UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended |
or
2022 | ||
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or | ||
☐ | TRANSITION REPORT |
For the transition period from | ||
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Commission File Number 000-54887
Bright Mountain Media, Inc.
(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Charter)
Florida | 27-2977890 | |
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Incorporation or |
Identification No. |
6400 Congress Avenue, Suite 2050, Boca Raton | 33487 | |
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| Zip |
561-998-2440
Registrant’s Telephone Number, Including Area Code
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 | ||
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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. þYes ¨☐ No ☒
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). þYes ¨☐ No ☒
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 |
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Non-accelerated filer ☒ |
| Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by checkmarkcheck 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 Exchange Act)o. Yes þ☐ No ☒
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 November 20, 2017 the issuer had 46,168,864August 10, 2022 there were shares of its common stockthe issuer’s shares outstanding.
TABLE OF CONTENTS
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
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2 |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Various statements in thisThis report contain or may containincludes forward-looking statements that are subjectrelate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors whichthat may cause our actual results, levels of activity, performance or achievements to bediffer materially different from any future results, levels of activity, performance or achievements expressed or implied by suchthese forward-looking statements. TheseWords 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 were basedlargely on various factorsour current expectations and were derived from utilizing numerous assumptionsfuture events and other factorsfinancial trends that could causewe believe may affect our actualfinancial condition, results to differ materially from those in the forward-looking statements. These factorsof operation, business strategy and financial needs. Forward-looking statements include, but are not limited to:to, statements about risks associated with:
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| 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; | |
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| acquisitions of new businesses and our ability to integrate those businesses into our operations; | |
| online security breaches; | |
| failure to effectively promote our | |
| our ability to protect our content; | |
| our ability to protect our intellectual property | |
| the success of our technology development efforts; | |
| additional competition resulting from our business expansion strategy; |
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| our dependence on third party service providers; | |
● | our ability to detect advertising fraud; | |
● | liability related to content which appears on our websites; | |
| regulatory | |
| dependence on executive officers and certain key employees and consultants; | |
| our ability to hire qualified personnel; | |
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| possible problems with our network infrastructure; | |
| ongoing material weaknesses in our disclosure controls and internal control over financial reporting; | |
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● | 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 | |
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| provisions of our charter and Florida law which may have anti-takeover | |
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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, 20162021, as filed with the Securities and Exchange Commission on June 13, 2022 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, and "Daily Engage Media" refers to Daily Engage Media Group LLC, a New Jersey limited liability company and wholly owned subsidiary of the Company.subsidiaries. In addition, when used in this report, “third“second quarter of 2017”2022” refers to the three months ended SeptemberJune 30, 2017, "third2022, “second quarter of 2016"2021” refers to the three months ended SeptemberJune 30, 2016, “2017” refers to the year ending December 31, 20172021, and “2016”“2021” refers to the year ended December 31, 2016.
Unless specifically set forth to the contrary, the2021. The information which appears on our website at www.brightmountainmedia.com is not part of this report.report.
3 |
ii
PART 1 -– FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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| September 30 |
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| December 31, |
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| 2017 |
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| 2016 |
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| (unaudited) |
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ASSETS |
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Current assets |
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Cash |
| $ | 123,292 |
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| $ | 162,795 |
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Accounts Receivable, net |
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| 223,396 |
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| 157,013 |
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Prepaid Expenses and Other Current Assets |
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| 71,727 |
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| 132,950 |
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Inventories |
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| 984,522 |
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| 1,127,072 |
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Total current assets |
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| 1,402,937 |
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| 1,579,830 |
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Fixed Assets, net |
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| 94,382 |
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| 99,001 |
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Intangible Assets, net |
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| 1,231,776 |
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| 967,114 |
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Goodwill |
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| 502,823 |
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| — |
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Tradenames |
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| 300,000 |
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| 150,000 |
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Other Assets |
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| 49,497 |
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| 184,400 |
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Total Assets |
| $ | 3,581,415 |
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| $ | 2,980,345 |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current Liabilities |
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Accounts Payable and Accrued Expense |
| $ | 525,308 |
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| $ | 654,140 |
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Accrued Interest |
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| 50,347 |
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| 11,111 |
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Accrued Interest to Related Party |
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| 16,550 |
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| 5,592 |
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Premium Finance Loan Payable |
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| — |
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| 53,643 |
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Deferred Rent |
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| 16,692 |
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| — |
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Other Current Liabilities |
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| 16,237 |
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| — |
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Notes Payable |
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| 926,766 |
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| 500,000 |
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Total Current Liabilities |
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| 1,551,900 |
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| 1,224,486 |
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Long Term Debt to Related Parties, net of debt discount of $887,855 and $389,095 |
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| 1,147,145 |
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| 185,905 |
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Total Liabilities |
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| 2,699,045 |
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| 1,410,391 |
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Commitments and contingencies (See Note 9) |
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Shareholders' Equity |
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Preferred stock, par value $0.01, 20,000,000 shares authorized, |
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600,000 and 100,000 shares issued and outstanding |
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Series A, 2,000,000 shares designated, 100,000 and |
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100,000 shares issued and outstanding |
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| 1,000 |
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| 1,000 |
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Series B, 1,000,000 shares designated, 0 and |
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0 shares issued and outstanding |
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Series C, 2,000,000 shares designated, 0 and |
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0 shares issued and outstanding |
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| — |
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| — |
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Series D, 2,000,000 shares designated, 0 and |
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0 shares issued and outstanding |
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| — |
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| — |
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Series E, 2,500,000 shares designated |
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| 5,000 |
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| — |
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500,000 and 0 issued and outstanding |
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Common stock, par value $0.01, 324,000,000 shares authorized, |
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46,168,864 issued and outstanding and 44,901,531 issued |
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and outstanding, respectively |
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| 461,689 |
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| 449,016 |
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Additional paid-in capital |
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| 11,343,468 |
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| 9,944,744 |
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Accumulated Deficit |
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| (10,928,787 | ) |
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| (8,824,806 | ) |
Total shareholders' equity |
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| 882,370 |
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| 1,569,954 |
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Total liabilities and shareholders' equity |
| $ | 3,581,415 |
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| $ | 2,980,345 |
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June 30, | December 31, | |||||||
2022 | 2021 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 417,188 | $ | 781,320 | ||||
Accounts receivable, net of allowance for doubtful accounts of $718,318 and $495,396, at June 30, 2022 and December 31, 2021, respectively | 3,490,699 | 3,550,126 | ||||||
Note receivable, net | 15,476 | 21,415 | ||||||
Prepaid expenses and other current assets | 766,007 | 904,716 | ||||||
Total current assets | 4,689,370 | 5,257,577 | ||||||
Property and equipment, net | 53,943 | 65,122 | ||||||
Website acquisition assets, net | 3,200 | 4,000 | ||||||
Intangible assets, net | 5,279,329 | 6,064,535 | ||||||
Goodwill | 19,645,468 | 19,645,468 | ||||||
Prepaid services/consulting agreements – long term | 104,939 | 284,825 | ||||||
Right-of-use asset | 687,310 | – | ||||||
Other assets | 237,181 | 242,686 | ||||||
Total assets | $ | 30,700,740 | $ | 31,564,213 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 8,521,440 | $ | 8,459,561 | ||||
Accrued expenses | 2,837,279 | 3,764,665 | ||||||
Accrued interest to related party | 1,727,262 | 640,255 | ||||||
Premium finance loan payable | 85,711 | 334,284 | ||||||
Deferred revenues | 623,629 | 1,162,425 | ||||||
Long term debt, current portion | – | 1,387,140 | ||||||
Long term debt to related parties, current portion, net | 3,632,192 | 7,316,402 | ||||||
Other current liabilities | 70,468 | 5,052 | ||||||
Total current liabilities | 17,497,981 | 23,069,784 | ||||||
Long term debt to related parties, net | 22,186,784 | 15,217,569 | ||||||
Operating lease liability | 691,340 | – | ||||||
Total liabilities | 40,376,105 | 38,287,353 | ||||||
Commitments and Contingencies | - | - | ||||||
Shareholders’ deficit | ||||||||
Convertible preferred stock, par value $ | , shares authorized:||||||||
Series A-1, | shares designated, shares issued and outstanding at June 30, 2022 and December 31, 2021– | – | ||||||
Series B-1, | shares designated, shares issued and outstanding at June 30, 2022 and December 31, 2021– | – | ||||||
Series E, 0.40 per share | shares designated, shares issued and outstanding at June 30, 2022 and December 31, 2021; liquidation preference of $1,250 | 1,250 | ||||||
Series F, | shares designated, shares issued and outstanding at June 30, 2022 and December 31, 2021– | – | ||||||
Preferred stock value | ||||||||
Common stock, par value $ | , shares authorized, and issued and and outstanding at June 30, 2022 and December 31, 2021, respectively1,499,846 | 1,498,103 | ||||||
Treasury stock, at cost; | shares at June 30, 2022 and December 31, 2021(219,837 | ) | (219,837 | ) | ||||
Additional paid-in capital | 98,462,565 | 98,128,948 | ||||||
Accumulated deficit | (109,448,440 | ) | (106,144,065 | ) | ||||
Accumulated other comprehensive income | 29,251 | 12,461 | ||||||
Total shareholders’ deficit | (9,675,365 | ) | (6,723,140 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 30,700,740 | $ | 31,564,213 |
See accompanying notes to unaudited condensed consolidated financial statements
4 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)(unaudited)
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| For the Three Months Ended |
| For the Nine Months Ended |
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
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| September 30, |
| September 30, |
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||||||||||||
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| 2017 |
| 2016 |
| 2017 |
| 2016 |
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Revenues | ||||||||||||||||||||||||||||||||
Advertising | $ | 5,716,779 | $ | 2,433,415 | $ | 9,175,943 | $ | 4,833,135 | ||||||||||||||||||||||||
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Product Sales |
| $ | 589,402 |
| $ | 292,235 |
| $ | 1,713,688 |
| $ | 976,056 |
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Revenues from Advertising |
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| 131,223 |
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| 113,502 |
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| 334,856 |
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| 313,266 |
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Total revenues |
| 720,625 |
| 405,737 |
| 2,048,544 |
| 1,289,322 |
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Cost of sales - Product |
| 387,360 |
| 229,391 |
| 1,116,465 |
| 732,536 |
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Cost of Revenues - Advertising |
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| 4,396 |
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| 826 |
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| 16,758 |
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| 5,202 |
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Cost of revenue | ||||||||||||||||||||||||||||||||
Advertising | 2,899,290 | 1,476,108 | 4,589,905 | 2,842,951 | ||||||||||||||||||||||||||||
Gross profit |
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| 328,869 |
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| 175,520 |
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| 915,321 |
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| 551,584 |
| 2,817,489 | 957,307 | 4,586,038 | 1,990,184 | ||||||||||||
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Selling, general and administrative expenses |
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| 801,307 |
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| 686,802 |
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| 2,750,275 |
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| 2,205,855 |
| 3,443,199 | 4,749,835 | 7,330,558 | 9,024,269 | ||||||||||||
Loss from operations |
| (472,438 | ) |
| (511,282 | ) |
| (1,834,954 | ) |
| (1,654,271 | ) | (625,710 | ) | (3,792,528 | ) | (2,744,520 | ) | (7,034,085 | ) | ||||||||||||
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Other income (expense) |
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Interest income |
| 232 |
| 11 |
| 451 |
| 21 |
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Gain on forgiveness of PPP loan | 295,600 | - | 1,137,140 | 1,706,735 | ||||||||||||||||||||||||||||
Other income (expense) | 39,059 | (82,357 | ) | 38,902 | 39,473 | |||||||||||||||||||||||||||
Interest expense |
| 20,883 |
| — |
| (48,868 | ) |
| — |
| (722 | ) | (75,211 | ) | (735 | ) | (336,206 | ) | ||||||||||||||
Interest expense - related party |
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| (95,478 | ) |
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| (297,130 | ) |
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| (220,610 | ) |
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| (335,015 | ) | (895,745 | ) | (539,215 | ) | (1,735,162 | ) | (574,503 | ) | ||||||||
Total other income (expense) |
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| (74,363 | ) |
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| (297,119 | ) |
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| (269,027 | ) |
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| (334,994 | ) | (561,808 | ) | (696,783 | ) | (559,855 | ) | 835,499 | |||||||||
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Net loss before income taxes |
| (546,801 | ) |
| (808,401 | ) |
| (2,103,981 | ) |
| (1,989,265 | ) | ||||||||||||||||||||
Income taxes |
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| — |
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| — |
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| — |
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| — |
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Net loss before tax | (1,187,518 | ) | (4,489,311 | ) | (3,304,375 | ) | (6,198,586 | ) | ||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||
Income tax expense | – | – | – | – | ||||||||||||||||||||||||||||
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Net loss |
| (546,801 | ) |
| (808,401 | ) |
| (2,103,981 | ) |
| (1,989,265 | ) | (1,187,518 | ) | (4,489,311 | ) | (3,304,375 | ) | (6,198,586 | ) | ||||||||||||
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Preferred stock dividends |
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Series A, Series B, Series C, Series D, and Series E preferred stock |
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| 1,122 |
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| 60,339 |
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| 3,849 |
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| 278,525 |
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Total preferred stock dividends |
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| 1,122 |
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| 60,339 |
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| 3,849 |
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| 278,525 |
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Series A, Series E, and Series F preferred stock | (1,247 | ) | (89,958 | ) | (2,480 | ) | (178,936 | ) | ||||||||||||||||||||||||
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Net loss attributable to common shareholders |
| $ | (547,923 | ) |
| $ | (868,740 | ) |
| $ | (2,107,830 | ) |
| $ | (2,267,790 | ) | $ | (1,188,765 | ) | $ | (4,579,269 | ) | $ | (3,306,855 | ) | $ | (6,377,522 | ) | ||||
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Other comprehensive income (loss) | $ | 16,709 | $ | (82,324 | ) | $ | 16,790 | $ | (113,613 | ) | ||||||||||||||||||||||
Comprehensive loss | $ | (1,172,056 | ) | $ | (4,661,593 | ) | $ | (3,290,065 | ) | $ | (6,491,135 | ) | ||||||||||||||||||||
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Basic and diluted net loss per share |
| $ | (0.01 | ) |
| $ | (0.02 | ) |
| $ | (0.05 | ) |
| $ | (0.06 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.02 | ) | $ | (0.05 | ) | ||||
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Weighted average shares outstanding - basic and diluted |
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| 45,126,811 |
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| 40,848,279 |
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| 44,973,345 |
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| 38,220,591 |
| 149,159,461 | 120,353,074 | 149,130,579 | 119,652,844 |
See accompanying notes to unaudited condensed consolidated financial statements
5 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN SHAREHOLDERS'SHAREHOLDERS’ (DEFICIT) EQUITY
For the NineThree and Six Months Ended SeptemberJune 30, 20172022 and 2021
(Unaudited)(unaudited)
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| Additional |
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| Total |
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| Preferred Stock |
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| Common Stock |
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| Paid-in |
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| Accumulated |
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| Shareholders' |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Equity |
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Balance – December 31, 2016 |
|
| 100,000 |
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| $ | 1,000 |
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|
| 44,901,531 |
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| $ | 449,016 |
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| $ | 9,944,744 |
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| $ | (8,824,806 | ) |
| $ | 1,569,954 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services ($0.850/share) |
|
| — |
|
|
| — |
|
|
| 3,600 |
|
|
| 36 |
|
|
| 3,024 |
|
|
| — |
|
|
| 3,060 |
|
Common stock issued for 10% dividend payment pursuant to Series A preferred stock Subscription Agreements |
|
| — |
|
|
| — |
|
|
| 10,000 |
|
|
| 100 |
|
|
| (100 | ) |
|
| — |
|
|
| — |
|
Issuance of Series E preferred Stock ($0.40/share) |
|
| 500,000 |
|
|
| 5,000 |
|
|
| — |
|
|
| — |
|
|
| 195,000 |
|
|
| — |
|
|
| 200,000 |
|
Stock option compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 95,821 |
|
|
| — |
|
|
| 95,821 |
|
Common stock issued as compensation |
|
| — |
|
|
| — |
|
|
| 28,500 |
|
|
| 285 |
|
|
| 22,515 |
|
|
| — |
|
|
| 22,800 |
|
Beneficial conversion feature |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 615,625 |
|
|
| — |
|
|
| 615,625 |
|
Common stock issued for cash ($0.40/share) |
|
| — |
|
|
| — |
|
|
| 125,000 |
|
|
| 1,250 |
|
|
| 48,750 |
|
|
| — |
|
|
| 50,000 |
|
Common stock issued in acquisition |
|
|
|
|
|
|
|
|
|
| 1,100,233 |
|
|
| 11,002 |
|
|
| 418,089 |
|
|
| — |
|
|
| 429,091 |
|
Net loss for the nine months ended September 30, 2017 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,103,981 | ) |
|
| (2,103,981 | ) |
Balance – September 30, 2017 |
|
| 600,000 |
|
| $ | 6,000 |
|
|
| 46,168,864 |
|
| $ | 461,689 |
|
| $ | 11,343,468 |
|
| $ | (10,928,787 | ) |
| $ | 882,370 |
|
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Deficit | |||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Treasury Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Deficit | |||||||||||||||||||||||||||||||
Balance, December 31, 2021 | 125,000 | $ | 1,250 | 149,810,383 | $ | 1,498,103 | (825,175 | ) | $ | (219,837 | ) | $ | 98,128,948 | $ | (106,144,065 | ) | $ | 12,461 | $ | (6,723,140 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (2,116,857 | ) | — | (2,116,857 | ) | ||||||||||||||||||||||||||||
Series E preferred stock dividend | — | — | — | — | — | — | (1,233 | ) | — | — | (1,233 | ) | ||||||||||||||||||||||||||||
Stock option vesting expense | — | — | — | — | — | — | 28,916 | — | — | 28,916 | ||||||||||||||||||||||||||||||
Issuance of common stock: | ||||||||||||||||||||||||||||||||||||||||
To Oceanside personnel as part of acquisition agreement | — | — | 174,253 | 1,743 | — | — | 277,062 | — | — | 278,805 | ||||||||||||||||||||||||||||||
Adjustment from foreign currency translation, net | — | — | — | — | — | — | — | — | 81 | 81 | ||||||||||||||||||||||||||||||
Balance, March 31, 2022 (unaudited) | 125,000 | $ | 1,250 | 149,984,636 | $ | 1,499,846 | (825,175 | ) | $ | (219,837 | ) | $ | 98,433,693 | $ | (108,260,922 | ) | $ | 12,542 | $ | (8,533,428 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (1,187,518 | ) | — | (1,187,518 | ) | ||||||||||||||||||||||||||||
Series E preferred stock dividend | — | — | — | — | — | — | (1,247 | ) | — | — | (1,247 | ) | ||||||||||||||||||||||||||||
Stock option vesting expense | — | — | — | — | — | — | 30,119 | — | — | 30,119 | ||||||||||||||||||||||||||||||
Adjustment from foreign currency translation, net | — | — | — | — | — | — | — | — | 16,709 | 16,709 | ||||||||||||||||||||||||||||||
Balance, June 30, 2022 (unaudited) | 125,000 | $ | 1,250 | 149,984,636 | $ | 1,499,846 | (825,175 | ) | $ | (219,837 | ) | $ | 98,462,565 | $ | (109,448,440 | ) | $ | 29,251 | $ | (9,675,365 | ) |
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 | 8,044,017 | $ | 80,440 | 118,162,150 | $ | 1,181,622 | (825,175 | ) | $ | (219,837 | ) | $ | 96,427,166 | $ | (93,932,080 | ) | $ | (22,665 | ) | $ | 3,514,646 | |||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (1,709,275 | ) | (1,709,275 | ) | |||||||||||||||||||||||||||||
Series A-1, E and F preferred stock dividend | — | — | — | — | — | — | (88,978 | ) | — | — | (88,978 | ) | ||||||||||||||||||||||||||||
Stock option vesting expense | 68,294 | 68,294 | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock: | ||||||||||||||||||||||||||||||||||||||||
Options exercise | — | — | 100,000 | 1,000 | — | — | 12,900 | — | — | 13,900 | ||||||||||||||||||||||||||||||
Warrants exercise | 25,000 | 250 | 9,750 | 10,000 | ||||||||||||||||||||||||||||||||||||
Adjustment from foreign currency translation, net | (8,624 | ) | (8,624 | ) | ||||||||||||||||||||||||||||||||||||
To Oceanside personnel as part of acquisition agreement | — | — | 379,266 | 3,793 | — | — | 603,033 | — | — | 606,826 | ||||||||||||||||||||||||||||||
Balance, March 31, 2021 (unaudited) | 8,044,017 | $ | 80,440 | 118,666,416 | $ | 1,186,665 | (825,175 | ) | $ | (219,837 | ) | $ | 97,032,165 | $ | (95,641,355 | ) | $ | (31,289 | ) | $ | 2,406,789 | |||||||||||||||||||
Beginning balance, value | 8,044,017 | $ | 80,440 | 118,666,416 | $ | 1,186,665 | (825,175 | ) | $ | (219,837 | ) | $ | 97,032,165 | $ | (95,641,355 | ) | $ | (31,289 | ) | $ | 2,406,789 | |||||||||||||||||||
Net loss | - | - | (4,489,311 | ) | (4,489,311 | ) | ||||||||||||||||||||||||||||||||||
Series A-1, E and F preferred stock dividend | - | - | - | (89,958 | ) | (89,958 | ) | |||||||||||||||||||||||||||||||||
Stock option vesting expense | - | - | - | 73,214 | 73,214 | |||||||||||||||||||||||||||||||||||
Issuance of common stock: | - | |||||||||||||||||||||||||||||||||||||||
To Centre Lane Partners as part of debt financing | - | - | 3,150,000 | 31,500 | - | 2,465,556 | 2,497,056 | |||||||||||||||||||||||||||||||||
Adjustment for currency translation | - | - | - | (82,324 | ) | (82,324 | ) | |||||||||||||||||||||||||||||||||
Balance, June 30, 2021 (unaudited) | 8,044,017 | $ | 80,440 | 121,816,416 | $ | 1,218,165 | (825,175 | ) | $ | (219,837 | ) | $ | 99,480,977 | $ | (100,130,666 | ) | $ | (113,613 | ) | $ | 315,466 | |||||||||||||||||||
Ending balance, value | 8,044,017 | $ | 80,440 | 121,816,416 | $ | 1,218,165 | (825,175 | ) | $ | (219,837 | ) | $ | 99,480,977 | $ | (100,130,666 | ) | $ | (113,613 | ) | $ | 315,466 |
See accompanying notes to unaudited condensed consolidated financial statements
6 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)(unaudited)
|
| For the Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | (2,103,981 | ) |
| $ | (1,989,265 | ) |
Adjustments to reconcile net loss to net cash used in operations: |
|
|
|
|
| |||
Depreciation |
|
| 18,925 |
|
|
| 10,025 |
|
Amortization of debt discount |
|
| 116,863 |
|
|
| 305,115 |
|
Amortization |
|
| 227,418 |
|
|
| 186,007 |
|
Stock option compensation expense |
|
| 95,821 |
|
|
| 107,193 |
|
Common stock issued for services |
|
| 25,860 |
|
|
| 64,110 |
|
Product refund reserve |
|
| — |
|
|
| 12,642 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 35,663 |
|
|
| (34,485 | ) |
Inventory |
|
| 142,550 |
|
|
| 7,842 |
|
Prepaid expenses and other current assets |
|
| 102,751 |
|
|
| 1,446 |
|
Accounts payable and accrued expense |
|
| (194,163 | ) |
|
| 53,679 |
|
Accrued interest |
|
| 39,236 |
|
|
| — |
|
Accrued interest - related party |
|
| 10,958 |
|
|
| — |
|
Other current liabilities |
|
| (557 | ) |
|
| — |
|
Deferred rents |
|
| 16,692 |
|
|
| — |
|
Other assets |
|
| 93,375 |
|
|
| (118,436 | ) |
Net cash used in operating activities |
|
| (1,372,589 | ) |
|
| (1,394,127 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of fixed assets |
|
| (14,305 | ) |
|
| (35,036 | ) |
Purchase of websites |
|
| — |
|
|
| (142,925 | ) |
Cash paid for acquisition, net of cash received |
|
| (199,573 | ) |
|
| — |
|
Net cash used in investing activities |
|
| (213,878 | ) |
|
| (177,961 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common and preferred stock |
|
| 250,000 |
|
|
| 800,000 |
|
Repayments on insurance premium notes payable |
|
| (53,643 | ) |
|
| (41,758 | ) |
Repayment of Notes Payable |
|
| (109,393 | ) |
|
| — |
|
Long-term debt - Related parties |
|
| 1,460,000 |
|
|
| 500,000 |
|
Net cash provided by financing activities |
|
| 1,546,964 |
|
|
| 1,258,242 |
|
|
|
|
|
|
|
|
|
|
Net decrease in cash |
|
| (39,503 | ) |
|
| (313,846 | ) |
Cash at beginning of period |
|
| 162,795 |
|
|
| 416,187 |
|
Cash at end of period |
| $ | 123,292 |
|
| $ | 102,341 |
|
For the Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (3,304,375 | ) | $ | (6,198,586 | ) | ||
Adjustments to reconcile net loss to net cash used in operations: | ||||||||
Depreciation | 11,853 | 34,534 | ||||||
Amortization of debt discount | 613,155 | 145,444 | ||||||
Amortization | 786,006 | 792,533 | ||||||
Stock option compensation expense | 59,035 | 141,507 | ||||||
Stock compensation for Oceanside shares | 116,744 | 606,826 | ||||||
Gain on forgiveness of PPP loan | (1,137,140 | ) | (1,706,735 | ) | ||||
Write off doubtful accounts | - | (239,575 | ) | |||||
Warrant expense for services rendered | - | 10,000 | ||||||
Provision for (Recovery of) bad debt | 222,279 | (141,070 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (146,062 | ) | 4,395,054 | |||||
Prepaid expenses and other current assets | 318,595 | 352,384 | ||||||
Other assets | 5,505 | (7,069 | ) | |||||
Right of use asset and lease liability | 4,030 | (129 | ) | |||||
Accounts payable | 67,295 | (807,053 | ) | |||||
Accrued expenses | (765,736 | ) | 133,846 | |||||
Accrued interest – related party | 1,122,007 | 429,059 | ||||||
Deferred revenues | (538,796 | ) | - | |||||
Net cash used in operating activities | (2,565,605 | ) | (2,059,030 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (3,824 | ) | (5,337 | ) | ||||
Net cash used in investing activities | (3,824 | ) | (5,337 | ) | ||||
Cash flows from financing activities: | ||||||||
Payments of premium finance loan payable | (248,573 | ) | (222,745 | ) | ||||
Proceeds from stock option exercises | - | 13,900 | ||||||
Dividend payments | (2,069 | ) | 2,522 | |||||
Principal payments received (funded) for notes receivable | 5,939 | (6,977 | ) | |||||
Proceeds from related party debt financing | 2,700,000 | 1,500,000 | ||||||
Repayments of debt | (250,000 | ) | - | |||||
Proceeds from PPP loan | - | 1,137,140 | ||||||
Net cash provided by financing activities | 2,205,297 | 2,423,840 | ||||||
Net (decrease) increase in cash and cash equivalents | (364,132 | ) | 359,473 | |||||
Cash and cash equivalents at the beginning of period | 781,320 | 736,046 | ||||||
Cash and cash equivalents at end of period | $ | 417,188 | $ | 1,095,519 |
See accompanying notes to unaudited condensed consolidated financial statements
7 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)June 30, 2022
|
| For the Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
Interest |
| $ | 92,783 |
|
| $ | 25,367 |
|
Income taxes |
| $ | — |
|
| $ | — |
|
Non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Premium finance loan payable recorded as prepaid |
| $ | 18,885 |
|
| $ | 43,402 |
|
Payable for purchase of website |
| $ | — |
|
| $ | 150,000 |
|
Conversion of convertible notes payable and accrued interest into common stock |
| $ | — |
|
| $ | 603,600 |
|
Beneficial conversion of debt discount to additional paid-in capital |
| $ | 615,625 |
|
| $ | 289,000 |
|
Discount recognized relative to website acquisition payable |
| $ | — |
|
| $ | 32,732 |
|
Common stock issued for acquisition of Daily Engage Media |
| $ | 429,091 |
|
| $ | — |
|
Notes payable issued for acquisition of Daily Engage Media |
| $ | 380,000 |
|
| $ | — |
|
(unaudited)
During the nine months ended September 30, 2016 the Company issued 809,475 shares of its common stock as dividends to the holders of its Series A, Series B, Series C, and Series D Stock.
For the Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Supplemental disclosure of cash flow information | ||||||||
Cash paid for Interest | $ | - | $ | - | ||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||
Recognition of right-of-use asset and operating lease liability | $ | 691,340 | $ | - | ||||
Issuance of common shares to Oceanside to settle share liability | $ | 162,061 | $ | - | ||||
Issuance of common stock to Centre Lane for debt issuance | $ | - | $ | 2,497,056 |
During the nine months ended September 30, 2016 the Company issued 5,100,000 shares of its common stock to the holders of its Series A, Series B, Series C, and Series D convertible preferred stock for conversion of 5,100,000 shares of its convertible preferred stock Series A, Series B, Series C, and Series D.
During the nine months ended September 30,2017 the Company issued 10,000 shares of its common stock as a dividend to the holder of its Series A convertible preferred stock.
See accompanying notes to unaudited condensed consolidated financial statements
8 |
5
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.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 subsidiaries,subsidiary, Bright Mountain LLC, and The Bright Insurance Agency, LLC, were formed as Florida limited liability companies in May 2011. Its wholly owned subsidiary, Bright Watches, LLC, was formed as a Florida limited liability company in December 2015, andMay 2011. Its wholly owned subsidiary, Bright Mountain, LLC (“BMLLC”) F/K/A Daily Engage Media Group, LLC (“Daily Engage Media”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”). 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, "“BMTM, the "Company," "we," "us," "our"“Company,” “we,” “us,” “our” or "Bright Mountain"“Bright Mountain” refers to Bright Mountain Media, Inc. and its subsidiaries.
The Company is engaged in operating a proprietary, end-to-end digital media holding companyand 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 assets targetingnews market websites to distribute video and servicingbanner advertisements throughout the military and public safety markets. The CompanyUnited States of America (“U.S.”).
Wild Sky owns and manages 24operates a collection of websites which are customized to provide ourthat offer significant global reach through its content and niche users, including active, reserveaudiences and retired military, law enforcement, first responders and other public safety employees with information and news that we believe may be of interest to them. Coupled with its recently acquired wholly ownedhas become a wholly-owned subsidiary Daily Engage Media, the Company has evolved to place its emphasis on providing quality content on its websites to drive traffic increases so that it can monetize these visits through advertising revenue. We generate revenues from two segments, product sales and advertising. The advertising segment consists primarily of advertising revenue and a small amount of subscription and service revenue.
On December 16, 2016, with an effective date of December 15, 2016, under the terms of an Asset Purchase Agreement, the Company acquired the assets, constituting the Black Helmet Apparel business (“Black Helmet Apparel”), from Sostre Enterprises, Inc. Assets acquired included various website properties and content, social media content, inventory and other intellectual property rights. The Black Helmet Apparel line of apparel features clothing and accessories focused on first responders.
On September 19, 2017, under the terms of an Amended and Restated Membership Interest Purchase Agreement with Daily Engage Media, and its members, the Company acquired 100% of the membership interests of Daily Engage Media. Launched in 2015, Daily Engage MediaCompany. Wild Sky is an ad network that connects advertisers with approximately 200 digital publications worldwide.the home to parenting and lifestyle brands.
Basis of PresentationNOTE 2 - GOING CONCERN.
The interim unauditedThese condensed consolidated financial statements included herein have been prepared byon a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company’s management has evaluated whether there is substantial doubt about the Company’s ability to continue as a going concern and has determined that substantial doubt existed as of the date of the end of the period. This determination was based on the following factors: (i) The Company has sustained a net loss of $3,304,375 for the six months ended June 30, 2022; (ii) used cash from operating activities of $2,565,605 for the six months ended June 30, 2022; (iii) has an accumulated deficit of $109,448,440 at June 30, 2022; (iv) the Company’s available cash as of the date of this filing will not be sufficient to fund its anticipated level of operations for the next 12 months; (v) the Company pursuantwill require additional financing for the fiscal year ending December 31, 2022 to continue at its expected level of operations; and (vi) if the rules and regulationsCompany fails to obtain the needed capital, it will be forced to delay, scale back, or eliminate some or all of the Securities and Exchange Commission (the “SEC”).its development activities or perhaps cease operations. In the opinion of management, these factors, among others, raise substantial doubt about the Company’s management, all adjustments necessaryability of the Company to present fairlycontinue as a going concern as of the consolidated resultsdate of operationsthe end of the period and cash flows for one year from the nine months ended September 30, 2017 and theissuance of these condensed consolidated financial positionstatements.
9 |
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 September 30, 2017 have been made.operations. Management continues raising capital through private placements and is exploring additional avenues for future fund-raising through both public and private sources. The resultsCompany is not currently involved in any binding agreements to raise private equity capital. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of operations for such interim period are not necessarily indicativerecorded asset amounts or the amounts and classification of liabilities that might be necessary should the operating results expected for the full year.Company be unable to continue as a going concern.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Principles of Consolidation and Basis of Presentation
The interim unaudited condensed consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant intercompany transactionsaccounts and balancestransactions have been eliminated in consolidation.
Use of Estimates
Our consolidatedeliminated. The accompanying unaudited financial statements arefor the three and six months ended June 30, 2022 and 2021 have been prepared in accordance with Accounting Principles Generally AcceptedU.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 Securities Act of 1933. 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 unaudited 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, 2021 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, 2021, as filed with the SEC on June 13, 2022. The interim condensed consolidated financial statements should be read in conjunction with that report.
Prior Period Reclassification
During the June 30, 2022 quarterly financial reporting close process, the Company identified an immaterial reclassification impacting the three months ended March 31, 2022. Specifically, the Company identified a reclassification of commissions from selling, general and administrative expenses to cost of revenue on the condensed consolidated statements of operations. This reclassification had no impact on the previously reported net loss for the three months ended March 31, 2022.
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board (“GAAP”FASB”) ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). These accounting principles requireThe 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 ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that 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 ASC 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.
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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 website visitors view or click the published website advertisements. Specific revenue recognition criteria for the advertising revenue stream is as follows:
● | Advertising revenues are generated by website visitors viewing or “clicking” on website advertisements utilizing direct-sold campaigns or 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 recorded in our condensed consolidated financial statements.
Leases
The Company records leases in accordance with FASB ASC Topic 842, Leases (“ASC 842”).
The Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease terms. Since the Company’s lease agreements does not provide an implicit rate, the Company estimated an incremental borrowing rate based on the information available 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 condensed consolidated financial statements as well as reported amounts of revenue and expenses during the periods presented. Our condensed 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'smanagement’s judgment in its application. There are also areas in which management'smanagement’s judgment in selecting any available alternative would not produce a materially different result.
Significant estimates included in the accompanying condensed consolidated financial statements include revenue recognition, the fair value of acquired assets for purchase price allocation in business combinations, valuation of inventory, valuation ofgoodwill 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 of equity based transactions.allowance on deferred tax assets.
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BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
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. At June 30 2022 and December 31, 2021, the Company had $417,188 and $781,320, respectively, in cash and cash equivalents.
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 three and six months ended June 30, 2022 and 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 Topic 820, Fair Value Measurement and Disclosures (“ASC 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.
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 financialfair values measurements and non-financial assets and liabilities in accordance with Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures.” This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost)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 | |
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 condensed consolidated balance sheets consist of cash, accounts receivable, 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 carrying value for similar debt instruments.
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Financial Disclosures about Fair Value of Financial Instruments
The tables below set forth information related to the Company’s financial instruments (in thousands):
SCHEDULE OF FINANCIAL INSTRUMENTS
Level in Fair | June 30, 2022 | December 31, 2021 | ||||||||||||||||
Value Hierarchy | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||
PPP Loan | 2 | $ | - | $ | - | $ | 1,137,140 | $ | 1,137,140 | |||||||||
Long-term debt to related parties, gross | 3 | $ | 29,616,564 | $ | 29,616,564 | $ | 26,414,064 | $ | 26,414,064 | |||||||||
Non-interest bearing BMLLC acquisition debt | 2 | $ | - | $ | - | $ | 250,000 | $ | 250,000 |
The following are the major categories of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of June 30, 2022 and 2021:
Fair Value measurement using Level 3
SCHEDULE OF FAIR VALUE OF LIABILITIES ON RECURRING BASIS
Balance at December 31, 2020 | $ | 16,916,705 | ||
Reclassification (1) | (464,800 | ) | ||
Balance at March 31, 2021 | $ | 16,451,905 | ||
Extinguishment (2) | (16,451,905 | ) | ||
Acquisition debt, Wild Sky, related party | 17,376,834 | |||
Addition: Related party debt (3) | 2,285,000 | |||
Addition: Related part debt (4) | 80,000 | |||
Decrease: Related party debt amortization | 328,922 | |||
Total Debt | 19,741,834 | |||
Less: debt discount, related party(5) | (3,163,451 | ) | ||
Less: current portion of long-term debt, related party | (2,729,200 | ) | ||
Balance at June 30, 2021 | $ | 13,849,183 |
Total long term debt to related parties at December 31, 2021 | $ | 22,533,971 | ||
Addition: Related party debt (6) | 1,400,000 | |||
Decrease: Related party debt amortization (7) | 256,083 | |||
Total long term debt to related parties at March 31, 2022 | $ | 24,190,054 | ||
Addition: Related party debt (6) | 1,300,000 | |||
Decrease: Related party debt amortization (7) | 328,922 | |||
Less: current portion of long-term debt, related party | (3,632,192 | ) | ||
Total long term debt to related parties at June 30, 2022 | $ | 22,186,784 |
(1) | Related to reclassification of Bright Mountain PPP loan | |
(2) | Centre Lane determined to be related party (See note 14) and applying FASB ASC Topic 470, Debt guidance | |
(3) | Centre Lane debt financing on May 26, 2021 | |
(4) | Note payable to the Company’s Chairman of the Board | |
(5) | Debt discount for Centre Lane debt and Note payable to the Company’s Chairman of the Board | |
(6) | Centre Lane debt financing from January 1, 2022 through June 30, 2022 | |
(7) | Debt discount additions and debt discount amortization on related party financings for the three and six months ended June 30, 2022 |
Off-balance sheet arrangements
There are no off-balance sheet arrangements as of June 30, 2022 and December 31, 2021.
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Accounts Receivable
Accounts receivable represent receivables from customers in the ordinary course of business. These are recorded at fair valueinvoice amount on the date revenue is recognized. Receivables are recorded net of the allowance for doubtful accounts in the accompanying condensed 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'sCompany’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 6030 or net 9060 days. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible receivables is made.
Inventories
Inventories consist As of finished goodsJune 30, 2022 and are stated atDecember 31, 2021, the lower of cost or market using the first in, first out (FIFO) method. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.
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BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
Revenue Recognition
The Company recognizes revenue on our products in accordance with ASC 605, “Revenue Recognition.” Under these guidelines, revenue is recognized on sales transactions when all of the following exist: persuasive evidence of an arrangement did exist; delivery of the product or advertising has occurred; the sales price to the buyer is fixed or determinable; and collectability is reasonably assured. The Company has several revenue streams generated directly from its websiterecorded an allowance for doubtful accounts of $718,318 and specific revenue recognition criteria for each revenue stream is as follows:$495,396, respectively.
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The Company follows the guidance of ASC 605-50-25, “Revenue Recognition, Customer Payments.” Accordingly, any incentives received from vendors are recognized as a reduction of the cost of products included in inventories. Promotional products or samples given to customers or potential customers are recognized as a cost of goods sold.
Our Daily Engage Media subsidiary is an Advertising Exchange Company that matches advertisers with publishers. Revenue is generated and recognized when ads appear and are viewed on websites in the Company’s portfolio.
Cost of Sales and Cost of Revenues
Components of costs of sales for the products segment include product costs, shipping costs to customers and any inventory adjustments for product sales. Cost of revenue for the advertising segment consists of revenue share payments to media providers and website publishers that are directly related to a revenue-generating event. The Company becomes obligated to make the revenue share payments in the period the advertising impressions, click-throughs, actions or lead-based information are delivered or occur.
Shipping and Handling Costs
The Company includes shipping and handling fees billed to customers as revenues and shipping and handling costs for shipments to customers as cost of revenues.
Sales Return Reserve Policy
Our return policy generally allows our end users to return purchased products for refund or in exchange for new products. We estimate a reserve for sales returns, if any, and record that reserve amount as a reduction of sales and as a sales return reserve liability. Sales to consumers on our web site generally may be returned within a reasonable period of time.
Product Warranty Reserve Policy
The Company is a retail distributor of products and warranties are the responsibility of the manufacturer. Therefore, the Company does not record a reserve for product warranty
Property and Equipment
Property and equipment isare recorded at cost.cost, less accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets of five to seven years for office furniture and equipment, and five years for computer equipment.assets. Leasehold improvements are amortized over the lesser of the lease term or the useful life of the improvements. Expenditures for maintenance and repairs along with fixed assets with a purchase price below our capitalization threshold of $500 are expensed as incurred.
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BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
Website Development Costs
The Company accounts for its website development costs in accordance with FASB ASC Topic 350-50, “Website Development Costs” (“ASC 350-50”). These costs, if any, are included in intangible assets in the accompanying condensed consolidated financial statements or expensed immediately if the Company cannot support recovery of these costs from positive future cash flows.
ASC 350-50 requires the expensing of all costs of the preliminary project stage and the training and application maintenance stage and the capitalization of all internal or external direct costs incurred during the application and infrastructure development stage.balance sheets. Upgrades or enhancements that add functionality are capitalized while other costs during the operating stage are expensed as incurred. The Company amortizes the capitalized website development costs over an estimated life of five years.
As of SeptemberJune 30, 20172022 and 2016,December 31, 2021, all website development costs have been expensed.
Amortization and Impairment of Long-Lived Assets
Amortization and impairment of long-lived assets are non-cash expenses relating primarily to intangible assets. The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10 “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Website acquisition costs, including related customer relationships and non-compete agreements, are amortized over three to five years. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. While it is likely that we will have significant amortization expense as we continue to acquire websites, we believe that intangible assets represent costs incurred by the acquired website to build value prior to acquisition and the related amortization and impairment charges of assets, if applicable, are not ongoing costs of doing business. Non-cash amortization loss
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 included in selling, general and administrative expensesmeasured 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 accompanying statementnature of operations. For the three months ended September 30, 2017 and 2016, non-cash amortization expense was $75,876 and $61,582, respectively. For the nine months ended September 30, 2017 and 2016, non-cash amortization expense was $227,418 and $186,007, respectively.assets.
The Company accounts for stock-basedshare-based compensation related to instruments issued to employees and non-employees under GAAP, which requires the measurement and recognition compensation costs for services in accordance with ASC 718 “Compensation – Stock Compensation.” ASC 718 requires companies to recognize in the statement of operations the grant-dateall equity-based payment awards based on estimated fair value of stock options and other equity based compensation issued to employees.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 accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 505-50, “Equity-Based Payments to Non-Employees.” The Company estimates the fair value of stock options by using the Black-Scholes option-pricing model. Non- cash stock-based stock optionShare-based compensation expense is expensed over the requisite service period and are included in selling, general and administrative expenses on the accompanying condensed consolidated statementstatements of operations. For the three months ended September 30, 2017operations and 2016, non-cash stock-based stock option compensation expense was $21,983 and $30,069, respectively. For the nine months ended September 30, 2017 and 2016, non-cash stock-based stock option compensation expense was $95,821 and $107,193, respectively.comprehensive loss. We have elected to account for forfeitures as they occur.
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BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
Advertising, Marketing and Promotion Costs
Advertising marketing and promotionmarketing expenses are expensed as incurred and are included in selling, general and administrative expenses on the accompanying statementconsolidated statements of operations.operations and comprehensive loss. For the three months ended SeptemberJune 30, 20172022 and 2016,2021, advertising, marketing and promotion expense was $66,436$12,400 and $3,050,$16,087, respectively. For the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, advertising, marketing and promotion expense was $231,669$18,109 and $15,156,$28,702, respectively.
Foreign currency translation
Assets and liabilities of the Company’s Israeli subsidiary are translated from Israeli shekels to United States dollars at exchange rates in effect at the balance sheet date. Income Taxes
We useand expenses are translated at the asset and liability method to accountexchange rates for income taxes. Under this method, deferred income taxes are determined basedthe 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 differences betweenforeign subsidiaries’ activities the tax basisimpact of assetsthe currency exchange is immaterial for the three and liabilitiessix months ended June 30, 2022 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. 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.2021.
Income Taxes
The Company follows the provisions of FASB ASC 740-10“Topic 740-10, Accounting for Uncertain Income Tax Positions.Taxes – Overall ”(“ASC 740-10”). 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 statementsin the period during which, based on all available evidence, management believes it is more likely than not that the position will besustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset oraggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largestamount of tax benefit that is more than 50%50 percent likely of being realized upon settlement with the applicable taxing authority. Theportion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected asa liability for unrecognized tax benefits in the accompanying condensed consolidated balance sheets along with any associated interest and penalties that wouldbe 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 and comprehensive loss.
As of SeptemberJune 30, 2017,2022, tax years 2016, 2015, and 20142018 through 2021 remain open for IRSInternal Revenue Service (“IRS”) audit. The Company has not received noany 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 one customer who accounted for approximately 41.7% of the revenues for the three months ended June 30, 2022. There was one customer who accounted for approximately 34.9% of the revenues for the six months ended June 30, 2022. There was one customer who accounted for approximately 12% of the revenues for the three months ended June 30, 2021. There was one customer who accounted for approximately 12% of revenues for the six months ended June 30, 2021. No other customer was over 10% of revenues for the three and six months ended June 30, 2022 and 2021.
As of June 30, 2022, one customer accounted for more than 10% of the accounts receivable balance, at 30.9%. As of December 31, 2021, two customers accounted for more than 10% of the accounts receivable balance, at 13.1% and 12.0%. As of June 30, 2022, one vendor accounted for more than 10% of the accounts payable, at 10.9%. As of December 31, 2021, one vendor accounted for more than 10% of the accounts payable balance, at 11.2%.
In accordance with ASC 260-10 “Earnings Per Share,”(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.
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When applicable, basic net earnings (loss) per common share is computedcalculated by dividing the net income, after deducting dividends on convertible preferred stock and participating securities as well as undistributed earnings (loss) for the periodallocated to participating securities, by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed usingis calculated in a similar manner after consideration of the weightedpotential dilutive effect of common stock equivalents on the average number of common and dilutive common stock equivalent shares outstanding during the period. As of September 30, 2017 and 2016, there were approximately 2,187,000 and 2,267,000 common stock equivalent shares outstanding as stock options, respectively, 600,000 and 100,000 commonCommon stock equivalents from the conversion of preferredinclude warrants and stock respectively, and 4,300,000 and 200,000 commonoptions. Common stock equivalents fromare calculated based upon the conversiontreasury stock method using an average market price of notes payable, respectively. Equivalentcommon shares were not utilized, asduring the effect is anti-dilutive.
Segment Information
In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, the Company is required to report financial and descriptive information about its reportable operating segments. The Company has two identifiable operating segments based on the activities of the company in accordance with the ASC 280-10 The Company's two segments are product sales and advertising as of September 30, 2017. The product sales segment sells merchandise directly to customers thorough e-commerce distributor portals such as Amazon and eBay and through our proprietary websites and retail location. The advertising segment is focused on producing advertising revenue generated by users viewing website advertisements utilizing several ad network partners and direct advertisers and subscription revenue generated by the sale of access to premium versions of our websites and to career postings on one of our websites.
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BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
Recent Accounting Pronouncements
In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers.”The update gives entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide goods or services to customers. The proposed ASU, which would apply to any entity that enters into contracts to provide goods or services, would supersede the revenue recognition requirements in ASC 605 "Revenue Recognition," and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the update would supersede some cost guidance included in Subtopic 605-35 "Revenue Recognition – Construction-Type and Production-Type Contracts." The update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The update is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in Update 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern,” which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early application was permitted. The adoption of ASU 2014-15 did not have a material effect on our condensed consolidated financial statements.
In July 2015, FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method.For public business entities, this ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this ASU should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period.The adoption of ASU No. 2015-11 did not have a material effect on our condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02 “Leases,” which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
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BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
In March 2016, the FASB issued ASU 2016-09,Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which relates to the accounting for employee share-based payments. This standard addresses several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. This standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of ASU No. 2016-9 did not have a material effect on our condensed consolidated financial statements.
In April 2016, the FASB issued ASU 2016–10“Revenue from Contract with Customers(ASC 606):Identifying Performance Obligations and Licensing.”The amendments in this Update do not change the core principle of the guidance in ASC 606. Rather, the amendments in this Update clarify the following two aspects of ASC 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. ASC 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended render more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with ASC 606. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In April 2016, the FASB issued ASU No. 2016-15,“Classification of Certain Cash Receipts and Cash Payments”ASU 2016- provides guidance regarding the classification of certain items within the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017 with early adoption permitted. We do not believe this ASU will have an impact on our results of operation, cash flows, other than presentation, or financial condition.
In January 2017, the FASB issued 2017-04,Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this ASU simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and eliminating the requirement for a reporting unit with a zero or negative carrying amount to perform a qualitative assessment. Instead, under this pronouncement, an entity would perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and would recognize an impairment change for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognizedDilution is not to exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects will be considered if applicable. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.
NOTE 2 - GOING CONCERN.
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 sustainedwhen a net loss is reported. Common stock equivalents that have an antidilutive effect are excluded from the computation of $2,103,981 and used cash in operating activities of $1,372,589 for the nine months ended September 30, 2017. diluted earnings per share.
Segment Information
The Company had an accumulated deficit of $10,928,787 at September 30, 2017. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.currently operates in one reporting segment. The Company's continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from related parties to sustain its current level of operations.
Management plans to continue to raise additional capital through private placements and is exploring additional avenues for future fund-raising through both public and private sources.
The condensed 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.
12
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 3 – ACQUISITIONS.
On January 2, 2016, the Company closed the acquisition of warisboring.com pursuant to the terms and conditions of the Website Asset Purchase Agreement dated December 4, 2015 for an aggregate purchase price of $250,000. The purchase price consisted of a cash payment of $100,000 at the January 4, 2016 closing and the balance of $150,000, payable monthly in an amount equal to 30% of the net revenues from the website, when collected, with the total amount of the earn out to be paid by January 4, 2019. The Company recorded the future monthly payments totaling $150,000 at a present value of $117,268, net of discount of $32,732. The present value was calculated at a discount rate of 12% (which is the Company’s then most recent borrowing rate) using the estimated future revenues from the website to estimate the payment dates. The estimated future revenues from the website were based on the average historical monthly revenues from the website prior to the Company’s acquisition. During the nine months ended September 30, 2017 and 2016, the Company amortized $8,183 and $8,184, respectively, of this discount. The acquisition was accounted following ASC 805 “Business Combinations.” Under the purchase method of accounting, the transaction was valued for accounting purposes at $217,268, which was the fair value of warisboring.com. The Company has initially determined there was only two amortizable intangible assets. The acquisition date estimated fair value of the consideration transferred consisted of the following:
Customer and related relationships |
| $ | 39,578 |
|
Website |
|
| 177,690 |
|
Total |
| $ | 217,268 |
|
The above estimated fair value of the intangible assets is based on a preliminary purchase price allocation prepared by management. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we may record adjustments to the asset acquired, with the corresponding offset to website. After the preliminary purchase price allocation period, we record adjustments to assets acquired subsequent to the purchase price allocation period in our operating results in the period in which the adjustments were determined. In the year following this transaction, we did not record any adjustments to our initial allocations.
On February 2, 2016, the Company entered into a Website Asset Purchase Agreement with unrelated third parties for a purchase price of $15,000 in cash. The acquisition was accounted for following ASC805 "Business Combinations." The operations of the website prior to the Company's acquisition were immaterial; therefore, pro forma information was not presented. There were no costs of acquisition incurred as a result of this purchase.
On December 16, 2016, with an effective date of December 15, 2016 under the terms of the Asset Purchase Agreement, we acquired the assets constituting the Black Helmet Apparel business from Sostre Enterprises, Inc., including various website properties and content, social media content, inventory and other intellectual property rights. The consideration for the acquisition consisted of $250,000 in cash, 200,000 shares of our common stock valued at $170,000, the assumption of $40,000 in liabilities and the forgiveness of working capital advances we had previously made to the seller totaling $200,000.
A summary of assets acquired is as follows:
Inventory |
| $ | 58,000 |
|
Intangibles – website |
|
| 80,000 |
|
Intangibles – trade name |
|
| 150,000 |
|
Intangibles – customer relationships |
|
| 252,000 |
|
Intangibles – non-compete agreements |
|
| 120,000 |
|
Total assets acquired |
| $ | 660,000 |
|
13
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 3 – ACQUISITIONS (continued).
Pro forma results
The following table sets forth a summary of the unaudited pro forma results of the Company as if the acquisition of the assets constituting the Black Helmet Apparel business which was closed in December 2016 and the acquisition of Daily Engage Media which closed in September 2017, had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the assets been acquired as of the first day of the periods presented.
|
| Three Months |
|
| Nine Months |
| ||
|
| September 30, |
|
| September 30, |
| ||
|
| 2016 |
|
| 2016 |
| ||
Total revenue |
| $ | 925,691 |
|
| $ | 2,416,562 |
|
Total expenses |
|
| 1,989,494 |
|
|
| 5,064,116 |
|
Preferred stock dividend |
|
| 60,339 |
|
|
| 278,525 |
|
Net loss attributable to common shareholders |
| $ | (1,124,142 | ) |
| $ | (2,926,079 | ) |
Basic and diluted net loss per share |
| $ | (0.03 | ) |
| $ | (0.07 | ) |
At September 30, 2017 and December 31, 2016, respectively, intangible assets consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Intangible Assets |
| $ | 2,040,239 |
|
| $ | 1,739,179 |
|
Less: Accumulated Amortization |
|
| (617,443 | ) |
|
| (581,045 | ) |
Less: Impairment Loss |
|
| (191,020 | ) |
|
| (191,020 | ) |
Intangible Assets, net |
| $ | 1,231,776 |
|
| $ | 967,114 |
|
Non-cash amortization expense for the three and nine month periods ending September 30, 2017 and 2016 was $75,876 and $61,582, respectively and $227,418 and $186,007, respectively.
In connection with the acquisition of the Black Helmet Apparel business, the Company recognized $150,000 attributable to tradenames acquired.
On March 3, 2017 the Company entered into a Membership Interest Purchase Agreement with Daily Engage Media, and its members Harry G. Pagoulatos, George G. Rezitis and Angelos Triantafillou (collectively, the "Members"). On September 19, 2017 the parties entered into an Amended and Restated Membership Interest Purchase Agreement which modified certain terms of the original agreement. The original agreement, as amended, is referred to as the "Daily Engage Purchase Agreement." Following the execution of the amendment, on September 19, 2017 the parties closed the transaction pursuant to which the Company acquired 100% of the membership interests of Daily Engage Media in exchange for the following consideration:
·
$380,000 paid through the delivery of unsecured, interest free, one year promissory notes (the "Closing Notes");
·
an aggregate of 1,100,223 shares of our common stock valued at $429,091 (the "Consideration Shares"); and
·
the forgiveness of $204,411 in working capital we had previously advanced Daily Engage Media.
14
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 3 – ACQUISITIONS (continued).
At the request of the Members and included as part of the Closing Notes and Consideration Shares, a portion of the closing consideration, including an $80,000 principal amount Closing Note together with 275,058 Consideration Shares, were issued to Mr. Vinay Belani, a third party with whom Daily Engage Media has a business relationship and are included in the above figures
Under the terms of the Daily Engage Purchase Agreement, upon Daily Engage Media achieving certain revenue and operating income tests, we agreed to issue additional consideration as follows:
·
if Daily Engage Media's revenues are at least $20,228,954, and it has operating income of at least $3,518,623 (the "Year-One Daily Engage Target") during the first 12 months following the closing date (the "Year-One Earn out Period") as determined by us in accordance with GAAP, we agreed to pay the Members and Mr. Belani collectively an additional $500,000 in cash and issue an additional 1,008,547 shares of our common stock (the "Year-One Earn out Shares");
·
if Daily Engage Media's revenues are at least $60,385,952, and operating income of at least $11,380,396 (the "Year-Two Daily Engage Target") during the first 12 months following the Year-One Earnout Period (the "Year-Two Earnout Period") as determined by us in accordance with GAAP, we agreed to pay the Members and Mr. Belani an additional $500,000 in cash and issue an additional 796,221 shares of our common stock (the "Year-Two Earnout Shares"). In addition, if the Year-Two Daily Engage Target is met, at the time of payment of the Year-Two Earnout Shares and the year-two earnout cash, the Members and Mr. Belani collectively will also be entitled to receive the Year-One Earnout Shares and the year-one earnout cash to the extent not previously received; and
·
if Daily Engage Media's revenues are at least $96,512,204, and it has operating income of at least $18,524,967 (the "Year-Three Daily Engage Target") during the 12 months following the Year-Two Earnout Period (the "Year-Three Earnout Period") as determined by us in accordance with GAAP, we agreed to pay the Members and Mr. Belani an additional $550,000 in cash and issue an additional 723,523 shares of our common stock (the "Year-Three Earnout Shares"). In addition, if the Year-Three Daily Engage Target is met, at the time of payment of the Year-Three Earnout Shares and the year-three earnout cash, the Members and Mr. Belani collectively will also be entitled to receive the Year-One Earnout Shares, the year-one earnout cash, the Year-Two Earnout Shares and the year-two earnout cash, to the extent not previously received.
The final accounting for the acquisition of Daily Engage Media has not been completed and will be completed during the first quarter of 2018. The preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on the estimated fair values is as follows:
Tangible assets acquired |
| $ | 106,534 |
|
Liabilities assumed |
|
| (237,855 | ) |
Exchange platform |
|
| 50,000 |
|
Tradename |
|
| 150,000 |
|
Customer relationships |
|
| 250,000 |
|
Non-compete agreements |
|
| 192,000 |
|
Goodwill |
|
| 502,823 |
|
Total purchase price |
| $ | 1,013,502 |
|
At this time we do not expect that goodwill will be tax deductible.
15
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 4 – INVENTORIES.
At September 30, 2017 and December 31, 2016 inventories consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Product inventory: clocks and watches |
| $ | 788,851 |
|
| $ | 982,283 |
|
Product inventory: Black Helmet Apparel and GoPoliceBlotter.com |
|
| 195,671 |
|
|
| 144,789 |
|
Total inventory balance |
| $ | 984,522 |
|
| $ | 1,127,072 |
|
NOTE 5 – PREPAID COSTS AND EXPENSES.
At September 30, 2017 and December 31, 2016, prepaid expenses and other current assets consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Prepaid rent |
| $ | 27,199 |
|
| $ | 46,523 |
|
Prepaid insurance |
|
| 18,885 |
|
|
| 84,825 |
|
Prepaid expense |
|
| 15,529 |
|
|
| — |
|
Prepaid inventory |
|
| 10,114 |
|
|
| 1,602 |
|
Prepaid Expenses and Other Current Assets |
| $ | 71,727 |
|
| $ | 132,950 |
|
NOTE 6 – PROPERTY AND EQUIPMENT.
At September 30, 2017 and December 31, 2016, property and equipment consisted of the following:
|
| September 30, |
|
| December 31, |
|
| Depreciable Life |
| |||
|
| 2017 |
|
| 2016 |
|
| (Years) |
| |||
Furniture and Fixtures |
| $ | 76,671 |
|
| $ | 70,108 |
|
| 7 |
| |
Computer Equipment |
|
| 59,511 |
|
|
| 56,142 |
|
| 5 |
| |
Leasehold Improvements |
|
| 39,385 |
|
|
| 35,011 |
|
| 10 |
| |
Total Fixed Assets |
|
| 175,567 |
|
|
| 161,261 |
|
|
|
|
|
Less: Accumulated Depreciation |
|
| (81,185 | ) |
|
| (62,260 | ) |
|
|
|
|
Total Fixed Assets, net |
| $ | 94,382 |
|
| $ | 99,001 |
|
|
|
|
|
Non-cash depreciation expense for the three and nine months ending September 30, 2017, respectively, and was $6,777 and $18,925 and $3,346 and $10,025 for the three and nine months ended September 30, 2016, respectively.
NOTE 7 – SEGMENT INFORMATION.
The Company has two identifiable segments as of September 30, 2017; products and advertising. The products segment sells merchandise directly to customers thorough e-commerce distributor portals such as Amazon and eBay and through our proprietary websites and retail location. The advertisingservices segment is focused on producing advertising revenue generated by users “clicking” on website advertisements utilizing several ad network partners, and direct advertisers.advertisers and subscription revenue generated by the sale of access to career postings on one of our websites; however, the latter is insignificant.
Recent Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13 (amended by ASU 2019-10), “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, regarding the measurement of credit losses for certain financial instruments.” which replaces the incurred loss model with a current expected credit loss (“CECL”) model. The followingCECL 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 Company’s consolidated financial statements.
In January 2017, the FASB issued 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 represents segment activityprovided to users. The new standard is effective January 1, 2024 (early adoption is permitted, but not earlier than January 1, 2021). The Company is currently evaluating the impact 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 Company’s consolidated financial statements.
16 |
NOTE 4 – PREPAID COSTS AND EXPENSES.
At June 30, 2022 and December 31, 2021, respectively, prepaid expenses and other current assets consisted of the following:
SCHEDULE OF PREPAID COSTS AND EXPENSES
June 30, 2022 | December 31, 2021 | |||||||
Prepaid insurance | $ | 177,286 | $ | 427,461 | ||||
Prepaid consulting service agreements – Spartan (1) | 404,076 | 379,775 | ||||||
Prepaid software | 153,509 | - | ||||||
Prepaid expenses – other | 31,136 | 97,480 | ||||||
Prepaid expenses and other current assets | $ | 766,007 | $ | 904,716 |
(1) | Spartan Capital is a broker-dealer that has assisted the Company with a range of services including capital raising activities, M&A advisory, and consulting services. The Company has a five-year agreement with Spartan Capital for the provision of such services and any prepayments made under the terms of this agreement starting October 2018 were capitalized and amortized over the remaining life of the agreement. |
NOTE 5 – PROPERTY AND EQUIPMENT.
At June 30, 2022 and December 31, 2021, respectively, property and equipment consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
Estimated Useful Life (Years) | June 30, 2022 | December 31, 2021 | ||||||||
Furniture and fixtures | 3-5 | $ | 40,541 | $ | 38,728 | |||||
Computer equipment | 3 | 116,948 | 176,624 | |||||||
Total property and equipment | 157,489 | 215,352 | ||||||||
Less: accumulated depreciation | (103,546 | ) | (150,230 | ) | ||||||
Total property and equipment, net | $ | 53,943 | $ | 65,122 |
Depreciation expense for the three months ended June 30, 2022 and nine month periods2021, was $8,468 and $16,487, respectively.
Depreciation expense for the six months ended SeptemberJune 30, 20172022 and 2016.2021, was $11,853 and $34,534, respectively.
|
| For the three months ended September 30, 2017 |
|
| For the three months ended September 30, 2016 |
| ||||||||||||||||||
|
| Products |
|
| Advertising |
|
| Total |
|
| Products |
|
| Advertising |
|
| Total |
| ||||||
Revenues |
| $ | 589,402 |
|
| $ | 131,233 |
|
| $ | 720,625 |
|
| $ | 292,235 |
|
| $ | 113,502 |
|
| $ | 405,737 |
|
Intangible assets amortization |
| $ | — |
|
| $ | 75,876 |
|
| $ | 75,876 |
|
| $ | — |
|
| $ | 61,582 |
|
| $ | 61,582 |
|
Depreciation |
| $ | 6,440 |
|
| $ | 337 |
|
| $ | 6,777 |
|
| $ | 2,426 |
|
| $ | 920 |
|
| $ | 3,346 |
|
Income/(Loss) from operations |
| $ | (541,619 | ) |
| $ | 69,181 |
|
| $ | (472,438 | ) |
| $ | (300,803 | ) |
| $ | (210,479 | ) |
| $ | (511,282 | ) |
Segment assets |
| $ | 1,429,824 |
|
| $ | 2,151,591 |
|
| $ | 3,581,415 |
|
| $ | 1,352,158 |
|
| $ | 856,317 |
|
| $ | 2,208,475 |
|
Purchase of assets |
| $ | — |
|
| $ | 199,573 |
|
| $ | 199,573 |
|
| $ | 29,415 |
|
| $ | 11,688 |
|
| $ | 41,103 |
|
NOTE 6 – WEBSITE ACQUISITION AND INTANGIBLE ASSETS.
16
At June 30, 2022 and December 31, 2021, respectively, website acquisitions, net consisted of the following:
BRIGHT MOUNTAIN MEDIA, INC.SCHEDULE OF WEBSITE ACQUISITIONS, NET
June 30, 2022 | December 31, 2021 | |||||||
Website acquisition assets | $ | 1,124,846 | $ | 1,124,846 | ||||
Less: accumulated amortization | (921,250 | ) | (920,450 | ) | ||||
Less: cumulative impairment loss | (200,396 | ) | (200,396 | ) | ||||
Website Acquisition Assets, net | $ | 3,200 | $ | 4,000 |
17 |
At June 30, 2022 and December 31, 2021, respectively, intangible assets, net consisted of the following:
SCHEDULE OF INTANGIBLE ASSETS
Useful Lives | June 30, 2022 | December 31, 2021 | ||||||||
Trade name | 5 years | $ | 3,749,600 | $ | 3,749,600 | |||||
Customer relationships | 5 years | 16,184,000 | 16,184,000 | |||||||
IP/Technology | 5 years | 7,223,000 | 7,223,000 | |||||||
Non-compete agreements | 3-5 years | 1,154,500 | 1,154,500 | |||||||
Total Intangible Assets | $ | 28,311,100 | $ | 28,311,100 | ||||||
Less: accumulated amortization | (6,544,842 | ) | (5,759,636 | ) | ||||||
Less: accumulated impairment loss | (16,486,929 | ) | (16,486,929 | ) | ||||||
Intangible assets, net | $ | 5,279,329 | $ | 6,064,535 |
Amortization expense for the three months ended June 30, 2022 and 2021 was $389,739 and $395,868, AND SUBSIDIARIESrespectively, related to both the website acquisition costs and the intangible assets. Amortization expense for the six months ended June 30, 2022 and 2021 was $786,006 and $792,533, respectively, related to both the website acquisition costs and the intangible assets.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 7 – SEGMENT INFORMATION (continued).GOODWILL
|
| For the nine months ended September 30, 2017 |
|
| For the nine months ended September 30, 2016 |
| ||||||||||||||||||
|
| Products |
|
| Advertising |
|
| Total |
|
| Products |
|
| Advertising |
|
| Total |
| ||||||
Revenues |
| $ | 1,713,688 |
|
| $ | 334,856 |
|
| $ | 2,048,544 |
|
| $ | 976,056 |
|
| $ | 313,266 |
|
| $ | 1,289,322 |
|
Intangible assets amortization |
| $ | — |
|
| $ | 227,418 |
|
| $ | 227,418 |
|
| $ | — |
|
| $ | 186,007 |
|
| $ | 186,007 |
|
Depreciation |
| $ | 16,725 |
|
| $ | 2,200 |
|
| $ | 18,925 |
|
| $ | 8,299 |
|
| $ | 1,726 |
|
| $ | 10,025 |
|
Loss from operations |
| $ | (1,386,894 | ) |
| $ | (448,060 | ) |
| $ | (1,834,954 | ) |
| $ | (988,648 | ) |
| $ | (665,623 | ) |
| $ | (1,654,271 | ) |
Segment assets |
| $ | 1,429,824 |
|
| $ | 2,151,591 |
|
| $ | 3,581,415 |
|
| $ | 1,352,158 |
|
| $ | 856,317 |
|
| $ | 2,208,475 |
|
Purchase of assets |
| $ | 14,305 |
|
| $ | 199,573 |
|
| $ | 213,878 |
|
| $ | 35,036 |
|
| $ | 142,925 |
|
| $ | 177,961 |
|
The following table represents the allocation of Goodwill as of December 31, 2021 and June 30, 2022:
SCHEDULE OF CHANGES GOODWILL
Owned & Operated | Ad Network | Total | ||||||||
December 31, 2021 | $ | 9,725,559 | $ | 9,919,909 | $ | 19,645,468 | ||||
June 30, 2022 | $ | 9,725,559 | $ | 9,919,909 | $ | 19,645,468 |
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. No triggering events were identified in the current period.
NOTE 8 – ACCRUED EXPENSES.
At June 30, 2022 and December 31, 2021, respectively, accrued expenses consisted of the following:
SCHEDULE OF ACCRUED EXPENSES
June 30, 2022 | December 31, 2021 | |||||||
Accrued salaries and benefits | $ | 986,103 | $ | 1,459,299 | ||||
Accrued dividends | 691,861 | 691,861 | ||||||
Accrued traffic settlement(1) | 10,254 | 10,254 | ||||||
Accrued legal settlement(2) | 216,101 | 81,101 | ||||||
Accrued legal fees | 139,786 | 182,537 | ||||||
Accrued other professional fees | 219,136 | 592,421 | ||||||
Share issuance liability(4) | 27,012 | 189,067 | ||||||
Accrued warrant penalty(3) | 366,899 | 366,899 | ||||||
Accrued Value-Added Tax payable | 47,545 | - | ||||||
Other accrued expenses | 132,582 | 191,226 | ||||||
Total accrued expenses | $ | 2,837,279 | $ | 3,764,665 |
(1) | The Company negotiates with its publishing partners regarding questionable traffic to arrive at traffic settlements. |
(2) | Accrued legal settlement related to the Encoding legal matter. See Note 10. |
(3) | The Company has sold units of its securities to various investors in several private placements. As part of each private placement, the Company agreed to file a registration statement with the SEC to register the resale of the shares by the respective holder in order to permit the public resale; such filing deadlines ranged from 120 to 270 days following the closing date of the respective placement and the Company was liable to pay a penalty fee for failure to file the resale registration statement within the allotted timeframe. |
(4) | Share issuance liability related to issuance of the Company’s common stock in connection with the Oceanside, MediaHouse and Wild Sky acquisitions and Oceanside employee share issuances. |
18 |
NOTE 9 – NOTES PAYABLE.PAYABLE
Long Term DebtLong-term debt to Related Parties, netrelated parties
FollowingCentre Lane Partners Master Credit Fund II, L.P. (“Center Lane Partners”), who sold the conversionCompany the Wild Sky business in June 2020 has partnered and assisted the Company from a liquidity perspective starting in April 2021. This relationship has been determined to qualify as a related party. A related party is a party that can exercise significant influence over the Company in making financial and/or operating decisions.
Effective June 1, 2020, the Company entered into a membership interest purchase agreement to acquire 100% of Wild Sky (the “Purchase Agreement”). The seller issued a first lien senior secured credit facility totaling $16,451,905, which consisted of $15,000,000 of initial indebtedness, repayment of Wild Sky’s existing accounts receivable factoring facility of approximately $900,000 and approximately $500,000 of expenses. The note bears interest at a rate of 6.0% per annum. Per the credit facility with the seller, our loan payments begin December 1, 2021. There is no prepayment penalty associated with this credit facility. Certain future capital raises do require partial or full prepayments of the credit facility. The membership interest purchase included a requirement that the opinion of the financial statements as of and for the year ended December 31, 2021 not include a “going concern opinion.” The Company defaulted on this requirement and on April 26, 2021, the Company obtained a waiver of this requirement from the lender. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding notesprincipal beginning on June 30, 2023.
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”). 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 (the “Credit Agreement”). The Credit Agreement was amended to permit the Company to raise up to $6,000,000 of total cash proceeds from the sale of its preferred stock prior to December 31, 2021 without having to make a mandatory prepayment of the loans (the “Loans”) under the Credit Agreement. The interest rate on the Loans after April 26, 2021 was increased to 10.00% per annum from 6.00%, which can continue to be paid in-kind in lieu of cash payment. In addition, the Company may issue up to $800,000 in dividends from the previous limit of $ per annum. In addition, the Company has issued common shares to Centre Lane Partners as part of this transaction. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023.
On May 26, 2021, the Company and certain of its subsidiaries entered into a Second amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Second Amendment”). 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 $1.5 million, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee (“the Exit Fee”) totaling $0.750 million which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. In addition, the Company has issued million common shares to Centre Lane Partners as part of this transaction.
On August 2016,12, 2021, the Company and certain of its subsidiaries entered into a Third amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Third Amendment”). 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 $0.5 million, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $0.250 million which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. In addition, the Company has issued million common shares to Centre Lane Partners as part of this transaction.
19 |
On August 31, 2021, the Company and certain of its subsidiaries entered into a Fourth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Fourth Amendment”). 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 $1.1 million, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $0.550 million which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.
On October 8, 2021, the Company and certain of its subsidiaries entered into a Fifth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Fifth Amendment”). 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 $725,000, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $800,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.
On November 5, 2021, the Company and certain of its subsidiaries entered into a Sixth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Sixth Amendment”). 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 $800,000, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $800,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. This amendment required the Company to issue shares of the Company’s common stock to Centre Lane Partners prior to November 30, 2021.
On December 23, 2021, the Company and certain of its subsidiaries entered into a Seventh amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Seventh Amendment”). 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 $500,000, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $500,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.
On January 26, 2022, the Company and certain of its subsidiaries entered into a Eighth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Eighth Amendment”). 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 $350,000, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $350,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.
On February 11, 2022, the Company and certain of its subsidiaries entered into a Ninth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Ninth Amendment”). 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 $250,000, in the aggregate. This term loan shall be repaid by June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $12,500 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment. Per the tenth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners, the interest rate on this term loan was increased to 12% from 10%
20 |
On March 11, 2022, the Company and certain of its subsidiaries entered into a Tenth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Tenth Amendment”). 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 $300,000, in the aggregate. This term loan shall be repaid by June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $15,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment. Additionally, per the Tenth Amendment, original loan and amendments one through eight now have maturity dates of June 30, 2025, with quarterly payments of 2.5% of outstanding principal beginning on June 30, 2023. Amendments nine through fourteen have a maturity date of June 30, 2023.
On March 25, 2022, the Company and certain of its subsidiaries entered into an Eleventh amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Eleventh Amendment”). 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 $500,000, in the aggregate. This term loan shall be repaid by June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $25,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.
On April 15, 2022, the Company and certain of its subsidiaries entered into a Twelfth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Twelfth Amendment”). 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 $450,000, in the aggregate. This term loan shall be repaid by June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $22,500 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.
On May 10, 2022, the Company and certain of its subsidiaries entered into a Thirteenth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Thirteenth Amendment”). 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 $500,000, in the aggregate. This term loan shall be repaid by June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $25,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.
On June 10, 2022, the Company and certain of its subsidiaries entered into a Fourteenth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Fourteenth Amendment”). 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 $350,000, in the aggregate. This term loan shall be repaid by June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $17,500 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment. See Note 15 for amendments to the Amended and Restated Senior Secured Credit Agreement subsequent to June 30, 2022.
21 |
As part of these transactions and given that Centre Lane was determined to be a related party, an independent fair value analysis was performed by the Company and all related transactions were recorded accordingly. As of the First Amendment dated April 26, 2021, the Company evaluated the debt for extinguishment or debt modification under FASB ASC Topic 470-50, Debt – Modifications and Extinguishments, and determined extinguishment was applicable. Under the rules, the Company extinguished the debt, which included the capitalized interest through April 26, 2021, and recorded it net of the debt discount, including all applicable fees and stock issuances. The debt discount determined for the First Amendment totaled $2,363,986 and is amortized over the remaining life of the loan and is included in interest expense – related party on the accompanying consolidated statement of operations and comprehensive loss or until the next debt modification or extinguishment is determined. For the Second Amendment, which occurred on May 26, 2021, the Company determined it was a debt modification. The Second Amendment provided the Company with debt financing of $1,500,000, an Exit fee of $750,000, and issuance of shares of common stock issued to Centre Lane. The debt discount determined for the Second Amendment totaled $904,637. For the Third Amendment, which occurred on August 12, 2021, the Company determined it was a debt modification. The Third Amendment provided the Company with debt financing of $500,000, an Exit fee of $250,000, and issuance of shares of common stock issued to Centre Lane. The debt discount determined for the Third Amendment totaled $322,529. For the Fourth Amendment, which occurred on August 31, 2021, the Company determined it was a debt modification. The Fourth Amendment provided the Company with debt financing of $1,100,000, an Exit fee of $550,000, and no common share issuance. The debt discount determined for the Fourth Amendment totaled $560,783. For the Fifth Amendment, which occurred on October 8, 2021, the Company determined it was a debt extinguishment. The Fifth Amendment provided the Company with debt financing of $725,000, an Exit fee of $362,500, and no common share issuance. The debt discount determined for the Fifth Amendment totaled $2,635,013. For the Sixth Amendment, which occurred on November 5, 2021, the Company determined it was a debt modification. The Sixth Amendment provided the Company with debt financing of $800,000, an Exit fee of $800,000, and no common share issuance. The debt discount determined for the Sixth Amendment totaled $902,745. For the Seventh Amendment, which occurred on December 23, 2021, the Company determined it was a debt modification. The Seventh Amendment provided the Company with debt financing of $500,000, an Exit fee of $500,000, and no common share issuance. The debt discount determined for the Seventh Amendment totaled $510,783. For the Eight Amendment, which occurred on January 26, 2022, the Company determined it was a debt modification. The Eighth Amendment provided the Company with debt financing of $350,000, an Exit fee of $350,000, and no common share issuance. The debt discount determined for the Eighth Amendment totaled $352,520. For the Ninth Amendment, which occurred on February 11, 2022, the Company determined it was a debt modification. The Ninth Amendment provided the Company with debt financing of $250,000, an Exit fee of $12,500, and no common share issuance. The debt discount determined for the Ninth Amendment totaled $19,700. For the Tenth Amendment, which occurred on March 11, 2022, the Company determined it was a debt modification. The Tenth Amendment provided the Company with debt financing of $300,000, an Exit fee of $15,000, and no common share issuance. The debt discount determined for the Tenth Amendment totaled $25,125. For the Eleventh Amendment, which occurred on March 25, 2022, the Company determined it was a debt modification. The Eleventh Amendment provided the Company with debt financing of $500,000, an Exit fee of $25,000, and no common share issuance. The debt discount determined for the Eleventh Amendment totaled $29,050. For the Twelfth Amendment, which occurred on April 15, 2022, the Company determined it was a debt modification. The Twelfth Amendment provided the Company with debt financing of $450,000, an Exit fee of $22,500, and no common share issuance. The debt discount determined for the Twelfth Amendment totaled $36,002. For the Thirteenth Amendment, which occurred on May 10, 2022, the Company determined it was a debt modification. The Thirteenth Amendment provided the Company with debt financing of $500,000, an Exit fee of $25,000, and no common share issuance. The debt discount determined for the Thirteenth Amendment totaled $38,502. For the Fourteenth Amendment, which occurred on June 10, 2022, the Company determined it was a debt modification. The Fourteenth Amendment provided the Company with debt financing of $350,000, an Exit fee of $17,500, and no common share issuance. The debt discount determined for the Fourteenth Amendment totaled $31,002.
The accumulated gross debt discount as of June 30, 2022 and December 31, 2021 totaled $8,732,377 and $8,200,476, respectively and will be amortized into the condensed consolidated statement of operations and comprehensive loss and included in the interest expense – related party over the remaining life of the loan or until the next debt modification or extinguishment is determined. Interest expense for note payable to related party for the three months ended June 30, 2022 and 2021 was $856,574 and $360,903, respectively. Interest expense for note payable to related party for the six months ended June 30, 2022 and 2021 was $1,657,251 and $360,903, respectively.
22 |
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, the Company issued 20,021,163 to owners and employees of Oceanside and contingent consideration of $750,000 paid through the delivery of unsecured, interest free, one and two-year promissory notes (the “Closing Notes”). At the time of the acquisition and under FASB ASC Topic 805, Business Combinations (“ASC 805”), these Closing Notes were recorded ratably as compensation expense into the statement of operations and comprehensive loss over the 24-month term and an accrued payable is being recognized over the same period. As of August 15, 2020, the Company did not make payment on the one year closing note and thereby defaulted on its obligation and the two-year closing note accelerated to become payable as of August 15, 2020. Upon default, the closing notes accrue interest at a series1.5% per month rate, or 18% annual rate. As a result, there was a total charge of 12%$300,672 recorded during the third quarter of 2020 which was $250,000 of compensation expense and $50,672 of interest expense-related party. The total $750,000 liability is recorded in accrued expenses. Interest expense for note payable to related party for the three months ended June 30, 2022 and 2021 was $33,657 and $33,567, 10%,respectively. Interest expense for note payable to related party for the six months ended June 30, 2022 and 6%2021 was $66,945. shares valued at $
During November 2018, the Company issued 10% convertible promissory notes that have conversion prices that create a beneficial conversionin the amount of $80,000 to a related party, who is our Chief Executive Officer. Thesethe Chairman of the Board. The notes mature five years from issuance and areis convertible at the option of the holder into shares of common stock at any time prior to maturity at a conversion pricesprice of $0.40 or $0.50$0.40 per share. A beneficial conversion feature exists on the date athe convertible note isnotes were issued whenwhereby the fair value of the underlying common stock to which the note isnotes are convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic valuenote of $70,000.
The principal balance of these notes payable was $80,000 at June 30, 2022 and December 31, 2021, and discounts recognized upon respective origination dates as a result of the beneficial conversion features is recorded as a debt discount with a corresponding amountfeature total $19,328 and $26,271, respectively. At June 30, 2022 and December 31, 2021, the total convertible notes payable to additional paid in capital. The debt discount is amortized to interest over the five-year life of the note using the effective interest method.
A summary of these note issuances to a related party at December 31, 2016net of discounts was $60,672 and September$53,729, respectively. Interest expense for note payable to related party was $2,023 and discount amortization was $3,491 for the three months ended June 30, 2017 is as follows:2022 and 2021. Interest expense for note payable to related party for the six months ended June 30, 2022 and 2021 was $4,023 and discount amortization was $6,943.
Issuance Date |
|
| Maturity Date |
|
| Principal |
|
| Discount |
|
| Amortization |
|
| Carry |
|
| Amortization |
|
| Carry |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
09/26/16 |
|
| 09/26/21 |
|
| $ | 100,000 |
|
| $ | 70,000 |
|
| $ | 3,692 |
|
| $ | 33,692 |
|
| $ | 10,500 |
|
| $ | 44,192 |
|
10/14/16 |
|
| 10/14/21 |
|
|
| 100,000 |
|
|
| 70,000 |
|
|
| 3,024 |
|
|
| 33,024 |
|
|
| 10,500 |
|
|
| 43,524 |
|
10/31/16 |
|
| 10/31/21 |
|
|
| 100,000 |
|
|
| 70,000 |
|
|
| 2,372 |
|
|
| 32,372 |
|
|
| 10,500 |
|
|
| 42,872 |
|
11/03/16 |
|
| 11/03/21 |
|
|
| 50,000 |
|
|
| 35,000 |
|
|
| 1,120 |
|
|
| 16,120 |
|
|
| 5,250 |
|
|
| 21,370 |
|
11/11/16 |
|
| 11/11/21 |
|
|
| 100,000 |
|
|
| 70,000 |
|
|
| 1,934 |
|
|
| 31,934 |
|
|
| 10,500 |
|
|
| 42,434 |
|
11/21/16 |
|
| 11/21/21 |
|
|
| 50,000 |
|
|
| 35,000 |
|
|
| 775 |
|
|
| 15,775 |
|
|
| 5,250 |
|
|
| 21,025 |
|
12/15/16 |
|
| 12/15/21 |
|
|
| 75,000 |
|
|
| 52,500 |
|
|
| 488 |
|
|
| 22,988 |
|
|
| 7,874 |
|
|
| 30,864 |
|
01/19/17 |
|
| 01/19/22 |
|
|
| 100,000 |
|
|
| 70,000 |
|
|
| — |
|
|
| — |
|
|
| 9,823 |
|
|
| 39,823 |
|
02/06/17 |
|
| 02/06/22 |
|
|
| 100,000 |
|
|
| 70,000 |
|
|
| — |
|
|
| — |
|
|
| 9,061 |
|
|
| 39,061 |
|
02/24/17 |
|
| 02/24/22 |
|
|
| 50,000 |
|
|
| 35,000 |
|
|
| — |
|
|
| — |
|
|
| 3,708 |
|
|
| 18,708 |
|
03/07/17 |
|
| 03/07/22 |
|
|
| 100,000 |
|
|
| 70,000 |
|
|
| — |
|
|
| — |
|
|
| 7,941 |
|
|
| 37,941 |
|
04/03/17 |
|
| 04/03/22 |
|
|
| 75,000 |
|
|
| 45,000 |
|
|
| — |
|
|
| — |
|
|
| 4,500 |
|
|
| 34,500 |
|
04/10/17 |
|
| 04/10/22 |
|
|
| 75,000 |
|
|
| 45,000 |
|
|
| — |
|
|
| — |
|
|
| 4,250 |
|
|
| 34,250 |
|
04/19/17 |
|
| 04/19/22 |
|
|
| 50,000 |
|
|
| 30,000 |
|
|
| — |
|
|
| — |
|
|
| 2,683 |
|
|
| 22,683 |
|
05/01/17 |
|
| 05/01/22 |
|
|
| 50,000 |
|
|
| 30,000 |
|
|
| — |
|
|
| — |
|
|
| 2,500 |
|
|
| 22,500 |
|
05/11/17 |
|
| 05/11/22 |
|
|
| 75,000 |
|
|
| 22,500 |
|
|
| — |
|
|
| — |
|
|
| 1,742 |
|
|
| 54,242 |
|
05/24/17 |
|
| 05/24/22 |
|
|
| 75,000 |
|
|
| 45,000 |
|
|
| — |
|
|
| — |
|
|
| 3,484 |
|
|
| 33,484 |
|
06/08/17 |
|
| 06/08/22 |
|
|
| 100,000 |
|
|
| 30,000 |
|
|
| — |
|
|
| — |
|
|
| 1,883 |
|
|
| 71,883 |
|
06/27/17 |
|
| 06/27/22 |
|
|
| 100,000 |
|
|
| 30,000 |
|
|
| — |
|
|
| — |
|
|
| 1,567 |
|
|
| 71,567 |
|
07/12/17 |
|
| 07/12/22 |
|
|
| 50,000 |
|
|
| 5,000 |
|
|
| — |
|
|
| — |
|
|
| 220 |
|
|
| 45,220 |
|
Long-term debt
17
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 8 – NOTES PAYABLE (continued).
Issuance Date |
|
| Maturity Date |
|
| Principal |
|
| Discount |
|
| Amortization |
|
| Carry |
|
| Amortization |
|
| Carry |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
07/26/17 |
|
| 07/26/22 |
|
|
| 135,000 |
|
|
| 50,625 |
|
|
| — |
|
|
| — |
|
|
| 1,851 |
|
|
| 86,226 |
|
07/27/17 |
|
| 07/27/22 |
|
|
| 25,000 |
|
|
| 9,375 |
|
|
| — |
|
|
| — |
|
|
| 338 |
|
|
| 15,963 |
|
08/01/17 |
|
| 08/01/22 |
|
|
| 75,000 |
|
|
| 28,125 |
|
|
| — |
|
|
| — |
|
|
| 938 |
|
|
| 47,813 |
|
08/10/17 |
|
| 08/10/22 |
|
|
| 25,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25,000 |
|
08/23/17 |
|
| 08/23/22 |
|
|
| 50,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 50,000 |
|
08/28/17 |
|
| 08/28/22 |
|
|
| 75,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 75,000 |
|
08/30/17 |
|
| 08/30/22 |
|
|
| 75,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 75,000 |
|
|
|
|
|
|
| $ | 1,525,000 |
|
| $ | 925,000 |
|
| $ | 13,405 |
|
| $ | 185,905 |
|
| $ | 116,863 |
|
| $ | 1,147,145 |
|
Amortization of debt discount totaled $116,863On February 17, 2021, under the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and $305,115 at September 30, 2017 and 2016, respectively.
Notes Payable
On November 30, 2016,Economic Security (“CARES”) Act, administered by the Small Business Administration (“SBA”), the Company entered into a promissory note agreementof $295,600 with an unaffiliated party in the principal amount of $500,000. The note is unsecured, carries anRegions Bank (the “Second Bright Mountain PPP Loan”) and has a two-year term and bears interest at a rate of 25%1.0% per annum payable in arrears at maturity.annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The note matures November 30, 2017 andSecond Bright Mountain PPP Loan may be prepaid at any time without notice orprior to maturity with no prepayment penalty. In the eventpenalties. The Promissory Note contains customary events of default provisions. Under the terms of anythe CARES Act, PPP loan provision, the lenderrecipients can declareapply for and be granted forgiveness for all or anya portion of loans granted under the unpaidPPP. This was the second tranche available under the PPP program and was forgiven as of June 15, 2022 and the Company recorded a non-cash gain on the PPP forgiveness during the three months ended June 30, 2022.
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 $841,540 with Holcomb Bank (the “Second Wild Sky PPP Loan”) and has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest immediately duepayments are deferred for six months after the date of disbursement. The Second Wild Sky PPP Loan 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 payable.
On September 30,2017, the note was amended, extending the maturity to December 31,2017 and reducing the interest rate to 10%. In addition, the note holder reduced the accrued interest duebe granted forgiveness for all or a portion of loans granted under the PPP. This was the second tranche available under the PPP program and was forgiven as of March 23, 2022 and the Company recorded a non-cash gain on the PPP forgiveness during the three months ended March 31, 2022.
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 from approximately $106,000of $464,800 with Regions Bank (the “Bright Mountain PPP Loan”) 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 Loan may be prepaid at any time prior to $50,000 at September 20,2017. This reduction in accrued interestmaturity with no prepayment penalties. The Promissory Note contains customary events of approximately $56,000 was taken indefault provisions. Under the third quarter of 2017. Accrued interest on this note totaled $50,347 at September 30, 2017.
As a partterms of the acquisitionCARES Act, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of Daily Engage Medialoans granted under the PPP. On January 28, 2021, the Company applied for the promissory note 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 and recorded a non-cash gain on the PPP forgiveness during the year ended December 31, 2021.
23 |
Effective June 1, 2020, the Company acquired Wild Sky and assumed the $1,706,735 promissory note (the “Wild Sky PPP Loan”) with Holcomb Bank received under the PPP. The Wild Sky PPP Loan has a two Notes Payable-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 Wild Sky PPP Loan may be prepaid at any time prior to Gibraltar Capital Advances, LLCmaturity with no prepayment penalties. The Wild Sky PPP Loan contains customary events of default provisions. Under the terms of the CARES Act, PPP loan recipients can apply for and Complete Business Solutions Group, Inc.be granted forgiveness for all or a portion of loans granted under the PPP. On January 22, 2021, the Company applied for the promissory note to be forgiven by the SBA in whole or in part and on March 29, 2021, the amountsCompany obtained the forgiveness of $26,618the Wild Sky PPP Loan in whole and $20,148,recorded a non-cash gain on the PPP forgiveness during the three months ended March 31, 2021.
At June 30, 2022 and December 31, 2021, a summary of the Company’s debt is as follows:
SCHEDULE OF LONG-TERM DEBT
June 30, 2022 | December 31, 2021 | |||||||
Non-interest bearing BMLLC acquisition debt | $ | - | $ | 250,000 | ||||
PPP loans | - | 1,137,140 | ||||||
Wild Sky acquisition debt | 18,181,564 | 18,146,564 | ||||||
Centre Lane debt | 11,355,000 | 8,187,500 | ||||||
Note payable debt to the Company’s Chairman of the Board | 80,000 | 80,000 | ||||||
Total Debt | 29,616,564 | 27,801,204 | ||||||
Less: debt discount, related party | (3,797,588 | ) | (3,880,093 | ) | ||||
Less: current portion of long-term debt | - | (1,387,140 | ) | |||||
Less: current portion of long-term debt, related party | (3,632,192 | ) | (7,316,402 | ) | ||||
Long term debt to related parties, net and long term debt | $ | 22,186,784 | $ | 15,217,569 |
Interest expense was $895,745 and $539,216 for the three months ended June 30, 2022 and 2021, respectively. Interest expense was $1,735,162 and $574,504 for the six months ended June 30, 2022 and 2021, respectively.
The minimum annual principal payments of notes payable at June 30, 2022 were:
SCHEDULE OF MATURITIES OF LONG-TERM OBLIGATION
For the Twelve Months Ending: | ||||
2022 (remainder of the year) | $ | - | ||
2023 | 4,527,348 | |||
2024 | 2,416,395 | |||
2025 | 22,672,821 | |||
Total | $ | 29,616,564 |
Premium Finance Loan Payable
The Company also issued promissorygenerally 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 2021 and 2020 of $406,522 and $380,397, respectively.
Total Premium Finance Loan Payable balance for the amount of $380,000 payable to three Daily Engage Media membersCompany’s policies was $85,711 at June 30, 2022 and a third party, with whom they have a business relationship. The notes mature on September 19, 2018.$334,284 at December 31, 2021.
24 |
NOTE 910 – COMMITMENTS AND CONTINGENCIES.CONTINGENCIES.
Leases
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 which contains renewal options. Thethat expired on October 31, 2021. On June 14, 2022, the Company signed a second lease which was entered into on August 25, 2014 was amended on July 30, 2015addendum (“Second Addendum”) to increase the original approximate 2,014 square feet tolease for the Boca Raton headquarters office space with approximately 4,4504,500 square feet. The new lease term is for five years beginning upon completion of improvements to the office space by the Landlord. For the interim period from signing of the Second Addendum to the completion of the improvements (estimated at approximately 2 months), the monthly rent will be $7,719. Thereafter, for the 1st year, the cash rent will be $11,893 per month. Rent increases yearly at 3% from years two through five. The Company has the option to renew the lease for one additional five year term.
The right-of-use asset and lease liability is as follows as of June 30, 2022 and December 31, 2021:
SCHEDULE OF RIGHT OF USE ASSET AND LEASE LIABILITY
June 30, 2022 | December 31, 2021 | |||||||
Assets | ||||||||
Operating lease right of use asset | $ | 687,310 | $ | - | ||||
Liabilities | ||||||||
Operating lease liability | $ | 691,340 | $ | - |
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 was extended and will terminate on March 14, 2019 at a current base rent ofliability. The Company did not have any variable lease payments for a term of approximately $8,978 per monthits operating lease for the first twelvethree and six months with a 3% escalation each year. An additional security deposit of $2,500 was required. Rent is all-inclusiveended June 30, 2022 and includes electricity, heat, air-conditioning, and water. 2021.
The original rent commencement date was October 11, 2014 and will expire on March 14, 2019.
The Company leases retail space for its product sales division at 4900 Linton Boulevard, Bay 17A, Delray Beach, FL 33445 under a long-term, non-cancellable lease agreement, which contains renewal options. The lease, which was entered into on August 25, 2014, is for approximately 2,150 square feet for a term of 36 months in Delray Beach, Florida at a base rent of approximately $2,329 per month for the first twelve months with a 3% escalation each year. A security deposit of $3,865, first month's prepaid rent of $3,865, and last month's prepaid rent of $4,015 was paid upon lease execution. The lease is a triple net lease. Common area maintenance is approximately $1,317 per month for the first twelve months with annual escalations not to exceed 4%. The rent commencement date was October 1, 2014 and was initially set to expire on September 30, 2017. In January 2017, this lease was modified and extended concurrent with the expansion of our retail space in the same location.
18
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 9 – COMMITMENTS AND CONTINGENCIES (continued).
In January 2017, the Company entered into an additional lease and modified and extended our existing lease for our retail site. The new lease agreement provides for an additional 2,720 square feet adjacent to our existing Delray Beach FL location commencing February 1, 2017, and expiring January 31, 2022. This lease provides for one month’s free rent, an initial monthly base rental of $1,757, representing a one-half reduction in rental payments for the first year as an accommodation. Minimum base rental for year two is $3,513 per month, escalating 3% per year thereafter. The Company also provided a $10,000 security deposit and prepaid $96,940 in future rents on the facility through the funding of certain leasehold improvements. Prepaid rent totaled $56,199 at September 30, 2017. Simultaneously, the Company modified our existing lease on the initial space, extending this lease to coincide with the new space, expiring January 31, 2022, at an initial base rental of $2,471 per month, escalating 3% per year thereafter.
On December 16, 2016, with an effective date of December 15, 2016 under the termsmaturity of the Asset Purchase Agreement, we acquiredCompany’s operating lease liability at June 30, 2022:
SCHEDULE OF MATURITY OPERATING LEASE LIABILITY
2022 (remainder of year) | $ | 19,570 | ||
2023 | 108,060 | |||
2024 | 112,680 | |||
2025 | 117,038 | |||
2026 | 122,346 | |||
Thereafter | 758,010 | |||
Total undiscounted operating lease payments | 1,237,704 | |||
Less: Imputed interest | (546,364 | ) | ||
Present value of operating lease liability | $ | 691,340 |
The following summarizes additional information related to the assets constituting the Black Helmet Apparel business including various website properties and content, social media content, inventory and other intellectual property rights. (See Note 3) We also acquired the right to assume the lease of their warehouse facility consisting of approximately 2,667 square feet. The lease was renewed for a three-year term in April 2016 with an initial base rental rate of $1,641 per month, and escalating at approximately 3% per year thereafter.operating lease:
SCHEDULE OF ADDITIONAL INFORMATION RELATED TO OPERATING LEASE
June 30, 2022 | ||||
Weighted-average remaining lease term | 10.1 | |||
Weighted-average discount rate | 11.6 | % |
Rent expense forFor the three months ended SeptemberJune 30, 20172022 and 20162021, rent expense was $72,155$44,802 and $32,053, respectively and for$53,588, respectively. For the ninesix months ended SeptemberJune 30, 20172022 and 20162021, rent expense was $190,080$94,374 and $112,785,$102,020, respectively.
Legal
From time-to-time, wethe 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, wethe Company currently believebelieves that the final outcome of these ordinary course matters will not have a material adverse effect on our business.
25 |
In 2020, Synacor, Inc commenced an action against MediaHouse, LLC, Inform, Inc. and the Company, alleging approximately $230,000 was owed based on invoices provided in 2019 in respect to that certain Content Provider & Advertising Agreement with MediaHouse. The Company has filed an answer and defenses and intends to defend the alleged claims. This is recorded as an accrued liability as of December 31, 2021. During January 2022, the Company entered into a settlement agreement related to the legal proceeding with Synacor. The agreement obligates the Company to pay $12,000 per month beginning January 24, 2022 for 12 consecutive months and then a final one-time payment in the amount of $40,000 to be paid on or before January 24, 2023. Notwithstanding, the Company has an early settlement option to pay-off the obligation with a discount if it pays $160,000 to Synacor on or before September 1, 2022, which amount shall be inclusive of the monthly installments previously mentioned prior to the date when early settlement payment is transmitted to Synacor.
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.
Bright Mountain has been sued by plaintiffs Joey Winshman, Eli Desatnik and Nadav Slutzy (“Plaintiffs”) in a lawsuit filed in the United States District Court for the Southern District of Florida on December 17, 2021 (the “Lawsuit”). Plaintiffs allege that BMM defaulted on its obligations to Plaintiffs under three promissory notes that arose from the merger between Bright Mountain Israel Acquisition Ltd., a wholly owned subsidiary of Bright Mountain, and Slutzky & Winshman Ltd. Plaintiffs seek to recover from Bright Mountain the principal balance of the promissory notes, interest, attorney’s fees, and costs. Discovery in the Lawsuit is underway and the parties continue to intermittently explore the possibility of settlement.
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 175,000 warrants to purchase Company stock with a $1.00 exercise price. This was recorded as an accrued liability as of December 31, 2020 and the warrants were issued in 2021.
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.
Other CommitmentsNOTE 11 – PREFERRED STOCK.
On August 31, 2021, W. Kip Speyer, the Company’s CEO, at that time, gave notice that all of his held preferred stock was converted in accordance with the original terms. Accordingly, entered into various contracts or agreements innotified the normal course of business, which may contain commitments. During the nine months ended September 30, 2017 and 2016, the Company entered into agreements with third party vendors to supply website content and data, website software development, advertising, public relations, and legal services. All of these commitments contain provisions whereby either party may terminate the agreement with specified notice, normally 30 days, and with no further obligationtransfer agent on the part of either party. shares of the Company’s common stock is to be issued to Mr. Speyer. The Company
During the years ended December 31, 2016 and 2015, the Company entered into agreements with third parties related to websites acquired during the respective periods as further discussed in Note 3. In connection with the two acquisitions made in 2016, the Company entered into a management agreement associated with the WarIsBoring website at $5,000 per month through November 18, 2018, and two service agreements in connection the Black Helmet Apparel acquisition at $6,250 per month, each, through December 15, 2019, plus the ability to earn bonuses ranging from $50,000 for the year ending December 31, 2017 to $100,000 for the year ending December 31, 2019 each based upon the satisfaction of certain revenue and gross margin targets. These agreements may be terminated with six months written notice. Future contingent milestone payments under the acquisitions made in 2015 totaled approximately $210,000 and $210,000 for 2017 and 2016, respectively.
Total payments for the nine month periods ended September 30, 2017 and 2016 were $112,500 and $0, respectively.
Contractual commitments remaining under various acquisition related agreements total: $245,000 in 2017; $205,000 in 2018; $144,000 in 2019 and $0 for 2020 and 2021, respectively.
March 19,
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 9 – COMMITMENTS AND CONTINGENCIES (continued).
The Company entered into an Executive Employment Agreement with our Chief Executive Officer, with an effective date of June 1, 2014. Under the initial terms of this agreement, the Company would compensate the Chief Executive Officer with a base salary of $75,000 annually, and he is entitled to receive discretionary bonuses as may be awarded by the Company's board of directors from time to time. The initial term 2022 of the agreement is three years,share issuance, and the Company may extend it for an additional one-year period upon written notice at least 180 days prior to the expirationissuance of the term. The Chief Executive Officer's base annual salary was increased to $77,500 in January 2015, $96,000 in July 2015, and to $125,000 effective October 1, 2015 upon recommendationshares is a matter of administration. Management confirmed with SEC legal counsel that the Compensation Committee of the board of directors. In May 2016 the Chief Executive Officer suggested and orally agreed to a voluntary reduction in his base salary to $95,000 per annum.
The agreement will terminate upon the Chief Executive Officer's death or disability. In the event of a termination upon his death, the Company is obligated to pay his beneficiary or estate an amount equal to one year base salary plus any earned bonusshareholder rights have transferred at the time of his death. In the event the agreement is terminated as a result of his disability, as defined in the agreement, he is entitled to continue to receive his base salary for a period of one year.exercise notice. The Company is also entitled to terminateconsiders the agreement either with or without case,Common Shares issued and the Chief Executive Officer is entitled to voluntarily terminate the agreement upon one year's notice to the Company. In the event of a termination by the Company for cause, as defined in the agreement, or voluntarily by the Chief Executive Officer, the Company is obligated to pay him the base salary through the date of termination. In the event the Company terminates the agreement without cause, the Company is obligated to give him one years' notice of the Company's intent to terminate and, at the end of the one year period, pay an amount equal to two times his annual base salary together with any bonuses which may have been earnedoutstanding as of the date of termination. A constructive terminationthe conversion notice. The Company recognizes the conversion of the agreement will also occur ifpreferred stock on August 31, 2021 and provides all rights as a common shareholder with regard to said shares to Mr. Speyer, including all voting rights. The Company confirms that there was no inducement to convert the shares and that the correct shares were issued in accordance with the original conversion terms. As of said date, the Company materially breaches any term of the agreement or if a successor companyhas an accrued dividend liability due to the Company fails to assume the Company's obligations under the employment agreement. In that event, the Chief Executive Officer will be entitled to the same compensation as if the Company terminated the agreement without cause. The employment agreement contains customary non-compete and confidentiality provisions. The Company also agreed to indemnify the Chief Executive Officer pursuant to the provisions of the Company's Amended and Restated Articles of Incorporation and Amended and Restated By-laws.
On April 1, 2017 the Company entered into the First Amendment to the Executive Employment Agreement with our Chief Executive Officer. Under the terms of the amendment, the term of his employment was extended to April 1, 2020, which may be further extended for additional one year periods upon 180 day’s notice by us to him. Under the terms of the amendment, Mr. Speyer's base salary was increased to $165,000 annually and he is entitled to earn annual performance bonuses, beginning with the year ending December 31, 2017, ranging from 25% to 80% of his base salary upon our achievement of certain annual revenue and EBITDA targets. All other terms and conditions of his employment agreement remain in full force.
On September 19, 2017 in connection with the closing of the acquisition of Daily Engage Media, we entered into three-year employment agreements with Messrs. Harry G. Pagoulatos and George G. Rezitis, two of the members. Mr. Pagoulatos and Mr. Rezitis will serve as chief operating officer and chief technology officer, respectively, of our Daily Engage Media Group. The terms of the employment agreements are identical except for the amount of base salary each individual will receive. We agreed to pay Mr. Pagoulatos an annual base salary of $60,000 during the first year of the term of his employment agreement, which increases to $75,000 annually for the remainder of the term. We agreed to pay Mr. Rezitis an annual base salary of $70,000 during the first year of the term of his employment agreement, which increases to $75,000 annually for the remainder of the term. Both employees are entitled to receive a discretionary bonus as may be awarded by our board of directors in their sole discretion, as well as participation in executive benefit programs we may offer, paid vacation and reimbursement for business expenses. The employment agreements may be terminated upon the death or disability of the employee, by us with or without cause or by the employee. If the employment agreement is terminated upon the employee's death or disability, we are obligated to continuing paying the base salary for a period of 60 days following termination. If the employment agreement is terminated by us for cause (as defined in the agreement) or by the employee, the employee is not entitled to receive any severance or other compensation after the date of termination. If we terminate the employment agreement without cause, we are obligated to pay the base salary and executive benefits for one year following the date of termination. The employment agreements contain customary confidentiality, non-compete and indemnification provisions.
20
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 10 – RELATED PARTIES.
As discussed more fully in Note 8, section titled “Long Term Debt to Related Parties, net”, in 2017 and 2016, the Company issued a series of convertible promissory notes to our Chief Executive Officer totaling $1,460,000 and $575,000, respectively. These notes have a conversion price ranging from $0.50 per share to $0.40 per share and resulted in the recognition of a beneficial conversion feature recorded as a debt discount. These notes payable, net of debt discount, total $1,147,145 and $185,905 at September 30, 2017 and December 31, 2016, respectively and mature five years from issuance and are convertible at the option of the holder into shares of common stock at any time prior to maturity at a conversion price of $0.50 per share. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion features is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest over the five-year life of the note using the effective interest method. The notes are reported net of their unamortized debt discount of $887,855 and $389,095 as of September 30, 2017 and December 31, 2016, respectively.
In September 2017, Mr. W. Kip Speyer the Company’s Chairman and Chief Executive Officer, purchased an aggregate of 500,000 shares of the Company’s Series E Convertible Preferred Stock at a purchase price of $0.40 per share. The designations, rights and preferences of Series E Stock are described in Note 11. The Company used the proceeds from these sales for working capital.recorded totaling $691,450.
NOTE 11 – SHAREHOLDERS’ EQUITY.
Preferred Stock
The Company has authorized $0.01$ (the "Preferred Stock"“Preferred Stock”), issuable in such series and with such designations, rights and preferences as the board of directors may determine. The Company'sCompany’s board of directors has previously designated five series of preferred stock, consisting of 10% Series A Convertible Preferred Stock ("(“Series A Stock"Stock”), 10% Series B Convertible Preferred Stock ("(“Series B Stock"Stock”), 10% Series C Convertible Preferred Stock ("(“Series C Stock"Stock”), 10% Series D Convertible Preferred Stock ("(“Series D Stock"Stock”) and 10% Series E Convertible Preferred Stock ("(“Series E Stock"Stock”). At September 30, 2017, there were 100,000 shares of preferred stock with a par value of
26 |
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 A StockF-1 pays dividends at the rate of 12% per annum and 500,000automatically converts into shares of our common stock on April 10, 2022. The Series F-2 pays dividends at the rate of 6% per annum and automatically converts into shares of our common on July 27, 2022. The Series F-3 pays dividends at the rate of 10% per annum and automatically converts into shares of our common stock on August 30, 2022. Additional terms of the designations, rights and preferences of the Series F-1, Series F-2 and Series F-3 include:
● | the shares have no voting rights, except as may be provided under Florida law; | |
● | the shares pay cash dividends subject to the provisions of Florida law at the dividend rates set forth above, payable monthly in arrears; | |
● | the shares are convertible at any time at the option of the holder into shares of our common stock on a 1:1 basis. The conversion ratio is proportionally adjusted in the event of stock splits, recapitalization or similar corporate events. Any shares not previously converted will automatically convert into shares of our common stock on the dates set forth above; | |
● | the shares rank junior to our 10% Series A Convertible Preferred Stock and our 10% Series E Convertible Preferred Stock; | |
● | in the event of a liquidation or winding up of the Company, the shares have a liquidation preference of $0.50 per share for the Series F-1, $0.50 per share for the Series F-2 and $0.40 per share for the Series F-3; and | |
● | the shares are not redeemable by the Company. |
At both June 30, 2022 and December 31, 2021 DF Stock issued and outstanding. shares of Series E Stock were issued and outstanding. There are no shares of Series A-1 Stock, Series B Stock, Series B-1 Stock, Series C Stock, Series D or Series
The Series A Stock is senior to all other classes of the Company's securities and has a stated value of $0.50 per share. Holders of shares of Series A Stock are entitled to the payment of a 10% dividend payable in shares of the Company’s common stock at a rate of one share of common stock for each 10 shares of Series A Stock, payable annually the 10th business day of January. The shares of Series A Stock are redeemable at the Company's option upon 20 days’ notice for an amount equal to the amount of capital invested. On August 18, 2016, Series A Stockholders converted 1,800,000 shares of Series A Stock into 1,800,000 shares of common stock, leaving 100,000 Series A Stock outstanding. On the 10th business day of January 2018 there were 7,205 shares of common stock dividends owed and payable to the Series A Stockholder of record as dividends on the Series A Stock.
On September 6, 2017, the board of directors designated 2,500,000 shares of Preferred Stock as Series E Stock, which such designation was amended on September 29, 2017. Holders of shares of Series E Stock are entitled to 10% dividends, payable monthly as may be permitted under Florida law out of funds legally available therefor. The shares of Series E Stock rank senior to any other class of our equity securities, except for the Series A Stock, have a liquidation preference of $0.40 per share and are not redeemable.
The remainingOther designations, rights and preferences of each of the Series A Stock and Series E Stockseries 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'sholder’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.
21
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBERDividends paid for Convertible Preferred Stock were $1,247 during the three months ended June 30, 2017
(Unaudited)
NOTE 11 – SHAREHOLDERS’ EQUITY (continued).
In September 2017, Mr. W. Kip Speyer, the Company’s Chairman2022 and Chief Executive Officer, purchased an aggregate of 500,000 shares offor Series E and F Convertible Preferred Stock at a purchase pricewere $836 during the three months ended June 30, 2021. Dividends paid for Convertible Preferred Stock were $2,069 during the six months ended June 30, 2022 and for Series E and F Convertible Preferred Stock were $2,522 during the three months ended June 30, 2021.
Total preferred stock dividend accrued amounted to $691,861 as of $0.40 per share. The Company used the proceeds from these sales for working capital.June 30, 2022 and December 31, 2021.
NOTE 12 – COMMON STOCK.
A) Stock issued for cashCash
In August 2017During the six months ended June 30, 2022 and 2021, the Company issued 125,000 sharesdid not sell any of its common stock for $50,000 or $0.40 per share tosecurities through a private investor.placement.
B) Stock issued for services
On January 16, 2017,During the six months ended June 30, 2022, the Company issued to a consultant 3,600 shares of itsour common stock at $0.85 per share, or $3,060, for services rendered. The Company valued these common shares based on the fair value atfollowing concepts:
SCHEDULE OF COMMON SHARES ISSUED DURING THE PERIOD
Shares (#) | Value | |||||||
Shares issued to Oceanside employees per the acquisition agreement valued at $ | $ | |||||||
Total | $ | 278,805 |
27 |
During the date of grant.
On April 25, 2017six months ended June 30, 2021, the Company issued 28,500a net shares of itsour common stock with a fair value of $22,800 onfor the date of issuance for compensation to employees and officers.following concepts:
Shares (#) | Value | |||||||
Shares issued to Centre Lane related to debt financing | $ | |||||||
Options exercised by employees | 13,900 | |||||||
Warrants exercised | 10,000 | |||||||
Shares issued to Oceanside employees per the acquisition agreement valued at $ | ||||||||
Total | $ | 3,127,782 |
C) Stock issued for dividendsacquisitions
In January 2017,During the six months ended June 30, 2022 and 2021, the Company issued 10,000 shares of its common stock as dividends to the holder of its Series A preferred stock.did not make any acquisitions.
D) Stock issued for acquisitiondeemed dividend
On September 19, 2017,During the six months ended June 30, 2022 and 2021, the Company issued 1,100,233 shares of its commondid not issue any stock withthat resulted in a fair value of $429,091 for acquisition of Daily Engage Media.deemed dividend.
Stock Incentive Plan and Stock Option Grants to Employees and DirectorsCompensation
The Company accounts for stock option compensation issued to employees for services in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”). ASC Topic 718 requires companies to recognize in the statement of operations and comprehensive loss the grant-date fair value of stock options and other equity basedequity-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 ASC Topic 505-50, “ASU No. 2018-07, Equity-Based PaymentsCompensation – Stock Compensation (Topic 718): Improvements to Non-EmployeesNonemployee 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”Topic 505, Equity, and ASC 718,, including related amendments and interpretations. The related expense is recognized over the period the services are provided.
On April 14, 2022, the Board of Directors of the Company and the Compensation Committee of the Board adopted and approved the 2022 Bright Mountain Media Stock Option Plan (the “Stock Option Plan”). The Company has adopted threeStock Option Plan will be presented for stockholder approval at the Company’s 2022 Annual Meeting of Stockholders. The Stock Option Plan provides for the grants of awards to eligible employees, directors and consultants in the form of stock option plans, the terms of which are substantially identical.options. The purpose of each planthe 2022 Plan (the “Plan” is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. Under each 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 Compensation Committee of the Company's board of directors administers each plan. The material terms of each option which may be granted under each plan will 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.
22
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 11 – SHAREHOLDERS’ EQUITY (continued).
Stock Option Plans
On April 20, 2011, the Company's board of directors and majority stockholder adopted the 2011 Stock Option Plan (the “2011 Plan”) under whichis the Company reserved for issuance an aggregate of 900,000 shares of commonsuccessor to the Company’s prior stock foroption plans (2011, 2013, 2015, and 2019 Plans) and accordingly no new grants towill be made under the 2011 Plan.prior plans from and after the date hereof. The maximum aggregate numberStock Option Plan is a term of years and authorizes the issuance of up to shares of the Company’s common stock that shall be subject to grants made under the 2011 Plan to any individual during any calendar year is 180,000 shares.stock. As of SeptemberJune 30, 2017, 27,0002022 shares were remaining under the 20112022 Plan for the future issuance.
On April 1, 2013, the Company's board of directors and majority stockholder adopted the 2013 Stock Option Plan (the “2013 Plan”) under which the Company reserved for issuance an aggregate of 900,000 shares of common stock for grants to be made under the 2013 Plan. The maximum aggregate number of shares of common stock that shall be subject to grants made under the 2013 Plan to any individual during any calendar year is 180,000 shares. As of September 30, 2017, 134,000 shares were remaining under the 2013 Plan for future issuance.
On May 22, 2015, the Company's board of directors adopted the 2015 Stock Option Plan (the “2015 Plan”) under which the Company reserved for issuance an aggregate of 1,000,000 shares of common stock for grants to be under the 2015 Plan. The majority shareholders of the Company ratified the adoption of the 2015 Plan on June 17, 2015. The maximum aggregate number of shares of common stock that shall be subject to grants made under the 2015 Plan to any individual during any calendar year is 100,000 shares. As of September 30, 2017, 439,000 shares were remaining under the 2015 Plan for future issuance.
On March 22, 2016 the Company granted 100,000 ten-year stock options, which have an exercise price of $0.695 per share to an executive officer and director. The aggregate fair value of these options was computed at $39,901 or $0.3990 per option.
On March 22, 2016 the Company granted 46,000 ten-year stock options, which have an exercise price of $0.695 per share to a director. The aggregate fair value of these options was computed at $18,354 or $0.3990 per option.
On September 1, 2017 the Company granted 10,000 ten-year stock options, which have an exercise price of $0.50 per share. The aggregate fair value of these options was computed at $1,840 or $0.184 per option.
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.
28 |
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-linestraight- line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted during the nine months ended September 30, 2017 and 2016:
|
| Nine Months Ended September 30, |
| |||||
Assumptions: |
| 2017 |
|
| 2016 |
| ||
Expected term (years) |
| 6.25 |
|
|
| 6.25 |
| |
Expected volatility |
|
| 52 | % |
|
| 63 | % |
Risk-free interest rate |
|
| 1.99 | % |
|
| 0.38 | % |
Dividend yield |
|
| 0 | % |
|
| 0 | % |
Expected forfeiture rate |
|
| 0 | % |
|
| 0 | % |
23
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 11 – SHAREHOLDERS’ EQUITY (continued).
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.volatility as the Company’s stock has limited trading volume history. 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 $21,983$ and $30,069$ of non-cash stock-based stock option compensation expense for the three months ended June 30, 2022 and 2021, respectively. The Company recorded $ and $ of non-cash stock-based stock option compensation expense for the six months ended June 30, 2022 and 2021, respectively. The stock option expense for the three and six months ended SeptemberJune 30, 20172022 and 2016,2021, respectively and $95,821 and $107,193 for the nine months ended September 30, 2017 and 2016, respectively. The non-cash stock option expense has been recognized as a component of general and administrative expenses in the accompanying unaudited condensed consolidated financial statements.
As of SeptemberJune 30, 20172022, there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $104,051$ to be recognized through August 2020.May 2026.
SCHEDULE OF STOCK OPTION ACTIVITY
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||||||||||||||||||
|
| Number of Options |
| Weighted Average Exercise Price |
| Weighted Average Remaining Contractual Term |
| Aggregate Intrinsic Value |
| |||||||||||||||||||||||
Balance Outstanding, December 31, 2016 |
|
| 2,281,000 |
| $ | 0.47 |
|
| 6.8 |
| $ | 795,185 |
| |||||||||||||||||||
Balance Outstanding, December 31, 2021 | $ | $ | — | |||||||||||||||||||||||||||||
Granted |
|
| 10,000 |
|
| — |
|
| — |
|
| — |
| — | ||||||||||||||||||
Exercised |
|
| — |
|
|
| — |
|
| — |
|
| — |
| — | — | ||||||||||||||||
Forfeited |
|
| (104,000 | ) |
|
| — |
|
| — |
|
| — |
| — | — | ||||||||||||||||
Expired |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ) | — | — | |||||||||||||
Balance Outstanding, September 30, 2017 |
|
| 2,187,000 |
| $ | 0.45 |
|
| 5.9 |
| $ | 220,174 |
| |||||||||||||||||||
Exercisable at September 30, 2017 |
|
| 1,640,000 |
|
| $ | 0.31 |
|
|
| 3.8 |
|
|
|
|
| ||||||||||||||||
Balance Outstanding, June 30, 2022 | $ | $ | — | |||||||||||||||||||||||||||||
Exercisable at June 30, 2022 | $ | $ | — |
SCHEDULE OF OPTIONS OUTSTANDING UNDER OPTION PLANS
|
| Options Outstanding |
| Options Exercisable | ||||||||||
Range or Exercise Price |
| Number Outstanding |
| Remaining Average Contractual Life (In Years) |
| Weighted Average Exercise Price |
| Number Exercisable |
| Weighted Average Exercise Price |
| Remaining Average Conversion Life (In Years) | ||
0.14 - 0.24 |
| 720,000 |
| 1.1 |
| $ | 0.14 |
| 720,000 |
| $ | 0.14 |
| 1.1 |
0.25 - 0.49 |
| 351,000 |
| 1.7 |
| $ | 0.28 |
| 351,000 |
| $ | 0.28 |
| 1.6 |
0.50 - 0.85 |
| 1,116,000 |
| 3.1 |
| $ | 0.69 |
| 569,000 |
| $ | 0.60 |
| 1.2 |
|
| 2,187,000 |
| 5.9 |
| $ | 0.45 |
| 1,640,000 |
| $ | 0.31 |
| 3.8 |
Options Outstanding | ||||||||||||||||||||
Range or | Number Outstanding | Weighted Average Exercise Price | Remaining Average Contractual Life (In Years) | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||
$ | -5,495,433 | $ | 0.01 | 37,500 | $ | 0.01 | ||||||||||||||
$ | -54,000 | 0.28 | 54,000 | 0.28 | ||||||||||||||||
$ | -501,000 | 0.69 | 501,000 | 0.69 | ||||||||||||||||
$ | -138,227 | 1.64 | 80,364 | 1.63 | ||||||||||||||||
Total | 6,188,660 | $ | 0.10 | 672,864 | $ | 0.73 |
29 |
NOTE 13 – RELATED PARTIES.
24
BRIGHT MOUNTAIN MEDIA, INC.Centre Lane Partners Master Credit Fund II, L.P. (“Center Lane Partners”), AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
(Unaudited)
NOTE 12 – CONCENTRATIONS.
Thewho sold the Company the Wild Sky business in June 2020 has historically purchasespartnered and assisted the Company from a substantial amount of its products from two vendors; Citizens Watch Company of America, Inc.,liquidity perspective during 2021 and Bulova Corporation. The following table provides information on the percentage of purchases in duringthrough the three and ninesix months ended SeptemberJune 30, 20172022. This relationship has been determined to qualify as a related party. A related party is a party that can exercise significant influence over the Company in making financial and/or operating decisions. Through June 30, 2022, the Company has entered into fourteen amendments to the Amended and 2016 from these vendors:Restated Senior Secured Credit agreement between itself and Centre Lane Partners. See Note 9 - Notes Payable for more information.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Citizens |
|
| 52 | % |
|
| 37 | % |
|
| 58 | % |
|
| 40 | % |
Bulova |
|
| 17 | % |
|
| 18 | % |
|
| 18 | % |
|
| 18 | % |
Although we continueThe total related party debt owed to add additional product vendorsCentre Lane Partners was $29,616,564 and we continue$26,334,064 as of June 30, 2022 and December 31, 2021, respectively. The debt owed to expand our product lineCentre Lane Partners is reported net of their unamortized debt discount of $3,797,588 and vendor relationships, due$3,853,822 as of June 30, 2022 and December 31, 2021, respectively. For further clarification, please see Note 9, Notes Payable.
As discussed in Note 9, notes payable to continued high concentrationthe Chairman of the Board amounted to $60,672 and reliance$53,729 as of June 30, 2022 and December 31, 2021, respectively, and are reported net of their unamortized debt discount of $19,328 and $26,271 as of June 30, 2022 and December 31, 2021, respectively. See Note 9 further discussion on these two vendors, the loss of one of these two vendors could adversely affect the Company's operations.notes payable.
The Company generates revenues from two segments: product sales and advertising. The sharp increase in PayPal/eBay concentration is due to our acquisition of the Black Helmet Apparel business in December 2016. Due to high concentration and reliance on these portals, the loss of a working relationship with either of these two portals could adversely affect the Company's operations. In addition, a substantial amount of payments for our products sold are processed through PayPal and Amazon. A disruption in PayPal or Amazon payment processing could have an adverse effect on the Company's operations and cash flow. During the three months ended SeptemberJune 30, 2017 these two portals accounted for 52%2022 and 47%2021, we paid cash dividends on the outstanding shares of the Company’s Series E and F Preferred Stock of $836 and $1,261, respectively, held by affiliates of ourthe Company. During the six months ended June 30, 2022 and 2021 we paid cash dividends on the outstanding shares of the Company’s Series E and F Preferred Stock of $2,069 and $2,522, respectively held by affiliates of the Company.
The unsecured and interest free Closing Notes of $750,000 related to the Oceanside acquisition were recorded ratably as compensation expense into the condensed consolidated statement of operations and comprehensive loss over the 24-month term and an accrued payable is being recognized over the same period. As of August 15, 2020, the Company did not make payment on the First Closing Note and thereby defaulted on its obligation and the Second Closing Note accelerated to become payable as of August 15, 2020. Upon default, the Closing Notes accrue interest at a 1.5% per month rate, or 18% annual rate. As a result, there was a total product sales as comparedcharge of $300,672 recorded during the third quarter of 2020 which was $250,000 of compensation expense and $50,672 of interest expense-related party. Interest expense for note payable to 7% and 92% inrelated party for the three months ended SeptemberJune 30, 2016. During2022 and 2021 was $33,657 and $33,567, respectively. Interest expense for note payable to related party for the nine months September 30, 2017 these two portals accounted for 51% and 48%, respectively, of our total product sales as compared to 7% and 90% in the ninesix months ended SeptemberJune 30, 2016.2022 and 2021 was $66,945.
Credit RiskNOTE 14 – INCOME TAXES.
The Company minimizesrecorded $0 tax provision for the concentration of credit risk associated withthree and six months ended June 30, 2022 and 2021, due in large part to its cash byexpected tax losses for the year and maintaining a full valuation allowance against its cash with high quality federally insured financial institutions. However, cash balances in excess of the FDIC insured limit of $250,000 are at risk. net deferred tax assets.
At SeptemberJune 30, 20172022 and December 31, 2016, respectively,2021, the Company had no cash balances in excess of0 unrecognized tax benefits or accrued interest and penalties recorded. No interest and penalties were recognized during the FDIC insured limit.
Concentration of Funding
During the ninethree and six months ended SeptemberJune 30, 2017, the Company's funding was provided primarily through the issuance of $950,000 in convertible notes2022 and the sale of Series E Stock to an officer and director of the Company. See Notes 8 and 10.2021.
NOTE 1315 – SUBSEQUENT EVENTS.EVENTS.
Subsequent to September 30, 2017, Mr. W. Kip Speyer, the Company’s Chairman and Chief Executive Officer, purchased an aggregate of 625,000 shares of Series E Stock at a purchase price of $0.40 per share. The designations, rights and preferences of Series E Stock as described in Note 11. The Company used the proceeds from these sales for working capital.
On November 14, 2017,July 1, 2022, the Company filed an application with the OTCQB for a review of its candidature to be upgraded to the OTCQB exchange from the OTC Expert market as the Company is now current with its SEC filing obligations. This process is expected to take between eight to ten weeks.
On July 8, 2022, the Company and certain of its subsidiaries entered into an Amendmentits fifteenth amendment to the Amended and Restated Membership Interest PurchaseSenior 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 September 19, 2017 byJune 5, 2020, as amended (the “Credit Agreement”). The Credit Agreement was amended to provide for an additional loan amount of $350 thousand, in the aggregate. This term loan matures on June 30, 2023. In addition, and among our company, Daily Engage Media and the members of Daily Engage Media which modified the termsas part of the escrow arrangement for transaction, there is an Exit Fee (“the earnout shares. UnderExit Fee”) totaling $18 thousand which will be added and capitalized to the termsprincipal amount of the amendment, instructionsterm loan.
The Company announced that it accepted the resignation of its Chief Financial Officer, Edward Cabanas on July 26, 2022, effective August 15, 2022, and appointed Miriam Martinez as the Company’s new Chief Financial Officer. Pursuant to our transfer agent havean Offer Letter, Ms. Martinez will receive an annual base salary of $225,000. In addition to base salary, Ms. Martinez is eligible to participate in all of the Company’s Benefits Plans as are set forth in the Company’s Employee Manual. In addition, Ms. Martinez has been deposited in escrow in lieugranted options to purchase an equal number of certificates representingshares of the earnout shares. In connection therewith,Company’s common stock as part of the parties entered into an Amended and Restated Escrow Agreement.2022 company Stock Option Plan.
30 |
ITEM 2.
MANAGEMENT'S 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 and ninesix months ended SeptemberJune 30, 20172022 and 20162021 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, 20162021 as filed with the Securities and Exchange Commission.Commission on June 13, 2022 (the “2020 Form 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 and six months ended June 30, 2022 and 2021 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, 2021 is derived from our audited consolidated financial statements appearing in the 2021 Form 10-K as filed with the SEC on June 13, 2022.
Executive Overview of Second Quarter 2022 Results
Our key user metrics and financial results for the second quarter of 2022 are more fully discussed and described herein and should be read in context with the disclosure on this page. The second quarter of 2022 results are as follows:
User metrics:
● | Quarterly ad impressions delivered were approximately 1.2 billion for the three months ended June 30, 2022 and approximately 2.2 billion for the six months ended June 30, 2022; this compares to approximately 0.9 billion for the three months ended June 30, 2021 and approximately 2.0 billion for the six months ended June 30, 2021. |
Second quarter 2022 financial results:
● | Advertising revenue increased 135% in the three months ended June 30, 2022 from the same period of 2021. Advertising revenue increased 90% in the six months ended June 30, 2022 from the same period of 2021. | |
● | Gross profit increased 194% in the three months ended June 30, 2022 from the same period of 2021. Gross profit increased 130% in the six months ended June 30, 2022 from the same period of 2021. | |
● | Selling, general and administrative expenses decreased 28% in the three months ended June 30, 2022 from the same period of 2021. Selling, general and administrative expenses decreased 19% in the six months ended June 30, 2022 from the same period of 2021. | |
● | Included within the expenses for the three months ended June 30, 2022 are $389,739 of non-cash amortization of the intangible assets, and $30,119 of stock based compensation. Included within the expenses for the six months ended June 30, 2022 are $786,006 of non-cash amortization of the intangible assets and $59,035 of stock based compensation. | |
● | Net cash used in operating activities was ($2,565,605) for the first six months of 2022 as compared to ($2,059,030) for the six months of 2021. |
31 |
Overview
Bright Mountain Media, Inc. is aan end-to-end digital media holding company for online assets targeting and servicingadvertising services platform, efficiently connecting brands with targeted consumer demographics. Through the military and public safety markets. Last year, we connected over 315 million relevant advertisements with approximately 57 million visitors within our targeted demographics. Our websites are dedicated to providing “those that keep us safe” places to go online where they can do everything from stay current on news and events affecting them, look for jobs, share information, communicate with the public, and purchase products. We own and manage 24 websites which are customized to provide our niche users, including active, reserve and retired military, law enforcement, first responders and other public safety employees with information, news and entertainment across various platforms that has proven to beremoval of interest and engaging to them. Now coupled with our recently acquired wholly owned subsidiary Daily Engage Media, we have evolved to place our emphasis on not only providing quality content on our websites to drive traffic increases, but to increasemiddlemen in the advertising services process, Bright Mountain Media efficiently connects brands with targeted consumer demographics while maximizing revenue we generate from companies and brands looking to reach our audiences. Daily Engage Media is anpublishers. Bright Mountain Media’s assets include the Bright Mountain, LLC ad network, that connects advertisers with approximately 200 digital publications worldwide. Our websites feature timely, proprietaryMediaHouse (f/k/a NDN), Oceanside (f/k/a S&W Media), Wild Sky Media and aggregated content covering current events and a variety20 owned and/or managed websites.
We generate revenue sales of additional subjects targeted to the specific demographics of the individual website. Our business strategy requires us to continue to provide this quality content to our niche markets as we integrate Daily Engage Media’s experience and expertise in connecting digital readers and advertisers to grow our business, operations and revenues. Presently, weadvertising services which generate revenue from two segments: product sales and advertising. Our focus at this time is to launch a full-scale ad services platform, the Bright Mountain Media Ad Network. We believe that this new platform will become our core business and will have a significant impactadvertisements (ad impressions) placed on our future businessowned and operations.
A key componentmanaged sites, as well as from advertisements we place on partner websites, for which we earn a share of our growth is our transition to an ad network. Our ad network createsthe revenue. We also generate advertising services revenue from other publisher’s content in our market infacilitating the formreal-time buying and selling of a revenue share based on ad impressions we deliver. For this reason, the managerial focusadvertisements 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 be in increasing our total impressions delivered to grow our total advertising revenue. From the fourth quarter in 2016 to the third quarter of 2017, we experienced an 171% increase in the number of total ad impressions delivered including impressions from Daily Engage Media from September 19, 2017 to September 30, 2017. Ad impression growth over the past four consecutive quarters is conveyed in the following graph:include:
The following graph provides information on the quarterly traffic to our proprietary and managed websites over the respective quarterly periods presented. As a result of our acquisition of Daily Engage Media during the third quarter of 2017, and our shifting focus to increasing the advertising revenue we generate from companies and brands looking to reach our audiences, we do not expect to provide the following information in future periods. The total traffic for the third quarter including Daily Engage Media for the period September19, 2017 through September 30, 2017 would be approximately 17,057,797.
The Bright Mountain Media Ad Network includes a real-time bidding Ad Exchange. This new platform is expected to have capabilities including the following:
● |
|
|
|
| |
|
| |
|
| |
● | Server-to-server integration with other advertiser and publisher platforms for extremely quick transactions and ad deployments. |
This Ad ExchangeBright Mountain’s platform will be a trading deskmarketplace for publishers and advertisers where they will be able to login and 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 also have the ability to create their own unique ad formats. Advertisers will be able to choose where their ads will be seen using our filters or by connection directly
We have begun expansion with the publisherrecent acquisition of Wild Sky Media. Wild Sky Media offers massive global reach through our platform.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 niche marketgrowth 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 to 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. |
32 |
Results of operations
Revenues, Cost of Revenue, Gross Profit Margins, selling, general and administrative expenses, and other income (expense)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2022 | 2021 | Change | % Change | 2022 | 2021 | Change | % Change | |||||||||||||||||||||||||
Advertising revenues | $ | 5,716,779 | $ | 2,433,415 | $ | 3,283,364 | 135 | % | $ | 9,175,943 | $ | 4,833,135 | $ | 4,342,808 | 90 | % | ||||||||||||||||
Total cost of revenue | $ | 2,899,290 | $ | 1,476,108 | $ | 1,423,182 | 96 | % | $ | 4,589,905 | $ | 2,842,951 | $ | 1,746,954 | 61 | % | ||||||||||||||||
Gross Profit | $ | 2,817,489 | $ | 957,307 | $ | 1,860,182 | 194 | % | $ | 4,586,038 | $ | 1,990,184 | $ | 2,595,854 | 130 | % | ||||||||||||||||
Gross profit margin as a percentage of advertising revenues | 49.3 | % | 39.3 | % | 50.0 | % | 41.2 | % |
Advertising revenue for the militarythree months ended June 30, 2022 was 135% higher than the comparable period in 2021. The main reason for the increase was higher programmatic revenue at our BMLLC business in a combination of adding new clients and public safety sectors consistsincreased use of its proprietary RTB platform complemented by higher Direct campaign revenue at our Wild Sky business period over period.
Advertising revenue for the six months ended June 30, 2022 was 90% higher than the comparable period in 2021. The main reason for the increase was higher programmatic revenue at our BMLLC business in a targeted U.S. demographiccombination of in excessadding new clients and increased use of 40 million users including their spouses. Adding their parentsits proprietary RTB platform complemented by higher Direct campaign revenue at our Wild Sky business period over period.
We incur costs of sales associated with the advertising revenue. These costs include revenue share payments to media providers and other family members increaseswebsite publishers. Our gross profit margin percentage increased 1000 basis points (49.3% versus 39.3%) for the U.S. targeted market to approximately 100 million users. We also believe there are another estimated 100-plus million military and public safety personnel and their families and veterans internationally.
As a homogeneous group, our user profile should be attractive to local, national and international companies whose advertising budgets are shifting from print media, radio and televisionthree months ended June 30, 2022 compared to the internet. We believe that the marketcomparable prior period. Our gross profit margin percentage increased 880 basis points (50.0% versus 41.2%) for the militarysix months ended June 30, 2022 compared to the comparable prior period. This increase is mainly due to higher margins in our programmatic business due to the increased use of our proprietary RTB exchange platform which eliminates the use of third parties and public safety providers is fragmented,the increase of new clients with improved margins and increased Direct campaign revenues that also have higher gross margins.
Selling, General and Administrative Expenses
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change | |||||||||||||||||||||||||
Selling, general and administrative expense | $ | 3,443,199 | $ | 4,749,835 | $ | (1,306,636 | ) | (28 | )% | $ | 7,330,558 | $ | 9,024,269 | $ | (1,693,711 | ) | (19 | )% | ||||||||||||||
Selling, general and administrative expense as a percentage of total revenue | 60 | % | 195 | % | 80 | % | 187 | % |
Selling, general and administrative costs decreased approximately $1,306,636, or (28%) for the three months ended June 30, 2022 compared to the same period in 2021. Selling, general and administrative costs decreased approximately $1,693,711, or (19%) for the six months ended June 30, 2022. These decreases are mainly due to reduced costs related to reductions in headcount throughout our operations period over period and lower professional fees, specifically audit, tax and valuation work, period over period.
Selling, general and administrative expenses are expected to increase as we have an opportunity to become a leading player in the market throughexecute our planned growth consolidationstrategy of launching and operating the Bright Mountain Media Ad Networkad exchange network which will include additional administrative support. Subject to the availability of additional working capital, the Company also intends to add staff to its accounting department to improve controls over its accounting and reporting processes. As the Company expands the size of the accounting department, its use of consultants is expected to decrease.
Other income (expense), net
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change | |||||||||||||||||||||||||
Other income (expense), net | $ | (561,808 | ) | $ | (696,783 | ) | $ | 134,975 | 19 | % | $ | (559,855 | ) | $ | 835,499 | $ | (1,395,354 | ) | (167 | )% |
Other income (expense) increased approximately $134,975, or 19% for the three months ended June 30, 2022 compared to the same period in 2021, mainly due to PPP loan forgiveness by $295,600 during the three months ended June 30, 2022.
Other income decreased approximately $1,395,354, or (167%) for the six months ended June 30, 2022 compared to the same period in 2021, mainly due to reduced PPP loan forgiveness by $569,555 and increased interest expense – related party.
33 |
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 specifically targetedconsidered 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; | |
● | Non-restructuring severance expenses | |
● | Nonrecurring 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 niche demographics.statement of operations and comprehensive loss of certain expenses.
OurThe following is an unaudited reconciliation of net loss to adjusted net loss and Adjusted EBITDA for the periods presented:
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net loss before tax | $ | (1,187,518 | ) | $ | (4,489,311 | ) | $ | (3,304,375 | ) | $ | (6,198,586 | ) | ||||
plus: | ||||||||||||||||
Stock compensation expense | 30,115 | 128,342 | 175,780 | 298,390 | ||||||||||||
Depreciation expense | 8,468 | 16,487 | 11,853 | 34,534 | ||||||||||||
Amortization expense | 389,741 | 396,267 | 786,007 | 792,533 | ||||||||||||
Nonrecurring professional fees | 164,465 | 115,409 | 307,749 | 160,409 | ||||||||||||
Amortization on debt discount | 333,177 | 141,992 | 613,155 | 145,444 | ||||||||||||
Bad debt (recovery) | (49,076 | ) | (147,166 | ) | 222,279 | (141,070 | ) | |||||||||
Non-restructuring severance expense | 29,313 | - | 29,313 | - | ||||||||||||
Interest expense, net | 722 | 75,211 | 735 | 336,206 | ||||||||||||
Interest expense – related party | 562,568 | 393,772 | 1,122,007 | 429,060 | ||||||||||||
Adjusted EBITDA | $ | 281,975 | $ | (3,368,997 | ) | $ | (35,497 | ) | $ | (4,143,080 | ) |
For the three and six months ended June 30, 2022 and 2021, to disclose an adjusted EBITDA that accurately represents actual operations, we have excluded the PPP loan forgiveness from the calculation.
34 |
Liquidity and capital resources
Liquidity is the ability of a company to fully implementgenerate sufficient cash to satisfy its needs for cash. The following table summarized total current assets, total current liabilities and working (deficit) at June 30, 2022 as compared to December 31, 2021.
June 30, 2022 | December 31, 2021 | |||||||
Total current assets | $ | 4,689,370 | $ | 5,257,577 | ||||
Total current liabilities | 17,497,981 | 23,069,784 | ||||||
Net working deficit | $ | (12,808,611 | ) | $ | (17,812,207 | ) |
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 strategytime to quantify the amount of this expected increase. During 2021, we implemented policies and launchprocedures around cash collections to prevent the aging of accounts receivables that we experienced in 2020. Cash collection efforts have been successful, and we feel that we have appropriately reserved for uncollectible amounts at June 30, 2022.
During February and March 2021, the Company received two loans with proceeds totaling $1,137,140 (the “PPP Loans”) under the second 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 (“SBA”). The Second Bright Mountain Media Ad Network is dependent upon our abilityand Second Wild Sky PPP Loans are evidenced by promissory notes (the “Promissory Notes”) with Regions Bank and Holcomb Bank, respectively, and have a two-year term and bear 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 raise additional sufficient capital. Historically we have been dependent uponmaturity 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. On March 23, 2022 and equity purchasesJune 15, 2022, the Company obtained PPP forgiveness for the second tranches of the loans totaling $1,137,140.
During January through June 30, 2022, the Company received $2.7 million in debt financing from our Chief Executive Officer and, to a lesser extent in prior years from other accredited investors, to provide sufficientCentre Lane Partners. The use of the funds to meet ourwas for general working capital needs. During May 26, 2021 through December 31, 2021, the nineCompany received $5.1 million in debt financing from Centre Lane Partners. The use of the funds was for general working capital needs.
Going concern
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’s management has evaluated whether there is substantial doubt about the Company’s ability to continue as a going concern and has determined that substantial doubt existed as of the date of the end of the period covered by this report. This determination was based on the following factors: (i) the Company used cash of approximately $2.6 million in operations for the six months ended SeptemberJune 30, 2017 we raised $1,460,0002022; (ii) the Company’s available cash as of working capital from our Chief Executive Officer. While we estimate that we need a minimumthe date of $1,800,000 in additional working capitalthis filing will not be sufficient to provide sufficient funds to pay our operating expenses and fund our development overits anticipated level of operations for the next 12 months, we believe that if we are successfulmonths; (iii) the anticipated revenues from Daily Engage MediaCompany will have a significant impact on our revenues and results of operations in future periods. While we have engaged a placement agent to assist us in raising capital privately on a best efforts basis, we do not have any firm commitmentsrequire additional financing for this capital and 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 Daily Engage Media, of which there is no assurance, we will be unablefiscal year ending December 31, 2022 to continue at its expected level of operations; and (iv) if the Company fails to grow our company and mayobtain the needed capital, it will be forced to reduce certain operating expenses in an effortdelay, scale back, or eliminate some or all of its development activities or perhaps cease operations. In the opinion of management, these factors, among others, raise substantial doubt about the ability of the Company to conserve our working capital.continue as a going concern as of the date of the end of the period covered and for one year from the issuance of these condensed consolidated financial statements.
Going Concern
For the nine months ended September 30, 2017, we reported a net loss of $(2,103,981), cash used in operating activities of $1,372,589 and we had an accumulated deficit of $(10,928,787) at September 30, 2017. The report of our independent registered public accounting firm on our audited consolidated financial statements at December 31, 20162021 and 20152020 and for the years then ended containscontained 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 into manage our effortsworking capital deficit, or to generate revenuesmanage our cash versus liabilities, or report profitable operationsour ability to continue obtaining investment capital and loans from related parties and outside investors or to continue as a going concern, in which event investors would lose their entire investment in our company.
Results of operations
|
| Third Quarter 2017 |
|
| Third Quarter 2016 |
|
| % Change |
| |||
Product sales |
| $ | 589,402 |
|
| $ | 292,235 |
|
|
| 102 |
|
Revenues from advertising |
|
| 131,223 |
|
|
| 113,502 |
|
|
| 16 |
|
Total revenues |
| $ | 720,625 |
|
| $ | 405,737 |
|
|
| 78 |
|
Cost of sales – products |
|
| 387,360 |
|
|
| 229,391 |
|
|
| 70 |
|
Cost of sales - products as a percentage of product sales |
|
| 65.7 | % |
|
| 78.5 | % |
|
|
|
|
Cost of sales - advertising |
|
| 4,396 |
|
|
| 826 |
|
|
|
|
|
Cost of sales – adversting as a percent of advertising revenue |
|
| 3.4 | % |
|
| 0.72 | % |
|
|
|
|
Gross profit |
| $ | 328,869 |
|
| $ | 175,520 |
|
|
| 78 |
|
Gross profit as a percentage of total revenues |
|
| 45.6 | % |
|
| 43.3 | % |
|
|
|
|
Selling, general and administrative expenses |
| $ | 801,307 |
|
| $ | 686,802 |
|
|
| 17 |
|
(Loss) from operations |
| $ | (472,438 | ) |
| $ | (511,282 | ) |
|
| -8 |
|
|
|
|
|
|
|
|
|
|
| |||
|
| Nine Months Ended September 30, 2017 |
|
| Nine Months Ended September 30, 2016 |
|
| % Change |
| |||
Product sales |
| $ | 1,713,688 |
|
| $ | 976,056 |
|
|
| 76 |
|
Revenues from advertising |
|
| 334,856 |
|
|
| 313,266 |
|
|
| 7 |
|
Total revenues |
| $ | 2,048,544 |
|
| $ | 1,289,322 |
|
|
| 59 |
|
Cost of sales – products |
|
| 1,116,465 |
|
|
| 732,536 |
|
|
| 54 |
|
Cost of sales - products as a percentage of product sales |
|
| 65.2 | % |
|
| 75.1 | % |
|
|
|
|
Cost of sales - advertising |
|
| 16,758 |
|
|
| 5,202 |
|
|
|
|
|
Cost of sales – adversting as a percent of advertising revenue |
|
| 5.0 | % |
|
| 1.7 | % |
|
|
|
|
Gross profit |
| $ | 915,321 |
|
| $ | 551,584 |
|
|
| 66 |
|
Gross profit as a percentage of total revenues |
|
| 44.7 | % |
|
| 42.8 | % |
|
|
|
|
Selling, general and administrative expenses |
|
| 2,750,275 |
|
|
| 2,202,855 |
|
|
| 25 |
|
(Loss) from operations |
| $ | (1,834,954 | ) |
| $ | (1,654,271 | ) |
|
| 11 |
|
Revenue
Presently, we generate revenue from two segments: product salesOur ability to fully implement the Bright Mountain Media Ad Exchange Network and advertising which includes advertising revenue and subscriptions. Revenues related to product sales increased during bothmaximize the three and nine months ended September 30, 2017 from the comparable period in 2016 which are attributable to our acquisition of the Black Helmet Apparel business in mid-December 2016. Sales by our Black Helmet Apparel business totaled $279,162 and $784,861 during the three and nine months ended September 30, 2017, respectively, compared to their pre-acquisition sales of $226,164 and $692,214 for the comparable periods in 2016, as included in our pro-forma disclosure in Note 3 – Acquisitions. While there can be no assurance, we expect a similar increase quarter-over-quarter during the fourth quarter of 2017 resulting from this acquisition.
Advertising revenues increased 16% for the third quarter of 2017 and 7% for the nine months ended September 30, 2017 over the comparable periods in 2016 which is attributable to Daily Engage Media for the period of September 19, 2017 through September 30, 2017 following our acquisition of it in mid-September 2017. Sales by Daily Engage business totaled $1,030,476 during the first nine months of 2017 compared to their pre-acquisition sales of $435,026 for the first nine months of 2016, as included in our pro-forma disclosure in Note 3 – Acquisitions. Daily Engage Media sales totaling $32,539 for the period from the date of acquisition through September 30,2017 are included in our results for the three and nine months ended September 30,2017. While there can be no assurance, we expect similar an increase quarter-over-quarter during the remainder of 2017 resulting from this acquisition.
Cost of Sales
Cost of sales as a percentage of product sales remained relatively steady during the third quarter 2017 and the nine months then ended compared to the comparable periods of the prior year. Historically, we did not recognize any cost of sales for our services segment, which has now been renamed Advertising following our acquistion of Daily Engage Media during mid-September 2017. We now incur costs of sales associated with this segment which includes revenue share payments to media providers and website publishers.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by approximately 17% and approximately 25% for the three and nine months ended September 30, 2017 from the comparable periods in 2016. Our selling, general and administrative expenses were 111% and 134%value of our total revenues for the three and nine months ended September 30, 2017, respectively, as compared to 169% and 171% for the comparable periods in 2016.
A significant portion of our selling, general and administrative expenses between periods was attributable to non-cash expenses recognized during the nine months ended September 30, 2017 and 2016 including amortization expense attributable to intangible assets acquired and amortization of debt discounts of $227,418 and $116,863, respectively. In addition, stock options compensation expense totaled $95,821 and $107,193 in the first nine months 2017 and 2016, respectively. During the 2017 periods we have increased our staffing, including in connection with our acquisition of Black Helmet Apparel, which has increased our employee costs. Advertising and marketing expenses increased sharply between the periods which is attributable to our acquisition of Black Helmet Apparel business during the fourth quarter 2016. For the three months ended September 30, 2017 and 2016, advertising, marketing and promotion expense was $66,436 and $3,050, respectively. For the nine months ended September 30, 2017 and 2016, advertising, marketing and promotion expense was $231,669 and $15,156, respectively. The business model for Black Helmet Apparel relies heavily on on-line promotion of products offered. We anticipate these quarter-over-quarter increases to continue as the Company focuses on expanding the Black Helmet Apparel customer base and promoting anticipated newly introduced products.
Selling, general and administrative expenses are expected to continue to increase in a controlled manor as we execute our planned growth strategy of increasing website visits both organically and through targeted acquisitions and providing the needed administrative support for the increased level of activities. 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.
Total other income (expense)
Total other income (expense) primarily reflects interest expense associated with our borrowings under a non-convertible and several convertible notes. Our Chief Executive Officer loaned the Company an additional $1,460,000 during the first nine months 2017 under a series of 6% to 12% convertible notes bringing the total notes payable to him at September 30, 2017 to $1,147,145 net of the related note discount. Interest under these notes totaled $95,478 and $220,610, inclusive of $49,597 and $116,863 in amortization of the related debt discount, for the three and nine months ended September 30, 2017. In addition, the Company recorded interest of $23,611 and $39,236 during the three and nine months ended September 30, 2017 on a $500,000 25% note payable issued in November 2016 which matures in November 2017. On September 30, 2017, the note was amended, extending the maturity to December 31, 2017 and reducing the interest rate at 10.0%.
Non-GAAP financial measure
We report adjusted net (loss) to measure our overall results because we believe it better reflects our net results by excluding the impact of non-cash equity based compensation. We use Adjusted EBITDA to measure our operations by excluding interest and certain additional non-cash expenses. These measures are one of the primary metrics by which we evaluate the performance of our business, on which our internal budgets are based. We believe the presentation of adjusted net (loss) and Adjusted EBITDA enhances our investors' overall understanding of the financial performance of our business.
We believe that investors have access to 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 believe these measures are useful for analysts and investors as the measures allows a more meaningful year-to-year comparison of our performance. The items below are excluded from the 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 September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
(unaudited) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net (loss) |
| $ | (546,801 | ) |
| $ | (808,401 | ) |
| $ | (2,103,981 | ) |
| $ | (1,989,265 | ) |
plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense |
|
| 21,983 |
|
|
| 30,069 |
|
|
| 95,821 |
|
|
| 107,193 |
|
Stock issued for services |
|
| — |
|
|
| 9,180 |
|
|
| 25,860 |
|
|
| 64,110 |
|
Adjusted net (loss): |
|
| (524,818 | ) |
|
| (769,152 | ) |
| $ | (1,982,300 | ) |
| $ | (1,817,962 | ) |
Depreciation expense |
|
| 6,777 |
|
|
| 3,346 |
|
|
| 18,925 |
|
|
| 10,025 |
|
Amortization expense |
|
| 75,876 |
|
|
| 61,582 |
|
|
| 227,418 |
|
|
| 186,007 |
|
Amortization on debt discount |
|
| 49,597 |
|
|
| — |
|
|
| 116,863 |
|
|
| 305,115 |
|
Interest expense |
|
| 24,766 |
|
|
| 297,130 |
|
|
| 152,164 |
|
|
| 29,900 |
|
Adjusted EBITDA: |
| $ | (367,802 | ) |
| $ | (407,094 | ) |
| $ | (1,466,930 | ) |
| $ | (1,286,915 | ) |
Liquidity and capital resources
Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. As of September 30, 2017 the Company had a balance of cash and cash equivalents of $123,292 and working capital of $148,963 as compared to cash and cash equivalents of $162,795 and working capital of $355,344 at December 31, 2016. Our current assets decreased 11% at September 30, 2017 from December 31, 2016 which reflects the decrease in cash, accounts receivable, prepaid expenses and inventories. Our current liabilities increased 26.7% at September 30, 2017 from December 31, 2016 which primarily reflects a decrease in accounts payable and premium finance loan payable, offset by increases in accrued interest, including to a related party, and notes payable. We do not have any external sources of liquidity and are dependent upon loans from our Chief Executive Officer as described elsewhere herein. In addition to the amounts owed Mr. Speyer, in November 2016 we borrowed $500,000 from an unrelated third party under a promissory note which matures in November 2017. On September 30, 2017, the note was amended, extending the maturity to December 31, 2017 and reducing the interest rate at 10.0%. Presently, we do not have sufficient funds to satisfy this unsecured obligation when it becomes due.
Our operations do not provide sufficient cash to pay our cash operating expenses. If we are unable to increase our revenues to a level which provides sufficient funds to pay our operating expenses without relying upon loans from a related party, as well as to pay our obligations as they become due, our ability to continueraise 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 leverageprovide adequate funds to meet our resources and implement our plans for continued growth are in jeopardy. During 2017 and 2016 our average monthly negative cash flow was approximately $150,000. 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.
Cash flows
Net cash flows used in operating activities totaled $1,372,589 and $1,394,127 for the nine month periods ending September 30, 2017 and 2016, respectively.working capital needs. During the six months ended SeptemberJune 30, 2017,2022, we raised $2,700,000 of debt financing (see Note 13 Related Parties for more information).
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.
35 |
Summary of cash flows
For the six months ended June 30, | ||||||||
2022 | 2021 | |||||||
Net cash used in operating activities | $ | (2,565,605 | ) | $ | (2,059,030 | ) | ||
Net cash used in investing activities | $ | (3,824 | ) | $ | (5,337 | ) | ||
Net cash provided by financing activities | $ | 2,205,297 | $ | 2,423,840 |
During the six months ended June 30, 2022, the Company raised $2,700,000 of debt financing which was used primarily to fund our working capital. We used cash primarily to fund our net loss of $2,103,981 for$3,304,375.
During the period as well as increases in accrued interest, including to a related party. Cash used during the ninesix months ended SeptemberJune 30, 2016 was primarily attributable to operational losses during the period.
Net cash flows used in investing activities totaled $213,878 and $177,961 for the first nine months of 2017 and 2016, respectively. Cash used included the purchase of fixed assets in 2017 of $14,305 and cash used in the acquisition of Daily Engage Media of $199,573 and in 2016, $142,925 attributable to the purchase of two websites and $35,036 attributable to the purchase of fixed assets.
Net cash flows provided from financing activities totaled $1,546,964 and $1,258,242 during the nine month periods ending September 30, 2017 and 2016, respectively. During the first nine months of 2017,2021, the Company received $1,460,000 under a seriesraised $1,500,000 of 6%, 10%, and 12% 5-year convertible notes issueddebt financing which was used primarily to fund our Chief Executive Officer. This figure was reduced by the repayments of $53,643 in insurance premium financing notes. During the first nine months of 2016, the Company sold $500,000 in debt and issued $300,000 in 12%, 5-year convertible notes issued to our Chief Executive Officer. This figure was reduced by the repayments of $41,758 in insurance premium financing notes.working capital.
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 13 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 13 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.
Off balance sheet arrangements
As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable for a smaller reporting company.
ITEM 4.
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 theirhis evaluation as of the end of the period covered by this report, our Chief Executive Officer and 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, 2016.2021. 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 and evaluate the effectiveness of 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.There have been no We continue to strategically plan changes in our internal control over financial reporting during our lastthrough this fiscal quarter, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Q2 2022.
PART II - OTHER INFORMATION
ITEM 1.
None.None, except as previously disclosed.
ITEM 1A.
Not applicable for a smaller reporting company.We incorporate by reference the risk factors disclosed in Part I, Item 1A of our 2021 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.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Between September 2017 and November 13, 2017 Mr. W. Kip Speyer, an executive officer and director, purchased 1,125,500 shares of our Series E Stock at a purchase price of $0.40 per share for an aggregate purchase price of $450,000 in a series of private transactions. The designations, rights and preferences of our Series E Preferred are described earlier in this report under Note 3. WeDuring the period from January 1, 2022 through June 30, 2022, Bright Mountain Media, Inc. did not paysell any commissions or finders fees and the proceeds were used by us for working capital. Mr. Speyer is an accredited investor and the purchases were exempt from registration under the Securities Act of 1933, as amended in reliance on an exemption provided by Section 4(a)(2) of that act.equity securities.
Between January 2017 and August 2017 Mr. W. Kip Speyer, an officer and director, lent us an aggregate of $950,000 under the terms of convertible promissory notes. The notes are unsecured, carry an interest rate ranging from 6% to 12%, mature five years from date of issuance and are convertible at any time at the option of the holder into our common stock art conversion prices ranging from $0.50 to $0.40 per share.
We do not pay any commissions or finders fees and the proceeds were used by us for working capital. The recipient is an accredited investor and the issuances were exempt from registration under the Securities Act of 1933, as amended (The “Securities Act”) in reliance on an exemption provided by Section 4(a)(2) of that act.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.
Not applicable to our company’s operations.None.
ITEM 5.
On September 1, 2017 our board of directors designated a series of our blank check preferred stock, consisting of 2,500,000 shares, as 10% Series E Convertible Preferred Stock (the "Series E Stock"). The designations, rights and preferences of the Series E Stock, as amended, is as follows:None.
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As described in Part II, Item 2 of this report, we have issued and sold an aggregate of 1,062,500 shares of our Series E Stock to Mr. Kip Speyer, our Chief Executive Officer. The description of the designations, rights and preferences of the Series E Stock is qualified in its entirety by reference to the Articles of Amendment to the Amended and Restated Articles of Incorporation which is filed as Exhibit 3.10 to this report.
In November 2016, we borrowed $500,000 from a third party and issued an unsecured one year promissory note which bore interest at the rate of 25% per annum. On September 30,2017, the note was amended, extending the maturity to December 31,2017 and reducing the interest rate to 10%. In addition, the note holder reduced the accrued interest due under the note from approximately $106,000 to $50,000 at September 20,2017.
On November 14, 2017 we entered into an Amendment to the Amended and Restated Membership Interest Purchase Agreement dated September 19, 2017 by and among our company, Daily Engage Media and the members of Daily Engage Media which modified the terms of the escrow arrangement for the earnout shares. Under the terms of the amendment, instructions to our transfer agent have been deposited in escrow in lieu of certificates representing the earnout shares. In connection therewith, the parties entered into an Amended and Restated Escrow Agreement. The foregoing descriptions of the terms and conditions of the Amendment to the Amended and Restated Membership Interest Purchase Agreement and the Amended and Restated Escrow Agreement are qualified in their entirety by reference to the agreements which are filed as Exhibits 10.10 and 10.11, respectively, to this report.
ITEM 6. EXHIBITS.
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31.2 |
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32.1 |
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Section 1350 | Filed | |||||||||
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101.INS | Inline XBRL Instance Document | Filed | ||||||||
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101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed | ||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed | ||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed | ||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed | ||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | Filed | ||||||||
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*SIGNATURES
filed herewith
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. | |||
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