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EX-32.1 - Bright Mountain Media, Inc.ex32-1.htm
EX-31.2 - Bright Mountain Media, Inc.ex31-2.htm
EX-31.1 - Bright Mountain Media, Inc.ex31-1.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

  [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
    For the quarterly period ended September 30, 2020
     
    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
None        

 

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 [X] 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 [X] 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 [X] Smaller reporting company [X]
    Emerging growth company [X]

 

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 [X]

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of November 24, 2020 there were 114,564,060 shares of the issuer’s common stock issued and outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

   

Page

No.

  PART I - FINANCIAL INFORMATION  
     
ITEM 1. FINANCIAL STATEMENTS. 4
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 45
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 54
     
ITEM 4. CONTROLS AND PROCEDURES. 55
     
  PART II - OTHER INFORMATION  
     
ITEM 1. LEGAL PROCEEDINGS. 56
     
ITEM 1A. RISK FACTORS. 56
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 56
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 56
     
ITEM 4. MINE SAFETY DISCLOSURES. 56
     
ITEM 5. OTHER INFORMATION. 56
     
ITEM 6. EXHIBITS. 57

 

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 varying gross profit margins, our ability to raise additional capital and continue as a going concern;
     
  our ability to fully develop the Bright Mountain digital media services platform;
     
  the impact of COVID-19 on internet advertising;
     
  our ability to manage and expand our relationships with publishers;
     
  the impact of seasonal fluctuations on our revenues;
     
  acquisitions of new businesses and our ability to integrate those businesses into our operations;
     
  online security breaches;
     
  failure to effectively promote our brand and attract advertisers;
     
  our ability to protect our content;
     
  our ability to protect our intellectual property rights;
     
  the success of our technology development efforts;
     
  additional competition resulting from our business expansion strategy;
     
  our dependence on third party service providers;
     
  our ability to detect advertising fraud;
     
  liability related to content which appears on our websites;
     
  regulatory risks and compliance with privacy laws;
     
  dependence on executive officers and certain key employees and consultants;
     
  our ability to hire qualified personnel;
     
  possible problems with our network infrastructure;
     
  ongoing material weaknesses in our disclosure controls and internal control over financial reporting;
     
  the impact on available working capital resulting from the payment of cash dividends to our affiliates;
     
  dilution to existing shareholders upon the conversion of outstanding preferred stock and convertible notes and/or the exercise of outstanding options and warrants, including warrants with cashless exercise rights;
     
  the illiquid nature of our common stock;
     
  risks associated with securities litigation;
     
  provisions of our charter and Florida law which may have anti-takeover effects; and

 

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, 2019, as filed with the Securities and Exchange Commission on May 14, 2020 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, “third quarter of 2020” refers to the three months ended September 30, 2020, “period ended 9 months” refers to the nine months ended September 30, 2020 “third quarter of 2019” refers to the three months ended September 30, 2019, “2020” refers to the year ending December 31, 2020 and “2019” refers to the year ended December 31, 2019. The information which appears on our website at www.brightmountainmedia.com is not part of this report.

 

3

 

 

PART 1 – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

    September 30, 2020     December 31, 2019  
    (unaudited)        
ASSETS                
Current Assets                
Cash and cash equivalents   $ 1,050,370     $ 957,013  
Accounts receivable, net     5,409,605       3,997,475  
Note receivable, net     13,646       63,812  
Prepaid expenses and other current assets     702,054       752,975  
Current assets - discontinued operations     -       1,705  
                 
Total Current Assets     7,175,675       5,772,980  
                 
Property and equipment, net     119,912       30,666  
Website acquisition assets, net     12,789       48,928  
Intangible assets, net     12,052,337       19,610,801  
Goodwill     22,150,047       53,646,856  
Prepaid services/consulting agreements - long term     620,000       913,182  
Right of use asset     243,549       397,912  
Other assets     396,969       35,823  
Total Assets   $ 42,771,278     $ 80,457,148  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY                
Current Liabilities                
Accounts payable   $ 7,605,873     $ 8,358,442  
Accrued expenses     1,933,476       3,228,328  
Accrued interest to related party     12,720       6,629  
Premium finance loan payable     16,671       179,844  
Deferred revenues     65,512       6,651  
Long term debt, current portion     1,135,000       165,163  
Operating lease liability, current portion     221,763       211,744  
Current liabilities - discontinued operations     -       591  
Total Current Liabilities     10,991,015       12,157,392  
                 
Long term debt to related parties, net     36,199       25,689  
Long term debt     18,588,440       -  
Deferred tax liability     283,213       581,440  
Operating lease liability, net of current portion     21,915       198,232  
Total Liabilities     29,920,782       12,962,753  
Commitments and Contingencies                
Shareholders’ Equity                
Convertible preferred stock, par value $0.01, 20,000,000 shares authorized,                
Series A-1, 2,000,000 shares designated, 1,200,000 and 1,200,000 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively     12,000       12,000  
Series B-1, 6,000,000 shares designated, 0 and 0 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively     -       -  
Series E, 2,500,000 shares designated, issued and outstanding at September 30, 2020 and December 31, 2019, respectively     25,000       25,000  

Series F, 4,344,017 shares designated, issued and outstanding at September 30, 2020 and December 31, 2019, respectively

    43,440       43,440  
Common stock, par value $0.01, 324,000,000 shares authorized, 114,564,060 and 100,244,312 issued and 114,013,943 and 78,063,531 outstanding at September 30, 2020 and December 31, 2019, respectively     1,145,642       1,002,444  
Additional paid-in capital     96,360,804       86,856,500  
Accumulated deficit     (83,581,144 )     (20,444,989 )

Treasury Stock at cost 550,117 shares at September 30, 2020

    (1,155,246 )     -  
Total shareholders’ equity     12,850,496       67,494,395  
Total Liabilities and Shareholders’ Equity   $ 42,771,278     $ 80,457,148  

 

See accompanying notes to unaudited condensed consolidated financial statements

 

4

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30, 2020   September 30, 2019   September 30, 2020   September 30, 2019 
                 
Revenues                    
Advertising  $4,894,486   $2,113,276   $9,438,612   $3,915,326 
                     
Cost of revenue                    
Advertising   2,085,060    1,432,922    5,005,646    2,874,076 
Gross profit   2,809,426    680,354    4,432,966    1,041,250 
                     
Selling, general and administrative expenses   5,493,343    2,734,203    13,860,462    4,452,490 
                     
Loss from operations   (2,683,917)   (2,053,849)   (9,427,496)   (3,411,240)
                     
Other income (expense)                    
Interest (expense) income, net   (251,779)   16,234    (323,047)   37,281 
Gain on settlement   935,408    -    935,408    122,500 
Impairment of assets   (53,996,544)   -    (53,996,544)   - 
Settlement of contingent consideration   

(750,000

)   

-

    

(750,000

)   - 
Other income (expense)   -    (6,993)   (215)   (7,902)
Interest expense - related party   (2,045)   (5,574)   (6,091)   (17,289)
Total other (expense) income   (54,064,960)   3,667    (54,140,489)   134,590 
                     
Net loss from continuing operations   (56,748,877)   (2,050,182)   (63,567,985)   (3,276,650)
                     
Income (loss) from discontinued operations   -    13,649    -    (174,021)
                     
Net loss before tax   (56,748,877)   (2,036,533)   (63,567,985)   (3,450,671)
                     
Income tax benefit   177,089    -    431,830    - 
                     
Net Loss   (56,571,788)   (2,036,533)   (63,136,155)   (3,450,671)
                     
Preferred stock dividends                    
Series A, Series E, and Series F preferred stock   (180,122)   (52,682)   (447,369)   (201,484)
                     
Net loss attributable to common shareholders  $(56,751,910)  $(2,089,215)  $(63,583,524)  $(3,652,155)
                     
Basic and diluted net loss for continuing operations per share  $(0.51)  $(0.03)  $(0.59)  $(0.05)
Basic and diluted net income (loss) for discontinued operations per share  $0.00   $0.00  $0.00   $(0.00)
Basic and diluted net loss per share  $(0.51)  $(0.03)  $(0.59)  $(0.05)
Weighted average shares outstanding - basic and diluted   110,995,809    64,267,465    108,099,730    66,485,230 

 

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 Nine Months Ended September 30, 2020 and 2019

(Unaudited)

 

   Preferred Stock   Common Stock   Treasury Stock   Additional
Paid-in
   Accumulated   Total Shareholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
Balance - December 31, 2019   8,044,017   $80,440    100,244,312   $1,002,444    -   -   $86,856,500   $(20,444,989)  $67,494,395 
Series A-1, E, and F preferred stock dividend   -    -    -    -    -    -    (118,252)   -    (118,252)
Stock option vesting expense   -    -    -    -    -    -    36,595    -    36,595 
Units consisting of one share of common stock and one warrant issued for cash, net of costs   -    -    5,117,500    51,175    -    -    2,123,762    -    2,174,937 
Stock issued to Spartan Capital for acquisitions completed   -    -    1,310,000    13,100    -    -    2,109,300    -    2,122,400 
Common stock issued for services rendered   -    -    61,048    611    -    -    91,108    -    91,719 
Net loss for the three months ended March 31, 2020   -    -    -    -    -    -    -    (3,459,020)   (3,459,020)
Balance - March 31, 2020   8,044,017   $ 80,440    106,732,860   $ 1,067,330    -   -   $ 91,099,013   $ (23,904,009)  $ 68,342,774 
Series A-1, E, and F preferred stock dividend   -    -    -    -    -    -    (148,995)   -    (148,995)
Stock option vesting expense   -    -    -    -    -    -    41,499    -    41,499 
Units consisting of one share of common stock and one warrant issued for cash   -    -    1,025,000    10,250    -    -    425,375    -    435,625 
Stock issued for acquisition   -    -    2,500,000    25,000    -    -    3,700,000    -    3,725,000 
Net loss for the three months ended June 30, 2020   -    -    -    -    -    -    -    (3,105,347)   (3,105,347)
Balance – June 30, 2020   8,044,017   $80,440    110,257,860   $1,102,580    -   -   $95,116,892   $(27,009,356)  $69,290,556 
Series A-1, E and F preferred stock dividend   -    -    -    -    -    -    (180,122)   -    (180,122)
Stock option vesting expense   -    -    -    -    -    -    51,011    -    51,011 
Stock option exercise   -    -    50,000    500    -    -    6,450    -    6,950 
Units consisting of one share of common stock and one warrant issued for cash   -    -    4,256,200    42,562    -    -    1,366,573    -    1,409,135 
                                              
Treasury stock   -    -    -    -    550,117    (1,155,246)   -    -    (1,155,246)
Net loss for the three months ended September 30, 2020   -    -    -    -    -    -    -    (56,571,788)   (56,571,788)
Balance – September 30, 2020   8,044,017   $80,440    114,564,060   $1,145,642    550,117   (1,155,246)  $96,360,804   $(83,581,144)  $12,850,496 

 

 

   Preferred Stock   Common Stock  

Additional

Paid-in

   Accumulated  

Total

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 
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    64,068,864    640,689    20,559,308    (17,753,228)   3,515,209 
Series E and F preferred stock dividend   -    -    -    -    (74,994)   -    (74,994)
Stock option vesting expense   -    -    -    -    9,898    -    9,898 
Common Stock issued for services-cancelled   -    -    (3,000)   (30)   -    -    (30)
Units consisting of one share of common stock and one warrant issued for cash, net of costs   -    -    240,000    2,400    117,600    -    120,000 
Units consisting of one share of common stock and two warrants issued for cash, net of costs   -    -    1,052,500    10,525    510,755    -    521,280 
Net loss for the three months ended June 30, 2019   -    -    -    -    -    (703,876)   (703,876)
Balance – June 30, 2019   6,844,017   $68,440    65,358,364   $653,584   $21,122,567   $(18,457,104)  $3,387,487 
Series A-1, E and F preferred stock dividend   -    -    -    -    (52,682)   -    (52,682)
Stock option vesting expense   -    -    -    -    15,963    -    15,963 
Common stock issued for services   -    -    22,167    222    32,028    -    32,250 
Issuance of Series A-1 preferred stock   500,000    5,000    -    -    245,000    -    250,000 
Units consisting of one share of common stock and two warrants issued for cash   -    -    258,360    2,584    126,596    -    129,180 
Common stock issued in acquisition of Slutsky & Winshman   -    -    12,354,640    120,508    19,288,773    -    19,409,281 
Net loss for the three months ended September 30, 2019   -    -    -    -    -    (2,036,533)   (2,036,533)
Balance – September 30, 2019   7,344,017   $73,440    77,993,531   $776,898   $40,778,245   $(20,493,637)  $21,134,946 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

6

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30, 2020

(Unaudited)

 

   For the Nine Months Ended September 30, 
   2020   2019 
Cash flows from operating activities:          
Net loss  $(63,136,155)  $(3,450,671)
Add back: loss attributable to discontinued operations   -    174,021 
Adjustments to reconcile net loss to net cash used in operations:          
Depreciation   29,616    5,613 
Amortization of debt discount   10,510    10,472 
Amortization   3,289,330    120,668 
Impairment of tradename   -    20,800 
Impairment of goodwill   42,444,971    - 
Impairment of intangibles   11,551,573    - 
Gain on settlement   (935,408)   (122,500)
Stock option compensation expense   129,105    29,074 
Stock issued for services rendered   92,218    32,250 
Non-cash finance fee   275,000    - 
Non-cash settlement of contingent consideration   750,000    - 
Change in deferred taxes   (431,830)   - 
Provision for bad debt   287,068    29,338 
Changes in operating assets and liabilities:          
Accounts receivable   1,193,666    (808,812)
Prepaid expenses and other current assets   536,920    482,979 
Prepaid services/consulting agreements   293,182    - 
Other assets   263,836    (17,369)
Right of use asset and lease liability   (11,935)   - 
Accounts payable   (1,674,722)   1,078,205 
Accrued expenses   53,950    1,070,498 
Accrued interest – related party   6,091    3,213 
Deferred revenues   25,528    (4,163)
Net cash (used in) continuing operations for operating activities   (4,957,486)   (1,346,384)
Net cash (used in) discontinued operations   -    (155,739)
Net cash (used in) operating activities   (4,957,486)   (1,502,123)
           
Cash flows from investing activities:          
Purchase of property and equipment   (4,055)   (8,746)
Cash received in acquisition   -    603,744 
Principal collected on notes receivable   -    77,500 
Notes receivable funded   -    (1,156,887)
Cash acquired from Wild Sky   1,357,669    - 
Cash paid for website acquisition   -    (8,000)
Net cash provided by (used in) investing activities   1,353,614    (492,389)
           
Cash flows from financing activities:         
Proceeds from issuance of common stock, net   3,586,148    1,651,410 
Payments of premium finance loan payable   (163,173)   (89,154)
Dividend payments   (235,129)   (201,847)
Principal payments received for notes receivable   44,583    - 
Proceeds from issuance of preferred stock   -    250,000 
Principal payment on notes payable   464,800    (64,681)
Net cash provided by financing activities   3,697,229    1,545,728 
           
Impact on foreign exchange rates on cash   -    9,818 
Net increase (decrease) in cash and cash equivalents including cash and cash equivalents classified within assets related to continuing operations   

93,357

    (438,966)
Net (decrease) in cash related to discontinued operations   

-

    

(15,971

)
Net increase (decrease) in cash and cash equivalents   

93,357

    

(454,937

)
Cash and cash equivalents at the beginning of period   957,013    1,042,457 
Cash and cash equivalents at end of period  $1,050,370   $587,520 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

7

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30, 2020

(Unaudited)

 

   For the Nine Months Ended September 30, 
   2020   2019 
Supplemental disclosure of cash flow information          
Cash paid for          
Interest  $6,091   $15,926 
           
Non-cash investing and financing activities          
Non-cash acquisition of Slutsky & Winshman net liabilities  $-   $168,244 
Non-cash acquisition of intangible assets of Slutsky & Winshman  $-   $4,169,000 
Non-cash acquisition of right of use asset  $-    266,320 
Non-cash acquisition of goodwill  $-   $15,408,523 
Premium finance loan payable recorded as prepaid  $-   $28,602 
Stock dividend  $-   $100 
Reduction of liability with Daily Engage Media Group, LLC  $-    197,500 
Notes receivable for the sale of Black Helmet  $-   $155,000 
Stock issued for prepaid services and consulting agreements to Spartan Capital  $-    32,200 
Recognition of right of use asset and lease liability for S&W  $-   $245,540 

Non-cash acquisition of assets of Wild Sky

  $(4,111,956)  $- 
Non-cash acquisition of intangible assets of Wild Sky  $(7,246,300)  $- 

Non-cash acquisition of goodwill of Wild Sky

  $

(10,814,559

)  $- 

Non-cash acquisition of liabilities of Wild Sky

  $3,388,579   $- 
Common stock issued for acquisition  $3,725,000   $- 
Long term debt from acquisition  $16,416,905   $- 
Issuance of debt in accordance with legal settlement  $219,837   $- 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

8

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(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, was formed as a Florida limited liability company in May 2011. Its wholly owned subsidiary, Bright Mountain, LLC (“BMLLC”) F/K/A Daily Engage Media Group, LLC (“DEM”) was formed as a New Jersey limited liability company in February 2015. In August 2019 Bright Mountain Israel Acquisition, an Israeli company was formed and acquired the wholly owned subsidiary Slutzky & Winshman Ltd. (“S&W”) which then changed its name to Oceanside Media, see Note 4. Further, on November 18, 2019, Bright Mountain Media, Inc., through its wholly owned subsidiary BMTM2, Inc., a Florida corporation, acquired News Distribution Network, Inc., a Delaware company, which then changed its name to MediaHouse, Inc. On June 1, 2020, Bright Mountain Media, Inc. acquired the wholly owned subsidiary CL Media Holdings, LLC D/B/A “Wild Sky”. When used herein, the terms “BMTM, the “Company,” “we,” “us,” “our” or “Bright Mountain” refers to Bright Mountain Media, Inc. and its subsidiaries.

 

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 5.

 

Continuing Operations

 

Bright Mountain Media, Inc. is engaged in operating a proprietary, end-to-end digital media and advertising services platform designed to connect brand advertisers with demographically-targeted consumers – both large audiences and more granular segments – across digital, social and connected television (CTV) publishing formats. We define “end-to-end” as our process for taking ad buying from beginning to end, delivering a complete functional solution, usually without requiring any involvement from a third party.

 

Through acquisitions and organic software development initiatives, we have consolidated and plan to further condense key elements of the prevailing digital advertising supply chain through the elimination of industry “middlemen” and/or costly redundancy of services via our ad exchange network. Our aim is to enable and support a streamlined, end-to-end advertising model that addresses both demand (ad buy side) and supply (media sell side) for both direct sales teams and programmatic sales and publishing of digital advertisements that reach specific target audiences based on what, where, when and how that specific target audience elects to access certain web and/or streaming video content. Programmatic advertising relies on computer programs to use data and proprietary algorithms to select which ads to buy and for what price, while direct sales involves traditional interpersonal contact between ad buyers and advertising sales representative(s).

 

By selling advertisements on our current portfolio of 25 owned and operated websites and 20 CTV apps, coupled with acquisition or development of other niche web properties in the future, we are building depth in specific demographic verticals that allow us to package audiences into targeted consumer categories valued by advertisers.

 

On August 15, 2019, under the terms of the Share Exchange Agreement and Plan of Merger with Oceanside Media and its members, the Company acquired 100% of the membership interests of Oceanside Media. Launched in 2015, Oceanside Media provided digital performance-based marketing services to customers which include primarily advertisers and advertising agencies that promote or sell products and/or services to consumers through digital media.

 

On November 18, 2019, under the terms of the Share Exchange Agreement and Plan of Merger with NDN and its shareholders, the Company acquired 100% of the ownership interests of NDN. Launched in 2019 as a spin-off from Inform, Inc. NDN which was rebranded as MediaHouse partners with content producers and online news market websites to distribute video and banner advertisements throughout the United States of America.

 

On June 1, 2020, Bright Mountain Media, Inc. (“Bright Mountain”) entered into a membership interest purchase agreement ( the “Purchase Agreement”) with Centre Lane Partners Master Credit Fund II, L.P. (“Centre Lane”) to purchase 100% of the membership interests of CL Media Holdings, LLC (“Wild Sky Media”). Wild Sky Media owns and operates a collection of websites that offer significant global reach through its content and niche audiences and has become a wholly-owned subsidiary of the Company. Wild Sky Media is the home to parenting and lifestyle brands.

 

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 of $63,136,155 and used net cash in operating activities of $4,957,486 for the nine months ended September 30, 2020. The Company had an accumulated deficit of $83,581,144 at September 30, 2020. 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 public or private capital.

 

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.

 

9

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

 

Principles of Consolidation and Basis of Presentation

 

The condensed consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. The accompanying unaudited financial statements for the three and nine months ended September 30, 2020 and 2019 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, 2019 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, 2019, as filed with the SEC on May 14, 2020. 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 is 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.

 

10

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).

 

The Company recognizes revenue from its own advertising platform, ad network partners and websites (“Ad Network”) through its publishing advertiser impressions and pay-for-click services. the Company’s owned and operated sites, our ad network, or platforms. Invalid traffic on the Ad Network may impact the amount collected and adjusted by our Ad Network.

 

The Company has one revenue stream generated directly from publishing advertisements, whether on the Company’s owned and operated sites, our ad network, or platforms. The revenue is earned when the website visitors view or click the published website advertisements. Specific revenue recognition criteria for the advertising revenue stream is as follows:

 

  Advertising revenues are generated by website visitors viewing or “clicking” on website advertisements utilizing direct-sold campaigns or several ad network partners.
     
  Revenues are recognized net of adjustments based on the traffic generated and is billed monthly. The Company subsequently settles these transactions with publishers at which time adjustments for invalid traffic may impact the amount collected.

 

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 $235,000. In connection with the acquisition of S&W in August 2019 a ROU asset and lease liability of approximately $353,000 was recognized on the consolidated balance sheet.

 

11

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).

 

Use of Estimates

 

Our consolidated financial statements are prepared in accordance with US 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 US 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 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.

 

12

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).

 

The Company measures its financial assets and liabilities in accordance with GAAP. For certain of our financial instruments, including cash, accounts payable, accrued expenses, and the short-term portion of long-term debt, the carrying amounts approximate fair value due to their short maturities. We adopted accounting guidance for fair values measurements and disclosures (ASC 820). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

  Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
     
  Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
     
  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 nine months ended September 30, 2020, using significant unobservable inputs (Level 3):

 

Fair Value measurement using Level 3

 

Balance at December 31, 2019  $245,163 
Long term debt additions during 2020   18,343,277 
Principal reductions/payments during 2020   - 
Adjustment to fair value   - 
Balance at September 30, 2020  $18,588,440 

 

Off balance sheet arrangements

 

Notes Payable and related potential liabilities are excluded from the balance sheet when there are significant uncertainties associated with the likelihood that the liabilities will be paid in full or until such time that the amount of the liability can be reasonably determined or estimated.

 

13

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).

 

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.

 

The policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30 or net 60 days. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible receivables is made. As of September 30, 2020 and December 31, 2019, the Company has recorded an allowance for doubtful accounts of $906,970 and $505,401, respectively.

 

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 three - five years for office furniture and fixtures, and three 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 and nine months ended September 30, 2020 and 2019, $0 and $8,000 was capitalized for the purchase of a Facebook page, respectively.

 

14

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).

 

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 that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Website acquisition costs 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. During the nine months ended September 30, 2020, the Company recorded impairment expense of $42,444,971 related to goodwill and $11,551,573 related to intangibles.

 

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 September 30, 2020 and 2019, non-cash stock-based stock option compensation expense was $51,011 and $15,963, respectively. For the nine months ended September 30, 2020 and 2019, non-cash stock-based stock option compensation expense was $129,105 and $29,074, respectively.

 

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 September 30, 2020 and 2019, advertising, marketing and promotion expense was $12,527 and $110,342, respectively for continuing operations and $0 and $0 for discontinued operations, respectively. For the nine months ended September 30, 2020 and 2019, advertising, marketing and promotion expense was $36,377 and $116,342, respectively for continuing operations and $0 and $6,888 for discontinued operations, respectively.

 

15

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).

 

Foreign currency translation

 

Assets and liabilities of the Company’s Israeli subsidiary are translated from Israeli shekels to United States dollars at exchange rates in effect at the balance sheet date. Assets and liabilities of the Company’s Thailand subsidiary are translated from Thai baht to United States dollars at exchange rates in effect at the balance sheet date. Income and expenses are translated at the exchange rates for the weighted average rates for the period. The translation adjustments for the reporting period will be included in our statements of comprehensive income.

 

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 September 30, 2020, tax years 2019, 2018, and 2017 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.

 

16

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).

 

Concentrations

 

The Company generates revenues from through our owned and operated websites and CTV apps along with our ad exchange network. There was one customer which accounted for approximately 19% of the revenues for the three months ended September 30, 2020. There were no customers which represented more than 10% of revenues for the nine months ended September 30, 2020. There were two customers which accounted for accounts receivable of approximately 17% and 12%, respectively, at September 30, 2020. There was one vendor who is owed approximately 14% of the accounts payable due at September 30, 2020.

 

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 September 30, 2020 and December 31, 2019, the Company had approximately $133,945 and $0, 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 and nine months ended September 30, 2020 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 September 30, 2020 and 2019, there were 2,142,727 and 1,897,000 common stock equivalent shares outstanding as stock options, respectively; 36,552,558 and 22,618,240 common stock equivalent shares outstanding from warrants to purchase common shares, respectively, 8,044,017 and 6,844,017 common stock equivalents from the conversion of preferred stock, respectively; and 80,000 and 0 common stock equivalents from the conversion of notes payable, respectively. Equivalent shares were not utilized as the effect is anti-dilutive.

 

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 and subscription revenue generated by the sale of access to career postings on one of our websites.

 

17

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).

 

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. The adoption of this guidance did not have an impact on the 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. The adoption of this guidance did not have an impact on the 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 value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this guidance did not have an impact on our consolidated Financial Statements.

 

18

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 4 – ACQUISITIONS

 

On July 31, 2019, the Company executed a Share Exchange Agreement and Plan of Merger (the “Merger Agreement”) with Slutzky & Winshman Ltd., an Israeli company (“S&W”) and the shareholders of S&W (the “Shareholders”). The merger closed on August 15, 2019, and we acquired all of the outstanding shares of S&W. Subsequent to the transaction, the company was renamed and rebranded as Oceanside Media. Pursuant to the terms of the Merger Agreement, we issued 12,130,799 shares valued at $19,409,278 to owners and employees of Oceanside Media, contingent consideration of $750,000 paid through the delivery of unsecured, interest free, one and two year promissory notes (the “Closing Notes”), and 223,841 restricted stock units held in escrow for future vested stock options valued at $185,722. Since the time of the acquisition until early September 2020, there were various unresolved matters related to the offsets.  The parties were unable to work-out an agreement for the payment of the first tranche of the Notes.  Therefore, no amount or payment was agreed upon as of August 15, 2020.  Based on the unresolved differences, the fair value of the liability at the acquisition date and the 1 year anniversary remeasurement date for the purchase price determination in accordance with ASC 805 was not reasonably determined or estimated.  Accordingly, the Notes associated with the acquisition of S&W have not been included within the purchase price calculation with regards to the valuation of the intangible assets and goodwill recognized in the acquisition. 

 

In late September 2020, a new agreement was reached, in principle, by the parties whereby the payment due dates of the Notes, as well as the unresolved disagreements were stricken, and the Company agreed to pay the full amounts of the notes at future dates.  This agreement supersedes all prior agreements.  The Company has recognized a liability of $750,000, which represents the fair value of the settlement of contingent consideration in the current period. The first payment of the notes for $375,000 will be made upon the closing of a significant capital raise.  The second payment of $375,000 is scheduled for August 15, 2021.

 

Effective upon the Closing, we agreed to pay Spartan Capital Securities (“Spartan Capital”) a broker-dealer and member of FINRA a finder’s fee equal to issue 650,000 shares of our common stock valued at $1,040,000 and $650,000 cash. The shares were issued in February 2020 and the $165,000 was paid in March 2020. The amounts due were included in the accrued expenses as of December 31, 2019.

 

In accordance with ASC 805 “Business Combinations” the measurement period for the acquisition is for one year during which the Company may re-evaluate the assets acquired, liabilities assumed and the goodwill resulting from the transaction as well as the change in amortization as a result of changes in the provisional amounts as if the accounting had been completed at the acquisition date. The re-evaluation performed did not result in a change in the values recorded for the assets acquired, liabilities assumed or resulting goodwill. As discussed further in Note 15, the Company recognized a deferred tax liability associated with the intangible assets acquired. As discussed above, the $750,000 contingent Closing Notes, which will be paid in full have not been included in the evaluation of the acquired assets, liabilities assumed or resulting goodwill from the transaction.

 

The allocation of the purchase price to the assets acquired and liabilities assumed based on management’s estimate of fair values at the date of acquisition as follows:

 

   August 15, 2019 
Tangible assets acquired  $3,234,754 
Liabilities assumed   (3,402,999)
Deferred tax liability   (744,960)
Net liabilities assumed   (913,205)
      
Tradename – Trademarks   1,207,400 
IP/Technology   1,883,000 
Customer relationships   738,000 
Non-compete agreements   827,300 
Goodwill   15,666,786 
Total purchase price  $19,409,281 

 

19

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 4 – ACQUISITIONS (continued).

 

The table below summarizes the value of the total consideration given in the transaction:

 

   Amount 
     
Shares issued to owners  $19,185,524 
Shares issued for vested options   127,757 
Shares issued to employees   96,000 
Preliminary purchase price   19,409,281 
Restricted stock units held in escrow   185,719 
Closing notes   750,000 
Total consideration  $20,345,000 

 

On November 18, 2019, the Company executed a Merger Agreement which merged Bright Mountain Media, Inc., a Florida corporation (“Bright Mountain Media”), through its wholly-owned subsidiary BMTM2, Inc., a Florida corporation with News Distribution Network, Inc. a Delaware Company (“NDN”). The subsidiary then changed its name to MediaHouse. Bright Mountain agreed to issue 22,180,761 shares of its common stock. Each share of NDN’s outstanding Series A-1 Preferred Stock and common stock, were cancelled and extinguished and converted into the right to receive shares of Bright Mountain’s common stock based upon a paid-in capital basis, and subject to a $1.75 conversion price of our common stock. For every $1.75 of paid-in capital by an NDN stockholder, the NDN stockholder received one share of Bright Mountain common stock. Moreover, All NDN warrants and options outstanding at the Effective Time of the Merger Agreement terminated and were cancelled unless exercised prior to the Effective Time of the Merger Agreement.

 

As it pertains to outstanding promissory notes and other obligations payable to NDN, Bridge notes in the current principal amount of $776,000 were converted into shares of Bright Mountain’s common stock at a conversion price of $0.50 per share, with one common stock warrant exercisable at $0.75 per share and one common stock warrant exercisable at $1.00 per share issued for each conversion share. The principal of the bridge notes was converted into shares of Bright Mountain’s common stock at a conversion price of $1.75 per share, and all accrued but unpaid interest were forgiven by the noteholders. Also of note is the open line of credit of approximately $660,000 due Mr. Greg Peters, NDN’s Chief Executive Officer, was converted into shares of Bright Mountain’s common stock at a conversion price of $0.50 per share, with one common stock warrant exercisable at $.75 per share and one common stock warrant exercisable at $1.00 per share issued for each conversion share.

 

The Total Consideration Shares are subject to lock up restrictions on resale as determined by Bright Mountain and 25% percent of the Total Consideration Shares were placed in escrow to satisfy certain obligations including, but not limited to, (i) the delivery of NDN audited financial statements, (ii) NDN having accounts receivable of at least $1,100,000 and (iii) certain NDN liabilities not to exceed $4,000,000. Effective upon the Closing, we agreed to pay Spartan Capital Securities LLC (“Spartan Capital”) a broker-dealer and member of FINRA a finder’s fee equal to issue 660,000 shares of our common stock valued at $1,082,400. The shares were issued in February 2020. The value of the shares were included in the accrued expenses as of December 31, 2019.

 

20

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 4 – ACQUISITIONS (continued).

 

The allocation of the purchase price to the assets acquired and liabilities assumed based on management’s estimate of fair values at the date of acquisition as follows:

 

   November 18, 2019 
Tangible assets acquired  $1,193,313 
Liabilities assumed   (4,228,722)
Deferred tax liability   (3,383,754)
Net liabilities assumed   (6,419,163)
      
Tradename – Trademarks   923,600 
IP/Technology   4,930,000 
Customer relationships   8,690,000 
Non-compete agreements   837,100 
Goodwill   36,991,147 
Total purchase price  $45,952,684 

 

In accordance with ASC 350, the finite lived intangible assets associated with MediaHouse were tested for valuation based on indicators of impairment noted by management, including decreased revenues. The year 2020 has been marked by the COVID-19 Global pandemic when many companies in various industries were forced to restructure their advertising budgets and spending. The fair value of the respective assets was determined based on the projected future cash flows associated with the respective assets. These fair values were compared with the carrying values of the respective assets to determine if an impairment of the respective assets was warranted. It was determined that the finite lived intangible assets associated with MediaHouse were deemed impaired based on an analysis of the carrying values and fair values of the assets. During the three and nine months ended September 30, 2020, the Company recorded an impairment expense of $11,551,573 within Impairment Expense on the Statement of Operations.

 

The table below summarizes the value of the total consideration given in the transaction:

 

   Amount 
     
Shares issued to owners  $36,376,448 
Warrants issued   9,576,236 
Total consideration  $45,952,684 

 

On June 1, 2020, Bright Mountain Media, Inc. (“Bright Mountain”) entered into a membership interest purchase agreement (the “Purchase Agreement”) with Centre Lane Partners Master Credit Fund II, L.P. (“Centre Lane”) to purchase 100% of the membership interests of CL Media Holdings, LLC (“Wild Sky Media”). The purchase was completed on a debt-free, cash-free basis, free and clear of any liens and encumbrances. Bright Mountain issued 2,500,000 shares of its restricted common stock to Centre Lane and Centre Lane issued a first lien senior secured credit facility of $16,416,905. Per the credit facility with Center Lane, our loan payments begin December 1, 2021. There is no prepayment penalty associated with this credit facility. Certain future capital raises do require partial or full prepayments of the credit facility.

 

21

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 4 – ACQUISITIONS (continued).

 

The Agreement provides for a senior secured five-year loan in the initial principal amount of $16,416,905. Pursuant to the Credit Agreement, the loan bears interest at six percent (6%) payment–in-kind interest (“PIK Interest”) which will be added to the outstanding principal balance. The Credit Agreement provides for no amortization for the first 18 months and 10% thereafter. Amortization is payable in equal quarterly installments on the principal balance after adding the PIK Interest with a bullet payment due at maturity on June 1, 2025. The loan under the Credit Agreement may be prepaid in minimum amounts $250,000. The loan balance can be prepaid with no penalty. The loan is guaranteed by Bright Mountain and certain of its domestic subsidiaries of which became party to a Guarantee Agreement dated as of the Effective Date and each domestic subsidiary that, subsequent to the Effective Date, becomes a subsidiary. The Credit Agreement contains negative covenants that, subject to certain exceptions, limits the ability of Bright Mountain and its subsidiaries to, among other things, incur debt, engage in new lines of business, incur liens, engage in mergers, consolidations, liquidations and dissolutions, dispose of assets of Bright Mountain and its subsidiaries, make investments, loans, advances, guarantees and acquisitions. Any equity raised up to $15,000,000 in the first one-hundred eighty days from the Credit Agreement is excluded from the loan balance prepayment requirements.

 

The allocation of the purchase price to the assets acquired and liabilities assumed based on management’s estimate of fair values at the date of acquisition as follows:

 

   June 1, 2020 
Tangible assets acquired  $5,469,625 
Liabilities assumed   (3,388,579)
Deferred tax liability   (133,603)
Net assets assumed   1,947,443 
      
Tradename – Trademarks   2,313,300 
IP/Technology   1,403,000 
Customer relationships   3,530,000 
Goodwill   10,948,162 
Total purchase price  $20,141,905 

 

The table below summarizes the value of the total consideration given in the transaction:

 

   Amount 
     
Debt issued  $16,416,905 
Shares issued   3,725,000 
Total consideration  $20,141,905 

 

22

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 4 – ACQUISITIONS (continued).

 

The following table sets forth a summary of the unaudited pro forma results of the Company as if the acquisitions of Oceanside, MediaHouse, and Wild Sky Media which was closed in August 2019, November 2019, and June 2020, respectively, had taken place on the first day of 2019 and 2020, respectively. These combined results are not necessarily indicative of the results that may have been achieved had the business been acquired as of the first day of the period presented.

 

  

September 30,

2020

  

September 30,

2019

 
Total revenue  $14,936,070   $26,652,346 
Total expenses   (83,909,439)   (44,986,351)
Preferred stock dividend   (447,369)   (201,484)
Net loss attributable to common shareholders  $(69,420,738)  $(18,535,489)
Basic and diluted net loss per share  $(0.64)  $(0.28)

 

NOTE 5 – 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 Mountain 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 Mountain 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 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.

 

23

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 5 – DISCONTINUED OPERATIONS (continued).

 

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.

 

During the nine months ended September 30, 2020, the Company settled the discontinued assets and liabilities and assumed the remaining cash. The detail of the consolidated balance sheet, the consolidated statement of operations and consolidated cash flow for the discontinued operations is as stated below:

 

   December 31, 2019 
     
Cash  $791 
Accounts receivable   914 
Total current assets   1,705 
Total assets - discontinued operations   1,705 
Accounts payable   591 
Total current liabilities - discontinued operations   591 
Net assets discontinued operations  $1,114 

 

   September 30, 2019 
Revenues  $103,266 
Cost of revenues   56,050 
Gross profit   47,216 
      
Selling, general and administrative expenses   242,395 
      
Loss from discontinued operations   (195,179)
Other income   21,158 
Loss from discontinued operations   (174,021)
      
Basic and fully diluted net loss per share  $0.00 
      
Cash (used in) operations for discontinued operations:     
Loss from discontinued operations  $(174,021)
Write-off of fixed assets   49,347 
Inventory   91,884 
Loss on sale of business unit   11,309 
Other assets   11,124 
Accounts payable   (133,753)
Deferred rents   (11,629)
Cash (used in) discontinued operations  $(155,739)
Net decrease in cash and cash equivalents from discontinued operations  $(15,971)

 

24

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 6 – PREPAID COSTS AND EXPENSES.

 

At September 30, 2020 and December 31, 2019, prepaid expenses and other current assets consisted of the following:

 

  

September 30,

2020

  

December 31,

2019

 
Prepaid insurance  $37,996   $205,656 
Prepaid VAT fees   3,102    199,596 
Prepaid expenses – other   350,954    37,723 
Current portion of prepaid service agreements   310,002    310,000 
Prepaid expenses and other current assets  $702,054   $752,975 

 

NOTE 7 – PROPERTY AND EQUIPMENT.

 

At September 30, 2020 and December 31, 2019, property and equipment consisted of the following:

 

   Useful Lives 

September 30,

2020

  

December 31,

2019

 
Furniture and fixtures  3-5 years  $40,453   $39,696 
Leasehold improvements  3 years   -    1,388 
Computer equipment  3 years   176,302    79,188 
Total property and equipment      216,755    120,272 
Less: accumulated depreciation      (96,843)   (89,606)
Total property and equipment, net     $119,912   $30,666 

 

Depreciation expense for the three months ending September 30, 2020 and 2019, was $19,437 and $3,121, respectively.

 

Depreciation expense for the nine months ending September 30, 2020 and 2019, was $29,616 and $5,613, respectively.

 

NOTE 8 – WEBSITE ACQUISITION AND INTANGIBLE ASSETS.

 

At September 30, 2020 and December 31, 2019, respectively, website acquisitions, net consisted of the following:

 

   Useful Lives 

September 30,

2020

  

December 31,

2019

 
Website Acquisition Assets  3-5 years  $1,124,846   $1,124,846 
Less: accumulated amortization      (911,661)   (875,522)
Less: cumulative impairment loss      (200,396)   (200,396)
Website Acquisition Assets, net     $12,789   $48,928 

 

25

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 8 – WEBSITE ACQUISITION AND INTANGIBLE ASSETS (continued).

 

At September 30, 2020 and December 31, 2019, respectively, intangible assets, net consisted of the following:

 

   Useful Lives 

September 30,

2020

  

December 31,

2019

 
Trade name  5 years  $3,843,933   $2,131,000 
Customer relationships  5 years   6,587,333    9,615,000 
IP/Technology  5 years   4,362,833    6,813,000 
Non-compete agreements  3-5 years   1,202,028    1,742,400 
Total Intangible Assets     $15,996,127   $20,301,400 
Less: accumulated amortization      (3,943,790)   (690,599)
Intangible assets, net     $12,052,337   $19,610,801 
Goodwill     $22,150,047   $53,646,856 

 

Amortization expense for the three months ended September 30, 2020 and 2019 was $1,289,416 and $101,709, respectively, related to both the website acquisition costs and the intangible assets. Amortization expense for the nine months ended September 30, 2020 and 2019 was $3,289,330 and $131,409, respectively, related to both the website acquisition costs and the intangible assets.

 

During 2019, the Company rebranded Daily Engage to Bright Mountain and wrote off the $32,000 tradename asset of Daily Engage.

 

During 2019, the Company acquired Oceanside in which finite lived intangible assets of $4,655,700 and Goodwill of $15,666,783 were recognized, see Note 4. 

 

During 2019, the Company acquired MediaHouse in which finite lived intangible assets of $15,380,700 and Goodwill of $36,991,147 were recognized, see Note 4. 

 

During 2020, the Company acquired Wild Sky Media in which finite lived intangible assets of $7,246,300 and Goodwill of $10,948,162 were recognized, see Note 4.

 

In accordance with ASC 350, the finite lived intangible assets associated with Oceanside and MediaHouse were tested for valuation based on indicators of impairment noted by management, including decreased revenues. The year 2020 has been marked by the COVID-19 Global pandemic when many companies in various industries were forced to restructure their advertising budgets and spending. The fair value of the respective assets was determined based on the projected future cash flows associated with the respective assets. These fair values were compared with the carrying values of the respective assets to determine if an impairment of the respective assets was warranted. It was determined that the carrying values of the finite lived intangible assets associated with Oceanside did not exceed the respective fair values of the assets, therefore no revaluation associated with these assets has been recognized. It was determined that the finite lived intangible assets associated with MediaHouse were deemed impaired based on an analysis of the carrying values and fair values of the assets. During the three and nine months ended September 30, 2020, the Company recorded an impairment expense of $11,551,573 within Impairment Expense on the Statement of Operations.

 

26

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 8 – WEBSITE ACQUISITION AND INTANGIBLE ASSETS (continued).

 

The Company categorizes Goodwill into two reporting units, Owned & Operated and Ad Network. In accordance with ASC 350, Goodwill is tested for impairment at least annually and based on the acquisition dates of Oceanside and MediaHouse, this test was performed as part of the current quarter. ASC 350 deems an impairment to have occurred when the carrying value of the Goodwill associated with the reporting unit exceeds the implied value of the Goodwill associated with the reporting unit.  The year 2020 has been marked by the COVID-19 Global pandemic when many companies in various industries were forced to restructure their advertising budgets and spending. This caused a significant contraction of economic activity at the beginning in the first months of the year and has continued. Although there are recent signs of improvement with significant GDP gains, many companies have yet to reinstate their advertising budgets and/or have changed the way they are spending these budgets. Many advertisers have moved away from direct ad buys in favor of programmatic distribution with its lower costs. The fair value of the respective reporting units was determined based on both the Income Approach (Discount Cash Flows) and the Market Multiples Approach. As of September 30, 2020, it was determined that the carrying value of the Goodwill associated with the Owned & Operated reporting unit was not deemed impaired in accordance with ASC 350. It was determined that the recorded Goodwill associated with the Ad Network exceeded the fair value of the Goodwill and during the three and nine months ended September 30, 2020, the Company recorded an impairment expense of $42,444,971 within Impairment Expense on the Statement of Operations.

 

NOTE 9 – ACCRUED EXPENSES.

 

At September 30, 2020 and December 31, 2019, respectively, accrued expenses consisted of the following:

 

  

September 30,

2020

  

December 31,

2019

 
   (unaudited)     
Accrued dividends  $547,567   $158,966 
Accrued professional fees   37,887    62,887 
Other accrued expenses   613,366    377,075 
Accrued compensation   734,656    342,000 
Accrued service/consulting agreements   -    2,287,400 
Total accrued expenses  $1,933,476   $3,228,328 

 

The accrued consulting fees on December 31, 2019 included $2,122,400 representing cash due of $165,000 and common stock of 650,000 and 660,000 shares to be issued to Spartan Capital Securities, LLC in the acquisition of Oceanside and MediaHouse, respectively.

 

27

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 10 – NOTES PAYABLE.

 

Long-term debt to related parties

 

During November 2018, the Company issued 10% convertible promissory notes in the amount of $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 and $80,000 at September 30, 2020 and December 31, 2019, respectively and discounts recognized upon respective origination dates as a result of the beneficial conversion feature total $43,801 and $57,840. At September 30, 2020 and December 31, 2019, the total convertible notes payable to related party net of discounts was $36,199 and $22,160, respectively.

 

The unsecured and interest free Closing Notes of $750,000 as identified in Note 4 had various unresolved matters related to the offsets.  The parties were unable to work-out an agreement for the payment of the first tranche of the Notes.  Therefore, no amount or payment was agreed upon as of August 15, 2020.  Based on the unresolved differences, the fair value of the liability at the acquisition date and the 1 year anniversary remeasurement date for the purchase price determination in accordance with ASC 805 was not reasonably determined or estimated.

 

In late September 2020, a new agreement was reached, in principle, by the parties whereby the payment due dates of the Notes, as well as the unresolved disagreements were stricken, and the Company agreed to pay the full amounts of the notes at future dates.  This agreement supersedes all prior agreements.  The Company has recognized the recording of the liability as a settlement of contingent consideration to be recognized in the current period.  The first payment of the notes for $375,000 will be made upon the closing of a significant capital raise.  The second payment of $375,000 is scheduled for August 15, 2021.

 

Interest expense for note payable to related party was $2,045 and $2,045 for the three months ended September 30, 2020 and 2019, respectively and discount amortization was $3,529 and $3,529, respectively. Interest expense for note payable to related party for the nine months ended September 30, 2020 and 2019 was $6,091 and $6,393, respectively and discount amortization was $10,510 and $10,472, respectively.

 

Long-term debt

 

In connection with the acquisition of BMLLC, the Company issued promissory notes totaling $380,000. The notes had no stated interest rate and matured on September 19, 2018 and the Company was in default prior to a settlement reached on July 8, 2020. Effective July 8, 2020, the Company executed a Settlement Agreement and Release with Harry G. Pagoulatos, George Rezitis, and Angelo Triantafillou whereby they relinquish their Bright Mountain common stock shares and the Company pays them full and final settlement of $385,000 within 12 months from the date the shares are delivered to Bright Mountain Media. The Company had previously made payments against the notes resulting in a recorded liability due to the parties of $165,163. The settlement increased the liability to a final settlement amount of $385,000, requiring an additional liability of $219,837 which was recognized by the Company. The balance of the notes payable at September 30, 2020 and December 31, 2019 were $385,000 and $165,163, respectively. The notes are payable one year from the surrender of the note holders common stock of the Company, which is included in treasury stock. See further discussion in Notes 11, under Legal and Note 13, under Treasury Stock.

 

28

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 10 – NOTES PAYABLE (continued).

 

On April 24, 2020, Bright Mountain Media, Inc. (the “Company”) received loan proceeds of $464,800 (the “PPP Loan”) under the Paycheck Protection Program (the “PPP”). The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration. The PPP Loan is evinced by a promissory note (the “Promissory Note”) with Regions Bank and has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains customary events of default provisions. Under the terms of the CARES Act, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.

 

Effective June 1, 2020, the Company acquired Wild Sky Media and assumed the $1,706,735 loan received under the Paycheck Protection Program (the “PPP”). The PPP Loan is evinced by a promissory note (the “Promissory Note”) with Holbomb Bank and has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains customary events of default provisions. Under the terms of the CARES Act, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.

 

Effective June 1, 2020, we entered into a membership interest purchase agreement to acquire 100% of Wild Sky Media. The seller issued a first lien senior secured credit facility which consisted of $15,000,000 of initial indebtedness, repayment of Wild Sky Media’s existing accounts receivable factoring facility of approximately $900,000 and $500,000 of expenses totaling $16,416,905. The note bears interest at a rate of 6.0% per annum. Per the credit facility with the seller, our loan payments begin December 1, 2021. There is no prepayment penalty associated with this credit facility. Certain future capital raises do require partial or full prepayments of the credit facility.

 

At September 30, 2020 and December 31, 2019 a summary of the Company’s debt is as follows:

 

  

September 30,

2020

  

December 31,

2019

 
Non-interest bearing BMLLC acquisition debt  $385,000   $165,163 
Non-interest bearing notes issued as settlement of contingent consideration   750,000    - 
PPP loans   2,171,535    - 
Wild Sky acquisition debt   16,416,905    - 
Total Debt   19,723,440    165,163 
Less Short Term Debt   1,135,000    165,163 
Long Term Debt  $18,588,440   $- 

 

29

 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

 

NOTE 10 – NOTES PAYABLE (continued).

 

Interest expense for the three months ended September 30, 2020 and 2019 were $246,255 and $0, respectively. Interest expense for the nine months ended September 30, 2020 and 2019 were $328,340 and $0, respectively.

 

The minimum annual principal payments of notes payable at September 30, 2020 were:

 

2020   $ -  
2021     1,545,423  
2022     3,713,153  
2023     1,393,142  
2024     1,258,965  
2025     11,812,757  
Total