NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Organization
and Nature of Operations
Bright
Mountain Media, Inc. (the “Company” or “Bright Mountain” or “We”) is a Florida corporation formed
on May 20, 2010. Its wholly owned subsidiary, Bright Mountain LLC, was formed as a Florida limited liability company in May 2011. Its
wholly owned subsidiary, Bright Mountain, LLC (“BMLLC”) F/K/A Daily Engage Media Group, LLC (“Daily Engage”)
was formed as a New Jersey limited liability company in February 2015. In August 2019, Bright Mountain Israel Acquisition, an Israeli
company was formed and acquired the wholly owned subsidiary Slutzky & Winshman Ltd. (“S&W”) which then changed its
name to Oceanside Media LLC (“Oceanside”), see Note 4. Further, on November 18, 2019, Bright Mountain, through its wholly
owned subsidiary BMTM2, Inc., a Florida corporation, acquired News Distribution Network, Inc. (“NDN”), a Delaware company,
which then changed its name to MediaHouse, Inc. (“MediaHouse”). On June 1, 2020, Bright Mountain acquired the wholly owned
subsidiary CL Media Holdings, LLC D/B/A “Wild Sky Media” (“Wild Sky”). When used herein, the terms “BMTM,
the “Company,” “we,” “us,” “our” or “Bright Mountain” refers to Bright Mountain
Media, Inc. and its subsidiaries.
The
Company is engaged in operating a proprietary, end-to-end digital media and advertising services platform designed to connect brand advertisers
with demographically-targeted consumers – both large audiences and more granular segments – across digital, social and connected
television (CTV) publishing formats. We define “end-to-end” as our process for taking ad buying from beginning to end, delivering
a complete functional solution, usually without requiring any involvement from a third party.
Through
acquisitions and organic software development initiatives, we have consolidated and plan to further condense key elements of the prevailing
digital advertising supply chain through the elimination of industry “middlemen” and/or costly redundancy of services via
our ad exchange network. Our aim is to enable and support a streamlined, end-to-end advertising model that addresses both demand (ad
buy side) and supply (media sell side) for both direct sales teams and programmatic sales and publishing of digital advertisements that
reach specific target audiences based on what, where, when and how that specific target audience elects to access certain web and/or
streaming video content. Programmatic advertising relies on computer programs to use data and proprietary algorithms to select which
ads to buy and for what price, while direct sales involve traditional interpersonal contact between ad buyers and advertising sales representative(s).
By
selling advertisements on our current portfolio of 20 owned and operated websites and 13 CTV apps, coupled with acquisition or development
of other niche web properties in the future, we are building depth in specific demographic verticals that allow us to package audiences
into targeted consumer categories valued by advertisers.
Oceanside
provides digital performance-based marketing services to customers which include primarily advertisers and advertising agencies that
promote or sell products and/or services to consumers through digital media.
MediaHouse
partners with content producers and online news market websites to distribute video and banner advertisements throughout the United States
of America (“U.S.”).
Wild
Sky owns and operates a collection of websites that offer significant global reach through its content and niche audiences and has become
a wholly-owned subsidiary of the Company. Wild Sky is the home to parenting and lifestyle brands.
NOTE
2 - GOING CONCERN.
The
accompanying condensed consolidated financial statements have been prepared and are presented assuming the Company’s ability to
continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of
business. The Company has sustained a net loss of $6,198,586,
used cash from operating activities of $2,059,030
for the six months ended June 30, 2021, and has
an accumulated deficit of $100,130,666
at June 30, 2021 that raise substantial
doubt about its ability to continue as a going concern.
The
Company’s continuation as a going concern is dependent upon its ability to generate revenues, control its expenses and its
ability to continue obtaining investment capital and loans from related parties and outside investors to sustain its current level of
operations. Management continues raising capital through private placements and is exploring additional avenues for future fund-raising
through both public and private sources. The Company is not currently involved in any binding agreements to raise private equity capital.
The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue
as a going concern.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Principles
of Consolidation and Basis of Presentation
The
condensed consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All intercompany
accounts and transactions have been eliminated in the condensed consolidated financial statements. The accompanying unaudited financial
statements for the three and six months ended June 30, 2021 and 2020 have been prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”) applicable to interim financial information and the requirements of Form 10-Q and Article 8 of Regulation
S-X of the Securities Act of 1933. Accordingly, they do not include all of the information and disclosures required by accounting
principles generally accepted in the United States for complete consolidated financial statements. In the opinion of management, such
condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) necessary for the fair
presentation of the condensed consolidated financial position and the condensed consolidated results of operations. The condensed consolidated
results of operations for periods presented are not necessarily indicative of the results to be expected for the full year or any future
periods. The condensed consolidated balance sheet information as of December 31, 2020 was derived from the audited consolidated financial
statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on
December 23, 2021. The interim condensed consolidated financial statements should be read in conjunction with that report.
Revenue
Recognition
The
Company recognizes revenue in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC
606”). The Company recognizes revenues at a point-in-time when control of services is transferred to the customer.
Cash received by the Company prior to when control of services is transferred to the customer is recorded as deferred revenue.
To
determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs
the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii)
determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize
revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it
is probable that Company will collect the consideration it is entitled to in exchange for the advertising services it transfers to the
customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the advertising
services promised within each contract and determines those that are performance obligations and assesses whether each promised advertising
service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance
obligation based on relative fair values, when (or as) the performance obligation is satisfied.
The
Company recognizes revenue from its own advertising platform, ad network partners and websites (“Ad Network”) through its
publishing advertiser impressions and pay-for-click services. the Company’s owned and operated sites, our ad network, or platforms.
Invalid traffic on the Ad Network may impact the amount collected and adjusted by our Ad Network.
The
Company has one revenue stream generated directly from publishing advertisements, whether on the Company’s owned and operated sites,
our ad network, or platforms. The revenue is earned when the website visitors view or click the published website advertisements. Specific
revenue recognition criteria for the advertising revenue stream is as follows:
|
● |
Advertising
revenues are generated by website visitors viewing or “clicking” on website advertisements utilizing direct-sold campaigns
or several ad network partners. |
|
● |
Revenues
are recognized net of adjustments based on the traffic generated and is billed monthly. The Company subsequently settles these transactions
with publishers at which time adjustments for invalid traffic may impact the amount collected. |
There
are no significant initial costs incurred to obtain contracts with customers, and no contract assets or contract liabilities recorded
in our condensed consolidated financial statements.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
Leases
The
Company records leases in accordance with FASB ASC Topic 842, Leases.
The
Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets and operating lease liabilities
are recognized based on the present value of the future minimum lease payments over the remaining lease terms as of January 1, 2019.
Since the Company’s lease agreements does not provide an implicit rate, the Company estimated an incremental borrowing rate based
on the information available on January 1, 2019 in determining the present value of lease payments. Operating lease expense is recognized
on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Variable lease
costs such as operating costs and property taxes are expensed as incurred.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions.
We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at
the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported
amounts of assets and liabilities as of the date of our condensed consolidated financial statements as well as reported amounts of revenue
and expenses during the periods presented. Our condensed consolidated financial statements would be affected to the extent there are
material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction
is specifically dictated by GAAP and does not require management’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 condensed consolidated financial statements include revenue recognition, the fair value of acquired
assets for purchase price allocation in business combinations, valuation of goodwill and intangible assets, estimates of amortization
period for intangible assets, estimates of depreciation period for fixed assets, the valuation of equity-based transactions, and the
valuation allowance on deferred tax assets.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Cash and cash equivalents are all maintained in bank accounts in the U.S. and other foreign countries in which the Company operates.
Cash maintained in bank accounts outside of the U.S. is not significant.
Credit
Risk
The
Company maintains certain of its cash balances in various U.S. banks, which at times, may exceed federally insured limits. The Company
has not incurred any losses on these accounts. In addition, the Company maintains various bank accounts in Thailand and Israel, which
are not insured. During the periods ended June 30, 2021, June 30, 2020, and the year ended December 31, 2020, we have not incurred material
losses on these uninsured accounts. The Company minimizes the concentration of credit risk associated with its cash by maintaining its
cash with high quality federally insured financial institutions. The Company performs ongoing evaluations of its trade accounts receivable
customers and generally does not require collateral.
Fair
Value of Financial Instruments and Fair Value Measurements
FASB
ASC Topic 820, Fair Value Measurement and Disclosures (“ASC 820”) defines fair value as the price that
would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s level within the fair value hierarchy
is based on the lowest level of input significant to the fair value measurement.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
The
Company measures its financial assets and liabilities in accordance with GAAP. For certain of our financial instruments, including cash,
accounts payable, accrued expenses, and the short-term portion of long-term debt, the carrying amounts approximate fair value due to
their short maturities. We adopted accounting guidance for fair values measurements and disclosures (ASC 820). The guidance utilizes
a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following
is a brief description of those three levels:
|
Level
1: |
Observable
inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. |
|
Level
2: |
Inputs
other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities
in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and |
|
Level
3: |
Unobservable
inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect
those that a market participant would use. |
Financial
instruments recognized in the condensed 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 six months ended June 30, 2021,
using significant unobservable inputs (Level 3):
Fair
Value measurement using Level 3
SCHEDULE OF FAIR VALUE OF LIABILITIES ON RECURRING BASIS
| |
| | |
Balance at December 31, 2020 | |
$ | 16,916,705 | |
Reclassification (1) | |
| (464,800 | ) |
Balance at March 31, 2021 | |
$ | 16,451,905 | |
Extinguishment (2) | |
| (16,451,905 | ) |
Acquisition debt, Wild Sky, related party | |
| 17,376,834 | |
Addition: Related party debt (3) | |
| 2,285,000 | |
Addition: Related part debt (4) | |
| 80,000 | |
Total Debt | |
| 19,741,834 | |
Less: debt discount, related party(5) | |
| (3,163,451 | ) |
Less: current portion of long-term debt, related party | |
| (2,729,200 | ) |
Balance at June 30, 2021 | |
$ | 13,849,183 | |
|
(1) |
Related to reclass of PPP loan |
|
(2) |
Centre Lane determined to be related party (See note 14) and applying ASC 470
guidance |
|
(3) |
Centre Lane debt financing on May 26, 2021 |
|
(4) |
Note payable to the Company’s Chairman of the Board |
|
(5) |
Debt discount for Centre Lane debt and Note payable to the Company’s
Chairman of the Board |
BRIGHT MOUNTAIN MEDIA, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
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.
Due
to uncertainties associated with certain Notes Payable resulting from the acquisition of S&W, the Company has not included
the value of those Notes Payable within the purchase price and/or related assets acquired in the acquisition. These off-balance sheet
arrangements are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Accounts
Receivable
Accounts
receivable represent receivables from customers in the ordinary course of business. These are recorded at invoices amount on the date
revenue is recognized. Receivables are recorded net of the allowance for doubtful accounts in the accompanying condensed consolidated
balance sheets. The Company provides allowances for doubtful accounts for estimated losses resulting from the inability of its customers
to repay their obligation. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment
of their ability to repay, additional allowances may be required. The Company provides for potential uncollectible accounts receivable
based on specific customer identification and historical collection experience adjusted for existing market conditions. If market conditions
decline, actual collection experience may not meet expectations and may result in decreased cash flows and increased bad debt expense.
The Company is also subject to adjustments from traffic settlements that are deducted from open invoices.
The
policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30 or net
60 days. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible
receivables is made. As of June 30, 2021 and December 31, 2020, the Company has recorded an allowance for doubtful accounts of $366,929
and $774,826, respectively. The accounts receivable balance at January 1, 2020 amounted to $3,967,899.
Property
and Equipment
Property
and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed using the straight-line method based on the
estimated useful lives of the related assets. Leasehold improvements are amortized over the lesser of the lease term or the useful life
of the improvements.
Website
Development Costs
The
Company accounts for its website development costs in accordance with FASB ASC 350-50, Website Development
Costs. These costs, if any, are included in intangible assets in the accompanying condensed consolidated financial
statements. Upgrades or enhancements that add functionality are capitalized while other costs during the operating stage are
expensed as incurred. The Company amortizes the capitalized website development costs over an estimated life of five
years.
As
of June 30, 2021, all website development costs have been expensed.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
Amortization
and Impairment of Long-Lived Assets
The
Company evaluates long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and
used is measured by comparing the carrying amount of an asset to forecasted undiscounted future net cash flows expected to be generated
by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the
amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are
written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management’s
estimates, depending upon the nature of the assets.
Stock-Based
Compensation
The
Company accounts for share-based compensation related to instruments issued to employees and non-employees under GAAP, which requires
the measurement and recognition compensation costs for all equity-based payment awards based on estimated fair values. The value of the
portion of an employee award that is ultimately expected to vest is recognized as an expense over the requisite service periods using
the straight-line attribution method. The Company estimates the fair value of stock options by using the Black-Scholes option-pricing
model. Share-based compensation expense is included in selling, general and administrative expenses on the accompanying condensed consolidated
statement of operations. We have elected to account for forfeitures as they occur.
Advertising,
Marketing and Promotion Costs
Advertising,
marketing and promotion expenses are expensed as incurred and are included in selling, general and administrative expenses on the accompanying
statement of operations. For the three months ended June 30, 2021 and 2020, advertising, marketing and promotion expense was $16,087
and $11,994, respectively. For the six months ended June 30, 2021 and 2020, advertising, marketing and promotion expense was $28,702
and $23,850, respectively.
Foreign
currency translation
Assets
and liabilities of the Company’s Israeli subsidiary are translated from Israeli shekels to United States dollars at exchange rates
in effect at the balance sheet date. Income and expenses are translated at the exchange rates for the weighted average rates for the
period. The translation adjustments for the reporting period will be included in our statements of comprehensive income. Based on the
foreign subsidiaries’ activities the impact of the currency exchange is immaterial for the six months ended June 30, 2021
and 2020.
Income
Taxes
The
Company follows the provisions of FASB ASC 740-10, Income Taxes – Overall (“ASC 740-10”). When
tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities,
while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial 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 condensed 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 June 30, 2021, tax years 2017 through 2020 remain open for Internal Revenue Service (“IRS”) audit. The Company has not
received any notice of audit or notifications from the IRS for any of the open tax years.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
Concentrations
The
Company generates revenues from through Ad Exchange Networks and through our Owned and Operated Ad Exchange Network. There was one customer
who accounted for approximately 12%
of the revenues for the three months ended June 30, 2021. There was one customer who accounted for approximately 12% of revenues for
the six months ended June 30, 2021. No other customer was over 10%
of revenues for the six months ended June 30, 2021. There were no customers which accounted for accounts receivable in excess of 10%
at June 30, 2021. There was one vendor who accounted for approximately 7%
of the accounts payable due at June 30, 2021.
There
was one large customer who accounted for approximately 18%
of the revenues for the three months ended June 30, 2020. There were no customers who represented more than 10%
of revenues for the six months ended June 30, 2020. There were two large customers who accounted for accounts receivable of approximately
11%
and 12%,
respectively, at June 30, 2020. There was one vendor who accounted for approximately 11%
of the accounts payable due at June 30, 2020.
Credit
Risk
The
Company maintains certain of its cash balances in various U.S. banks, which at times, may exceed federally insured limits. The Company
has not incurred any losses on these accounts. In addition, the Company maintains various bank accounts in Thailand, which are not insured.
During the three and six months ended June 30, 2021 and 2020, we have not incurred material losses on these uninsured accounts. The Company
minimizes the concentration of credit risk associated with its cash by maintaining its cash with high quality federally insured financial
institutions. The Company performs ongoing evaluations of its trade accounts receivable customers and generally does not require collateral.
Concentration
of Funding
Historically,
the Company had a large portion of the funding provided through the sale of shares of the Company’s common stock with related warrants,
however, during the three and six months ended June 30, 2021 no funding through the sale of shares occurred.
Basic
and Diluted Net Earnings (Loss) Per Common Share
Earnings
(loss) per share is calculated and reported under the “two-class” method. The “two-class” method is an earnings
allocation method under which earnings per share is calculated for each class of common stock and participating security considering
both dividends declared or accumulated and participation rights in undistributed earnings as if all such earnings had been distributed
during the period. The Company has convertible preferred stock which have a right to participate in dividends; these are deemed to be
participating securities. During periods of loss, there is no allocation required under the two-class method since the participating
securities do not have a contractual obligation to fund the losses of the Company.
When
applicable, basic earnings (loss) per share is calculated by dividing net income, after deducting dividends on convertible preferred
stock and participating securities as well as undistributed earnings allocated to participating securities, by the average number of
common shares outstanding during the period. Diluted earnings (loss) per share is calculated in a similar manner after consideration
of the potential dilutive effect of common stock equivalents on the average number of common shares outstanding during the period. Common
stock equivalents include warrants and stock options. Common stock equivalents are calculated based upon the treasury stock method using
an average market price of common shares during the period. Dilution is not considered when a net loss is reported. Common stock equivalents
that have an antidilutive effect are excluded from the computation of diluted earnings per share.
Segment
Information
The
Company currently operates in one reporting segment. The services segment is focused on producing advertising revenue generated by users
“clicking” on website advertisements utilizing several ad network partners, and direct advertisers and subscription revenue
generated by the sale of access to career postings on one of our websites, however the latter, is insignificant.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
Recent
Accounting Pronouncements
In
June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13 (amended by ASU 2019-10), Financial
Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, regarding the measurement of credit
losses for certain financial instruments, which replaces the incurred loss model with a current expected credit loss (“CECL”)
model. The CECL model is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The
Company is required to adopt the new guidance on January 1, 2023. The Company is currently evaluating the impact this guidance will have
on the condensed consolidated financial statements.
In
January 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-04 (amended by ASU 2019-10), Intangibles –
Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the test for goodwill impairment
by removing the second step of the test. There is a one-step qualitative test and does not amend the optional qualitative assessment
of goodwill impairment. The new standard is effective January 1, 2023 and is not expected to have a material impact on the Company’s
condensed consolidated financial statements.
In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for certain financial instruments with
characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred
stock instruments and made certain disclosure amendments to improve the information provided to users. The new standard is effective
January 1, 2024 (early adoption is permitted, but not earlier than January 1, 2021). The new standard is not expected to have a material
impact on the Company’s condensed consolidated financial statements.
In
March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform
on Financial Reporting, which provides optional expedient and exceptions for applying generally accepted accounting
principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.
In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation
of the LIBOR, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative
reference rates that are more observable or transaction based and less susceptible to manipulation. This accounting standards update
provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates
that are expected to be discontinued. This new guidance may be adopted by the Company no later than December 1, 2022, with early adoption
permitted. The potential adoption of this guidance is not expected to have a material impact on the condensed consolidated financial
statements.
NOTE 4 – ACQUISITIONS
Wild Sky Media
On June 1, 2020, the Company
entered into a membership interest purchase agreement (the “Purchase Agreement”) with Centre Lane Partners Master Credit
Fund II, L.P. (“Centre Lane”) to purchase 100%
of the membership interests of CL Media Holdings, LLC (“Wild Sky”). The Company issued 2,500,000
shares of restricted common stock to Centre Lane and Centre Lane issued a first lien senior secured credit facility of $16,451,905.
Per the credit facility with Center Lane, our loan payments began 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.
BRIGHT MOUNTAIN MEDIA, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
NOTE
4 – ACQUISITIONS (continued).
The
Agreement provides for a senior secured five-year loan in the initial principal amount of $16,451,905. 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.
Effective
upon the closing of the Wild Sky Purchase Agreement, the Company agreed to pay Spartan Capital Securities LLC (“Spartan Capital”),
a broker-dealer and member of FINRA, a finder’s fee in the form of Company common stock. Spartan Capital was issued 610,000 shares
(valued at $908,900) in December 2020.
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:
SCHEDULE
OF PURCHASE PRICE ALLOCATION TO ASSETS ACQUIRED AND LIABILITIES ASSUMED
| |
June 1, 2020 | |
Tangible assets acquired | |
| | |
Cash & cash equivalents | |
$ | 1,651,509 | |
Accounts receivable, net | |
| 2,887,282 | |
Prepaid expense | |
| 484,885 | |
Fixed assets, net | |
| 124,575 | |
Other assets | |
| 321,374 | |
Intangible assets acquired: | |
| | |
Tradename – Trademarks | |
| 2,360,300 | |
IP/Technology | |
| 1,412,000 | |
Customer relationships | |
| 4,563,000 | |
Less: Liabilities assumed | |
| | |
Accounts payable | |
| (922,153 | ) |
Accrued expenses | |
| (524,188 | ) |
Other current liabilities | |
| (235,503 | ) |
Long term loan payable – PPP | |
| (1,706,735 | ) |
Less: Deferred tax liability | |
| (247,577 | ) |
Net assets acquired | |
| 10,168,769 | |
| |
| | |
Goodwill | |
| 9,973,136 | |
Total purchase price | |
$ | 20,141,905 | |
The
table below summarizes the value of the total consideration given in the transaction:
SCHEDULE OF TOTAL CONSIDERATION TRANSACTION
| |
Amount | |
| |
| |
Debt issued | |
$ | 16,416,905 | |
Shares issued | |
| 3,725,000 | |
Total consideration | |
$ | 20,141,905 | |
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
5 – PREPAID COSTS AND EXPENSES.
At
June 30, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following:
SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS
| |
June 30, 2021 | | |
December 31, 2020 | |
Prepaid insurance | |
$ | 118,874 | | |
$ | 386,206 | |
Prepaid consulting service agreements – Spartan (1) | |
| 379,773 | | |
| 379,771 | |
Prepaid expenses – other | |
| 279,066 | | |
| 174,237 | |
Prepaid expenses and other current assets | |
$ | 777,713 | | |
$ | 940,214 | |
(1) |
Spartan
Capital is a broker-dealer that has assisted the Company with a range of services including capital raising activities, M&A advisory,
and consulting services. The Company has a five-year agreement with Spartan Capital for the provision of such services and any prepayments
made under the terms of this agreement starting October 2018 were capitalized and amortized over the remaining life of the agreement. |
NOTE
6 – PROPERTY AND EQUIPMENT.
At
June 30, 2021 and December 31, 2020, property and equipment consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
| |
Estimated Useful Life (Years) | | |
June 30, 2021 | | |
December 31, 2020 | |
Furniture and fixtures | |
| 3-5 | | |
$ | 79,431 | | |
$ | 80,844 | |
Leasehold improvements | |
| 3 | | |
| - | | |
| 1,388 | |
Computer equipment | |
| 3 | | |
| 216,004 | | |
| 176,641 | |
Total property and equipment | |
| | | |
| 295,435 | | |
| 258,873 | |
Less: accumulated depreciation | |
| | | |
| (211,382 | ) | |
| (145,623 | ) |
Total property and equipment, net | |
| | | |
$ | 84,053 | | |
$ | 113,250 | |
Depreciation
expense for the three months ended June 30, 2021 and 2020, was $16,487 and $4,926, respectively.
Depreciation
expense for the six months ended June 30, 2021 and 2020, was $34,534 and $10,179, respectively.
NOTE
7 – WEBSITE ACQUISITION AND INTANGIBLE ASSETS.
At
June 30, 2021 and December 31, 2020, respectively, website acquisitions, net consisted of the following:
SCHEDULE OF WEBSITE ACQUISITIONS, NET
| |
June 30, 2021 | | |
December 31, 2020 | |
Website acquisition assets | |
$ | 1,124,846 | | |
$ | 1,124,846 | |
Less: accumulated amortization | |
| (919,650 | ) | |
| (918,850 | ) |
Less: cumulative impairment loss | |
| (200,396 | ) | |
| (200,396 | ) |
Website Acquisition Assets, net | |
$ | 4,800 | | |
$ | 5,600 | |
At
June 30, 2021 and December 31, 2020, respectively, intangible assets, net consisted of the following:
SCHEDULE OF INTANGIBLE ASSETS
| |
Useful Lives | |
June 30, 2021 | | |
December 31, 2020 | |
Trade name | |
5 years | |
$ | 3,749,600 | | |
$ | 3,749,600 | |
Customer relationships | |
5 years | |
| 16,184,000 | | |
| 16,184,000 | |
IP/Technology | |
5 years | |
| 7,223,000 | | |
| 7,223,000 | |
Non-compete agreements | |
3-5 years | |
| 1,154,500 | | |
| 1,154,500 | |
Total Intangible Assets | |
| |
$ | 28,311,100 | | |
$ | 28,311,100 | |
Less: accumulated amortization | |
| |
| (4,962,187 | ) | |
| (4,170,454 | ) |
Less: accumulated impairment loss | |
| |
| (16,486,929 | ) | |
| (16,486,929 | ) |
Intangible assets, net | |
| |
$ | 6,861,984 | | |
$ | 7,653,717 | |
Amortization
expense for the three months ended June 30, 2021 and 2020 was $395,868 and $1,029,680, respectively, related to both the website acquisition
costs and the intangible assets. Amortization expense for the six months ended June 30, 2021 and 2020 was $791,733 and $1,944,267, respectively,
related to both the website acquisition costs and the intangible assets.
During
2020, the finite lived intangible assets associated with Oceanside and MediaHouse were tested for impairment valuation based on indicators
of impairment noted by management, including decreased revenues. Primarily resulting from the COVID-19 global pandemic when many companies
in various industries were forced to restructure their advertising budgets and spending. The fair value of the respective assets was
determined based on the projected future cash flows associated with the respective assets. These fair values were compared with the carrying
values of the respective assets to determine if an impairment of the respective assets was warranted. It was determined that the carrying
values of the finite lived intangible assets associated with Oceanside did not exceed the respective fair values of the assets, therefore
no revaluation associated with these assets has been recognized. It was determined that the finite lived intangible assets associated
with MediaHouse were deemed impaired based on an analysis of the carrying values and fair values of the assets. In September 2020, the
Company recorded an impairment expense of $16,486,929 within intangible assets impairment expense on the condensed consolidated statement
of operations.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
8 – GOODWILL
The
following table presents changes to goodwill from December 31, 2020 through June 30, 2021:
SCHEDULE OF CHANGES GOODWILL
| |
Owned & Operated | | |
Ad Network | | |
Total | |
December 31, 2020 goodwill | |
$ | 9,725,559 | | |
$ | 9,919,909 | | |
$ | 19,645,468 | |
June 30, 2021 goodwill | |
$ | 9,725,559 | | |
$ | 9,919,909 | | |
$ | 19,645,468 | |
Goodwill
is tested for impairment at least annually and if triggering events are noted prior to the annual assessment. Impairment is deemed to
occur when the carrying value of the Goodwill associated with the reporting unit exceeds the implied value of the Goodwill associated
with the reporting unit. The year 2020 has been marked by the COVID-19 Global pandemic when many companies in various industries were
forced to restructure their advertising budgets and spending. This is evidenced by the reduced revenues from our customers in comparison
with the 2019 year. The fair value of the respective reporting units was determined based on both the Income Approach (Discount Cash
Flows) and the Market Multiples Approach. In September 2020, it was determined that the carrying value of the Goodwill associated with
the Owned & Operated reporting unit was not deemed impaired; while recorded goodwill associated with the Ad Network reporting unit
exceeded the fair value of the Goodwill and in September 2020, the Company recorded an impairment of $42,279,087.
NOTE
9 – ACCRUED EXPENSES.
At
June 30, 2021 and December 31, 2020, accrued expenses consisted of the following:
SCHEDULE OF ACCRUED EXPENSES
| |
June 30, 2021 | | |
December 31, 2020 | |
| |
(unaudited) | | |
| |
Accrued interest – related party | |
$ | 459,496 | | |
$ | 581,888 | |
Accrued salaries and benefits | |
| 1,237,321 | | |
| 1,237,909 | |
Accrued dividends | |
| 632,370 | | |
| 455,956 | |
Accrued traffic settlement(1) | |
| 10,254 | | |
| 10,254 | |
Accrued legal settlement(2) | |
| 216,101 | | |
| 117,717 | |
Accrued legal fees | |
| 199,639 | | |
| 113,683 | |
Accrued other professional fees | |
| 194,550 | | |
| 206,613 | |
Share issuance liability(4) | |
| 65,129 | | |
| 515,073 | |
Accrued warrant penalty(3) | |
| 366,899 | | |
| 262,912 | |
Other accrued expenses | |
| 15,008 | | |
| 44,891 | |
Total accrued expenses | |
$ | 3,396,767 | | |
$ | 3,546,896 | |
(1) |
The
Company negotiates with its publishing partners regarding questionable traffic to arrive at traffic settlements. |
(2) |
Accrued
legal settlement related to the Encoding legal matter. Refer to Note 11. |
(3) |
The
Company has sold units of its securities to various investors in several private placements. As part of each private placement, the
Company agreed to file a registration statement with the SEC to register the resale of the shares by the respective holder in order
to permit the public resale; such filing deadlines ranged from 120 to 270 days following the closing date of the respective placement
and the Company was liable to pay a penalty fee for failure to file the resale registration statement within the allotted timeframe. |
(4) |
Share
issuance liability related to issuance of the Company’s common stock in connection with the Oceanside, MediaHouse and Wild
Sky acquisitions and Oceanside employee share issuances. |
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
10 – NOTES PAYABLE
Long-term
debt to related parties
Centre
Lane Partners Master Credit Fund II, L.P. (“Center Lane Partners”), who sold the Company the Wild Sky business in June 2020
(See below) has partnered and assisted the Company from a liquidity perspective starting in April 2021. This relationship has been determined
to qualify as a related party. A related party is a party that can exercise significant influence over the Company in making
financial and/or operating decisions.
Effective
June 1, 2020, we entered into a membership interest purchase agreement to acquire 100%
of Wild Sky. The seller issued a first lien senior secured credit facility totaling $16,451,905,
which consisted of $15,000,000
of initial indebtedness, repayment of Wild Sky’s
existing accounts receivable factoring facility of approximately $900,000
and approximately $500,000
of expenses. The note bears interest at a rate
of 6.0%
per annum. Per the credit facility with the seller, our loan payments begin December 1, 2021. There is no prepayment penalty associated
with this credit facility. Certain future capital raises do require partial or full prepayments of the credit facility. The membership
interest purchase included a requirement that the opinion of the financial statements as of and for the year ended December 31, 2020
not include a “going concern opinion.” The Company defaulted on this requirement and on April 26, 2021, the Company
obtained a waiver of this requirement from the lender.
On
April 26, 2021, the Company and certain of its subsidiaries entered into a First Amendment to Amended and Restated Senior Secured Credit
Agreement (the “First Amendment”). The Company and its subsidiaries are parties to a credit agreement
between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020 (the “Credit Agreement”).
The Credit Agreement was amended to permit the Company to raise up to $6,000,000 of total cash proceeds from the sale of its preferred
stock prior to December 31, 2021 without having to make a mandatory prepayment of the loans (the “Loans”) under the Credit
Agreement. The interest rate on the Loans after April 26, 2021 was increased to 10.00% per annum from 6.00%, which can continue to be
paid in-kind in lieu of cash payment. In addition, the Company may issue up to $800,000 in dividends from the previous limit of $500,000
per annum. In addition, the Company has issued 150,000 common shares to Centre Lane Partners as part of this transaction.
On
May 26, 2021, the Company and certain of its subsidiaries entered into a Second amendment to the Amended and Restated Senior Secured
Credit Agreement between itself and Centre Lane Partners (“the Second Amendment”). The Company and its subsidiaries
are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5,
2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $1.5
million, in the aggregate. This term loan shall
be repaid by December 31, 2021. In addition, and as part of the transaction, there is an Exit Fee (“the Exit Fee”) totaling
$0.750 million
which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. In addition, the
Company has issued 3.0
million common shares to Centre Lane Partners as part of this
transaction.
As
part of these transactions and given that Centre Lane was determined to be a related party, an independent fair value analysis was performed
by the Company and all related transactions were recorded accordingly. As of the First Amendment dated April 26, 2021, the Company
evaluated the debt for extinguishment or debt modification under FASB ASC 470-50, Debt – Modifications and Extinguishments,
and determined extinguishment was applicable. Under the rules, the Company extinguished the debt, which included the capitalized interest
through April 26, 2021, and recorded it net of the debt discount, including all applicable fees and stock issuances. The debt discount
determined for the First Amendment totaled $2,363,986
and is amortized over the remaining life of the
loan and is included in interest expense – related party on the accompanying condensed consolidated statement of operations or
until the next debt modification or extinguishment is determined. For the Second Amendment, which occurred on May 26, 2021, the
Company determined it was a debt modification. The Second Amendment provided the Company with debt financing of $1,500,000,
an Exit fee of $750,000,
and issuance of 3,000,000
shares of common stock issued to Centre Lane. The increment
to the debt discount was $904,637.
This debt discount was added to the previously mentioned $ 2,363,986
debt discount for a total gross debt discount
of $3,268,623 which
will be amortized into the condensed consolidated statement of operations and included in the interest expense – related party
over the remaining life of the loan or until the next debt modification or extinguishment is determined. Interest expense for note payable
to related party for the three months ended June 30, 2021 and 2020 was $360,903
and $0,
respectively. Interest expense for note payable to related party for the six months ended June 30, 2021 and 2020 was $360,903
and $0,
respectively.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE 10 – NOTES PAYABLE (continued).
On
July 31, 2019, the Company executed a Share Exchange Agreement and Plan of Merger (the “Oceanside Merger Agreement”)
with Slutzky & Winshman Ltd., an Israeli company (“Oceanside”) and the shareholders of Oceanside (the
“Oceanside Shareholders”). The merger closed on August 15, 2019, and the Company acquired all of the outstanding shares
of S&W. Pursuant to the terms of the Merger Agreement, we issued 12,513,227 shares valued at $20,021,163 to owners and employees
of Oceanside and contingent consideration of $750,000 paid through the delivery of unsecured, interest free, one and two-year
promissory notes (the “Closing Notes”). At the time of the acquisition and under ASC 805, these Closing Notes were
recorded ratably as compensation expense into the statement of operations over the 24-month term and an accrued payable is being
recognized over the same period. As of August 15, 2020, the Company did not make payment on the one year closing note and thereby
defaulted on its obligation and the two-year closing note accelerated to become payable as of August 15, 2020. Upon default, the
closing notes accrue interest at a 1.5% per
month rate, or 18% annual
rate. As a result, there was a total charge of
$300,672 recorded
during the third quarter of 2020 which was $250,000 of
compensation expense and $50,672 of
interest expense-related party. The total $750,000 liability
is recorded in accrued expenses. Interest expense for note payable to related party for the three months ended June 30, 2021
and 2020 was $33,567 and
$0,
respectively. Interest expense for note payable to related party for the six months ended June 30, 2021 and 2020 was $66,945 and
$0,
respectively.
During
November 2018, the Company issued 10% convertible promissory notes in the amount of $80,000 to a related party, to our Chairman of the
Board. The notes mature five years from issuance and is convertible at the option of the holder into shares of common stock at any time
prior to maturity at a conversion price of $0.40 per share. A beneficial conversion feature exists on the date the convertible notes
were issued whereby the fair value of the underlying common stock to which the notes are convertible into is in excess of the face value
of the note of $70,000.
The
principal balance of these notes payable was $80,000 at June 30, 2021 and December 31, 2020, and discounts recognized upon respective
origination dates as a result of the beneficial conversion feature total $33,329 and $40,272, respectively. At June 30, 2021 and December
31, 2020, the total convertible notes payable to related party net of discounts was $46,671 and $39,728, respectively.
Interest
expense for note payable to related party was $2,023 for the three months ended June 30, 2021 and 2020 and discount amortization was
$3,491. Interest expense for note payable to related party for the six months ended June 30, 2021 and 2020 was $4,023 and $4,046, respectively
and discount amortization was $6,943 and $6,981, respectively.
Long-term
debt
On
February 17, 2021, under the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic
Security (“CARES”) Act, administered by the Small Business Administration (“SBA”), the Company entered into a
promissory note of $295,600
with Regions Bank (the “Second Bright
Mountain PPP Loan”) and has a two-year
term and bears interest at a rate of 1.0%
per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The Second Bright Mountain
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. This was the second tranche available under the PPP program.
On
March 23, 2021, under the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security
(“CARES”) Act, administered by the Small Business Administration (“SBA”), the Company’s Wild Sky subsidiary
entered into a promissory note of $841,540
with Holcomb Bank (the “Second Wild
Sky PPP Loan”) and has a two-year term and bears interest at a rate of 1.0%
per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The Second Wild Sky
PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains customary events
of default provisions. Under the terms of the CARES Act, PPP Loan recipients can apply for and be granted forgiveness for all or a portion
of loans granted under the PPP. This was the second tranche available under the PPP program.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
10 – NOTES PAYABLE (continued).
On
April 24, 2020, under the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security
(“CARES”) Act, administered by the Small Business Administration (“SBA”), the Company entered into a promissory
note of $464,800
with Regions Bank (the “Bright Mountain
PPP Loan”) and has a two-year term and bears interest at a rate of 1.0%
per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan may be prepaid
at any time prior to 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. On January 28, 2021, the Company applied for the promissory note to be forgiven by the SBA in whole or in part; as of the date
of this report, the Company that application is still in process. This loan was forgiven on July 16, 2021 by the Small Business Administration
(SBA). For more information, see Note 16, Subsequent Events.
Effective
June 1, 2020, the Company acquired Wild Sky and assumed the $1,706,735
promissory note (the “Wild Sky PPP Loan”)
with Holcomb Bank received under the PPP. The Wild Sky PPP Loan has a two-year term and bears interest at a rate of 1.0%
per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The Wild Sky PPP Loan
may be prepaid at any time prior to maturity with no prepayment penalties. The Wild Sky PPP Loan contains customary events of default
provisions. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion
of loans granted under the PPP. On January 22, 2021, the Company applied for the promissory note to be forgiven by the SBA in whole or
in part and on March 29, 2021, the Company obtained the forgiveness of the Wild Sky PPP Loan in whole and recorded a non-cash gain on
the PPP forgiveness during the three months ended March 31, 2021.
At
June 30, 2021 and December 31, 2020 a summary of the Company’s debt is as follows:
SCHEDULE OF LONG-TERM DEBT
| |
June
30,
2021 | | |
December
31,
2020 | |
Non-interest bearing BMLLC acquisition debt | |
$ | 385,000 | | |
$ | 385,000 | |
PPP loans | |
| 1,601,940 | | |
| 2,171,534 | |
Wild Sky acquisition debt | |
| 17,376,834 | | |
| 16,451,906 | |
Centre Lane debt | |
| 2,285,000 | | |
| - | |
Note payable debt to the Company’s Chairman of the Board | |
| 80,000 | | |
| - | |
Total Debt | |
| 21,728,774 | | |
| 19,008,440 | |
Less: debt discount, related party | |
| (3,163,451 | ) | |
| - | |
Less: current portion of long-term debt | |
| (1,986,940 | ) | |
| (2,091,735 | ) |
Less: current portion of long-term debt, related party | |
| (2,729,200 | ) | |
| - | |
Long Term Debt | |
$ | 13,849,183 | | |
$ | 16,916,705 | |
The
minimum annual principal payments of notes payable at June 30, 2021 were:
SCHEDULE OF MATURITIES OF LONG-TERM OBLIGATION
| |
| | |
2021 | |
$ | 2,486,533 | |
2022 | |
| 2,862,358 | |
2023 | |
| 2,287,791 | |
2024 | |
| 1,797,883 | |
2025 | |
| 12,294,208 | |
Total | |
$ | 21,728,774 | |
Premium
Finance Loan Payable
The
Company generally finances its annual insurance premiums through the use of short-term notes, payable in 10 equal monthly installments.
Coverages financed include Directors and Officers and Errors and Omissions with premiums financed in 2020 and 2019 of $380,398 and $194,592,
respectively.
Total
Premium Finance Loan Payable balance for the Company’s policies was $117,145 at June 30, 2021 and $339,890 at December 31, 2020.
NOTE
11 – COMMITMENTS AND CONTINGENCIES.
The
Company leases its corporate offices at 6400 Congress Avenue, Suite 2050, Boca Raton, Florida 33487 under a long-term non-cancellable
operating lease agreement expiring on October 31, 2021. The lease terms require base rent payments of approximately $7,260 plus sales
tax per month for the first twelve months commencing in September 2018, with a 3% escalation each year. Included in other assets is a
required security deposit of $18,100. Rent is all-inclusive and includes electricity, heat, air-conditioning, and water.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
11 – COMMITMENTS AND CONTINGENCIES (continued).
The
right-of-use asset and lease liability is as follows as of June 30, 2021 and December 31, 2020:
SCHEDULE OF RIGHT OF USE ASSET AND LEASE LIABILITY
| |
June 30,
2021 | | |
December 31,
2020 | |
Assets | |
| | | |
| | |
Operating lease right of use asset | |
$ | 24,765 | | |
$ | 72,598 | |
| |
| | | |
| | |
Liabilities | |
| | | |
| | |
Operating lease liability | |
$ | 24,765 | | |
$ | 72,727 | |
The
Company’s non-lease components are primarily related to property maintenance and other operating services, which varies based on
future outcomes and is recognized in rent expense when incurred and not included in the measurement of the lease liability. The Company
did not have any variable lease payments for its operating lease for the three and six months ended June 30, 2021.
The
maturity of the Company’s operating lease liability for the 12 months ended June 30:
SCHEDULE OF MATURITY OF OPERATING LEASE LIABILITY
| |
| | |
2021 | |
$ | 24,765 | |
Total net lease liabilities | |
$ | 24,765 | |
The
following summarizes additional information related to the operating lease:
SCHEDULE OF ADDITIONAL INFORMATION RELATED TO OPERATING LEASE
| |
| |
| |
June 30, 2021 | |
Weighted-average remaining lease term | |
| 0.58 years | |
Weighted-average discount rate | |
| 5.50 | % |
For
the three months ended June 30, 2021 and 2020, rent expense was $53,588 and $61,923, respectively. For the six months ended June 30,
2021 and 2020, rent expense was $102,020 and $222,554, respectively.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
11 – COMMITMENTS AND CONTINGENCIES (continued).
Legal
From
time-to-time, the Company may be involved in litigation or be subject to claims arising out of our operations or content appearing on
our websites in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, the
Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on our business.
Under
the covenants of the Placement Agent Agreement with Spartan Capital and as disclosed in the Placement Offering Memorandum, the Company
was obligated to make a filing with a stock exchange to list the Company’s shares. The Company was to make such filing by a listing
deadline and have stock exchange approval by a listing approval deadline. In the event the Company was unable to meet to deadlines, the
investors in the Offering would be entitled to one additional share of common stock for each share purchased in the Offering provided,
however, that such deadlines and obligations of the Company to issue additional shares would be extended for so long as the Company was
able to demonstrate to the reasonable satisfaction of the Placement Agent, which consent shall not be reasonably withheld that it had
acted in good-faith in attempting to list such securities which included responding to comments from such exchange. The Company believes
it has acted in good-faith and has no obligation. No litigation has been filed by Spartan at this time or any of the shareholders in
connection with the matter. For more information, see Note 16, Subsequent Events.
In
2020, Synacor, Inc. commenced an action against MediaHouse, LLC, Inform, Inc. and the Company, alleging approximately $230,000
was owed based on invoices provided in 2019 in
respect to that certain Content Provider & Advertising Agreement with MediaHouse. The Company has filed an answer and defenses and
intends to defend the alleged claims. This is recorded as an accrued liability as of June 30, 2021. For more information, see Note 16,
Subsequent Events.
A
former employee of the Company filed a suit against the Company MediaHouse, Inc., and Gregory A. Peters, a former Executive, (the “Defendants”)
alleging two counts of defamation. Any potential losses associated with this matter cannot be estimated at this time.
Encoding.com,
Inc. (“Encoding”) was a former digital media customer of MediaHouse. Encoding had a long overdue outstanding receivable from
MediaHouse’s predecessor company, Inform, Inc. MediaHouse did not assume the liability at acquisition. In 2020, the Company and
Encoding agreed to settle the overdue receivable through the issuance of 175,000 warrants to purchase Company stock with a $1.00 exercise
price. This is recorded as an accrued liability as of December 31, 2020 and the warrants were issued in May 2021.
Regardless
of the outcome, litigation can have an adverse impact on our company because of defense and settlement costs, diversion of management
resources and other factors. For further updates that could effect the Legal matter, please see Note 16, Subsequent Events.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
12 – PREFERRED STOCK.
The
Company has authorized 20,000,000 shares of preferred stock with a par value of $0.01 (the “Preferred Stock”), issuable in
such series and with such designations, rights and preferences as the board of directors may determine. The Company’s board of
directors has previously designated five series of preferred stock, consisting of 10% Series A Convertible Preferred Stock (“Series
A Stock”), 10% Series B Convertible Preferred Stock (“Series B Stock”), 10% Series C Convertible Preferred Stock (“Series
C Stock”), 10% Series D Convertible Preferred Stock (“Series D Stock”) and 10% Series E Convertible Preferred Stock
(“Series E Stock”).
On
November 5, 2018, the Company filed Articles of Amendment to Amended and Restated Articles of Incorporation, as amended, which:
|
● |
returned
1,000,000 shares of previously designated 10% Series B Convertible Preferred Stock, 2,000,000 shares of previously designated 10%
Series C Convertible Preferred Stock and 2,000,000 shares of previously designated 10% Series D Convertible Preferred Stock to the
status of authorized but undesignated and unissued shares of our blank check preferred stock as there were no shares of any of these
series outstanding and no intention to issue any such shares in the future: and |
|
|
|
|
● |
created
three new series of preferred stock, 12% Series F-1 Convertible Preferred Stock (“Series F-1”) consisting of 2,177,233
shares, 6% Series F-2 Convertible Preferred Stock (“Series F-2”) consisting of 1,408,867 shares, and 10% Series F-3 Convertible
Preferred Stock (“Series F-3”) consisting of 757,917 shares. |
The
designations, rights and preferences of the Series F-1, Series F-2 and Series F-3 are identical, other than the dividend rate, liquidation
preference and date of automatic conversion into shares of our common stock. The Series F-1 pays dividends at the rate of 12% per annum
and automatically converts into shares of our common stock on April 10, 2022. The Series F-2 pays dividends at the rate of 6% per annum
and automatically converts into shares of our common on July 27, 2022. The Series F-3 pays dividends at the rate of 10% per annum and
automatically converts into shares of our common stock on August 30, 2022. Additional terms of the designations, rights and preferences
of the Series F-1, Series F-2 and Series F-3 include:
|
● |
the
shares have no voting rights, except as may be provided under Florida law; |
|
● |
the
shares pay cash dividends subject to the provisions of Florida law at the dividend rates set forth above, payable monthly in arrears; |
|
● |
the
shares are convertible at any time at the option of the holder into shares of our common stock on a 1:1 basis. The conversion ratio
is proportionally adjusted in the event of stock splits, recapitalization or similar corporate events. Any shares not previously
converted will automatically convert into shares of our common stock on the dates set forth above; |
|
● |
the
shares rank junior to our 10% Series A Convertible Preferred Stock and our 10% Series E Convertible Preferred Stock; |
|
● |
in
the event of a liquidation or winding up of the Company, the shares have a liquidation preference of $0.50 per share for the Series
F-1, $0.50 per share for the Series F-2 and $0.40 per share for the Series F-3; and |
|
● |
the
shares are not redeemable by the Company. |
On
July 18, 2019, the Company filed Articles of Amendment to Amended and Restated Articles of Incorporation, as amended, which:
|
● |
Approved
designation of 2,000,000 shares of the preferred stock as 10% series A-1 Convertible Preferred Stock and authorized the issuance
of the Series A-1 Preferred Stock; |
|
● |
Dividends
on the Series A-1 Preferred stock are cumulative and payable in cash; |
|
|
|
|
● |
Dividends
shall be payable monthly in arrears within fifteen (15) days after the end of the month. |
At
both June 30, 2021 and December 31, 2020, there were 1,200,000 shares of Series A-1 Stock, 2,500,000 shares of Series E Stock and 4,344,017
shares of Series F Stock issued and outstanding. There are no shares of Series B Stock, Series B-1 Stock, Series C Stock or Series D
Stock issued and outstanding.
Other
designations, rights and preferences of each of series of preferred stock are identical, including (i) shares do not have voting rights,
except as may be permitted under Florida law, (ii) are convertible into shares of our common stock at the holder’s option on a
one for one basis, (iii) are entitled to a liquidation preference equal to a return of the capital invested, and (iv) each share will
automatically convert into shares of common stock five years from the date of issuance or upon a change in control. Both the voluntary
and automatic conversion formulas are subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate
events.
Dividends
paid for Series A-1, E and F Convertible Preferred Stock paid were $1,261 during the three months ended June 30, 2021 and for Series
E and F Convertible Preferred Stock were $31,261 during the three months ended June 30, 2020. Dividends paid for Series A-1, E and F
Convertible Preferred Stock paid were $2,522 during the six months ended June 30, 2021 and for Series E and F Convertible Preferred Stock
were $55,007 during the six months ended June 30, 2020.
Total
preferred stock dividend accrued amounted to $632,370 and $363,460 as of June 30, 2021 and December 31, 2020, respectively.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
13 – COMMON STOCK.
A)
Stock issued for Cash
For
the six months ended June 30, 2021, the Company did not sell any of its securities through a private placement.
For
the six months ended June 30, 2020, the Company sold an aggregate of 6,142,500 units of its securities to 66 accredited investors in
a private placement exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) and Rule
506(b) of Regulation D resulting in gross proceeds to the Company of $3,071,250. Each unit, which was sold at a purchase price of $0.50,
consisted of one share of common stock and one five-year warrant to purchase one share of common stock at an exercise price of $0.75
per share. Spartan Capital, served as placement agent for the Company in this offering. As compensation for its services, Spartan Capital
held back $460,688 for commissions, $165,000 to pay the accrued finder’s fee for the Oceanside acquisition, and $275,000 in other
consulting fees, resulting in net cash received by the Company of $2,170,563. The Company issued Spartan Capital Placement Agents Warrants
to purchase an aggregate of 614,250 shares of our common stock, including the cash commission and Placement Agent Warrants issued pursuant
to the closings included in the Company’s condensed consolidated statement of changes in shareholders’ equity for the six
months ended June 30, 2020.
B)
Stock issued for services
During
the six months ended June 30, 2021, the Company issued 3,654,266 shares of our common stock for the following concepts:
SCHEDULE
OF COMMON SHARES ISSUED DURING THE PERIOD
| |
Shares (#) | | |
Value | |
Shares issued to Centre Lane related to debt financing | |
| 3,150,000 | | |
$ | 2,497,056 | |
Options exercised by employees | |
| 100,000 | | |
| 13,900 | |
Warrants exercised | |
| 25,000 | | |
| 10,000 | |
Shares issued to Oceanside employees per the acquisition agreement valued at $1.60 | |
| 379,266 | | |
| 606,826 | |
Total | |
| 3,654,266 | | |
$ | 3,127,782 | |
In
February 2020, the Company issued 650,000 shares of our common stock to Spartan Capital for services rendered during 2019 based on the
fair value of date of service, or $1.60 a share valued at $1,040,000.
In
February 2020, the Company issued 660,000 shares of our common stock to Spartan Capital for services rendered during 2019 based on the
fair value of date of service, or $1.64 a share valued at $1,082,400.
In
March 2020, the Company issued 60,000 shares of our common stock to MZHCI, Inc for services rendered during 2020 based on the fair value
of date of service, or $1.50 a share valued at $90,000.
During
the three and six months ended June 30, 2020, the Company issued 1,025,000 shares as part of a private placement to several accredited
investors that raised $435,625 of net cash after paying fees and commissions.
C)
Stock issued for acquisitions
During
the three and six months ended June 30, 2021, the Company did not make any acquisitions.
On
June 1, 2020, the Company entered into a membership interest purchase agreement (the “Purchase Agreement”) with Centre Lane
Partners Master Credit Fund II, L.P. (“Centre Lane”) to purchase 100% of the membership interests of CL Media Holdings, LLC
(“Wild Sky”). The Company issued 2,500,000 shares of restricted common stock to Centre Lane and Centre Lane issued a first
lien senior secured credit facility of $16,451,905. The common shares were valued at $3,725,000 or $1.49 per share.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
13 – COMMON STOCK (continued).
Stock
Option Compensation
The
Company accounts for stock option compensation issued to employees for services in accordance with FASB ASC Topic 718,
Compensation – Stock Compensation (ASC 718). ASC 718 requires companies to recognize in the statement of
operations the grant-date fair value of stock options and other equity-based compensation issued to employees. The value of the
portion of an employee award that is ultimately expected to vest is recognized as an expense over the requisite service periods
using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the
measurement and recognition criteria of ASU No. 2018- 07, Compensation – Stock Compensation (Topic 718):
Improvements to Nonemployee Share-Based Payment Accounting. The Company estimates the fair value of stock options by
using the Black-Scholes option-pricing model.
Stock
options issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on
the fair value of the services provided or the estimated fair market value of the option, whichever is more reliably measurable in accordance
with FASB ASC 505, Equity, and ASC 718, including related amendments and interpretations. The related expense is recognized
over the period the services are provided.
On
April 20, 2011, the Company’s board of directors and majority stockholder adopted the 2011 Stock Option Plan (the “2011 Plan”),
to be effective on January 3, 2011. The Company has reserved for issuance an aggregate of 900,000
shares of common stock under the 2011 Plan. The
maximum aggregate number of shares of Company stock that shall be subject to Grants made under the Plan to any individual during any
calendar year shall be 180,000
shares. On April 1, 2013, the Company’s
board of directors and majority stockholder adopted the 2013 Stock Option Plan (the “2013 Plan”), to be effective on April
1, 2013. The Company has reserved for issuance an aggregate of 900,000
shares of common stock under the 2013 Plan. As
of December 31, 2020 and June 30, 2021, 337,000
and 597,000
shares, respectively were remaining under the
2011 Plan for future issuance. As of December 31, 2020 and June 30, 2021, 467,000
and 567,000
shares, respectively, were remaining under
the 2013 Plan for future issuance.
On
May 22, 2015, the Company’s board of directors and majority stockholder adopted the 2015 Stock Option Plan (the “2015 Plan”),
to be effective on May 22, 2015. The Company has reserved for issuance an aggregate of 1,000,000 shares of common stock under the 2015
Plan. As of December 31, 2020 and June 30, 2021, 859,000 shares were remaining under the 2015 Plan for the future issuance.
On
November 7, 2019, the Company’s board of directors and majority stockholder adopted the 2019 Stock Option Plan (the “2019
Plan”), to be effective on November 7, 2019. The Company has reserved for issuance an aggregate of 5,000,000 shares of common stock
under the 2019 Plan. As of December 31, 2020 and June 30, 2021, 4,761,773 shares were remaining under the 2019 Plan for the future issuance.
The
purpose of the 2011 Plan, 2013 Plan, 2015 Plan, and 2019 Plan (the “Plans” are to provide an incentive to attract and retain
directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship
and to stimulate an active interest of such persons into our development and financial success. Under the 2015 Plan, the Company is authorized
to issue incentive stock options intended to qualify under Section 422 of the Code, non-qualified stock options, stock appreciation rights,
performance shares, restricted stock and long-term incentive awards. The Company’s board of directors will administer the 2011
Plan until such time as such authority has been delegated to a committee of the board of directors. The material terms of each option
granted pursuant to the 2011 Plan by the Company shall contain the following terms: (i) that the purchase price of each share purchasable
under an incentive option shall be determined by the Committee at the time of grant, (ii) the term of each option shall be fixed by the
Committee, but no option shall be exercisable more than 10 years after the date such option is granted and (iii) in the absence of any
option vesting periods designated by the Committee at the time of grant, options shall vest and become exercisable in terms and conditions,
consistent with the Plan, as may be determined by the Committee and specified in the Grant Instrument.
The
Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon
several variables such as the expected option term, expected volatility of our stock price over the expected option term, expected risk-free
interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected
forfeiture rates.
The
Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors,
which is subject to ASC 718 requirements. These amounts are estimates and thus may not be reflective of actual future results,
nor amounts ultimately realized by recipients of these grants. The Company recognizes share-based compensation expense on a straight-
line basis over the requisite service period for each award.
The
expected life is computed using the simplified method, which is the average of the vesting term and the contractual term. The expected
volatility is based on an average of similar public company’s historical volatility. The risk-free interest rate is based on the
U.S. Treasury yields with terms equivalent to the expected term of the related option at the time of the grant. Dividend yield is based
on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if
the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.
The
Company recorded $74,722 and
$41,499 of
stock option expense for the three months ended June 30, 2021 and 2020, respectively. The Company
recorded $143,016 and
$78,094 of
stock option expense for the six months ended June 30, 2021 and 2020, respectively. The
stock option expense for the three and six months ended June 30, 2021 and 2020, respectively has been recognized as a component of selling,
general and administrative expenses in the accompanying condensed consolidated financial statements.
As
of June 30, 2021, there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $400,590
to be recognized through May 2025.
A
summary of the Company’s stock option activity during the six months ended June 30, 2021 is presented below:
SCHEDULE OF STOCK OPTION ACTIVITY
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
13 – COMMON STOCK (continued).
| |
Number of Options | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Term | | |
Aggregate Intrinsic Value | |
Balance Outstanding, December 31, 2020 | |
| 1,375,227 | | |
$ | 0.76 | | |
| 4.1 | | |
$ | 3,201,237 | |
Granted | |
| 150,000 | | |
| 0.33 | | |
| 9.3 | | |
| 414,320 | |
Exercised | |
| (100,000) | | |
| — | | |
| — | | |
| — | |
Forfeited | |
| (100,000) | | |
| — | | |
| — | | |
| — | |
Expired | |
| (310,000) | | |
| — | | |
| — | | |
| — | |
Balance Outstanding, June 30, 2021 | |
| 1,015,227 | | |
$ | 0.22 | | |
| 2.7 | | |
$ | 3,615,557 | |
Exercisable at June 30, 2021 | |
| 675,932 | | |
$ | 0.68 | | |
| 3.8 | | |
$ | (158,503) | |
Summarized
information with respect to options outstanding under the option plans at June 30, 2021 is as follows:
SCHEDULE OF OPTIONS OUTSTANDING UNDER OPTION PLANS
| | |
Options Outstanding | | |
| | |
| |
Range or Exercise Price | | |
Number Outstanding | | |
Weighted Average Exercise Price | | |
Remaining Average Contractual Life (In Years) | | |
Number Exercisable | | |
Weighted Average Exercise Price | |
$ | 0.14 - $0.24 | | |
| - | | |
$ | 0.00 | | |
| - | | |
| - | | |
$ | 0.00 | |
$ | 0.25 - $0.49 | | |
| 126,000 | | |
| 0.28 | | |
| 1.2 | | |
| 126,000 | | |
| 0.28 | |
$ | 0.50 -$0.85 | | |
| 501,000 | | |
| 0.69 | | |
| 4.0 | | |
| 498,500 | | |
| 0.69 | |
$ | 0.86 - $1.75 | | |
| 188,227 | | |
| 1.53 | | |
| 11.1 | | |
| 51,432 | | |
| 1.63 | |
$ | 1.76 - $2.10 | | |
| 100,000 | | |
| 2.10 | | |
| 9.1 | | |
| — | | |
| 0.00 | |
$ | 2.11 - $3.05 | | |
| 100,000 | | |
| 3.05 | | |
| 9.3 | | |
| — | | |
| 0.00 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total | | |
| 1,015,227 | | |
$ | 1.17 | | |
| 6.0 | | |
| 675,932 | | |
$ | 0.68 | |
NOTE
14 – RELATED PARTIES.
Centre
Lane Partners Master Credit Fund II, L.P. (“Center Lane Partners”), who sold the Company the Wild Sky business in June 2020
(See Note 4) has partnered and assisted the Company from a liquidity perspective during 2021. This relationship has been determined to
qualify as a related party. A related party is essentially a party that can exercise significant influence over the Company in making
financial and/or operating decisions.
On
April 26, 2021, the Company and certain of its subsidiaries entered into a First Amendment to Amended and Restated Senior Secured Credit
Agreement (the “First Amendment”). The Company and its subsidiaries are parties to a credit agreement
between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020 (the “Credit Agreement”).
The Credit Agreement was amended to permit the Company to raise up to $6,000,000 of total cash proceeds from the sale of its preferred
stock prior to December 31, 2021 without having to make a mandatory prepayment of the loans (the “Loans”) under the Credit
Agreement. The interest rate on the Loans after April 26, 2021 was increased to 10.00% per annum from 6.00%, which can continue to be
paid in-kind in lieu of cash payment. In addition, the Company may issue up to $800,000 in dividends from the previous limit of $500,000
per annum. In addition, the Company has issued 150,000 common shares to Centre Lane Partners as part of this transaction.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
14 – RELATED PARTIES (continued).
On
May 26, 2021, the Company and certain of its subsidiaries entered into a Second Amendment to the Amended and Restated Senior Secured
Credit Agreement between itself and Centre Lane Partners (the “Second Amendment”). The Company and its subsidiaries
are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5,
2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $1.5
million, in the aggregate. This term loan shall
be repaid by December 31, 2021. In addition, and as part of the transaction, there is an Exit Fee (“the Exit Fee”) totaling
$0.750 million
which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. In addition, the
Company has issued 3.0
million common shares to Centre Lane Partners as part of this
transaction.
As
part of these transactions and given that Centre Lane was determined to be a related party, an independent fair value analysis was performed
by the Company and all related transactions were recorded accordingly. As of the First Amendment dated April 26, 2021, the Company evaluated
the debt for extinguishment or debt modification under FASB ASC 470-50, Debt – Modifications and Extinguishments, and determined
extinguishment was applicable. Under the rules, the Company extinguished the debt, which included the capitalized interest through April
26, 2021, and recorded it net of the debt discount, including all applicable fees and stock issuances. The debt discount determined for
the First Amendment totaled $2,363,986 and is amortized over the remaining life of the loan and is included in interest expense –
related party on the accompanying condensed consolidated statement of operations or until the next debt modification or extinguishment
is determined. For the Second Amendment, which occurred on May 26, 2021, the Company determined it was a debt modification. The Second
Amendment provided the Company with debt financing of $1,500,000, an Exit fee of $750,000, and issuance of 3,000,000 shares of common
stock issued to Centre Lane. The increment to the debt discount was $904,637. This debt discount was added to the previously mentioned
$2,363,986 debt discount for a total gross debt discount of $3,268,623 which will be amortized into the condensed consolidated statement
of operations and included in the interest expense – related party over the remaining life of the loan or until the next debt modification
or extinguishment is determined.
The
total related party debt owed to Centre Lane Partners was $16,531,712 and $16,451,905 as of June 30, 2021 and December 31, 2020. The
debt owed to Centre Lane Partners is reported net of their unamortized debt discount of $3,130,122 and $0 as of June 30, 2021 and December
31, 2020. For further clarification, please see Note 10, Notes Payable.
During
November 2018, Mr. W. Kip Speyer, the Company’s Chairman of the Board, entered into two convertible note agreements with the company
totaling $80,000. These notes have a conversion price of $0.40 per share and resulted in the recognition of a beneficial conversion feature
recorded as a debt discount. These notes payable total $46,671 and $39,728 at June 30, 2021 and December 31, 2020. The notes are reported
net of their unamortized debt discount of $33,329 and $40,272 as of June 30, 2021 and December 31, 2020, respectively.
During
the three months ended June 30, 2021 and 2020 we paid cash dividends on the outstanding shares of the Company’s Series E and F
Preferred Stock of $1,261 and $31,260, respectively held by affiliates of the Company. During the six months ended June 30, 2021 and
2020 we paid cash dividends on the outstanding shares of the Company’s Series E and F Preferred Stock of $2,522 and $55,007, respectively
held by affiliates of the Company.
The
unsecured and interest free Closing Notes of $750,000 related to the Oceanside acquisition were recorded ratably as compensation expense
into the condensed consolidated statement of operations over the 24-month term and an accrued payable is being recognized over the same
period. As of August 15, 2020, the Company did not
make payment on the First Closing Note and thereby defaulted on its obligation and the Second Closing Note accelerated
to become payable as of August 15, 2020. Upon default, the
Closing Notes accrue interest at a 1.5% per month rate, or 18% annual rate.
As a result, there was a total charge of $300,672 recorded during the third quarter of 2020 which was $250,000 of compensation expense
and $50,672 of interest expense-related party. For the three and six months ended June 30, 2021, $33,567
and $66,945,
respectively of interest expense-related party was recorded.
NOTE
15 – INCOME TAXES.
The
Company recorded $0 tax provision for the three and six months ended June 30, 2021, due in large part to its expected tax losses for
the year and maintaining a full valuation allowance against its net deferred tax assets.
At
June 30, 2021 and December 31, 2020, the Company had no unrecognized tax benefits or accrued interest and penalties recorded. No interest
and penalties were recognized during the three and six months ended June 30, 2021.
BRIGHT
MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2021
(Unaudited)
NOTE
16 – SUBSEQUENT EVENTS.
As
disclosed in Note 10, relative to PPP Loans, on July 16, 2021, the Company obtained the forgiveness of the Bright Mountain PPP Loan in
the full amount of $464,800.
Between
August 12, 2021 and February 11, 2022, the Company and certain of its subsidiaries entered into eight amendments to the Amended and
Restated Senior Secured Credit Agreement between itself and Centre Lane Partners Master Credit Fund II, L.P. (“Centre Lane
Partners”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as
Administrative Agent and Collateral Agent dated June 5, 2020, as amended (the “Credit Agreement”). The Credit Agreement
was amended to provide for an additional loan amount of $4.225
million, in the aggregate. This term loan matures on June
30, 2023. In addition, and as part of the transaction, there is an Exit Fee (“the Exit Fee”) totaling $2.825
million which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. In
addition, the Company has issued 9.5
million common shares to Centre Lane Partners as part of these transactions.
On
June 28, 2021 Bright Mountain Media, Inc (the “Company”) issued a press release that effective at the close of business on
June 30, 2021, Bright Mountain Media, Inc’s., common stock (“BMTM”) ceased trading on the OTCQB and its shares began
trading on the OTC Pink Market on July 1, 2021. The common stock will continue to trade with the symbol BMTM. Furthermore, on September
28, 2021, Bright Mountain Media, Inc. shares of common stock began trading on the Expert Market from the OTC Pink Sheets. The Company’s
Common Stock will continue to be on the Expert Market until such time as the Company has become current in its filings with the Securities
and Exchange Commission at which point it will seek to have its shares restored to the OTC markets.
On
August 31, 2021, the Company’s Chairman of the Board, W. Kip Speyer, converted his preferred shares into common shares of the Company.
In that transaction, he converted 7,919,017 preferred shares into 7,919,017 common shares of the Company. As of said date, the Company
has an accrued dividend liability due to Mr. W. Kip Speyer recorded totaling $695,773.
On
September 22, 2021, the Company entered into a Share Issuance Settlement with Spartan Capital Securities, LLC (“Spartan”).
Under the terms of the Agreement, the Company agreed to issue a total of 10,398,700 of its common stock (the “Shares”) to
seventy-five accredited investors who participated in the Company’s Private Placement Offering, which began in November 2019 and
was completed in August 2020 (the “Private Placement”). As previously disclosed, under the terms of Private Placement, if
the Company did not file a listing application of its common stock on the NYSE American Exchange within an agreed time period after the
Company had received at least $1,500,000 of net proceeds, contemplated by the Placement Agent Agreement (the “Listing Application
Deadline”) and obtained listing approval from the NYSE American within a 120 days from the Listing Application Deadline the Company
would issue to each Investor in such Offering an additional share of common stock provided that if the Listing was not obtained by Listing
Approval Deadline, the Listing Approval Deadline would be extended for so long and to the extent that the Company could demonstrate to
Spartan’s reasonable satisfaction that it has used and continuing to use good faith efforts to obtain Listing Approval. The Company
believes it has acted in good faith, but in order to avoid protracted and expensive litigation as to whether the Company was obligated
to issue the Shares to the private placement investors, and without admitting or denying that the Company had any such obligation, the
Company has agreed to issue the Shares to the private placement investors as set forth above.
Effective
December 1, 2021, the Board of Directors of the Company appointed Mr. Matthew Drinkwater as its new Chief Executive Officer (CEO). Mr.
Drinkwater joins the Company with an extensive track record of adding value to the companies he has worked for over his professional
career in several key senior executive and sales roles at companies such as Buzzfeed, Twitter, Groupon Inc., Yahoo and America
Online (AOL). Mr. W. Kip Speyer will remain with the Company in his role of Chairman of the Board and transition his CEO role to
Mr. Drinkwater.
On
December 3, 2021, the Company received formal notification that an event of default had occurred under the Closing Notes as part of the
Oceanside acquisition that was later followed up with a notice of summons in a civil action on December 28, 2021 by the Oceanside selling
shareholders. The Company is reviewing its obligations under the Notes with external counsel and the parties are engaged in settlement
discussions. No assurances can be made of the final resolution.
During
January 2022, the Company entered into a settlement agreement related to the legal proceeding with Synacor referenced in Note
11. The agreement obligates the Company to pay $12,000
per month beginning January 24, 2022 for 12 consecutive
months and then a final one-time payment in the amount of $40,000
to be paid on or before January 24, 2023. Notwithstanding,
the Company has an early settlement option to pay-off the obligation with a discount if it pays $160,000
to Synacor on or before September 1, 2022, which
amount shall be inclusive of the monthly installments previously mentioned prior to the date when early settlement payment is transmitted
to Synacor.
On
January 14, 2022, the Board of Directors nominated and elected Mr. Matthew Drinkwater, the Company’s Chief Executive Officer to
the Board of Directors of the Company.