in the measurement of the lease liability. Finance Lease On October 1, 2023, the Company entered into a lease agreement for computer equipment with a lease term of three years . At December 31, 2023, the finance lease asset was $ 60 ,000 and is included under assets on the consolidated balance sheets. At December 31, 2023, the finance lease liability was $ 60 ,000, including the current portion of $ 18 ,000, and is included under liabilities on the consolidated balance sheets. Finance lease expense for the year ended December 31, 2023 was $ 7,000 , inclusive of interest of $ 3,000 and amortization of $ 4,000 , included in general and administrative expense the statements of operations and comprehensive loss. As of December 31, 2023 and 2022, the right-of-use asset and lease liability for the operating lease are summarized as follows (in thousands): F-32 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023 2022 Assets Operating lease $ 306 $ 367 Finance lease (1) 60 — $ 366 $ 367 Liabilities Operating lease liability, current $ 64 $ 38 Operating lease liability, net of current portion 239 319 Total operating lease liabilities $ 303 $ 357 Finance lease obligations, current $ 18 $ — Finance lease obligations, net of current portion 42 — Total finance lease obligations $ 60 $ — Weighted average remaining lease terms (in years) Operating lease 3.75 4.75 Finance lease 2.75 — Weighted average discount rate Operating lease 14.39 % 14.39 % Finance lease 21.12 % — % (1) Finance lease represents computer software, see Note 5 "Property and Equipment". As of December 31, 2023, the aggregate annual lease obligations were as follows (in thousands): Operating Lease Finance Lease 2024 $ 64 $ 18 2025 79 22 2026 96 20 2027 78 — Total lease obligations 316 60 Less: Amount representing interest ( 13 ) — Net lease obligations $ 303 $ 60 NOTE 13 – BUSINESS COMBINATIONS On April 20, 2023, the Company completed the Big Village Acquisition of two business units of Big Village Holding LLC for approximately $ 20.0 million, plus assumed liabilities, in an all-cash transaction funded by a senior secured credit facility. As part of the Big Village Acquisition, the Company formed BV Insights, LLC ("Insights") and Big-Village Agency, LLC ("Agency") to incorporate the assets acquired in the transactions, additionally, letters of employment were extended to certain legacy employees of the Big Village Entities, resulting in a total of 203 employees accepting the offer of employment by the Company. The purpose of the acquisition was to add synergies to our existing revenue stream. The purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated F-33 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS to goodwill and intangibles. The goodwill of $ 2.3 million recognized was attributable to assembled workforce and strategic benefits that are expected to be achieved and is tax deductible for a period of 15 years. Identified intangibles total $ 16.2 million inclusive of the below: (in thousands) Useful Life (Years) Amount Trade name 7 to 10 $ 5,622 Developed technology 10 3,838 Customer relationships 7 to 10 6,700 $ 16,160 The following table summarizes the allocation of the purchase price based on the estimated fair value of the acquired assets and assumed liabilities at the date of the Big Village Acquisition and subsequent adjustment: (in thousands) Balance Purchase price consideration Centre Lane Senior Secured Credit Facility $ 19,874 Fair value of assets acquired Accounts receivable 12,477 Intangibles 16,160 Goodwill 2,264 Prepaid and other assets 836 Property and equipment 206 $ 31,943 Fair value of liabilities assumed Accounts payable and accrued expenses 6,540 Deferred revenue 4,534 Other current liabilities 995 $ 12,069 Total fair value of assets acquired and liabilities assumed $ 19,874 We incurred costs related to the Big Village Acquisition of approximately $ 2.2 million during the year ended December 31, 2023. Additionally, $ 2.8 million in cure claims was paid to accepted vendors on the closing date and $ 1.2 million was subsequently paid to employees representing bonus. Amounts for cure claims and bonuses are included above as part of assumed liability. All acquisition related costs were expensed as incurred and have been recorded in general and administrative expenses in our consolidated statements of operations and comprehensive loss. The final allocation of purchase price has changed from the preliminary allocation because of a reduction in the fair value of assets acquired of $ 2.4 million and liabilities assumed of $ 1.4 million, resulting in an increase in goodwill of approximately $ 1.0 million. Proforma Results Our results for the year ended December 31, 2023 include results from the Big Village Acquisition between April 20, 2023 to December 31, 2023. Standalone revenue related to the entities acquired in the Big Village Acquisition was $ 31.0 million, for the year ended December 31, 2023. The following unaudited pro forma information presents the Company's results of operations as if the Big Village Acquisition had occurred on January 1, 2022. The proforma results do not purport F-34 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS to represent what the Company's results of operations actually would have been if the transaction had occurred on January 1, 2022 or what the Company's operating results will be in future periods. Supplemental pro forma information is as follows: (Unaudited) Years Ended December 31, 2023 2022 Revenue $ 56,780 $ 75,948 Net loss $ 36,741 $ ( 6,640 ) Basic and diluted net loss per share $ 0.22 $ ( 0.05 ) NOTE 14 – REVENUE RECOGNITION The following table represents our revenue disaggregated by type (in thousands): Year Ended December 31, 2023 2022 Revenue: Digital publishing $ 4,130 $ 8,032 Advertising technology 9,463 11,548 Consumer insights 23,868 — Creative services 5,130 — Media services 1,955 — Total revenue $ 44,546 $ 19,580 Geographic Information Revenue by geographical region consist of the following (in thousands): Year Ended December 31, 2023 2022 Revenue: United States $ 44,546 $ 18,400 Israel — 1,180 Total revenue $ 44,546 $ 19,580 Revenue by geography is generally based on the country of the Company’s contracting entity. Total United States revenue was approximately 100 %, and 94 % of total revenue for the years ended December 31, 2023, and 2022, respectively. As of December 31, 2023, and 2022, 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 years ended December 31, 2023 and 2022, comprised the following (in thousands): F-35 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023 December 31, 2022 Deferred revenue at start of the year $ 737 $ 1,162 Amounts invoiced during the year 31,864 588 Business combinations 4,534 — Less: revenue recognized during the year ( 32,566 ) ( 1,013 ) Deferred revenue at end of the year $ 4,569 $ 737 NOTE 15 – 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 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, 2023, 11,771,640 shares were remaining under the Stock Option Plan for the future issuance. Options As of December 31, 2023, options to purchase 10,728,360 shares of common stock were outstanding under the Stock Option Plan at a weighted average exercise price of $ 0.12 per share. Compensation expense recorded in connection with the Stock Option Plan was $ 196,000 , and $ 144,000 for the years ended December 31, 2023, and 2022, 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, 2023: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Balance Outstanding, December 31, 2022 6,517,660 $ 0.33 7.8 $ 552 Granted 6,128,200 0.09 9.2 198 Exercised ( 90,000 ) 0.01 0 10 Forfeited ( 1,426,375 ) 0.02 0 136 Expired ( 401,125 ) 0.07 0 38 Balance Outstanding, December 31, 2023 10,728,360 $ 0.12 8.7 $ 568 Exercisable at December 31, 2023 1,916,954 $ 0.31 6.5 $ 121 Unvested at December 31, 2023 8,811,406 $ 0.07 9.2 $ 447 During the years ended December 31, 2023 and 2022, 90,000 and 100,000 common stock options were exercised with an aggregate intrinsic value of $ 10,000 and $ 44,000 , respectively. Summarized information with respect to options outstanding under the stock option plans at December 31, 2023, is as follows: F-36 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 8,922,133 $ 0.06 9.1 1,110,977 $ — 0.14 - 0.24 1,202,000 0.18 8.9 201,750 0.18 0.25 - 0.49 416,000 0.42 1.6 416,000 0.42 0.50 - 0.85 55,000 0.56 0.7 55,000 0.56 0.86 - 1.75 133,227 1.22 5.9 133,227 1.22 10,728,360 $ 0.10 8.7 1,916,954 $ 0.22 As of December 31, 2023, there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $ 503,000 to be recognized through July 2027. 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, 2023 and 2022: December 31, 2023 December 31, 2022 Expected Term (years) 6.25 6.25 Expected volatility 486 % 427 % Risk -free interest rate 4.15 % 2.83 % Dividend yield — % — % Expected forfeiture rate — % — % 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. NOTE 16 – 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: F-37 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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. Assets Measured at Fair Value on a Nonrecurring Basis The Company has certain non-financial assets that are measured at fair value on a non-recurring basis when there is an indicator of impairment, and they are recorded at fair value only when impairment is recognized. These assets include goodwill and intangible assets, net. The below table shows the quantitative information for assets measured at fair value on a non-recurring basis: ($ in thousands) Quantitative Information about Level 3 Fair Value Measurements Fair Value Valuation Technique Unobservable Input Rate (Weighted Average Cost of Capital Goodwill $ 7,785 Discounted cash flow Discount rate 21.12 % Intangible assets, net $ 15,234 Discounted cash flow Discount rate 21.12 % Goodwill and Intangibles Assets At September 30, 2023 and December 31, 2023 an impairment assessment was performed on goodwill and intangibles for Ad Network, Owned & Operating and Insights reporting units. We estimated the fair value of our reporting units utilizing an income approach (discounted cash flow method), which incorporated significant unobservable Level 3 inputs. The assessment indicated that the carrying value was in excess of its implied fair value, resulting in an impairment charge of $ 14.1 million and $ 2.9 million for goodwill and intangible assets, respectively. During the year ended December 31, 2023, goodwill and intangibles acquired by the Company were $ 2.3 million and $ 16.2 million , respectively. The fair value assigned to the acquired intangibles is based on a discounted flow analysis, in which the Company makes 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 fair value calculations 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. Goodwill represents the residual value after the fair value of the intangibles were identified. Centre Lane Senior Secured Credit Facility F-38 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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. Amendment seventeen was considered an extinguishment, the company utilize a third party valuation company to calculate 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. NOTE 17 – COMMITMENTS AND CONTINGENCIES 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. Ladenburg On July 11, 2023, Ladenburg Thalmann & Co. Inc. (“Ladenburg”) filed an action against the Company for breach of contract in the United States District Court for the Southern District of Florida, Case No. 9:23-cv-81019-AMC. Ladenburg alleges that it entered into an Investment Banking Agreement (the “Agreement”) with the Company on September 1, 2020. According to Ladenburg, that Agreement provided that Ladenburg would be the exclusive investment advisor and banker for the Company. Ladenburg alleges that the Agreement entitles them to a fee for any financing transactions (debt financing or merger and acquisition transactions) that the Company engages in during the term of the contract. In April 2023, the Company informed Ladenburg of an impending Big Village Acquisition. Ladenburg now seeks $ 1.5 million plus interest, costs and attorneys’ fees and expenses as a result of that acquisition and debt financing, claiming that it is entitled to a fee. The Company disputes the allegations and disputes that Ladenburg is entitled to receive any fee since it did not perform any work pertaining to such acquisition. The outcome of this matter is not determinable as of the date of issuance of these financial statements. 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 18 - STOCKHOLDER S' DEFICIT Preferred Stock F-39 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 designated six series of preferred stock, consisting of: 1. 10% Series A Convertible Preferred Stock (“Series A Stock”); 2. 10% Series B Convertible Preferred Stock (“Series B Stock”); 3. 10% Series C Convertible Preferred Stock (“Series C Stock”); 4. 10% Series D Convertible Preferred Stock (“Series D Stock”); 5. 10% Series E Convertible Preferred Stock (“Series E Stock”); and 6. 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; • 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: • shares do not have voting rights, except as may be permitted under Florida law; • are convertible into shares of our common stock at the holder’s option on a one for one basis; • are entitled to a liquidation preference equal to a return of the capital invested; and • 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. There were no shares of preferred stock issued or outstanding at December 31, 2023, and 2022. 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. F-40 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Dividends for Series E Convertible Preferred Stock were $ 5,000 , for the year ended December 31, 2022, There were no preferred stock dividends paid in the year ended December 31, 2023. At December 31, 2023 and 2022, accrued unpaid preference dividend was $ 691,000 . This amount is payable to the Company's Chairman, Mr. Kip Speyer and is included under other liabilities in the consolidated balance sheet at December 31, 2023. 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, 2023, 11,771,640 shares were remaining under the 2022 Plan for the future issuance. Issue of Common Stock During the year ended December 31, 2023, the Company issued 21,658,498 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 21,401,993 $ 1,926 Common stock issued for services rendered 190,000 31 Common stock issued for options exercised 90,000 1 Adjustment to Oceanside shares issued (A) ( 23,495 ) — Total 21,658,498 $ 1,958 (A) -represents an adjustment to reconcile shares actually issued related to the Oceanside acquisition in 2019. 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): Shares (#) Value $'000 Common stock issued for services rendered 235,000 $ 38 Common stock issued for options exercised 100,000 1 Conversion of Preferred Stocks 125,000 1 Shares issued to Oceanside employees per the acquisition agreement valued at $ 1.60 174,253 279 Total 634,253 $ 319 Treasury Stocks During the year ended December 31, 2021, three shareholders 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-41 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Warrants At December 31, 2023 and 2022, we had 21,362,066 and 35,998,316 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. Approximately 14,636,250 common stock warrants expired during the year ended December 31, 2023, there was no expiration for the year ended December 31, 2022. A summary of the Company’s warrants outstanding as of December 31, 2023 and 2022 is presented below: December 31, 2023 Warrants Exercise Price Number Outstanding Gross cash proceeds if exercised $'000 $ 1.00 4,992,308 $ 4,992 $ 0.75 15,456,008 $ 11,592 $ 0.65 913,750 $ 594 21,362,066 $ 17,178 December 31, 2022 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 NOTE 19 – LOSS PER SHARE As of December 31, 2023, and 2022, there were 172,103,134 and 150,444,636 shares of common stock issued, respectively, and 171,277,959 and 149,619,461 shares of common stock outstanding, respectively. Outstanding shares as of December 31, 2023, and 2022, 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, 2023, and 2022 (in thousands except shares and per share data). F-42 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023 2022 Loss per share: Numerator: Net loss $ ( 35,564 ) $ ( 8,125 ) Preferred stock dividends — ( 5 ) Net loss available to common stockholders $ ( 35,564 ) $ ( 8,130 ) Denominator: Weighted-average common shares outstanding Basic and diluted 164,845,671 149,191,057 Net loss per common share Basic and diluted $ ( 0.22 ) $ ( 0.05 ) 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, 2023, and 2022 were as follows: December 31, 2023 2022 Common stock equivalent from: Shares unvested and subject to exercise of stock options 10,728,360 6,517,660 Shares subject to warrants stock conversion 21,362,066 35,998,316 Shares subject to convertible notes stock conversion 200,000 200,000 NOTE 20 – RELATED PARTY TRANSACTIONS Centre Lane Partners 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 2022 and through the year ended December 31, 2023. Additionally, in connection with the Seventeenth Amendment, on December 31, 2023, the Company issued 21,401,993 shares of common stock of the Company to BV Agency, LLC, an entity beneficially owned by Centre Lane Partners. This relationship has been determined to qualify as a related party, BV Agency, LLC and Centre Lane Partners own approximately 12.4 % and 8.8 % of the Company’s outstanding common stock, respectively. A related party is a party that can exercise significant influence over the Company in making financial and/or operating decisions. Through December 31, 2023, the Company has entered into 19 amendments to the Credit Agreement between itself and Centre Lane Partners. The total related party debt owed to Centre Lane Partners was $ 70.2 million and $ 33.1 million as of December 31, 2023 and 2022, respectively. See Note 10 - 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, 2023, and 2022, respectively. See Note 11, 10 % Convertible Promissory Note for further discussion on these notes payable. Preferred Stocks During the years ended December 31, 2023 and 2022, the Company paid cash dividends on the outstanding shares of the Company’s Series E and F Preferred Stock of $ 0 and $ 5,000 , respectively, held by affiliates of the Company. F-43 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At December 31, 2023 and 2022, accrued unpaid preference dividend was $ 691,000 . These amounts are payable to the Company's Chairman, Mr. Kip Speyer. NOTE 21 – 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 $ 296,000 and $ 842,000 . 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. The Company’s loss before income taxes consists of the following: Year Ended December 31, 2023 2022 United States $ ( 35,806 ) $ ( 7,596 ) Foreign 242 ( 529 ) Total loss before provision for income taxes $ ( 35,564 ) $ ( 8,125 ) A reconciliation of the federal statutory income tax rate to the effective tax rate is as follows: December 31, 2023 2022 Amount Rate Amount Rate Federal tax expense (benefit) at the statutory rate from operations $ ( 7,469 ) 21.00 % $ ( 1,706 ) 21.00 % State tax benefit, net of federal income tax benefit ( 631 ) 1.78 % ( 872 ) 10.73 % PPP loan forgiveness — — % ( 62 ) 0.76 % Other adjustments ( 70 ) 0.20 % ( 73 ) 0.90 % Effect of foreign taxes ( 7 ) 0.02 % 43 ( 0.53 ) % Impairment 2,944 ( 8.28 ) % — — % Stock compensation 40 ( 0.11 ) % 38 ( 0.46 ) % Change in valuation allowance 5,193 ( 14.61 ) % 2,632 ( 32.40 ) % Total tax provision (benefit) $ — — % $ — — % F-44 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The tax effect of significant components of the Company’s deferred tax assets and liabilities at December 31, 2023, and 2022, are as follows: December 31, 2023 2022 Deferred tax assets: Net operating loss carryforward $ 20,665 $ 16,552 Intangible assets 1,964 — Lease liability 97 — Other 732 1,028 Total gross deferred tax assets 23,458 17,580 Less: Deferred tax asset valuation allowance ( 22,762 ) ( 17,570 ) Total net deferred tax assets $ 696 $ 10 Property and equipment — ( 10 ) Right-of-use asset ( 98 ) — Debt modification ( 598 ) — Net deferred tax liability $ — $ — As of December 31, 2023, the Company had U.S. federal net operating loss carryforwards of $ 74.3 million that expire at various dates from 2030 through 2038, and includes $ 64.0 million that have an unlimited carryforward period. As of December 31, 2023, the Company had state and local net operating loss carryforwards of $ 91.2 million that expire at various dates from 2030 through 2042, and includes $ 30.7 million that have an unlimited carryforward period. As of December 31, 2023, the Company had foreign net operating loss carryforwards of $ 4.6 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 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 2023 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, 2023, and 2022, the change in the valuation allowance was an increase of approximately $ 5.2 million and an increase of approximately $ 2.6 million, respectively. The Tax Cuts and Jobs Act (TCJA) resulted in significant changes to the treatment of research and developmental (R&D) expenditures under Section 174 of the IRC. For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&D expenditures that are paid or incurred in connection with their trade or business. Specifically, costs for U.S.-based R&D activities must be amortized over five years and costs for foreign R&D activities must be amortized over 15 years—both using a midyear convention. As of December 31, 2023, the Company capitalized a substantial amount of R&D expenditures primarily related to research and development activities performed in the U.S. F-45 Table of Contents BRIGHT MOUNTAIN MEDIA, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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, 2023, and 2022, 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, 2023 and 2022, no accrued interest or penalties are recorded on the balance sheets, 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 2020 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 22 – SUBSEQUENT EVENTS Departure of Director On January 18, 2024, Pamela J. Parizek, a director, notified the Company that she was resigning from the Board of Directors, effective immediately. At the time of her resignation, Ms. Parizek was the Chair of the Company's Audit Committee. F-46