UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For
the quarterly period ended | ||
| or | ||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For the transition period from ___________ to ___________ |
Commission
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(Exact Name of Registrant as Specified in its Charter)
State or Other Jurisdiction of Incorporation or Organization |
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| Address of Principal Executive Offices | Zip Code |
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Not applicable
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | Not applicable |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company | ||
| Emerging
growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of February 2, 2022 there were 151,099,871 shares of the issuer’s common stock issued and shares outstanding.
TABLE OF CONTENTS
| Page No. | ||
| PART I - FINANCIAL INFORMATION | ||
| ITEM 1. | FINANCIAL STATEMENTS. | 4 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. | 29 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. | 34 |
| ITEM 4. | CONTROLS AND PROCEDURES. | 34 |
| PART II - OTHER INFORMATION | ||
| ITEM 1. | LEGAL PROCEEDINGS. | 35 |
| ITEM 1A. | RISK FACTORS. | 35 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. | 36 |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. | 36 |
| ITEM 4. | MINE SAFETY DISCLOSURES. | 36 |
| ITEM 5. | OTHER INFORMATION. | 36 |
| ITEM 6. | EXHIBITS. | 37 |
| 2 |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about risks associated with:
| ● | our ability to fully develop the Bright Mountain Media Ad Exchange Network and services platform; | |
| ● | the continued appeal of internet advertising; | |
| ● | our ability to manage and expand our relationships with publishers; | |
| ● | our dependence on revenues from a limited number of customers; | |
| ● | the impact of seasonal fluctuations on our revenues; | |
| ● | acquisitions of new businesses and our ability to integrate those businesses into our operations; | |
| ● | online security breaches; | |
| ● | failure to effectively promote our brand and attract advertisers; | |
| ● | our ability to protect our content; | |
| ● | our ability to protect our intellectual property rights; | |
| ● | the success of our technology development efforts; | |
| ● | additional competition resulting from our business expansion strategy; | |
| ● | our dependence on third party service providers; | |
| ● | our ability to detect advertising fraud; | |
| ● | liability related to content which appears on our websites; | |
| ● | regulatory risks and compliance with privacy laws; | |
| ● | dependence on executive officers and certain key employees and consultants; | |
| ● | our ability to hire qualified personnel; | |
| ● | possible problems with our network infrastructure; | |
| ● | ongoing material weaknesses in our disclosure controls and internal control over financial reporting; | |
| ● | the impact on available working capital resulting from the payment of cash dividends to our affiliates; | |
| ● | dilution to existing shareholders upon the conversion of outstanding preferred stock and convertible notes and/or the exercise of outstanding options and warrants, including warrants with cashless exercise rights; | |
| ● | the illiquid nature of our common stock; | |
| ● | risks associated with securities litigation; and | |
| ● | provisions of our charter and Florida law which may have anti-takeover effects |
Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report, including the Part II, Item 2, our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on December 23, 2021 and our other filings with the Securities and Exchange Commission in their entirety. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.
OTHER PERTINENT INFORMATION
Unless specifically set forth to the contrary, when used in this report the terms “Bright Mountain”, the “Company,” “we”, “us”, “our” and similar terms refer to Bright Mountain Media, Inc., a Florida corporation, and its subsidiaries. In addition, when used in this report, “first quarter of 2021” refers to the three months ended March 31, 2021, “first quarter of 2020” refers to the three months ended March 31, 2020, “2020” refers to the year ending December 31, 2020. The information which appears on our website at www.brightmountainmedia.com is not part of this report.
| 3 |
PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| March 31, 2021 | December 31, 2020 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Note receivable, net | ||||||||
| Right of use asset | - | |||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Website acquisition assets, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Prepaid services/consulting agreements - long term | ||||||||
| Right of use asset | - | |||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued interest to related party | ||||||||
| Premium finance loan payable | ||||||||
| Deferred revenues | ||||||||
| Long term debt, current portion | ||||||||
| Operating lease liability, current portion | ||||||||
| Total Current Liabilities | ||||||||
| Long term debt to related parties, net | ||||||||
| Long term debt | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ Equity | ||||||||
| Convertible preferred stock, par value $, shares authorized | ||||||||
| Series A-1, shares designated, shares issued and outstanding at March 31, 2021 and December 31, 2020 | ||||||||
| Series B-1, shares designated, shares issued and outstanding at March 31, 2021 and December 31, 2020 | - | - | ||||||
| Series E, shares designated, issued and outstanding at March 31, 2021 and December 31, 2020 | ||||||||
| Series F, shares designated, issued and outstanding at March 31, 2021 and December 31, 2020 | ||||||||
| Common stock, par value $, shares authorized, and issued and and outstanding at March 31, 2021 and December 31, 2020, respectively | ||||||||
| Treasury stock, at cost; shares at March 31, 2021 and December 31, 2020 | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements
| 4 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenues | ||||||||
| Advertising | $ | $ | ||||||
| Cost of revenue | ||||||||
| Advertising | ||||||||
| Gross profit | ||||||||
| Selling, general and administrative expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Interest income | ||||||||
| Gain on forgiveness of PPP loan | - | |||||||
| Other (expense)/income | | ( | ) | |||||
| Interest expense | ( | ) | - | |||||
| Interest expense - related party | ( | ) | ( | ) | ||||
| Total other income | ||||||||
| Net loss before tax | ( | ) | ( | ) | ||||
| Income tax benefit | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Preferred stock dividends | ||||||||
| Series A-1, Series E, and Series F preferred stock | ( | ) | ( | ) | ||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive loss | $ | ( | ) | $ | ||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding - basic and diluted | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements
| 5 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGE IN SHAREHOLDERS’ EQUITY
For the Three Months Ended March 31, 2021 and 2020
(Unaudited)
| Preferred Stock | Common Stock | Treasury Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Series A-1, E and F preferred stock dividend | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Stock option vesting expense | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock: | ||||||||||||||||||||||||||||||||||||||||
| Options exercise | — | — | ||||||||||||||||||||||||||||||||||||||
| Warrants exercise | ||||||||||||||||||||||||||||||||||||||||
| Adjustment from foreign currency translation, net | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| To Oceanside personnel as part of acquisition agreement | — | |||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 (unaudited) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Preferred Stock | Common Stock | Treasury Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Series A-1, E and F preferred stock dividend | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Stock option vesting expense | — | — | — | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock: | ||||||||||||||||||||||||||||||||||||||||
| Services rendered | — | — | ||||||||||||||||||||||||||||||||||||||
| Units consisting of one share of common stock and one warrant issued for cash | — | — | ||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2020 (unaudited) | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements
| 6 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
March 31, 2021
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||
| Depreciation | ||||||||
| Amortization of debt discount | ||||||||
| Amortization | ||||||||
| Gain on settlement of liability | - | |||||||
| Stock option compensation expense | ||||||||
| Stock compensation for Oceanside shares | - | |||||||
| Gain on forgiveness of PPP loan | ( | ) | - | |||||
| Write off doubtful accounts | ( | ) | ||||||
| Warrant expense for services rendered | ||||||||
| Non-cash acquisition fee | - | |||||||
| Non-cash compensation for services | - | ( | ) | |||||
| Change in deferred taxes | - | ( | ) | |||||
| Provision for bad debt | - | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Prepaid services/consulting agreements | - | |||||||
| Other assets | ( | ) | ( | ) | ||||
| Right of use asset and lease liability | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Accrued interest – related party | ||||||||
| Deferred revenues | - | |||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash paid for property & equipment | ( | ) | - | |||||
| Net cash (used in) investing activities | ( | ) | - | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock, net | - | |||||||
| Payments of premium finance loan payable | ( | ) | ( | ) | ||||
| Proceeds from stock option exercises | - | |||||||
| Dividend payments | ( | ) | ||||||
| Principal payments received (funded) for notes receivable | ( | ) | ||||||
| Proceeds from PPP loan | - | |||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents at the beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements
| 7 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
March 31, 2021
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for | ||||||||
| Interest | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Premium finance loan payable recorded as prepaid | $ | $ | ||||||
| Issuance of common stock payable to Spartan Capital for consulting services | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements
| 8 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Organization and Nature of Operations
Bright Mountain Media, Inc. (the “Company” or “Bright Mountain” or “We”) is a Florida corporation formed on May 20, 2010. Its wholly owned subsidiary, Bright Mountain LLC, was formed as a Florida limited liability company in May 2011. Its wholly owned subsidiary, Bright Mountain, LLC (“BMLLC”) F/K/A Daily Engage Media Group, LLC (“Daily Engage”) was formed as a New Jersey limited liability company in February 2015. In August 2019, Bright Mountain Israel Acquisition, an Israeli company was formed and acquired the wholly owned subsidiary Slutzky & Winshman Ltd. (“S&W”) which then changed its name to Oceanside Media LLC (“Oceanside”), see Note 4. Further, on November 18, 2019, Bright Mountain, through its wholly owned subsidiary BMTM2, Inc., a Florida corporation, acquired News Distribution Network, Inc. (“NDN”), a Delaware company, which then changed its name to MediaHouse, Inc. (“MediaHouse”). On June 1, 2020, Bright Mountain acquired the wholly owned subsidiary CL Media Holdings, LLC D/B/A “Wild Sky Media” (“Wild Sky”). When used herein, the terms “BMTM, the “Company,” “we,” “us,” “our” or “Bright Mountain” refers to Bright Mountain Media, Inc. and its subsidiaries.
The Company is engaged in operating a proprietary, end-to-end digital media and advertising services platform designed to connect brand advertisers with demographically-targeted consumers – both large audiences and more granular segments – across digital, social and connected television (CTV) publishing formats. We define “end-to-end” as our process for taking ad buying from beginning to end, delivering a complete functional solution, usually without requiring any involvement from a third party.
Through acquisitions and organic software development initiatives, we have consolidated and plan to further condense key elements of the prevailing digital advertising supply chain through the elimination of industry “middlemen” and/or costly redundancy of services via our ad exchange network. Our aim is to enable and support a streamlined, end-to-end advertising model that addresses both demand (ad buy side) and supply (media sell side) for both direct sales teams and programmatic sales and publishing of digital advertisements that reach specific target audiences based on what, where, when and how that specific target audience elects to access certain web and/or streaming video content. Programmatic advertising relies on computer programs to use data and proprietary algorithms to select which ads to buy and for what price, while direct sales involve traditional interpersonal contact between ad buyers and advertising sales representative(s).
By selling advertisements on our current portfolio of 20 owned and operated websites and 13 CTV apps, coupled with acquisition or development of other niche web properties in the future, we are building depth in specific demographic verticals that allow us to package audiences into targeted consumer categories valued by advertisers.
Oceanside provides digital performance-based marketing services to customers which include primarily advertisers and advertising agencies that promote or sell products and/or services to consumers through digital media.
MediaHouse partners with content producers and online news market websites to distribute video and banner advertisements throughout the United States of America (“U.S.”).
Wild Sky owns and operates a collection of websites that offer significant global reach through its content and niche audiences and has become a wholly-owned subsidiary of the Company. Wild Sky is the home to parenting and lifestyle brands.
NOTE 2 - GOING CONCERN.
The
accompanying consolidated financial statements have been prepared and are presented assuming the Company’s ability to continue
as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has sustained a net loss of $
The Company’s continuation as a going concern is dependent upon its ability to generate revenues, control its expenses and its ability to continue obtaining investment capital and loans from related parties and outside investors to sustain its current level of operations. Management continues raising capital through private placements and is exploring additional avenues for future fund-raising through both public and private sources. The Company is not currently involved in any binding agreements to raise private equity capital. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
| 9 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Principles of Consolidation and Basis of Presentation
The condensed consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. The accompanying unaudited financial statements for the three months ended March 31, 2021 and 2020 have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) applicable to interim financial information and the requirements of Form 10-Q and Article 8 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements. In the opinion of management, such condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of the condensed consolidated financial position and the condensed consolidated results of operations. The condensed consolidated results of operations for periods presented are not necessarily indicative of the results to be expected for the full year or any future periods. The condensed consolidated balance sheet information as of December 31, 2020 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on December 23, 2021. The interim condensed consolidated financial statements should be read in conjunction with that report.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606 Revenue from Contracts with Customers. The Company recognizes revenues at a point-in-time when control of services is transferred to the customer. Cash received by the Company prior to when control of services is transferred to the customer is recorded as deferred revenue.
To determine revenue recognition for arrangements that the Company determines are within the scope of Topic 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 Company will collect the consideration it is entitled to in exchange for the advertising services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the advertising services promised within each contract and determines those that are performance obligations and assesses whether each promised advertising service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation based on relative fair values, when (or as) the performance obligation is satisfied.
The Company recognizes revenue from its own advertising platform, ad network partners and websites (“Ad Network”) through its publishing advertiser impressions and pay-for-click services, the Company’s owned and operated sites, our ad network, or platforms. Invalid traffic on the Ad Network may impact the amount collected and adjusted by our Ad Network.
The Company has one revenue stream generated directly from publishing advertisements, whether on the Company’s owned and operated sites, our ad network, or platforms. The revenue is earned when the users click on the published website advertisements. Specific revenue recognition criteria for the advertising revenue stream is as follows:
| ● | Advertising revenues are generated by users “clicking” on or seeing website advertisements utilizing several ad network partners.
| |
| ● | Revenues are recognized net of adjustments based on the traffic generated and is billed monthly. The Company subsequently settles these transactions with publishers at which time adjustments for invalid traffic may impact the amount collected. |
There are no significant initial costs incurred to obtain contracts with customers, and no contract assets or contract liabilities recorded in our consolidated financial statements
| 10 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
Leases
The Company records leases in accordance with ASC Topic 842, Leases.
The Company determines if an arrangement is a lease at inception. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the remaining lease terms as of January 1, 2019. Since the Company’s lease agreements does not provide an implicit rate, the Company estimated an incremental borrowing rate based on the information available on January 1, 2019 in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Variable lease costs such as operating costs and property taxes are expensed as incurred.
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. 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 revenue recognition, the fair value of acquired assets for purchase price allocation in business combinations, valuation of goodwill and intangible assets, estimates of amortization period for intangible assets, estimates of depreciation period for fixed assets, the valuation of equity-based transactions, and the valuation allowance on deferred tax assets.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents are all maintained in bank accounts in the U.S. and other foreign countries in which the Company operates. Cash maintained in bank accounts outside of the U.S. is not significant.
Credit Risk
The Company maintains certain of its cash balances in various U.S. banks, which at times, may exceed federally insured limits. The Company has not incurred any losses on these accounts. In addition, the Company maintains various bank accounts in Thailand and Israel, which are not insured. During the period ended March 31, 2021 and the year ended December 31, 2021, we have not incurred material losses on these uninsured accounts. The Company minimizes the concentration of credit risk associated with its cash by maintaining its cash with high quality federally insured financial institutions. The Company performs ongoing evaluations of its trade accounts receivable customers and generally does not require collateral.
Fair Value of Financial Instruments and Fair Value Measurements
FASB ASC 820 “Fair Value Measurement and Disclosures: (“ASU 820”) defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement.
| 11 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
The Company measures its financial assets and liabilities in accordance with GAAP. For certain of our financial instruments, including cash, accounts payable, accrued expenses, and the short-term portion of long-term debt, the carrying amounts approximate fair value due to their short maturities. We adopted accounting guidance for fair values measurements and disclosures (ASC 820). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
| Level 1: | Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
| Level 2: | Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and | |
| Level 3: | Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. |
Financial instruments recognized in the consolidated balance sheets consist of cash, accounts receivable, prepaid expenses and other current assets, note receivable, accounts payable, accrued expenses and premium finance loan payable. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The carrying value of long-term debt to related parties and long-term debt to others approximates the current borrowing rate for similar debt instruments.
The following are the major categories of liabilities measured at fair value on a recurring basis for the three months ended March 31, 2021, using significant unobservable inputs (Level 3):
Fair Value measurement using Level 3
| Balance at December 31, 2020 | $ | |||
| Reclassification (1) | ( | ) | ||
| Balance at March 31, 2021 | $ |
| (1) |
Accounts Receivable
Accounts receivable represent receivables from customers in the ordinary course of business. These are recorded at invoices amount on the date revenue is recognized. Receivables are recorded net of the allowance for doubtful accounts in the accompanying consolidated balance sheets. The Company provides allowances for doubtful accounts for estimated losses resulting from the inability of its customers to repay their obligation. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to repay, additional allowances may be required. The Company provides for potential uncollectible accounts receivable based on specific customer identification and historical collection experience adjusted for existing market conditions. If market conditions decline, actual collection experience may not meet expectations and may result in decreased cash flows and increased bad debt expense. The Company is also subject to adjustments from traffic settlements that are deducted from open invoices.
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 and its collection agency are exhausted, the determination for charging off uncollectible
receivables is made. As of March 31, 2021 and December 31, 2020, the Company has recorded an allowance for doubtful accounts of $
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets. Leasehold improvements are amortized over the lesser of the lease term or the useful life of the improvements.
Website Development Costs
The Company accounts for its website development costs in accordance with ASC 350-50, “Website Development Costs”. These costs, if any, are included in intangible assets in the accompanying consolidated financial statements. 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.
| 12 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
As of March 31, 2021, all website development costs have been expensed.
Amortization and Impairment of Long-Lived Assets
The Company evaluates long-lived assets, including amortizable intangible assets, 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.
The Company accounts for share-based compensation related to instruments issued to employees and non-employees under GAAP, which requires the measurement and recognition compensation costs for all equity-based payment awards based on estimated fair values. The value of the portion of an employee award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company estimates the fair value of stock options by using the Black-Scholes option-pricing model. Share-based compensation expense is included in selling, general and administrative expenses on the accompanying consolidated statement of operations. We have elected to account for forfeitures as they occur.
Advertising, Marketing and Promotion Costs
Advertising,
marketing and promotion expenses are expensed as incurred and are included in selling, general and administrative expenses on the accompanying
statement of operations. For the three months ended March 31, 2021 and 2020, advertising, marketing and promotion expense was $
Foreign currency translation
Assets and liabilities of the Company’s foreign subsidiaries, Oceanside and Wild Sky’s Thailand subsidiary, are translated from the foreign currency to United States dollars at exchange rates in effect at the balance sheet date. Income and expenses are translated at the exchange rates for the weighted average rates for the period. The translation adjustments for the reporting period will be included in our statements of comprehensive income. Based on the foreign subsidiaries activities, see Note 4, the impact of the currency exchange is immaterial for the three months ended March 31, 2021 and 2020.
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.
| 13 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
The Company follows the provisions of ASC 740-10, Income Taxes - Overall. 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 Statement of Operations.
As of March 31, 2021, tax years 2017 through 2020 remain open for Internal Revenue Service (“IRS”) audit. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years.
Concentrations
The
Company generates revenues from through Ad Exchange Networks and through our Owned and Operated Ad Exchange Network. There was only one
customer which accounted for greater than
Credit Risk
The Company maintains certain of its cash balances in various U.S. banks, which at times, may exceed federally insured limits. The Company has not incurred any losses on these accounts. In addition, the Company maintains various bank accounts in Thailand, which are not insured. During the three months ended March 31, 2021 and 2020, we have not incurred material losses on these uninsured accounts. The Company minimizes the concentration of credit risk associated with its cash by maintaining its cash with high quality federally insured financial institutions. The Company performs ongoing evaluations of its trade accounts receivable customers and generally does not require collateral.
Concentration of Funding
Historically, the Company had a large portion of the funding provided through the sale of shares of the Company’s common stock with related warrants, however, during the three months ended March 31, 2021 no funding through the sale of shares occurred.
Earnings (loss) per share is calculated and reported under the “two-class” method. The “two-class” method is an earnings allocation method under which earnings per share is calculated for each class of common stock and participating security considering both dividends declared or accumulated and participation rights in undistributed earnings as if all such earnings had been distributed during the period. The Company has convertible preferred stock which have a right to participate in dividends; these are deemed to be participating securities. During periods of loss, there is no allocation required under the two-class method since the participating securities do not have a contractual obligation to fund the losses of the Company.
When applicable, basic earnings (loss) per share is calculated by dividing net income, after deducting dividends on convertible preferred stock and participating securities as well as undistributed earnings allocated to participating securities, by the average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated in a similar manner after consideration of the potential dilutive effect of common stock equivalents on the average number of common shares outstanding during the period. Common stock equivalents include warrants and stock options. Common stock equivalents are calculated based upon the treasury stock method using an average market price of common shares during the period. Dilution is not considered when a net loss is reported. Common stock equivalents that have an antidilutive effect are excluded from the computation of diluted earnings per share.
Segment Information
The Company currently operates in one reporting segment. The services segment is focused on producing advertising revenue generated by users “clicking” on website advertisements utilizing several ad network partners, and direct advertisers and subscription revenue generated by the sale of access to career postings on one of our websites, however the latter, is insignificant.
| 14 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13 (amended by ASU 2019-10), “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, regarding the measurement of credit losses for certain financial instruments.” which replaces the incurred loss model with a current expected credit loss (“CECL”) model. The CECL model is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company is required to adopt the new guidance on January 1, 2023. The Company is currently evaluating the impact this guidance will have on the consolidated financial statements.
In January 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-04 (amended by ASU 2019-10), “Intangibles – Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment.” Which simplifies the test for goodwill impairment by removing the second step of the test. There is a one-step qualitative test and does not amend the optional qualitative assessment of goodwill impairment. The new standard is effective January 1, 2023 and is not expected to have a material impact on the Company’s consolidated financial statements.
In August 2020, the FASB issued ASU 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 new standard is not expected to have a material impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the LIBOR, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. This accounting standards update provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This new guidance may be adopted by the Company no later than December 1, 2022, with early adoption permitted. The potential adoption of this guidance is not expected to have a material impact on the consolidated financial statements.
| 15 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 4 – ACQUISITIONS.
Wild Sky Media
On
June 1, 2020, the Company entered into a membership interest purchase agreement (the “Purchase Agreement”) with Centre Lane
Partners Master Credit Fund II, L.P. (“Centre Lane”) to purchase
The
Agreement provides for a senior secured five-year loan in the initial principal amount of $
Effective
upon the closing of the Wild Sky Purchase Agreement, the Company agreed to pay Spartan Capital Securities LLC (“Spartan Capital”),
a broker-dealer and member of FINRA, a finder’s fee in the form of Company common stock. Spartan Capital was issued shares
(valued at $
The allocation of the purchase price to the assets acquired and liabilities assumed based on management’s estimate of fair values at the date of acquisition as follows:
June 1, 2020 | ||||
| Tangible assets acquired | ||||
| Cash & cash equivalents | $ | |||
| Accounts receivable, net | ||||
| Prepaid expense | ||||
| Fixed assets, net | ||||
| Other assets | ||||
| Intangible assets acquired: | ||||
| Tradename – Trademarks | ||||
| IP/Technology | ||||
| Customer relationships | ||||
| Less: Liabilities assumed | ||||
| Accounts payable | ( | ) | ||
| Accrued expenses | ( | ) | ||
| Other current liabilities | ( | ) | ||
| Long term loan payable – PPP | ( | ) | ||
| Less: Deferred tax liability | ( | ) | ||
| Net assets acquired | ||||
| Goodwill | ||||
| Total purchase price | $ | |||
The table below summarizes the value of the total consideration given in the transaction:
Amount | ||||
| Debt issued | $ | |||
| Shares issued | ||||
| Total consideration | $ | |||
| 16 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 5 – PREPAID COSTS AND EXPENSES.
At March 31, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following:
March 31, 2021 | December 31, 2020 | |||||||
| Prepaid insurance | $ | $ | ||||||
| Prepaid consulting service agreements – Spartan (1) | ||||||||
| Prepaid expenses – other | ||||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
| (1) |
NOTE 6 – PROPERTY AND EQUIPMENT.
At March 31, 2021 and December 31, 2020, property and equipment consisted of the following:
| Estimated Useful Life (Years) | March 31, 2021 | December 31, 2020 | ||||||||||
| Furniture and fixtures | $ | $ | ||||||||||
| Leasehold improvements | ||||||||||||
| Computer equipment | ||||||||||||
| Total property and equipment | ||||||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||||
| Total property and equipment, net | $ | $ | ||||||||||
Depreciation
expense for the three months ending March 31, 2021 and 2020, was $
NOTE 7 – WEBSITE ACQUISITION AND INTANGIBLE ASSETS.
At March 31, 2021 and December 31, 2020, respectively, website acquisitions, net consisted of the following:
March 31, 2021 | December 31, 2020 | |||||||
| Website acquisition assets | $ | $ | ||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Less: cumulative impairment loss | ( | ) | ( | ) | ||||
| Website Acquisition Assets, net | $ | $ | ||||||
At March 31, 2021 and December 31, 2020, respectively, intangible assets, net consisted of the following:
| Useful Lives | March 31, 2021 | December 31, 2020 | ||||||||
| Trade name | $ | $ | ||||||||
| Customer relationships | ||||||||||
| IP/Technology | ||||||||||
| Non-compete agreements | ||||||||||
| Total Intangible Assets | $ | $ | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||||
| Less: accumulated impairment loss | ( | ) | ( | ) | ||||||
| Intangible assets, net | $ | $ | ||||||||
Amortization
expense for the three months ended March 31, 2021 and 2020 was $
During
2020, the finite lived intangible assets associated with Oceanside and MediaHouse were tested for impairment valuation based on indicators
of impairment noted by management, including decreased revenues. primarily resulting from the COVID-19 global pandemic when many companies
in various industries were forced to restructure their advertising budgets and spending. The fair value of the respective assets was
determined based on the projected future cash flows associated with the respective assets. These fair values were compared with the carrying
values of the respective assets to determine if an impairment of the respective assets was warranted. It was determined that the carrying
values of the finite lived intangible assets associated with Oceanside did not exceed the respective fair values of the assets, therefore
no revaluation associated with these assets has been recognized. It was determined that the finite lived intangible assets associated
with MediaHouse were deemed impaired based on an analysis of the carrying values and fair values of the assets. In September 2020, the
Company recorded an impairment expense of $
NOTE 8 – GOODWILL
The following table presents changes to goodwill from December 31, 2020 through March 31, 2021:
| Owned & Operated | Ad Network | Total | ||||||||||
| December 31, 2020 goodwill | $ | $ | $ | |||||||||
| March 31, 2021 goodwill | $ | $ | $ | |||||||||
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. The year 2020 has been marked by the COVID-19 Global pandemic when many companies in various industries were
forced to restructure their advertising budgets and spending. This is evidenced by the reduced revenues from our customers in comparison
with the 2019 year. The fair value of the respective reporting units was determined based on both the Income Approach (Discount Cash
Flows) and the Market Multiples Approach. In September 2020, it was determined that the carrying value of the Goodwill associated with
the Owned & Operated reporting unit was not deemed impaired; while recorded goodwill associated with the Ad Network reporting unit
exceeded the fair value of the Goodwill and in September 2020, the Company recorded an impairment of $
| 17 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 9 – ACCRUED EXPENSES.
At March 31, 2021 and December 31, 2020, respectively, accrued expenses consisted of the following:
March 31, 2021 | December 31, 2020 | |||||||
| (unaudited) | ||||||||
| Accrued interest | $ | $ | ||||||
| Accrued salaries and benefits | ||||||||
| Accrued dividends | ||||||||
| Accrued traffic settlement(1) | ||||||||
| Accrued legal settlement(2) | ||||||||
| Accrued legal fees | ||||||||
| Accrued other professional fees | ||||||||
| Share issuance liability(4) | - | |||||||
| Accrued warrant penalty(3) | ||||||||
| Other accrued expenses | ||||||||
| Total accrued expenses | $ | $ | ||||||
| (1) | |
| (2) | |
| (3) | |
| (4) |
| 18 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 10 – NOTES PAYABLE
Long-term debt to related parties
During
November 2018, the Company issued 10% convertible promissory notes in the amount of $
The
principal balance of these notes payable was $
Interest
expense for note payable to related party was $
The
unsecured and interest free Closing Notes of $
Interest
expense for note payable to related party for the three months ended March 31, 2021 and 2020 was $
Long-term debt
On
February 17, 2021, under the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic
Security (“CARES”) Act, administered by the Small Business Administration (“SBA”),the Company entered into a
promissory note of $
On
March 23, 2021, under the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security
(“CARES”) Act, administered by the Small Business Administration (“SBA”), the Company’s Wild Sky subsidiary
entered into a promissory note of $
| 19 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 10 – NOTES PAYABLE (continued).
On
April 24, 2020, under the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security
(“CARES”) Act, administered by the Small Business Administration (“SBA”),the Company entered into a promissory
note of $
Effective
June 1, 2020, the Company acquired Wild Sky and assumed the $
Effective
June 1, 2020, we entered into a membership interest purchase agreement to acquire
At March 31, 2021 and December 31, 2020 a summary of the Company’s debt is as follows:
March 31, 2021 | December 31, 2020 | |||||||
| Non-interest bearing BMLLC acquisition debt | $ | $ | ||||||
| PPP loans | ||||||||
| Wild Sky acquisition debt | ||||||||
| Total debt | ||||||||
| Less short-term debt and current portion of long term debt | ||||||||
| Long Term Debt | $ | $ | ||||||
The minimum annual principal payments of notes payable at March 31, 2021 were:
| 2021 | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Total | $ |
Premium Finance Loan Payable
The
Company generally finances its annual insurance premiums through the use of short-term notes, payable in 10 equal monthly installments.
Coverages financed include Directors and Officers and Errors and Omissions with premiums financed in 2020 and 2019 of $
Total
Premium Finance Loan Payable balance for the Company’s policies was $
NOTE 11 – COMMITMENTS AND CONTINGENCIES.
The
Company leases its corporate offices at 6400 Congress Avenue, Suite 2050, Boca Raton, Florida 33487 under a long-term non-cancellable
operating lease agreement expiring on
| 20 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 11 – COMMITMENTS AND CONTINGENCIES (continued).
The right of use asset and lease liability is as follows as of March 31, 2021 and December 31, 2020:
| March 31, 2021 | December 31, 2020 | |||||||
| Assets | ||||||||
| Operating lease right of use asset | $ | $ | ||||||
| Liabilities | ||||||||
| Operating lease liability | $ | $ | ||||||
The Company’s non-lease components are primarily related to property maintenance and other operating services, which varies based on future outcomes and is recognized in rent expense when incurred and not included in the measurement of the lease liability. The Company did not have any variable lease payments for its operating lease for the three months ended March 31, 2021.
The maturity of the Company’s operating lease liability for the 12 months ended March 31:
| 2021 | $ | |||
| Total net lease liabilities | $ |
The following summarizes additional information related to the operating lease:
| March 31, 2021 | ||||
| Weighted-average remaining lease term | ||||
| Weighted-average discount rate | % | |||
For
the three months ended March 31, 2021 and 2020, rent expense was $
| 21 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 11 – COMMITMENTS AND CONTINGENCIES (continued).
Legal
From time-to-time, the Company may be involved in litigation or be subject to claims arising out of our operations or content appearing on our websites in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on our business.
Under the covenants of the Placement Agent Agreement with Spartan Capital and as disclosed in the Placement Offering Memorandum, the Company was obligated to make a filing with a stock exchange to list the Company’s shares. The Company was to make such filing by a listing deadline and have stock exchange approval by a listing approval deadline. In the event the Company was unable to meet to deadlines, the investors in the Offering would be entitled to one additional share of common stock for each share purchased in the Offering provided, however, that such deadlines and obligations of the Company to issue additional shares would be extended for so long as the Company was able to demonstrate to the reasonable satisfaction of the Placement Agent, which consent shall not be reasonably withheld that it had acted in good-faith in attempting to list such securities which included responding to comments from such exchange. The Company believes it has acted in good-faith and has no obligation. No litigation has been filed by Spartan at this time or any of the shareholders in connection with the matter. For more information, see Note 16 Subsequent events.
In
2020, Synacor, Inc commenced an action against MediaHouse, LLC, Inform, Inc. and the Company, alleging approximately $
A former employee of the Company filed a suit against the Company MediaHouse, Inc., and Gregory A. Peters, a former Executive, (the “Defendants”) alleging two counts of defamation. Any potential losses associated with this matter cannot be estimated at this time.
Encoding.com,
Inc. (“Encoding”) was a former digital media customer of MediaHouse. Encoding had a long overdue outstanding receivable from
MediaHouse’s predecessor company, Inform, Inc. MediaHouse did not assume the liability at acquisition. In 2020, the Company and
Encoding agreed to settle the overdue receivable through the issuance of
Regardless of the outcome, litigation can have an adverse impact on our company because of defense and settlement costs, diversion of management resources and other factors. For further updates that could effect the Legal matter, please see Note 16 on Subsequent Events.
| 22 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 12 – PREFERRED STOCK.
The
Company has authorized shares of preferred stock with a par value of $ (the “Preferred Stock”), issuable in
such series and with such designations, rights and preferences as the board of directors may determine.
On November 5, 2018, the Company filed Articles of Amendment to Amended and Restated Articles of Incorporation, as amended, which:
| ● | returned shares of previously designated 10% Series B Convertible Preferred Stock, shares of previously designated 10% Series C Convertible Preferred Stock and shares of previously designated 10% Series D Convertible Preferred Stock to the status of authorized but undesignated and unissued shares of our blank check preferred stock as there were no shares of any of these series outstanding and no intention to issue any such shares in the future: and |
| ● | created three new series of preferred stock, 12% Series F-1 Convertible Preferred Stock (“Series F-1”) consisting of shares, 6% Series F-2 Convertible Preferred Stock (“Series F-2”) consisting of shares, and 10% Series F-3 Convertible Preferred Stock (“Series F-3”) consisting of shares. |
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
| ● | 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 $ |
| ● | the shares are not redeemable by the Company. |
On July 18, 2019, the Company filed Articles of Amendment to Amended and Restated Articles of Incorporation, as amended, which:
| ● | Approved designation of shares of the preferred stock as 10% series A-1 Convertible Preferred Stock and authorized the issuance of the Series A-1 Preferred Stock; |
| ● | Dividends on the Series A-1 Preferred stock are cumulative and payable in cash; | |
| ● | Dividends shall be payable monthly in arrears within fifteen (15) days after the end of the month. |
At both March 31, 2021 and December 31, 2020, there were shares of Series A-1 Stock, shares of Series E Stock and shares of Series F Stock issued and outstanding. There are no shares of Series B Stock, Series B-1 Stock, Series C Stock or Series D Stock issued and outstanding.
Other designations, rights and preferences of each of series of preferred stock are identical, including (i) shares do not have voting rights, except as may be permitted under Florida law, (ii) are convertible into shares of our common stock at the holder’s option on a one for one basis, (iii) are entitled to a liquidation preference equal to a return of the capital invested, and (iv) each share will automatically convert into shares of common stock five years from the date of issuance or upon a change in control. Both the voluntary and automatic conversion formulas are subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events.
Dividends
paid for Series A-1, E and F Convertible Preferred Stock paid were $
| 23 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 13 – COMMON STOCK.
A) Stock issued for Cash
During the first quarter of 2021, the Company did not sell any of its securities through a private placement.
During
the first quarter of 2020, the Company sold an aggregate of units of its securities to
B) Stock issued for services
During the first three months as of March 31, 2021, the Company issued a net shares of our common stock for the following concepts:
| Shares (#) | Value | |||||||
| Options exercised by employees | $ | |||||||
| Warrants exercised | ||||||||
| Shares issued to Oceanside employees per the acquisition agreement valued at $1.60 | ||||||||
| Total | $ | |||||||
In
February 2020, the Company issued shares of our common stock to Spartan Capital for services rendered during 2019 based on the
fair value of date of service, or $ a share valued at $
In
February 2020, the Company issued shares of our common stock to Spartan Capital for services rendered during 2019 based on the
fair value of date of service, or $ a share valued at $
In
March 2020, the Company issued shares of our common stock to MZHCI, Inc for services rendered during 2020 based on the fair value
of date of service, or $ a share valued at $
C) Stock issued for acquisitions
During the three months ended March 31, 2021 or the three months ended March 31, 2020, the Company did not make any acquisitions.
| 24 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 13 – COMMON STOCK (continued).
Stock Option Compensation
The Company accounts for stock option compensation issued to employees for services in accordance with ASC Topic 718, “Compensation – Stock Compensation”. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees. The value of the portion of an employee award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASU No. 2018- 07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.”. The Company estimates the fair value of stock options by using the Black-Scholes option-pricing model.
Stock options issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option, whichever is more reliably measurable in accordance with FASB ASC 505, Equity, and FASB ASC 718, including related amendments and interpretations. The related expense is recognized over the period the services are provided.
On April 20, 2011, the Company’s board of directors and majority stockholder adopted the 2011 Stock Option Plan (the “2011 Plan”), to be effective on January 3, 2011. The Company has reserved for issuance an aggregate of shares of common stock under the 2011 Plan. The maximum aggregate number of shares of Company stock that shall be subject to Grants made under the Plan to any individual during any calendar year shall be shares. On April 1, 2013, the Company’s board of directors and majority stockholder adopted the 2013 Stock Option Plan (the “2013 Plan”), to be effective on April 1, 2013. The Company has reserved for issuance an aggregate of shares of common stock under the 2013 Plan. As of March 31, 2021, shares were remaining under the 2011 Plan for future issuance. As of March 31, 2021, shares were remaining under the 2013 Plan for future issuance.
On May 22, 2015, the Company’s board of directors and majority stockholder adopted the 2015 Stock Option Plan (the “2015 Plan”), to be effective on May 22, 2015. The Company has reserved for issuance an aggregate of shares of common stock under the 2015 Plan. As of March 31, 2021, shares were remaining under the 2015 Plan for the future issuance.
On November 7, 2019, the Company’s board of directors and majority stockholder adopted the 2019 Stock Option Plan (the “2019 Plan”), to be effective on November 7, 2019. The Company has reserved for issuance an aggregate of shares of common stock under the 2019 Plan. As of March 31, 2021, shares were remaining under the 2019 Plan for the future issuance.
The purpose of the 2011 Plan, 2013 Plan, 2015 Plan, and 2019 Plan (the “Plans” are 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. Under the 2015 Plan, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the Code, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long-term incentive awards. The Company’s board of directors will administer the 2011 Plan until such time as such authority has been delegated to a committee of the board of directors. The material terms of each option granted pursuant to the 2011 Plan by the Company shall contain the following terms: (i) that the purchase price of each share purchasable under an incentive option shall be determined by the Committee at the time of grant, (ii) the term of each option shall be fixed by the Committee, but no option shall be exercisable more than 10 years after the date such option is granted and (iii) in the absence of any option vesting periods designated by the Committee at the time of grant, options shall vest and become exercisable in terms and conditions, consistent with the Plan, as may be determined by the Committee and specified in the Grant Instrument.
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 Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors, which is subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes share-based compensation expense on a straight- line basis over the requisite service period for each award.
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. 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 recorded $
As of March 31, 2021, there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $ to be recognized through March 2025.
| 25 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 13 – COMMON STOCK (continued).
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
| Balance Outstanding, December 31, 2020 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ) | — | — | |||||||||||||
| Forfeited | ) | — | — | |||||||||||||
| Expired | ) | — | — | |||||||||||||
| Balance Outstanding, March 31, 2021 | $ | $ | ||||||||||||||
| Exercisable at March 31, 2021 | $ | $ | ||||||||||||||
| Options Outstanding | ||||||||||||||||||||||
Range or Exercise Price | Number Outstanding | Weighted Average Exercise Price | Remaining Average Contractual Life (In Years) | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||||
| $ | - $ | $ | $ | |||||||||||||||||||
| - | ||||||||||||||||||||||
| - | ||||||||||||||||||||||
| - | ||||||||||||||||||||||
| - | ||||||||||||||||||||||
| - | ||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||
NOTE 14 – RELATED PARTIES.
During
November 2018, Mr. W. Kip Speyer, the Company’s Chairman of the Board, entered into two convertible note agreements with the company
totaling $
During
the three months ended March 31, 2021 and 2020 we paid cash dividends on the outstanding shares of the Company’s Series E and F
Preferred Stock of $
On
July 31, 2019, the Company executed a Share Exchange Agreement and Plan of Merger (the “Oceanside Merger Agreement”) with
Slutzky & Winshman Ltd., an Israeli company (“Oceanside”) and the shareholders of Oceanside (the “Oceanside Shareholders”).
The merger closed on August 15, 2019, and the Company acquired all of the outstanding shares of S&W. Pursuant to the terms of the
Merger Agreement, we issued shares valued at $
NOTE 15 – INCOME TAXES.
The
Company recorded $
At
March 31, 2021 and December 31, 2020, the Company had
| 26 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 16 – SUBSEQUENT EVENTS.
As disclosed in Note 10, the Company obtained the forgiveness of the Wild Sky PPP Loan in whole. Further, on May 26, 2021, the Company applied for the Bright Mountain PPP Loan to be forgiven by the SBA in whole or in part and on July 16, 2021, the Company obtained the forgiveness of the Bright Mountain PPP Loan in whole.
On
April 26, 2021, the Company and certain of its subsidiaries entered into a First Amendment to Amended and Restated Senior Secured Credit
Agreement (the “First Amendment to Credit Agreement”). The Company and its subsidiaries are parties to a credit agreement
between itself and Centre Lane Partners Master Credit Fund II, L.P. (“Center Lane Partners”) as Administrative Agent and
Collateral Agent dated June 5, 2020 (the “Credit Agreement”). The Credit Agreement was amended to permit the Company to raise
up to $
During
May 2021, the Company settled an outstanding debt with Encoding.com, Inc. (“Encoding”) was a former digital media customer
of MediaHouse. Encoding had a long overdue outstanding receivable from MediaHouse’s predecessor company, Inform, Inc. MediaHouse
did not assume the liability at acquisition. In 2020, the Company and Encoding agreed to settle the overdue receivable through the issuance
of
Between
May 26, 2021 and January 26, 2022, the Company and certain of its subsidiaries entered into seven amendments to the Amended and Restated
Senior Secured Credit Agreement between itself and Centre Lane Partners Master Credit Fund II, L.P. (“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 dated June 5, 2020, as amended (the “Credit Agreement”). The Credit Agreement was amended to provide for
an additional loan amount of $
On June 28, 2021 Bright Mountain Media, Inc (the “Company”) issued a press release that effective at the close of business on June 30, 2021, Bright Mountain Media, Inc’s., common stock (“BMTM”) ceased trading on the OTCQB and its shares began trading on the OTC Pink Market on July 1, 2021. The common stock will continue to trade with the symbol BMTM. Furthermore, on September 28, 2021, Bright Mountain Media, Inc. shares of common stock began trading on the Expert Market from the OTC Pink Sheets. The Company’s Common Stock will continue to be on the Expert Market until such time as the Company has become current in its filings with the Securities and Exchange Commission at which point it will seek to have its shares restored to the OTC markets.
On
August 31, 2021, the Company’s Chairman of the Board, W. Kip Speyer, converted his preferred shares into common shares of the Company.
In that transaction, he converted preferred shares into common shares of the Company. As of said date, the Company
has an accrued dividend liability due to Mr. W. Kip Speyer recorded totaling $
| 27 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 16 – SUBSEQUENT EVENTS. (continued)
On
September 22, 2021, the Company entered into a Share Issuance Settlement with Spartan Capital Securities, LLC (“Spartan”).
Under the terms of the Agreement, the Company agreed to issue a total of of its common stock (the “Shares”) to
seventy-five accredited investors who participated in the Company’s Private Placement Offering, which began in November 2019 and
was completed in August 2020 (the “Private Placement”). As previously disclosed, under the terms of Private Placement, if
the Company did not file a listing application of its common stock on the NYSE American Exchange within an agreed time period after the
Company had received at least $
Effective December 1, 2021, the Company appointed Mr. Matthew Drinkwater as its new Chief Executive Officer (CEO). Mr. Drinkwater joins the Company with 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, twitter, groupon inc., yahoo and america online (aol). Mr. W. Kip Speyer will remain with the Company in his role of Chairman of the Board and transition his CEO role to Mr. Drinkwater.
On December 3, 2021, the Company received formal notification that an event of default had occurred under the Closing Notes as part of the Oceanside acquisition that was later followed up with a notice of summons in a civil action on December 28, 2021 by the Oceanside selling shareholders. The Company is reviewing its obligations under the Notes.
During
January 2022, the Company entered into a settlement agreement related to the legal proceeding from Note 11 with Synacor. The agreement
obligates the Company to pay $
On January 14, 2022, the Board of Directors nominated and elected Mr. Matthew Drinkwater, the Company’s Chief Executive Officer to the Board of Directors of the Company.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of our unaudited condensed consolidated financial condition and results of operations for the three months ended March 31, 2021 and 2020 should be read in conjunction with the unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth later in this report under Part II, Item 1A. in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission on December 23, 2021 (the “2020 10-K”) and our other filings with the SEC. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. All information in this section for the three months ended March 31, 2021 and 2020 is unaudited and derived from the unaudited condensed consolidated financial statements appearing elsewhere in this report; unless otherwise noted, all information for the year ended December 31, 2020 is derived from our audited consolidated financial statements appearing in the 2020 10-K.
Executive Overview of First Quarter 2021 Results
Our key user metrics and financial results for the three months ended March 31, 2021, are more fully discussed and described herein and should be read in context with the disclosure on this page. The first quarter results are as follows:
User metrics:
| ● | Quarterly ad impressions delivered were approximately 1.2 billion in the first quarter of 2021 and approximately 1.5 billion for the three months ended March 31, 2020; |
First quarter 2021 financial results:
| ● | Advertising revenue increased 5.7% in the three months ended March 31, 2021 from the same period of 2020; | |
| ● | Gross profit increased 131.0% in the three months ended March 31, 2021 from the same period of 2020; | |
| ● | Selling, general and administrative expenses increased 19.5% in the three months ended March 31, 2021 from the same period of 2020; | |
| ● | Included within the expenses for the three months ended March 31, 2021 are $396,266 of non-cash amortization of the intangible assets, $88,155 of non-cash compensation expense related to issuance of BMTM shares to employees of Oceanside per the original acquisition agreement, $10,000 of stock compensation for a warrant exercise from Spartan Capital employee, and $68,294 of stock option based compensation. Included within the expenses for the three months ended March 31, 2020 are $952,622 of non-cash amortization of the intangible assets, $442,500 of non-cash expenses associated with the equity raise, and $281,618 of acquisition related audit and consulting fees, and $36,595 of stock based compensation; | |
| ● | Net cash used in operating activities was $(222,093) for the first three months of 2021 as compared to $(1,369,272) for the three months of 2020. |
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Overview
Bright Mountain Media, Inc. is an end-to-end digital media and advertising services platform, efficiently connecting brands with targeted consumer demographics. Through the removal of middlemen in the advertising services process, Bright Mountain Media efficiently connects brands with targeted consumer demographics while maximizing revenue to publishers. Bright Mountain Media’s assets include the Bright Mountain, LLC ad network, MediaHouse (f/k/a NDN), Oceanside (f/k/a S&W Media), Wild Sky Media and 24 owned and/or managed websites.
We generate revenue sales of advertising services which generate revenue from advertisements (ad impressions) placed on our owned and managed sites, as well as from advertisements we place on partner websites, for which we earn a share of the revenue. We also generate advertising services revenue from facilitating the real-time buying and selling of advertisements at scale between networks of buyers, often called DSPs (Demand Side Platforms) and sellers, often called SSPs (Supply Side Platforms).
When fully developed Bright Mountain’s full suite of advertising solutions will include:
| ● | The ability for advertisers to purchase advertising space on a variety of digital publications; | |
| ● | Leading targeting technology, allowing advertisers to pinpoint their marketing efforts to reach geo-targeted, specific demographics across desktop, tablet, and mobile devices; | |
| ● | The ability to handle any ad format, including video, display, and native advertisements; | |
| ● | Ad serving and self-service features for publishers and advertisers; and | |
| ● | Server-to-server integration with other advertiser and publisher platforms for extremely quick transactions and ad deployments. |
Bright Mountain’s platform will be a marketplace for publishers and advertisers where they will be able to choose from various features to maximize their earning potential. Advertisers have the ability to directly target desired demographics on publishers sites through our platform. Publishers will be able to select a variety of ad units for their video, mobile, display and native advertisements, and have the ability to create their own unique ad formats.
We have begun expansion with the recent acquisition of Wild Sky Media. Wild Sky Media offers massive global reach through hyper-engaging content and multicultural audiences. This is achieved through their six websites focusing on parenting and lifestyle brands. The websites include Mom.com, Cafemom.com, LittleThings.com, mamaslatinas.com, revelist.com, and babynamewizard.com.
Key initiatives
Our growth strategy is based upon:
| ● | completing and launching the Bright Mountain Media advertising solutions marketplace; | |
| ● | expanding our sales revenues through organic growth; | |
| ● | continuing to pursue acquisition candidates that are strategic our business plan; | |
| ● | evaluating expenses attributed to our non-strategic business lines; and | |
| ● | continuing to automate our processes and reduce overhead where possible without impacting our customer experience |
| 30 |
Results of operations
Revenues, Cost of Revenue, and Gross Profit Margins
| For the Three Months Ended March 31, | ||||||||||||||||
| 2021 | 2020 | Change | % Change | |||||||||||||
| Advertising revenues | $ | 2,399,720 | $ | 2,270,186 | $ | 129,534 | 5.7 | % | ||||||||
| Cost of revenue | $ | 1,366,843 | $ | 1,823,082 | $ | (456,239 | ) | (25.0 | %) | |||||||
| Gross Profit | $ | 1,032,877 | $ | 447,104 | $ | 585,773 | 131.0 | % | ||||||||
| Gross profit margin as a percentage of advertising revenues | 43.0 | % | 19.7 | % | ||||||||||||
Our advertising revenue for the first quarter of 2021 was 5.7% higher than the comparable period in 2020. Approximately $1,590,625 of the 2021 revenue is attributable to the acquisition of Wild Sky Media which occurred on June 1, 2020. Our legacy revenues decreased approximately $1,461,091 due to decreased advertising spend in key industries due to the COVID-19 virus which affected our legacy businesses, as well as a negative impact from our MediaHouse operation since we restructured it at the end of 2020.
We incur costs of sales associated with the advertising revenue. These costs include revenue share payments to media providers and website publishers. Approximately $689,643 of the 2021 cost of revenue is attributable to the acquisition of Wild Sky Media which occurred on June 1, 2020 and is not in the comparable period ending March 31, 2020. As such, the gross profit margin, excluding Wild Sky, period over period would have decreased to 16.3% versus 19.7% mainly driven by lower sales volume. The digital publishing business has generally higher gross margins than the Advertising Network business.
Selling, General and Administrative Expenses
| For the Three Months Ended March 31, | ||||||||||||||||
| 2021 | 2020 | $ Change | % Change | |||||||||||||
| Selling, general and administrative expense | $ | 4,274,434 | $ | 3,575,850 | $ | 698,584 | 19.5 | % | ||||||||
| Selling, general and administrative as a percentage of total revenue | 178.1 | % | 157.5 | % | ||||||||||||
Selling, general and administrative costs increased approximately $2,059,749 due to the operating activities of Wild Sky Media, which are not reflected in the prior period expenses. The Company also has increased its expenses associated with amortization of intangibles of approximately $381,465 with the acquisition of Wild Sky Media, which closed on June 1, 2020.
Selling, general and administrative expenses are expected to increase as we execute our planned growth strategy of launching and operating the Bright Mountain Media ad exchange network which will include additional administrative support. Subject to the availability of additional working capital, the Company also intends to add administrative staff to its accounting department to improve controls over its accounting and reporting processes. As the Company expands the size of the accounting department, the use of consultants is expected to decrease.
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Non-GAAP financial measure
We report adjusted EBITDA as a supplemental measure to U.S. generally accepted accounting principles (“GAAP”). This measure is one of the primary metrics by which we evaluate the performance of our business, on which our internal budgets are based. We believe that investors have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. We endeavor to compensate for the limitations of the non-GAAP measure presented by providing the comparable GAAP measure with equal or greater prominence and description of the reconciling items, including quantifying such items to derive the non-GAAP measure. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measure.
Our adjusted EBITDA is defined as operating income/loss excluding:
| ● | non-cash stock option compensation expense; | |
| ● | depreciation; | |
| ● | equity raise expenses; | |
| ● | professional fees; | |
| ● | acquisition-related items consisting of amortization expense and impairment expense; | |
| ● | interest; and | |
| ● | amortization on debt discount. |
We believe this measure is useful for analysts and investors as this measure allows a more meaningful year-to-year comparison of our performance. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole. The above items are excluded from adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, adjusted EBITDA corresponds more closely to the cash operating income/loss generated from our business. Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations of certain expenses
The following is an unaudited reconciliation of net (loss) to adjusted net (loss) and Adjusted EBITDA for the periods presented:
For the Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Net loss | $ | (1,709,275 | ) | $ | (3,119,991 | ) | ||
| plus: | ||||||||
| Stock compensation expense | 170,048 | 36,595 | ||||||
| Depreciation expense | 18,047 | 5,253 | ||||||
| Amortization expense | 396,266 | 928,199 | ||||||
| Gain on debt forgiveness | (1,706,735 | ) | - | |||||
| Professional fees | 45,000 | |||||||
| Amortization on debt discount | 3,452 | 3,490 | ||||||
| Interest expense | 260,995 | |||||||
| Interest expense – related party | 35,288 | 2,023 | ||||||
| $ | (2,486,914 | ) | $ | (2,114,431 | ) | |||
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Liquidity and capital resources
Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. The following table summarized total current assets, total current liabilities and working capital (deficit) at March 31, 2021 as compared to December 31, 2020.
| March 31, 2021 | December 31, 2020 | |||||||
| Total current assets | $ | 5,136,672 | $ | 8,120,422 | ||||
| Total current liabilities | 14,170,051 | 16,058,220 | ||||||
| Working capital | $ | (9,033,379 | ) | $ | (7,937,798 | ) | ||
The increase in cash is mainly a result of receipts of $1,137,140 from the proceeds of the 2nd tranche of PPP loans during the three months ended March 31, 2021. The decrease in our current assets is mostly reflective of decreases in accounts receivable and prepaid expenses.
As we continue our efforts to grow our business, we expect that our monthly cash operating overhead will continue to increase as we add personnel, although at a lesser rate, and we are not able at this time to quantify the amount of this expected increase. In 2021 we implemented policies and procedures around cash collections to prevent the aging of accounts receivables that was experienced in 2020. Cash collection efforts have been successful, and we feel that we have appropriately reserved for uncollectible amounts at March 31, 2021.
During February and March 2021, the Company received 2 loan proceeds totaling $1,137,140 (the “PPP Loans”) under the 2nd tranche of the Paycheck Protection Program (the “PPP”). The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration. The PPP Loan is evinced by a promissory note (the “Promissory Note”) with Regions Bank and has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loans may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains customary events of default provisions. Under the terms of the CARES Act, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.
Going concern and management’s liquidity plans
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company sustained a net loss of $1,709,275 and used net cash in operating activities of $222,093 for the three months ended March 31, 2021. The Company had an accumulated deficit of $95,641,355 at March 31, 2021.
The report of our independent registered public accounting firm on our audited consolidated financial statements at December 31, 2020 and 2019 and for the years then ended contains an explanatory paragraph regarding substantial doubt of our ability to continue as a going concern based upon our net losses, cash used in operations and accumulated deficit. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to generate revenues or report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.
Our ability to fully implement the Bright Mountain Media Ad Exchange Network and maximize the value of our assets are dependent upon our ability to raise additional capital sufficient for our short-term and long-term growth plans. Historically, we have been dependent upon debt financing and equity capital raises to provide adequate funds to meet our working capital needs. During the three months ended March 31, 2021, we did not raise any debt or equity capital. During the three months ended March 31, 2020 we raised $2,558,750 through the sale of our securities in one private placement. While we have engaged a placement agent to assist us in raising capital, the placement agent is acting on a best-efforts basis and there are no assurances we will be successful in raising additional capital during 2022 through the sale of our securities. Any delay in raising sufficient funds will delay the implementation of our business strategy and could adversely impact our ability to significantly increase our revenues in future periods. In addition, if we are unable to raise the necessary additional working capital, absent a significant increase in our revenues, most particularly from our advertising segment, of which there is no assurance, we will be unable to continue to grow our company and may be forced to reduce certain operating expenses to conserve our working capital.
| 33 |
Summary of cash flows
| March 31, | ||||||||
| 2021 | 2020 | |||||||
| Net cash (used in) operating activities | $ | (222,093 | ) | $ | (1,369,272 | ) | ||
| Net cash (used in) provided by investing activities | $ | (6,564 | ) | $ | - | |||
| Net cash provided by financing activities | $ | 1,040,243 | $ | 1,682,282 | ||||
During the three months ended March 31, 2021, we used cash primarily to fund our net loss of $1,709,275 for the period.
During the three months ended March 31, 2021 the Company received proceeds of $1,137,140 through the granting of the 2nd tranche of PPP loans from the US Government and paid dividends of $1,261.
Critical accounting policies
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 1 to our unaudited condensed consolidated financial statements appearing elsewhere in this report.
Recent accounting pronouncements
The recent accounting standards that have been issued or proposed by the FASB or other standards-setting bodies as described in Note 1 appearing earlier in this report that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.
All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable for a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under Securities Exchange Act of 1934 (the “Exchange Act”). In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
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Based on his evaluation as of the end of the period covered by this report, our Chief Financial Officer concluded that our disclosure controls and procedures were not effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of continuing material weaknesses in our internal control over financial reporting as described in our Annual Report on Form 10-K for the year ended December 31, 2020. A material weakness is a deficiency, or combination of deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected.
We have implemented changes and will continue to monitor our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. We do not, however, expect that the material weaknesses in our disclosure controls will be remediated until such time as we have added to our accounting and administrative staff allowing improved internal control over financial reporting.
Changes in Internal Control over Financial Reporting. We have begun strategically planning changes in our internal control over financial reporting during this fiscal quarter, Q1 2021.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None, except as previously disclosed.
ITEM 1A. RISK FACTORS.
We incorporate by reference the risk factors disclosed in Part I, Item 1A of our 2020 Form 10-K subject to the new or modified risk factors appearing below that should be read in conjunction with the risk factors disclosed in such Form 10-K.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the period from January 1, 2021 through March 31, 2021, Bright Mountain Media, Inc. did not sell any units of its securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS.
| No. | Exhibit Description | Form | Date Filed | Number | Herewith | |||||
| 31.1 | Rule 13a-14(a)/15d-14(a) certification of Principal Executive Officer | Filed | ||||||||
| 31.2 | Rule 13a-14(a)/15d-14(a) certification of principal financial and accounting officer | Filed | ||||||||
| 32.1 | Section 1350 certification of Principal Executive Officer and principal financial and accounting officer | Filed | ||||||||
| 101.INS | XBRL Instance Document | Filed | ||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | Filed | ||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed | ||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed | ||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed | ||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Filed |
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SIGNATURES
Pursuant to the requirements 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. | ||
| February 7, 2022 | By: | /s/ Matthew Drinkwater |
| Matthew Drinkwater, Chief Executive Officer, Principal Executive Officer | ||
| By: | /s/ Edward A. Cabanas | |
| Edward A. Cabanas, Chief Financial Officer, Principal Financial and Accounting Officer | ||
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