Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2024. In addition to historical consolidated financial information, this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include, but are not limited to, those identified below, and in the section "Cautionary Statement Regarding Forward-Looking Information", those discussed in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2024, and those discussed in any subsequent filing we make with the SEC.

Business Overview

Organization and Nature of Operations

Bright Mountain Media, Inc. (together with its wholly-owned subsidiaries, the "Company," "Bright Mountain" or "we") is an end-to-end marketing services company that helps brands with the right audiences, at the right time, with the right message, both effectively and efficiently by removing the middlemen in the marketing workflow. Our end-to-end offerings combine consumer insights with creative services, media services, and advertising technology to deliver solutions to improve audience fidelity for brands. We focus on digital publishing, advertising technology, consumer insights, creative services, 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, and 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 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, and 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 return on investment. 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:

Key Factors Affecting Our Performance

Seasonal Fluctuations. Typically advertising technology companies report a material portion of their revenues during the third and fourth calendar quarters as a result of back-to-school and holiday-related advertising spend. We continue to experience this trend in our advertising technology division. Because of seasonal fluctuations, there can be no assurance that the results of any quarter or full year will be indicative of results for future years or quarters.

Limited Number of Customers. During the nine months ended September 30, 2025 one customer represented 14.4% of revenue. During the nine months ended September 30, 2024 one customer represented 13.4% of revenue. The loss of this customer could have a material adverse impact on our results of operations in future periods.

Managing Industry Dynamics. We operate in the rapidly evolving digital advertising industry. Advances in programmatic advertising technologies, and the efficient and automated method of purchasing ads online, has enabled publishers to auction their ad inventory to more buyers simultaneously, in real time. As advertisers stay ahead of evolving trends in consumer engagement with digital media, an expansive opportunity for innovation emerges. Our commitment to understanding customer needs empowers us, and our continuous pursuit of innovation enables swift adaptation to industry shifts. This approach not only facilitates the development of cutting-edge solutions, but also does so in a cost-effective manner.

As regulatory concerns accelerate the impact on existing industry standards, companies are actively seeking new methods to finely tailor their messages to target audiences. Tech companies will be limited in how they monetize personal information for advertising purposes. This trend is exemplified by two imminent developments: (1) the anticipated erosion of Google's third-party cookies, and (2) the data security measures integrated into Apple iPhones. Consequently, companies must explore innovative methods to better understand their target audiences and have the tools to effectively engage with them.

Key Operating and Financial Metrics

We monitor the following key financial and operational metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. The following is our analysis for the three and nine months ended September 30, 2025 and 2024:

(1) For a reconciliation of net loss to Adjusted EBITDA see "Use of Non-GAAP Financial Measures" below.

Revenue

The Company generates revenue through:

Revenue decreased by $211,000, or 1%, for the three months ended September 30, 2025, compared to the same period in 2024. Revenue increased by $3.9 million, or 10%, for the nine months ended September 30, 2025, compared to the same period in 2024. See below for a detailed analysis of revenue for the three and nine months ended September 30, 2025, and 2024.

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.

Cost of revenue decreased by $78,000, or 1%, for the three months ended September 30, 2025 compared to the same period in 2024. Cost of revenue increased by $3.3 million, or 12%, for the nine months ended September 30, 2025, compared to the same period in 2024. See below for a detailed analysis of cost of revenue for the three and nine months ended September 30, 2025, and 2024.

General and Administrative Expenses

General and administrative expenses consist primarily of (i) personnel and related costs for our executive, finance and accounting, human resources, and, administrative personnel, including salaries, benefits, bonuses, and stock-based compensation; (ii) legal, accounting, and other professional service fees; (iii) other corporate expenses; (iv) information technology costs; and (v) facility costs.

General and administrative expenses decreased by $315,000, or 7%, for the three months ended September 30, 2025 compared to the same period in 2024. General and administrative expenses decreased by $2.3 million, or 16%, for the nine months ended September 30, 2025, compared to the same period in 2024. See below for a detailed analysis of general and administrative expenses for the three and nine months ended September 30, 2025 and 2024.

Results of Operations

The following is our analysis of the results of operations for the periods indicated below. This analysis should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this Quarterly Report on Form 10-Q.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

Net loss for the quarter ended September 30, 2025 was $2.8 million as compared to a net loss of $3.3 million for the same period in 2024. The following is our analysis for the period:

Revenue

Our revenue decreased by $211,000, or 1%, for the three months ended September 30, 2025, compared to the same period in 2024. The Company focuses on digital publishing, advertising technology, consumer insights, creative services, and media services. Changes in revenue generated by each such division are set forth below:

Digital Publishing

Digital publishing revenue decreased by $239,000, or 46%, for the three months ended September 30, 2025, compared to the same period in 2024. Approximately $280,000, or 2%, of the Company's revenue for the three months ended September 30, 2025, was generated from our digital publishing customers, compared to $519,000, or 4%, for the same period in 2024. This division was significantly impacted by macroeconomic factors, which reduced traffic to our website, coupled with an overall reduction in spending by some customers related to inflationary concerns.

Advertising Technology

Advertising technology revenue increased by $412,000, or 9%, for the three months ended September 30, 2025, compared to the same period in 2024. Approximately $5.1 million, or 36%, of the Company's revenue for the three months ended September 30, 2025, was generated from our advertising technology customers compared to $4.7 million, or 33%, for the same period in 2024. This growth was driven by our ability to leverage our resources to attract top advertisers, which in turn allowed us to onboard premium publishers. This led to an increase in volume, as well as rates and overall revenue.

Consumer Insights

Consumer insights revenue decreased by $403,000, or 6%, for the three months ended September 30, 2025, compared to the same period in 2024. Approximately $6.4 million, or 46%, of the Company's revenue for the three months ended September 30, 2025 was generated from our consumer insights customers compared to $6.8 million, or 48%, for the same period in 2024.

Creative Services

Creative services revenue decreased by $119,000, or 7%, for the three months ended September 30, 2025, compared to the same period in 2024. Approximately $1.5 million, or 11%, of the Company's revenue for the three months ended September 30, 2025, was generated from our creative services customers compared to $1.6 million, or 11% for the same period in 2024.

Media Services

Media services revenue increased by $138,000, or 23%, for the three months ended September 30, 2025, compared to the same period in 2024. Approximately $728,000, or 5%, of the Company's revenue for the three months ended September 30, 2025, was generated from our media services customers compared to $590,000, or 4%, for the same period in 2024. This increase was primarily related to the timing of customer needs.

Cost of Revenue

Cost of revenue decreased by $78,000, or 1%, for the three months ended September 30, 2025, compared to the same period for 2024. This decrease is due to the factors discussed below:

Direct Salaries and Labor Cost

Direct salaries and labor cost remained consistent, with a slight increase of $5,000 for the three months ended September 30, 2025, when compared to the same period in 2024. Approximately $1.5 million, or 16%, of the Company's cost of revenue for the three months ended September 30, 2025, was a result of direct salaries and labor cost compared to $1.5 million, or 15%, for the same period in 2024. These costs represent salary and labor cost of employees that work directly on customer projects for our consumer insights, creative services, and media services divisions.

Direct Project Cost

Direct project cost decreased by $613,000, or 20%, for the three months ended September 30, 2025 when compared to the same period in 2024. Approximately $2.4 million, or 25%, of the Company's cost of revenue for the three months ended September 30, 2025, was a result of direct project cost compared to $3.0 million, or 31%, during the same period in 2024. This decrease was consistent with the decrease in revenue from our consumer insights division. These costs include payments made to third-parties that are directly attributable to the completion of projects that allow for revenue recognition for our consumer insights, creative services, and media services divisions.

Non-Direct Project Cost

Non-direct project cost decreased by $229,000, or 13%, for the three months ended September 30, 2025 when compared to the same period in 2024. Approximately $1.5 million, or 16%, of the Company's cost of revenue for the three months ended September 30, 2025, was a result of non-direct project cost compared to $1.8 million, or 18%, for the same period in 2024. This decrease is related to our continued efforts to decrease headcount. These costs represent overall client service costs that are not specifically related to a particular project, but relate to services for our consumer insights, creative services, and media services divisions.

Publisher Cost

Publisher cost was $3.7 million, which represents 39% of overall cost of revenue, and $3.0 million, or 31%, of overall cost of revenue, for the three months ended September 30, 2025 and 2024, respectively. We experienced an increase of $716,000, or 24%, for the three months ended September 30, 2025, compared to the same period in 2024. In 2024, we ran political campaigns with margins better than our average. We did not run similar campaigns in 2025, and as a result, in 2025 our margins were lower. In 2025, we have had higher costs with publishers in connection with the revenue obtained from ad sales. These costs represent payments to media providers and website publishers.

Gross Margin

Gross margin was $4.3 million and $4.4 million for the three months ended September 30, 2025 and 2024, respectively. Our gross margin decreased by $133,000, or 3%, for the three months ended September 30, 2025, when compared to the same period of 2024. Gross margin as a percentage of revenue remained consistent at 31% for the three months ended September 30, 2025 and 2024.

General and Administrative Expenses

General and administrative expenses decreased by $315,000, or 7%, for the three months ended September 30, 2025, compared to the same period in 2024. The decrease is due to a combination of factors as discussed below:

Personnel Cost

Personnel cost decreased by $270,000, or 14%, for the three months ended September 30, 2025, compared to the same period in 2024. This change was mainly driven by a decrease in the Company's head count by a net change of 28 employees. The Company employee's headcount was 113 and 141 at September 30, 2025 and 2024, respectively.

Legal Fees

Legal fees increased by $302,000, or 191%, for the three months ended September 30, 2025, compared to the same period in 2024. This increase was due largely to payments made as part of the ongoing litigation with Ladenburg. See Note 16, Commitments and Contingencies, to the consolidated financial statements.

Website Expenses

Website expenses decreased by $153,000, or 44%, for the three months ended September 30, 2025, compared to the same period in 2024. This decrease was related to a reclassification of certain components of software costs from website expenses to cost of revenue.

Financing Expense (Income)

Financing and other expense, net, decreased by $242,000, or 7%, for the three months ended September 30, 2025, compared to the same period in 2024. This decrease is related to a decrease in interest paid under the Centre Lane Senior Secured Credit Facility due to greater capitalization of interest in the current year. See Note 10, Centre Lane Senior Secured Credit Facility, to the consolidated financial statements.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Net loss for the nine months ended September 30, 2025 was $10.1 million as compared to a net loss of $13.2 million for the same period in 2024. The following is our analysis for the period:

Revenue

Our revenue increased by $3.9 million, or 10%, for the nine months ended September 30, 2025, compared to the same period in 2024. The increase in revenue was largely attributable to our advertising technology division. The Company focuses on digital publishing, advertising technology, consumer insights, creative services, and media services. Changes in revenue generated by each such division are set forth below:

Digital Publishing

Digital publishing revenue decreased by $246,000, or 17%, for the nine months ended September 30, 2025, compared to the same period in 2024. Approximately $1.2 million, or 3%, of the Company's revenue for the nine months ended September 30, 2025 was generated from our digital publishing customers, compared to $1.5 million, or 4%, for the same period in 2024.

Advertising Technology

Advertising technology revenue increased by $3.5 million, or 33%, for the nine months ended September 30, 2025, compared to the same period in 2024. Approximately $14.4 million, or 33%, of the Company's revenue for the nine months ended September 30, 2025 was generated from our advertising technology customers compared to $10.9 million, or 28%, for the same period in 2024. This growth was driven by our ability to leverage our resources to attract top advertisers, which in turn has allowed us to onboard premium publishers. This led to an increase in volume, as well as rates and overall revenue.

Consumer Insights

Consumer insights revenue increased by $601,000, or 3%, for the nine months ended September 30, 2025, compared to the same period in 2024. Approximately $20.7 million, or 48%, of the Company's revenue for the nine months ended September 30, 2025 was generated from our consumer insights customers compared to $20.1 million, or 51%, for the same period in 2024.

Creative Services

Creative services revenue decreased by $607,000, or 11%, for the nine months ended September 30, 2025, compared to the same period in 2024. Approximately $4.7 million, or 11%, of the Company's revenue for the nine months ended September 30, 2025 was generated from our creative services customers compared to $5.3 million, or 13% for the same period in 2024. This decrease was primarily related to a decrease in the number of projects for smaller tier revenue customers.

Media Services

Media services revenue increased by $642,000, or 36%, for the nine months ended September 30, 2025, compared to the same period in 2024. Approximately $2.4 million, or 6%, of the Company's revenue for the nine months ended September 30, 2025 was generated from our media services customers compared to $1.8 million, or 5%, for the same period in 2024. This increase was primarily related to the timing of customer needs and the moving of certain projects from year-end 2024 to the first three quarters of 2025.

Cost of Revenue

Cost of revenue increased by $3.3 million, or 12%, for the nine months ended September 30, 2025, compared to the same period for 2024. This increase is due to the factors discussed below:

Direct Salaries and Labor Cost

Direct salaries and labor cost decreased by $394,000, or 7%, for the nine months ended September 30, 2025, when compared to the same period in 2024. Approximately $5.2 million, or 16%, of the Company's cost of revenue for the nine months ended September 30, 2025 was a result of direct salaries and labor cost compared to $5.6 million, or 22% for the same period in 2024. These costs represent salary and labor cost of employees that work directly on customer projects for our consumer insights, creative services, and media services divisions.

Direct Project Cost

Direct project cost increased by $1.7 million, or 19%, for the nine months ended September 30, 2025, when compared to the same period in 2024. Approximately $10.9 million, or 34%, of the Company's cost of revenue for the nine months ended September 30, 2025 was a result of direct project cost compared to $9.2 million, or 32%, during the same period in 2024. This increase was related to an increase in customer contracts. These costs include payments made to third-parties that are directly attributable to the completion of projects that allow for revenue recognition for our consumer insights, creative services, and media services divisions.

Non-Direct Project Cost

Non-direct project cost was $3.7 million, or 12%, of the Company's cost of revenue for the nine months ended September 30, 2025, compared to $5.5 million, or 19%, for the same period in 2024. These costs represent overall client service costs that are not specifically related to a particular project, but relate to services for our consumer insights, creative services, and media services divisions. The decrease of $1.8 million is related to our continued efforts to decrease headcount.

Publisher Cost

Publisher cost was $10.5 million, which represents 33% of overall cost of revenue, and $7.1 million, or 25%, of overall cost of revenue, for the nine months ended September 30, 2025 and 2024, respectively. We experienced an increase of $3.3 million, or 47%, for the nine months ended September 30, 2025, compared to the same period in 2024. In 2024, we ran political campaigns with margins better than our average. We did not run similar campaigns in 2025, and as a result, in 2025 our margins were lower. In 2025, we have had higher costs with publishers in connection with the revenue obtained from ad sales. These costs represent payments to media providers and website publishers.

Gross Margin

Gross margin was $11.6 million and $10.9 million for the nine months ended September 30, 2025 and 2024, respectively. Our gross margin increased $617,000, or 6%, for the nine months ended September 30, 2025, when compared to the same period of 2024. Gross margin as a percentage of revenue decreased to 27% for the nine months ended September 30, 2025, compared to 28% for the same period of 2024 due to the higher cost of revenue.

General and Administrative Expenses

General and administrative expenses decreased by $2.3 million, or 16%, for the nine months ended September 30, 2025, compared to the same period in 2024. The decrease is due to a combination of factors as discussed below:

Personnel Cost

Personnel cost decreased by $1.5 million, or 22%, for the nine months ended September 30, 2025, compared to the same period in 2024. This change was mainly driven by a decrease in the Company's head count by a net change of 28 employees. The Company employee's headcount was 113 and 141 at September 30, 2025 and 2024, respectively.

Insurance Cost

Insurance cost decreased by $215,000, or 35%, compared to the same period in 2024. This change was mainly driven by a reform of the Company's management liability insurance program, including changes to insurance providers, resulting in a decrease in premiums from the prior year.

Legal Fees

Legal fees increased by $169,000, or 18%, for the nine months ended September 30, 2025, compared to the same period in 2024. This increase was due largely to payments made as part of the ongoing litigation with Ladenburg. See Note 16, Commitments and Contingencies, to the consolidated financial statements.

Website Expenses

Website expenses decreased by $352,000, or 34%, for the nine months ended September 30, 2025, compared to the same period in 2024. This decrease was related to a reclassification of certain components of software costs from website expenses to cost of revenue.

Data Processing

Data processing decreased by $357,000, or 37%, for the nine months ended September 30, 2025, compared to the same period in 2024. This reduction was due largely to the reclassification of certain components of data processing costs from data processing to website expenses.

Financing Expense (Income)

Financing and other expense, net, decreased by $146,000, or 2%, for the nine months ended September 30, 2025, compared to the same period in 2024. This decrease is related to a decrease in interest paid under the Centre Lane Senior Secured Credit Facility due to greater capitalization of interest in the current year. See Note 10, Centre Lane Senior Secured Credit Facility, to the consolidated financial statements.

Use of Non-GAAP Financial Measure

Non-GAAP results are presented only as a supplement to the financial statements and for use within management's discussion and analysis based on accounting principles generally accepted in the United States of America ("GAAP"). The non-GAAP financial information is provided to enhance the reader's understanding of the Company's financial performance, but non-GAAP measures should not be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP.

All of the items included in the reconciliation from net loss before taxes to EBITDA and from EBITDA to Adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles, stock-based compensation, etc.) or (ii) items that management does not consider to be useful in assessing the Company's ongoing operating performance (e.g., M&A costs, income taxes, gain on sale of investments, loss on disposal of assets, etc.). In the case of the non-cash items, management believes that investors can better assess the Company's operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect the Company's ability to generate free cash flow or invest in its business.

We use, and we believe investors benefit from the presentation of, EBITDA and Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.

Because not all companies use identical calculations, the Company's presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the Company's performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures.

A reconciliation of net loss before taxes to non-GAAP EBITDA and Adjusted EBITDA is as follows:

Liquidity and Capital Resources

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. The following table summarizes total current assets, total current liabilities, and net working capital (deficit) as of September 30, 2025, as compared to December 31, 2024.

As of September 30, 2025, we had a cash balance of $553,000 and a restricted cash balance of $1.9 million compared with a cash balance of $2.5 million and a restricted cash balance of $1.9 million as of December 31, 2024. The Company's liquidity needs, and a discussion of how it intends to meet those needs, is discussed below. See - "Going Concern."

Going Concern

Historically, the Company has incurred losses, which have resulted in an accumulated deficit of approximately $177.0 million as of September 30, 2025. Cash flows provided by (used in) operating activities were $347,000 and $(451,000) for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, the Company had a working capital deficit of approximately $17.3 million, inclusive of $553,000 in cash and cash equivalents and $1.9 million in restricted cash.

The Company's current cash and working capital, as of the filing of this Quarterly Report on Form 10-Q, are 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 obligations and continue as a going concern. 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. During the next year, we anticipate that we will need approximately $5.2 million to meet our contractual obligations in addition to amounts needed for our working capital needs. 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 Facility, or raising equity capital. The ability to access the capital markets depends, in part, upon the volume and market price of the Company's stock, which cannot be assured. Other measures include reducing or delaying certain business activities, and reducing general and administrative expenses, including a reduction in headcount. The ultimate success of these plans is not guaranteed.

The accompanying unaudited 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.

Financing Arrangement Summary

Centre Lane Senior Secured Credit Facility

On June 5, 2020, the Company and its subsidiaries entered into the Amended and Restated Senior Secured Credit Facility between themselves, the lenders party thereto and Centre Lane Partners Master Credit Fund II, L.P., as Administrative Agent and Collateral Agent ("Centre Lane Partners"), as amended (the "Credit Agreement"). The Credit Agreement has been amended numerous times to change the terms, including the amounts outstanding, the interest rate, the maturity date and other payment terms.

As of September 30, 2025, Centre Lane Partners has loaned the Company $39.9 million through Amendments One through Eight (the "Second Out Loans"), Amendments Nine through Sixteen (the "First Out Loans"), and Amendments Seventeen and Twenty-One (the "Third Out Loans").

Effective March 31, 2025, the Company, the Lenders, and Centre Lane Partners entered into the Twenty-Second Amendment to the Credit Agreement, pursuant to which the following adjustments were made to the outstanding loans:

Effective September 30, 2025, the Company, the Lenders, and Centre Lane Partners entered into the Twenty-Third Amendment to the Credit Agreement, which applied the following adjustments to loans with outstanding payments due on September 30, 2025, including the following temporary modifications:

The outstanding principal owed to Centre Lane Partners was $83.6 million and $78.8 million as of September 30, 2025 and December 31, 2024, respectively. Of the amount outstanding at September 30, 2025, approximately $5.1 million is due by September 30, 2026, with $975,000 due at December 31, 2025, and $1.4 million due at each of March 31, June 30, and September 30, 2026. The balance of $78.5 million is due in December 2026.

For a full description of the Centre Lane Senior Secured Credit Facility, see Note 10, Centre Lane Senior Secured Credit Facility, to the consolidated financial statements.

Summary of Cash Flows

The following table summarizes cash flow activities during the nine months ended September 30, 2025 and 2024:

Operating Activities

Our largest source of operating cash is cash collections from customers from revenue. Our primary uses of our operating cash, are for cost of revenue expenses, personnel-related expenditures and other general administrative expenses.

For the nine months ended September 30, 2025, cash provided by operating activities was $347,000 The primary factors affecting our operating cash flows during the period were our net loss of $10.1 million, adjusted for non-cash charges of $1.4 million for amortization of intangible assets, $1.7 million of amortization of debt discount, $7.0 million in interest paid in kind on the Centre Lane Senior Secured Credit Facility, and a $4,000 net change in operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities were a $2.4 million increase in deferred revenue and a $706,000 decrease in accounts receivable, partially offset by a $1.6 million decrease in accounts payable and accrued expenses and a $1.5 million decrease in other liabilities.

For the nine months ended September 30, 2024, cash used in operating activities was $451,000. The primary factors affecting our operating cash flows during the period were our net loss of $13.2 million, adjusted for non-cash charges of $1.4 million for amortization of intangible assets, $2.2 million of amortization of debt discount, $6.9 million in interest paid in kind on the Centre Lane Senior Secured Credit Facility, $191,000 for stock compensation expense, and a $1.8 million net change in operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities were a $2.3 million increase in accounts receivable, a $543,000 decrease in accounts payable, and a $363,000 decrease in other liabilities, partially offset by a $200,000 increase in deferred revenue.

Investing Activities

Cash used in investing activities of $30,000 and $100,000 for the nine months ended September 30, 2025 and 2024, respectively, was attributable to $30,000 and $14,000, respectively, for the purchase of property and equipment, and $86,000 for website enhancements during the nine months ended September 30, 2024.

Financing Activities

During the nine months ended September 30, 2025, the Company used cash of $2.3 million in financing activities, which is largely attributable to the repayment of principal on the Centre Lane Senior Secured Credit Facility of $2.3 million.

During the nine months ended September 30, 2024, the Company used cash of $971,000 in financing activities, which is largely attributable to repayment of principal on the Centre Lane Senior Secured Credit Facility of $879,000.

Contractual Obligations and Commitments

There were no other material changes in our contractual obligations and commitments from those disclosed above in Note 10, Centre Lane Senior Secured Credit Facility, and Note 12, Leases, to the consolidated financial statements, and in the Annual Report on Form 10-K for the year ended December 31, 2024.

Off-Balance Sheet Arrangements

As of September 30, 2025 and December 31, 2024, there were no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.

Critical Accounting Policies and 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 unaudited consolidated financial statements as well as reported amounts of revenue and expenses during the periods presented. Our unaudited consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management's judgment in its application. There are also areas in which management's judgment in selecting any available alternative would not produce a materially different result.

Significant estimates included in the accompanying consolidated financial statements include, valuation of goodwill and intangible assets, 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, the valuation of the Centre Lane Senior Secured Facility to determine whether a debt modification or extinguishment has occurred, and the valuation allowance on deferred tax assets.

Critical accounting policies are those policies that management believes are very important to the portrayal of our financial position and results of operations, and that require management to make estimates that are difficult, subjective or otherwise complex. For further information on all of our significant accounting policies, see the Company's audited consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Recent Accounting Pronouncements

Recent accounting pronouncements are detailed in the "Summary of Significant Accounting Policies" in Note 2 to our unaudited consolidated financial statements.

Smaller Reporting Company Status

We are a "smaller reporting company" as defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We may continue to be a smaller reporting company even though we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.