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 March 31, 2019
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the transition period from ___________ to ___________
Commission File Number
000-54887
Bright Mountain Media, Inc.
(Exact Name of Registrant as Specified in its Charter)
|
Florida
|
|
27-2977890
|
|
State or Other Jurisdiction of Incorporation or
Organization
|
|
I.R.S. Employer Identification No.
|
|
6400 Congress Avenue, Suite 2050, Boca Raton, FL
|
|
33487
|
|
Address of Principal Executive Offices
|
|
Zip Code
|
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
|
|
|
|
|
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past
90 days. Yes
☑
No ☐
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit such files). Yes
☑
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 ☐
|
|
Non-accelerated filer ☑
|
Smaller reporting company
☑
|
|
|
Emerging growth company
☑
|
If
an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the
Act). Yes ☐ 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
May 17, 2019 there were 65,051,862 shares of the issuer’s
common stock issued and outstanding.
TABLE OF CONTENTS
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Page No.
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PART I - FINANCIAL INFORMATION
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4
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26
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31
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31
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PART II - OTHER INFORMATION
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32
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32
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32
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32
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32
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32
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33
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2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This
report includes forward-looking statements that relate to future
events or our future financial performance and involve known and
unknown risks, uncertainties and other factors that may cause our
actual results, levels of activity, performance or achievements to
differ materially from any future results, levels of activity,
performance or achievements expressed or implied by these
forward-looking statements. Words such as, but not limited to,
“believe,” “expect,”
“anticipate,” “estimate,”
“intend,” “plan,” “targets,”
“likely,” “aim,” “will,”
“would,” “could,” and similar expressions
or phrases identify forward-looking statements. We have based these
forward-looking statements largely on our current expectations and
future events and financial trends that we believe may affect our
financial condition, results of operation, business strategy and
financial needs. Forward-looking statements include, but are not
limited to, statements about risks associated with:
●
our history of losses, our declining gross profit margins, our
ability to raise additional capital and continue as a going
concern;
●
our ability to fully develop the Bright Mountain Media Ad Exchange
Network and services platform
●
a failure to successfully transition to primarily advertising based
revenue model;
●
the continued appeal of internet advertising;
●
our ability to manage and expand our relationships with
publishers;
●
our dependence on revenues from a limited number of
customers;
●
the impact of seasonal fluctuations on our revenues;
●
acquisitions of new businesses and our ability to integrate those
businesses into our operations;
●
online security breaches;
●
failure to effectively promote our brand and attract
advertisers;
●
our ability to protect our content;
●
our ability to protect our intellectual property
rights;
●
the success of our technology development efforts;
●
additional competition resulting from our business expansion
strategy;
●
our dependence on third party service providers;
●
our dependence on revenues from a limited number of
customers;
●
our ability to detect advertising fraud;
●
liability related to content which appears on our
websites;
●
regulatory risks and compliance with privacy laws;
●
dependence on executive officers and certain key employees and
consultants;
●
our ability to hire qualified personnel;
●
possible problems with our network infrastructure;
●
ongoing material weaknesses in our disclosure controls and internal
control over financial reporting;
●
the impact on available working capital resulting from the payment
of cash dividends to our affiliates;
●
dilution to existing shareholders upon the conversion of
outstanding preferred stock and convertible notes and/or the
exercise of outstanding options and warrants, including warrants
with cashless exercise rights;
●
the illiquid nature of our common stock;
●
risks associated with securities litigation;
●
provisions of our charter and Florida law which may have
anti-takeover effects; and
●
the impact of diversion of management’s time as we pursue the
litigation against the former owners of one of the entities we
acquired.
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, 2018, as
filed with the Securities and Exchange Commission on April 12, 2019
and our other filings with the Securities and Exchange Commission
in their entirety. Except for our ongoing obligations to disclose
material information under the Federal securities laws, we
undertake no obligation to release publicly any revisions to any
forward-looking statements, to report events or to report the
occurrence of unanticipated events. These forward-looking
statements speak only as of the date of this report, and you should
not rely on these statements without also considering the risks and
uncertainties associated with these statements and our
business.
OTHER PERTINENT INFORMATION
Unless
specifically set forth to the contrary, when used in this report
the terms “Bright Mountain”, the “Company,”
“we”, “us”, “our” and similar
terms refer to Bright Mountain Media, Inc., a Florida corporation,
and its subsidiaries. In addition, when used in this report,
“first quarter of 2019” refers to the three months
ended March 31, 2019, "first quarter of 2018" refers to the three
months ended March 31, 2018, “2019” refers to the year
ending December 31, 2019 and “2018” refers to the year
ended December 31, 2018. The information which appears on our
website at
www.brightmountainmedia.com
is not part of
this report.
3
PART 1 – FINANCIAL INFORMATION
I
TEM 1. FINANCIAL STATEMENTS
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
March 31,
2019
|
December 31,
2018
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
Current assets
|
|
|
|
Cash
and Cash Equivalents
|
$
727,525
|
$
1,042,457
|
|
Accounts
Receivable, net
|
933,361
|
561,470
|
|
Note
Receivable, net
|
549,053
|
18,750
|
|
Prepaid
Expenses and Other Current Assets
|
531,845
|
611,206
|
|
Current
Assets - Discontinued Operations
|
41,054
|
239,747
|
|
|
|
|
|
Total current
assets
|
2,782,838
|
2,473,630
|
|
|
|
|
|
Property
& Equipment, net
|
3,112
|
5,464
|
|
Website
Acquisition Assets, net
|
88,950
|
113,741
|
|
Intangible
Assets, net
|
218,095
|
221,117
|
|
Goodwill
|
988,926
|
988,926
|
|
Prepaid
Services/Consulting Agreements - Long Term
|
1,085,000
|
1,162,500
|
|
Right
of Use Asset
|
225,536
|
—
|
|
Other
Assets
|
4,703
|
—
|
|
Other
Assets - Discontinued Operations
|
—
|
60,470
|
|
Total Assets
|
$
5,397,160
|
$
5,025,848
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
Current Liabilities
|
|
|
|
Accounts
Payable
|
$
1,015,622
|
$
655,229
|
|
Accrued
Expenses
|
315,994
|
465,032
|
|
Accrued
Interest to Related Party
|
947
|
947
|
|
Premium
Finance Loan Payable
|
60,206
|
92,537
|
|
Deferred
Revenues
|
6,648
|
4,163
|
|
Long
Term Debt, Current Portion
|
165,162
|
229,844
|
|
Operating
Lease Liability, Current Portion
|
84,472
|
—
|
|
Current
Liabilities - Discontinued Operations
|
76,696
|
143,929
|
|
Total Current
Liabilities
|
1,725,747
|
1,591,681
|
|
|
|
|
|
Long
Term Debt to Related Parties, net
|
15,140
|
11,688
|
|
Operating
Lease Liability, net of Current Portion
|
141,064
|
—
|
|
Total Liabilities
|
1,881,951
|
1,603,369
|
|
Commitments and contingencies
|
|
|
|
Shareholders' Equity
|
|
|
|
Convertible
Preferred stock, par value $0.01, 20,000,000 shares
authorized,
|
|
|
|
Series
A, 2,000,000 shares designated, 0 and
|
|
|
|
100,000
shares issued and outstanding at March 31, 2019 and December 31,
2018, respectively
|
—
|
—
|
|
Series
B, 0 shares designated, issued and outstanding at March 31, 2019
and December 31, 2018, respectively
|
—
|
—
|
|
Series
C, 0 shares designated, issued and outstanding at March 31, 2019
and December 31, 2018, respectively
|
—
|
—
|
|
Series
D, 0 shares designated, issued and outstanding at March 31, 2019
and December 31, 2018, respectively
|
—
|
—
|
|
Series
E, 2,500,000 shares designated, issued and outstanding at March 31,
2019 and December 31, 2018, respectively
|
25,000
|
25,000
|
|
Series
F, 4,344,017 shares designated, issued and outstanding at March 31,
2019 and December 31, 2018, respectively
|
43,440
|
43,440
|
|
Common
stock, par value $0.01, 324,000,000 shares authorized,
|
|
|
|
64,065,864
and 62,125,114 issued and outstanding at March 31, 2019 and
December 31, 2018, respectively
|
640,689
|
621,252
|
|
Additional
paid-in capital
|
20,559,308
|
19,775,753
|
|
Accumulated
Deficit
|
(17,753,228
)
|
(17,042,966
)
|
|
Total
shareholders' equity
|
3,515,209
|
3,422,479
|
|
Total Liabilities and Shareholders' Equity
|
$
5,397,160
|
$
5,025,848
|
See accompanying notes to unaudited condensed consolidated
financial statements
4
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
|
For the
Three Months Ended March 31,
|
|
|
|
2019
|
2018
|
|
|
|
|
|
Revenues
|
|
|
|
Advertising
|
$
1,085,456
|
$
683,058
|
|
|
|
|
|
Cost
of revenue
|
|
|
|
Advertising
|
885,696
|
510,704
|
|
Gross
profit
|
199,760
|
172,354
|
|
|
|
|
|
Selling,
general and administrative expenses
|
915,954
|
828,992
|
|
|
|
|
|
Loss
from operations
|
(716,194
)
|
(656,638
)
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
Interest
income
|
6,006
|
275
|
|
Gain
on settlement of liability
|
122,500
|
-
|
|
Interest
expense
|
(909
)
|
(15,353
)
|
|
Interest
expense - related party
|
(6,201
)
|
(99,858
)
|
|
Total
other income (expense)
|
121,396
|
(114,936
)
|
|
|
|
|
|
Net
Loss from Continuing Operations
|
(594,798
)
|
(771,574
)
|
|
|
|
|
|
Loss
from Discontinued Operations
|
(115,464
)
|
(177,676
)
|
|
|
|
|
|
Net
Loss
|
(710,262
)
|
(949,250
)
|
|
|
|
|
|
Preferred
stock dividends
|
|
|
|
Series
A, Series E, and Series F preferred stock
|
(74,171
)
|
(14,763
)
|
|
|
|
|
|
Net
loss attributable to common shareholders
|
$
(784,433
)
|
$
(964,013
)
|
|
|
|
|
|
Basic
and diluted net loss for continuing operations per
share
|
$
(0.01
)
|
$
(0.02
)
|
|
Basic
and diluted net loss for discontinued operations per
share
|
$
(0.002
)
|
$
(0.004
)
|
|
Basic
and diluted net loss per share
|
$
(0.01
)
|
$
(0.02
)
|
|
Weighted
average shares outstanding - basic and diluted
|
62,900,662
|
45,807,289
|
See accompanying notes to unaudited condensed consolidated
financial statements
5
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN SHAREHOLDERS'
EQUITY
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
|
|
|
|
|
|
Additional
|
|
Total
|
|
|
Preferred
Stock
|
Common
Stock
|
Paid-in
|
Accumulated
|
Shareholders'
|
||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
|
Balance
- December 31, 2018
|
6,844,017
|
$
68,440
|
62,125,114
|
$
621,252
|
$
19,775,753
|
$
(17,042,966
)
|
$
3,422,479
|
|
|
|
|
|
|
|
|
|
|
Series
E and F preferred stock dividend
|
-
|
-
|
-
|
-
|
(74,171
)
|
-
|
(74,171
)
|
|
|
|
|
|
|
|
|
|
|
Stock
option vesting expense
|
-
|
-
|
-
|
-
|
3,213
|
-
|
3,213
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services - cancelled
|
-
|
-
|
(3,000
)
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Units
consisting of one share of common stock and one warrant issued for
cash, net of costs
|
-
|
-
|
1,943,750
|
19,437
|
854,513
|
-
|
873,950
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the three months ended March 31, 2019
|
-
|
-
|
-
|
-
|
-
|
(710,262
)
|
(710,262
)
|
|
Balance
– March 31, 2019
|
6,844,017
|
$
68,440
|
64,065,864
|
$
640,689
|
$
20,559,308
|
$
(17,753,228
)
|
$
3,515,209
|
|
|
|
|
|
|
Additional
|
|
Total
|
|
|
Preferred Stock
|
Common Stock
|
Paid-in
|
Accumulated
|
Shareholders'
|
||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
|
Balance -
December 31, 2017
|
1,475,000
|
$
14,750
|
46,168,864
|
$
461,689
|
$
11,685,685
|
$
(11,818,902
)
|
$
343,222
|
|
|
|
|
|
|
|
|
|
|
Series E
preferred stock dividend
|
-
|
-
|
-
|
-
|
(14,763
)
|
-
|
(14,763
)
|
|
Common stock
issued for 10% dividend payment pursuant to Series A preferred
stock subscription
|
-
|
-
|
10,000
|
100
|
(100
)
|
-
|
-
|
|
Stock option
vesting expense
|
-
|
-
|
-
|
-
|
7,344
|
-
|
7,344
|
|
Issuance of
Series E preferred stock
|
500,000
|
5,000
|
-
|
-
|
195,000
|
|
200,000
|
|
Units
consisting of one share of common stock and one warrant issued for
cash, net of costs
|
-
|
-
|
1,762,500
|
17,625
|
616,876
|
-
|
634,501
|
|
Net loss for
the three months ended March 31, 2018
|
-
|
-
|
-
|
-
|
-
|
(949,250
)
|
(949,250
)
|
|
Balance
– March 31, 2018
|
1,975,000
|
$
19,750
|
47,941,364
|
$
479,414
|
$
12,490,042
|
$
(12,768,152
)
|
$
221,054
|
See accompanying notes to unaudited condensed consolidated
financial statements
6
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
MARCH 31, 2019
(Unaudited)
|
|
For the
Three Months Ended
|
|
|
|
March
31,
|
|
|
|
2019
|
2018
|
|
Cash flows from operating activities:
|
|
|
|
Net
loss
|
$
(710,262
)
|
$
(949,250
)
|
|
Addback:
Loss attributable to discontinued operations
|
115,464
|
177,676
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used in operations:
|
|
|
|
Depreciation
|
2,352
|
2,964
|
|
Amortization
of debt discount
|
3,452
|
48,389
|
|
Amortization
|
35,813
|
71,456
|
|
Gain
on settlement of liability
|
(122,500
)
|
-
|
|
Stock
option compensation expense
|
3,213
|
7,344
|
|
Provision
for bad debt
|
4,034
|
26,281
|
|
Changes in operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
(375,928
)
|
(33,790
)
|
|
Prepaid
expenses and other current assets
|
29,361
|
26,191
|
|
Prepaid
services/consulting agreements
|
127,500
|
-
|
|
Other
assets
|
(4,703
)
|
(1,980
)
|
|
Accounts
payable
|
360,393
|
117,572
|
|
Accrued
expenses
|
(26,538
)
|
(4,815
)
|
|
Deferred
revenue
|
2,485
|
(1,499
)
|
|
Cash
used in continuing operations for operating activities
|
(555,864
)
|
(513,461
)
|
|
Cash
used in discontinued operations for operating
activities
|
(73,589
)
|
(162,299
)
|
|
Net
cash used in operating activities
|
(629,453
)
|
(675,760
)
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
Purchase
of property and equipment
|
-
|
(505
)
|
|
Cash
paid for website acquisition
|
(8,000
)
|
-
|
|
Net
cash used in investing activities
|
(8,000
)
|
(505
)
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Proceeds
from issuance of common stock, net of commissions
|
873,950
|
634,501
|
|
Proceeds
from issuance of preferred stock
|
-
|
200,000
|
|
Payments
of insurance premium notes payable
|
(32,331
)
|
(22,224
)
|
|
Dividend
payments
|
(74,171
)
|
(14,763
)
|
|
Principal
payment on notes payable
|
(64,681
)
|
(55,449
)
|
|
Note
receivable funded
|
(375,303
)
|
-
|
|
Net
cash provided by financing activities
|
327,464
|
742,065
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents including cash and
cash equivalents classified within assets related to discontinued
operations
|
(309,989
)
|
65,800
|
|
Net
decrease in cash and cash equivalents classified within assets
related to discontinued operations
|
(4,943
)
|
(764
)
|
|
Net
(decrease) increase in cash and cash equivalents
|
(314,932
)
|
65,036
|
|
Cash
and cash equivalents at beginning of period
|
1,042,457
|
101,231
|
|
Cash
and cash equivalents at end of period
|
$
727,525
|
$
166,267
|
See accompanying notes to unaudited condensed consolidated
financial statements
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
MARCH 31, 2019
(Unaudited)
|
Supplemental
disclosure of cash flow information
|
|
|
|
Cash
paid for
|
|
|
|
Interest
|
$
2,749
|
$
62,176
|
|
|
|
|
|
Non-cash
investing and financing activities
|
|
|
|
Premium
finance loan payable recorded as prepaid
|
$
71,845
|
$
66,131
|
|
Notes
receivable for the sale of Black Helmet
|
$
155,000
|
$
-
|
|
Recognition
of right of use asset and lease liability
|
$
245,540
|
$
-
|
|
Stock
dividend
|
$
-
|
$
100
|
See accompanying notes to unaudited condensed consolidated
financial statements
7
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES.
Organization and Nature of Operations
Bright
Mountain Media, Inc. is a Florida corporation formed on May 20,
2010. Its wholly owned subsidiaries, 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, and its wholly owned subsidiary DEM Group
LLC (“DEM”) was formed as a New Jersey limited
liability company in February 2015. When used herein, the terms
"BMTM, the "Company," "we," "us," "our" or "Bright Mountain" refers
to Bright Mountain Media, Inc. and its subsidiaries.
Discontinued Operations
Effective
December 31, 2018 the Company discontinued the E-Commerce
operations, the Products segment, as of December 31, 2018 per the
determination of Management and the Board of Directors.
Accordingly, the Company determined that the assets and liabilities
of this reportable segment met the discontinued operations criteria
in Accounting Standards Codification 205-20-45, and were classified
as discontinued operations at December 31, 2018. See Discontinued
Operations Note 4.
Continuing Operations
We
are a digital media holding company for online assets targeting and
servicing the military and public safety markets and as such we
delivered impressions, which include both our targeted demographic
and the larger general demographic from our ad network. Our owned
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, and communicate with the public. We own 19
websites and manage five additional websites, for a total of 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 be of interest and engaging to them.
During
the past several years the Company has evolved to place its
emphasis on not only providing quality content on our websites to
drive traffic increases, but to increase the advertising revenue we
generate from companies and brands looking to reach our audiences.
Our ad network connects general use advertisers with approximately
200 digital publications worldwide. Bright Mountain’s
websites feature timely, proprietary and aggregated content
covering current events and a variety of additional subjects that
are targeted to the specific, primarily young male, demographics of
the individual website. Our business strategy requires us to
continue to provide this quality content to our niche markets as we
grow our business, operations and revenues. The Company’s
focus is to launch its full-scale Ad Network Business platform, the
Bright Mountain Media Ad Network Business.
On September 19, 2017, under the terms of an
Amended and Restated Membership Interest Purchase Agreement with
DEM, and its members, the Company acquired 100% of the membership
interests of DEM. Launched in 2015, DEM is an ad network that
connects advertisers with approximately 200 digital publications
worldwide.
NOTE 2 - GOING CONCERN.
The
accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. The Company sustained a net loss from continuing
operations of $594,798, a loss of $115,464 from discontinued
operations and used net cash in operating activities of $629,453
for the three months ended March 31, 2019. The Company had an
accumulated deficit of $17,753,228 at March 31, 2019. These factors
raise substantial doubt about the ability of the Company to
continue as a going concern for a reasonable period. The Company's
continuation as a going concern is dependent upon its ability to
generate revenues, control its expenses and its ability to continue
obtaining investment capital and loans from related parties and
outside investors to sustain its current level of
operations.
Management
continues raising capital through private placements and is
exploring additional avenues for future fund-raising through both
public and private sources. The Company is not currently involved
in any binding agreements to raise private equity
capital.
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 2 – GOING CONCERN (continued).
The
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.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES.
Principles of Consolidation and Basis of Presentation
The
condensed consolidated financial statements include the accounts of
the Company and all of its wholly-owned subsidiaries. All
intercompany accounts and transactions have been eliminated in the
condensed consolidated financial statements. The accompanying
unaudited financial statements for the three months ended March 31,
2019 and 2018 have been prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”) applicable to
interim financial information and the requirements of Form 10-Q and
Article 8 of Regulation S-X of the SEC. Accordingly, they do not
include all of the information and disclosures required by
accounting principles generally accepted in the United States for
complete consolidated financial statements. In the opinion of
management, such condensed consolidated financial statements
include all adjustments (consisting of normal recurring accruals)
necessary for the fair presentation of the condensed consolidated
financial position and the condensed consolidated results of
operations. The condensed consolidated results of operations for
periods presented are not necessarily indicative of the results to
be expected for the full year. The condensed consolidated balance
sheet information as of December 31, 2018 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, 2018, as
filed with the SEC on April 12, 2019. The interim condensed
consolidated financial statements should be read in conjunction
with that report.
Revenue Recognition
On
January 1, 2019, the Company adopted Accounting Standards Update
(“ASU”) 2014-09,
Revenue from Contracts with Customers (Topic
606)
(“Topic 606”) using the “modified
retrospective” method, meaning the standard is applied only
to the most current period presented in the financial
statements. Furthermore, we elected to apply the standard
only to those contracts which were not completed as of the date of
the adoption. Results for reporting periods beginning on the date
of adoption are presented under Topic 606, while prior period
amounts have not been adjusted and continue to be reported in
accordance with accounting standards in effect for those periods.
Following the adoption of Topic 606, the Company will continue to
recognize revenue at a point-in-time when control of services are
transferred to the customer. This is consistent with the
Company’s previous revenue recognition accounting
policy.
To
determine revenue recognition for arrangements that the Company
determines are within the scope of Topic 606, the Company performs
the following five steps: (i) identify the contract(s) with a
customer; (ii) identify the performance obligations in the
contract; (iii) determine the transaction price; (iv) allocate the
transaction price to the performance obligations in the contract;
and (v) recognize revenue when (or as) the Company satisfies a
performance obligation. The Company only applies the
five-step model to contracts when it is probable that Company will
collect the consideration it is entitled to in exchange for the
advertising services it transfers to the customer. At
contract inception, once the contract is determined to be within
the scope of Topic 606, the Company assesses the advertising
services promised within each contract and determines those that
are performance obligations and assesses whether each promised
advertising service is distinct. The Company then
recognizes as revenue the amount of the transaction price that is
allocated to the respective performance obligation based on
relative fair values, when (or as) the performance obligation is
satisfied.
The
Company recognizes revenue from its own advertising platform, ad
network partners and websites (“Ad Network”) through
its publishing advertiser impressions and pay-for-click services.
the Company’s owned and operated sites, our ad network, or
platforms. Invalid traffic on the Ad Network may impact the
amount collected and adjusted by our Ad Network.
The
Company has one revenue stream generated directly from publishing
advertisements, whether on the Company’s owned and operated
sites, our ad network, or platforms. The revenue is earned when the
users click on the published website advertisements. Specific
revenue recognition criteria for the advertising revenue stream is
as follows:
●
Advertising
revenues are generated by users "clicking" on website
advertisements utilizing several ad network parners.
●
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.
Leases
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842),
which sets out the principles for the recognition, measurement,
presentation and disclosure of leases for both lessees and lessors.
On January 1, 2019, the Company adopted the new lease standard
using the optional transition method under which comparative
financial information has not been restated and will continue to
apply the provisions of the previous lease standard in its annual
disclosures for the comparative periods. In addition, the new lease
standard provides a number of optional practical expedients in
transition. The Company elected the package of practical
expedients. As such, the Company did not have to reassess whether
expired or existing contracts are or contain a lease and did not
have to reassess the lease classifications or reassess the initial
direct costs associated with expired or existing
leases.
The new
lease standard also provides practical expedients for an
entity’s ongoing accounting. The Company elected the
short-term lease recognition exemption under which the Company will
not recognize right of use (“ROU”) assets or lease
liabilities, and this includes not recognizing ROU assets or lease
liabilities for existing short-term leases. The Company elected the
practical expedient to not separate lease and non-lease components
for certain classes of assets (office building).
The
Company determines if an arrangement is a lease at inception.
Operating lease ROU assets and operating lease liabilities are
recognized based on the present value of the future minimum lease
payments over the remaining lease terms as of January 1, 2019.
Since the Company’s lease agreements does not provide an
implicit rate, the Company estimated an incremental borrowing rate
based on the information available at January 1, 2019 in
determining the present value of lease payments. Operating lease
expense is recognized on a straight-line basis over the lease term,
subject to any changes in the lease or expectations regarding the
terms. Variable lease costs such as operating costs and property
taxes are expensed as incurred.
On
January 1, 2019, the Company recognized a ROU asset and a lease
liability of approximately $245,000 on its consolidated balance
sheet.
9
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued).
The new
lease standard also provides practical expedients for an
entity’s ongoing accounting. The Company elected the
short-term lease recognition exemption under which the Company will
not recognize right of use (“ROU”) assets or lease
liabilities, and this includes not recognizing ROU assets or lease
liabilities for existing short-term leases. The Company elected the
practical expedient to not separate lease and non-lease components
for certain classes of assets (office building).
The
Company determines if an arrangement is a lease at inception.
Operating lease ROU assets and operating lease liabilities are
recognized based on the present value of the future minimum lease
payments over the remaining lease terms as of January 1, 2019.
Since the Company’s lease agreements does not provide an
implicit rate, the Company estimated an incremental borrowing rate
based on the information available at January 1, 2019 in
determining the present value of lease payments. Operating lease
expense is recognized on a straight-line basis over the lease term,
subject to any changes in the lease or expectations regarding the
terms. Variable lease costs such as operating costs and property
taxes are expensed as incurred.
On
January 1, 2019, the Company recognized a ROU asset and a lease
liability of approximately $245,000 on its consolidated balance
sheet.
Use of Estimates
Our
consolidated financial statements are prepared in accordance with
GAAP. These accounting principles require management to make
certain estimates, judgments, and assumptions. We believe
that the estimates, judgments, and assumptions upon which we rely
are reasonable based upon information available to us at the time
that these estimates, judgments, and assumptions are
made. These estimates, judgments, and assumptions can affect the
reported amounts of assets and liabilities as of the date of our
consolidated financial statements as well as reported amounts of
revenue and expenses during the periods presented. Our consolidated
financial statements would be affected to the extent there are
material differences between these estimates and actual results. In
many cases, the accounting treatment of a particular transaction is
specifically dictated by GAAP and does not require management's
judgment in its application. There are also areas in which
management's judgment in selecting any available alternative would
not produce a materially different result. Significant estimates
included in the accompanying consolidated financial statements
include revenue recognition, the fair value of acquired assets for
purchase price allocation in business combinations, valuation of
inventory, valuation of intangible assets, estimates of
amortization period for intangible assets, estimates of
depreciation period for fixed assets and the valuation of
equity-based transactions, and the valuation allowance on deferred
tax assets.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash
equivalents.
Fair Value of Financial Instruments and Fair Value
Measurements
FASB ASC 820
“
Fair
Value Measurement and Disclosures:
(“ASU 820”)
defines fair value as the price that would be received to sell an
asset or paid to transfer a liability (an exit price) in an orderly
transaction between market participants on the measurement date.
ASC 820 also establishes a fair value hierarchy which requires an
entity to maximize the use of observable inputs and minimize the
use of unobservable inputs when measuring fair value. A financial
instrument’s level within the fair value hierarchy is based
on the lowest level of input significant to the fair value
measurement
The
Company measures its financial assets and liabilities in accordance
with GAAP. For certain of our financial instruments, including
cash, accounts payable, accrued expenses, and the short-term
portion of long-term debt, the carrying amounts approximate fair
value due to their short maturities. We adopted accounting guidance
for fair values measurements and disclosures (ASC 820). The
guidance utilizes a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value into
three broad levels. The following is a brief description of those
three levels:
|
Level
1:
|
Observable inputs such as quoted prices (unadjusted) in active
markets for identical assets or liabilities.
|
|
Level
2:
|
Inputs other than quoted prices that are observable, either
directly or indirectly. These include quoted prices for similar
assets or liabilities in active markets and quoted prices for
identical or similar assets or liabilities in markets that are not
active.
|
|
Level
3:
|
Unobservable inputs in which little or no market data exists,
therefore developed using estimates and assumptions developed by
us, which reflect those that a market participant would
use.
|
Financial
instruments recognized in the consolidated balance sheets consist
of cash, accounts receivable, prepaid expenses and other current
assets, note receivable, accounts payable, accrued expenses and
premium finance loan payable. The Company believes that the
carrying value of its current financial instruments approximates
their fair values due to the short-term nature of these
instruments. The carrying value of long-term debt to related
parties and long-term debt to others approximates the current
borrowing rate for similar debt instruments.
The
following are the major categories of liabilities measured at fair
value on a recurring basis for the three months ended March 31,
2019, using significant unobservable inputs (Level 3):
|
Fair
Value measurement using Level 3
|
|
|
|
|
|
Balance
at December 31, 2018
|
$
309,844
|
|
Long
term debt additions during 2019
|
-
|
|
Principal
reductions during 2019
|
(64,681
)
|
|
Adjustment
to fair value
|
-
|
|
Balance
at March 31, 2019
|
$
245,163
|
Accounts Receivable
Accounts
receivable are recorded at fair value on the date revenue is
recognized. The Company provides allowances for doubtful accounts
for estimated losses resulting from the inability of its customers
to repay their obligation. If the financial condition of the
Company's customers were to deteriorate, resulting in an impairment
of their ability to repay, additional allowances may be required.
The Company provides for potential uncollectible accounts
receivable based on specific customer identification and historical
collection experience adjusted for existing market conditions. If
market conditions decline, actual collection experience may not
meet expectations and may result in decreased cash flows and
increased bad debt expense.
10
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued).
The
policy for determining past due status is based on the contractual
payment terms of each customer, which are generally net 60 or net
90 days. Once collection efforts by the Company and its collection
agency are exhausted, the determination for charging off
uncollectible
receivables is made.
Property and Equipment
Property
and equipment is recorded at cost. Depreciation is computed using
the straight-line method based on the estimated useful lives of the
related assets of seven years for office furniture and equipment,
and five years for computer equipment. Leasehold improvements are
amortized over the lesser of the lease term or the useful life of
the improvements.
Website Development Costs
The
Company accounts for its website development costs in accordance
with ASC 350-50, "Website Development Costs". These costs, if any,
are included in intangible assets in the accompanying consolidated
financial statements.
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. 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.
For
the three months ended March 31, 2019 $8,000 was capitalized for
the purchase of a Facebook page. During the three months ended
March 31, 2018 all website costs were expensed.
Amortization and Impairment of Long-Lived Assets
Amortization
and impairment of long-lived assets are non-cash expenses relating
primarily to website acquisitions. The Company accounts for
long-lived assets in accordance with the provisions of ASC 360,
"Property, Plant and Equipment". This requires thatlong-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 are amortized over 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 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.
Stock-Based Compensation
The Company accounts for stock-based instruments
issued to employees for services in accordance with ASC Topic 718.
ASC Topic 718 requires companies to recognize in the statement of
operations the grant-date fair value of stock options and other
equity-based compensation issued to employees. The value of the
portion of an employee award that is ultimately expected to vest is
recognized as an expense over the requisite service periods using
the straight-line attribution method. The Company accounts for
non-employee share-based awards in accordance with the measurement
and recognition criteria of ASC Topic
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
option compensation is expensed over the requisite service period
and are included in selling, general and administrative expenses on
the accompanying statement of operations. For the three months
ended March 31, 2019 and 2018, non-cash stock-based stock option
compensation expense was $3,213 and $7,344,
respectively.
11
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued).
Advertising, Marketing and Promotion Costs
Advertising,
marketing and promotion expenses are expensed as incurred and are
included in selling, general and administrative expenses on the
accompanying statement of operations. For the three months ended
March 31, 2019 and 2018, advertising, marketing and promotion
expense was $6,000 and $217, respectively for continuing operations
and $6,002 and $60,923 for discontinued operations,
respectively.
Income Taxes
We
use the asset and liability method to account for income taxes.
Under this method, deferred income taxes are determined based on
the differences between the tax basis of assets and liabilities and
their reported amounts in the consolidated financial statements
which will result in taxable or deductible amounts in future years
and are measured using the currently enacted tax rates and laws in
the period those differences are expected to reverse. A valuation
allowance is provided to reduce net deferred tax assets to the
amount that, based on available evidence, is more likely than not
to be realized.
The Company follows the provisions of ASC
740-10,
Income Taxes -
Overall.
When tax returns
are filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others
are subject to uncertainty about the merits of the position taken
or the amount of the position that would be ultimately sustained.
In accordance with the guidance of ASC 740-10, the benefit of a tax
position is recognized in the financial
statements
in the period during which, based on all available
evidence, management believes it is more likely than not that the
position will be
sustained upon examination, including the
resolution of appeals or litigation processes, if any. Tax
positions taken are not offset or
aggregated with other positions. Tax positions
that meet the more-likely-than-not recognition threshold are
measured as the largest
amount of tax benefit that is more than 50 percent
likely of being realized upon settlement with the applicable taxing
authority. The
portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above
should be reflected as
a liability for unrecognized tax benefits in the
accompanying consolidated balance sheets along with any associated
interest and penalties that would
be payable to the taxing authorities upon
examination. Interest and penalties associated with
unrecognized tax expenses are recognized as tax expenses in the
Statement of Operations.
As
of March 31, 2019, tax years 2018, 2017, and 2016 remain open for
Internal Revenue Service ("IRS") audit. The Company has received no
notice of audit or any notifications from the IRS for any of the
open tax years.
C
oncentrations
The
Company generates revenues from through an Ad Exchange Network and
through our Owned and Operated Ad Exchange Network. There are two
large customers who account for approximately 59% of the Ad
Exchange Network Revenue for the three months ended March 31, 2019.
One of those customers accounted for approximately 24% of the
Accounts Receivable at March 31, 2019.
Credit Risk
The
Company minimizes the concentration of credit risk associated with
its cash by maintaining 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. At March 31, 2019
and December 31, 2018, the Company had approximately $469,000 and
$706,000, respectively, in cash balances above the FDIC insured
limit. The Company performs ongoing evaluations of its trade
accounts receivable customers and generally does not require
collateral.
Concentration of Funding
During
the three months ended March 31, 2019 a large portion of the
Company's funding was provided through the sale of shares of the
Company's common stock with related warrants.
Basic and Diluted Net Earnings (Loss) Per Common Share
In accordance with ASC 260-10
, "Earnings Per
Share",
basic net earnings
(loss) per common share is computed by dividing the net earnings
(loss) for the period by the weighted average number of common
shares outstanding during the period. Diluted earnings (loss) per
share are computed using the weighted average number of common and
dilutive common stock equivalent shares outstanding during the
period. As of March 31, 2019, and 2018 there were 1,797,000 and
2,027,000 common stock equivalent shares outstanding as stock
options, respectively; 16,319,875 and 0 common stock equivalent
shares outstanding from warrants to purchase common shares,
respectively, 6,844,017 and 1,475,000 common stock equivalents from
the conversion of preferred stock, respectively; and 0 and
4,070,000 common stock equivalents from the conversion of notes
payable, respectively. Equivalent shares were not utilized as the
effect is anti-dilutive.
12
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued).
Segment Information
The Company currently operates in one reporting
segment. This segment is focused on producing advertising revenue
generated by users "clicking" on website advertisements utilizing
several ad network partners and direct
advertisers.
Recent Accounting Pronouncements
In
June 2016, the FASB issued ASU 2016-13 “Financial Instruments
– Credit Losses” which replaces the incurred loss model
with a current expected credit loss (“CECL”) model. The
CECL model applies to financial assets subject to credit losses and
measured at amortized cost and certain off-balance sheet exposures.
Under current U.S. GAAP, an entity reflects credit losses on
financial assets measured on an amortized cost basis only when
losses are probable and have been incurred, generally considering
only past events and current conditions in making these
determinations. ASU 2016-13 prospectively replaces this approach
with a forward-looking methodology that reflects the expected
credit losses over the lives of financial assets, starting when
such assets are first acquired. Under the revised methodology,
credit losses will be measured based on past events, current
conditions and reasonable and supportable forecasts that affect the
collectability of financial assets.
ASU
2016-13 also revises the approach to recognizing credit losses for
available-for-sale securities by replacing the direct write-down
approach with the allowance approach and limiting the allowance to
the amount at which the security’s fair value is less than
the amortized cost. In addition, ASU 2016-13 provides that the
initial allowance for credit losses on purchased credit impaired
financial assets will be recorded as an increase to the purchase
price, with subsequent changes to the allowance recorded as a
credit loss expense. ASU 2016-13 also expands disclosure
requirements regarding an entity’s assumptions, models and
methods for estimating the allowance for credit losses. The
amendments of this Update are effective for fiscal years, and
interim periods within those fiscal years, beginning after December
15, 2019. Early adoption is permitted as of January 1, 2019. The
Company is currently evaluating the impact the adoption of this new
standard will have on its consolidated financial
statements.
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 recognized 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.
In
August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement
(Topic 820), - Disclosure Framework - Changes to the Disclosure
Requirements for Fair Value Measurement," which makes a number of
changes meant to add, modify or remove certain disclosure
requirements associated with the movement amongst or hierarchy
associated with Level 1, Level 2 and Level 3 fair
valuemeasurements. This guidance is effective for fiscal years, and
interim periods within those fiscal years, beginning after December
15, 2019. Early adoption is permitted upon issuance of the update.
We do not expect the adoption of this guidance to have a material
impact on our consolidated Financial Statements.
13
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued).
Reclassification
Certain
reclassifications have been made to the December 31, 2018 and March
31, 2018 consolidated financial statements to conform to the March
31, 2019 presentation.
NOTE 4 – DISCONTINUED OPERATIONS.
Management,
prior to December 31, 2018 with the appropriate level or authority,
determined to exit, effective December 31, 2018, its Black Helmet
business line as a result of, among other things, the change in our
strategic direction to a focus solely in our advertising segment.
Historically revenues from our product sales segment including
revenues from two of our websites that operate as e-commerce
platforms, included Bright Watches and Black Helmet, as well as
Bright Watches’ retail location.
Management,
prior to December 31, 2018, with the appropriate level of
authority, determined to discontinue the operations of Bright
Mountain watches effective December 31, 2018. The decisions to exit
all components of our product segment will result in these
businesses being accounted for as discontinued operations. The
Company has determined that the exit of the Bright Watches business
requires the Company
to liquidate the inventory and settle all obligations to wind down
the business unit. The Company sold the remaining inventory during
the three months ended March 31, 2019. Accordingly, the Company
determined that the assets and liabilities of this reportable
segment met the discontinued operations criteria in Accounting
Standards Codification 205-20-45, as such the results have been
classified as discontinued operations.
On
March 8, 2019 the Black Helmet Apparel E-Commerce business was sold
for $175,000. The Company received $20,000 at the closing and
issued a 6% promissory note for $155,000 payable in twelve monthly
payments of principal and interest. At December 31, 2018,
approximately $180,000 of inventory was considered held for sale
and included in discontinued operations.
On
March 22, 2019 the Company sold the remaining Bright Watches
inventory for approximately $7,000. At December 31, 2018 $7,454 of
inventory, written down to fair market value, was considered held
for sale and included in discontinued operations.
14
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 4 – DISCONTINUED OPERATIONS (continued).
The
detail of the consolidated balance sheets, the consolidated
statements of operations and consolidated cash flows for the
discontinued operations is as stated below:
|
|
Three
Months Ended
|
|
|
|
March 31,
2019
|
December 31,
2018
|
|
Cash
|
$
11,804
|
$
16,747
|
|
Inventory
|
29,250
|
223,000
|
|
Total
Current Assets
|
41,054
|
239,747
|
|
Fixed
assets, net
|
-
|
49,347
|
|
Other
Assets
|
-
|
11,123
|
|
Total
Other assets - discontinued operations
|
-
|
60,470
|
|
Total
Assets - Discontinued Operations
|
$
41,054
|
300,217
|
|
Accounts
payable
|
20,907
|
127,512
|
|
Accrued
Expenses
|
55,789
|
-
|
|
Deferred
rents
|
-
|
16,417
|
|
Total
current liabilities - discontinued operations
|
76,696
|
143,929
|
|
Net
Assets (Liabilities) Discontinued Operations
|
$
(35,642
)
|
$
156,288
|
|
|
For the
Three Months Ended March 31,
|
|
|
|
2019
|
2018
|
|
Revenues
|
$
98,797
|
$
375,286
|
|
Cost
of revenues
|
50,863
|
291,565
|
|
Gross
profit
|
47,934
|
83,722
|
|
|
|
|
|
Selling,
General and Administrative Expenses
|
130,650
|
261,411
|
|
|
|
|
|
Loss
from discontinued operations
|
(82,716
)
|
(177,689
)
|
|
|
|
|
|
Other
income (expense)
|
(32,748
)
|
13
|
|
Loss
from discontinued operations
|
$
(115,464
)
|
$
(177,676
)
|
|
|
|
|
|
Basic
and fully diluted net loss per share
|
$
(0.002
)
|
$
(0.004
)
|
|
|
|
|
|
Cash
(used in) provided by operations for discontinued
operations:
|
|
|
|
Loss
from discontinued operations
|
$
(115,464
)
|
(177,676
)
|
|
Depreciation
|
-
|
3,375
|
|
Amortization
of website acquisition and intangibles
|
-
|
41,267
|
|
Loss
on sale of Black Helmet Business Unit
|
11,309
|
-
|
|
Write-off
of property and equipment
|
49,348
|
-
|
|
Inventory
|
37,327
|
107,706
|
|
Deposits
|
11,123
|
-
|
|
Prepaid
rents
|
-
|
10,540
|
|
Accounts
payable
|
(106,604
)
|
(126,588
)
|
|
Accrued
Expenses
|
55,789
|
(5,816
)
|
|
Deferred
rents
|
(16,417
)
|
(15,107
)
|
|
Cash
used in discontinued operations
|
$
(73,589
)
|
$
(162,299
)
|
|
|
|
|
|
Net
decrease in cash and cash equivalents from discontinued
operations
|
$
(4,943
)
|
$
(764
)
|
15
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 5 –
PREPAID COSTS
AND EXPENSES.
At
March 31, 2019 and December 31, 2018, prepaid expenses and other
current assets consisted of the following:
|
|
March 31,
2019
|
December 31,
2018
|
|
Prepaid
insurance
|
$
71,845
|
$
101,206
|
|
Current
portion of prepaid service agreements
|
460,000
|
510,000
|
|
Prepaid
expenses and other current assets
|
$
531,845
|
$
611,206
|
NOTE 6 – PROPERTY AND EQUIPMENT.
At
March 31, 2019 and December 31, 2018, property and equipment
consisted of the following:
|
|
Useful Lives
|
March 31,
2019
|
December 31,
2018
|
|
Furniture
and fixtures
|
3-5
years
|
$
36,374
|
$
36,374
|
|
Computer
equipment
|
3
years
|
57,112
|
57,112
|
|
Leasehold
improvements
|
5
years
|
-
|
0
|
|
Total
property and equipment
|
|
93,486
|
93,486
|
|
Less:
accumulated depreciation
|
|
(90,374
)
|
(88,022
)
|
|
Total
property and equipment, net
|
|
$
3,112
|
$
5,464
|
Depreciation
expense for the three months ending March 31, 2019 and 2018, was
$2,352 and $2,964, respectively.
NOTE 7 – WEBSITE ACQUISITION AND INTANGIBLE
ASSETS.
At
March 31, 2019 and December 31, 2018, respectively, website
acquisitions, net consisted of the following:
|
|
March 31,
2019
|
December 31,
2018
|
|
Website
Acquisition Assets
|
$
1,124,846
|
$
1,116,846
|
|
Less:
accumulated amortization
|
(835,500
)
|
(802,709
)
|
|
Less:
accumulated impairment loss
|
(200,396
)
|
(200,396
)
|
|
Website
Acquisition Assets, net
|
$
88,950
|
$
113,741
|
At
March 31, 2019 and December 31, 2018, respectively, intangible
assets, net consisted of the following:
|
|
Useful Lives
|
March 31,
2019
|
December 31,
2018
|
|
Tradename
|
5
years
|
32,000
|
32,000
|
|
Customer
relationships
|
5
years
|
187,000
|
187,000
|
|
Non-compete
agreements
|
5-8
years
|
78,000
|
78,000
|
|
Total
Intangible Assets
|
|
$
297,000
|
$
297,000
|
|
Less:
accumulated amortization
|
|
(78,905
)
|
(75,883
)
|
|
Intangible
assets, net
|
|
$
218,095
|
$
221,117
|
Amortization
expense for the three months ended March 31, 2019 and 2018 was
$35,813 and $71,456, respectively, related to both the website
acquisition costs and the intangible assets.
During
the first quarter of 2019 the Company paid $8,000 for a Facebook
page which will dramatically expand our social media audience and
provide an opportunity to increase our advertising impressions.
There were no outstanding assets, liabilities, or trademarks
associated with this acquisition.
16
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 8 – ACCRUED EXPENSES
.
At
March 31, 2019 and 2018, respectively, accrued expenses consisted
of the following:
|
|
March
31,
2019 |
December 31,
2018
|
|
|
(unaudited)
|
|
|
Accrued
dividends and interest
|
$
25,548
|
$
25,909
|
|
Accrued
legal fees
|
34,672
|
94,200
|
|
Accrued
audit fees
|
12,500
|
-
|
|
Other
accrued expenses
|
-
|
51,979
|
|
Accrued
liquidation damages
|
88,020
|
-
|
|
Accrued
traffic settlements
|
95,254
|
95,254
|
|
Settlement
of liability
|
60,000
|
197,690
|
|
Total
Accrued Expenses
|
$
315,994
|
$
465,032
|
NOTE 8- ACCRUED EXPENSES
(continued).
As
further described in Note 10, during the quarter ended March 31,
2019 the Company reached a settlement of $75,000 for publisher
payments in collections of $197,500 resulting in a gain on
settlement of $122,500. During March 2019 a $15,000 payment was
made.
Series
E and F dividends totaling $25,548 and $25,909 for March 31, 2019
and 2018, respectively, have been included in accrued
expenses.
The
Company negotiates with its publishing partners regarding
questionable traffic to arrive at traffic settlements. A total of
$95,254 was accrued at March 31, 2019 and December 31, 2018 for
these potential future settlements.
The
Company accrued $88,020 in liquidation damages related to the late
filing of the Resale Registration Statement discussed in Note
10.
NOTE 9 – NOTES PAYABLE.
Long Term Debt to Related Parties
Between September 2016 and August
2017
,
the
Company issued a series of convertible notes payable to an
executive officer and a major shareholder totaling $2,035,000. The
notes mature five years from
issuance
at which time all principal and interest are
payable. Interest rates on the notes ranged from 6% to 12% and the
notes were convertible at any time prior to maturity at conversion
prices ranging from $0.40 to 0.50 per share
.
The
Company recognized a beneficial conversion feature when the fair
value of the underlying common stock to which
the
note is convertible into was in excess of the face
value of the note. For notes payable
under
this criteria the intrinsic value of the beneficial conversion
features was recorded as a debt discount with a corresponding
amount to additional paid in capital. The debt discount is being
amortized to
interest
over the five-year life of the
note
using
the effective interest method.
On
November 7, 2018 the Company entered into a Note Exchange Agreement
with Mr. W. Kip Speyer, our CEO and member of our Board of
Directors, pursuant to which we exchanged our convertible notes for
three new series of preferred stock as outlined below:
●
$1,075,000
principal amount and accrued but unpaid interest due Mr. Speyer
under 12% Convertible Promissory Notes maturing between September
26, 2021 and April 10, 2022 for 2,177,233 shares of our newly
created Series F-1 Convertible Preferred Stock in full satisfaction
of those notes;
●
$660,000
principal amount and accrued but unpaid interest due Mr. Speyer
under 6% Convertible Promissory Notes maturing between April 19,
2022 and July 27, 2022 for 1,408,867 shares of our newly created
Series F-2 Convertible Preferred Stock in full satisfaction of
those notes.
●
$300,000
principal amount and accrued but unpaid interest due Mr. Speyer
under 10% Convertible Promissory Notes maturing between August 1,
2022 and August 30, 2022 for 757,197 shares of our newly created
Series F-3 Convertible Preferred Stock in full satisfaction of
those notes.
17
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 9 – NOTES PAYABLE (continued).
During
November 2018 the Company issued 10% convertible promissory notes
in the amount of $80,000 to a related party, to our Chief Executive
Officer. The notes mature five years from issuance and is
convertible at the option of the holder into shares of common stock
at any time prior to maturity at a conversion price of $0.40 per
share. A beneficial conversion feature exists on the date the
convertible notes were issued whereby the fair value of the
underlying common stock to which the notes are convertible into is
in excess of the face value of the note of $70,000.
The
principal balance of these notes
payable
was $80,000 at March 31, 2019 and December
31
,
2018, respectively
and discounts recognized upon
respective
origination dates as a
result
of the
beneficial
conversion feature total $64,860 and
$68,312
.
At
March 31, 2019 and December 31, 2018, the total convertible notes
payable to related
party
net of discounts was $15,140 and $11,688,
respectively.
Interest
expense for note payable to related party was $2,749 and $49,651
for the three months ended March 31, 2019 and March 31, 2018,
respectively and discount amortization was $3,452 and $50,207,
respectively.
Long-term debt
The
Company has a note payable originating from a prior website
acquisition. At the time of the acquisition, the Company agreed to
pay $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 a discount of $32,732. The present value
was calculated at a discount rate of 12% using the estimate future
revenues. The balance of the note payable at March 31, 2019 and
December 31, 2018, was $0 and $57,181 net of discounts of $0
respectively.
In
connection with the acquisition of DEM, the Company issued
promissory notes totaling $380,000. The notes have no stated
interest rate and matured on September 19, 2018 and the Company is
in default pending the final outcome of the legal matters. The
balance of the notes payable at March 31, 2019 and December 31,
2018 were $165,162. This note was not paid off by the maturity date
due to pending litigation. See further discussion in Note 11, under
Legal.
At
March 31, 2019 and December 31, 2018 a summary of the Company's
debt is as follows:
|
|
March 31,
2019
|
December 31,
2018
|
|
$150,000 non-interest bearing Note Payable issued on January
6, 2016 for the acquisition of the WarIsBoring.com website maturing
on January 4, 2019
|
$
—
|
$
57,181
|
|
Non-interest bearing Promissory Note issued for the DEM acquisition
on September 19, 2017 which matured on September 19, 2018. The
original note was $380,000 of which $35,000 was reclassified in
2018 to the Service Agreement listed below.
|
165,162
|
165,162
|
|
$45,000 non-interest bearing Note Payable issued on August 23,2018
and maturing on April 23, 2019 associated with a Service Agreement
through August 23, 2020
|
—
|
7,501
|
|
Total Debt
|
165,162
|
229,844
|
|
Less Short Term
Debt
|
165,162
|
229,844
|
|
Long
Term Debt
|
$
—
|
$
—
|
Interest
expense for notes payable was $2,749 and $15,353 for the three
months ended March 31, 2019 and 2018, respectively and discount
amortization was $4,361 and $52,025, respectively.
Premium Finance Loan Payable
The
Company generally finances its annual insurance premiums through
the use of short-term notes, payable in 10 equal monthly
installments. Coverages financed include Directors and Officers and
Errors and Omissions with premiums financed in 2019 of $110,200 and
$41,914, respectively.
Total
Premium Finance Loan Payable balance for all of the Company’s
policies was $60,206 T March 31, 2019 and $92,537 at December 31,
2018.
18
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 10 – COMMITMENTS AND CONTINGENCIES.
The
Company leases its corporate offices at 6400 Congress Avenue, Suite
2050, Boca Raton, Florida 33487 under a long-term non-cancellable
operating lease agreement expiring on October 31, 2021. The lease
terms require base rent payments of approximately $7,260 plus sales
tax per month for the first twelve months commencing in September
2018, with a 3% escalation each year. Included in other assets is a
required security deposit of $18,100.
The
right of use asset and lease liability are as follows as of March
31, 2019:
|
Assets
|
|
|
Right-of-Use
Asset
|
$
225,536
|
|
|
|
|
Liabilities
|
|
|
Operating
lease liability, current
|
$
84,472
|
|
Operating
lease liability, net of current portion
|
141,064
|
|
Total
operating lease liability
|
$
225,536
|
The Company’s non-lease components are
primarily related to property maintenance and other operating
services, which varies based on future outcomes and is recognized
in rent expense when incurred and not included in the measurement
of the lease liability. The Company did not have any variable lease
payments for its operating lease for the three months ended March
31, 2019.
The
maturity of the Company’s operating lease liability is as
follows as of March 31:
|
2020
|
$
94,799
|
|
2021
|
97,643
|
|
2022
|
49,668
|
|
Total undiscounted
lease payments
|
242,110
|
|
Present value
adjustment
|
(16,574
)
|
|
Total net lease
liability
|
$
225,536
|
19
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 10 – COMMITMENTS AND CONTINGENCIES
(continued).
The
following summarizes additional information related to the
operating lease:
|
|
March 31,
|
|
|
2019
|
|
Weighted-average
remaining lease term
|
2.66
years
|
|
Weighted-average
discount rate
|
5.50
%
|
The
Company leased retail space for its product sales division at 4900
Linton Boulevard, Bay 17A, Delray Beach, FL 33445 under a two
long-term, non-cancellable lease agreement, which contained renewal
options. The leases commenced in January 2017 and are in effect for
a period of five years. Minimum base rentals total approximately
$6,000 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. The Company discontinued all retail
operations and has made a settlement with the landlord to terminate
the lease of approximately $55,000 which is included in accrued
expenses. See Discontinued Operations Note 4.
On
December 16, 2016, under the terms of the Asset Purchase Agreement,
we acquired the assets constituting the Black Helmet apparel
business including various website properties and content, social
media content, inventory and other intellectual property right. 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, escalating at approximately
3% per year thereafter. The Company vacated the premises before
March 31, 2019. See Discontinued Operations Note 4.
For
the three months ended March 31, 2019 and 2018, rent expense in
continuing operations was $29,409 and $33,303, respectively. For
the three months ended March 31, 2019 and 2018, rent expense
included in discontinued operations was $37,042 and $30,787,
respectively.
20
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 10 – COMMITMENTS AND CONTINGENCIES
(continued).
Legal
Effective
July 18,
2018
we
terminated the
employment
agreements
with
each
of Messrs. Harry G. Pagoulatos and George G.
Rezitis for cause. Messrs
.
Pagoulatos and Rezitis had been employed by us as
chief operating officer and chief technology officer, respectively,
of our DEM
subs
idiary
since
our acquisition of that company in September 2017. Mr. Todd Speyer,
our Vice President, Digital and a member of our board of
directors
,
have
assumed operating responsibilities for DEM. While the malfeasance
of Messrs. Harry G. Pagoulatos and George G. Rezitis giving rise to
their for-cause termination adversely affected
our
results
of
operations for the second and third quarters, we do not expect that
these terminations will result in any material,
long-term
change
in the operations of DEM.
In July
of 2018,
Messrs.
Pagoulato
s
and
Rezitis
,
along
with a third
party
who
had
been
a
minority owner in
DEM
prior to
our acquisition of that company, filed a
Complaint
in the
U.S. District
Court,
District
of
New
Jersey
(case
number
2:
l
8-cv-11357-ES-SCM) against our Company and our
Chief Executive Officer,
seeking
compensatory and
punitive
damages
and
attorneys' fees
,
among
other items, and alleging
,
among
other items
,
fraud
and
breach
of
contract.
We
vehemently
deny
all
allegation
s
in
the
complaint
and
believe
them
to be
without
merit.
We
filed
a
Motion
to
Dismiss
this
case
for
a
multitude
of
reasons
including,
but
not
restricted
to,
failure to state a
cause
of
action and
jurisdictional
and
venue
arguments
as
the
acquisition and
employment
agreements
provides
that
any
di
s
pute
should
be
heard
in
either
the
state or
local
courts
of
Palm Beach
County,
Florida. This Motion to Dismiss has been pending a decision since
October 2018. At
the
appropriate
juncture
,
we
also
intend
to serve
a Rule 11 Motion for
Sanctions based
upon the fact
that
the
Complaint contains
frivolo
us
arguments or arguments with no evidentiary
support.
In connection with the DEM acquisition, the
Company entered
into
three-year
employment
agreements
with
two
former members of the
entity.
Under
these agreements, the Company
was
obliged
to pay base salaries of $65,000 and $70,000, respectively to the
employees with an increase to
$75,000
each in
the
second
year of
the agreement as well
as
bonuses
to be paid at the discretion of the board of
directors.
As
discussed in Note 8
, the
principles
of DEM
failed to disclose
an
obligation
at
closing.
During
the quarter ended March 31, 2019 the Company reached a settlement
with the collections lawyer to pay down the amount remaining in
collections through equal monthly payments through February 1,
2020.
From time-to-time, we 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, we currently believe
that the final outcome of these ordinary course matters will
not
have
a
material adverse effect on our business. 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 Commitments
On September 5
,
2018 the
Company entered into a Master Services Agreement with
Kubient
,
Inc.
pursuant to which it will provide its programmatic technology
platform to us on a nonexclusive basis for the purpose of managing
our programmatic business partners. The Company did not pay
anything to Kubient
,
Inc. for
the year ended March 31, 2019 for its platform. The Company has
provided advertising services to Kubient and at March 31, 2019 the
Company is owed $108,817 and a note receivable of $75,000 and we
have reserved a total of $136,000 against these
balances.
On
September 28
,
2018
Bright Mountain Media
,
Inc.
entered
into
a
non-binding letter of intent with Kubient
,
Inc
.
pursuant
to which we
may
acquire
Kubient
,
Inc
.
in
an all
stock transaction.
The
Company has completed the due diligence process and has made a
determination that it will not pursue the acquisition of Kubient,
Inc.
On September 6
,
2017
Bright Mountain Media
,
Inc
.
entered
into a five-
year
Consulting Agreement with the Spartan Capital
Securities
,
LLC
(
"
Spartan Capital"), which became effective on
September 28
,
2018
and,
accordingly,
Spartan Capital was engaged to provide advisory
services
. The
consulting agreement calls for payments of $5,000 per month for a
term of 60 months to be prepaid upon the effective date of the
agreement. In addition
,
the
Company issued Spartan Capital 1,000,000 shares of our
common
stock
(the
"Consulting
Shares")
in accordance with the consulting agreement.
21
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 10 – COMMITMENTS AND CONTINGENCIES
(continued).
On September 6
,
2017
we
also
entered
into a
five-year M&A Advisory Agreement with Spartan Capital which
became effective on September 28, 2018 for sixty months. Under the
terms of the agreement, Spartan Capital will provide
consulting
services
to us
related to potential mergers or acquisitions. As consideration for
the M&A advisory service we paid Spartan Capital a fee of
$500,000 on the effective date of the
agreement.
Consulting fees consisting of
$300
,
000 in cash and
1,000
,
000 shares of
common stock valued at $750,000 as well as the $500,000 M&A
advisory fee are considered prepaid expenses. Total prepaid
service/consulting fees, net were $1,472,500
,
of which
$310,000 is considered
short-term
and is
included in prepaid expenses and other current assets as of
December 31, 2018. These prepaid expenses are being amortized over
60 months, the term of the respective agreements. The amortization
expense was $77,500 for the three months ended March 31,
2019.
The Company granted the purchasers in the offering
demand
and
piggy-back registration rights with respect to the
share
s
of our
common stock included in the Units and the shares of common stock
issuable upon the exercise of the Private Placement Warrants. In
addition
,
the
Company agreed to file a resale registration
statement
within
120 days
following the final closing of this offering covering the shares of
common stock issuable upon the exercise of the Private Placement
Warrants included in the Units. If the Company should fail to
timely file this resale registration
statement,
then
within five business days of the end of month we will pay the
holders an amount in cash, as
partial liquidated damages,
equal to 2% of the aggregate purchase price paid by the holder for
each 30 days, or portion thereof, until the earlier
of the date the deficiency is cured or the
expiration of six months from filing deadline
.
The
Company will keep any such registration
statement
effective until the earlier of the date upon which
all such securities may be sold without registration under Rule 144
promulgated under the Securities Act or the date which is six
months after the
expiration
date of
the Private Placement Warrants. We are obligated to pay all costs
associated with this registration statement
,
other
than selling expenses of the holders
. On April 25, 2019 we filed the Registration
Statement and included in accrued expenses $88,020 for the
liquidated damages due at March 31, 2019.
On December 11, 2018 we entered into an
Uplisting Advisory and Consulting Agreement with Spartan Capital
pursuant to which Spartan Capital will provide (i) advice and input
with respect to strategies to accomplish an uplisting of our common
stock to the Nasdaq Capital Market or NYSE American LLC or another
national securities exchange, and the implementation of such
strategies and making introductions to facilitate the uplisting,
(ii) advice and input with respect to special situation and
restructuring services, including debtor and creditor advisory
services, and (iii) sell-side advisory services with respect to the
sale and disposition of non-core businesses and assets, including
facilitating due diligence and identifying potential buyers and
strategic partners and positioning these businesses and assets to
maximize value. We paid Spartan Capital a fee of $200,000 for its
services under this agreement which is for a 12 month term
beginning on the closing date of the offering. The agreement also
provides that we will reimburse Spartan Capital for reasonable
out-of-pocket expenses, which we must approve in advance. The
Company has included the uplisting fee in prepaid expense at March
31, 2019 and December 31, 2018 of $150,000 and $200,000,
respectively and it is amortized over a twelve-month period. For
the three months ended March 31, 2019 and 2018 the Company
recognized $50,000 and $0, respectively.
NOTE 11 - EQUITY.
Preferred Stock
The
Company has authorized 20,000,000 shares of preferred stock with a
par value of $0.01 (the "Preferred Stock"), issuable in such series
and with such designations, rights and preferences as the board of
directors may determine. The Company's board of directors has
previously designated five series of preferred stock, consisting of
10% Series A Convertible Preferred Stock ("Series A Stock"),
10%
Series B Convertible Preferred Stock ("Series B
Stock"), 10% Series C Convertible Preferred Stock ("Series C
Stock"), 10% Series D Convertible Preferred Stock ("Series D
Stock") and 10% Series E Convertible Preferred Stock ("Series E
Stock").
Dividends paid for
Series E Convertible Preferred Stock paid during the three months
ended March 31, 2019 and 2018 was $24,658 and $16,986,
respectively. Dividends paid for Series F Convertible Preferred
Stock paid during the three months ended March 31, 2019 and 2018
was $49,512 and $0, respectively.
22
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 11 – EQUITY (continued).
Common Stock
Between
January 2019 and March 2019, the Company sold an aggregate of
163,750 units of its securities to 1 accredited investor in a
private placement exempt from registration under the Securities Act
in reliance on exemptions provided by Section 4(a)(2) and Rule
506(b) of Regulation D resulting in gross proceeds to the Company
of $58,950. Each unit, which was sold at a purchase price of $0.40,
consisted of one share of common stock and one five-year warrant to
purchase one share of common stock at an exercise price of $0.65
per share. Spartan Capital, served as placement agent for the
Company in this offering. As compensation for its services, the
Company paid Spartan Capital commissions and other fees totaling
$6,550, and issued Spartan Capital Placement Agents Warrants to
purchase an aggregate of 16,375 shares of our common stock,
including the cash commission and Placement Agent Warrants issued
pursuant to the final closing on January 9, 2019 included in the
Company’s consolidated statement of changes in
shareholders’ equity for the three months ended March 31,
2019.
Between
January 2019 and March 2019, the Company sold an aggregate of
1,030,000 units of its securities to 9 accredited investors in a
private placement from registration under the Securities Act in
reliance on exemptions provided by Section 4(a)(2) and Rule 506(b)
of Regulation D resulting in gross the Company of $515,000. Each
unit, which was sold at a purchase price of $0.50, consisted of one
share of common stock and one five-year warrant to purchase one
share of common stock at an exercise price of $0.75 per share. We
used $463,500 of the proceeds to issue 6% promissory notes to
Inform, Inc as a part of the potential acquisition.
Between
February 2019 and March 2019, the Company sold an aggregate of
750,000 units of its securities to 3 accredited investors in a
private placement exempt from registration under the Securities Act
in reliance on exemptions provided by Section 4(a)(2) and Rule
506(b) of Regulation D resulting in gross proceeds to the Company
of $300,000. Each unit, which was sold at a purchase price of
$0.40, consisted of one share of common stock and one five-year
warrant to purchase one share of common stock at an exercise price
of $0.65 per share.
During
the period January 2018 to March 2018, warrants to purchase an
aggregate of 176,250 of the Company’s common stock were
valued at $95,552. The Company initially recorded the warrants as
professional fees in the condensed consolidated statement of
operations however management subsequently determined that based on
the services specified in the agreement, the fees incurred from the
warrant issuance were solely for the purpose of raising capital in
connection with the private placement discussed above. As a result,
the fees are considered an offering cost and should have been
reflected as a component of shareholder’s equity for the
period ended March 31, 2018.
Stock Option Compensation
The
Company accounts for stock option compensation issued to employees
for services in accordance with ASC Topic 718, “Compensation
– Stock Compensation”. ASC Topic 718 requires companies
to recognize in the statement of operations the grant-date fair
value of stock options and other equity-based compensation issued
to employees. The value of the portion of an employee award that is
ultimately expected to vest is recognized as an expense over the
requisite service periods using the straight-line attribution
method. The Company accounts for non-employee share-based awards in
accordance with the measurement and recognition criteria of ASU No.
2018- 07, “Compensation – Stock Compensation (Topic
718): Improvements to Nonemployee Share-Based Payment
Accounting.”. The Company estimates the fair value of stock
options by using the Black-Scholes option-pricing
model.
Stock
options issued to consultants and other non-employees as
compensation for services provided to the Company are accounted for
based on the fair value of the services provided or the estimated
fair market value of the option, whichever is more reliably
measurable in accordance with FASB ASC 505, Equity, and FASB ASC
718, including related amendments and interpretations. The related
expense is recognized over the period the services are
provided.
The
Company recorded $3,213 and $7,344 of stock option expense for the
three months ended March 31, 2019 and 2018 respectively. The stock
option expense for the three months ended March 31, 2019 and 2018,
respectively has been recognized as a component of general and
administrative expenses in the accompanying consolidated financial
statements.
As of
March 31, 2019 there were total unrecognized compensation costs
related to non-vested share-based compensation arrangements of
$8,465 to be recognized through December 2020.
23
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 11 – EQUITY (continued).
A
summary of the Company's stock option activity during the three
months ended March 31, 2019 is presented below:
|
|
Number of
Options
|
Weighted Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
|
Balance
Outstanding, December 31, 2018
|
$
1,797,000
|
$
0.44
|
5.1
|
$
825,647
|
|
Granted
|
$
—
|
$
—
|
—
|
$
—
|
|
Exercised
|
$
—
|
$
—
|
—
|
$
—
|
|
Forfeited
|
$
—
|
$
—
|
—
|
$
—
|
|
Expired
|
$
—
|
$
—
|
—
|
$
—
|
|
Balance
Outstanding, March 31, 2019
|
$
1,797,000
|
$
0.44
|
4.7
|
$
788,690
|
|
Exercisable
at March 31, 2019
|
$
1,693,000
|
$
0.44
|
4.2
|
$
715,323
|
Summarized
information with respect to options outstanding under the two
option plans at March 31, 2019 is as follows:
|
|
Options Outstanding
|
|
|
||
|
Range or
Exercise Price
|
Number
Outstanding
|
Weighted Average Exercise Price
|
Remaining
Average
Contractual Life
(In Years)
|
Number
Exercisable
|
Weighted
Average
Exercise
Price
|
|
0.14 - 0.24
|
540,000
|
$
0.14
|
2.4
|
540,000
|
$
0.14
|
|
0.25 - 0.49
|
351,000
|
$
0.28
|
3.9
|
351,000
|
$
0.28
|
|
0.50 - 0.85
|
906,000
|
$
0.68
|
6.4
|
802,000
|
$
0.68
|
|
|
1,797,000
|
$
0.44
|
4.7
|
1,693,000
|
$
0.44
|
NOTE 12 – RELATED PARTIES.
During
November 2018, Mr. W. Kip Speyer, the Company’s Chairman and
Chief Executive Officer, entered into two convertible note
agreements with the company totaling $80,000. These notes have a
conversion price of $0.40 per share and resulted in the recognition
of a beneficial conversion feature recorded as a debt discount.
These notes payable total $15,140 and $11,688 at March 31, 2019 and
December 31, 2018. The notes are reported net of their unamortized
debt discount of $64,860 and $68,312 as of March 31, 2019 and
December 31, 2018, respectively.
During
the three months ended March 31, 2019 and March 31, 2018 we paid
cash dividends on these outstanding shares of the Company’s
Series E and F Preferred Stock of $72,937 and $14,763,
respectively.
NOTE 13 – NOTES RECEIVABLE.
In
March 2019 we sold the assets which were used in our Black Helmet
apparel E-Commerce business to an unaffiliated third party for
$175,000, of which $20,000 was paid at closing and the balance is
payable under the terms of a promissory note in the principal
amount of $155,000 and bearing interest at 8% per annum. The note
is secured by a guarantee of the principal of the purchaser. The
term of the note is twelve months.
As
of March 31, 2019 the Company has a total of $373,500 in Notes
Receivable to Inform, Inc., a potential acquisition. The notes bear
interest at 6% and mature on June 30, 2019. The Company funded
these notes though a Private Placement memorandum placement exempt
from registration under the Securities Act in reliance on
exemptions provided by Section 4(a)(2) and Rule 506(b) of
Regulation D. There is more information regarding these notes in
Note 11.
A
$75,000 note was issued to Kubient, Inc. during 2018 as a part of
an acquisition which the Company withdrew from. The note has been
defaulted on and has been sent to our collection agent, and as a
result the Company has recorded a reserve of $56,250 on the
note.
24
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 14 – SUBSEQUENT EVENTS.
On April 25, 2019 the Company entered into an
amended non-binding letter of intent with Inform, Inc. pursuant to
which we may acquire Inform, Inc. in an all stock transaction. The
amended non-binding letter of intent replaced in its entirety the
February 2019 non-binding letter of intent previously entered into
by the parties.
Inform, Inc. provides
data-driven technology solutions for the syndication and
monetization of contextually relevant, personalized premium video
content. Inform seeks to solve the industry’s supply
challenge for premium video by creating new video streams and
impression opportunities across the most desirable online
publishing destinations in the United States. Pursuant to the
execution of the February 2019 non-binding letter of intent with
Inform, Inc.,
the Company
issued 6% Promissory Notes to that company which mature on June 30,
2019. These notes are secured by the pledge of stock in the Company
by the primary shareholder of Inform, Inc.
During
the April, and May, 2019, the Company sold an aggregate of 709,000
units of its securities to 15 accredited investors in a private
placement exempt from registration under the Securities Act in
reliance on exemptions provided by Section 4(a)(2) and Rule 506(b)
of Regulation D resulting in gross proceeds to the Company of
$354,500. Each unit, which was sold at a purchase price of $0.50,
consisted of one share of common stock and one five-year warrant to
purchase one share of common stock at an exercise price of $0.75
per share. We used $319,050 of the proceeds to issue 6% promissory
notes to Inform, Inc as a part of the potential acquisition. The
remaining $35,450 of the proceeds were used for general working
capital.
On
May 14, 2019 the Company submitted an amended Registration
Statement under Form S-1/A (the “Report”) to amend the
S-1 filed on April 25, 019. A notice of effectiveness was issued
making the Report effective May 14, 2019.
25
I
TEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The
following discussion of our unaudited condensed consolidated
financial condition and results of operations for the three months
ended March 31, 2019 and 2018 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, 2018 as filed
with the Securities and Exchange Commission on April 12, 2019 (the
“2018 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 nine months ended March 31, 2019 and 2018 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, 2018 is
derived from our audited consolidated financial statements
appearing in the 2018 10-K.
Executive Overview of First Quarter 2019 Results
Our key
user metrics and financial results for the first quarter of 2019,
which include certain charges related to our financing with Spartan
Capital, are more fully discussed and described on pages 32 and 33
and should be read in context with the disclosure on this page. The
third quarter results are as follows:
|
User metrics:
|
●
Quarterly ad
impressions delivered were approximately one billion in the first
quarter of 2019
●
Delivered over 57
million advertisements on our owned and managed
websites.
|
First quarter 2019 financial results:
|
●
Advertising revenue
increased 58.4% in the first quarter of 2019 from the first quarter
of 2018;
●
Gross profit
increased 15.4% in the first quarter of 2019 from the first quarter
of 2018
●
Selling, general
and administrative expenses increased 10.5% in the first quarter of
2019 compared to the first quarter of 2018;
●
Loss from
continuing operations was $594,798 for the first quarter of 2019 as
compared to $771,574 for the comparable period in
2018;
●
Net loss
attributable to common stockholders was $784,433 for the first
quarter of 2019 as compared to $964,013 for the comparable period
in 2018;
●
Adjusted EBITDA was
$(546,310) for the first quarter of 2019 as compared to $(574,599)
for the comparable period in 2018; and
●
Net cash used in
operations was $656,453 for the first three months of 2019 as
compared to $675,760 for the first three months of
2018.
Overview
Bright
Mountain Media is a digital media holding company for online
publications, advertising services and software primarily focused
on serving large audience segments as well as brands trying to
reach them. We do this by connecting advertisers and brands with
consumers through a full suite of advertising services that
incorporates an ad network, multiple real-time biding platforms and
25 websites (owned and managed) that provide content, services and
products. Bright Mountain Media’s owned and managed websites
primarily provide content and services to US military and veteran
audiences, as well as first responders and their families. We have
also recently begun expanding our footprint to provide advertising
services to audiences and advertisers globally.
We
generate revenue
sales of advertising
services which generate revenue from advertisements (ad
impressions) placed on our owned and managed sites, as well as from
advertisements we place on partner websites, for which we earn a
share of the revenue. We also generate advertising services revenue
from facilitating the real-time buying and selling of
advertisements at scale between networks of buyers, often called
DSPs (Demand Side Platforms) and sellers, often called SSPs (Supply
Side Platforms).
26
When
fully developed Bright Mountain’s full suite of advertising
solutions will include:
●
The ability for
advertisers to login and purchase advertising space on a variety of
digital publications;
●
Leading targeting
technology, allowing advertisers to pinpoint their marketing
efforts to reach geo-targeted, specific demographics across
desktop, tablet, and mobile devices;
●
The ability to
handle any ad format, including video, display, and native
advertisements;
●
Ad serving and
self-service features for publishers and advertisers;
and
●
Server-to-server
integration with other advertiser and publisher platforms for
extremely quick transactions and ad deployments.
This
Bright Mountain Media full services advertising solution will be a
marketplace for publishers and advertisers where they will be able
to login and choose from various features to maximize their earning
potential. Advertisers will be able to set their budget and choose
where their ads will be seen using our filters or by connection
directly with publishers 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.
As
mentioned above, in addition to our niche market of US military and
public safety sectors, we intend to broaden the scope of our
partner publishers and publisher networks to include global
audience segments across connected television, mobile devices,
tablets and desktop computers.
Key initiatives
Our
growth strategy is based upon:
●
completing and
launching the Bright Mountain Media advertising solutions
marketplace;
●
expanding our sales
revenues through organic growth;
●
continuing to
pursue acquisition candidates that are strategic our business
plan;
●
evaluating expenses
attributed to our non-strategic business lines; and
●
continuing to
automate our processes and reduce overhead where possible without
impacting our customer experience
Key metrics
In
addition, over the past quarters (third quarter in 2017 to the
first quarter of 2019), we experienced a 90% increase in the number
of total ad impressions delivered. The change in ad impression over
the past four consecutive quarters is conveyed in the following
graph:
Results of operations
Revenue
|
|
For the three months ended
|
|||
|
|
March 31,
|
|||
|
|
2019
|
2018
|
Change
|
%
Change
|
|
Advertising
|
$
1,085,456
|
$
683,058
|
$
402,398
|
58.9
%
|
Cost of Revenue and Gross Profit Margins
|
|
For the three months ended
|
|||
|
|
March 31,
|
|||
|
|
2019
|
2018
|
Change
|
%
Change
|
|
Advertising
revenues
|
$
1,085,456
|
$
683,058
|
$
402,398
|
58.9
%
|
|
Total cost of
revenue
|
885,696
|
510,704
|
374,992
|
73.4
%
|
|
Gross
profit
|
$
199,760
|
$
172,354
|
$
27,406
|
15.9
%
|
|
|
|
|
|
|
|
Gross profit margin
as a percentage of advertising revenues
|
18.4
%
|
25.2
%
|
|
|
Our
advertising revenue for the first quarter of 2019 was 58.9% higher
than he comparable period in 2018 due to the acquisition of a key
customer during the third quarter of 2017. Our advertising revenues
for the first quarter of 2019 were 1.68% less than the fourth
quarterof 2018. The fourth quarter of the year is historically the
largest revenue quarter for advertising.
27
We
incur costs of sales associated with the advertising revenue. These
costs include revenue share payments to media providers and website
publishers.
Selling, General and Administrative Expenses
|
|
For the three months ended
|
|||
|
|
March
31,
|
|||
|
|
2019
|
2018
|
Change
|
% Change
|
|
Selling, general
and administrative expenses
|
$
915,954
|
828,992
|
$
86,962
|
10.5
%
|
|
SG&A as a
percentage of total revenues
|
84.4
%
|
121.4
%
|
|
|
The
components of selling, general and administration expense increases
are attributable to changes during 2019 including higher salaries
and wages and professional fees. The higher salaries and wages are
related to the replacement of staff at higher wages. Increased
professional fees relates to legal fees which increased due to
costs associated with remedial actions we have taken to counter the
adverse impact of the actions ofthe former Daily Engage Media
employees. We amortized amortization of prepaid contract fees paid
to Spartan Capital totaling $122,500. Professional fees also
include the $88,000 related to the late filing of our Registration
Statement and higher audit fees related to filing our Form 10-K for
2018. The website development expense for the three months ended
March 31, 2019 from the comparable period in 2018 period declined,
as the work was completed by the fourth quarter 2018. Non-cash
amortization of intangible expense decreased during 2019 as the
final valuation of the DEM acquisition reduced overall amortization
expense and prior period impairments reducing amortization expenses
during 2019 .
Selling,
general and administrative expenses are expected to continue to
increase as we execute our planned growth strategy of launching and
operating the Bright Mountain Media ad exchange network which will
include additional administrative support. Subject to the
availability of additional working capital, the Company also
intends to add administrative staff to its accounting department to
improve controls over its accounting and reporting
processes.
Total other income (expense)
Total
other income (expense) for the three months ended March 31, 2019
and 2018 of $121,395 and $(114,936), respectively, primarily
reflects a $122,500 extinguishment of the publisher payments
liability. Interest expense related party and non-related party
debt declined during the first quarter of 2019 due to the November,
2018 exchange of the related party notes payable for preferred
stock and repayment of debt.
Discontinued Operations
The
Company discontinued its E-commerce business in the fourth quarter
of 2018. The loss on discontinued operations was $115,494 and
$177,676 for the three months ended March 31, 2019 and 2018,
respectively. Revenues significantly declined during the period,
from $375,000 in 2018 to $98,000 for the same period in 2019, gross
profit margins declined from $84,000 in 2018 to $47,000 for the
same period in 2019. Selling, general and administrative expenses
declined from $261,000 in 2018 to $131,000 for the three months
ended March 31, 2019. Expenses declined as the Company exited the
business. Other income (expenses) for the three months ended March
31, 2019 was ($33,000) relates to the sale of the Black Helmet
assets and the write-down of property and equipment during the
period
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 should 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 consider the impact to our statement of operations of certain
expenses.
28
Non-GAAP financial measure (continued)
The
following is an unaudited reconciliation of net (loss) to adjusted
net (loss) and Adjusted EBITDA for the periods
presented:
|
|
For the Three Months Ended
|
|
|
|
March 31,
|
March 31,
|
|
|
2019
|
2018
|
|
Net
loss from continuing operations
|
$
(594,798
)
|
$
(771,574
)
|
|
plus:
|
|
|
|
Stock
compensation expense
|
3,213
|
7,344
|
|
Depreciation
expense
|
2,352
|
2,964
|
|
Amortization
expense
|
35,813
|
71,456
|
|
Amortization
on debt discount
|
3,452
|
48,389
|
|
Interest
expense
|
3,658
|
66,822
|
|
|
$
(546,310
)
|
$
(574,599
)
|
Liquidity and capital resources
Liquidity
is the ability of a company to generate sufficient cash to satisfy
its needs for cash. The following table summarized total current
assets, total current liabilities and working capital (deficit) at
March 31, 2019 as compared to December 31, 2018.
|
|
March
31,
2019
|
December
31,
2018
|
|
Total
current assets
|
$
2,782,838
|
$
2,473,630
|
|
Total
current liabilities
|
1,725,747
|
1,591,681
|
|
Working
capital
|
$
1,057,091
|
$
881,949
|
The
increase in cash and increase in the working capital deficit is a
result of cash proceeds from the sale of equity securities in three
private placements during the three months ended March 31, 2019.
The increase in our current assets is mostly reflective of an
increase in cash balances, notes receivable, and prepaid expenses
offset by the decrease in current assets due to discontinued
operations.
As
we continue our efforts to grow our business, we expect that our
monthly cash operating overhead will continue to increase as we add
personnel, although at a lesser rate, and we are not able at this
time to quantify the amount of this expected increase. In the first
quarter of 2019 we implemented policies and procedures around cash
collections to prevent the aging of accounts receivables that was
experienced in 2018. Cash collection efforts have been successful,
and we feel that we have appropriately reserved for uncollectible
amounts at March 31, 2019.
We
do not have any commitments for capital expenditures. During the
fourth quarter of 2018 we loaned Kubient, Inc. $75,000 under the
terms of a promissory note. The promissory notes payable in the
aggregate amount of $165,162 to three members of DEM as partial
consideration in our acquisition of that entity, which became due
in September 2018, and has not been paid pending the settlement of,
or conclusion of, the litigation described later in this report
under Part II, Item 1. Legal Matters.
Going concern and management’s liquidity plans
The
accompanying condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company sustained a net loss of
($710,262) and used net cash in operating activities of ($629,453)
for the three months ended March 31, 2019. The Company had an
accumulated deficit of ($17,753,228) at March 31,
2019.
The
report of our independent registered public accounting firm on our
audited consolidated financial statements at December 31, 2018 and
2017 and for the years then ended contains an explanatory paragraph
regarding substantial doubt of our ability to continue as a going
concern based upon our net losses, cash used in operations and
accumulated deficit. These factors, among others, raise substantial
doubt about our ability to continue as a going concern. Our
unaudited condensed consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. There are no assurances we will be successful in our
efforts to generate revenues or report profitable operations or to
continue as a going concern, in which event investors would lose
their entire investment in our company.
29
Our
ability to fully implement the Bright Mountain Media Ad Exchange
Network and maximize the value of our assets are dependent upon our
ability to raise additional capital sufficient for our short-term
and long-term growth plans. Historically we have been dependent
upon loans and equity purchases from our Mr. W. Kip Speyer, an
executive officer and member of our board of directors, and, during
2019 and 2018, sales of equity securities to accredited investors,
to provide adequate funds to meet our working capital needs. During
the three months ended March 31, 2019 we raised $880,000 of working
capital through the sale of our securities in three private
placements. While we estimate that we need a minimum of $2.4
million in additional working capital to provide sufficient funds
to pay our operating expenses and fund our development over the
next 12 months, we believe that if we are successful the
anticipated revenues from our advertising segment 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, the placement agent is acting on a best
efforts basis and there are no assurances we will be successful in
raising additional capital during the balance of 2019 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.
Summary of cash flows
|
|
March
31, 2019
|
|
|
|
2019
|
2018
|
|
Net
cash (used in) operating activities
|
$
(629,453
)
|
$
(675,760
)
|
|
Net
cash (used in) investing activities
|
$
(8,000
)
|
$
(505
)
|
|
Net
cash provided by financing activities
|
$
327,464
|
$
742,065
|
During
the three months ended March 31, 2019, we used cash primarily to
fund our net loss of $710,262 for the period, decrease in prepaid
expenses and services/consulting agreements of $122,500 for the
period offset by a increase in accounts receivable of $375,927
EBITA and $360,391 of accounts payable offset by a decrease in
accrued expenses of $26,538. During the three months ended
March 2018, we used cash primarily to fund our net loss of $949,250
for the period as well as a decrease in prepaid expenses and other
current assets of a $26,191, offset by lower accounts payable of
$360,391.
The
increases in net cash used in investing activities in 2019 is
attributable to $8,000 paid for the acquisition in 2019 of a
Facebook page.
During
the three months ended March 31, 2019 the Company raised $873.950
through the sale of equity securities in three private placement
memorandums. During 2018 the Company raised $634,501, net for sale
of common stock and $200,000 of preferred shares.
Critical accounting policies
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities, the disclosure of
contingent assets and liabilities and the reported amounts of
revenue and expenses during the reported periods. The more critical
accounting estimates include estimates related to revenue
recognition and accounts receivable allowances. We also have other
key accounting policies, which involve the use of estimates,
judgments and assumptions that are significant to understanding our
results, which are described in Note 1 to our unaudited condensed
consolidated financial statements appearing elsewhere in this
report.
Recent accounting pronouncements
The
recent accounting standards that have been issued or proposed by
the FASB or other standards-setting bodies as described in Note 1
appearing earlier in this report that do not require adoption until
a future date are not expected to have a material impact on the
financial statements upon adoption.
All
other newly issued accounting pronouncements, but not yet
effective, have been deemed either immaterial or not
applicable.
30
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.
I
TEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.
Not
applicable for a smaller reporting company.
I
TEM 4.
CONTROLS AND PROCEDURES.
Evaluation of Disclosure
Controls and Procedures
. We
maintain “disclosure controls and procedures” as such
term is defined in Rule 13a-15(e) under Securities Exchange Act of
1934 (the “Exchange Act”). In designing and evaluating
our disclosure controls and procedures, our management recognized
that disclosure controls and procedures, no matter how well
conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of disclosure controls and procedures
are met. Additionally, in designing disclosure controls and
procedures, our management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible
disclosure controls and procedures. The design of any disclosure
controls and procedures also is based in part upon certain
assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated
goals under all potential future conditions.
Based
on his evaluation as of the end of the period covered by this
report, our Chief Executive Officer, who also serves as our
principal financial and accounting 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, 2018. 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
will continue to monitor our internal control over financial
reporting on an ongoing basis and are committed to taking further
action and implementing additional enhancements or improvements, as
necessary and as funds allow. We do not, however, expect that the
material weaknesses in our disclosure controls will be remediated
until such time as we have added to our accounting and
administrative staff allowing improved internal control over
financial reporting.
Changes in Internal Control
over Financial Reporting.
There
have been no changes in our internal control over financial
reporting during our last fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
31
PART II - OTHER INFORMATION
I
TEM 1.
LEGAL PROCEEDINGS.
None,
except as previously disclosed.
I
TEM 1A.
RISK FACTORS.
We
incorporate by reference the risk factors disclosed in Part I, Item
1A of our 2018 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.
There are no assurances our advertising revenues will return to
historic levels in future periods.
As
described elsewhere herein, during the first quarter of 2019
advertising revenues increased approximately 58.9% from our
advertising revenues for the first quarter of 2019 which is
attributable to discontinuing the E-Commerce segment and focusing
on advertising.
I
TEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE
OF PROCEEDS.
Between
April 8, 2019 and May 17, 2019, we sold an aggregate of 709,000
units of our securities to 15 accredited investors in a private
placement exempt from registration under the Securities Act of
1933, as amended, in reliance on exemptions provided by Section
4(a)(2) and Rule 506(b) of Regulation D of that act resulting in
gross proceeds to us of $354,500. Each unit, which was sold at a
purchase price of $0.50, consisted of one share of common stock and
one five-year warrant to purchase one share of common stock at an
exercise price of $0.75 per share. We did not pay any commissions
or finder’s fees for these sales. We used $319,050 of the
proceeds to lend Inform, Inc., an entity with which we are a party
to a non-binding letter of intent, under the terms of 6% secured
promissory notes which mature on June 30, 2019, and used the
balance of $35,450 for general working capital.
I
TEM 3.
DEFAULTS UPON SENIOR
SECURITIES.
None.
I
TEM 4.
MINE SAFETY DISCLOSURES.
None.
I
TEM 5.
OTHER INFORMATION.
None.
32
I
TEM 6.
EXHIBITS.
|
No.
|
|
Exhibit Description
|
|
Form
|
|
Date Filed
|
|
Number
|
|
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended
and Restated Articles of Incorporation
|
|
Form
10
|
|
3/31/13
|
|
3.3
|
|
|
|
|
|
Articles
of Amendment to the Amended and Restated Articles of
Incorporation
|
|
8-K
|
|
7/9/13
|
|
3.3
|
|
|
|
|
|
Articles
of Amendment to the Amended and Restated Articles of
Incorporation
|
|
8-K
|
|
11/16/13
|
|
3.4
|
|
|
|
|
|
Articles
of Amendment to the Amended and Restated Articles of
Incorporation
|
|
8-K
|
|
12/30/13
|
|
3.4
|
|
|
|
|
|
Articles
of Amendment to the Amended and Restated Articles of
Incorporation
|
|
10-K
|
|
3/31/14
|
|
3.5
|
|
|
|
|
|
Articles
of Amendment to the Amended and Restated Articles of
Incorporation
|
|
8-K
|
|
7/28/14
|
|
3.6
|
|
|
|
|
|
Articles
of Amendment to the Amended and Restated Articles of
Incorporation
|
|
10-K/A
|
|
4/1/15
|
|
3.5
|
|
|
|
|
|
Articles
of Amendment to the Amended and Restated Articles of
Incorporation
|
|
8-K
|
|
12/4/15
|
|
3.7
|
|
|
|
|
|
Amended
and Restated Bylaws
|
|
Form
10
|
|
3/31/13
|
|
3.2
|
|
|
|
|
|
Articles
of Amendment to the Amended and Restated Articles of Incorporation
|
|
8-K
|
|
11/13/18
|
|
3.10
|
|
|
|
|
|
Rule
13a-14(a)/15d-14(a) certification of Chief Executive
Officer
|
|
|
|
|
|
|
|
Filed
|
|
|
|
Rule
13a-14(a)/15d-14(a) certification of principal financial and
accounting officer
|
|
|
|
|
|
|
|
Filed
|
|
|
|
Section
1350 certification of Chief Executive Officer and principal
financial and accounting officer
|
|
|
|
|
|
|
|
Filed
|
|
|
101.INS
|
|
XBRL
Instance Document
|
|
|
|
|
|
|
|
Filed
|
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
Filed
|
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
Filed
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
Filed
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
Filed
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
Filed
|
33
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.
|
|
|
|
|
|
|
May 23, 2019
|
By:
|
/s/ W. Kip Speyer
|
|
|
|
W. Kip Speyer, Chief Executive Officer,
principal financial and accounting officer
|
34
TABLE OF CONTENTS
Part 1 Financial InformationItem 1. Financial StatementsNote 1 Nature Of Operations and Summary Of Significant Accounting PoliciesNote 2 - Going ConcernNote 2 Going Concern (continued)Note 3 Summary Of Significant Accounting PoliciesNote 3 Summary Of Significant Accounting Policies (continued)Note 4 Discontinued OperationsNote 4 Discontinued Operations (continued)Note 5 Prepaid Costs and ExpensesNote 6 Property and EquipmentNote 7 Website Acquisition and Intangible AssetsNote 8 Accrued ExpensesNote 8- Accrued Expenses (continued)Note 9 Notes PayableNote 9 Notes Payable (continued)Note 10 Commitments and ContingenciesNote 10 Commitments and Contingencies (continued)Note 11 - EquityNote 11 Equity (continued)Note 12 Related PartiesNote 13 Notes ReceivableNote 14 Subsequent EventsItem 2. Management's Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits