Bright Mountain Media (BMTM) Risk Analysis

Our website domain names are crucial to our business. However, as with phone numbers, we do not have and cannot acquire any property rights in an internet address. The regulation of domain names in the U.S. and in other countries is also subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we might not be able to maintain our domain names or obtain comparable domain names, which could harm our business. We also rely on a combination of trade secret laws and restrictions on disclosure to protect our intellectual property rights. Our success depends on the protection of the proprietary aspects of our technology as well as our ability to operate without infringing on the proprietary rights of others. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated. Others may independently discover our trade secrets and proprietary information, and in such cases, we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our intellectual property rights. Therefore, in certain jurisdictions, we may be unable to protect our technology and designs adequately against unauthorized third-party use, which could adversely affect our ability to compete.

Attracting and retaining users of our websites requires us to continue to provide quality, targeted content and to continue to develop new and updated applications, features and services for our websites. If we are unable to do so on a timely basis or if we are unable to implement new applications, features and services without disruption to our existing ones, our ability to continue to expand our website traffic will be in jeopardy. The costs of development of these enhancements may negatively impact our ability to achieve profitability. There can be no assurance that the revenue opportunities from expanded website content, or updated technologies, applications, features or services will justify the amounts ultimately spent by us.

Various risks could interrupt access to our primary network infrastructure or data, exposing us to significant costs and other liabilities. Our revenue depends on technology for critical business operations, providing services to our clients, delivering and measuring advertising impressions, operating our ad exchange, and impression placement. That technology further depends on our IT systems' continuing and uninterrupted performance. Our IT infrastructure operates on cloud-based service providers, Software as a Service (SaaS) providers), and managed services housed in third-party commercial data centers, including primary and secondary locations, which are regionally dispersed to mitigate the impact of a localized event. This infrastructure relies on multiple internet service providers (ISPs), content delivery networks (CDNs), domain name systems (DNS providers), and mobile networks for operations. In addition, our systems interact with the systems of buyers and sellers and their contractors. Any damage to, or failure of, these systems could result in interruptions to the availability or functionality of our service. Moreover, the failure of our data center hosting facilities or any other third-party providers to meet our capacity requirements or dramatically increased costs of such resources, could result in interruptions in the availability or functionality of our solutions or impede our ability to scale our operations. All of these providers and systems are vulnerable to disruption and/or damage from several sources, many of which are beyond our control, including without limitation: (i) loss of adequate power or cooling and telecommunications failures, (ii) fire, flood, earthquake, hurricane, and other natural disasters, (iii) software and hardware errors, failures, or crashes, (iv) financial insolvency, and (v) computer viruses, malware, hacking, terrorism, and similar disruptive problems. Cyberattacks present a severe threat because they are difficult to prevent and remediate, are constantly evolving and improving, and can be used to defraud our buyers and sellers and their clients to steal confidential or proprietary data from us, our clients, or their users. Artificial intelligence has the potential to exacerbate cybersecurity threats, increasing their frequency and sophistication. Malfunctions or failure of our systems or systems that interact with our systems, or inaccessibility or corruption of data, could disrupt our operations and negatively impact our business. This could impact our business operations to a level in excess of any applicable business interruption insurance, result in potential liability to buyers and sellers, and negatively affect our reputation and ability to sell our solution.

New tools used by consumers to limit data collection, regulatory restrictions and potential changes to web browsers and mobile operating systems affect our ability to collect such data, which could harm our operating results and financial condition. The ability of our platform to deliver high quality solutions to our customers is based on our technology's capability to derive relevant, actionable insights from the data that we ingest into our systems and our ability to execute marketing programs across digital channels. The future of digital data collection practices is evolving, with some prominent companies in the industry recently announcing that they will implement their own individual data collection tools and phase out others. This approach may or may not be compatible with our current operations in those channels and platforms. It is yet to be determined if there will be an industry-wide framework for targeting consumers in a digital environment. Furthermore, regulatory and legislative actions may influence which data collection tools are permitted in various jurisdictions and may further restrict our data collection efforts. Without this incremental data, we may not have sufficient insight into the consumer's activity to provide some of our current tools, products, and services, which may impact our capacity to execute our customers' programs efficiently and effectively. Various digital tracking tools may be deleted or blocked by consumers. The most commonly used internet browsers also allow consumers to modify their browser settings to block first-party cookies (placed directly by the publisher or website owner that the consumer intends to interact with), which are not affected by changes from web browsers and operating systems, or third-party cookies (placed by parties that do not have direct relationship with the consumer), which some browsers may block by default. Mobile devices using Android and iOS operating systems limit the ability of cookies, or similar technology, to track consumers while they are using applications other than their web browser on the device. Even if cookies and ad blockers do not ultimately have an adverse effect on our business, investor concerns about the utility and robustness of these tracking technologies could limit demand for our stock and cause its price to decline. We also partner with third-party data suppliers and publishers. When we purchase or license from third-party data suppliers, we are dependent upon our ability to obtain such data on commercially reasonable terms and in compliance with applicable regulations. If a substantial number of data suppliers were to withdraw or withhold their data from us, or if we had to terminate our ties with data suppliers either due to commercial or regulatory reasons, our ability to provide products to our customers could be materially adversely impacted, which could result in decreased revenues and operating results. We cannot provide assurance that we will be successful in maintaining our relationships with these external data source providers or that we will be able to continue to obtain data from them on acceptable terms or at all. Furthermore, we cannot provide assurance that we will be able to obtain data from alternative sources if our current sources become unavailable.

Our advertising technology division, research division, and publishing division use, in various ways, "cookies," or small text files placed on consumer devices when an Internet browser is used, as well as mobile device identifiers, to gather data in connection with certain of their products and offerings. These cookies and mobile device identifiers may record information such as when a consumer views or clicks on an advertisement, when a consumer visits a website, the consumer's location, and browser or other device information. Third party vendors may also share their information about consumers' interests with us or give us permission to use their cookies and mobile device identifiers. We use data from cookies, mobile device identifiers, and other tracking technologies for various purposes, including-for our advertising technology division-helping advertisers decide whether to bid on, and how to price, an ad impression in a certain location, at a given time, for a particular consumer. Without cookies, mobile device identifiers, and other tracking technology data: (i) transactions processed through our advertising technology division would be executed with less insight into consumer activity, reducing the precision of advertisers' decisions about which impressions to purchase for an advertising campaign, which could make placement identifiers advertising through our platform less valuable, and harm our revenue; (ii) we might no longer be able to continue to provide certain products we currently offer, such as certain audience segments; (iii) vendors who help us monetize our advertising inventory on our owned and operated websites might face greater difficulty in monetizing that inventory. If our ability to use cookies, mobile device identifiers or other tracking technologies is limited, we may be required to develop or obtain additional applications and technologies to compensate for the lack of cookies, mobile device identifiers and other tracking technology data, which could be time consuming or costly to develop, less effective, and subject to additional regulation. Additionally, consumers can, with increasing ease, implement technologies that limit our ability to collect and use data to deliver advertisements or provide services or products. Cookies may be deleted or blocked by consumers. The most commonly used Internet browsers allow consumers to modify their browser settings to block first-party cookies (placed directly by the publisher or website owner that the consumer intends to interact with) or third-party cookies (placed by parties, like us, that have no direct relationship with the consumer), and some browsers block third-party cookies by default. Some prominent technology companies, including Google, have also announced intentions to discontinue the use of cookies, and to develop alternative methods and mechanisms for tracking consumers. As companies replace cookies, it is possible that such companies may rely on proprietary algorithms or statistical methods to track consumers without cookies, or may utilize log-in credentials entered by consumers into other web properties owned by these companies, such as their email services, to track web usage, including usage across multiple devices. Alternatively, such companies may build different and potentially proprietary consumer tracking methods into their widely-used web browsers. Although we believe it is possible for our businesses to adapt and continue to provide their services and products without cookies, this transition could be more disruptive, slower, or more expensive than we currently anticipate, and could materially affect our ability to serve our customers, and our business, results of operations, and financial condition could be adversely affected. Mobile devices using Android and iOS operating systems limit the ability of cookies to track consumers while they are using applications other than their web browser on the device. As a consequence, fewer cookies may be set in browsers or be accessible in mobile devices, which could adversely affect our business. Some consumers also download "ad blocking" software on their computers or mobile devices, not only for privacy reasons, but also to counteract the adverse effect advertisements can have on the consumer experience, including increased load times, data consumption, and screen overcrowding. Ad-blocking technologies and other global privacy controls may prevent some third-party cookies, or other tracking technologies, from being stored on a consumer's computer or mobile device. If more consumers adopt these measures, it could reduce the volume or effectiveness and value of advertising, which could adversely affect our business, results of operations, and financial condition. Even if ad blockers do not ultimately have an adverse effect on our business, investor concerns about ad blockers could cause our stock price to decline.

Typically 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.

We display pay-per-click, banner, cost per acquisition ("CPM"), direct, and other forms of advertisements to users that come from third-party advertising services. We do not control the content and functionality of such third-party advertisements and, while we provide guidelines as to what types of advertisements are acceptable, there can be no assurance that such advertisements will not contain content or functionality that is harmful to users. Our inability to monitor and control what types of advertisements get displayed to users could negatively impact our reputation and have a material adverse effect on our business, financial condition and results of operations.