BMTM 10-K & 10-Q changes, risk factors and insider trading

IfWe are continuing to remediate significant deficiencies in our internal controls, and if we fail to establish and maintain adequate internal control over our financial and management system, our ability to accurately and timely report our financial results could be adversely affected, resulting in errors in our financial reporting, which could cause a loss of investor confidence.

We anticipate that we will need a significant amount of cash in the near future in order to repay the portion of our outstanding debt obligations owed under the Centre Lane Senior Secured Credit Facility as and when they mature. As of December 31, 2024,2025, we owed Centre Lane $78.8$86.1 million under the Centre Lane Senior Secured Credit Facility. Of this amount, $952,000$1.8 million is due on each of March 31, 2025,2026, $1.4 million is due on June 30, 2025,2026, and $1.4 million is due on September 30, 2025 and December 31, 2025, respectively.2026. The remaining balance of $75.0$81.5 million is due inon 2026December or20, later.2026. If we have insufficient cash to pay these amountsamounts, and we are otherwise unable to extend the maturity dates or refinance these obligations, we would be in default. We cannot provide any assurances that we will be able to raise the necessary amount of capital to repay these obligations or that we will be able to extend the maturity dates or otherwise refinance these obligations. Upon a default in the Centre Lane Senior Secured Credit Facility, Centre Lane would have the right to exercise its rights and remedies to collect, which would include foreclosing on our assets. Accordingly, a default would have a material adverse effect on our business and, if Centre Lane exercises its rights and remedies, we would likely be forced to seek bankruptcy protection.

Historically, we have not generated sufficient gross profit to pay our operating expensesexpenses, and we reported a net loss for the years ended December 31, 2024,2025, and 2023.2024. During 20242025 and 2023,2024, we were dependent on borrowings under the Amended and Restated Centre Lane Senior Secured Credit Facility (the "Centre Lane Senior Secured Credit Facility") to support our working capital needs. We are not currently a party to any binding agreements to raise additional capital and there are no assurances we will be able to raise any additional third-party capital. Although we recently improved our gross profit substantially and became cash flow positive, there can be no assurance that this trend will continue, and if it does not continue, and we are unable to raise sufficient additional working capital as needed, we may be unable to grow our Company, and we may not be able to pay our liabilities as they come due.

We must maintain effective financial and management systems and internal controls to meet our public company reporting obligations. Moreover, the Sarbanes-Oxley ("SOX") requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. If weWe have apreviously identified material weaknessweaknesses orand deficiencysignificant deficiencies in our internal controlcontrols over financial reporting,reporting and have been working to remediate them. The existence of these deficiencies means that we may not detect errors on a timely basis and our consolidated financial statements may be materially misstated. Effective internal controls are necessary for us to produce reliable financial reports and are important to prevent fraud. As a result, our failure to remediate these deficiencies and maintain effective financial and management systems and internal controls could result in errors in our financial reporting, us being subject to regulatory action and a loss of investor confidence in the reliability of our financial statements.

For the year ended December 31, 2025, two customers represented 13.6% and 11.9% of our revenue, respectively, and for the year ended December 31, 2024, one customer represented 12.2% of our revenue, and for the year ended December 31, 2023, two customers represented 23.0% of our revenue, with one customer representing 10.0% of our revenue, and the other representing 13.0% of our revenue. The loss of these customers could have a material adverse impact on our results of operations in future periods. There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the future level of demand for our services that will be generated by these customers. In addition, revenues from these customers may fluctuate from time to time based on the commencement and completion of projects, the timing of which may be affected by market conditions or other facts, some of which may be outside of our control. If these customers experience declining or delayed sales due to market, economic or competitive conditions, we could be pressured to reduce the prices we charge for our servicesservices, or we could lose major customers. These customers have the option to cancel their agreements with us by providing advance written notice with the time period required for the advance notice being not longer than 30 days. Any such development could have an adverse effect on our margins and financial position and would negatively affect our revenue, results of operations and/or the trading price of our common stock.

TypicallyTypically, advertising technology companies report a material portion of their revenues during the fourth calendar quarter as a result of holiday-related advertising spending. Our experience has been consistent with this trend. Because of seasonal fluctuations, there can be no assurance that the results of any particular quarter will be indicative of results for the full year or for future years or quarters.

Outside of our owned and operated websites, our AdTech business is dependent upon our publishing partners to provide the media it sells. Our AdTech business depends on these publishers to make their respective media inventories available to it to use in connection with the campaigns that it manages, creates, or markets. Our AdTech business's growth depends, in part, on its ability to expand and maintain its publisher relationships within its network and to have access to new sources of media inventory such as new partner websites and Facebook pages that offer attractive demographics, innovative and quality content, and growing Web user traffic volume. Our AdTech business's ability to attract new publishers to its networks and to retain Web publishers currently in its networks will depend on various factors, some of which are beyond our control. These factors include, but are not limited to, our AdTech business's ability to introduce new and innovative products and services, its pricing policies, and the cost-efficiency to Web publishers of outsourcing their advertising sales. In addition, the number of competing intermediaries that purchase media inventory from Web publishers continues to increase. In the event our AdTech business is not able to maintain effective relationships with its publishers, its ability to distribute advertising campaigns will be greatly hindered which will reduce the value of its services and adversely impact its results of operations in future periods.

Our success also depends on our ability to attract, train and retain qualified personnel. Competition for qualified personnel is intenseintense, and we may experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications. If we fail to attract and retain qualified personnel, our business may suffer.

We may be involved in lawsuits and regulatory actions, both in and outside the ordinary course of our business, with customers, employees and others. Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may be difficult to ascertain. These types of claims, as well as other types of lawsuits to which we are subject from time to time, can distract management’s attention from core business operations and impact operating results, particularly if a lawsuit results in an unfavorable outcome, or could harm the Company’s reputation with customers, employees, investors and others. Litigation is both costly and time consumingtime-consuming and often results in the diversion of management time and resources. All or a portion of our costs may not be covered by insurance, and there can be no assurance that we will prevail in any such matter.

There is a limited public market for our common stock.stock and our shares may be quoted on a lower tier of the OTC Markets.

Our shares of common stock, par value $0.01 per share, (the "common stock") are currently quoted for trading on the OTCQB Market. There is a limited trading market for our shares of common stock and a robust trading market for our securities may not develop in the foreseeable future. If no market develops, it may be difficult or impossible for you to sell your shares if you should desire to do so. There is extremely limited and sporadic trading of our common stock, and no assurance can be given, when, if ever, an active trading market will develop or, if developed, that it will be sustained. In addition, if we fail to maintain the continued eligibility requirements for the OTCQB Market, including the minimum bid price requirement, our common stock may be removed from the OTCQB Market and quoted on a lower tier of the OTC Markets. Any such downgrade could further reduce the visibility, liquidity and trading activity of our common stock.

We have entered into and may, in the future, enter into various debt transactions and agreements with Centre Lane, including the Centre Lane Senior Secured Credit Facility. Centre Lane hasmay nonot have any fiduciary duty to make decisions in our best interest. Centre Lane generally is entitled to vote our common stock in accordance with its own interests, which may be contrary to our and your interests and Centre Lane is not obligated to offer us business opportunities or to offer to loan additional amounts to us. We believe that the debt transactions and agreements that we have entered into with Centre Lane are on terms that are at least as favorable as could reasonably have been obtained at such time from third parties. However, these relationships could create, or appear to create, potential conflicts of interest when our board of directors is faced with decisions that could have different implications for us and Centre Lane. The appearance of conflicts, even if such conflicts do not materialize, might adversely affect the public’s perception of us, as well as our relationship with other companies and our ability to enter into new relationships in the future, which could have a material adverse effect on our ability to do business. In addition, conflicts of interest may arise between us and Centre Lane. Centre Lane may favor its own interests over our and your interests.

Our Company has a concentration of stock ownership and control, which may have the effect of delaying, preventing or deterring a change of control, or, in the case of ownership of our common stock by Centre Lane, causing a change of control.

Our common stock ownership is highly concentrated. As of December 31, 2024,2025, Mr. W. Kip Speyer, our former Chairman of the Board, beneficially owned approximately 17.9%16.6% of our common stock. In addition, 10th Lane Partners LP, an affiliate of Centre Lane, beneficially owns approximately 23.6%26.1% of our common stock (which amount includes the holdings of two other Centre Lane affiliates) and an individual shareholder owns an additional 6.1%5.9% of our common stock. As a result of the concentrated ownership of the Company's stock, these people collectivelycollectively, or Centre Lane individually, may be able to control all matters requiring shareholder approval, including the election of directors and approval of mergers and other significant corporate transactions. This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of our Company.Company, or, in the case of Centre Lane, causing a change of control to benefit Centre Lane. It could also deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our CompanyCompany, and it may affect the market price of our common stock.

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 aims to ensure that ad placements are not only well-targeted, but also continuously optimized for maximum efficiency and ROI.return on investment ("ROI"). Our commitment to combining premium inventory access with data-driven programmatic campaign optimization makes us a valuable partner in the success of our clients' advertising and marketing endeavors.

Seasonal Fluctuations. TypicallyTypically, advertising technology companies report a material portion of their revenues during the third and fourth calendar quarter 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. For the year ended December 31, 2025, two customers represented 13.6% and 11.9% of our revenue, respectively, and for the year ended December 31, 2024, one customer represented 12.2% of our revenue, and for the year ended December 31, 2023, two customers represented 13.0% and 10.0% of our revenue, respectively.revenue. The loss of either of these customers could have a material adverse impact on our results of operations in future periods.

Impairment of goodwill and intangibles decreasedincreased approximately $17.1 million,$786,000, or 100%, for the for the year ended December 31, 20242025, compared to 2023.2024.

Our revenue increased by $12.1$2.5 million, or 27%,4%, for the year ended December 31, 2024,2025, compared to the same period in 2023. For the year ended December 31, 2024, revenue includes $36.5 million, which represents the impact of the Big Village Acquisition, completed in April 2023. This compares to $31.0 million for the same period in 2023.2024. 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 revenue decreased by $2.4 million,$251,000, or 58%,14%, for the year ended December 31, 20242025 compared to the same period of 2023.2024. Approximately $1.7$1.5 million, or 3%, of the Company’s revenue for the year ended December 31, 20242025 was generated from our digital publishing customers compared to $4.1$1.7 million, or 9%,3%, for the same period in 2023.2024. 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 and reduction in website traffic.

MediaConsumer servicesinsights revenue increaseddecreased by $467,000,$462,000, or 24%,2%, for the year ended December 31, 20242025 compared to the same period in 2023,2024. andApproximately represented$26.6 approximatelymillion, 4%or 45%, of the Company’s revenue for the year ended December 31, 2025 was generated from our consumer insights customers, compared to $27.0 million, or 48%, for the same period in 2024.

Cost of revenue increased $8.4by $3.2 million, or 27%,8%, for the year ended December 31, 2024,2025, compared to the same period of 2023.2024. ForThis increase was due to the yearfactors endeddiscussed December 31, 2024, cost of revenue includes $25.9 million, or 64% from the impact of the Big Village Acquisition, which was completed in April 2023. This compares to $24.0 million, or 75% for the same period in 2023.below:

Direct salaries and labor cost increaseddecreased $202,000,by $1.0 million, or 3%14%, for the year ended December 31, 20242025 when compared to the same period in 2023.2024. Approximately $7.6$6.5 million, or 19%,15%, of the Company's cost of revenue for the year ended December 31, 20242025 was a result of direct salaries and labor cost, compared to $7.4$7.6 million, or 23%19%, for the same period in 2023.2024. This decrease was related to our continued efforts to decrease headcount. 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 increased $1.5$2.4 million, or 14%20%, for the year ended December 31, 20242025 when compared to the same period in 2023.2024. Approximately $11.7$14.1 million, or 29%,32%, of the Company's cost of revenue for the year ended December 31, 2024,2025, was a result of direct project cost compared to $10.2$11.7 million, or 32%,29%, for the same period in 2023.2024. AsThis discussed above, the Big Village Acquisition, whichincrease was completedrelated into April 2023, is the main driver of thean increase in directcustomer project cost for the year ended December 31, 2024.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 increaseddecreased $246,000,by $1.4 million, or 4%,21%, for the year ended December 31, 2024,2025, when compared to the same period in 2023.2024. Approximately $6.6$5.2 million, or 16%,12%, of the Company's cost of revenue for the year ended December 31, 2024,2025, was a result of non-direct project cost compared to $6.4$6.6 million, or 20%,16%, for the same period in 2023.2024. This decrease was related to our continued efforts to reduced headcount. These costs represent overall client service costs that are not specifically related to a particular project.

Publisher cost was $12.4$15.1 million, which represents 31%35% of overall cost of revenue, and $5.9$12.4 million, or 18%,31%, of overall cost of revenue for the years ended December 31, 20242025 and 2023,2024, respectively. We experienced an increase of $6.5$2.8 million, or 111%,22%, for the year ended December 31, 20242025 compared to the same period in 2023.2024. ThisPublisher increasecosts iswere consistent with the increase notedlower in revenue2024 forbecause ourwe advertisingwere technologyrunning division.political campaigns, which generate lower publisher costs. We did not run similar campaigns in 2025. These costs represent payments to media providers and website publishers which drive revenue for our advertising technology division.publishers.

Gross margin was $16.5$15.8 million, and $12.8$16.5 million for the years December 31, 20242025 and 2023.2024. Our gross margin increaseddecreased $3.7 million$674,000, or 29%4%, for the year ended December 31, 2024,2025, when compared to the same period for 2023.2024. Gross margin as a percentage of revenue remaineddecreased consistentto at 29%27% for boththe yearsyear ended December 31, 20242025, andcompared 2023.to 29% for the same period of 2024, due to the higher cost of revenue.

General and administrative expenses decreased $1.1$5.0 million, or 5%,23%, for the year ended December 31, 2024,2025, compared to the same period in 2023.2024. The decrease iswas due to a combination of factors as discussed below.below:

Personnel cost decreased by approximately $1.3$1.9 million, or 13%,21%, for the year ended December 31, 20242025 compared to the same period in 2023.2024. The Company reduced its headcount in 20242025 by 7112 employees, including 287 employees that were terminated as a reduction in force. The Company incurred severance cost of approximately $250,000$70,000 in connection with this reduction. The Company incurred severance cost of approximately $250,000 associated with a headcount reduction during the same period for 2024. We had 107 total employees as of December 31, 2025, compared to 119 total employees as of December 31, 2024.

Legal fees increaseddecreased by $1.6$1.5 million, or 167%,56%, for the year ended December 31, 2024,2025, compared to the same period in 2023.2024. This increasedecrease is due largely to a decrease in payments made as part of the ongoing litigation with Ladenburg. For a full description of litigation matters, see Note 17,16, "Commitments and Contingencies," to the consolidated financial statements.

Data processing costs increaseddecreased by $509,000,$824,000, or 57%,32%, during the year ended December 31, 2024,2025, when compared to the same period in 2023.2024. AsThis discussedreduction above,was due largely to the Bigreclassification Villageof Acquisitioncertain wascomponents completed in April 2023, and contributed toof data processing forcosts nineto monthscosts of the prior period and for the full twelve months of the current period, and is the main driver of the increase in data processing for the year ended December 31, 2024.revenue

As of December 31, 2024,2025, we had a cash balance of $2.5$1.4 million and a restricted cash balance of $1.9 million, compared with a cash balance of $4.0$2.5 million and a restricted cash balance of $1.9 million as of December 31, 2023.2024. The Company’s liquidity needs, and a discussion of how it intends to meet those needs, is discussed below. See –“Going Concern.”

During the year ended December 31, 2024 and 2023,2024, the Company received $1.9 million and $8.6 million, respectively, in debt financing from the Centre Lane Senior Secured Credit Facility. We used these funds to secure a bond in connection with our appeal of the Ladenburg litigation during 2024,2024. and to fundDuring the Bigyear Villageended AcquisitionDecember in31, 2023.2025, we did not receive additional debt financing from the Centre Lane Senior Secured Credit Facility.

Historically, the Company has incurred losses, which has resulted in an accumulated deficit of approximately $166.9$180.3 million as of December 31, 2024.2025. Cash flows provided by (used in) operating activities were $1.9$1.3 million and $(4.7)$1.9 million for the years ended December 31, 2024,2025, and 2023,2024, respectively. As of December 31, 2024,2025, the Company had a working capital deficit of approximately $13.5$95.5 million, inclusive of $2.5$1.4 million in cash and cash equivalents and $1.9 million in restricted cash.

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 $3.9$86.3 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 Agreement or raising equity capital. Any refinancing or additional financing may require the consent of Centre Lane under the terms of the Centre Lane Senior Secured Credit Agreement, and there can be no assurance that such consent would be obtained. The ability to access the capital markets is also dependent upon the volume and market price of the Company's stock, which cannot be assured. Other measures include reducing or delaying certain business activities, or reducing general and administrative expenses, including a reduction in headcount. If the Company is unable to successfully implement one or more of these alternatives, it may be required t seek protection under applicable bankruptcy or insolvency laws. The ultimate success of these plans is not guaranteed.guaranteed and if we are unable to refinance or restructure the Centre Lane Senior Secured Credit facility, we may not be able to continue as a going concern.

On June 5, 2020, the Company and its subsidiaries entered into to the Amended and Restated Senior Secured Credit AgreementFacility between themselves, the lenders party thereto (the "Lenders") 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.

Changing the lastFirst outOut termLoans loancash PIKinterest rate to the SOFR plus 7% until December 31, 2024, and to theTerm SOFR plus 2% (previously 5%) thereafter;

For the period ended MarchJune 31,30, 2026, one customer represented 19.8%16.2% of our total accounts receivable balancebalance, and another customer represented 11.1%10.4% of that balance. Inability to collect these amounts could have a material adverse impact on our 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,and media services, and advertising technology to deliver solutions to improve audience fidelity for brands. We focus on digital publishing, advertising technology, consumer insights, and creative services, and media services.

Our digital publishing division focuses on developing content that attracts an audience and monetizes that audience through advertising. The currentOur portfolio of owned and operated websites is focused on moms, parenting, families, women's lifestyle, and morerelated broadly,consumer women.interests. TheAs of June 30, 2026, our portfolio consists of popular websites including Mom.com,includes Cafemom.com, LittleThings.com, and MamasLatinas.com. This demographic is highly sought after by brandsMamasLatinas.com, and theirother advertisingdigital agencies.media properties. We use internal and external technologies to constantlycontinually improve the effectiveness and efficiency of the content we create. Our publishing division monetizes its audiences through both direct and programmatic advertising sales. During the three and six months ended June 30, 2026, the Company completed the sale of the Mom.com domain name and related assets. See Note 20, Sale of Mom.com Domain Name, to the consolidated financial statements.

Limited Number of Customers. During the threesix months ended MarchJune 31,30, 2026, three customers represented 48.9%46.2% of revenue. During the threesix months ended MarchJune 31,30, 2025, one customer represented 15.4%15.6% of revenue. The loss of these customers could have a material adverse impact on our results of operations in future periods.

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 six months ended MarchJune 31,30, 20262026, and 2025:

Revenue decreased by $227,000,$1.8 million, or 2%,12%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. Revenue decreased by $2 million, or 7%, for the six months ended June 30, 2026, compared to the same period in 2025. See below for a detailed analysis of revenue for the three and six months ended MarchJune 31,30, 20262026, and 2025.

Cost of revenue decreased by $264,000,$1.2 million, or 3%,9%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. Cost of revenue decreased by $1.4 million, or 6%, for the six months ended June 30, 2026, compared to the same period in 2025. See below for a detailed analysis of cost of revenue for the three and six months ended MarchJune 31,30, 20262026, and 2025.

General and administrative expenses decreased by $2.0 million,$418,000, or 43%,10%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. General and administrative expenses decreased by $2.4 million, or 28% for the six months ended June 30, 2026, compared to the same period in 2025. See below for a detailed analysis of general and administrative expenses for the three and six months ended MarchJune 31,30, 20262026, and 2025.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

Net loss for the quarter ended MarchJune 31,30, 2026 was $1.3$3.2 millionmillion, as compared to a net loss of $3.2$4.1 millionmillion, for the same period in 2025. The following is our analysis for the period:

Revenue decreased by $227,000,$1.8 million, or 2%,12%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. The Company focuses on digital publishing, advertising technology, consumer insights, and creative services, and media services. Changes in revenue generated by each such division are set forth below:

MediaDigital servicespublishing revenue decreased by $829,000,$62,000, or 99%,17%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. Approximately $12,000,$297,000, or 0.1%,2%, of the Company’s revenue for the three months ended MarchJune 31,30, 2026, was generated from our mediadigital servicespublishing customerscustomers, compared to $841,000,$359,000, or 6%,2%, for the same period in 2025.

Cost of revenue decreased by $264,000,$1.2 million, or 3%,9%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. This decrease was due to the factors discussed below:

Direct salaries and labor cost decreased by $1.4$1.6 million, or 80%,86%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. Approximately $371,000,$259,000, or 4%,2%, of the Company's cost of revenue for the three months ended MarchJune 31,30, 2026, was a result of direct salaries and labor cost compared to $1.8$1.9 millionmillion, or 18%,15%, for the same period in 2025. This decrease was relatedprimarily attributable to continued headcount reductions within our continuedconsumer effortsinsights and creative and media services divisions as part of our ongoing cost optimization initiatives. In connection with these workforce reductions, the Company increased its use of third-party consultants to decreasesupport headcount.customer projects, with those costs included within direct project costs. These costs represent salary and labor cost of employees who work directly on customer projects for our consumer insights,insights and creative services, and media services divisions.

Direct project cost decreased by $2.4$1.6 million, or 67%,32%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. Approximately $1.2$3.3 million, or 12%,30%, of the Company's cost of revenue for the three months ended MarchJune 31,30, 2026, was a result of direct project cost compared to $3.6$4.9 million, or 37%,40%, during the same period in 2025. This decrease was relatedprimarily attributable to a decreasereduction in customer contracts.contracts, partially offset by increased third-party consultant costs incurred to support customer projects following workforce reductions. 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,insights and creative services, and media services divisions.

Non-direct project cost increased by $1.4$1.1 million, or 143%,93%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. Approximately $2.4$2.2 million, or 25%,20%, of the Company's cost of revenue for the three months ended MarchJune 31,30, 2026, was a result of non-direct project cost compared to $1.0$1.2 million, or 10%,9%, for the same period in 2025. This increase iswas consistentprimarily withattributable to the increaseCompany's notedincreased inuse revenueof fromthird-party ourcontractors creativeto support client service activities following workforce reductions. Contractor costs are included within both direct project cost and non-direct project cost depending on the nature of the services division.provided. These costs represent overall client service costs that are not specifically related to a particular project, but relate to services for our consumer insights,insights and creative services, and media services divisions.

Publisher cost increased by $1.9$1.0 million, or 62%,28%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. Approximately $4.9$4.7 million, or 51%,42%, of the Company's cost of revenue for the three months ended MarchJune 31,30, 2026, was a result of publisher cost compared to $3.0$3.7 million, or 31%,30%, for the same period in 2025. This increase is consistent with the increase noted in revenue from our advertising technology division. These costs represent payments to media providers and website publishers.

Gross margin was $4.3approximately $2.4 million and $4.3$3.0 million for the three months ended MarchJune 31,30, 2026, and 2025, respectively. Our gross margin remaineddecreased consistent$619,000, or 20%, for the three months ended MarchJune 31,30, 2026, when compared to the same period of 2025. Gross margin as a percentage of revenue increaseddecreased to 31%18% for the three months ended MarchJune 31,30, 2026, compared to 30%20% for the same period of 2025 due to the slight decrease in cost of revenue.2025.

General and administrative expenses decreased by $2.0 million,$418,000, or 43%,10%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. The decrease was due to a combination of factors as discussed below:

Personnel cost decreased by $173,000,$301,000, or 9%,17%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. This change was mainly driven by a decrease in the Company's head count by a net change of 1733 employees. The Company's employee headcount was 9982 and 116115 at MarchJune 31,30, 20262026, and 2025, respectively.